-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IHD4x7xlftzmqynHeBVqdrTqcbSCZCEpAjJA6DhawBSlTPCCYpPW3gVIDjAonWNn BUXlUgGVEwLtSJdGZL6MNA== 0000950123-99-004054.txt : 19990505 0000950123-99-004054.hdr.sgml : 19990505 ACCESSION NUMBER: 0000950123-99-004054 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 20 FILED AS OF DATE: 19990503 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRESNAN COMMUNICATIONS GROUP LLC CENTRAL INDEX KEY: 0001085399 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 382558446 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-77637 FILM NUMBER: 99609346 BUSINESS ADDRESS: STREET 1: 709 WESTCHESTER AVENUE CITY: WHITE PLAINS STATE: NY ZIP: 10604 BUSINESS PHONE: 9149936600 MAIL ADDRESS: STREET 1: 709 WESTCHESTER AVENUE CITY: WHITE PLAINS STATE: NY ZIP: 10604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRESNAN CAPITAL CORP CENTRAL INDEX KEY: 0001013692 STANDARD INDUSTRIAL CLASSIFICATION: TELEVISION BROADCASTING STATIONS [4833] IRS NUMBER: 133887244 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-77637-01 FILM NUMBER: 99609347 BUSINESS ADDRESS: STREET 1: 709 WESTCHESTER AVE CITY: WHITE PLAINS STATE: NY ZIP: 10604 BUSINESS PHONE: 9149936600 MAIL ADDRESS: STREET 1: 709 WESTCHESTER AVE CITY: WHITE PLAINS STATE: NY ZIP: 10604 S-4 1 FORM S-4 1 As filed with the Securities and Exchange Commission on May 3, 1999 Registration No. 333-[_____] ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 BRESNAN COMMUNICATIONS GROUP LLC BRESNAN CAPITAL CORPORATION (Exact Names of Registrants as Specified in Their Charters) ----------- Delaware (State or Other Jurisdiction of Incorporation or Organization) 4841 4841 (Primary Standard Industrial Classification Code Number) 38-2558446 13-3887244 (I.R.S. Employer Identification Numbers) ----------- 709 Westchester Avenue White Plains, New York 10604 (914) 993-6600 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrants' Principal Executive Offices) ----------- Robert V. Bresnan 709 Westchester Avenue White Plains, New York 10604 (914) 993-6600 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service) Copies to: Barry A. Brooks, Esq. Paul, Hastings, Janofsky & Walker LLP 399 Park Avenue New York, New York 10022 (212) 318-6000 ----------- Approximate date of commencement of proposed sale to the public: As soon as practicable after the Registration Statement becomes effective. If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. |_| If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. |_| If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. |_| -------------------- CALCULATION OF REGISTRATION FEE
Title of Each Class Proposed Maximum Proposed Maximum of Securities to be Amount to Offering Price Aggregate Offering Amount of Registered be Registered Per Note Price (1) Registration Fee - --------------------------------------------------------------------------------------------------------- 8% Senior Notes due 2009 $170,000,000 100% $170,000,000 47,260 - --------------------------------------------------------------------------------------------------------- 9 1/4% Senior Discount Notes due 2009 $275,000,000 63.644% $175,021,000 48,656
(1) Calculated pursuant to Rule 457(f). -------------------- 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 the Registration Statement shall become effective on such date as the Commission, acting pursuant to aid Section 8(a), may determine. 2 The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. The prospectus is not an offer to sell these securities and it is not soliciting an order to buy these securities in any state where the offer or sale is not permitted. PROSPECTUS [LOGO] SUBJECT TO COMPLETION DATED May 3,1999 OFFER TO EXCHANGE any and all outstanding 8% Senior Notes due 2009, Series A for 8% Senior Notes due 2009, Series B and 9 1/4% Senior Discount Notes due 2009, Series A for 9 1/4% Senior Discount Notes due 2009, Series B of BRESNAN COMMUNICATIONS GROUP LLC AND BRESNAN CAPITAL CORPORATION TERMS OF EXCHANGE OFFER o Expires 5:00 p.m., New York City time, , 1999, unless extended. o The exchange offer is subject to customary conditions which we may waive. o All outstanding Notes that are validly tendered and not validly withdrawn will be exchanged. o Tenders of outstanding Notes may be withdrawn any time prior to 5:00 p.m., New York City time, on the date of the expiration of the exchange offer. o The exchange of Notes will not be a taxable exchange for U.S. federal income tax purposes. o We will not receive any proceeds from the exchange offer. o The terms of the exchange notes to be issued are substantially similar to the outstanding Notes, except for transfer restrictions and registration rights relating to the outstanding Notes. --------------- See "Risk Factors" beginning on page 16 for a discussion of certain factors that investors should consider in connection with the exchange offer and an investment in the exchange notes. --------------- This prospectus and the accompanying letter of transmittal are first being mailed to holders of outstanding Notes on or about , 1999. --------------- Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. --------------- The date of this prospectus is May 3, 1999. 3 (Continued from previous page) Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. 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 of 1933. 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 Exchange Notes received in exchange for Outstanding Notes where such Outstanding Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. We have agreed that, starting on _______________, 1999 and ending on the close of business ___________, 2000 we will make this prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." INFORMATION REGARDING FORWARD-LOOKING STATEMENTS This prospectus includes forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to risks, uncertainties, and assumptions about us, including, among other things: o Our anticipated growth strategies, o Our intention to introduce new and enhanced services, o Anticipated trends in our businesses, including trends in the market for telecommunications services, o Future expenditures for capital investments, and o Our ability to effectively compete with our competitors. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this prospectus might not occur. TABLE OF CONTENTS Page ---- Prospectus Summary.............................................................1 Risk Factors..................................................................16 The TCI Transactions..........................................................27 Use of Proceeds...............................................................28 The Exchange Offer............................................................29 Capitalization................................................................40 Selected Combined Financial and Operating Data................................41 Unaudited Pro Forma Combined Financial Data...................................43 Management's Discussion and Analysis of Financial Condition and Results of Operations.......................................................48 Business......................................................................56 Legislation and Regulation....................................................74 Management....................................................................84 Security Ownership of Certain Beneficial Owners and Management................88 Certain Relationships and Related Transactions................................89 Description of the Partnership Agreement......................................93 Description of the New Credit Facility........................................96 Description of Notes..........................................................97 Certain Federal Tax Considerations...........................................129 Plan of Distribution.........................................................133 Legal Matters................................................................133 Experts......................................................................133 Available Information........................................................133 Index to Combined Financial Statements.......................................F-1 -ii- 4 PROSPECTUS SUMMARY The following summary contains basic information about this exchange offer. It likely does not contain all the information that is important to you in making a decision to exchange the Outstanding Notes. For a more complete understanding of this Exchange Offer, we encourage you to read this entire document. Unless the context otherwise requires, all references to "the Company," "we," "us" or "our" in this prospectus mean Bresnan Communications Group LLC ("BCG") and its subsidiaries, as well as (1) all cable television systems (the "Existing Bresnan Systems") previously owned by Bresnan Communications Company Limited Partnership (the "Parent") and (2) certain cable television systems previously owned by affiliates of Tele-Communications, Inc. (the "Contributed TCI Systems"), in each case which have been contributed to Bresnan Telecommunications Company LLC ("BTC"), a subsidiary of BCG. BCG was only recently formed and became the owner of these systems at the closing of the transactions (the "TCI Transactions") pursuant to the contribution agreement (the "Contribution Agreement") described in this prospectus, which closing took place on February 2, 1999. Unless the context otherwise requires, all references to "TCI" in this prospectus mean Tele-Communications, Inc., which has become a subsidiary of AT&T, and/or affiliates of Tele-Communications, Inc. All references to "Blackstone" in this prospectus mean Blackstone B.C. Capital Partners L.P. and/or its affiliates. The combined financial statements of Bresnan Communications Group Systems, the predecessor to the Company for accounting and financial reporting purposes, presented elsewhere in this prospectus are the combination of the financial statements of the Parent and the Contributed TCI Systems. Prior to consummating the TCI Transactions, the Parent and the owners of the Contributed TCI Systems were under the common ownership and control of TCI. Based on such common ownership and control, the financial statements are presented at historical cost on a combined basis. The Exchange Offer We completed a private offering on February 2, 1999 of $170,000,000 aggregate principal amount of our 8% Senior Notes due 2009 (the "Senior Notes") and $275,000,000 aggregate principal amount at maturity of our 9 1/4% Senior Discount Notes due 2009 (the "Senior Discount Notes," and together with the Senior Notes, the "Outstanding Notes"). On the same day, we entered into a registration rights agreement with the initial purchasers in such private offering agreeing, among other things, to deliver to you this prospectus and to complete this exchange offer within 210 days of the issuance of the Outstanding Notes. You should read the discussion under the headings "Summary Description of the Exchange Notes" and "Description of the Exchange Notes" for further information regarding the registered notes. We believe that the notes issued in this exchange offer (the "Exchange Notes" and, together with the Outstanding Notes, the "Notes") may be resold by you without compliance with the registration and prospectus delivery provisions of the Securities Act of 1933, as amended, subject to certain conditions. You should read the discussion under the headings "Summary of the Terms of the Exchange Offer" and "The Exchange Offer" for further information regarding the exchange offer and the resale of the Notes. The Company We own, develop and operate geographically concentrated cable television systems in small- and medium-sized communities in the midwestern United States. On June 3, 1998, certain of our affiliates entered into an agreement to combine the Existing Bresnan Systems with the Contributed TCI Systems. These transactions closed on February 2, 1999. The Contributed TCI Systems are located mainly in markets next to the Existing Bresnan Systems. As of December 31, 1998, after giving effect to the TCI Transactions and certain acquisitions and dispositions of assets that were closed or are expected to be closed after December 31, 1998, our cable television systems would have passed approximately 967,000 homes and served approximately 652,000 basic subscribers, ranking us among the 20 largest multiple system operators in the United States. We are a leading operator of cable television systems located in small- and medium-sized communities where subscribers generally require cable television to clearly receive a full complement of off-air broadcast stations and have limited entertainment alternatives. Our management believes that our cable television systems are less susceptible to competition and subscriber turnover than urban cable television systems, resulting in more predictable revenue and cash flow. -1- 5 Our management follows a systematic approach to the upgrade of our cable television plant which enables us to provide new and enhanced services, including digital cable and advanced analog cable services, expanded pay-per-view options and high-speed Internet service. Digital cable or advanced analog cable service was available to approximately 74% of our basic subscribers as of December 31, 1998 and high-speed Internet service has been launched in seven of our markets under either the "Bresnan@Home" brand or the proprietary "BresnanLink" brand. Our management anticipates that digital cable and high-speed Internet services will become important sources of revenue growth as we continue to market and increase the penetration of these services. The upgrade of the Existing Bresnan Systems has been substantially completed and the upgrade of the Contributed TCI Systems is expected to be substantially complete by the end of 1999. Our management believes that our network infrastructure is more technically advanced than that of our peers, and that the increased quality, reliability and variety of our services have contributed to our repeated recognition by the cable television industry for superior customer satisfaction. William J. Bresnan, our President and Chief Executive Officer, is a cable television pioneer with 40 years of industry experience. Mr. Bresnan founded the Parent in 1984 and, in partnership with TCI, developed its business through internal growth and acquisitions. Prior to 1984, Mr. Bresnan was the Chairman and Chief Executive Officer of Group W Cable, Inc., one of the largest cable television companies in the United States at the time based on the number of cable subscribers. In addition to Mr. Bresnan, our senior management team has significant business experience in acquiring, operating and financing telecommunications operations, averaging approximately 20 years of industry experience. We expect to continue to benefit from our relationship with TCI, one of the leading cable television operators in the United States. Pursuant to certain contractual arrangements with TCI, we are able to purchase substantially all of our programming services at TCI's cost plus an administrative surcharge and have the right to receive discounts on purchases of certain equipment through TCI or its vendors. We believe that our relationship with TCI results in lower programming costs and improved availability of certain technological innovations, including state-of-the-art digital converters, cable modems and digitally compressed cable television programming services. We will also benefit from the expertise and valuable industry knowledge of TCI's Leo J. Hindery, William R. Fitzgerald and Derek Chang, who joined our Advisory Committee following the consummation of the TCI Transactions. TCI recently completed its merger with AT&T Corp. whereby TCI has become a subsidiary of AT&T. Business Strategy Focusing on Small- and Medium-Sized Communities. We focus on serving small- and medium-sized communities located primarily in four midwestern states: Michigan, Minnesota, Wisconsin and Nebraska. Our management believes that the cable television systems in these communities are less susceptible to competition from direct broadcast satellite providers, due to the importance of local programming to residents in these communities, and from cable overbuilders, due to the relatively small size of these communities. Our strategy of upgrading systems and aggressively launching new and enhanced services should also limit consumer demand for alternative multichannel television and high-speed Internet service providers. Additionally, we believe that residents of the areas that we serve generally have a greater sense of community than residents of metropolitan areas, and as a result are more receptive to our extensive community relations and customer satisfaction initiatives. Consequently, our management believes that our brand name is well established with our subscribers, enhancing our ability to launch new services and bundle service offerings. Clustering and Interconnection of Cable Television Systems. We have pursued the acquisition and development of cable television systems in communities that are within close proximity to our existing systems in order to maximize economies of scale and operating efficiencies. Such operating efficiencies include centralized billing and the sharing of general management, customer service, marketing and technical support. We intend to interconnect systems within a cluster with fiber optic cable, enabling the consolidation of headend facilities. Headend consolidation facilitates the launch of new and enhanced services, such as digital cable and high-speed Internet services, in smaller communities than would otherwise be economically attractive, by allowing us to spread the capital and operating costs associated with these services over a larger subscriber base. The integration of the Contributed TCI Systems is expected to significantly enhance the clustering and interconnection of our cable television systems. We intend to complete a system interconnection and headend elimination program within three years. Upon completion of this program, the number of headends required to serve the Company's subscribers will be reduced from 127 to 73 and approximately 72% of our subscribers will be served from six central headend facilities. -2- 6 Upgrading to State-of-the-Art Technology. We made an early commitment to upgrade the Existing Bresnan Systems in order to increase programming choices, provide new and enhanced services and improve overall customer satisfaction. Reflecting this commitment, as of December 31, 1998, approximately 84% of the basic subscribers in the Existing Bresnan Systems were served by high capacity, broadband hybrid fiber optic/coaxial cable ("HFC") and approximately 70% were served by 750 MHZ capacity plant. Our management believes that the Existing Bresnan Systems are technologically advanced beyond the systems operated by most other multiple system operators. We plan to invest, over the next three years, approximately $67.0 million to upgrade system architecture and capacity primarily in the Contributed TCI Systems, complete return activations and deploy additional fiber. Many of the Contributed TCI Systems have already been upgraded to facilitate the launch of digital cable service. As of December 31, 1998, 51% of the Contributed TCI Systems' subscribers were served by 550 MHZ capacity or greater plant. Providing New and Enhanced Services. The improved clustering of our cable television systems combined with upgrades to state-of-the-art technology allow us to accelerate the introduction of new and enhanced services including the following: digital cable service, which allows for a significant increase in channel capacity and enhanced offerings, including near-video-on-demand, and is available to a majority of our basic subscribers; high-speed Internet service, which has been launched in seven markets under either the "Bresnan@Home" brand or the proprietary "BresnanLink" brand; wide area network and point-to-point data services; digital advertising insertion; and intraLATA toll and long distance resale services, which have been launched in the Upper Michigan cluster. Our management believes that these new and enhanced service offerings attract new subscribers, enhance revenue and cash flow per subscriber, increase customer loyalty and reduce churn. Maintaining Strong Community Relations. Our ongoing community relations initiatives in the markets served by the Existing Bresnan Systems have resulted in widespread brand recognition and numerous industry awards. Our management believes that maintaining strong community relations will continue to be important to our long-term success. Our community-oriented initiatives include educational programs and the sponsorship of programs and events recognizing outstanding local citizens. We believe that our ongoing community relations initiatives result in consumer and governmental goodwill and name recognition which have increased customer loyalty and will facilitate future efforts to provide telecommunications services. Our management intends to implement these initiatives in the Contributed TCI Systems. Emphasizing Customer Satisfaction. In order to maximize customer satisfaction, we strive to provide reliable, high-quality service offerings, superior customer service and attractive programming choices at reasonable rates. We have implemented stringent internal customer service standards, which our management believes meet or exceed those established by the National Cable Television Association. We have received five Beacon Awards in the past five years from the Cable Television Public Affairs Association, a cable television industry group. Our most recent award recognized our "On Time Guarantee Program" as the outstanding customer relations program by a multiple system operator in the United States. Additionally, our management believes that by upgrading our cable television systems it has increased the quality and reliability of our services, resulting in increased customer satisfaction. We believe that our customer service efforts have contributed to our subscriber growth, the acceptance of our new and enhanced service offerings and ongoing patronage by existing subscribers. We are providing a level of emphasis on customer satisfaction in the Contributed TCI Systems similar to the level that we are providing in the Existing Bresnan Systems. BCG was formed in 1998 and Bresnan Capital Corporation was formed in 1996. Our principal executive office is located at 709 Westchester Avenue, White Plains, New York 10604-3023. Our telephone number is (914) 993-6600. The TCI Transactions Reflecting our management's strategy of acquiring and developing cable television systems in regional clusters, certain of our affiliates entered into the Contribution Agreement with TCI and Blackstone on June 3, 1998 pursuant to which TCI transferred to us the Contributed TCI Systems, together with indebtedness in the amount of approximately $708.9 million. The Contributed TCI Systems served approximately 416,000 basic subscribers in small- and medium-sized communities which were mainly located next to the Existing Bresnan System. The amount of indebtedness contributed to us was based on, among other things, capital expenditures made prior to the consummation of the TCI Transactions, working capital adjustments and adjustments in respect of acquisitions and dispositions that occurred prior to the consummation of the TCI Transactions (such indebtedness, as adjusted, the -3- 7 "Assumed TCI Debt"). In addition, Blackstone contributed approximately $136.5 million in cash in connection with the TCI Transactions (the "Cash Contribution"). We repaid our existing indebtedness and the Assumed TCI Debt with the net proceeds received from the private offering of the Outstanding Notes, the Cash Contribution and borrowings under the new credit facility (the "New Credit Facility") of our subsidiary, BTC (together with the private offering of the Outstanding Notes,"Financings"). TCI, Blackstone, and William J. Bresnan, collectively with our management, indirectly beneficially own approximately 50.0%, 39.8% and 10.2%, respectively, of our outstanding equity interests. The following table sets forth certain of our financial, operating and technical data as of December 31, 1998 after giving effect to the TCI Transactions. The following table does not reflect the impact of certain acquisitions and dispositions of assets that were closed or are expected to be closed after December 31, 1998. See "--Recent Events." After giving effect to such acquisitions and dispositions, our systems would have passed approximately 967,000 homes and served approximately 652,000 basic subscribers.
As of and for the Year Ended December 31, 1998(a) (dollars in thousands, except for per subscriber data) ---------------------------------------------------- Existing Contributed Bresnan TCI Systems Systems Total ----------- ----------- ----------- Revenue ........................................................... $ 90,836 $ 171,128 $ 261,964 Average monthly total revenue per average basic subscriber(b) ..... $ 34.77 $ 34.52 $ 34.61 Homes passed ...................................................... 298,171 603,621 901,792 Basic subscribers ................................................. 201,468 416,399 617,867 Basic penetration ................................................. 67.6% 69.0% 68.5% Premium units ..................................................... 89,269 154,232 243,501 Pay-to-basic ratio(c) ............................................. 44.3% 37.0% 39.4% Percentage of basic subscribers served by 550 MHZ plant or greater 83.5% 50.6% 61.3%
- ---------- (a) Represents the historical combined financial, operating and technical data of the Existing Bresnan Systems and the Contributed TCI Systems as of and for the year ended December 31, 1998. The table does not include financial, operating and technical data for any acquisition of assets that is expected to close after December 31, 1998 other than the Recent Acquisitions and Disposition. For information regarding such acquisitions and dispositions, see "--Recent Events." (b) Represents average monthly total revenue for the year ended December 31, 1998 divided by the number of average basic subscribers for the period.. (c) Pay-to-basic ratio measures premium units as a percentage of basic subscribers. -4- 8 Recent Events Recent Acquisitions and Disposition In January 1999, we acquired cable television systems that, as of December 31, 1998, served approximately 21,900 basic subscribers in Michigan for approximately $42.0 million (the "Michigan Acquisition"). In March 1999, we also acquired cable television systems that, as of December 31, 1998, served approximately 14,800 basic subscribers in Minnesota for approximately $27.0 million (the "Minnesota Acquisition," and together with the Michigan Acquisition, the "Acquisitions"). In February 1999, we disposed of cable television systems that, as of December 31, 1998, served approximately 2,800 basic subscribers in Michigan for approximately $4.4 million (the "Disposition"). The Acquisitions and the Disposition are collectively referred to herein as the "Recent Acquisitions and Disposition." As of December 31, 1998, after giving pro forma effect to the completion of the Recent Acquisitions and Disposition, the number of basic subscribers served by us would increase by 34,000 from approximately 618,000 to approximately 652,000. We have evaluated and we expect to continue to evaluate possible strategic acquisitions and dispositions of related businesses and assets on an ongoing basis and at any given time we may be engaged in discussions or negotiations or enter into agreements with respect thereto. Proposed Joint Venture with AT&T In December 1998, the Parent, on our behalf, entered into a letter of intent with AT&T to form a joint venture (the "Joint Venture"), the business of which would be to provide local or any-distance communications services (other than mobile wireless services, video entertainment services and high-speed Internet services) to residential consumers and certain small business customers under the "AT&T" brand name over our cable infrastructure. The Joint Venture would have the exclusive right to use our cable infrastructure for such services and would have access to wholesale bulk long distance services and certain other network services from AT&T. We expect to purchase between 35% and 49% of the equity of the Joint Venture on terms to be negotiated. AT&T would have majority representation on the Board of Directors of the Joint Venture, appoint all officers of the Joint Venture and manage the day-to-day operations of the Joint Venture. The Joint Venture would have a 15-year term with one five-year extension at AT&T's sole election. Under the terms of the letter of intent, we would be responsible for paying all of the capital expenditures associated with upgrading our infrastructure and operational support systems to meet AT&T's telephone certification requirements. We estimate that we would need to spend approximately $4.0 million in excess of our planned capital expenditures to meet the telephone certification requirements. In addition, in the event operating cash flow from the Joint Venture is insufficient to satisfy ongoing operating and capital expenditures, each of the parties would be required to provide funds for the insufficiency on a pro rata basis. We would be entitled to receive an initial connectivity payment when any cable television system covering a specified number of households passed meets certain specified standards. In addition, the documentation relating to the Joint Venture would provide that we would be entitled to agreed-upon minimum payments in the event certain penetration levels are not met and certain revenue sharing mechanisms once certain revenue targets are met. Formation of the Joint Venture is subject to certain conditions precedent, including the execution of definitive documentation. We cannot predict if or when such conditions would be met. See "Risk Factors--Risks Associated with Offering Telecommunications Services." -5- 9 Organization The following chart illustrates in summary form the organizational structure of the Company and certain related entities. [GRAPHIC OMITTED] - ---------- (a) BCI (USA), LLC is an affiliate of William J. Bresnan. For additional information regarding the ownership of BCI (USA), LLC, see "Principal Partners." (b) The combined financial statements of Bresnan Communications Group Systems, the predecessor to the Company for accounting and financial reporting purposes, presented elsewhere in this Prospectus are the combination of the financial statements of the Parent and the Contributed TCI Systems. Prior to consummating the TCI Transactions, the Parent and the owners of the Contributed TCI Systems were under the common ownership and control of TCI. Based on such common ownership and control, the financial statements are presented at historical cost on a combined basis. -6- 10 Summary of the Terms of the Exchange Offer Outstanding Notes $170.0 million aggregate principal amount of 8% Senior Notes due 2009, Series A, which were issued on February 2, 1999 (the "Senior Notes"). $275.0 million aggregate principal amount at maturity (approximately $175.0 million gross proceeds) of 9 1/4% Senior Discount Notes due 2009, Series A, which were issued on February 2, 1999 (the "Senior Discount Notes", and together with the Senior Notes, the "Outstanding Notes"). Exchange Notes $170.0 million aggregate principal amount of 8% Senior Notes due 2009, Series B that we are offering hereby (the "Exchange Senior Notes"). $275.0 million aggregate principal amount at maturity of 9 1/4% Senior Discount Notes due 2009, Series B that we are offering hereby (the "Exchange Senior Discount Notes", and together with the Exchange Senior Notes, the "Exchange Notes"). The Outstanding Notes and the Exchange Notes are referred to collectively as the "Notes." The Exchange Offer We are offering to exchange $1,000 principal amount of Exchange Notes for each $1,000 principal amount of Outstanding Notes (the "Exchange Offer"). Outstanding Notes may only be exchanged in $1,000 principal amount increments. In order to be exchanged, an Outstanding Note must be properly tendered and accepted. All Outstanding Notes that are validly tendered and not validly withdrawn will be exchanged. Resales Based on an interpretation by the Securities and Exchange Commission set forth in no-action letters issued to third parties, we believe that you may resell or otherwise transfer Exchange Notes issued pursuant to the Exchange Offer without compliance with the registration and prospectus delivery provisions of the Securities Act of 1933, provided, however, there are exceptions to this general statement. You may not freely transfer the Exchange Notes if: o you are an "affiliate" of ours within the meaning of Rule 405 under the Securities Act of 1933; o you are a broker-dealer who acquired the Outstanding Notes directly from us without compliance with the registration and prospectus delivery provisions of the Securities Act of 1933; o you did not acquire the Exchange Notes in the ordinary course of your business; or o you have engaged in, intend to engage in, or have an arrangement or understanding with any person to participate in the distribution of the Exchange Notes. Any holder subject to any of the exceptions above and each participating broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer in exchange for Outstanding Notes that were acquired as a result of market-making, must comply with the registration and prospectus -7- 11 delivery requirements of the Securities Act of 1933 in connection with the resale of the Exchange Notes. If our belief is inaccurate and you transfer any Exchange Note issued to you in the Exchange Offer without delivering a prospectus meeting the requirements of the Exchange Securities Act of 1933 or without an exemption from registration of your Exchange Notes from such requirements, you may incur liability under the Securities Act of 1933. We do not assume or indemnify you against any such liability. Expiration of Exchange 5:00 p.m., New York City time, on , 1999, unless we Offer extend the exchange offer, in which case the term "expiration date" means the latest date and time to which the Exchange Offer is extended. Interest on the Exchange Each Exchange Senior Note will bear interest from Senior Notes and the February 2, 1999. If your Senior Notes are accepted Senior Notes for exchange, you will not receive accrued interest on the Senior Notes, and will be deemed to have waived the right to receive any interest on the Senior Notes from and after February 2, 1999. Interest on the Exchange Each Exchange Senior Discount Note Senior Discount Notes and Original Issue o will be issued at a discount to its aggregate Discount on the Senior principal amount at maturity; Discount Notes o will not accrue interest prior to February 1, 2004, unless we elect to accrue interest on or after February 1, 2002; and o on or after August 1, 2004, will pay interest at the rate of 9 1/4% per year on February 1 and August 1 of each year. Conditions to the The Exchange Offer is subject to certain customary Exchange Offer conditions, which we may waive. See "The Exchange Offer -- Conditions." Procedures for Tendering If you wish to accept the Exchange Offer, you must complete, sign and date the accompanying letter of transmittal in accordance with its instructions and deliver the letter of transmittal, together with the Outstanding Notes and any other required documentation, to the exchange agent at the address set forth in the letter of transmittal. If you hold Outstanding Notes through The Depository Trust Company and wish to accept the Exchange Offer, you must do so pursuant to The Depository Trust Company's Automated Tender Offer Program, by which you will agree to be bound by the letter of transmittal. By executing the letter of transmittal, each holder will represent to us that, among other things, (1) the Exchange Notes are being obtained in the ordinary course of business of the person receiving such Exchange Notes whether or not such person is the holder, (2) neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such Exchange Notes and (3) neither the -8- 12 holder nor any such other person is an "affiliate," as defined in Rule 405 under the Securities Act of 1933, of the Company. Special Procedures for If you are a beneficial owner whose Outstanding Notes Beneficial Owners are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender in the Exchange Offer, you should contact the person in whose name your Outstanding Notes are registered promptly and instruct the person to tender on your behalf. If you wish to tender in the Exchange Offer on your own behalf, you must, prior to completing and executing the letter of transmittal and delivering your Outstanding Notes, either make appropriate arrangements to register ownership of the Outstanding Notes in your name or obtain a properly completed bond power from the person in whose name your Outstanding Notes are registered. The transfer of registered ownership may take considerable time. Guaranteed Delivery If you wish to tender your Outstanding Notes in the Procedures Exchange Offer and your Outstanding Notes are not immediately available or you cannot deliver your Outstanding Notes, the letter of transmittal or any other required documents or you cannot comply with the procedures for book-entry transfer prior to the expiration date, you may tender your Outstanding Notes according to the guaranteed delivery procedures set forth under "The Exchange Offer--Guaranteed Delivery Procedures." Withdrawal Rights Tenders may be withdrawn at any time prior to 5:00 p.m., New York City time, on the expiration date pursuant to the procedures described under "The Exchange Offer--Withdrawal of Tenders." Acceptance of Outstanding We will accept for exchange any and all Outstanding Notes and Delivery of Notes that are properly tendered in the Exchange Exchange Notes Offer prior to the expiration date. The Exchange Notes issued pursuant to the Exchange Offer will be delivered promptly after the expiration date. See "The Exchange Offer --Terms of the Exchange Offer." Certain U.S. Federal We believe with respect to the exchange of Income Tax Consequences Outstanding Notes for Exchange Notes: o the exchange should not constitute a taxable exchange for U.S. federal income tax purposes; o you should not recognize gain or loss upon receipt of the Exchange Notes; and o you must include interest on the Exchange Notes in gross income to the same extent as the Outstanding Notes. Registration Rights Agreement In connection with the sale of the Outstanding Notes, we entered into a registration rights agreement with the initial purchasers of the Outstanding Notes which grant the holders of the Outstanding Notes certain exchange and registration rights. As a result of the making of this Exchange Offer, we will have fulfilled certain of our obligations under the registration rights agreement. If you do not tender your Outstanding Notes in the -9- 13 Exchange Offer, you will not have any further registration rights under the registration rights agreement or otherwise, unless you were not eligible to participate in the Exchange Offer. See "The Exchange Offer--General." In such event, you will continue to hold the untendered Outstanding Notes and will be entitled to all the rights and subject to all the limitations applicable to the Outstanding Notes under the indenture governing the notes, except to the extent such rights or limitations, by their terms, terminate or cease to have further effectiveness as a result of the Exchange Offer. All untendered Outstanding Notes will continue to be subject to restrictions on transfer under the Securities Act of 1933. Exchange Agent State Street Bank and Trust Company is serving as our exchange agent in connection with the Exchange Offer. -10- 14 Summary Description of the Exchange Notes The form and terms of the Exchange Notes will be substantially the same as the form and terms of the Original Notes except that: (i) the Exchange Notes have been registered under the Securities Act of 1933 and, therefore, will not bear legends restricting the transfer thereof; and (ii) the holders of the Exchange Notes, except for limited instances, will not be entitled to further registration rights under the registration rights agreement. The Exchange Notes will evidence the same debt as the Original Notes and will be entitled to the benefit of the indenture under which the Original Notes were issued. Notes Offered $170.0 million aggregate principal amount of 8% Senior Notes due 2009. $275.0 million aggregate principal amount at maturity of 9 1/4% Senior Discount Notes due 2009. Maturity Date The Exchange Notes will mature on February 1, 2009. Interest We will pay interest on the Exchange Senior Notes at the rate of 8% per year on February 1 and August 1 of each year, beginning on August 1, 1999. The Exchange Senior Discount Notes will be issued at a discount to their aggregate principal amount at maturity. For a discussion of U.S. federal income tax treatment of the Exchange Senior Discount Notes under the original issue discount rules, please refer to the section of this Prospectus entitled "Certain Federal Tax Considerations." The Exchange Senior Discount Notes will accrete at a rate of 9 1/4% per year to an aggregate principal amount of $275.0 million by February 1, 2004. The Exchange Senior Discount Notes will not accrue interest prior to February 1, 2004, unless we elect to accrue interest on or after February 1, 2002. On and after August 1, 2004, we will pay interest on the Exchange Senior Discount Notes at the rate of 9 1/4% per year on February 1 and August 1 of each year. Ranking Your right to payment under the Exchange Notes will rank equally with the right to payment of our future unsecured and unsubordinated debt holders. Bresnan Communications Group LLC is a holding company and conducts all of its operations through its subsidiaries. Bresnan Capital Corporation has no, and the terms of the indenture governing the Notes prohibit it from having any, obligations other than the Notes. If we default, your right to payment under the Exchange Notes will be structurally subordinated to all existing and future liabilities (including trade payables) of our subsidiaries other than Bresnan Capital Corporation. After giving effect to the TCI Transactions and the Financings, as of December 31, 1998, all of our outstanding liabilities, other than the Notes, would have been incurred by our subsidiaries and would have totaled approximately $540.1 million, including approximately $511.8 million of indebtedness, all of which would have been structurally senior to the Exchange Notes. -11- 15 Sinking Fund None. Optional Redemption We may not redeem the Exchange Notes prior to February 1, 2004 except as set forth below. After February 1, 2004, we may, at our option, redeem the Exchange Notes, in whole or in part, at any time prior to maturity at the redemption prices set forth under "Description of Notes--Optional Redemption." In addition, at any time on or prior to February 1, 2002, we may redeem up to 35% of the aggregate principal amount of the Exchange Senior Notes and/or 35% of the aggregate principal amount at maturity of the Exchange Senior Discount Notes with the net cash proceeds of certain equity offerings at a redemption price of 108.000% of the aggregate principal amount of the Exchange Senior Notes or 109.250% of the accreted value of the Exchange Senior Discount Notes, as applicable, in each case, plus accrued and unpaid interest, if any, to the date of redemption; provided that at least 65% of the aggregate principal amount of the Exchange Senior Notes and 65% of the aggregate principal amount at maturity of the Exchange Senior Discount Notes, as applicable, remain outstanding immediately after any redemption. See "Description of Notes--Optional Redemption." Change of Control Upon a change of control under the indenture governing the Exchange Notes, you will have the right to require us to repurchase all or a portion of your Exchange Notes at a price equal to 101% of the principal amount or accreted value thereof, as applicable, in each case, plus accrued and unpaid interest, if any, to the date of repurchase. See "Description of Notes--Purchase at the Option of Holders Upon a Change of Control." Certain Covenants The indenture governing the Exchange Notes will limit our ability and the ability of our restricted subsidiaries to, among other things, o incur additional indebtedness, o make certain restricted payments, o create certain liens, o in the case of our restricted subsidiaries, create or permit to exist dividend or payment restrictions with respect to us, o in the case of our restricted subsidiaries, guarantee indebtedness, o consolidate, merge or transfer all or substantially all of our assets or the assets of our subsidiaries on a consolidated basis, o sell assets, and o transact business with our affiliates. All of these limitations will be subject to a number of important qualifications. See "Description of Notes--Certain Covenants." -12- 16 Exchange Offer; Registration Rights To remove the transferability restrictions on the Outstanding Notes, we have agreed: o to file the registration statement of which this Prospectus is a part with the Securities and Exchange Commission ("the Commission") to exchange the Outstanding Notes for the Exchange Notes within 120 days after the original issuance of the Outstanding Notes (the "Original Issue Date"); o to cause the registration statement to be declared effective by the Commission within 180 days after the Original Issue Date; and o to consummate the Exchange Offer no later than the 30th business day after the registration statement is declared effective. If the Exchange Offer is not permitted by applicable law or Commission policy, or a holder is not otherwise able to exchange its Outstanding Notes for certain reasons, we will file with the Commission, subject to our receipt of certain information, a shelf registration statement to register restricted Outstanding Notes for public resale. We will seek to have any shelf-registration statement declared effective by the Commission relating to the resale of the Notes (the "Shelf Registration Statement"). In such case, we will also use our reasonable best efforts to keep the Shelf Registration Statement effective until the earlier of two years after the Original Issue Date or the date on which all applicable Notes have been sold thereunder. If we default on our registration obligations, we will be obligated to pay certain Special Interest (as defined) to the holders of the Notes. See "The Exchange Offer--Registration Defaults; Special Interest." Use of Proceeds We will not receive any cash proceeds from the Exchange Offer. See "Use of Proceeds." Risk Factors You should consider carefully all of the information set forth in this Prospectus and, in particular, should evaluate the specific factors set forth under "Risk Factors" in deciding whether to invest in the Exchange Notes. -13- 17 Summary Combined Financial and Operating Data (dollars in thousands, except per subscriber data) The summary combined financial data as of and for the three years ended December 31, 1998 set forth below have been derived from the audited combined financial statements of Bresnan Communications Group Systems (a combination of the financial statements of the Parent and the Contributed TCI Systems), the predecessor to the Company for accounting and financial reporting purposes. Prior to consummating the TCI Transactions, the Parent and the owners of the Contributed TCI Systems were under the common ownership and control of TCI. Based on such common ownership and control, the financial data are presented at historical cost on a combined basis. See "Use of Proceeds." The pro forma combined financial data for the year ended December 31, 1998 set forth below have been derived from the unaudited pro forma combined financial data of the Company contained in this Prospectus under the caption "Unaudited Pro Forma Combined Financial Data." The data set forth below are qualified in their entirety by, and should be read in conjunction with, the historical combined financial statements of Bresnan Communications Group Systems, the predecessor to the Company for accounting and financial reporting purposes, and the related notes thereto, "Risk Factors--The TCI Transactions," "Unaudited Pro Forma Combined Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Prospectus.
Year Ended December 31, ------------------------------------------------------ Pro Forma 1996 1997 1998 1998(a) --------- --------- --------- --------- Statement of Operations Data: Revenue $ 216,609 $ 247,108 $ 261,964 $ 261,964 Operating costs and expenses: Programming 46,087 53,857 63,686 62,687 Operating 31,405 31,906 28,496 28,496 Selling, general and administrative 52,485 50,572 58,568 55,913 Depreciation and amortization 50,908 53,249 54,308 54,308 --------- --------- --------- --------- Total operating costs and expenses 180,885 189,584 205,058 201,404 --------- --------- --------- --------- Operating income 35,724 57,524 56,906 60,560 Other income (expense) (b): Interest--related party (1,859) (1,892) (1,872) -- Interest--other (13,173) (16,823) (16,424) (72,650) Gain on sale of cable television systems -- -- 27,027 27,027 Other, net (844) (978) (273) (273) --------- --------- --------- --------- Total other income (expense) (15,876) (19,693) 8,458 (45,896) --------- --------- --------- --------- Net earnings $ 19,848 $ 37,831 $ 65,364 $ 14,664 ========= ========= ========= =========
-14- 18
Year Ended December 31, ------------------------------------------------------ Pro Forma 1996 1997 1998 1998(a) --------- --------- --------- --------- Financial Ratios and Other Data: EBITDA(c) $ 86,632 $ 110,773 $ 111,214 $ 114,868 Capital expenditures 78,248 33,875 58,601 -- Ratio of total debt to EBITDA(d) 7.5 Ratio of earnings to fixed charges(e) 2.1x 2.9x 4.4x 1.2x Average monthly total revenue per average basic subscriber(f) $ 30.95 $ 33.16 $ 34.61 $ 34.61 Cash Flow Data: Net cash provided by operations 79,143 92,548 102,361 -- Net cash used in investing (78,335) (34,103) (72,276) -- Net cash used in financing (3,100) (54,741) (25,406) -- Summary Operating Data (end of period): Homes passed 847,364 914,182 901,792 901,792 Basic subscribers 584,807 620,862 617,867 617,867 Basic penetration 69.0% 67.9% 68.5% 68.5% Premium units 295,727 262,900 243,501 243,501 Pay-to-basic ratio(g) 50.6% 42.3% 39.4% 39.4% Balance Sheet Data (end of period): Total assets $ 596,047 $ 617,198 $ 664,436 $ 679,369 Total debt 207,234 214,170 232,617 856,868 Parents' investment/member's equity 347,188 359,098 381,748 (205,735)
(a) The unaudited pro forma combined financial data for the year ended December 31, 1998 give pro forma effect to the TCI Transactions and the Financings as if such transactions had occurred on January 1, 1998, but do not give pro forma effect to certain acquisitions and dispositions of assets that were closed or are expected to be closed after December 31, 1998. See "--Recent Events." (b) The historical combined financial data do not include any indebtedness or related interest expense in respect of the Contributed TCI Systems. Pro forma financial data for the year ended December 31, 1998 give pro forma effect to interest expense as if the TCI Transactions and Financings had occurred on January 1, 1998. (c) EBITDA represents operating income before depreciation and amortization. EBITDA is presented because it is a widely accepted financial indicator of a company's ability to incur and service debt. EBITDA, however, is not a measure determined in accordance with generally accepted accounting principles ("GAAP") and should not be considered in isolation or as a substitute for or an alternative to net income, cash flow from operating activities or other income or cash flow data prepared in accordance with GAAP, or as a measure of a company's operating performance or liquidity. EBITDA as presented may not be comparable to other similarly titled measures used by other companies. (d) The ratio of total debt to EBITDA was calculated by dividing pro forma total debt by pro forma EBITDA for the year ended December 31, 1998. The historical combined financial statements of the Bresnan Communications Group Systems appearing elsewhere in this Prospectus do not reflect the Assumed TCI Debt assumed pursuant to the terms of the Contribution Agreement and repaid with the net proceeds of the Cash Contribution and the Financings. The pro forma effect of the Assumed TCI Debt is reflected in the unaudited pro forma combined financial data appearing elsewhere in this Prospectus. (e) For purposes of this calculation, "earnings" is defined as earnings before fixed charges. Fixed charges represent interest paid or accrued on indebtedness, the amortization of deferred financing costs and the portion of rents deemed representative of the interest factor. The historical combined financial statements of Bresnan Communications Group Systems, the predecessor of the Company for accounting and financial reporting purposes, appearing elsewhere in this Prospectus do not reflect the Assumed TCI Debt assumed pursuant to the terms of the Contribution Agreement and repaid with the net proceeds of the Cash Contributions and the Financings. The pro forma effect of the Assumed TCI Debt is reflected in the unaudited pro forma combined financial data appearing elsewhere in this Prospectus. In addition had the pro forma combined financial statement of operations been prepared excluding the gain on sale of cable television systems, the Company would have had a deficiency of earnings available to cover fixed charges of $12.4 million. (f) Represents average monthly total revenue for the periods indicated divided by the number of average basic subscribers in each period. (g) Pay-to-basic ratio measures premium units as a percentage of basic subscribers. -15- 19 RISK FACTORS An investment in the Exchange Notes involves a high degree of risk. You should carefully consider the risk factors set forth below, as well as the other information appearing elsewhere in this prospectus, before making an investment in the Exchange Notes. This prospectus includes "forward-looking statements" including, in particular, the statements about the Company's plans, strategies, and prospects under the headings "Prospectus Summary," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, such plans, intentions or expectations may not be achieved. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this prospectus are set forth below and elsewhere in this prospectus. All forward-looking statements attributable to the Company or persons acting on our behalf are expressly qualified in their entirety by the following cautionary statements. Substantial Leverage and Deficit in Member's Equity--Our substantial indebtedness and deficit in member's equity could adversely affect our financial health and prevent us from fulfilling our obligations under the Notes. We have a significant amount of indebtedness and the carrying value of our liabilities exceeds the carrying value of our assets by a substantial amount. The following chart shows certain important credit statistics and is presented assuming that the TCI Transactions and the Financings were completed as of the dates or at the beginning of the periods specified below and applied the proceeds as intended:
Pro Forma As of December 31, 1998 ---- (in millions) Total indebtedness ...................................... $ 856.9 Member's equity (deficit) ............................... $ (205.7) Pro Forma For the Year Ended December 31, 1998 ---- Ratio of earnings to fixed charges ..................... 1.2x
In addition, after completion of the Recent Acquisitions and Disposition, our pro forma total indebtedness would have increased by $14.6 million as of December 31, 1998 and our pro forma ratio of earnings to fixed charges would have been 1.2 for the year ended December 31, 1998. See "Prospectus Summary--Recent Events." In addition had the pro forma combined statement of operations been prepared excluding the gain on sale of cable television systems, the Company would have a deficiency of earnings available to cover fixed charges of $12.4 million. Our substantial indebtedness and deficit in member's equity could have important consequences to you. For example, it could: o make it more difficult for us to satisfy our obligations with respect to the Notes; o increase our vulnerability to general adverse economic and telecommunications industry conditions, including interest rate fluctuations; o limit our ability to obtain necessary financing to fund future working capital requirements, capital expenditures, acquisitions of additional systems, debt service and other general corporate requirements; -16- 20 o require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, including the Notes and the New Credit Facility, thereby reducing the availability of our cash flow to fund working capital requirements, capital expenditures, acquisitions of additional systems, and other general corporate requirements; o limit our flexibility in planning for, or reacting to, changes in our business and the telecommunications industry; o place us at a competitive disadvantage compared to our competitors that have less debt or whose liabilities do not exceed their assets; and o limit, along with the financial and other restrictive covenants in our indebtedness, including the Notes and the New Credit Facility, among other things, our ability to borrow additional funds. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could have a material adverse effect on us. See "--Risks Associated with the Restrictions Imposed by the New Credit Facility," "Description of the New Credit Facility" and "Description of Notes." Additional Borrowings Available--Despite current indebtedness levels, we may still be able to incur substantially more indebtedness. This could exacerbate the risks described above. We may be able to incur substantial additional indebtedness in the future. The terms of the indenture governing the Notes do not fully prohibit us from doing so. Further, the indenture allows for the incurrence of all such indebtedness at our subsidiaries, all of which would be structurally senior to the Notes. In addition, as of December 31, 1998, BTC would have been permitted to borrow additionally up to approximately $ 138.2 million under the New Credit Facility, subject to the covenants contained therein, after giving effect to the TCI Transactions and the Financings. All of those borrowings would be structurally senior to the Notes. We expect to continue to borrow funds under the New Credit Facility. Furthermore, the New Credit Facility provides BTC with the right to request that the lenders thereunder lend it up to an additional $200.0 million, subject to the terms and conditions contained therein. If new indebtedness is added to our current indebtedness levels, the related risks that we and you now face could intensify. See "Capitalization," "Selected Combined Financial and Operating Data," "Description of the New Credit Facility" and "Description of Notes--Certain Covenants." Risks of Significant Cash Requirements--To service our indebtedness and grow our business, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control. Our ability to make payments on and to refinance our indebtedness, including the Notes and the New Credit Facility, which has a maturity date prior to that of the Notes, and to fund planned capital expenditures will depend on our ability to generate cash and secure financings in the future. Our ability to do this, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Based on our current level of operations, we believe our cash flow from operations, available cash and available borrowings under our New Credit Facility, subject to the covenants contained therein, will be adequate to meet our liquidity needs for the foreseeable future. Our business may not generate sufficient cash flow from operations. In addition, future borrowings may not be available to us under the New Credit Facility or other sources of financing in an amount sufficient to enable us to service our indebtedness, including the Notes and the New Credit Facility, to grow our business or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness, including the Notes and the New Credit Facility, on or before maturity. We may not be able to refinance any of our indebtedness, including the Notes and the New Credit Facility, on commercially reasonable terms or at all. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." -17- 21 Net Losses--We have a history of net losses and expect to continue to experience net losses. The Existing Bresnan Systems sustained net losses in each of the years in the four-year period ended December 31, 1997. For the year ended December 31, 1998, the Existing Bresnan Systems recorded net income of $18.8 million after recognizing a gain of $27.0 million on the sale of certain cable systems. Without the recognition of this gain in 1998, the loss for such period would have been $8.2 million. As part of the TCI Transactions, we have assumed and repaid the Assumed TCI Debt. The combined historical financial information of Bresnan Communications Group Systems, predecessor to the Company for accounting and financial reporting purposes, presented elsewhere in this prospectus does not include such assumed indebtedness on the balance sheet or the effect such indebtedness would have had on our results of operations. See "The TCI Transactions," "Use of Proceeds" and "Unaudited Pro Forma Combined Financial Data." Lenders May Block Distributions--If we are in default under our New Credit Facility, our lenders could prevent us from being able to make payments to the holders of the Notes. As described below, we must rely on dividends and distributions from our subsidiaries to pay interest on the Notes, to pay principal amounts when due and to purchase Notes tendered to our Company upon, under certain circumstances, asset dispositions or upon a change of control as defined in the indenture governing the Notes. The New Credit Facility limits the amount of dividends and other distributions BTC will be able to pay or make to us. Furthermore, no dividends or distributions are allowed at any time that BTC is in violation of any of the covenants or representations therein, which include maintenance covenants (e.g., senior leverage ratio, total leverage ratio, maximum capital expenditures and operating cash flow to interest expense ratio). For so long as a default under the New Credit Facility continues, payments on the Notes may only be made with the consent of the lenders under the New Credit Facility. There is no limit on how long this prohibition on dividends and distributions, and hence payments on the Notes, may continue and the lenders are not required to accelerate the maturity of the loans or consent to the making of payments on the Notes. Accordingly, if requested, the lenders may not consent. See "--Risks Associated with the Restrictions Imposed by the New Credit Facility," "-- Subordination/Holding Company Structure" and "Description of the New Credit Facility." Risks Associated with the Restrictions Imposed by the New Credit Facility--Our New Credit Facility imposes significant restrictions on us. The New Credit Facility contains a number of significant covenants that, among other things, restrict the ability of BTC and its subsidiaries to: o pay dividends or make distributions to the Company, including distributions necessary to make payments on the Notes; o pledge assets; o dispose of assets or merge; o incur indebtedness; o repurchase or redeem equity interests and indebtedness; o create liens; o make certain capital expenditures; -18- 22 o make certain investments or acquisitions; o provide guarantees; o enter into leases; and o enter into affiliate transactions. In addition, the New Credit Facility contains, among other covenants, requirements that we maintain specified financial ratios. The New Credit Facility also restricts BCG's ability to incur additional indebtedness. Our ability to comply with these provisions may be affected by events beyond our control. The breach of any of these covenants will result in a default under the New Credit Facility. In addition, our ownership interest in BTC is pledged under the New Credit Facility and our subsidiaries guarantee the indebtedness under such facility. In the event of any default, our lenders could elect to declare all amounts borrowed under the New Credit Facility, together with accrued interest and other fees, to be due and payable and could prevent the distribution of funds by BTC to BCG. If the amounts outstanding under the New Credit Facility were to be accelerated, thereby causing an acceleration of amounts outstanding under the Notes, we may not be able to repay such amounts and the Notes. The New Credit Facility provides that certain changes in the indirect ownership interests in BTC of TCI or Blackstone would constitute an event of default thereunder. As a result, the lenders under the New Credit Facility may have the right to accelerate the loans thereunder. A change of control under the New Credit Facility may not constitute a change of control under the indenture governing the Notes for which we would be required to make an offer to purchase the Notes. See "Description of Notes--Purchase at the Option of Holders Upon a Change of Control." See "Description of the New Credit Facility." Subordination/Holding Company Structure--The Notes are the obligations of a holding company which has no operations and depends on its subsidiaries for cash. The Notes are the obligations of BCG, which is a holding company. Our subsidiaries conduct all of our consolidated operations and own substantially all of our consolidated assets. Consequently, our cash flow and our ability to meet our debt service obligations depends upon the cash flow of our subsidiaries and the payment of funds by the subsidiaries to the holding company in the form of loans, dividends or otherwise. The subsidiaries are not obligated to make funds available to the holding company for payment on the Notes or otherwise. In addition, our subsidiaries' ability to make any payments will depend on their earnings, the terms of their indebtedness, including the New Credit Facility, business and tax considerations and legal restrictions. The New Credit Facility limits our subsidiaries' ability to make funds available to BCG, the holding company. The Notes will effectively rank junior to all liabilities of our subsidiaries, including the New Credit Facility. In the event of a bankruptcy, liquidation or dissolution of a subsidiary and following payment of these liabilities, our subsidiaries may not have sufficient assets remaining to make payments to us as a shareholder or otherwise. In addition, our ownership interest in BTC is pledged under the New Credit Facility and our subsidiaries guarantee the indebtedness under such facility. After giving effect to the TCI Transactions and the Financings, as of December 31, 1998, our subsidiaries would have had approximately $540.1 million of outstanding liabilities, including $511.8 million of indebtedness. See "Capitalization" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." In addition, after giving effect to the TCI Transactions and the Financings and assuming that we have completed the Recent Acquisitions and Disposition, as of December 31, 1998, our subsidiaries would have had approximately $554.7 million of outstanding liabilities, including $526.5 million of indebtedness. The indenture governing the Notes will permit us to incur additional indebtedness, including secured indebtedness, under certain circumstances, all of which may be incurred by our subsidiaries. All of the indebtedness of the Company, other than the Notes, is structurally senior to the Notes and our indebtedness and other liabilities exceed our assets by $205.7 million. See "--Additional Borrowings Available," "--Lenders May Block Distributions" and "--Risks Associated with the Restrictions Imposed by the New Credit Facility." -19- 23 Risks Associated with Integrating New Systems--We may not have the ability to integrate the new systems and basic subscribers obtained in connection with the TCI Transactions. We own and operate cable television systems serving approximately 618,000 basic subscribers, as compared to approximately 201,000 basic subscribers previously served by the Existing Bresnan Systems. The integration of these new cable television systems and basic subscribers will place significant demands on our management and our operational, financial and marketing resources. Our current operating and financial systems and controls may not be adequate and any steps taken to improve these systems and controls may not be sufficient. Our failure to successfully integrate and manage the new systems may have a material adverse effect on our business, financial condition and results of operations. Risks of Growth Strategy--If we are unsuccessful in implementing our growth strategy we may be unable to fulfill our obligations under the Notes. We have evaluated and we expect to continue to evaluate possible strategic acquisitions and dispositions of related businesses and assets, some of which may be significant, on an ongoing basis and at any given time we may be engaged in discussions or negotiations or enter into agreements with respect thereto. We expect that a substantial portion of any of our future growth will be achieved through the provision of new and enhanced services and through acquisitions and joint ventures. We may not be able to offer successfully new and enhanced services and such new and enhanced services may not generate additional cash flows. In addition, acquisitions are subject to certain material contingencies, including approval by the Federal Communications Commission (the "FCC") of transfers and assignments of certain licenses and, in most instances, approval by each municipality or franchising authority of the transfer of the franchises issued by it. We may not be able to obtain the required approvals to complete any future acquisitions and onerous conditions may be imposed in connection with obtaining any approval. Also, we may not be able to successfully complete acquisitions of additional cable television systems consistent with our business strategy or successfully integrate any acquired businesses into our operations. Furthermore, unexpected liabilities and contingencies associated with acquired businesses may accompany acquisitions. Our continued growth may also increase our need for qualified personnel. We may not be successful in attracting, integrating and retaining qualified personnel. Additionally, in the event that we enter into a definitive agreement with respect to any acquisition or joint venture, we may require additional financing. We may not be able to obtain additional financing for any future acquisitions or joint ventures on commercially reasonable terms or at all. Risks Associated with Future Capital Requirements--Our capital investment program may not generate projected results and we may need to obtain additional capital to fund all planned capital expenditures. We may not be able to obtain additional capital. We intend to upgrade a significant portion of the Contributed TCI Systems and make other capital investments. We expect to make approximately $110.0 million in capital investments during 1999. We may not be able to fund our planned capital investments. Our ability to incur additional indebtedness is limited under the terms of our indebtedness and under certain circumstances requires the consent of two-thirds of the holders of the Parent's limited partnership interests. Moreover, successful completion of our upgrade may not allow us to compete effectively with competitors which either do not rely on cable to deliver telecommunications services into the home or have access to significantly greater amounts of capital and an existing telecommunications network. Our failure to make our planned capital expenditures could have a material adverse effect on our financial condition or results of operations and on our competitive position. See "--Risks Associated with Competition," "Business--Technology Overview," "Description of the Partnership Agreement," "Description of the New Credit Facility" and "Description of Notes." Risks Associated with Competition--We operate in a very competitive business environment. We face competition from several sources, including: -20- 24 o alternative methods of receiving and distributing television signals, including direct broadcast satellite, multipoint multichannel distribution systems, master antenna television systems and satellite master antenna television systems; o data transmission and Internet service providers; and o other sources of news, information and entertainment such as off-air television broadcast programming, newspapers, movie theaters, live sporting events and home video products, including videotape cassette recorders and digital video disc players. The FCC and Congress are expected to consider proposals to enhance the ability of direct broadcast satellite providers to gain access to additional programming and to authorize direct broadcast satellite carriers to transmit local signals to local markets on a broader basis than permitted under current law. If direct broadcast satellite providers gain permission and are able to deliver local or regional off-air signals, cable television system operators may lose a competitive advantage over direct broadcast satellite providers. Moreover, direct broadcast satellite providers are not subject to many of the regulations imposed on franchised cable operators, such as rate regulation. Direct broadcast satellite providers also have, in some cases, procured exclusive programming distribution rights. In addition, some of the Regional Bell Operating Companies, other telephone companies, public utility companies and other entities are in the process of entering our business. The Regional Bell Operating Companies, other telephone companies, public utility companies and other entities which may enter our business have significant access to capital, and several have expressed their intention to enter the multichannel video programming distribution business in addition to their existing voice and data transmission businesses. Among other things, telephone companies have an existing relationship with the households in their service areas, have substantial financial resources, and may have an existing infrastructure which may be capable of delivering cable television service. Electric utilities also have the potential to become significant competitors in the video marketplace, as many of them already possess fiber optic transmission lines in certain of the areas they serve. In the last year, several utilities have announced, commenced, or moved forward with ventures involving multichannel video programming distribution. Cable television systems generally operate pursuant to franchises granted on a non-exclusive basis. In addition, the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act") prohibits franchising authorities from unreasonably denying requests for additional franchises and permits franchising authorities to operate cable television systems in their communities without franchises. As franchises are non-exclusive, other cable television companies can build their own systems and obtain franchises to operate directly in competition with us. This type of competition is called "overbuilding." We are aware of existing overbuild situations in four of our systems which service an aggregate of approximately 41,000 basic subscribers, or approximately 6% of our total basic subscribers. We cannot predict whether competition from these or future competitors or from developing and future technologies will have a material effect on us and our business and operations. Moreover, as we expand and introduce new and enhanced services, including additional telecommunications services, we will be subject to increased competition from other telecommunications providers. The industry in which we operate is highly competitive and we may compete against competitors with fewer regulatory burdens, greater financial and personnel resources, greater brand name recognition and long-standing relationships with regulatory authorities. Moreover, mergers, joint ventures and alliances among franchise, wireless or private cable television operators, Regional Bell Operating Companies and others may result in providers capable of offering cable television and other telecommunications services in direct competition with us. See "Business--Competition." Increases in Programming Costs--Our programming costs are increasing. Programming has been and is expected to continue to be our largest single expense item and accounted for approximately 31% of our total operating costs and expenses for the year ended December 31, 1998. In recent years the cable industry has experienced a rapid escalation in the cost of programming, in particular, sports programming. This escalation may continue and we may not be able to pass programming cost increases on to our subscribers. In addition, as we add programming to our basic and "preferred basic" tiers and reposition the Disney premium service to the "preferred basic" tier, we may face additional market constraints on our ability to pass these costs on to our subscribers. -21- 25 Risks Associated with Regulation of the Cable Television Industry--Our business is subject to extensive governmental legislation and regulation. The applicable legislation and regulations and changes to them could adversely affect our business. The cable television industry is subject to extensive legislation and regulation at the federal and local levels, and, in some instances, at the state level, and many aspects of such regulation are currently the subject of judicial proceedings and administrative or legislative proposals. Future changes in legislation or regulations could have an adverse impact on us and our business operations. For instance, proposals have been introduced before the FCC, local franchising authorities and state regulators to require cable operators offering high-speed Internet services using their broadband high capacity infrastructure and cable modems to allow access to their broadband capacity on an unbundled basis by other Internet service providers. While the FCC recently declined to adopt such proposals, it cannot be determined whether the FCC, local franchising authorities or state regulators will require unbundled access to cable operators' broadband capacity by other Internet service providers. Imposition of an unbundled access requirement could impede the ability of cable operators, including us, to successfully market Internet services to consumers in competition with Internet service providers and could dissuade cable operators from investing in broadband capacity. If such a requirement to open cable lines to competitors were imposed, it could adversely affect us. The 1992 Cable Act significantly expanded the scope of cable television regulation. In particular, pursuant to the 1992 Cable Act, the FCC adopted regulations that limit our ability to set and increase rates for our basic packages and for the provision of cable television-related equipment. Prior to March 31, 1999, our Cable Programming Service tier ("CPS") was also subject to regulations. The 1992 Cable Act permits certified local franchising authorities and the FCC to order rate reductions and refunds of previously collected rates determined to be in excess of the permitted reasonable rates. It is possible that future rate reductions or refunds of previously collected fees may be required in the future. The Telecommunications Act of 1996 materially altered federal, state and local laws and regulations pertaining to cable television, telecommunications and other related services. In particular, the Telecommunications Act substantially amends the Communications Act of 1934 to restrict the ability of the FCC and, in certain instances, franchising authorities, to regulate rates under the 1992 Cable Act. Certain provisions of the Telecommunications Act could materially affect the growth and operation of the cable television industry and the cable services we provide. Certain provisions of the legislation have substantially lessened regulatory burdens, such as the deregulation of rates for the CPS tier which occurred on March 31, 1999. However, the cable television industry is subject to additional competition as a result of the legislation. Furthermore, certain provisions of the Telecommunications Act and the FCC's implementing regulations have been, and likely will be, subject to judicial challenge, and the FCC continues to implement the Telecommunication Act in rule making proceedings. At this time, we cannot predict the outcome of such litigation or the short and long-term effect (financial or otherwise) of the Telecommunications Act and FCC rulemakings on our operations. See "Legislation and Regulation." Risks Associated with Offering Telecommunications Services--As we continue to offer telecommunications services, we may be subject to additional regulatory burdens. As we continue to enter the business of offering wireline telecommunications services, we may be required to obtain federal, state and local licenses or other authorizations to offer such services. We may not be able to obtain such authorizations in a timely manner, if at all, and conditions could be imposed upon such licenses or authorizations that may not be favorable to us. Furthermore, telecommunications carriers are subject to additional regulation, as well as higher rates for pole attachments. In particular, under the Telecommunications Act, providers of telecommunications services who cannot reach agreement with local utilities over pole attachment rates in states that do not regulate pole attachment rates will be subject to an FCC methodology for determining the rates, which rates would be higher than those paid by cable operators. The rate increases are to be phased in over a five-year period beginning on February 8, 2001. If we become subject to such regulation or higher rates, we may incur additional costs which may be material to our business. See "Legislation and Regulation." -22- 26 Risks Associated with Loss of Favorable Programming and Equipment Supply--We could lose our current access to favorable programming service rates and equipment discounts. We have the right under an agreement with TCI to purchase various programming services at TCI's cost plus an administrative surcharge. In connection with the TCI Transactions, TCI has agreed to use its reasonable best efforts to make goods and services that are provided to TCI available to us following the consummation of the TCI Transactions on the same terms and conditions as they are made available to TCI, subject to certain conditions and restrictions. We could lose this beneficial treatment under certain circumstances, including in the event that TCI does not own the required interest in the Company or upon an initial public offering. TCI's ownership in the Parent falling below a required contractual ownership threshold may cause us to lose our beneficial rates, but not necessarily trigger a change of control under the indenture governing the Notes. Our management believes that the rates at which we purchase programming and equipment from TCI are significantly lower than those it could obtain independently. Loss of access to programming and equipment at such favorable rates could have a material adverse effect on our financial condition and results of operations. We also have access to certain technological innovations as a result of our affiliation with TCI. We may not be able to purchase programming services at these rates, receive equipment discounts or have access to certain technological innovations in the future. See "Business--Programming and Equipment Supply," "Certain Relationships and Related Transactions--Agreements Entered into in Connection with the Transactions" and "Description of the Partnership Agreement." Exit Provisions--The owners of the Company may be forced to or may elect to exit the Company. In this event, among other things, we may lose our access to favorable programming and goods and services supply. Pursuant to the partnership agreement entered into in connection with the consummation of the TCI Transactions (the "Partnership Agreement"), Blackstone or TCI may elect to sell their interests in the Parent after five years from the date of the consummation of the TCI Transactions, which is up to approximately five years prior to the maturity of the Notes, or, in limited circumstances, cause an initial public offering after three years from the date of the consummation of the TCI Transactions. A sale by either Blackstone or TCI of their interests in the Parent or an initial public offering may have one or more of the following consequences: o we may be forced to sell our business o William J. Bresnan and affiliates of William J. Bresnan may elect to sell their interests in the Parent o if either Blackstone or TCI sells to the other, William J. Bresnan and affiliates of William J. Bresnan may be forced to sell their interests in the Parent o we may lose our access to favorable programming and goods and services supply. See "--Risks Associated with Loss of Favorable Programming and Equipment Supply." In addition, William J. Bresnan and affiliates of William J. Bresnan may have the right to force TCI to purchase their interests in the Parent upon the occurrence of certain events. If the foregoing transactions result in a change of control under the indenture governing the Notes, we may be required to offer to repurchase all of the outstanding Notes. We may not have sufficient funds to finance a change of control offer. See "--Financing a Change of Control Offer." See "Description of the Partnership Agreement." Original Issue Discount; Tax Distributions--Holders of the Exchange Senior Discount Notes will generally be required to include amounts in gross income for federal income tax purposes in advance of receiving cash and interest deductions may be disallowed to certain beneficial owners of the Company, resulting in increased Tax Distributions and reduced cash. The Exchange Senior Discount Notes will be issued with original issue discount ("OID") for federal income tax purposes. Consequently, holders of the Exchange Senior Discount Notes will be required to include amounts in -23- 27 gross income for federal income tax purposes in advance of receiving cash payments attributable to the income. In the event of our bankruptcy, an Exchange Senior Discount Note holder's claim likely will be limited to the issue price plus the accrued portion of the OID (as determined by the bankruptcy court) at the date of bankruptcy filing. Although the beneficial owners of the partners of the Parent that are affiliates of William J. Bresnan are not taxable as corporations, some of the beneficial owners of Blackstone are corporations. Pursuant to the Partnership Agreement, the Parent is obligated to make certain tax distributions to William J. Bresnan, the partners of the Parent that are affiliates of William J. Bresnan and Blackstone. Based on certain financial forecasts set forth in the Partnership Agreement, the Parent is generally required to apply certain tax allocation methods so that Blackstone is allocated no more than $50,000 of income for the first six fiscal years of the Company. See "Certain Federal Tax Considerations" for a more detailed discussion of the federal income tax consequences to us and to holders of the Exchange Senior Discount Notes resulting from the purchase, ownership and disposition of the Exchange Senior Discount Notes. Dependence on Key Personnel--The loss of certain key executive officers could adversely affect the Company. Our operations are managed by a small number of key executive officers, including William J. Bresnan, Jeffrey S. DeMond and Michael W. Bresnan. The loss of William J. Bresnan, Jeffrey S. DeMond or Michael W. Bresnan could have a material adverse effect on our financial condition and results of operations. We have not entered into any employment agreements with or procured key man life insurance on any of our key executive officers. Risks Associated with Potential Conflicts of Interest--Our management is also responsible for managing other cable television operations and may not be able to devote their full time to our operations. In addition to the Company, William J. Bresnan and TCI control a partnership with significant international cable television operations. We do not hold any equity interests in this entity and do not derive any revenue from or have any obligations to it. Management of the Company is performed by the officers of one of our affiliates, which is wholly owned by William J. Bresnan. These officers also perform substantial management and administrative services for the international operations described above. Consequently, there are constraints on the ability of these officers to devote all or a significant portion of their time to the Company and conflicts of interest may arise in the allocation of management and administrative services and personnel between the Company and the international operations described above. No formal procedures exist or are planned for determining whether the Company or the international operations described above will receive priority with respect to personnel requirements. In addition, TCI and other media and telecommunications companies in which either TCI and/or Blackstone have ownership interests are in the business of providing cable, telephony and other telecommunications services. As a result, TCI and/or Blackstone may have interests or acquire interests in the future in entities that may conflict with our interests. We have no ability to preclude TCI or Blackstone from pursuing such other interests. See "Certain Relationships and Related Transactions." Financing a Change of Control Offer--We may not have the ability to raise the funds necessary to finance the change of control offer required by the indenture. Upon the occurrence of certain specific kinds of change of control events, we will be required to offer to repurchase all outstanding Notes. However, we may not have sufficient funds at the time of the change of control to make the required repurchase of Notes or restrictions in the New Credit Facility or other indebtedness may not allow such repurchases. In addition, certain important corporate events, such as leveraged recapitalizations that would increase the level of our indebtedness, would not constitute a "Change of Control" under the indenture governing the Notes. See "Description of Notes--Purchase at the Option of Holders Upon a Change of Control." -24- 28 Late Fee Litigation--Certain of the Contributed TCI Systems have been, and we may in the future be, named in actions relating to the imposition of late fees. These actions could adversely affect our business. Certain of the Contributed TCI Systems have been named in purported class actions in various jurisdictions concerning late fee charges and practices. Certain of our cable television systems charge late fees to subscribers who do not pay their cable bills on time. Plaintiffs generally allege that the late fees charged by such cable television systems are not reasonably related to the costs incurred by the cable television systems as a result of the late payments. Plaintiffs seek to require cable television systems to provide compensation for alleged excessive late fee charges for past periods. These cases are at various stages of the litigation process. Pursuant to the Contribution Agreement, the pending actions, to the extent they relate to the Contributed TCI Systems and to periods prior to the consummation of the TCI Transactions, will remain liabilities of TCI. However, we may be named in the pending actions or there may be future actions relating to late fees brought against the Company, which may have a detrimental impact on our business. Franchises--Our non-exclusive franchises are subject to non-renewal or termination in certain circumstances. Cable television companies operate under franchises typically granted by local authorities which are subject to renewal and renegotiation from time to time. Our business is dependent upon the retention and renewal of its local franchises. A franchise is generally granted for a fixed term, for instance, ranging from five to 15 years, but in many cases is terminable if the franchisee fails to comply with the material provisions thereof. Our franchises typically impose conditions relating to the use and operation of the cable television system, including requirements relating to the payment of fees, system bandwidth capacity, customer service, franchise renewal and termination. The 1992 Cable Act prohibits franchising authorities from granting exclusive cable television franchises and from unreasonably refusing to award additional competitive franchises; and permits municipal authorities to operate cable television systems in their communities without franchises. The Cable Communications Policy Act of 1984 (the "1984 Cable Act") provides, among other things, for an orderly franchise renewal process in which a franchise renewal will not be unreasonably withheld or, if renewal is denied and the franchising authority acquires ownership of the system or effects a transfer of the system to another person, the operator generally is entitled to the "fair market value" for the system covered by such franchise, but no value attributable to the franchise itself. Although we believe that we generally have good relationships with our franchise authorities, we may not be able to retain or renew such franchises and the terms of any such renewals may be on terms which are not as favorable to us as our existing franchises. The non-renewal or termination of franchises relating to a significant portion of our subscribers could have a material adverse effect on our results of operations. Year 2000 Risk--We face risks from potential year 2000 problems. We have implemented enterprise-wide, comprehensive efforts to assess and remediate our computer systems and related software and equipment to ensure such systems, software and equipment recognize, process and store information in the year 2000 and thereafter. Such year 2000 remediation efforts, which encompass the Contributed TCI Systems and the Existing Bresnan Systems include an assessment of our most critical systems, such as customer service and billing systems, headends and other cable plant, business support operations, and other equipment and facilities. We are also continuing our efforts to verify the year 2000 readiness of our significant suppliers and vendors and continue to communicate with significant business partners' and affiliates to assess our partners' and affiliates' year 2000 status. We currently estimate the remaining costs associated with our year 2000 program to be at least $4.4 million. Our failure to address or correct a material year 2000 problem could result in an interruption or failure of certain important business operations. We believe our year 2000 program will significantly reduce risks associated with the changeover to the year 2000 and we are currently developing certain contingency plans to minimize the effect of any potential year 2000 related disruptions. See "Management's Discussion and Analysis of Financial Position and Results of Operations--Year 2000." Nominal Assets--Bresnan Capital Corporation has nominal assets and no operations. Bresnan Capital Corporation's sole purpose is to be a co-obligor of the Notes. Bresnan Capital Corporation has nominal assets and no operations. You should not expect Bresnan Capital Corporation to pay you any amounts on the Notes. -25- 29 No Prior Market--You may find it difficult to sell your notes. Currently, there is no public market for the Exchange Notes or the Outstanding Notes. We do not intend to apply for listing of the Notes on any securities exchange or on any automated dealer quotation system. Although the initial purchasers of the Outstanding Notes have informed us that they intend to make a market in the Notes, they are not obligated to do so and may discontinue any such market at any time without notice. In addition, such market making activity may be limited during the Exchange Offer or during an offering under a shelf registration statement should we decide to file one. As a result, we can make no assurance to you as to the development or liquidity of any market for the Notes, your ability to sell the Notes, or the price at which you may be able to sell the Notes. Future trading prices of the Notes will depend on many factors, including, among other things, prevailing interest rates, our operating results and the market for similar securities. Historically, the market for securities similar to the Notes, including non-investment grade debt, has been subject to disruptions that have caused substantial volatility in the prices of such securities. We cannot assure you that, if a market develops, it will not be subject to similar disruptions. Any such disruptions may have an adverse effect on the holders of the Notes. Failure to Exchange Notes--If you fail to exchange your Notes or follow the procedure for tendering, your Notes will continue to be restricted. Issuance of Exchange Notes in exchange for the Outstanding Notes pursuant to the Exchange Offer will only be made following the prior satisfaction of the procedures and conditions set forth in "The Exchange Offer--Procedure for Tendering Outstanding Notes." Such procedures and conditions include timely receipt by the exchange agent (as defined) of such Outstanding Notes, and of a properly completely and duly executed letter of transmittal. Failure to Exchange Notes that are not tendered or are tendered but not accepted will, following the consummation of the exchange offer, continue to be restricted securities under the Securities Act of 1933 and may not be offered or sold except pursuant to any exemption from, or in a transaction not subject to, the Securities Act of 1933 and applicable state securities law. -26- 30 THE TCI TRANSACTIONS Pursuant to the terms of the Contribution Agreement, dated as of June 3, 1998, as amended, by and among Blackstone, the Parent, William J. Bresnan and certain of his affiliates (collectively, the "Bresnan Group"), TCID of Michigan, Inc., a Nevada corporation ("TCID"), and certain other affiliates of TCI (the "Contributed TCI Systems Parties"), the Contributed TCI Systems and the Assumed TCI Debt were transferred to the Parent. The amount of the Assumed TCI Debt was determined to be approximately $708.9 million pursuant to the Contribution Agreement and was adjusted based on, among other things, capital expenditures made prior to the consummation of the TCI Transactions, working capital adjustments and adjustments in respect of acquisitions and dispositions that occur prior to the consummation of the TCI Transactions. In connection with the TCI Transactions, the Contributed TCI Systems and the Assumed TCI Debt, together with the assets and liabilities of the Existing Bresnan Systems, were transferred to BCG, a wholly owned subsidiary of the Parent. BCG then contributed such assets and some or all of such liabilities to BTC, a wholly owned subsidiary of BCG. The Company repaid its existing indebtedness and the Assumed TCI Debt with the net proceeds received from the Cash Contribution and the Financings. See "Use of Proceeds." Since the consummation of the TCI Transactions, the Parent has been managed by BCI (USA), LLC (the "General Partner of the Parent"), an affiliate of William J. Bresnan. As a result of the TCI Transactions, the Company is operating cable television systems that serve approximately 618,000 basic subscribers in six states. As the sole general partner, subject to certain governance provisions set forth in the Partnership Agreement, the General Partner of the Parent is managing the business and day-to-day operations of the Company. For additional information regarding the governance and management of the Parent and the Company, see "Description of the Partnership Agreement." The TCI Transactions consisted of the following principal steps: (1) Prior to consummating the TCI Transactions, (a) each of the Contributed TCI Systems Parties contributed the assets constituting its portion of the Contributed TCI Systems and certain related obligations and liabilities to TCI Bresnan LLC, a Delaware limited liability company wholly owned by the Contributed TCI Systems Parties, and (b) the Contributed TCI Systems Parties together assigned the Assumed TCI Debt to TCI Bresnan LLC. Upon the consummation of the TCI Transactions (the "Closing"), the Contributed TCI Systems and the Assumed TCI Debt were transferred to the Parent. (2) Prior to consummating the TCI Transactions, the Bresnan Group contributed to the General Partner of the Parent all of the interests it holds in the Parent (the "Bresnan Group Contributed Interests"), except for a portion of the interest held by William J. Bresnan, which represents a 1% limited partnership interest in the Parent. In connection with the closing of the TCI Transactions, the General Partner of the Parent converted all of the Bresnan Group Contributed Interests to a limited partnership interest in the Parent, except that the General Partner of the Parent continues to hold that portion of its interest in the Parent that, after giving effect to the TCI Transactions, represents a 1% interest as a general partner. (3) At or immediately prior to the Closing, TCID converted its general partnership interest in the Parent to a limited partnership interest in the Parent. (4) At the Closing, Blackstone paid to the Parent, as a capital contribution, approximately $136.5 million in immediately available funds. In exchange for the capital contribution, Blackstone received an approximate 39.8% limited partnership interest in the Parent. (5) At the Closing, the Parent contributed all of its operating assets and liabilities to BCG, which were contributed with some or all of such liabilities to BTC. As result of these contributions, the Contributed TCI Systems and the Existing Bresnan Systems are consolidated and held by BTC. Blackstone owns approximately a 39.8% equity interest in the Company, TCI indirectly owns a 50.0% equity interest in the Company, and William J. Bresnan and the General Partner of the Parent collectively indirectly own approximately a 10.2% equity interest in the Company. -27- 31 USE OF PROCEEDS We will not receive any cash proceeds from the Exchange Offer. In consideration for issuing the Exchange Notes contemplated herein, we will receive Outstanding Notes in like principal amount or principal amount at maturity, as applicable. We will cancel all Outstanding Notes surrendered in exchange for the Exchange Notes. Accordingly, issuance of the Exchange Notes will not result in any change in the indebtedness of the Company. The net proceeds from the private offering of the Outstanding Notes were approximately $331.0 million. The following table sets forth the estimated sources and uses of funds of the TCI Transactions and the Financings as of December 31, 1998:
Amount (in millions) Sources of Funds: New Credit Facility $ 510.3 Senior Notes 170.0 Senior Discount Notes 175.0 Blackstone contribution 136.5 --------- $ 991.8 ========= Uses of Funds: Repayment of existing debt, including accrued interest(a) $ 252.9 Repayment of the Assumed TCI Debt(b) 708.9 Payment of certain fees and expenses(c) 30.0 --------- $ 991.8 =========
- ---------- (a) Includes repayment of the obligations under the Parent's existing credit facility (the "Old Credit Facility") in the amount of approximately $209.0 million and the promissory note in favor of TCI in the amount of approximately $42.0 million (the "TCID Note"). See "Certain Relationships and Related Transactions." (b) The aggregate amount of the Assumed TCI Debt is subject to adjustment pursuant to the terms of the Contribution Agreement. See "Certain Relationships and Related Transactions." (c) Includes a transaction fee equal to 1% of the ascribed value of each of TCI's, Blackstone's and the Bresnan Group's contributions to the Parent (approximately $3.4 million) and fees and expenses of each of TCI, Blackstone and the Bresnan Group paid pursuant to the terms of the Partnership Agreement. See "Certain Relationships and Related Transactions." The amounts outstanding under the Old Credit Facility would have become due and payable from March 31, 1999 through March 31, 2006 and bear interest at rates which, as of December 31, 1998, ranged from 6.815% to 8.0%. The TCID Note, including accrued interest, would have become due and payable on the earlier of April 30, 2001 or the first business day following the full repayment of all amounts outstanding under the Old Credit Facility and bears interest at a rate equal to the prime rate of The Toronto-Dominion Bank's New York branch which, as of December 31, 1998, was 7.75%. The Toronto-Dominion Bank, an affiliate of TD Securities (USA) Inc., and The Chase Manhattan Bank, an affiliate of Chase Securities Inc., were lenders under the Old Credit Facility and received approximately $37.7 million and approximately $22.4 million, respectively, from the repayment from borrowings under such facility. See "Plan of Distribution." -28- 32 THE EXCHANGE OFFER The following discussion sets forth or summarizes the material terms of the Exchange Offer, including those set forth in the letter of transmittal distributed with this prospectus. This summary is qualified in its entirety by reference to the full text of the documents underlying the Exchange Offer, including the indenture and the registration rights agreement governing the Notes, which are exhibits to the exchange offer registration statement of which this prospectus is a part. General In connection with the sale of the Outstanding Notes to the initial purchasers, we entered into a registration rights agreement (the "Registration Rights Agreement"), dated February 2, 1999, among the Company and Salomon Smith Barney Inc., Chase Securities Inc., Morgan Stanley & Co. Incorporated and TD Securities (USA) Inc. (collectively, the "Initial Purchasers"). The Registration Rights Agreement requires among other things, that we use our reasonable best efforts to: o file with the Securities and Exchange Commission (the "Commission") within 120 days after the Original Issue Date a registration statement under the Securities Act of 1933 in connection with the issue of exchange notes; o cause the registration statement relating to such registered exchange offer to become effective under the Securities Act of 1933 within 180 days after the Original Issue Date; o upon the effectiveness of such exchange offer registration statement, commence the Exchange Offer and keep the Exchange Offer open for not less than 20 days (or longer if required by applicable law); and o cause the Exchange Offer to be consummated within 45 days after the effective date of the Exchange Offer registration statement. The Exchange Offer being made hereby, if consummated within the required time periods, will satisfy our obligations under the Registration Rights Agreement. This prospectus, together with the letter of transmittal, is being sent to all beneficial holders known to us. In addition, we agreed, pursuant to the Registration Rights Agreement, to file a shelf registration statement pursuant to Rule 415 under the Securities Act of 1933, if: o a change in law or applicable interpretations of the staff of the Commission do not permit us to effect the Exchange Offer; o for any other reason the Exchange Offer is not consummated within 210 days after the Original Issuance Date; o an initial purchaser of the Outstanding Notes so requests a shelf registration with respect to Outstanding Notes not eligible to be exchanged for Exchange Notes in the Exchange Offer; or o any holder of Outstanding Notes (other than an initial purchaser) is not eligible to participate in the Exchange Offer or does not receive freely tradeable Exchange Notes in the Exchange Offer other than by reason of such holder being an "affiliate" of the Company within the meaning of the Securities Act of 1933 (it being understood that the requirement that a broker-dealer deliver this prospectus in connection with sales of Exchange Notes shall not result in such Exchange Notes being not "freely tradeable"). We have agreed to use our reasonable best efforts to cause such shelf registration statement to become effective under the Securities Act of 1933 as soon as practicable but in no event later than 60 days after the filing of -29- 33 the shelf registration statement. In addition, we agreed to use our reasonable best efforts to keep such shelf registration statement continually effective, supplemented and amended for a period of at least two years following the Original Issue Date, or such shorter period as will terminate when all Notes covered by such shelf registration statement have been sold pursuant thereto. Registration Defaults; Special Interest If the registration statement related to the Exchange Offer or shelf registration statement is not timely filed or declared effective or thereafter ceases to be effective or fails to be usable for its intended purpose without being succeeded immediately by a post-effective amendment that cures such failure and is itself immediately declared effective, or if the Exchange Offer has not been consummated on or prior to the 45th day after the effective date, we have agreed to pay special interest as liquidated damages to each holder of Outstanding Notes affected thereby ("Special Interest"). Special Interest will accrue and become payable on the Notes as follows: (i) if (A) the registration statement related to the Exchange Offer is not filed with the Commission within 120 days following the Original Issuance Date or (B) notwithstanding that we have consummated or will consummate an Exchange Offer, we are required to file a shelf registration statement and such shelf registration statement is not filed on or prior to the 60th day following the date on which the obligation to file such shelf registration statement arises, then commencing on the day after either such required filing date, Special Interest shall accrue (in addition to the stated interest on the Notes) on the principal amount or Accreted Value, as applicable, of the Notes at a rate of 0.25% per annum for the first 90 days immediately following each such filing date, such Special Interest rate increasing by an additional 0.25% per annum at the beginning of each subsequent 90-day period; or (ii) if (A) the registration statement related to the Exchange Offer is not declared effective by the Commission within 180 days following the Original Issue Date or (B) notwithstanding that we have consummated or will consummate an Exchange Offer, we are required to file a shelf registration statement and such shelf registration statement is not declared effective by the Commission on or prior to the 120th day following the date on which the obligation to file such shelf registration statement arises, then, commencing on the day after either such required effective date, Special Interest shall accrue (in addition to the stated interest on the Notes) on the principal amount or Accreted Value, as applicable, of the Notes at a rate of 0.25% per annum for the first 90 days immediately following such date, such Special Interest rate increasing by an additional 0.25% per annum at the beginning of each subsequent 90-day period; or (iii) if (A) we have not exchanged all Notes validly tendered in accordance with the terms of the Exchange Offer for Exchange Notes on or prior to the later of the 45th day after the date on which the registration statement related to the Exchange Offer was declared effective or the 210th day after the Original Issue Date or (B) if applicable, the shelf registration statement has been declared effective and such shelf registration statement ceases to be effective or usable (subject to certain exceptions) at any time prior to the second anniversary of the Original Issue Date (other than as a result of a suspension period and other than after such time as all Notes have been disposed of thereunder), then Special Interest shall accrue on the principal amount or Accreted Value, as applicable, of the Notes (in addition to the stated interest on the Notes) at a rate of 0.25% per annum for the first 90 days commencing on (x) the 46th or the 211th, as the case may be, day after such effective date or issuance, as the case may be, in the case of (A) above, or (y) the day such shelf registration statement ceases to be effective in the case of (B) above (or in the event of a suspension period, on the earlier of the last day of such suspension period or the 60th day after notice of such suspension period), such Special Interest rate increasing by an additional 0.25% per annum at the beginning of each subsequent 90-day period; provided, however, that the Special Interest (with respect to each of clauses (i), (ii) and (iii) above) on the Notes may not exceed in the aggregate 1.00% per annum; provided further, however, that (1) upon the filing of the registration statement or a shelf registration statement (in the case of clause (i) above), (2) upon the effectiveness of the registration statement related to the Exchange Offer or shelf registration statement (in the case of clause (ii) above), or (3) upon the exchange of all Notes tendered for Exchange Notes (in the case of clause (iii)(A) above), or upon the effectiveness of the shelf registration statement which had ceased to remain effective (other than as a result of a suspension period) (in the case of clause (iii)(B) above), Special Interest on the Notes as a result of such clause (or the relevant subclause thereof), as the case may be, shall cease to accrue. -30- 34 Except as set forth herein, this prospectus may not be used for any offer to resell, resale or other transfer of Exchange Notes. Except as set forth above, after consummation of the Exchange Offer, holders of Notes have no registration or exchange rights under the Registration Rights Agreement. See "--Consequences of Failure to Exchange." Expiration Date; Extensions; Amendments The term "Expiration Date" shall mean 5:00 p.m., New York City time, on , 1999, unless we, in our sole discretion, extend the Exchange Offer, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. To extend the Exchange Offer, we will notify the exchange agent of any extension by oral or written notice, followed by a public announcement thereof no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. In no event will the Expiration Date be extended to a date more than 30 business days after effectiveness of the registration statement. We reserve the right, in our reasonable judgment: (1) to delay accepting any Outstanding Notes, to extend the Exchange Offer or to terminate the Exchange Offer if any of the conditions set forth below under "--Conditions" shall not have been satisfied, by giving oral or written notice of such delay, extension or termination to the exchange agent, or (2) to amend the terms of the Exchange Offer in any manner. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by a public announcement thereof. Terms of the Exchange Offer Upon the terms and subject to the conditions set forth in this Prospectus and in the letter of transmittal, we will accept any and all Outstanding Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time on the Expiration Date. We will issue $1,000 principal amount of Exchange Notes in exchange for each $1,000 principal amount or principal amount at maturity (as applicable) of Outstanding Notes accepted in the Exchange Offer. Holders of the Outstanding Notes may tender some or all of their Outstanding Notes pursuant to the Exchange Offer; however, Outstanding Notes may be tendered only in integral multiples of $1,000. The Exchange Notes will evidence the same debt as the Outstanding Notes and will be entitled to the benefits of the indenture. The form and terms of the Exchange Notes are substantially the same as the form and terms of the Outstanding Notes, except that: o the Exchange Notes have been registered under the Securities Act of 1933 and thus will not bear legends restricting the transfer thereof; and o holders of the Exchange Notes generally will not be entitled to certain rights under the registration rights agreement or Special Interest, which rights generally will terminate upon consummation of the Exchange Offer. Holders of Outstanding Notes do not have any appraisal or dissenters' rights under the Delaware General Corporation Law or the indenture in connection with the Exchange Offer. We intend to conduct the Exchange Offer in accordance with the applicable requirements of the Securities Exchange Act of 1934, as amended and the rules and regulations of the Commission thereunder, including Rule 14e-1. We shall be deemed to have accepted validly tendered Outstanding Notes when, as and if we have given oral or written notice thereof to the exchange agent. The exchange agent will act as agent for the tendering holders pursuant to the exchange agent agreement for the purpose of receiving the Exchange Notes from us. -31- 35 If any tendered Outstanding Notes are not accepted for exchange because of an invalid tender, the occurrence of certain other events set forth herein or otherwise, the certificates for any such unaccepted Outstanding Notes will be returned, without expense, to the tendering holder thereof as promptly as practicable after the Expiration Date. Holders who tender their Outstanding Notes in the Exchange Offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes with respect to the exchange of Outstanding Notes pursuant to the Exchange Offer. We will pay all charges and expenses, other than transfer taxes in certain circumstances, in connection with the Exchange Offer. See "--Fees and Expenses." Interest on Exchange Notes Each Exchange Senior Note will bear interest from February 2, 1999, Holders of the Senior Notes whose Senior Notes are accepted for exchange will not receive accrued interest on such Senior Notes for any period from and after the last interest payment date to which interest has been paid or duly provided for on such Senior Notes prior to the Original Issue Date of the Exchange Notes or, if no such interest has been paid or duly provided for, will not receive any accrued interest on such Senior Notes, and will be deemed to have waived the right to receive any interest on such Senior Notes accrued from and after such interest payment date or, if no such interest has been paid or duly provided for, from and after February 2, 1999. Interest on the Exchange Senior Notes will be payable semi-annually on February 1 and August 1 of each year, commencing August 1, 1999. The Exchange Senior Discount Notes will be issued at a discount to their aggregate principal amount at maturity. For a discussion of U.S. federal income tax treatment of the Exchange Senior Discount Notes under the original issue discount rules, please refer to the section of this prospectus entitled "Certain Federal Tax Considerations." The Exchange Senior Discount Notes will accrete at a rate of 9 1/4% per year to an aggregate principal amount of $275.0 million by February 1, 2004. The Exchange Senior Discount Notes will not accrue interest prior to February 1, 2004, unless we elect to accrue interest on or after February 1, 2002. On and after August 1, 2004, we will pay interest on the Exchange Senior Discount Notes at the rate of 9 1/4% per year on February 1 and August 1 of each year. Procedures for Tendering Outstanding Notes Only holders of Outstanding Notes may tender such Outstanding Notes in the Exchange Offer. To tender in the Exchange Offer, a holder must complete, sign and date the letter of transmittal, or a facsimile thereof, have the signatures thereon guaranteed if required by the letter of transmittal, and mail or otherwise deliver such letter of transmittal or such facsimile, together with the Outstanding Notes and any other required documents, to the exchange agent so as to be received by the exchange agent at the address set forth below prior to 5:00 p.m., New York City time, on the Expiration Date. Delivery of the Outstanding Notes may be made by book-entry transfer of such Outstanding Notes into the exchange agent's account at The Depository Trust Corporation in accordance with the procedures described below. Confirmation of such book-entry transfer must be received by the exchange agent prior to the Expiration Date. By executing the letter of transmittal, each holder will make to the Company the representation set forth below in the first paragraph under the heading "--Resale of Exchange Notes." The tender by a holder and the acceptance thereof by the Company will constitute an agreement between such holder and us in accordance with the terms and subject to the conditions set forth herein and in the letter of transmittal. - -------------------------------------------------------------------------------- The method of delivery of Outstanding Notes and the letter of transmittal and all other required documents to the exchange agent is at the election and risk of the holder. 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 delivery to the exchange agent before the Expiration Date. No letter of transmittal or Outstanding Notes should be sent to the Company. Holders may request their respective brokers, dealers, commercial banks, trust companies or nominees to effect the above transactions for such holders. - -------------------------------------------------------------------------------- -32- 36 Any beneficial owner whose Outstanding Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact the registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. Signatures on the letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed by an "eligible institution" (as defined below) unless the Outstanding Notes tendered pursuant thereto: (1) are signed by the registered holder, unless such holder has completed the box entitled "Special Exchange Instructions" or "Special Delivery Instructions" on the letter of transmittal, or (2) are tendered for the account of an eligible institution. In the event that signatures on a letter of transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantee must be by 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 Securities Exchange Act of 1934 (an "eligible institution"). If the letter of transmittal is signed by a person other than the registered holder of any Outstanding Notes listed therein, such Outstanding Notes must be endorsed or accompanied by a properly completed bond power, signed by such registered holder as such registered holder's name appears on such Outstanding Notes, with the signature thereon guaranteed by an eligible institution. If the letter of transmittal or any Outstanding Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers or 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 of tendered Outstanding Notes and withdrawal of tendered Outstanding Notes will be determined by us in our sole discretion, which determination will be final and binding. We reserve the absolute right to reject any and all Outstanding Notes not properly tendered or any Outstanding Notes our acceptance of which would, in the opinion of counsel for the Company, be unlawful. We also reserve the right to waive any defects, irregularities or conditions of tender as to particular Outstanding Notes. Our 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 Outstanding Notes must be cured within such time as we shall determine. Although we intend to notify holders of Outstanding Notes of defects or irregularities with respect to tenders of Outstanding Notes, neither of us nor the exchange agent or any other person shall incur any liability for failure to give such notification. Tenders of Outstanding Notes will not be deemed to have been made until such defects or irregularities have been cured or waived. Any Outstanding Notes received by the exchange agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the exchange agent to the tendering holders, unless otherwise provided in the letter of transmittal, as soon as practicable following the Expiration Date. Book-Entry Delivery Procedures Promptly after the date of this prospectus, the exchange agent will establish accounts with respect to the Outstanding Notes at The Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of the Exchange Offer. Any financial institution that is a participant in the Book-Entry Transfer Facility systems may make book-entry delivery of the Outstanding Notes by causing The Depository Trust Company to transfer such Outstanding Notes into the exchange agent's account at such Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures for such transfer. Timely book-entry delivery of Outstanding Notes pursuant to the Exchange Offer, however, requires receipt of a confirmation of a book-entry transfer ("Book-Entry Confirmation") prior to the Expiration Date. In addition, although delivery of Outstanding Notes may be effected through book-entry transfer into the exchange agent's account at the Book-Entry Transfer Facility, the letter of transmittal or a manually signed facsimile thereof, together with any required signature guarantees and any other required documents, or an "agent's message" (as defined below) in connection with a book-entry transfer, must, in any case, be delivered or transmitted to and received by the exchange agent at its address set forth on the cover page of the letter of transmittal -33- 37 prior to the Expiration Date to receive Exchange Notes for tendered Outstanding Notes, or the guaranteed delivery procedure described below must be complied with. Tender will not be deemed made until such documents are received by the exchange agent. Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the exchange agent. Tender of Outstanding Notes Held Through The Depository Trust Company The exchange agent and The Depository Trust Company have confirmed that the Exchange Offer is eligible for The Depository Trust Company's Automated Tender Offer Program. Accordingly, participants in The Depository Trust Company's Automated Tender Offer Program may, in lieu of physically completing and signing the applicable letter of transmittal and delivering it to the exchange agent, electronically transmit their acceptance of the Exchange Offer by causing The Depository Trust Company to transfer Outstanding Notes to the exchange agent in accordance with The Depository Trust Company's Automated Tender Offer Program procedures for transfer. The Depository Trust Company will then send an agent's message to the exchange agent. The term "agent's message" means a message transmitted by The Depository Trust Company, received by the exchange agent and forming part of the Book-Entry Confirmation, which states that The Depository Trust Company has received an expressed acknowledgment from a participant in The Depository Trust Company's Automated Tender Offer Program that is tendering Outstanding Notes which are the subject of such Book-Entry Confirmation, that such participant has received and agrees to be bound by the terms of the applicable letter of transmittal or, in the case of an agent's message relating to guaranteed delivery, that such participant has received and agrees to be bound by the applicable notice of guaranteed delivery, and that we may enforce such agreement against such participant. Guaranteed Delivery Procedures Holders who wish to tender their Outstanding Notes and (1) whose Outstanding Notes are not immediately available; (2) who cannot deliver their Outstanding Notes, the letter of transmittal or any other required documents to the exchange agent; or (3) who cannot complete the procedures for book-entry transfer, prior to the Expiration Date, may effect a tender if: (a) the tender is made through an eligible institution; (b) prior to the Expiration Date, the exchange agent receives from such eligible institution a properly completed and duly executed notice of guaranteed delivery by facsimile transmission, mail or hand delivery setting forth the name and address of the holder, the certificate number(s) of such Outstanding Notes and the principal amount or principal amount at maturity (as applicable) of Outstanding Notes tendered, stating that the tender is being made thereby and guaranteeing that, within three (3) New York Stock Exchange trading days after the Expiration Date, the letter of transmittal or facsimile thereof, together with the certificate(s) representing the Outstanding Notes or a Book-Entry Confirmation transfer of such Outstanding Notes into the exchange agent's account at The Depository Trust Company and all other documents required by the letter of transmittal, will be deposited by the eligible institution with the exchange agent; and (c) such properly completed and executed letter of transmittal or facsimile thereof, as well as the certificate(s) representing all tendered Outstanding Notes in proper form for transfer or a Book-Entry Confirmation transfer of such Outstanding Notes into the exchange agent's account at The Depository Trust Company and all other documents required by the letter of transmittal, are received by the exchange agent within three (3) New York Stock Exchange trading days after the Expiration Date. -34- 38 Upon request to the exchange agent, a notice of guaranteed delivery will be sent to holders who wish to tender their Outstanding Notes according to the guaranteed delivery procedures set forth above. Withdrawal of Tenders Except as otherwise provided herein, tenders of Outstanding Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. To withdraw a tender of Outstanding Notes in the Exchange Offer, a written or facsimile transmission notice of withdrawal must be received by the exchange agent at the address set forth herein prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice of withdrawal must o specify the name of the person having deposited the Outstanding Notes to be withdrawn (the "depositor"); o identify the Outstanding Notes to be withdrawn, including the certificate number(s) and principal amount or principal amount at maturity (as applicable) of such Outstanding Notes, or, in the case of Outstanding Notes transferred by book-entry transfer, the name and number of the account at The Depository Trust Company to be credited; o be signed by the holder in the same manner as the original signature on the letter of transmittal by which such Outstanding Notes were tendered, including any required signature guarantees, or be accompanied by documents of transfer sufficient to have the trustee under the indenture register the transfer of such Outstanding Notes into the name of the person withdrawing the tender; and o specify the name in which any such Outstanding Notes are to be registered, if different from that of the depositor. All questions as to the validity, form and eligibility, including time of receipt, of such notices will be determined by the Company, whose determination shall be final and binding on all parties. Any Outstanding Notes so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer and no Exchange Notes will be issued with respect thereto unless the Outstanding Notes so withdrawn are validly retendered. Any Outstanding Notes which have been tendered but which are not accepted for exchange will be returned to such holder without cost to such holder as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Outstanding Notes may be retendered by following one of the procedures described above under "--Procedures for Tendering" at any time prior the Expiration Date. Conditions Notwithstanding any other term of the Exchange Offer, we shall not be required to accept for exchange any Outstanding Notes, and may terminate or amend the Exchange Offer as provided herein before the acceptance of such Outstanding Notes, if: (a) in the opinion of counsel to the Company, the Exchange Offer or any part thereof contemplated herein violates any applicable law or interpretation of the staff of the Commission; (b) any action or proceeding shall have been instituted or threatened in any court or by any governmental agency which might materially impair our ability to proceed with the Exchange Offer or any material adverse development shall have occurred in any such action or proceeding with respect to us; (c) any governmental approval has not been obtained, which approval we shall deem necessary for the consummation of the Exchange Offer as contemplated hereby; (d) any cessation of trading on The Nasdaq Stock Market or any exchange, or any banking moratorium, shall have occurred, as a result of which we are unable to proceed with the Exchange Offer; or -35- 39 (e) a stop order shall have been issued by the Commission or any state securities authority suspending the effectiveness of the registration statement or proceedings shall have been initiated or, to our knowledge, threatened for that purpose. If we determine in our reasonable judgment that any of the foregoing conditions are not satisfied, we may: (1) refuse to accept any Outstanding Notes and return all tendered Outstanding Notes to the tendering holders; (2) extend the Exchange Offer and retain all Outstanding Notes tendered prior to the expiration of the Exchange Offer, subject, however, to the rights of holders to withdraw such Outstanding Notes (see "--Withdrawals of Tenders"); or (3) waive such unsatisfied conditions with respect to the Exchange Offer and accept all properly tendered Outstanding Notes which have not been withdrawn. Exchange Agent State Street Bank and Trust Company will act as exchange agent for the Exchange Offer with respect to the Outstanding Notes. Questions and requests for assistance, requests for additional copies of this prospectus or of the letter of transmittal for the Outstanding Notes and requests for copies of the notice of guaranteed delivery should be directed to the exchange agent, addressed as follows: By registered or certified mail or overnight courier: State Street Bank and Trust Company Corporate Trust Division P.O. Box 778 Boston, MA 02102-0078 Attn: Kellie Mullen By facsimile (for eligible institutions only): (617) 664-5290 Confirm by telephone: (617) 664-5587 Kellie Mullen Fees and Expenses The expenses of soliciting Outstanding Notes for exchange will be borne by the Company. The principal solicitation is being made by mail by the exchange agent. However, additional solicitations may be made by telephone, facsimile or in person by officers and regular employees of the Company and its affiliates and by persons so engaged by the exchange agent. We will pay the exchange agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith and pay other registration expenses, including fees and expenses of the trustee under the indenture, filing fees, blue sky fees and printing and distribution expenses. We will pay all transfer taxes, if any, applicable to the exchange of the Outstanding Notes pursuant to the Exchange Offer. If, however, certificates representing the Exchange Notes or the Outstanding Notes for principal amounts or principal amounts at maturity (as applicable) not tendered or accepted for exchange are to be delivered to, or are to be issued in the name of, any person other than the registered holder of the Outstanding Notes tendered, or if tendered Outstanding Notes 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 the Outstanding Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes, whether imposed on the registered holder or any other person, will be payable by the tendering holder. -36- 40 Accounting Treatment The Exchange Notes will be recorded at the same carrying value as the Outstanding Notes, which is the aggregate principal amount or accrued value (as applicable) of the Outstanding Notes, as reflected in our accounting records on the date of exchange. Accordingly, no gain or loss for accounting purposes will be recognized in connection with the Exchange Offer. The expenses of the Outstanding Notes offering and the Exchange Offer will be amortized over the term of the Exchange Notes. Resale of Exchange Notes We are making the Exchange Offer in reliance on the position of the Exxon Capital No-Action Letter, Morgan Stanley No-Action Letter, Shearman & Sterling No-Action Letter, and other interpretive letters addressed to third parties in other transactions, however, we have not sought our own interpretive letter addressing such matters and there can be no assurance that the staff of the Commission would make a similar determination with respect to the Exchange Offer as it has in such interpretive letters to third parties. See "--General." Based on these interpretations by the staff of the Commission, and subject to the two immediately following sentences, we believe that Exchange Notes issued pursuant to this Exchange Offer in exchange for Outstanding Notes may be offered for resale, resold and otherwise transferred by holders of such Exchange Notes, other than such a holder who is a broker-dealer, without further compliance with the registration and prospectus delivery requirements of the Securities Act of 1933, provided that such Exchange Notes are acquired in the ordinary course of such holder's business and that such holder is not participating, and has no arrangement or understanding with any person to participate, in a distribution within the meaning of the Securities Act of 1933 of such Exchange Notes. Notwithstanding the above, any holder of Outstanding Notes may be subject to separate restrictions if it: o is our "affiliate" within the meaning of Rule 405 under the Securities Act of 1933; o does not acquire such Exchange Notes in the ordinary course of its business; o intends to participate in the Exchange Offer for the purpose of distributing Exchange Notes; or o is a broker-dealer who purchased such Outstanding Notes directly from us. Holders of Outstanding Notes falling into any of the categories above: o will not be able to rely on the interpretations of the staff of the Commission set forth in the above- mentioned interpretive letters; o will not be permitted or entitled to tender such Outstanding Notes in the Exchange Offer; and o must comply with the registration and prospectus delivery requirements of the Securities Act of 1933 in connection with any sale or other transfer of such Outstanding Notes unless such sale is made pursuant to an exemption from such requirements. Each broker-dealer that receives Exchange Notes for its own account in exchange for Outstanding Notes, where such Outstanding Notes were acquired by such broker-dealer as a result of market-making or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. See "Plan of Distribution." The Commission has taken the position that broker-dealers may fulfill their prospectus delivery requirements with respect to Exchange Notes (other than a resale of an unsold allotment from the original sale of the Outstanding Notes) with this prospectus. Under the Registration Rights Agreement, we are required during the period required by the Securities Act to allow Broker-Dealers and other persons, if any, with similar prospectus delivery requirements to use this prospectus in connection with the resale of such Exchange Notes. In addition, as described below, if any broker-dealer holds Outstanding Notes acquired for its own account (a "Participating Broker-Dealer"), then such Participating Broker-Dealer may be deemed a statutory "underwriter" within the meaning of the Securities Act of 1933 and must deliver a prospectus meeting the requirements of the Securities Act of 1933 in connection with any resales of such Exchange Notes. -37- 41 Each holder of Outstanding Notes and each initial purchaser who is required to deliver a prospectus in connection with sales or market making activities, by acquisition of Outstanding Notes, agrees that, upon a receipt of notice from us that: (1) the issuance by the Commission of any stop order suspending the effectiveness of the exchange offer registration statement under the Securities Act of 1933 or of the suspension by any state securities commission of the qualification of the Outstanding Notes from offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, or (2) the existence of any fact or the happening of any event that makes any statement of a material fact made in the registration statement or this prospectus, or any amendment or supplement thereto or any document incorporated by reference herein untrue, or that requires the making of any additions or changes in the registration statement or this prospectus in order to make the statements herein, in light of the circumstances under which they were made, not misleading (in each case, a "Suspension Notice"), such holder or person shall discontinue disposition of the Outstanding Notes pursuant to this prospectus until such holder or person has received copies of the supplemented or amended prospectus or such holder or person is advised in writing by the Company that use of the prospectus may be resumed and has received copies of any additional or supplemental filings that are incorporated by reference in the prospectus (in each case, the "Recommencement Date"). In addition, each holder or person will be deemed to have agreed that it will either: (1) destroy any prospectuses, other than permanent file copies, then in such holder or person's possession which have been replaced by us with more recently dated prospectuses; or (2) deliver to us, at our expense, all copies, other than permanent file copies, then in such holder's or person's possession of the prospectus covering such Outstanding Notes that was current at the time of receipt of the Suspension Notice. We shall extend the time period regarding the effectiveness of the registration statement by a number of days equal to the number of days in the period from and including the date of delivery of the Suspension Notice to the date of delivery of the Recommencement Date. Consequences of Failure to Exchange Any Outstanding Notes tendered and exchanged in the Exchange Offer will reduce the aggregate principal amount or aggregate principal at maturity (as applicable) of Outstanding Notes outstanding. Following the consummation of the Exchange Offer, holders who did not tender their Outstanding Notes generally will not have any further registration rights under the Registration Rights Agreement, and such Outstanding Notes will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for such Outstanding Notes could be adversely affected. The Outstanding Notes are currently eligible for sale pursuant to Rule 144A through PORTAL. Because we anticipate that most holders will elect to exchange such Outstanding Notes for Exchange Notes pursuant to the Exchange Offer due to the absence of restrictions on the resale of Exchange Notes, except for applicable restrictions on any holder of Exchange Notes who is our affiliate or is a broker-dealer which acquired the Outstanding Notes directly from us, under the Securities Act of 1933, we anticipate that the liquidity of the market for any Outstanding Notes remaining after the consummation of the Exchange Offer may be substantially limited. As a result of the making of this Exchange Offer, we will have fulfilled certain of our obligations under the Registration Rights Agreement, and holders who do not tender their Outstanding Notes, except for certain instances involving the initial purchasers or holders of Outstanding Notes who are not eligible to participate in the Exchange Offer, will not have any further registration rights under the Registration Rights Agreement or otherwise or rights to receive Special Interest for failure to register. Accordingly, any holder that does not exchange its Outstanding Notes for Exchange Notes will continue to hold the untendered Outstanding Notes and will be entitled to all the rights and subject to all the limitations applicable thereto under the indenture, except to the extent that such rights or limitations, by their terms, terminate or cease to have further effectiveness as a result of the Exchange Offer. -38- 42 The Outstanding Notes that are not exchanged for Exchange Notes pursuant to the Exchange Offer will remain restricted securities within the meaning of the Securities Act of 1933. Accordingly, such Outstanding Notes may be resold only: o to the Company or any of its subsidiaries; o inside the United States to a qualified institutional buyer in compliance with Rule 144A under the Securities Act of 1933; o inside the United States to an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933), an "accredited investor" that, prior to such transfer, furnishes or has furnished on its behalf by a U.S. broker-dealer to the trustee under the indenture a signed letter containing certain representations and agreements relating to the restrictions on transfer of the notes, the form of which letter can be obtained from such trustee; o outside the United States in compliance with Rule 904 under the Securities Act of 1933; o pursuant to the exemption from registration provided by Rule 144 under the Securities Act of 1933, if available; or o pursuant to an effective registration statement under the Securities Act of 1933. Each accredited investor that is not a qualified institutional buyer and that is an original purchaser of any of the Outstanding Notes from the initial purchasers will be required to sign a letter confirming that such person is an accredited investor under the Securities Act of 1933 and that such person acknowledges the transfer restrictions summarized herein. Other Participation in the Exchange Offer is voluntary and holders of Outstanding Notes should carefully consider whether to accept the offer to exchange their Outstanding Notes. Holders of Outstanding Notes are urged to consult their financial and tax advisors in making their own decision on what action to take with respect to the exchange offer. We may in the future seek to acquire untendered Outstanding Notes in open market or privately negotiated transactions, through subsequent exchange offers or otherwise. We have no present plans to acquire any Outstanding Notes that are not tendered in the Exchange Offer or to file a registration statement to permit resales of any untendered Outstanding Notes. -39- 43 CAPITALIZATION The following table sets forth the unaudited consolidated cash and cash equivalents and capitalization of the Company as of December 31, 1998 (1) on a combined historical basis, (2) pro forma for the TCI Transactions, and (3) pro forma for the TCI Transactions and the Financings. See "Use of Proceeds."
As of December 31, 1998 ----------------------- (in millions) Pro Forma for Pro Forma for the TCI Combined the TCI Transactions and Historical Transactions (a) the Financings (a) ---------- ---------------- ------------------ Cash, cash equivalents and restricted cash $ 53.8 $177.8(b) $ 47.5 ====== ====== ====== Debt: Old Credit Facility 209.0(c) 209.0(c) -- TCID Note 22.1(d) 22.1(d) -- Other Debt 1.5 1.5 1.5 Assumed TCI Debt -- 708.9(b) -- New Credit Facility -- -- 510.4(e) Senior Notes -- -- 170.0 Senior Discount Notes -- -- 175.0 ------ ------ ------ Total Debt 232.6 941.5 856.9 ------ ------ ------ Equity: Parents' investment/member's equity (deficit) 381.7 (203.1)(b) (205.7)(f) ------ ------ ------ Total capitalization $614.3 $738.4 $651.2 ====== ====== ======
(a) Does not give pro forma effect to the Recent Acquisitions and Disposition. See "Prospectus Summary--Recent Events." (b) In connection with the TCI Transactions, we received $133.8 million representing Blackstone's $136.5 million capital contribution reduced by $2.7 million of placement fees. A transaction fee equal to 1% of the ascribed value of each of TCI's, Blackstone's and the Bresnan Group's capital contributions to the Parent were paid in cash in connection with the TCI Transactions, accordingly an approximate $3.4 million reduction in cash has been recorded against member's equity. In addition, we assumed the Assumed TCI Debt which was recorded as a reclassification from member's equity to debt. In accordance with the terms of the Contribution Agreement, TCI did not contribute its cash to the Company, accordingly a $6.4 million reduction in cash has been recorded against member's equity. (c) Does not include $1.9 million of accrued but unpaid interest repaid from funds received by us in connection with the TCI Transactions and the Financings, including the net proceeds from the private offering of the Outstanding Notes. See "Use of Proceeds." (d) Does not include $19.9 million of accrued but unpaid interest repaid from funds received by us in connection with the TCI Transactions and the Financings, including the net proceeds from the private offering of the Outstanding Notes. See "Use of Proceeds." (e) As of December 31, 1998, BTC would have been permitted to borrow additionally up to approximately $138.2 million under the New Credit Facility, subject to the covenants contained therein, after giving effect to the TCI Transactions and the Financings. BTC expects to continue to borrow funds under the New Credit Facility. (f) Reflects a $2.6 million charge related to the write-off of deferred financing costs associated with previous amendments to the Old Credit Facility. -40- 44 SELECTED COMBINED FINANCIAL AND OPERATING DATA (dollars in thousands, except per subscriber data) The selected combined financial data as of and for the four years ended December 31, 1998 set forth below have been derived from the combined financial statements of Bresnan Communications Group Systems (a combination of the financial statements of the Parent and the Contributed TCI Systems), the predecessor to the Company for accounting and financial reporting purposes. Prior to consummating the TCI Transactions, the Parent and the owners of the Contributed TCI Systems were under the common ownership and control of TCI. Based on such common ownership and control, the financial data are presented at historical cost on a combined basis. See "Use of Proceeds." The pro forma combined financial data for the year ended December 31, 1998 set forth below have been derived from the unaudited pro forma combined financial data of the Company contained in this Prospectus under the caption "Unaudited Pro Forma Combined Financial Data." The data set forth below are qualified in their entirety by, and should be read in conjunction with, the historical combined financial statements of Bresnan Communications Group Systems, the predecessor to the Company for accounting and financial reporting purposes, and the related notes thereto, "Risk Factors--The TCI Transactions," "Unaudited Pro Forma Combined Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Prospectus.
Year Ended December 31, -------------------------------------------------------------------------- Pro Forma 1994 1995 1996 1997 1998 1998(a) --------- --------- --------- --------- --------- --------- Statement of Operations Data: Revenue $ 179,235 $ 195,364 $ 216,609 $ 247,108 $ 261,964 $ 261,964 Operating costs and expenses: Programming 36,347 39,168 46,087 53,857 63,686 62,687 Operating 18,152 26,966 31,405 31,906 28,496 28,496 Selling, general and administrative 42,403 47,180 52,485 50,572 58,568 55,913 Depreciation and amortization 40,486 47,201 50,908 53,249 54,308 54,308 --------- --------- --------- --------- --------- --------- Total operating costs and expenses 137,388 160,515 180,885 189,584 205,058 201,404 --------- --------- --------- --------- --------- --------- Operating income 41,867 34,849 35,724 57,524 56,906 60,560 Other income (expense) (b): Interest--related party (1,600) (1,978) (1,859) (1,892) (1,872) -- Interest--other (10,957) (14,085) (13,173) (16,823) (16,424) (72,650) Gain on sale of cable television systems -- -- -- -- 27,027 27,027 Other, net (424) 61 (844) (978) (273) (273) --------- --------- --------- --------- --------- --------- Total other income (expense) (12,981) (16,002) (15,876) (19,693) 8,458 (45,896) --------- --------- --------- --------- --------- --------- Net earnings $ 28,886 $ 18,847 $ 19,848 $ 37,831 $ 65,364 $ 14,664 ========= ========= ========= ========= ========= =========
-41- 45
Year Ended December 31, -------------------------------------------------------------------------- Pro Forma 1994 1995 1996 1997 1998 1998(a) --------- --------- --------- --------- --------- --------- Financial Ratios and Other Data: EBITDA(c) $ 82,050 $ 86,632 $ 110,773 $ 111,214 $ 114,868 Capital expenditures $ 98,004 78,248 32,875 58,601 - Ratio of total debt to EBITDA(d) 7.5 Ratio of earnings to fixed charges(e) 3.2x 2.1x 2.1x 2.9x 4.4x 1.2x Average monthly total revenue per average basic subscriber(f) $ 28.01 $ 28.49 $ 30.95 $ 33.16 $ 34.61 $ 34.61 Cash Flow Data: Net cash provided by operations - 61,200 79,143 92,548 102,361 - Net cash used in investing - (52,175) (78,335) (34,103) (77,276) - Net cash used in financing - (8,203) (3,100) (54,741) (25,406) - Summary Operating Data (end of period): Homes passed 800,383 841,145 847,364 914,182 901,792 901,792 Basic subscribers 561,333 581,553 584,807 620,862 617,867 617,867 Basic penetration 70.1% 69.1% 69.0% 67.9% 68.5% 68.5% Premium units 283,283 294,533 295,727 262,900 243,501 243,501 Pay-to-basic ratio(g) 50.5% 50.6% 50.6% 42.3% 39.4% 39.4% -------------------------------------------------------------------------- Balance Sheet Data (end of period): Total assets $ 569,189 $ 564,591 $ 596,047 $ 617,198 $ 664,436 $ 679,369 Total debt 187,798 185,480 207,234 214,170 232,617 856,868 Parents' investment/member's equity (deficit) 338,781 344,664 347,188 359,098 381,748 (205,735)
(a) The unaudited pro forma combined financial data for the year ended December 31, 1998 give pro forma effect to the TCI Transactions and the Financings as if such transactions had occurred on January 1, 1998, but do not give pro forma effect to the Recent Acquisitions and Disposition. See "Prospectus Summary--Recent Events." (b) The historical combined financial data does not include any indebtedness or related interest expense in respect of the Contributed TCI Systems. Pro forma financial data for the year ended December 31, 1998 give pro forma effect to interest expense in respect of the Assumed TCI Debt as if the TCI Transactions and Financings had occurred on January 1, 1998. (c) EBITDA represents operating income before depreciation and amortization. EBITDA is presented because it is a widely accepted financial indicator of a company's ability to incur and service debt. EBITDA, however, is not a measure determined in accordance with GAAP and should not be considered in isolation or as a substitute for or an alternative to net income, cash flow from operating activities or other income or cash flow data prepared in accordance with GAAP, or as a measure of a company's operating performance or liquidity. EBITDA as presented may not be comparable to other similarly titled measures used by other companies. (d) The ratio of total debt to EBITDA was calculated by dividing pro forma total debt by pro forma EBITDA for the year ended December 31, 1998. The historical combined financial statements of the Bresnan Communications Group Systems appearing elsewhere in this prospectus do not reflect the Assumed TCI Debt assumed pursuant to the terms of the Contribution Agreement and repaid with the net proceeds of the Cash Contribution and the Financings. The pro forma effect of the Assumed TCI Debt is reflected in the unaudited pro forma combined financial data appearing elsewhere in this prospectus. (e) For purposes of this calculation, "earnings" is defined as earnings before fixed charges. Fixed charges represent interest paid or accrued on indebtedness, the amortization of deferred financing costs and the portion of rents deemed representative of the interest factor. The historical combined financial statements of Bresnan Communications Group Systems, the predecessor of the Company for accounting and financial reporting purposes, appearing elsewhere in this Prospectus do not reflect the Assumed TCI Debt assumed pursuant to the terms of the Contribution Agreement and repaid with the net proceeds of the Cash Contribution and the Financings. The pro forma effect of the Assumed TCI Debt is reflected in the unaudited pro forma combined financial data appearing elsewhere in this prospectus. In addition had the pro forma combined financial statement of operations been prepared excluding the gain on sale of cable television systems, the Company would have had a deficiency of earnings available to cover fixed charges of $12.4 million. (f) Represents average monthly total revenue for the periods indicated divided by the number of average basic subscribers in each period. (g) Pay-to-basic ratio measures premium units as a percentage of basic subscribers. -42- 46 UNAUDITED PRO FORMA COMBINED FINANCIAL DATA The unaudited pro forma combined financial data of the Company presented below are derived from the historical combined financial statements of Bresnan Communications Group Systems, the predecessor to the Company for accounting and financial reporting purposes. The combined financial statements of Bresnan Communications Group Systems are the combination of the financial statements of the Parent and the Contributed TCI Systems. Prior to consummating the TCI Transactions, the Parent and the owners of the Contributed TCI Systems were under the common ownership and control of TCI. Based on such common ownership and control, the financial statements have been presented at historical cost on a combined basis. Such historical combined financial statements do not include certain pro forma adjustments based on contractual arrangements which are expected to be in place upon completion of the TCI Transactions. These pro forma adjustments are reflected in the TCI Transactions columns in the accompanying unaudited pro forma combined financial data. The unaudited pro forma combined financial data give effect to the formation of the Company and to each of the following: (1) the TCI Transactions, and (2) the Financings as if such transactions had been consummated on January 1, 1998 in the case of the unaudited pro forma combined statement of operations data for the year ended December 31, 1998, and on December 31, 1998, in the case of the unaudited pro forma combined balance sheet data. The unaudited pro forma combined financial data do not give effect to the Recent Acquisitions and Disposition. See "Offering Memorandum Summary--Recent Events." The unaudited pro forma combined financial data may not be indicative of the results that actually would have occurred if the transactions described above had been completed and in effect for the periods indicated or the results that may be obtained in the future. The unaudited pro forma combined financial data presented below are qualified in their entirety by, and should be read in conjunction with, the historical combined financial statements of Bresnan Communications Group Systems, and related notes thereto, "Risk Factors--Conditions of Closing the TCI Transactions," "The TCI Transactions" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Offering Memorandum. Bresnan Communications Group LLC Unaudited Pro Forma Combined Balance Sheet As of December 31, 1998 (dollars in thousands)
TCI Combined Transactions Pro Forma Historical (a) Financings(b) Combined(c) ---------- --- ------------- ----------- Assets Cash, cash equivalents and restricted cash $ 53,835 $ 123,961 $(130,278) $ 47,518 Trade and other receivables, net 8,874 -- -- 8,874 Property and equipment, net 306,663 -- -- 306,663 Franchise costs, net 291,103 -- -- 291,103 Other assets, net 3,961 -- 21,250 25,211 -------- --------- --------- --------- $664,436 $ 123,961 $(109,028) $ 679,369 ======== ========= ========= ========= Liabilities and Parents' Investment/Member's Equity (Deficit) Accounts payable and accrued expenses $ 16,588 $ -- $ -- $ 16,588 Accrued interest payable 21,835 -- (21,835) -- Other liabilities 11,648 -- -- 11,648 Debt 232,617 708,854 (84,603) 856,868 Partners' investment/ member's equity (deficit) 381,748 (584,893) (2,590) (205,735) -------- -------- --------- -------- $664,436 $ 123,961 $(109,028) $ 679,369 ======== ========= ========= =========
See accompanying notes to unaudited pro forma combined balance sheet. -43- 47 Footnotes to the Unaudited Pro Forma Combined Balance Sheet As of December 31, 1998 (dollars in thousands) TCI Transactions (a) The following table summarizes the unaudited pro forma balance sheet adjustments related to the TCI Transactions:
Cash and Member's Cash Equity Equivalents Debt (Deficit) ----------- ---- --------- Blackstone capital contribution $ 136,500 $ -- $ 136,500 Placement fees relating to capital contribution (2,730) -- (2,730) Historical cash not contributed(1) (6,378) -- (6,378) Assumed TCI Debt(2) -- 708,854 (708,854) Transaction fees to partners of the Parent(3) (3,431) -- (3,431) --------- --------- --------- $ 123,961 $ 708,854 $(584,893) =======================================
(1) A $6,378 reduction in cash has been recorded relating to the cash included in the historical balance sheet which will not be contributed by the Contributed TCI Systems Parties in the TCI Transactions. (2) In connection with the TCI Transactions, the Company will assume the Assumed TCI Debt. Such transaction is reflected as a reclassification from member's equity to debt in the accompanying unaudited pro forma combined balance sheet. (3) A transaction fee equal to 1% of the ascribed value of each of TCI's, Blackstone's and the Bresnan Group's capital contributions to the Parent will be paid in cash in connection with the TCI Transactions. Financings (b) The following table summarizes the unaudited pro forma balance sheet adjustments related to the Financings including (1) the assumed borrowings under the New Credit Facility and the Notes, (2) repayment of outstanding indebtedness and related accrued interest, (3) payment of deferred financing costs, and (4) the write-off of deferred financing costs related to the Old Credit Facility: -44- 48
Cash and Accrued Member's Cash Interest Equity Equivalents Other Assets Payable Debt (Deficit) ----------- ------------ ------- ---- --------- Borrowings under the New Credit Facility $ 510,330 $ -- $ -- $ 510,330 $ -- Proceeds from the Offering: Senior Notes 170,000 -- -- 170,000 -- Senior Discount Notes 175,021 -- -- 175,021 -- Repayment of accrued interest payable (21,835) -- (21,835) -- -- Repayment of Old Credit Facility (209,000) -- -- (209,000) -- Repayment of TCID Note (22,100) -- -- (22,100) -- Repayment of Assumed TCI Debt (708,854) -- -- (708,854) -- Payment of deferred financing costs (23,840) 23,840 -- -- -- Write-off of deferred financing costs related to the Old Credit Facility -- (2,590) -- -- (2,590) --------- --------- --------- --------- --------- $(130,278) $ 21,250 $ (21,835) $ (84,603) $ (2,590) ========= ========= ========= ========= =========
General (c) Does not give pro forma effect to the Recent Acquisitions and Disposition. See "Offering Memorandum Summary--Recent Events." -45- 49 Bresnan Communications Group LLC Unaudited Pro Forma Combined Statement of Operations Year Ended December 31, 1998 (dollars in thousands)
Combined TCI Pro Forma Historical Transactions Financings Combined(a) ---------- ------------ ---------- ----------- Revenue $ 261,964 $ -- $ -- $ 261,964 Operating costs and expenses Programming 63,686 (999)(b) -- 62,687 Operating 28,496 -- -- 28,496 Selling, general and administrative 58,568 (2,655)(c) -- 55,913 Depreciation and amortization 54,308 -- -- 54,308 --------- --------- --------- --------- Total operating costs and expenses 205,058 (3,654) -- 201,404 --------- --------- --------- --------- Operating income 56,906 3,654 -- 60,560 Interest expense (18,296) -- (54,354)(d) (72,650) Other (273) -- -- (273) Gain on sale of cable television systems 27,027 -- -- 27,027 --------- --------- --------- --------- 8,458 -- (54,354) (45,896) --------- --------- --------- --------- Net earnings (loss) $ 65,364 $ 3,654 $ (54,354) $ 14,664 ========= ========= ========= ========= EBITDA(e) $ 111,214 $ 3,654 $ -- $ 114,868 ========= ========= ========= =========
See accompanying notes to unaudited pro forma combined statements of operations. -46- 50 Bresnan Communications Group LLC Notes to the Unaudited Pro Forma Combined Statements of Operations Year Ended December 31, 1998 (dollars in thousands) General (a) Does not give pro forma effect to the Recent Acquisitions and Disposition. See "Offering Memorandum Summary--Recent Events." TCI Transactions (b) Represents the net adjustment to reflect an administrative surcharge on programming purchased from TCI, which for the year ended December 31, 1998 is more than offset by contractual cost reductions for select programming. (c) Represents the net adjustment to reverse actual allocated overhead expenses and to include anticipated contractual management fees to be charged by the General Partner of the Parent (3% of revenue), contractual monitoring fees to be paid to TCI, Blackstone and the Bresnan Group, and certain other general and administrative expenses to be incurred by the Company. Financings (d) Represents the net adjustment to increase interest expense for the year ended December 31, 1998 as if the Financings had occurred on January 1, 1998 and reverse interest expense included in the historical combined financial statements of Bresnan Communications Group Systems, the predecessor to the Company for accounting and financial reporting purposes. An illustration of this adjustment for the year ended December 31, 1998 along with the related interest rate assumptions, follows:
Year Ended December 31, 1998 ---- Borrowings under New Credit Facility $ 510,330 Borrowings under Senior Notes 170,000 Borrowings under Senior Discount Notes 175,021 --------- Total new indebtedness 855,351 Assumed weighted average annual interest rate 8.1% Pro rata for the period (days outstanding / 365 days) 100.00% --------- Computed pro forma interest expense 70,266 Amortization of deferred financing fees 2,384 --------- Total pro forma interest expense 72,650 Reverse historical interest expense (18,296) --------- Net interest expense adjustment $ 54,354 =========
(e) EBITDA represents operating income before depreciation and amortization. EBITDA is presented because it is a widely accepted financial indicator of a company's ability to incur and service debt. EBITDA, however, is not a measure determined in accordance with GAAP and should not be considered in isolation or as a substitute for or an alternative to net income, cash flow from operating activities or other income or cash flow data prepared in accordance with GAAP or as a measure of a company's operating performance or liquidity. EBITDA as presented may not be comparable to other similarly titled measures used by other companies. -47- 51 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General On June 3, 1998, Blackstone, the Parent, the Bresnan Group, TCID and the Contributed TCI Systems Parties entered into the Contribution Agreement pursuant to which, on February 2, 1999, the TCI Transactions were effected. See "The TCI Transactions." As a result of the TCI Transactions, the Contributed TCI Systems and the Existing Bresnan Systems were transferred to the Company. The combined financial statements of Bresnan Communications Group Systems contained in this prospectus are the combination of the financial statements of the Parent and the Contributed TCI Systems. Prior to the consummation of the TCI Transactions, the Parent and the Contributed TCI Systems Parties were under the common ownership and control of TCI. Based on such common ownership and control, the financial statements are presented at historical cost on a combined basis. The following discussion relates to the combined financial statements of Bresnan Communications Group Systems. Revenue. Substantially all of the Company's revenue is earned from subscriber fees for cable television programming services, the sale of advertising, commissions for products sold through home shopping networks, fees for ancillary services, such as the rental of converters and remote control devices and installations, and fees for high-speed Internet service. The Company generated increases in revenue for each of the past three years, primarily as a result of internal subscriber growth, basic and "preferred basic" tier rate increases, acquisitions and, to a lesser extent, through growth in advertising and equipment rental which were partially offset by decreases in premium services and installation revenue. From the year ended December 31, 1994 through December 31, 1998, revenue increased at a compound annual growth rate of 9.9%. The operation of the Company's cable television systems is regulated at the federal, state and local levels. Under federal law, certain services are regulated if the appropriate franchise authority is certified by the FCC to regulate rates. Until March 31, 1999, rates for the CPS tier were also subject to regulation. See "Legislation and Regulation." During the year ended December 31, 1998, 79.9% of the Company's revenue was derived from these regulated services. Any increases in rates charged for these regulated services are governed by regulation pursuant to the Communications Act. Competitive factors may also limit the Company's ability to increase its rates. See "Business--Competition." The following table sets forth for the periods indicated the percentage of the Company's total revenue attributable to the sources indicated:
Year Ended December 31, --------------------------------- 1996 1997 1998 ----- ----- ----- Basic and "preferred basic" 74.4% 75.6% 76.0% Premium 12.5% 11.0% 9.1% Other 13.1% 13.4% 14.9% ----- ----- ----- Total revenue 100.0% 100.0% 100.0% ===== ===== =====
Operating Costs and Expenses. The Company's operating costs and expenses consist of programming expenses, operating costs, selling, general and administrative expenses and depreciation and amortization expense. The Company's programming expenses have historically increased at rates in excess of inflation due to system acquisitions, as well as increases in the number, quality and cost of programming services offered by the Company. See "Risk Factors--Increases in Programming Costs." Operating costs primarily include expenses related to wages and employee benefits of technical personnel, electricity, systems supplies and vehicles. Selling, general and administrative expenses include wages and employee benefits of customer service, accounting and administrative personnel, franchise fees, marketing and advertising costs and expenses related to billing, payment processing, office administration and corporate overhead. Depreciation and amortization expense relates to the depreciation of the Company's tangible assets and the amortization of the Company's franchise costs. Results of Operations The following table, which is derived from, and should be read in conjunction with, the combined financial statements of Bresnan Communications Group Systems, the predecessor to the Company for accounting and financial reporting purposes, and related notes included elsewhere in this prospectus, sets forth the historical combined -48- 52 statement of operations data and the components of net earnings and EBITDA expressed as a percentage of revenue for the periods indicated.
Year Ended December 31, ------------------------------------------------------------------------ 1996 1997 1998 -------------------- -------------------- -------------------- (dollars in thousands) Statement of Operations Data: Revenue $ 216,609 100.0% $ 247,108 100.0% $ 261,964 100.0% Operating costs and expenses: Programming 46,087 21.3% 53,857 21.8% 63,686 24.3% Operating 31,405 14.5% 31,906 12.9% 28,496 10.9% Selling, general and administrative 52,485 24.2% 50,572 20.5% 58,568 22.4% Depreciation and amortization 50,908 23.5% 53,249 21.5% 54,308 20.7% --------- ----- --------- ----- --------- ----- Total operating costs and expenses 180,885 83.5% 189,584 76.7% 205,058 78.3% --------- ----- --------- ----- --------- ----- Operating income 35,724 16.5% 57,524 23.3% 56,906 21.7% Interest expense (15,032) 6.9% (18,715) 7.6% (18,296) 7.0% Gain on sale of cable television systems -- -- -- -- 27,027 10.3% Other, net (844) .4% (978) .4% (273) 0.1% --------- ----- --------- ----- --------- ----- Net earnings $ 19,848 9.2% $ 37,831 15.3% $ 65,364 25.0% ========= ===== ========= ===== ========= ===== EBITDA(a) $ 86,632 40.0% $ 110,773 44.8% $ 111,214 42.5% ========= ===== ========= ===== ========= =====
________ (a) EBITDA represents operating income before depreciation and amortization. EBITDA is presented because it is a widely accepted financial indicator of a company's ability to incur and service debt. EBITDA, however, is not a measure determined in accordance with generally accepted accounting principles ("GAAP") and should not be considered in isolation or as a substitute for or an alternative to net income, cash flow from operating activities or other income or cash flow data prepared in accordance with GAAP, or as a measure of a company's operating performance or liquidity. EBITDA as presented may not be comparable to other similarly titled measures used by other companies. Year Ended December 31, 1998 Compared with Year Ended December 31, 1997 Revenue increased $14.9 million or 6.0% to $262.0 million for the year ended December 31, 1998 as compared to the same period in 1997, primarily as a result of basic and "preferred basic" tier rate increases, acquisitions and, to a lesser extent, growth in advertising, equipment rental and pay-per-view revenue. The 1998 basic and "preferred basic" tier rate increases included (1) amounts to cover the Company's increase in programming costs, offset by a reduction for the approximate .2% correction of the estimated inflation rate used in the 1997 rate setting for regulated services and (2) regulated rate increases. This increase in revenue was partially offset by a decrease in revenue from premium services of $3.2 million or 11.7% to $24.1 million due to a 7.4% decrease in premium units. Advertising and home shopping revenue grew by $1.3 million or 8.2% to $17.1 million due to an increase in customer buy rates and additional advertising insertion. A portion of the increase in advertising sales revenue was attributable to arrangements with programming suppliers that may not continue at current levels in future periods. Operating costs and expenses increased $15.5 million or 8% to $205.1 million for the year ended December 31, 1998 as compared to the same period in 1997. In the year ended December 31, 1998, programming expense increased $9.8 million or 18.3% to $63.7 million, operating expense decreased $3.4 million or 10.7% to $28.5 million and selling, general and administrative expense increased $8.0 million or 15.8% to $58.6 million, in each case as compared to the same period in 1997. The increase in programming expense was caused by increases in rates charged by programming suppliers, including substantial increases in rates relating to sports programming (18.9% versus an average of 10.3% for non-sports programming). Programming expense also increased as a result of the repositioning in 1998 of the Disney service from a premium service to a "preferred basic" tier service. Management anticipates that the Company's programming costs will continue to increase in future periods. See "Risk Factors--Increases in Programming Costs." The decrease in operating expense was primarily related to an increase in capitalized labor and overhead resulting primarily from increased installation and construction activities. Selling, general and administrative expense increased due to additional corporate overhead charges, customer billing charges -49- 53 and marketing expenses. Included in selling, general and administrative expense are $1.9 million of additional costs incurred by the Parent in anticipation of the TCI Transactions. The Company's billing expense increased $2.0 million in connection with a new customer billing system and other billing charges. The Company also experienced an increase in marketing expenses of $2.2 million as it renewed its efforts in marketing after having experienced a significant decrease in marketing expenses the previous year. All other variable expenses increased as a result of an increase in the number of basic subscribers served by the Company. Depreciation and amortization increased $1.1 million or 2.0% to $54.3 million for the year ended December 31, 1998 as compared to the same period in 1997, primarily as a result of the previous year's increase in capital expenditures. Operating income decreased $.6 million or 1.1% to $56.9 million for the year ended December 31, 1998 as compared to the same period in 1997 as a result of increases in expenses noted above more than offsetting the increases in revenue. Interest expense decreased $.4 million or 2.2% to $18.3 million for the year ended December 31, 1998 as compared to the same period in 1997 as a result of a $1.4 million write-off of deferred financing costs in 1997 relating to the Parent's amendment of the Old Credit Facility. This decrease was partially offset by increased interest rates and debt balances in 1998. Net earnings increased $27.5 million or 72.8% to $65.4 million for the year ended December 31, 1998 as compared to the same period in 1997 as a result of the recognition of a $27.0 million gain on the sale of cable television systems by the Company. EBITDA increased $.4 million or .4% to $111.2 million for the year ended December 31, 1998 as compared to the same period in 1997 as a result of increases in revenue partially offset by increases in programming expenses and selling, general and administrative expense. EBITDA margin decreased from 44.8% to 42.5%, primarily as a result of expenses increasing at a rate greater than revenue. Year Ended December 31, 1997 Compared with Year Ended December 1996 Revenue increased $30.5 million or 14.1% to $247.1 million for the year ended December 31, 1997 as compared to the same period in 1996, primarily as a result of a 6.5% increase in the number of basic subscribers from 583,000 average basic subscribers to 621,000 average basic subscribers, the recognition of revenue from a cable television system acquired by the Company in early 1997, basic and "preferred basic" rate increases and, to a lesser extent, growth in advertising, equipment rental and pay-per-view revenue. Revenue, without giving effect to revenue recognized as a result of the acquisition, increased by 7.5%. Revenue from premium services grew by $.1 million or .5% to $27.3 million due to an increase in premium units, including increases resulting from acquisitions. Revenue from advertising increased $2.5 million or 19.6% to $15.3 million as a result of increased capacity to provide advertising insertion and advertising revenues recognized from the acquired system described above. Revenue from equipment rental increased $1.2 million or 30.0% to $5.2 million as the Company began offering its basic subscribers advanced analog converters. Revenue from pay-per-view services increased $.4 million or 16.2% to $2.8 million as a result of increased customer buy rates, increased channel capacity for this service and the recognition of a full year of revenue from the acquired system described above. Operating costs and expenses increased $8.7 million or 4.8% to $189.6 million for the year ended December 31, 1997 as compared to the same period in 1996, primarily due to the recognition of costs and expenses related to a cable television system acquired in early 1997 and an increase in programming expense, resulting from the launch of new services and rate increases on existing services. For the year ended December 31, 1997, programming expense increased $7.8 million or 16.9% to $53.9 million, operating expense increased $.5 million or 1.6% to $31.9 million, and selling, general and administrative expense decreased $1.9 million or 3.6% to $50.6 million, in each case as compared to the same period in 1996. Programming expense increased as a result of increases in the number of cable television channels provided and increases in programming rates, as well as subscriber growth. Management anticipates that the Company's programming costs will increase in future periods. Operating expense increased as a result of subscriber growth. Selling, general and administrative expense decreased primarily as a result of decreased marketing and advertising costs. Depreciation and amortization increased $2.3 million or 4.6% to $53.2 million for the year ended December 31, 1997 as compared to the same period in 1996 primarily as a result of increased capital expenditures and acquisitions. -50- 54 Interest expense increased $3.7 million or 24.5% to $18.7 million as a result of increased interest rates and debt balances. The Company also recorded a $1.4 million write-off of deferred financing costs in 1997 relating to the Parent's amendment of the Old Credit Facility. Operating income and net earnings increased $21.8 million or 61.0% and $18.0 million or 90.6%, respectively, to $57.5 million and $37.8 million, respectively, for the year ended December 31, 1997 as compared to the year ended December 31, 1996 as a result of acquisitions, rate increases and other revenue increases, offset slightly by increases in programming expense, operating expense and depreciation and amortization. EBITDA increased $24.1 million or 27.9% to $110.8 million for the year ended December 31, 1997 as compared to the same period in 1996. The increase was primarily the result of the items described above. EBITDA margin increased from 40.0% to 44.8%, primarily as a result of the items described above. Liquidity and Capital Resources During the year ended December 31, 1998, the Company made capital expenditures of $58.6 million as it began upgrading the Contributed TCI Systems and rolling out digital cable and advanced analog cable services to both the Existing Bresnan Systems and the Contributed TCI Systems. During the year ended -51- 55 December 31, 1997, the Company made capital expenditures of $33.9 million as compared to $78.2 million for the same period during the year ended 1996. The Company was completing the rebuild and upgrade of the Existing Bresnan Systems during 1996, resulting in the significant reduction in year to year capital expenditures. See "Business--Technology Overview." The Company's business requires substantial cash for operations and capital expenditures. In addition, the Company has followed a strategy of expansion through selective acquisitions of cable television systems. To date, cash requirements have been funded by cash flow from operating activities and by borrowings. See "Risk Factors--Risks of Significant Cash Requirements." As part of its capital investment program, the Company plans to invest, over the next three years, (1) approximately $67.0 million to upgrade system architecture and capacity primarily in the Contributed TCI Systems, complete return activations and deploy additional fiber and (2) approximately $10.0 million to interconnect certain of the Company's systems. The Company has budgeted approximately $110.0 million for capital expenditures in 1999. The Company's capital expenditures are expected to consist of the following: (1) approximately $56.0 million to upgrade system architecture and capacity primarily in the Contributed TCI Systems, complete return activations, deploy additional fiber and to interconnect certain of the Company's systems, (2) approximately $18.7 million to purchase digital and advanced analog addressable converters, (3) approximately $7.5 million to launch high-speed Internet access and telephony services, and (4) approximately $27.8 million for ongoing replacement and other capital expenditures. The Company expects to fund these expenditures through cash flow from operations and additional borrowings under the New Credit Facility. See "Risk Factors--Risks Associated with Future Capital Requirements." Cash provided by operating activities was $102.4 million for the year ended December 31, 1998, an increase of $9.8 million from the same period in 1997. This increase was primarily a result of basic and "preferred basic" tier rate increases and subscriber growth. Cash provided by operating activities was $92.5 million for the year ended December 31, 1997, an increase of $13.4 million from the same period in 1996. This increase was primarily a result of the increase in the Company's net earnings which was primarily a result of subscriber growth, both from acquisitions and internal growth, and basic and "preferred basic" tier rate increases, offset slightly by an increase in the Company's receivables. As of December 31, 1998, amounts outstanding under the Old Credit Facility and the TCID Note were $210.9 million and $42.0 million, respectively, in each case including accrued interest. See "Certain Relationships and Related Transactions." As part of the TCI Transactions, the Company assumed the Assumed TCI Debt in an aggregate amount of $708.9 million. See "The TCI Transactions." The net proceeds from the Financings and the Cash Contribution were used to repay amounts outstanding under the Old Credit Facility, the TCID Note and the Assumed TCI Debt. See "Use of Proceeds." As of December 31, 1998, the Company would have borrowed approximately $510.3 million under the New Credit Facility and would have the ability to borrow an additional $138.2 million in revolving loans under such facility, subject to the covenants contained therein, after giving effect to the TCI Transactions and the Financings. The Company expects to continue to borrow funds under the New Credit Facility. The Company may use such borrowings for general purposes, such as capital expenditures, and to finance acquisitions. See "Risk Factors--Substantial Leverage and Deficit in Member's Equity" and "Use of Proceeds." In addition, the Company may borrow additional funds in connection with the Joint Venture. See "Prospectus Summary- - -Recent Events." The Company has evaluated and expects to continue to evaluate possible strategic acquisitions and dispositions of related businesses and assets, some of which may be significant, on an ongoing basis and at any given time it may be engaged in discussions or negotiations or enter into agreements with respect thereto. In the event that the Company enters into a definitive agreement with respect to any acquisition or joint venture, it may require additional financing. The Company has entered into fixed interest rate exchange agreements to effectively fix or set maximum interest rates on portions of its floating rate long-term debt. The Company is exposed to credit loss in the event of nonperformance by the counterparties to the fixed interest rate exchange agreements. These exchange agreements have been entered into with certain of the institutions that are lenders under the Old Credit Facility. As of December 31, 1998, such fixed interest rate exchange agreements effectively fix or set a maximum interest rates on an aggregate notional principal amount of $110.0 million with a rate between 9.625% and 9.705% upon the occurrence of certain events. The expiration dates of the exchange agreements range from August 25, 1999 to April 3, 2000. Following the consummation of the TCI Transactions and the Financings and the application of the net proceeds therefrom, the Company intends to keep in place these fixed interest rate exchange agreements. The difference between the fair -52- 56 market value and the book value of long-term debt and the exchange agreements as of December 31, 1998 was not material. Management believes that, after giving effect to the TCI Transactions and the Financings and based on the Company's current level of operations, cash flow provided from operating activities, together with expected availability under the New Credit Facility, subject to the covenants contained therein, will be sufficient to enable the Company to service indebtedness, make capital expenditures and meet operating costs and expenses for the foreseeable future. If and when appropriate, the Company or its affiliates may elect to incur additional indebtedness or to raise equity in the public or private markets. See "Risk Factors--Substantial Leverage and Deficit in Member's Equity" and "Description of the Notes--Optional Redemption." Year 2000 State of Readiness During 1998, TCI and the Parent continued enterprise-wide, comprehensive efforts to assess and remediate their respective computer systems and related software and equipment to ensure such systems, software and equipment recognize, process and store information in the year 2000 and thereafter. Such year 2000 remediation efforts, which encompass the Contributed TCI Systems and the Existing Bresnan Systems, respectively, include an assessment of their most critical systems, such as customer service and billing systems, headends and other cable plant, business support operations, and other equipment and facilities. TCI and the Parent also continued their efforts to verify the year 2000 readiness of their significant suppliers and vendors and continued to communicate with significant business partners and affiliates to assess such partners and affiliates' year 2000 status. TCI and the Parent have formed year 2000 program management teams to organize and manage their year 2000 remediation efforts. The program management teams are responsible for overseeing, coordinating and reporting on their respective year 2000 remediation efforts. Since consummation of the TCI Transactions, assessment and remediation of year 2000 issues for the Contributed TCI Systems has become the responsibility of the Company. The Company is continuing the approach of the respective project teams since the consummation of the TCI Transactions. The program management teams have defined a four-phase approach to determining the year 2000 readiness of their respective internal systems, software and equipment. Such approach is intended to provide a detailed method for tracking the evaluation, repair and testing of their respective systems, software and equipment. Phase 1, Assessment, involves the inventory of all systems, software and equipment and the identification of any year 2000 issues. Phase 1 also includes the preparation of the work plans needed for remediation. Phase 2, Remediation, involves repairing, upgrading and/or replacing any non-compliant equipment and systems. Phase 3, Testing, involves testing their respective systems, software, and equipment for year 2000 readiness, or in certain cases, relying on test results provided to TCI and the Parent. Phase 4, Implementation, involves placing compliant systems, software and equipment into production or service. As of December 31, 1998, the combined status of TCI's and the Parent's projects related to their respective systems were as follow: Phase 1 of the projects was substantially complete, with expected completion by May 1999, Phase 2 was underway with expected completion by July 1999, and Phases 3 and 4 were just beginning, with expected completion dates in September 1999. The completion dates set forth above are based on current expectations. However, due to the uncertainties inherent in year 2000 remediation, no assurances can be given as to whether such projects will be completed on such dates. The project management teams are completing an inventory of their important systems with embedded technologies and are currently determining the correct remediation approach. The embedded technologies assessments are expected to be complete by May 1999. Third Party Systems, Software and Equipment The project management teams continue their surveys of significant third-party vendors and suppliers whose systems, services or products are important to their operations (e.g., suppliers of addressable controllers and set-top -53- 57 boxes, and the provider of billing services). The year 2000 readiness of such providers is critical to continued provision of cable television service. The project management teams have received information that the most critical systems, services or products supplied to their respective cable television systems by third-parties are either year 2000 ready or are expected to be year 2000 ready by mid-1999. In addition to the survey process described above, management of TCI and the Parent have identified their most critical supplier/vendor relationships and have instituted a verification process to determine the vendors' year 2000 readiness. Such verification includes, as deemed necessary, reviewing vendors' test and other data and engaging in regular conferences with vendors' year 2000 teams. TCI and the Parent are testing to validate the year 2000 compliance of certain critical products and services. Costs To date, year 2000 costs incurred were not material. Management of TCI and the Parent currently estimate the Company's remaining year 2000 costs to be at least $4.4 million. Although no assurances can be given, management currently expects that (1) cash flow from operations will fund the costs associated with year 2000 compliance and (2) the total projected cost associated with the year 2000 programs will not be material to the Company's financial position, results of operations or cash flows. Contingency Plans The failure to correct a material year 2000 problem could result in an interruption or failure of certain important business operations. Management believes that the Company's year 2000 program will significantly reduce risks associated with the changeover to the year 2000 and is currently developing certain contingency plans to minimize the effect of any potential year 2000 related disruptions. The risks and the uncertainties discussed below and the associated contingency plans relate to systems, software, equipment, and services that TCI and the Parent have deemed critical in regard to customer service, business operations, financial impact or safety. The failure of addressable controllers contained in the cable television system headends could disrupt the delivery of premium services to customers and could necessitate crediting customers for failure to receive such premium services. In this unlikely event, management expects that it will identify and transmit the lowest cost programming tier. Unless other contingency plans are developed with the program suppliers, premium and adult content channels would not likely be transmitted until the addressable controller share had been repaired. Customer service networks and/or automated voice response systems failure could prevent access to customer account information, hamper installation scheduling, and disable the processing of pay-per-view requests. The Company plans to have its customer service representatives answer telephone calls from customers in the event of outages and expect to retrieve needed customer information manually from the billing service provider. A failure of the services provided by billing systems service providers could result in a loss of customer records which could disrupt the ability to bill customers for a protracted period. The Company plans to prepare electronic backup records of their customer billing information prior to the year 2000 to allow for data recovery and to continue to monitor the year 2000 readiness of its key customer-billing suppliers. Advertising revenue could be adversely affected by the failure of certain equipment which could impede or prevent the insertion of advertising spots in cable television programming. Management anticipates that it can minimize such effect by manually resetting the dates each day until the equipment is repaired. Security and fire protection systems failure could leave facilities vulnerable to intrusion and fire. Management expects to return such systems to normal functioning by turning the power off and then on again ("power off/on"). Management also plans to have additional security staff on site and plans to implement a backup plan for communicating with local fire and police departments. Also, certain personal computers interface and control elevators, escalators, wireless systems, public access systems and certain telephony systems. In the event such computers cease operating, conducting a power off/on is expected to resume normal functioning. If a power off/on does not resume normal functioning, management expects to resolve the problem by resetting the computer to a pre-designated date which precedes the year 2000. -54- 58 In the event that the local public utility cannot supply power, the Company expects to supply power for a limited time to cable headends and office sites through backup generators. The financial impact of any or all of the above worst-case scenarios has not been and cannot be estimated by management due to the numerous uncertainties and variables associated with such scenarios. See "Risk Factors--Year 2000 Risk." Inflation The net impact of inflation on the Company's results of operations has not been material in the last three years due to the relatively low rates of inflation during this period. If the rate of inflation increases, the Company may increase subscriber rates to keep pace with the increase in inflation, although there may be timing delays and other market considerations. -55- 59 BUSINESS The Company The Company owns, develops and operates geographically concentrated cable television systems in small-and medium-sized communities in the midwestern United States. On June 3, 1998, affiliates of the Company entered into a definitive agreement to combine the Existing Bresnan Systems with the Contributed TCI Systems. This combination occurred on February 2, 1999. The Contributed TCI Systems are located in markets largely adjacent to the Existing Bresnan Systems. As of December 31, 1998, after giving effect to the TCI Transactions and the Recent Acquisitions and Disposition, the Company's cable television systems would have passed approximately 967,000 homes and served approximately 652,000 basic subscribers, ranking the Company among the 20 largest multiple system operators in the United States. The Company is a leading operator of cable television systems located in small- and medium-sized communities where subscribers generally require cable television to clearly receive a full complement of off-air broadcast stations and have limited entertainment alternatives. Management believes that the Company's cable television systems are less susceptible to competition and subscriber turnover than urban cable television systems, resulting in more predictable revenue and cash flow. Management has followed a systematic approach to the upgrade of the Company's cable television plant which has enabled the Company to provide new and enhanced services, including digital cable and advanced analog cable services, expanded pay-per-view options and high-speed Internet service. Digital cable or advanced analog cable service was available to approximately 74% of the Company's basic subscribers as of December 31, 1998 and high-speed Internet service has been launched in seven of the Company's markets under either the "Bresnan@Home" brand or the proprietary "BresnanLink" brand. Management anticipates that digital cable and high-speed Internet services will become important sources of revenue growth as the Company continues to market and increase the penetration of these services. The upgrade of the Existing Bresnan Systems has been substantially completed and the upgrade of the Contributed TCI Systems is expected to be substantially complete by the end of 1999. Management believes that the Company's network infrastructure is more technically advanced than that of the Company's peers, and that the increased quality, reliability and variety of the Company's services have contributed to the Company's repeated recognition by the cable television industry for superior customer satisfaction. William J. Bresnan, the Company's President and Chief Executive Officer, is a cable television pioneer with 40 years of industry experience. Mr. Bresnan founded the Parent in 1984 and, in partnership with TCI, developed its business through internal growth and acquisitions. Prior to 1984, Mr. Bresnan was the Chairman and Chief Executive Officer of Group W Cable, Inc., one of the largest cable television companies in the United States at the time based on the number of cable subscribers. In addition to Mr. Bresnan, the senior management team of the Company has significant business experience in acquiring, operating and financing telecommunications operations, averaging approximately 20 years of industry experience. Management expects the Company to continue to benefit from its relationship with TCI, one of the leading cable television operators in the United States. Pursuant to certain contractual arrangements with TCI, the Company is able to purchase substantially all of its programming services at TCI's cost plus an administrative surcharge and has the right to receive discounts on purchases of certain equipment through TCI or its vendors. The Company believes that its relationship with TCI results in lower programming costs and improved availability of certain technological innovations, including state-of-the-art digital converters, cable modems and digitally compressed cable television programming services. The Company will also benefit from the expertise and valuable industry knowledge of TCI's Leo J. Hindery, William R. Fitzgerald and Derek Chang, who have joined the Company's Advisory Committee. TCI recently completed its merger with AT&T whereby TCI has become a subsidiary of AT&T. Business Strategy Focusing on Small- and Medium-Sized Communities. The Company focuses on serving small- and medium-sized communities located primarily in four midwestern states: Michigan, Minnesota, Wisconsin and Nebraska. Management believes that the cable television systems in these communities are less susceptible to competition from direct broadcast satellite providers, due to the importance of local programming to residents in these communities, and from cable overbuilders, due to the relatively small size of these communities. The Company's strategy of upgrading systems and aggressively launching new and enhanced services should also limit -56- 60 consumer demand for alternative multichannel television and high-speed Internet service providers. Additionally, the Company believes that residents of the areas that it serves generally have a greater sense of community than residents of metropolitan areas, and as a result are more receptive to the Company's extensive community relations and customer satisfaction initiatives. Consequently, management believes that the Company's brand name is well established with its subscribers, enhancing its ability to launch new services and bundle service offerings. Clustering and Interconnection of Cable Television Systems. The Company has pursued the acquisition and development of cable television systems in communities that are within close proximity to its existing systems in order to maximize economies of scale and operating efficiencies. Such operating efficiencies include centralized billing and the sharing of general management, customer service, marketing and technical support. The Company intends to interconnect systems within a cluster with fiber optic cable, enabling the consolidation of headend facilities. Headend consolidation facilitates the launch of new and enhanced services, such as digital cable and high-speed Internet services, in smaller communities than would otherwise be economically attractive, by allowing the Company to spread the capital and operating costs associated with these services over a larger subscriber base. The integration of the Contributed TCI Systems is expected to significantly enhance the clustering and interconnection of the Company's cable television systems. The Company intends to complete a system interconnection and headend elimination program within three years. Upon completion of this program, the number of headends required to serve the Company's subscribers will be reduced from 127 to 73 and approximately 72% of its subscribers will be served from six central headend facilities. Upgrading to State-of-the-Art Technology. The Company made an early commitment to upgrade the Existing Bresnan Systems in order to increase programming choices, provide new and enhanced services and improve overall customer satisfaction. Reflecting this commitment, as of December 31, 1998, approximately 84% of the basic subscribers in the Existing Bresnan Systems were served by high capacity, broadband HFC and approximately 70% were served by 750 MHZ capacity plant. Management believes that the Existing Bresnan Systems are technologically advanced beyond the systems operated by most other multiple system operators. The Company plans to invest, over the next three years, approximately $67.0 million to upgrade system architecture and capacity, primarily in the Contributed TCI Systems, complete return activations and deploy additional fiber. Many of the Contributed TCI Systems have already been upgraded to facilitate the launch of digital cable service. As of December 31, 1998, 51% of the Contributed TCI Systems' subscribers were served by 550 MHZ capacity or greater plant. Providing New and Enhanced Services. The improved clustering of the Company's cable television systems combined with upgrades to state-of-the-art technology allow the Company to accelerate the introduction of new and enhanced services including the following: digital cable service, which allows for a significant increase in channel capacity and enhanced offerings, including near-video-on-demand, and is available to a majority of the Company's basic subscribers; high-speed Internet service, which has been launched in seven markets under either the "Bresnan@Home" brand or the proprietary "BresnanLink" brand; wide area network and point-to-point data services; digital advertising insertion; and intraLATA toll and long distance resale services, which have been launched in the Upper Michigan cluster. Management believes that these new and enhanced service offerings attract new subscribers, enhance revenue and cash flow per subscriber, increase customer loyalty and reduce churn. Maintaining Strong Community Relations. The Company's ongoing community relations initiatives in the markets served by the Existing Bresnan Systems have resulted in widespread brand recognition and numerous industry awards. Management believes that maintaining strong community relations will continue to be important to the Company's long-term success. The Company's community-oriented initiatives include educational programs and the sponsorship of programs and events recognizing outstanding local citizens. Management believes that the Company's ongoing community relations initiatives result in consumer and governmental goodwill and name recognition which have increased customer loyalty and will facilitate future efforts to provide telecommunications services. Management intends to implement these initiatives in the Contributed TCI Systems. Emphasizing Customer Satisfaction. In order to maximize customer satisfaction, the Company strives to provide reliable, high-quality service offerings, superior customer service and attractive programming choices at reasonable rates. The Company has implemented stringent internal customer service standards, which management believes meet or exceed those established by the National Cable Television Association. The Company has received five Beacon Awards in the past five years from the Cable Television Public Affairs Association. The Company's most recent award recognized its "On Time Guarantee Program" as the outstanding customer relations program by a multiple system operator in the United States. Additionally, management believes that by upgrading the Company's cable television systems it has increased the quality and reliability of its services, resulting in increased -57- 61 customer satisfaction. Management believes that the Company's customer service efforts have contributed to its subscriber growth, the acceptance of its new and enhanced service offerings and ongoing patronage by existing subscribers. The Company plans to provide a level of emphasis on customer satisfaction in the Contributed TCI Systems similar to the level that it currently provides in the Existing Bresnan Systems. The TCI Transactions Reflecting management's strategy of acquiring and developing cable television systems in regional clusters, affiliates of the Company entered into the Contribution Agreement with TCI and Blackstone on June 3, 1998 pursuant to which TCI transferred to the Company the Contributed TCI Systems, which serve approximately 416,000 basic subscribers in small- and medium-sized communities largely adjacent to the Existing Bresnan Systems, together with the Assumed TCI Debt. In addition, Blackstone contributed approximately $136.5 million in cash in connection with the TCI Transactions. The Company repaid its existing indebtedness and the Assumed TCI Debt with the net proceeds received from the Cash Contribution and the Financings. TCI, Blackstone, and William J. Bresnan, collectively with management, indirectly beneficially own approximately 50.0%, 39.8% and 10.2%, respectively, of the outstanding equity interests of the Company. The following table sets forth certain financial, operating and technical data for the Company as of December 31, 1998 after giving effect to the TCI Transactions. The following table does not reflect the impact of the Recent Acquisitions and Disposition. See "Prospectus Summary--Recent Events." After giving effect to the Recent Acquisitions and Disposition, the Company's systems would have passed approximately 967,000 homes and served approximately 652,000 basic subscribers.
As of and for the Year Ended December 31, 1998(a) (dollars in thousands, except for per subscriber data) ------------------------------------------------------ Existing Contributed Bresnan TCI Systems Systems Total ----------- ----------- ----------- Revenue $ 90,836 $ 117,128 $ 261,964 Average monthly total revenue per average basic subscriber $ 34.77 $ 34.52 $ 34.61 Homes passed 298,171 603,621 901,792 Basic subscribers 201,468 416,399 617,867 Basic penetration 67.6% 69.0% 68.5% Premium units 89,269 154,232 243,501 Pay-to-basic ratio(c) 44.3% 37.0% 39.4% Percentage of basic subscribers served by 550 MHZ plant or greater 83.5% 50.6% 61.3%
- ---------- (a) Represents the historical combined financial, operating and technical data of the Existing Bresnan Systems and the Contributed TCI Systems as of and for the year ended December 31, 1998. The table does not include financial, operating and technical data for the Recent Acquisition that is expected to close after December 31, 1998 other than the Recent Acquisitions and Disposition. For information regarding such acquisitions and dispositions, see "Prospectus Summary--Recent Events." (b) Represents average monthly total revenue for the year ended December 31, 1998 divided by the number of average basic subscribers in each period. (c) Pay-to-basic ratio measures premium units as a percentage of basic subscribers. -58- 62 Description of Operating Regions To manage and operate its cable television systems, the Company has established four operating regions: Michigan, Minnesota, Wisconsin and Nebraska. Within each region, certain groups of cable television systems have been or are expected to be interconnected. As of December 31, 1998, after giving effect to the TCI Transactions and completion of the Company's planned system interconnection and headend elimination program, approximately 71% of the Company's basic subscribers would have been served by six central headend facilities and approximately 80% would have been served by cable television systems that are interconnected within a cluster. The following table and the discussion that follows provide an overview of selected financial, operating and technical data for each of the Company's operating regions as of and for the year ended December 31, 1998 after giving effect to the TCI Transactions. Unless otherwise indicated, the following table and the discussion do not reflect the impact of the Recent Acquisitions and Disposition discussed under the caption "Prospectus Summary--Recent Events." After giving effect to the Recent Acquisitions and Disposition, the Company's systems would have passed approximately 967,110 homes and served approximately 651,812 basic subscribers.
As of and for the Year Ended December 31, 1998 ----------------------------------------------------------------------- Michigan Minnesota Wisconsin Nebraska Systems Sold (a) Total -------- --------- --------- -------- ---------------- ----- (dollars in thousands, except per subscriber data) Financial Data: Revenue $ 92,503 $ 87,169 $ 45,468 $ 26,192 $10,632 $261,964 Average monthly basic 26.91 25.97 26.46 27.14 23.61 26.39 revenue per average basic subscriber (b) Average monthly total 35.38 33.56 34.80 35.91 33.08 34.61 revenue per average basic subscriber (c) Operating and Technical Data (end of period): Homes passed 330,441 298,595 187,737 85,019 N/A 901,792 Miles of plant 6,356 3,826 1,535 1,116 N/A 12,833 Density (d) 52 78 122 76 N/A 70 Basic subscribers 223,542 222,624 111,104 60,597 N/A 617,867 Basic penetration 67.6% 74.6% 59.2% 71.3% N/A 68.5% Premium units 100,890 66,801 42,851 32,959 N/A 243,501 Pay-to-basic ration(e) 45.1% 30.0% 38.6% 54.4% N/A 39.4% Clusters 4 3 2 3 N/A 12 Headends 51 39 9 28 N/A 127(f) Planned headend 21 23 5 5 N/A 54(f) eliminations Plant bandwidth (g): 330 MHZ or less 20.0% 13.7% 2.1% 23.0% N/A 14.8% 350-400 MHZ 7.4 15.2 0.0 0.8 N/A 8.2 450-550 MHZ 27.3 14.8 47.3 76.2 N/A 31.2 625-750 MHZ 45.3 56.3 50.6 0.0 N/A 45.8
- ---------- (a) For financial data, represents systems located in Mississippi and Georgia which were disposed of by the Company on March 27, 1998 and December 21, 1998, respectively. For information regarding the Recent Acquisitions and Disposition, see "Prospectus Summary--Recent Events." (b) Represents average monthly revenue from basic programming services for the year ended December 31, 1998 divided by the number of average basic subscribers for the period. (c) Represents average monthly total revenue for the year ended December 31, 1998 divided by the number of average basic subscribers in each period. -59- 63 (d) Represents homes passed divided by miles of plant. (e) Pay-to-basic ratio measures premium units as a percentage of basic subscribers. (f) After giving effect to the Recent Acquisitions and Disposition, the Company expects to have 130 headends prior to eliminations and 58 planned headend eliminations. (g) Represents percentage of basic subscribers within a region served by the indicated plant bandwidth. Michigan Region. The Company's Michigan Region is organized into four regional clusters: the Bay City cluster, the Ludington cluster, the Petoskey cluster and the Upper Michigan cluster. After completion of planned interconnects within certain of these clusters, the Company expects that approximately 180,700 or 81%, of the Company's basic subscribers located in the Michigan Region will be served by four central headend facilities. Bay City Cluster. As of December 31, 1998, the Bay City cluster was comprised of approximately 114,900 basic subscribers served by 21 headends. After completion of planned fiber interconnects within the cluster, the Company expects that ten headends will be eliminated and that approximately 105,500, or 92%, of the basic subscribers in this cluster will be served by one central headend facility. Saginaw County, where Bay City is located, is the center of agriculture, commerce and industry in central Michigan. Numerous manufacturing companies are based or have facilities in the area, including Dow Chemical, which is headquartered in the town of Midland. Saginaw Township and Thomas Township are rapidly growing communities where the Company believes there will be strong demand for its high-speed Internet service. In the cities of Bay City and Midland, the Company operates a 750 MHZ cable system, a substantial portion of which is two-way activated. In October 1998, the Company launched its high-speed Internet service in these cities, and has already achieved a penetration rate in excess of 1% of two-way activated homes. The Company has a contract with Delta College to provide data and telecommunications services, and has interconnected four sites through its broadband network. In addition, the Company has initiated a virtual private network trial for Dow Chemical. Petoskey Cluster. As of December 31, 1998, the Petoskey cluster was comprised of approximately 32,900 basic subscribers served by 12 headends. After completion of planned interconnects within the cluster, the Company expects that six headends will be eliminated and that approximately 23,700, or 72%, of the basic subscribers in this cluster will be served by two central headend facilities. The economy of Petoskey is primarily driven by tourism and manufacturing. Many families maintain second homes in this area, due to the year round resort attractions, such as golf and skiing. Most households maintain their cable television service throughout the year, which keeps churn rates low in this cluster. Upper Michigan Cluster. As of December 31, 1998, the Upper Michigan cluster was comprised of approximately 69,000 basic subscribers served by 14 headends. In 1997, the Company completed interconnects within the cluster and, as of December 31, 1998, approximately 51,300, or 74%, of the basic subscribers in this cluster were served by one central headend facility. Industry in the Upper Michigan area includes tourism, retail sales, mining and manufacturing. Several universities, including Northern Michigan University, Michigan Technological University and Lake Superior State University are located in the area. The Company first launched its high-speed Internet service in Marquette in July 1997. The Company subsequently launched service in additional systems in the Upper Michigan cluster, achieving initial penetration rates from 1% to 3% of two-way activated homes. The Company has also interconnected universities and school districts in the area with fiber in order to provide high-speed Internet service and distance learning services. In 1997, the Company created a high-speed link connecting the Escanaba Daily Press and the Iron Mountain Daily News to their printing facility in another city. The Company also provides virtual private network services between three office locations for a state employment agency. The Company launched digital cable service in the Upper Michigan cluster in August 1998. -60- 64 Minnesota Region. The Company's Minnesota Region is organized into three regional clusters: the Rochester cluster, the St. Cloud cluster and the Duluth cluster. After completion of planned interconnects within certain of these clusters, the Company expects that approximately 169,300 or 76%, of the Company's basic subscribers located in the Minnesota Region will be served by two central headend facilities. Rochester Cluster. As of December 31, 1998, the Rochester Cluster was comprised of approximately 114,000 basic subscribers served by 11 headends. After completion of planned interconnects within the cluster, the Company expects that seven headends will be eliminated and that approximately 110,600, or 97%, of the basic subscribers in this cluster will be served by one central headend facility. For each of the past four years Rochester has been named by USA Today as one of the areas in the United States with the highest quality of life, highlighted by low crime and unemployment rates. The economy of the Rochester area is supported by the presence of several universities, as well as numerous technology, healthcare and agriculture companies. For example, the city of Rochester serves as the headquarters for the Mayo Clinic, one of the preeminent medical facilities in the world. In 1997, the Company built a network connecting schools in the Mankato school district. The network provides point-to-point data and other telecommunications services, and is also used for distance learning programs. See "--New and Enhanced Services." The Company has initiated a service trial with the Mayo Clinic to provide a virtual private network for physicians enabling them to access and exchange data from home. The Company also began offering high-speed Internet service in Rochester in November 1998. The Company believes that the high education levels among residents and the presence of universities in this area indicate strong potential demand for its high-speed Internet service. The Company launched digital cable service in December 1997 and, as of December 31, 1998, it was available to over 75% of the basic subscribers served by the Rochester cluster. St. Cloud Cluster. As of December 31, 1998, the St. Cloud cluster was comprised of approximately 74,500 basic subscribers served by 21 headends. After completion of planned interconnects within the cluster, the Company expects that 14 headends will be eliminated and that approximately 58,700, or 79%, of the basic subscribers in this cluster will be served by one central headend facility. St. Cloud is the center of one of Minnesota's fastest growing metropolitan areas and is located along Interstate 94, northwest of Minneapolis/St. Paul. St. Cloud is home to three universities. The granite, printing and lens manufacturing industries are important to St. Cloud's local economy. The Company has contracted to install broadband connections to provide cable television and high-speed Internet service to the dormitories at Southwest State University in the town of Marshall. The Company launched its high-speed Internet service in Marshall in June 1998 and expects to launch such service in St. Cloud in early 1999. The Company launched digital cable service in the St. Cloud cluster in March 1998 and, as of December 31, 1998, it was available to approximately 48% of the basic subscribers located in this cluster. Wisconsin Region. The Company's Wisconsin Region is organized into two regional clusters: the Madison cluster and the Walworth/Fontana cluster. After completion of planned interconnects within the Madison cluster, the Company expects that three headends will be eliminated and that approximately 97,400 or 88%, of the Company's basic subscribers located in the Wisconsin Region will be served by one central headend facility. Madison Cluster. As of December 31, 1998, the Madison cluster was comprised of approximately 101,000 basic subscribers served by six headends. After completion of planned interconnects within the cluster, the Company expects that approximately 97,400, or 97%, of the basic subscribers in this cluster will be served by one central headend facility. Madison is the state capital of Wisconsin and home of the main campus of the University of Wisconsin, which accounts for a significant portion of the area's workforce. Federal, state and county governments in this area employ approximately 20,000 people. Numerous small- and medium-sized manufacturing and service firms are also located in the area. -61- 65 The Company believes that the presence of numerous businesses and the University of Wisconsin in the Madison cluster indicate strong potential demand for high-speed Internet service, virtual private networks, wide area networks and point-to-point data services. Nebraska Region. The Company's Nebraska Region is organized into three regional clusters: the Grand Island cluster, the Scottsbluff cluster and the Beatrice cluster. After completion of planned interconnects within these clusters, the Company expects that five headends will be eliminated and that approximately 28,200, or 47%, of the basic subscribers in this region will be served by two central headend facilities. The Nebraska economy is based primarily on agriculture, and numerous sugar processing plants are located throughout the Company's service area. The largest railroad switching yard in the United States is located in North Platte. Numerous junior colleges and regional hospitals are major employers in the region. The Company has launched digital cable service in many of the larger systems making it available to over 65% of the basic subscribers in the Nebraska Region as of December 31, 1998, and expects to launch digital cable service in the near future in many of the remaining systems. Technology Overview The Company has adopted an HFC architecture as the standard for its ongoing system upgrades. In most systems, the Company deploys fiber to individual nodes, serving an average of 600 homes or commercial buildings, and coaxial cable from the node to the home or building. Management believes that this network design provides high capacity and superior signal quality and enables the Company to provide the newest forms of telecommunications services to its subscribers. The primary advantages of HFC architecture over traditional coaxial cable networks include: o Increasing the channel capacity of cable television systems o Reducing the number of amplifiers in cascade from the headend to the home, resulting in improved signal quality and reliability o Reducing the number of homes per node, improving the capacity of the network to provide high-speed Internet service and reducing the number of households affected by disruptions in the network o Providing sufficient dedicated reverse spectrum for two-way services, thereby avoiding reverse signal interference problems o Minimizing ongoing network maintenance costs This architecture enables the Company to offer new and enhanced services, including additional channels and tiers, expanded pay-per-view options, high-speed Internet service, wide area network and point-to-point data services and digital advertising insertion. This architecture also provides a network infrastructure of suitable quality to offer facilities-based telephony services, although incremental capital investment would be required to offer such services. The Company made an early commitment to upgrade the Existing Bresnan Systems in order to increase programming choices, provide new and enhanced services and improve overall customer satisfaction. The Company has substantially completed the upgrade of the Existing Bresnan Systems to an HFC architecture, and serves approximately 73% of the basic subscribers in these systems with 750 MHZ capacity plant, with an average of 600 homes per node which can further be reduced to 150 homes. The Company is currently generating incremental revenue by offering new and enhanced services such as digital cable service, advanced analog cable service and high-speed Internet service in certain of these systems. The Company intends to activate most of these systems for two-way data transmission. As part of its capital investment program, the Company plans to invest, over the next three years, (1) approximately $67.0 million to upgrade system architecture and capacity, primarily in the Contributed TCI -62- 66 Systems, complete return activations, and deploy additional fiber, and (2) approximately $10.0 million to interconnect certain of the Company's systems. Upon completion of the capital investment program, the Company expects to serve approximately 68% of the basic subscribers in its systems with 750 MHZ capacity plant with a majority of these systems activated for two-way data transmission. Currently, approximately 62% of the Contributed TCI Systems have been upgraded to HFC architecture and 51% have been upgraded to 550 MHZ or greater plant. Upon completion of the capital investment program, the Company expects that approximately 87% of its basic subscribers will be served by HFC architecture and approximately 87% will be served by 550 MHZ or greater plant. The Company anticipates that upon completion of its planned system interconnection and headend elimination program, the number of headends required to serve its basic subscribers will be reduced from 127 to 73 and that approximately 72% of its basic subscribers will be served from six central headend facilities. The Company's capital investment program, which has been substantially completed in the Existing Bresnan Systems and will continue in the Contributed TCI Systems, benefits the Company in several ways: o Extensive use of fiber optic technology reduces operating and maintenance costs o Consolidation and upgrade of headends improves system reliability and reduces maintenance costs o Use of addressable technology, including digital and advanced analog converters, broadens choices for subscribers and develops new revenue streams o Use of two-way transmission capability facilitates the offering of "impulse" pay-per-view, interactive data services and voice services o Use of digital compression, which greatly increases the number of channels available to subscribers, augments current analog channel offerings New and Enhanced Services The Company's system upgrades facilitate the introduction of the following new and enhanced services to a substantial portion of the Company's subscribers: o Additional Channels and Tiers. As of December 31, 1998, digital cable or advanced analog cable services were available to approximately 69% of the Company's basic subscribers. The Company's digital program offerings are supplied through TCI's digital compression service and include an interactive program guide and the ability to offer up to 101 additional video channels and 43 audio channels. o Expanded Pay-Per-View Options. The Company currently offers pay-per-view programming featuring movies, sports and special events. The Company's digital pay-per-view offerings are supplied through Viewer's Choice and include up to 30 channels, which permits the offering of a number of current top video releases, commencing at 30-minute intervals, to encourage impulse buying. As the Company continues to expand its digital cable service, it intends to make its near-video-on-demand service available to a greater number of subscribers. o Residential High-Speed Internet Service. The Company has deployed high-speed Internet service, which provides local content and connectivity to the Internet under the "Bresnan@Home" brand and, where the @Home service is not available, under its own "BresnanLink" brand, in portions of the following systems:
System Launch Date Service ------ ----------- ------- Marquette, Michigan July 1997 BresnanLink Escanaba, Michigan October 1997 BresnanLink Houghton, Michigan April 1998 BresnanLink
-63- 67 Iron Mountain, Michigan May 1998 BresnanLink Marshall, Minnesota June 1998 BresnanLink Bay City/Midland, Michigan October 1998 @Home Rochester, Minnesota December 1998 @Home
As of December 31, 1998, high-speed Internet service was available to approximately 110,000 two-way activated homes and the Company provided service to approximately 1,600 residential subscribers. The Company anticipates that service will be available in the Duluth, Mankato and Winona, Minnesota markets in the first quarter of 1999 and in the St. Cloud, Minnesota and Madison, Wisconsin markets by the second quarter of 1999. The Company is evaluating the potential rollout of BresnanLink and Bresnan@Home services in other markets. o Business Data Services. The Company offers three primary services to the business community through its BresnanLink service: (1) high-speed Internet service, (2) wide area networks and point-to-point data service, and (3) virtual private networks. In 1998, the Company signed multi-year contracts that are expected to generate over $1 million in annual revenue from business customers. The Company has made a significant commitment to the development of "distance learning," which enables the delivery of educational training programs to people located at remote sites from the point of instruction by transmitting two-way video and audio signals over the Company's fiber optic networks. A number of school districts have contracted with the Company to provide interactive television networks as well as high-speed data and Internet service. The Company now connects more than 115 educational sites for distance learning, which for the year ended December 31, 1998 generated revenue of approximately $435,000. o Digital Advertisement Insertion. The Company has purchased two state-of-the-art regional digital video servers to enable it to provide digital advertisement insertion. Digital advertisement insertion is expected to provide the Company with greater flexibility to offer regional and more targeted advertising. In systems which are upgraded to HFC architecture, the Company is able to insert advertising targeted to specific segments of a community. Management believes that the Company's geographic clustering and favorable subscriber demographics enable it to offer greater and more attractive audience reach to advertisers. o Telephone Services. The Company has launched intraLATA toll and long distance resale services to customers in the Upper Michigan cluster and will continue to evaluate the launch of these services in additional markets. Furthermore, following the completion of the planned capital investment program, management believes the Company will be well positioned to provide other voice services to residential and business customers in certain of its systems. The Company will continue to evaluate the attractiveness of providing these services which will require incremental investments of capital, some of which may be significant. In addition, the Parent recently entered into a letter of intent with AT&T to form the Joint Venture, the business of which would be to provide local or anydistance communications services (other than mobile wireless services, video entertainment services and highspeed Internet services) to residential consumers and certain small business customers under the "AT&T" brand name over the Company's cable infrastructure. See "Prospectus SummaryRecent Events." The Company is required to apply for and obtain prior authorization from the FCC and certain states to offer certain telecommunications services, and to comply with a variety of ongoing regulatory requirements applicable to telecommunications carriers. See "Risk FactorsRisks Associated with Offering Telecommunications Services." o Other Services. The Company continues to evaluate new services on an ongoing basis as these services become available, such as set top Internet service, video games and video-on-demand, and adds these services to its offerings as they become commercially viable. -64- 68 Bresnan's Commitment to Community Relations Management believes that maintaining strong community relations will continue to be important to the Company's long-term success. The Company's community-oriented initiatives include educational programs and the sponsorship of programs and events recognizing outstanding local citizens. In addition, certain members of the Company's management team, including William J. Bresnan, host community events for political and business leaders as well as representatives of the local media where they discuss the operations of the Company and recent developments in the telecommunications industry. The Company has received numerous awards recognizing its ongoing community relations initiatives in the Existing Bresnan Systems. Management believes that the Company's ongoing community relations initiatives result in consumer and governmental goodwill and name recognition, which have increased customer loyalty and will likely facilitate any future efforts to provide new telecommunications services. Management intends to continue this strategy in the Contributed TCI Systems. The Company encourages local management to take a leadership role in community and civic activities. The success of the Company's local initiatives was cited in 1992 when William J. Bresnan received the industry's Cable Television Public Affairs Association President's Award, the industry's top award for excellence in public affairs. In 1998, William J. Bresnan received the Distinguished Service Award from the North Central Cable Television Association. Other examples of the Company's community relations activities in the Existing Bresnan Systems are as follows: o Local Origination Programs. In Midland and Bay City, Michigan, the Company produces local origination programs, including Government Update and Hometown News. Government Update is an interview program with political leaders, including federal, state and local government officials, which reinforces the Company's relationship with these important members of the community. Hometown News, which airs in conjunction with CNN Headline News, features local news on people and events. Hometown News has won several awards for programming excellence from the Cable Television Public Affairs Association and the Michigan Cable Television Association. Orchids and Onions, also honored by the Michigan Cable Television Association, is a series of editorial opinion spots produced by the Company running in many of the Company's cable television systems in Michigan. The series highlights local people and organizations and serves as a vehicle for the Company to comment on programs and issues that concern the public interest. Certain of the Company's cable television systems televise local sports programs, telethons for the arts, cultural and community activities and governmental public meetings, including City Council sessions and voter forums and debates. The Company has won several awards for its local productions. o Community Relations Programs. Six years ago, the Company created an annual award program in Upper Michigan to enhance its relationship with the senior citizen community, a significant demographic segment in that market. The Super Senior Award honors senior citizens who have made significant contributions to their communities. Honorees are selected from a pool of senior citizens nominated by local civic organizations, churches, senior centers and friends. The program received statewide attention when Hillary Rodham Clinton and Congressman Bart Stupak presented the Super Senior Awards in June 1995. o Educational and Family Viewing Programs. The Company's Education Program provides certain public and private schools in its franchised areas with free installation and monthly cable service and 525 hours per month of commercial-free educational programming and data services. The Company began a series of community workshops for parents and family members on media literacy skills. The "Critical Viewing," or "Take Charge of Your TV," workshops are designed to teach parents and teachers how to critically select programming appropriate for their children to watch. The Company has also undertaken a partnership with The Discovery Networks to co-sponsor a series of "Critical Viewing" workshops in all of the communities served by the Company. Customer Satisfaction The Company strives to provide reliable, high-quality service offerings, superior customer service and attractive programming choices at reasonable rates. The Company has implemented stringent internal customer service standards, which management believes meet or exceed those established by the National Cable Television Association. The Company offers 30-day trial periods for new subscribers, with a money-back guarantee for -65- 69 subscribers who are not completely satisfied with their cable television service, as well as 24 hour repair service. The Company believes that its commitment to customer service has contributed and will continue to contribute to its success relative to direct broadcast satellite providers, which the Company believes are not currently able to provide a comparable level of installation and repair service. The Company has received five Beacon Awards in the past five years from the Cable Television Public Affairs Association, a cable television industry group. The most recent award recognized the Company's "On Time Guarantee Program" as the outstanding customer relations program by a multiple system operator in the United States. Additionally, management believes that by upgrading its cable television systems it has increased the quality and reliability of its services, resulting in increased customer satisfaction. Management believes that the Company's customer service efforts have contributed to its subscriber growth, the acceptance of its new and enhanced service offerings and ongoing patronage by existing subscribers. The Company plans to provide a level of emphasis on customer satisfaction in the Contributed TCI Systems similar to the level that it currently provides in the Existing Bresnan Systems. Sales and Marketing The Company seeks to increase penetration levels for its basic, "preferred basic," digital or advanced analog, premium and ancillary services through a variety of marketing, branding and promotional strategies. The Company seeks to maximize its revenue per subscriber through the use of "tiered" packaging strategies to market premium services and to develop and promote niche programming services. The Company regularly uses targeted telemarketing campaigns to sell these tiers and services to its existing subscriber base. The Company's customer service representatives are trained and given the incentive to use their daily contacts with subscribers as opportunities to sell the Company's new service offerings. Due to the nature of the communities it serves, the Company is able to market its services in ways not typically used by urban cable operators. The Company markets its products and services to its subscribers at its local offices where many of its subscribers pay their cable bills in person. Examples of the Company's in-store marketing include the promotion of premium services as well as display stands that allow subscribers to try the Company's high-speed Internet service and the DMX digital music product. The Company also aggressively promotes its services utilizing both broad and targeted marketing strategies, including outbound telemarketing, direct mail, cross-channel promotion and media advertising events. The Company promotes awareness of the Bresnan brand through advertising campaigns and community relations efforts. Involvement in and promotion of its distance learning services also strengthens the Company's brand recognition. As a result of its branding efforts and consistent service, the Company believes it has developed a reputation for quality and reliability in the communities served by the Existing Bresnan Systems. The Company will implement these strategies in the communities served by the Contributed TCI Systems and believes that these strategies are particularly effective due to its regional clustering, which enables it to reach a greater number of potential subscribers and increase its brand recognition with its marketing campaigns. Programming and Equipment Supply Many cable television companies enter into contracts to obtain basic and premium programming from program suppliers whose compensation typically is based on a fixed fee per subscriber. Some program suppliers provide volume discount pricing structures and offer marketing support to cable television operators. Pursuant to an agreement with TCI, the Company is able to purchase substantially all of its programming services at TCI's cost plus an administrative surcharge, although the Company retains the option to purchase programming directly from other parties in certain circumstances. Management believes that these rates are significantly lower than the rates the Company could obtain independently. The agreement may be terminated by TCI under various circumstances, including in the event that TCI does not own the required interest in the Company or upon an initial public offering. The Company may not be able to purchase programming services at these rates in the future. Other than TCI and providers of local broadcast programming, no other single party provides a material portion of the Company's programming. See "Risk Factors--Risks Associated with Loss of Favorable Programming and Equipment Supply." Programming has historically been and is expected to be the Company's largest single operating expense item, accounting for approximately 32% of total operating costs and expenses during the year ended December 31, 1998. See "Risk Factors--Increases in Programming Costs" and "Certain Relationships and Related Transactions." -66- 70 Pursuant to the terms of the Partnership Agreement, TCI will use its reasonable best efforts to make goods and services that are provided to TCI available to the Company on the same terms and conditions as they are made available to TCI, subject to certain conditions and restrictions. The Company may not continue to receive this favorable treatment in the future. See "Risk Factors--Risks Associated with Loss of Favorable Programming and Equipment Supply" and "Certain Relationships and Related Transactions." Customer Rates and Services The Company's cable television systems typically offer five levels of programming services: basic service, "preferred basic" service, digital or advanced analog service, premium services and pay-per-view. As of December 31, 1998, the basic service package consisted of local off-air broadcast channels, regional broadcast channels, such as WGN, and public access channels. The number of satellite services offered with the basic service package varies among the Company's cable television systems. As of December 31, 1998, after giving effect to the TCI Transactions, the monthly rate charged for the basic service package averaged $11.89. The "preferred basic" service package consists of satellite-delivered services such as ESPN, MTV, CNN, The Discovery Channel and USA Network, in addition to regional sports services like Mid-West Sports. As of December 31, 1998, after giving effect to the TCI Transactions, the monthly rate charged for the "preferred basic" service package averaged $17.22 in addition to the monthly rate charged for the basic service package. As of December 31, 1998, the digital or advanced analog tier consisted of from 19 to 61 additional video channels. The tier is available at average monthly rates of $13.00 for digital and $8.95 for advanced analog, including, in each case, converter rental in addition to the monthly rate charged for the basic service package. Rates for the basic service packages in certain markets are currently subject to government regulation. As a CPS tier, the "preferred basic" tier ceased being subject to rate regulation on March 31, 1999, pursuant to the Telecommunications Act. However, the FCC will continue to process complaints regarding rates for CPS services provided prior to March 31, 1999. See "Legislation and Regulation." The Company's cable television systems also offer premium services, which include HBO, Cinemax, Showtime, The Disney Channel, The Movie Channel, The Sundance Channel, Starz and Encore. The Company also offers residential DMX digital music product as a premium service. While all premium services are not available in all markets, some combination of these services is available in each of the Company's markets. As of December 31, 1998, after giving effect to the TCI Transactions, the individual retail rates for these services ranged from $7.95 to $13.95 per month. Premium service packages, such as the Showtime/The Movie Channel/Encore package ($11.95 per month) and the Showtime/The Movie Channel/Encore plus any additional premium service package ($19.95 per month), are available in certain of the Company's markets. Rates for premium services are currently exempt from governmental regulation. See "Legislation and Regulation." The Company's cable television systems typically offer pay-per-view special events programming and certain of the Company's cable television systems offer up to 29 channels of pay-per-view feature films. The average per-film price is $3.95. Special event prices vary considerably based on market demand and programming charges. The Company offers high-speed Internet service in certain of its systems, through either the "Bresnan@Home" brand or the proprietary "BresnanLink" brand, for $39.95 per month, including cable modem rental. Competition Cable television systems face competition from other competing cable operators and from alternative methods of receiving and distributing television signals, including direct broadcast satellite, multiple channel distribution systems, master antenna television and satellite master antenna television systems, data transmission and Internet service providers, and from other sources of news, information and entertainment such as off-air television broadcast programming, newspapers, movie theaters, live sporting events and home video products, including videotape cassette recorders and digital video disc players. The extent to which a cable television system is competitive depends, in part, upon that system's ability to provide, at a reasonable price to subscribers, a greater variety of programming and other communications services than those which are available off-air or through other alternative delivery sources and upon superior technical performance and customer service. Overbuilds. Under the 1992 Cable Act, franchising authorities are prohibited from granting exclusive cable television franchises and from unreasonably refusing to award additional competitive franchises. As a result, the Company's cable television systems are operated under non-exclusive franchises granted by local authorities. Such -67- 71 franchises are subject to renewal and renegotiation from time to time. Operators of cable television systems, including the Company, may therefore experience competition from other operators that overbuild. Municipal authorities, which are permitted under the 1992 Cable Act to operate cable television systems in their communities without franchises, may also seek to compete with the Company by overbuilding. The Company is aware of overbuild situations in its St. Cloud, Minnesota system, Winona, Minnesota system, Marshall, Minnesota system and the Negaunee portion of the Marquette, Michigan system which service an aggregate of approximately 41,000 basic subscribers, or approximately 6% of the Company's total basic subscribers. St. Cloud (a Contributed TCI System) is being overbuilt by Seren, a subsidiary of Northern States Power Company, which has begun construction. In response to this overbuild, TCI has designated this system a priority for the upgrade of cable plant and the launch of new and enhanced services. TCI has completed 40 new channels of compressed digital cable and audio services and is in the process of upgrading the system to 750 MHZ two-way HFC architecture. Winona (a Contributed TCI System) is being overbuilt by Hiawatha Broadband Company which has partially constructed a network passing approximately 4,000 homes. The Company's plant has been upgraded to 625 MHZ two-way HFC architecture and will be further upgraded to 750 MHZ in 1999. In Marshall (an Existing Bresnan System), Dakota Telecom Group has been granted a franchise, which the Company is contesting, but has not yet begun construction of a competing cable system. The Company is in the process of completing the upgrade of its Marshall system to a 750 MHZ, two-way HFC architecture and expects the upgrade to be complete by the end of May 1999. A portion of the Company's Marquette system (an Existing Bresnan System) covering approximately 1,700 homes was overbuilt by the City of Negaunee prior to the Company's acquisition of the system in 1984. The Company recently became aware of requests for competitive franchises in its Sauk Center, Minnesota system, Park Rapids, Minnesota system, and Willmar, Minnesota system which service an aggregate of approximately 11,000 basic subscribers, or approximately 2% of the Company's total basic subscribers. Constructing a competing cable television system is a capital intensive process which involves a high degree of risk. The Company believes that, in order to be successful, a competitor's overbuild would need to be able to serve the homes and businesses in the overbuilt area on a more cost-effective basis than the Company. Any such overbuild operation would require either significant access to capital or access to facilities already in place that are capable of delivering cable television programming. Management cannot predict the extent to which additional competition from overbuilds will materialize or, if such competition materializes, the extent of its effect on the Company. See "Risk Factors--Risks Associated with Competition." Broadcast Television. In most of the areas served by the Company's cable television systems, a variety of terrestrial broadcast television programming can be received off-air. Typically, there are three to ten VHF/UHF broadcast channels that provide local, network and syndicated programming free of charge. However, the quality of the reception is often poor and the selection of programming generally quite limited. As such, management does not believe that off-air broadcast television has a material impact on the operation of the Company's cable television systems. In addition, certain of the Company's cable television systems in Marshall, Montevideo, and Duluth, Minnesota face competition from UHF low power television service operators that provide services for approximately $30 per month. The Telecommunications Act directed the FCC to establish, and the FCC has adopted, regulations and policies for the issuance of licenses for digital television ("DTV") to incumbent television broadcast licensees. DTV is expected to deliver high definition television pictures and multiple digital-quality program streams, as well as CD-quality audio programming and advanced digital services, such as data transfer or subscription video. The FCC also has authorized television broadcast stations to transmit textual and graphic information. Alternative Video Distribution Systems. Cable television operators, including the Company, also face competition from companies that provide video programming using alternative technologies for receiving and distributing television signals. Such current and potential competitors include direct broadcast satellite, multiple channel distribution systems and master antenna television and satellite master antenna television systems. Direct Broadcast Satellite. Direct broadcast satellite providers, which distribute programming to subscribers' receiving equipment by high-powered satellite transmission, currently constitute the most prevalent form of competition for traditional cable television systems. Currently, there are three direct broadcast satellite providers that have launched services that compete with the cable television services provided by the Company in its service areas: DirecTV, Inc. ("DirecTV"), EchoStar Communications Corp. ("EchoStar") and United States Satellite Broadcasting Corporation, Inc. ("USSB"). In addition, -68- 72 PRIMESTAR, Inc. ("PrimeStar") operates a medium-powered fixed satellite service which provides services similar to those offered by direct broadcast satellite providers. According to a recent report issued by the FCC concerning competition in the United States video market, as of June 1998, direct broadcast satellite providers and PRIMESTAR served, in the aggregate, approximately 7.0 million subscribers, constituting 9.4% of the multichannel video programming service market. Franchised cable operators continue to service 85% of the multichannel video programming service market. The direct broadcast satellite industry is undergoing consolidation. On January 22, 1999, Hughes Electronics Corporation ("Hughes"), the owner of DirecTV, announced that it had reached an agreement with PrimeStar to acquire PrimeStar's approximately 2.3 million medium power satellite subscriber business and related high power satellite assets, subject to regulatory and other consents. On December 14, 1998, Hughes announced that it had signed a definitive merger agreement with USSB to acquire the business and assets of USSB, subject to appropriate regulatory and shareholder approvals. Hughes estimates that the combination of DirecTV, PrimeStar and USSB will result in its direct broadcast satellite business serving more than 7 million subscribers with more than 370 entertainment channels. In November 1998, EchoStar announced that it will purchase satellite television assets from News Corp. and MCI WorldCom, Inc., including an agreement for the transfer to EchoStar of a direct broadcast satellite license, subject to appropriate regulatory and shareholder approvals. EchoStar believes that it will be able to transmit more than 500 channels with its existing and new facilities. In addition, there are several companies licensed or authorized to operate direct broadcast satellite systems who have yet to begin service, including Televisa International, LLC., which the FCC has authorized to offer service to subscribers in the United States via a Mexican satellite. Others may announce intentions to enter the direct broadcast satellite market and may offer direct broadcast satellite services within the Company's service areas. To date, the Company believes that it has not lost a significant number of subscribers, or a significant amount of revenue to direct broadcast satellite providers. The Company believes that its services will continue to have a competitive advantage over direct broadcast satellite because (1) the initial equipment and installation costs to the subscriber associated with direct broadcast satellite technology have traditionally been significantly higher than cable television installation costs; (2) currently, direct broadcast satellite providers cannot broadcast local and regional off-air signals, except in limited circumstances (and the Company believes that in the event direct broadcast satellite providers develop the technology and receive the necessary regulatory approval to provide these broadcast signals, they will target areas of greater population density than the Company's current service areas); (3) direct broadcast satellite subscribers in a single household may not view different channels simultaneously on other television sets without installing additional receivers for each television set, usually at additional costs; (4) direct broadcast satellite subscribers may experience signal loss in extreme weather conditions; and (5) direct broadcast satellite providers have a limited ability to provide interactive services. The direct broadcast satellite industry is seeking to modify current law in order to transmit local channels to its subscribers. In addition, while the effect of competition from these direct broadcast satellite services cannot be specifically predicted, it is clear that there has been significant growth in direct broadcast satellite subscribers nationwide and that such competition may continue as, among other things, developments in technology continue to increase satellite transmitter power and decrease the cost and size of equipment needed to receive these transmissions. Moreover, direct broadcast satellite providers have the additional advantage of not being subject to many of the regulations imposed on franchised cable operators, such as rate regulation and franchise fee payments. Direct broadcast satellite providers have, in some cases, procured exclusive programming distribution rights. See "Risk Factors--Risks Associated with Competition." Multiple Channel Distribution Systems. The Company faces competition in certain of its systems from multiple channel distribution systems, which use low power microwave frequencies to transmit video programming over the air to subscribers. Wireless distribution services generally provide many of the programming services provided by cable television systems, and digital compression technology is likely to increase significantly the channel capacity of these systems. However, multiple channel distribution systems service requires unobstructed "line of sight" transmission paths. The Company faces competition from multiple channel distribution systems in Bay City, Michigan, Madison, Wisconsin, and North Platte, Grand Island and Beatrice, Nebraska. At this time, the Company does not view any of these competitors as a material threat to its business and operations. Multiple channel distribution systems generally is less expensive for subscribers than cable television due in large part to the fewer number of channels it offers. Amendments to FCC regulations -69- 73 enable multiple channel distribution systems to compete more effectively with cable television systems by making available additional channels to the multiple channel distribution systems industry and by refining the procedures through which multiple channel distribution systems licenses are granted. Master Antenna Television and Satellite Master Antenna Television. Master antenna television and satellite master antenna television systems are small, closed cable television systems which operate within hotels, apartment complexes, condominium complexes and individual residences. Due to the widespread availability of satellite earth stations, such private cable television systems can offer both improved reception of local television stations and many of the same satellite-delivered program services which are offered by franchised cable television systems. Master antenna television and satellite master antenna television systems currently benefit from operating advantages not available to franchised cable television systems, including fewer regulatory burdens and no requirement to service low density or economically depressed communities. By reducing the regulations affecting the cable television industry, the Telecommunications Act may reduce some of the advantages that have previously been enjoyed by master antenna television and satellite master antenna television providers. However, since master antenna television and satellite master antenna television systems generally do not fall within the 1992 Cable Act's definition of a "cable system," such services may be exempt from other requirements of the 1992 Cable Act that were not amended by the Telecommunications Act and which therefore still impact cable television operators. Furthermore, it is possible that as a result of the expansion under the Telecommunications Act of the scope of entities which are exempt from regulation as "cable systems," some master antenna television and satellite master antenna television systems previously regulated as "cable systems" are exempt from regulation under the Communications Act (including regulation under the 1984 Cable Act and the 1992 Cable Act). Exemption from regulation may provide a competitive advantage to certain of the Company's current and potential competitors. Telephone Companies. The Telecommunications Act removes certain regulatory barriers for local exchange carriers ("LECs") and others to provide a wide variety of video services competitive with services provided by cable television systems. For example, telephone companies may now provide video programming directly to their customers in their telephone service territory, subject to certain regulatory requirements. See "Legislation and Regulation." Various LECs currently are providing video programming services within and outside their telephone service areas through a variety of distribution methods, including the deployment of broadband wire facilities and the use of wireless transmission facilities. Cable television systems could be placed at a competitive disadvantage if the delivery of video programming services by LECs becomes widespread, since LECs are not required, under certain circumstances, to obtain local franchises to deliver such video services or, in some instances, to comply with the variety of obligations imposed upon cable television systems under such franchises. Issues of cross-subsidization by LECs of video and telephony services also pose strategic disadvantages for cable television operators seeking to compete with LECs that provide video services. The Company cannot predict the likelihood of success of video service ventures by LECs or the impact on the Company of such competitive ventures. Most of the Company's cable television assets are located in the operating areas of two Regional Bell Operating Companies. It is not clear at this time whether any of such Regional Bell Operating Companies intend to compete with the Company directly or by constructing broadband video delivery systems within the Company's area of operation. The Company is unable to predict whether and to what extent any of such Regional Bell Operating Companies, or any other telephone company, will seek to compete directly with the Company, or the effect that any such competition will have on the Company's business. LECs and other companies provide facilities for the transmission and distribution to homes and businesses of interactive services, including Internet service, as well as data and other non-video services. Many of these services will compete with services offered by the Company. The Company cannot predict the likelihood of success of the broadband services offered by the Company's competitors or the impact on the Company of such competitive ventures. Open Video Systems. The Telecommunications Act established a new framework for the delivery of video programming, the open video system ("OVS"). Under the statute and the FCC's rules, subject to certain exceptions, a LEC or other entrant (other than a cable television system operator) may provide in-region distribution of video programming to subscribers, although the OVS operator must provide non-discriminatory access to unaffiliated -70- 74 programmers on a portion of its channel capacity. The FCC has to date certified approximately 15 companies to provide OVS in various parts of the United States. The Fifth Circuit Court of Appeals recently reversed certain of the FCC's OVS rules, including the FCC's rule preempting local franchise requirements, although the FCC requested a rehearing on the Fifth Circuit's decision. Internet Video. Video programming may be distributed over the Internet or other data channels for viewing on computer terminals. This is accomplished by using video compression technologies and through downloading of the video data for later playback or through "video streaming." Due to bandwidth and other limitations, this method of video distribution does not yet produce programming that is comparable in length, quality, or convenience to cable television service. Public Utility Holding Companies. The Telecommunications Act also authorizes registered utility holding companies and their subsidiaries to provide video programming services, notwithstanding the applicability of the Public Utility Holding Company Act. Electric utilities also have the potential to become significant competitors in the video marketplace, as many of them already possess fiber optic transmission lines in areas they serve. In the last year, several utilities have announced, commenced, or moved forward with ventures involving multichannel video programming distribution. See "Legislation and Regulation." To date, the Company believes that it has not lost a significant number of subscribers, nor a significant amount of revenue, to its competitors' systems. However, competition from these technologies may have a negative impact on the Company's cable television business in the future. As the Company expands its offerings to include telecommunications services, it will be subject to competition from other telecommunications providers. The telecommunications industry is highly competitive and includes competitors with greater financial and personnel resources, who have brand name recognition and long-standing relationships with regulatory authorities. Moreover, mergers, joint ventures and alliances among franchise, wireless or private cable television operators, Regional Bell Operating Companies and others may result in providers capable of offering cable television and telecommunications services in direct competition with the Company. See "Risk Factors--Risks Associated with Competition." Other new technologies may become competitive with services that the Company may offer. Advances in communications technology as well as changes in the marketplace and the regulatory and legislative environments are constantly occurring. Thus, it is not possible to predict the effect that ongoing or future developments might have on the cable television industry or on the operations of the Company. Franchises As of December 31, 1998, after giving effect to the TCI Transactions, the Company would have had an aggregate of 488 cable television franchises. These franchises often provide for the payment of fees to the issuing authority, which is usually a local government. The 1984 Cable Act prohibits franchising authorities from imposing annual franchise fees in excess of 5% of the gross revenues attributable to subscribers located in the franchise area and also permits the operator of a cable television system to seek renegotiation and modification of franchise requirements if warranted by changed circumstances. For the three years ended December 31, 1998, franchise fee payments made by the Company have averaged approximately 4% of gross cable television revenues. The table below illustrates the grouping of the franchises held by the Company as of December 31, 1998, after giving effect to the TCI Transactions:
As of December 31, 1998 -------------------------------------------- Percentage Year of Franchise Number of of Total Expiration Franchises Franchises - ------------------ ----------------- ------------------ 1999................................ 31 6.3 2000................................ 15 3.1 2001................................ 53 10.9 2002................................ 52 10.6 2003 and after...................... 277 56.8 ---- ----- Total............................... 428 87.7 ==== =====
-71- 75 As of December 31, 1998, the Company had 43 expired franchises, approximately 8.8% of total franchises. The Company is in the process of renewing its expired franchises. In addition, the Company has 11 franchises with indefinite expiration dates and six systems in which no franchises are required, there exist no written agreements, or are being operated pursuant to extension permits. The 1992 Cable Act requires franchising authorities to render a final decision on any franchise transfer request within 120 days after the receipt of all information required by FCC regulations and by the franchising authority. Approval is deemed to be granted if the franchising authority fails to render a final decision on the request within such period, unless an extension of 120 day deadline has been agreed to by the franchising authority and the parties to the transfer application. The 1984 Cable Act provides for an orderly franchise renewal process and establishes comprehensive renewal procedures which require an incumbent franchisee's renewal application be assessed on its own merit and not as part of a comparative process with competing applications. A franchising authority may not unreasonably withhold the renewal of a franchise. If a franchise renewal is denied and the system is acquired by the franchising authority or a third party, then such franchising authority or other purchaser must pay the operator the "fair market value" for the system covered by the franchise. See "Risk Factors--Franchises" and "Legislation and Regulation." Under the Telecommunications Act, cable operators are not required to obtain franchises for the provision of telecommunications services, and, with certain exceptions, franchising authorities are prohibited from limiting, restricting, or conditioning the provision of such services. In addition, franchising authorities may not require a cable operator to provide any telecommunications service or facilities, other than institutional networks, as a condition of an initial franchise grant, a franchise renewal, or a franchise transfer. The Telecommunications Act also provides that franchise fees are limited to an operator's cable-related revenues and do not apply to revenues that a cable operator derives from providing new telecommunications services. However, the Company currently pays franchise fees for such new telecommunications services. Management believes that the Company's franchise relationships are satisfactory. Properties The Company's principal physical assets consist of cable television plant and equipment, including signal receiving, encoding and decoding devices, headend reception facilities, distribution systems and customer drop equipment for each of its cable television systems. The Company's cable television plant and related equipment are generally attached to utility poles under pole rental agreements with local public utilities and telephone companies, and in certain locations are buried in underground ducts or trenches. The physical components of the Company's cable television systems require maintenance and periodic upgrading to keep pace with technological advances. The Company owns or leases real property for signal reception sites and business offices in many of the communities served by its systems and for its principal executive offices. The Company owns most of its service vehicles. Management believes that the Company's properties are in good operating condition and are suitable and adequate for the Company's business operations. Legal Proceedings The Company is involved in various legal proceedings, all of which have arisen in the ordinary course of business. Management does not believe that any of such proceedings will have a material adverse effect on the financial condition or results of operations of the Company. See "Risk Factors--Late Fee Litigation" and "Legislation and Regulation--Federal Regulation--Other Matters." Employees As of December 31, 1998, after giving effect to the TCI Transactions, the Company had 1,229 employees at 48 locations, 1,186 of which were full-time. Of the 1,186 full-time employees, 34 were covered by collective -72- 76 bargaining agreements at two locations. The Company considers its relationship with its employees to be satisfactory. -73- 77 LEGISLATION AND REGULATION The following summary of regulatory developments and legislation does not purport to describe all present and proposed federal, state and local regulations and legislation affecting the telecommunications industry. Other existing federal and state legislation and regulations currently are the subject of judicial proceedings, legislative hearings, and administrative proposals which could change, in varying degrees, the manner in which this industry operates. Neither the outcome of these proceedings, nor their impact upon the telecommunications industry or the Company can be predicted at this time. The Telecommunications Act required the FCC to undertake a host of implementing rulemakings, the final outcome of which cannot yet be determined. Moreover, Congress and the FCC have frequently revisited the subject of cable television regulation and may do so again. The cable television industry is subject to extensive regulation under federal law by Congress and the FCC, and is additionally regulated by some state governments and substantially all local governments. Various legislative and regulatory proposals under consideration from time to time by Congress and various federal agencies may, in the future, materially affect the regulation, operations and business of the cable television industry. The four most significant pieces of federal legislation that affect the cable television industry are the Communications Act, the 1984 Cable Act, the 1992 Cable Act and the Telecommunications Act. The following is a summary of these laws and other significant federal laws and regulations which affect the growth and operation of the cable television industry, as well as a description of certain state and local laws. Federal Statutory Law The 1984 Cable Act became effective on December 29, 1984. This federal statute, which amended the Communications Act, created uniform national standards and guidelines for the regulation of cable television systems. The 1984 Cable Act was amended in many respects by the 1992 Cable Act, which was enacted by Congress on October 5, 1992. The 1992 Cable Act significantly changed the regulatory environment in which participants in the cable industry operate. Principal responsibility for implementing the policies of the 1984 Cable Act and the 1992 Cable Act is allocated between the FCC and state or local franchising authorities. The 1992 Cable Act and the FCC's implementing regulations allowed for a greater degree of regulation of the cable television industry than had previously been in effect with respect to, among other things: (1) cable television system rates for both basic (and associated equipment) and certain non-basic services; (2) program access and exclusivity arrangements; (3) access to cable channels by unaffiliated programming services; (4) leased access terms and conditions; (5) horizontal and vertical ownership of cable television systems; (6) customer service requirements; (7) franchise renewals; (8) television broadcast signal carriage and retransmission consent; (9) technical standards; (10) customer privacy; (11) consumer protection matters; (12) cable equipment compatibility; (13) obscene or indecent programming; and (14) requirements that subscribers not be required to subscribe to tiers of service other than the basic service tier as a condition of purchasing premium services. The 1992 Cable Act and the FCC's implementing regulations encouraged competition with existing cable television systems by allowing municipalities to own and operate their own cable television systems without having to obtain a franchise, preventing franchising authorities from granting exclusive franchises or unreasonably refusing to award additional franchises covering an existing cable television system's service area and prohibiting, with certain exceptions, the common ownership of cable television systems and multiple channel distribution systems or satellite master antenna television systems located in the same service areas. The Telecommunications Act modified the cross-ownership restrictions. See "--Telecommunications Legislation--Cross Ownership; Reduced Regulations." The 1992 Cable Act and the FCC's implementing regulations also precluded operators of cable television systems affiliated with video programmers from favoring such programmers in determining carriage on their cable systems or from unreasonably restricting the sale of their programming to other multichannel video distributors. In a significant development, the Telecommunications Act became law in 1996. The Telecommunications Act materially alters federal, state and local laws pertaining to cable television, telecommunications and other related services. The legislation deregulated rates for CPS packages on March 31, 1999, and deregulated rates with respect to certain small cable operators and cable operators that face video competition from LECs. The Company's "preferred basic" services are classified as CPS packages. The Telecommunications Act encourages additional competition in the video programming industry by, among other things, allowing LECs, including the Regional Bell Operating Companies and their subsidiaries, to provide video programming in their own telephone service areas (with some regulatory safeguards), in competition with operators of cable television systems. -74- 78 Federal Regulation The FCC, the principal federal regulatory agency with jurisdiction over the cable television industry, has promulgated regulations covering a number of matters relevant to the cable industry. The FCC has the authority to enforce these regulations through the imposition of substantial fines, the issuance of cease and desist orders and/or the imposition of other administrative sanctions, such as the revocation of FCC licenses needed to operate certain transmission facilities frequently used in connection with cable operations. A brief summary of the most significant of these federal regulations and, where applicable, the effect of the Telecommunications Act on such regulations follows. Rate Regulation The 1984 Cable Act codified existing FCC preemption of rate regulation for premium channels and optional nonbasic service packages. The 1984 Cable Act also deregulated basic service rates for cable television systems determined by the FCC to be subject to "effective competition." The 1992 Cable Act replaced the FCC's old standard for determining "effective competition," under which most cable television systems were exempt from rate regulation, with a statutory provision that subjected nearly all cable television systems to regulation of basic and CPS service rates. Under the 1992 Cable Act, a local franchising authority in a community not subject to "effective competition" generally is authorized to regulate basic cable rates after certifying to the FCC that, among other things, it will adopt and administer rate regulation consistent with FCC rules, and in a manner that will provide a reasonable opportunity to consider the views of interested parties. Upon certification, the franchising authority obtains the right to approve the basic rates charged by an operator of cable television systems. In regulating the basic service rates, certified local franchise authorities have the authority to order a rate refund of previously paid rates determined to be in excess of the maximum permitted reasonable rates. The Telecommunications Act expands the definition of "effective competition" to include any franchise area in which an LEC (or an affiliate thereof) provides video programming services to subscribers by any means, other than through direct broadcast satellite services. In order to qualify as "effective competition," such LEC must provide programming services "comparable" to services provided by operators of cable television systems in the franchise area. Additionally, the 1992 Cable Act: (1) authorized the FCC to adopt a formula to be applied by franchising authorities to ensure that basic service rates are reasonable; (2) allowed the FCC to review rates for CPS packages (other than per-channel or per-program services) in response to complaints filed by franchising authorities and/or cable subscribers; (3) prohibited cable television systems from requiring subscribers to purchase service tiers above the basic service tier in order to purchase premium services where the relevant system is technically capable of providing such services; (4) required the FCC to adopt regulations to establish, on the basis of actual costs, prices for the installation of cable service, remote controls, converter boxes and additional outlets; and (5) allowed the FCC to impose restrictions on the retiering and rearrangement of cable services under certain limited circumstances. Notwithstanding the enactment of the Telecommunications Act, certain rate regulation provisions under the 1992 Cable Act remain in effect for operators of cable television systems subject to rate regulation. In particular, basic service rates remain subject to regulation by local franchising authorities, except, in certain instances, with respect to certain small cable operators. The Telecommunications Act immediately eliminated regulation of rates for CPS packages for a defined class of "small cable operators." Rates for the basic service tiers of small cable operators are deregulated if their systems offered only a single tier of services as of December 31, 1994. To qualify as a "small cable operator," the operator (including affiliates) must serve in the aggregate fewer than one percent of all subscribers located in the United States and have affiliate gross revenues not exceeding $250 million. The exception applies in any franchise area in which the operator serves 50,000 or fewer subscribers. The Company does not believe that it would qualify as a "small cable operator" under the Telecommunications Act due to the fact that it would likely be deemed to have "affiliate gross revenues" exceeding $250 million as a result of its affiliation with TCI. Therefore, under the Telecommunications Act, the Company's systems continue to be subject to basic service rate regulation in jurisdictions where the local franchising authorities have been certified to regulate rates. The Company's systems were also subject to regulation of rates for CPS packages until the statutory repeal of such regulation occurred on March 31, 1999, as described below. The Telecommunications Act eliminated regulation of rates for CPS packages for all cable operators as of March 31, 1999. The FCC will continue to process complaints regarding CPS service offered prior to March 31, 1999. These Telecommunications Act provisions should materially alter the applicability of FCC rate regulations adopted under the 1992 Cable Act for non-basic service. -75- 79 The Telecommunications Act relaxes the uniform rate requirements of the 1992 Cable Act, which required an operator of cable television systems to have a uniform rate structure for the provision of cable services throughout the geographic area in which the operator provides cable service. Specifically, the legislation clarifies that the uniform rate provision does not apply where an operator of a cable television system faces "effective competition." In addition, bulk discounts to multiple dwelling units are exempted from the uniform rate requirements. The FCC recently clarified that a "bulk discount" is a discount available to all residents of a multiple dwelling unit. However, complaints may be made to the FCC against operators of cable television systems not subject to effective competition for "predatory" pricing (including with respect to bulk discounts to multiple dwelling units). The Telecommunications Act also permits operators of cable television systems to aggregate, on a franchise, system, regional or company level, its equipment costs in broad categories. The Telecommunications Act is also expected to facilitate the rationalization of equipment rates across jurisdictional boundaries. However, these cost-aggregation rules do not apply to the limited equipment used by subscribers who only receive basic service. The FCC has issued rules to implement the cost-aggregation provisions. The FCC has adopted rules designed to implement the 1992 Cable Act's rate regulation provisions. The FCC's revised regulations contain standards for the regulation of basic service rates. The revised rate regulations adopt a benchmark price cap system for measuring whether existing basic service rates are reasonable, and provide a formula for evaluating future rate increases. Alternatively, operators of cable television systems have the opportunity to make cost-of-service showings which, in some cases, can justify rates above the applicable benchmarks. The rules also require that charges for cable-related equipment (e.g., converter boxes and remote control devices) and installation services be unbundled from the provision of cable service, and that charges for such equipment be based instead upon actual cost thereof plus a reasonable profit. The FCC's regulations require that charges for equipment and installation services be recalculated annually and adjusted accordingly. "Anti-Buy Through" Provisions The 1992 Cable Act and corresponding FCC regulations allow subscribers to purchase video programming which is offered on a per channel or per program basis without having to subscribe to any service other than the basic service, subject to available technology. The available technology exception sunsets on October 5, 2002. The FCC may waive compliance with this requirement for a specified period the FCC deems reasonable and appropriate if it determines that compliance with such requirement would require the operator to increase its rates and the waiver would serve the public interest. Most of the Company's cable television systems do not have the technological capability to offer programming in the manner required by the 1992 Cable Act and currently are exempt from complying with the requirement. Management cannot predict the extent to which this provision of the 1992 Cable Act and the corresponding FCC rules may cause subscribers to discontinue their subscriptions for optional CPS packages in favor of the less expensive basic cable service. Carriage of Broadcast Television Signals The 1992 Cable Act allows commercial television broadcast stations which are "local" to a cable television system to elect every three years either (1) to require the cable television system to carry the station, subject to certain exceptions (known as the "must carry" requirement), or (2) to deny the cable television system the right to carry the station without the station's express consent (known as "retransmission consent"). Local noncommercial television stations are also given mandatory carriage rights, subject to certain exceptions, but are not given the option to negotiate retransmission consent for the carriage of their signal. In addition, cable television systems must obtain retransmission consent for the carriage of all "distant" commercial broadcast stations, except for certain "superstations," i.e., commercial satellite-delivered independent stations such as WGN. The "must carry" provisions were under judicial review in the United States Supreme Court and remained in effect during the litigation. On March 31, 1997, the United States Supreme Court upheld the "must carry" provisions on constitutional grounds. Thus, operators of cable television systems remain subject to the "must carry" requirements. Pursuant to the Telecommunications Act, the FCC is considering the "must carry" rights of digital television stations, which could substantially increase the burden associated with "must carry" rights. Congress and the FCC may also consider whether DBS operators should be subject to must carry requirements. -76- 80 Renewal of Franchises The 1984 Cable Act established renewal procedures and criteria designed to protect incumbent franchisees against arbitrary denials of renewal. While these formal procedures are not mandatory unless timely invoked by either the operator of the cable television system or the franchising authority, they can provide substantial protection to incumbent franchisees. Notwithstanding the renewal process, franchising authorities and operators of cable television systems remain free to negotiate a renewal outside the formal process. Nevertheless, renewal is by no means assured, as the franchisee must meet certain statutory standards if the formal renewal procedures are invoked. Even if a franchise is renewed, a franchising authority may impose new and more onerous requirements, such as requiring upgrades to facilities and equipment, although the municipality must take into account the cost of meeting such requirements. The 1992 Cable Act made several changes to the process under which an operator of cable television systems may seek to enforce its renewal rights. These changes could make it easier in some cases for a franchising authority to deny renewal. Under the 1992 Cable Act, franchising authorities may consider the "level" of programming service provided by an operator of cable television systems in deciding whether to renew. For alleged franchise violations occurring after December 29, 1984, franchising authorities are no longer precluded from denying renewal based on failure to substantially comply with the material terms of the franchise where the franchising authority has "effectively acquiesced" to such past violations. Rather, the franchising authority is estopped if, after giving the operator notice and opportunity to cure, it fails to respond to a written notice from the operator of its failure or inability to cure. Courts may not reverse a denial of renewal based on procedural violations found to be "harmless error." Franchise Transfers The 1992 Cable Act requires franchising authorities to act on any franchise transfer request within 120 days after receipt of all information required by FCC regulations and by the franchising authority. Approval is deemed to be granted if the franchising authority fails to render a final decision on the request within such period unless an extension of time has been agreed to by the franchising authority and the parties to the transfer application. Channel Set-Asides The 1984 Cable Act permits local franchising authorities to require operators of cable television systems to set aside certain channels for public, educational and governmental access programming. The 1984 Cable Act further requires cable television systems with thirty-six or more activated channels to designate a portion of their channel capacity for commercial leased access by unaffiliated third parties. The channels set aside may be utilized by the operator for other activities until utilized for such programming. The U.S. Supreme Court has upheld the statutory right of cable operators to prohibit or limit the provision of indecent or obscene programming on commercial leased access channels. While operators of cable television systems are permitted to set reasonable leased access rates, the FCC has established a formula for determining maximum reasonable rates, as required under the 1992 Cable Act. The FCC reconsidered and revised its rules governing the rates that operators may charge for this designated channel capacity as well as its rules governing the use of such channels. Among other revisions to the rules, operators must now compute the rates for these channels based on average, rather than on the highest spread between program costs and subscriber revenues, and, consequently, the rates that operators are permitted to charge for these channels may have decreased. Inside Wiring; Subscriber Access In a 1997 order, the FCC established rules that require an incumbent cable operator upon expiration of a multiple dwelling unit service contract to sell, abandon, or remove "home run" wiring that was installed by the cable operator in a multiple dwelling unit building. These inside wiring rules are expected to assist building owners in their attempts to replace existing cable operators with new programming providers who are willing to pay the building owner a higher fee, where such a fee is permissible. Additionally, the FCC has proposed to restrict exclusive contracts between building owners and cable operators or other multichannel video programming distributors. In another proceeding, the FCC has issued an order preempting state, local and private restrictions on over-the-air reception antennas placed on rental properties in areas where a tenant has exclusive use of the property, such as balconies or patios. However, tenants may not install such antennas on the common areas of multiple dwelling units, such as on roofs. This new order may limit the extent to which multiple dwelling unit owners and the Company may -77- 81 enforce certain aspects of multiple dwelling unit agreements which otherwise would prohibit, for example, placement of direct broadcast satellite receive antennae in multiple dwelling unit areas (such as apartment balconies or patios) under the exclusive occupancy of a renter. Equal Employment Opportunity The 1984 Cable Act included provisions to ensure that minorities and women are provided equal employment opportunities within the cable television industry. The statute required the FCC to adopt reporting and certification rules that apply to all operators of cable television systems with more than five full-time employees. Pursuant to the requirements of the 1992 Cable Act, the FCC has imposed more detailed annual Equal Employment Opportunity ("EEO") reporting requirements on operators of cable television systems and has expanded those requirements to all multichannel video service distributors. Failure to comply with the EEO requirements can result in the imposition of fines and/or other administrative sanctions, or may, in certain circumstances, be cited by a franchising authority as a reason for denying a franchisee's renewal request. A recent federal appeals court decision overturning the FCC's broadcast EEO rules on constitutional grounds may call into question the validity of the cable EEO rules. However, the Company cannot predict the effect of that litigation on the cable industry at this time. As a direct result of the federal appellate court decision referenced above, the FCC is now conducting a rulemaking in which it is reevaluating both the broadcast and cable EEO regulations. Technical Requirements The FCC has imposed technical standards applicable to all channels on which downstream video programming is carried, and has prohibited franchising authorities from adopting standards which are in conflict with or more restrictive than those established by the FCC. The Telecommunications Act provides that local and state authorities may not prohibit, restrict or condition a cable television system's use of any transmission technology or subscriber equipment. In order to prevent harmful interference with aeronautical navigation and safety radio services, the FCC also has adopted additional standards applicable to cable television systems using frequencies in the 108-137 MHZ and 225-400 MHZ bands and established limits on cable television system signal leakage. Periodic testing by cable operators for compliance with these technical standards and signal leakage limits is required. The FCC has adopted regulations to implement the requirements of the 1992 Cable Act designed to improve the compatibility of cable television systems and consumer electronics equipment. These regulations, inter alia, generally prohibit operators of cable television systems from scrambling their basic service. Other Matters FCC regulations also address numerous other matters, including a cable television system's carriage of local sports programming, franchise fees, pole attachments, customer service, rules applicable to origination cablecasts governing political programming, rates charged to political candidates, personal attacks, sponsorship identification, lottery information and limitations on advertising contained in children's programming. The Company is presently the subject of various proceedings before the FCC regarding rates charged to subscribers for both basic service and CPS packages, none of which management believes to be material to the Company's operations. From time to time, the Company may be the subject of other proceedings before the FCC. The Company cannot predict the outcome of any pending proceedings or any other proceeding that may be before the FCC in the future. Telecommunications Legislation The Telecommunications Act materially alters federal, state and local laws and regulations pertaining to cable television, telecommunications and other services. In addition to the amendments previously discussed herein, the legislation also allows additional competition in video programming by telephone companies and public utility companies, and makes other revisions to the Communications Act, including amendments to the 1984 Cable Act and the 1992 Cable Act. The most far-reaching changes in the communications industry may result from the telephony provisions of the Telecommunications Act. These provisions promote local exchange competition as a national policy by -78- 82 eliminating legal barriers to competition in the local telephone business and setting standards to govern the relationships among telecommunications providers. The provisions also establish uniform requirements and standards for entry, competitive carrier interconnection, and unbundling of LEC monopoly services. Subject to certain limitations, the Telecommunications Act expressly prohibits any legal barriers to competition in intrastate or interstate communications service under state and local laws. The Telecommunications Act also empowers the FCC, after notice and an opportunity for comment, to preempt the enforcement of any statute, regulation or legal requirement that prohibits, or has the effect of prohibiting, the ability of any entity to provide any intrastate or interstate telecommunications service. The Telecommunications Act is intended, in part, to promote substantial competition in the marketplace for telephone service and in the delivery of video and other services, and permits operators of cable television systems to enter the local telephone exchange market. The cable industry's ability to offer telephone services competitively may be adversely affected by the degree and form of regulatory flexibility afforded to LECs and, in part, will depend upon the outcome of various FCC rulemakings and judicial proceedings, including the proceedings dealing with the interconnection obligations of telecommunications carriers. The FCC adopted regulations implementing the Telecommunications Act requirement that LECs open their telephone networks to competition by providing competitors interconnection, access to unbundled network elements and retail services at wholesale rates. Numerous parties appealed these regulations. The U.S. Court of Appeals for the Eighth Circuit, where the appeals were consolidated, vacated key portions of the FCC's regulations, including the FCC's pricing and non-discrimination rules. The Eighth Circuit's decision was appealed to the U.S. Supreme Court, which issued its decision on January 25, 1999. The U.S. Supreme Court upheld most of the FCC's interconnection regulations, including the pricing and nondiscrimination rules provisions, but remanded certain "unbundling" rules to the FCC. The FCC has begun a new proceeding with respect to the unbundling requirements. The ultimate outcome of the FCC's rulemakings, and the ultimate impact of the Telecommunications Act or any final regulations adopted pursuant to this legislation or any additional litigation on the Company or its business cannot be determined at this time. The Company may be required to apply for and obtain prior authorization from the FCC and states to offer telecommunications services, and to comply with a variety of ongoing regulatory requirements applicable to telecommunications carriers. Telephone Company Provision of Video Programming The Telecommunications Act repeals the statutory ban against telephone companies providing video programming services in their telephone service areas. Therefore, the Telecommunications Act permits telephone companies to compete directly with operators of cable television systems. Under the legislation, LECs, including the Regional Bell Operating Companies and their subsidiaries, are allowed to compete with operators of cable television systems, including the Company, both inside and outside the LECs' telephone service areas, with some regulatory safeguards. The legislation recognizes several means by which telephone companies may opt to provide competitive video programming, each of which may subject the telephone company to different regulation. If a telephone company provides video programming services via radio communications, it will be regulated under Title III of the Communications Act (the general sections governing use of the airwaves), rather than under Title VI (cable regulation). If a telephone company provides common carriage transport of video programming, it will be subject to the requirements of Title II of the Communications Act (the general common carrier provisions), rather than Title VI. Telephone companies providing video programming through any other means (other than as an "open video system," as described below) will be regulated under Title VI. The FCC prescribed new rules that prohibit open video systems from discriminating among video programming providers with regard to carriage, and that ensure that open video system rates, terms, and conditions for service are reasonable and not unjustly or unreasonably discriminatory. The FCC also adopted regulations prohibiting an open video system operator and its affiliates from occupying more than one-third of the system's activated channels when demand for channel capacity exceeds supply. The Telecommunications Act also mandates open video system regulations that (1) permit the operator to use channel-sharing arrangements, (2) extend to open video systems the FCC's sports exclusivity, network non-duplication and syndicated exclusivity regulations and (3) prohibit the operator from unreasonably discriminating in its own favor in the way information about programming is presented or provided to subscribers. Open video systems will be subject to the authority of local governments to manage public rights-of-way. Local franchising authorities may require open video system operators to pay fees, which are limited to a percentage of the gross revenue of the operator and its affiliates, and which may -79- 83 not exceed the rate at which franchise fees are imposed on any operator of cable television systems in the corresponding franchise area. The Fifth Circuit Court of Appeals recently reversed certain of the FCC's OVS rules, including the FCC's rule preempting local franchise requirements. The decision may be subject to further appeals. Buyouts The Telecommunications Act generally prohibits buyouts of cable television systems (including any ownership interest of such systems exceeding 10%) by LECs within an LEC's telephone service area, buyouts by operators of cable television systems of LEC systems within a cable operator's franchise area, and joint ventures between operators of cable television systems and LECs in the same markets. There are some statutory exceptions, including a rural exemption which permits buyouts in which the purchased system serves a non-urban area with fewer than 35,000 inhabitants. Also, the FCC may grant waivers of the buyout provisions in cases where (1) the operator of a cable television system or the LEC would be subject to undue economic distress if such provisions were enforced, (2) the system or facilities would not be economically viable in the absence of a buyout or a joint venture or (3) the anticompetitive effects of the proposed transaction are clearly outweighed by the transaction's effect in light of community needs. The respective local franchising authority must approve any such waiver. The FCC has also granted temporary waivers of this anti-buyout provision. Public Utility Competition The Telecommunications Act also authorizes registered utility holding companies and their subsidiaries to provide video programming services, notwithstanding the Public Utility Holding Company Act. In order to take advantage of the legislation, public utilities must establish separate subsidiaries through which to operate any cable operations. Such utility companies must also apply to the FCC for operating authority. Several such utilities have been granted broad authority by the FCC to engage in activities which could include the provision of video programming. Cross-Ownership; Reduced Regulations The Telecommunications Act makes several other changes to relax ownership restrictions and regulation of cable television systems. The Telecommunications Act repeals the 1992 Cable Act's three-year holding requirement pertaining to sales of cable television systems. The statutory broadcast/cable cross-ownership restrictions imposed under the 1984 Cable Act have been eliminated, although the FCC's regulations prohibiting broadcast/cable common-ownership currently remain in effect. The satellite master antenna television/cable cross-ownership and the multiple channel distribution systems/cable cross-ownership restrictions have been eliminated for operators of cable television systems subject to "effective competition." The Telecommunications Act may also exempt certain of the Company's competitors from regulation as cable systems. The legislation amends the definition of a "cable system" under the Communications Act so that competitive providers of video services will be regulated and franchised as "cable systems" only if they use public rights-of-way. Thus, a broader class of entities (including some entities which may be in competition with the Company) providing video programming may be exempt from regulation as cable television systems under the Communications Act. Pole Attachments The Communications Act requires the FCC to regulate the rates, terms and conditions imposed by public utilities for cable television systems' use of utility pole and conduit space unless state authorities can demonstrate that they adequately regulate pole attachment rates, as is the case in certain states in which the Company operates. In the absence of state regulation, the FCC administers pole attachment rates on a formula basis. In some cases, utility companies have increased pole attachment fees for cable television systems that have installed fiber optic cables and that are using such cables for the distribution of non-video services. The FCC has concluded that, in the absence of state regulation, it has jurisdiction to determine whether utility companies have justified their demand for additional rental fees and that the Communications Act does not permit disparate rates based on the type of service provided over the equipment attached to the utility's pole. The FCC's existing pole attachment rate formula, which may be modified by a pending rulemaking proceeding, governs charges for utilities for attachments by cable operators providing only cable television services. The Telecommunications Act and the FCC's implementing regulations modify the current pole attachment provisions of the Communications Act by immediately permitting -80- 84 certain providers of telecommunications services to rely upon the protections of the current law and by requiring that utilities provide cable television systems and telecommunications carriers with nondiscriminatory access to any pole, conduit or right-of-way controlled by the utility. The FCC also has adopted new regulations to govern the charges for pole attachments used by companies who are providing telecommunications services, including cable television operators. These new pole attachment rate regulations will become effective in February 2001. Any resulting increase in attachment rates will be phased in equal annual increments over a period of five years beginning in February 2001. The ultimate impact of any revised FCC rate formula or of any new pole attachment rate regulations on the Company or its businesses cannot be determined at this time. Miscellaneous Requirements The Telecommunications Act also imposes requirements on operators of cable television systems, including an obligation, upon request, to fully scramble or block at no charge the audio and video portion of any channel not specifically subscribed to by a household. In addition, it requires that sexually explicit programming be scrambled, blocked or restricted to those hours of the day when children are unlikely to view the programming, as determined by the FCC, although a recent federal district court ruling found the scrambling provision unconstitutional. The scrambling requirement could increase operating expenses for operators of cable television systems and provide a competitive advantage to less regulated providers of video programming services. However, the decision has no impact on the operating expenses of the Company. FCC Implementation of the Telecommunications Act The FCC is presently, and will be, engaged in numerous proceedings to implement various provisions of the Telecommunications Act. In addition to the proceedings previously discussed herein, the FCC recently completed a proceeding implement most of the cable-related reform provisions of the Telecommunications Act. In this proceeding, the FCC clarified that rates for CPS services provided after March 31, 1999 will not be subject to FCC review and regulation. The FCC will continue to process complaints regarding rates for services provided prior to March 31, 1999. Regarding "effective competition," from LECs, LEC affiliates, or multichannel video programming distributors using LEC facilities, the FCC determined that effective competition will be found if a LEC's service offering substantially overlaps the incumbent cable operator's service in the same franchise area. Potential as well as actual LEC service can be considered. The Telecommunications Act also requires that the LLC's programming service be comparable to the incumbent cable operator's service. The FCC adopted the definition used for the competing provider test for effective competition, which specifies that comparable service must include at least 12 channels of video programming, including at least one channel of nonbroadcast service. Certain provisions of the Telecommunications Act could materially affect the growth and operation of the cable television industry and the cable services provided by the Company. Although the legislation may substantially lessen regulatory burdens, the cable television industry may be subject to additional competition as a result thereof. See "Business--Competition." There are numerous rulemakings which have been, and which will be, undertaken by the FCC which will interpret and implement the provisions of the Telecommunications Act. Furthermore, certain provisions of the Telecommunications Act have been, and likely will continue to be, subject to judicial challenge. The Company is unable at this time to predict the outcome of such rulemakings or litigation or the short and long-term effect (financial or otherwise) of the Telecommunications Act and the FCC rulemakings on the Company. Copyright Cable television systems are subject to federal copyright licensing requirements covering carriage of broadcast signals. In exchange for making semi-annual payments to a federal copyright royalty pool and meeting certain other obligations, operators of cable television systems obtain a compulsory license to retransmit broadcast signals. The amount of this royalty payment varies, depending on the amount of system revenues from certain sources, the number of distant signals carried and the location of the cable television system with respect to over-the-air television stations. Operators of cable television systems are liable for interest on underpaid, latepaid and unpaid royalty fees, but are not entitled to collect interest on refunds received for overpayment of copyright fees. The Copyright Office recently issued a report to Congress reviewing the various copyright licensing regimes governing the retransmission of broadcast signals by multichannel video providers. The Copyright Office recommended that Congress make major revisions of both the cable television and satellite compulsory licenses to -81- 85 make them as simple as possible to administer, to provide copyright owners with full compensation for the use of their works, and to treat every multichannel video delivery system the same, except to the extent that technological differences or differences in the regulatory burdens placed upon the delivery system justify different copyright treatment. The possible simplification, modification or elimination of the compulsory copyright license is the subject of continuing legislative review. The elimination or substantial modification of the cable compulsory license could adversely affect the Company's ability to obtain suitable programming and could substantially increase the cost of programming that remains available for distribution to the Company's customers. The Company cannot predict the outcome of this legislative activity. The present policies of the Copyright Office governing the consolidated reporting of certain cable television systems have often led to substantial increases in the amount of copyright fees owed by the systems affected. These situations have most frequently arisen in the context of cable television system mergers and acquisitions. Any changes adopted by the Copyright Office in its current policies may increase the copyright impact of certain transactions involving cable company mergers and cable television system acquisitions. Cable operators distribute programming and advertising that use music controlled by the two principal major music performing rights organizations, the Association of Songwriters, Composers, Artists and Producers ("ASCAP") and Broadcast Music, Inc. ("BMI"). In October 1989, the special rate court of the U.S. District Court for the Southern District of New York imposed interim rates on the cable industry's use of ASCAP-controlled music. The same federal district court also established a special rate court for BMI. BMI and cable industry representatives concluded negotiations for a standard licensing agreement covering the performance of BMI music contained in advertising and other information inserted by operators into cable programming and on certain local access and origination channels carried on cable systems. The Company's settlement with BMI did not have a significant impact on the Company's business and operations. ASCAP and cable industry representatives have met to discuss the development of a standard licensing agreement covering ASCAP-controlled music in local origination and access channels and pay-per-view programming. Although the Company cannot predict the ultimate outcome of these industry negotiations or the amount of any license fees it may be required to pay for past and future use of ASCAP-controlled music, it does not believe such license fees will be significant to the Company's business and operations. State and Local Regulation Because a cable television system uses local streets and rights-of-way, cable television systems are subject to state and local regulation, typically imposed through the franchising process. Local and/or state officials are usually involved in franchise selection, system design and construction, safety, service rates, consumer relations, billing practices and community-related programming and services. Cable television systems are generally operated pursuant to nonexclusive franchises, permits or licenses granted by a municipality or other state or local government entity. Franchises generally are granted for fixed terms and in many cases are terminable if the franchise operator fails to comply with material provisions. See "Business--Franchises." Although the 1984 Cable Act provides for certain procedural protections, there can be no assurance that renewals of such franchises will be granted or that renewals will be made on similar terms and conditions. Franchises usually call for the payment of fees (which are limited to 5% of the system's gross revenues for cable services under the Communications Act) to the granting authority. Upon receipt of a franchise, the cable television system owner is usually subject to a broad range of obligations to the issuing authority directly affecting the business of the system. Franchises generally contain provisions governing charges for basic cable television services, fees to be paid to the franchising authority, length of the franchise term, renewal, sale or transfer of the franchise, territory of the franchise, design and technical performance of the system, use and occupancy of public streets and number and types of cable services provided. The terms and conditions of franchises vary materially from jurisdiction to jurisdiction, and even from city to city within the same state, historically ranging from reasonable to highly restrictive or burdensome. The 1992 Cable Act prohibits exclusive franchises, and allows franchising authorities to exercise greater control over the operation of franchised cable television systems than the 1984 Cable Act did, especially in the area of customer service and basic service rate regulation. The 1992 Cable Act also allows franchising authorities to operate their own multichannel video distribution system without having to obtain a franchise. Moreover, franchising authorities are immunized from monetary damage awards arising from regulation of cable television systems or decisions made on franchise grants, renewals, transfers and amendments. -82- 86 Various proposals have been introduced at the state and local levels with regard to the regulation of cable television systems, and a number of states have adopted legislation subjecting cable television systems to the jurisdiction of centralized state governmental agencies, some of which impose regulation of a character similar to that of a public utility. Although the state and local jurisdictions in which the Company's systems are located are not among those which have adopted legislation centralizing the regulation of cable television systems, there are no assurances that such legislation may not be considered or adopted in the future by states and local jurisdictions in which the Company operates. -83- 87 MANAGEMENT The business and operations of the Company are conducted and managed exclusively by the General Partner of the Parent, subject to certain consent or other rights of the Parent's limited partners. See "Description of the Partnership Agreement." The General Partner of the Parent has engaged Bresnan Communications, Inc. ("BCI"), a corporation wholly owned by William J. Bresnan, to perform management and administrative services, on its behalf, for the Company. See "Risk Factors--Risks Associated with Potential Conflicts of Interest" and "Certain Relationships and Related Transactions." In addition, the Company has an Advisory Committee. The Advisory Committee is comprised of nine representatives, with each of the General Partner of the Parent, TCI and Blackstone having the right to designate three members thereof. The Advisory Committee consults with the Company on certain strategic business initiatives from time to time. Executive Officers and Advisory Committee Members The Company. The following table sets forth certain information with respect to the members of the Advisory Committee and the executive officers of BCI who are responsible for providing significant services with respect to the management and operations of the Company. Prior to January 1, 1996, certain of the individuals listed below functioned effectively as executive officers of the Parent, and were compensated for their service as such by the Parent (other than William J. Bresnan, who was compensated by BCI). On January 1, 1996 all such individuals became executive officers of BCI and, in certain instances, another affiliate of William J. Bresnan. Certain of the individuals listed below have been responsible for providing services with respect to the management and operations of the Parent and its subsidiaries since April 23, 1996.
Name Age Position - ---- --- -------- William J. Bresnan 65 President and Chief Executive Officer; Member of the Advisory Committee Jeffrey S. DeMond 43 Senior Vice President, Chief Financial Officer, Treasurer and Assistant Secretary; Member of the Advisory Committee Michael W. Bresnan 40 Senior Vice President--Domestic Division; Member of the Advisory Committee Leonard Higgins 40 Vice President--Telephone and Data Services Andrew C. Kober 36 Vice President and Controller Gareth P. McIntosh 56 Vice President--Engineering Roger D. Worboys 51 Vice President--Operations Joshua H. Astrof 27 Member of the Advisory Committee Derek Chang 30 Member of the Advisory Committee William R. Fitzgerald 41 Member of the Advisory Committee Mark T. Gallogly 41 Member of the Advisory Committee Leo J. Hindery, Jr. 51 Member of the Advisory Committee Simon P. Lonergan 30 Member of the Advisory Committee
William J. Bresnan has been the President and Chief Executive Officer of BCI since its inception in 1984 and is a member of the Advisory Committee of the Company. Mr. Bresnan is also the Secretary and the sole director of BCI, and has served in such capacities since BCI's inception. Prior to founding BCI and the Parent, Mr. Bresnan served as Chairman and Chief Executive Officer of Group W Cable, Inc. from 1981 to 1984. Mr. Bresnan also served as President of Group W Cable's predecessor organization, the Cable TV Division of Teleprompter Corp., from 1974 to 1981. During the twenty years prior to 1984, Mr. Bresnan continuously managed the first, second, or third largest cable company in the U.S., and oversaw the cable build-outs of major metropolitan markets such as San Francisco, Dallas, and Tampa-St. Petersburg. Mr. Bresnan served as President of the Cable Television Division of Teleprompter Corporation from 1974 to 1981. Mr. Bresnan has served on the Board of Directors of the National Cable Television Association for 30 non-consecutive years and as a member of its Executive Committee for non-consecutive terms aggregating 15 years. In addition, Mr. Bresnan is a director of each of Cable in the Classroom, Cable Television Laboratories, the Foundation for Minority Interests in Media, the Cable Television Advertising Bureau and C-SPAN, and is currently Chairman of CablePAC and the National Cable Television Center and Museum. Mr. Bresnan has 40 years of experience in the cable television industry. -84- 88 Jeffrey S. DeMond, C.P.A., is Executive Vice President and Chief Financial Officer of BCI and is a member of the Advisory Committee of the Company. Mr. DeMond served as Treasurer and Assistant Secretary of BCI since November 1985. Mr. DeMond served as Senior Vice President of BCI from January 1996 through March 1999, Vice President of BCI from December 1986 through December 1995. In addition, Mr. DeMond served as the Parent's Vice President--Finance and Chief Financial Officer from November 1986 through December 1995 and as its Director of Finance from November 1985 through November 1986. Before joining the Parent, Mr. DeMond served as a Senior Manager at Peat, Marwick, Mitchell & Co. (now KPMG LLP), where he worked with clients in a variety of industries, including radio broadcasting and film syndication from 1979 through 1985. Mr. DeMond is currently an active member of the Accounting Committee of the National Cable Television Association. Michael W. Bresnan is Executive Vice President--Domestic Division of BCI and is a member of the Advisory Committee of the Company. Mr. Bresnan served as Senior Vice President -- Domestic Division of BCI from January 1997 through March 1999 and as Senior Vice President--Operations of the Parent from January 1996 through December 31, 1996 and as the Parent's Director of Operations from August 1987 through December 1995. Mr. Bresnan served as General Manager of the Parent's Marquette, Michigan system from October 1985 through August 1987, Mr. Bresnan joined the Parent in July 1985 as its Project Manager. Before joining the Parent, Mr. Bresnan was a design engineer at TRW, Inc., where he was responsible for the design and development of state-of-the-art microwave electronics for use in communications satellites. Mr. Bresnan is a member of the National Cable Television Association's Coalition Opposing Signal Theft. Leonard Higgins has been Senior Vice President--Telephone and Data Services of BCI since March 1999. From September 1997 through March 1999, Mr. Higgins was Vice President --Telephone and Data Services of BCI. Before joining BCI, Mr. Higgins was Executive Director of Strategic Business Development at Bellcore from July 1996 to September 1997. Mr. Higgins joined Bellcore after serving as Vice President of Development for Sutton Capital, Inc., from March 1993 to July 1996. Sutton is a telecommunications investment company with interests in cable television systems, cellular operations and alternative access networks. While at Sutton, Mr. Higgins directed the development of an alternative local telecommunications network in New Jersey and he directed Sutton's participation in the FCC PCS auctions. Prior to joining Sutton, Mr. Higgins was Director of Corporate Development for Teleport Communications Group, from 1988 to 1993. While at Teleport, Mr. Higgins oversaw the expansion of Teleport's local telecommunications networks into a number of new markets. Andrew C. Kober, C.P.A., is Vice President and Controller of BCI. Mr. Kober served as Controller of the Parent from August 1990 through December 1995. Before joining the Company, Mr. Kober worked at Arthur Young & Company (now Ernst & Young LLP) from 1984 through 1990. At Arthur Young & Company, Mr. Kober worked with clients in the broadcasting, cable and cable programming industries, as well as with clients in the manufacturing and legal services industries. Mr. Kober is a member of the New York State Society of Certified Public Accountants, the American Institute of Certified Public Accountants and the Cable Television Tax Professionals Institute. Gareth P. McIntosh is Vice President--Engineering of BCI. Mr. McIntosh served as the Parent's Director of Engineering from November 1994 through December 1995. Before joining the Parent, Mr. McIntosh served as Vice President of Engineering of Fundy Cable Ltd. in Canada from April 1990 to November 1994. At Fundy Cable Ltd., Mr. McIntosh played an instrumental role in developing its joint cable-telephony system in the United Kingdom. From 1980 to 1990, Mr. McIntosh served as Vice President of Engineering for the Canadian-based Rogers Cablesystems Limited, where he was responsible for its cable television systems and was involved in the initial stages of the development of a national Canadian cellular communications system. Roger D. Worboys is Senior Vice President -- Cable Operations of BCI. From January 1996 through March 1999, Mr. Worboys was Vice President -- Operations of BCI. Before joining BCI in January 1996, Mr. Worboys was Vice President of Operations for Insight Communications in New York from 1988 to December 1995, where he was responsible for cable television systems located in six states and for the development of Insight Communications' one million subscriber operations in the United Kingdom. Mr. Worboys joined Insight Communications after serving as Vice President of Operations of Simmons Communications from 1986 to 1988, where he supervised its five operating regions which served 330,000 subscribers in 17 states. Mr. Worboys has over 20 years of experience in the cable television industry. Joshua H. Astrof is a member of the Advisory Committee of the Company. Mr. Astrof is an Associate of The Blackstone Group L.P. which he joined in August 1998. Prior to joining Blackstone, Mr. Astrof received his -85- 89 MBA from Harvard Business School in 1998. Prior to attending Harvard, Mr. Astrof was an Associate and an Analyst with Donaldson, Lufkin & Jenrette Securities Corporation from 1993 to 1996. Derek Chang is a member of the Advisory Committee of the Company. Mr. Chang has served as Executive Vice President of Corporate Development and Partnership Relations for AT&T Broadband and Internet Services since March 1999. Prior to serving as Executive Vice President, Mr. Chang held the same position with TCI. Prior to serving as Executive Vice President with TCI, Mr. Chang was Assistant to TCI's President and CEO Leo J. Hindery, Jr. Prior to joining TCI, Mr. Chang served as Treasurer of InterMedia Partners, L.P. from 1994 to 1997. Prior to joining InterMedia, Mr. Chang received an MBA from Stanford University's Graduate School of Business in 1994. Prior to attending Stanford, Mr. Chang served as an analyst for The First Boston Corporation in the Mergers and Acquisitions Group from 1990 to 1992. He is on the Advisory Boards or Boards of Directors of InterMedia Capital Partners IV, L.P., InterMedia Capital Partners VI, L.P., Insight Communications, Falcon Communications and TCI's partnerships with Time Warner in Kansas City and Houston. William R. Fitzgerald is a member of the Advisory Committee of the Company. Mr. Fitzgerald has served as Executive Vice President and COO of AT&T Broadband and Internet Services since March 1999. In this capacity, Mr. Fitzgerald manages the day-to-day cable operations of the company. Prior to serving as Executive Vice President and COO, Mr. Fitzgerald held the same position with TCI. Prior to joining TCI in March 1996, he was a Senior Vice President and partner with Daniels & Associates, a leading brokerage and investment banking firm to the communications industry. Before joining Daniels & Associates, Mr. Fitzgerald was Vice President at The First National Bank of Chicago. He is on the Advisory Boards or Boards of Directors of InterMedia Capital Partners IV, L.P., InterMedia Capital Partners VI, L.P., Insight Communications, Falcon Communications and TCI's partnerships with Time Warner in Kansas City and Houston. Mr. Fitzgerald received an undergraduate degree from Indiana University School of Business and a master's degree in business and finance from the J.L. Kellogg Graduate School of Management at Northwestern University. Mark T. Gallogly is a member of the Advisory Committee of the Company. Mr. Gallogly is a member of the limited liability company that acts as the general partner of Blackstone Capital Partners III, L.P. and its affiliates. He is a Senior Managing Director of The Blackstone Group L.P. and has been with Blackstone since 1989. Mr. Gallogly is on the Advisory Boards or Boards of Directors of InterMedia Capital Partners VI, L.P., CommNet Cellular Inc., TWFanch-One Co. and Centennial Cellular Corp. Leo J. Hindery, Jr. is a member of the Advisory Committee of the Company. Mr. Hindery has served as the President and Chief Executive Officer with AT&T Broadband and Internet Services since March 1999 and is a director of TCI. From March 1997 to March 1999, Mr. Hindery served as President and Chief Operating Officer and a Director of TCI. Mr. Hindery is also President and Chief Executive Officer of TCI Communications, Inc. and is Chairman of the Board of and a director of TCI Music. Mr. Hindery was previously founder, Managing General Partner and Chief Executive Officer of InterMedia Partners, a cable TV operator, and its affiliated entities since 1988. Mr. Hindery is a director of National Cable Television Association, Cable Television Systems Corporation, USA Networks, Inc. and the At Home Corporation and Chairman and Director of C-SPAN. Simon P. Lonergan is a member of the Advisory Committee of the Company. Mr. Lonergan is a Vice President of The Blackstone Group L.P. which he joined in 1996. Prior to joining Blackstone, Mr. Lonergan received his MBA from Harvard Business School in 1996. Prior to attending Harvard, Mr. Lonergan was an Associate at Bain Capital, Inc. from 1992 to 1994 and a Consultant at Bain & Co. from 1989 to 1992. Mr. Lonergan is a member of the Board of Directors of CommNet Cellular Inc. and a member of the Advisory Committee of each of Graham Packaging Company and InterMedia Capital Partners VI, L.P. William J. Bresnan is the father of Michael W. Bresnan. Bresnan Capital Corporation. Bresnan Capital Corporation, a Delaware corporation and wholly owned subsidiary of the Company, exists for the sole purpose of serving as co-obligor of the Notes. The sole director of Bresnan Capital Corporation is William J. Bresnan. Mr. Bresnan serves as President and Secretary of Bresnan Capital Corporation and Jeffrey S. DeMond serves as its Vice President and Assistant Secretary. Bresnan Capital Corporation has nominal assets and does not conduct any operations. -86- 90 Executive Compensation and Other Information The Parent was formed in 1984 and BCG was formed in August 1998. None of the officers of BCI has ever received any compensation from BCG nor have they received any compensation from the Parent since January 1, 1996. None of such individuals expects to receive any compensation from the Company or the Parent at any time in the future. Prior to the consummation of the TCI Transactions, BCI and Bresnan Management Services, Inc., an affiliate of William J. Bresnan ("BMSI"), performed certain management and administrative services for the Parent. The aggregate fees paid and accrued to BCI and BMSI, collectively, by the Parent were approximately $4.2 million, $4.8 million and $6.7 million for the years ended December 31, 1996, 1997 and 1998, respectively. See "Certain Relationships and Related Transactions." Members of the Advisory Committee will receive no compensation for their services on the committee. -87- 91 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information as of the date of this prospectus with respect to the beneficial ownership of partnership interests of the Parent and interests owned by all persons that function effectively as executive officers of the Company. Unless otherwise noted, the individuals have sole voting and investment power. The Parent owns all of the outstanding equity interests of the Company. See "Prospectus Summary--Organization."
Name and Address Type of Interest Interest - ---------------- ---------------- -------- BCI (USA), LLC General Partner Interest 1.0%(a) c/o Bresnan Communications, Inc. 709 Westchester Avenue White Plains, NY 10604 TCI Bresnan LLC/TCID of Michigan, Inc. Limited Partner Interest 50.0%(b) 9197 South Peoria Street Englewood, CO 80112 Blackstone Limited Partner Interest 39.8%(c) c/o The Blackstone Group L.P. 345 Park Avenue 31st Floor New York, NY 10154 BCI (USA), LLC Limited Partner Interest 8.2% c/o Bresnan Communications, Inc. 709 Westchester Avenue White Plains, NY 10604 William J. Bresnan Limited Partner Interest 1.0% c/o Bresnan Communications, Inc. 709 Westchester Avenue White Plains, NY 10604 All executive officers as a group (14 persons)(e) 10.2%
- ---------- * Represents less than 1%. (a) William J. Bresnan holds a 86.7% interest in the General Partner of the Parent, BCI holds a 2.5% interest in the General Partner of the Parent and BCI Management, L.P. holds a 10.8% interest in the General Partner of the Parent. See footnote (d). BCI, a corporation wholly owned by William J. Bresnan, holds a 4.76% general partner interest in BCI Management, L.P. The limited partner interests in BCI Management, L.P. are held by employees of BCI and the Company. The limited partner interests represent an economic interest rather than a beneficial ownership interest. (b) Includes interests held by each of TCI Bresnan LLC and TCID. TCI Bresnan LLC and TCID are affiliates of Tele-Communications, Inc. (c) The Parent partnership interests beneficially owned by Blackstone are held collectively by Blackstone B.C. Capital Partners L.P., Blackstone B.C. Offshore Capital Partners L.P. and an affiliated Delaware limited partnership. The general partner of each such entities with voting and investment control of the Parent partnership interests is a Delaware limited liability company. Messrs. Peter G. Peterson and Stephen A. Schwarzman are founding members of the limited liability company and as such may be deemed to share beneficial ownership of the Parent partnership interests owned by Blackstone. (d) None of the executive officers hold a beneficial interest in the Company in excess of 1%, other than William J. Bresnan who holds a beneficial interest in the Company of 10.2%. -88- 92 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Existing Agreements and Arrangements The following descriptions are summaries of the relevant material provisions of certain agreements and arrangements in existence prior to the consummation of the TCI Transactions. These agreements and arrangements relate only to the Existing Bresnan Systems. Service Agreements Prior to January 1, 1996, all of the overhead expenses of the Parent (other than the salary and related benefits of the President of BCI) were paid directly by the Parent. Currently, BCI performs substantial management services for both the Parent and Bresnan Communications Poland LLC. See "Risk Factors--Risks Associated with Potential Conflicts of Interest." The Parent pays its portion of the expenses related to such services pursuant to the Management Agreement and the Administration Agreement. In connection with the consummation of the TCI Transactions, the Management Agreement and the Administration Agreement were terminated and services are performed for the Company pursuant to the terms of the Partnership Agreement. See "Agreements Entered into in Connection with the TCI Transaction--Partnership Agreement" and "Description of the Partnership Agreement." Management Agreement The Parent entered into the Management Agreement with BCI, a corporation wholly owned by William J. Bresnan, on December 31, 1995. Certain of the executive officers of BCI function as executive officers of the Company. Pursuant to the Management Agreement, BCI provided certain services to the Parent in connection with the management and operation of the Company's cable television systems, related businesses, projects and investments. The Management Agreement was terminated in connection with the consummation of the TCI Transactions. Payments by the Parent under the Cable Television Management Agreement and the Former Management Agreement aggregated approximately $2.6 million, $2.5 million and $6.7 million for the years ended December 31, 1996, 1997 and 1998, respectively. BCI has, effective as of January 1, 1996, assumed a substantial portion of the Parent's obligations to pay overhead expenses for which the Parent had previously been directly responsible (including, without limitation, BCI-related salaries, insurance, executive office rental and travel expenses). Administration Agreement The Parent entered into the Administration Agreement with BMSI, on December 31, 1995, pursuant to which BMSI agreed to provide to the Parent certain administrative services in connection with the administration and operation of the Parent's cable television systems, businesses, projects and investments. The Administration Agreement was terminated in connection with the consummation of the TCI Transactions. BMSI, effective as of January 1, 1996, assumed all of the Parent's obligations to pay certain administration expenses for which the Parent had previously been directly responsible (including, without limitation, costs of accounting and administration and expenses relating to headquarters operations, excluding BCI-related expenses). Payments by the Parent under the Administration Agreement aggregated approximately $1.6 million and $2.2 million for the years ended December 31, 1996 and 1997, respectively. Effective January 1, 1998, these costs were borne directly by the Parent. Agreements with and Purchases from TCI and its Affiliates Prior to the consummation of the TCI Transactions, the Parent purchased substantially all of its programming services from TCI and its affiliates pursuant to a Supply Agreement (the "Supply Agreement") with Satellite Services, Inc. ("SSI"), a subsidiary of TCI. These purchases were made in the normal course of business and at rates which the Parent's management believes are significantly lower than those the Parent could obtain from third-parties and for the years ended December 31, 1996, 1997 and 1998, aggregated approximately $14.4 million, $13.4 million and $15.6 million respectively. See "Risk Factors--Risks Associated with Loss of Favorable Programming and Equipment Supply." -89- 93 TCID held an unexercised option pursuant to which TCID may purchase from William J. Bresnan a portion of his interests in the Parent for $1, which was exercised prior to the consummation of the TCI Transactions. The exercise of the option increased TCID's partnership interest in the Parent to approximately 78.4%. See "Business--The TCI Transactions." Pursuant to the Parent's prior partnership agreement, TCID and William J. Bresnan transferred through BCI, to BCI Management, L.P., approximately 1.6% and 0.5%, respectively, of TCID's economic and voting interest in the Parent. TCID and William J. Bresnan were not paid in connection with the transfer. The transfer occurred as of October 1, 1996. In May 1998, the Parent entered into a five-year service agreement with At Home Corporation with respect to certain of its systems. Such agreement provides At Home Corporation with the exclusive right, subject to certain conditions, to provide high-speed residential Internet service for subscribers in such systems. In consideration of providing its services, At Home Corporation was paid an up-front fee of $.1 million (which was credited toward service payments made by the Parent for services rendered) and, on an on-going basis, At Home Corporation is entitled to a specified percentage of revenues earned by the Parent for providing the @Home services. TCID Note The Parent has issued to TCID, as lender, the TCID Note dated May 12, 1988 in the principal amount of $25.0 million, of which $22.1 million was borrowed. Interest accrued on the TCID Note at a per annum rate (based on a 360-day year) equal to the prime rate of The Toronto-Dominion Bank's New York branch which, as of December 31, 1998 was 7.75%. Pursuant to an agreement dated as of October 10, 1994, the term of the TCID Note was extended from April 30, 1998 to April 30, 2001. As of December 31, 1998, the aggregate amount of indebtedness outstanding under the TCID Note was $22.1 million of principal and $19.9 million of accrued interest. TCID is an indirect wholly owned subsidiary of TCI. The TCID Note was repaid in full with a portion of the proceeds from the TCI Transactions and the Financings. See "Use of Proceeds." Subordinated Promissory Note The Parent executed a subordinated promissory note dated July 22, 1994 (the "Subordinated Note") in favor of TCID for a maximum principal amount of $2.9 million with interest thereon to be computed at a rate of 12% per year, compounded quarterly, based on a 365-day year. The Subordinated Note was canceled in May 1996. No amounts were ever drawn under the Subordinated Note and no fees were paid in connection therewith. Other Loans and Advances to or from Affiliates During the normal course of business, the Parent incurred management costs and made and received advances on behalf of Bresnan Communications Poland LLC ("BCP") and TCI International Partners (Chile), L.P., formerly Bresnan International Partners (Chile), L.P. ("BIP") who have invested in new cable television systems in Chile and Poland. In August 1998, an affiliate of William J. Bresnan transferred its interest in BIP to an affiliate of TCI. These costs totaled approximately $39,000, $0 and $0 for the years ended December 31, 1996, 1997 and 1998, respectively, and are reflected as a reduction of selling, general and administrative expenses. The Parent formerly provided to BCP and BIP the management and administrative services currently provided to BCP by BCI. All amounts due to BCP and BIP have been repaid in full. During the period from January 1, 1996 through December 31, 1998, the largest amount of indebtedness of BCP and BIP owed to the Company outstanding at any time was $6.0 million. The Parent has no current commitment to make any loan or advance to, nor any obligation to repay any amounts advanced by, either of BCP and BIP or (except pursuant to the TCID Note) any other affiliate. The Parent currently does not provide services to BCP and BIP and does not anticipate that it will make any loans or receive any loans to or from either BCP or BIP. BCP is effectively controlled by William J. Bresnan and TCI. BIP is controlled by TCI. Certain of the persons that function effectively as executive officers of the Company also function as such for BCP. Guarantee A guarantee of borrowings made by the Parent under the Old Credit Facility in the amount of $3.0 million has been provided by William J. Bresnan. No consideration was paid to Mr. Bresnan in connection with the guarantee. The guarantee will continue pursuant to the terms of the New Credit Facility. -90- 94 Purchases from Other Affiliates During the normal course of business, the Parent purchases automobiles and airline transportation services at amounts no less favorable than those the Parent could obtain from third parties from The Irving Corporation, Atlantic Imports, Inc. and Bresnan Aviation, Inc. William J. Bresnan and Jeffrey S. DeMond are shareholders of The Irving Corporation and Atlantic Imports, Inc. and William J. Bresnan and Mr. DeMond are directors thereof. Bresnan Aviation, Inc. is a corporation wholly owned by William J. Bresnan. Payments made by the Parent to The Irving Corporation and Atlantic Imports, Inc. aggregated approximately, $0, $61,000 and $160,000 for the years ended December 31, 1996, 1997 and 1998, respectively. Payments made by the Parent or BMSI on behalf of the Parent to Bresnan Aviation, Inc. aggregated approximately $114,000, $342,000 and $347,000 for the years ended December 31, 1996, 1997 and 1998, respectively. Agreements Entered into in Connection with the TCI Transactions The following descriptions are summaries of the relevant material provisions of certain agreements entered into by the Company in connection with the TCI Transactions. Contribution Agreement On June 3, 1998, Blackstone, the Parent, the Bresnan Group, TCID and the Contributed TCI Systems Parties entered into the Contribution Agreement pursuant to which the TCI Transactions occurred. The terms of the Contribution Agreement were determined through arms-length negotiations among the parties thereto. Pursuant to the terms of the Contribution Agreement the Company became the owner of the Contributed TCI Systems and the Existing Bresnan Systems and assumed the Assumed TCI Debt. The Contribution Agreement contains certain adjustment mechanisms pursuant to which the ownership interests of Blackstone and the Bresnan Group and the amount of the Assumed TCI Debt may change. See "The TCI Transactions." In addition, pursuant to the terms of the Contribution Agreement, in the event of certain overbuild situations, TCI is required to either (1) pay the Parent an adjustment amount to be calculated pursuant to the terms of the Contribution Agreement, (2) acquire the affected systems pursuant to a redemption of a portion of its equity interest in the Parent equal to the adjustment amount, or (3) cause its equity interest in the Parent to be reduced to reflect the adjustment amount. Pursuant to the terms of the Contribution Agreement, TCI entered into an agreement pursuant to which TCI will, under limited circumstances, make loans to the Parent and its subsidiaries. Partnership Agreement Pursuant to the terms of the Partnership Agreement, TCI, Blackstone and the Bresnan Group receives, an annual monitoring fee equal to the product of (1) such partner's partnership interest percentage in the Parent and (2) $500,000, which will be payable on a quarterly basis in advance. The General Partner of the Parent receives an annual management fee, payable in advance in equal quarterly installments equal to 3% of the Parent's budgeted consolidated gross operating revenues for such year (or partial year) with respect to a specified number of base subscribers. The Partnership Agreement contains a mechanism for reimbursement of any overpayment or underpayment, as applicable, of management fees once actual revenues are determined. The management fee will be increased by such budgeted amount as agreed to by the General Partner of the Parent and at least 66 2/3% in interest of the limited partners to reflect certain expected incremental costs and expenses associated with operating and managing additional subscribers beyond the base number of subscribers. Pursuant to the terms of the Partnership Agreement, the Parent will pay or reimburse TCI, Blackstone and the Bresnan Group for all reasonable fees and expenses relating to the TCI Transactions and the Financings. In addition, pursuant to the terms of the Partnership Agreement, the Parent paid to TCI, Blackstone and the Bresnan Group or its designated affiliate a transaction fee (approximately $3.4 million in the aggregate) in cash in an amount equal to 1% of the capital contributions made by such partner. Pursuant to the terms of the Partnership Agreement, the Parent is required to cause its subsidiaries to continue carriage of the Starz and Encore programming services in the Contributed TCI Systems on the terms as were in effect prior to the consummation of the TCI Transactions. In addition, the Company is required to use its reasonable best efforts to launch the Starz and Encore programming services in the Existing Bresnan Systems on the terms set forth in the Parent's agreement with such programmers as soon as possible. Starz and Encore are subsidiaries of TCI. -91- 95 Programming Supply Agreement In connection with the consummation of the TCI Transactions, BTC entered into a programming supply agreement (the "New Supply Agreement") with SSI which will replace the Supply Agreement. SSI contracts with various programmers to purchase programming. Subject to the terms and conditions of the New Supply Agreement, BTC, subject to certain exceptions, is required to buy and procure certain programming services from SSI for which it pays SSI its cost plus surcharge. The term of the New Supply Agreement will initially be 15 years and in the absence of certain events will be automatically extended thereafter for successive one year periods. The New Supply Agreement may be terminated by the parties under certain circumstances, including but not limited to, in the event that TCI's interest in BTC falls below a specified percentage or upon certain initial public offerings. See "Risk Factors--Risks Associated With Loss of Favorable Programming and Equipment Supply." Advertising Arrangement In connection with the consummation of the TCI Transactions, the Company and TCI entered into an arrangement for the advertising sales business of the Company (the "Advertising Arrangement"). Agreement Relating to At Home Corporation Pursuant to the terms of the Partnership Agreement, the Parent is required to operate (for a period up to and until June 2002 (the "Restricted Period")) the Contributed TCI Systems, subject to certain exceptions, in accordance with TCI's distribution agreement with At Home Corporation, an affiliate of TCI. Such obligations include, among other things, the requirement that the Parent provide the "@Home" services through the Contributed TCI Systems, in accordance with the terms of TCI's distribution agreement with At Home Corporation; provided that if the costs borne by the Parent for providing the services under such agreement is less favorable than the Parent's agreement with At Home Corporation then the Parent will be released from those obligations as of the time the Contributed TCI Systems become subject to the Parent's agreement with At Home Corporation. During the Restricted Period, the Company is not permitted to conduct or engage in any "restricted business" with respect to the Contributed TCI Systems other than through At Home Corporation. Such "restricted businesses" include, among other things, the provision of "residential Internet service" (as defined in the agreement) over its cable television plant or equipment at bit rate speeds greater than 128 kbps whose primary purpose is the provision to consumers of entertainment, information content, transactional services or e-mail, chat and news groups or substantially similar services. So long as the Parent is in compliance with these provisions, TCI has agreed to use commercially reasonable efforts to obtain for the benefit of the Contributed TCI Systems the benefits available to TCI and its controlled affiliates (as such term is defined) under its distribution agreement with At Home Corporation, including the benefits under the most favored nations provisions of such agreement. Under its agreement with At Home Corporation, TCI pays At Home Corporation a specified percentage of revenues collected by TCI for the services provided by At Home Corporation. Billing Agreement In connection with the consummation of the TCI Transactions, the Parent entered into a billing contract (the "CSG Contract") with CSG Systems, Inc. ("CSG") with respect to the subscribers previously served by the Contributed TCI Systems. If the number of subscribers served by the CSG Contract falls below the number served by the Contributed TCI Systems billed pursuant to the CSG Contract on February 2, 1999, plus the number of subscribers of the Contributed TCI Systems scheduled to be billed under such agreement within the six month period beginning on February 2, 1999, then, subject to certain limitations, the Parent will be required to pay TCI a penalty fee. This obligation will remain in effect until December 31, 2012 or such earlier date upon which the CSG Contract terminates. -92- 96 DESCRIPTION OF THE PARTNERSHIP AGREEMENT Organization and Duration. The Partnership Agreement became effective on February 2, 1999. The Parent will continue to exist until February 1, 2014 unless terminated prior to such date in accordance with the provisions of the Partnership Agreement. General Partner. The sole general partner of the Parent will be the General Partner of the Parent. Subject to the partnership matters that require the approval of the limited partners (see "--Consent and Other Rights of Partners"), the business and operations of the Parent will be conducted and managed exclusively by the General Partner of the Parent. Change of Control of General Partner. Upon the occurrence of any of the following (each, a "General Partner Change of Control"): (1) the death of William J. Bresnan; (2) the incapacity of William J. Bresnan such that he is unable to perform substantially all of his duties as Chief Executive Officer of the general partner for a period of nine months; (3) the bankruptcy, insolvency, or appointment of a trustee, in connection with a bankruptcy or insolvency, to manage the affairs of William J. Bresnan; (4) any other event that either (A) causes William J. Bresnan and his wife and their descendants (including their spouses), any trust established for the benefit of the foregoing individuals or any partnership or other entity at least 80% owned by any of the foregoing persons (collectively, the "Bresnan Family Members") to own, directly or indirectly, less than 50% of the economic and voting interests in the general partner, (B) causes third parties (other than William J. Bresnan, Bresnan Family Members and officers of the Parent) to own, directly or indirectly, more than 20% of the economic and voting interests in the general partner, (C) causes William J. Bresnan not to control the general partner, or (D) causes William J. Bresnan and the Bresnan Family Members to own, directly or indirectly, less than 50% of the economic and voting interests in the owner of the interest as a limited partner in the Parent initially owned by the General Partner of the Parent; or (5) William J. Bresnan ceasing to serve as Chief Executive Officer of the Parent other than as a result of (1) or (2) above; then a new Chief Executive Officer of the general partner (the "CEO") will be elected to replace William J. Bresnan as CEO of the general partner and such new CEO must be approved by the consent of 66 2/3% in interest of the limited partners. Tax Distributions. To the extent set forth in the Partnership Agreement, the Parent generally is required to make distributions (the "Tax Distributions") to partners (other than TCI) to allow them to pay their federal, state and local income tax liabilities attributable to their investment in the Company. The amount so distributable to a partner each fiscal year will be based upon the federal taxable income, including income attributable to guaranteed payments, allocated to such partner for such year, treating partnership losses generated subsequent to the effective date of the Partnership Agreement as carried forward to and reducing taxable income in subsequent fiscal years. Such computation of federal taxable income will take into account the effect of the AHYDO rules, as described in "Risk Factors--Original Issue Discount; Tax Distributions" and "Certain Federal Tax Considerations," to the extent relevant to the beneficial owners of the Company. Notwithstanding any of the above, the Parent is generally required to apply certain tax allocation methods so that, based on certain financial forecasts set forth in the Partnership Agreement, Blackstone is allocated no more than $50,000 of income for the first six fiscal years of the Company (taking into account only certain effects of the AHYDO rules on such income). Generally, the Partnership Agreement provides that the computation of the amount of the Tax Distributions to each partner will be determined as if such partner was taxable at the highest marginal rates for regular and alternative minimum tax purposes, as the case may be, applicable to individuals residing in the State and City of New York, regardless of the actual status of such partner. Capital Contributions and Distributions Other than Tax Distributions. Other than the contributions made pursuant to the Contribution Agreement, the partners of the Parent will not be required to make any additional contributions. Subject to any restrictions contained in any indebtedness of the Parent or its subsidiaries, distributions -93- 97 other than Tax Distributions will be made to the partners on a quarterly basis in accordance with the terms of the Partnership Agreement. Expenses and Fees. The Parent reimbursed each partner for all reasonable fees and expenses relating to the TCI Transactions and the Financings. In addition, at the Closing, the Parent paid to each partner or its designated affiliate a transaction fee in cash in an amount equal to 1% of the capital contributions made by such partner. Each partner received a monitoring fee equal to the product of (1) such partner's partnership interest percentage in the Parent and (2) $500,000, which will be payable on a quarterly basis in advance. The General Partner of the Parent receives an annual management fee, payable in advance in equal quarterly installments equal to 3% of the Parent's budgeted consolidated gross operating revenues for such year (or partial year) with respect to a specified number of base subscribers. The Partnership Agreement contains a mechanism for reimbursement of any overpayment or underpayment, as applicable, of management fees once actual revenues are determined. The management fee will be increased by such budgeted amount as agreed to by the General Partner of the Parent and at least 66 2/3% in interest of the limited partners to reflect certain expected incremental costs and expenses associated with operating and managing additional subscribers beyond the base number of subscribers. Consent and Other Rights of Partners. Matters Subject to Partner Consent. Certain matters are subject to receipt of the consent of 66 2/3% in interest of the limited partners of the Parent. Such actions or events that require such consent include, but are not limited to: (1) any expenditures that are a specified percentage above those budgeted for in the Parent's annual budget; (2) any transaction with any partner or any affiliate of a partner, with certain permitted exceptions; (3) the selection of a person to manage the Parent's operations other than as provided for in the Partnership Agreement; (4) the incurrence of indebtedness by the Parent or its subsidiaries ("Partnership Indebtedness") which causes such Partnership Indebtedness to exceed the total amount available under any debt facilities in place at the Closing, or any refinancing or guarantee of such indebtedness of a material amount or any material amendment to such debt facilities; (5) any incurrence of Partnership Indebtedness that would cause the Parent to exceed a specified maximum leverage ratio; (6) the sale or other transfer of assets or cable systems of the Parent for consideration in excess of $25 million in the aggregate; (7) the issuance or sale of additional equity interests in the Parent or the admission of new partner; (8) the purchase of assets in excess of $25 million in any calendar year; (9) the merger of or consolidation of the Parent with any other entity; (10) any amendments or modifications to any approved operating plan or annual budget; (11) the liquidation or dissolution of the Parent except in accordance with the terms of the Partnership Agreement; (12) any fundamental change in the business of the Parent; and (13) any action by any subsidiary of the Parent which, if taken directly by the Parent, would require consent of the limited partners pursuant to the Partnership Agreement. Other Rights. In addition to the rights described in the immediately preceding section, upon the written request of 66 2/3% in interest of the limited partners (except with respect to clauses (1) and (6) below, which actions will be taken in accordance with such clauses), the general partner will: (1) amend the Partnership Agreement; provided that such amendment does not adversely affect any partner, in which case such affected partner's consent will be required (but such partner's consent will not be required for any such amendment necessary to give effect to any actions described in clauses (2), (3), (4) or (5) below); (2) sell additional interests in the Parent to a person that is not a partner or an affiliate of a partner at the time of such sale and use the proceeds of such sale in the manner specified by 66 2/3% in interest of the limited partners, subject to certain exceptions; (3) incur Partnership Indebtedness or refinance any then existing Partnership Indebtedness on behalf of the Parent or its subsidiaries and use the proceeds of such indebtedness in the manner specified by 66 2/3% in interest of the limited partners; provided that the leverage ratio of the Parent and its subsidiaries after giving effect to such incurrence or refinancing does not exceed the specified maximum leverage ratio; (4) sell the Parent or all or substantially all of its assets to any entity that is not an affiliate of the Parent or merge or consolidate the Parent with or into any other entity that is not an affiliate of the Parent; (5) sell, exchange or otherwise transfer any assets or cable systems of the Parent or enter into any contract for any such purpose; and (6) under certain circumstances, pursue on behalf of the Parent any and all rights available to the Parent with respect to claims under agreements with affiliates of any of the partners. Transfer Restrictions. No limited partner may transfer all or any portion of its interest in the Parent to any third party until February 1, 2004 other than (1) with the consent of the general partner and 66 2/3% in interest of the other limited partners, which consent may be granted or denied at the sole discretion of such Partners; (2) subject to certain conditions, to a limited number of enumerated permitted transferees; or (3) in connection with the transactions described in below in "--Exit Provisions." -94- 98 The general partner may transfer all (but not less than all) of its partnership interest as a general partner to certain enumerated permitted assignees so long as such assignment or transfer (1) does not create a General Partner Change of Control, (2) will not, in the reasonable judgment of at least 66 2/3% in interest of the limited partners (other than the Bresnan Partners), cause certain events to occur with respect to the Parent or violate any franchise or other agreement or license of the Parent or any of its subsidiaries, and (3) is evidenced by documents in form and substance reasonably satisfactory to the limited partners. Exit Provisions. At any time after February 1, 2004, if TCI or Blackstone (an "Initial Partner") wishes to sell its interests in the Parent it must notify the other and deliver an investment banker's non-binding written valuation of the fair value of the Parent, at which time a negotiation period will commence. The negotiations may lead to a sale of its interests by one Initial Partner to the other Initial Partner or to a third party, a sale of all of the Parent or its assets or an IPO (as defined in the Partnership Agreement), in each case subject to compliance with numerous procedures and time constraints specified in the Partnership Agreement. Various tag along and drag along rights may also apply if an Initial Partner or the Bresnan Group wishes to exit. After February 1, 2002, TCI or Blackstone may initiate an IPO, subject to consent of the other, which consent shall not be withheld unless it would cause uncompensated adverse tax consequences, so long as such IPO (together with all distributions, including tax distributions, theretofore received by each limited partner) would reflect an implied valuation of the Parent (based on such IPO price) that would yield to the partners at least a specified annual internal rate of return based upon their actual capital contributions to the Parent. In connection with the consummation of an IPO, the Parent would be reorganized into a corporation upon terms agreed to by the partners. In connection with such reorganization, the partners would enter into a previously agreed upon shareholders agreement and registration rights agreement. Such shareholders agreement would contain, among other things, provisions relating to voting for nominees of the various shareholders for the corporation's board of directors, restrictions on transfer and "tag-along" rights for the shareholders. The registration rights agreement would provide the shareholders with demand registration rights under certain circumstances and unlimited incidental registration rights, subject to customary cut-backs. In addition, upon (1) removal of the General Partner of the Partner as general partner, (2) the death of William J. Bresnan, (3) subject to the last sentence of this paragraph, after February 1, 2007 or (4) the replacement of William J. Bresnan as CEO with a new CEO that is not a Bresnan Family Member, the General Partner of the Parent has the right to force TCI to purchase the interests in the Parent held by the Bresnan Partners at fair market value. The exercise of the put right under clause (3) above will be effective only if Blackstone does not initiate its exit rights within 30 days after such put exercise, and if Blackstone does initiate its exit rights, then any sale pursuant to the put right (but not pursuant to other exit rights) will be delayed until the earlier of the closing of Blackstone's sale pursuant to the exit provisions or Blackstone's abandonment of such exit process. Upon a sale to TCI by the Bresnan Partners, TCI will have the right to replace the General Partner of the Parent as sole general partner, subject to Blackstone's consent, which will not be unreasonably withheld. Vendor Terms Subject to various limitations, TCI has agreed, in the Partnership Agreement, to use its reasonable best efforts to make available to the Parent and its wholly-owned subsidiaries goods and services that are provided to TCI with respect to cable television systems owned and operated by TCI at the same cost and on the same terms and conditions as such goods and services are made available to TCI. -95- 99 DESCRIPTION OF THE NEW CREDIT FACILITY BTC, a wholly owned subsidiary of the Company, is the owner of the Existing Bresnan Systems and the Contributed TCI Systems pursuant to the Contribution Agreement, has obtained commitments from a consortium of financial institutions for up to $650 million in senior bank credit facilities. The $650 million commitments consist of a $150 million reducing revolving credit facility (the "Revolving Credit Facility"), a term loan of up to $328 million (the "A Term Loan" and together with the "Revolving Credit Facility", "Facility A"), and a term loan of up to $172 million ("Facility B"). The commitments under the New Credit Facility will reduce commencing with the quarter ending March 31, 2002. Facility A permanently reduces in quarterly amounts ranging from 2.5% to 6.25% of the Facility A amount starting March 31, 2002 and matures approximately eight and one half years after February 2, 1999. Facility B is also to be repaid in quarterly installments of .25% of the Facility B amount beginning in March 2002 and matures approximately nine years after February 2, 1999, on which date all remaining amounts of Facility B will be due and payable. Additional reductions of the New Credit Facility will also be required upon certain asset sales, subject to the right of BTC and its subsidiaries to reinvest asset sale proceeds under certain circumstances. The interest rate options include a LIBOR option and a Prime Rate option (as such terms are defined in the New Credit Facility) plus applicable margin rates based on BTC's total leverage ratio. In addition, BTC is required to pay a commitment fee on the unused revolver portion of Facility A which will accrue at a rate ranging from .25% to .375% per annum, depending on BTC's total leverage ratio. Though the borrowings under the New Credit Facility are generally unsecured, the Company has pledged 100% of its membership interest in BTC and BTC and its restricted subsidiaries have provided negative pledges on all of their existing and future assets, subject to certain exceptions to be agreed upon. In addition, BTC is required to pledge all future inter-company notes held by itself or any subsidiary and its equity interest in its restricted subsidiaries, in each case subject to certain exceptions. The Parent and all of the present and future restricted direct and indirect wholly owned subsidiaries of BTC guaranteed the New Credit Facility. The New Credit Facility contains financial covenants which, among other things, (1) limits the amount that BTC or BCG may borrow in the future; (2) limits the amount of debt that can be maintained by BTC; (3) requires BTC to maintain specified levels of the ratio of cash flow to future debt service; (4) requires BTC to maintain specified levels of the ratio of cash flow to interest expense; and (5) limits the amount of capital expenditures BTC may make based on its total leverage. In addition, the New Credit Facility contains covenants that provide for certain limitations on BTC, BCG and/or the Parent with respect to additional indebtedness, liens, mergers and acquisitions, restricted payments, investments, the sale, disposition or exchange of assets, certain amendments to material agreements and transactions with affiliates. In this regard, BTC is permitted to make restricted payments to pay interest and principal at stated maturity on the Notes but only so long as no Default or Event of Default (as such terms will be defined in the New Credit Facility) has occurred and is continuing or would be caused thereby. Events of Default under the New Credit Facility include nonpayment of amounts when due, bankruptcy, violation of covenants, breaches of representations, cross defaults, loss of certain licenses, certain judgments and certain changes in the ownership of the Parent or the indirect ownership interest in BTC. In addition, the New Credit Facility provides BTC with the right to request the lenders to make available to it an incremental facility of up to an additional $200 million (the "Incremental Facility"). The Incremental Facility is uncommitted and the decision of any lender to make such a commitment is in the lender's sole discretion. The terms of the Incremental Facility are unnegotiated, however, the terms of the Incremental Facility cannot be more restrictive than the terms of Facility A. The Notes are joint and several obligations of BCG and Bresnan Capital Corporation and debt service in respect of the Notes require the payment of funds from BTC to BCG, a holding company. The New Credit Facility prohibits such payments upon a Default or an Event of Default under the New Credit Facility. In addition, the lenders have a pledge of the membership interests of BTC owned by BCG. Furthermore, the holding company structure provides holders of the Notes with a claim only on the equity of BTC and the Notes are structurally subordinated to the New Credit Facility and any other debt of BCG's subsidiaries, including BTC. -96- 100 DESCRIPTION OF NOTES The Outstanding Notes were issued and the Exchange Notes will be issued under the Indenture dated as of February 2, 1999 (the "Indenture") between the Company, Bresnan Capital Corporation ("BCC," and together with the Company, the "Issuers") and State Street Bank and Trust Company, as trustee (the "Trustee"). A copy of the Indenture will be made available to holders of the Notes upon request to the Company at the address set forth under "Available Information." The form and terms of the Exchange Notes are the same in all material respects as the form and terms of the Outstanding Notes, except that the Exchange Notes will have been registered under the Securities Act of 1933 and, therefore, will not bear legends restricting the transfer thereof. The Outstanding Notes have not been registered under the Securities Act of 1933 and are subject to certain transfer restrictions. The following summary of the material provisions of the Notes, the Indenture and the Registration Rights Agreement does not purport to be complete. Where reference is made to a particular provision of the Indenture or the Registration Rights Agreement, those provisions, including the definitions of certain terms, are qualified in their entirety by reference to all of the provisions of the Indenture and Registration Rights Agreement and those terms made a part of the Indenture and the Registration Rights Agreement by the Trust Indenture Act of 1939. General The Exchange Senior Notes and the Exchange Senior Discount Notes will be issued each as a separate series of notes under the Indenture. BCC is a Wholly Owned Subsidiary of the Company, has nominal assets and does not conduct any operations. The Company is a Wholly Owned Subsidiary of Bresnan Communications Company Limited Partnership, a Michigan limited partnership (the "Parent"). For purposes of this Section, references to the "Company" shall mean Bresnan Communications Group LLC, excluding its subsidiaries. Capitalized terms used in this Section and not otherwise defined below have the respective meanings assigned to them in the Indenture. The description of the Notes set forth below is separately applicable to each of the Exchange Senior Notes and the Exchange Senior Discount Notes, except where specific references are otherwise made to the Exchange Senior Notes or the Exchange Senior Discount Notes. The Exchange Senior Notes and the Exchange Senior Discount Notes will be issued each as a separate series and will not together have any class voting or other rights. Principal of and premium and interest, if any, on the Notes will be payable at the office or agency to be maintained by the Issuers, which, unless otherwise provided by the Issuers, will be the office of the Trustee. Principal of and premium and interest payments, if any, on the Notes may be paid by check. The Notes may be presented for registration of transfer and exchange at such offices. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), as in effect on the date of the Indenture. The Notes are subject to all such terms, and holders of the Notes are referred to the Indenture and the Trust Indenture Act for a statement of those terms. The Notes will be issued in fully registered form only, without coupons, and will be issued in denominations of $1,000 and integral multiples thereof. Terms of the Notes The Notes will be joint and several senior unsecured obligations of the Issuers and will mature on February 1, 2009. The Indenture provides that the Issuers may issue Exchange Senior Notes with a maximum aggregate principal amount of up to $250.0 million and Exchange Senior Discount Notes with maximum gross proceeds of $200.0 million. The Exchange Senior Notes will initially bear interest at 8% per annum from the Original Issue Date or from the most recent date to which interest has been paid or provided for, payable semiannually on February 1 and August 1 of each year, commencing on August 1, 1999. The Exchange Senior Discount Notes will be issued at a discount to their aggregate principal amount at maturity and will accrete at a rate of approximately 9 1/4% per annum, compounded semiannually, to an aggregate principal amount of $275.0 million by February 1, 2004. Except as set forth below under "The Exchange Offer," interest will not accrue on the Exchange Senior Discount Notes prior to February 1, 2004; provided, however, that -97- 101 the Company may elect, upon not less than 60 days prior notice, to commence the accrual of interest on all outstanding Exchange Senior Discount Notes on or after February 1, 2002, in which case the outstanding principal amount at maturity of each Exchange Senior Discount Note will on such commencement date be reduced to the Accreted Value of such Exchange Senior Discount Note as of such date and interest shall be payable with respect to such Exchange Senior Discount Note on each February 1 and August 1 thereafter. Except as otherwise described in the preceding paragraph, interest on the Exchange Senior Discount Notes will accrue at the rate of 9 1/4% per annum and will be payable in cash semiannually in arrears on February 1 and August 1, commencing August 1, 2004. The record date for payment of interest will be the close of business on the January 15 or July 15 preceding the applicable interest payment date. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. The interest rate on the Notes is subject to increase in the circumstances (such additional interest being referred to as "Special Interest") described under "The Exchange Offer;." All references herein to interest on the Notes shall include such Special Interest, if appropriate. Settlement for the Notes will be made by in immediately available funds. The Notes will trade in The Depository Trust Company's Same Day Funds Settlement System until maturity, and secondary market trading activity in the Notes will therefore settle in immediately available funds. Ranking The indebtedness evidenced by the Notes will be senior unsecured obligations of the Issuers, will rank pari passu in right of payment with all existing and future senior indebtedness of the Company and will be senior in right of payment to all existing and future subordinated indebtedness of the Company. BCC has no, and the terms of the Indenture prohibit it from having any, obligations other than the Notes. As of December 31, 1998, after giving pro forma effect to the TCI Transactions and the Financings, the Company would have had no Indebtedness outstanding other than the Notes. All the operations of the Company are conducted through its subsidiaries. As a holding company, the Company has no operations and, therefore, is dependent on the cash flow of its subsidiaries and other entities to meet its own obligations, including the payment of interest and principal obligations on the Notes when due. Claims of creditors of such subsidiaries, including the lenders under the New Credit Facility, trade creditors, secured creditors and creditors holding indebtedness and guarantees issued by such subsidiaries, and claims of holders (other than the Company), if any, of Equity Interests of such subsidiaries, will have priority with respect to the assets and earnings of such subsidiaries over the claims of creditors of the Company, including holders of the Notes. The Notes, therefore, will be structurally subordinated to all liabilities of the Company's subsidiaries (other than BCC), including obligations under the New Credit Facility and obligations owing to trade creditors, and will be effectively subordinated to claims of holders (other than the Company), if any, of Preferred Equity Interests of subsidiaries of the Company. As of December 31, 1998, after giving pro forma effect to the TCI Transactions and the Financings, the total balance sheet liabilities of the Company's subsidiaries (including trade payables and accrued liabilities) would have been approximately $540.1 million, of which approximately $511.8 million would have been Indebtedness. At December 31, 1998, after giving pro forma effect to the TCI Transactions and the Financings, holders of the Notes would have been structurally or effectively subordinated to all other Indebtedness of the Company and its subsidiaries. The payment of dividends and the making of loans and advances to the Company by its Subsidiaries are subject to statutory restrictions and restrictions under the New Credit Facility. Although the Indenture limits the Incurrence of Indebtedness and Preferred Equity Interests of certain of the Company's subsidiaries, such limitations are subject to a number of significant qualifications. Furthermore, all the Indebtedness that may be Incurred under and in accordance with the terms of the Indenture may be Incurred in its entirety by the Company's subsidiaries. Moreover, the Indenture does not impose any limitation on the Incurrence by such subsidiaries of liabilities that are not considered Indebtedness under the Indenture. See "--Certain Covenants--Limitation on Indebtedness." Optional Redemption The Notes will not be redeemable prior to February 1, 2004, except as set forth below. At any time on or after February 1, 2004, and prior to maturity, the Notes will be redeemable at the option of the Issuers, in whole or in part, on not less than 30 nor more than 60 days' notice. -98- 102 The Exchange Senior Notes and the Senior Notes are redeemable at the following redemption prices (expressed as percentages of principal amount), plus accrued and unpaid interest, if any, to the date of redemption (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period commencing February 1 of the year indicated:
Redemption Year Price - ---- ----- 2004 104.000% 2005 102.667% 2006 101.333%
and thereafter, beginning February 1, 2007, at 100% of the principal amount of the Exchange Senior Notes or the Senior Notes, as applicable. The Exchange Senior Discount Notes and the Senior Discount Notes are redeemable at the following redemption prices (expressed as percentages of Accreted Value) plus accrued and unpaid interest, if any, to the date of redemption (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period commencing February 1 of the year indicated:
Redemption Year Price - ---- ----- 2004 104.625% 2005 103.083% 2006 101.542%
and thereafter, beginning February 1, 2007, at 100% of the Accreted Value of the Exchange Senior Discount Notes or the Senior Discount Notes, as applicable. In the event of redemption of fewer than all the Exchange Senior Notes and the Senior Notes or the Exchange Senior Discount Notes and the Senior Discount Notes, as the case may be, the Trustee shall select by lot or in such manner as it shall deem fair and equitable such Notes to be redeemed. On and after any redemption date, interest will cease to accrue or accrete, as applicable, on such Notes or portions thereof called for redemption unless the Issuers shall fail to redeem any such Notes. In addition, at any time or from time to time prior to February 1, 2002, the Issuers may redeem up to 35% of, in the case of the Exchange Senior Notes and Senior Notes, the aggregate principal amount or, in the case of the Exchange Senior Discount Notes and Senior Discount Notes, the aggregate principal amount at maturity, at a redemption price equal to, in the case of the Exchange Senior Notes and Senior Notes, 108.000% of the principal amount thereof or, in the case of the Exchange Senior Discount Notes and Senior Discount Notes, 109.250% of the Accreted Value thereof, in each case, plus accrued and unpaid interest, if any, to the date of redemption (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), with the net cash proceeds to the Company of one or more Equity Offerings, provided that at least 65% of the aggregate principal amount of Exchange Senior Notes and Senior Notes would remain outstanding immediately after giving effect to such redemption and at least 65% of the original aggregate principal amount at maturity of the Exchange Senior Discount Notes and Senior Discount Notes would remain outstanding immediately after giving effect to such redemption. Any such redemption shall be made within 75 days of any such Equity Offering upon not less than 30 nor more than 60 days' prior notice. Sinking Fund There will be no mandatory sinking fund payments for the Notes. -99- 103 Purchase at the Option of Holders Upon a Change of Control Upon the occurrence of a Change of Control, each holder of Notes shall have the right to require the Issuers to purchase all or any part (equal to $1,000 or an integral multiple thereof) of such holder's Notes pursuant to the offer described below (the "Change of Control Offer") at a purchase price equal to 101% of the principal amount thereof in the case of the Exchange Senior Notes and Senior Notes, and 101% of the Accreted Value thereof in the case of the Exchange Senior Discount Notes and Senior Discount Notes, in each case plus accrued and unpaid interest, if any, to the purchase date (the "Change of Control Payment"). Within 30 days following any Change of Control, the Issuers shall (i) cause a notice of the Change of Control Offer to be sent at least once to the Dow Jones News Service or similar business news service in the United States and (ii) mail a notice to each holder of Notes stating: (1) that a Change of Control has occurred and a Change of Control Offer is being made pursuant to the covenant entitled "Purchase at the Option of Holders Upon a Change of Control" and that, subject to the terms and conditions set forth herein, all Notes timely tendered will be accepted for payment; (2) the purchase price and the purchase date, which shall be, subject to any contrary requirements of applicable law, no earlier than 30 days nor later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"); (3) that any Note (or portion thereof) accepted for payment (and duly paid on the Change of Control Payment Date) pursuant to the Change of Control Offer shall cease to accrue or accrete interest, as applicable, after the Change of Control Payment Date; (4) that any Notes (or portions thereof) not tendered will continue to accrue or accrete interest, as applicable; (5) a description of the transaction or transactions constituting the Change of Control; and (6) the procedures that holders of Notes must follow in order to tender their Notes (or portions thereof) for payment and the procedures that holders of Notes must follow in order to withdraw an election to tender Notes (or portions thereof) for payment. The Issuers shall not be required to make a Change of Control Offer upon a Change of Control if a third-party makes the Change of Control Offer in a manner, at the times and otherwise in compliance with all requirements applicable to a Change of Control Offer made by the Issuers and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. Notes repurchased by either Issuer or such third-party pursuant to a Change of Control Offer shall have the status of Notes issued but not outstanding or shall be retired and canceled, at the option of the Issuers. The Issuers will comply, to the extent applicable, with the requirements of Rule 14e-1 under the Exchange Act, and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the purchase of Notes in connection with a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the provisions relating to the Change of Control Offer, the Issuers will comply with the applicable securities laws and regulations and will not be deemed to have breached their obligations described above by virtue thereof. Except as described herein with respect to a Change of Control, the Indenture does not contain any provisions that permit the holders of the Notes to require that the Issuers purchase or redeem the Notes in the event of a takeover, recapitalization or similar restructuring. The Change of Control purchase feature is the result of negotiations among the Issuers and the initial purchasers of the Outstanding Notes. Management has no present intention to engage in a transaction involving a Change of Control, although it is possible that the Company could decide to do so in the future. Subject to the limitations discussed below, the Company could, in the future, enter into certain transactions, including acquisitions, refinancings or other recapitalizations, that would not constitute a Change of Control under the Indenture, but that could increase the amount of Indebtedness outstanding at such time or otherwise affect the Company's capital structure or credit ratings. Restrictions on the ability of the Company and its Restricted Subsidiaries to Incur additional Indebtedness are contained in the covenants described under "--Certain Covenants--Limitation on Indebtedness" and "--Certain Covenants--Limitation on Liens." Such restrictions can only be waived with the consent of the registered holders of a majority in principal amount, in the case of the Exchange Senior Notes and Senior Notes, and principal amount at maturity, in the case of the Exchange Senior Discount Notes and Senior Discount Notes, then outstanding. Except for the limitations contained in such covenants, however, the Indenture will not contain any covenants or provisions that may afford holders of the Notes protection in the event of a highly leveraged transaction. There can be no assurance that the Issuers will be able to fund any purchase of the Notes upon a Change of Control. The Issuers may not have sufficient funds at the time of the Change of Control to make the Change of -100- 104 Control Offer or restrictions in the New Credit Facility may prohibit the distribution of funds from the Company's subsidiaries which may be necessary in order to make the Change of Control Offer. In addition, certain important corporate events, such as leveraged recapitalizations that would increase the level of the Company's Indebtedness, would not constitute a Change of Control. See "Risk Factors--Financing a Change of Control Offer." Book-Entry System Notes offered and sold to "qualified institutional buyers" will be issued in the form of one or more fully registered Notes in global form ("U.S. Global Notes"). Notes offered and sold outside the United States in reliance on Regulation S under the Securities Act will be issued in the form of a single note in temporary global form (the "Temporary Regulation S Note") which will not be exchangeable for an interest in a U.S. Global Note or a Regulation S Global Note (as defined below), or any other note without a legend containing restrictions on transfer, until the expiration of the "40-day restricted period" within the meaning of Rule 903(c)(3) of Regulation S under the Securities Act and then only upon certification that beneficial interests in such U.S. Global Note, Regulation S Global Note or other note are owned either by non-U.S. Persons or U.S. Persons who purchased such interests in a transaction that did not require registration under the Securities Act (the "Regulation S Certification"). The U.S. Global Notes and the Temporary Regulation S Note will be deposited upon issuance with the Trustee as custodian for the Depository Trust Company, New York, New York ("DTC") and registered in the name of Cede & Co., as DTC's nominee. Until the expiration of such 40-day restricted period under Regulation S, transfers of interests in the Temporary Regulation S Note may only be effected through the Euroclear System ("Euroclear") or Cedel S.A. ("Cedel") (as indirect participants in DTC) in accordance with the restrictions set forth in "Notice to Investors." Euroclear and Cedel will hold interests in the Temporary Regulation S Note and the Regulation S Global Note on behalf of their participants through customers' securities accounts in their respective names on the books of their respective depositories, which are Morgan Guaranty Trust Company of New York, Brussels Office, as operator of Euroclear, and Citibank, N.A., as operator of Cedel. Following the expiration of the 40-day restricted period, interests in the Temporary Regulation S Note may be exchanged for interests in a global note (the "Regulation S Global Note"), interests in the U.S. Global Note or certificated notes in the names requested by Euroclear or Cedel upon delivery by the holder thereof of the Regulation S Certification. U.S. Global Notes and Regulation S Global Notes are collectively referred to herein as "Global Securities." Upon the issuance of a Global Security, DTC or its nominee will credit the accounts of Persons holding through it with, in the case of the Exchange Senior Notes, the respective principal amounts or, in the case of the Exchange Senior Discount Notes, the respective principal amounts at maturity represented by such Global Security received by such Persons in the Exchange Offer. Such accounts shall be designated by the initial purchasers of the Outstanding Notes with respect to Notes placed by the initial purchasers for the Issuers. Ownership of beneficial interests in a Global Security will be limited to Persons that have accounts with DTC ("participants") or Persons that may hold interests through participants. Any Person acquiring an interest in a Global Security through an offshore transaction in reliance on Regulation S of the Securities Act may hold such interest through Cedel or Euroclear. Ownership of beneficial interests by participants in a Global Security will be shown on, and the transfer of that ownership interest will be effected only through, records maintained by DTC for such Global Security. Ownership of beneficial interests in such Global Security by Persons that hold through participants will be shown on, and the transfer of that ownership interest within such participant will be effected only through, records maintained by such participant. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of such securities in definitive form. Such limits and such laws may impair the ability to transfer beneficial interests in a Global Security. Payment of principal and interest on Notes represented by any such Global Security will be made to DTC or its nominee, as the case may be, as the sole registered owner and the sole holder of the Notes represented thereby for all purposes under the Indenture. None of the Issuers, the Trustee, any agent of the Issuers, or the initial purchasers of the Outstanding Notes will have any responsibility or liability for any aspect of DTC's records relating to or payments made on account of beneficial ownership interests in a Global Security representing any Notes or for maintaining, supervising, or reviewing any of DTC's records relating to such beneficial ownership interests. The Issuers have been advised by DTC that upon receipt of any payment of principal of, or interest on, any Global Security, DTC will immediately credit, on its book-entry registration and transfer system, the accounts of participants with payments in amounts proportionate to their respective beneficial interests in the principal or face amount of such Global Security as shown on the records of DTC. Payments by participants to owners of beneficial interests in a Global Security held through such participants will be governed by standing instructions and customary -101- 105 practices as is now the case with securities held for customer accounts registered in "street name" and will be the sole responsibility of such participants. A Global Security may not be transferred except as a whole by DTC or a nominee of DTC to a nominee of DTC or to DTC. A Global Security is exchangeable for certificated Notes only if (i) DTC notifies the Issuers that it is unwilling or unable to continue as a depositary for such Global Security or if at any time DTC ceases to be a clearing agency registered under the Exchange Act, (ii) the Issuers execute and deliver to the Trustee a notice that such Global Security shall be so transferable, registrable, and exchangeable, and such transfers shall be registrable or (iii) there shall have occurred and be continuing a Default or an Event of Default with respect to the Notes represented by such Global Security. Any Global Security that is exchangeable for certificated Notes pursuant to the preceding sentence will be transferred to, and registered and exchanged for, certificated Notes in authorized denominations and registered in such names as DTC or any successor depositary holding such Global Security may direct. Subject to the foregoing, a Global Security is not exchangeable, except for a Global Security of like denomination to be registered in the name of DTC or any successor depositary or its nominee. In the event that a Global Security becomes exchangeable for certificated Notes, (i) certificated Notes will be issued only in fully registered form in denominations of $1,000 or integral multiples thereof, (ii) payment of principal, any repurchase price, and interest on the certificated Notes will be payable, and the transfer of the certificated Notes will be registrable, at the office or agency of the Issuers maintained for such purposes and (iii) no service charge will be made for any registration of transfer or exchange of the certificated Notes, although the Issuers may require payment of a sum sufficient to cover any tax or governmental charge imposed in connection therewith. So long as DTC or any successor depositary for a Global Security, or any nominee, is the registered owner of such Global Security, DTC or such successor depositary or nominee, as the case may be, will be considered the sole owner or holder of the Notes represented by such Global Security for the purposes of receiving payment on the Notes, receiving notices, and for all other purposes under the Indenture and the Notes. Beneficial interests in Notes will be evidenced only by, and transfers thereof will be effected only through, records maintained by DTC or any successor depositary and its participants. Cede & Co. has been appointed as the nominee of DTC. Except as provided above, owners of beneficial interests in a Global Security will not be entitled to and will not be considered the holders thereof for any purposes under the Indenture. Accordingly, each Person owning a beneficial interest in a Global Security must rely on the procedures of DTC or any successor depositary, and, if such Person is not a participant, on the procedures of the participant through which such Person owns its interest, to exercise any rights of a holder under the Indenture. The Issuers understand that under existing industry practices, in the event that the Issuers request any action of holders or that an owner of a beneficial interest in a Global Security desires to give or take any action which a holder is entitled to give or take under the Indenture, DTC or any successor depositary would authorize the participants holding the relevant beneficial interest to give or take such action and such participants would authorize beneficial owners owning through such participants to give or take such action or would otherwise act upon the instructions of beneficial owners owning through them. DTC has advised the Issuers that DTC is a limited-purpose trust company organized under the Banking Law of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered under the Exchange Act. DTC was created to hold the securities of its participants and to facilitate the clearance and settlement of securities transactions among its participants in such securities through electronic book-entry changes in accounts of the participants, thereby eliminating the need for physical movement of securities certificates. DTC's participants include securities brokers and dealers (including the Initial Purchasers), banks, trust companies, clearing corporations, and certain other organizations some of whom (and/or their representatives) own DTC. Access to DTC's book-entry system is also available to others, such as banks, brokers, dealers, and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. Certain Covenants Set forth below are summaries of certain covenants contained in the Indenture. During any period of time that (a) the Notes have Investment Grade Ratings from both Rating Agencies and (b) no Default or Event of Default has occurred and is continuing under the Indenture, the Company and the Restricted Subsidiaries will not be subject to the provisions of the Indenture applicable to them described under "--Limitation on Indebtedness," "--Limitation on Restricted Payments," "--Limitation on Asset Dispositions," "--Limitation on Restrictions on Distributions from Restricted Subsidiaries," "--Limitation on Transactions with Affiliates," clause (x) of the second paragraph (and such clause (x) as referred to in the first paragraph) of "--Designation of Restricted and Unrestricted Subsidiaries" and clause (v) of the first paragraph of "--Merger, Consolidation and Sale of Assets" (collectively, the "Suspended -102- 106 Covenants"). In the event that the Company and the Restricted Subsidiaries are not subject to the Suspended Covenants for any period of time as a result of the preceding sentence and, subsequently, one or both of the Rating Agencies withdraws its ratings or downgrades the ratings assigned to the Notes below the required Investment Grade Ratings or a Default or Event of Default occurs and is continuing, then the Company and the Restricted Subsidiaries will thereafter again be subject to the Suspended Covenants and compliance with the Suspended Covenants with respect to Restricted Payments made after the time of such withdrawal, downgrade, Default or Event of Default will be calculated in accordance with the terms of the covenant described below under "--Limitation on Restricted Payments" as though such covenant had been in effect during the entire period of time from the Original Issue Date. Limitation on Indebtedness. The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, Incur any Indebtedness unless, after giving effect to the Incurrence on a pro forma basis (a) the Company's Leverage Ratio would not exceed 8.0 to 1.0 or (b) such Indebtedness is Permitted Indebtedness. Permitted Indebtedness is defined to include any and all of the following: (i) the Notes; (ii) Indebtedness outstanding on the Funding Date; (iii) Indebtedness under the New Credit Facility in an aggregate principal amount outstanding or available at any one time not to exceed $875.0 million, which amount shall be permanently reduced by the amount of Net Available Proceeds used to Repay Indebtedness under the New Credit Facility to the extent such Net Available Proceeds are not intended to be subsequently reinvested in replacements, improvements or additions to existing or new Properties used or usable in a Domestic Telecommunications Business or used for the permanent repayment or reduction of other Indebtedness, pursuant to the covenant described under "--Limitation on Asset Dispositions" (except at any time after the Issuers have made an Offer to Purchase in accordance with the covenant described under "--Limitation on Asset Dispositions," any Net Available Proceeds remaining after such Offer to Purchase shall only reduce such amount to the extent such remaining Net Available Proceeds are used to permanently Repay Indebtedness under the New Credit Facility); (iv) Permitted Refinancing Indebtedness Incurred in respect of Indebtedness Incurred pursuant to the provisions of clause (a) of the immediately preceding paragraph or clauses (i), (ii), (ix) and (x) of this paragraph; (v) Indebtedness of the Company owing to and held by a Restricted Subsidiary and Indebtedness of a Restricted Subsidiary owing to and held by the Company or any other Restricted Subsidiary; provided, however, that any event that results in any such Restricted Subsidiary holding such Indebtedness ceasing to be a Restricted Subsidiary, or any subsequent transfer of any such Indebtedness (except to the Company or a Restricted Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness by the issuer thereof; (vi) Indebtedness under Interest Rate Agreements entered into for the purpose of limiting risk in the ordinary course of the financial management of the Company or any of its Restricted Subsidiaries and not for speculative purposes; provided, however, that the obligations under such agreements are related to payment obligations on Indebtedness that was otherwise permitted to be Incurred by the terms of the Indenture at the time it was Incurred; (vii) Indebtedness in connection with one or more standby letters of credit or performance bonds issued in the ordinary course of business or pursuant to self-insurance obligations (including, but not limited to, workers' compensation) and, in each case, not in connection with the borrowing of money or the obtaining of advances or credit (other than the extension of credit represented by the issuance for the account of the Company or any of its Restricted Subsidiaries of such letter of credit or performance bond itself); (viii) Indebtedness not otherwise permitted hereunder in an amount outstanding at any time during the period from the beginning of the fiscal quarter during which the Original Issue Date occurred to the end of the sixth fiscal quarter after the quarter during which the Original Issue Date occurred (the "First Six Fiscal Quarters") not to exceed $35.0 million and at all times after the First Six Fiscal Quarters an amount outstanding at any time not to exceed $25.0 million, provided that any Indebtedness Incurred under this clause (viii) shall cease to be deemed Incurred or outstanding for purposes of this clause (viii) but shall be deemed Incurred for purposes of clause (a) of the first paragraph of this covenant from and after the first date on which the Company could have Incurred such Indebtedness under clause (a) of the first paragraph of this covenant without reliance upon this clause (viii); (ix) Indebtedness Incurred by the Company or any of its Restricted Subsidiaries consisting of Capitalized Lease Obligations or Purchase Money Indebtedness for Property used or to be used in connection with a Domestic Telecommunications Business, provided that (A) the aggregate principal amount of such Indebtedness (exclusive of the interest portion thereof and the reasonable costs of financing) does not exceed the lesser of the Fair Market Value or the purchase price and related costs of design, development, acquisition, construction or improvement of such Property at the time of such Incurrence and (B) the aggregate principal amount of all Indebtedness Incurred and then outstanding pursuant to this clause (ix) (together with all Permitted Refinancing Indebtedness Incurred in respect of Indebtedness previously Incurred pursuant to this clause (ix)) does not exceed $25.0 million; (x) Acquired Indebtedness, provided that after giving effect to the underlying acquisition, merger or consolidation, either (A) the Company would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Leverage Ratio referred to in clause (a) of the first paragraph of this covenant or (B) such Leverage Ratio is no greater immediately following such acquisition, merger or consolidation than the Leverage Ratio immediately prior to such acquisition, merger or consolidation; (xi) other Indebtedness in -103- 107 an amount not greater than twice the aggregate amount of cash Equity Interest Sale Proceeds, provided that such Equity Interest Sale Proceeds have not, in the discretion of the Company, been treated as Equity Interest Sale Proceeds for purposes of clause (c)(ii) in the first paragraph of the covenant described under "--Limitation on Restricted Payments" and, provided further that such Indebtedness shall have been Incurred at substantially the same time as such cash Equity Interest Sale Proceeds were received; and (xii) Indebtedness arising from agreements providing for indemnification or adjustment of purchase price or from guarantees securing any obligations of the Company or any Restricted Subsidiary pursuant to such agreements, Incurred or assumed in connection with the disposition of any Property or Restricted Subsidiary of the Company, other than guarantees or similar credit support by the Company or any Restricted Subsidiary of Indebtedness incurred by any Person acquiring all or any portion of such Property or Restricted Subsidiary for the purpose of financing such acquisition, provided that the maximum aggregate liability in respect of all such Indebtedness permitted pursuant to this clause (xii) shall at no time exceed the net proceeds actually received from the sale of such Property or Restricted Subsidiary. For purposes of determining compliance with this covenant, (i) in the event that an item of Indebtedness (including Indebtedness issued to banks or other lenders) meets the criteria of more than one of the categories of Indebtedness described above (including clause (a) of the first paragraph of this covenant), the Company, in its sole discretion, will classify such item of Indebtedness as of the time of the Incurrence thereof (subject to the proviso in clause (viii) of the preceding paragraph) and will only be required to include the amount and type of such Permitted Indebtedness in one of the above clauses and (ii) an item of Indebtedness (including Indebtedness issued to banks or other lenders) may be divided and classified in more than one of the types of Indebtedness described above. The accrual of interest, accretion of Accreted Value and payment of interest in the form of additional subordinated Indebtedness will not be deemed to be an Incurrence of Indebtedness for purposes of this covenant. Limitation on Restricted Payments. The Company shall not make, and shall not permit any Restricted Subsidiary to make, any Restricted Payment if at the time of, and after giving effect to, such proposed Restricted Payment, (a) a Default or Event of Default shall have occurred and be continuing, (b) the Company could not Incur at least $1.00 of additional Indebtedness pursuant to clause (a) of the first paragraph of "--Limitation on Indebtedness" or (c) the aggregate amount of such Restricted Payment and (subject to the second succeeding paragraph) all other Restricted Payments made since the Issue Date (the amount of any Restricted Payment, if made other than in cash, to be based upon Fair Market Value) would exceed an amount equal to the sum of (i) the result of (A) Cumulative EBITDA minus (B) the product of 1.2 and Cumulative Interest Expense, plus (ii) Equity Interest Sale Proceeds, plus (iii) the amount by which Indebtedness of the Company (other than subordinated Indebtedness) or any Restricted Subsidiary is reduced on the Company's consolidated balance sheet upon the conversion or exchange (other than by a Subsidiary of the Company) subsequent to the Original Issue Date of any Indebtedness of the Company or any Restricted Subsidiary convertible or exchangeable for Equity Interests (other than Disqualified Equity Interests) in the Company (less the amount of any cash or other Property distributed by the Company or any Restricted Subsidiary upon conversion or exchange), plus (iv) an amount equal to the deemed net reduction in Investments made by the Company and its Restricted Subsidiaries subsequent to the Original Issue Date in any Person resulting from (A) dividends, repayment of loans or advances, or other transfers or distributions of Property (unless such transfers or distributions are otherwise included in the calculation of EBITDA for purposes of clause (c)(i)(A) above), in each case to the Company or any Restricted Subsidiary from any Person or (B) the redesignation of any Unrestricted Subsidiary as a Restricted Subsidiary, not to exceed, in the case of (A) or (B), the amount of such Investments previously made by the Company and its Restricted Subsidiaries in such Person or such Unrestricted Subsidiary, as the case may be, which were treated as Restricted Payments. Notwithstanding the foregoing limitation, the Company or any Restricted Subsidiary (as the case may be) may (a) pay dividends on or make distributions in respect of Equity Interests in the Company within 60 days of the declaration thereof if, on the declaration date, such dividends or distributions could have been paid in compliance with the foregoing limitation; (b) redeem, repurchase, defease, acquire or retire for value, any Indebtedness subordinate (whether pursuant to its terms or by operation of law) in right of payment to the Notes with the proceeds of or in exchange for any Permitted Refinancing Indebtedness; (c) acquire, redeem or retire Equity Interests in the Company or Indebtedness of the Company subordinate (whether pursuant to its terms or by operation of law) in right of payment to the Notes in exchange for, or in connection with a substantially concurrent issuance (other than to a Subsidiary of the Company or an employee stock ownership plan or trust established by the Company or any such Subsidiary for the benefit of their employees) of, Equity Interests in the Company (other than Disqualified Equity Interests) or in exchange for cash contributions to the equity capital of the Company; (d) with respect to any taxable year or portion thereof that the Company is a Pass-Through Entity, pay any dividend or other distribution on Equity Interests in the Company in an amount not to exceed the aggregate amount necessary to permit each Relevant Taxpayer to pay the Tax Liability of such Relevant Taxpayer with respect to such taxable year; (e) pay any dividend -104- 108 or other distribution on Equity Interests in the Company or make loans to the Parent, in each case to allow BCI Management L.P. To acquire, redeem or retire Equity Interests in the Company held directly or indirectly by a present or former employee of the Company or any Restricted Subsidiary (or such employee's estate, as the case may be) upon such employee's death, disability, retirement or termination of employment with the Company and any Restricted Subsidiary in an aggregate amount not to exceed $5.0 million per year (the "Base Amount"), provided that, to the extent not all the Base Amount is utilized to pay dividends in such year, the unused portion of such Base Amount may be carried forward to and be deemed part of the Base Amount for the immediately subsequent year, provided further that the Base Amount may not exceed $10.0 million in any year; (f) make Investments in Persons (including Unrestricted Subsidiaries) the primary businesses of which are Cable Businesses, Cable Programming Businesses or Related Businesses (other than Investments in Equity Interests in the Company or Tele-Communications, Inc.) in an aggregate amount (based on the amount actually invested) for all such Investments made pursuant to this clause (f) not to exceed the sum of (i) $20.0 million, (ii) an amount equal to the deemed net reduction in Investments made by the Company and its Restricted Subsidiaries subsequent to the Original Issue Date in any Person resulting from payment of dividends, repayment of loans or advances, or other transfers or distributions of Property to the Company or any Restricted Subsidiary from any Person (but only to the extent such net reduction has not been utilized to increase the amount of Restricted Payments permissible pursuant to clauses (c)(i) or (c)(iv) in the immediately preceding paragraph), and not to exceed, in the case of this clause (f)(ii), the amount of such Investments previously made by the Company and its Restricted Subsidiaries in such Person which were made in reliance on this clause (f) and (iii) Equity Interest Sale Proceeds to the extent such Proceeds have not, in the discretion of the Company, been treated as Equity Interest Sale Proceeds for purposes of clause (c)(ii) in the immediately preceding paragraph; (g) pay dividends to the Parent, the proceeds of which are or will be used to pay, or reimburse the Parent for the payment of, management fees and monitoring fees of the Parent pursuant to and in amounts provided for in the Partnership Agreement, provided that such management fees may be increased on an annual basis to up to 5.0% of consolidated gross revenues of the Company to the extent necessary to cover the pro-rata reimbursement of operating expenses (including pro-rata amounts of salaries of Company Employees and overhead expenses) attributable to the Company, provided further that if at the time of such dividend a Default or an Event of Default shall have occurred and be continuing (or would result therefrom) such dividend shall be limited to an amount not to exceed the portion of the management fees that represents a pro-rata reimbursement of operating expenses attributable to the Company; (h) declare and pay scheduled dividends (not constituting a return on capital) to holders of any Disqualified Equity Interests of the Company or any of its Restricted Subsidiaries subject to and Incurred in accordance with the covenant described under "--Limitation on Indebtedness;" (i) make Investments with Excluded Contributions, provided that such Excluded Contribution was received by the Company at substantially the same time as such Investment was made; (j) make Investments in connection with the AT&T Joint Venture in an aggregate amount not to exceed the lesser of 66 2/3% of the amount of any cash equity contributions made by AT&T or its Affiliates (other than the Company and its Affiliates) in the AT&T Joint Venture and $25.0 million; (k) to the extent Investments in connection with the AT&T Joint Venture are made with Excluded Contributions in accordance with clause (i) of this paragraph, make additional Investments in the AT&T Joint Venture in an aggregate amount not to exceed the lesser of 50% of the amount of such Excluded Contributions and $20.0 million, provided that each such additional Investment is made at substantially the same time as such Investment pursuant to clause (i) of this paragraph was made, provided further that such Investment shall not be made at the same time or substantially the same time as the Company makes a distribution (other than a Tax Distribution) with respect to its Equity Interests; (l) acquire Equity Interests of any Person who beneficially owns, directly or indirectly, 50% or more of the total voting power of the Voting Equity Interests of the Company for the sole purpose of contributing the acquired Equity Interests to the Company's 401(k) Plan, provided that the contribution of the acquired Equity Interests is in the ordinary course and in lieu of cash contributions the Company would otherwise make to its 401(k) Plan; and (m) make other Restricted Payments in an aggregate amount not to exceed $15.0 million. Any payments made pursuant to clauses (b), (c), (d), (g), (h), (i), (k) and (l) of the immediately preceding paragraph shall be excluded from the calculation of the aggregate amount of Restricted Payments made after the Original Issue Date; provided, however, that the proceeds from the issuance of Equity Interests pursuant to clause (c) of the immediately preceding paragraph shall not constitute Equity Interest Sale Proceeds to the extent such proceeds are used in the manner set forth in such clause (c) for purposes of clause (c)(ii) of the first paragraph of this covenant. Limitation on Liens. The Company shall not, and shall not permit any Restricted Subsidiary that has Guaranteed (a) any Indebtedness of the Company or (b) any Indebtedness of a Restricted Subsidiary that has Guaranteed any Indebtedness of the Company to, directly or indirectly, Incur or suffer to exist, any Lien (other than Permitted Liens) upon any of its Property, whether now owned or hereafter acquired, or any interest therein or any income or profits therefrom, unless it has made or will make effective provision whereby the Notes will be secured -105- 109 by such Lien equally and ratably with all other Indebtedness of the Company or such Restricted Subsidiary secured by such Lien for so long as any such other Indebtedness of the Company or such Restricted Subsidiary shall be so secured; provided, however, that no Lien may be granted with respect to Indebtedness of the Company that is subordinated to the Notes. Limitation on Restrictions on Distributions from Restricted Subsidiaries. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective, or enter into any agreement with any Person that would cause to become effective, any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to (a) pay dividends, in cash or otherwise, or make any other distributions on or in respect of its Equity Interests, or pay any Indebtedness or other obligation owed, to the Company or any other Restricted Subsidiary, (b) make any loans or advances to the Company or any other Restricted Subsidiary or (c) transfer any of its Property to the Company or any other Restricted Subsidiary. Such limitation will not apply (1) with respect to clauses (a), (b) and (c), to encumbrances and restrictions (i) in existence on the Original Issue Date under or by reason of any agreements in effect on the Original Issue Date, including under the Indenture and the Notes, (ii) in existence under or by reason of the New Credit Facility, provided that such restrictions or encumbrances are no less favorable to the holders of the Notes than those restrictions or encumbrances pursuant to the New Credit Facility as in effect on the Funding Date and as described in this Prospectus; provided further, however, that the provisions of the New Credit Facility permit distributions to the Company for the purpose of, and in an amount sufficient to fund, the payment of principal due at Stated Maturity and interest in respect of the Notes (provided, in either case, that such payment is due or to become due within 30 days from the date of such distribution) at a time when there does not exist an event which after notice or passage of time or both would permit the lenders under the New Credit Facility to declare all amounts thereunder due and payable; (iii) relating to Indebtedness of a Restricted Subsidiary and existing at such Restricted Subsidiary at the time it became a Restricted Subsidiary if either (A) such encumbrance or restriction was not created in connection with or in anticipation of the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Company or a Restricted Subsidiary or (B) such encumbrance or restriction was created in connection with the refinancing of preexisting Indebtedness in connection with or in anticipation of the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Company or a Restricted Subsidiary, and the new Indebtedness satisfies the requirements of "--Certain Definitions--Permitted Refinancing Indebtedness," and such encumbrance or restriction relates only to the Property previously subject to an encumbrance or restriction under the preexisting Indebtedness and such encumbrance or restriction is no more restrictive than was its predecessor, (iv) which result from the renewal, refinancing, extension or amendment of an agreement referred to in clauses (1)(i), (ii) and (iii) above and in clauses (2)(i) and (ii) below, provided such encumbrance or restriction is no more restrictive to such Restricted Subsidiary and is not materially less favorable to the holders of Notes than those under or pursuant to the agreement so renewed, refinanced, extended or amended, and (v) customary encumbrances or restrictions on distributions of cash or other deposits or customary net worth maintenance covenants imposed by customers under contracts entered into in the ordinary course of business, and (2) with respect to clause (c) only, to (i) any encumbrance or restriction relating to Indebtedness that is permitted to be Incurred and secured pursuant to the provisions under "--Limitation on Indebtedness" and "--Limitation on Liens" that limits the right of the debtor to dispose of the Property securing such Indebtedness, (ii) any encumbrance or restriction in connection with an acquisition of Property, so long as such encumbrance or restriction relates solely to the Property so acquired (and any improvements thereto) and was not created in connection with or in anticipation of such acquisition, (iii) customary provisions restricting subletting or assignment of leases and customary provisions in other agreements that restrict assignment of such agreements or rights thereunder, (iv) customary restrictions contained in asset sale agreements limiting the transfer of such assets pending the closing of such sale or (v) customary restrictions contained in cable television franchise agreements limiting the transfer of the franchises granted thereby. Limitation on Issuances of Guarantees by Restricted Subsidiaries. The Company will not permit any Restricted Subsidiary, directly or indirectly, to Guarantee any Indebtedness of the Company which is pari passu with or subordinate in right of payment to the Notes ("Guaranteed Indebtedness"), unless (i) such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture to the Indenture providing for a Guarantee (a "Subsidiary Guarantee") of payment of the Notes by such Restricted Subsidiary and (ii) until one year after all the Notes have been paid in full in cash, such Restricted Subsidiary waives and will not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Company or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Subsidiary Guarantee, provided that this paragraph shall not be applicable to any Guarantee of any Restricted Subsidiary that (a) existed at the time such Person became a Restricted Subsidiary and was not Incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary or (b) guarantees the payment of any -106- 110 principal, interest, penalties, fees, indemnification obligations, reimbursement obligations (including, without limitation, reimbursement obligations with respect to letters of credit and banker's acceptances), damages or other liabilities of the Company or any Restricted Subsidiary under the New Credit Facility. If the Guaranteed Indebtedness is (A) pari passu with, or subordinated to, the Subsidiary Guarantee or (B) subordinated to the Notes, then the Guarantee of such Guaranteed Indebtedness shall be subordinated to the Subsidiary Guarantee at least to the extent that the Guaranteed Indebtedness is subordinated to the Notes. Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted Subsidiary may provide by its terms that it shall be automatically and unconditionally released and discharged upon (i) any sale, exchange or transfer, to any Person not an Affiliate of the Company, of all of the Company's and each Restricted Subsidiary's Equity Interests in, or all or substantially all the assets of, such Restricted Subsidiary (which sale, exchange or transfer is not prohibited by the Indenture) or (ii) the release or discharge of the Guarantee which resulted in the creation of such Subsidiary Guarantee, except a discharge or release by or as a result of payment under such Guarantee. Limitation on Asset Dispositions. The Company may not, and may not permit any Restricted Subsidiary to, make any Asset Disposition unless: (i) the Company or the Restricted Subsidiary, as the case may be, receives consideration for such disposition at least equal to the Fair Market Value of the Property sold or disposed of as determined by the Governing Authority in good faith and evidenced by a Resolution filed with the Trustee; (ii) (A) at least 75% of the consideration for such disposition consists of (1) cash or Temporary Cash Investments, (2) the assumption of Indebtedness of the Company or any Restricted Subsidiary (other than Indebtedness that is subordinated to the Notes) and release of the Company and all Restricted Subsidiaries from all liability on the Indebtedness assumed or (3) any notes, obligations or other securities received by the Company or such Restricted Subsidiary from such transferee that are converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received) within 180 days following the closing of such Asset Disposition or (B) the consideration paid to the Company or such Restricted Subsidiary is in the form of Property (including franchises and licenses required to own or operate such Property) which is determined in good faith by the Governing Authority, as evidenced by a Resolution, to be used or usable in a Domestic Telecommunications Business; and (iii) the Company delivers an Officers' Certificate to the Trustee certifying that such Asset Disposition complies with the foregoing clauses (i) and (ii). The Net Available Proceeds (or any portion thereof) from Asset Dispositions may be applied by the Company or a Restricted Subsidiary, to the extent the Company or such Restricted Subsidiary elects (or is required by the terms of any Indebtedness): (1) to the permanent repayment or reduction of Indebtedness of the Company (other than subordinated Indebtedness) or a Restricted Subsidiary then outstanding (other than Indebtedness owed to the Company or any Affiliate of the Company); or (2) to reinvest in replacements, improvements or additions to existing or new Properties (including franchises and licenses required to own or operate such Properties) used or usable in a Domestic Telecommunications Business (including by means of an investment by a Restricted Subsidiary with Net Available Proceeds received by the Company or another Restricted Subsidiary). Pending the final application of any such Net Available Proceeds, the Company or such Restricted Subsidiary may temporarily reduce Indebtedness under a revolving credit facility, if any, or otherwise invest such Net Available Proceeds in Temporary Cash Investments. Any Net Available Proceeds from an Asset Disposition not applied in accordance with the preceding paragraph within 365 days from the date of the receipt of such Net Available Proceeds shall constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company will be required to make an Offer to Purchase with such Excess Proceeds on a pro-rata basis according to principal amount (or, in the case of Indebtedness issued at a discount, the then-Accreted Value) for (x) outstanding Notes at a price in cash equal to, in the case of the Senior Notes, 100% of the principal amount thereof and, in the case of the Senior Discount Notes, 100% of the Accreted Value thereof on the purchase date plus, in each case, accrued and unpaid interest, if any, thereon (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date) in accordance with the procedures (including prorating in the event of oversubscription) set forth in the Indenture and (y) any other Indebtedness of the Company that is pari passu with the Notes, at a price no greater than 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the purchase date (or 100% of the then-Accreted Value plus accrued and unpaid interest, if any, to the purchase date in the case of original issue discount Indebtedness), to the extent, in the case of this clause (y), required under the terms thereof (other than Indebtedness owed to the Company or any Affiliate of the Company). Any remaining Excess Proceeds may be applied to any use as determined by the Company which is not otherwise prohibited by the Indenture, and the amount of Excess Proceeds shall be reset to zero. -107- 111 Limitation on Transactions with Affiliates. The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, conduct any business or enter into or suffer to exist any transaction or series of transactions (including the purchase, sale, transfer, lease or exchange of any Property, the rendering of any service or the modification, renewal or extension of any existing agreement with Affiliates of the Company) with, or for the benefit of, any Affiliate of the Company (an "Affiliate Transaction") unless the terms of such Affiliate Transaction are (a) (i) with respect to an Affiliate Transaction involving, or reasonably expected to involve, aggregate payments or value in excess of $1.0 million, set forth in writing, and (ii) no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could be obtained at the time of such Affiliate Transaction for a similar transaction in arms-length dealings with a Person who is not such an Affiliate, (b) with respect to an Affiliate Transaction involving, or reasonably expected to involve, aggregate payments or value in excess of $10.0 million, the Governing Authority approves such Affiliate Transaction and, in its good faith judgment, believes that such Affiliate Transaction complies with clause (a)(ii) of this paragraph as evidenced by a Resolution and (c) with respect to an Affiliate Transaction involving, or reasonably expected to involve, aggregate payments in excess of $50.0 million, the Company obtains an opinion letter from an Independent Appraiser to the effect that the consideration to be paid or received in connection with such Affiliate Transaction is fair, from a financial point of view to the Company and its Restricted Subsidiaries. Notwithstanding the foregoing limitation, the Company or any of its Restricted Subsidiaries may enter into or suffer to exist the following: (i) any transaction pursuant to any contract in existence on the Funding Date or any renewal, amendment, extension or replacement of such contract on terms that are in the aggregate no less favorable to the Company and its Restricted Subsidiaries, including contracts for the acquisition of cable television programming and equipment; provided that as this clause (i) relates to the Partnership Agreement, the Contribution Agreement, the New Supply Agreement, the Advertising Arrangement, the TCID Note and the Assumed TCI Debt, each such agreement, note or debt in existence on the Funding Date shall be on terms that are no less favorable to the Company and its Restricted Subsidiaries than as are contemplated (including any changes to such terms) in this Prospectus, provided further that any material amendment, modification or replacement or successor agreements to the New Supply Agreement shall have been approved by the Governing Authority and a majority of the disinterested limited partners of the Parent; (ii) any Restricted Payment made in accordance with "--Limitation on Restricted Payments" or any Permitted Investment; (iii) any transaction or series of transactions between the Company and one or more of its Restricted Subsidiaries or between two or more of its Restricted Subsidiaries; (iv) the payment of reasonable compensation (including amounts or Equity Interests (other than Disqualified Equity Interests) paid pursuant to employee benefit plans) for the personal services of officers, directors and employees of the Company or any of its Restricted Subsidiaries; (v) loans and advances to Company Employees (such loans to be made either directly to such Company Employees or through the Parent, the General Partner, Bresnan Communications, Inc. or BCI Management, L.P.) or loans to BCI Management, L.P. (directly or indirectly through the Parent, the General Partner or Bresnan Communications, Inc.) to allow BCI Management, L.P. To acquire, redeem or retire Equity Interests in BCI Management, L.P. held by Company Employees (or such Company Employee's estate, as the case may be) upon such employee's death, disability, retirement or termination of employment, provided that such loans and advances do not exceed $5.0 million at any one time outstanding; (vi) customary indemnification payments to members of the Governing Body or officers of the Company, any Restricted Subsidiary, the Parent, the General Partner or BCI Management L.P. For liabilities incurred in connection with the rendering of services to the Company; and (vii) issuances of Equity Interests in the Company (other than Disqualified Equity Interests or Preferred Equity Interests) in connection with capital contributions. References, directly or indirectly, to any Person in the foregoing list of transactions is not intended to imply and should not be construed as implying that any such Person is an Affiliate of the Company. Designation of Restricted and Unrestricted Subsidiaries. The Governing Authority may designate any Subsidiary of the Company to be an Unrestricted Subsidiary if (a) the Subsidiary to be so designated does not own any Equity Interests or Indebtedness of, or own or hold any Lien on any Property of, the Company or any other Restricted Subsidiary and (b) either (i) the Subsidiary to be so designated has total assets of $1,000 or less, (ii) the portion (proportionate to the Company's Equity Interests in such Subsidiary) of the Fair Market Value of such Subsidiary at the time of such designation would be permitted as, and shall be deemed to constitute, an Investment pursuant to the covenant described under "--Limitation on Restricted Payments," or (iii) such designation is effective immediately upon such entity becoming a Subsidiary of the Company. Unless so designated as an Unrestricted Subsidiary, any Person that becomes a Subsidiary of the Company will be classified as a Restricted Subsidiary; provided, however, that such Subsidiary shall not be designated a Restricted Subsidiary and shall be automatically classified as an Unrestricted Subsidiary if either of the requirements set forth in clauses (x) and (y) of the immediately following paragraph will not be satisfied after giving pro forma effect to such classification. Except as -108- 112 provided in the first sentence of this paragraph, no Restricted Subsidiary may be redesignated as an Unrestricted Subsidiary. The Indenture further provides that neither the Company nor any Restricted Subsidiary shall at any time be directly or indirectly liable for any Indebtedness that provides that the holder thereof may (with the passage of time or notice or both) declare a default thereon or cause the payment thereof to be accelerated or payable prior to its Stated Maturity upon the occurrence of a default with respect to any Indebtedness, Lien or other obligation of any Unrestricted Subsidiary (including any right to take enforcement action against such Unrestricted Subsidiary). Upon designation of a Restricted Subsidiary as an Unrestricted Subsidiary in compliance with this covenant, such Restricted Subsidiary shall, by execution and delivery of a supplemental indenture in form satisfactory to the Trustee, be released from any Guarantee previously made by such Restricted Subsidiary. The Governing Authority may designate any Unrestricted Subsidiary to be a Restricted Subsidiary if, immediately after giving pro forma effect to such designation, (x) the Company could Incur at least $1.00 of additional Indebtedness pursuant to clause (a) of the first paragraph of the covenant described under "--Limitation on Indebtedness" or the Company's Leverage Ratio would be no greater immediately following such designation than the Company's Leverage Ratio immediately preceding such designation and (y) no Default or Event of Default shall have occurred and be continuing or would result therefrom. In the case of the redesignation of an Unrestricted Subsidiary (which was previously a Restricted Subsidiary) as a Restricted Subsidiary, the Company shall be deemed to have a continuing "Investment" in an Unrestricted Subsidiary equal to the amount (if positive) equal to (x) the Company's "Investment" in such Unrestricted Subsidiary at the time of such redesignation less (y) the portion (proportionate to the Company's Equity Interests in such Unrestricted Subsidiary) of the Fair Market Value of the net assets of such Unrestricted Subsidiary at the time of such redesignation. Any such designation or redesignation by the Governing Authority will be evidenced to the Trustee by filing with the Trustee a Resolution giving effect to such designation or redesignation and an Officers' Certificate (a) certifying that such designation or redesignation complies with the foregoing provisions and (b) giving the effective date of such designation or redesignation, such filing with the Trustee to occur within 75 days after the end of the fiscal quarter of the Company in which such designation or redesignation is made (or, in the case of a designation or redesignation made during the last fiscal quarter of the Company's fiscal year, within 120 days after the end of such fiscal year). The Company shall at all times cause each of BCC and Bresnan Telecommunications Company LLC to be a direct Wholly Owned Subsidiary. Limitation on Conduct of Business of BCC. BCC shall not conduct any business or other activities, own any Property, enter into agreements or Incur any Indebtedness or other liabilities, other than in connection with serving as an Issuer and obligor with respect to the Notes. Merger, Consolidation and Sale of Assets. Neither of the Issuers may consolidate with or merge with or into any other Person (other than a merger of a Restricted Subsidiary (other than BCC) into the Company), or convey, sell, transfer, lease or otherwise dispose of all or substantially all of its Property (in one transaction or a series of related transactions), unless: (i) such Issuer shall be the surviving Person (the "Surviving Person"), or the Surviving Person (if other than such Issuer) formed by such consolidation or into which such Issuer is merged or to which the Property of such Issuer is transferred shall be, in the case of BCC, a corporation, or in any other case, a corporation, partnership or trust, organized and existing under the laws of the United States or any State thereof or the District of Columbia; (ii) the Surviving Person (if other than such Issuer) shall expressly assume, by supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all of the obligations of such Issuer under the Notes and the Indenture, and the obligations under the Indenture shall remain in full force and effect; (iii) in the case of a sale, transfer, assignment, lease, conveyance or other disposition of all or substantially all of an Issuer's Property, such Property shall have been transferred as an entirety or virtually as an entirety to one or more Persons, provided that all such transferees shall have jointly and severally assumed, as the Surviving Person, the obligations of such Issuer pursuant to clause (ii); (iv) immediately before and immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; and (v) immediately after giving effect to such transaction on a pro forma basis (including, any Indebtedness Incurred or anticipated to be Incurred in connection with such transaction or series of transactions), (A) the Surviving Person would be able to Incur at least $1.00 of additional Indebtedness pursuant to clause (a) of the first paragraph of "--Limitation on Indebtedness" or (B) the Leverage Ratio for the Surviving Person would be no greater immediately following such transaction than the Company's Leverage Ratio immediately preceding such transaction. -109- 113 In connection with any consolidation, merger or transfer contemplated by this provision, the Issuers shall deliver, or cause to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and the supplemental indenture in respect thereof comply with this provision and that all conditions precedent herein provided for relating to such transaction or transactions have been complied with. After any such consolidation, merger or transfer (other than a lease of all or substantially all of an Issuer's Property) effected in compliance with the terms of the Indenture, references to such Issuer shall mean the Surviving Person and shall not mean the Person who was previously the Issuer. SEC Reports Notwithstanding that the Issuers may not be required to remain subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file with the Commission (but only if the Commission accepts such filings) and provide the Trustee and holders of the Notes with such annual reports and such information, documents and other reports as are specified in Sections 13 and 15(d) of the Exchange Act and applicable to a U.S. corporation subject to such sections, such information, documents and other reports to be so filed and provided at the times specified for the filing of such information, documents and reports under such sections. Notwithstanding the foregoing, such reporting requirements shall be deemed satisfied (x) prior to April 10, 1999, if the Company delivers to the Trustee and the holders of the Notes on or prior to such date copies of the audited consolidated financial statements of the Company for the three-year period ended December 31, 1998 and (y) prior to May 20, 1999, by filing with the Commission and delivering to the Trustee and the holders of the Notes on or prior to such date a registration statement under the Securities Act that contains the information that would be required in a Form 10-K for the Company for the year ended December 31, 1998 and a Form 10-Q for the Company for the quarter ended March 31, 1999 and any Form 8-K required under Section 13 or 15(d) of the Exchange Act. Events of Default The following events are defined in the Indenture as "Events of Default": (i) the Issuers fail to make the payment of any principal or Accreted Value, as applicable, of, or premium, if any, on the Notes when the same becomes due and payable at maturity, upon acceleration, redemption, mandatory repurchase or declaration, or otherwise; (ii) the Issuers fail to make the payment of any interest on the Notes when the same becomes due and payable, and such failure continues for a period of 30 days; (iii) either Issuer fails to comply with the covenant described under "--Certain Covenants--Merger, Consolidation and Sale of Assets;" (iv) either Issuer fails to comply with any other covenant applicable to it in the Notes or Indenture and such failure continues for 60 days after written notice specifying the default (and demanding that such default be remedied) from the Trustee or the registered holders of not less than 25% in aggregate principal amount, in the case of the Exchange Senior Notes and Senior Notes, and aggregate principal amount at maturity, in the case of the Exchange Senior Discount Notes and Senior Discount Notes, then outstanding; (v) a default under any Indebtedness by the Company or any Restricted Subsidiary which results in acceleration of the maturity of such Indebtedness, or the failure to pay any such Indebtedness at final maturity (giving effect to any applicable grace periods), in an amount aggregating $15.0 million or more (the "cross acceleration provisions"); (vi) any judgment or judgments for the payment of money (other than judgments which are covered by enforceable insurance policies issued by solvent carriers) in an aggregate amount in excess of $15.0 million shall be rendered against the Company or any Restricted Subsidiary and shall not be waived, satisfied or discharged for any period of 60 consecutive days during which a stay of enforcement shall not be in effect (the "judgment default provisions") and (vii) certain events involving bankruptcy, insolvency or reorganization of either of the Issuers or any Significant Subsidiary of the Company (the "bankruptcy provisions"). The Indenture provides that the Trustee may withhold notice to the holders of the Notes of any default (except in payment of principal or Accreted Value, as applicable, or premium, if any, or interest on such Notes) if the Trustee considers it to be in the best interest of the holders of the Notes to do so. The Indenture provides that if an Event of Default with respect to the Notes (other than an Event of Default resulting from certain events of bankruptcy, insolvency or reorganization with respect to the Company) shall have occurred and be continuing, the Trustee or the registered holders of not less than 25% in aggregate principal amount, in the case of the Exchange Senior Notes and Senior Notes, and aggregate principal amount at maturity, in the case of the Exchange Senior Discount Notes and Senior Discount Notes, then outstanding may declare to be immediately due and payable the principal amount or Accreted Value, as applicable, of the Notes of such series then outstanding, plus accrued but unpaid interest to the date of acceleration by written notice to the Issuers specifying the relevant Event of Default and that the written notice constitutes a "notice of acceleration"; provided, however, that after such acceleration but before a judgment or decree based on acceleration is obtained by the Trustee, the registered holders -110- 114 of a majority in aggregate principal amount, in the case of the Exchange Senior Notes and Senior Notes, and aggregate principal amount at maturity, in the case of the Exchange Senior Discount Notes and Senior Discount Notes, then outstanding may, under certain circumstances, rescind and annul such acceleration if all Events of Default, other than the nonpayment of accelerated principal or Accreted Value, as applicable, premium or interest, have been cured or waived as provided in the Indenture. In case an Event of Default resulting from certain events of bankruptcy, insolvency or reorganization with respect to the Company shall occur, such amount with respect to all of the Notes shall be due and payable immediately without any declaration or other act on the part of the Trustee or the holders of the Notes. The registered holders of a majority in principal amount, in the case of the Exchange Senior Notes and Senior Notes, and aggregate principal amount at maturity, in the case of the Exchange Senior Discount Notes and Senior Discount Notes, then outstanding shall have the right to waive any existing Default or Event of Default with respect to such series of Notes or compliance with any provision of the Indenture or such series of Notes and to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, subject to certain limitations specified in the Indenture. No holder of the Notes will have any right to institute any proceeding with respect to the Indenture or for any remedy thereunder, unless such holder shall have previously given to the Trustee written notice of a continuing Event of Default and unless also the registered holders of at least 25% in aggregate principal amount, in the case of the Exchange Senior Notes and Senior Notes, and aggregate principal amount at maturity, in the case of the Exchange Senior Discount Notes and Senior Discount Notes, then outstanding shall have made written request and offered reasonable indemnity to the Trustee to institute such proceeding as a trustee, and unless the Trustee shall not have received from the registered holders of a majority in aggregate principal amount, in the case of the Exchange Senior Notes and Senior Notes, and aggregate principal amount at maturity, in the case of the Exchange Senior Discount Notes and Senior Discount Notes, then outstanding a direction inconsistent with such request and shall have failed to institute such proceeding within 60 days. However, such limitations do not apply to a suit instituted by a holder of a Note for enforcement of payment of the principal or Accreted Value, as applicable, of and premium, if any, or interest on such Note on or after the respective due dates expressed in such Note. Amendments and Waivers Subject to certain exceptions, the Indenture may be amended with respect to the Notes of a series with the consent of the registered holders of a majority in principal amount, in the case of the Exchange Senior Notes and Senior Notes, and aggregate principal amount at maturity, in the case of the Exchange Senior Discount Notes and Senior Discount Notes, of the Notes of such series then outstanding affected by such amendment (including consents obtained in connection with a tender offer or exchange for the Notes) and any past default or compliance with any provisions may also be waived in respect of any series (except a default in the payment of principal, Accreted Value, premium or interest and certain covenants which cannot be amended without the consent of each holder of an outstanding Note of a series) with the consent of the registered holders of a majority in aggregate principal amount, in the case of the Exchange Senior Notes and Senior Notes, and aggregate principal amount at maturity, in the case of the Exchange Senior Discount Notes and Senior Discount Notes, of the Notes of such series then outstanding. However, without the consent of each holder of an outstanding Note of any series affected, no amendment may, among other things, (i) reduce the amount of Notes of any series whose holders must consent to an amendment or waiver, (ii) reduce the rate of or extend the time for payment of interest on any Note, (iii) reduce the principal or Accreted Value, as applicable, of or extend the Stated Maturity of any Note, (iv) make any Note payable in money other than that stated in the Note, (v) impair the right of any holder of the Notes to receive payment of principal or Accreted Value, as applicable, of and interest on such holder's Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such holder's Notes, (vi) subordinate in right of payment, or otherwise subordinate, the Notes to any other obligation of either Issuer, (vii) make any change in the amendment provisions that require each holder's consent or in the waiver provisions, (viii) reduce the premium payable upon the redemption of any Note or change the time at which any Note may or shall be redeemed as described under "--Optional Redemption," (ix) reduce the premium payable upon a Change of Control or, at any time after a Change of Control has occurred, change the time at which the Change of Control Offer relating thereto must be made or at which the Notes must be repurchased pursuant thereto, (x) at any time after the Company is obligated to make an Offer to Purchase with the Excess Proceeds from Asset Dispositions, change the time at which such Offer to Purchase must be made or at which the Notes must be repurchased pursuant thereto, (xi) modify any provision of the Indenture relating to the calculation of Accreted Value, (xii) modify any provision of the Indenture relating to the Escrowed Funds or the Special Mandatory Redemption or (xiii) release either of the Issuers from its respective -111- 115 obligations under the Indenture (other than pursuant to "--Certain Covenants--Merger, Consolidation and Sale of Assets"). Without the consent of any holder of the Notes, the Issuers and the Trustee may amend the Indenture (i) to cure any ambiguity, omission, defect or inconsistency, (ii) to provide for the assumption by a successor Person of the respective obligations of the Issuers or any Restricted Subsidiary under the Indenture or any Subsidiary Guarantee, (iii) to provide for uncertificated Notes in addition to or in place of certificated Notes (provided that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Internal Revenue Code, or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Internal Revenue Code), (iv) to add Guarantees with respect to the Notes of any series or to reflect the release pursuant to the terms of the Indenture of a Restricted Subsidiary from its obligations with respect to its Subsidiary Guarantee, (v) to secure the Notes of any series, (vi) to add to the covenants of the Issuers for the benefit of the holders of the Notes of any series or to surrender any right or power conferred upon the Issuers, (vii) to make any change that does not adversely affect the rights of any holder of the Notes of any series or (viii) to comply with any requirement of the Commission in connection with the qualification of the Indenture under the Trust Indenture Act. The consent of the holders of the Notes is not necessary under the Indenture to approve the particular form of any proposed amendment. It is sufficient if such consent approves the substance of the proposed amendment. After an amendment under the Indenture becomes effective, the Issuers are required to mail to each registered holder of the Notes at such holder's address appearing in the security register a notice briefly describing such amendment. However, the failure to give such notice to all holders of the Notes, or any defect therein, will not impair or affect the validity of the amendment. Defeasance The Issuers at any time may terminate all of their and any Restricted Subsidiaries' respective obligations under the Notes and the Indenture ("legal defeasance"), except for certain obligations, including those respecting the defeasance trust and obligations to register the transfer or exchange of the Notes, to replace mutilated, destroyed, lost or stolen Notes and to maintain a registrar and paying agent in respect of the Notes. The Issuers at any time may terminate their and any Restricted Subsidiaries' obligations under the covenants described under "--Certain Covenants" (other than the covenant described under "--Certain Covenants--Merger, Consolidation and Sale of Assets"), the operation of the cross acceleration provisions, the bankruptcy provisions with respect to Significant Subsidiaries and the judgment default provision described under "--Events of Default" and the limitations contained in clause (v) under the first paragraph of "--Certain Covenants--Merger, Consolidation and Sale of Assets" ("covenant defeasance"). The Issuers may exercise their legal defeasance option notwithstanding their prior exercise of their covenant defeasance option. If the Issuers exercise their legal defeasance option, payment of the Notes may not be accelerated because of an Event of Default with respect thereto. If the Issuers exercise their covenant defeasance option, payment of the Notes may not be accelerated because of an Event of Default specified in clause (iv), (v), (vi) or (vii) (with respect only to Significant Subsidiaries) under "--Events of Default" or because of the failure of the Company to comply with clause (v) under the first paragraph of "--Certain Covenants--Merger, Consolidation and Sale of Assets." In order to exercise either defeasance option, the Issuers must irrevocably deposit in trust (the "defeasance trust") with the Trustee money or U.S. Government Obligations for the payment of principal or Accreted Value, as applicable, of and interest on the Notes to maturity or an earlier redemption in accordance with the terms of the Indenture and must comply with certain other conditions, including delivery to the Trustee of an Opinion of Counsel to the effect that holders of the Notes will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit and defeasance and will be subject to Federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred (and, in the case of legal defeasance only, such Opinion of Counsel must be based on a ruling of the Internal Revenue Service or other change in applicable Federal income tax law). -112- 116 Certain Definitions Set forth below is a summary of certain of the defined terms used in the Indenture. Reference is made to the Indenture for the full definition of all such terms as well as any other capitalized terms used herein for which no definition is provided. "Accreted Value" of any outstanding Exchange Senior Discount Note or Senior Discount Note as of or to any date of determination prior to February 1, 2004, or of any other Indebtedness issued at a price less than the principal amount at stated maturity, means, as of any date of determination, an amount equal to the sum of (a) the issue price of such Exchange Senior Discount Note or Senior Discount Note or Indebtedness, as applicable, as determined in accordance with Section 1273 of the Internal Revenue Code or any successor provisions (which, in the case of the Exchange Senior Discount Notes or Senior Discount Notes, will be $636.44 per $1,000 principal amount at maturity of the Exchange Senior Discount Notes or Senior Discount Notes) plus (b) the aggregate of the portions of the original issue discount (the excess of the amounts considered as part of the "stated redemption price at maturity" of such Exchange Senior Discount Note or Senior Discount Note or Indebtedness, as applicable, within the meaning of Section 1273(a)(2) of the Internal Revenue Code or any successor provisions, whether denominated as principal or interest, over the issue price of such Exchange Senior Discount Note or Senior Discount Note or Indebtedness, as applicable) that shall theretofore have accrued pursuant to Section 1272 of the Internal Revenue Code (without regard to Section 1272(a)(7) of the Internal Revenue Code) from the date of issue of such Exchange Senior Discount Note or Senior Discount Note or Indebtedness, as applicable, to the date of determination (which amount, in the case of the Exchange Senior Discount Notes or Senior Discount Notes, shall be amortized on a daily basis and compounded semiannually on each February 1 and August 1 at a rate of 9 1/4% per annum from the Original Issue Date through the date of determination on the basis of a 360-day year of twelve 30-day months), minus all amounts theretofore paid in respect of such Exchange Senior Discount Note or Senior Discount Note or Indebtedness, as applicable, within the meaning of Section 1273(a)(2) of the Internal Revenue Code or any successor provisions (whether such amounts paid were denominated principal or interest). The Accreted Value of any outstanding Exchange Senior Discount Note or Senior Discount Note on or after February 1, 2004 will mean the principal amount at maturity of such Exchange Senior Discount Note or Senior Discount Note. Notwithstanding the foregoing, if the Company elects to pay interest on the Exchange Senior Discount Notes or Senior Discount Notes on or after February 1, 2002 and prior to February 1, 2004, the Notes shall cease to accrete, and the Accreted Value and the principal amount at maturity of such Exchange Senior Discount Note or Senior Discount Note shall be the Accreted Value on the date of commencement of such accrual as calculated in accordance with the first sentence of this definition. "Acquired Indebtedness" means Indebtedness of a Person (i) existing at the time such Person becomes a Restricted Subsidiary of the Company or (ii) assumed in connection with the acquisition of assets (or from merger or consolidation with or into) such Person, in each case, other than Indebtedness Incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary or such acquisition, as the case may be, provided that Indebtedness of such Person which is redeemed, defeased, retired or otherwise repaid at the time of, or substantially contemporaneously with, the consummation of the transactions by which such Person becomes a Restricted Subsidiary or such asset acquisition shall not constitute Acquired Indebtedness. "Affiliate" of any specified Person means (i) any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person or (ii) any individual who is a director or officer (a) of such specified Person, (b) of any Subsidiary of such specified Person or (c) of any Person described in clause (i) above. For the purposes of this definition, "control" when used with respect to any 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. For the purposes of the section described under "--Certain Covenants--Limitation on Transactions with Affiliates," "Affiliate" shall also mean (x) any beneficial owner of interests representing 10% or more of the total voting power of the then outstanding Voting Equity Interests (on a fully diluted basis) of the Company and (y) any Person who would be an Affiliate pursuant to the first sentence hereof of any such beneficial owner of interests representing 10% or more of the total voting power of the then outstanding Voting Equity Interests of the Company. "Annualized EBITDA" means, with respect to any Person, the product of such Person's EBITDA for the latest fiscal quarter for which financial statements are available multiplied by four. -113- 117 "Asset Disposition" means any transfer, conveyance, sale, lease, issuance or other disposition by the Company or any Restricted Subsidiary in one or more related transactions (including a consolidation or merger or other sale of any such Restricted Subsidiary with, into or to another Person in a transaction in which such Restricted Subsidiary ceases to be a Restricted Subsidiary of the Company, but excluding a disposition by a Restricted Subsidiary to the Company or a Restricted Subsidiary or by the Company to a Restricted Subsidiary) of (i) Equity Interests of a Restricted Subsidiary, (ii) substantially of all the assets of the Company or any Restricted Subsidiary representing a division or line of business or (iii) other Property of the Company or any Restricted Subsidiary outside of the ordinary course of business (excluding any transfer, conveyance, sale, lease or other disposition of equipment that is obsolete or no longer used by or useful to the Company, provided that the Company has delivered to the Trustee an Officers' Certificate stating that such criteria are satisfied). The following shall not be Asset Dispositions: (i) when used with respect to the Company, any Asset Disposition permitted pursuant to "Mergers, Consolidations and Certain Sales of Assets" which constitutes a disposition of all or substantially all of the assets of the Company and the Restricted Subsidiaries taken as a whole or any disposition that constitutes a Change of Control pursuant to the Indenture, (ii) any disposition that constitutes a Restricted Payment permitted by the covenant described under "Certain Covenants--Limitation on Restricted Payments" or a Permitted Investment, (iii) a disposition of Temporary Cash Investments and (iv) any disposition of assets in one or more related transactions with an aggregate Fair Market Value of less than $1.0 million. "AT&T Joint Venture" means the joint venture to be entered into between the Company or a Restricted Subsidiary and AT&T Corp. or an Affiliate thereof relating to the use of the Company's cable television systems in connection with the provision of telephony services by the joint venture, as further described under "Prospectus Summary--Recent Events" in this Prospectus. "Attributable Indebtedness" means Indebtedness deemed to be Incurred in respect of a Sale and Leaseback Transaction and shall be, at the date of determination, the present value (discounted at the actual rate of interest implicit in such transaction, compounded annually), of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale and Leaseback Transaction (including any period for which such lease has been extended). "Average Life" means, as of the date of determination, with respect to any Indebtedness or Preferred Equity Interest, the quotient obtained by dividing (i) the sum of the products of the numbers of years (rounded to the nearest one-twelfth of one year) from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Preferred Equity Interest multiplied by the amount of such payment by (ii) the sum of all such payments. "Bresnan Family Member" means William J. Bresnan, his spouse and descendants (including spouses of his descendants), any trust established solely for the benefit of any of the foregoing individuals, or any partnership or other entity at least 80% owned or controlled directly or indirectly by any of the foregoing persons. "Cable Business" means the ownership, development, operation and/or acquisition of cable television systems. "Cable Programming Business" means the ownership, development or provision of cable television programming. "Capitalized Lease Obligations" means Indebtedness represented by obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP and the amount of such Indebtedness shall be the capitalized amount of such obligations determined in accordance with GAAP. "Cash Equivalents" means investments in time deposits, certificates of deposit or money market deposits maturing within 90 days of the date of acquisition thereof, entitled to U.S. federal deposit insurance for the full amount thereof or issued by a bank or trust company which is organized under the laws of the United States of America or any state thereof having capital in excess of $500 million; provided that no such investment shall mature later than the Assumed Redemption Date. "Change of Control" means (i) at any time prior to the first Public Equity Offering that results in a Public Market, the occurrence of any of the following events: -114- 118 (A) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act or any successor provisions to either of the foregoing), including any group acting for the purpose of acquiring, holding, voting or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act, other than any one or more of the Permitted Holders, is (including as a result of consolidation or merger, sale, transfer, lease conveyance or other disposition of assets, or otherwise) the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% or more of the total voting power of the Voting Equity Interests of the General Partner at any time that the Permitted Holders are the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, in the aggregate of less than 50% of the total voting power of the Voting Equity Interests of the Company (for purposes of this clause (A), such person or group shall be deemed to beneficially own any Voting Equity Interests of an entity (the "specified entity") held by any other entity (the "parent entity") so long as such person or group beneficially owns, directly or indirectly, in the aggregate a majority of the total Equity Interests of such parent entity); or (B) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act or any successor provisions to either of the foregoing), including any group acting for the purpose of acquiring, holding, voting or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act, other than any one or more of the Permitted Holders, is (including as a result of consolidation or merger, sale, transfer, lease conveyance or other disposition of assets, or otherwise) the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of more than 50% of the total voting power of the Voting Equity Interests of the Company (for purposes of this clause (B), such person or group shall be deemed to beneficially own any Voting Equity Interests of an entity (the "specified entity") held by any other entity (the "parent entity") so long as such person or group beneficially owns, directly or indirectly, in the aggregate a majority of the total Equity Interests of such parent entity); or (C) the holders of the Equity Interests of the Company shall have approved any plan of liquidation or dissolution of the Company (other than in connection with a reorganization effected for the sole purpose of facilitating a Public Equity Offering that is consummated within 30 days of such approval); and (ii) on or after the first Public Equity Offering that results in a Public Market, the occurrence of any of the following events: (A) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act or any successor provisions to either of the foregoing), including any group acting for the purpose of acquiring, holding, voting or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act, other than any one or more of the Permitted Holders, is (including as a result of consolidation or merger, sale, transfer, lease conveyance or other disposition of assets, or otherwise) the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 35% or more of the total voting Power of the Voting Equity Interests of the Company at any time that the Permitted Holders are the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, in the aggregate of a lesser percentage of the total voting power of the Voting Equity Interests of the Company than such other person or group (for purposes of this clause (A), such person or group shall be deemed to beneficially own any Voting Equity Interests of an entity (the "specified entity") held by any other entity (the "parent entity") so long as such person or group beneficially owns, directly or indirectly, in the aggregate a majority of the total Equity Interests of such parent entity); or (B) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election or appointment by the Board of Directors or whose nomination for election by the holders of the Voting Equity Interests of the Company was approved by a vote of a majority of the members then still in office who were either members at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of the Company then in office; or (C) the holders of the Equity Interests of the Company shall have approved any plan of liquidation or dissolution of the Company. -115- 119 "Company Employee" means an employee of the Parent, the General Partner, Bresnan Communications, Inc. or BCI Management, L.P., who, for the twelve-month period immediately preceding or following the date of determination, has spent or is reasonably expected in good faith to spend a substantial amount of his or her working time performing management or administrative services for the Company. "Consolidated Interest Expense" means, for any Person (or in the case of the Company, the Company and its Restricted Subsidiaries), for any period, the amount of interest in respect of Indebtedness (including amortization of original issue discount, fees payable in connection with financing, including commitment, availability and similar fees (but excluding amortization of deferred financing fees related to the Financings), non-cash interest payments on any Indebtedness and the interest portion of any deferred payment obligation and after taking into account the effect of elections made under, and the net costs associated with, any Interest Rate Agreement, however denominated, with respect to such Indebtedness), the amount of Redeemable Dividends in respect of Equity Interests meeting the requirements of "--Disqualified Equity Interests" in such Person, the amount of Preferred Equity Interest dividends in respect of all Preferred Equity Interests in Subsidiaries of such Person held by Persons other than such Person or a Restricted Subsidiary of such Person equal to the quotient of such dividend divided by the difference between one and the maximum statutory federal income tax rate (expressed as a decimal number between 1 and 0) then applicable to the issuer of such Preferred Equity Interest, commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing, and the interest component of rentals in respect of any Capitalized Lease Obligation or Sale and Leaseback Transaction paid, accrued or scheduled to be paid or accrued by such Person during such period, determined on a consolidated basis in accordance with GAAP. For purposes of this definition, interest on a Capitalized Lease Obligation or a Sale and Leaseback Transaction shall be deemed to accrue at an interest rate reasonably determined by such Person to be the rate of interest implicit in such Capitalized Lease Obligation or Sale and Leaseback Transaction in accordance with GAAP consistently applied. "Consolidated Net Income" of a Person means for any period, the net income (loss) of such Person and its Subsidiaries determined in accordance with GAAP; provided, however, that there shall not be included in such Consolidated Net Income (i) with respect to the Company, any net income (loss) of any Person if such Person is not a Restricted Subsidiary, except that (a) subject to the limitations contained in (iv) below, the Company's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution to a Restricted Subsidiary, to the limitations contained in clause (iii) below) and (b) the Company's equity in a net loss of any such Person (other than an Unrestricted Subsidiary) for such period shall be included in determining such Consolidated Net Income, (ii) any net income (loss) of any Person acquired by such Person or a Subsidiary of such Person in a pooling of interests transaction for any period prior to the date of such acquisition, (iii) with respect to the Company, any net income (loss) of any Restricted Subsidiary if such Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company, except that (a) subject to the limitations contained in (iv) below, the Company's equity in the net income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash that could have been distributed by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a dividend (subject, in the case of a dividend to another Restricted Subsidiary, to the limitation contained in this clause) and (b) the Company's equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income, (iv) any net after-tax gain (or loss) realized upon the sale or other disposition of any property, plant or equipment of such Person or its consolidated Subsidiaries (including pursuant to any Sale and Leaseback Transaction) which is not sold or otherwise disposed of in the ordinary course of business and any gain (or loss) realized upon the sale or other disposition of any Equity Interests in any Person, (v) any net after-tax extraordinary gain or loss, (vi) the net after-tax cumulative effect of a change in accounting principles and (vii) for purposes of calculating the Leverage Ratio only, any net after-tax income (or loss) from discontinued operations. "Contribution Agreement" means the Contribution Agreement, dated as of June 3, 1998, as amended prior to the Original Issue Date, by and among Blackstone Cable Acquisition Company, LLC, the Parent and certain of its affiliates (including William J. Bresnan), TCID of Michigan, Inc., and certain affiliates of Tele-Communications, Inc. "Cumulative EBITDA" means at any date of determination the aggregate amount of EBITDA of the Company during the period (treated as one accounting period) from the beginning of the first full fiscal quarter following the fiscal quarter during which the Funding Date occurs to the end of the most recent fiscal quarter ending prior to the date of determination for which financial statements are available or required or, if such aggregate -116- 120 EBITDA for such period is negative, the amount (expressed as a negative number) by which such cumulative EBITDA is less than zero. "Cumulative Interest Expense" means at any date of determination the aggregate amount of Consolidated Interest Expense paid, accrued or scheduled to be paid or accrued by the Company and its Restricted Subsidiaries during the period (treated as one accounting period) from the beginning of the first full fiscal quarter following the fiscal quarter during which the Funding Date occurs to the end of the most recent fiscal quarter ending prior to the date of determination for which financial statements are available or required determined on a consolidated basis in accordance with GAAP. "Default" means any event which is, or after notice or the passage of time or both would be, an Event of Default. "Disqualified Equity Interest" means, with respect to any Person, any Equity Interest that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or otherwise (a)(i) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (ii) is redeemable at the option of the holder thereof, in whole or in part, or (iii) is or may become convertible or exchangeable at the option of the holder for Indebtedness and (b) as to which the maturity, mandatory redemption, conversion or exchange or redemption at the option of the holder thereof occurs, or may occur, on or prior to the Stated Maturity of the Notes; provided, however, that Equity Interests in such Person that would not otherwise be characterized as Disqualified Equity Interests under this definition shall not constitute Disqualified Equity Interests if (A) such Equity Interests are convertible or exchangeable into Indebtedness solely at the option of such Person or (B) such Equity Interests would be Disqualified Equity Interests solely because such Equity Interests require such Person to make an offer to purchase such Equity Interests upon the occurrence of certain events and such Equity Interests expressly provide that such offer may not be satisfied until all the Notes have been paid in full. "Domestic Telecommunications Business" means (i) a Person actively engaged in, or assets constituting plant, property or equipment used in the operation of, a Cable Business, (ii) a Person actively engaged in a Cable Programming Business or (iii) a Person actively engaged in, or assets which comprise, a Related Business the services of which are offered in connection with the operation, or utilizing the facilities, of a cable television system; provided that each such Cable Business, Cable Programming Business or Related Business is located in the United States. "EBITDA" means, for any Person, for any period, an amount equal to (A) the sum of (i) Consolidated Net Income for such period, plus, to the extent deducted in the calculation of Consolidated Net Income, (ii) the provision for taxes for such period based on income or profits and any provision for taxes utilized in computing net loss under clause (i) hereof, plus (iii) Consolidated Interest Expense for such period, plus (iv) depreciation for such period on a consolidated basis, plus (v) amortization of intangibles for such period on a consolidated basis, plus (vi) any other non-cash items reducing Consolidated Net Income for such period, plus (vii) any fees and expenses directly related to an offering of the Equity Interests of such Person, Permitted Investments, acquisitions or recapitalizations (in the case of the Company, including the recapitalization pursuant to the terms of the Contribution Agreement) or Indebtedness, in each case, otherwise permitted under the Indenture, minus (B) all non-cash items increasing Consolidated Net Income for such period, all for such Person and its Subsidiaries determined in accordance with GAAP consistently applied, except that with respect to the Company, each of the foregoing items shall be determined on a consolidated basis with respect to the Company and its Restricted Subsidiaries only. "Equity Interest Sale Proceeds" means the sum of (a) the aggregate Net Cash Proceeds received by the Company from (i) the issue or sale (other than to a Subsidiary of the Company or an employee ownership plan or trust established by the Company or any Subsidiary of the Company) by the Company of any class of its Equity Interests (other than Disqualified Equity Interests) on or after the Original Issue Date or (ii) contributions to the equity capital of the Company on or after the Original Issue Date which do not themselves constitute Disqualified Equity Interests and (b) the Fair Market Value, as determined by an Independent Appraiser with experience underwriting debt and/or equity securities for operators of Domestic Telecommunications Businesses, of any Domestic Telecommunications Business contributed to the Company by Tele-Communications, Inc. or its Affiliates in exchange in whole or in part for Equity Interests (other than Disqualified Equity Interests) in the Company on or after the Original Issue Date. "Equity Interests" means, with respect to any Person, any and all shares or other equivalents (however designated) of corporate stock, partnership interests or any other participation, right, warrants, options or other -117- 121 interest (whether or not currently exercisable) in the nature of an interest in equity in such Person (including Preferred Equity Interests, but excluding any debt security convertible or exchangeable into such equity interest), entitling the holders thereof (together with the holders of all other interests of the same class) to a pro rata share of any dividend or distribution, or a pro rata participation in any other allocation, of the profits of such Person. "Equity Offering" means a public or private offering by the Company or a Person that owns all the outstanding Equity Interests of the Company for cash of its Equity Interests (other than Disqualified Equity Interests). "Event of Default" has the meaning set forth under "--Events of Default." "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Excluded Contributions" means the aggregate Net Cash Proceeds received by the Company after the Original Issue Date from (a) contributions to the equity capital of the Company (which do not themselves constitute Disqualified Equity Interests) for the purpose of making an Investment in accordance with clauses (i) and (k) of the second paragraph of the covenant described under "--Limitation on Restricted Payments" and (b) the sale (other than to a Subsidiary of the Company or an employee stock ownership plan or trust established by the Company or any such Subsidiary for the benefit of their employees) of Equity Interests (other than Disqualified Equity Interests) of the Company, in each case designated as Excluded Contributions pursuant to an Officers' Certificate executed by an Officer of the Company, the cash proceeds of which are excluded from the calculation set forth in clause (c) of the first paragraph under "--Limitation on Restricted Payments." "Fair Market Value" means with respect to any Property, the price which could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair Market Value will be determined, except as otherwise provided, (i) if such Property has a Fair Market Value of less than $5.0 million, by any Officer of the Company or (ii) if such Property has a Fair Market Value equal to or in excess of $5.0 million, by a majority of the Governing Authority and evidenced by a Resolution, dated within 30 days of the relevant transaction, of the Governing Authority delivered to the Trustee. "GAAP" means United States generally accepted accounting principles as in effect in the United States on the Original Issue Date. "General Partner" means the Person acting as the managing general partner of the Parent. "Governing Authority" means, with respect to the Company, the General Partner (subject to the approval of the limited partners of the Parent, when and as provided in the Partnership Agreement), the advisory committee, the executive committee, management committee, board of directors or similar governing body of the Company, or any authorized committee thereof, in any such case, with the authority to manage the business and affairs of the Company. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any Person and any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Hedging Obligation" of any Person means any obligation of such Person pursuant to any Interest Rate Agreement, foreign exchange contract, currency swap agreement, currency option or any other similar agreement or arrangement. "Incur" means, with respect to any Indebtedness or other obligation of any Person, to create, issue, incur (by merger, conversion, exchange or otherwise), extend, assume, Guarantee or become liable in respect of such Indebtedness or other obligation or the recording, as required pursuant to GAAP or otherwise, of any such Indebtedness or obligation on the balance sheet of such Person (and "Incurrence", "Incurred", "Incurrable" and -118- 122 "Incurring" shall have meanings correlative to the foregoing); provided, however, that a change in GAAP that results in an obligation of such Person that exists at such time, and is not theretofore classified as Indebtedness, becoming Indebtedness shall not be deemed an Incurrence of such Indebtedness; provided further, that solely for purposes of determining compliance with "Certain Covenants--Limitation on Indebtedness", amortization of debt discount shall not be deemed to be the Incurrence of Indebtedness. "Indebtedness" means (without duplication), with respect to any Person, any indebtedness, secured or unsecured, contingent or otherwise, which is for borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof), or evidenced by bonds, notes, debentures or similar instruments or representing the balance deferred and unpaid of the purchase price of any Property (excluding any balances that constitute subscriber advance payments and deposits, accounts payable or trade payables, and other accrued liabilities arising in the ordinary course of business) if and to the extent any of the foregoing indebtedness would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, and shall also include, to the extent not otherwise included (i) any Capitalized Lease Obligations, (ii) Indebtedness of other Persons secured by a Lien to which the Property owned or held by such first-named Person is subject, whether or not the obligation or obligations secured thereby shall have been assumed (the amount of such Indebtedness being deemed to be the lesser of the value of such Property or the amount of the Indebtedness so secured), (iii) Guarantees of Indebtedness of other Persons, (iv) any Disqualified Equity Interests, (v) any Attributable Indebtedness, (vi) all obligations of such Person in respect of letters of credit, bankers' acceptances or other similar instruments or credit transactions (including reimbursement obligations with respect thereto), other than obligations with respect to letters of credit securing obligations (other than obligations entered into in connection with the borrowing of money or the obtaining of advances or credit (other than the extension of credit represented by the issuance for the account of the Company or any of its Restricted Subsidiaries of such letter of credit itself)) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the third business day following receipt by such Person of a demand for reimbursement following payment on the letter of credit, (vii) Preferred Equity Interests (owned other than by such Person) in its Restricted Subsidiaries and (viii) any payment obligations of any such Person at the time of determination under any Hedging Obligation. For purposes of this definition, the maximum fixed repurchase price of any Disqualified Equity Interest that does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Equity Interest as if such Disqualified Equity Interest were repurchased on any date on which Indebtedness shall be required to be determined pursuant to the Indenture; provided, however, that if such Disqualified Equity Interest is not then permitted to be repurchased, the repurchase price shall be the book value of such Disqualified Equity Interest. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability of any contingent obligations in respect thereof at such date. In the case of Indebtedness sold at a discount, the amount of such Indebtedness shall at all times be the Accreted Value of such Indebtedness at the date of determination as determined in conformity with GAAP. For purposes of this definition, the amount of the payment obligation with respect to any Hedging Obligation shall be an amount equal to (i) zero, if such obligation is an Interest Rate Agreement permitted pursuant to clause (vi) of the second paragraph of "--Certain Covenants--Limitation on Indebtedness" or (ii) the amount appearing as a liability under GAAP in respect of such Hedging Obligation, if such Hedging Obligation is not an Interest Rate Agreement so permitted. Notwithstanding the foregoing, Indebtedness shall not include any interest or accrued interest. "Independent Appraiser" means an investment banking firm of national standing or any third party appraiser of national standing; provided, however, that such firm or appraiser is not an Affiliate of the Company or Tele-Communications, Inc. "Interest Rate Agreement" means, for any Person, any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedging agreement or other similar agreement. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended. "Investment" by any Person means any direct or indirect loan or advance (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of such Person) or other extension of credit or capital contribution (by means of transfers of cash or other Property to others or payments for Property or services for the account or use of others, or otherwise) to, or Incurrence of a Guarantee of any obligation of, or purchase or acquisition of Equity Interests, bonds, notes, debentures or other securities or evidence of Indebtedness issued by, any other Person. In determining the amount of any Investment made by transfer of any Property other than cash, such Property shall be valued at its Fair Market Value at the time of such Investment. -119- 123 "Investment Grade Rating" means a rating equal to or higher than Baa3 (or the equivalent) by Moody's and BBB- (or the equivalent) by S&P. "Letter of Credit" means an irrevocable documentary letter of credit from an issuing bank of nationally recognized standing (whose debt is rated "A" or higher according to the Rating Agencies) expiring on June 1, 1999, which names the Trustee as the beneficiary thereof and which shall be presentable for payment at any time by the Trustee, provided that the only condition to payment thereunder shall be a certification signed by the Trustee stating one of the following: (i) the Trustee will use the amount drawn to fund a portion of the aggregate Mandatory Redemption Price, (ii) a Remedies Trigger Event (as defined in the Escrow Agreement) has occurred or (iii) the Special Mandatory Redemption has not taken place as of the date of the certification and the Letter of Credit will expire within 10 business days of such date. "Leverage Ratio" means the ratio of (i) the outstanding Indebtedness of a Person and its Restricted Subsidiaries to (ii) the Annualized EBITDA of such Person and its Restricted Subsidiaries. For purposes of computing the Company's Leverage Ratio, if (a) since the beginning of the relevant period, the Company or any Restricted Subsidiary shall have made any Asset Disposition or an Investment (by merger or otherwise) in any Restricted Subsidiary (or any Person that becomes a Restricted Subsidiary) or an acquisition of Property which constitutes all or substantially all of an operating unit of a business (including cable television systems) or shall have Incurred or Repaid any Indebtedness or shall have classified in accordance with GAAP any operations as discontinued, (b) the transaction giving rise to the need to calculate the Leverage Ratio is such an Asset Disposition, Investment, acquisition, Incurrence or Repayment of Indebtedness or discontinuation of operations or (c) since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made such an Asset Disposition, Investment or acquisition, Incurrence or Repayment of Indebtedness or discontinuation of operations, the Leverage Ratio for such period shall be calculated after giving pro forma effect to such Asset Sale, Investment, acquisition, Incurrence or Repayment of Indebtedness or discontinuation of operations as if such Asset Disposition, Investment, acquisition, Incurrence or Repayment of Indebtedness or discontinuation of operations occurred on the first day of such period. Any such pro forma calculation may include adjustments in the reasonable determination of the Company as quantified and set forth in an Officers' Certificate, to (i) reflect identified operating expense reductions reasonably expected to result from any acquisition or (ii) eliminate the effect of any extraordinary accounting event with respect to any acquired Person on Consolidated Net Income. "Lien" means with respect to any Property of any Person, any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, security interest, lien, charge, easement (other than any easement not materially impairing usefulness or marketability), encumbrance, preference, priority, or other security agreement or preferential arrangement of any kind or nature whatsoever on or with respect to such Property (including any Capitalized Lease Obligation, conditional sale or other title retention agreement having substantially the same economic effect as any of the foregoing or any Sale and Leaseback Transaction), provided that in no event shall an operating lease that is not a Capitalized Lease Obligation or Sale and Leaseback Transaction be deemed to constitute a Lien. "Moody's" means Moody's Investors Service, Inc. or any successor to the rating agency business thereof. "Net Available Proceeds" from any Asset Disposition by any Person means cash or cash equivalents received (including amounts received by way of sale or discounting of any note, installment receivable or other receivable, but excluding any other consideration received in the form of assumption by the acquiror of Indebtedness or other obligations relating to such Property) therefrom by such Person, net of (i) all legal, title and recording taxes, expenses and commissions and other fees and expenses (including appraisals, brokerage commissions and investment banking fees) Incurred and all federal, state, provincial, foreign and local taxes required to be accrued as a liability as a consequence of such Asset Disposition, (ii) all payments made by such Person or its Subsidiaries on any Indebtedness which is secured by such Property in accordance with the terms of any Lien upon or with respect to such Property or which must by the terms of such Lien, or in order to obtain a necessary consent to such Asset Disposition or by applicable law, be repaid out of the proceeds from such Asset Disposition, (iii) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures of such Person as a result of such Asset Disposition and (iv) appropriate amounts to be provided by such Person or any Subsidiary thereof, as the case may be, as a reserve in accordance with generally accepted accounting principles against any -120- 124 liabilities associated with such Property and retained by such Person or any Subsidiary thereof, as the case may be, after such Asset Disposition, including liabilities under any indemnification obligations and severance and other employee termination costs associated with such Asset Disposition, in each case as determined by the governing body of such Person, in its reasonable good faith judgment evidenced by a resolution of such governing body filed with the Trustee; provided, however, that any reduction in such reserve within twelve months following the consummation of such Asset Disposition will be, for all purposes of the Indenture and the Notes, treated as a new Asset Disposition at the time of such reduction with Net Available Proceeds equal to the amount of such reduction; provided further, however, that, in the event that any consideration for a transaction (which would otherwise constitute Net Available Proceeds) is required to be held in escrow pending determination of whether a purchase price adjustment will be made, at such time as such portion of the consideration is released to such Person or its Restricted Subsidiary from escrow, such portion shall be treated for all purposes of the Indenture and the Notes as a new Asset Disposition at the time of such release from escrow with Net Available Proceeds equal to the amount of such portion of consideration released from escrow. "Net Cash Proceeds" with respect to any issuance or sale of Equity Interests, means the aggregate cash or Temporary Cash Investments received as proceeds of such issuance or sale, net of attorney's fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "New Credit Facility" means the Loan Agreement dated February 2, 1999 by and among Bresnan Telecommunications Company LLC, as borrower, and the lenders from time to time party thereto, including any collateral documents, instruments and agreements executed in connection therewith, substantially on terms as described in this Prospectus under "Description of the New Credit Facility." The term "New Credit Facility" shall also include any amendments, supplements, modifications, extensions, renewals, restatements or refundings thereof with another credit facility and any credit facilities that replace, refund or refinance any part of the loans, other credit facilities or commitments thereunder, including any such replacement, refunding or refinancing facility that increases the amount that may be borrowed thereunder or alters the maturity thereof, with the same or different lenders. "Offer to Purchase" means a written offer (the "Offer") sent by the Company to each holder of Notes offering to purchase up to the principal amount in the case of the Exchange Senior Notes and Senior Notes and the principal amount at maturity in the case of the Exchange Senior Discount Notes and Senior Discount Notes specified in such Offer at the purchase price specified in such Offer (as determined pursuant to the Indenture). Unless otherwise required by applicable law, the Offer shall specify an expiration date (the "Expiration Date") of the Offer to Purchase which shall be, subject to any contrary requirements of applicable law, not less than 30 days or more than 60 days after the date of such Offer and a settlement date (the "Purchase Date") for purchase of Notes within 5 business days after the Expiration Date. The Company shall notify the Trustee at least 10 business days (or such shorter period as is acceptable to the Trustee) prior to the mailing of the Offer of the Company's obligation to make an Offer to Purchase, and the Offer shall be mailed by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. The Offer shall contain information concerning the business of the Company and its Subsidiaries which the Company in good faith believes will enable such holders to make an informed decision with respect to the Offer to Purchase (which at a minimum will include (i) the most recent annual and quarterly financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the documents required to be filed with the Trustee pursuant to the Indenture (which requirements may be satisfied by delivery of such documents together with the Offer), (ii) a description of material developments in the Company's business subsequent to the date of the latest of such financial statements referred to in clause (i) (including a description of the events requiring the Company to make the Offer to Purchase), (iii) if applicable, appropriate pro forma financial information concerning the Offer to Purchase and the events requiring the Company to make the Offer to Purchase and (iv) any other information required by applicable law to be included therein). The Offer shall contain all instructions and material necessary to enable such holders to tender Notes pursuant to the Offer to Purchase. The Offer shall also state: a. the Section of the Indenture pursuant to which the Offer to Purchase is being made; b. the Expiration Date and the Purchase Date; c. the aggregate principal amount in the case of the outstanding Exchange Senior Notes and Senior Notes and aggregate principal amount at maturity in the case of the outstanding Exchange Senior Discount Notes and Senior Discount Notes offered to be purchased by the Company pursuant to the Offer -121- 125 to Purchase (including, if less than 100%, the manner by which such amount has been determined pursuant to the section of the Indenture requiring the Offer to Purchase) (the "Purchase Amount"); d. the purchase price to be paid by the Company for $1,000 aggregate principal amount in the case of the Exchange Senior Notes and Senior Notes and aggregate principal amount at maturity in the case of the Exchange Senior Discount Notes and Senior Discount Notes accepted for payment (as specified pursuant to the Indenture) (the "Purchase Price"); e. that the holder may tender all or any portion of the Notes registered in the name of such holder and that any portion of a Note tendered must be tendered in an integral multiple of $1,000 principal amount in the case of the Exchange Senior Notes and Senior Notes and principal amount at maturity in the case of the Exchange Senior Discount Notes and Senior Discount Notes; f. the place or places where Notes are to be surrendered for tender pursuant to the Offer to Purchase; g. that any Notes not tendered or tendered but not purchased by the Company will continue to accrue or accrete interest, as the case may be; h. that on the Purchase Date the Purchase Price will become due and payable upon each Note being accepted for payment pursuant to the Offer to Purchase and that interest thereon, if any, shall cease to accrue or accrete, as the case may be, on and after the Purchase Date; i. that each holder electing to tender a Note pursuant to the Offer to Purchase will be required to surrender such Note at the place or places specified in the Offer prior to the close of business on the Expiration Date (such Note being, if the Company or the Trustee so requires, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the holder thereof or his or her attorney duly authorized in writing); j. that holders will be entitled to withdraw all or any portion of Notes tendered if the Company (or the Paying Agent) receives, not later than the close of business on the Expiration Date, a telegram, telex, facsimile transmission or letter setting forth the name of the holder, the principal amount in the case of the Exchange Senior Notes and Senior Notes and the principal amount at maturity in the case of the Exchange Senior Discount Notes and Senior Discount Notes the holder tendered, the certificate number of the Note the holder tendered and a statement that such holder is withdrawing all or a portion of his or her tender; k. that (i) if Notes in an aggregate principal amount in the case of the Exchange Senior Notes and Senior Notes and aggregate principal amount at maturity in the case of the Exchange Senior Discount Notes and Senior Discount Notes less than or equal to the Purchase Amount are duly tendered and not withdrawn pursuant to the Offer to Purchase, the Company shall purchase all such Notes and (ii) if Notes in an aggregate principal amount in the case of the Exchange Senior Notes and Senior Notes and aggregate principal amount at maturity in the case of the Exchange Senior Discount Notes and Senior Discount Notes in excess of the Purchase Amount are tendered and not withdrawn pursuant to the Offer to Purchase, the Company shall purchase Notes having an aggregate principal amount in the case of the Exchange Senior Notes and Senior Notes and aggregate principal amount at maturity in the case of the Exchange Senior Discount Notes and Senior Discount Notes equal to the Purchase Amount on a pro-rata basis (with such adjustments as may be deemed appropriate so that only Notes in denominations of $1,000 principal amount in the case of the Exchange Senior Notes and Senior Notes and principal amount at maturity in the case of the Exchange Senior Discount Notes and Senior Discount Notes or integral multiples thereof shall be purchased); and l. that in the case of any holder whose Note is purchased only in part, the Company shall execute, and the Trustee shall authenticate and deliver to the holder of such Note without service charge, a new Note or Notes, or any authorized denomination as required by such holder, in an aggregate principal amount in the case of the Exchange Senior Notes and Senior Notes and aggregate principal amount at maturity in the case of the Exchange Senior Discount Notes and Senior Discount Notes equal to and in exchange for the unpurchased portion of the Note so tendered. -122- 126 Any Offer to Purchase shall be governed by and effected in accordance with the Offer for such Offer to Purchase. The Issuers will comply, to the extent applicable, with the requirements of Rule 14e-1 under the Exchange Act, and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the purchase of Notes in connection with a Offer to Purchase. To the extent that the provisions of any securities laws or regulations conflict with the provisions relating to the Offer to Purchase, the Issuers will comply with the applicable securities laws and regulations and will not be deemed to have breached their obligations described above by virtue thereof. "Officer" means, with respect to the Company, the President, the Chief Executive Officer, the Chief Financial Officer, any Senior Vice President, any Executive Vice President, the Vice President--Finance, the Vice President--Controller, the Treasurer or the Secretary of the Company. "Officers' Certificate" means, with respect to the Company, a certificate signed by two Officers at least one of whom shall be the principal executive officer, principal financial officer, treasurer or principal accounting officer of the Company. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be counsel to the Company, the General Partner or the Trustee. "Original Issue Date" means February 2, 1999. "Pass-Through Entity" means a partnership, limited liability company, "S corporation" or any other entity that is not subject to federal income tax and whose members are taxed on a distributive share of such entity's income. "Permitted Holder" shall mean any Bresnan Family Member, TCI Communications Inc. and its successors (resulting from any corporate reorganization contemplated on the Original Issue Date or any internal corporate reorganization), Blackstone Capital Partners III Merchant Banking Fund L.P. and, in each case, their respective Affiliates. Any person or group whose acquisition of beneficial ownership constitutes a Change of Control in respect of which a Change of Control Offer is made in accordance with the requirements of the Indenture will thereafter, together with its Affiliates, constitute an additional Permitted Holder. "Permitted Investment" means an Investment by the Company or any Restricted Subsidiary in (i) a Restricted Subsidiary or a Person which will, upon the making of such Investment, become a Restricted Subsidiary; provided, however, that the primary business of such Restricted Subsidiary is a Cable Business, a Cable Programming Business or a Related Business; (ii) another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary; provided, however, that such Person's primary business is a Cable Business, a Cable Programming Business or a Related Business; (iii) Temporary Cash Investments; (iv) receivables owing to the Company or any Restricted Subsidiary, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; (v) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; (vi) loans and advances to Company Employees (such loans to be made either directly to such employees or through the Parent, the General Partner, Bresnan Communications, Inc. or BCI Management, L.P.), provided that such loans and advances do not exceed $5.0 million at any one time outstanding; (vii) any Person to the extent such Investment represents the non-cash portion of the consideration received in connection with an Asset Sale consummated in compliance with the covenant described under "--Certain Covenants -- Limitation on Asset Dispositions"; (viii) Equity Interests, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments; (ix) any Investment existing on the Funding Date; and (x) Investments consisting of the licensing or contribution of intellectual property (excluding franchises and licenses required to own or operate Property) pursuant to joint marketing arrangements with other Persons. "Permitted Liens" means (i) Liens Incurred by the Company or any of its Restricted Subsidiaries if, after giving effect to such Incurrence on a pro forma basis, the amount of the total Indebtedness of the Company and its Restricted Subsidiaries that is secured by a Lien does not exceed the product of the Annualized EBITDA of the Company multiplied by 2.5; (ii) Liens on the Property of the Company or any of its Restricted Subsidiaries existing on the Original Issue Date; (iii) Liens on the Property of the Company or any of its Restricted Subsidiaries to secure any extension, renewal, refinancing, replacement or refunding (or successive extensions, renewals, refinancings, replacements or refundings), in whole or in part, of any Indebtedness secured by Liens referred to in any of clauses -123- 127 (i), (ii), (vii) or (x); provided, however, that any such Lien will be limited to all or part of the same Property that secured the original Indebtedness (plus improvements on such Property) and the aggregate principal amount of Indebtedness that is secured by such Lien will not be increased to an amount greater than the sum of (A) the outstanding principal amount, or, if greater, the committed amount, of the Indebtedness described under clauses (i), (ii), (vii) and (x) at the time the original Lien became a Permitted Lien under the Indenture and (B) an amount necessary to pay any premiums, fees and other expenses Incurred by the Company or any of its Restricted Subsidiaries in connection with such extension, renewal, refinancing, replacement or refunding; (iv) Liens for taxes, assessments or governmental charges or levies on the Property of the Company or any of its Restricted Subsidiaries if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings; (v) Liens imposed by law, such as landlords and carriers', warehousemen's, suppliers', materialmen's, repairmen's and mechanics' Liens and other similar Liens on the Property of the Company or any of its Restricted Subsidiaries which secure payment of obligations not more than 60 days past due or are being contested in good faith and by appropriate proceedings; (vi) Liens on the Property of the Company or any of its Restricted Subsidiaries Incurred to secure performance of obligations with respect to statutory or regulatory requirements, performance or return-of-money bonds, surety bonds or other obligations of a like nature and Incurred in a manner consistent with industry practice; (vii) Liens on Property at the time the Company or any of its Restricted Subsidiaries acquired such Property, including any acquisition by means of a merger or consolidation with or into the Company or any of its Restricted Subsidiaries; provided, however, that such Lien shall not have been Incurred in anticipation of such transaction or series of related transactions pursuant to which such Property was acquired by the Company or any of its Restricted Subsidiaries; (viii) zoning restrictions, licenses, restrictions on the use of real property, minor irregularities in the title thereto, or other Liens on the Property of the Company or any of its Restricted Subsidiaries incidental to the conduct of their respective businesses or the ownership of their respective Properties which (except for acknowledgments in any credit agreement of the lenders' right to setoff deposits held by such lenders so long as such deposits were made in the ordinary course of business and not with the intent to provide collateral to such lenders) were not created in connection with the Incurrence of Indebtedness or the obtaining of advances or credit and which do not in the aggregate materially detract from the value of their respective Properties or materially impair the use thereof in the operation of their respective businesses; (ix) pledges or deposits by the Company or any of its Restricted Subsidiaries under workers' compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which the Company or any of its Restricted Subsidiaries is a party, or deposits to secure public or statutory obligations of the Company or any of its Restricted Subsidiaries, or deposits for the payment of rent; (x) Liens on Property securing Acquired Indebtedness; provided, however, that any such Lien (A) was not Incurred in connection with, or in contemplation of, the Person obligated with respect to such Acquired Indebtedness becoming a Restricted Subsidiary or the acquisition relating to such Acquired Indebtedness and (B) may not extend to any other Property of the Company or any other Restricted Subsidiary which is not a direct Subsidiary of such Person; (xi) utility easements, rights-of-way, building restrictions and such other encumbrances or charges against real property as are of a nature generally existing with respect to properties of a similar character and which do not in the aggregate materially detract from the value or materially impair the use of such property; (xii) leases or subleases granted to others not materially interfering with the ordinary course of business of the Company and its Subsidiaries; (xiii) customary Liens contained in asset sale agreements limiting the transfer of such assets pending the closing of such sale or created by the grant of options to purchase such assets; provided, in any such case, the sale of such assets is not otherwise prohibited under the Indenture; (xiv) Liens on the Property of a Restricted Subsidiary securing Indebtedness of such Restricted Subsidiary owed to the Company; (xv) judgment Liens in an aggregate amount outstanding at any one time of not more than $15.0 million, provided such Lien is adequately bonded and any appropriate legal proceedings which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired; (xvi) any interest or title of a lessor under any Capitalized Lease Obligation otherwise permitted under the Indenture, provided that such Liens do not extend to any Property which is not leased property subject to such Capitalized Lease Obligation; (xvii) Liens to secure Indebtedness permitted to be incurred under clause (ix) of the second paragraph of the covenant described under "--Certain Covenants--Limitations on Indebtedness," provided that any such Lien (A) may not extend to any Property of the Company or any Restricted Subsidiary other than the Property acquired, constructed or leased with the proceeds of such Indebtedness any improvements or accessions to such Property and (B) shall be created within 180 days of the acquisition, construction or lease of such Property by the Company or such Restricted Subsidiary; (xviii) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person in the ordinary course of business to facilitate the purchase, shipment or storage of such inventory or other goods; (xix) Liens securing reimbursement obligations with respect to commercial letters of credit created in the ordinary course of business which encumber Property relating to such letters of credit and products and proceeds thereof; (xx) Liens securing Indebtedness under Hedging Obligations otherwise permitted under the -124- 128 Indenture; (xxi) Liens securing Indebtedness outstanding under the New Credit Facility that are created while commitments under the New Credit Facility are outstanding; and (xxii) Liens on Equity Interests of Unrestricted Subsidiaries to secure nonrecourse Indebtedness of such Unrestricted Subsidiary, provided that any such Lien may not extend to any Property of the Company or any Restricted Subsidiary other than such Equity Interests, provided further that any holder of Indebtedness of the Company or any Restricted Subsidiary shall not have the ability to declare a default or accelerate payment thereunder upon the occurrence of a default under the Indebtedness secured by such Lien. "Permitted Refinancing Indebtedness" means any extensions, renewals, substitutions, refinancings or replacements of any Indebtedness, including any successive extensions, renewals, substitutions, refinancings or replacements so long as (i) such Permitted Refinancing Indebtedness is incurred in an aggregate principal amount (or if issued with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if issued with original issue discount, the aggregate accreted value) then outstanding of the Indebtedness being refinanced plus any interest and premium payable thereon and any fees and expenses incurred in connection therewith, (ii) the Average Life of such Indebtedness is equal to or greater than the Average Life of the Indebtedness being refinanced, (iii) the Stated Maturity of such Indebtedness is no earlier than the earlier of (a) the Stated Maturity of the Indebtedness being extended, renewed, substituted for, refinanced or replaced and (b) the first anniversary of the Stated Maturity of the Notes and (iv) to the extent such new Indebtedness extends, renews, substitutes for, refinances or replaces Indebtedness subordinated or pari passu to the Notes, such new Indebtedness is subordinated or pari passu to the same extent as the Indebtedness being extended, renewed, substituted for, refinanced or replaced, provided that Permitted Refinancing Indebtedness shall not include (a) Indebtedness of a Restricted Subsidiary that refinances Indebtedness of the Company except to the extent that such Restricted Subsidiary was, prior to such refinancing, a guarantor of such Indebtedness, or (b) Indebtedness of the Company or a Restricted Subsidiary that refinances Indebtedness of an Unrestricted Subsidiary, and provided further that, subject to the foregoing proviso, subclause (iv) of this definition will not apply to any extension, renewal, substitution for refinancing or replacement of Indebtedness of any Restricted Subsidiary that is not a guarantor of the Notes. "Person" means any individual, corporation, company (including limited liability company), partnership, joint venture, trust, estate, unincorporated organization or government or any agency or political subdivision thereof. "Preferred Equity Interest" means any Equity Interest in a Person, however designated, which entitles the holder thereof to a preference with respect to dividends, distributions or liquidation proceeds of such Person over the holders of other Equity Interests issued by such Person. "Property" means, with respect to any Person, any interest of such Person in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, including, without limitation, Equity Interests in any other Person (but excluding Equity Interests or other securities issued by such Person). "Public Equity Offering" means an underwritten public offering of common stock of the Company (or a corporation owning all of the outstanding Equity Interests of the Company) pursuant to an effective registration statement under the Securities Act. "Public Market" means any time after (a) a Public Equity Offering has been consummated and (b) at least 15% of the total issued and outstanding common stock of the Company (or a corporation owning all of the outstanding Equity Interests of the Company) has been distributed by means of an effective registration statement under the Securities Act or sales pursuant to Rule 144 under the Securities Act. "Purchase Money Indebtedness" means Indebtedness (a) consisting of the deferred purchase price of property, conditional sale obligations, obligations under any title retention agreement, other purchase money obligations and obligations in respect of industrial revenue bonds, in each case where the Stated Maturity of such Indebtedness does not exceed the anticipated useful life of the Property being financed, and (b) Incurred to finance the acquisition, construction or lease by the Company or a Restricted Subsidiary of such Property, including additions and improvements thereto; provided, however, that such Indebtedness is Incurred within 180 days after the acquisition, construction or lease of such Property by the Company or such Restricted Subsidiary. "Rating Agencies" mean Moody's and S&P. -125- 129 "Redeemable Dividend" means, for any dividend with regard to Disqualified Equity Interests, the quotient of the dividend divided by the difference between one and the maximum statutory federal income tax rate (expressed as a decimal number between 1 and 0) then applicable to the issuer of such Disqualified Equity Interests. "Related Business" means the provision of high-speed data services, Internet access, interactive services, telephony (including personal communications services) and/or any other telecommunications service. "Relevant Taxpayer" means (i) in the case of any beneficial owner of an Equity Interest in the Company that is an individual, such individual; (ii) in the case of any beneficial owner of an Equity Interest in the Company that is taxed as a corporation, such corporation; (iii) in the case of any beneficial owner of an Equity Interest in the Company that is a Pass-Through Entity, such Pass-Through Entity itself and any indirect individual, corporate, trust or estate beneficial owner of an Equity Interest in the Company through such Pass-Through Entity; and (iv) in the case of any direct or indirect beneficial owner of an Equity Interest in the Company that is a trust or an estate, such trust or estate and any individual (or other trust and estate) which is a beneficiary of such trust or estate to the extent that such individual (or other trust or estate) is taxable on the income of such trust or estate. A Person shall be considered an indirect owner of an Equity Interest in the Company only to the extent that such Person has an indirect interest in the Company through a Pass-Through Entity or a trust or estate or through multiple tiers of Pass-Through Entities, trusts or estates (or any combination thereof). Notwithstanding anything in this paragraph to the contrary, the term Relevant Taxpayer shall not include Tele-Communications, Inc. or any affiliate thereof. "Repay" means, in respect of any Indebtedness, to repay, prepay, repurchase, redeem, legally defease or otherwise retire such Indebtedness. "Repayment" and "Repaid" shall have correlative meanings. For purposes of the covenant described under "--Limitation on Asset Dispositions" and the definition of "Leverage Ratio", Indebtedness shall be considered to have been Repaid only to the extent the related loan commitment, if any, shall have been permanently reduced in connection therewith. "Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company or the General Partner to have been duly adopted by the Governing Authority (or the General Partner if the General Partner constitutes the Governing Authority (subject to the adoption by the limited partners of the Parent, when and as provided in the Partnership Agreement)) and to be in full force and effect on the date of such certification and delivered to the Trustee. "Restricted Payment" means (i) any dividend or distribution (whether made in cash, Property or securities) declared or paid on or with respect to any Equity Interest in the Company except dividends or distributions payable solely in Equity Interests (other than Disqualified Equity Interests) in the Company or in warrants, rights, or options to purchase or acquire (other than debt securities convertible into an Equity Interest), directly or indirectly, any Equity Interests (other than Disqualified Equity Interests) in the Company; (ii) a payment made by the Company or any Restricted Subsidiary to purchase, redeem, acquire or retire any Equity Interests in the Company or Equity Interests in any Affiliate of the Company (other than a Restricted Subsidiary) or any warrants, rights or options to directly or indirectly purchase or acquire any such Equity Interests or any securities exchangeable for or convertible into any such Equity Interests, except for payments made to the Company or a Restricted Subsidiary; (iii) a payment made by the Company or any Restricted Subsidiary to redeem, repurchase, defease or otherwise acquire or retire for value, prior to any scheduled maturity, scheduled sinking fund or mandatory redemption payment (other than the purchase, repurchase, or other acquisition of any Indebtedness subordinate in right of payment to the Notes purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition), Indebtedness of the Company which is subordinate (whether pursuant to its terms or by operation of law) in right of payment to the Notes; (iv) an Investment (other than Permitted Investments), including a deemed Investment pursuant to clause (iv) of "--Certain Covenants--Designation of Restricted and Unrestricted Subsidiaries," in any Person. "Restricted Subsidiary" means (a) BCC; (b) any Subsidiary of the Company unless such Subsidiary shall have been designated as an Unrestricted Subsidiary as permitted pursuant to "Certain Covenants--Designation of Restricted and Unrestricted Subsidiaries" and (c) an Unrestricted Subsidiary which is redesignated as a Restricted Subsidiary as permitted pursuant to "Certain Covenants--Designation of Restricted and Unrestricted Subsidiaries." "S&P" means Standard & Poor's Ratings Service or any successor to the rating agency business thereof. -126- 130 "Sale and Leaseback Transaction" means, with respect to any Person, any direct or indirect arrangement pursuant to which Property is sold or transferred by such Person or a Subsidiary of such Person and is thereafter leased back from the purchaser or transferee thereof by such Person or one of its Subsidiaries. "Securities Act" means the Securities Act of 1933, as amended. "Significant Subsidiary" means any Restricted Subsidiary that would be a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X under the Securities Act as such Regulation is in effect on the Original Issue Date. "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the payment of principal or Accreted Value, as applicable, of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless such contingency has occurred). "Subsidiary" of any specified Person means any corporation, partnership, joint venture, association or other business entity, whether now existing or hereafter organized or acquired, (i) in the case of a corporation, of which more than 50% of the total voting power of the Equity Interests entitled (without regard to the occurrence of any contingency) to vote in the election of directors, officers or trustees thereof is held by such first-named Person or any of its Subsidiaries; or (ii) in the case of a partnership, joint venture, association or other business entity, with respect to which such first-named Person or any of its Subsidiaries has the power to direct or cause the direction of the management and policies of such entity by contract or otherwise if in accordance with GAAP such entity is consolidated with the first-named Person for financial statement purposes. "Tax Distribution" shall have the meaning given to such term in Section 3.3(a) of the Amended and Restated Limited Partnership Agreement of the Parent as in effect on the Funding Date (as such Tax Distribution is described in this Prospectus under "Description of the Partnership Agreement--Tax Distributions"). "Tax Liability" means an amount, for each year, equal to the Tax Distribution determined with respect to each Relevant Taxpayer. "Tele-Communications, Inc." means Tele-Communications, Inc., a Delaware corporation, and any successor thereto by way of merger or consolidation or by transfer of all or substantially all the assets of such first-named Person. "Temporary Cash Investments" means any of the following: (i) Investments in U.S. Government Obligations or in securities guaranteed by the United States of America, in each case maturing within 90 days of the date of acquisition thereof, (ii) Investments in time deposit accounts, certificates of deposit and money market deposits maturing within 90 days of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America or any State thereof having capital, surplus and undivided profits aggregating in excess of $500.0 million and whose long-term debt is rated "A-3" or "A-" or higher according to Moody's or S&P (or such similar equivalent rating by at least one "nationally recognized statistical rating organization" (as defined in Rule 436 under the Securities Act)), (iii) repurchase obligations with a term of not more than 7 days for underlying securities of the types described in clause (i) entered into with a bank meeting the qualifications described in clause (ii) above, (iv) Investments in commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation organized and in existence under the laws of the United States of America with a rating at the time as of which any Investment therein is made of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P (or such similar equivalent rating by at least one "nationally recognized statistical rating organization" (as defined in Rule 436 under the Securities Act)) and (v) investments in money market funds that are registered under the Investment Company Act of 1940, which have net assets of at least $500.0 million and at least 85% of whose assets are investments or other obligations of the type described in clauses (i) through (iv) of this definition. "Unrestricted Subsidiary" means (a) any Subsidiary of the Company which is designated after the Original Issue Date as an Unrestricted Subsidiary as permitted pursuant to "--Certain Covenants--Designation of Restricted and Unrestricted Subsidiaries" and (b) any Subsidiary of an Unrestricted Subsidiary and until such time, in each case, as it may thereafter be redesignated as a Restricted Subsidiary as permitted pursuant to such covenant. -127- 131 "U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the issuer's option. "Voting Equity Interests" means the Equity Interests in a corporation or other Person with voting power under ordinary circumstances entitling the holders thereof to elect or appoint the board of directors, executive committee or other governing body of such corporation or Person or generally having the right to vote with respect to organizational matters of such Person or generally having the right to vote with respect to or veto significant transactions or activities with respect to such Person or a Person holding a majority interest in such Person; provided, however, that Preferred Equity Interests with customary contingent voting rights shall not be deemed Voting Equity Interests solely by virtue of such contingent voting rights. "Wholly Owned Subsidiary" means a Restricted Subsidiary of the Company, greater than 95% of the then outstanding Equity Interests in which (other than directors' qualifying shares) are owned by the Company and/or one or more other Wholly Owned Subsidiaries. Transfer and Exchange Holders may transfer or exchange their Notes in accordance with the Indenture. The Registrar under the Indenture may require a holder, among other things, to furnish appropriate endorsements and transfer documents, and to pay any taxes and fees required by law or permitted by the Indenture. The registered holder of a Note may be treated as the owner of it for all purposes. Notices Notices to holders of Notes will be given by mail to the addresses of such holders as they may appear in the security register. Governing Law The Indenture, the Notes and the Escrow Agreement are governed by and construed in accordance with the internal laws of the State of New York without reference to principles of conflicts of law. The Trustee State Street Bank and Trust Company is the Trustee under the Indenture and has been appointed by the Issuers as Registrar and Paying Agent with regard to the Notes. The Indenture provides that, except during the continuance of an Event of Default, the Trustee will perform only such duties as are specifically set forth in the Indenture. During the existence of an Event of Default, the Trustee will exercise such rights and powers vested in it under the Indenture and use the same degree of care and skill in its exercise as a prudent person would exercise under the circumstances in the conduct of such person's own affairs. -128- 132 CERTAIN FEDERAL TAX CONSIDERATIONS Certain United States Federal Income Tax Considerations The following discussion summarizes the material United States federal income tax consequences of an exchange of Outstanding Notes for Exchange Notes and the ownership of the Exchange Notes. It is based on the Internal Revenue Code of 1986, as amended to the date hereof (the "Code"), existing and proposed Treasury regulations, and judicial and administrative determinations, all of which are subject to change at any time, possibly on a retroactive basis. The following relates only to Notes that are held as "capital assets" within the meaning of Section 1221 of the Code by the initial Holders of the Outstanding Notes. It does not discuss state, local, or foreign tax consequences, nor does it discuss tax consequences to subsequent purchasers (persons who did not purchase the Outstanding Notes pursuant to their original issue), or to categories of holders that are subject to special rules, such as foreign persons, tax-exempt organizations, insurance companies, banks, and dealers in stocks and securities. Tax consequences may vary depending on the particular status of an investor. No rulings will be sought from the Internal Revenue Service (the "IRS") with respect to the federal income tax consequences of the Exchange Offer. As used herein, a "U.S. Holder" is a beneficial owner of a Note who is for United States federal income tax purposes: (1) a citizen or resident of the U.S., (2) a corporation, partnership or other entity created or organized in or under the laws of the U.S. or any political subdivision thereof, (3) an estate the income of which is subject to U.S. Federal income taxation regardless of its source, (4) a trust if (A) a United States court is able to exercise primary supervision over the administration of the trust and (B) one or more United States persons have the authority to control all substantial decisions of the trust, (5) a certain type of trust in existence on August 20, 1996, which was treated as a United States person under the Code in effect immediately prior to such date and which has made a valid election to be treated as a United States person under the Code and (6) any person otherwise subject to U.S. federal income tax on a net income basis in respect of its worldwide taxable income. A "Non-U.S. Holder" is a beneficial owner of a Note that is not a U.S. Holder. THIS SECTION DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO AN INVESTOR'S DECISION TO EXCHANGE OUTSTANDING NOTES FOR EXCHANGE NOTES. EACH INVESTOR SHOULD CONSULT WITH ITS OWN TAX ADVISOR CONCERNING THE APPLICATION OF THE FEDERAL INCOME TAX LAWS, AS WELL AS THE APPLICATION OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND OTHER TAX LAWS, TO ITS PARTICULAR SITUATION BEFORE DETERMINING WHETHER TO EXCHANGE OUTSTANDING NOTES FOR EXCHANGE NOTES. The Exchange Offer We believe that the Exchange Notes received pursuant to the Exchange Offer will be treated as a continuation of the corresponding Outstanding Notes because the terms of the Exchange Notes are not materially different from the terms of the Outstanding Notes, and accordingly (i) such exchange will not constitute a taxable event to a U.S. Holder, (ii) no gain or loss will be realized by a U.S. Holder upon receipt of an Exchange Note, (iii) the holding period of the Exchange Note will include the holding period of the Outstanding Note exchanged therefor and (iv) the adjusted tax basis of the Exchange Note will be the same as the adjusted tax basis of the Outstanding Notes exchanged. The filing of a shelf Registration Statement should not result in a taxable exchange to the Company or any holder of a Note. United States Federal Income Taxation of U.S. Holders Payments of Interest on the Exchange Senior Notes Interest on an Exchange Senior Note will be taxable to a U.S. Holder as ordinary income from domestic sources at the time it is paid or accrued in accordance with the U.S. Holder's regular method of accounting for federal income tax purposes. Original Issue Discount on the Exchange Senior Discount Notes Because the Senior Discount Notes were issued with OID, the Exchange Senior Discount Notes also will bear OID that each U.S. Holder thereof generally will be required to include in income as it accrues, and in advance of cash payments attributable to such income, as described below. -129- 133 The amount of OID with respect to the Exchange Senior Discount Notes will be equal to the excess of (1) the Exchange Senior Discount Note's "stated redemption price at maturity" over (2) its "issue price." The issue price of an Exchange Senior Discount Note will be equal to the price of a Senior Discount Note which was 63.644%. The stated redemption price at maturity of an Exchange Senior Discount will include all payments required to be made on the Exchange Senior Discount Note, including any stated interest payments. A U.S. Holder of an Exchange Senior Discount Note is required to include in gross income for U.S. federal income tax purposes an amount equal to the sum of the "daily portions" of such OID for all days during the taxable year on which the holder holds the Exchange Senior Discount Note. The daily portions of OID required to be included in such holder's gross income in a taxable year will be determined on a constant yield basis by allocating to each day during the taxable year on which the holder holds the Exchange Senior Discount Note a pro rata portion of the OID on such Exchange Senior Discount Note which is attributable to the "accrual period" in which such day is included. Accrual periods with respect to an Exchange Senior Discount Note may be any set of periods (which may be of varying lengths) selected by a U.S. Holder as long as (1) no accrual period is longer than one year and (2) each scheduled payment of interest or principal on the Exchange Senior Discount Note occurs on either the first or final day of an accrual period. The amount of OID attributable to each accrual period will be equal to the product of (1) the "adjusted issue price" at the beginning of such accrual period and (2) the "yield to maturity" of the instrument stated in a manner appropriately taking into account the length of the accrual period. The yield to maturity is the discount rate that, when used in computing the present value of all payments to be made under the Exchange Senior Discount Notes, produces an amount equal to the issue price of the Exchange Senior Discount Notes. The adjusted issue price of an Exchange Senior Discount Note at the beginning of an accrual period is generally defined as the issue price of the Exchange Senior Discount Note plus the aggregate amount of OID that accrued in all prior accrual periods, less any cash payments made on the Exchange Senior Discount Note. Accordingly , a U.S. Holder of an Exchange Senior Discount Note will be required to include OID thereon in gross income for U.S. federal tax purposes in advance of the receipt of cash attributable to such income. The amount of OID allocable to an initial short accrual period may be computed using any reasonable method if all other accrual periods, other than a final short accrual period, are of equal length. The amount of OID allocable to the final accrual period at maturity of an Exchange Senior Discount Note is the difference between (A) the amount payable at the maturity of the Exchange Senior Discount Note and (B) the Exchange Senior Discount Note's adjusted issue price as of the beginning of the final accrual period. Payments on the Exchange Senior Discount Notes (including principal and stated interest payments) are not separately included in a U.S. Holder's income, but rather are treated first as payments of accrued OID and then as payments of principal, which reduce the U.S. Holder's adjusted tax basis in the Exchange Senior Discount Notes. In determining the yield and maturity with respect to the Exchange Senior Discount Notes, the Company will not be deemed to exercise any call option on the Exchange Senior Discount Notes. In the event the Company elects to pay interest on the Exchange Senior Discount Notes prior to February 1, 2004, the Exchange Senior Discount Notes will be treated solely for the purposes of subsequently applying the OID rules as if each such Exchange Senior Discount Note was retired and then reissued on the date of such election for an amount equal to its adjusted issue price on that date. Sale, Exchange or Retirement of the Notes Upon the sale, exchange, retirement or other taxable disposition of a Note, the U.S. Holder will recognize gain or loss in an amount equal to the difference between (1) the amount of cash and the fair market value of other property received in exchange therefor (other than amounts attributable to accrued but unpaid interest on the Exchange Senior Notes which will be taxable as such) and (2) the U.S. Holder's adjusted tax basis in such Note. A U.S. Holder's adjusted tax basis in a Note will equal the purchase price paid by such U.S. Holder for the Note increased, in the case of an Exchange Senior Discount Note, by any OID previously included in income by such holder with respect to such Note and decreased, in the case of an Exchange Senior Discount Note, by any payments received thereon. Gain or loss realized on the sale, exchange, retirement or other taxable disposition of a Note will be capital gain or loss and will be long-term capital gain or loss if at the time of sale, exchange, retirement, or other taxable disposition, the Note has been held for more than 12 months. The maximum rate of tax on long-term capital gains with respect to Notes held by an individual is 20%. The deductibility of capital losses is subject to certain limitations. -130- 134 United States Federal Income Taxation of Non-U.S. Holders The payment to a Non-U.S. Holder of interest (including the amount of any payment that is attributable to OID that accrued while such Non-U.S. Holder held the Note) on a Note will not be subject to U.S. federal withholding tax pursuant to the "portfolio interest exception," provided that (1) the Non-U.S. Holder does not actually or constructively own 10% or more of the capital or profits interest in the Company and is not a controlled foreign corporation that is related to the Company within the meaning of the Code and (2) either (A) the beneficial owner of the Notes certifies to the Company or its agent, under penalties of perjury, that it is not a U.S. Holder and provides its name and address on U.S. Treasury Form W-8 (or a suitable substitute form) or (B) a securities clearing organization, bank or other financial institution that holds the Notes on behalf of such Non-U.S. Holder in the ordinary course of its trade or business (a "financial institution") certifies under penalties of perjury that such a Form W-8 (or suitable substitute form) has been received from the beneficial owner by it or by a financial institution between it and the beneficial owner and furnishes the payor with a copy thereof. Final Treasury Regulations that will be effective January 1, 2000 (the "Withholding Regulations") provide alternative methods for satisfying the certification requirement described in (2) above. The Withholding Regulations will generally require, in the case of Notes held by a foreign partnership, that the certificate described in (2) above be provided by the partners rather than by the foreign partnership, and that the partnership provide certain information including a U.S. tax identification number. If a Non-U.S. Holder cannot satisfy the requirements of the portfolio interest exception described above, payments of interest (including the amount of any payment that is attributable to OID that accrued while such Non-U.S. Holder held the Note) made to such Non-U.S. Holder will be subject to a 30% withholding tax, unless the beneficial owner of the Note provides the Company or its paying agent, as the case may be, with a properly executed (1) Internal Revenue Service Form 1001 (or successor form) claiming an exemption from or reduction in the rate of withholding under the benefit of a tax treaty or (2) Internal Revenue Service Form 4224 (or successor form) stating that interest paid on the Note is not subject to withholding tax because it is effectively connected with the beneficial owner's conduct of a trade or business in the United States. If a Non-U.S. Holder of a Note is engaged in a trade or business in the United States and interest on the Note is effectively connected with the conduct of such trade or business, such Non-U.S. Holder, although exempt from U.S. federal withholding tax (provided the Non-U.S. Holder files the appropriate certification with the Company or its U.S. Agent) will be subject to U.S. federal income tax on such interest (including OID) in the same manner as if it were a U.S. Holder. In addition, if such Non-U.S. Holder is a foreign corporation, it may be subject to a branch profits tax equal to 30% of its effectively connected earnings and profits (subject to adjustment) for that taxable year unless it qualifies for a lower rate under an applicable income tax treaty. Any capital gain realized on the sale, redemption, retirement or other taxable disposition of a Note by a Non-U.S. holder generally will not be subject to U.S. federal income tax provided (1) such gain is not effectively connected with the conduct by such holder of a trade or business in the United States, (2) in the case of gains derived by an individual, such individual is not present in the United States for 183 days or more in the taxable year of the disposition and certain other conditions are met and (3) the Non-U.S. Holder is not subject to tax pursuant to the provisions of U.S. federal income tax law applicable to certain expatriates. Information Reporting and Backup Withholding In general, information reporting requirements will apply to certain payments within the United States of interest (including OID) on the Notes, including payments made by the United States office of a paying agent, broker or other intermediary. Information reporting requirements will also apply to the proceeds of a sale, redemption or other disposition of Notes through a United States office of a United States or foreign broker or through the office of a foreign broker that is a controlled foreign corporation for United States federal income tax purposes or a foreign person 50 percent or more of whose gross income from all sources for the three year period ending with the close of its taxable year preceding the payment was effectively connected with a U.S. trade or business. A 31% backup withholding tax may apply to such payments if made to a U.S. Holder and such U.S. Holder fails to provide a correct taxpayer identification number or certification of exempt status or, with respect to certain payments, the U.S. Holder fails to report in full all dividend and interest income and the IRS notifies the payor of a duty to withhold. Non-U.S. Holders are generally exempt from the information reporting and backup withholding rules but may be required to comply with certification and identification requirements in order to prove their exemption. -131- 135 The Withholding Regulations alter the foregoing rules in certain respects. Among other things, such regulations expand the number of foreign intermediaries that are potentially subject to information reporting and address certain documentary evidence requirements relating to exemption from the backup withholding requirements. Holders of the Notes should consult their tax advisers concerning the possible application of such regulations to any payments made on or with respect to the Notes. Any amounts withheld under the backup withholding rules from a payment to a holder of the Notes will be allowed as a refund or a credit against such holder's U.S. federal income tax liability, provided that the required information is furnished to the IRS. The Company must report annually to the IRS and to each Non-U.S. Holder any interest that is subject to withholding, or that is exempt from U.S. withholding tax pursuant to a tax treaty, or interest that is exempt from U.S. tax under the portfolio interest exception. Copies of these information returns may also be made available under the provisions of a specific treaty or agreement to the tax authorities of the country in which the Non-U.S. Holder resides. -132- 136 PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Outstanding Notes where such Outstanding Notes were acquired as a result of market-making activities or other trading activities. We have agreed that, starting on the Expiration Date and ending on the close of business one year after the Expiration Date, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until , 199_, all dealers effecting transactions in the Exchange Notes may be required to deliver a prospectus. We will not receive any proceeds from any sale of Exchange Notes by broker-dealers. Exchange Notes 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 Exchange Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participate in a distribution of such Exchange Notes may be deemed to be an "underwriter" within the meaning of the Securities Act of 1933 and any profit resulting from any such resale of Exchange Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act of 1933. 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 one year after the Expiration Date, we 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. We have agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the holder of the Outstanding Notes) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the Outstanding Notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. LEGAL MATTERS Certain legal matters relating to the validity of the Exchange Notes offered hereby will be passed upon on behalf of the Company by Paul, Hastings, Janofsky & Walker LLP, New York, New York. EXPERTS The combined financial statements of Bresnan Communications Group Systems as of December 31, 1997 and 1998 and for each to the years in the three year period ended December 31, 1998, have been included herein and in the registration statement in reliance upon the report of KPMG LLP, independent certified public accountants, appearing elsewhere herein, and upon authority of said firm as experts in accounting and auditing. AVAILABLE INFORMATION We are subject to the information requirements of the Securities Exchange Act of 1934 and in accordance with the Securities Exchange Act of 1934 we file reports, proxy statements and other information with the Securities and Exchange Commission. You may read and copy any of such information on file with the Securities and Exchange Commission at the Securities and Exchange Commission's public reference facilities at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at its regional offices located at Seven World Trade Center, New York, New York 10048 and at Northwestern Atrium Center, 500 West Madison Street, Suite 140, Chicago, Illinois 60661-2511. Copies of filed documents can be obtained, at prescribed rates, by mail from the Public Reference Section of the Securities and Exchange Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 or by telephone at 1-800-SEC-0330, or electronically through the Securities and Exchange Commission's Electronic Data Gathering, Analysis and Retrieval system at the Securities and Exchange Commission's Web site (http://www.sec.gov). -133- 137 We have filed with the Securities and Exchange Commission a registration statement on Form S-4 under the Securities Act of 1933, with respect to the Exchange Notes offered by this prospectus. As permitted by the rules and regulations of the Securities and Exchange Commission, this prospectus omits certain information contained in the registration statement. For further information with respect to the Company and the Exchange Notes, reference is made to the registration statement, including its exhibits and the financial statements, notes and schedules filed as a part of it, which you may read and copy at the public reference facilities of the Securities and Exchange Commission referred to above. Statements contained in this Prospectus as to the contents of any contract or other document are not necessarily complete, and in each instance reference is made to the full text of such contract or document filed as an exhibit to the registration statement, each such statement being qualified in all respects by such reference. -134- 138 INDEX TO COMBINED FINANCIAL STATEMENTS Page ---- Audited Combined Financial Statements Independent Auditors' Report..............................................F-2 Combined Balance Sheets as of December 31, 1997 and 1998..................F-3 Combined Statements of Operations and Parents' Investment for the years ended December 31, 1996, 1997 and 1998...................F-4 Combined Statements of Cash Flows for the years ended December 31, 1996, 1997 and 1998.......................................F-5 Notes to Combined Financial Statements December 31, 1997 and 1998.........F-6 F-1 139 Independent Auditors' Report Tele-Communications, Inc.: We have audited the accompanying combined balance sheets of Bresnan Communications Group Systems, (as defined in Note 1 to the combined financial statements) as of December 31, 1997 and 1998, and the related combined statements of operations and Parents' investment and cash flows for each of the years in the three-year period ended December 31, 1998. These combined financial statements are the responsibility of the Bresnan Communications Group Systems management. Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Bresnan Communications Group Systems, as of December 31, 1997 and 1998, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1998, in conformity with generally accepted accounting principles. Denver, Colorado April 2, 1999 F-2 140 BRESNAN COMMUNICATIONS GROUP SYSTEMS (A combination of certain assets, as defined in Note 1) Combined Balance Sheets December 31, 1997 and 1998
Assets 1997 1998 -------- -------- (Amounts in thousands) Cash and cash equivalents ............................ $ 6,957 $ 6,636 Restricted cash (note 3) ............................. -- 47,199 Trade and other receivables, net ..................... 11,700 8,874 Property and equipment, at cost: Land and buildings ............................... 5,229 4,123 Distribution systems ............................. 410,158 443,114 Support equipment ................................ 45,687 50,178 -------- -------- 461,074 497,415 Less accumulated depreciation .................... 157,618 190,752 -------- -------- 303,456 306,663 Franchise costs, net ................................. 291,746 291,103 Other assets, net of accumulated amortization ........ 3,339 3,961 -------- -------- Total assets ............................... $617,198 $664,436 ======== ======== Liabilities and Parents' Investment Accounts payable ..................................... $ 2,071 $ 3,193 Accrued expenses ..................................... 11,809 13,395 Accrued interest ..................................... 20,331 21,835 Debt ................................................. 214,170 232,617 Other liabilities .................................... 9,719 11,648 -------- -------- Total liabilities ............................ 258,100 282,688 Parents' investment .................................. 359,098 381,748 -------- -------- Commitments and contingencies (note 7) Total liabilities and Parents' investment .... $617,198 $664,436 ======== ========
See accompanying notes to combined financial statements. F-3 141 BRESNAN COMMUNICATIONS GROUP SYSTEMS (A combination of certain assets, as defined in Note 1) Combined Statements of Operations and Parents' Investment Years Ended December 31, 1996, 1997 and 1998
1996 1997 1998 --------- --------- --------- (Amounts in thousands) Revenue ........................................ $ 216,609 $ 247,108 $ 261,964 Operating costs and expenses: Programming (note 6) ....................... 46,087 53,857 63,686 Operating .................................. 31,405 31,906 28,496 Selling, general and administrative (note 6) 52,485 50,572 58,568 Depreciation and amortization .............. 50,908 53,249 54,308 --------- --------- --------- 180,885 189,584 205,058 --------- --------- --------- Operating income ................... 35,724 57,524 56,906 Other income (expense): Interest expense: Related party (note 4) ................. (1,859) (1,892) (1,872) Other .................................. (13,173) (16,823) (16,424) Gain on sale of cable television systems ... -- -- 27,027 Other, net ................................. (844) (978) (273) --------- --------- --------- (15,876) (19,693) 8,458 --------- --------- --------- Net earnings ....................... 19,848 37,831 65,364 Parents' investment: Beginning of year .......................... 344,664 347,188 359,098 Operating expense allocations and charges (notes 4 and 6) ........................ 54,643 60,389 71,648 Net assets of acquired systems (note 3) .... -- 33,635 -- Cash transfers, net ........................ (71,967) (119,945) (114,362) --------- --------- --------- End of year ................................ $ 347,188 $ 359,098 $ 381,748 ========= ========= =========
See accompanying notes to combined financial statements. F-4 142 BRESNAN COMMUNICATIONS GROUP SYSTEMS (A combination of certain assets, as defined in Note 1) Combined Statements of Cash Flows Years Ended December 31, 1996, 1997 and 1998
1996 1997 1998 --------- --------- --------- (Amounts in thousands) Cash flows from operating activities Net earnings .......................................... $ 19,848 $ 37,831 $ 65,364 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization ................. 50,908 53,249 54,308 Gain on sale of cable television systems ...... -- -- (27,027) Other noncash charges ......................... 1,171 2,141 452 Changes in operating assets and liabilities, net of effects of acquisitions: Change in receivables ................. (291) (3,413) 2,826 Change in other assets ................ (144) 164 -- Change in accounts payable, accrued expenses and other liabilities ....... 7,178 2,305 6,141 Other, net ............................ 473 271 297 --------- --------- --------- Net cash provided by operating activities ................ 79,135 92,548 102,361 --------- --------- --------- Cash flows from investing activities: Capital expended for property and equipment ........... (78,248) (33,875) (58,601) Capital expended for franchise costs .................. (87) (1,407) (157) Cash received in acquisitions ......................... -- 1,179 28,681 Change in restricted cash ............................. -- -- (47,199) --------- --------- --------- Net cash used in investing activities ............... (78,335) (34,103) (77,276) --------- --------- --------- Cash flows from financing activities: Borrowings under note agreement ....................... 40,300 31,300 49,400 Repayments under note agreement ....................... (18,546) (24,364) (30,953) Deferred finance costs paid ........................... (595) (2,121) (1,139) Change in Parents' investment ......................... (24,259) (59,556) (42,714) --------- --------- --------- Net cash used in financing activities ............... (3,100) (54,741) (25,406) --------- --------- --------- Net increase (decrease) in cash (2,292) 3,704 (321) Cash and cash equivalents: Beginning of year ..................................... 5,545 3,253 6,957 --------- --------- --------- End of year ........................................... $ 3,253 $ 6,957 $ 6,636 ========= ========= ========= Supplemental disclosure of cash flow information - Cash paid during the year for interest ................ $ 12,996 $ 16,971 $ 16,792 ========= ========= =========
See accompanying notes to combined financial statements. F-5 143 BRESNAN COMMUNICATIONS GROUP SYSTEMS (A combination of certain assets, as defined in Note 1) Notes to Combined Financial Statements - (Continued) December 31, 1997 and 1998 (In Thousands) (1) Basis of Presentation and Partnership Formation The financial statements of Bresnan Communications Group Systems are the combination of the financial statements of Bresnan Communications Company Limited Partnership ("BCCLP") and certain additional cable television systems (the "TCI Bresnan Systems") owned by affiliates of Tele-Communications, Inc. ("TCI"). BCCLP and the TCI Bresnan Systems are under the common ownership and control of TCI. Based on such common ownership and control, the accompanying financial statements are presented herein at historical cost on a combined basis and will serve as a predecessor to Bresnan Communications Group LLC. The combined net assets of Bresnan Communications Group Systems are herein referred to as "Parents' investment." BCCLP is a partnership between a subsidiary of TCI and William J. Bresnan and certain entities which he controls (collectively, the "Bresnan Entities"). BCCLP owns and operates cable television systems principally located in the midwestern United States. TCI and the Bresnan Entities hold 78.4% and 21.6% interests, respectively, in BCCLP. Certain of the TCI Bresnan Systems have been acquired through a series of transactions whereby TCI acquired various larger cable entities (the "Original Systems"). The accounts of certain of the TCI Bresnan Systems include allocations of purchase accounting adjustments from TCI's acquisition of the Original Systems. Such allocations and the related franchise cost amortization are based upon the relative fair market values of the systems involved. In addition, certain costs of TCI and the Bresnan Entities are charged to the Bresnan Communications Group Systems based on the methodologies described in note 6. Although such allocations are not necessarily indicative of the costs that would have been incurred by the Bresnan Communications Group Systems on a stand alone basis, management of TCI and the Bresnan Entities believe that the resulting allocated amounts are reasonable. On June 3, 1998, certain affiliates of TCI, the Bresnan Entities, BCCLP and Blackstone Cable Acquisition Company, LLC ("Blackstone") (collectively, the "Partners") entered into a Contribution Agreement. Effective February 2, 1999 under the terms of the contribution agreement, certain affiliates of TCI were transferred to BCCLP along with approximately $708,854 of assumed TCI debt (the "TCI Transaction") which is not reflected in the accompanying combined financial statements. At the same time, Blackstone contributed $136,500 to BCCLP. As a result of these transactions, the Bresnan Entities remain the managing partner of BCCLP, with a 10.2% combined general and limited partner interest, while TCI and Blackstone are 50% and 39.8% limited partners of BCCLP, respectively. The amount of the assumed TCI debt will be adjusted based on certain working capital adjustments at a specified time after the consummation of TCI Transaction. Upon completion of these transactions BCCLP formed a wholly-owned subsidiary, Bresnan Communications Group LLC ("BCG"), into which it contributed all its assets and liabilities. Simultaneous with this transaction Bresnan Communications Group LLC formed a wholly-owned subsidiary, Bresnan Telecommunications Company LLC ("BTC"), into which it contributed all its assets and liabilities. In anticipation of these transactions, on January 25, 1999, BCG sold $170,000 aggregate principal amount of 8% senior notes (the "Senior Notes") due 2009 and $275,000 aggregate principal amount at maturity (approximately $175,000 gross proceeds) of 9.25% senior discount notes (the "Senior Discount Notes") due 2009. The net proceeds from the offering of the Senior Notes and the Senior Discount Notes approximated F-6 144 BRESNAN COMMUNICATIONS GROUP SYSTEMS (A combination of certain assets, as defined in Note 1) Notes to Combined Financial Statements - (Continued) December 31, 1997 and 1998 (In Thousands) $336,000 after giving effect to discounts and commissions. Also, BTC borrowed $508,000 of $650,000 available under a new credit facility (the "Credit Facility"). The proceeds of the Senior Notes, the Senior Discount Notes and the Credit Facility were used to retire the assumed TCI debt and the outstanding debt of the Bresnan Communications group systems prior to the TCI Transaction (see Note 4), as well as the payment of certain fees and expenses. Deferred financing costs of $2.6 million associated with the retired debt will be written off. After giving effect to the issuance of debt noted above, the unaudited proforma debt outstanding at December 31, 1998 would be $857 million and the Parents' investment would decrease to a deficit position of $206 million at December 31, 1998. On March 9, 1999, AT&T Corp. ("AT&T") acquired TCI in a merger (the "AT&T Merger"). In the AT&T Merger, TCI became a subsidiary of AT&T. (2) Summary of Significant Accounting Policies (a) Cash Equivalents Cash equivalents consist of investments which are readily convertible into cash and have maturities of three months or less at the time of acquisition. (b) Trade and Other Receivables Receivables are reflected net of an allowance for doubtful accounts. Such allowance at December 31, 1997 and 1998 was not significant. (c) Property and Equipment Property and equipment is stated at cost, including acquisition costs allocated to tangible assets acquired. Construction costs, including interest during construction and applicable overhead, are capitalized. During 1996, 1997 and 1998, interest capitalized was $1,005, $324 and $47, respectively. Depreciation is computed on a straight-line basis using estimated useful lives of 3 to 15 years for distribution systems and 3 to 40 years for support equipment and buildings. Repairs and maintenance are charged to operations, and renewals and additions are capitalized. At the time of ordinary retirements, sales or other dispositions of property, the original cost and cost of removal of such property are charged to accumulated depreciation, and salvage, if any, is credited thereto. Gains or losses are only recognized in connection with the sales of properties in their entirety. (d) Franchise Costs F-7 145 BRESNAN COMMUNICATIONS GROUP SYSTEMS (A combination of certain assets, as defined in Note 1) Notes to Combined Financial Statements - (Continued) December 31, 1997 and 1998 (In Thousands) Franchise costs include the difference between the cost of acquiring cable television systems and amounts allocated to their tangible assets. Such amounts are generally amortized on a straight-line basis over 40 years. Costs incurred by Bresnan Communications Group Systems in negotiating and renewing franchise agreements are amortized on a straight-line basis over the life of the franchise, generally 10 to 20 years. (e) Impairment of Long-Lived Assets Management periodically reviews the carrying amounts of property and equipment and identifiable intangible assets to determine whether current events or circumstances warrant adjustments to such carrying amounts. If an impairment adjustment is deemed necessary, such loss is measured by the amount that the carrying value of such assets exceeds their fair value. Considerable management judgment is necessary to estimate the fair value of assets. Accordingly, actual results could vary significantly from such estimates. Assets to be disposed of are carried at the lower of their financial statement carrying amount or fair value less costs to sell. (f) Financial Instruments Bresnan Communications Group Systems has entered into fixed interest rate exchange agreements ("Interest Rate Swaps") which are used to manage interest rate risk arising from its financial liabilities. Such Interest Rate Swaps are accounted for as hedges; accordingly, amounts receivable or payable under the Interest Rate Swaps are recognized as adjustments to interest expense. Such instruments are not used for trading purposes. During 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," ("SFAS 133"), which is effective for all fiscal years beginning after June 15, 1999. SFAS 133 establishes accounting and reporting standards for derivative instruments and hedging activities by requiring that all derivative instruments be reported as assets or liabilities and measured at their fair values. Under SFAS 133, changes in the fair values of derivative instruments are recognized immediately in earnings unless those instruments qualify as hedges of the (1) fair values of existing assets, liabilities, or firm commitments, (2) variability of cash flows of forecasted transactions, or (3) foreign currency exposures of net investments in foreign operations. Although management has not completed its assessment of the impact of SFAS 133 on its combined results of operations and financial position, management estimates that the impact of SFAS 133 will not be material. (g) Income Taxes The majority of the net assets comprising the TCI Bresnan Systems and BCCLP were historically held in partnerships. In addition, BCG has been formed as a limited liability company, to be treated for tax purposes as a flow-through entity. Accordingly, no provision has been made for income tax expense or benefit in the accompanying combined financial statements as the earnings or losses of Bresnan Communications Group Systems will be reported in the respective tax returns of BCG's members (see note 5). F-8 146 BRESNAN COMMUNICATIONS GROUP SYSTEMS (A combination of certain assets, as defined in Note 1) Notes to Combined Financial Statements - (Continued) December 31, 1997 and 1998 (In Thousands) (h) Revenue Recognition Cable revenue for customer fees, equipment rental, advertising, pay-per-view programming and revenue sharing agreements is recognized in the period that services are delivered. Installation revenue is recognized in the period the installation services are provided to the extent of direct selling costs. (i) Combined Statements of Cash Flows Except for acquisition transactions described in note 3, transactions effected through Parents' investment have been considered constructive cash receipts and payments for purposes of the combined statements of cash flows. (j) Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. (3) Acquisitions and System Dispositions In January 1997, affiliates of TCI acquired certain cable television assets located in or around the Saginaw, Michigan area which are included in the TCI Bresnan Systems. TCI's cost basis in such acquired assets has been allocated based on their respective fair values. Such allocation has been reflected in the accompanying combined financial statements as follows: Cash $ 1,179 Property and equipment 10,786 Franchise costs 21,670 ---------- Parents' investment $ 33,635 ==========
In addition in 1998, BCCLP acquired two cable systems which were accounted for under the purchase method. The purchase prices were allocated to the assets acquired in relation to their fair values as increases in property and equipment of $7,099 and franchise costs of $21,651. The results of operations of these cable television systems have been included in the accompanying combined statements of operations from their dates of acquisition. Pro forma information on the acquisitions has not been presented because the effects were not significant. During 1998, BCCLP also disposed of two cable systems for gross proceeds of $58,949, which resulted in gain on sale of cable television systems of $27,027. As part of one of the dispositions, BCCLP received $47,199 of cash that is restricted to reinvestment in additional cable television systems. F-9 147 BRESNAN COMMUNICATIONS GROUP SYSTEMS (A combination of certain assets, as defined in Note 1) Notes to Combined Financial Statements - (Continued) December 31, 1997 and 1998 (In Thousands) (4) Debt Debt is summarized as follows:
1997 1998 ------------ -------- Notes payable to banks(a) $ 190,300 209,000 Notes payable to partners(b) 22,100 22,100 Other debt 1,770 1,517 ------------ -------- $ 214,170 232,617 ============ ========
(a) The notes payable to banks represent borrowings under a $250,000 senior unsecured reducing revolving credit and term loan facility (the "Bank Facility") as documented in the loan agreement as amended and restated as of August 5, 1998. The Bank Facility calls for a current available commitment of $250,000 of which $209,000 is outstanding at December 31, 1998. The Bank Facility provides for two tranches, a revolving loan tranche of $175,000 (the "Revolving Loan Tranche") and a term loan tranche of $75,000 (the "Term Loan Tranche"). The Revolving Loan Tranche is available through March 30, 1999 and then requires quarterly payments/commitment reductions ranging from 2.5% to 7.5% of the principal through its maturity on March 31, 2005. The Term Loan Tranche, fully drawn at closing and maturing March 31, 2006, requires quarterly payments of .25% beginning March 31, 1999 through December 31, 2004, quarterly payments of 2.5% for the year ended December 31, 2005 and 84% of the principal at maturity. The Bank Facility provides for interest at varying rates based on two optional measures: 1) for the Revolving Loan Tranche, the prime rate plus .625% and/or the London Interbank Offered Rate ("LIBOR") plus 1.625% and 2) for the Term Loan Tranche, the prime rate plus 1.75% and/or LIBOR plus 2.75%. The Bank Facility has provisions for certain performance-based interest rate reductions which are available under either interest rate option. In addition, the Bank Facility allows for interest rate swap agreements. The rates applicable to balances outstanding at December 31, 1998 ranged from 6.815% to 8.000%. Covenants of the Bank Facility require, among other conditions, the maintenance of certain earnings, cash flow and financial ratios and include certain limitations on additional investments, indebtedness, capital expenditures, asset sales, management fees and affiliate transactions. Commitment fees of .375% per annum are payable on the unused principal amounts of the available commitment under the Bank Facility, as well as an annual agency fee to a bank of $60. A guarantee in the amount of $3,000, has been provided by one of the BCCLP partners. F-10 148 BRESNAN COMMUNICATIONS GROUP SYSTEMS (A combination of certain assets, as defined in Note 1) Notes to Combined Financial Statements - (Continued) December 31, 1997 and 1998 (In Thousands) Balances outstanding at December 31, 1998 are due as follows: 1999 $ 14,150 2000 17,500 2001 20,850 2002 24,200 2003 and thereafter 132,300 ----------- $ 209,000 ===========
(b) The note payable to a partner is comprised of a $25,000 subordinated note of which $22,100 was outstanding at December 31, 1997 and 1998. The note, dated May 12, 1988, is junior and subordinate to the senior debt represented by the notes payable to banks. Interest is to be provided for at the prime rate (as defined) and is payable quarterly, to the extent allowed under the bank subordination agreement, or at the maturity date of the note, which is the earlier of April 30, 2001 or the first business day following the full repayment of the entire amount due under the notes payable to banks. Applicable interest rates at December 31, 1997 and 1998 were 8.25% and 7.75%, respectively. The note also provides for repayment at any time without penalty, subject to subordination restrictions. Bresnan Communications Group Systems has entered into Interest Rate Swaps to effectively fix or set a maximum interest rate on a portion of its floating rate long-term debt. Bresnan Communications Group Systems is exposed to credit loss in the event of nonperformance by the counterparties to the Interest Rate Swaps. At December 31, 1998, such Interest Rate Swaps effectively fixed or set maximum interest rates between 9.625% and 9.705% on an aggregate notional principal amount of $110,000, which rate would become effective upon the occurrence of certain events. The effect of the Interest Rate Swaps was to increase interest expense by $851, $460, and $19 for the years ended December 31, 1996, 1997 and 1998, respectively. The expiration dates of the Interest Rate Swaps ranges from August 25, 1999 to April 3, 2000. The difference between the fair market value and book value of long-term debt and the Interest Rate Swaps at December 31, 1997 and 1998 is not significant. (5) Income Taxes Taxable earnings differ from those reported in the accompanying combined statements of operations due primarily to differences in depreciation and amortization methods and estimated useful lives under regulations prescribed by the Internal Revenue Service. At December 31, 1998, the reported amounts of Bresnan Communications Group Systems' assets exceeded their respective tax bases by approximately $394 million. F-11 149 BRESNAN COMMUNICATIONS GROUP SYSTEMS (A combination of certain assets, as defined in Note 1) Notes to Combined Financial Statements - (Continued) December 31, 1997 and 1998 (In Thousands) (6) Transactions with Related Parties Bresnan Communications Group Systems purchases, at TCI's cost, substantially all of its pay television and other programming from affiliates of TCI. Charges for such programming were $42,897, $48,588 and $58,562 for 1996, 1997 and 1998, respectively, and are included in programming expenses in the accompanying combined financial statements. Certain affiliates of the Partners provide administrative services to Bresnan Communications Group Systems and have assumed managerial responsibility of Bresnan Communications Group Systems cable television system operations and construction. As compensation for these services, Bresnan Communications Group Systems pays a monthly fee calculated pursuant to certain agreed upon formulas. Such charges totaled $11,746, $11,801 and $13,086 and have been included in selling, general and administrative expenses for years ended December 31, 1996, 1997 and 1998, respectively. (7) Commitments and Contingencies On October 5, 1992, Congress enacted the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"). In 1993 and 1994, the Federal Communications Commission ("FCC") adopted certain rate regulations required by the 1992 Cable Act and imposed a moratorium on certain rate increases. As a result of such actions, Bresnan Communications Group Systems' basic and tier service rates and its equipment and installation charges (the "Regulated Services") are subject to the jurisdiction of local franchising authorities and the FCC. Basic and tier service rates are evaluated against competitive benchmark rates as published by the FCC, and equipment and installation charges are based on actual costs. Any rates for Regulated Services that exceeded the benchmarks were reduced as required by the 1993 and 1994 rate regulations. The rate regulations do not apply to the relatively few systems which are subject to "effective competition" or to services offered on an individual service basis, such as premium movie and pay-per-view services. Bresnan Communications Group Systems believes that it has complied in all material respects with the provisions of the 1992 Cable Act, including its rate setting provisions. However, Bresnan Communications Group Systems' rates for Regulated Services are subject to review by the FCC, if a complaint has been filed by a customer, or the appropriate franchise authority, if such authority has been certified by the FCC to regulate rates. If, as a result of the review process, a system cannot substantiate its rates, it could be required to retroactively reduce its rates to the appropriate benchmark and refund the excess portion of rates received. Any refunds of the excess portion of tier service rates would be retroactive to the date of complaint. Any refunds of the excess portion of all other Regulated Service rates would be retroactive to one year prior to the implementation of the rate reductions. Certain of Bresnan Communications Group Systems' individual systems have been named in purported class actions in various jurisdictions concerning late fee charges and practices. Certain of Bresnan Communications Group Systems' cable systems charge late fees to customers who do not pay their cable bills on time. Plaintiffs generally allege that the late fees charged by such cable systems are not reasonably related to the costs incurred by the cable systems as a result of the late payment. Plaintiffs seek to require cable systems to provide compensation for alleged excessive late fee charges for past periods. These cases are at various stages of the litigation process. Based upon the facts available, management believes that, F-12 150 BRESNAN COMMUNICATIONS GROUP SYSTEMS (A combination of certain assets, as defined in Note 1) Notes to Combined Financial Statements - (Continued) December 31, 1997 and 1998 (In Thousands) although no assurances can be given as to the outcome of these actions, the ultimate disposition of these matters should not have a material adverse effect upon the financial condition or results of operations of Bresnan Communications Group Systems. BCCLP entered into three letters of intent with three different cable operators pursuant to which the BCCLP intends to sell a small cable television system in Michigan and acquire cable television systems in both Michigan and Minnesota. These transactions would result in a net cost to the BCCLP of approximately $63,000, $2,000 was deposited for the acquisition in Michigan. BCCLP expects to fund these transactions through the use of restricted cash, cash flow from operations and additional borrowings. Bresnan Communications Group Systems has other contingent liabilities related to legal proceedings and other matters arising in the ordinary course of business. Although it is reasonably possible Bresnan Communications Group Systems may incur losses upon conclusion of such matters, an estimate of any loss or range of loss cannot be made. In the opinion of the management, it is expected that amounts, if any, which may be required to satisfy such contingencies will not be material in relation to the accompanying combined financial statements. Bresnan Communications Group Systems leases business offices, has entered into pole attachment agreements and uses certain equipment under lease arrangements. Rental expense under such arrangements amounted to $3,208, $3,221 and $2,833 in 1996, 1997 and 1998, respectively. Future minimum lease payments under noncancelable operating leases are estimated to approximate $2,240 per year for each of the next five years. It is expected that, in the normal course of business, expiring leases will be renewed or replaced by leases on the same or similar properties. During 1998, TCI and BCCLP have continued enterprise-wide, comprehensive efforts to assess and remediate their respective computer systems and related software and equipment to ensure such systems, software and equipment will recognize, process and store information in the year 2000 and thereafter. Such year 2000 remediation efforts, which encompass the TCI Bresnan Systems and the Bresnan Entities, respectively, include an assessment of their most critical systems, such as customer service and billing systems, headends and other cable plant, business support operations, and other equipment and facilities. TCI and BCCLP also continued their efforts to verify the year 2000 readiness of their significant suppliers and vendors and continued to communicate with significant business partners' and affiliates to assess such partners and affiliates' year 2000 status. TCI and BCCLP have formed year 2000 program management teams to organize and manage their year 2000 remediation efforts. The program management teams are responsible for overseeing, coordinating and reporting on their respective year 2000 remediation efforts. Upon consummation of the TCI Transaction, assessment and remediation of year 2000 issues for the TCI Bresnan Systems became the responsibility of BCCLP. During 1998, the project management teams continued their surveys of significant third-party vendors and suppliers whose systems, services or products are important to their operations (e.g., suppliers of addressable F-13 151 BRESNAN COMMUNICATIONS GROUP SYSTEMS (A combination of certain assets, as defined in Note 1) Notes to Combined Financial Statements - (Continued) December 31, 1997 and 1998 (In Thousands) controllers and set-top boxes, and the provider of billing services). The year 2000 readiness of such providers is critical to continued provision of cable service. In addition to the survey process described above, management of TCI and BCCLP have identified their most critical supplier/vendor relationships and have instituted a verification process to determine the vendors' year 2000 readiness. Such verification includes, as deemed necessary, reviewing vendors' test and other data and engaging in regular conferences with vendors' year 2000 teams. TCI and BCCLP are also requiring testing to validate the year 2000 compliance of certain critical products and services. Year 2000 costs incurred in the year ended December 31, 1998 for Bresnan Communications Group Systems were not material. Management of TCI and BCCLP currently estimate the remaining costs associated with Bresnan Communications Group Systems to be not less than $4.4 million. Although no assurances can be given, management currently expects that (i) cash flow from operations will fund the costs associated with year 2000 compliance and (ii) the total projected cost associated with the year 2000 programs will not be material to Bresnan Communications Group Systems financial position, results of operations or cash flows. The failure to correct a material year 2000 problem could result in an interruption or failure of certain important business operations. There can be no assurance that the systems of Bresnan Communications Group Systems or the systems of other companies on which they rely will be converted in time, or that any such failure to convert by the Bresnan Communications Group Systems or other companies will not have a material adverse effect on the financial position, results of operations or cash flows of Bresnan Communications Group Systems. F-14 152 ================================================================================ No dealer, salesperson or any other person has been authorized to give any information or to make any representations in connection with this Exchange Offer other than those contained in this Prospectus, and, if given or made, such information or representations must not be relied upon as having been authorized by the Company. This Prospectus doe does not constitute an offer to sell or a solicitation of an offer to buy any security other than those to which it relates, nor does it constitute an offer to sell or a solicitation of an offer or solicitation. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that the information contained herein is correct as of any time subsequent to the date hereof. ---------------------- ================================================================================ ================================================================================ [LOGO] BRESNAN COMMUNICATIONS GROUP LLC BRESNAN CAPITAL CORPORATION Offer to Exchange 8% Senior Notes due 2009 for all Outstanding 8% Senior Notes due 2009 and 9 1/4% Senior Discount Notes due 2009 for all Outstanding 9 1/4% Senior Discount Notes due 2009 -------------------- PROSPECTUS -------------------- May 3, 1999 ================================================================================ 153 PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS Item 20. Indemnification of Directors and Officers Indemnification Under the Limited Liability Company Agreement of The Company. The Limited Liability Company Agreement of BCG dated August 5, 1998, (the "Operating Agreement") between BCG and BCCLP, its member (the "Member") provides certain Indemnifiable Persons (as defined therein) shall be indemnified and held harmless by the Company to the fullest extent permitted by law from and against any losses, claims, demands, liabilities, costs, damages and causes of action of any nature whatsoever, and amounts paid in settlement of any claims, including, without limitation, any reasonable legal, accounting or other expenses incurred in connection with investigating or defending any actual or threatened claims, investigations, suits, proceedings or actions, arising out of or incidental to an Indemnifiable Person's conduct of the affairs of BCG within the scope of authority conferred by the Operating Agreement (collectively, "Claims"). Notwithstanding the foregoing, no indemnification is available under the Operating Agreement in respect of any Claim adjudged to be primarily the result of fraud or willful misconduct of an Indemnifiable Person. Unless the Member otherwise determines, BCG will pay the costs and expenses, including reasonable legal fees, incurred by any Indemnifiable Person in connection with any Claim for which an Indemnifiable Person may be entitled to indemnification in accordance with the Operating Agreement in advance of the final disposition of such Claim, upon receipt by the Company of an undertaking of such Indemnifiable Person to repay such payment if there is a final adjudication or determination that such Indemnifiable Person is not entitled to indemnification as provided under the Operating Agreement. The indemnification rights contained in the Operating Agreement shall be cumulative and in addition to any and all other rights, remedies and recourse to which an Indemnifiable Person shall be entitled, whether pursuant to the provisions of this Agreement, at law, or in equity. Payment of the indemnification obligations set forth herein shall be made from the assets of BCG and the Member shall not be personally liable to an Indemnifiable Person for payment of indemnification thereunder. Notwithstanding anything contained in the Operating Agreement to the contrary, all indemnification obligations of BCG shall survive the termination of BCG. Indemnification Under the Delaware Limited Liability Company Act. Section 18-108 of the Delaware Limited Liability Company Act authorizes a limited liability company to indemnify and hold harmless any member or manager or other person from and against any and all claims and demands whatsoever, subject to such standards and restrictions, if any, as are set forth in its limited liability company agreement. Indemnification Under the By-Laws of BCC. The By-Laws of BCC provide that BCC, to the fullest extent permitted by applicable law, will indemnify any officer or director of BCC who was or is a party or is threatened to be made a party to, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative in nature, by reason of the fact that such person is or was a director or officer of BCC, or is or was serving at the request of BCC as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding and/or the defense or settlement of such action or suit, and BCC may enter into agreements with any such person for the purpose of providing for such indemnification. To the extent that a director or officer of BCC has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in the preceding paragraph, or in defense of any claim, issue or matter therein, and BCC has not previously reimbursed or paid for all such expenses, such person will be indemnified against its expenses (including attorneys' fees and disbursements) actually and reasonably 154 incurred by such person in connection therewith. Expenses (including attorneys' fees) incurred by an officer or director in defending any civil, criminal, administrative or investigative action, suit or proceeding shall be paid by BCC in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such officer or director to repay such amount if it shall ultimately be determined that such officer or director was not entitled to be indemnified by BCC against such expenses as authorized in the By-Laws of BCC. The indemnification and advancement of expenses permitted in the By-Laws of BCC will not be deemed exclusive of any other rights to which any person may be entitled under any agreement, or by virtue of vote of stockholders or disinterested directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding an office, and will continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such person. Indemnification Under the Delaware General Corporation Law Section 145 of the Delaware General Corporation Law (the "DGCL), authorizes a corporation to indemnify its directors, officers, employees and agents and its former directors, officers, employees, and agents and those who serve, at the corporation's request, in such capacities with another enterprise, against expenses (including attorneys' fees), as well as judgments, fines and settlements in nonderivative lawsuits, actually and reasonably incurred in connection with the defense of any settlements in nonderivative in which they or any of them wee or are made parties or are threatened to be made parties by reason of their serving or having served in such capacity. The DGCL provides, however, that such person must have acted in good faith and in a manner such person reasonably believed to be in (or not opposed to) the best interests of the corporation and, in the case of a criminal action, such person must have had no reasonable cause to believe his or her conduct was unlawful. In addition, the DGCL does not permit indemnification in an action or suit by or in the right of the corporation, where such person has been adjudged liable to the corporation, unless and only to the extent that, a court determines that such person fairly and reasonably is entitled to indemnity for costs the court deems proper in light of liability adjudication. Indemnity is mandatory to the extent a claim, issue or matter has been successfully defended. The DGCL also prohibits limitations on officer or director liability for acts or omissions which resulted in violation of a statute prohibiting certain dividend declarations, certain payments to stockholders after dissolution and particular types of loans. The effect of these provisions is to eliminate the rights of BCI and its stockholders (through stockholders' derivative suits on behalf of BCI to recover monetary damages against an officer or director for breach of fiduciary as an officer or director (including breaches resulting from grossly negligent behavior), except in the situations described above. These provisions will not limit the liability of directors or officers under the federal securities laws of he United States. Item 21. Exhibits and Financial Statement Schedules. a. Exhibits
Exhibit Description Number ----------- - ------ 2.1 Purchase Agreement, dated January 25, 1999, among the Issuers, BCCLP and the Initial Purchasers named therein 3.1 Certificate of Formation of BCG 3.2 Limited Liability Company Agreement of BCG 3.3 Certificate of Incorporation of BCC 3.4 By-Laws of BCC
155 4.1 Indenture, dated February 2, 1999, among BCG, BCC and State Street Bank and Trust Company, as trustee, relating to the Issuers' $170,000,000 principal amount of 8% Senior Notes due 2009 and $275,000,000 aggregate principal amount at maturity of 9 1/4% Senior Discount Notes due 2009 4.2 Form of 144A Senior Note 4.3 Form of 144A Senior Discount Note 4.4 Form of Regulation S Senior Note 4.5 Form of Regulation S Senior Discount Note 4.6 Registration Rights Agreement, dated January 25, 1999, among the Issuers and the Initial Purchasers named therein 5.1 Opinion of Paul, Hastings, Janofsky & Walker LLP 10.1 Loan Agreement dated as of February 2, 1999 among BTC, various lending institutions, Toronto Dominion (Texas), Inc., as the Administrative Agent for the Lenders, with TD Securities (USA) Inc., Chase Securities Inc., the Bank of Nova Scotia, BNY Capital Markets, Inc. and NationsBanc Montgomery Securities LLC, collectively, the Arranging Agents, Chase Securities Inc., as Syndication Agent, the Bank of Nova Scotia, the Bank of New York Company, Inc., and NationsBanc Montgomery Securities LLC, as Documentation Agents, and TD Securities (USA) Inc., and Chase Securities Inc., as Joint Book Managers and Joint Lead Arrangers 10.2 Management Services Agreement by and between BCI (USA), LLC and BCCLP* 12 Ratio of Earnings to Fixed Charges Calculation 21 Subsidiaries of the Company 23.1 Consent of Paul, Hastings, Janofsky & Walker LLP (contained in Exhibit 5.1) 23.2 Consent of KPMG LLP 25.1 Statement of Eligibility of State Street Bank and Trust Company, as Trustee on Form T-1 27.1 Financial Data Schedule of the Company 27.2 Financial Data Schedule of BCC 99.1 Form of Letter of Transmittal* 99.2 Form of Notice of Guaranteed Delivery*
156 b. Financial Statement Schedules Schedule II - Valuation and Qualifying Accounts c. Not applicable * To be filed by amendment ITEM 22. Undertakings. The undersigned Registrants hereby undertake that: (1) Prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this Registration Statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to the reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. (2) Every prospectus: (i) that is filed pursuant to the immediately preceding paragraph or (ii) that purports to meet the requirements of Section 10(a)(3) of the Act and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the Registration Statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrants pursuant to the provisions, or otherwise, the Registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrants of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrants will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. 157 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrants have duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in White Plains, New York on the 3rd day of May, 1999. BRESNAN COMMUNICATIONS GROUP LLC By: BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP, its member By: BCI (USA), LLC, its managing partner By: BRESNAN COMMUNICATIONS, INC., its managing member By: /s/ Jeffrey S. DeMond ------------------------------------------ Name: Jeffrey S. DeMond Title: Executive Vice President and Chief Financial Officer BRESNAN CAPITAL CORPORATION By: /s/ Jeffrey S. DeMond ------------------------------------------ Name: Jeffrey S. DeMond Title: Vice President Pursuant to the requirements of the Securities Act of 1933, the Registration Statement has been signed by the following persons in the capacities and on the dates indicated. Signature Title Date --------- ----- ---- /s/ William J. Bresnan Director of BCI May 3, 1999 - ------------------------ /s/ William J. Bresnan Director of BCC May 3, 1999 - ------------------------ 158 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Balances at Additions Charged Beginning of to Costs and Balance at End Period Expenses Deductions (1) of Period --------------------------------------------------------------------------- For the year ended December 31, 1998 Allowance for receivables 824,815.56 3,040,503.27 (3,238,853.58) 626,465.25 For the year ended December 31, 1997 Allowance for receivables 540,742.90 3,737,347.99 (3,453,275.33) 824,815.56 For the year ended December 31, 1996 Allowance for receivables 399,630.80 2,900,988.67 (2,759,876.57) 540,742.90
- ---------- (1) Represents the write-off of uncollectible accounts, net of recoveries and the sale of receivables to acquiring companies. 159 EXHIBIT INDEX -------------
Exhibit Description Number ----------- - ------ 2.1 Purchase Agreement, dated January 25, 1999, among the Issuers, BCCLP and the Initial Purchasers named therein 3.1 Certificate of Formation of BCG 3.2 Limited Liability Company Agreement of BCG 3.3 Certificate of Incorporation of BCC 3.4 By-Laws of BCC 4.1 Indenture, dated February 2, 1999, among BCG, BCC and State Street Bank and Trust Company, as trustee, relating to the Issuers' $170,000,000 principal amount of 8% Senior Notes due 2009 and $275,000,000 aggregate principal amount at maturity of 9 1/4% Senior Discount Notes due 2009 4.2 Form of 144A Senior Note 4.3 Form of 144A Senior Discount Note 4.4 Form of Regulation S Senior Note 4.5 Form of Regulation S Senior Discount Note 4.6 Registration Rights Agreement, dated January 25, 1999, among the Issuers and the Initial Purchasers named therein 5.1 Opinion of Paul, Hastings, Janofsky & Walker LLP 10.1 Loan Agreement dated as of February 2, 1999 among BTC, various lending institutions, Toronto Dominion (Texas), Inc., as the Administrative Agent for the Lenders, with TD Securities (USA) Inc., Chase Securities Inc., the Bank of Nova Scotia, BNY Capital Markets, Inc. and NationsBanc Montgomery Securities LLC, collectively, the Arranging Agents, Chase Securities Inc., as Syndication Agent, the Bank of Nova Scotia, the Bank of New York Company, Inc., and NationsBanc Montgomery Securities LLC, as Documentation Agents, and TD Securities (USA) Inc., and Chase Securities Inc., as Joint Book Managers and Joint Lead Arrangers 10.2 Management Services Agreement by and between BCI (USA), LLC and BCCLP* 12 Ratio of Earnings to Fixed Charges Calculation 21 Subsidiaries of the Company 23.1 Consent of Paul, Hastings, Janofsky & Walker LLP (contained in Exhibit 5.1) 23.2 Consent of KPMG LLP 25.1 Statement of Eligibility of State Street Bank and Trust Company, as Trustee on Form T-1 27.1 Financial Data Schedule of the Company 27.2 Financial Data Schedule of BCC 99.1 Form of Letter of Transmittal* 99.2 Form of Notice of Guaranteed Delivery*
* To be filed by amendment EX-2.1 2 PURCHASE AGREEMENT 1 EXHIBIT 2.1 EXECUTION COPY Bresnan Communications Group LLC Bresnan Capital Corporation 8% Senior Notes due 2009 9 1/4% Senior Discount Notes due 2009 Purchase Agreement New York, New York January 25, 1999 Salomon Smith Barney Inc. Chase Securities Inc. Morgan Stanley & Co. Incorporated TD Securities (USA) Inc. In care of: Salomon Smith Barney Inc. Seven World Trade Center New York, New York 10048 Ladies and Gentlemen: Bresnan Communications Group LLC, a limited liability company organized under the laws of Delaware (the "Company"), and Bresnan Capital Corporation, a corporation organized under the laws of Delaware ("BCC"), propose to issue and sell to the several parties named in Schedule I hereto (the "Initial Purchasers"), for whom you (the "Representatives") are acting as representatives, $170,000,000 aggregate principal amount of their 8% Senior Notes due 2009 (the "Senior Notes") and $275,000,000 aggregate principal amount at maturity ($175,021,000 gross proceeds) of their 9 1/4% Senior Discount Notes due 2009 (the "Senior Discount Notes" and, together with the Senior Notes, the "Securities"). The Securities are to be issued under an indenture (the "Indenture"), dated as of the Closing Date (as defined below), among the Company, BCC and State Street Bank and Trust Company, as trustee (the "Trustee"). The Securities have the benefit of a registration rights agreement (the "Registration Rights Agreement"), dated as of the Execution Time (as defined below), among the Company, BCC and the Initial Purchasers, pursuant to which the Company and BCC have agreed to register the Securities under the Act (as defined below) subject to the terms and conditions therein specified. To the extent there are no additional parties listed on Schedule I other than you, the term 2 Representatives as used herein shall mean you as the Initial Purchasers, and the terms Representatives and Initial Purchasers shall mean either the singular or plural as the context requires. The use of the neuter in this Agreement shall include the feminine and masculine wherever appropriate. Capitalized terms used herein without definition have the respective meanings assigned to them in the Final Memorandum (as defined below). Certain terms used herein are defined in Section 18 hereof. The sale of the Securities to the Initial Purchasers will be made without registration of the Securities under the Act in reliance upon exemptions from the registration requirements of the Act. In connection with the sale of the Securities, the Company and BCC have prepared a preliminary offering memorandum, dated January 14, 1999 (the "Preliminary Memorandum"), and a final offering memorandum, dated January 25, 1999 (as amended or supplemented at the Execution Time, the "Final Memorandum"). Each of the Preliminary Memorandum and the Final Memorandum sets forth certain information concerning the Company, BCC and the Securities. Each of the Company and BCC hereby confirms that it has authorized the use of the Preliminary Memorandum and the Final Memorandum, and any amendment or supplement thereto, in connection with the offer and sale of the Securities by the Initial Purchasers. In the event that the Funding Conditions (as set forth in the escrow agreement, the form of which is attached hereto as Exhibit B (the "Escrow Agreement")) are not satisfied on or prior to the Closing Date, on the Closing Date, the Company and BCC will execute the Escrow Agreement and deposit with State Street Bank and Trust Company, as escrow agent (the "Escrow Agent"), the net proceeds of the offering of the Securities, together with certain other funds or letters of credit (such net proceeds and other funds or letters of credit are collectively referred to herein as the "Escrowed Funds") in an amount sufficient to redeem the Securities at a mandatory redemption price in cash equal to 101% of the aggregate principal amount or accreted value thereof plus, in the case of the Senior Notes, accrued and unpaid interest, if any, to the redemption date, based on the assumption that the redemption would occur on May 14, 1999 (the "Mandatory Redemption Price"). Assuming execution of the Escrow Agreement on the Closing Date, either (i) upon the satisfaction of the 3 Funding Conditions, the Escrowed Funds will be released to the Company or (ii) in the event the Funding Conditions are not satisfied on or before April 30, 1999 or the Contribution Agreement is terminated prior to such date, the Escrowed Funds will be used to pay the Mandatory Redemption Price for the Securities. In connection with the consummation of the TCI Transactions and satisfaction of the Funding Conditions, certain affiliates of TCI listed on Exhibit A to the Contribution Agreement (collectively, the "TCI Systems Parties") will contribute the Contributed TCI Systems and certain related obligations and liabilities to TCI Bresnan LLC, which entity will also be assigned the Assumed TCI Debt, and, in connection with the consummation of the TCI Transactions, the Contributed TCI Systems and the Assumed TCI Debt will be transferred to BCCLP. BCCLP will, in connection with the consummation of the TCI Transactions, contribute all its operating assets and liabilities, including the Existing Bresnan Systems and the Contributed TCI Systems, to the Company, which will contribute such assets and some or all of such liabilities to, Bresnan Telecommunications Company LLC, a Delaware limited liability company and wholly owned subsidiary of the Company ("BTC"). As used herein, the "Business" means the Company and its subsidiaries, taken as a whole after giving pro forma effect to the TCI Transactions and the Financings and the "Combined Company" means the Company, after giving pro forma effect to the TCI Transactions and the Financings. In the event that the Funding Conditions are satisfied and the TCI Transactions are consummated at or prior to Closing, all obligations relating to the Escrow Agreement, including the delivery of any opinions with respect thereto, shall not be applicable. 1. Representations and Warranties. (a) Each of the Company and BCC represents and warrants to each Initial Purchaser as set forth below in this Section 1. (i) At the Execution Time and on the Closing Date, the Final Memorandum did not and will not (and any amendment or supplement thereto, at the date thereof and at the Closing Date, will not), contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements 4 therein, in the light of the circumstances under which they were made, not misleading; provided, however, that neither the Company nor BCC makes any representation or warranty as to the information contained in or omitted from the Final Memorandum, or any amendment or supplement thereto, in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of the Initial Purchasers through the Representatives specifically for inclusion therein. (ii) None of the Company, BCC, any of their respective Affiliates or any person acting on behalf of any of them (provided that no representation or warranty is made as to the activities of any Initial Purchaser or any person acting on its behalf) has, directly or indirectly, made offers or sales of any security, or solicited offers to buy any security, under circumstances that would require the registration of the Securities under the Act. (iii) None of the Company, BCC, any of their respective Affiliates or any person acting on behalf of any of them (provided that no representation or warranty is made as to the activities of any Initial Purchaser or any person acting on its behalf) has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with any offer or sale of the Securities in the United States. (iv) The Securities satisfy the eligibility requirements of Rule 144A(d)(3) under the Act. (v) None of the Company, BCC, any of their respective Affiliates or any person acting on behalf of any of them (provided that no representation or warranty is made as to the activities of any Initial Purchaser or any person acting on its behalf) has engaged in any directed selling efforts with respect to the Securities, and each of them has complied with the offering restrictions requirement of Regulation S. Terms used in this paragraph have the meanings given to them by Regulation S. (vi) The Company and BCC have been advised by The 5 Portal Market of the NASD that the Securities have been designated Portal-eligible securities in accordance with the rules and regulations of the NASD. (vii) Neither the Company nor BCC is, and after giving effect to the offering and sale of the Securities and the application of the proceeds thereof as described in the Final Memorandum will not be, an "investment company" within the meaning of the Investment Company Act, without taking account of any exemption arising out of the number of holders of the Company's securities. (viii) Neither the Company nor BCC has paid or agreed to pay to any person any compensation for soliciting another to purchase any of the Securities (except as contemplated by this Agreement). (ix) Neither the Company nor BCC has taken, directly or indirectly, any action prohibited by Regulation M under the Exchange Act in connection with the offering of the Securities. (x) The information provided by the Company or BCC pursuant to Section 5(h) hereof will not, at the date thereof, contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (xi) Each of the Company, BCC and BCCLP has been duly formed or incorporated, as applicable, and is validly existing as a limited liability company, limited partnership or corporation, as applicable, in good standing under the laws of the jurisdiction in which it is chartered or organized with full corporate, limited liability company or limited partnership power and authority to own or lease, as the case may be, and to operate its properties and conduct its business as described in the Final Memorandum, and is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction which requires such qualification, except where the 6 failure to be so qualified, individually or in the aggregate, could not reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Business; each of the Company's subsidiaries (excluding BCC) has been duly formed and is validly existing as a limited liability company or corporation, as applicable, under the laws of the jurisdiction in which it is chartered or organized with full corporate or limited liability company power, as applicable, and authority to own or lease, as the case may be, and to operate its properties and conduct its business as described in the Final Memorandum, and is duly qualified to do business as a foreign entity and is in good standing under the laws of each jurisdiction which requires such qualification, except where the failure to be so qualified, individually or in the aggregate, could not reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Business. (xii) This Agreement and the Registration Rights Agreement have been duly authorized, executed and delivered by each of the Company and BCC; each of the Indenture and the Escrow Agreement has been duly authorized, and when executed and delivered by each of the Company and BCC, assuming due authorization, execution and delivery thereof by the other parties thereto, will constitute a legal, valid and binding instrument enforceable against each of the Company and BCC in accordance with its terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors' rights and remedies generally from time to time in effect, and to general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, regardless of whether considered in a proceeding in equity or at law); the Securities have been duly authorized, and, when executed and authenticated in accordance with the provisions of the Indenture, and delivered to and paid for by the Initial Purchasers in accordance with the terms of this Agreement, will have been duly executed and delivered by each of the Company and BCC and will constitute the 7 legal, valid and binding obligations of each of the Company and BCC entitled to the benefits of the Indenture (subject to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors' rights and remedies generally from time to time in effect and to general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, regardless of whether considered in a proceeding in equity or at law). (xiii) No consent, approval, authorization, filing with or order of any court or governmental agency or body is required in connection with the transactions contemplated herein, in the Indenture, the Registration Rights Agreement and the Escrow Agreement except such as will be obtained under the Act and the Trust Indenture Act, such as may be required under the blue sky laws of any jurisdiction in connection with the transactions contemplated by the Registration Rights Agreement, such as may be required under such blue sky laws in connection with the purchase and distribution of the Securities by the Initial Purchasers in the manner contemplated herein and in the Final Memorandum. (xiv) The TCI Transactions will be consummated in accordance with the terms of the Contribution Agreement (and the related agreements referenced therein), provided that the terms of such transactions and the assets and businesses combined pursuant thereto will conform in all material respects to the descriptions thereof contained throughout the Final Memorandum (subject to any changes contemplated therein). (xv) The execution and delivery of this Agreement, the Indenture, the Registration Rights Agreement, the Escrow Agreement and the Contribution Agreement, the issue and sale of the Securities, the consummation of any other of the transactions herein or therein contemplated and the fulfillment of the terms hereof or thereof will not conflict with, result in a breach or violation or imposition of any lien, charge or encumbrance upon any property or assets of the Company, BCC, the Combined Company or any of their 8 respective subsidiaries pursuant to: (1) the charter or certificate of formation, as the case may be, or by-laws, limited partnership agreement or limited liability company agreement, as the case may be, of the Company, BCC or any of their respective subsidiaries; (2) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which the Company, BCC, the Combined Company or any of their respective subsidiaries is a party or bound or to which their respective property is subject; or (3) any statute, law, rule, regulation, judgment, order or decree applicable to the Company, BCC, the Combined Company or any of their respective subsidiaries of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company, BCC, the Combined Company or any of their respective subsidiaries or any of their respective properties; except, in the case of clauses (2) and (3) above, for any such violation or default that, individually or in the aggregate, could not reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Business. (xvi) The combined historical financial statements and schedules of Bresnan Communications Group Systems included in the Final Memorandum present fairly in all material respects the consolidated financial condition, results of operations and cash flows of the Combined Company, as of the dates and for the periods indicated, comply as to form with the applicable accounting requirements of the Act and have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as otherwise noted therein or, in the case of interim statements, 9 normal year-end adjustments); the selected financial data set forth under the caption "Selected Combined Financial and Operating Data" in the Final Memorandum fairly present, on the basis stated in the Final Memorandum, the information included therein; the pro forma combined financial statements included in the Final Memorandum include assumptions that provide a reasonable basis for presenting the significant effects directly attributable to the transactions and events described therein, the related pro forma adjustments give appropriate effect to those assumptions, and the pro forma adjustments reflect the proper application of those adjustments to the historical combined financial statement amounts in the pro forma combined financial statements included in the Final Memorandum; the pro forma combined financial statements included in the Final Memorandum comply as to form in all material respects with the applicable accounting requirements of Regulation S-X under the Act; and the pro forma adjustments have been properly applied to the historical combined amounts in the compilation of those statements. (xvii) Except as discussed in the Final Memorandum (exclusive of any amendment or supplement thereto), there is no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company, BCC, the Combined Company, any of their respective subsidiaries or their respective property pending or, to the knowledge of each of the Company and BCC, threatened that: (1) could reasonably be expected to have a material adverse effect on the performance of this Agreement, the Indenture, the Registration Rights Agreement, the Escrow Agreement or the Contribution Agreement or the consummation of any of the transactions contemplated hereby or thereby; or (2) could reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, 10 business or properties of the Business, whether or not arising from transactions in the ordinary course of business. (xviii) None of the Company, BCC, the Combined Company or any subsidiary of the Company, BCC or the Combined Company is in violation or default of: (1) any provision of its charter or certificate of formation, as the case may be, or by-laws, limited partnership agreement or limited liability company agreement, as the case may be; (2) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which it is a party or bound or to which its property is subject; or (3) any statute, law, rule, regulation, judgment, order or decree applicable to the Company, BCC, the Combined Company or any of their respective subsidiaries of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company, BCC, the Combined Company or such subsidiary or any of its properties, as applicable; except, in the case of clauses (2) and (3) above, for any such violation or default that, individually or in the aggregate, could not reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Business. (xix) KPMG LLP, who have certified certain combined financial statements of Bresnan Communications Group Systems and delivered their report with respect to the audited combined financial statements included in the Final Memorandum, are independent public accountants with respect to BCCLP, TCI, the Company and BCC within the meaning of the Act and the applicable published rules and regulations thereunder. 11 (xx) The Company, BCC, the Combined Company and their respective subsidiaries possess all licenses, certificates, permits and other authorizations issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses, except for any failure to possess a license, certificate, permit or authorization that, individually or in the aggregate, could not reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Business; and none of the Company, BCC, the Combined Company or any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such license, certificate, authorization or permit which, individually or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Business, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Final Memorandum (exclusive of any amendment or supplement thereto). Except as previously disclosed to the Initial Purchasers, (A) the Company, BCC, BCCLP and the TCI Systems Parties have applied for and have received all licenses, certificates, permits and other authorizations issued by the appropriate franchise authorities necessary to transfer the franchises in connection with the consummation of the TCI Transactions and (B) except for any revocations or modifications that could not reasonably be expected to have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Business or on the consummation of the TCI Transactions, none of the Company, BCC, BCCLP or the TCI Systems Parties has received any notice of proceedings relating to the revocation or modification of any such license, certificate, permit or authorization. (xxi) The subsidiaries listed on Annex A attached hereto are the only subsidiaries of the Company and BCC. 12 (xxii) Each of the Company, BCC and the Combined Company is in compliance with the Commission's staff legal bulletin No.5 dated January 12, 1998, as amended to date, related to Year 2000 compliance. Any certificate signed by any officer of the Company or BCC and delivered to the Representatives or counsel for the Initial Purchasers in connection with the offering of the Securities shall be deemed a representation and warranty by each of the Company and BCC as to matters covered thereby, to each Initial Purchaser. (b) BCCLP represents and warrants to each Initial Purchaser that this Agreement and the Contribution Agreement have been duly authorized, executed and delivered by BCCLP and the Escrow Agreement has been duly authorized and, when executed and delivered by BCCLP, in each case, assuming due authorization, execution and delivery by each of the other parties thereto, constitutes or, upon such execution and delivery by BCCLP, will constitute a legal, valid and binding instrument enforceable, in each case, in accordance with its terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors' rights and remedies generally from time to time in effect and to general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, regardless of whether considered in a proceeding in equity or at law). 2. Purchase and Sale. Subject to the terms and conditions and in reliance upon the representations and warranties herein set forth, each of the Company and BCC agrees to sell to each Initial Purchaser, and each Initial Purchaser agrees, severally and not jointly, to purchase from the Company and BCC, (i) at a purchase price of 97.500% of the principal amount thereof, plus accrued interest, if any, from February 2, 1999, to the Closing Date, the principal amount of Senior Notes and (ii) at a purchase price of 61.735% of the principal amount at maturity thereof, plus accretion of original issue discount, if any, from February 2, 1999, to the Closing Date, the principal amount at maturity of Senior Discount Notes, in each case, as set forth opposite such Initial Purchaser's name in Schedule I hereto. 13 3. Delivery and Payment. Delivery of and payment for the Securities shall be made at 10:00 A.M., New York City time, on February 2, 1999, or at such time on such later date as the Representatives shall designate, which date and time may be postponed by agreement between the Representatives and the Company and BCC or as provided in Section 9 hereof (such date and time of delivery and payment for the Securities being herein called the "Closing Date"). Delivery of the Securities shall be made to the Representatives for the respective accounts of the several Initial Purchasers against payment by the several Initial Purchasers through the Representatives of the purchase price thereof to or upon the order of the Company by wire transfer payable in same-day funds to the account specified by the Company. Delivery of the Securities shall be made through the facilities of The Depository Trust Company unless the Representatives shall otherwise instruct. 4. Offering by Initial Purchasers. Each Initial Purchaser, severally and not jointly, represents and warrants to and agrees with each of the Company and BCC that: (a) It has not offered or sold, and will not offer or sell, any Securities except (i) to those it reasonably believes to be qualified institutional buyers (as defined in Rule 144A under the Act) and that, in connection with each such sale, it has taken or will take reasonable steps to ensure that the purchaser of such Securities is aware that such sale is being made in reliance on Rule 144A or (ii) in accordance with the restrictions set forth in Exhibit A hereto. (b) Neither it nor any person acting on its behalf has made or will make offers or sales of the Securities in the United States by means of any form of general solicitation or general advertising (within the meaning of Regulation D) in the United States, except pursuant to a registered public offering, whether an exchange offer or shelf registration, as provided in the Registration Rights Agreement. 5. Agreements. Each of the Company and BCC agrees with each Initial Purchaser that: (a) The Company and BCC will furnish to each Initial 14 Purchaser, without charge, during the period referred to in paragraph (c) below, as many copies of the Final Memorandum and any amendments and supplements thereto as it may reasonably request. (b) Neither the Company nor BCC will amend or supplement the Final Memorandum without the prior written consent of the Representatives, which consent will not be unreasonably withheld. (c) If at any time prior to the completion of the sale of the Securities by the Initial Purchasers (as reasonably determined by the Representatives), any event occurs as a result of which the Final Memorandum, as then amended or supplemented, would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it should be necessary to amend or supplement the Final Memorandum to comply with applicable law, the Company and BCC promptly (i) will notify the Representatives of any such event; (ii) subject to the requirements of paragraph (b) of this Section 5, will prepare an amendment or supplement that will correct such statement or omission or effect such compliance; and (iii) will supply any supplemented or amended Final Memorandum to the several Initial Purchasers without charge in such quantities as you may reasonably request. (d) The Company and BCC will cooperate with the Initial Purchasers in arranging, if necessary, for the qualification of the Securities for sale by the Initial Purchasers under the laws of such jurisdictions as the Initial Purchasers may designate and will maintain such qualifications in effect so long as required for the sale of the Securities; provided that neither the Company nor BCC shall be obligated to (i) qualify to do business in any jurisdiction where it is not now so qualified, (ii) or to take any action that would subject it to service of process in suits, other than those arising out of the offering or sale of the Securities, in any jurisdiction where it is not now so subject or (iii) subject themselves to taxation in excess of a nominal dollar amount in any such jurisdiction where they are not then so subject. The Company and BCC will promptly advise the Representatives of the receipt by 15 the Company or BCC of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose. (e) Neither the Company nor BCC will, nor will they permit any of their respective Affiliates under their control to, resell any Securities that have been acquired by any of them. (f) None of the Company, BCC or any of their respective Affiliates, or any person acting on their behalf will, directly or indirectly, make offers or sales of any security, or solicit offers to buy any security, under circumstances that would require the registration of the Securities under the Act, except pursuant to a registered public offering, whether an exchange offer or shelf registration, as provided in the Registration Rights Agreement; provided, however, actions of any Initial Purchaser or its Affiliates other than at the direction of the Company or BCC shall not constitute a breach of this covenant. (g) None of the Company, BCC or any of their respective Affiliates, or any person acting on its or their behalf will engage in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with any offer or sale of the Securities in the United States; provided, however, actions of any Initial Purchaser or its Affiliates other than at the direction of the Company or BCC shall not constitute a breach of this covenant. (h) So long as any of the Securities are "restricted securities" within the meaning of Rule 144(a)(3) under the Act, the Company and BCC will, unless they become subject to and complies with Section 13 or 15(d) of the Exchange Act, provide to each holder of such restricted securities and to each prospective purchaser (as designated by such holder) of such restricted securities, upon the request of such holder or prospective purchaser, any information required to be provided by Rule 144A(d)(4) under the Act. This covenant is intended to be for the benefit of the holders, and the prospective purchasers designated by such holders, from time 16 to time of such restricted securities. (i) None of the Company, BCC or any of their respective Affiliates, or any person acting on their behalf will engage in any directed selling efforts with respect to the Securities, and each of them will comply with the offering restrictions requirement of Regulation S; provided, however, actions of any Initial Purchaser or its Affiliates other than at the direction of the Company or BCC shall not constitute a breach of this covenant. Terms used in this paragraph have the meanings given to them by Regulation S. (j) The Company and BCC will cooperate with the Representatives and use their respective commercially reasonable efforts to permit the Securities to be eligible for clearance and settlement through The Depository Trust Company. (k) Each of the Company, BCC and BCCLP will not, without the prior written consent of Salomon Smith Barney Inc., offer, sell, contract to sell, or otherwise dispose of (or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise) by the Company, BCC or BCCLP or any Affiliate of the Company, BCC or BCCLP or any person in privity with the Company, BCC, BCCLP or any Affiliate of the Company, BCC or BCCLP) directly or indirectly, or announce the offering of, or file a registration statement for, any debt securities issued or guaranteed by the Company, BCC or BCCLP (other than (i) the Securities, (ii) pursuant to a registered public offering as provided in the Registration Rights Agreement, (3) the New Credit Facility and (iv) pursuant to a private placement of debt securities to a maximum of three purchasers other than under Rule 144A, provided that such purchasers must be restricted from reselling such debt securities until the end of the period referenced herein during which the Company, BCC and BCCLP are restricted from offering debt securities) for the period ending on the earlier of the date that (A) occurs 120 days following the Execution Time and, if applicable, (B) all the Securities are redeemed pursuant to the Special Mandatory Redemption. (l) Neither the Company nor BCC will take, directly or 17 indirectly, any action prohibited by Regulation M under the Exchange Act in connection with the offering of the Securities. (m) The Company and BCC agree to pay all costs and expenses relating to the Offering that are customarily borne by an issuer in an underwritten offering of securities (subject to the provisions of any letters that have been entered into between BCCLP and the Initial Purchasers which may relate to costs and expenses related to this Offering). (n) The Company and BCC will apply the net proceeds from the sale of the Securities substantially in accordance with their statements under the caption "Use of Proceeds" in the Final Memorandum. (o) The Company, BCC and BCCLP will comply with the terms of the Escrow Agreement. 6. Conditions to the Obligations of the Initial Purchasers. The obligations of the Initial Purchasers to purchase the Securities shall be subject to the accuracy of the representations and warranties on the part of each of the Company, BCC and BCCLP contained herein at the Execution Time and the Closing Date, to the accuracy of the statements of each of the Company and BCC made in any certificates pursuant to the provisions hereof, to the performance by each of the Company, BCC and BCCLP of its obligations hereunder and to the following additional conditions: (a) The Company shall have requested and caused Paul, Hastings, Janofsky & Walker LLP, counsel for each of the Company and BCC, to furnish to the Representatives its opinion, dated the Closing Date and addressed to the Representatives, to the effect that: (i) each of the Company, BCC, BCCLP and their respective subsidiaries, including BTC (individually, a "Subsidiary" and collectively, the "Subsidiaries"), has been duly formed or incorporated, as applicable, and is validly existing as a limited liability company, limited partnership or corporation, as applicable, in good standing under the laws of the jurisdiction in which it is chartered or organized, with requisite 18 corporate, limited liability company or limited partnership power, as applicable, and authority to own or lease, as the case may be, and to operate its properties and conduct its business as described in the Final Memorandum, and is duly qualified to do business as a foreign entity and is in good standing under the laws of the jurisdictions referenced in such opinion, other than such jurisdictions where the failure to so qualify, individually or in the aggregate, could not reasonably be expected to have a material adverse effect on the condition (financial or otherwise), earnings, business or properties of the Business; (ii) all the outstanding equity interests of the Company, BCC, BCCLP and each of their respective Subsidiaries have been duly and validly authorized and issued and, to the extent applicable, are fully paid and nonassessable, and, except as otherwise set forth in the Final Memorandum, all outstanding equity interests of BCC and each of the Subsidiaries of the Company are owned of record by the Company, either directly or through wholly owned subsidiaries, to the knowledge of such counsel, after due inquiry, free and clear of any security interests, claims, liens or encumbrances; (iii) BCCLP owns of record all the outstanding equity interests of the Company; (iv) the Indenture has been duly authorized, executed and delivered by the Company and BCC, and constitutes a legal, valid and binding instrument enforceable against each of the Company and BCC in accordance with its terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors' rights and remedies generally from time to time in effect and to general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, regardless of whether considered in a proceeding in equity or at law); the Securities have been duly and validly authorized and, when executed and authenticated in accordance with the provisions of the Indenture and delivered to and paid for by the Initial Purchasers pursuant to this Agreement, will constitute 19 legal, valid and binding obligations of each of the Company and BCC entitled to the benefits of the Indenture and enforceable in accordance with its terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors' rights and remedies generally from time to time in effect and to general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, regardless of whether considered in a proceeding in equity or at law); the Escrow Agreement has been duly authorized, and when executed and delivered by each of the Company and BCC, will constitute a legal, valid and binding instrument enforceable against each of the Company and BCC in accordance with its terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors' rights and remedies generally from time to time in effect and to general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, regardless of whether considered in a proceeding in equity or at law); and the statements set forth under the heading "Description of Notes" and "Exchange Offer; Registration Rights" in the Final Memorandum, insofar as such statements purport to summarize certain provisions of the Securities, the Indenture, the Registration Rights Agreement and the Escrow Agreement, provide a fair summary of such provisions; (v) to the knowledge of such counsel, there is no pending or threatened action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company, BCC, BCCLP or any of their respective subsidiaries or properties that is not adequately disclosed in the Final Memorandum, except in each case for such proceedings that, if the subject of an unfavorable decision, ruling or finding would not singly or in the aggregate, result in a material adverse change in the condition (financial or otherwise), earnings, business or properties of the Business; and the statements in the Final Memorandum under the headings "Certain Federal Tax Considerations," "Legislation and 20 Regulation," "Business--Legal Proceedings," and "Exchange Offer; Registration Rights," to the extent such statements constitute matters of law, summaries of legal matters or legal conclusions have been reviewed by such counsel and are correct in all material respects; (vi) based solely upon an officer's certificate from BCCLP, which in turn is based solely upon an officer's certificate from the TCI Systems Parties regarding the accuracy of the representations and warranties with respect to factual matters made by the TCI Systems Parties in the Contribution Agreement to the other parties thereto and upon the actual knowledge of attorneys in such counsel's firm who participated in due diligence discussions relating to the negotiation of the Contribution Agreement on behalf of BCCLP, such counsel has not become aware that there is any pending or threatened action, suit, or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the TCI Systems Parties or any of the Contributed TCI Systems that is not adequately disclosed in the Final Memorandum, except in each case for such proceedings that, if the subject of an unfavorable decision, ruling or finding would not individually or in the aggregate, result in a material adverse change in the condition (financial or otherwise), earnings, business or properties of the Business; (vii) this Agreement and the Registration Rights Agreement have been duly authorized, executed and delivered by each of the Company and BCC; (viii) no consent, approval, authorization, filing with or order of any court or governmental agency or body is required in connection with the transactions contemplated herein or in the Indenture, the Registration Rights Agreement and the Escrow Agreement, except such as will be obtained under the Act and the Trust Indenture Act, such as may be required under the blue sky or securities laws of any jurisdiction in connection with the transactions contemplated by the Registration Rights Agreement, such 21 as may be required under such blue sky laws in connection with the purchase and sale of the Securities by the Initial Purchasers in the manner contemplated in this Agreement and the Final Memorandum, such other approvals (specified in such opinion) as have been obtained; (ix) based solely upon an officer's certificate from BCCLP, which in turn is based solely upon an officer's certificate from the TCI Systems Parties regarding the accuracy of the representations and warranties with respect to factual matters made by the TCI Systems Parties in the Contribution Agreement to the other parties thereto and upon the actual knowledge of attorneys in such counsel's firm who participated in due diligence discussions relating to the negotiation of the Contribution Agreement on behalf of BCCLP, such counsel has not become aware that there is any consent, approval, authorization, filing with or order of any court or governmental agency or body that is required in connection with the consummation of the TCI Transactions other than those that have been obtained or if not obtained could not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the condition (financial or otherwise), earnings, business or properties of the Business; (x) the execution and delivery of the Indenture, this Agreement, the Registration Rights Agreement, the Escrow Agreement and the Contribution Agreement, the issue and sale of the Securities, the consummation of any other of the transactions herein or therein contemplated and the fulfillment of the terms hereof or thereof will not conflict with, result in a breach or violation of, or imposition of any lien, charge or encumbrance upon any property or asset of the Company, BCC, BCCLP or their respective subsidiaries pursuant to, (i) the charter or certificate of formation, as the case may be, or by-laws, limited partnership agreement or limited liability company agreement, as the case may be, of the Company, BCC, BCCLP or their respective subsidiaries; (ii) the terms of any agreement listed on Annex 1 to this opinion; or (iii) any statute, law, rule, regulation, judgment, order or decree known to 22 such counsel to be applicable to the Company, BCC, BCCLP or any of their respective subsidiaries of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company, BCC, BCCLP, any of their respective subsidiaries or any of their respective properties, except, in the case of clauses (iii) above, for any such conflict, breach, violation or default that, individually or in the aggregate, could not reasonably be expected to have a material adverse effect on the condition (financial or otherwise), earnings, business or properties of the Business; (xi) based solely upon an officer's certificate from BCCLP, which in turn is based solely upon an officer's certificate from the TCI Systems Parties regarding the accuracy of the representations and warranties with respect to factual matters made by the TCI Systems Parties in the Contribution Agreement to the other parties thereto and upon the actual knowledge of attorneys in such counsel's firm who participated in due diligence discussions relating to the negotiation of the Contribution Agreement on behalf of BCCLP, such counsel have not become aware that the execution and delivery of the Indenture, this Agreement, the Registration Rights Agreement, the Escrow Agreement and the Contribution Agreement, the issue and sale of the Securities, the consummation of any other of the transactions herein or therein contemplated and the fulfillment of the terms hereof or thereof will not conflict with, result in a breach or violation of, or imposition of any lien, charge or encumbrance upon any of the properties or assets of the Contributed TCI Systems pursuant to any statute, law, rule, regulation, judgment, order or decree known to such counsel to be applicable to the Contributed TCI Systems except for any such conflict, breach, violation or default that, individually or in the aggregate, could not reasonably be expected to have a material adverse effect on the condition (financial or otherwise), earnings, business or properties of the Business; (xii) assuming the accuracy of the representations and warranties and compliance with the agreements contained herein, no registration of the 23 Securities under the Act, and no qualification of an indenture under the Trust Indenture Act, are required for the offer and sale by the Initial Purchasers of the Securities in the manner contemplated by this Agreement; and (xiii) neither the Company nor BCC is and, after giving effect to the offering and sale of the Securities and the application of the proceeds thereof as described in the Final Memorandum, will be an "investment company" as defined in the Investment Company Act without taking account of any exemption arising out of the number of holders of the Company's or BCC's securities, respectively. For the purposes of opinions (v) and (x) above, the properties of the Company, BCC, BCCLP and their respective subsidiaries do not include the Contributed TCI Systems. In the event that the TCI Transactions are not consummated prior to or simultaneously with the Closing, such counsel will not deliver opinion (ix). In addition, such counsel's opinion should state that in connection with the preparation of the Final Memorandum, such counsel has participated in various discussions and meetings with the Initial Purchasers, their representatives, officers and other representatives of the Company and BCC and representatives of the Company's independent public accountants and such counsel has also examined certain other documents furnished to them by the Company as such counsel has deemed necessary and relevant for purposes of the following. During the course of the above-described procedures, subject to the last two sentences of this paragraph, nothing came to such counsel's attention that led them to believe that the Final Memorandum, as of its date or the Closing Date, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The limitations inherent in the independent verification of factual matters and the character of determinations involved in the preparation of the Final Memorandum are such, however, that such counsel does not 24 assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Final Memorandum (except to the extent stated in paragraph (v) hereof). Such statement shall also provide that such counsel need express no view with respect to the financial statements, the notes thereto and other information of an accounting, financial or statistical nature in the Final Memorandum. In rendering such opinion, such counsel may rely (A) as to matters involving the application of laws of any jurisdiction other than the State of Delaware, the State of New York or the Federal laws of the United States, to the extent they deem proper and specified in such opinion, upon the opinion of other counsel of good standing whom they believe to be reliable and who are reasonably satisfactory to counsel for the Initial Purchasers; and (B) as to matters of fact, to the extent they deem proper, on certificates of responsible officers of the Company, BCC and public officials. References to the Final Memorandum in this Section 6(a) include any amendment or supplement thereto at the Closing Date. (b) The Company shall have requested and caused Robert Bresnan, Vice President and General Counsel for each of the Company and BCC, to furnish to the Representatives his opinion, dated the Closing Date and addressed to the Representatives, to the effect that: (i) to the knowledge of such counsel, there is no pending or threatened action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company, BCC, BCCLP or any of their respective subsidiaries or properties that is not adequately disclosed in the Final Memorandum, except in each case for such proceedings that, if the subject of an unfavorable decision, ruling or finding would not singly or in the aggregate, result in a material adverse change in the condition (financial or otherwise), earnings, business or properties of the Business; and (ii) the execution and delivery of the Indenture, this Agreement, the Registration Rights Agreement, the Escrow Agreement and the Contribution Agreement, the issue and sale of the Securities, the consummation of 25 any other of the transactions herein or therein contemplated and the fulfillment of the terms hereof or thereof will not conflict with, result in a breach or violation of, or imposition of any lien, charge or encumbrance upon any property or asset of the Company, BCC, BCCLP or their respective subsidiaries pursuant to the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which the Company, BCC, BCCLP or any of their respective subsidiaries is a party or bound or to which its respective property is subject except for any such conflict, breach, violation or default that, individually or in the aggregate, could not reasonably be expected to have a material adverse effect on the condition (financial or otherwise), earnings, business or properties of the Business. For the purposes of opinions (i) and (ii) above, the properties of the Company, BCC, BCCLP and their respective subsidiaries do not include the Contributed TCI Systems. In addition, such counsel's opinion should state that subject to the last sentence of this paragraph, nothing came to such counsel's attention that led him to believe that the Final Memorandum, as of its date or the Closing Date, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Such statement shall also provide that such counsel need express no view with respect to the financial statements, the notes thereto and other information of an accounting, financial or statistical nature in the Final Memorandum. (c) BCCLP shall have requested and caused Paul, Hastings, Janofsky & Walker LLP, counsel for BCCLP, to furnish to the Representatives its opinion, dated the Closing Date and addressed to the Representatives, to the effect that this Agreement, the Registration Rights Agreement, the Escrow Agreement and the Contribution Agreement have been duly authorized, executed and delivered by BCCLP and each constitutes a legal, valid and binding 26 instrument enforceable against BCCLP in accordance with its terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors' rights and remedies generally from time to time in effect and to general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, regardless of whether considered in a proceeding in equity or at law); and that the execution, delivery and performance of the Partnership Agreement by BCI (USA), LLC has been duly authorized and, when executed and delivered by Bresnan Communications, Inc. on behalf of BCI (USA), LLC, as general partner of BCCLP, assuming due authorization, execution and delivery thereof by the other parties thereto, will constitute a legal, valid and binding instrument enforceable against BCI (USA), LLC, as general partner of BCCLP, in accordance with its terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors' rights and remedies generally from time to time in effect and to general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, regardless of whether considered in a proceeding in equity or at law). (d) The Company and BCC shall have requested and caused Cole, Raywid & Braverman, regulatory counsel for the Company and BCC, to furnish to the Representatives its opinion, dated the Closing Date and addressed to the Representatives, to the effect that: (i) the statements regarding communications regulatory matters in the Final Memorandum under the headings "Legislation and Regulation," "Business-- Competition," "Risk Factors--Risks Associated with Competition," "Risk Factors--Risks Associated with Offering Telecommunications Services," "Risk Factors-- Risks Associated with Regulation of the Cable Television Industry" and "Risk Factors--Franchises" fairly summarize the matters therein described; (ii) to the knowledge of such counsel, based on information provided to such counsel regarding existing operations, the Company, BCC, the Combined Company and their respective subsidiaries possess all licenses, 27 certificates, permits and other authorizations issued by the Federal Communications Commission ("FCC") necessary to conduct their respective businesses, and none of the Company, BCC, the Combined Company or any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such license, certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Business, whether or not arising from trans actions in the ordinary course of business, except as set forth in or contemplated in the Final Memorandum (exclusive of any amendment or supplement thereto); (iii) the Company and the Combined Company have applied for and have received all approvals from the FCC necessary to consummate the TCI Transactions and neither the Company nor the Combined Company has received any notice of proceedings relating to the revocation or modification of any such license, in each case, except as previously disclosed to the Initial Purchasers; (iv) to the knowledge of such counsel, there is no pending or threatened action, suit or proceeding by or before the FCC against the Company, BCC, the Combined Company or any of their respective subsidiaries or properties that is not adequately disclosed in the Final Memorandum, except in each case for such proceedings that, if the subject of an unfavorable decision, ruling or finding would not singly or in the aggregate, result in a material adverse change in the condition (financial or otherwise), prospects, earnings, business or properties of the Business; (v) no consent, approval, authorization, filing with or order of the FCC is required under the Communications Act of 1934, as amended (the "Communications Act"), in connection with the transactions contemplated herein or in the Indenture, the Registration Rights Agreement, the Escrow Agreement and the Contribution Agreement, except such as have 28 been obtained; and (vi) the execution and delivery of the Indenture, this Agreement, the Registration Rights Agreement and the Escrow Agreement, the issue and sale of the Securities, the consummation of any other of the transactions herein or therein contemplated and the fulfillment of the terms hereof or thereof will not conflict with, result in a breach or violation of the Communications Act or any FCC regulation in effect or cause the suspension, revocation, impairment, forfeiture, nonrenewal or termination of any FCC license or other authorization of the FCC. To the extent that any agreement or other document purports to grant a security interest in licenses issued by the FCC, the FCC has taken the position that security interests in FCC licenses are not valid. To the extent that any party seeks to exercise control of an FCC license in the event of a default or for any other reason, it may be necessary to obtain prior FCC consent. (e) The Representatives shall have received from Cravath, Swaine & Moore, counsel for the Initial Purchasers, such opinion or opinions, dated the Closing Date and addressed to the Representatives, with respect to the issuance and sale of the Securities, the Indenture, the Registration Rights Agreement, the Final Memorandum (as amended or supplemented at the Closing Date) and other related matters as the Representatives may reasonably require, and each of the Company, BCC and BCCLP shall have furnished to such counsel such documents as they reasonably request for the purpose of enabling them to pass upon such matters. (f) To the extent the Funding Conditions have not been satisfied on or prior to the Closing Date, the Escrow Agreement shall have been executed by each of the parties thereto and the Company and BCC shall have deposited with the Escrow Agent the Escrowed Funds in an aggregate amount sufficient to pay the aggregate Mandatory Redemption Price assuming the Special Mandatory Redemption takes place on May 14, 1999. (g) To the extent the Funding Conditions have not been 29 satisfied on or prior to the Closing Date, the Company and BCC shall have requested and caused KPMG LLP, to furnish to the Representatives, the Trustee and the Escrow Agent its opinion, dated the Closing Date and addressed to the Escrow Agent, to the effect that the Escrowed Funds are sufficient to redeem the Securities in accordance with the procedures set forth in the Escrow Agreement for the Special Mandatory Redemption assuming the Special Mandatory Redemption takes place on May 14, 1999. (h) Each of the Company and BCC shall have furnished to the Representatives a certificate of the Company and BCC, as applicable, signed by the President and Chief Executive Officer and the principal financial or accounting officer of the Company and BCC, as applicable, dated the Closing Date, to the effect that the signers of such certificate have carefully examined the Final Memorandum, any amendment or supplement to the Final Memorandum and this Agreement and that: (i) the representations and warranties of the Company and BCC, as applicable, in this Agreement are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date, and the Company and BCC, as applicable, have complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date; and (ii) since the date of the most recent financial statements included in the Final Memorandum (exclusive of any amendment or supplement thereto), there has been no material adverse change in the condition (financial or otherwise), prospects, earnings, business or properties of the Business, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated by the Final Memorandum (exclusive of any amendment or supplement thereto). (i) At the Execution Time and at the Closing Date, the Company shall have requested and caused KPMG LLP to furnish to the Representatives letters, dated respectively as of the Execution Time and as of the Closing Date, in form and substance satisfactory to the Representatives, confirming that they are independent accountants within the meaning of 30 rule 101 of the AIPCA's Code of Professional Conduct and its interpretations and rulings, that they have performed a review of the unaudited interim combined financial information of Bresnan Communications Group Systems for the nine-month period ended September 30, 1998, and as at September 30, 1998, and stating in effect that: (i) their audit of the audited combined financial statements included in the Final Memorandum and reported on by them comprised audit tests and procedures deemed necessary for the purpose of expressing an opinion on such financial statements, taken as a whole; (ii) on the basis of a reading of the latest unaudited combined financial statements made available by BCCLP and TCI; their limited review in accordance with the standards established under Statement on Auditing Standards No. 71, of the unaudited interim financial information for the nine-month period ended September 30, 1998, and as at September 30, 1998; carrying out certain specified procedures (but not an examination in accordance with generally accepted auditing standards) which would not necessarily reveal matters of significance with respect to the comments set forth in such letter; a reading of the minutes of the meetings of the stockholders, directors and executive, finance, and audit committees of each of BCCLP and TCI; and inquiries of certain officials of the BCCLP, TCI Communications, Inc., and the TCI Systems Parties, who have responsibility for financial and accounting matters of each of such entities and their respective subsidiaries as to transactions and events subsequent to December 31, 1997, nothing came to their attention which caused them to believe that: (1) any unaudited financial statements included in the Final Memorandum are not stated on a basis substantially consistent with that of the audited combined financial statements included in the Offering Memorandum; and said unaudited financial statements are not in conformity with generally accepted accounting principles applied on a basis substantially consistent with that of the audited combined financial statements included 31 in the Final Memorandum; or (2) with respect to the period subsequent to September 30, 1998, there were any increases, at a specified date not more than five days prior to the date of the letter, in the debt of Bresnan Communications Group Systems greater than $10,000,000 as compared with the amounts shown on the September 30, 1998, combined balance sheet included in the Final Memorandum, or for the period from October 1, 1998, to such specified date there were any decreases, as compared with the corresponding period in the preceding year, in revenue, or EBITDA and net earnings, except in all instances for changes or decreases set forth in such letter, in which case the letter shall be accompanied by an explanation by the Company as to the significance thereof unless said explanation is not deemed necessary by the Representatives; (iii) they have performed certain other specified procedures as a result of which they determined that certain information of an accounting, financial or statistical nature (which is limited to accounting, financial or statistical information derived from the general accounting records of the Company and its subsidiaries) set forth in the Final Memorandum, including the information set forth under the captions "Offering Memorandum Summary," "Risk Factors," "Use of Proceeds," "Capitalization," "Selected Combined Financial and Operating Data," "Unaudited Pro Forma Combined Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business" and "Certain Relationships and Related Transactions," agrees with the accounting records of BCCLP and TCI, excluding any questions of legal interpretation; and (iv) on the basis of a reading of the unaudited pro forma financial statements (the "pro forma combined financial statements") included in the Final Memorandum; carrying out certain specified procedures; inquiries of certain officials of BCCLP, TCI Communications, Inc. and the TCI Systems Parties who 32 have responsibility for financial and accounting matters; and proving the arithmetic accuracy of the application of the pro forma adjustments to the historical combined amounts in the pro forma combined financial statements, nothing came to their attention which caused them to believe that the pro forma combined financial statements do not comply in form in all material respects with the applicable accounting requirements of Rule 11-02 of Regulation S-X or that the pro forma adjustments have not been properly applied to the historical amounts in the compilation of such statements. References to the Final Memorandum in this Section 6(i) include any amendment or supplement thereto at the date of the applicable letter. (j) Subsequent to the Execution Time or, if earlier, the dates as of which information is given in the Final Memorandum (exclusive of any amendment or supplement thereto), there shall not have been: (i) any change or decrease specified in the letter or letters referred to in paragraph (i) of this Section 6; or (ii) any change, or any development involving a prospective change, in or affecting the condition (financial or otherwise), prospects, earnings, business or properties of the Business, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Final Memorandum (exclusive of any amendment or supplement thereto) the effect of which, in any case referred to in clause (i) or (ii) above, is, in the sole judgment of the Representatives, so material and adverse as to make it impractical or inadvisable to market the Securities as contemplated by the Final Memorandum (exclusive of any amendment or supplement thereto). (k) The Securities shall have been designated as Portal-eligible securities in accordance with the rules and regulations of the NASD, and the Securities shall be eligible for clearance and settlement through The Depository Trust Company. 33 (l) Subsequent to the Execution Time, there shall not have been any decrease in the rating of any of the Company's or BCC's debt securities by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Act) or any notice given of any intended or potential decrease in any such rating or of a possible change in any such rating that does not indicate the direction of the possible change. (m) Prior to the Closing Date, the Company and BCC shall have furnished to the Representatives such further information, certificates and documents as the Representatives may reasonably request. If any of the conditions specified in this Section 6 shall not have been fulfilled in all material respects when and as provided in this Agreement, or if any of the opinions and certificates mentioned above or elsewhere in this Agreement shall not be in all material respects reasonably satisfactory in form and substance to the Representatives and counsel for the Initial Purchasers, this Agreement and all obligations of the Initial Purchasers hereunder may be canceled at, or at any time prior to, the Closing Date by the Representatives. Notice of such cancelation shall be given to the Company and BCC in writing or by telephone or facsimile confirmed in writing. The documents required to be delivered by this Section 6 will be delivered at the office of counsel for the Company, at 399 Park Avenue, New York, New York 10022, on the Closing Date. 7. Reimbursement of Expenses. If the sale of the Securities provided for herein is not consummated because any condition to the obligations of the Initial Purchasers set forth in Section 6 hereof is not satisfied or because of any refusal, inability or failure on the part of the Company, BCC or BCCLP, to perform any agreement herein or comply with any provision hereof other than by reason of a default by any of the Initial Purchasers, the Company and BCC will reimburse the Initial Purchasers severally through Salomon Smith Barney on demand for all reasonable out-of-pocket expenses (including reasonable fees and disbursements of counsel) that shall have been incurred by them in connection with the proposed purchase and sale of the Securities. 34 8. Indemnification and Contribution. (a) Each of the Company, BCC and, subject to paragraph (e) of this Section 8, BCCLP, agrees to indemnify and hold harmless each Initial Purchaser, the directors, officers, employees and agents of each Initial Purchaser and each person who controls any Initial Purchaser within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Memorandum, the Final Memorandum (or in any supplement or amendment thereto) or any information provided by the Company or BCC to any holder or prospective purchaser of Securities pursuant to Section 5(h), or in any amendment thereof or received by it supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that (i) none of the Company, BCC or BCCLP will be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made in the Preliminary Memorandum or the Final Memorandum, or in any amendment thereof or supplement thereto, in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Initial Purchasers through the Representatives specifically for inclusion therein and (ii) that with respect to any untrue statement or omission of a material fact made in any Preliminary Memorandum, the indemnity agreement contained in this Section 8(a) shall not inure to the benefit of any Initial Purchaser from whom the person asserting any such loss, claim, damage or liability purchased the Securities concerned in any initial resale of the Securities by the Initial Purchaser, to the extent that any such loss, claim, damage or liability of such Purchaser occurs under the circumstances where it shall have been determined by a court of competent jurisdiction by final and 35 nonappealable judgment that (A) the untrue statement or omission of a material fact contained in the Preliminary Memorandum was corrected in the Final Memorandum, (B) the Company and/or BCC had previously furnished copies of the Final Memorandum to the Initial Purchasers and (C) such loss, claim, damage or liability results from the fact that there was not sent or given to such person at or prior to the written confirmation of the sale of such Securities to such person, a copy of the Final Memorandum. This indemnity agreement will be in addition to any liability which the Company, BCC or BCCLP may otherwise have. (b) Each Initial Purchaser severally and not jointly agrees to indemnify and hold harmless each of the Company, BCC and BCCLP, each of their respective directors and officers, and each other person, if any, who controls each of the Company, BCC or BCCLP, within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act, to the same extent as the foregoing indemnity from the Company, BCC and BCCLP to each Initial Purchaser, but only with reference to written information relating to such Initial Purchaser furnished to the Company by or on behalf of such Initial Purchaser through the Representatives specifically for inclusion in the Preliminary Memorandum or the Final Memorandum (or in any amendment or supplement thereto). This indemnity agreement will be in addition to any liability which any Initial Purchaser may otherwise have. Each of the Company, BCC and BCCLP acknowledges that the statements set forth in the last paragraph of the cover page regarding delivery of the Securities and, under the heading "Plan of Distribution", (i) the list of Initial Purchasers and their respective participation in the sale of the Securities; (ii) the sentences related to concessions and reallowances; and (iii) the paragraph related to stabilization, syndicate covering transactions and penalty bids in the Preliminary Memorandum and the Final Memorandum, constitute the only information furnished in writing by or on behalf of the Initial Purchasers for inclusion in the Preliminary Memorandum or the Final Memorandum (or in any amendment or supplement thereto). (c) Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party 36 (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses; and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying party's choice at the indemnifying party's expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); provided, however, that such counsel shall be reasonably satisfactory to the indemnified party. Notwithstanding the indemnifying party's election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ one separate counsel (in addition to one local counsel in each jurisdiction), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest; (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party; (iii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action; or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding. 37 (d) In the event that the indemnity provided in paragraph (a) or (b) of this Section 8 is unavailable to or insufficient to hold harmless an indemnified party for any reason, the Company, BCC and, subject to paragraph (e) of this Section 8, BCCLP and the Initial Purchasers agree to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively "Losses") to which the Company, BCC and BCCLP and one or more of the Initial Purchasers may be subject in such proportion as is appropriate to reflect the relative benefits received by the Company, BCC and BCCLP on the one hand and by the Initial Purchasers on the other from the offering of the Securities; provided, however, that in no case shall any Initial Purchaser (except as may be provided in any agreement among the Initial Purchasers relating to the offering of the Securities) be responsible for any amount in excess of the purchase discount or commission applicable to the Securities purchased by such Initial Purchaser hereunder. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the Company, BCC and, subject to paragraph (e) of this Section 8, BCCLP and the Initial Purchasers shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company, BCC and BCCLP on the one hand and of the Initial Purchasers on the other in connection with the statements or omissions which resulted in such Losses, as well as any other relevant equitable considerations. Benefits received by the Company, BCC and BCCLP, shall be deemed to be equal to the total net proceeds from the offering (before deducting expenses) received by the Company, and benefits received by the Initial Purchasers shall be deemed to be equal to the total purchase discounts and commissions in each case set forth on the cover of the Final Memorandum. Relative fault shall be determined by reference to, among other things, whether any untrue or any alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information provided by the Company, BCC and BCCLP on the one hand or the Initial Purchasers on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Company, BCC and BCCLP and the Initial Purchasers agree that it would not be just and equitable if contribution were determined by pro rata allocation or any 38 other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 8, each person who controls an Initial Purchaser within the meaning of either the Act or the Exchange Act and each director, officer, employee and agent of an Initial Purchaser shall have the same rights to contribution as such Initial Purchaser, and each person who controls the Company, BCC and BCCLP within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act and each officer and director of the Company, BCC and BCCLP shall have the same rights to contribution as the Company, BCC and BCCLP subject in each case to the applicable terms and conditions of this paragraph (d). (e) The indemnification and contribution provided by BCCLP pursuant to this Section 8 will be effective if the Funding Conditions are not satisfied on or prior to Closing and until the earlier of Funding Date or the Mandatory Redemption Date (each as defined in the Escrow Agreement). For all periods on and after the Funding Date or the Mandatory Redemption Date, as applicable, each of the Initial Purchasers agree and acknowledge that BCCLP will be released from all its obligations under this Section 8. 9. Default by an Initial Purchaser. If any one or more Initial Purchasers shall fail to purchase and pay for any of the Securities agreed to be purchased by such Initial Purchaser hereunder and such failure to purchase shall constitute a default in the performance of its or their obligations under this Agreement, the remaining Initial Purchasers shall be obligated severally to take up and pay for (in the respective proportions which the principal amount of Senior Notes or principal amount at maturity of Senior Discount Notes, as applicable, set forth opposite their names in Schedule I hereto bears to the aggregate principal amount of Senior Notes or aggregate principal amount at maturity of Senior Discount Notes, as applicable, set forth opposite the names of all the remaining Initial Purchasers) the Securities which the defaulting Initial Purchaser or Initial Purchasers agreed but failed to purchase; provided, however, that in the event that the aggregate principal amount of Senior Notes or aggregate principal amount at maturity of Senior Discount Notes, as applicable, which the defaulting Initial Purchaser or Initial Purchasers agreed but failed to purchase shall exceed 10% 39 of the aggregate principal amount of Senior Notes or aggregate principal amount at maturity of Senior Discount Notes, as applicable, set forth in Schedule I hereto, the remaining Initial Purchasers shall have the right to purchase all, but shall not be under any obligation to purchase any, of the Securities, and if such nondefaulting Initial Purchasers do not purchase all the Securities, this Agreement will terminate without liability to any nondefaulting Initial Purchaser or the Company or BCC. In the event of a default by any Initial Purchaser as set forth in this Section 9, the Closing Date shall be postponed for such period, not exceeding five Business Days, as the Representatives shall determine in order that the required changes in the Final Memorandum or in any other documents or arrangements may be effected. Nothing contained in this Agreement shall relieve any defaulting Initial Purchaser of its liability, if any, to the Company or BCC or any nondefaulting Initial Purchaser for damages occasioned by its default hereunder. 10. Termination. This Agreement shall be subject to termination in the absolute discretion of the Representatives, by notice given to the Company and BCC prior to delivery of and payment for the Securities, if at any time prior to such time (i) trading in securities generally on the New York Stock Exchange shall have been suspended or limited or minimum prices shall have been established on such Exchange; (ii) a banking moratorium shall have been declared either by Federal or New York State authorities; or (iii) there shall have occurred any outbreak or escalation of hostilities, declaration by the United States of a national emergency or war or other calamity or crisis the effect of which on financial markets is such as to make it, in the sole judgment of the Representatives, impracticable or inadvisable to proceed with the offering or delivery of the Securities as contemplated by the Final Memorandum (exclusive of any amendment or supplement thereto). 11. Representations and Indemnities to Survive. The respective agreements, representations, warranties, indemnities (subject to Section 8(e)) and other statements of the Company, BCC and BCCLP or their respective officers and of the Initial Purchasers set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of the Initial Purchasers or the Company, BCC and BCCLP or any of the officers, directors, employees, agents or controlling persons referred to in Section 8 hereof, and will survive delivery of and payment for the Securities. The 40 provisions of Sections 7 and 8 hereof shall survive the termination or cancelation of this Agreement. 12. Joint and Several Obligations. All representations, warranties, agreements and other obligations or statements of the Company, BCC and, subject to Section 8(e) hereof, BCCLP are the joint and several representations, warranties, agreements, obligations and statements of the Company and BCC and, with respect to Section 8 hereof, BCCLP. 13. Notices. All communications hereunder will be in writing and effective only on receipt, and, if sent to the Representatives, will be mailed, delivered or telefaxed to the Salomon Smith Barney Inc. General Counsel (fax no.: (212) 816-7912) and confirmed to the General Counsel, Salomon Smith Barney Inc. at 388 Greenwich Street, New York, New York 10013 Attention: General Counsel; or, if sent to the Company, BCC and BCCLP will be mailed, delivered or telefaxed and confirmed to it at, 709 Westchester Avenue, White Plains, New York 10604, Attention: Jeffrey S. DeMond (fax no.: (914) 993-6601), with a copy to Paul, Hastings, Janofsky & Walker LLP, 399 Park Avenue, New York, New York 10022, attention: Barry Brooks, Esq. (fax no.: (212) 319-4090) 14. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers, directors, employees, agents and controlling persons referred to in Section 8 hereof, and, except as expressly set forth in Section 5(h) hereof, no other person will have any right or obligation hereunder. 15. Applicable Law. This Agreement will be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed within the State of New York. 16. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute an original and all of which together shall constitute one and the same instrument. 17. Headings. The section headings used herein are for convenience only and shall not affect the construction hereof. 41 18. Definitions. The terms which follow, when used in this Agreement, shall have the meanings indicated. "Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "Affiliate" shall have the meaning specified in Rule 501(b) of Regulation D. "BCCLP" shall mean Bresnan Communications Company Limited Partnership, a Michigan limited partnership. "Business Day" shall mean any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies are authorized or obligated by law to close in The City of New York. "Commission" shall mean the Securities and Exchange Commission. "Contribution Agreement" shall mean the Contribution Agreement dated June 3, 1998, as amended, among Blackstone, BCCLP and certain of its affiliates, and certain affiliates of TCI. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "Execution Time" shall mean the date and time that this Agreement is executed and delivered by the parties hereto. "Investment Company Act" shall mean the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission promulgated thereunder. "NASD" shall mean the National Association of Securities Dealers, Inc. "Partnership Agreement" shall mean the Bresnan Communications Company Limited Partnership Amended and Restated Partnership Agreement to be entered into by the parties thereto upon the consummation of the TCI Transactions. 42 "Regulation D" shall mean Regulation D under the Act. "Regulation S" shall mean Regulation S under the Act. "TCI" shall mean Tele-Communications, Inc., a Delaware corporation. "Trust Indenture Act" shall mean the Trust Indenture Act of 1939, as amended, and the rules and regulations of the Commission promulgated thereunder. If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this Agreement and your acceptance shall represent a binding agreement among us. Very truly yours, BRESNAN COMMUNICATIONS GROUP LLC By Bresnan Communications Company Limited Partnership, its sole member By BCI (USA), L.L.C., managing general partner By Bresnan Communications, Inc., member By /s/ Robert Bresnan ---------------------------- Name: Robert Bresnan Title: Vice President & General Counsel BRESNAN CAPITAL CORPORATION By /s/ Robert Bresnan ---------------------------- Name: Robert Bresnan Title: Authorized Representative BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP By PCI (USA), L.L.C., Managing General Partner By Bresnan Communications, Inc. Member By /s/ Robert Bresnan ---------------------------- Name: Robert Bresnan Title: Vice President & General Counsel 43 The foregoing Agreement is hereby confirmed and accepted as of the date first above written. Salomon Smith Barney Inc. Chase Securities Inc. Morgan Stanley & Co. Incorporated TD Securities (USA) Inc. By: Salomon Smith Barney Inc. By /s/ Craig A. Larson ----------------------------- Name: Craig A. Larson Title: Vice President 44 SCHEDULE I
Principal Amount at Maturity of Senior Principal Amount Discount Initial Purchasers of Senior Notes Notes ------------------ --------------- ----- Salomon Smith Barney Inc............................................... $85,000,000 $137,500,000 Chase Securities Inc................................................... $31,875,000 $51,562,500 TD Securities (USA) Inc................................................ $21,250,000 $34,375,000 Morgan Stanley & Co. Incorporated...................................... $31,875,000 $51,562,500 ----------- ----------- Total $170,000,000 $275,000,000
45 EXHIBIT A Selling Restrictions for Offers and Sales outside the United States (1)(a) The Securities have not been and will not be registered under the Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S under the Act or pursuant to an exemption from the registration requirements of the Act. Each Initial Purchaser represents and agrees that, except as otherwise permitted by Section 4(a)(i) of the Agreement to which this is an exhibit, it has offered and sold the Securities, and will offer and sell the Securities, (i) as part of their distribution at any time; and (ii) otherwise until 40 days after the later of the commencement of the offering and the Closing Date, only in accordance with Rule 903 of Regulation S under the Act. Accordingly, each Initial Purchaser represents and agrees that neither it, nor any of its Affiliates nor any person acting on its or their behalf has engaged or will engage in any directed selling efforts with respect to the Securities, and that it and they have complied and will comply with the offering restrictions requirement of Regulation S. Each Initial Purchaser agrees that, at or prior to the confirmation of sale of Securities (other than a sale of Securities pursuant to Section 4(a)(i) of the Agreement to which this is an exhibit), it shall have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Securities from it during the distribution compliance period a confirmation or notice to substantially the following effect: "The Securities covered hereby have not been registered under the U.S. Securities Act of 1933 (the "Act") and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering and February 2, 1999, except in either case in accordance with Regulation S or Rule 144A under the Act. Terms used above have the meanings given to them by Regulation S." (b) Each Initial Purchaser also represents and agrees that it has not entered and will not enter into any contractual 46 arrangement with any distributor with respect to the distribution of the Securities, except with its Affiliates or with the prior written consent of the Company. (c) Terms used in this section have the meanings given to them by Regulation S. (2) Each Initial Purchaser represents and agrees that (i) it has not offered or sold, and prior to the expiration of the period of six months from the Closing Date, will not offer or sell, in the United Kingdom, by means of any document, any Securities other than to persons whose ordinary business it is to buy, hold, manage, or dispose of investments whether as principal or as agent for purposes of their businesses or otherwise in circumstances that do not constitute an offer (except in circumstances that do not constitute an offer to the public within the meaning of the Public Offer of Securities Regulations 1995); (ii) it has complied and will comply with all applicable provisions of the Financial Services Act 1986 of the United Kingdom with respect to anything done by it in relation to the Securities in, from or otherwise involving the United Kingdom; and (iii) it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issue of the Securities to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person to whom the document may otherwise lawfully be issued or passed on. EX-3.1 3 CERTIFICATE OF FORMATION 1 EXHIBIT 3.1 CERTIFICATE OF FORMATION OF BRESNAN COMMUNICATIONS GROUP LLC This Certificate of Formation of Bresnan Communications Group LLC is being executed by the undersigned for the purpose of forming a limited liability company pursuant to the Delaware Limited Liability Company Act (6 Del. C. Section 18-101, et seq.) (the "Act"). 1. The name of the limited liability company (hereinafter called the "Company") is "Bresnan Communications Group LLC." 2. The purpose of the Company is to engage in any lawful act or activity for which a limited liability company may be organized under the Act. 3. The address, including street, number, city and country, of the registered office of the Company in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle 19801. The name of the registered agent of the Company in the State Delaware at such address is The Corporation Trust Company. 4. In furtherance and not in limitation of the powers conferred by the Act, the Company shall be governed by a limited liability company agreement. 5. The Company shall to the fullest extent permitted by Section 18-108 of the Act, as the same may be amended and supplemented, indemnify any and all persons whom it shall have the power to indemnify under said Section 18-108 from and against any and all matters, and the indemnification provided for herein shall not be deemed exclusive of any other right to which any person may be entitled under the limited liability company agreement, or otherwise. 2 IN WITNESS WHEREOF, the undersigned acting as an authorized signatory pursuant to Section 18-204 of the Act has caused this Certificate of Formation of Bresnan Communications Group LLC to be duly executed this 5th day of August, 1998. BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP By: BCI (USA), L.P., general partner By: Bresnan Communications, Inc., general partner By: /s/ Jeffrey S. DeMond ----------------------------------- Name: Jeffrey S. DeMond Title: SVP EX-3.2 4 LIMITED LIABILITY COMPANY AGREEMENT 1 Exhibit 3.2 LIMITED LIABILITY COMPANY AGREEMENT OF BRESNAN COMMUNICATIONS GROUP LLC This LIMITED LIABILITY COMPANY AGREEMENT (this "Agreement") is made as of August 5, 1998 by and between BRESNAN COMMUNICATIONS GROUP LLC, a Delaware limited liability company (the "Company"), and BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP, a Michigan limited partnership (the "Member"). RECITALS: WHEREAS, on August 5, 1998, a Certificate of Formation of Bresnan Communications Group LLC was filed with the Secretary of State of the State of Delaware; and WHEREAS, in order to effect the business objectives of the Company, the parties desire to enter into this limited liability company agreement. NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, agree as follows: ARTICLE I GENERAL PROVISIONS 1.1 FORMATION. The Member hereby ratifies, in all respects, the actions taken in connection with the formation of the Company under and pursuant to the Act (as defined herein). This Agreement is subject to, and to the extent legally required, governed by, the Act and the Certificate (as defined herein). In the event of a direct conflict between the provisions of this Agreement and either the mandatory provisions of the Act or the Certificate, such mandatory provisions of the Act or the Certificate, as the case may be, shall control. The Member shall take, or cause to be taken, all other necessary action required by law to maintain the Company as a limited liability company under the Act and under the laws of all other jurisdictions in which the Company may elect to conduct business. 1.2 NAME. The name of the Company shall be "Bresnan Communications Group LLC" or such other name as the Member shall determine. 1.3 PURPOSE AND BUSINESS OF THE COMPANY. The purpose of the Company shall be to engage in any lawful business, purpose or activity of every kind and character for which a limited liability company may be organized under the Act, including, without limitation, engaging in, or holding investments in one or more 2 entities directly or indirectly engaging in, business activities in the telecommunications industry, and engaging in any business activity related or incidental thereto. 1.4 PLACE OF BUSINESS. The Company shall maintain its principal office and place of business at 709 Westchester Avenue, White Plains, New York 10604. The Company shall continuously maintain a registered office and registered agent in the State of Delaware as required by the Act. The registered office of the Company shall be located at the Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801, or at such other place as the Member may determine. The registered agent at such address shall be The Corporation Trust Company or as otherwise determined by the Member. The Member may, at any time and from time to time, change the location of its principal office and place of business. The Member may establish such additional place or places of business as it may from time to time determine. 1.5 DURATION OF THE COMPANY. The Company's existence shall commence on the date the Certificate is filed in accordance with the Act and shall continue without interruption, subject to the provisions of the Act, unless terminated at an earlier date in accordance with Article VIII. 1.6 UNRESTRICTED SUBSIDIARY. The Company and each of its subsidiaries is hereby designated an "Unrestricted Subsidiary" as defined in the Fourth Amended and Restated Loan Agreement dated as of May 16, 1997, as amended, by and among the Member and the other parties named therein. ARTICLE II DEFINITIONS For purposes of this Agreement, unless the context otherwise requires, the following terms shall have the following respective meanings: 2.1 "ACT" means the Delaware Limited Liability Company Act, codified in Title 6 of the Delaware Code, Sections 18-101 et seq., as it may be amended from time to time. 2.2 "AGREEMENT" means this Limited Liability Company Agreement, as it may be amended from time to time. 2.3 "CAPITAL CONTRIBUTION" means the total amount of all cash and the fair market value of all property contributed by the Member to the Company pursuant to the terms of this Agreement. 2.4 "CERTIFICATE" means the Certificate of Formation of the Company which was filed with the Secretary of State of the State of Delaware on August 5, 1998, as it may be amended from time to time pursuant to the Act and the terms of this Agreement. -2- 3 2.5 "CLAIMS" shall have the meaning assigned to such term in Section 3.5. 2.6 "COMPANY" means Bresnan Communications Group LLC, a limited liability company which shall be governed by this Agreement, as said limited liability company may from time to time be constituted. 2.7 "COMPANY EXPENSES" means, collectively, (i) any costs, fees or expenses incurred or payable by the Company, the Member or any of the Member's partners or affiliates in connection with the operation of the Company's business or the maintenance of the Company's assets and (ii) any amounts which the Company is obligated to pay to or on behalf of an Indemnifiable Person pursuant to Section 3.5. 2.8 "INDEMNIFIABLE PERSON" means the Member and any member (managing or otherwise), general partner, limited partner, officer, director, agent, affiliate or employee of the Member or its partners or affiliates. 2.9 "MEMBER" means Bresnan Communications Company Limited Partnership, a Michigan limited partnership, and any and all other Persons who become a substitute or successor Member in accordance with the provisions of this Agreement. 2.10 "MEMBERSHIP INTEREST" means the Member's "limited liability company interest" (as defined in Section 18-101(8) of the Act) in the Company. 2.11 "ORGANIZATION EXPENSES" means the fees, costs and expenses of and incidental to organizing and funding the Company. 2.12 "PERSON" means any individual, partnership, joint venture, firm, association, corporation, trust, limited liability company, limited liability partnership, joint stock company or other entity or any government or agency, department, political subdivision or instrumentality thereof. 2.13 "SECTION" means, except as otherwise indicated, the applicable section or subsection of this Agreement. 2.14 "TERMINATING DISSOLUTION" shall have the meaning assigned to such term in Section 8.1. 2.15 "TRANSFER" means, with respect to a Membership Interest, any sale, assignment, encumbrance, conveyance or other transfer of such Membership Interest (or any interest therein), whether voluntary or involuntary, including a transfer by operation of law. -3- 4 ARTICLE III MANAGEMENT OF THE COMPANY 3.1 MANAGEMENT GENERALLY. The business and affairs of the Company shall be managed by and under the authority of the Member, who shall have all the rights and powers that may be possessed by a "manager" under the Act, and such rights and powers as are otherwise conferred by law or by this Agreement or that are necessary, advisable or convenient to the management of the business and affairs of the Company. 3.2 ADVISORY COMMITTEE. The Company shall form an Advisory Committee (the "Advisory Committee") consisting of up to three (3) representatives from Tele-Communications, Inc., or its controlled affiliates, and three representatives from each of (i) Blackstone Cable Acquisition Company, LLC or its affiliates and (ii) the general partner of the Member or its affiliates. The Member will be responsible for administration of the Advisory Committee. The Advisory Committee will meet quarterly in a location approved by the members of the Advisory Committee, and will consult with and advise the Member with respect to the business of the Company and perform such other advisory functions as may be requested by the Member from time to time. 3.3 EXPENSES. The Company shall pay all Organization Expenses and Company Expenses. 3.4 EXCULPATION. No Indemnifiable Person shall have any liability or obligation to the Company or the Member for any loss suffered by the Company which arises out of any action or inaction of such Indemnifiable Person, or of any other Indemnifiable Person, so long as such Indemnifiable Person, in good faith, shall have determined that such action or inaction was in the best interest of the Company and such action or inaction did not constitute fraud or willful misconduct. 3.5 INDEMNIFICATION. The Indemnifiable Persons shall be indemnified and held harmless by the Company to the fullest extent permitted by law from and against any losses, claims, demands, liabilities, costs, damages and causes of action of any nature whatsoever, and amounts paid in settlement of any claims, including, without limitation, any reasonable legal, accounting or other expenses incurred in connection with investigating or defending any actual or threatened claims, investigations, suits, proceedings or actions, arising out of or incidental to an Indemnifiable Person's conduct of the affairs of the Company within the scope of authority conferred by this Agreement (collectively, "Claims"). Notwithstanding the foregoing, no indemnification shall be available hereunder in respect of any Claim adjudged to be primarily the result of fraud or willful misconduct of an Indemnifiable Person. Unless the Member otherwise determines, the Company shall pay the costs and expenses, including reasonable legal fees, incurred by any Indemnifiable Person in connection with any Claim for which an Indemnifiable Person may be entitled to indemnification in accordance with this Section 3.5 in advance of the final disposition of -4- 5 such Claim, upon receipt by the Company of an undertaking of such Indemnifiable Person to repay such payment if there shall be a final adjudication or determination that such Indemnifiable Person is not entitled to indemnification as provided herein. The indemnification rights contained in this Section 3.5 shall be cumulative and in addition to any and all other rights, remedies and recourse to which an Indemnifiable Person shall be entitled, whether pursuant to the provisions of this Agreement, at law, or in equity. Payment of the indemnification obligations set forth herein shall be made from assets of the Company and the Member shall not be personally liable to an Indemnifiable Person for payment of indemnification hereunder. Notwithstanding anything contained herein to the contrary, all indemnification obligations of the Company shall survive the termination of the Company. ARTICLE IV MEMBER AND CAPITAL CONTRIBUTIONS 4.1 MEMBER. The address of the Member is 709 Westchester Avenue, White Plains, New York 10604 Attn: General Counsel and Chief Financial Officer, telephone number: (914) 993-6600, facsimile number: (914) 993-6693. 4.2 INITIAL CONTRIBUTIONS. Concurrently with the execution of this Agreement, the Member shall contribute $100.00 to the Company. 4.3 ADDITIONAL CONTRIBUTIONS; RETURN OF DISTRIBUTIONS. Except as provided in Section 4.2, in Section 18-607 of the Act or by other applicable law, the Member shall not be required to make any contribution to the capital of the Company or to return any distribution made to the Company by it; provided, however, the Member may make additional Capital Contributions in such amounts and at such times as the Member shall determine. 4.4 LIMITED LIABILITY. Except to the extent provided by applicable law, the Member shall not be bound by, or personally liable for, the expenses, debts, liabilities or obligations of the Company. ARTICLE V DISTRIBUTIONS AND ALLOCATIONS 5.1 DISTRIBUTIONS. Notwithstanding anything contained herein to the contrary, from time to time the Company shall make cash distributions to the Member sufficient to allow the payment by Bresnan Communications Company Limited Partnership ("BCCLP") of any Tax Distribution (as defined in the Amended and Restated Partnership Agreement of BCCLP, dated as of February __, 1999 (the "Partnership Agreement")) to its partners required by the terms of the Partnership Agreement. All other distributions of cash or other assets of the Company shall be made to the Member at such times and in such amounts as the Member may determine. -5- 6 5.2 LIMITATION ON DISTRIBUTIONS. No distribution shall be made to the extent that such distribution would violate Section 18-607 of the Act or any other applicable law. 5.3 ALLOCATIONS. All items of income, gain, loss, deduction and credit for federal, state and local income tax purposes shall be allocated to the Member. 5.4 TAX TREATMENT OF COMPANY. Solely for federal, state and local income tax purposes, the Member intends that the Company will be disregarded as an entity separate from the Member as set forth in Treasury Regulations Section 301.7701-3. The Member shall file Form 8832 with the Internal Revenue Service in order to effectuate such classification. ARTICLE VI BOOKS AND RECORDS; ACCOUNTS 6.1 BOOKS AND RECORDS. The Member shall maintain at the office of the Company full and accurate books of the Company showing all receipts and expenditures, assets and liabilities, profits and losses, and all other books, records and information required by the Act or necessary for recording the Company's business and affairs including (a) Federal, state and local income tax or information returns and reports, if any, and (b) financial statements of the Company. The financial and accounting books and records of the Company may be maintained in accordance with such accounting procedures and principles as the Member may deem appropriate. 6.2 BANKING. The Member may open and thereafter maintain one or more separate bank accounts in the name of the Company in which the funds of the Company may be deposited. No funds of any other Person shall be deposited in any such account, and the funds in any such account shall be used solely for the business of the Company. 6.3 TAX MATTERS; ANNUAL TAX RETURNS. The Member shall include all items of Company income, gain, loss and deduction on the Member's tax return. The Member shall prepare or cause to be prepared all tax returns and any other reports or forms as are required by the Internal Revenue Service or as may be necessary for the Member to file its Federal or any required state or local income tax return. ARTICLE VII TRANSFER OF MEMBERSHIP INTEREST The Member may Transfer all or any portion of its Membership Interest. -6- 7 ARTICLE VIII DISSOLUTION AND WINDING UP OF THE COMPANY 8.1 DISSOLUTION OF THE COMPANY. The Company shall be dissolved upon the first to occur of any of the following events (each a "Terminating Dissolution"): 8.1.1 a determination by the Member to dissolve the Company; 8.1.2 the expiration of the term of the Company set forth in Article I; or 8.1.3 any other event causing dissolution of the Company under the Act. 8.2 WINDING UP OF THE COMPANY. Upon a Terminating Dissolution of the Company, the Member shall wind up the business and affairs of the Company in an orderly manner and any Company assets not previously distributed to the Member, or the proceeds therefrom to the extent the Member elects to liquidate the same, to the extent sufficient therefor, shall be applied and distributed in the following order: 8.2.1 To the payment and discharge of all of the Company's debts and liabilities to Persons other than the Member; 8.2.2 To the establishment of any reserve which the Member may deem reasonably necessary for any contingent liabilities or obligations of the Company; such reserve may be paid over by the Member to any bank or other acceptable party, as escrow agent, to be held for disbursement in payment of any of the aforementioned liabilities and, at the expiration of such reasonable period as shall be determined by the Member, for distribution of the balance, in the manner hereinafter provided in this Section 8.2; 8.2.3 To the payment and discharge of all of the Company's debts and liabilities to the Member (other than in respect of its Membership Interest); and 8.2.4 The balance of such assets or proceeds shall be distributed to the Member. ARTICLE IX MISCELLANEOUS 9.1 SUCCESSORS AND ASSIGNS. This Agreement and each provision of this Agreement shall be binding upon and shall inure to the benefit of the Member and its successors and permitted assigns. -7- 8 9.2 AMENDMENTS. Amendments may be made to this Agreement from time to time by a written document duly executed by each of the parties hereto. 9.3 NO WAIVER. The failure of the Member to insist upon strict performance of a covenant under this Agreement or of any obligation under this Agreement, irrespective of the length of time for which such failure continues, shall not be a waiver of that Member's right to demand strict compliance in the future. No consent or waiver, express or implied, to or of any breach or default in the performance of any obligation under this Agreement shall constitute a consent or waiver to or of any other breach or default in the performance of the same or any other obligation under this Agreement. No provision of this Agreement may be waived except by a writing specifically waiving such provision and executed by the party chargeable with such waiver. 9.4 ENTIRE AGREEMENT. This Agreement constitutes the full and complete agreement of the parties to this Agreement with respect to the subject matter of this Agreement. 9.5 CAPTIONS. The titles or captions of Articles or Sections contained in this Agreement are inserted only as a matter of convenience and for reference, are not a part of this Agreement, and in no way define, limit, extend or describe the scope of this Agreement or the intent of any provision of this Agreement. 9.6 COUNTERPARTS. This Agreement may be executed in any number of counterparts, all of which together shall for all purposes constitute one agreement, binding on all the parties, notwithstanding that all parties have not signed the same counterpart. 9.7 SEPARABILITY. In case any of the provisions contained in this Agreement or any application of any of those provisions shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained in this Agreement and other applications of those provisions shall not in any way be affected or impaired thereby. 9.8 CONSTRUCTION. Except as expressly provided herein, none of the provisions of this Agreement shall be for the benefit of, or enforceable by, any creditors of the Company or other third parties. 9.9 APPLICABLE LAW. This Agreement shall be construed and enforced in accordance with the laws of the State of Delaware. -8- 9 IN WITNESS WHEREOF, this LIMITED LIABILITY COMPANY AGREEMENT has been executed as of the date first above written. MEMBER: BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP By: BCI (USA), L.P., its managing general partner By: BRESNAN COMMUNICATIONS, INC., its general partner By: /s/ Robert Bresnan ........................................ Name: Robert Bresnan Title: Vice President & General Counsel COMPANY: BRESNAN COMMUNICATIONS GROUP LLC By: BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP, its member By: BCI (USA), L.P., its managing general partner By: BRESNAN COMMUNICATIONS, INC., its general partner By: /s/ Robert Bresnan .......................................... Name: Robert Bresnan Title: Vice President & General Counsel EX-3.3 5 CERTIFICATION OF INCORPOATION 1 EXHIBIT 3.1 CERTIFICATE OF FORMATION OF BRESNAN COMMUNICATIONS GROUP LLC This Certificate of Formation of Bresnan Communications Group LLC is being executed by the undersigned for the purpose of forming a limited liability company pursuant to the Delaware Limited Liability Company Act (6 Del. C. Section 18-101, et seq.) (the "Act"). 1. The name of the limited liability company (hereinafter called the "Company") is "Bresnan Communications Group LLC." 2. The purpose of the Company is to engage in any lawful act or activity for which a limited liability company may be organized under the Act. 3. The address, including street, number, city and country, of the registered office of the Company in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle 19801. The name of the registered agent of the Company in the State Delaware at such address is The Corporation Trust Company. 4. In furtherance and not in limitation of the powers conferred by the Act, the Company shall be governed by a limited liability company agreement. 5. The Company shall to the fullest extent permitted by Section 18-108 of the Act, as the same may be amended and supplemented, indemnify any and all persons whom it shall have the power to indemnify under said Section 18-108 from and against any and all matters, and the indemnification provided for herein shall not be deemed exclusive of any other right to which any person may be entitled under the limited liability company agreement, or otherwise. 2 IN WITNESS WHEREOF, the undersigned acting as an authorized signatory pursuant to Section 18-204 of the Act has caused this Certificate of Formation of Bresnan Communications Group LLC to be duly executed this 5th day of August, 1998. BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP By: BCI (USA), L.P., general partner By: Bresnan Communications, Inc., general partner By: /s/ Jeffrey S. DeMond ----------------------------------- Name: Jeffrey S. DeMond Title: SVP EX-3.4 6 BY-LAWS 1 EXHIBIT 3.4 BY-LAWS OF BRESNAN CAPITAL CORPORATION (A DELAWARE CORPORATION) ARTICLE I STOCKHOLDERS 1. CERTIFICATES REPRESENTING STOCK. Every holder of stock in the Corporation shall be entitled to have a certificate signed by, or in the name of, the Corporation by the Chairman or Vice Chairman of the Board of Directors, if any, or by the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Corporation representing the number of shares owned by him or her in the Corporation. Any and all signatures on any such certificate may be facsimiles. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent, or registrar at the date of issue. Whenever the Corporation shall be authorized to issue more than one class of stock or more than one series of any class of stock and whenever the Corporation shall issue any shares of its stock as partly paid stock, the certificate representing shares of any such class or series or of any such partly paid stock shall set forth thereon the statements prescribed by the General Corporation Law. Any restrictions on the transfer or registration of transfer of any shares of stock of any class or series shall be noted conspicuously on the certificate representing such shares. The Corporation may issue a new certificate of stock in place of any certificate theretofore issued by it, alleged to have been lost, stolen, or destroyed, and the Board of Directors may require the owner of any lost, stolen, or destroyed certificate, or his legal representative, to give the Corporation a bond sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft, or destruction of any such certificate or the issuance of any such new certificate. 2. FRACTIONAL SHARE INTERESTS. The Corporation may, but shall not be required to, issue fractions of a share. If the Corporation does not issue fractions of a share, it shall (1) arrange for the disposition of fractional interests by those entitled thereto, (2) pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or (3) issue scrip or warrants in registered or bearer form which shall entitle the holder to receive a certificate for a full share upon the surrender of such scrip or warrants aggregating a full share. A certificate for a fractional share shall, but scrip or warrants 2 shall not unless otherwise provided therein, entitle the holder to exercise voting rights, to receive dividends thereon, and to participate in any of the assets of the Corporation in the event of liquidation, in each case to the extent of such fraction. The Board of Directors may cause scrip or warrants to be issued subject to the conditions that they shall become void if not exchanged for certificates representing full shares before a specified date, or subject to the conditions that the shares for which scrip or warrants are exchangeable may be sold by the Corporation and the proceeds thereof distributed to the holders of scrip or warrants, or subject to any other conditions which the Board of Directors may impose. 3. STOCK TRANSFERS. Upon compliance with provisions restricting the transfer or registration of transfer of shares of stock, if any, transfers or registration of transfers of shares of stock of the Corporation shall be made only on the stock ledger of the Corporation and on surrender of the certificate or certificates for such shares of stock properly endorsed and the payment of all taxes due thereon. 4. RECORD DATE FOR STOCKHOLDERS. For the purpose of determining the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix, in advance, a record date, which shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty days nor less than ten days before the date of such meeting. If no record date is fixed, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at any meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting of stockholders, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting of stockholders, when no prior action by the Board of Directors is required by the General Corporation Law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by the General Corporation Law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action. -2- 3 In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. 5. MEANING OF CERTAIN TERMS. As used herein in respect of the right to notice of a meeting of stockholders or a waiver thereof or to participate or vote thereat or to consent or dissent in writing in lieu of a meeting, as the case may be, the term "share" or "shares" or "share of stock" or "shares of stock" or "stockholder" or "stockholders" refers to an outstanding share or shares of stock and to a holder or holders of record of outstanding shares of stock when the Corporation ha only one class of shares of stock outstanding; and said reference is also intended to include any outstanding share or shares of stock and any holder or holders of record of outstanding shares of stock of any class upon which or upon whom the Certificate of Incorporation confers such rights where there are two or more classes or series of shares of stock or upon which or upon whom the General Corporation Law confers such rights notwithstanding that the Certificate of Incorporation may provide for more than one class or series of shares of stock, one or more of which are limited or denied such rights thereunder. 6. STOCKHOLDER MEETINGS. 6.1 TIME. The annual meeting shall be held on the date and at the time fixed, from time to time, by the Board of Directors, provided, that the first annual meeting shall be held on a date within thirteen months after the organization of the corporation, and each successive annual meeting shall be held on a date within thirteen months after the date of the preceding annual meeting. A special meeting shall be held on the date and at the time fixed by the Board of Directors. 6.2 PLACE. Annual meetings and special meetings shall be held within or without the State of Delaware, as the Board of Directors may, from time to time, fix. Whenever the Board of Directors shall fail to fix such place, the meeting shall be held at the registered office of the Corporation in the State of Delaware. 6.3 CALL. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by the General Corporation Law or by the Certificate of Incorporation, may be called by action of the Board of Directors, the Chairman of the Board or the President and shall be called by the Chairman of the Board, the President or the Secretary at the written request of a majority of the Board of Directors then in office or the holders of a majority of the outstanding shares of stock entitled to vote. -3- 4 6.4 NOTICE OR WAIVER OF NOTICE. Written notice of all meetings of stockholders shall be given, stating the place, date, and hour of the meeting and stating the place within the city or other municipality or community at which the list of stockholders of the Corporation may be examined. The notice of an annual meeting shall state that the meeting is called for the election of directors and for the transaction of other business which may properly come before the meeting, and shall (if any other action which could be taken at a special meeting is to be taken at such annual meeting) state any other purpose or purposes. The notice of a special meeting shall in all instances state the purpose or purposes for which the meeting is to be called. The notice of any meeting shall also include, or be accompanied by, any additional statements, information, or documents prescribed by the General Corporation Law. Except as otherwise provided by the General Corporation Law, a copy of the notice of any meeting shall be given, not less than ten days nor more than sixty days before the date of the meeting. Notice by mail shall be deemed to be given when deposited, with postage thereon prepaid, in the United States Mail directed to the stockholder at his or her address as it appears on the records of the Corporation. If a meeting is adjourned to another time, not more than thirty days hence, and/or to another place, and if an announcement of the adjourned time and/or place is made at the meeting, it shall not be necessary to give notice of the adjourned meeting unless the Board of Directors, after adjournment, fix a new record date for the adjourned meeting. Notice need not be given to any stockholder who submits a written waiver of notice signed by him or her before or after the time stated therein. Attendance of a stockholder at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when the stockholder attends the meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice. 6.5 STOCKHOLDER LIST. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city or other municipality or community where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledge shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section or the books of the Corporation, or to vote at any meeting of stockholders. 6.6 CONDUCT OF MEETING. Meetings of the stockholders shall be presided over by one of the following officers in the order of seniority and if present and acting, the Chairman of the Board, if any, the Vice Chairman of the Board, if any, the President, a Vice President, if any, or, if none of the foregoing is in office and present and acting, by a chairman to be chosen by the stockholders. The Secretary of the Corporation, or in -4- 5 his absence, an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present the chairman of the meeting shall appoint a secretary of the meeting. 6.7 PROXY REPRESENTATION. Every stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him or her by proxy. A stockholder may execute a writing authorizing another person or persons to act for him or her as proxy. Execution may be accomplished by the stockholder or his or her authorized officer, director, employee or agent signing such writing or causing his or her signature to be affixed to such writing by any reasonable means including, but not limited to, by facsimile signature. A stockholder may authorize another person or persons to act for him or her as proxy by transmitting or authorizing the transmission of a telegram, cablegram, or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission, provided that any such telegram, cablegram or other means of electronic transmission must either set forth or be submitted with information from which it can be determined that the telegram, cablegram or other electronic transmission was authorized by the stockholder. If it is determined that such telegrams, cablegrams or other electronic transmissions are valid, the inspectors or, if there are no inspectors, such other persons making that determination shall specify the information upon which they relied. Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to the above may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission. No proxy shall be voted or acted upon after three years from its date unless such proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and, if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the Corporation generally. 6.8 INSPECTORS. The Board of Directors, in advance of any meeting of stockholders, may, but need not unless prescribed by the General Corporation Law, appoint one or more inspectors of election to act at the meeting or any adjournment thereof and make a written report thereof. If an inspector or inspectors are not appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors. In case any person who may be appointed as an inspector fails t appear or act, the vacancy may be filled by appointment made by the directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, if any, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares o stock represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall count all votes and ballots, determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by inspectors and certify their -5- 6 determination of the number of shares represented at the meeting, and their count of all votes and ballots. 6.9 QUORUM. The holders of a majority of the outstanding shares of stock shall constitute a quorum at a meeting of stockholders for the transaction of any business. The stockholders present may adjourn the meeting despite the absence of a quorum. 6.10 VOTING. Each share of stock shall entitle the holder thereof to one vote. In the election of directors, a plurality of the votes cast shall elect. Any other action shall be authorized by a majority of the votes cast except where the General Corporation Law prescribes a different percentage of votes and/or a different exercise of voting power, and except as may be otherwise prescribed by the provisions of the Certificate of Incorporation or these By-Laws. In the election of directors, and for any other action, voting need not be by written ballot. 7. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by the General Corporation Law to be taken at any annual or special meeting of stockholders, or any action which may be taken at any annual or special meeting of stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to a Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE II DIRECTORS 1. FUNCTIONS AND DEFINITION. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors of the Corporation except as otherwise provided in the General Corporation Law or in the Certificate of Incorporation. The Board of Directors shall have the authority to fix the compensation of the members thereof. The use of the phrase "whole Board of Directors" herein refers to the total number of directors which the Corporation would have if there were no vacancies. 2. QUALIFICATIONS AND NUMBER. A director need not be a stockholder, or a citizen or resident of the United States or the State of Delaware. The initial Board of Directors shall consist of one person. Except for the initial Board of Directors, the number of -6- 7 directors may be fixed from time to time by action of the stockholders or of the Board of Directors. The number of directors may be increased or decreased by action of the stockholders or of the Board of Directors. 3. ELECTION AND TERM. The first Board of Directors, unless the members thereof shall have been named in the Certificate of Incorporation, shall be elected by the incorporator or incorporators and shall hold office until the first annual meeting of stockholders and until their successors are elected and qualified or until their earlier resignation or removal. Any director may resign at any time upon written notice to the Corporation. Directors who are elected at an annual meeting of stockholders, and directors who are elected in the interim to fill vacancies and newly created directorships, shall hold office until the next annual meeting of stockholders or until their successors are elected and qualified or until their earlier resignation or removal. Newly created directorships and any vacancies in the Board of Directors, including unfilled vacancies resulting from the removal of directors for cause or without cause, may be filled by the vote of a majority of the remaining directors then in office although less than a quorum, or by the sole remaining director. 4. MEETINGS. 4.1 TIME. Meetings shall be held at such time as the Board of Directors shall fix, except that the first meeting of a newly elected Board of Directors shall be held as soon after its election as the directors may conveniently assemble. 4.2 PLACE. Meetings shall be held at such place within or without the State of Delaware as shall be fixed by the Board of Directors. 4.3 CALL. No call shall be required for regular meetings for which the time and place have been fixed. Special meetings may be called by or at the direction of the Chairman of the Board, if any, the Vice Chairman of the Board, if any, or the President, or of a majority of the directors in office. 4.4 NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required for regular meetings for which the time and place have been fixed. Written, oral, or any other mode of notice of the time and place shall be given for special meetings in sufficient time for the convenient assembly of the directors thereat. Notice need not be given to any director or to any member of a committee of directors who submits a written waiver of notice signed by him or her before or after the time for the meeting stated therein. Attendance of any such person at a meeting shall constitute a waiver of notice of such meeting, except when he or she attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in any written waiver of notice. 4.5 QUORUM AND ACTION. A majority of the whole Board of Directors shall constitute a quorum for the transaction of business except when a vacancy or vacancies prevents such majority, whereupon a majority of the directors in office shall -7- 8 constitute a quorum, provided, that such majority shall constitute at least one third of the whole Board of Directors. A majority of the directors present, whether or not a quorum is present, may adjourn a meeting to another time and place. Except as otherwise provided by the General Corporation Law, the vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. The quorum and voting provisions herein stated shall not be construed as conflicting with any provisions of the General Corporation Law and these By-Laws which govern a meeting of directors held to fill vacancies and newly created directorships in the Board of Directors or action of disinterested directors. 4.6 CHAIRMAN OF THE MEETING. The Chairman of the Board of Directors, if any, and if present and acting, shall preside at all meetings. Otherwise, the Vice Chairman of the Board of Directors, if any and if present and acting, or the President, if present and acting, or any other director chosen by the Board of Directors, shall preside. 5. REMOVAL OF DIRECTORS. Except as may otherwise be provided by the General Corporation Law, any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. 6. COMMITTEES. The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of any member of any such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation with the exception of any authority the delegation of which is prohibited by Section 141 of the General Corporation Law or by these By-Laws, and may authorize the seal of the Corporation to be affixed to all papers which may require it. 7. WRITTEN ACTION. Any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board of Directors or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors, or committee. 8. ELECTRONIC COMMUNICATION. Any member or members of the Board of Directors or of any committee designated by the Board of Directors, may participate in a meeting of such Board of Directors, or any such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. -8- 9 ARTICLE III OFFICERS The officers of the Corporation shall consist of a President and a Secretary, and, if deemed necessary, expedient, or desirable by the Board of Directors, a Chief Executive Officer, a Chairman of the Board, a Vice Chairman of the Board, one or more Vice Presidents, one or more Assistant Secretaries, a Treasurer, one or more Assistant Treasurers, and such other officers with such titles as the resolution of the Board of Directors choosing them shall designate. Except as may otherwise be provided in the resolution of the Board of Directors choosing him or her, no officer other than the Chairman or Vice Chairman of the Board, if any, need be a director. Any number of offices may be held by the same person. Unless otherwise provided in the resolution choosing him or her, each officer shall be chosen for a term which shall continue until the meeting of the Board of Directors following the next annual meeting of stockholders and until his successor shall have been chosen and qualified or until his earlier resignation or removal. Any officer may be removed, with or without cause, by the Board of Directors. Any vacancy in any office may be filled by the Board of Directors. All officers of the Corporation shall have such authority and perform such duties in the management and operation of the Corporation as may be prescribed in the resolutions of the Board of Directors designating and choosing such officers or prescribing the authority and duties of the various officers of the Corporation, and as are customarily incident to their office, except to the extent that such resolutions may be inconsistent therewith. The Secretary or Assistant Secretary of the Corporation shall record all of the proceedings of all meetings and the actions in writing of stockholders, directors and committees of directors, and shall exercise such additional authority and perform such additional duties as the Board of Directors shall assign to him or her. The President of the Corporation shall, subject to the control of the Board of Directors, manage the business of the Corporation. ARTICLE IV INDEMNIFICATION The Corporation, to the full extent permitted by law, shall indemnify any officer or director of the Corporation who was or is a party or is threatened to be made a party to, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative in nature, by reason of the fact that such person is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, -9- 10 against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding and/or the defense or settlement of such action or suit, and the Corporation may enter into agreements with any such person for the purpose of providing for such indemnification. To the extent that a director or officer of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in the preceding paragraph, or in defense of any claim, issue or matter therein, and the Corporation shall not previously have reimbursed or paid for all such expenses, such person shall be indemnified against expenses (including attorneys' fees and disbursements) actually and reasonably incurred by such person in connection therewith. Expenses (including attorneys' fees) incurred by an officer or director in defending any civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such director or officer is not entitled to be indemnified by the Corporation against such expenses as authorized by this Article. The indemnification and advancement of expenses permitted by this Article shall not be deemed exclusive of any other rights to which any person may be entitled under any agreement, or by virtue of vote of stockholders or disinterested directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding an office, and shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such person. ARTICLE V CORPORATE SEAL The corporate seal shall be in such form as the Board of Directors shall prescribe. ARTICLE VI FISCAL YEAR The fiscal year of the Corporation shall be fixed, and shall be subject to change, by the Board of Directors. -10- 11 ARTICLE VII CONTROL OVER BY-LAWS Subject to the provisions of the Certificate of Incorporation and the provisions of the General Corporation Law, the power to amend, alter or repeal these By-Laws and to adopt new By-Laws may be exercised by the Board of Directors or by the stockholders entitled to vote. ARTICLE VIII BOOKS AND RECORDS 1. BOOKS AND RECORDS. The books and records of the Corporation may be kept at such places within or without the State of Delaware as the proper officers of the Corporation may from time to time determine. 2. STOCK RECORD. The person in whose name shares of stock stand on the stock record of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation. -11- 12 CONSENT OF THE SOLE DIRECTOR OF BRESNAN CAPITAL CORPORATION The undersigned, being the sole director of Bresnan Capital Corporation, a Delaware corporation (the "Corporation"), hereby consents to the following resolutions and the actions therein authorized, and waives notice of and the holding of a meeting of directors for such purposes, all pursuant to the provisions of Section 141(f) of the General Corporation Law of the State of Delaware. RESOLVED, that any and all actions taken by the sole incorporator of the Corporation in connection with the management of the affairs and organization of the Corporation are hereby ratified, approved and affirmed in all respects; and further RESOLVED, that the following named persons are hereby elected to the respective offices set forth opposite their names below, to serve at the pleasure of the Board of Directors and until their respective successors are duly elected and qualified: Name Office ________ __________ William J. Bresnan President and Secretary Jeffrey S. DeMond Vice President and Assistant Secretary ; and further RESOLVED, that the issuance of one hundred (100) shares of common stock, par value $.01 per share, of the Corporation to Bresnan Communications Company Limited Partnership, for an aggregate consideration of one dollar ($1.00) is hereby authorized and approved; the subscription for such shares by Bresnan Communications Company Limited Partnership is hereby accepted; and the officers of the Corporation are hereby authorized and directed to so issue such shares and to take such other actions as may be necessary or appropriate to implement such issuance; and further RESOLVED, that the officers of the Corporation be, and they each hereby are, authorized to open such bank accounts for the Corporation at such banks as such officers deem appropriate and advisable; that the respective forms of banking resolutions of such banks be, and the same hereby are, approved as though adopted verbatim by the Board of Directors on the respective dates indicted on such form resolutions; and that the Secretary of the Corporation is hereby directed to insert a copy of such resolutions in the minute book of the Corporation upon the opening of such accounts. 13 IN WITNESS WHEREOF, the undersigned have executed this Consent as of the 25th day of April, 1996. /s/ William J. Bresnan -------------------------------- William J. Bresnan -2- EX-4.1 7 INDENTURE 1 EXHIBIT 4.1 EXECUTION COPY Bresnan Communications Group LLC Bresnan Capital Corporation 8% Senior Notes due 2009 9 1/4% Senior Discount Notes due 2009 INDENTURE Dated as of February 2, 1999 State Street Bank and Trust Company, Trustee 2 TABLE OF CONTENTS
Page ARTICLE I Definitions and Incorporation by Reference SECTION 1.01. Definitions .................................................................... 1 SECTION 1.02. Other Definitions .............................................................. 33 SECTION 1.03. Incorporation by Reference of Trust Indenture Act .............................. 34 SECTION 1.04. Rules of Construction .......................................................... 35 ARTICLE II The Securities SECTION 2.01. Amount of Securities; Issuable in Series ....................................... 36 SECTION 2.02. Form and Dating ................................................................ 38 SECTION 2.03. Execution and Authentication ................................................... 38 SECTION 2.04. Registrar and Paying Agent ..................................................... 39 SECTION 2.05. Paying Agent To Hold Money in Trust ............................................ 39 SECTION 2.06. Securityholder Lists ........................................................... 40 SECTION 2.07. Replacement Securities ......................................................... 40 SECTION 2.08. Outstanding Securities ......................................................... 40 SECTION 2.09. Temporary Securities ........................................................... 41 SECTION 2.10. Cancelation .................................................................... 41 SECTION 2.11. Defaulted Interest ............................................................. 41 SECTION 2.12. CUSIP Numbers .................................................................. 42 ARTICLE III Redemption SECTION 3.01. Notices to Trustee ............................................................. 42 SECTION 3.02. Selection of Securities To Be Redeemed ......................................... 43 SECTION 3.03. Notice of Redemption ........................................................... 43 SECTION 3.04. Effect of Notice of Redemption ................................................. 44 SECTION 3.05. Deposit of Redemption Price .................................................... 44 SECTION 3.06. Securities Redeemed in Part .................................................... 44
ARTICLE IV 3
Page Covenants SECTION 4.01. Payment of Securities........................................................... 45 SECTION 4.02. SEC Reports. ................................................................ 45 SECTION 4.03. Limitation on Indebtedness...................................................... 46 SECTION 4.04. Limitation on Restricted Payments............................................... 49 SECTION 4.05. Limitation on Liens............................................................. 53 SECTION 4.06. Limitation on Issuance of Guarantees by Restricted Subsidiaries................. 54 SECTION 4.07. Limitation on Asset Dispositions................................................ 54 SECTION 4.08. Limitation on Restrictions on Distributions from Restricted Subsidiaries........ 57 SECTION 4.09. Limitation on Transactions with Affiliates...................................... 59 SECTION 4.10. Designation of Restricted and Unrestricted Subsidiaries......................... 61 SECTION 4.11. Limitation on Conduct of Business of BCC. ...................................... 63 SECTION 4.12. Limitation on Conduct of Business of the Company and BCC Prior to the Funding Date................................................................... 63 SECTION 4.13. Change of Control............................................................... 63 SECTION 4.14. Compliance Certificate.......................................................... 65 SECTION 4.15. Applicability of Article IV; Investment Grade Ratings........................... 66 SECTION 4.16. OID Certificate................................................................. 66 SECTION 4.17. Further Instruments and Acts.................................................... 66 ARTICLE V Successor Company SECTION 5.01. When Company and BCC May Merge or Transfer Assets............................... 67 SECTION 5.02. Applicability of Article V; Investment Grade Ratings............................ 68 ARTICLE VI Defaults and Remedies SECTION 6.01. Events of Default............................................................... 69
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Page SECTION 6.02. Acceleration ................................................................... 71 SECTION 6.03. Other Remedies ................................................................. 72 SECTION 6.04. Waiver of Past Defaults ........................................................ 72 SECTION 6.05. Control by Majority ............................................................ 72 SECTION 6.06. Limitation on Suits ............................................................ 73 SECTION 6.07. Rights of Holders To Receive Payment ........................................... 73 SECTION 6.08. Collection Suit by Trustee ..................................................... 73 SECTION 6.09. Trustee May File Proofs of Claim ............................................... 74 SECTION 6.10. Priorities ..................................................................... 74 SECTION 6.11. Undertaking for Costs .......................................................... 74 SECTION 6.12. Waiver of Stay or Extension Laws ............................................... 75 ARTICLE VII Trustee SECTION 7.01. Duties of Trustee .............................................................. 75 SECTION 7.02. Rights of Trustee .............................................................. 77 SECTION 7.03. Individual Rights of Trustee ................................................... 77 SECTION 7.04. Trustee's Disclaimer ........................................................... 78 SECTION 7.05. Notice of Defaults ............................................................. 78 SECTION 7.06. Reports by Trustee to Holders .................................................. 78 SECTION 7.07. Compensation and Indemnity ..................................................... 78 SECTION 7.08. Replacement of Trustee ......................................................... 79 SECTION 7.09. Successor Trustee by Merger .................................................... 81 SECTION 7.10. Eligibility; Disqualification .................................................. 81 SECTION 7.11. Preferential Collection of Claims Against Company .............................. 81 ARTICLE VIII Discharge of Indenture; Defeasance SECTION 8.01. Discharge of Liability on Securities; Defeasance................................ 82 SECTION 8.02. Conditions to Defeasance........................................................ 83 SECTION 8.03. Application of Trust Money...................................................... 84 SECTION 8.04. Repayment to Company............................................................ 84 SECTION 8.05. Indemnity for Government Obligations............................................ 85 SECTION 8.06. Reinstatement. ................................................................ 85 ARTICLE IX
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Page Amendments SECTION 9.01. Without Consent of Holders...................................................... 85 SECTION 9.02. With Consent of Holders......................................................... 86 SECTION 9.03. Compliance with Trust Indenture Act............................................. 87 SECTION 9.04. Revocation and Effect of Consents and Waivers................................... 88 SECTION 9.05. Notation on or Exchange of Securities........................................... 88 SECTION 9.06. Trustee To Sign Amendments...................................................... 88 SECTION 9.07. Payment for Consent............................................................. 89 ARTICLE X Miscellaneous SECTION 10.01. Trust Indenture Act Controls ................................................... 89 SECTION 10.02. Notices ........................................................................ 89 SECTION 10.03. Communication by Holders with Other Holders ................................... 90 SECTION 10.04. Certificate and Opinion as to Conditions Precedent ............................ 90 SECTION 10.05. Statements Required in Certificate or Opinion ................................. 91 SECTION 10.06. When Securities Disregarded ................................................... 91 SECTION 10.07. Rules by Trustee, Paying Agent and Registrar .................................. 91 SECTION 10.08. Legal Holidays ................................................................ 91 SECTION 10.09. Governing Law ................................................................. 92 SECTION 10.10. No Recourse Against Others .................................................... 92 SECTION 10.11. Successors .................................................................... 92 SECTION 10.12. Multiple Originals ............................................................ 92 SECTION 10.13. Table of Contents; Headings ................................................... 92
Appendix A - Provisions Relating to Original Securities, Additional Securities, Private Exchange Securities and Exchange Securities Exhibit 1 to Appendix A - Form of Initial Security Exhibit A - Form of Exchange Security Exhibit B - Form of Letter of Representation 6
Page CROSS-REFERENCE TABLE Indenture Section 310 (a)(1) .................................................................................................. 7.10 (a)(2) .................................................................................................... 7.10 (a)(3) .................................................................................................... N.A. (a)(4) .................................................................................................... N.A. (b) ....................................................................................................... 7.08; 7.10 (c) ....................................................................................................... N.A. 311 (a) ..................................................................................................... 7.11 (b) ....................................................................................................... 7.11 (c) ....................................................................................................... N.A. 312 (a) ..................................................................................................... 2.06 (b) ....................................................................................................... 10.03 (c) ....................................................................................................... 10.03 313 (a) ..................................................................................................... 7.06 (b)(1) .................................................................................................... N.A. (b)(2) .................................................................................................... 7.06 (c) ....................................................................................................... 10.02 (d) ....................................................................................................... 7.06 314 (a) ..................................................................................................... 4.02; 4.14; 10.02 (b) ....................................................................................................... N.A. (c)(1) .................................................................................................... 10.04 (c)(2) .................................................................................................... 10.04 (c)(3) .................................................................................................... N.A. (d) ....................................................................................................... N.A. (e) ....................................................................................................... 10.05 (f) ....................................................................................................... 4.10 315 (a) ..................................................................................................... 7.01 (b) ....................................................................................................... 7.05; 10.02 (c) ....................................................................................................... 7.01 (d) ....................................................................................................... 7.01 (e) ....................................................................................................... 6.11 316 (a) (last sentence) ................................................................................................... 10.06 (a)(1)(A) ................................................................................................. 6.05 (a)(1)(B) ................................................................................................. 6.04
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Page (a)(2) ................................................................................................. N.A. (b) .................................................................................................... 6.07 317 (a)(1) ............................................................................................. 6.08 (a)(2) ................................................................................................. 6.09 (b) .................................................................................................... 2.05 318 (a) ................................................................................................ 10.01
N.A. Means Not Applicable. Note: This Cross-Reference Table shall not, for any purposes, be deemed to be part of this Indenture. 8 INDENTURE dated as of February 2, 1999, among BRESNAN COMMUNICATIONS GROUP LLC, a Delaware limited liability company (the "Company"), BRESNAN CAPITAL CORPORATION, a Delaware corporation ("BCC"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company, as Trustee (the "Trustee"). Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of the Company's and BCC's 8% Senior Notes due 2009 (the "Initial Senior Notes") and 9 1/4% Senior Discount Notes due 2009 (the "Initial Senior Discount Notes" and together with the Initial Senior Notes, the "Initial Securities"), each to be issued, from time to time, in one or more series as in this Indenture provided and, if and when issued pursuant to a private exchange for the Initial Securities, the Company's and BCC's 8% Senior Notes due 2009 (the "Private Exchange Senior Notes") and 9 1/4% Senior Discount Notes due 2009 (the "Private Exchange Senior Discount Notes" and together with the Exchange Senior Notes, the "Private Exchange Securities") and, if and when issued pursuant to a registered exchange for the Initial Securities or Private Exchange Securities, the Company's and BCC's 8% Senior Notes due 2009 (the "Exchange Senior Notes") and 9 1/4% Senior Discount Notes due 2009 (the "Exchange Senior Discount Notes" and together with the Exchange Senior Notes, the "Exchange Securities"). (The Initial Senior Notes, together with the Private Exchange Senior Notes and the Exchange Senior Notes, shall be referred to herein as the "Senior Notes". The Initial Senior Discount Notes, together with the Private Exchange Senior Discount Notes and the Exchange Senior Discount Notes, shall be referred to herein as the "Senior Discount Notes". The Senior Notes, together with the Senior Discount Notes, shall be referred to herein as the "Securities".) ARTICLE I Definitions and Incorporation by Reference SECTION 1.01. Definitions. 9 "Accreted Value" of any outstanding Senior Discount Note as of or to any date of determination prior to February 1, 2004, or of any other Indebtedness issued at a price less than the principal amount at stated maturity, means, as of any date of determination, an amount equal to the sum of (a) the issue price of such Senior Discount Note or Indebtedness, as applicable, as determined in accordance with Section 1273 of the Internal Revenue Code or any successor provisions (which, in the case of the Senior Discount Notes, will be $636.44 per $1,000 principal amount at maturity of Senior Discount Notes) plus (b) the aggregate of the portions of the original issue discount (the excess of the amounts considered as part of the "stated redemption price at maturity" of such Senior Discount Note or Indebtedness, as applicable, within the meaning of Section 1273(a)(2) of the Internal Revenue Code or any successor provisions, whether denominated as principal or interest, over the issue price of such Senior Discount Note or Indebtedness, as applicable) that shall theretofore have accrued pursuant to Section 1272 of the Internal Revenue Code (without regard to Section 1272(a)(7) of the Internal Revenue Code) from the date of issue of such Senior Discount Note or Indebtedness, as applicable, to the date of determination (which amount, in the case of the Senior Discount Notes, shall be amortized on a daily basis and compounded semiannually on each February 1 and August 1 at a rate of 9 1/4% per annum from the Issue Date through the date of determination on the basis of a 360-day year of twelve 30-day months), minus all amounts theretofore paid in respect of such Senior Discount Note or Indebtedness, as applicable, within the meaning of Section 1273(a)(2) of the Internal Revenue Code or any successor provisions (whether such amounts paid were denominated principal or interest). The Accreted Value of any outstanding Senior Discount Note on or after February 1, 2004, will mean the principal amount at maturity of such Senior Discount Note. Notwithstanding the foregoing, if the Company and BCC elect to pay cash interest on the Senior Discount Notes on or after February 1, 2002, and prior to February 1, 2004, the Securities shall cease to accrete, and the Accreted Value and the principal amount at maturity of such Senior Discount Note shall be the Accreted Value on the date of commencement of such accrual as calculated in accordance with the first sentence of this definition. 10 "Acquired Indebtedness" means Indebtedness of a Person (i) existing at the time such Person becomes a Restricted Subsidiary of the Company or (ii) assumed in connection with the acquisition of assets (or from merger or consolidation with or into) such Person, in each case, other than Indebtedness Incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary or such acquisition, as the case may be; provided that Indebtedness of such Person which is redeemed, defeased, retired or otherwise repaid at the time of, or substantially contemporaneously with, the consummation of the transactions by which such Person becomes a Restricted Subsidiary or such asset acquisition shall not constitute Acquired Indebtedness. "Affiliate" of any specified Person means (i) any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person or (ii) any individual who is a director or officer (a) of such specified Person, (b) of any Subsidiary of such specified Person or (c) of any Person described in clause (i) above. For the purposes of this definition, "control" when used with respect to any 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. For the purposes of Section 4.09, "Affiliate" shall also mean (x) any beneficial owner of interests representing 10% or more of the total voting power of the then outstanding Voting Equity Interests (on a fully diluted basis) of the Company and (y) any Person who would be an Affiliate pursuant to the first sentence hereof of any such beneficial owner of interests representing 10% or more of the total voting power of the then outstanding Voting Equity Interests of the Company. "Annualized EBITDA" means, with respect to any Person, the product of such Person's EBITDA for the latest fiscal quarter for which financial statements are available multiplied by four. "Asset Disposition" means any transfer, conveyance, sale, lease, issuance or other disposition by 11 the Company or any Restricted Subsidiary in one or more related transactions (including a consolidation or merger or other sale of any such Restricted Subsidiary with, into or to another Person in a transaction in which such Restricted Subsidiary ceases to be a Restricted Subsidiary of the Company, but excluding a disposition by a Restricted Subsidiary to the Company or a Restricted Subsidiary or by the Company to a Restricted Subsidiary) of (i) Equity Interests of a Restricted Subsidiary, (ii) substantially of all the assets of the Company or any Restricted Subsidiary representing a division or line of business or (iii) other Property of the Company or any Restricted Subsidiary outside of the ordinary course of business (excluding any transfer, conveyance, sale, lease or other disposition of equipment that is obsolete or no longer used by or useful to the Company; provided that the Company has delivered to the Trustee an Officers' Certificate stating that such criteria are satisfied). The following shall not be Asset Dispositions: (i) when used with respect to the Company, any Asset Disposition permitted pursuant to Article V which constitutes a disposition of all or substantially all of the assets of the Company and the Restricted Subsidiaries taken as a whole or any disposition that constitutes a Change of Control pursuant to this Indenture, (ii) any disposition that constitutes a Restricted Payment permitted by Section 4.04 or a Permitted Investment, (iii) a disposition of Temporary Cash Investments and (iv) any disposition of assets in one or more related transactions with an aggregate Fair Market Value of less than $1.0 million. "Assumed TCI Debt" means the indebtedness to be assumed and repaid by the Parent in connection with the consummation of the TCI Transactions in accordance with the terms of the Contribution Agreement. "AT&T Joint Venture" means the joint venture to be entered into between the Company or a Restricted Subsidiary and AT&T Corp. or an Affiliate thereof relating to the use of the Company's cable television systems in connection with the provision of telephony services by the joint venture. "Attributable Indebtedness" means Indebtedness deemed to be Incurred in respect of a Sale and Leaseback Transaction and shall be, at the date of determination, the present value (discounted at the actual rate of interest 12 implicit in such transaction, compounded annually), of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale and Leaseback Transaction (including any period for which such lease has been extended). "Average Life" means, as of the date of determination, with respect to any Indebtedness or Preferred Equity Interest, the quotient obtained by dividing (i) the sum of the products of the numbers of years (rounded to the nearest one-twelfth of one year) from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Preferred Equity Interest multiplied by the amount of such payment by (ii) the sum of all such payments. "Board of Directors" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board. "Bresnan Family Member" means William J. Bresnan, his spouse and descendants (including spouses of his descendants), any trust established solely for the benefit of any of the foregoing individuals, or any partnership or other entity at least 80%-owned or controlled, directly or indirectly, by any of the foregoing persons. "Business Day" means each day that is not a Legal Holiday. "Cable Business" means the ownership, development, operation and/or acquisition of cable television systems. "Cable Programming Business" means the ownership, development or provision of cable television programming. "Capitalized Lease Obligations" means Indebtedness represented by obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP and the amount of such Indebtedness shall be the capitalized amount of such obligations determined in accordance with GAAP. "Change of Control" means (i) at any time prior to 13 the first Public Equity Offering that results in a Public Market, the occurrence of any of the following events: (A) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act or any successor provisions to either of the foregoing), including any group acting for the purpose of acquiring, holding, voting or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act, other than any one or more of the Permitted Holders, is (including as a result of consolidation or merger, sale, transfer, lease conveyance or other disposition of assets, or otherwise) the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% or more of the total voting power of the Voting Equity Interests of the General Partner at any time that the Permitted Holders are the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, in the aggregate of less than 50% of the total voting power of the Voting Equity Interests of the Company (for purposes of this clause (A), such person or group shall be deemed to beneficially own any Voting Equity Interests of an entity (the "specified entity") held by any other entity (the "parent entity") so long as such person or group beneficially owns, directly or indirectly, in the aggregate a majority of the total Equity Interests of such parent entity); or (B) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act or any successor provisions to either of the foregoing), including any group acting for the purpose of acquiring, holding, voting or disposing of securities within the meaning of Rule 13d-5 (b)(1) under the Exchange Act, other than any one or more of the Permitted Holders, is (including as a result of consolidation or merger, sale, transfer, lease conveyance or other disposition of assets, or otherwise) the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of more than 50% of the total voting power of the Voting Equity Interests of the Company (for purposes of this clause (B), such person or group shall 14 be deemed to beneficially own any Voting Equity Interests of an entity (the "specified entity") held by any other entity (the "parent entity") so long as such person or group beneficially owns, directly or indirectly, in the aggregate a majority of the total Equity Interests of such parent entity); or (C) the holders of the Equity Interests of the Company shall have approved any plan of liquidation or dissolution of the Company (other than in connection with a reorganization effected for the sole purpose of facilitating a Public Equity Offering that is consummated within 30 days of such approval); and (ii) on or after the first Public Equity Offering that results in a Public Market, the occurrence of any of the following events: (A) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act or any successor provisions to either of the foregoing), including any group acting for the purpose of acquiring, holding, voting or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act, other than any one or more of the Permitted Holders, is (including as a result of consolidation or merger, sale, transfer, lease conveyance or other disposition of assets, or otherwise) the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 35% or more of the total voting Power of the Voting Equity Interests of the Company at any time that the Permitted Holders are the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, in the aggregate of a lesser percentage of the total voting power of the Voting Equity Interests of the Company than such other person or group (for purposes of this clause (A), such person or group shall be deemed to beneficially own any Voting Equity Interests of an entity (the "specified entity") held by any other entity (the "parent entity") so long as such person or group beneficially owns, directly or indirectly, in the aggregate a majority of the total Equity Interests of such parent entity); or 15 (B) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election or appointment by the Board of Directors or whose nomination for election by the holders of the Voting Equity Interests of the Company was approved by a vote of a majority of the members then still in office who were either members at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of the Company then in office; or (C) the holders of the Equity Interests of the Company shall have approved any plan of liquidation or dissolution of the Company. "Company" means the party named as such in this Indenture until a successor replaces it pursuant to the applicable provisions hereof and, thereafter, means the successor and, for purposes of any provision contained herein and required by the TIA, each other obligor on the indenture securities. "Company Employee" means an employee of the Parent, the General Partner, Bresnan Communications, Inc. or BCI Management, L.P., who, for the twelve-month period immediately preceding or following the date of determination, has spent or is reasonably expected in good faith to spend a substantial amount of his or her working time performing management or administrative services for the Company. "Consolidated Interest Expense" means, for any Person (or in the case of the Company, the Company and its Restricted Subsidiaries), for any period, the amount of interest in respect of Indebtedness (including amortization of original issue discount, fees payable in connection with financing, including commitment, availability and similar fees (but excluding amortization of deferred financing fees related to the Financings), noncash interest payments on any Indebtedness and the interest portion of any deferred payment obligation and after taking into account the effect of elections made under, and the net costs associated with, 16 any Interest Rate Agreement, however denominated, with respect to such Indebtedness), the amount of Redeemable Dividends in respect of Equity Interests meeting the requirements of "Disqualified Equity Interests" in such Person, the amount of Preferred Equity Interest dividends in respect of all Preferred Equity Interests in Subsidiaries of such Person held by Persons other than such Person or a Restricted Subsidiary of such Person equal to the quotient of such dividend divided by the difference between one and the maximum statutory Federal income tax rate (expressed as a decimal number between 1 and 0) then applicable to the issuer of such Preferred Equity Interest, commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing, and the interest component of rentals in respect of any Capitalized Lease Obligation or Sale and Leaseback Transaction paid, accrued or scheduled to be paid or accrued by such Person during such period, determined on a consolidated basis in accordance with GAAP. For purposes of this definition, interest on a Capitalized Lease Obligation or a Sale and Leaseback Transaction shall be deemed to accrue at an interest rate reasonably determined by such Person to be the rate of interest implicit in such Capitalized Lease Obligation or Sale and Leaseback Transaction in accordance with GAAP consistently applied. "Consolidated Net Income" of a Person means for any period, the net income (loss) of such Person and its Subsidiaries determined in accordance with GAAP; provided, however, that there shall not be included in such Consolidated Net Income (i) with respect to the Company, any net income (loss) of any Person if such Person is not a Restricted Subsidiary, except that (a) subject to the limitations contained in (iv) below, the Company's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution to a Restricted Subsidiary, to the limitations contained in clause (iii) below) and (b) the Company's equity in a net loss of any such Person (other than an Unrestricted Subsidiary) for such period shall be included in determining such Consolidated Net Income, (ii) any net income (loss) of any Person acquired by such Person or a 17 Subsidiary of such Person in a pooling of interests transaction for any period prior to the date of such acquisition, (iii) with respect to the Company, any net income (loss) of any Restricted Subsidiary if such Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company, except that (a) subject to the limitations contained in (iv) below, the Company's equity in the net income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash that could have been distributed by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a dividend (subject, in the case of a dividend to another Restricted Subsidiary, to the limitation contained in this clause) and (b) the Company's equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income, (iv) any net after-tax gain (or loss) realized upon the sale or other disposition of any property, plant or equipment of such Person or its consolidated Subsidiaries (including pursuant to any Sale and Leaseback Transaction) which is not sold or otherwise disposed of in the ordinary course of business and any gain (or loss) realized upon the sale or other disposition of any Equity Interests in any Person, (v) any net after-tax extraordinary gain or loss, (vi) the net after-tax cumulative effect of a change in accounting principles and (vii) for purposes of calculating the Leverage Ratio only, any net after-tax income (or loss) from discontinued operations. "Contribution Agreement" means the Contribution Agreement, dated as of June 3, 1998, as amended prior to the Issue Date, by and among Blackstone Cable Acquisition Company, LLC, the Parent and certain of its affiliates (including William J. Bresnan), TCID of Michigan, Inc., and certain affiliates of Tele-Communications, Inc. "Cumulative EBITDA" means at any date of determination the aggregate amount of EBITDA of the Company during the period (treated as one accounting period) from the beginning of the first full fiscal quarter following the fiscal quarter during which the Funding Date occurs to the end of the most recent fiscal quarter ending prior to the 18 date of determination for which financial statements are available or required or, if such aggregate EBITDA for such period is negative, the amount (expressed as a negative number) by which such cumulative EBITDA is less than zero. "Cumulative Interest Expense" means at any date of determination the aggregate amount of Consolidated Interest Expense paid, accrued or scheduled to be paid or accrued by the Company and its Restricted Subsidiaries during the period (treated as one accounting period) from the beginning of the first full fiscal quarter following the fiscal quarter during which the Funding Date occurs to the end of the most recent fiscal quarter ending prior to the date of determination for which financial statements are available or required determined on a consolidated basis in accordance with GAAP. "Default" means any event which is, or after notice or the passage of time or both would be, an Event of Default. "Disqualified Equity Interest" means, with respect to any Person, any Equity Interest that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or otherwise (a)(i) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (ii) is redeemable at the option of the holder thereof, in whole or in part, or (iii) is or may become convertible or exchangeable at the option of the holder for Indebtedness and (b) as to which the maturity, mandatory redemption, conversion or exchange or redemption at the option of the holder thereof occurs, or may occur, on or prior to the Stated Maturity of the Securities; provided, however, that Equity Interests in such Person that would not otherwise be characterized as Disqualified Equity Interests under this definition shall not constitute Disqualified Equity Interests if (A) such Equity Interests are convertible or exchangeable into Indebtedness solely at the option of such Person or (B) such Equity Interests would be Disqualified Equity Interests solely because such Equity Interests require such Person to make an offer to purchase such Equity Interests upon the occurrence of certain events and such Equity Interests expressly provide that such offer may not be satisfied until all the Securities have been paid in full. 19 "Domestic Telecommunications Business" means (i) a Person actively engaged in, or assets constituting plant, property or equipment used in the operation of, a Cable Business, (ii) a Person actively engaged in a Cable Programming Business or (iii) a Person actively engaged in, or assets which comprise, a Related Business the services of which are offered in connection with the operation, or utilizing the facilities, of a cable television system; provided that each such Cable Business, Cable Programming Business or Related Business is located in the United States. "EBITDA" means, for any Person, for any period, an amount equal to (A) the sum of (i) Consolidated Net Income for such period, plus, to the extent deducted in the calculation of Consolidated Net Income, (ii) the provision for taxes for such period based on income or profits and any provision for taxes utilized in computing net loss under clause (i) hereof, plus (iii) Consolidated Interest Expense for such period, plus (iv) depreciation for such period on a consolidated basis, plus (v) amortization of intangibles for such period on a consolidated basis, plus (vi) any other noncash items reducing Consolidated Net Income for such period, plus (vii) any fees and expenses directly related to an offering of the Equity Interests of such Person, Permitted Investments, acquisitions or recapitalizations (in the case of the Company, including the recapitalization pursuant to the terms of the Contribution Agreement) or Indebtedness, in each case, otherwise permitted under this Indenture, minus (B) all noncash items increasing Consolidated Net Income for such period, all for such Person and its Subsidiaries determined in accordance with GAAP consistently applied, except that with respect to the Company, each of the foregoing items shall be determined on a consolidated basis with respect to the Company and its Restricted Subsidiaries only. "Equity Interest Sale Proceeds" means the sum of (a) the aggregate Net Cash Proceeds received by the Company from (i) the issue or sale (other than to a Subsidiary of the Company or an employee ownership plan or trust established by the Company or any Subsidiary of the Company) by the Company of any class of its Equity Interests (other than Disqualified Equity Interests) on or after the Issue 20 Date or (ii) contributions to the equity capital of the Company on or after the Issue Date which do not themselves constitute Disqualified Equity Interests and (b) the Fair Market Value, as determined by an Independent Appraiser with experience underwriting debt and/or equity securities for operators of Domestic Telecommunications Businesses, of any Domestic Telecommunications Business contributed to the Company by Tele-Communications, Inc. or its Affiliates in exchange in whole or in part for Equity Interests (other than Disqualified Equity Interests) in the Company on or after the Issue Date. "Equity Interests" means, with respect to any Person, any and all shares or other equivalents (however designated) of corporate stock, partnership interests or any other participation, right, warrants, options or other interest (whether or not currently exercisable) in the nature of an interest in equity in such Person (including Preferred Equity Interests, but excluding any debt security convertible or exchangeable into such equity interest), entitling the holders thereof (together with the holders of all other interests of the same class) to a pro rata share of any dividend or distribution, or a pro rata participation in any other allocation, of the profits of such Person. "Equity Offering" means a public or private offering by the Company or a Person that owns all the outstanding Equity Interests of the Company for cash of its Equity Interests (other than Disqualified Equity Interests). "Escrow Agreement" means the escrow agreement in the form attached as Exhibit B to the Purchase Agreement. "Event of Default" has the meaning set forth under Section 6.01. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Excluded Contributions" means the aggregate Net Cash Proceeds received by the Company after the Issue Date from (a) contributions to the equity capital of the Company (which do not themselves constitute Disqualified Equity Interests) for the purpose of making an Investment in accordance Section 4.04(b)(ix) and (xi) and (b) the sale 21 (other than to a Subsidiary of the Company or an employee stock ownership plan or trust established by the Company or any such Subsidiary for the benefit of their employees) of Equity Interests (other than Disqualified Equity Interests) of the Company, in each case designated as Excluded Contributions pursuant to an Officers' Certificate executed by an Officer of the Company, the cash proceeds of which are excluded from the calculation set forth in Section 4.04(a)(iii). "Fair Market Value" means with respect to any Property, the price which could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair Market Value will be determined, except as otherwise provided, (i) if such Property has a Fair Market Value of less than $5.0 million, by any Officer of the Company or (ii) if such Property has a Fair Market Value equal to or in excess of $5.0 million, by a majority of the Governing Authority and evidenced by a Resolution, dated within 30 days of the relevant transaction, of the Governing Authority delivered to the Trustee. "Funding Date" means either (i) if the Escrow Agreement is not executed on the date hereof, the date hereof or (ii) if the Escrow Agreement is executed on the date hereof, the meaning given to such term in the Escrow Agreement. "GAAP" means United States generally accepted accounting principles as in effect in the United States on the Issue Date. "General Partner" means the Person acting as the managing general partner of the Parent. "Governing Authority" means, with respect to the Company, the General Partner (subject to the approval of the limited partners of the Parent, when and as provided in the Partnership Agreement), the advisory committee, the executive committee, management committee, board of directors or similar governing body of the Company, or any authorized committee thereof, in any such case, with the authority to manage the business and affairs of the Company. 22 "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any Person and any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Hedging Obligation" of any Person means any obligation of such Person pursuant to any Interest Rate Agreement, foreign exchange contract, currency swap agreement, currency option or any other similar agreement or arrangement. "Holder" or "Securityholder" means the Person in whose name a Security is registered on the Security register described in Section 2.04 as the registered holder of any Security. "Incur" means, with respect to any Indebtedness or other obligation of any Person, to create, issue, incur (by merger, conversion, exchange or otherwise), extend, assume, Guarantee or become liable in respect of such Indebtedness or other obligation or the recording, as required pursuant to GAAP or otherwise, of any such Indebtedness or obligation on the balance sheet of such Person (and "Incurrence", "Incurred", "Incurrable" and "Incurring" shall have meanings correlative to the foregoing); provided, however, that a change in GAAP that results in an obligation of such Person that exists at such time, and is not theretofore classified as Indebtedness, becoming Indebtedness shall not be deemed an Incurrence of such Indebtedness; provided further that solely for purposes of determining compliance with Section 23 4.03, amortization of debt discount shall not be deemed to be the Incurrence of Indebtedness. "Indebtedness" means (without duplication), with respect to any Person, any indebtedness, secured or unsecured, contingent or otherwise, which is for borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof), or evidenced by bonds, notes, debentures or similar instruments or representing the balance deferred and unpaid of the purchase price of any Property (excluding any balances that constitute subscriber advance payments and deposits, accounts payable or trade payables, and other accrued liabilities arising in the ordinary course of business) if and to the extent any of the foregoing indebtedness would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, and shall also include, to the extent not otherwise included, (i) any Capitalized Lease Obligations, (ii) Indebtedness of other Persons secured by a Lien to which the Property owned or held by such first-named Person is subject, whether or not the obligation or obligations secured thereby shall have been assumed (the amount of such Indebtedness being deemed to be the lesser of the value of such Property or the amount of the Indebtedness so secured), (iii) Guarantees of Indebtedness of other Persons, (iv) any Disqualified Equity Interests, (v) any Attributable Indebtedness, (vi) all obligations of such Person in respect of letters of credit, bankers' acceptances or other similar instruments or credit transactions (including reimbursement obligations with respect thereto), other than obligations with respect to letters of credit securing obligations (other than obligations entered into in connection with the borrowing of money or the obtaining of advances or credit (other than the extension of credit represented by the issuance for the account of the Company or any of its Restricted Subsidiaries of such letter of credit itself)) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the third Business Day following receipt by such Person of a demand for reimbursement following payment on the letter of credit, (vii) Preferred Equity Interests (owned other than by such Person) in its Restricted Subsidiaries and (viii) any payment obligations of any such Person at the 24 time of determination under any Hedging Obligation. For purposes of this definition, the maximum fixed repurchase price of any Disqualified Equity Interest that does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Equity Interest as if such Disqualified Equity Interest were repurchased on any date on which Indebtedness shall be required to be determined pursuant to the Indenture; provided, however, that if such Disqualified Equity Interest is not then permitted to be repurchased, the repurchase price shall be the book value of such Disqualified Equity Interest. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability of any contingent obligations in respect thereof at such date. In the case of Indebtedness sold at a discount, the amount of such Indebtedness shall at all times be the Accreted Value of such Indebtedness at the date of determination as determined in conformity with GAAP. For purposes of this definition, the amount of the payment obligation with respect to any Hedging Obligation shall be an amount equal to (i) zero, if such obligation is an Interest Rate Agreement permitted pursuant to Section 4.03(b)(vi) or (ii) the amount appearing as a liability under GAAP in respect of such Hedging Obligation, if such Hedging Obligation is not an Interest Rate Agreement so permitted. Notwithstanding the foregoing, Indebtedness shall not include any interest or accrued interest. "Indenture" means this Indenture as amended or supplemented from time to time. "Independent Appraiser" means an investment banking firm of national standing or any third-party appraiser of national standing; provided, however, that such firm or appraiser is not an Affiliate of the Company or Tele-Communications, Inc. "Interest Rate Agreement" means, for any Person, any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedging agreement or other similar agreement. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended. "Investment" by any Person means any direct or indirect loan or advance (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of such Person) or other extension of credit or capital contribution (by means of transfers of cash or other Property to others or payments for Property or services for the account or use of others, or otherwise) to, or Incurrence of a Guarantee of any obligation of, or purchase or acquisition of Equity Interests, bonds, notes, debentures or other securities or evidence of Indebtedness issued by, any other Person. In determining the amount of any Investment made by transfer of any Property other than cash, such Property shall be valued at its Fair Market Value at the time of such Investment. "Investment Grade Rating" means a rating equal to or higher than Baa3 (or the equivalent) by Moody's and BBB-(or the equivalent) by S&P. "Issue Date" means the date on which the Original Securities are initially issued. "Leverage Ratio" means the ratio of (i) the outstanding Indebtedness of a Person and its 25 Restricted Subsidiaries to (ii) the Annualized EBITDA of such Person and its Restricted Subsidiaries. For purposes of computing the Company's Leverage Ratio, if (a) since the beginning of the relevant period, the Company or any Restricted Subsidiary shall have made any Asset Disposition or an Investment (by merger or otherwise) in any Restricted Subsidiary (or any Person that becomes a Restricted Subsidiary) or an acquisition of Property which constitutes all or substantially all of an operating unit of a business (including cable television systems) or shall have Incurred or Repaid any Indebtedness or shall have classified in accordance with GAAP any operations as discontinued, (b) the transaction giving rise to the need to calculate the Leverage Ratio is such an Asset Disposition, Investment, acquisition, Incurrence or Repayment of Indebtedness or discontinuation of operations or (c) since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made such an Asset Disposition, Investment or acquisition, Incurrence or Repayment of Indebtedness or discontinuation of operations, the Leverage Ratio for such period shall be calculated after giving pro forma effect to such Asset Sale, Investment, acquisition, Incurrence or Repayment of Indebtedness or discontinuation of operations as if such Asset Disposition, Investment, acquisition, Incurrence or Repayment of Indebtedness or discontinuation of operations occurred on the first day of such period. Any such pro forma calculation may include adjustments in the reasonable determination of the Company as quantified and set forth in an Officers' Certificate, to (i) reflect identified operating expense reductions reasonably expected to result from any acquisition or (ii) eliminate the effect of any extraordinary accounting event with respect to any acquired Person on Consolidated Net Income. "Lien" means with respect to any Property of any Person, any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, security interest, lien, charge, easement (other than any easement not materially impairing usefulness or marketability), encumbrance, preference, priority, or other security agreement or preferential arrangement of any kind or nature whatsoever on or with respect to such Property (including any Capitalized Lease Obligation, conditional sale or other title retention agreement having substantially the same economic effect as any of the foregoing or any Sale and Leaseback Transaction); provided that in no event shall an operating lease that is not a Capitalized Lease Obligation or Sale and Leaseback Transaction be deemed to constitute a Lien. "Moody's" means Moody's Investors Service, Inc., or any successor to the rating agency business thereof. "Net Available Proceeds" from any Asset Disposition by any Person means cash or cash equivalents received (including amounts received by way of sale or discounting of any note, installment receivable or other 26 receivable, but excluding any other consideration received in the form of assumption by the acquiror of Indebtedness or other obligations relating to such Property) therefrom by such Person, net of (i) all legal, title and recording taxes, expenses and commissions and other fees and expenses (including appraisals, brokerage commissions and investment banking fees) Incurred and all Federal, state, provincial, foreign and local taxes required to be accrued as a liability as a consequence of such Asset Disposition, (ii) all payments made by such Person or its Subsidiaries on any Indebtedness which is secured by such Property in accordance with the terms of any Lien upon or with respect to such Property or which must by the terms of such Lien, or in order to obtain a necessary consent to such Asset Disposition or by applicable law, be repaid out of the proceeds from such Asset Disposition, (iii) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures of such Person as a result of such Asset Disposition and (iv) appropriate amounts to be provided by such Person or any Subsidiary thereof, as the case may be, as a reserve in accordance with generally accepted accounting principles against any liabilities associated with such Property and retained by such Person or any Subsidiary thereof, as the case may be, after such Asset Disposition, including liabilities under any indemnification obligations and severance and other employee termination costs associated with such Asset Disposition, in each case as determined by the governing body of such Person, in its reasonable good faith judgment evidenced by a resolution of such governing body filed with the Trustee; provided, however, that any reduction in such reserve within 12 months following the consummation of such Asset Disposition will be, for all purposes of this Indenture and the Securities, treated as a new Asset Disposition at the time of such reduction with Net Available Proceeds equal to the amount of such reduction; provided further, however, that, in the event that any consideration for a transaction (which would otherwise constitute Net Available Proceeds) is required to be held in escrow pending determination of whether a purchase price adjustment will be made, at such time as such portion of the consideration is released to such Person or its Restricted Subsidiary from escrow, such portion shall be treated for all purposes of this Indenture and the Securities as a new Asset Disposition at the time of such release from escrow 27 with Net Available Proceeds equal to the amount of such portion of consideration released from escrow. "Net Cash Proceeds", with respect to any issuance or sale of Equity Interests, means the aggregate cash or Temporary Cash Investments received as proceeds of such issuance or sale, net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "New Credit Facility" means the Loan Agreement to be dated as of the Funding Date by and among Bresnan Telecommunications Company LLC, as borrower, and the lenders from time to time party thereto, including any collateral documents, instruments and agreements executed in connection therewith, substantially on terms as described in the Offering Memorandum under "Description of the New Credit Facility". The term "New Credit Facility" shall also include any amendments, supplements, modifications, extensions, renewals, restatements or refundings thereof with another credit facility and any credit facilities that replace, refund or refinance any part of the loans, other credit facilities or commitments thereunder, including any such replacement, refunding or refinancing facility that increases the amount that may be borrowed thereunder or alters the maturity thereof, with the same or different lenders. "New Supply Agreement" means the programming supply agreement, dated as of the Funding Date, between BTC and Satellite Services, Inc., a subsidiary of Tele-Communications, Inc. "Offer to Purchase" means a written offer (the "Offer") sent by the Company to each Holder of Securities offering to purchase up to the principal amount in the case of the Senior Notes and the principal amount at maturity in the case of the Senior Discount Notes specified in such Offer at the purchase price specified in such Offer (as determined pursuant to this Indenture). Unless otherwise required by applicable law, the Offer shall specify an expiration date (the "Expiration Date") of the Offer to Purchase which shall be, subject to any contrary 28 requirements of applicable law, not less than 30 days or more than 60 days after the date of such Offer and a settlement date (the "Purchase Date") for purchase of Securities within 5 Business Days after the Expiration Date. The Company shall notify the Trustee at least 10 Business Days (or such shorter period as is acceptable to the Trustee) prior to the mailing of the Offer of the Company's obligation to make an Offer to Purchase, and the Offer shall be mailed by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. The Offer shall contain information concerning the business of the Company and its Subsidiaries which the Company in good faith believes will enable such Holders to make an informed decision with respect to the Offer to Purchase (which at a minimum will include (i) the most recent annual and quarterly financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the documents required to be filed with the Trustee pursuant to this Indenture (which requirements may be satisfied by delivery of such documents together with the Offer), (ii) a description of material developments in the Company's business subsequent to the date of the latest of such financial statements referred to in clause (i) (including a description of the events requiring the Company to make the Offer to Purchase), (iii) if applicable, appropriate pro forma financial information concerning the Offer to Purchase and the events requiring the Company to make the Offer to Purchase and (iv) any other information required by applicable law to be included therein). The Offer shall contain all instructions and material necessary to enable such Holders to tender Securities pursuant to the Offer to Purchase. The Offer shall also state: (a) the Section of this Indenture pursuant to which the Offer to Purchase is being made; (b) the Expiration Date and the Purchase Date; (c) the aggregate principal amount in the case of the outstanding Senior Notes and aggregate principal amount at maturity in the case of the outstanding Senior Discount Notes offered to be purchased by the Company pursuant to the Offer to Purchase (including, if less than 100%, the manner by which such amount has 29 been determined pursuant to Section 4.07) (the "Purchase Amount"); (d) the purchase price to be paid by the Company for $1,000 aggregate principal amount in the case of the Senior Notes and aggregate principal amount at maturity in the case of the Senior Discount Notes accepted for payment (as specified pursuant to this Indenture) (the "Purchase Price"); (e) that the Holder may tender all or any portion of the Securities registered in the name of such Holder and that any portion of a Security tendered must be tendered in an integral multiple of $1,000 principal amount in the case of the Senior Notes and principal amount at maturity in the case of the Senior Discount Notes; (f) the place or places where Securities are to be surrendered for tender pursuant to the Offer to Purchase; (g) that any Securities not tendered or tendered but not purchased by the Company will continue to accrue or accrete interest, as the case may be; (h) that on the Purchase Date the Purchase Price will become due and payable upon each Security being accepted for payment pursuant to the Offer to Purchase and that interest thereon, if any, shall cease to accrue or accrete, as the case may be, on and after the Purchase Date; (i) that each Holder electing to tender a Security pursuant to the Offer to Purchase will be required to surrender such Security at the place or places specified in the Offer prior to the close of business on the Expiration Date (such Security being, if the Company or the Trustee so requires, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his or her attorney duly authorized in writing); (j) that Holders will be entitled to withdraw all 30 or any portion of Securities tendered if the Company (or the Paying Agent) receives, not later than the close of business on the Expiration Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount in the case of the Senior Notes and the principal amount at maturity in the case of the Senior Discount Notes the Holder tendered, the certificate number of the Security the Holder tendered and a statement that such Holder is withdrawing all or a portion of his or her tender; (k) that (i) if Securities in an aggregate principal amount in the case of the Senior Notes and aggregate principal amount at maturity in the case of the Senior Discount Notes less than or equal to the Purchase Amount are duly tendered and not withdrawn pursuant to the Offer to Purchase, the Company shall purchase all such Securities and (ii) if Securities in an aggregate principal amount in the case of the Senior Notes and aggregate principal amount at maturity in the case of the Senior Discount Notes in excess of the Purchase Amount are tendered and not withdrawn pursuant to the Offer to Purchase, the Company shall purchase Securities having an aggregate principal amount in the case of the Senior Notes and aggregate principal amount at maturity in the case of the Senior Discount Notes equal to the Purchase Amount on a pro rata basis (with such adjustments as may be deemed appropriate so that only Securities in denominations of $1,000 principal amount in the case of the Senior Notes and principal amount at maturity in the case of the Senior Discount Notes or integral multiples thereof shall be purchased); and (l) that in the case of any Holder whose Security is purchased only in part, the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities, or any authorized denomination as required by such Holder, in an aggregate principal amount in the case of the Senior Notes and aggregate principal amount at maturity in the case of the Senior Discount Notes equal to and in exchange for the unpurchased portion of the Security so tendered. 31 Any Offer to Purchase shall be governed by and effected in accordance with the Offer for such Offer to Purchase. The Company and BCC will comply, to the extent applicable, with the requirements of Rule 14e-1 under the Exchange Act, and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the purchase of Securities in connection with an Offer to Purchase. To the extent that the provisions of any securities laws or regulations conflict with the provisions relating to the Offer to Purchase, the Company and BCC will comply with the applicable securities laws and regulations and will not be deemed to have breached their obligations described above by virtue thereof. "Offering Memorandum" means the Offering Memorandum dated January 25, 1999, pursuant to which the Original Securities were offered. "Officer" means, with respect to the Company, the President, the Chief Executive Officer, the Chief Financial Officer, any Senior Vice President, any Executive Vice President, the Vice President--Finance, the Vice President--Controller, the Treasurer or the Secretary of the Company. "Officers' Certificate" means, with respect to the Company, a certificate signed by two Officers at least one of whom shall be the principal executive officer, principal financial officer, treasurer or principal accounting officer of the Company. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be counsel to the Company, the General Partner or the Trustee. "Parent" means Bresnan Communications Company Limited Partnership, a Michigan limited partnership and owner of all of the equity interests of the Company. "Partnership Agreement" means the Amended and Restated Limited Partnership Agreement of the Parent, dated as of the Funding Date. 32 "Pass-Through Entity" means a partnership, limited liability company, "S corporation" or any other entity that is not subject to federal income tax and whose members are taxed on a distributive share of such entity's income. "Permitted Holder" shall mean any Bresnan Family Member, TCI Communications Inc. and its successors (resulting from any corporate reorganization contemplated on the Issue Date or any internal corporate reorganization), Blackstone Capital Partners III Merchant Banking Fund L.P. and, in each case, their respective Affiliates. Any person or group whose acquisition of beneficial ownership constitutes a Change of Control in respect of which a Change of Control Offer is made in accordance with the requirements of this Indenture will thereafter, together with its Affiliates, constitute an additional Permitted Holder. "Permitted Investment" means an Investment by the Company or any Restricted Subsidiary in (i) a Restricted Subsidiary or a Person which will, upon the making of such Investment, become a Restricted Subsidiary; provided, however, that the primary business of such Restricted Subsidiary is a Cable Business, a Cable Programming Business or a Related Business; (ii) another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary; provided, however, that such Person's primary business is a Cable Business, a Cable Programming Business or a Related Business; (iii) Temporary Cash Investments; (iv) receivables owing to the Company or any Restricted Subsidiary, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; (v) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; (vi) loans and advances to Company Employees (such loans to be made either directly to such employees or through the Parent, the General Partner, Bresnan Communications, Inc., or BCI Management, L.P.); provided that such loans and advances do not exceed $5.0 million at any one time outstanding; (vii) any Person to the extent such Investment represents the noncash portion of the consideration received in connection with an Asset Sale consummated in compliance 33 with Section 4.07; (viii) Equity Interests, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments; (ix) any Investment existing on the Funding Date; and (x) Investments consisting of the licensing or contribution of intellectual property (excluding franchises and licenses required to own or operate Property) pursuant to joint marketing arrangements with other Persons. "Permitted Liens" means (i) Liens Incurred by the Company or any of its Restricted Subsidiaries if, after giving effect to such Incurrence on a pro forma basis, the amount of the total Indebtedness of the Company and its Restricted Subsidiaries that is secured by a Lien does not exceed the product of the Annualized EBITDA of the Company multiplied by 2.5; (ii) Liens on the Property of the Company or any of its Restricted Subsidiaries existing on the Issue Date; (iii) Liens on the Property of the Company or any of its Restricted Subsidiaries to secure any extension, renewal, refinancing, replacement or refunding (or successive extensions, renewals, refinancings, replacements or refundings), in whole or in part, of any Indebtedness secured by Liens referred to in any of clauses (i), (ii), (vii) or (x); provided, however, that any such Lien will be limited to all or part of the same Property that secured the original Indebtedness (plus improvements on such Property) and the aggregate principal amount of Indebtedness that is secured by such Lien will not be increased to an amount greater than the sum of (A) the outstanding principal amount, or, if greater, the committed amount, of the Indebtedness described under clauses (i), (ii), (vii) and (x) at the time the original Lien became a Permitted Lien under this Indenture and (B) an amount necessary to pay any premiums, fees and other expenses Incurred by the Company or any of its Restricted Subsidiaries in connection with such extension, renewal, refinancing, replacement or refunding; (iv) Liens for taxes, assessments or governmental charges or levies on the Property of the Company or any of its Restricted Subsidiaries if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings; (v) Liens imposed by law, such as landlords' and carriers', warehousemen's, suppliers', materialmen's, repairmen's and mechanics' Liens and other similar Liens on 34 the Property of the Company or any of its Restricted Subsidiaries which secure payment of obligations not more than 60 days past due or are being contested in good faith and by appropriate proceedings; (vi) Liens on the Property of the Company or any of its Restricted Subsidiaries Incurred to secure performance of obligations with respect to statutory or regulatory requirements, performance or return-of-money bonds, surety bonds or other obligations of a like nature and Incurred in a manner consistent with industry practice; (vii) Liens on Property at the time the Company or any of its Restricted Subsidiaries acquired such Property, including any acquisition by means of a merger or consolidation with or into the Company or any of its Restricted Subsidiaries; provided, however, that such Lien shall not have been Incurred in anticipation of such transaction or series of related transactions pursuant to which such Property was acquired by the Company or any of its Restricted Subsidiaries; (viii) zoning restrictions, licenses, restrictions on the use of real property, minor irregularities in the title thereto, or other Liens on the Property of the Company or any of its Restricted Subsidiaries incidental to the conduct of their respective businesses or the ownership of their respective Properties which (except for acknowledgments in any credit agreement of the lenders' right to set off deposits held by such lenders so long as such deposits were made in the ordinary course of business and not with the intent to provide collateral to such lenders) were not created in connection with the Incurrence of Indebtedness or the obtaining of advances or credit and which do not in the aggregate materially detract from the value of their respective Properties or materially impair the use thereof in the operation of their respective businesses; (ix) pledges or deposits by the Company or any of its Restricted Subsidiaries under workers' compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which the Company or any of its Restricted Subsidiaries is a party, or deposits to secure public or statutory obligations of the Company or any of its Restricted Subsidiaries, or deposits for the payment of rent; (x) Liens on Property securing Acquired Indebtedness; provided, however, that any such Lien (A) was not Incurred in connection with, or in contemplation of, the Person obligated with respect to such Acquired Indebtedness becoming a Restricted Subsidiary or the acquisition relating to such Acquired Indebtedness and (B) may not extend to any other Property of the Company or any other Restricted Subsidiary which is not a direct Subsidiary of such Person; (xi) utility easements, rights-of-way, building restrictions and such other encumbrances or charges against real property as are of a nature generally existing with respect to properties of a similar character and which do not in the aggregate materially detract from the value or materially impair the use of such property; (xii) leases or subleases granted to others not materially interfering with the ordinary course of business of the Company and its Subsidiaries; (xiii) customary Liens contained in asset sale agreements limiting the transfer of such assets pending the closing of such sale or created by the grant of options to purchase such assets; provided, in any such case, the sale of such assets is not otherwise prohibited under this Indenture; (xiv) Liens on the Property of a Restricted Subsidiary securing Indebtedness of such Restricted Subsidiary owed to the Company; (xv) judgment Liens in an aggregate amount outstanding at any one time of not more than 35 $15.0 million; provided such Lien is adequately bonded and any appropriate legal proceedings which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired; (xvi) any interest or title of a lessor under any Capitalized Lease Obligation otherwise permitted under this Indenture; provided that such Liens do not extend to any Property which is not leased property subject to such Capitalized Lease Obligation; (xvii) Liens to secure Indebtedness permitted to be incurred under Section 4.03(b)(ix); provided that any such Lien (A) may not extend to any Property of the Company or any Restricted Subsidiary other than the Property acquired, constructed or leased with the proceeds of such Indebtedness any improvements or accessions to such Property and (B) shall be created within 180 days of the acquisition, construction or lease of such Property by the Company or such Restricted Subsidiary; (xviii) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person in the ordinary course of business to facilitate the purchase, shipment or storage of such inventory or other goods; (xix) Liens securing reimbursement obligations with respect to commercial letters of credit created in the ordinary course of business which encumber Property relating to such letters of credit and products and proceeds thereof; (xx) Liens securing Indebtedness under Hedging Obligations otherwise permitted under this Indenture; (xxi) Liens securing Indebtedness outstanding under the New Credit Facility that are created while commitments under the New Credit Facility are outstanding; and (xxii) Liens on Equity Interests of Unrestricted Subsidiaries to secure nonrecourse Indebtedness of such Unrestricted Subsidiary; provided that any such Lien may not extend to any Property of the Company or any Restricted Subsidiary other than such Equity Interests; provided further that any holder of Indebtedness of the Company or any Restricted Subsidiary shall not have the ability to declare a default or accelerate payment thereunder upon the occurrence of a default under the Indebtedness secured by such Lien. "Permitted Refinancing Indebtedness" means any extensions, renewals, substitutions, refinancings or replacements of any Indebtedness, including any successive extensions, renewals, substitutions, refinancings or replacements so long as (i) such Permitted Refinancing Indebtedness is incurred in an aggregate principal amount (or if issued with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if issued with original issue discount, the aggregate accreted value) then outstanding of the Indebtedness being refinanced plus any interest and premium payable thereon and any fees and expenses incurred in connection therewith, (ii) the Average Life of such Indebtedness is equal to or greater than the Average Life of the Indebtedness being refinanced, (iii) the Stated Maturity of such Indebtedness is no earlier than the earlier of (a) the Stated Maturity of the Indebtedness being extended, renewed, substituted for, refinanced or replaced and (b) the first anniversary of the Stated Maturity of the Securities and (iv) to the extent such new Indebtedness extends, renews, substitutes for, refinances or replaces Indebtedness subordinated or pari passu to the Securities, such new Indebtedness is subordinated or pari passu to the same extent as the Indebtedness being extended, renewed, substituted for, refinanced or replaced; provided that Permitted Refinancing Indebtedness shall not include (a) Indebtedness of a Restricted Subsidiary that refinances Indebtedness of the Company except to the extent that such Restricted Subsidiary was, prior to such refinancing, a guarantor of such Indebtedness, or (b) Indebtedness of the Company or a Restricted Subsidiary that refinances Indebtedness of an Unrestricted Subsidiary; and provided further that, subject to the foregoing proviso, subclause (iv) of this definition will not apply to any extension, renewal, substitution for refinancing or replacement of Indebtedness of any Restricted Subsidiary that is not a guarantor of the Securities. "Person" means any individual, corporation, company (including limited liability company), partnership, joint venture, trust, estate, unincorporated organization or government or any agency or political subdivision thereof. "Preferred Equity Interest" means any Equity Interest in a Person, however designated, which entitles the holder thereof to a preference with respect to dividends, distributions or liquidation proceeds of such Person over the holders of other Equity Interests issued by such Person. "principal" of any Indebtedness (including the Securities) means the principal amount of such Indebtedness plus the premium, if any, on such Indebtedness. "Property" means, with respect to any Person, any interest of such Person in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, including, without limitation, Equity Interests in any other Person (but excluding Equity Interests or other securities issued by such Person). "Public Equity Offering" means an underwritten public offering of common stock of the Company (or a corporation owning all of the outstanding Equity Interests of the Company) pursuant to an effective registration statement under the Securities Act. 36 "Public Market" means any time after (a) a Public Equity Offering has been consummated and (b) at least 15% of the total issued and outstanding common stock of the Company (or a corporation owning all of the outstanding Equity Interests of the Company) has been distributed by means of an effective registration statement under the Securities Act or sales pursuant to Rule 144 under the Securities Act. "Purchase Money Indebtedness" means Indebtedness (a) consisting of the deferred purchase price of property, conditional sale obligations, obligations under any title retention agreement, other purchase money obligations and obligations in respect of industrial revenue bonds, in each case where the Stated Maturity of such Indebtedness does not exceed the anticipated useful life of the Property being financed, and (b) Incurred to finance the acquisition, construction or lease by the Company or a Restricted Subsidiary of such Property, including additions and improvements thereto; provided, however, that such Indebtedness is Incurred within 180 days after the acquisition, construction or lease of such Property by the Company or such Restricted Subsidiary. "Rating Agencies" mean Moody's and S&P. "Redeemable Dividend" means, for any dividend with regard to Disqualified Equity Interests, the quotient of the dividend divided by the difference between one and the maximum statutory Federal income tax rate (expressed as a decimal number between 1 and 0) then applicable to the issuer of such Disqualified Equity Interests. "Related Business" means the provision of high-speed data services, Internet access, interactive services, telephony (including personal communications services) and/or any other telecommunications service. "Relevant Taxpayer" means (i) in the case of any beneficial owner of an Equity Interest in the Company that is an individual, such individual; (ii) in the case of any beneficial owner of an Equity Interest in the Company that is taxed as a corporation, such corporation; (iii) in the case of any beneficial owner of an Equity Interest in the Company that is a Pass-Through Entity, such Pass-Through 37 Entity itself and any indirect individual, corporate, trust or estate beneficial owner of an Equity Interest in the Company through such Pass-Through Entity; and (iv) in the case of any direct or indirect beneficial owner of an Equity Interest in the Company that is a trust or an estate, such trust or estate and any individual (or other trust and estate) which is a beneficiary of such trust or estate to the extent that such individual (or other trust or estate) is taxable on the income of such trust or estate. A Person shall be considered an indirect owner of an Equity Interest in the Company only to the extent that such Person has an indirect interest in the Company through a Pass-Through Entity or a trust or estate or through multiple tiers of Pass-Through Entities, trusts or estates (or any combination thereof). Notwithstanding anything in this paragraph to the contrary, the term Relevant Taxpayer shall not include Tele-Communications, Inc., or any affiliate thereof. "Repay" means, in respect of any Indebtedness, to repay, prepay, repurchase, redeem, legally defease or otherwise retire such Indebtedness. "Repayment" and "Repaid" shall have correlative meanings. For purposes of Section 4.07 and the definition of "Leverage Ratio", Indebtedness shall be considered to have been Repaid only to the extent the related loan commitment, if any, shall have been permanently reduced in connection therewith. "Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company or the General Partner to have been duly adopted by the Governing Authority (or the General Partner if the General Partner constitutes the Governing Authority (subject to the adoption by the limited partners of the Parent, when and as provided in the Partnership Agreement)) and to be in full force and effect on the date of such certification and delivered to the Trustee. "Restricted Payment" means (i) any dividend or distribution (whether made in cash, Property or securities) declared or paid on or with respect to any Equity Interest in the Company except dividends or distributions payable solely in Equity Interests (other than Disqualified Equity Interests) in the Company or in warrants, rights, or options to purchase or acquire (other than debt securities convertible into an Equity Interest), directly or 38 indirectly, any Equity Interests (other than Disqualified Equity Interests) in the Company; (ii) a payment made by the Company or any Restricted Subsidiary to purchase, redeem, acquire or retire any Equity Interests in the Company or Equity Interests in any Affiliate of the Company (other than a Restricted Subsidiary) or any warrants, rights or options to directly or indirectly purchase or acquire any such Equity Interests or any securities exchangeable for or convertible into any such Equity Interests, except for payments made to the Company or a Restricted Subsidiary; (iii) a payment made by the Company or any Restricted Subsidiary to redeem, repurchase, defease or otherwise acquire or retire for value, prior to any scheduled maturity, scheduled sinking fund or mandatory redemption payment (other than the purchase, repurchase, or other acquisition of any Indebtedness subordinate in right of payment to the Securities purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition), Indebtedness of the Company which is subordinate (whether pursuant to its terms or by operation of law) in right of payment to the Securities; (iv) an Investment (other than Permitted Investments), including a deemed Investment pursuant to Section 4.10(a)(ii)(B), in any Person. "Restricted Subsidiary" means (a) BCC; (b) any Subsidiary of the Company unless such Subsidiary shall have been designated as an Unrestricted Subsidiary as permitted pursuant to Section 4.10 and (c) an Unrestricted Subsidiary which is redesignated as a Restricted Subsidiary as permitted pursuant to Section 4.10. "S&P" means Standard & Poor's Ratings Service or any successor to the rating agency business thereof. "Sale and Leaseback Transaction" means, with respect to any Person, any direct or indirect arrangement pursuant to which Property is sold or transferred by such Person or a Subsidiary of such Person and is thereafter leased back from the purchaser or transferee thereof by such Person or one of its Subsidiaries. "SEC" means the Securities and Exchange Commission. 39 "Securities Act" means the Securities Act of 1933, as amended. "Significant Subsidiary" means any Restricted Subsidiary that would be a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X under the Securities Act as such Regulation is in effect on the Issue Date. "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the payment of principal or Accreted Value, as applicable, of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless such contingency has occurred). "Subsidiary" of any specified Person means any corporation, partnership, joint venture, association or other business entity, whether now existing or hereafter organized or acquired, (i) in the case of a corporation, of which more than 50% of the total voting power of the Equity Interests entitled (without regard to the occurrence of any contingency) to vote in the election of directors, officers or trustees thereof is held by such first-named Person or any of its Subsidiaries; or (ii) in the case of a partnership, joint venture, association or other business entity, with respect to which such first-named Person or any of its Subsidiaries has the power to direct or cause the direction of the management and policies of such entity by contract or otherwise if in accordance with GAAP such entity is consolidated with the first-named Person for financial statement purposes. "Tax Distribution" shall have the meaning given to such term in Section 3.3(a) of the Partnership Agreement as in effect on the Funding Date (as such Tax Distribution is described in the Offering Memorandum under "Description of the Partnership Agreement--Tax Distributions"). "Tax Liability" means an amount, for each year, equal to the Tax Distribution determined with respect to 40 each Relevant Taxpayer. "TCID Note" means the note dated May 12, 1988 issued by the Parent to TCID of Michigan, Inc., a Nevada corporation, in the principal amount of $25,000,000. "TCI Transactions" means the transactions contemplated by the Contribution Agreement, including the contribution of all cable television systems owned by the Parent and certain cable television systems owned by affiliates of Tele-Communications, Inc., in each case to a subsidiary of the Company. "Tele-Communications, Inc." means Tele-Communications, Inc., a Delaware corporation, and any successor thereto by way of merger or consolidation or by transfer of all or substantially all the assets of such first-named Person. "Temporary Cash Investments" means any of the following: (i) Investments in U.S. Government Obligations or in securities guaranteed by the United States of America, in each case maturing within 90 days of the date of acquisition thereof, (ii) Investments in time deposit accounts, certificates of deposit and money market deposits maturing within 90 days of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America or any State thereof having capital, surplus and undivided profits aggregating in excess of $500.0 million and whose long-term debt is rated "A-3" or "A-" or higher according to Moody's or S&P (or such similar equivalent rating by at least one "nationally recognized statistical rating organization" (as defined in Rule 436 under the Securities Act)), (iii) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (i) entered into with a bank meeting the qualifications described in clause (ii) above, (iv) Investments in commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation organized and in existence under the laws of the United States of America with a rating at the time as of which any Investment therein is made of "P-l" (or higher) according to Moody's or "A-l" (or higher) according to S&P 41 (or such similar equivalent rating by at least one "nationally recognized statistical rating organization" (as defined in Rule 436 under the Securities Act)) and (v) investments in money market funds that are registered under the Investment Company Act of 1940, which have net assets of at least $500.0 million and at least 85% of whose assets are investments or other obligations of the type described in clauses (i) through (iv) of this definition. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of this Indenture; provided, however, that, in the event the TIA is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendments, the Trust Indenture Act of 1939 as so amended. "Trustee" means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor. "Trust Officer" means any officer within the Corporate Trust Division of the Trustee (or any successor group of the trustee) with direct responsibility for the administration of this Indenture and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Uniform Commercial Code" means the New York Uniform Commercial Code as in effect from time to time. "Unrestricted Subsidiary" means (a) any Subsidiary of the Company which is designated after the Issue Date as an Unrestricted Subsidiary as permitted pursuant to Section 4.10 and (b) any Subsidiary of an Unrestricted Subsidiary and until such time, in each case, as it may thereafter be redesignated as a Restricted Subsidiary as permitted pursuant to Section 4.10. "U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not 42 callable or redeemable at the issuer's option. "Voting Equity Interests" means the Equity Interests in a corporation or other Person with voting power under ordinary circumstances entitling the holders thereof to elect or appoint the board of directors, executive committee or other governing body of such corporation or Person or generally having the right to vote with respect to organizational matters of such Person or generally having the right to vote with respect to or veto significant transactions or activities with respect to such Person or a Person holding a majority interest in such Person; provided, however, that Preferred Equity Interests with customary contingent voting rights shall not be deemed Voting Equity Interests solely by virtue of such contingent voting rights. "Wholly Owned Subsidiary" means a Restricted Subsidiary of the Company, greater than 95% of the then outstanding Equity Interests in which (other than directors' qualifying shares) are owned by the Company and/or one or more other Wholly Owned Subsidiaries. SECTION 1.02. Other Definitions. Defined in Term Section "Affiliate Transaction"................................ 4.09 "Bankruptcy Law"....................................... 6.01 "Base Amount".......................................... 4.04 "Change of Control Offer".............................. 4.13 "Change of Control Payment Date"....................... 4.13 "Change of Control Purchase Price"..................... 4.13 "covenant defeasance option"........................... 8.01 "Custodian"............................................ 6.01 "Event of Default"..................................... 6.01 "Excess Proceeds"...................................... 4.07 "Exchange Security".................................... Appendix A "First Six Fiscal Quarters"............................ 4.03 "Funding Conditions"................................... Appendix A "Global Security"...................................... Appendix A "Guaranteed Indebtedness............................... 4.06 "legal defeasance option".............................. 8.01 "Legal Holiday"........................................ 10.08 "Mandatory Redemption Date"............................ Appendix A "OID".................................................. 2.01 "Original Securities".................................. 2.01 43 "Original Senior Discount Notes........................ 2.01 "Original Senior Notes"................................ 2.01 "Paying Agent"......................................... 2.04 "Private Exchange Security"............................ Appendix A "Purchase Date"........................................ 4.07 "Registered Exchange Offer"............................ Appendix A "Registrar"............................................ 2.04 "Shelf Registration Statement"......................... Appendix A "Subsidiary Guarantee"................................. 4.06 "Surviving Person"..................................... 5.01 "Suspended Covenants".................................. 4.15 SECTION 1.03. Incorporation by Reference of Trust Indenture Act. Prior to the effectiveness of the registration statement relating to the Registered Exchange Offer or the Shelf Registration Statement, this Indenture shall be governed by the provisions of the TIA. After the effectiveness of either the registration statement relating to the Registered Exchange Offer or the Shelf Registration Statement, this Indenture shall be subject to the provisions of the TIA that are required to be a part of this Indenture and shall, to the extent applicable, be governed by such provisions. The following TIA terms have the following meanings: "Commission" means the SEC. "indenture securities" means the Securities. "indenture security holder" means a Securityholder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company, BCC and any other obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions. 44 SECTION 1.04. Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) "including" means including without limitation; (5) words in the singular include the plural and words in the plural include the singular; (6) unsecured Indebtedness shall not be deemed to be subordinate or junior to secured Indebtedness merely by virtue of its nature as unsecured Indebtedness; (7) the Accreted Value of any noninterest bearing or other discount security at any date shall be the Accreted Value thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP; and (8) the principal amount of any Preferred Equity Interests shall be the greater of (i) the maximum liquidation value of such Preferred Equity Interests or (ii) the maximum mandatory redemption or mandatory repurchase price with respect to such Preferred Equity Interests. ARTICLE II The Securities SECTION 2.01. Amount of Securities; Issuable in Series. As provided in Appendix A hereto, the aggregate principal amount of Senior Notes which may be authenticated and delivered under this Indenture is $250,000,000 and the aggregate gross proceeds of Senior Discount Notes which may be authenticated and delivered under this Indenture is 45 $200,000,000. All Senior Notes, on the one hand, and all Senior Discount Notes, on the other hand, shall be substantially identical in all respects other than issue prices, issuance dates and denominations. The Securities may be issued in one or more series; provided, however, that (i) any Securities issued with original issue discount ("OID") for Federal income tax purposes shall not be issued as part of the same series as any Securities that are issued with a different amount of OID or are not issued with OID and (ii) Senior Notes and Senior Discount Notes may not be part of the same series. Subject to Section 2.03, the Trustee shall authenticate Senior Notes for original issue on the Issue Date in the aggregate principal amount of $170,000,000 (the "Original Senior Notes") and Senior Discount Notes for original issue on the Issue Date in the aggregate principal amount at maturity of $275,000,000 (approximately $175,021,000 gross proceeds) (the "Original Senior Discount Notes" and, together with the Original Senior Notes, the "Original Securities"). With respect to any Securities issued after the Issue Date (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, Original Securities pursuant to Section 2.07, 2.09 or 3.06 or Appendix A), there shall be established in or pursuant to a resolution of the Governing Authority, and subject to Section 2.03, set forth, or determined in the manner provided in an Officers' Certificate, or established in one or more indentures supplemental hereto, prior to the issuance of such Securities: (1) whether such Securities shall be issued as part of a new or existing series of Securities and the title of such Securities (which shall distinguish the Securities of the series from Securities of any other series); (2) the aggregate principal amount, in the case of the Senior Notes, or principal amount at maturity, in the case of the Senior Discount Notes, of such Securities that may be authenticated and delivered under this Indenture, which shall be in an aggregate principal amount not to exceed $80,000,000 in the case of the Senior Notes and a principal amount at maturity 46 aggregating no more than $24,979,000 gross proceeds in the case of the Senior Discount Notes (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the same series pursuant to Section 2.07, 2.09 or 3.06 or Appendix A and except for Securities which, pursuant to Section 2.03, are deemed never to have been authenticated and delivered hereunder); (3) the issue price and issuance date of such Securities, including the date from which interest on such Securities shall accrue or accrete, as applicable; (4) if applicable, that such Securities shall be issuable in whole or in part in the form of one or more Global Securities and, in such case, the respective depositories for such Global Securities, the form of any legend or legends that shall be borne by any such Global Security in addition to or in lieu of that set forth in Exhibit 1 to Appendix A and any circumstances in addition to or in lieu of those set forth in Section 2.3 or 2.4 of Appendix A in which any such Global Security may be exchanged in whole or in part for Securities registered, or any transfer of such Global Security in whole or in part may be registered, in the name or names of Persons other than the depository for such Global Security or a nominee thereof; and (5) if applicable, that such Securities shall not be issued in the form of Initial Securities subject to Appendix A, but shall be issued in the form of Private Exchange Securities or Exchange Securities as set forth in Exhibit A. If any of the terms of any series are established by action taken pursuant to a resolution of the Governing Authority, a copy of an appropriate record of such action shall be certified by the Secretary or any Assistant Secretary of each of the Company and BCC and delivered to the Trustee at or prior to the delivery of the Officers' Certificate or the trust indenture supplemental hereto setting forth the terms of the series. 47 SECTION 2.02. Form and Dating. Provisions relating to the Initial Securities of each series are set forth in Appendix A, which is hereby incorporated in and expressly made part of this Indenture. The Initial Securities of each series and the Trustee's certificate of authentication shall be substantially in the form of Exhibit 1 to Appendix A which is hereby incorporated in and expressly made a part of this Indenture. The Private Exchange Securities and the Exchange Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A, which is hereby incorporated in and expressly made a part of this Indenture. The Securities of each series may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company or BCC is subject, if any, or usage, provided that any such notation, legend or endorsement is in a form reasonably acceptable to the Company and BCC. Each Security shall be dated the date of its authentication. The terms of the Securities of each series set forth in Exhibit 1 to Appendix A and Exhibit A are part of the terms of this Indenture. SECTION 2.03. Execution and Authentication. Two Officers shall sign the Securities for the Company and BCC by manual or facsimile signature. Each of the Company's and BCC's seal shall be impressed, affixed, imprinted or reproduced on the Securities and may be in facsimile form. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. At any time and from time to time after the execution and delivery of this Indenture, the Company and BCC may deliver Securities of any series executed by the Company and BCC to the Trustee for authentication, together with a written order of the Company and BCC in the form of an Officers' Certificate for the authentication and delivery of such Securities, and the Trustee in accordance with such written order of the Company and BCC shall authenticate and deliver such Securities. A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of 48 authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee may appoint an authenticating agent reasonably acceptable to the Company and BCC to authenticate the Securities. Unless limited by the terms of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands. SECTION 2.04. Registrar and Paying Agent. The Company and BCC shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange (the "Registrar") and an office or agency where Securities may be presented for payment (the "Paying Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company and BCC may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Company and BCC shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-registrar not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company and BCC shall notify the Trustee of the name and address of any such agent. If the Company and BCC fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07. The Company, BCC or any of their respective domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar, co-registrar or transfer agent. The Company and BCC initially appoint the Trustee as Registrar and Paying Agent in connection with the Securities. SECTION 2.05. Paying Agent To Hold Money in Trust. On or prior to each due date of the principal or 49 Accreted Value, as applicable, and interest on any Security, the Company and BCC shall deposit with the Paying Agent a sum sufficient to pay such principal or Accreted Value, as applicable, and interest so becoming due. The Company and BCC shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all money held by the Paying Agent for the payment of principal or Accreted Value, as applicable, of or interest on the Securities and shall notify the Trustee of any default by the Company and BCC in making any such payment. If the Company, BCC or a Wholly Owned Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company and BCC at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon complying with this Section, the Paying Agent shall have no further liability for the money delivered to the Trustee. SECTION 2.06. Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company and BCC shall furnish to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. SECTION 2.07. Replacement Securities. If a mutilated Security is surrendered to the Registrar or if the Holder of a Security claims that such Security has been lost, destroyed or wrongfully taken, the Company and BCC shall issue and the Trustee shall authenticate a replacement Security if the requirements of Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies any other reasonable requirements of the Trustee. If required by the Trustee, the Company or BCC, such Holder shall furnish an indemnity bond sufficient in the judgment of the Company, BCC and the Trustee to protect the Company, BCC, the Trustee, the Paying Agent, the Registrar and any co-registrar from any loss which any of them may suffer if a Security is replaced. The Company, BCC and the Trustee may 50 charge the Holder for their expenses in replacing a Security. Every replacement Security is an additional obligation of the Company and BCC. SECTION 2.08. Outstanding Securities. Securities outstanding at any time are all Securities authenticated by the Trustee except for those canceled by it, those delivered to it for cancelation and those described in this Section as not outstanding. Subject to Section 10.06, a Security does not cease to be outstanding because the Company, BCC or an Affiliate of the Company or BCC holds the Security. If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee, the Company and BCC receive proof satisfactory to them that the replaced Security is held by a bona fide purchaser. If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date money sufficient to pay all principal in the case of the Senior Notes or Accreted Value in the case of the Senior Discount Notes and interest payable on that date with respect to the Securities (or portions thereof) to be redeemed or maturing, as the case may be, then on and after that date such Securities (or portions thereof) cease to be outstanding and interest on them ceases to accrue or accrete, as applicable. SECTION 2.09. Temporary Securities. Until definitive Securities are ready for delivery, the Company and BCC may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company and BCC consider appropriate for temporary Securities. Without unreasonable delay, the Company and BCC shall prepare and the Trustee shall authenticate definitive Securities and deliver them in exchange for temporary Securities. SECTION 2.10. Cancelation. The Company and BCC at any time may deliver Securities to the Trustee for cancelation. The Registrar and the Paying Agent shall 51 forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel (subject to the record retention requirements of the Exchange Act) all Securities surrendered for registration of transfer, exchange, payment or cancelation and deliver canceled Securities to the Company and BCC upon a written direction of the Company and BCC. Except as expressly permitted herein, the Company and BCC may not issue new Securities to replace Securities they have redeemed, paid or delivered to the Trustee for cancelation. SECTION 2.11. Defaulted Interest. If the Company and BCC default in a payment of interest on the Securities, the Company and BCC shall pay the defaulted interest (plus interest on such defaulted interest at the rate borne by the Securities to the extent lawful) in any lawful manner. The Company and BCC may pay the defaulted interest to the persons who are Securityholders on a subsequent special record date. The Company and BCC shall fix or cause to be fixed any such special record date and payment date to the reasonable satisfaction of the Trustee and shall promptly mail to each Securityholder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid. SECTION 2.12. CUSIP Numbers. The Company and BCC in issuing the Securities may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided, however, that none of the Company, BCC or the Trustee shall have any responsibility for any defect in the "CUSIP" number that appears on any Security, check, advice of payment or redemption notice, and any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. ARTICLE III 52 Redemption SECTION 3.01. Notices to Trustee. If the Company and BCC elect to redeem Securities pursuant to paragraph 5(a) of the Securities or are required to redeem Securities pursuant to paragraph 5(b) of the Securities, they shall notify the Trustee in writing of the redemption date, the principal amount of Senior Notes or principal amount at maturity of Senior Discount Notes, as applicable, to be redeemed and that such redemption is being made pursuant to paragraph 5(a) or 5(b), as applicable, of the Securities. The Company and BCC shall give each notice to the Trustee provided for in this Section at least 45 days before the redemption date, or if the Company and BCC are required to redeem Securities pursuant to paragraph 5(b), promptly after the occurrence of the event requiring such redemption unless the Trustee consents to a shorter period. Such notice shall be accompanied by an Officers' Certificate and an Opinion of Counsel from the Company and BCC to the effect that such redemption will comply with the conditions herein. SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than all the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed pro rata or by lot or by a method that complies with applicable legal and securities exchange requirements, if any, and that the Trustee considers fair and appropriate and in accordance with methods generally used at the time of selection by fiduciaries in similar circumstances. The Trustee shall make the selection from outstanding Securities not previously called for redemption. The Trustee may select for redemption portions of the principal amount of Senior Notes or Accreted Value of Senior Discount Notes, as applicable, in each case, that have denominations larger than $1,000. Securities and portions of them the Trustee selects shall be in amounts of $1,000 or a whole multiple of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall notify the Company promptly of the Securities or portions of Securities to be redeemed. SECTION 3.03. Notice of Redemption. At least 53 30 days but not more than 60 days before a date for redemption of Securities, the Company and BCC shall mail a notice of redemption by first-class mail to each Holder of Securities to be redeemed. The notice shall identify the Securities (or portion thereof) to be redeemed and shall state (including CUSIP numbers, if any): (1) the redemption date; (2) the redemption price; (3) the name and address of the Paying Agent; (4) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price; (5) if fewer than all the outstanding Securities are to be redeemed, or if a Security is to be redeemed in part only, the identification and principal amounts or Accreted Value, as applicable, of the particular Securities (or portion thereof) to be redeemed; (6) that, unless the Company and BCC default in making such redemption payment, interest on Securities (or portion thereof) called for redemption ceases to accrue or accrete, as applicable, on and after the redemption date; and (7) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Securities. At the Company's and BCC's written request, the Trustee shall give the notice of redemption in the Company's and BCC's name and at the Company's and BCC's expense. In such event, the Company and BCC shall provide the Trustee with the information required by this Section at least 45 days before the redemption date, or if the Company and BCC are required to redeem Securities pursuant to paragraph 5(b), promptly after the occurrence of the event requiring such redemption. 54 SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed, Securities called for redemption become due and payable on the redemption date and at the redemption price stated in the notice. Upon surrender to the Paying Agent, such Securities shall be paid at the redemption price stated in the notice, plus accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the related interest payment date that is on or prior to the date of redemption). Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder. SECTION 3.05. Deposit of Redemption Price. Prior to the redemption date, the Company and BCC shall deposit with the Paying Agent (or, if the Company, BCC or a Wholly Owned Subsidiary is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued interest (subject to the right of Holders of record on the relevant record date to receive interest due on the related interest payment date that is on or prior to the date of redemption) on all Securities to be redeemed on that date other than Securities or portions of Securities called for redemption that have been delivered by the Company and BCC to the Trustee for cancelation. SECTION 3.06. Securities Redeemed in Part. Upon surrender of a Security that is redeemed in part, the Company and BCC shall execute and the Trustee shall authenticate for the Holder (at the Company's and BCC's expense) a new Security equal in principal amount in the case of the Senior Notes or Accreted Value in the case of the Senior Discount Notes to the unredeemed portion of the Security surrendered. ARTICLE IV Covenants SECTION 4.01. Payment of Securities. The Company and BCC shall promptly pay the principal or Accreted Value, as applicable, of and interest on the Securities in immediately available funds on the dates and in the manner provided in the Securities and in this Indenture. Principal or Accreted Value, as applicable, and interest shall be 55 considered paid on the date due if on such date the Trustee or the Paying Agent holds in accordance with this Indenture money sufficient to pay all principal or Accreted Value, as applicable, and interest then due. The Company and BCC shall pay interest on overdue principal or Accreted Value, as applicable, at the rate specified therefor in the Securities, and it shall pay interest on overdue installments of interest at the rate borne by the Securities to the extent lawful. SECTION 4.02. SEC Reports. Notwithstanding that the Company and BCC may not be required to remain subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file with the SEC (but only if the SEC accepts such filings) and provide the Trustee and Holders of the Securities with such annual reports and such information, documents and other reports as are specified in Sections 13 and 15(d) of the Exchange Act applicable to a U.S. corporation subject to such sections, such information, documents and other reports to be so filed and provided at the times specified for the filing of such information, documents and reports under such sections. The Company and BCC shall also comply with the provisions of TIA Section 314(a). Notwithstanding the foregoing, such reporting requirements shall be deemed satisfied (x) prior to April 10, 1999, if the Company delivers to the Trustee and the Holders of the Securities on or prior to such date copies of the audited consolidated financial statements of the Company for the three-year period ended December 31, 1998 and (y) prior to May 20, 1999, by filing with the SEC and delivering to the Trustee and the holders of the Securities on or prior to such date a registration statement under the Securities Act that contains the information that would be required in a Form 10-K for the Company for the year ended December 31, 1998, and a Form 10-Q for the Company for the quarter ended March 31, 1999, and any Form 8-K required under Section 13 or 15(d) of the Exchange Act. SECTION 4.03. Limitation on Indebtedness. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, Incur any Indebtedness unless, after giving effect to the Incurrence on a pro forma basis (i) the Company's Leverage Ratio would 56 not exceed 8.0 to 1.0 or (ii) such Indebtedness is Permitted Indebtedness. (b) Permitted Indebtedness is defined to include any and all of the following: (i) the Original Securities (and any Private Exchange Securities or Exchange Securities issued in exchange therefor); (ii) Indebtedness outstanding on the Funding Date; (iii) Indebtedness under the New Credit Facility in an aggregate principal amount outstanding or available at any one time not to exceed $875.0 million, which amount shall be permanently reduced by the amount of Net Available Proceeds used to Repay Indebtedness under the New Credit Facility to the extent such Net Available Proceeds are not intended to be subsequently reinvested in replacements, improvements or additions to existing or new Properties used or usable in a Domestic Telecommunications Business or used for the permanent repayment or reduction of other Indebtedness, pursuant to Section 4.07 (except at any time after the Company and BCC have made an Offer to Purchase in accordance with Section 4.07, any Net Available Proceeds remaining after such Offer to Purchase shall only reduce such amount to the extent such remaining Net Available Proceeds are used to permanently Repay Indebtedness under the New Credit Facility); (iv) Permitted Refinancing Indebtedness Incurred in respect of Indebtedness Incurred pursuant to Section 4.03(a)(i) or Section 4.03(b) (i), (ii), (ix) and (x); (v) Indebtedness of the Company owing to and held by a Restricted Subsidiary and Indebtedness of a Restricted Subsidiary owing to and held by the Company or any other Restricted Subsidiary; provided, however, that any event that results in any such Restricted Subsidiary holding such Indebtedness ceasing to be a Restricted Subsidiary, or any subsequent transfer of any such Indebtedness (except to the Company or a Restricted Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness by 57 the issuer thereof; (vi) Indebtedness under Interest Rate Agreements entered into for the purpose of limiting risk in the ordinary course of the financial management of the Company or any of its Restricted Subsidiaries and not for speculative purposes; provided, however, that the obligations under such agreements are related to payment obligations on Indebtedness that was otherwise permitted to be Incurred by the terms of this Indenture at the time it was Incurred; (vii) Indebtedness in connection with one or more standby letters of credit or performance bonds issued in the ordinary course of business or pursuant to self-insurance obligations (including, but not limited to, workers' compensation) and, in each case, not in connection with the borrowing of money or the obtaining of advances or credit (other than the extension of credit represented by the issuance for the account of the Company or any of its Restricted Subsidiaries of such letter of credit or performance bond itself); (viii) Indebtedness not otherwise permitted under this Section 4.03 in an amount outstanding at any time during the period from the beginning of the fiscal quarter during which the Issue Date occurs to the end of the sixth fiscal quarter after the quarter during which the Issue Date occurs (the "First Six Fiscal Quarters") not to exceed $35.0 million and at all times after the First Six Fiscal Quarters an amount outstanding at any time not to exceed $25.0 million; provided that any Indebtedness Incurred under this clause (viii) shall cease to be deemed Incurred or outstanding for purposes of this clause (viii) but shall be deemed Incurred for purposes of Section 4.03(a)(i) from and after the first date on which the Company could have Incurred such Indebtedness under Section 4.03(a)(i) without reliance upon this clause (viii); (ix) Indebtedness Incurred by the Company or any of its Restricted Subsidiaries consisting of Capitalized Lease Obligations or Purchase Money Indebtedness for Property used or to be used in connection with a Domestic Telecommunications Business; 58 provided that (A) the aggregate principal amount of such Indebtedness (exclusive of the interest portion thereof and the reasonable costs of financing) does not exceed the lesser of the Fair Market Value or the purchase price and related costs of design, development, acquisition, construction or improvement of such Property at the time of such Incurrence and (B) the aggregate principal amount of all Indebtedness Incurred and then outstanding pursuant to this clause (ix) (together with all Permitted Refinancing Indebtedness Incurred in respect of Indebtedness previously Incurred pursuant to this clause (ix)) does not exceed $25.0 million; (x) Acquired Indebtedness; provided that after giving effect to the underlying acquisition, merger or consolidation, either (A) the Company would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Leverage Ratio referred to in Section 4.03(a)(i) or (B) such Leverage Ratio is no greater immediately following such acquisition, merger or consolidation than the Leverage Ratio immediately prior to such acquisition, merger or consolidation; (xi) other Indebtedness in an amount not greater than twice the aggregate amount of cash Equity Interest Sale Proceeds; provided that such Equity Interest Sale Proceeds have not, in the discretion of the Company, been treated as Equity Interest Sale Proceeds for purposes of Section 4.04(a)(iii)(B); provided further that such Indebtedness shall have been Incurred at substantially the same time as such cash Equity Interest Sale Proceeds were received; and (xii) Indebtedness arising from agreements providing for indemnification or adjustment of purchase price or from guarantees securing any obligations of the Company or any Restricted Subsidiary pursuant to such agreements, Incurred or assumed in connection with the disposition of any Property or Restricted Subsidiary of the Company, other than guarantees or similar credit support by the Company or any Restricted Subsidiary of Indebtedness incurred by any Person acquiring all or any portion of such Property or Restricted Subsidiary for the purpose of financing such 59 acquisition; provided that the maximum aggregate liability in respect of all such Indebtedness permitted pursuant to this clause (xii) shall at no time exceed the net proceeds actually received from the sale of such Property or Restricted Subsidiary. (c) For purposes of determining compliance with this Section 4.03, (i) in the event that an item of Indebtedness (including Indebtedness issued to banks or other lenders) meets the criteria of more than one of the categories of Indebtedness described under Section 4.03(a)(i) and Section 4.03(b), the Company, in its sole discretion, will classify such item of Indebtedness as of the time of the Incurrence thereof (subject to the proviso in Section 4.03(b)(viii)) and will only be required to include the amount and type of such Permitted Indebtedness in one of the above clauses; (ii) an item of Indebtedness (including Indebtedness issued to banks or other lenders) may be divided and classified in more than one of the types of Indebtedness described above; and (iii) the accrual of interest, accretion of Accreted Value and payment of interest in the form of additional subordinated Indebtedness will not be deemed to be an Incurrence of Indebtedness for purposes of this Section 4.03. SECTION 4.04. Limitation on Restricted Payments. (a) The Company shall not make, and shall not permit any Restricted Subsidiary to make, any Restricted Payment if at the time of, and after giving effect to, such proposed Restricted Payment, (i) a Default or Event of Default shall have occurred and be continuing, (ii) the Company could not Incur at least $1.00 of additional Indebtedness pursuant to Section 4.03(a)(i) or (iii) the aggregate amount of such Restricted Payment and (subject to Section 4.03(c)) all other Restricted Payments made since the Issue Date (the amount of any Restricted Payment, if made other than in cash, to be based upon Fair Market Value) would exceed an amount equal to the sum of: 60 (A) the result of (1) Cumulative EBITDA minus (2) the product of 1.2 and Cumulative Interest Expense, plus (B) Equity Interest Sale Proceeds, plus (C) the amount by which Indebtedness of the Company (other than subordinated Indebtedness) or any Restricted Subsidiary is reduced on the Company's consolidated balance sheet upon the conversion or exchange (other than by a Subsidiary of the Company) subsequent to the Issue Date of any Indebtedness of the Company or any Restricted Subsidiary convertible or exchangeable for Equity Interests (other than Disqualified Equity Interests) in the Company (less the amount of any cash or other Property distributed by the Company or any Restricted Subsidiary upon conversion or exchange), plus (D) an amount equal to the deemed net reduction in Investments made by the Company and its Restricted Subsidiaries subsequent to the Issue Date in any Person resulting from (1) dividends, repayment of loans or advances, or other transfers or distributions of Property (unless such transfers or distributions are otherwise included in the calculation of EBITDA for purposes of Section 4.04(a)(iii)(A)(1)), in each case to the Company or any Restricted Subsidiary from any Person or (2) the redesignation of any Unrestricted Subsidiary as a Restricted Subsidiary, not to exceed, in the case of (1) or (2), the amount of such Investments previously made by the Company and its Restricted Subsidiaries in such Person or such Unrestricted Subsidiary, as the case may be, which were treated as Restricted Payments. (b) Notwithstanding the foregoing, the Company or any Restricted Subsidiary (as the case may be) may: 61 (i) pay dividends on or make distributions in respect of Equity Interests in the Company within 60 days of the declaration thereof if, on the declaration date, such dividends or distributions could have been paid in compliance with the foregoing limitation; (ii) redeem, repurchase, defease, acquire or retire for value, any Indebtedness subordinate (whether pursuant to its terms or by operation of law) in right of payment to the Securities with the proceeds of or in exchange for any Permitted Refinancing Indebtedness; (iii) acquire, redeem or retire Equity Interests in the Company or Indebtedness of the Company subordinate (whether pursuant to its terms or by operation of law) in right of payment to the Securities in exchange for, or in connection with a substantially concurrent issuance (other than to a Subsidiary of the Company or an employee stock ownership plan or trust established by the Company or any such Subsidiary for the benefit of their employees) of, Equity Interests in the Company (other than Disqualified Equity Interests) or in exchange for cash contributions to the equity capital of the Company; (iv) with respect to any taxable year or portion thereof that the Company is a Pass-Through Entity, pay any dividend or other distribution on Equity Interests in the Company in an amount not to exceed the aggregate amount necessary to permit each Relevant Taxpayer to pay the Tax Liability of such Relevant Taxpayer with respect to such taxable year; (v) pay any dividend or other distribution on Equity Interests in the Company or make loans to the Parent, in each case to allow BCI Management L.P. to acquire, redeem or retire Equity Interests in BCI Management, L.P. held directly or indirectly by a present or former employee of the Company or any Restricted Subsidiary (or such employee's estate, as the case may be) upon such employee's death, disability, retirement or termination of employment with the Company and any Restricted Subsidiary in an aggregate amount not to exceed $5.0 million per year 62 (the "Base Amount"); provided that, to the extent not all the Base Amount is utilized to pay dividends in such year, the unused portion of such Base Amount may be carried forward to and be deemed part of the Base Amount for the immediately subsequent year; provided further that the Base Amount may not exceed $10.0 million in any year; (vi) make Investments in Persons (including Unrestricted Subsidiaries) the primary businesses of which are Cable Businesses, Cable Programming Businesses or Related Businesses (other than Investments in Equity Interests in the Company or Tele-Communications, Inc.) in an aggregate amount (based on the amount actually invested) for all such Investments made pursuant to this clause (vi) not to exceed the sum of (A) $20.0 million, (B) an amount equal to the deemed net reduction in Investments made by the Company and its Restricted Subsidiaries subsequent to the Issue Date in any Person resulting from payment of dividends, repayment of loans or advances, or other transfers or distributions of Property to the Company or any Restricted Subsidiary from any Person (but only to the extent such net reduction has not been utilized to increase the amount of Restricted Payments permissible pursuant to Section 4.04(a)(iii)(A) or (iii)(D), and not to exceed, in the case of this clause (vi)(B), the amount of such Investments previously made by the Company and its Restricted Subsidiaries in such Person which were made in reliance on this clause (vi) and (C) Equity Interest Sale Proceeds to the extent such Proceeds have not, in the discretion of the Company, been treated as Equity Interest Sale Proceeds for purposes of Section 4.04(a)(iii)(B); (vii) pay dividends to the Parent, the proceeds of which are or will be used to pay, or reimburse the 63 Parent for the payment of, management fees and monitoring fees of the Parent pursuant to and in amounts provided for in the Partnership Agreement; provided that such management fees may be increased on an annual basis to up to 5.0% of consolidated gross revenues of the Company to the extent necessary to cover the pro rata reimbursement of operating expenses (including pro rata amounts of salaries of Company Employees and overhead expenses) attributable to the Company; provided further that if at the time of such dividend a Default or an Event of Default shall have occurred and be continuing (or would result therefrom) such dividend shall be limited to an amount not to exceed the portion of the management fees that represents a pro rata reimbursement of operating expenses attributable to the Company; (viii) declare and pay scheduled dividends (not constituting a return on capital) to holders of any Disqualified Equity Interests of the Company or any of its Restricted Subsidiaries subject to and Incurred in accordance with Section 4.03; (ix) make Investments with Excluded Contributions; provided that such Excluded Contribution was received by the Company at substantially the same time as such Investment was made; (x) make Investments in connection with the AT&T Joint Venture in an aggregate amount not to exceed the lesser of 66-2/3% of the amount of any cash equity contributions made by AT&T or its Affiliates (other than the Company and its Affiliates) in the AT&T Joint Venture and $25.0 million; (xi) to the extent Investments in connection with the AT&T Joint Venture are made with Excluded Contributions in accordance with Section 4.04(b)(ix), make additional Investments in the AT&T Joint Venture in an aggregate amount not to exceed the lesser of 50% of the amount of such Excluded Contributions and $20.0 million; provided that each such additional Investment is made at substantially the same time as such Investment pursuant to Section 4.04(b)(ix); provided further that such Investment shall not be made 64 at the same time or substantially the same time as the Company makes a distribution (other than a Tax Distribution) with respect to its Equity Interests; (xii) acquire Equity Interests of any Person who beneficially owns, directly or indirectly, 50% or more of the total voting power of the Voting Equity Interests of the Company for the sole purpose of contributing the acquired Equity Interests to the Company's 401(k) Plan; provided that the contribution of the acquired Equity Interests is in the ordinary course and in lieu of cash contributions the Company would otherwise make to its 401(k) Plan; and (xiii) make other Restricted Payments in an aggregate amount not to exceed $15.0 million. (c) Any payments made pursuant to Section 4.04(b)(ii), (iii), (iv), (vii), (viii), (ix), (xi) and (xii) shall be excluded from the calculation of the aggregate amount of Restricted Payments made after the Issue Date; provided, however, that the proceeds from the issuance of Equity Interests pursuant to Section 4.04(b)(iii) shall not constitute Equity Interest Sale Proceeds to the extent such proceeds are used in the manner set forth in Section 4.04(b)(iii) for purposes of Section 4.04(a)(iii)(B). SECTION 4.05. Limitation on Liens. The Company shall not, and shall not permit any Restricted Subsidiary that has Guaranteed (a) any Indebtedness of the Company or (b) any Indebtedness of a Restricted Subsidiary that has Guaranteed any Indebtedness of the Company to, directly or indirectly, Incur or suffer to exist, any Lien (other than Permitted Liens) upon any of its Property, whether now owned or hereafter acquired, or any interest therein or any income or profits therefrom, unless it has made or will make effective provision whereby the Securities will be secured by such Lien equally and ratably with all other Indebtedness of the Company or such Restricted Subsidiary secured by such Lien for so long as any such other Indebtedness of the Company or such Restricted Subsidiary shall be so secured; provided, however, that no Lien may be granted with respect to Indebtedness of the Company that is subordinated to the Securities. SECTION 4.06. Limitation on Issuance of 65 Guarantees by Restricted Subsidiaries. (a) The Company shall not permit any Restricted Subsidiary, directly or indirectly, to Guarantee any Indebtedness of the Company which is pari passu with or subordinate in right of payment to the Securities ("Guaranteed Indebtedness"), unless (a) such Restricted Subsidiary simultaneously executes and delivers a supplemental indenture to this Indenture providing for a Guarantee (a "Subsidiary Guarantee") of payment of the Securities by such Restricted Subsidiary and (b) until one year after all the Securities have been paid in full in cash, such Restricted Subsidiary waives and will not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Company or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Subsidiary Guarantee; provided that this Section 4.06(a) shall not be applicable to any Guarantee of any Restricted Subsidiary that (i) existed at the time such Person became a Restricted Subsidiary and was not Incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary or (ii) guarantees the payment of any principal, interest, penalties, fees, indemnification obligations, reimbursement obligations (including, without limitation, reimbursement obligations with respect to letters of credit and banker's acceptances), damages or other liabilities of the Company or any Restricted Subsidiary under the New Credit Facility. If the Guaranteed Indebtedness is (A) pari passu with, or subordinated to, the Subsidiary Guarantee or (B) subordinated to the Securities, then the Guarantee of such Guaranteed Indebtedness shall be subordinated to the Subsidiary Guarantee at least to the extent that the Guaranteed Indebtedness is subordinated to the Securities. (b) Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted Subsidiary may provide by its terms that it shall be automatically and unconditionally released and discharged upon (a) any sale, exchange or transfer, to any Person not an Affiliate of the Company, of all of the Company's and each Restricted Subsidiary's Equity Interests in, or all or substantially all the assets of, such Restricted Subsidiary (which sale, exchange or transfer is not prohibited by this Indenture) or (b) the release or discharge of the Guarantee which resulted in the creation of such Subsidiary Guarantee, except a discharge or release by 66 or as a result of payment under such Guarantee. SECTION 4.07. Limitation on Asset Dispositions. (a) The Company may not, and may not permit any Restricted Subsidiary to, make any Asset Disposition unless: (i) the Company or the Restricted Subsidiary, as the case may be, receives consideration for such disposition at least equal to the Fair Market Value of the Property sold or disposed of as determined by the Governing Authority in good faith and evidenced by a Resolution filed with the Trustee; (ii) (A) at least 75% of the consideration for such disposition consists of (1) cash or Temporary Cash Investments, (2) the assumption of Indebtedness of the Company or any Restricted Subsidiary (other than Indebtedness that is subordinated to the Securities) and release of the Company and all Restricted Subsidiaries from all liability on the Indebtedness assumed or (3) any notes, obligations or other securities received by the Company or such Restricted Subsidiary from such transferee that are converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received) within 180 days following the closing of such Asset Disposition or (B) the consideration paid to the Company or such Restricted Subsidiary is in the form of Property (including franchises and licenses required to own or operate such Property) which is determined in good faith by the Governing Authority, as evidenced by a Resolution, to be used or usable in a Domestic Telecommunications Business; and (iii) the Company delivers an Officers' Certificate to the Trustee certifying that such Asset Disposition complies with Section 4.07(a)(i) and (ii). 67 (b) The Net Available Proceeds (or any portion thereof) from Asset Dispositions may be applied by the Company or a Restricted Subsidiary, to the extent the Company or such Restricted Subsidiary elects (or is required by the terms of any Indebtedness): (i) to the permanent repayment or reduction of Indebtedness of the Company (other than subordinated Indebtedness) or a Restricted Subsidiary then outstanding (other than Indebtedness owed to the Company or any Affiliate of the Company); or (ii) to reinvest in replacements, improvements or additions to existing or new Properties (including franchises and licenses required to own or operate such Properties) used or usable in a Domestic Telecommunications Business (including by means of an investment by a Restricted Subsidiary with Net Available Proceeds received by the Company or another Restricted Subsidiary). Pending the final application of any such Net Available Proceeds, the Company or such Restricted Subsidiary may temporarily reduce Indebtedness under a revolving credit facility, if any, or otherwise invest such Net Available Proceeds in Temporary Cash Investments. (c) Any Net Available Proceeds from an Asset Disposition not applied in accordance with the Section 4.07(b) within 365 days from the date of the receipt of such Net Available Proceeds shall constitute "Excess Proceeds". When the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company will be required to make an Offer to Purchase with such Excess Proceeds on a pro rata basis according to principal amount (or, in the case of Indebtedness issued at a discount, the then-Accreted Value) for (i) outstanding Securities at a price in cash equal to, in the case of the Senior Notes, 100% of the principal amount thereof and, in the case of the Senior Discount Notes, 100% of the Accreted Value thereof on the purchase date plus, in each case, accrued and unpaid interest, if any, thereon (subject to the right 68 of Holders of record on the relevant record date to receive interest due on the relevant interest payment date) in accordance with the procedures (including prorating in the event of oversubscription) set forth in this Indenture and (ii) any other Indebtedness of the Company that is pari passu with the Securities, at a price no greater than 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the purchase date (or 100% of the then Accreted Value plus accrued and unpaid interest, if any, to the purchase date in the case of original issue discount Indebtedness), to the extent, in the case of this Section 4.07(c)(ii), required under the terms thereof (other than Indebtedness owed to the Company or any Affiliate of the Company). Any remaining Excess Proceeds may be applied to any use as determined by the Company which is not otherwise prohibited by this Indenture, and the amount of Excess Proceeds shall be reset to zero. SECTION 4.08. Limitation on Restrictions on Distributions from Restricted Subsidiaries. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective, or enter into any agreement with any Person that would cause to become effective, any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to (i) pay dividends, in cash or otherwise, or make any other distributions on or in respect of its Equity Interests, or pay any Indebtedness or other obligation owed, to the Company or any other Restricted Subsidiary, (ii) make any loans or advances to the Company or any other Restricted Subsidiary or (iii) transfer any of its Property to the Company or any other Restricted Subsidiary. (b) Such limitation will not apply (i) with respect to Section 4.08(a)(i), (ii) and 69 (iii), to encumbrances and restrictions (A) in existence on the Issue Date under or by reason of any agreements in effect on the Issue Date, including under this Indenture and the Securities, (B) in existence under or by reason of the New Credit Facility; provided that such restrictions or encumbrances are no less favorable to the Holders of the Securities than those restrictions or encumbrances pursuant to the New Credit Facility as in effect on the Funding Date and as described in the Offering Memorandum; provided further, however, that the provisions of the New Credit Facility permit distributions to the Company for the purpose of, and in an amount sufficient to fund, the payment of principal due at Stated Maturity and interest in respect of the Securities (provided, in either case, that such payment is due or to become due within 30 days from the date of such distribution) at a time when there does not exist an event which after notice or passage of time or both would permit the lenders under the New Credit Facility to declare all amounts thereunder due and payable; (C) relating to Indebtedness of a Restricted Subsidiary and existing at such Restricted Subsidiary at the time it became a Restricted Subsidiary if either (1) such encumbrance or restriction was not created in connection with or in anticipation of the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Company or a Restricted Subsidiary or (2) such encumbrance or restriction was created in connection with the refinancing of preexisting Indebtedness in connection with or in anticipation of the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Company or a Restricted Subsidiary, and the new Indebtedness satisfies the requirements 70 contained in the definition of "Permitted Refinancing Indebtedness", and such encumbrance or restriction relates only to the Property previously subject to an encumbrance or restriction under the preexisting Indebtedness and such encumbrance or restriction is no more restrictive than was its predecessor, (D) which result from the renewal, refinancing, extension or amendment of an agreement referred to in Section 4.08(b)(i)(A), (B) and (C) and in Section 4.08(b)(ii)(A) and (B) below, provided such encumbrance or restriction is no more restrictive to such Restricted Subsidiary and is not materially less favorable to the Holders of Securities than those under or pursuant to the agreement so renewed, refinanced, extended or amended, and (E) customary encumbrances or restrictions on distributions of cash or other deposits or customary net worth maintenance covenants imposed by customers under contracts entered into in the ordinary course of business, and (ii) with respect to Section 4.08(a)(iii) only, to (A) any encumbrance or restriction relating to Indebtedness that is permitted to be Incurred and secured pursuant to Sections 4.03 and 4.05 that limits the right of the debtor to dispose of the Property securing such Indebtedness, (B) any encumbrance or restriction in connection with an acquisition of Property, so long as such encumbrance or restriction relates solely to the Property so acquired (and any improvements thereto) and was not created in connection with or in anticipation of such acquisition, (C) customary provisions restricting subletting or assignment of leases and customary provisions in other agreements that restrict assignment of such agreements or rights 71 thereunder, (D) customary restrictions contained in asset sale agreements limiting the transfer of such assets pending the closing of such sale or (E) customary restrictions contained in cable television franchise agreements limiting the transfer of the franchises granted thereby. SECTION 4.09. Limitation on Transactions with Affiliates. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, conduct any business or enter into or suffer to exist any transaction or series of transactions (including the purchase, sale, transfer, lease or exchange of any Property, the rendering of any service or the modification, renewal or extension of any existing agreement with Affiliates of the Company) with, or for the benefit of, any Affiliate of the Company (an "Affiliate Transaction") unless the terms of such Affiliate Transaction are (i) (A) with respect to an Affiliate Transaction involving, or reasonably expected to involve, aggregate payments or value in excess of $1.0 million, set forth in writing, and (B) no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could be obtained at the time of such Affiliate Transaction for a similar transaction in arm's-length dealings with a Person who is not such an Affiliate, (ii) with respect to an Affiliate Transaction involving, or reasonably expected to involve, aggregate payments or value in excess of $10.0 million, the Governing Authority approves such Affiliate Transaction and, in its good faith judgment, believes that such Affiliate Transaction complies with Section 4.09(a)(i)(B) as evidenced by a Resolution and (iii) with respect to an Affiliate Transaction involving, or reasonably expected to involve, aggregate payments in excess of $50.0 million, the Company obtains an opinion letter from an Independent Appraiser to the effect that the consideration to be paid or 72 received in connection with such Affiliate Transaction is fair, from a financial point of view to the Company and its Restricted Subsidiaries. (b) Notwithstanding the foregoing limitation, the Company or any of its Restricted Subsidiaries may enter into or suffer to exist the following: (i) any transaction pursuant to any contract in existence on the Funding Date (including the repayment in full of the TCID Note and the Assumed TCI Debt) or any renewal, amendment, extension or replacement of such contract on terms that are in the aggregate no less favorable to the Company and its Restricted Subsidiaries, including contracts for the acquisition of cable television programming and equipment; provided that as this clause (i) relates to the Partnership Agreement, the Contribution Agreement, the New Supply Agreement, the TCID Note and the Assumed TCI Debt, each such agreement, note or debt in existence on the Funding Date shall be on terms that are no less favorable to the Company and its Restricted Subsidiaries than as are contemplated (including any changes to such terms) in the Offering Memorandum; provided further that any material amendment, modification or replacement or successor agreements to the New Supply Agreement shall have been approved by the Governing Authority and a majority of the disinterested limited partners of the Parent; (ii) any Restricted Payment made in accordance with Section 4.04 or any Permitted Investment; (iii) any transaction or series of transactions between the Company and one or more of its Restricted Subsidiaries or between two or more of its Restricted Subsidiaries; (iv) the payment of reasonable compensation (including amounts or Equity Interests (other than Disqualified Equity Interests) paid pursuant to employee benefit plans) for the personal services of officers, directors and employees of the Company or any of its Restricted Subsidiaries; 73 (v) loans and advances to Company Employees (such loans to be made either directly to such Company Employees or through the Parent, the General Partner, Bresnan Communications, Inc. or BCI Management, L.P.) or loans to BCI Management, L.P. (directly or indirectly through the Parent, the General Partner or Bresnan Communications, Inc.), to allow BCI Management, L.P. to acquire, redeem or retire Equity Interests in BCI Management, L.P., held by Company Employees (or such Company Employee's estate, as the case may be) upon such employee's death, disability, retirement or termination of employment; provided that such loans and advances do not exceed $5.0 million at any one time outstanding; (vi) customary indemnification payments to members of the Governing Authority or officers of the Company, any Restricted Subsidiary, the Parent, the General Partner or BCI Management L.P. for liabilities incurred in connection with the rendering of services to the Company; and (vii) issuances of Equity Interests in the Company (other than Disqualified Equity Interests or Preferred Equity Interests) in connection with capital contributions. (c) References, directly or indirectly, to any Person in Section 4.09(b) is not intended to imply and should not be construed as implying that any such Person is an Affiliate of the Company. SECTION 4.10. Designation of Restricted and Unrestricted Subsidiaries. (a) The Governing Authority may designate any Subsidiary of the Company to be an Unrestricted Subsidiary if (i) the Subsidiary to be so designated does not own any Equity Interests or Indebtedness of, or own or hold any Lien on any Property of, the Company or any other Restricted Subsidiary and (ii) either (A) the Subsidiary to be so designated has total assets of $1,000 or less, (B) the portion (proportionate to the Company's Equity Interests in 74 such Subsidiary) of the Fair Market Value of such Subsidiary at the time of such designation would be permitted as, and shall be deemed to constitute, an Investment pursuant to Section 4.04, or (C) such designation is effective immediately upon such entity becoming a Subsidiary of the Company. Unless so designated as an Unrestricted Subsidiary, any Person that becomes a Subsidiary of the Company will be classified as a Restricted Subsidiary; provided, however, that such Subsidiary shall not be designated a Restricted Subsidiary and shall be automatically classified as an Unrestricted Subsidiary if either of the requirements set forth in Section 4.10(b)(i) and (ii) will not be satisfied after giving pro forma effect to such classification. Except as provided in the first sentence of this Section 4.10(a), no Restricted Subsidiary may be redesignated as an Unrestricted Subsidiary. Neither the Company nor any Restricted Subsidiary shall at any time be directly or indirectly liable for any Indebtedness that provides that the holder thereof may (with the passage of time or notice or both) declare a default thereon or cause the payment thereof to be accelerated or payable prior to its Stated Maturity upon the occurrence of a default with respect to any Indebtedness, Lien or other obligation of any Unrestricted Subsidiary (including any right to take enforcement action against such Unrestricted Subsidiary). Upon designation of a Restricted Subsidiary as an Unrestricted Subsidiary in compliance with this Section 4.10, such Restricted Subsidiary shall, by execution and delivery of a supplemental indenture in form satisfactory to the Trustee, be released from any Guarantee previously made by such Restricted Subsidiary. (b) The Governing Authority may designate any Unrestricted Subsidiary to be a Restricted Subsidiary if, immediately after giving pro forma effect to such designation, (i) the Company could Incur at least $1.00 of additional Indebtedness pursuant to Section 4.03(a)(i) or the Company's Leverage Ratio would be no greater immediately following such designation than the Company's Leverage Ratio immediately preceding such designation and (ii) no Default or Event of Default shall have occurred and be continuing or would result therefrom. In the case of the redesignation of 75 an Unrestricted Subsidiary (which was previously a Restricted Subsidiary) as a Restricted Subsidiary, the Company shall be deemed to have a continuing "Investment" in an Unrestricted Subsidiary equal to the amount (if positive) equal to (a) the Company's "Investment" in such Unrestricted Subsidiary at the time of such redesignation less (b) the portion (proportionate to the Company's Equity Interests in such Unrestricted Subsidiary) of the Fair Market Value of the net assets of such Unrestricted Subsidiary at the time of such redesignation. (c) Any such designation or redesignation by the Governing Authority will be evidenced to the Trustee by filing with the Trustee a Resolution giving effect to such designation or redesignation and an Officers' Certificate (i) certifying that such designation or redesignation complies with the foregoing provisions and (ii) giving the effective date of such designation or redesignation, such filing with the Trustee to occur within 75 days after the end of the fiscal quarter of the Company in which such designation or redesignation is made (or, in the case of a designation or redesignation made during the last fiscal quarter of the Company's fiscal year, within 120 days after the end of such fiscal year). (d) The Company shall at all times cause each of BCC and Bresnan Telecommunications Company LLC to be a direct Wholly Owned Subsidiary. SECTION 4.11. Limitation on Conduct of Business of BCC. BCC shall not conduct any business or other activities, own any Property, enter into agreements or Incur any Indebtedness or other liabilities, other than in connection with serving as an issuer and obligor with respect to the Securities. SECTION 4.12. Limitation on Conduct of Business of the Company and BCC Prior to the Funding Date. Prior to the Funding Date, the Company and BCC are prohibited from conducting any business or other activities, owning any Property, entering into any agreements or Incurring any Indebtedness or liabilities, other than in connection with the issuance of the Original Securities or pursuant to and in accordance with the Escrow Agreement or the Contribution Agreement, provided that no such action undertaken with 76 respect to the Contribution Agreement shall be effective or binding on the Company and BCC prior to the Funding Date. SECTION 4.13. Change of Control. (a) Upon the occurrence of a Change of Control, each Holder of Securities shall have the right to require the Company and BCC to repurchase all or any part (in a principal amount or Accreted Value, as applicable, equal to $1,000 or an integral multiple thereof) of such Holder's Securities pursuant to the offer described below (the "Change of Control Offer") at a purchase price (the "Change of Control Purchase Price") equal to 101% of the principal amount thereof, in the case of the Senior Notes, and 101% of the Accreted Value thereof, in the case of the Senior Discount Notes, in each case plus accrued and unpaid interest, if any, to the purchase date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date). (b) Within 30 days following any Change of Control, the Company and BCC shall (i) cause a notice of the Change of Control Offer to be sent at least once to the Dow Jones News Service or similar business news service in the United States and (ii) send, by first-class mail, with a copy to the Trustee, to each Holder of Securities, at such Holder's address appearing in the Security Register, a notice stating: (A) that a Change of Control has occurred and a Change of Control Offer is being made pursuant to this Section 4.13 and that all Securities timely tendered will be accepted for payment; (B) the Change of Control Purchase Price and the purchase date, which shall be, subject to any contrary requirements of applicable law, a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"); (C) that any Security (or portion thereof) accepted for payment (and duly paid on the Change of Control Payment Date) pursuant to the Change of Control Offer shall cease to accrue or accrete interest, as applicable, after the Change of Control Payment Date; (D) that any Security (or portions thereof) not properly tendered will continue to accrue or accrete interest, as applicable; (E) a description of the transaction or transactions constituting the Change of Control; and (F) the procedures that Holders of Securities must follow in order to tender their Securities (or portions thereof) for payment and the procedures that Holders of 77 Securities must follow in order to withdraw an election to tender Securities (or portions thereof) for payment. (c) Holders electing to have a Security purchased shall be required to surrender the Security, with an appropriate form duly completed, to the Company or its agent at the address specified in the notice at least three Business Days prior to the Change of Control Payment Date. Holders shall be entitled to withdraw their election if the Trustee or the Company receives not later than one Business Day prior to the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security that was delivered for purchase by the Holder and a statement that such Holder is withdrawing its election to have such Security purchased. (d) On or prior to the Change of Control Payment Date, the Company shall irrevocably deposit with the Trustee or with the Paying Agent (or, if the Company or any of its Wholly Owned Subsidiaries is acting as the Paying Agent, segregate and hold in trust) in cash an amount equal to the Change of Control Purchase Price payable to the Holders entitled thereto, to be held for payment in accordance with the provisions of this Section. On the Change of Control Payment Date, the Company shall deliver to the Trustee the Securities or portions thereof that have been properly tendered to and are to be accepted by the Company for payment. The Trustee or the Paying Agent shall, on or promptly after the Change of Control Payment Date, mail or deliver payment to each tendering Holder of the Change of Control Purchase Price. In the event that the aggregate Change of Control Purchase Price is less than the amount delivered by the Company to the Trustee or the Paying Agent, the Trustee or the Paying Agent, as the case may be, shall deliver the excess to the Company immediately after the Change of Control Payment Date. (e) The Company and BCC will comply, to the extent applicable, with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws or regulations thereunder to the extent such laws and regulations are applicable in connection with the purchase of Securities pursuant to this Section. To the extent that the provisions of any securities laws or regulations 78 conflict with the provisions of this Section, the Company and BCC will comply with the applicable securities laws and regulations and will not be deemed to have breached their obligations under this Section by virtue thereof. (f) The Company and BCC shall not be required to make a Change of Control Offer upon a Change of Control if a third-party makes the Change of Control Offer in a manner, at the times and otherwise in compliance with all requirements of this Section 4.13 applicable to a Change of Control made by the Company and BCC and purchases all Securities validly tendered and not withdrawn under such Change of Control Offer. Securities repurchased by either the Company or BCC or such third party pursuant to a Change of Control Offer shall have the status of Securities issued but not outstanding or shall be retired or canceled, at the option of the Company and BCC. SECTION 4.14. Compliance Certificate. The Company and BCC shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company, commencing with the fiscal year ended December 31, 1999, an Officers' Certificate stating that in the course of the performance by the signers of their duties as Officers of the Company and BCC they would normally have knowledge of any Default by the Company or BCC and whether or not the signers know of any Default or Event of Default that occurred during such period. If they do, the certificate shall describe the Default, its status and what action the Company and BCC are taking or propose to take with respect thereto. The Company and BCC shall comply with TIA Section 314(a)(4). SECTION 4.15. Applicability of Article IV; Investment Grade Ratings. During any period of time that (a) the Securities have Investment Grade Ratings from both Rating Agencies and (b) no Default or Event of Default has occurred and is continuing under this Indenture, the Company and the Restricted Subsidiaries will not be subject to the provisions of Section 4.03, 4.04, 4.07, 4.08, 4.09, 4.10(b)(i) (and Section 4.10(b)(i) as referred to in Section 4.10(a)) (collectively, the "Suspended Covenants"). In the event that the Company and the Restricted Subsidiaries are not subject to the Suspended Covenants for any period of time as a result of the preceding sentence and, subsequently, one or both of the Rating Agencies withdraws 79 its ratings or downgrades the ratings assigned to the Securities below the required Investment Grade Ratings or a Default or Event of Default occurs and is continuing, then the Company and the Restricted Subsidiaries will thereafter again be subject to the Suspended Covenants and compliance with the Suspended Covenants with respect to Restricted Payments made after the time of such withdrawal, downgrade, Default or Event of Default will be calculated in accordance with the terms of Section 4.04 as though Section 4.04 had been in effect during the entire period of time from the Issue Date. SECTION 4.16.OID Certificate. The Company and BCC shall file with the Trustee promptly after the end of each calendar year (a) a written notice specifying the Accreted Value (including daily rates and accrual periods) of outstanding Senior Discount Notes as of the end of such year and (ii) such other specific information relating to such Accreted Value as may then be relevant under the Internal Revenue Code. SECTION 4.17. Further Instruments and Acts. Upon request of the Trustee, the Company and BCC shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. ARTICLE V Successor Company SECTION 5.01. When Company and BCC May Merge or Transfer Assets. (a) Neither the Company nor BCC may consolidate with or merge with or into any other Person (other than a merger of a Restricted Subsidiary (other than BCC) into the Company), or convey, sell, transfer, lease or otherwise dispose of all or substantially all of its Property (in one transaction or a series of related transactions), unless: (i) either the Company or BCC, as applicable, shall be the surviving Person (the "Surviving Person"), or the Surviving Person (if other than the Company or BCC, as applicable) formed by such consolidation or 80 into which the Company or BCC, as applicable, is merged or to which the Property of the Company or BCC, as applicable, is transferred shall be, in the case of BCC, a corporation, or in any other case, a corporation, partnership or trust, organized and existing under the laws of the United States or any State thereof or the District of Columbia; (ii) the Surviving Person (if other than the Company or BCC, as applicable) shall expressly assume, by supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all of the obligations of the Company or BCC, as applicable, under the Securities and this Indenture, and the obligations under this Indenture shall remain in full force and effect; (iii) in the case of a sale, transfer, assignment, lease, conveyance or other disposition of all or substantially all of the Company's or BCC's Property, such Property shall have been transferred as an entirety or virtually as an entirety to one or more Persons; provided that all such transferees shall have jointly and severally assumed, as the Surviving Person, the obligations of the Company or BCC, as applicable, pursuant to clause (ii); (iv) immediately before and immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; and (v) immediately after giving effect to such transaction on a pro forma basis (including, any Indebtedness Incurred or anticipated to be Incurred in connection with such transaction or series of transactions), (A) the Surviving Person would be able to Incur at least $1.00 of additional Indebtedness pursuant Section 4.03(a)(i) or (B) the Leverage Ratio for the Surviving Person would be no greater immediately following such transaction than the Company's Leverage Ratio immediately preceding such transaction. (b) Upon the consolidation, merger or transfer of all or substantially all of the assets of either the Company 81 or BCC in accordance with Section 5.01(a), the successor corporation formed by such a consolidation or into which the Company or BCC is merged or to which such transfer is made shall succeed to, shall be substituted for and may exercise every right and power of the Company or BCC, as applicable, under the Securities and this Indenture, with the same effect as if such successor corporation had been named as the Company or BCC, as applicable, herein. In the event of any transaction (other than a lease) described and listed in Section 5.01 in which the Company or BCC, as applicable, is not the Surviving Person, the Surviving Person shall succeed to, be substituted for and may exercise every right and power of the Company or BCC, as applicable, and the Company and BCC, as applicable, shall be discharged from all obligations and covenants under the Securities and this Indenture. SECTION 5.02. Applicability of Article V; Investment Grade Ratings. During any period of time that (a) the Securities have Investment Grade Ratings from both Rating Agencies and (b) no Default or Event of Default has occurred and is continuing under this Indenture, the Company and the Restricted Subsidiaries will not be subject to Section 5.01(a)(v). In the event that the Company and the Restricted Subsidiaries are not subject to Section 5.01(a)(v) for any period of time as a result of the preceding sentence and, subsequently, one or both of the Rating Agencies withdraws its ratings or downgrades the ratings assigned to the Securities below the required Investment Grade Ratings or a Default or Event of Default occurs and is continuing, then the Company and the Restricted Subsidiaries will thereafter again be subject to Section 5.01(a)(v). ARTICLE VI Defaults and Remedies SECTION 6.01. Events of Default. The following events shall be "Events of Default": (1) the Company and BCC default in the payment of the principal or Accreted Value, as applicable, of, or premium, if any, on any Security when the same becomes 82 due and payable at its Stated Maturity, upon acceleration, redemption, optional redemption, mandatory repurchase or declaration or otherwise; (2) the Company and BCC default in any payment of interest on any Security when the same becomes due and payable, and such default continues for a period of 30 days; (3) the Company or BCC fails to comply with Article V; (4) the Company or BCC fails to comply with any covenant or agreement in the Securities or in this Indenture (other than a failure that is the subject of the foregoing clause (1), (2) or (3)) and such failure continues for 60 days after written notice is given to the Company and BCC as specified below; (5) a default by the Company or any Restricted Subsidiary under any Indebtedness of the Company or any Restricted Subsidiary which results in acceleration of the maturity of such Indebtedness, or the failure to pay any such Indebtedness at final maturity, in an aggregate amount in excess of $15,000,000 or its foreign currency equivalent at the time; (6) the Company, BCC or any Significant Subsidiary of the Company pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a Custodian of it or for any substantial part of its property; or (D) makes a general assignment for the benefit of its creditors; or takes any comparable action under any foreign laws relating to insolvency; 83 (7) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company, BCC or any Significant Subsidiary of the Company in an involuntary case; (B) appoints a Custodian of the Company, BCC or any Significant Subsidiary of the Company or for any substantial part of its property; or (C) orders the winding up or liquidation of the Company, BCC or any Significant Subsidiary of the Company; or (D) grants any similar relief under any foreign laws; and in each such case the order or decree remains unstayed and in effect for 30 days; or (8) any judgment or judgments for the payment of money (other than judgments which are covered by enforceable insurance policies issued by solvent carriers) in an aggregate amount in excess of $15,000,000 or its foreign currency equivalent at the time is entered against the Company or any Restricted Subsidiary and shall not be waived, satisfied or discharged for any period of 60 consecutive days during which a stay of enforcement shall not be in effect. The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. The term "Bankruptcy Law" means Title 11, United States Code, or any similar Federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law. 84 A Default under clause (4) is not an Event of Default until the Trustee or the Holders of at least 25% in aggregate principal amount, in the case of the Senior Notes or aggregate principal amount at maturity, in the case of the Senior Discount Notes, of the Securities of a series then outstanding notify the Company and BCC (and in the case of such notice by Holders, the Trustee) of the Default and the Company and BCC do not cure such Default within the time specified after receipt of such notice. Such notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default". The Company and BCC shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice in the form of an Officers' Certificate of any Event of Default and any event that with the giving of notice or the lapse of time would become an Event of Default, its status and what action the Company is taking or proposes to take with respect thereto. SECTION 6.02. Acceleration. If an Event of Default (other than an Event of Default specified in Section 6.01(6) or (7) with respect to the Company or BCC) occurs and is continuing, the Trustee by notice to the Company and BCC, or the Holders of at least 25% in aggregate principal amount, in the case of the Senior Notes, or aggregate principal amount at maturity, in the case of the Senior Discount Notes, of the Securities of any series then outstanding by notice to the Company, BCC and the Trustee, may declare the principal or Accreted Value of, as applicable, and accrued and unpaid interest on all the Securities of that series to be due and payable. Upon such a declaration, such principal or Accreted Value, as applicable, and interest shall be due and payable immediately. If an Event of Default specified in Section 6.01(6) or (7) with respect to the Company or BCC occurs, the principal or Accreted Value of, as applicable, and accrued and unpaid interest on all the Securities shall, automatically and without any action by the Trustee or any Holder, become and be immediately due and payable. The Holders of a majority in aggregate principal amount, in the case of the Senior Notes, or aggregate principal amount at maturity, in the case of the Senior Discount Notes, of the outstanding Securities of a series by notice to the Trustee and the Company may rescind any declaration of acceleration 85 if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or Accreted Value, as applicable, or interest that has become due solely because of the acceleration. No such rescission shall affect any subsequent Default or impair any right consequent thereto. SECTION 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal or Accreted Value of, as applicable, or interest on the Securities of that series or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in aggregate principal amount, in the case of the Senior Notes, or aggregate principal amount at maturity, in the case of the Senior Discount Notes, of the Securities of a series then outstanding by notice to the Trustee may waive an existing Default and its consequences except (i) a Default in the payment of the principal or Accreted Value of, as applicable, or interest on a Security or (ii) a Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Securityholder affected. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. SECTION 6.05. Control by Majority. The Holders of a majority in aggregate principal amount, in the case of the Senior Notes, or aggregate principal amount at maturity, in the case of the Senior Discount Notes, of the Securities of a series then outstanding may direct the time, method and place of conducting any proceeding for any remedy available 86 to the Trustee or of exercising any trust or power conferred on the Trustee with respect to the Securities of that series. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Section 7.01, that the Trustee determines is unduly prejudicial to the rights of other Securityholders or would involve the Trustee in personal liability; provided, however, that subject to Section 315 of the TIA, the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. Prior to taking any action hereunder, the Trustee shall be entitled, in accordance with Section 6.06(2), to reasonable indemnification against all losses and expenses caused by taking or not taking such action. SECTION 6.06. Limitation on Suits. A Securityholder may not pursue any remedy with respect to this Indenture or the Securities unless: (1) such Holder shall have previously given to the Trustee written notice of a continuing Event of Default; (2) the Holders of at least 25% in aggregate principal amount, in the case of the Senior Notes, or aggregate principal amount at maturity, in the case of the Senior Discount Notes, of a series then outstanding shall have made a written request, and such Holder of or Holders shall have offered reasonable indemnity, to the Trustee to pursue such proceeding as trustee; and (3) the Trustee has failed to institute such proceeding and has not received from the Holders of at least a majority in aggregate principal amount or aggregate principal amount at maturity, as applicable, of the Securities of a series outstanding a direction inconsistent with such request, within 60 days after such notice, request and offer. The foregoing limitations on the pursuit of remedies by a Securityholder shall not apply to a suit instituted by a Holder of Securities for the enforcement of payment of the principal or Accreted Value of, as applicable, or interest on such Security on or after the applicable due date specified in such Security. A 87 Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over another Securityholder. SECTION 6.07. Rights of Holders To Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal or Accreted Value of, as applicable, and interest on the Securities held by such Holder, on or after the respective due dates expressed in the Securities, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. Collection Suit by Trustee. If an Event of Default specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company and BCC for the whole amount then due and owing (together with interest on any unpaid interest to the extent lawful) and the amounts provided for in Section 7.07. SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Securityholders allowed in any judicial proceedings relative to the Company, BCC, their respective creditors or their respective property and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.07. SECTION 6.10. Priorities. If the Trustee collects any money or property pursuant to this Article VI with respect to the Securities of a series, it shall pay out the money or property in the following order: 88 FIRST: to the Trustee for amounts due under Section 7.07; SECOND: to Securityholders for amounts due and unpaid on the Securities of that series for principal or Accreted Value, as applicable, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal or Accreted Value as applicable, and interest, respectively; and THIRD: to the Company and BCC. The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section. At least 15 days before such record date, the Company and BCC shall mail to each Securityholder of the applicable series and the Trustee a notice that states the record date, the payment date and amount to be paid. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in aggregate principal amount, in the case of the Senior Notes, or aggregate principal amount at maturity, in the case of the Senior Discount Notes, of a series of the Securities. SECTION 6.12. Waiver of Stay or Extension Laws. Each of the Company and BCC (to the extent it may lawfully do so) shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and each of the Company and BCC (to the extent that it may lawfully do so) 89 hereby expressly waives all benefit or advantage of any such law, and shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE VII Trustee SECTION 7.01. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs. (b) Except during the continuance of an Event of Default: (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that: (1) this paragraph does not limit the effect of paragraph (b) of this Section; (2) the Trustee shall not be liable for any error 90 of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section. (e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company and BCC. (f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers. (h) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section and to the provisions of the TIA and the provisions of this Article VII shall apply to the Trustee in its role as Registrar, Paying Agent and Security Custodian. (i) The Trustee shall not be deemed to have notice of a Default or an Event of Default unless (a) the Trustee has received written notice thereof from the Company, BCC or any Holder or (b) a Trust Officer shall have actual knowledge thereof. SECTION 7.02. Rights of Trustee. Subject to Sections 315(a) through (d) of the TIA: (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by 91 the proper person. The Trustee need not investigate any fact or matter stated in the document. The Trustee may, however, in its discretion make such further inquiry or investigation into such facts or matters as it may see fit and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company and BCC, personally or by agent or attorney. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within its rights or powers; provided, however, that the Trustee's conduct does not constitute wilful misconduct or negligence. (e) The Trustee may consult with counsel, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Securities shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (f) The permissive rights of the Trustee to do things enumerated in this Indenture shall not be construed as a duty unless so specified herein. SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company, BCC or their respective Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar or coregistrar may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. 92 SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity, priority or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's or BCC's use of the proceeds from the Securities, and it shall not be responsible for any statement of the Company or BCC in this Indenture or in any document issued in connection with the sale of the Securities or in the Securities other than the Trustee's certificate of authentication. SECTION 7.05. Notice of Defaults. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder notice of the Default or Event of Default within 90 days after it is known to a Trust Officer or written notice of it is received by the Trustee. Except in the case of a Default or Event of Default in payment of principal or Accreted Value of, as applicable, or interest on any Security, the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Securityholders. SECTION 7.06. Reports by Trustee to Holders. As promptly as practicable after each May 15 beginning with May 15, 1999, and in any event prior to July 15 in each year, the Trustee shall mail to each Securityholder a brief report dated as of May 15 each year that complies with TIA Section 313(a), if and to the extent required by such subsection. The Trustee shall also comply with TIA Section 313(b). A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each stock exchange (if any) on which the Securities are listed. Each of the Company and BCC agrees to notify promptly the Trustee whenever the Securities become listed on any stock exchange and of any delisting thereof. SECTION 7.07. Compensation and Indemnity. The Company and BCC shall pay to the Trustee from time to time reasonable compensation for its services. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company and BCC shall 93 reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee's agents, counsel, accountants and experts. The Company and BCC, jointly and severally shall indemnify the Trustee against any and all loss, liability or expense (including reasonable attorneys' fees) incurred by it in connection with the acceptance and administration of this trust and the performance of its duties hereunder. The Trustee shall notify the Company and BCC promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company and BCC shall not relieve the Company or BCC of its obligations hereunder. The Company and BCC shall defend the claim and the Trustee may have separate counsel and the Company and BCC, as applicable shall pay the fees and expenses of such counsel. The Company and BCC need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustee's own wilful misconduct, negligence or bad faith. The Company and BCC need not pay for any settlement made by the Trustee without the Company's or BCC's consent, such consent not to be unreasonably withheld. All indemnifications and releases from liability granted hereunder to the Trustee shall extend to its officers, directors, employees, agents, successors and assigns. To secure the Company's and BCC's payment obligations in this Section, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and interest on particular Securities. The Company's and BCC's payment obligations pursuant to this Section shall survive the resignation or removal of the Trustee and the discharge of this Indenture. When the Trustee incurs expenses after the occurrence of a Default specified in Section 6.01(6) or (7) with respect to the Company or BCC, the expenses are intended to constitute expenses of administration under the Bankruptcy Law. SECTION 7.08. Replacement of Trustee. The 94 Trustee may resign at any time by so notifying the Company and BCC. The Holders of a majority in aggregate principal amount or aggregate principal amount at maturity, as applicable, of the Securities then outstanding may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee. The Company and BCC shall remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise becomes incapable of acting. If the Trustee resigns, is removed by the Company and BCC or by the Holders of a majority in aggregate principal amount or aggregate principal amount at maturity, as applicable, of the Securities then outstanding and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company and BCC shall promptly appoint a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company and BCC. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in aggregate principal amount or principal amount at maturity, as applicable, of the Securities then outstanding may petition any court of competent jurisdiction for the appointment of a 95 successor Trustee. If the Trustee fails to comply with Section 7.10, any Securityholder who has been a bona fide Holder of a Security for at least six months may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding the replacement of the Trustee pursuant to this Section, the Company's and BCC's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. SECTION 7.09. Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation or banking association without any further act shall be the successor Trustee. In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any such successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have. SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of TIA Section 310(a). The Trustee shall have (or, in the case of a corporation included in a bank holding company system, the related bank holding company shall have) a combined capital and surplus of at least $50,000,000 as set forth in its (or its related bank holding company's) most recent published annual report of condition. The Trustee shall comply with TIA Section 310(b), subject to the penultimate paragraph thereof; 96 provided, however, that there shall be excluded from the operation of TIA Section 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company or BCC are outstanding if the requirements for such exclusion set forth in TIA Section 310(b)(1) are met. SECTION 7.11. Preferential Collection of Claims Against Company. The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated. ARTICLE VIII Discharge of Indenture; Defeasance SECTION 8.01. Discharge of Liability on Securities;Defeasance. (a) When (i) the Company and BCC deliver to the Trustee all outstanding Securities (other than Securities replaced pursuant to Section 2.07) for cancelation or (ii) all outstanding Securities have become due and payable, whether at maturity or as a result of the mailing of a notice of redemption pursuant to Article III and the Company or BCC irrevocably deposits with the Trustee funds sufficient to pay at maturity or upon redemption all outstanding Securities, including interest thereon to maturity or such redemption date (other than Securities replaced pursuant to Section 2.07), and if in either case the Company or BCC pays all other sums payable hereunder by the Company or BCC, then this Indenture shall, subject to Section 8.01(c), cease to be of further effect. The Trustee shall acknowledge satisfaction and discharge of this Indenture on demand of the Company and BCC accompanied by an Officers' Certificate and an Opinion of Counsel and at the cost and expense of the Company and BCC. (b) Subject to Sections 8.01(c) and 8.02, the Company or BCC at any time may terminate (i) all of their obligations under the Securities and this Indenture ("legal defeasance option") or (ii) their obligations under Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11 and 4.13 and the operation of Sections 6.01(5), 6.01(6), 6.01(7) and 6.01(8) (but, in the case of 97 Sections 6.01(6) and (7), with respect only to Significant Subsidiaries) and the limitations contained in clause (e) of Section 5.01 ("covenant defeasance option"). The Company and BCC may exercise their legal defeasance option notwithstanding their prior exercise of their covenant defeasance option. If the Company or BCC exercises their legal defeasance option, payment of the Securities may not be accelerated because of an Event of Default. If the Company and BCC exercise their covenant defeasance option, payment of the Securities may not be accelerated because of an Event of Default specified in Sections 6.01(4) (with respect to the covenants of Article IV identified in the immediately preceding paragraph), 6.01(5), 6.01(6), 6.01(7) and 6.01(8) (with respect only to Significant Subsidiaries in the case of Sections 6.01(6) and 6.01(7)) or because of the failure of the Company and BCC to comply with the limitations contained in Section 5.01(a)(v). If the Company and BCC exercise their legal defeasance option or their covenant defeasance option, each Restricted Subsidiary shall be released from all its obligations under this Indenture. Upon satisfaction of the conditions set forth herein and upon request of the Company and BCC, the Trustee shall acknowledge in writing the discharge of those obligations that the Company and BCC terminate. (c) Notwithstanding clauses (a) and (b) above, the Company's and BCC's obligations in Sections 2.04, 2.05, 2.06, 2.07, 7.07, 7.08, 8.05 and 8.06 shall survive until the Securities have been paid in full. Thereafter, the Company's and BCC's obligations in Sections 7.07 and 8.05 shall survive. SECTION 8.02. Conditions to Defeasance. The Company and BCC may exercise its legal defeasance option or its covenant defeasance option only if: (1) the Company or BCC irrevocably deposits in trust with the Trustee money or U.S. Government Obligations for the payment of principal or Accreted Value, as applicable, of and interest on the Securities to maturity or redemption, as the case may be; 98 (2) the Company and BCC deliver to the Trustee a certificate from a nationally recognized firm of independent accountants expressing their opinion that the payments of principal or Accreted Value, as applicable, and interest when due and without reinvestment on the deposited U.S. Government Obligations plus any deposited money without investment will provide cash at such times and in such amounts as will be sufficient to pay principal or Accreted Value, as applicable, and interest when due on all the Securities to maturity or redemption, as the case may be; (3) 123 days pass after the deposit is made and during the 123-day period no Default specified in Section 6.01(6) or (7) with respect to the Company or BCC occurs that is continuing at the end of the period; (4) the deposit does not constitute a default under any other agreement binding on the Company or BCC; (5) the Company and BCC deliver to the Trustee an Opinion of Counsel to the effect that the trust resulting from the deposit does not constitute, or is qualified as, a regulated investment company under the Investment Company Act of 1940; (6) in the case of the legal defeasance option, the Company and BCC shall have delivered to the Trustee an Opinion of Counsel stating that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of this Indenture there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Securityholders will not recognize income, gain or loss for Federal income tax purposes as a result of such 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 had not occurred; (7) in the case of the covenant defeasance option, the Company and BCC shall have delivered to the Trustee an Opinion of Counsel to the effect that the 99 Securityholders will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; and (8) the Company and BCC deliver to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance and discharge of the Securities as contemplated by this Article VIII have been complied with. Before or after a deposit, the Company may make arrangements satisfactory to the Trustee for the redemption of Securities at a future date in accordance with Article III. SECTION 8.03. Application of Trust Money. The Trustee shall hold in trust money or U.S. Government Obligations deposited with it pursuant to this Article VIII. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal of and interest on the Securities. SECTION 8.04. Repayment to Company. Subject to Section 8.02(2), the Trustee and the Paying Agent shall promptly turn over to the Company and BCC upon request any excess money or securities held by them at any time. Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to the Company and BCC upon request any money held by them for the payment of principal or Accreted Value, as applicable, or interest that remains unclaimed for two years, and, thereafter, Securityholders entitled to the money must look to the Company and BCC for payment as general creditors. SECTION 8.05. Indemnity for Government Obligations. The Company and BCC shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Obligations or the principal and interest received on such U.S. Government Obligations. 100 SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with this Article VIII by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's and BCC's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article VIII until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with this Article VIII; provided, however, that if the Company or BCC has made any payment of interest on or principal or Accreted Value, as applicable, of any Securities because of the reinstatement of its obligations, the Company and BCC shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE IX Amendments SECTION 9.01. Without Consent of Holders. The Company, BCC and the Trustee may amend this Indenture or the Securities of any series without notice to or consent of any Securityholder: (1) to cure any ambiguity, omission, defect or inconsistency; (2) to comply with Article V; (3) to provide for uncertificated Securities in addition to or in place of certificated Securities; provided, however, that the uncertificated Securities are issued in registered form for purposes of Section 163(f) of the Internal Revenue Code or in a manner such that the uncertificated Securities are described in Section 163(f)(2)(B) of the Internal Revenue Code; 101 (4) to add Guarantees with respect to the Securities or to secure the Securities or to reflect the release pursuant to the terms of this Indenture of a Restricted Subsidiary from its obligations with respect to a Subsidiary Guarantee; (5) to add to the covenants of the Company and BCC for the benefit of the Holders or to surrender any right or power herein conferred upon the Company or BCC; (6) to comply with any requirements of the SEC in connection with qualifying, or maintaining the qualification of, this Indenture under the TIA; or (7) to make any change that does not adversely affect the rights of any Securityholder. After an amendment under this Section becomes effective, the Company and BCC shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.02. With Consent of Holders. The Company, BCC and the Trustee may amend this Indenture with respect to any series or the Securities of a series without notice to any Securityholder but with the written consent of the Holders of at least a majority in aggregate principal amount or aggregate principal amount at maturity, as applicable, of the Securities of that series then outstanding (including consents obtained in connection with a tender offer or exchange offer for the Securities) affected by such amendment. However, without the consent of each Securityholder affected thereby, an amendment may not: (1) reduce the amount of Securities of any series whose Holders must consent to an amendment; (2) reduce the rate of or extend the time for payment of interest on any Security; (3) reduce the principal or Accreted Value, as applicable, of or extend the Stated Maturity of any 102 Security; (4) make any Security payable in money other than that stated in the Security; (5) impair the right of any Holder to receive payment of principal or Accreted Value, as applicable, of and interest on such Holder's Securities on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder's Securities; (6) subordinate in right of payment, or otherwise subordinate the securities to any other obligation of either the Company or BCC; (7) reduce the amount payable upon the redemption or repurchase of any Security under Article III or Section 4.07 or 4.13, change the time at which any Security may or shall be redeemed in accordance with Article III, or, at any time after a Change of Control or Asset Sale has occurred, change the time at which any Change of Control Offer or Offer to Purchase must be made or at which the Securities must be repurchased pursuant to such Change of Control Offer or Offer to Purchase; (8) make any change in Section 6.04 or 6.07 or the second sentence of this Section; (9) modify any mandatory redemption provisions, if any, of a series of Securities; or (10) release either the Company or BCC from its obligations under this Indenture (other than Article V). It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. After an amendment under this Section becomes effective, the Company and BCC shall mail to Securityholders of each applicable series a notice briefly describing such amendment. The failure to give such notice to all 103 Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.03. Compliance with Trust Indenture Act. Every amendment to this Indenture or the Securities shall comply with the TIA as then in effect. SECTION 9.04. Revocation and Effect of Consents and Waivers. A consent to an amendment or a waiver by a Holder of a Security shall bind the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent or waiver is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder's Security or portion of the Security if the Trustee receives the notice of revocation before the date the amendment or waiver becomes effective. After an amendment or waiver becomes effective, it shall bind every Securityholder. An amendment or waiver becomes effective upon the execution of such amendment or waiver by the Trustee. The Company and BCC may, but shall not be obligated to, fix a record date for the purpose of determining the Securityholders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Securityholders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date. SECTION 9.05. Notation on or Exchange of Securities. If an amendment changes the terms of a Security, the Trustee may require the Holder of the Security to deliver such Security to the Trustee. The Trustee may place an appropriate notation on the Security regarding the changed terms and return such Security to the Holder. Alternatively, if the Company, BCC or the Trustee so 104 determines, the Company and BCC in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment. SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any amendment authorized pursuant to this Article IX if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive, and (subject to Section 7.01) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture. SECTION 9.07. Payment for Consent. None of the Company, BCC or any Affiliate of the Company or BCC shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Securities unless such consideration is offered to be paid to all Holders of all Securities that so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement. ARTICLE X Miscellaneous SECTION 10.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with another provision that is required to be included in this Indenture by the TIA, the required provision shall control. SECTION 10.02. Notices. Any notice or communication shall be in writing and delivered in person or mailed by first-class mail or sent by facsimile (with a hard copy delivered in person or by mail promptly thereafter) and 105 addressed as follows: if to the Company: c/o Bresnan Communications, Inc. 709 Westchester Avenue White Plains, NY 10604 Attention of: General Counsel if to BCC: c/o Bresnan Communications, Inc. 709 Westchester Avenue White Plains, NY 10604 Attention of: General Counsel if to the Trustee: State Street Bank and Trust Company Goodwin Square 225 Asylum Street Hartford, CT 06103 Attention of: Corporate Trust Division The Company, BCC or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Securityholder shall be mailed to the Securityholder at the Securityholder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee 106 receives it. SECTION 10.03. Communication by Holders with Other Holders. Securityholders may communicate pursuant to TIA Section 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, BCC, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). SECTION 10.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company or BCC to the Trustee to take or refrain from taking any action under this Indenture, the Company and BCC shall furnish to the Trustee: (1) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 10.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include: (1) a statement that the individual making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and 107 (4) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with. SECTION 10.06. When Securities Disregarded. In determining whether the Holders of the required principal amount or principal amount at maturity, as applicable, of Securities have concurred in any direction, waiver or consent, Securities owned by the Company, BCC or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or BCC shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities that the Trustee knows are so owned shall be so disregarded. Also, subject to the foregoing, only Securities outstanding at the time shall be considered in any such determination. SECTION 10.07. Rules by Trustee, Paying Agent and Registrar. The Trustee may make reasonable rules for action by or a meeting of Securityholders. The Registrar and the Paying Agent or coregistrar may make reasonable rules for their functions. SECTION 10.08. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of New York, Connecticut and Massachusetts. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected. SECTION 10.09. Governing Law. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. SECTION 10.10. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company or BCC shall not have any liability for any 108 obligations of the Company or BCC under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities. SECTION 10.11. Successors. All agreements of the Company and BCC in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 10.12. Multiple Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. SECTION 10.13. Table of Contents; Headings. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above. BRESNAN COMMUNICATIONS GROUP LLC, by Bresnan Communications Company Limited Partnership, its sole member, by BCI (USA), L.L.C., managing general 109 partner, by Bresnan Communications, Inc., member, by /s/ Jeffery S. DeMond ------------------------------ Name: Jeffery S. DeMond Title: SVP/CFO BRESNAN CAPITAL CORPORATION, by /s/ Jeffery S. DeMond ------------------------------- Name: Jeffery S. DeMond Title: VP STATE STREET BANK AND TRUST COMPANY, as Trustee, by /s/ Cauna M. Silva --------------------------------- Name: Cauna M. Silva Title: Assistant Vice President 110 APPENDIX A PROVISIONS RELATING TO INITIAL SECURITIES AND EXCHANGE SECURITIES 1. Definitions 1.1 Definitions For the purposes of this Appendix A the following terms shall have the meanings indicated below: "Applicable Procedures" means, with respect to any transfer or transaction involving a Temporary Regulation S Global Security or beneficial interest therein, the rules and procedures of the Depository, Euroclear and Cedel for such a Temporary Regulation S Global Security, in each case to the extent applicable to such transaction and as in effect from time to time. "Cedel" means Cedel Bank, S.A., or any successor securities clearing agency. "Definitive Security" means a certificated Initial Security or Exchange Security or Private Exchange Security bearing, if required, the restricted securities legend set forth in Section 2.3(d). "Depository" means The Depository Trust Company, its nominees and their respective successors. "Distribution Compliance Period", with respect to any Securities, means the period of 40 consecutive days beginning on and including the later of (i) the day on which such Securities are first offered to persons other than distributors (as defined in Regulation S under the Securities Act) in reliance on Regulation S and (ii) the issue date with respect to such Securities. "Euroclear" means the Euroclear Clearance System or any successor securities clearing agency. 111 "Exchange Securities" means the Exchange Senior Notes and the Exchange Senior Discount Notes. "Exchange Senior Discount Notes" means the 9 1/4% Senior Discount Notes due 2009 to be issued pursuant to this Indenture in connection with a Registered Exchange Offer pursuant to the Registration Agreement. "Exchange Senior Notes" means the 8% Senior Notes due 2009 to be issued pursuant to this Indenture in connection with a Registered Exchange Offer pursuant to the Registration Agreement. "IAI" means an institutional "accredited investor" as described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "Initial Purchasers" means Salomon Smith Barney Inc., Chase Securities Inc., Morgan Stanley & Co. Incorporated and TD Securities (USA) Inc. "Initial Securities" means the Initial Senior Notes and the Initial Senior Discount Notes. "Initial Senior Discount Notes" means the 9 1/4% Senior Discount Notes due 2009 to be originally issued from time to time, excluding Exchange Senior Discount Notes and Private Exchange Senior Discount Notes, in one or more series as provided for in this Indenture. "Initial Senior Notes" means the 8% Senior Notes due 2009 to be originally issued from time to time, excluding Exchange Senior Notes and Private Exchange Senior Notes, in one or more series as provided for in this Indenture. "Original Securities" means the Original Senior Notes and the Original Senior Discount Notes. "Original Senior Discount Notes" means Initial Senior Discount Notes in the aggregate principal amount at maturity of $275,000,000 ($175,021,000 gross proceeds) issued on February 2, 1999. 112 "Original Senior Notes" means Initial Senior Notes in the aggregate principal amount of $170,000,000 issued on February 2, 1999. "Private Exchange" means the offer by the Company, pursuant to Section 2 of the Registration Agreement dated January 25, 1999, or pursuant to any similar provision of any other Registration Agreement, to issue and deliver to certain purchasers, in exchange for the Initial Securities held by such purchasers as part of their initial distribution, a like aggregate principal amount or aggregate principal amount at maturity, as applicable, of Private Exchange Securities. "Private Exchange Securities" means the Private Exchange Senior Notes and the Private Exchange Senior Discount Notes. "Private Exchange Senior Discount Notes" means the 9 1/4% Senior Discount Notes due 2009 to be issued pursuant to this Indenture in connection with a Private Exchange pursuant to the Registration Agreement. "Private Exchange Senior Notes" means the 8% Senior Notes due 2009 to be issued pursuant to this Indenture in connection with a Private Exchange pursuant to the Registration Agreement. "Purchase Agreement" means the Purchase Agreement dated January 25, 1999, among the Company, BCC, the Parent and the Initial Purchasers relating to the Original Securities, or any similar agreement relating to any future sale of Initial Securities by the Company and BCC. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Registered Exchange Offer" means the offer by the Company, pursuant to the Registration Agreement, to certain Holders of Initial Securities, to issue and deliver to such Holders, in exchange for the Initial Securities, a like aggregate principal amount or aggregate principal amount at maturity, as applicable, of Exchange Securities registered under the Securities Act. "Registration Agreement" means the Registration 113 Rights Agreement dated January 25, 1999, among the Company, BCC and the Initial Purchasers relating to the Original Securities, or any similar agreement relating to any additional Initial Securities. "Rule 144A Securities" means all Initial Securities offered and sold to QIBs in reliance on Rule 144A. "Securities" means the Senior Notes and the Senior Discount Notes. "Securities Act" means the Securities Act of 1933, as amended. "Securities Custodian" means the custodian with respect to a Global Security (as appointed by the Depository) or any successor person thereto, who shall initially be the Trustee. "Senior Discount Notes" means the Initial Senior Discount Notes, the Exchange Senior Discount Notes and the Private Exchange Senior Discount Notes, treated as a single class. "Senior Notes" means the Initial Senior Notes, the Exchange Senior Notes and the Private Exchange Senior Notes, treated as a single class. "Shelf Registration Statement" means a registration statement issued by the Company in connection with the offer and sale of Initial Securities or Private Exchange Securities pursuant to the Registration Agreement. "Transfer Restricted Securities" means Definitive Securities and any other Securities that bear or are required to bear the legend set forth in Section 2.3(d) hereto. 1.2 Other Definitions Defined in TermSection: "Agent Members" 2.1(b) "Global Security" 2.1(a) 114 "IAI Global Security" 2.1(a) "Regulation S" 2.1 "Rule 144A" 2.1 "Rule 144A Global Security" 2.1(a) "Permanent Regulation S Global Security" 2.1(a) "Temporary Regulation S Global Security 2.1(b) 2. The Securities 2.1 Form and Dating The Initial Securities will be offered and sold by the Company, from time to time, pursuant to one or more Purchase Agreements. Initial Securities not issued pursuant to an offering registered under the Securities Act will be resold initially only to QIBs in reliance on Rule 144A under the Securities Act ("Rule 144A") and in reliance on Regulation S under the Securities Act ("Regulation S"). Initial Securities may thereafter be transferred to, among others, QIBs, non-U.S. purchasers in reliance on Regulation S and IAIs under Rule 501(a)(1), (2), (3) or (7) under the Securities Act, subject to the restrictions on transfers set forth herein. (a) Global Securities. Initial Securities initially resold pursuant to Rule 144A shall be issued initially in the form of one or more permanent global Securities in definitive, fully registered form (collectively, the "Rule 144A Global Security"), Initial Securities initially resold pursuant to Regulation S shall be issued initially in the form of one or more temporary global securities (collectively, the "Temporary Regulation S Global Security") and, subject to Section 2.4 hereof, Initial Securities transferred subsequent to the initial resale thereof to IAIs shall be issued initially in the form of one or more permanent global securities in definitive, fully registered form (collectively, the "IAI Global Security"), in each case without interest coupons and with the global securities legend and restricted securities legend set forth in Exhibit 1 hereto, which shall be deposited on behalf of the purchasers of the Initial Securities represented thereby with the Securities Custodian, and registered in the name of the Depository or a nominee of the Depository, duly executed by the Company and authenticated by the Trustee as provided in this Indenture. 115 Beneficial ownership interests in the Temporary Regulation S Global Security will not be exchangeable for interests in the Rule 144A Global Security, a permanent global security (the "Permanent Regulation S Global Security"), or any other Security without a legend containing restrictions on transfer of such Security prior to the expiration of the Distribution Compliance Period and then only upon certification in form reasonably satisfactory to the Trustee that beneficial ownership interests in such Temporary Regulation S Global Security are owned either by non-U.S. persons or U.S. persons who purchased such interests in a transaction that did not require registration under the Securities Act. The Rule 144A Global Security, Temporary Regulation S Global Security, IAI Global Security and Permanent Regulation S Global Security are collectively referred to herein as "Global Securities." The aggregate principal amount in the case of the Senior Notes or principal amount at maturity in the case of the Senior Discount Notes of the Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depository or its nominee as hereinafter provided. (b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a Global Security deposited with or on behalf of the Depository. The Company and BCC shall execute and the Trustee shall, in accordance with this Section 2.1(b) and pursuant to an order of the Company and BCC, authenticate and deliver initially one or more Global Securities that (a) shall be registered in the name of the Depository for such Global Security or Global Securities or the nominee of such Depository and (b) shall be delivered by the Trustee to such Depository or pursuant to such Depository's instructions or held by the Trustee as Securities Custodian. Members of, or participants in, the Depository ("Agent Members") shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depository or by the Trustee as Securities Custodian or under such Global Security, and the Depository may be treated by the Company, BCC, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Security for all purposes whatsoever. 116 Notwithstanding the foregoing, nothing herein shall prevent the Company, BCC, the Trustee or any agent of the Company, BCC or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices of such Depository governing the exercise of the rights of a holder of a beneficial interest in any Global Security. (c) Definitive Securities. Except as provided in Section 2.3 or 2.4, owners of beneficial interests in Global Securities will not be entitled to receive physical delivery of certificated Securities. 2.2 Authentication. The Trustee shall authenticate and deliver: (1) Original Senior Notes for original issue in an aggregate principal amount of $170,000,000, (2) Original Senior Discount Notes for original issue in an aggregate principal amount at maturity of $275,000,000 ($175,021,000 aggregate gross proceeds), (3) additional Initial Senior Notes, if and when issued, in an aggregate principal amount of up to $80,000,000, (4) additional Initial Senior Discount Notes, if and when issued, in an aggregate principal amount at maturity yielding gross proceeds of up to $24,979,000, (5) the Exchange Senior Notes or Private Exchange Senior Notes for issue only in a Registered Exchange Offer or Private Exchange, respectively, pursuant to the Registration Agreement, for a like principal amount of Initial Senior Notes or Private Exchange Senior Notes, as applicable, in each case upon a written order of the Company and BCC signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of each of the Company and BCC and (6) the Exchange Senior Discount Notes or Private Exchange Senior Discount Notes for issue only in a Registered Exchange Offer or Private Exchange, respectively, pursuant to the Registration Agreement, for a like principal amount at maturity of Initial Senior Discount Notes or Private Exchange Senior Discount Notes, as applicable, in each case upon a written order of the Company and BCC signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of each of the Company and BCC. Such orders shall specify the amount of the Securities to be authenticated and the date on which the original issue of Securities is to be authenticated and whether the Securities are to be Initial 117 Securities, Exchange Securities or Private Exchange Securities. The aggregate principal amount of Senior Notes outstanding at any time may not exceed $250,000,000 and the aggregate principal amount at maturity of Senior Discount Notes outstanding may not yield aggregate gross proceeds (measured at the time of original issuance) in excess of $200,000,000, in each case except as provided in Section 2.08 of this Indenture. 2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive Securities. When Definitive Securities are presented to the Registrar or a coregistrar with a request: (x) to register the transfer of such Definitive Securities; or (y) to exchange such Definitive Securities for an equal principal amount or principal amount at maturity, as applicable, of Definitive Securities of other authorized denominations, the Registrar or coregistrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Definitive Securities surrendered for transfer or exchange: (i) shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company, BCC and the Registrar or co-registrar, duly executed by the Holder thereof or his attorney duly authorized in writing; and (ii) if such Definitive Securities bear a restricted securities legend, they are being transferred or exchanged pursuant to an effective registration statement under the Securities Act or pursuant to clause (A), (B) or (C) below, and are accompanied by the following additional information and documents, as applicable: (A) if such Definitive Securities are being delivered to the Registrar by a Holder for registration in the name of such Holder, without 118 transfer, a certification from such Holder to that effect; or (B) if such Definitive Securities are being transferred to the Company and BCC, a certification to that effect; or (C) if such Definitive Securities are being transferred pursuant to an exemption from registration in accordance with Rule 144 under the Securities Act, (i) a certification to that effect and (ii) if the Company and BCC so requests, an opinion of counsel or other evidence reasonably satisfactory to it as to the compliance with the restrictions set forth in the legend set forth in Section 2.3(d)(i). (b) Transfer and Exchange of Global Securities. (i) The transfer and exchange of Global Securities or beneficial interests therein shall be effected through the Depository, in accordance with this Indenture (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depository therefor. A transferor of a beneficial interest in a Global Security shall deliver a written order given in accordance with the Depository's procedures containing information regarding the participant account of the Depository to be credited with a beneficial interest in the Global Security and such account shall be credited in accordance with such instructions with a beneficial interest in the Global Security and the account of the Person making the transfer shall be debited by an amount equal to the beneficial interest in the Global Security being transferred. In the case of a transfer of a beneficial interest in a Global Security to an IAI, the transferee must furnish a signed letter to the Trustee containing certain representations and agreements (the form of which letter can be obtained from the Trustee, the Company or BCC and is attached as Exhibit B). (ii) If the proposed transfer is a transfer of a beneficial interest in one Global Security to a 119 beneficial interest in another Global Security, the Registrar shall reflect on its books and records the date and an increase in the principal amount or principal amount at maturity, as applicable, of the Global Security to which such interest is being transferred in an amount equal to the principal amount or principal amount at maturity, as applicable, of the interest to be so transferred, and the Registrar shall reflect on its books and records the date and a corresponding decrease in the principal amount or principal amount at maturity, as applicable, of Global Security from which such interest is being transferred. (iii) Notwithstanding any other provisions of this Appendix A (other than the provisions set forth in Section 2.4), a Global Security may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. (iv) In the event that a Global Security is exchanged for Securities in definitive registered form pursuant to Section 2.4 prior to the consummation of a Registered Exchange Offer or the effectiveness of a Shelf Registration Statement with respect to such Securities, such Securities may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of this Section 2.3 (including the certification requirements set forth on the reverse of the Initial Securities intended to ensure that such transfers comply with Rule 144A, Regulation S or such other applicable exemption from registration under the Securities Act, as the case may be) and such other procedures as may from time to time be adopted by the Company. (c) Restrictions on Transfer of Temporary Regulation S Global Securities. During the Distribution Compliance Period, beneficial ownership interests in Temporary Regulation S Global Securities may only be sold, pledged or transferred through Euroclear or Cedel in accordance with the Applicable Procedures and only (i) to the Company and BCC, (ii) so long as such security is 120 eligible for resale pursuant to Rule 144A, to a person whom the selling holder reasonably believes is a QIB that purchases for its own account or for the account of a QIB to whom notice is given that the resale, pledge or transfer is being made in reliance on Rule 144A, (iii) in an offshore transaction in accordance with Regulation S, or (iv) pursuant to an exemption from registration under the Securities Act provided by Rule 144 (if applicable) under the Securities Act, in each case in accordance with any applicable securities laws of any state of the United States. During the Distribution Compliance Period, interests in the Temporary Regulation S Global Security may not be transferred to institutions that are IAIs (but not QIBs). (d) Legend. (i) Except as permitted by the following paragraphs (ii), (iii) and (iv), each certificate evidencing the Global Securities and the Definitive Securities (and all Securities issued in exchange therefor or in substitution thereof) shall bear a legend in substantially the following form: "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY AND BCC THAT THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF THE ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE COMPANY OR BCC AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE COMPANY AND BCC, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (3) IN A 121 TRANSACTION COMPLYING WITH THE PROVISIONS OF RULE 903 OR 904 UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (4) TO AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a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b)(3) OF REGULATION S UNDER THE SECURITIES ACT)), (5) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT, OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES THAT IT WILL FURNISH TO THE COMPANY, BCC AND THE TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY AND BCC THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT AND THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (k)(2)(i) OF RULE 902 UNDER) REGULATION S 122 UNDER THE SECURITIES ACT." Each Definitive Security will also bear the following additional legend: "IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS." (ii) Upon any sale or transfer of a Transfer Restricted Security (including any Transfer Restricted Security represented by a Global Security) pursuant to Rule 144 under the Securities Act: (A) in the case of any Transfer Restricted Security that is a Definitive Security, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a Definitive Security that does not bear the legends set forth above and rescind any restriction on the transfer of such Transfer Restricted Security; and (B) in the case of any Transfer Restricted Security that is represented by a Global Security, the Registrar shall permit the beneficial owner thereof to exchange such Transfer Restricted Security for a beneficial interest in a Global Security that does not bear the legends set forth above and rescind any restriction on the transfer of such Transfer Restricted Security, in either case, if the Holder certifies in writing to the Registrar that its request for such exchange was made in reliance on Rule 144 (such certification to be in the form set forth on the reverse of the Initial Security if the Security is a Definitive Security). (iii) After a transfer of any Initial Securities or Private Exchange Securities, as the case may be, during the period of the effectiveness of a Shelf Registration Statement with respect to such Initial Securities or Private Exchange Securities, all requirements pertaining to restricted legends on such 123 Initial Security or such Private Exchange Security will cease to apply and an Initial Security or Private Exchange Security, as the case may be, in global form without restricted legends will be available to the transferee of the beneficial interests of such Initial Securities or Private Exchange Securities. Upon the occurrence of any of the circumstances described in this paragraph, the Company and BCC will deliver an Officers' Certificate to the Trustee instructing the Trustee to issue Securities without restricted legends. (iv) Upon the consummation of a Registered Exchange Offer with respect to the Initial Securities pursuant to which certain Holders of such Initial Securities are offered Exchange Securities in exchange for their Initial Securities, Exchange Securities in global form without restricted legends will be available to Holders or beneficial owners that exchange such Initial Securities (or beneficial interests therein) in such Registered Exchange Offer. Upon the occurrence of any of the circumstances described in this paragraph, the Company and BCC will deliver an Officers' Certificate to the Trustee instructing the Trustee to issue Securities without restricted legends. (e) Cancelation or Adjustment of Global Security. At such time as all beneficial interests in a Global Security have either been exchanged for Definitive Securities, redeemed, repurchased or canceled, such Global Security shall be returned by the Depository to the Trustee for cancelation or retained and canceled by the Trustee. At any time prior to such cancelation, if any beneficial interest in a Global Security is exchanged for Definitive Securities, redeemed, repurchased or canceled, the principal amount or principal amount at maturity, as applicable, of Securities represented by such Global Security shall be reduced and an adjustment shall be made on the books and records of the Trustee (if it is then the Securities Custodian for such Global Security) with respect to such Global Security, by the Trustee or the Securities Custodian, to reflect such reduction. (f) Obligations with Respect to Transfers and Exchanges of Securities. 124 (i) To permit registrations of transfers and exchanges, the Company and BCC shall execute and the Trustee shall authenticate Definitive Securities and Global Securities at the Registrar's or co-registrar's request. (ii) No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charge payable upon exchange or transfer pursuant to Sections 3.06, 4.08 and 9.05 of this Indenture). (iii) The Registrar or co-registrar shall not be required to register the transfer of or exchange of any Security for a period beginning 15 days before the mailing of a notice of redemption or an offer to repurchase Securities or 15 days before an interest payment date. (iv) Prior to the due presentation for registration of transfer of any Security, the Company, BCC, the Trustee, the Paying Agent, the Registrar or any coregistrar may deem and treat the person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Company, BCC, the Trustee, the Paying Agent, the Registrar or any coregistrar shall be affected by notice to the contrary. (v) All Securities issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange. (g) No Obligation of the Trustee. (i) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global 125 Security, a member of, or a participant in the Depository or any other Person with respect to the accuracy of the records of the Depository or its nominee or of any participant or member thereof, with respect to any ownership interest in the Securities or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depository) of any notice (including any notice of redemption or repurchase) or the payment of any amount, under or with respect to such Securities. All notices and communications to be given to the Holders and all payments to be made to Holders under the Securities shall be given or made only to the registered Holders (which shall be the Depository or its nominee in the case of a Global Security). The rights of beneficial owners in any Global Security shall be exercised only through the Depository subject to the applicable rules and procedures of the Depository. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depository with respect to its members, participants and any beneficial owners. (ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Depository participants, members or beneficial owners in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. 2.4 Certificated Securities (a) A Global Security deposited with the Depository or with the Trustee as Securities Custodian pursuant to Section 2.1 shall be transferred to the beneficial owners thereof in the form of Definitive Securities in an aggregate principal amount or principal amount at maturity, as applicable, equal to the principal amount or principal amount at maturity, as applicable, of 126 such Global Security, in exchange for such Global Security only if such transfer complies with Section 2.3 and (i) the Depository notifies the Company and BCC that it is unwilling or unable to continue as a Depository for such Global Security or if at any time the Depository ceases to be a "clearing agency" registered under the Exchange Act, and a successor depositary is not appointed by the Company and BCC within 90 days of such notice, or (ii) a Default or an Event of Default has occurred and is continuing or (iii) the Company and BCC, in their sole discretion, notify the Trustee in writing that they elect to cause the issuance of Definitive Securities under this Indenture. (b) Any Global Security that is transferable to the beneficial owners thereof pursuant to this Section 2.4 shall be surrendered by the Depository to the Trustee, to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Security, an equal aggregate principal amount or principal amount at maturity, as applicable, of Definitive Securities of authorized denominations. Definitive Securities issued in exchange for any portion of a Global Security transferred pursuant to this Section shall be executed, authenticated and delivered only in denominations of $1,000 and any integral multiple thereof and registered in such names as the Depository shall direct. Any Definitive Security delivered in exchange for an interest in the Global Security shall, except as otherwise provided by Section 2.3(d), bear the restricted securities legend set forth in Exhibit 1 hereto. (c) The registered Holder of a Global Security may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action that a Holder is entitled to take under this Indenture or the Securities. (d) In the event of the occurrence of any of the events specified in Section 2.4(a)(i), (ii) or (iii), the Company and BCC will promptly make available to the Trustee a reasonable supply of Definitive Securities in definitive, fully registered form without interest coupons. 127 EXHIBIT 1 to APPENDIX A [FORM OF FACE OF INITIAL SECURITY] [Global Securities Legend] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY, BCC OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. [Restricted Securities Legend] THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY AND BCC THAT THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF THE ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE COMPANY OR BCC AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE COMPANY AND BCC, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A 128 UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (3) IN A TRANSACTION COMPLYING WITH THE PROVISIONS OF RULE 903 OR 904 UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (4) TO AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a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b)(3) OF REGULATION S UNDER THE SECURITIES ACT)), (5) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT, OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES THAT IT WILL FURNISH TO THE COMPANY, BCC AND THE TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY AND BCC THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) 129 UNDER THE SECURITIES ACT AND THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (k)(2)(i) OF RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT. [Temporary Regulation S Global Security Legend] BENEFICIAL OWNERSHIP INTERESTS IN THIS TEMPORARY REGULATION S GLOBAL NOTE WILL NOT BE EXCHANGEABLE FOR INTERESTS IN THE RULE 144A GLOBAL NOTE OR THE PERMANENT REGULATION S GLOBAL NOTE OR ANY OTHER NOTE REPRESENTING AN INTEREST IN THE NOTES REPRESENTED HEREBY WHICH DO NOT CONTAIN A LEGEND CONTAINING RESTRICTIONS ON TRANSFER, UNTIL THE EXPIRATION OF THE "40-DAY DISTRIBUTION COMPLIANCE PERIOD" (WITHIN THE MEANING OF RULE 903(b)(3) OF REGULATION S UNDER THE SECURITIES ACT) AND THEN ONLY UPON CERTIFICATION IN FORM REASONABLY SATISFACTORY TO THE TRUSTEE THAT SUCH BENEFICIAL INTERESTS ARE OWNED EITHER BY NON-U.S. PERSONS OR U.S. PERSONS WHO PURCHASED SUCH INTERESTS IN A TRANSACTION THAT DID NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT. DURING SUCH 40-DAY RESTRICTED PERIOD, BENEFICIAL OWNERSHIP INTERESTS IN THIS TEMPORARY REGULATION S GLOBAL NOTE MAY ONLY BE SOLD, PLEDGED OR TRANSFERRED THROUGH THE EUROCLEAR SYSTEM OR CEDEL S.A. AND ONLY (A) TO THE COMPANY, BCC OR ANY SUBSIDIARY OF THE COMPANY OR BCC, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT OR (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE). DURING SUCH 40-DAY RESTRICTED PERIOD, INTERESTS IN THIS TEMPORARY REGULATION S GLOBAL NOTE MAY NOT BE TRANSFERRED TO INSTITUTIONS THAT ARE "ACCREDITED INVESTORS" AS DEFINED IN RULE 501(a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o. Up to $ 8% Senior Note due 2009 CUSIP No. ______ Bresnan Communications Group LLC, a Delaware limited liability company (the "Company"), and Bresnan Capital Corporation, a Delaware corporation ("BCC"), promise to pay to Cede & Co., or registered assigns, the principal sum as set forth on the Schedule of Increases or Decreases annexed hereto on February 1, 2009. Interest Payment Dates: February 1 and August 1. Record Dates: January 15 and July 15. 2 Additional provisions of this Senior Note are set forth on the other side of this Senior Note. IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed. BRESNAN COMMUNICATIONS GROUP LLC, by Bresnan Communications Company Limited Partnership, its sole member by BCI (USA) L.L.C., managing general partner by Bresnan Communications, Inc., managing member by_______________________________ Name: Title: by_______________________________ Name: Title: BRESNAN CAPITAL CORPORATION, by_______________________________ Name: Title: by_______________________________ Name: 3 Title: 4 TRUSTEE'S CERTIFICATE OF AUTHENTICATION Dated: STATE STREET BANK AND TRUST COMPANY, as Trustee, certifies that this is one of the Securities referred to in the Indenture. By: _________________________ Authorized Signatory 5 [FORM OF REVERSE SIDE OF INITIAL SENIOR NOTE] 8% Senior Note due 2009 1. Interest (a) Bresnan Communications Group LLC, a Delaware limited liability company (such limited liability company, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), and Bresnan Capital Corporation, a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called "BCC") promise to pay interest on the principal amount of this Senior Note at the rate per annum shown above. The Company and BCC will pay interest semiannually on February 1 and August 1 of each year. Interest on the Senior Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from February 2, 1999. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. The Company and BCC shall pay interest on overdue principal at the rate borne by the Senior Notes plus 1% per annum, and it shall pay interest on overdue installments of interest at the rate borne by the Senior Notes to the extent lawful. (b) Special Interest. The holder of this Senior Note is entitled to the benefits of a Registration Agreement, dated as of January 25, 1999, among the Company, BCC and the Initial Purchasers named therein (the "Registration Agreement"). Capitalized terms used in this paragraph (b) but not defined herein have the meanings assigned to them in the Registration Agreement. In the event that (i) the Exchange Offer Registration Statement has not been filed with the Commission on or prior to the 120th day following the date of the original issuance of the Senior Notes or the Shelf Registration Statement is not filed on or prior to the 60th day following the date on which an obligation to file a Shelf Registration Statement arose, (ii) the Exchange Offer Registration Statement has not been declared effective on or prior to the 180th day following the date of the original issuance of the Senior Notes, (iii) the Registered Exchange Offer has not been consummated on or prior to the later of the 45th day after 6 the date on which the Exchange Offer Registration Statement was declared effective or the 210th day following the date of the original issuance of the Senior Notes or the Shelf Registration Statement has not been declared effective on or prior to the 120th day following the date on which the obligation to file the Shelf Registration Statement arose, or (iv) after the Shelf Registration Statement has been declared effective, such Registration Statement thereafter ceases to be effective or usable in connection with resales of the Senior Notes at any time that the Company is obligated to maintain the effectiveness thereof pursuant to the Registration Agreement (each such event referred to in clauses (i) through (iv) above being referred to herein as a "Registration Default"), interest (the "Special Interest") shall accrue (in addition to stated interest on the Senior Notes) from and including the date on which the first such Registration Default shall occur to but excluding the date on which all Registration Defaults have been cured, at a rate per annum equal to 0.25% of the principal amount of the Senior Notes; provided, however, that such rate per annum shall increase by 0.25% per annum from and including the 91st day after the first such Registration Default (and each successive 91st day thereafter) unless and until all Registration Defaults have been cured; provided further, however, that in no event shall the Special Interest accrue at a rate in excess of 1.00% per annum. The Special Interest will be payable in cash semiannually in arrears each February 1 and August 1. 2. Method of Payment The Company and BCC will pay interest on the Senior Notes (except defaulted interest) to the Persons who are registered holders of Senior Notes at the close of business on the January 15 or July 15 next preceding the interest payment date even if Senior Notes are canceled after the record date and on or before the interest payment date. Holders must surrender Senior Notes to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States of America that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Senior Notes represented by a Global Security (including principal, premium and interest) will be made by wire transfer of immediately available funds to the accounts 7 specified by The Depository Trust Company. The Company will make all payments in respect of a certificated Senior Note (including principal, premium and interest), by mailing a check to the registered address of each Holder thereof; provided, however, that payments on the Senior Notes may also be made, in the case of a Holder of at least $1,000,000 aggregate principal amount of Senior Notes, by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion). 3. Paying Agent and Registrar Initially, State Street Bank and Trust Company, a Massachusetts trust company (the "Trustee"), will act as Paying Agent and Registrar. The Company and BCC may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company and BCC or any of the Company's domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. Indenture The Company and BCC issued the Senior Notes under an Indenture dated as of February 2, 1999 (the "Indenture"), among the Company, BCC and the Trustee. The terms of the Senior Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Senior Notes are subject to all such terms, and Securityholders are referred to the Indenture and the TIA for a statement of those terms. The Senior Notes are senior unsecured obligations of the Company and BCC limited to $250,000,000 aggregate principal amount at any one time outstanding (subject to Sections 2.01 and 2.08 of the Indenture). This Senior Note is one of the Original Senior Notes referred to in the 8 Indenture issued in an aggregate principal amount of $170,000,000. The Senior Notes include the Original Senior Notes, up to an aggregate principal amount of $80,000,000 additional Initial Senior Notes that may be issued under the Indenture, and any Exchange Senior Notes issued in exchange for Initial Senior Notes. The Original Senior Notes, such additional Initial Senior Notes and the Exchange Senior Notes are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the ability of the Company and its Restricted Subsidiaries to, among other things, make certain Investments and other Restricted Payments, pay dividends and other distributions, incur indebtedness, enter into consensual restrictions upon the payment of certain dividends and distributions by such Restricted Subsidiaries, enter into or permit certain transactions with Affiliates, create or incur Liens and make Asset Dispositions. The Indenture also imposes limitations on the ability of the Company and BCC to consolidate or merge with or into any other Person or sell, transfer, assign, lease, convey or otherwise dispose of all or substantially all of the Property of the Company and BCC. These limitations are subject to significant exceptions, and most would cease to be effective while the Senior Notes have an Investment Grade Rating. 5. Redemption (a) Except as set forth below, the Senior Notes may not be redeemed prior to February 1, 2004. On and after that date, the Company and BCC may redeem the Senior Notes in whole at any time or in part from time to time at the following redemption prices (expressed in percentages of principal amount), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption), if redeemed during the 12-month period beginning on or after February 1 of the years set forth below: Period 2004 2005 9 2006 2007 and thereafter Redemption Price ----- 104.000% 102.667% 101.333% 100.000% 10 Notwithstanding the foregoing, on or prior to February 1, 2002, the Company and BCC may redeem up to 35% of the original aggregate principal amount of the Senior Notes issued with the net cash proceeds to the Company from one or more Equity Offerings, at a redemption price equal to 108.000% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that it on or prior to the date of redemption); provided, however, that after giving effect to any such redemption, at least 65% of the original aggregate principal amount of the Senior Notes remains outstanding. Any such redemption shall be made within 75 days of such Equity Offering. (b) Notwithstanding the foregoing, in the event that the Funding Conditions are not satisfied on or prior to April 30, 1999 or the Contribution Agreement is terminated prior to such date, then the Company and BCC will redeem all the Senior Notes at a redemption price in cash equal to 101% of the aggregate principal amount plus accrued and unpaid interest, if any, to the Mandatory Redemption Date. The "Mandatory Redemption Date" means the earlier of (a) May 14, 1999, in the event that the Funding Conditions are not satisfied by April 30, 1999, and (b) the 15th day (or if such day is not a Business Day, the next following Business Day) following the termination of the Contribution Agreement. The "Funding Conditions" mean the occurrence of the following events: (i) the consummation of the TCI Transactions, as contemplated throughout the Offering Memorandum, in accordance with the terms of the Contribution Agreement (and the related agreements referenced therein); provided that the terms of such transactions and the assets and businesses combined pursuant thereto conform in all material respects to the descriptions thereof contained throughout the Offering Memorandum (subject to any changes contemplated therein), (ii) the funding of the capital contribution by 11 Blackstone in an aggregate amount of not less than $136.5 million, (iii) the conditions to the closing under the Contribution Agreement (and the related agreements referenced therein) shall have been satisfied or waived and (iv) the availability under the New Credit Facility of an aggregate amount of not less than $600.0 million and borrowings thereunder necessary to effect the TCI Transactions as contemplated throughout the Offering Memorandum, provided that the terms of the New Credit Facility conform in all material respects to the descriptions thereof contained throughout the Offering Memorandum. 6. Sinking Fund The Senior Notes are not subject to any sinking fund. 7. Notice of Redemption Notice of optional redemption pursuant to paragraph 5(a) will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date, and notice of mandatory redemption pursuant to paragraph 5(b) will be mailed promptly after the occurrence of the event triggering such redemption but in no event less than 10 days prior to the Mandatory Redemption Date, in each case, to each Holder of Senior Notes to be redeemed at his or her registered address. Senior Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on all Senior Notes (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Senior Notes (or such portions thereof) called for redemption. 8. Repurchase of Senior Notes at the Option of Holders upon Change of Control 12 Upon a Change of Control, any Holder of Senior Notes will have the right, subject to certain conditions specified in the Indenture, to cause the Company to repurchase all or any part of the Senior Notes of such Holder at a purchase price equal to 101% of the principal amount of the Senior Notes to be repurchased plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture. 9. Denominations; Transfer; Exchange The Senior Notes are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Senior Notes in accordance with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Senior Notes selected for redemption (except, in the case of a Senior Note to be redeemed in part, the portion of the Senior Note not to be redeemed) or to transfer or exchange any Senior Notes for a period of 15 days prior to a selection of Senior Notes to be redeemed or 15 days before an interest payment date. 10. Persons Deemed Owners The registered Holder of this Senior Note may be treated as the owner of it for all purposes. 11. Unclaimed Money If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company and BCC at its written request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and BCC and not to the Trustee for payment. 13 12. Discharge and Defeasance Subject to certain conditions, the Company and BCC at any time may terminate some of or all its obligations under the Senior Notes and the Indenture if the Company or BCC deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Senior Notes to redemption or maturity, as the case may be. 13. Amendment, Waiver Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Senior Notes may be amended without prior notice to any Securityholder but with the written consent of the Holders of at least a majority in aggregate principal amount of the outstanding Senior Notes and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of at least a majority in principal amount of the outstanding Senior Notes. Subject to certain exceptions set forth in the Indenture, without the consent of any Holder of Senior Notes, the Company, BCC and the Trustee may amend the Indenture or the Senior Notes (i) to cure any ambiguity, omission, defect or inconsistency; (ii) to comply with Article V of the Indenture; (iii) to provide for uncertificated Senior Notes in addition to or in place of certificated Senior Notes; (iv) to add Guarantees with respect to the Senior Notes; (v) to reflect the release pursuant to the terms of the Indenture of a Restricted Subsidiary from its obligations with respect to a Subsidiary Guarantee; (vi) to secure the Senior Notes; (vii) to add additional covenants or to surrender rights and powers conferred on the Company; (viii) to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA; or (ix) to make any change that does not adversely affect the rights of any Securityholder. 14. Defaults and Remedies If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Senior Notes then outstanding, subject to certain limitations, may declare all the Senior 14 Notes to be immediately due and payable. Certain events of bankruptcy or insolvency are Events of Default and shall result in the Senior Notes being immediately due and payable upon the occurrence of such Events of Default without any further act of the Trustee or any Holder. Holders of Senior Notes may not enforce the Indenture or the Senior Notes except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Senior Notes unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in aggregate principal amount of the Senior Notes then outstanding may direct the Trustee in its exercise of any trust or power under the Indenture. The Holders of a majority in aggregate principal amount of the Senior Notes then outstanding, by written notice to the Company and the Trustee, may rescind any declaration of acceleration and its consequences if the rescission would not conflict with any judgment or decree, and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration. 15. Trustee Dealings with the Company and BCC Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Senior Notes and may otherwise deal with and collect obligations owed to it by the Company, BCC or their respective Affiliates and may otherwise deal with the Company, BCC or their respective Affiliates with the same rights it would have if it were not Trustee. 16. No Recourse Against Others A director, officer, employee or stockholder, as such, of the Company or BCC shall not have any liability for any obligations of the Company or BCC under the Senior Notes or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Senior Note, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Senior Notes. 15 17. Authentication This Senior Note shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Senior Note. 18. Abbreviations Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 19. Governing Law THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 20. CUSIP Numbers Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company and BCC have caused CUSIP numbers to be printed on the Senior Notes and have directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Senior Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. THE COMPANY AND BCC WILL FURNISH TO ANY HOLDER OF SENIOR NOTES UPON WRITTEN REQUEST AND WITHOUT CHARGE TO THE HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE TEXT OF THIS SENIOR NOTE. 16 ASSIGNMENT FORM To assign this Senior Note, fill in the form below: I or we assign and transfer this Senior Note to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Senior Note on the books of the Company. The agent may substitute another to act for him. ____________________________________________________________ Date: ________________ Your Signature: _____________________ ____________________________________________________________ Sign exactly as your name appears on the other side of this Senior Note. In connection with any transfer of any of the Senior Notes evidenced by this certificate occurring prior to the expiration of the period referred to in Rule 144(k) under the Securities Act after the later of the date of original issuance of such Senior Notes and the last date, if any, on which such Senior Notes were owned by the Company, BCC or any Affiliate of the Company or BCC, the undersigned confirms that such Senior Notes are being transferred in accordance with its terms: CHECK ONE BOX BELOW (1) [ ] to the Company and BCC; or (2) [ ] pursuant to an effective registration statement under the Securities Act of 1933; or 17 (3) [ ] to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or (4) [ ] outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act of 1933; or (5) [ ] to an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933) that has furnished to the Trustee a signed letter containing certain representations and agreements (the form of which letter can be obtained from the Trustee, the Company or BCC); or (6) [ ] pursuant to another available exemption from registration provided by Rule 144 under the Securities Act of 1933. Unless one of the boxes is checked, the Trustee will refuse to register any of the Senior Notes evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (4), (5) or (6) is checked, the Trustee may require, prior to registering any such transfer of the Senior Notes, such legal opinions, certifications and other information as the Company and BCC have reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933. ___________________________ Your Signature 18 Signature Guarantee: Date: ______________________ __________________________ Signature must be guaranteed Signature of Signature by a participant in a Guarantee recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee ______________________________________________________________________________ 19 [TO BE ATTACHED TO GLOBAL SECURITIES] SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The initial principal amount of this Global Security is $ . The following increases or decreases in this Global Security have been made:
Date of Amount of decrease Amount of increase Principal Amount Signature of Exchange in Principal in Principal of this Global authorized Amount of this Amount of this Security following signatory of Global Security Global Security such decrease or Trustee or increase Securities Custodian
20 OPTION OF HOLDER TO ELECT PURCHASE IF YOU WANT TO ELECT TO HAVE THIS SENIOR NOTE PURCHASED BY THE COMPANY AND BCC PURSUANT TO SECTION 4.07 (ASSET DISPOSITION) OR 4.13 (CHANGE OF CONTROL) OF THE INDENTURE, CHECK THE BOX: [ ] IF YOU WANT TO ELECT TO HAVE ONLY PART OF THIS SENIOR NOTE PURCHASED BY THE COMPANY AND BCC PURSUANT TO SECTION 4.07 OR 4.13 OF THE INDENTURE, STATE THE AMOUNT: $ DATE: __________________ YOUR SIGNATURE: __________________ (SIGN EXACTLY AS YOUR NAME APPEARS ON THE OTHER SIDE OF THE SENIOR NOTE) SIGNATURE GUARANTEE:_______________________________________ SIGNATURE MUST BE GUARANTEED BY A PARTICIPANT IN A RECOGNIZED SIGNATURE GUARANTY MEDALLION PROGRAM OR OTHER SIGNATURE GUARANTOR ACCEPTABLE TO THE TRUSTEE. EX-4.3 9 FORM OF 144A SENIOR DISCOUNT NOTE 1 EXHIBIT 4.3 [FORM OF FACE OF INITIAL SENIOR DISCOUNT NOTE] No. Up to: $ 9 1/4% Senior Discount Note due 2009 CUSIP No. ______ Bresnan Communications Group LLC, a Delaware limited liability company (the "Company"), and Bresnan Capital Corporation, a Delaware corporation ("BCC"), promise to pay to Cede & Co., or registered assigns, the principal amount at maturity sum as set forth on the Schedule of Increases or Decreases annexed hereto on February 1, 2009. Interest Payment Dates: February 1 and August 1. Record Dates: January 15 and July 15. 2 Additional provisions of this Senior Discount Note are set forth on the other side of this Senior Discount Note. IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed. BRESNAN COMMUNICATIONS GROUP LLC, by Bresnan Communications Company Limited Partnership, its sole member by BCI (USA) L.L.C., managing general partner by Bresnan Communications, Inc., managing member by ______________________________ Name: Title: by ______________________________ Name: Title: BRESNAN CAPITAL CORPORATION, by ______________________________ Name: Title: by ______________________________ Name: 3 Title: [CORPORATE SEAL] TRUSTEE'S CERTIFICATE OF AUTHENTICATION Dated: STATE STREET BANK AND TRUST COMPANY, as Trustee, certifies that this is one of the Securities referred to in the Indenture. by:_________________________ Authorized Signatory 4 [FORM OF REVERSE SIDE OF INITIAL SENIOR DISCOUNT NOTE] 9 1/4% Senior Discount Note due 2009 1. Interest (a) Bresnan Communications Group LLC, a Delaware limited liability company (such limited liability company, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), and Bresnan Capital Corporation, a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called "BCC") promise to, after February 1, 2004, pay interest on the principal amount at maturity of this Senior Discount Note at the rate per annum shown above. The Senior Discount Notes will not accrue cash interest on or prior to February 1, 2004, unless the Company and BCC elect, upon not less than 60 days prior notice, to commence the accrual of cash interest on or after February 1, 2002, in which case the outstanding principal amount at maturity of each Senior Discount Note will on such commencement date be reduced to the Accreted Value of such Senior Discount Note as of such date and cash interest shall be payable with respect to such Senior Discount Note on each February 1 and August 1 thereafter. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. The Company and BCC shall pay interest on overdue Accreted Value at the rate borne by the Senior Discount Notes plus 1% per annum, and it shall pay interest on overdue installments of interest at the rate borne by the Senior Discount Notes to the extent lawful. (b) Special Interest. The holder of this Senior Discount Note is entitled to the benefits of a Registration Agreement, dated as of January 25, 1999, among the Company, BCC and the Initial Purchasers named therein (the "Registration Agreement"). Capitalized terms used in this paragraph (b) but not defined herein have the meanings assigned to them in the Registration Agreement. In the event that (i) the Exchange Offer Registration Statement has not been filed with the Commission on or prior to the 120th day following the date of the original issuance of the Senior Discount Notes or the Shelf Registration Statement is 5 not filed on or prior to the 60th day following the date on which an obligation to file a Shelf Registration Statement arose, (ii) the Exchange Offer Registration Statement has not been declared effective on or prior to the 180th day following the date of the original issuance of the Senior Discount Notes, (iii) the Registered Exchange Offer has not been consummated on or prior to the later of the 45th day after the date on which the Exchange Offer Registration Statement was declared effective or the 210th day following the date of the original issuance of the Senior Discount Notes or the Shelf Registration Statement has not been declared effective on or prior to the 120th day following the date on which the obligation to file the Shelf Registration Statement arose, or (iv) after the Shelf Registration Statement has been declared effective, such Registration Statement thereafter ceases to be effective or usable in connection with resales of the Senior Discount Notes at any time that the Company and BCC are obligated to maintain the effectiveness thereof pursuant to the Registration Agreement (each such event referred to in clauses (i) through (iv) above being referred to herein as a "Registration Default"), interest (the "Special Interest") shall accrue (in addition to stated interest on the Senior Discount Notes) from and including the date on which the first such Registration Default shall occur to but excluding the date on which all Registration Defaults have been cured, at a rate per annum equal to 0.25% of the Accreted Value of the Senior Discount Notes; provided, however, that such rate per annum shall increase by 0.25% per annum from and including the 91st day after the first such Registration Default (and each successive 91st day thereafter) unless and until all Registration Defaults have been cured; provided further, however, that in no event shall the Special Interest accrue at a rate in excess of 1.00% per annum. The Special Interest will be payable in cash semiannually in arrears each February 1 and August 1. 2. Method of Payment The Company and BCC will pay interest on the Senior Discount Notes (except defaulted interest) to the Persons who are registered holders of Senior Discount Notes at the close of business on the January 15 or July 15 next preceding the interest payment date even if Senior Discount Notes are canceled after the record date and on or before 6 the interest payment date. Holders must surrender Senior Discount Notes to a Paying Agent to collect Accreted Value payments. The Company will pay Accreted Value and interest in money of the United States of America that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Senior Discount Notes represented by a Global Security (including Accreted Value, premium and interest) will be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company. The Company will make all payments in respect of a certificated Senior Discount Note (including Accreted Value, premium and interest), by mailing a check to the registered address of each Holder thereof; provided, however, that payments on the Senior Discount Notes may also be made, in the case of a Holder of at least $1,000,000 aggregate principal amount at maturity of Senior Discount Notes, by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion). 3. Paying Agent and Registrar Initially, State Street Bank and Trust Company, a Massachusetts trust company (the "Trustee"), will act as Paying Agent and Registrar. The Company and BCC may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company and BCC or any of the Company's domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. Indenture The Company and BCC issued the Senior Discount Notes under an Indenture dated as of February 2, 1999 (the "Indenture"), among the Company, BCC and the Trustee. The terms of the Senior Discount Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA"). Terms defined in the Indenture and not defined 7 herein have the meanings ascribed thereto in the Indenture. The Senior Discount Notes are subject to all such terms, and Securityholders are referred to the Indenture and the TIA for a statement of those terms. The Senior Discount Notes are senior unsecured obligations of the Company and BCC limited to $200,000,000 aggregate gross proceeds (subject to Sections 2.01 and 2.08 of the Indenture). This Senior Discount Note is one of the Original Senior Discount Notes referred to in the Indenture issued in an aggregate principal amount at maturity of $275,000,000 (aggregate gross proceeds of $175,021,000). The Senior Discount Notes include the Original Senior Discount Notes, up to an aggregate gross proceeds of $24,979,000 additional Initial Senior Discount Notes that may be issued under the Indenture, and any Exchange Senior Discount Notes issued in exchange for Initial Senior Discount Notes. The Original Senior Discount Notes, such additional Initial Senior Discount Notes and the Exchange Senior Discount Notes are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the ability of the Company and its Restricted Subsidiaries to, among other things, make certain Investments and other Restricted Payments, pay dividends and other distributions, incur indebtedness, enter into consensual restrictions upon the payment of certain dividends and distributions by such Restricted Subsidiaries, enter into or permit certain transactions with Affiliates, create or incur Liens and make Asset Dispositions. The Indenture also imposes limitations on the ability of the Company and BCC to consolidate or merge with or into any other Person or sell, transfer, assign, lease, convey or otherwise dispose of all or substantially all of the Property of the Company and BCC. These limitations are subject to significant exceptions, and most would cease to be effective while the Senior Discount Notes have an Investment Grade Rating. 5. Redemption (a) Except as set forth below, the Senior Discount Notes may not be redeemed prior to February 1, 2004. On and after that date, the Company and BCC may redeem the Senior Discount Notes in whole at any time or in part from time to time at the following redemption prices 8 (expressed in percentages of Accreted Value), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption), if redeemed during the 12-month period beginning on or after February 1 of the years set forth below: Period 2004 2005 2006 2007 and thereafter Redemption Price 104.625% 103.083% 101.542% 100.000% 9 Notwithstanding the foregoing, on or prior to February 1, 2002, the Company and BCC may redeem up to 35% of the original aggregate principal amount at maturity of the Senior Discount Notes issued with the net cash proceeds to the Company from one or more Equity Offerings, at a redemption price equal to 109.250% of the Accreted Value thereof, plus accrued and unpaid interest thereon, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that it on or prior to the date of redemption); provided, however, that after giving effect to any such redemption, at least 65% of the original aggregate principal amount at maturity of the Senior Discount Notes remains outstanding. Any such redemption shall be made within 75 days of such Equity Offering. (b) Notwithstanding the foregoing, in the event that the Funding Conditions are not satisfied on or prior to April 30, 1999 or the Contribution Agreement is terminated prior to such date, then the Company and BCC will redeem all the Senior Discount Notes at a redemption price in cash equal to 101% of the aggregate Accreted Value plus accrued and unpaid interest, if any, to the Mandatory Redemption Date. The "Mandatory Redemption Date" means the earlier of (a) May 14, 1999, in the event that the Funding Conditions are not satisfied by April 30, 1999, and (b) the 15th day (or if such day is not a Business Day, the next following Business Day) following the termination of the Contribution Agreement. The "Funding Conditions" mean the occurrence of the following events: (i) the consummation of the TCI Transactions, as contemplated throughout this Offering Memorandum, in accordance with the terms of the Contribution Agreement (and the related agreements referenced therein); provided that the terms of such transactions and the assets and businesses combined pursuant thereto conform in all material respects to the descriptions thereof contained throughout this Offering Memorandum (subject to any changes contemplated therein), 10 (ii) the funding of the capital contribution by Blackstone in an aggregate amount of not less than $136.5 million, (iii) the conditions to the closing under the Contribution Agreement (and the related agreements referenced therein) shall have been satisfied or waived and (iv) the availability under the New Credit Facility of an aggregate amount of not less than $600.0 million and borrowings thereunder necessary to effect the TCI Transactions as contemplated throughout this Offering Memorandum, provided that the terms of the New Credit Facility conform in all material respects to the descriptions thereof contained throughout this Offering Memorandum. 6. Sinking Fund The Senior Discount Notes are not subject to any sinking fund. 7. Notice of Redemption Notice of optional redemption pursuant to paragraph 5(a) will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date, and notice of mandatory redemption pursuant to paragraph 5(b) will be mailed promptly after the occurrence of the event triggering such redemption but in no event less than 10 days prior to the Mandatory Redemption Date, in each case, to each Holder of Senior Discount Notes to be redeemed at his or her registered address. Senior Discount Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued and accreted interest on all Senior Discount Notes (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue and accrete on such Senior Discount Notes (or such portions thereof) called for redemption. 11 8. Repurchase of Securities at the Option of Holders upon Change of Control Upon a Change of Control, any Holder of Senior Discount Notes will have the right, subject to certain conditions specified in the Indenture, to cause the Company to repurchase all or any part of the Senior Discount Notes of such Holder at a purchase price equal to 101% of the Accreted Value of the Senior Discount Notes to be repurchased plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture. 9. Denominations; Transfer; Exchange The Senior Discount Notes are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Senior Discount Notes in accordance with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Senior Discount Notes selected for redemption (except, in the case of a Senior Discount Note to be redeemed in part, the portion of the Senior Discount Note not to be redeemed) or to transfer or exchange any Senior Discount Notes for a period of 15 days prior to a selection of Senior Discount Notes to be redeemed or 15 days before an interest payment date. 10. Persons Deemed Owners The registered Holder of this Senior Discount Note may be treated as the owner of it for all purposes. 11. Unclaimed Money If money for the payment of Accreted Value or interest remains unclaimed for two years, the Trustee or 12 Paying Agent shall pay the money back to the Company and BCC at its written request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and BCC and not to the Trustee for payment. 12. Discharge and Defeasance Subject to certain conditions, the Company and BCC at any time may terminate some of or all its obligations under the Senior Discount Notes and the Indenture if the Company or BCC deposits with the Trustee money or U.S. Government Obligations for the payment of Accreted Value and interest on the Senior Discount Notes to redemption or maturity, as the case may be. 13. Amendment, Waiver Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Senior Discount Notes may be amended without prior notice to any Securityholder but with the written consent of the Holders of at least a majority in aggregate principal at maturity amount of the outstanding Senior Discount Notes and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of at least a majority in principal amount at maturity of the outstanding Senior Discount Notes. Subject to certain exceptions set forth in the Indenture, without the consent of any Holder of Senior Discount Notes, the Company, BCC and the Trustee may amend the Indenture or the Senior Discount Notes (i) to cure any ambiguity, omission, defect or inconsistency; (ii) to comply with Article V of the Indenture; (iii) to provide for uncertificated Senior Discount Notes in addition to or in place of certificated Senior Discount Notes; (iv) to add Guarantees with respect to the Senior Discount Notes; (v) to reflect the release pursuant to the terms of the Indenture of a Restricted Subsidiary from its obligations with respect to a Subsidiary Guarantee; (vi) to secure the Senior Discount Notes; (vii) to add additional covenants or to surrender rights and powers conferred on the Company; (viii) to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA; or (ix) to make any change that does not adversely affect the rights of any Securityholder. 13 14. Defaults and Remedies If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount at maturity of the Senior Discount Notes then outstanding, subject to certain limitations, may declare all the Senior Discount Notes to be immediately due and payable. Certain events of bankruptcy or insolvency are Events of Default and shall result in the Senior Discount Notes being immediately due and payable upon the occurrence of such Events of Default without any further act of the Trustee or any Holder. Holders of Senior Discount Notes may not enforce the Indenture or the Senior Discount Notes except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Senior Discount Notes unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in aggregate principal amount at maturity of the Senior Discount Notes then outstanding may direct the Trustee in its exercise of any trust or power under the Indenture. The Holders of a majority in aggregate principal amount at maturity of the Senior Discount Notes then outstanding, by written notice to the Company and the Trustee, may rescind any declaration of acceleration and its consequences if the rescission would not conflict with any judgment or decree, and if all existing Events of Default have been cured or waived except nonpayment of Accreted Value or interest that has become due solely because of the acceleration. 15. Trustee Dealings with the Company and BCC Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Senior Discount Notes and may otherwise deal with and collect obligations owed to it by the Company, BCC or their respective Affiliates and may otherwise deal with the Company, BCC or their respective Affiliates with the same rights it would have if it were not Trustee. 16. No Recourse Against Others 14 A director, officer, employee or stockholder, as such, of the Company or BCC shall not have any liability for any obligations of the Company or BCC under the Senior Discount Notes or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Senior Discount Note, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Senior Discount Notes. 17. Authentication This Senior Discount Note shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Senior Discount Note. 18. Abbreviations Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 19. Governing Law THIS SENIOR DISCOUNT NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 20. CUSIP Numbers Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company and BCC have caused CUSIP numbers to be printed on the Senior Discount Notes and have directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Senior Discount Notes or as contained in any notice of redemption and reliance may be placed only on the other identification 15 numbers placed thereon. THE COMPANY AND BCC WILL FURNISH TO ANY HOLDER OF SENIOR DISCOUNT NOTES UPON WRITTEN REQUEST AND WITHOUT CHARGE TO THE HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE TEXT OF THIS SENIOR DISCOUNT NOTE. 16 ASSIGNMENT FORM To assign this Senior Discount Note, fill in the form below: I or we assign and transfer this Senior Discount Note to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Senior Discount Note on the books of the Company. The agent may substitute another to act for him. ____________________________________________________________ Date: ________________ Your Signature: _____________________ ____________________________________________________________ Sign exactly as your name appears on the other side of this Senior Discount Note. In connection with any transfer of any of the Senior Discount Notes evidenced by this certificate occurring prior to the expiration of the period referred to in Rule 144(k) under the Securities Act after the later of the date of original issuance of such Senior Discount Notes and the last date, if any, on which such Senior Discount Notes were owned by the Company, BCC or any Affiliate of the Company or BCC, the undersigned confirms that such Senior Discount Notes are being transferred in accordance with its terms: CHECK ONE BOX BELOW (1) [ ] to the Company and BCC; or (2) [ ] pursuant to an effective registration statement under the Securities Act of 1933; or 17 (3) [ ] to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or (4) [ ] outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act of 1933; or (5) [ ] to an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933) that has furnished to the Trustee a signed letter containing certain representations and agreements (the form of which letter can be obtained from the Trustee, the Company or BCC); or (6) [ ] pursuant to another available exemption from registration provided by Rule 144 under the Securities Act of 1933. Unless one of the boxes is checked, the Trustee will refuse to register any of the Senior Discount Notes evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (4), (5) or (6) is checked, the Trustee may require, prior to registering any such transfer of the Senior Discount Notes, such legal opinions, certifications and other information as the Company and BCC have reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933. 18 _________________________ Your Signature Signature Guarantee: Date: ______________________ __________________________ Signature must be guaranteed Signature of Signature by a participant in a Guarantee recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee ____________________________________________________________ 19 [TO BE ATTACHED TO GLOBAL SECURITIES] SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The initial principal amount at maturity of this Global Security is $ . The following increases or decreases in this Global Security have been made:
Date of Amount of decrease Amount of increase Principal Amount Signature of Exchange in Principal in Principal at Maturity of authorized Amount at Maturity Amount at Maturity this Global signatory of of this Global of this Global Security following Trustee or Security Security such decrease or Securities increase Custodian
20 OPTION OF HOLDER TO ELECT PURCHASE IF YOU WANT TO ELECT TO HAVE THIS SENIOR DISCOUNT NOTE PURCHASED BY THE COMPANY AND BCC PURSUANT TO SECTION 4.07 (ASSET DISPOSITION) OR 4.13 (CHANGE OF CONTROL) OF THE INDENTURE, CHECK THE BOX: [ ] IF YOU WANT TO ELECT TO HAVE ONLY PART OF THIS SENIOR DISCOUNT NOTE PURCHASED BY THE COMPANY AND BCC PURSUANT TO SECTION 4.07 OR 4.13 OF THE INDENTURE, STATE THE AMOUNT: $ DATE: __________________ YOUR SIGNATURE: __________________ (SIGN EXACTLY AS YOUR NAME APPEARS ON THE OTHER SIDE OF THE SENIOR DISCOUNT NOTE) SIGNATURE GUARANTEE:_______________________________________ SIGNATURE MUST BE GUARANTEED BY A PARTICIPANT IN A RECOGNIZED SIGNATURE GUARANTY MEDALLION PROGRAM OR OTHER SIGNATURE GUARANTOR ACCEPTABLE TO THE TRUSTEE. EX-4.4 10 FORM OF REGULATION S SENIOR NOTE 1 EXHIBIT 4.4 EXHIBIT A [FORM OF FACE OF EXCHANGE SENIOR NOTE] No. Up to: $ 8% Senior Note due 2009 CUSIP No. ______ Bresnan Communications Group LLC, a Delaware limited liability company (the "Company"), and Bresnan Capital Corporation, a Delaware corporation ("BCC"), promise to pay to Cede & Co., or registered assigns, the principal sum as set forth on the Schedule of Increases or Decreases annexed hereto on February 1, 2009. Interest Payment Dates: February 1 and August 1. Record Dates: January 15 and July 15. 2 Additional provisions of this Senior Note are set forth on the other side of this Senior Note. IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed. BRESNAN COMMUNICATIONS GROUP LLC, by Bresnan Communications Company Limited Partnership, its sole member by BCI (USA) L.L.C., managing general partner by Bresnan Communications, Inc., managing member by ______________________________ Name: Title: by ______________________________ Name: Title: BRESNAN CAPITAL CORPORATION, by ______________________________ Name: Title: by ______________________________ Name: Title: 3 [CORPORATE SEAL] TRUSTEE'S CERTIFICATE OF AUTHENTICATION Dated: STATE STREET BANK AND TRUST COMPANY, as Trustee, certifies that this is one of the Securities referred to in the Indenture. By: _________________________ Authorized Signatory 4 [FORM OF REVERSE SIDE OF EXCHANGE SENIOR NOTE] 8% Senior Note due 2009 1. Interest (a) Bresnan Communications Group LLC, a Delaware limited liability company (such limited liability company, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), and Bresnan Capital Corporation, a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called "BCC") promise to pay interest on the principal amount of this Senior Note at the rate per annum shown above. The Company and BCC will pay interest semiannually on February 1 and August 1 of each year. Interest on the Senior Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from February 2, 1999. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. The Company and BCC shall pay interest on overdue principal at the rate borne by the Senior Notes plus 1% per annum, and it shall pay interest on overdue installments of interest at the rate borne by the Senior Notes to the extent lawful. 2. Method of Payment The Company and BCC will pay interest on the Senior Notes (except defaulted interest) to the Persons who are registered holders of Senior Notes at the close of business on the January 15 or July 15 next preceding the interest payment date even if Senior Notes are canceled after the record date and on or before the interest payment date. Holders must surrender Senior Notes to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States of America that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Senior Notes represented by a Global Security (including principal, premium and interest) will be made by wire 5 transfer of immediately available funds to the accounts specified by The Depository Trust Company. The Company will make all payments in respect of a certificated Senior Note (including principal, premium and interest), by mailing a check to the registered address of each Holder thereof; provided, however, that payments on the Senior Notes may also be made, in the case of a Holder of at least $1,000,000 aggregate principal amount of Senior Notes, by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion). 3. Paying Agent and Registrar Initially, State Street Bank and Trust Company, a Massachusetts trust company (the "Trustee"), will act as Paying Agent and Registrar. The Company and BCC may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company and BCC or any of the Company's domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. Indenture The Company and BCC issued the Senior Notes under an Indenture dated as of February 2, 1999 (the "Indenture"), among the Company, BCC and the Trustee. The terms of the Senior Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Senior Notes are subject to all such terms, and Securityholders are referred to the Indenture and the TIA for a statement of those terms. The Senior Notes are senior unsecured obligations of the Company and BCC limited to $250,000,000 aggregate principal amount at any one time outstanding (subject to Sections 2.01 and 2.08 of the Indenture). This Senior Note is one of the Exchange Senior Notes referred to in the Indenture issued in exchange for Initial Securities. The Senior Notes include the Exchange Senior 6 Notes, the Original Senior Notes in the aggregate principal amount of $170,000,000 and up to an aggregate principal amount of $80,000,000 additional Initial Senior Notes that may be issued under the Indenture. The Exchange Senior Notes, the Original Senior Notes and such additional Initial Senior Notes are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the ability of the Company and its Restricted Subsidiaries to, among other things, make certain Investments and other Restricted Payments, pay dividends and other distributions, incur indebtedness, enter into consensual restrictions upon the payment of certain dividends and distributions by such Restricted Subsidiaries, enter into or permit certain transactions with Affiliates, create or incur Liens and make Asset Dispositions. The Indenture also imposes limitations on the ability of the Company and BCC to consolidate or merge with or into any other Person or sell, transfer, assign, lease, convey or otherwise dispose of all or substantially all of the Property of the Company and BCC. These limitations are subject to significant exceptions, and most would cease to be effective while the Senior Notes have an Investment Grade Rating. 5. Optional Redemption Except as set forth below, the Senior Notes may not be redeemed prior to February 1, 2004. On and after that date, the Company and BCC may redeem the Senior Notes in whole at any time or in part from time to time at the following redemption prices (expressed in percentages of principal amount), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption), if redeemed during the 12-month period beginning on or after February 1 of the years set forth below: Period 2004 2005 2006 2007 and thereafter Redemption Price 7 104.000% 102.667% 101.333% 100.000% 8 Notwithstanding the foregoing, on or prior to February 1, 2002, the Company and BCC may redeem up to 35% of the original aggregate principal amount of the Senior Notes issued with the net cash proceeds to the Company from one or more Equity Offerings, at a redemption price equal to 108.000% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that it on or prior to the date of redemption); provided, however, that after giving effect to any such redemption, at least 65% of the original aggregate principal amount of the Senior Notes remains outstanding. Any such redemption shall be made within 75 days of such Equity Offering. 6. Sinking Fund The Senior Notes are not subject to any sinking fund. 7. Notice of Redemption Notice of optional redemption pursuant to paragraph 5(a) will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date, and notice of mandatory redemption pursuant to paragraph 5(b) will be mailed promptly after the occurrence of the event triggering such redemption but in no event less than 10 days prior to the Mandatory Redemption Date, in each case, to each Holder of Senior Notes to be redeemed at his or her registered address. Senior Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on all Senior Notes (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Senior Notes (or such portions thereof) called for redemption. 8. Repurchase of Senior Notes at the Option of Holders upon Change of Control Upon a Change of Control, any Holder of Senior Notes will have the right, subject to certain conditions specified in the Indenture, to cause the Company to repurchase all or any part of the Senior Notes of such Holder at a purchase price equal to 101% 9 of the principal amount of the Senior Notes to be repurchased plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture. 9. Denominations; Transfer; Exchange The Senior Notes are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Senior Notes in accordance with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Senior Notes selected for redemption (except, in the case of a Senior Note to be redeemed in part, the portion of the Senior Note not to be redeemed) or to transfer or exchange any Senior Notes for a period of 15 days prior to a selection of Senior Notes to be redeemed or 15 days before an interest payment date. 10. Persons Deemed Owners The registered Holder of this Senior Note may be treated as the owner of it for all purposes. 11. Unclaimed Money If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company and BCC at its written request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and BCC and not to the Trustee for payment. 12. Discharge and Defeasance Subject to certain conditions, the Company and BCC at any time may terminate some of or all its obligations under the Senior Notes and the Indenture if the Company or BCC deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Senior Notes to redemption or maturity, as the case may be. 10 13. Amendment, Waiver Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Senior Notes may be amended without prior notice to any Securityholder but with the written consent of the Holders of at least a majority in aggregate principal amount of the outstanding Senior Notes and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of at least a majority in principal amount of the outstanding Senior Notes. Subject to certain exceptions set forth in the Indenture, without the consent of any Holder of Senior Notes, the Company, BCC and the Trustee may amend the Indenture or the Senior Notes (i) to cure any ambiguity, omission, defect or inconsistency; (ii) to comply with Article V of the Indenture; (iii) to provide for uncertificated Senior Notes in addition to or in place of certificated Senior Notes; (iv) to add Guarantees with respect to the Senior Notes; (v) to reflect the release pursuant to the terms of the Indenture of a Restricted Subsidiary from its obligations with respect to a Subsidiary Guarantee; (vi) to secure the Senior Notes; (vii) to add additional covenants or to surrender rights and powers conferred on the Company; (viii) to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA; or (ix) to make any change that does not adversely affect the rights of any Securityholder. 14. Defaults and Remedies If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Senior Notes then outstanding, subject to certain limitations, may declare all the Senior Notes to be immediately due and payable. Certain events of bankruptcy or insolvency are Events of Default and shall result in the Senior Notes being immediately due and payable upon the occurrence of such Events of Default without any further act of the Trustee or any Holder. Holders of Senior Notes may not enforce the Indenture or the Senior Notes except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Senior Notes unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in aggregate principal amount of the Senior Notes then outstanding may direct the Trustee in its exercise of any trust or power under the Indenture. The 11 Holders of a majority in aggregate principal amount of the Senior Notes then outstanding, by written notice to the Company and the Trustee, may rescind any declaration of acceleration and its consequences if the rescission would not conflict with any judgment or decree, and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration. 15. Trustee Dealings with the Company and BCC Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Senior Notes and may otherwise deal with and collect obligations owed to it by the Company, BCC or their respective Affiliates and may otherwise deal with the Company, BCC or their respective Affiliates with the same rights it would have if it were not Trustee. 16. No Recourse Against Others A director, officer, employee or stockholder, as such, of the Company or BCC shall not have any liability for any obligations of the Company or BCC under the Senior Notes or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Senior Note, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Senior Notes. 17. Authentication This Senior Note shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Senior Note. 18. Abbreviations Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 12 19. Governing Law THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 20. CUSIP Numbers Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company and BCC have caused CUSIP numbers to be printed on the Senior Notes and have directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Senior Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. THE COMPANY AND BCC WILL FURNISH TO ANY HOLDER OF SENIOR NOTES UPON WRITTEN REQUEST AND WITHOUT CHARGE TO THE HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE TEXT OF THIS SENIOR NOTE. 13 ASSIGNMENT FORM To assign this Senior Note, fill in the form below: I or we assign and transfer this Senior Note to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Senior Note on the books of the Company. The agent may substitute another to act for him. ___________________________________________________________ Date: ________________ Your Signature: _____________________ ___________________________________________________________ Sign exactly as your name appears on the other side of this Senior Note. Signature Guarantee: Date: ______________________ __________________________ Signature must be guaranteed Signature of Signature by a participant in a Guarantee recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee ___________________________________________________________ 14 [TO BE ATTACHED TO GLOBAL SECURITIES] SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The initial principal amount of this Global Security is $ . The following increases or decreases in this Global Security have been made:
Date of Amount of decrease Amount of increase Principal Amount Signature of Exchange in Principal in Principal of this Global authorized Amount of this Amount of this Security following signatory of Global Security Global Security such decrease or Trustee or increase Securities Custodian
15 OPTION OF HOLDER TO ELECT PURCHASE IF YOU WANT TO ELECT TO HAVE THIS SENIOR NOTE PURCHASED BY THE COMPANY AND BCC PURSUANT TO SECTION 4.07 (ASSET DISPOSITION) OR 4.13 (CHANGE OF CONTROL) OF THE INDENTURE, CHECK THE BOX: [ ] IF YOU WANT TO ELECT TO HAVE ONLY PART OF THIS SENIOR NOTE PURCHASED BY THE COMPANY AND BCC PURSUANT TO SECTION 4.07 OR 4.13 OF THE INDENTURE, STATE THE AMOUNT: $ DATE: __________________ YOUR SIGNATURE: __________________ (SIGN EXACTLY AS YOUR NAME APPEARS ON THE OTHER SIDE OF THE SENIOR NOTE) SIGNATURE GUARANTEE:_______________________________________ SIGNATURE MUST BE GUARANTEED BY A PARTICIPANT IN A RECOGNIZED SIGNATURE GUARANTY MEDALLION PROGRAM OR OTHER SIGNATURE GUARANTOR ACCEPTABLE TO THE TRUSTEE. EX-4.5 11 FORM OF REGULATION S SENIOR DISCOUNT NOTE 1 EXHIBIT 4.5 [FORM OF FACE OF EXCHANGE SENIOR DISCOUNT NOTE] No. Up to: $ 9 1/4% Senior Discount Note due 2009 CUSIP No. ______ Bresnan Communications Group LLC, a Delaware limited liability company (the "Company"), and Bresnan Capital Corporation, a Delaware corporation ("BCC"), promise to pay to Cede & Co., or registered assigns, the principal amount at maturity sum as set forth on the Schedule of Increases or Decreases annexed hereto on February 1, 2009. Interest Payment Dates: February 1 and August 1. Record Dates: January 15 and July 15. 2 Additional provisions of this Senior Discount Note are set forth on the other side of this Senior Discount Note. IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed. BRESNAN COMMUNICATIONS GROUP LLC, by Bresnan Communications Company Limited Partnership, its sole member by BCI (USA) L.L.C., managing general partner by Bresnan Communications, Inc., member by ________________________________ Name: Title: by ________________________________ Name: Title: BRESNAN CAPITAL CORPORATION, by ________________________________ Name: Title: by ________________________________ Name: 3 Title: [CORPORATE SEAL] TRUSTEE'S CERTIFICATE OF AUTHENTICATION Dated: STATE STREET BANK AND TRUST COMPANY, as Trustee, certifies that this is one of the Securities referred to in the Indenture. by:_________________________ Authorized Signatory 4 [FORM OF REVERSE SIDE OF EXCHANGE SENIOR DISCOUNT NOTE] 9 1/4% Senior Discount Note due 2009 1. Interest (a) Bresnan Communications Group LLC, a Delaware limited liability company (such limited liability company, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), and Bresnan Capital Corporation, a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called "BCC") promise to, after February 1, 2004, pay interest on the principal amount at maturity of this Senior Discount Note at the rate per annum shown above. The Senior Discount Notes will not accrue cash interest on or prior to February 1, 2004, unless the Company and BCC elect, upon not less than 60 days prior notice, to commence the accrual of cash interest on or after February 1, 2002, in which case the outstanding principal amount at maturity of each Senior Discount Note will on such commencement date be reduced to the Accreted Value of such Senior Discount Note as of such date and cash interest shall be payable with respect to such Senior Discount Note on each February 1 and August 1 thereafter. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. The Company and BCC shall pay interest on overdue Accreted Value at the rate borne by the Senior Discount Notes plus 1% per annum, and it shall pay interest on overdue installments of interest at the rate borne by the Senior Discount Notes to the extent lawful. 2. Method of Payment The Company and BCC will pay interest on the Senior Discount Notes (except defaulted interest) to the Persons who are registered holders of Senior Discount Notes 5 at the close of business on the January 15 or July 15 next preceding the interest payment date even if Senior Discount Notes are canceled after the record date and on or before the interest payment date. Holders must surrender Senior Discount Notes to a Paying Agent to collect Accreted Value payments. The Company will pay Accreted Value and interest in money of the United States of America that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Senior Discount Notes represented by a Global Security (including Accreted Value, premium and interest) will be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company. The Company will make all payments in respect of a certificated Senior Discount Note (including Accreted Value, premium and interest), by mailing a check to the registered address of each Holder thereof; provided, however, that payments on the Senior Discount Notes may also be made, in the case of a Holder of at least $1,000,000 aggregate principal amount at maturity of Senior Discount Notes, by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion). 3. Paying Agent and Registrar Initially, State Street Bank and Trust Company, a Massachusetts trust company (the "Trustee"), will act as Paying Agent and Registrar. The Company and BCC may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company and BCC or any of the Company's domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. Indenture The Company and BCC issued the Senior Discount Notes under an Indenture dated as of February 2, 1999 (the "Indenture"), among the Company, BCC and the Trustee. The terms of the Senior Discount Notes include those stated in the Indenture and those made part of the Indenture by 6 reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA"). Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Senior Discount Notes are subject to all such terms, and Securityholders are referred to the Indenture and the TIA for a statement of those terms. The Senior Discount Notes are senior unsecured obligations of the Company and BCC limited to $200,000,000 aggregate gross proceeds (subject to Sections 2.01 and 2.08 of the Indenture). This Senior Discount Note is one of the Exchange Senior Discount Notes referred to in the Indenture issued in exchange for Initial Senior Notes. The Senior Discount Notes include the Exchange Senior Discount Notes, the Original Senior Discount Notes in an aggregate principal amount at maturity of $275,000,000 (aggregate gross proceeds of $175,021,000) and up to an aggregate gross proceeds of $24,979,000 additional Initial Senior Discount Notes that may be issued under the Indenture. The Exchange Senior Discount Notes, the Original Senior Discount Notes and such additional Initial Senior Discount Notes are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the ability of the Company and its Restricted Subsidiaries to, among other things, make certain Investments and other Restricted Payments, pay dividends and other distributions, incur indebtedness, enter into consensual restrictions upon the payment of certain dividends and distributions by such Restricted Subsidiaries, enter into or permit certain transactions with Affiliates, create or incur Liens and make Asset Dispositions. The Indenture also imposes limitations on the ability of the Company and BCC to consolidate or merge with or into any other Person or sell, transfer, assign, lease, convey or otherwise dispose of all or substantially all of the Property of the Company and BCC. These limitations are subject to significant exceptions, and most would cease to be effective while the Senior Discount Notes have an Investment Grade Rating. 5. Optional Redemption (a) Except as set forth below, the Senior Discount Notes may not be redeemed prior to February 1, 2004. On and after that date, the Company and BCC may 7 redeem the Senior Discount Notes in whole at any time or in part from time to time at the following redemption prices (expressed in percentages of Accreted Value), plus accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of redemption), if redeemed during the 12-month period beginning on or after February 1 of the years set forth below: Period 2004 2005 2006 2007 and thereafter Redemption Price 104.625% 103.083% 101.542% 100.000% 8 Notwithstanding the foregoing, on or prior to February 1, 2002, the Company and BCC may redeem up to 35% of the original aggregate principal amount at maturity of the Senior Discount Notes issued with the net cash proceeds to the Company from one or more Equity Offerings, at a redemption price equal to 109.250% of the Accreted Value thereof, plus accrued and unpaid interest thereon, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that it on or prior to the date of redemption); provided, however, that after giving effect to any such redemption, at least 65% of the original aggregate principal amount at maturity of the Senior Discount Notes remains outstanding. Any such redemption shall be made within 75 days of such Equity Offering. 6. Sinking Fund The Senior Discount Notes are not subject to any sinking fund. 7. Notice of Redemption Notice of optional redemption pursuant to paragraph 5(a) will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date, and notice of mandatory redemption pursuant to paragraph 5(b) will be mailed promptly after the occurrence of the event triggering such redemption but in no event less than 10 days prior to the Mandatory Redemption Date, in each case, to each Holder of Senior Discount Notes to be redeemed at his or her registered address. Senior Discount Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued and accreted interest on all Senior Discount Notes (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue and accrete on such Senior Discount Notes (or such portions thereof) called for redemption. 8. Repurchase of Securities at the Option of Holders upon 9 Change of Control Upon a Change of Control, any Holder of Senior Discount Notes will have the right, subject to certain conditions specified in the Indenture, to cause the Company to repurchase all or any part of the Senior Discount Notes of such Holder at a purchase price equal to 101% of the Accreted Value of the Senior Discount Notes to be repurchased plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture. 9. Denominations; Transfer; Exchange The Senior Discount Notes are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Senior Discount Notes in accordance with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Senior Discount Notes selected for redemption (except, in the case of a Senior Discount Note to be redeemed in part, the portion of the Senior Discount Note not to be redeemed) or to transfer or exchange any Senior Discount Notes for a period of 15 days prior to a selection of Senior Discount Notes to be redeemed or 15 days before an interest payment date. 10. Persons Deemed Owners The registered Holder of this Senior Discount Note may be treated as the owner of it for all purposes. 11. Unclaimed Money If money for the payment of Accreted Value or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company and BCC at its written request unless an abandoned property law 10 designates another Person. After any such payment, Holders entitled to the money must look only to the Company and BCC and not to the Trustee for payment. 12. Discharge and Defeasance Subject to certain conditions, the Company and BCC at any time may terminate some of or all its obligations under the Senior Discount Notes and the Indenture if the Company or BCC deposits with the Trustee money or U.S. Government Obligations for the payment of Accreted Value and interest on the Senior Discount Notes to redemption or maturity, as the case may be. 13. Amendment, Waiver Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Senior Discount Notes may be amended without prior notice to any Securityholder but with the written consent of the Holders of at least a majority in aggregate principal at maturity amount of the outstanding Senior Discount Notes and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of at least a majority in principal amount at maturity of the outstanding Senior Discount Notes. Subject to certain exceptions set forth in the Indenture, without the consent of any Holder of Senior Discount Notes, the Company, BCC and the Trustee may amend the Indenture or the Senior Discount Notes (i) to cure any ambiguity, omission, defect or inconsistency; (ii) to comply with Article V of the Indenture; (iii) to provide for uncertificated Senior Discount Notes in addition to or in place of certificated Senior Discount Notes; (iv) to add Guarantees with respect to the Senior Discount Notes; (v) to reflect the release pursuant to the terms of the Indenture of a Restricted Subsidiary from its obligations with respect to a Subsidiary Guarantee; (vi) to secure the Senior Discount Notes; (vii) to add additional covenants or to surrender rights and powers conferred on the Company; (viii) to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA; or (ix) to make any change that does not adversely affect the rights of any Securityholder. 14. Defaults and Remedies 11 If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount at maturity of the Senior Discount Notes then outstanding, subject to certain limitations, may declare all the Senior Discount Notes to be immediately due and payable. Certain events of bankruptcy or insolvency are Events of Default and shall result in the Senior Discount Notes being immediately due and payable upon the occurrence of such Events of Default without any further act of the Trustee or any Holder. Holders of Senior Discount Notes may not enforce the Indenture or the Senior Discount Notes except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Senior Discount Notes unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in aggregate principal amount at maturity of the Senior Discount Notes then outstanding may direct the Trustee in its exercise of any trust or power under the Indenture. The Holders of a majority in aggregate principal amount at maturity of the Senior Discount Notes then outstanding, by written notice to the Company and the Trustee, may rescind any declaration of acceleration and its consequences if the rescission would not conflict with any judgment or decree, and if all existing Events of Default have been cured or waived except nonpayment of Accreted Value or interest that has become due solely because of the acceleration. 15. Trustee Dealings with the Company and BCC Subject to certain limitations imposed by the TIA, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Senior Discount Notes and may otherwise deal with and collect obligations owed to it by the Company, BCC or their respective Affiliates and may otherwise deal with the Company, BCC or their respective Affiliates with the same rights it would have if it were not Trustee. 16. No Recourse Against Others A director, officer, employee or stockholder, as such, of the Company or BCC shall not have any liability for 12 any obligations of the Company or BCC under the Senior Discount Notes or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Senior Discount Note, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Senior Discount Notes. 17. Authentication This Senior Discount Note shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Senior Discount Note. 18. Abbreviations Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 19. Governing Law THIS SENIOR DISCOUNT NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 20. CUSIP Numbers Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company and BCC have caused CUSIP numbers to be printed on the Senior Discount Notes and have directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Senior Discount Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. 13 THE COMPANY AND BCC WILL FURNISH TO ANY HOLDER OF SENIOR DISCOUNT NOTES UPON WRITTEN REQUEST AND WITHOUT CHARGE TO THE HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE TEXT OF THIS SENIOR DISCOUNT NOTE. 14 ASSIGNMENT FORM To assign this Senior Discount Note, fill in the form below: I or we assign and transfer this Senior Discount Note to ______________________________________________________________ (Print or type assignee's name, address and zip code) ______________________________________________________________ (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint_____________________________agent to transfer this Senior Discount Note on the books of the Company. The agent may substitute another to act for him. ____________________________________________________________ Date: ________________ Your Signature: _____________________ ____________________________________________________________ Sign exactly as your name appears on the other side of this Senior Discount Note. Signature Guarantee: Date: ______________________ __________________________ Signature must be guaranteed Signature of Signature by a participant in a Guarantee recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee ____________________________________________________________ 15 [TO BE ATTACHED TO GLOBAL SECURITIES] SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The initial principal amount at maturity of this Global Security is $ . The following increases or decreases in this Global Security have been made:
Date of Amount of decrease Amount of increase Principal Amount Signature of Exchange in Principal in Principal at Maturity of authorized Amount at Maturity Amount at Maturity this Global signatory of of this Global of this Global Security following Trustee or Security Security such decrease or Securities increase Custodian
16 OPTION OF HOLDER TO ELECT PURCHASE IF YOU WANT TO ELECT TO HAVE THIS SENIOR DISCOUNT NOTE PURCHASED BY THE COMPANY AND BCC PURSUANT TO SECTION 4.07 (ASSET DISPOSITION) OR 4.13 (CHANGE OF CONTROL) OF THE INDENTURE, CHECK THE BOX: [ ] IF YOU WANT TO ELECT TO HAVE ONLY PART OF THIS SENIOR DISCOUNT NOTE PURCHASED BY THE COMPANY AND BCC PURSUANT TO SECTION 4.07 OR 4.13 OF THE INDENTURE, STATE THE AMOUNT: $ DATE: __________________ YOUR SIGNATURE: __________________ (SIGN EXACTLY AS YOUR NAME APPEARS ON THE OTHER SIDE OF THE SENIOR DISCOUNT NOTE) SIGNATURE GUARANTEE:_______________________________________ SIGNATURE MUST BE GUARANTEED BY A PARTICIPANT IN A RECOGNIZED SIGNATURE GUARANTY MEDALLION PROGRAM OR OTHER SIGNATURE GUARANTOR ACCEPTABLE TO THE TRUSTEE. EX-4.6 12 REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 4.6 EXECUTION COPY BRESNAN COMMUNICATIONS GROUP LLC BRESNAN CAPITAL CORPORATION 8% Senior Notes due 2009 9 1/4% Senior Discount Notes due 2009 REGISTRATION RIGHTS AGREEMENT New York, New York January 25, 1999 Salomon Smith Barney Inc. Chase Securities Inc. Morgan Stanley & Co. Incorporated TD Securities (USA) Inc. In care of: Salomon Smith Barney Inc. Seven World Trade Center New York, New York 10048 Ladies and Gentlemen: Bresnan Communications Group LLC, a limited liability company organized under the laws of Delaware (the "Company"), and Bresnan Capital Corporation, a corporation organized under the laws of Delaware ("BCC"), propose to issue and sell to certain purchasers (the "Initial Purchasers"), upon the terms set forth in a purchase agreement of even date herewith (the "Purchase Agreement"), $170,000,000 aggregate principal amount of their 8% Senior Notes due 2009 (the "Senior Notes") and $275,000,000 aggregate principal amount at maturity (approximately $175,021,000 gross proceeds) of their 9 1/4% Senior Discount Notes due 2009 (the "Senior Discount Notes" and, together with the Senior Notes, the "Securities") relating to the initial placement of the Securities (the "Initial Placement"). To induce the Initial Purchasers to enter into the Purchase Agreement and to satisfy a condition of your obligations thereunder, each of the Company and BCC agrees with you for your benefit and the benefit of the holders from time to time of the Securities (including the Initial Purchasers) (each a "Holder" and, together, the "Holders"), as follows: 1. Definitions. Capitalized terms used herein without definition shall have the respective meanings set forth in the Purchase Agreement. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "Act" shall mean the Securities Act of 1933, as amended, and the rules and 2 regulations of the Commission promulgated thereunder. "Affiliate" of any specified person shall mean any other person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such specified person. For purposes of this definition, control of a person shall mean the power, direct or indirect, to direct or cause the direction of the management and policies of such person whether by contract or otherwise; and the terms "controlling" and "controlled" shall have meanings correlative to the foregoing. "Broker-Dealer" shall mean any broker or dealer registered as such under the Exchange Act. "Business Day" shall mean any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies are authorized or obligated by law to close in New York City. "Commission" shall mean the Securities and Exchange Commission. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "Exchange Offer Prospectus" shall mean the prospectus included in the Exchange Offer Registration Statement, as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the New Securities covered by such Exchange Offer Registration Statement, and all amendments and supplements thereto and all material incorporated by reference therein. "Exchange Offer Registration Period" shall mean the one-year period following the consummation of the Registered Exchange Offer, exclusive of any period during which any stop order shall be in effect suspending the effectiveness of the Exchange Offer Registration Statement. "Exchange Offer Registration Statement" shall mean a registration statement of the Company and BCC on an appropriate form under the Act with respect to the Registered Exchange Offer, all amendments and supplements to such registration statement, including post-effective amendments thereto, in each case including the Exchange Offer Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Exchanging Dealer" shall mean any Holder (which may include any Initial Purchaser) that is a Broker-Dealer electing to exchange for New Securities any Securities that it acquired for its own account as a result of market-making activities or other trading activities (but not directly from the Company, BCC or any Affiliate of the Company or BCC) for New Securities. "Holder" shall have the meaning set forth in the preamble hereto. 3 "Indenture" shall mean the Indenture relating to the Securities, dated as of February 2, 1999, among the Company, BCC and State Street Bank and Trust Company, as trustee, as the same may be amended from time to time in accordance with the terms thereof. "Initial Placement" shall have the meaning set forth in the preamble hereto. "Initial Purchaser" shall have the meaning set forth in the preamble hereto. "Losses" shall have the meaning set forth in Section 6(d) hereof. "Majority Holders" shall mean the Holders of a majority of the aggregate principal amount of Securities registered under a Registration Statement. "Managing Underwriters" shall mean the investment banker or investment bankers and manager or managers that shall administer an underwritten offering. "New Securities" shall mean debt securities of the Company and BCC identical in all material respects to the Securities (except that the interest rate step-up provisions and the transfer restrictions shall be modified or eliminated, as appropriate) and to be issued under the Indenture or the New Securities Indenture. "Prospectus" shall mean the prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A under the Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Securities or the New Securities covered by such Registration Statement, and all amendments and supplements thereto and all material incorporated by reference therein. "Purchase Agreement" shall have the meaning set forth in the preamble hereto. "Registered Exchange Offer" shall mean the proposed offer by the Company and BCC to issue and deliver to the Holders of the Securities that are not prohibited by any law or policy of the Commission from participating in such offer, in exchange for the Securities, a like aggregate principal amount of the New Securities. "Registration Statement" shall mean any Exchange Offer Registration Statement or Shelf Registration Statement that covers any of the Securities or the New Securities pursuant to the provisions of this Agreement, any amendments and supplements to such registration statement, including post-effective amendments (in each case including the Prospectus contained therein), all exhibits thereto and all material incorporated by reference therein. "Securities" shall have the meaning set forth in the preamble hereto. 4 "Shelf Registration" shall mean a registration effected pursuant to Section 3 hereof. "Shelf Registration Period" has the meaning set forth in Section 3(b) hereof. "Shelf Registration Statement" shall mean a "shelf" registration statement of the Company and BCC pursuant to the provisions of Section 3 hereof which covers some or all of the Securities or New Securities, as applicable, on an appropriate form under Rule 415 under the Act, or any similar rule that may be adopted by the Commission, amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Trustee" shall mean the trustee with respect to the Securities under the Indenture. "underwriter" shall mean any underwriter of Securities in connection with an offering thereof under a Shelf Registration Statement. 2. Registered Exchange Offer. (a) The Company and BCC shall use their reasonable best efforts to prepare and, not later than 120 days after the date of the original issuance of the Securities, shall file with the Commission the Exchange Offer Registration Statement with respect to the Registered Exchange Offer. The Company and BCC shall cause the Exchange Offer Registration Statement to become effective under the Act not later than 180 days after the date of the original issuance of the Securities. (b) Upon the effectiveness of the Exchange Offer Registration Statement, the Company and BCC shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder electing to exchange Securities for New Securities (assuming that such Holder is not an Affiliate of the Company or BCC, acquires the New Securities in the ordinary course of such Holder's business, has no arrangements with any person to participate in the distribution of the New Securities and is not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer) to trade such New Securities from and after their receipt without any limitations or restrictions under the Act and without material restrictions under the securities laws of a substantial proportion of the several states of the United States. (c) In connection with the Registered Exchange Offer, the Company and BCC shall: (i) mail to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (ii) keep the Registered Exchange Offer open for not less than 20 days (or longer if required by applicable law) after the date notice thereof is mailed to the Holders; 5 (iii) use its reasonable best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented and amended as required, under the Act to ensure that it is available for sales of New Securities by Exchanging Dealers during the Exchange Offer Registration Period; (iv) utilize the services of a depositary for the Registered Exchange Offer with an address in the Borough of Manhattan in New York City, which may be the Trustee or an Affiliate of the Trustee; (v) permit Holders to withdraw tendered Securities at any time prior to the close of business, New York time, on the last Business Day on which the Registered Exchange Offer is open; (vi) prior to effectiveness of the Exchange Offer Registration Statement, if requested or required by the Commission, provide a supplemental letter to the Commission (A) stating that the Company and BCC are conducting the Registered Exchange Offer in reliance on the position of the Commission in Exxon Capital Holdings Corporation (pub. avail. May 13, 1988) and Morgan Stanley and Co., Inc. (pub. avail. June 5, 1991); and (B) including a representation that neither the Company nor BCC have entered into any arrangement or understanding with any person to distribute the New Securities to be received in the Registered Exchange Offer and that, to the best of each of the Company's and BCC's information and belief, each Holder participating in the Registered Exchange Offer is acquiring the New Securities in the ordinary course of business and has no arrangement or understanding with any person to participate in the distribution of the New Securities; and (vii) comply in all respects with all applicable laws. (d) As soon as practicable after the close of the Registered Exchange Offer, the Company and BCC shall: (i) accept for exchange all Securities tendered and not validly withdrawn pursuant to the Registered Exchange Offer; (ii) deliver to the Trustee for cancellation in accordance with Section 4(s) all Securities so accepted for exchange; and (iii) cause the Trustee promptly to authenticate and deliver to each Holder of Securities a principal amount or principal amount at maturity, as the case may be, of New Securities equal to the principal amount or principal amount at maturity, as the case may be, of the Securities of such Holder so accepted for exchange. (e) Each Holder hereby acknowledges and agrees that any such Holder using the Registered Exchange Offer to participate in a distribution of the New Securities (x) could not 6 under Commission policy as in effect on the date of this Agreement rely on the position of the Commission in Morgan Stanley and Co., Inc. (pub. avail. June 5, 1991) and Exxon Capital Holdings Corporation (pub. avail. May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993 and similar no-action letters; and (y) must comply with the registration and prospectus delivery requirements of the Act in connection with any secondary resale transaction which must be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K under the Act if the resales are of New Securities obtained by such Holder in exchange for Securities acquired by such Holder directly from the Company, BCC or one of their respective Affiliates. Accordingly, each Holder participating in the Registered Exchange Offer shall be required to represent to the Company and BCC that, at the time of the consummation of the Registered Exchange Offer: (i) any New Securities received by such Holder will be acquired in the ordinary course of business; (ii) such Holder will have no arrangement or understanding with any person to participate in the distribution of the Securities or the New Securities within the meaning of the Act; and (iii) such Holder is not an Affiliate of the Company or BCC. (f) If any Initial Purchaser determines that it is not eligible to participate in the Registered Exchange Offer with respect to the exchange of Securities constituting any portion of an unsold allotment, at the request of such Initial Purchaser, the Company and BCC shall issue and deliver to such Initial Purchaser or the person purchasing New Securities registered under a Shelf Registration Statement as contemplated by Section 3 hereof from such Initial Purchaser, in exchange for such Securities, a like principal amount or principal amount of maturity, as the case may be, of New Securities. The Company and BCC shall use their respective best efforts to cause the CUSIP Service Bureau to issue the same CUSIP number for such New Securities as for New Securities issued pursuant to the Registered Exchange Offer. 3. Shelf Registration. (a) If (i) due to any change in law or applicable interpretations thereof by the Commission's staff, either the Company or BCC determines upon advice of its outside counsel that it is not permitted to effect the Registered Exchange Offer as contemplated by Section 2 hereof; (ii) for any other reason the Registered Exchange Offer is not consummated within 210 days after the date of original issuance of the Securities; (iii) any Initial Purchaser so requests with respect to Securities that are not eligible to be exchanged for New Securities in the Registered Exchange Offer and that are held by it following consummation of the Registered Exchange Offer; (iv) any Holder (other than an Initial Purchaser) is not eligible to participate in the Registered Exchange Offer or does not receive freely tradeable New Securities in the Registered Exchange Offer other than by reason of such Holder being an affiliate of the Company or BCC within the meaning of the Act; or (v) in the case of any Initial Purchaser that participates in the Registered Exchange Offer or acquires New Securities pursuant to Section 2(f) hereof, such Initial Purchaser does not receive freely tradeable New Securities in exchange for 7 Securities constituting any portion of an unsold allotment (it being understood that (x) the requirement that an Initial Purchaser deliver a Prospectus containing the information required by Item 507 or 508 of Regulation S-K under the Act in connection with sales of New Securities acquired in exchange for such Securities shall result in such New Securities being not "freely tradeable"; and (y) the requirement that an Exchanging Dealer deliver an Exchange Offer Prospectus in connection with sales of New Securities acquired in the Registered Exchange Offer in exchange for Securities acquired as a result of market-making activities or other trading activities shall not result in such New Securities being not "freely tradeable"), the Company and BCC shall effect a Shelf Registration Statement in accordance with subsection (b) below. (b) (i) The Company and BCC shall as promptly as practicable (but in no event more than 60 days after so required or requested pursuant to this Section 3), file with the Commission and thereafter shall use their reasonable best efforts to cause to be declared effective under the Act a Shelf Registration Statement relating to the offer and sale of the Securities or the New Securities, as applicable, by the Holders thereof from time to time in accordance with the methods of distribution elected by such Holders and set forth in such Shelf Registration Statement; provided, however, that no Holder (other than an Initial Purchaser) shall be entitled to have the Securities held by it covered by such Shelf Registration Statement unless such Holder agrees in writing to be bound by all of the provisions of this Agreement applicable to such Holder; and provided further, that with respect to New Securities received by an Initial Purchaser in exchange for Securities constituting any portion of an unsold allotment, the Company and BCC may, if permitted by current interpretations by the Commission's staff, file a post-effective amendment to the Exchange Offer Registration Statement containing the information required by Item 507 or 508 of Regulation S-K, as applicable, in satisfaction of its obligations under this subsection with respect thereto, and any such Exchange Offer Registration Statement, as so amended, shall be referred to herein as, and governed by the provisions herein applicable to, a Shelf Registration Statement. (ii) The Company and BCC shall use their respective reasonable best efforts to keep the Shelf Registration Statement continuously effective, supplemented and amended as required by the Act, in order to permit the Prospectus forming part thereof to be usable by Holders for a period of two years from the date of original issuance of the Securities or such shorter period that will terminate when all the Securities or New Securities, as applicable, covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement (in any such case, such period being called the "Shelf Registration Period"). The Company and BCC shall be deemed not to have used their respective reasonable best efforts to keep the Shelf Registration Statement effective during the requisite period if they voluntarily take any action that would result in Holders of Securities covered thereby not being able to offer and sell such Securities during that period, unless (A) such action is required by applicable law; or (B) such action is taken by the Company or BCC in good faith and for valid business reasons (not including avoidance of either the Company's or BCC's obligations hereunder), including the acquisition or divestiture of assets, so long as the Company and BCC promptly thereafter comply with the requirements of Section 4(k) hereof, if applicable. 4. Additional Registration Procedures. In connection with any Shelf Registration 8 Statement and, to the extent applicable, any Exchange Offer Registration Statement, the following provisions shall apply. (a) The Company and BCC shall: (i) furnish to you, as soon as practicable prior to the filing thereof with the Commission, a copy of any Exchange Offer Registration Statement and any Shelf Registration Statement, and each amendment thereof and each amendment or supplement, if any, to the Prospectus included therein (including all documents incorporated by reference therein after the initial filing) and shall use their best efforts to reflect in each such document, when so filed with the Commission, such comments as you reasonably propose; (ii) include the information set forth in Annex A hereto on the facing page of the Exchange Offer Registration Statement, in Annex B hereto in the forepart of the Exchange Offer Registration Statement in a section setting forth details of the Exchange Offer, in Annex C hereto in the underwriting or plan of distribution section of the Prospectus contained in the Exchange Offer Registration Statement, and in Annex D hereto in the letter of transmittal delivered pursuant to the Registered Exchange Offer; (iii) if requested by an Initial Purchaser, include the information required by Item 507 or 508 of Regulation S-K, as applicable, in the Exchange Offer Prospectus contained in the Exchange Offer Registration Statement; and (iv) in the case of a Shelf Registration Statement, include the names of the Holders that propose to sell Securities pursuant to the Shelf Registration Statement as selling security holders. (b) The Company and BCC shall ensure that: (i) any Registration Statement and any amendment thereto and any Prospectus forming part thereof and any amendment or supplement thereto complies in all material respects with the Act; (ii) any Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and (iii) any Prospectus forming part of any Registration Statement, and any amendment or supplement to such Prospectus, does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. (c) The Company and BCC shall advise you, the Holders of Securities covered by 9 any Shelf Registration Statement and any Exchanging Dealer under any Exchange Offer Registration Statement that has provided in writing to the Company or BCC a telephone or facsimile number and address for notices, and, if requested by you or any such Holder or Exchanging Dealer, shall confirm such advice in writing (which notice pursuant to clauses (ii) through (v) hereof shall be accompanied by an instruction to suspend the use of the Prospectus until the Company and BCC shall have remedied the basis for such suspension): (i) when a Registration Statement and any amendment thereto has been filed with the Commission and when the Registration Statement or any post-effective amendment thereto has become effective; (ii) of any request by the Commission for any amendment or supplement to the Registration Statement or the Prospectus or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (iv) of the receipt by the Company or BCC of any notification with respect to the suspension of the qualification of the securities included therein for sale in any jurisdiction or the initiation of any proceeding for such purpose; and (v) of the happening of any event that requires any change to the Registration Statement or the Prospectus so that, as of such date, the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in light of the circumstances under which they were made) not misleading. (d) The Company and BCC shall use their respective best efforts to obtain the withdrawal of any order suspending the effectiveness of any Registration Statement or the qualification of the securities therein for sale in any jurisdiction at the earliest possible time. (e) The Company and BCC shall furnish to each Holder of Securities covered by any Shelf Registration Statement, without charge, at least one copy of such Shelf Registration Statement and any post-effective amendment thereto, including all material incorporated therein by reference, and, if the Holder so requests in writing, all exhibits thereto (including exhibits incorporated by reference therein). (f) The Company and BCC shall, during the Shelf Registration Period, deliver to each Holder of Securities covered by any Shelf Registration Statement, without charge, as many copies of the Prospectus (including each preliminary Prospectus) included in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request. Each of the Company and BCC consents to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders of Securities in connection with the offering and sale of the Securities covered by the Prospectus, or any amendment or 10 supplement thereto, included in the Shelf Registration Statement. (g) The Company and BCC shall furnish to each Exchanging Dealer which so requests, without charge, at least one copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including all material incorporated by reference therein, and, if the Exchanging Dealer so requests in writing, all exhibits thereto (including exhibits incorporated by reference therein). (h) The Company and BCC shall promptly deliver to each Initial Purchaser, each Exchanging Dealer and each other person required to deliver a Prospectus during the Exchange Offer Registration Period, without charge, as many copies of the Prospectus included in such Exchange Offer Registration Statement and any amendment or supplement thereto as any such person may reasonably request. Each of the Company and BCC consents to the use of the Prospectus or any amendment or supplement thereto by any Initial Purchaser, any Exchanging Dealer and any such other person that may be required to deliver a Prospectus following the Registered Exchange Offer in connection with the offering and sale of the New Securities covered by the Prospectus, or any amendment or supplement thereto, included in the Exchange Offer Registration Statement. (i) Prior to the Registered Exchange Offer or any other offering of Securities pursuant to any Registration Statement, the Company and BCC shall arrange, if necessary, for the qualification of the Securities or the New Securities for sale under the laws of such jurisdictions as any Holder shall reasonably request and shall perform any and all other acts or things reasonably necessary or advisable to enable the offer and sale in such jurisdictions of the Securities or New Securities, as applicable; provided that in no event shall the Company or BCC be obligated to qualify to do business in any jurisdiction where it is not then so qualified or to take any action that would subject it to service of process in suits, other than those arising out of the Initial Placement, the Registered Exchange Offer or any offering pursuant to a Shelf Registration Statement, or to taxation in any such jurisdiction where it is not then so subject. (j) The Company and BCC shall cooperate with the Holders of Securities to facilitate the timely preparation and delivery of certificates representing New Securities or Securities to be issued or sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as Holders may request prior to sales of Securities pursuant to such Registration Statement. (k) Upon the occurrence of any event contemplated by subsections (c)(ii) through (v) above, the Company and BCC shall promptly prepare a post-effective amendment to the applicable Registration Statement or an amendment or supplement to the related Prospectus or file any other required document so that, as thereafter delivered to purchasers of the securities included therein, the Prospectus will not include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. In such circumstances, the period of effectiveness of the Exchange Offer Registration Statement provided for in Section 2 and the Shelf Registration Statement provided for in Section 3(b) shall each be extended by the number of days 11 from and including the date of the giving of a notice of suspension pursuant to Section 4(c) to and including the date when the Initial Purchasers, the Holders of the Securities and any known Exchanging Dealer shall have received such amended or supplemented Prospectus pursuant to this Section. (l) Not later than the effective date of any Registration Statement, the Company and BCC shall provide a CUSIP number for the Securities or the New Securities, as the case may be, registered under such Registration Statement and provide the Trustee with printed certificates for such Securities or New Securities, in a form eligible for deposit with The Depository Trust Company. (m) The Company and BCC shall use their best efforts to comply with all applicable rules and regulations of the Commission to the extent and so long as they are applicable to the Registered Exchange Offer or the Shelf Registration and shall make generally available to its security holders as soon as practicable after the effective date of the applicable Registration Statement an earnings statement satisfying the provisions of Section 11(a) of the Act. (n) The Company and BCC shall cause the Indenture, to be qualified under the Trust Indenture Act on or prior to the effective date of any Shelf Registration Statement or Exchange Offer Registration Statement. (o) The Company and BCC may require each Holder of Securities to be sold pursuant to any Shelf Registration Statement to furnish to the Company or BCC such information regarding the Holder and the distribution of such Securities as the Company and BCC may from time to time reasonably require for inclusion in such Registration Statement. The Company and BCC may exclude from such Shelf Registration Statement the Securities of any Holder that unreasonably fails to furnish such information within a reasonable time after receiving such request. (p) In the case of any Shelf Registration Statement, the Company and BCC shall enter into such agreements (including if requested an underwriting agreement in customary form) and take all other appropriate actions in order to expedite or facilitate the registration or the disposition of the Securities, and in connection therewith, if an underwriting agreement is entered into, cause the same to contain indemnification provisions and procedures no less favorable than those set forth in Section 6 (or such other provisions and procedures acceptable to the Majority Holders and the Managing Underwriters, if any) with respect to all parties to be indemnified pursuant to Section 6. (q) In the case of any Shelf Registration Statement, the Company and BCC shall: (i) make reasonably available for inspection by the Holders of Securities to be registered thereunder, any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney, accountant or other agent retained by the Holders or any such underwriter all relevant financial and other records, pertinent 12 corporate documents and properties of the Company, BCC and their respective subsidiaries; (ii) cause the Company's and BCC's officers, directors and employees to supply all relevant information reasonably requested by the Holders or any such underwriter, attorney, accountant or agent in connection with any such Registration Statement as is customary for similar due diligence examinations; provided, however, that any information that is designated in writing by the Company and BCC, in good faith, as confidential at the time of delivery of such information shall be kept confidential by the Holders or any such underwriter, attorney, accountant or agent, unless such disclosure is made in connection with a court proceeding or required by law, or such information becomes available to the public generally or through a third party without an accompanying obligation of confidentiality; (iii) make such representations and warranties to the Holders of Securities registered thereunder and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in primary underwritten offerings; (iv) obtain opinions of counsel to the Company and BCC (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the Managing Underwriters, if any) addressed to each selling Holder and the underwriters, if any, covering such matters as are customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such Holders and underwriters; (v) obtain "cold comfort" letters and updates thereof from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to each selling Holder of Securities registered thereunder and the underwriters, if any, in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with primary underwritten offerings; and (vi) deliver such documents and certificates as may be reasonably requested by the Majority Holders and the Managing Underwriters, if any, including those to evidence compliance with Section 4(k) and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company and BCC. The actions set forth in clauses (iii), (iv), (v) and (vi) of this Section 4(q) shall be performed on (A) the effective date of such Registration Statement and each post-effective amendment thereto; and (B) each closing under any underwriting or similar agreement as and to the extent required thereunder. (r) In the case of any Exchange Offer Registration Statement, the Company and 13 BCC shall: (i) make reasonably available for inspection by such Initial Purchaser, and any attorney, accountant or other agent retained by such Initial Purchaser, all relevant financial and other records, pertinent corporate documents and properties of the Company, BCC and their respective subsidiaries; (ii) cause the Company's and BCC's officers, directors and employees to supply all relevant information reasonably requested by such Initial Purchaser or any such attorney, accountant or agent in connection with any such Registration Statement as is customary for similar due diligence examinations; provided, however, that any information that is designated in writing by the Company or BCC, in good faith, as confidential at the time of delivery of such information shall be kept confidential by such Initial Purchaser or any such attorney, accountant or agent, unless such disclosure is made in connection with a court proceeding or required by law, or such information becomes available to the public generally or through a third party without an accompanying obligation of confidentiality; (iii) make such representations and warranties to such Initial Purchaser, in form, substance and scope as are customarily made by issuers to underwriters in primary underwritten offerings; (iv) obtain opinions of counsel to the Company and BCC (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to such Initial Purchaser and its counsel, addressed to such Initial Purchaser, covering such matters as are customarily covered in opinions requested in underwritten offerings; (v) obtain "cold comfort" letters and updates thereof from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to such Initial Purchaser, in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with primary underwritten offerings, or if requested by such Initial Purchaser or its counsel in lieu of a "cold comfort" letter, an agreed-upon procedures letter under Statement on Auditing Standards No. 35, covering matters requested by such Initial Purchaser or its counsel; and (vi) deliver such documents and certificates as may be reasonably requested by such Initial Purchaser or its counsel, including those to evidence compliance with Section 4(k) and with conditions customarily contained in underwriting agreements. The foregoing actions set forth in clauses (iii), (iv), (v), and (vi) of this Section 4(r) shall be performed at the close of the Registered Exchange Offer and the effective date of any post-effective amendment to the Exchange Offer Registration Statement. 14 (s) If a Registered Exchange Offer is to be consummated, upon delivery of the Securities by Holders to the Company or BCC (or to such other person as directed by the Company and BCC) in exchange for the New Securities, the Company and BCC shall mark, or cause to be marked, on the Securities so exchanged that such Securities are being canceled in exchange for the New Securities. In no event shall the Securities be marked as paid or otherwise satisfied. (t) The Company and BCC will use their respective commercially reasonable efforts if the Securities have been rated prior to the initial sale of such Securities, to confirm such ratings will apply to the Securities or the New Securities, as the case may be, covered by a Registration Statement. (u) In the event that any Broker-Dealer shall underwrite any Securities or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Rules of Fair Practice and the By-Laws of the National Association of Securities Dealers, Inc.) thereof, whether as a Holder of such Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, assist such Broker-Dealer in complying with the customary requirements of an underwritten offering and the registered offerings contemplated by this Agreement, including the requirements under such Rules and By-Laws. (v) The Company and BCC shall use their respective best efforts to take all other steps necessary to effect the registration of the Securities or the New Securities, as the case may be, covered by a Registration Statement. 5. Registration Expenses. The Company and BCC shall bear all expenses incurred in connection with the performance of its obligations under Sections 2, 3 and 4 hereof and, in the event of any Shelf Registration Statement, will reimburse the Holders for the reasonable fees and disbursements of one firm or counsel (in addition to one local counsel in each jurisdiction) designated by the Majority Holders to act as counsel for the Holders in connection therewith, and, in the case of any Exchange Offer Registration Statement, will reimburse the Initial Purchasers for the reasonable fees and disbursements of counsel acting in connection therewith, in an amount not to exceed $50,000. 6. Indemnification and Contribution. (a) Each of the Company and BCC agree to indemnify and hold harmless each Holder of Securities or New Securities, as the case may be, covered by any Registration Statement (including each Initial Purchaser and, with respect to any Prospectus delivery as contemplated in Section 4(h) hereof, each Exchanging Dealer), the directors, officers, employees and agents of each such Holder and each person who controls any such Holder within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or 15 alleged untrue statement of a material fact contained in the Registration Statement as originally filed or in any amendment thereof, or in any preliminary Prospectus or the Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that (i) the Company and BCC will not be liable in any case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company and BCC by or on behalf of any such Holder specifically for inclusion therein and (ii) that with respect to any untrue statement or omission of a material fact made in any preliminary Prospectus, the indemnity agreement contained in this Section 6 shall not inure to the benefit of any indemnified party under this indemnity agreement from whom the person asserting any such loss, claim, damage or liability purchased the Securities concerned, to the extent that any such loss, claim, damage or liability of such indemnified party occurs under circumstances where it shall have been determined by a court of competent jurisdiction by final and nonappealable judgment that (i) the Company and/or BCC had previously furnished copies of the Prospectus to such indemnified party; (ii) delivery of the Prospectus was required under the Act to be made to such person; (iii) the untrue statement or omission of a material fact contained in the preliminary Prospectus was corrected in the Prospectus; and (iv) there was not sent or given to such person, at or prior to the written confirmation of the sale by the indemnified party of such Securities to such person, a copy of the Prospectus. This indemnity agreement will be in addition to any liability which the Company and BCC may otherwise have. The Company and BCC, also agree to indemnify or contribute as provided in Section 6(d) to Losses of each underwriter of Securities or New Securities, as the case may be, registered under a Shelf Registration Statement, their directors, officers, employees or agents and each person who controls such underwriter on substantially the same basis as that of the indemnification of the Initial Purchasers and the selling Holders provided in this Section 6(a) and shall, if requested by any Holder, enter into an underwriting agreement reflecting such agreement, as provided in Section 4(p) hereof. (b) Each Holder of securities covered by a Registration Statement (including each Initial Purchaser and, with respect to any Prospectus delivery as contemplated in Section 4(h) hereof, each Exchanging Dealer) severally and not jointly agrees to indemnify and hold harmless the Company, BCC each of their respective directors, each of their respective officers who signs such Registration Statement and each person who controls the Company or BCC within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act, to the same extent as the foregoing indemnity from the Company and BCC to each such Holder, but only with reference to written information relating to such Holder furnished to the Company or BCC by or on behalf of such Holder specifically for inclusion in the documents referred to in the foregoing indemnity. This indemnity agreement will be in addition to any liability which any such Holder may otherwise have. 16 (c) Promptly after receipt by an indemnified party under this Section 6 or notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 6, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses; and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying party's choice at the indemnifying party's expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); provided, however, that such counsel shall be reasonably satisfactory to the indemnified party. Notwithstanding the indemnifying party's election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ one separate counsel (and one local counsel in each jurisdiction), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel (and local counsel) if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest; (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party; (iii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action; or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding. (d) In the event that the indemnity provided in paragraph (a) or (b) of this Section is unavailable to or insufficient to hold harmless an indemnified party for any reason, then each applicable indemnifying party shall have a joint and several obligation to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively "Losses") to which such indemnified party may be subject in such proportion as is appropriate to reflect the relative benefits received by such indemnifying party, on the one hand, and such indemnified party, on the other hand, from the Initial Placement and the Registration Statement which resulted in such Losses; provided, however, that in no case shall any Initial Purchaser or any subsequent Holder of any Security or New Security be responsible, in the aggregate, for any amount in excess of the 17 purchase discount or commission applicable to such Security, or in the case of a New Security, applicable to the Security that was exchangeable into such New Security, as set forth on the cover page of the Final Memorandum, nor shall any underwriter be responsible for any amount in excess of the underwriting discount or commission applicable to the securities purchased by such underwriter under the Registration Statement which resulted in such Losses. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the indemnifying party and the indemnified party shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of such indemnifying party, on the one hand, and such indemnified party, on the other hand, in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations. Benefits received by the Company and BCC shall be deemed to be equal to the total net proceeds from the Initial Placement (before deducting expenses) as set forth on the cover page of the Final Memorandum. Benefits received by the Initial Purchasers shall be deemed to be equal to the total purchase discounts and commissions as set forth on the cover page of the Final Memorandum, and benefits received by any other Holders shall be deemed to be equal to the value of receiving Securities or New Securities, as applicable, registered under the Act. Benefits received by any underwriter shall be deemed to be equal to the total underwriting discounts and commissions, as set forth on the cover page of the Prospectus forming a part of the Registration Statement which resulted in such Losses. Relative fault shall be determined by reference to, among other things, whether any alleged untrue statement or omission relates to information provided by the indemnifying party, on the one hand, or by the indemnified party, on the other hand, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The parties agree that it would not be just and equitable if contribution were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section, each person who controls a Holder within the meaning of either the Act or the Exchange Act and each director, officer, employee and agent of such Holder shall have the same rights to contribution as such Holder, and each person who controls the Company or BCC within the meaning of either the Act or the Exchange Act, each officer of the Company or BCC who shall have signed the Registration Statement and each director of the Company or BCC shall have the same rights to contribution as the Company and BCC, subject in each case to the applicable terms and conditions of this paragraph (d). (e) The provisions of this Section 6 will remain in full force and effect, regardless of any investigation made by or on behalf of any Holder or the Company, BCC or any of the directors, officers, employees, agents or controlling persons referred to in this Section 6, and will survive the sale by a Holder of securities covered by a Registration Statement. 7. Underwritten Registrations. (a) If any of the Securities or New Securities, as the case may be, covered by any Shelf Registration Statement are to be sold in an underwritten offering, the Managing Underwriters shall be selected by the Majority Holders after good faith consultation with the Company and BCC. (b) No person may participate in any underwritten offering pursuant to any Shelf Registration Statement, unless such person (i) agrees to sell such person's Securities or New Securities, as the case may be, on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to 18 approve such arrangements; and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 8. No Inconsistent Agreements. Neither the Company nor BCC has, as of the date hereof, entered into, nor shall it, on or after the date hereof, enter into, any agreement with respect to its securities that is inconsistent with the rights granted to the Holders herein or otherwise conflicts with the provisions hereof. 9. Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, qualified, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company and BCC have obtained the written consent of the Holders of at least a majority of the then outstanding aggregate principal amount of Senior Notes or aggregate principal amount at maturity of Senior Discount Notes (or, in each case, after the consummation of any Registered Exchange Offer in accordance with Section 2 hereof, of the applicable class of New Securities); provided that, with respect to any matter that directly or indirectly affects the rights of any Initial Purchaser hereunder, the Company and BCC shall obtain the written consent of each such Initial Purchaser against which such amendment, qualification, supplement, waiver or consent is to be effective. Notwithstanding the foregoing (except the foregoing proviso), a waiver or consent to departure from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders whose Securities or New Securities, as the case may be, are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other Holders may be given by the Majority Holders, determined on the basis of Securities or New Securities, as the case may be, being sold rather than registered under such Registration Statement. 10. Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail, telex, telecopier or air courier guaranteeing overnight delivery: (a) if to a Holder, at the most current address given by such Holder to the Company or BCC in accordance with the provisions of this Section 10, which address initially is, with respect to each Holder, the address of such Holder maintained by the Registrar under the Indenture, with a copy in like manner to Salomon Smith Barney Inc.; (b) if to you, initially at the respective addresses set forth in the Purchase Agreement; and (c) if to the Company or BCC, initially at their respective addresses set forth in the Purchase Agreement. All such notices and communications shall be deemed to have been duly given when received. The Initial Purchasers, the Company or BCC by notice to the other parties may designate additional or different addresses for subsequent notices or communications. 11. Successors. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including, without the need for an express assignment or any consent by the Company and BCC thereto, subsequent Holders of Securities and the New Securities. The Company and BCC hereby agree to extend the benefits of this Agreement to any Holder of Securities and the New Securities, and any such Holder may specifically enforce the provisions of this Agreement as if an original party hereto. 12. Counterparts. This Agreement may be in signed counterparts, each of which 19 shall an original and all of which together shall constitute one and the same agreement. 13. Headings. The headings used herein are for convenience only and shall not affect the construction hereof. 14. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed in the State of New York. 15. Severability. In the event that any one of more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected thereby, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law. 16. Securities Held by the Company, etc. Whenever the consent or approval of Holders of a specified percentage of principal amount or principal amount at maturity, as the case may be, of Securities or New Securities is required hereunder, Securities or New Securities, as applicable, held by the Company, BCC or their respective Affiliates shall be disregarded and deemed not to be outstanding in determining whether such consent or approval was given by the Holders of such required percentage. 17. Termination. This Agreement shall automatically terminate, without any further action on the part of the Company, BCC or the Initial Purchasers, upon (i) the termination or cancellation of the Purchase Agreement prior to the Closing Date or (ii) upon the completion of the Special Mandatory Redemption pursuant to paragraph 5(b) of the Securities and Article III of the Indenture and, with respect to a termination pursuant to clause (i) only, this Agreement shall no longer be in force and effect and no party shall have any further liability or obligation hereunder. 20 If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall represent a binding agreement among the Company, BCC and the several Initial Purchasers. Very truly yours, BRESNAN COMMUNICATIONS GROUP LLC By Bresnan Communications Company Limited Partnership, its sole member By BCI (USA), L.L.C., managing general partner By Bresnan Communications, Inc., member By /s/ Robert Bresnan -------------------------------------- Name: Robert Bresnan Title: Vice President & General Counsel Bresnan Capital Corporation By /s/ Robert Bresnan -------------------------------------- Name: Robert Bresnan Title: Authorized Representative The foregoing Agreement is hereby confirmed and accepted as of the date first above written. Salomon Smith Barney Inc. Chase Securities Inc. Morgan Stanley & Co. Incorporated TD Securities (USA) Inc. By: Salomon Smith Barney Inc. By: /s/ Craig A. Larson ----------------------------- Name: Craig A. Larson Title: Vice President 21 ANNEX A Each Broker-Dealer that receives New Securities 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 Securities. 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 Securities received in exchange for Securities where such Securities were acquired by such Broker-Dealer as a result of market-making activities or other trading activities. The Company and BCC have agreed that, starting on the Expiration Date (as defined herein) and ending on the close of business one year after the Expiration Date, it will make this Prospectus available to any Broker- Dealer for use in connection with any such resale. See "Plan of Distribution". 22 ANNEX B Each Broker-Dealer that receives New Securities for its own account in exchange for Securities, where such Securities 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 Securities. See "Plan of Distribution". 23 ANNEX C PLAN OF DISTRIBUTION Each Broker-Dealer that receives New Securities 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 Securities. 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 Securities received in exchange for Securities where such Securities were acquired as a result of market-making activities or other trading activities. The Company and BCC have agreed that, starting on the Expiration Date and ending on the close of business one year after the Expiration Date, they will make this Prospectus, as amended or supplemented, available to any Broker-Dealer for use in connection with any such resale. In addition, until __________, 199__, all dealers effecting transactions in the New Securities may be required to deliver a prospectus. Neither the Company nor BCC will receive any proceeds from any sale of New Securities by brokers-dealers. New Securities 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 Securities 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 Securities. Any Broker-Dealer that resells New Securities 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 Securities may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit resulting from any such resale of New Securities 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 one year after the Expiration Date, the Company and BCC 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 and BCC have agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the Holder of the Securities) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the Securities (including any Broker-Dealers) against certain liabilities, including liabilities under the Securities Act. [If applicable, add information required by Regulation S-K Items 507 and/or 508.] 24 ANNEX D Rider A CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: Address: Rider B If the undersigned is not a Broker-Dealer, the undersigned represents that it acquired the New Securities in the ordinary course of its business, it is not engaged in, and does not intend to engage in, a distribution of New Securities and it has no arrangements or understandings with any person to participate in a distribution of the New Securities. If the undersigned is a Broker-Dealer that will receive New Securities for its own account in exchange for Securities, it represents that the Securities to be exchanged for New Securities were acquired by it as a result of market-making activities or other trading activities and acknowledges that it will deliver a prospectus in connection with any resale of such New Securities; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. EX-5.1 13 OPINION OF PAUL, HASTINGS, JANOFSKY & WALKER LLP 1 EXHIBIT 5.1 April , 1999 Bresnan Communications Group LLC Bresnan Capital Corporation 709 Westchester Avenue White Plains, New York 10604 BRESNAN COMMUNICATIONS GROUP LLC BRESNAN CAPITAL CORPORATION REGISTRATION STATEMENT ON FORM S-4 Ladies and Gentlemen: This opinion is delivered in our capacity as counsel to (i) Bresnan Communications Group LLC, a Delaware corporation (the "Company") and (ii) Bresnan Capital Corporation, a Delaware corporation ("BCC", and together with the Company, the "Issuers"), in connection with the Issuers' registration statement on Form S-4 (the "Registration Statement") filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended, relating to the offering by the Issuers of $170,000,000 aggregate principal amount of its 8% Senior Notes due 2009, Series B and $275,000,000 aggregate principal amount at maturity of its 9 1/4% Senior Discount Notes due 2009, Series B (collectively, the "Notes"). In connection with this opinion, we have examined copies or originals of such documents, resolutions, certificates and instruments of the Issuers as we have deemed necessary to form a basis for the opinion hereinafter expressed. In addition, we have reviewed certificates of public officials, statutes, records and other instruments and documents as we have deemed necessary to form a basis for the opinion hereinafter expressed. In our examination of the foregoing, we have assumed, without independent investigation, (i) the genuineness of all signatures, and the authority of all persons or entities signing all documents examined by us and (ii) the authenticity of all documents submitted to us as originals and the conformity to authentic 2 Bresnan Communications Group LLC Bresnan Capital Corporation April ,1999 Page 2 original documents of all copies submitted to us as certified, conformed or photostatic copies. With regard to certain factual matters, we have relied, without independent investigation or verification, upon statements and representations of representatives of the Issuers. Based upon and subject to the foregoing, we are of the opinion that, as of the date hereof, when the Notes have been duly authenticated by the State Street Bank and Trust Company, in its capacity as Trustee, and duly executed and delivered on behalf of the Issuers against payment therefor as contemplated by the Registration Statement, the Notes will be legally issued and will constitute binding obligations of the Issuers, subject to applicable bankruptcy, insolvency, reorganization, fraudulent conveyance and transfer, moratorium or other laws now or hereafter in effect relating to or affecting the rights or remedies of creditors generally and by general principles of equity (whether applied in a proceeding at law or in equity) including, without limitation, standards of materiality, good faith and reasonableness in the interpretation and enforcement of contracts, and the application of such principles to limit the availability of specific equitable remedies such as specific performance. We hereby consent to being named as counsel to the Issuers in the Registration Statement, to the references therein to our firm under the caption "Legal Matters" and to the inclusion of this opinion as an exhibit to the Registration Statement. In giving this consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Commission thereunder. Very truly yours, /s/ Paul, Hastings, Janofsky & Walker LLP EX-10.1 14 LOAN AGREEMENT 1 EXHIBIT 10.1 EXECUTION COPY LOAN AGREEMENT among BRESNAN TELECOMMUNICATIONS COMPANY LLC, THE LENDERS PARTIES HERETO and TORONTO DOMINION (TEXAS), INC., as the Administrative Agent for the Lenders with TD SECURITIES (USA) INC., CHASE SECURITIES INC., THE BANK OF NOVA SCOTIA, BNY CAPITAL MARKETS, INC. and NATIONSBANC MONTGOMERY SECURITIES LLC, collectively, the Arranging Agents, CHASE SECURITIES INC., as Syndication Agent, THE BANK OF NOVA SCOTIA, THE BANK OF NEW YORK COMPANY, INC., and NATIONSBANC MONTGOMERY SECURITIES LLC, as Documentation Agents, and TD SECURITIES (USA) INC., and CHASE SECURITIES INC., as Joint Book Managers and Joint Lead Arrangers 2 INDEX
Page ---- ARTICLE 1 DEFINITIONS......................................................................................2 ARTICLE 2 LOANS...........................................................................................24 Section 2.1 The Loans.......................................................................................24 Section 2.2 Manner of Borrowing and Disbursement............................................................25 Section 2.3 Interest........................................................................................28 Section 2.4 Commitment Fee..................................................................................30 Section 2.5 Commitment Reductions...........................................................................31 Section 2.6 Prepayment of Advances..........................................................................32 Section 2.7 Repayment.......................................................................................34 Section 2.8 Notes; Loan Accounts............................................................................35 Section 2.9 Manner of Payment...............................................................................36 Section 2.10 Reimbursement...................................................................................39 Section 2.11 Pro Rata Treatment..............................................................................39 Section 2.12 Funding Source..................................................................................40 Section 2.13 Capital Adequacy................................................................................40 Section 2.14 Incremental Facility Advances...................................................................41 ARTICLE 3 CONDITIONS PRECEDENT............................................................................43 Section 3.1 Conditions Precedent to Effectiveness and to the Initial Advances...............................43 Section 3.2 Conditions Precedent to Each Advance............................................................46 ARTICLE 4 REPRESENTATIONS AND WARRANTIES..................................................................46 Section 4.1 Representations and Warranties..................................................................46 Section 4.2 Survival of Representations and Warranties, etc.................................................52 ARTICLE 5 GENERAL COVENANTS...............................................................................53 Section 5.1 Preservation of Existence and Similar Matters...................................................53 Section 5.2 Business; Compliance with Applicable Law........................................................53 Section 5.3 Maintenance of Properties.......................................................................54 Section 5.4 Accounting Methods and Financial Records........................................................54 Section 5.5 Insurance.......................................................................................54 Section 5.6 Payment of Taxes and Claims.....................................................................54 Section 5.7 Visits and Inspections..........................................................................55 Section 5.8 Payment of Indebtedness.........................................................................55 Section 5.9 Use of Proceeds.................................................................................55 Section 5.10 Management......................................................................................55 Section 5.11 Interest Rate Hedging...........................................................................55 Section 5.12 Covenants Regarding Formation of Subsidiaries, Investments and Acquisitions.....................56 Section 5.13 Payment of Wages................................................................................56 Section 5.14 Indemnity.......................................................................................56 Section 5.15 Environmental Compliance........................................................................57 Section 5.16 Year 2000 Compliance............................................................................57 ARTICLE 6 INFORMATION COVENANTS...........................................................................57 Section 6.1 Quarterly Financial Statements and Information..................................................58 Section 6.2 Annual Financial Statements and Information; Certificate of No
3 INDEX (continued) Default.........................................................................................58 Section 6.3 Performance Certificates........................................................................58 Section 6.4 Copies of Other Reports.........................................................................59 Section 6.5 Notice of Litigation and Other Matters..........................................................60 ARTICLE 7 NEGATIVE COVENANTS..............................................................................61 Section 7.1 Indebtedness of the Borrower....................................................................61 Section 7.2 Investments.....................................................................................62 Section 7.3 Limitation on Liens.............................................................................63 Section 7.4 Amendment and Waiver............................................................................63 Section 7.5 Limitations on Mergers and Acquisitions.........................................................64 Section 7.6 Limitation on Guaranties........................................................................65 Section 7.7 Restricted Payments and Purchases...............................................................65 Section 7.8 Senior Leverage Ratio...........................................................................67 Section 7.9 Total Leverage Ratio............................................................................68 Section 7.10 Annualized Operating Cash Flow to Pro Forma Debt Service Requirements Ratio.....................68 Section 7.11 Operating Cash Flow to Interest Expense.........................................................69 Section 7.12 Affiliate Transactions..........................................................................69 Section 7.13 Limitation on Leases............................................................................69 Section 7.14 ERISA Liabilities...............................................................................69 Section 7.15 Limitation on Capital Expenditures..............................................................70 ARTICLE 8 DEFAULT.........................................................................................70 Section 8.1 Events of Default...............................................................................71 Section 8.2 Remedies........................................................................................74 ARTICLE 9 ADMINISTRATIVE AGENT............................................................................75 Section 9.1 Appointment and Authorization...................................................................75 Section 9.2 Interest Lender Holders.........................................................................75 Section 9.3 Consultation with Counsel.......................................................................76 Section 9.4 Documents.......................................................................................76 Section 9.5 Administrative Agent and Affiliates.............................................................76 Section 9.6 Responsibility of the Administrative Agent......................................................76 Section 9.7 Security Documents..............................................................................76 Section 9.8 Action by Administrative Agent..................................................................77 Section 9.9 Notice of Default or Event of Default...........................................................77 Section 9.10 Responsibility Disclaimed.......................................................................77 Section 9.11 Indemnification.................................................................................78 Section 9.12 Credit Decision.................................................................................78 Section 9.13 Successor Administrative Agents.................................................................79 ARTICLE 10 CHANGE IN CIRCUMSTANCES AFFECTING LIBOR ADVANCES................................................79 Section 10.1 LIBOR Basis Determination Inadequate or Unfair..................................................79 Section 10.2 Illegality......................................................................................79 Section 10.3 Effect On Other Advances........................................................................80 ARTICLE 11 MISCELLANEOUS...................................................................................81
-ii- 4 INDEX (continued) Section 11.1 Notices.........................................................................................81 Section 11.2 Expenses........................................................................................82 Section 11.3 Waivers.........................................................................................83 Section 11.4 Determination by Administrative Agent Conclusive and Binding....................................83 Section 11.5 Set-Off.........................................................................................83 Section 11.6 Assignment......................................................................................84 Section 11.7 Accounting Principles...........................................................................88 Section 11.8 Counterparts....................................................................................88 Section 11.9 Governing Law...................................................................................88 Section 11.10 Severability....................................................................................88 Section 11.11 Interest and Charges............................................................................89 Section 11.12 Headings........................................................................................89 Section 11.13 Amendment and Waiver............................................................................89 Section 11.14 Survival........................................................................................90 Section 11.15 Entire Agreement................................................................................90 Section 11.16 Obligations Several.............................................................................90 Section 11.17 Confidentiality.................................................................................90 Section 11.18 Securities Laws.................................................................................90 ARTICLE 12 WAIVER OF JURY TRIAL............................................................................91 Section 12.1 Waiver of Jury Trial............................................................................91
-iii- 5 EXHIBITS Exhibit A - Form of Assignment of Notes Exhibit B - Form of Borrower's Pledge Agreement Exhibit C - Form of Facility A Term Loan Note Exhibit D - Form of Facility B Term Loan Note Exhibit E - Form of Revolving Loan Note Exhibit F - Form of Incremental Facility Note Exhibit G - Form of Holdco Pledge Agreement Exhibit H - Form of Notice of Incremental Facility Commitment Exhibit I - Form of Request for Advance Exhibit J - Form of Subsidiary Guaranty Exhibit K - Form of Borrower's Loan Certificate Exhibit L - Form of Holdco's Loan Certificate Exhibit M - Form of Opinion of Counsel for the Borrower Exhibit N - Form of Opinion of FCC Counsel Exhibit O - Form of Assignment and Assumption Agreement Exhibit P - Form of BCC LP Guaranty Exhibit Q - Form of Member Debt Subordination Agreement SCHEDULES Schedule 1 - Commitment Ratios Schedule 2 - Contemplated Transactions Schedule 3 - List of Licenses Schedule 4 - Liens of Record Schedule 5 - Exceptions to Necessary Authorizations Schedule 6 - Subsidiaries Schedule 7 - Litigation, Overbuilding, Other Franchises and Other Providers Schedule 8 - Year 2000 Review and Assessment Schedule 9 - Lender Notice Addresses -iv- 6 LOAN AGREEMENT among BRESNAN TELECOMMUNICATIONS COMPANY LLC, THE LENDERS PARTIES HERETO and TORONTO DOMINION (TEXAS), INC., as the Administrative Agent for the Lenders with TD SECURITIES (USA) INC., CHASE SECURITIES INC., THE BANK OF NOVA SCOTIA, BNY CAPITAL MARKETS, INC. and NATIONSBANC MONTGOMERY SECURITIES LLC, collectively, the Arranging Agents, CHASE SECURITIES INC., as Syndication Agent, THE BANK OF NOVA SCOTIA, THE BANK OF NEW YORK COMPANY, INC., and NATIONSBANC MONTGOMERY SECURITIES LLC, as Documentation Agents and TD SECURITIES (USA) INC., and CHASE SECURITIES INC., as Joint Book Managers and Joint Lead Arrangers The Borrower, the Lenders and the Administrative Agent hereby agree as follows as of the 2nd day of February, 1999: RECITALS WHEREAS, the Borrower has requested and the Lenders have agreed, subject to the terms and conditions set forth herein, to make available to Borrower the credit facilities hereinafter described; NOW, THEREFORE, for and in consideration of the premises set forth above, the covenants and agreements hereinafter set forth and other good and valuable consideration, 7 the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as set forth below: ARTICLE 1. DEFINITIONS Definitions For the purposes of this Agreement: "Acquisition" shall mean (whether by purchase, Exchange, issuance of stock or other equity or debt securities, merger, reorganization or any other method) (a) any acquisition by the Borrower, or any Restricted Subsidiary of the Borrower, of any other Person, which Person shall then become a Restricted Subsidiary consolidated with the Borrower or any such Restricted Subsidiary in accordance with GAAP or (b) any acquisition by the Borrower or any Restricted Subsidiary of the Borrower of (i) all or any substantial part of the assets of any other Person, or (ii) any assets that constitute a division or operating unit of the business of any other Person. "Administrative Agent" shall mean Toronto Dominion (Texas), Inc., a Delaware corporation, in its capacity as Administrative Agent for the Lenders. "Administrative Agent's Office" shall mean the office of the Administrative Agent located at 909 Fannin Street, Suite 1700, Houston, Texas 77010, or such other office of the Administrative Agent as may be specified in accordance with the provisions of Section 11.1 of this Agreement. "Advance" or "Advances" shall mean amounts advanced by the Lenders to the Borrower pursuant to Article 2 hereof on the occasion of any borrowing. "Affiliate" shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person. "Agreement" shall mean this Loan Agreement. "Agreement Date" shall mean February 2, 1999. "Annualized Operating Cash Flow" shall mean an amount equal to the Operating Cash Flow of the Borrower and its Restricted Subsidiaries for the immediately preceding fiscal quarter for which financial statements have been delivered to the Administrative Agent, multiplied by four (4); provided, however, that the calculation of Annualized Operating Cash Flow (a) on the Agreement Date, shall be determined by annualizing the Operating Cash Flow of the Contributed Assets for the nine (9) calendar months ended September 30, 1998, -2- 8 and adjusting such Operating Cash Flow for Acquisitions completed by BCC LP after September 30, 1998, and giving pro forma effect to programming discounts and reductions in contractually allocated overhead, (b) for all calculations from the Agreement Date through the date on which the March 31, 1999 financial statements are delivered, shall be the Operating Cash Flow for the Contributed Assets for the quarter ended December 31, 1998, multiplied by four (4), adjusted for Acquisitions by BCC LP during such period or by the Borrower during such period and giving pro forma effect to programming discounts and reductions in contractually allocated overhead, as such Operating Cash Flow is set forth in the financial statements for such period delivered to the Administrative Agent and the Lenders on or about the Agreement Date, and (c) for all calculations thereafter through the delivery of June 30, 1999 financial information, shall be the sum of (i) Operating Cash Flow for the Contributed Assets for the quarter ended December 31, 1998 adjusted for Acquisitions by BCC LP during such period or by the Borrower during such period and giving pro forma effect to programming discounts and reduction in contractually allocated overhead, multiplied by three (3) plus (ii) the Operating Cash Flow of the Borrower and its Restricted Subsidiaries for the period from the Agreement Date through March 31, 1999 on a quarterized basis. Upon delivery of audited financial statements for the period ended December 31, 1998 the Arranging Agents shall compare such information to the unaudited financial statements for such quarter, and shall, if applicable, make appropriate adjustments to the Applicable Margins based thereon. Notwithstanding the foregoing for purposes of clarification, (i) the March 31, 1999 financial statement calculations shall be done using the methodology set forth in clause (c) of this definition and (ii) the June 30, 1999 financial statement calculations shall be done using the methodology set forth prior to the proviso in this definition. "Applicable Law" shall mean, in respect of any Person, all provisions of constitutions, statutes, rules, regulations and orders of governmental bodies or regulatory agencies applicable to such Person, including, without limiting the foregoing, the Licenses, the Federal Communications Act of 1934, the Cable Communications Policy Act of 1984, and Title 17 of the United States Code, and all orders and decrees of all courts and arbitrators in proceedings or actions to which the Person in question is a party. "Applicable Margin" shall mean (a) with respect to the Facility A Loans, the interest rate margin applicable to Prime Rate Advances or LIBOR Advances, as the case may be, in each case determined in accordance with Section 2.3(f) hereof and (b) with respect to the Facility B Term Loan, (i) at all times when the Total Leverage Ratio is greater than or equal to 5.50:1, (A) 1.750% for Prime Rate Advances and (B) 2.750% for LIBOR Advances and, (ii) at all times when the Total Leverage Ratio is less than 5.50:1 (A) 1.500% for the Prime Rate Advances and (B) 2.500% for LIBOR Advances (in each case calculated as set forth in Section 2.3(f) hereof). "Arranging Agents" shall mean collectively, TD Securities (USA) Inc., Chase Securities Inc., The Bank of Nova Scotia, BNY Capital Markets Inc. and NationsBanc -3- 9 Montgomery Securities LLC. "Assignment of Notes" shall mean any Assignment of Notes between the Borrower or any domestic Restricted Subsidiary and the Administrative Agent, or any other similar agreement, each substantially in the form of Exhibit A attached hereto. "AT&T Investment" shall mean the joint venture to be entered into between the Borrower, Holdco or a Restricted Subsidiary and AT&T Corporation or an Affiliate thereof relating to the use of the Borrower's cable television systems in connection with the provision of telephony and certain other services by the joint venture. "Authorized Signatory" shall mean such senior personnel of the Borrower as may be duly authorized and designated in writing to execute documents, agreements and instruments on behalf of the Borrower. "Bad Axe Disposition" shall mean that certain disposition described as the Bad Axe Disposition on Schedule 2 attached hereto. "Basic Subscriber" shall mean a dwelling unit, including a separate apartment which is separately billed for cable television services within an apartment building or other multi-family dwelling, in respect of which the Borrower or a Restricted Subsidiary of the Borrower has in effect an agreement to provide one or more of the basic cable television subscription services offered by it and for which the Borrower or a Restricted Subsidiary of the Borrower has received at least one full month's payment at the rate customarily charged, except for those dwelling units for which payment is more than sixty (60) days past due, or for which notices of termination of service have been received. As to bulk subscribers, such as hotels, motels, and apartments, billed on a bulk basis, the number of Basic Subscribers shall be computed by dividing the aggregate monthly basic cable revenues from such bulk subscribers by the average monthly subscription price received by the Borrower or such Subsidiary of the Borrower from its other Basic Subscribers. "BCC LP" shall mean Bresnan Communications Company Limited Partnership, a Michigan limited partnership. "Blackstone Funds" shall mean Blackstone Capital Partners III Merchant Banking Fund, L.P., Blackstone Offshore Capital Partners III, L.P. and Blackstone Family Investment Partnership III, L.P. "Blackstone Funds Related Parties" shall mean the Blackstone Funds and any of their Affiliates and each general partner of the Blackstone Funds and any Affiliate of a Blackstone Fund who is a partner or employee of the Blackstone Group L.P. "Borrower" shall mean Bresnan Telecommunications Company LLC, a Delaware -4- 10 limited liability company. "Borrower's Pledge Agreement" shall mean any Borrower's Pledge Agreement between the Borrower and the Administrative Agent, or any other similar agreement substantially in the form of Exhibit B attached hereto, pursuant to which the Borrower will pledge to the Administrative Agent, for itself and on behalf of the Lenders, all of its ownership interests in any of its Restricted Subsidiaries existing on the Agreement Date. "Bresnan Assumption Agreement" shall mean that certain Assumption Agreement of William J. Bresnan dated as of November 7, 1984, together with a letter from Mr. Bresnan dated as of December 23, 1986, a supplemental letter from Mr. Bresnan dated as of May 12, 1988, a supplemental letter from Mr. Bresnan dated as of October 10, 1990, a supplemental letter from Mr. Bresnan dated as of July 25, 1994, a supplemental letter from Mr. Bresnan dated as of May 16, 1997, and a supplemental letter from Mr. Bresnan of even date herewith to the Administrative Agent and the Banks regarding the full applicability of such assumption agreement to the Loans. "Buffalo Acquisition" shall mean that certain acquisition described as the Buffalo Acquisition on Schedule 2 attached hereto. "Business Day" shall mean a day on which the Lenders and foreign exchange markets are open for the transaction of business required for this Agreement in New York, New York, Houston, Texas and London, England as relevant to the determination to be made or action to be taken. "Capital Expenditures" shall mean, in respect of any Person, expenditures for the purchase, construction or installation of property, plant or equipment (other than Acquisitions (including, with respect to the Contemplated Transactions and the Contributed Assets), Investments and Exchanges permitted hereunder, expenditures for repairs to the extent covered by the proceeds of insurance and purchases of similar assets made with Net Proceeds of any disposition of assets) which are capitalized in accordance with GAAP. "Capitalized Lease Obligation" shall mean that portion of any obligation of a Person as lessee under a lease which at the time would be required to be capitalized on the balance sheet of such lessee in accordance with GAAP. "Change of Control" shall mean (a) the failure, at any time during the term hereof, of TCIC and/or any of its Affiliates, directly or indirectly, including by way of consolidation or merger, to own at least twenty-five percent (25%) of the membership interests of the Borrower or (b) the failure, at any time, prior to January 29, 2002, of the Blackstone Funds Related Parties, directly or indirectly, including by way of consolidation or merger, to own at least twenty-percent (20%) of the membership interests of the Borrower, or (c) after such time as the Blackstone Funds Related Parties no longer own the minimum percentage interest -5- 11 referred to in clause (b), any Person, other than Bresnan Communications, Inc. and/or its Affiliates, shall own a direct or indirect percentage interest in the total membership interests (of any class) of the Borrower greater than the percentage interest held, directly or indirectly, by TCIC and/or any of its Affiliates. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Collateral" shall mean any property of any kind defined as Collateral under any Loan Document. "Commitments" shall mean, collectively, the Revolving Loan Commitment, the Facility A Term Loan Commitment , the Facility B Term Loan Commitment and any Incremental Facility Commitments. "Commitment Ratios" shall mean the percentages in which the Lenders are severally bound to make Advances to the Borrower under the Revolving Loan Commitment, the Facility A Term Loan Commitment and the Facility B Term Loan Commitment, as set forth on Schedule 1 attached hereto (together with dollar amounts) as of the Agreement Date. "Contemplated Transactions" shall mean (i) the Omega Acquisition, (ii) the Buffalo Acquisition, (iii) the Nebraska Acquisition and (iv) the Bad Axe Disposition. "Contributed Assets" shall mean the assets acquired by the Borrower and its Restricted Subsidiaries on or about the Agreement Date, or, when applicable, after the Agreement Date, in connection with the transactions contemplated hereby (including the Contribution Agreement). "Contribution Agreement" shall mean that certain Contribution Agreement by and among Blackstone Cable Acquisition Company, LLC, BCC LP, BCI (USA), L.P., a Delaware limited partnership, BCI Management, L.P., a Delaware limited partnership, William J. Bresnan, an individual, TCID Michigan and the other Persons set forth on Exhibit A to the Contribution Agreement dated as of June 3, 1998, as amended. "Debt Service Requirements" shall mean for the Borrower and its Restricted Subsidiaries on a consolidated basis, for any test period, after giving effect to any outstanding LIBOR Advances and Interest Hedge Agreements, the sum of (a) Scheduled Principal Payments during such period, (b) all principal payments scheduled to be made during such period in respect of Funded Debt (to the extent not included in clause (a) hereof), and (c) Interest Expense during such period. For purposes of calculating Debt Service Requirements, to the extent that interest payments on the Loans for the calculation period are not fixed by way of a LIBOR Basis or an Interest Hedge Agreement for the entire calculation period, interest shall be calculated on the outstanding Loans using the LIBOR Basis for a hypothetical one (1) month LIBOR Advance on the calculation date in the amount of the -6- 12 Loans then outstanding, which are not subject to a LIBOR Advance or an Interest Hedge Agreement for such period, using the Applicable Margin on the calculation date (and giving effect to any anticipated adjustments thereto as a result of payments under Sections 2.5, 2.6 and 2.7(a), 2.7 (b) and 2.7(c) hereof). "Default" shall mean any of the events specified in Section 8.1, regardless of whether there shall have occurred any passage of time or giving of notice or both that would be necessary in order to constitute such event an Event of Default. "Default Rate" shall mean a simple per annum interest rate equal to the sum of (a) the Prime Rate Basis plus (b) 2.00%. "Documentation Agents" shall mean collectively, The Bank of New York Company, Inc., The Bank of Nova Scotia and NationsBanc Montgomery Securities LLC. "Dow Jones Screen LIBO Page" shall mean the display designated as page 3750 on the Dow Jones Market Service (formerly known as the Telerate Service) or such other page as may replace page 3750 of such service for the purpose of displaying London interbank offered rates of major banks for dollar deposits or such other services or services as may be nominated by the British Bankers' Association for the purpose of displaying London interbank offered rates for dollar deposits. "Environmental Law" shall mean any applicable federal, state or local statute, law, ordinance, rule, regulation or decree regulating or relating to industrial hygiene or the protection of the environment or imposing liability or standards of conduct with respect to the use, generation, handling, storage, treatment, transport, or disposal, or otherwise concerning, any hazardous, toxic or dangerous waste, substance or material, now or at any time hereafter in effect. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as in effect on the Agreement Date and as such Act may be amended thereafter from time to time, together with all rules and regulations thereunder. "Event of Default" shall mean any of the events specified in Section 8.1 hereof to be an Event of Default, provided that any applicable notice or cure period (or both) specified in the applicable subsection of Section 8.1 hereof shall have been given or shall have expired (or both), as the case may be. "Excess Cash Flow" shall mean, with respect to any test period, Operating Cash Flow of the Borrower and its Restricted Subsidiaries for such period less the sum of (a) Interest Expense paid during such period, (b) Capital Expenditures made during such period, (c) Scheduled Principal Payments made during such period, (d) scheduled principal payments made in respect of Funded Debt (to the extent not included in clause (c) hereof), and (e) -7- 13 Restricted Payments made pursuant to Sections 7.7(a) and (b) hereof during such period. "Exchange" shall mean any (a) substantially concurrent swap, exchange or similar transaction in respect of assets of the Borrower or any Restricted Subsidiary of the Borrower and assets of a similar nature (and in the same line of business) and value (after giving effect to any cash paid or received) of another Person, or (b) Acquisition, holding and disposition of assets within a 365 day period in connection with the Acquisition of other assets of a similar nature and value (after giving effect to any cash paid or received); provided, however, that the cash portion of any Exchange (after giving effect to both the applicable acquisition(s) and disposition(s)) (1) received by the Borrower or its Restricted Subsidiaries, or (2) paid by the Borrower or its Restricted Subsidiaries shall (x) constitute in the case of (1) above proceeds in connection with a disposition of assets for purposes of this Agreement and (y) in the case of (2) above, an amount expended in connection with an Acquisition for purposes of this Agreement to the extent applicable. Notwithstanding anything to the contrary herein, any Exchange of assets (including stock and other securities) of the Borrower or a Restricted Subsidiary (other than stock or other securities issued to such Persons by an Unrestricted Subsidiary) shall be for assets to be owned. "Facility A Loans" shall mean the Revolving Loans and the Facility A Term Loans. "Facility A Maturity Date" shall mean June 30, 2007 or such earlier date as payment of the Facility A Loans shall be due (whether by acceleration, prepayment in full, or otherwise). "Facility A Term Loan Commitment" shall mean the several obligations of the Lenders having Facility A Term Loan Commitments to advance to the Borrower on the Agreement Date the aggregate sum of up to $328,000,000 in accordance with their respective Commitment Ratios for Facility A Term Loans and on the terms and conditions herein. "Facility A Term Loan Notes" shall mean those promissory notes in the aggregate principal amount of $328,000,000, one such note issued by the Borrower to each of the Lenders having Facility A Term Loan Commitments, each one substantially in the form of Exhibit C attached hereto, and any extensions, renewals, amendments, or substitutions to any of the foregoing. "Facility A Term Loans" shall mean the Loans advanced by the Lenders having Facility A Term Loan Commitments pursuant to the Facility A Term Loan Commitments. "Facility B Term Loan Commitment" shall mean the several obligations of the Lenders having Facility B Term Loan Commitments to advance to the Borrower on the Agreement Date the aggregate sum of up to $172,000,000 in accordance with their respective Commitment Ratios for Facility B Term Loans and on the terms and conditions herein. -8- 14 "Facility B Maturity Date" shall mean February 2, 2008 or such earlier date as payment of the Facility B Term Loans shall be due (whether by acceleration, prepayment in full, or otherwise). "Facility B Term Loan Notes" shall mean those certain promissory notes in the aggregate principal amount of $172,000,000, one such note issued by the Borrower to each of the Lenders having Facility B Term Loan Commitments, each one substantially in the form of Exhibit D attached hereto, and any extensions, renewals, amendments or substitutions to any of the foregoing. "Facility B Term Loans" shall mean the Loans advanced by the Lenders having Facility B Term Loan Commitments pursuant to the Facility B Term Loan Commitment. "FCC" shall mean the Federal Communications Commission or any successor thereto. "Federal Funds Rate" shall mean, as of any date, the interest rate charged to The Toronto-Dominion Bank, New York Branch, on borrowings of overnight funds from the Federal Reserve Bank of New York. "Funded Debt" shall mean as applied to the Borrower, as of any calculation date, without duplication, the sum of (a) all Indebtedness for Money Borrowed of the Borrower and its Restricted Subsidiaries (other than any Member Subordinated Debt), (b) the principal portion of all Capitalized Lease Obligations of the Borrower and its Restricted Subsidiaries, (c) reimbursement obligations of the Borrower and its Restricted Subsidiaries with respect to standby letters of credit with respect to Indebtedness for Money Borrowed (which excludes standby letters of credit entered into the ordinary course of business such as in lieu of bonds, security deposits and the like), and (d) all Guaranties issued by the Borrower or its Restricted Subsidiaries of Indebtedness of the type described in the foregoing clauses (a) through (c); less approximately $47,000,000 (less amounts paid with respect to the Omega Acquisition) held in cash on the Agreement Date from the proceeds of prior dispositions to make future Acquisitions, Investments and/or Capital Expenditures (as such amount may be reduced from time to time in connection therewith) and including interest thereon. "GAAP" shall mean, as in effect from time to time, generally accepted accounting principles in the United States, consistently applied. "Guaranty" or "Guaranteed," as applied to an obligation of another Person, shall mean and include (a) a guaranty, direct or indirect, in any manner, of any part or all of such obligation and (b) an agreement, direct or indirect, contingent or otherwise, the practical effect of which is to assure in any way the payment or performance (or payment of damages in the event of non-performance) of any part or all of such obligation, including, without limiting the foregoing, any reimbursement obligations as to amounts drawn down by beneficiaries of outstanding letters of credit. -9- 15 "Holdco" shall mean Bresnan Communications Group LLC. "Holdco Notes" shall mean, collectively, (a) those certain 8% Senior Notes due 2009 issued by Holdco and Bresnan Capital Corporation on February 2, 1999 and (b) those certain 9-1/4% Senior Discount Notes due 2009 issued by Holdco and Bresnan Capital Corporation on February 2, 1999, having substantially the same terms and conditions described in that certain Offering Memorandum dated January 25, 1999, as the same may be refinanced or refunded on the same or better terms. "Holdco Pledge Agreement" shall mean that certain Holdco Pledge Agreement dated as of the Agreement Date between Holdco and the Administrative Agent, or any other similar agreement, substantially in the form of Exhibit G attached hereto, pursuant to which Holdco has pledged to the Administrative Agent, for itself and on behalf of the Lenders, all of Holdco's membership interests in the Borrower. "Incremental Facility Advance" shall mean an Advance made by any Lender holding an Incremental Facility Commitment pursuant to Section 2.14 hereof. "Incremental Facility Commitment" shall mean the commitment of any Lender or Lenders to make advances to the Borrower in accordance with Section 2.14 hereof. The Borrower may obtain Incremental Facility Commitments from more than one Lender, which commitments shall be several obligations of each such Lender. "Incremental Facility Commitment Ratios" shall mean percentages in which the Lenders holding an Incremental Facility Commitment are severally bound to fund their respective portions of Advances to the Borrower under the Incremental Facility Commitment which are set forth in the Notice of Incremental Facility Commitment. "Incremental Facility Lenders" shall mean Lenders having an Incremental Facility Commitment or Incremental Facility Loans. "Incremental Facility Loans" shall mean the amounts advanced by the Lenders holding an Incremental Facility Commitment to the Borrower as Incremental Facility Loans under the Incremental Facility Commitment, not to exceed the amount of the Incremental Facility Commitment, and evidenced by the Incremental Facility Notes. "Incremental Facility Notes" shall mean those certain Incremental Facility Notes described in Section 2.14 hereof. "Indebtedness" shall mean, with respect to any Person, (a) all items, except items of equity or of capital stock or of surplus or of general contingency or deferred tax reserves, which in accordance with GAAP would be included in determining total liabilities as shown -10- 16 on the liability side of a balance sheet of such Person, (b) to the extent not otherwise included, all direct or indirect obligations secured by any Lien to which any property or asset owned by such Person is subject, whether or not the obligation secured thereby shall have been assumed, (c) to the extent not otherwise included, all Capitalized Lease Obligations of such Person, all obligations of such Person with respect to leases constituting part of a sale and lease-back arrangement, and all reimbursement obligations with respect to letters of credit, and (d) to the extent not otherwise included, all Guaranties of Indebtedness and all obligations under Interest Hedge Agreements shown on the balance sheet of such Person. "Indebtedness for Money Borrowed" shall mean, with respect to any Person, money borrowed and Indebtedness represented by notes payable and drafts accepted representing extensions of credit, all obligations evidenced by bonds, debentures, notes or other similar instruments, and all Indebtedness (including Capitalized Lease Obligations and obligations with respect to leases constituting part of a sale and lease-back arrangement) issued or assumed as full or partial payment for property or services, whether or not any such notes, drafts, obligations or Indebtedness represent Indebtedness for money borrowed (exclusive of Indebtedness described in Sections 7.1(b), (f), (h), (i) and (j) hereof). Where obligations are evidenced by bonds, debentures, notes or other similar instruments whose face amount exceeds the amount received by the Borrower with respect thereto, only the amount received plus debt discount amortized as of the calculation date need be taken into account as Indebtedness for Money Borrowed (exclusive of Indebtedness described in Sections 7.1(b), (f), (h), (i) and (j) hereof). "Indemnitee" shall have the meaning ascribed thereto in Section 5.14 hereof. "Interest Expense" shall mean, with respect to the Borrower and its Restricted Subsidiaries, for any test period, the sum of (a) cash interest paid or payable in respect of Funded Debt and (b) any Restricted Payments made by the Borrower pursuant to Section 7.7(c) hereof; provided, however, that for all calculation periods ending prior to March 31, 2000, (i) Interest Expense shall be annualized based on the Interest Expense for the number of full calendar months which have elapsed since the Agreement Date (for purposes of illustration only, Interest Expense for March 31, 1999, shall be calculated by multiplying the Interest Expense for March 1999 by 12), and (ii) Interest Expense shall include the monthly accrued portion of interest payable in cash in respect of the Holdco Notes (and not the actual cash payment thereon or Restricted Payments in respect thereof). "Interest Hedge Agreement" shall mean the obligations of any 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 and shall include, without limitation, interest rate swaps, caps, floors, collars and similar agreements. -11- 17 "Interest Period" shall mean, (a) in connection with any Prime Rate Advance, the period beginning on the date such Advance is made and ending on the last day of the calendar quarter in which such Advance is made; provided, however, that if a Prime Rate Advance is made on the last day of any calendar quarter, it shall have an Interest Period ending on the last day of the following calendar quarter; and (b) in connection with any LIBOR Advance, the term of such Advance selected by the Borrower or otherwise determined in accordance with this Agreement. Notwithstanding the foregoing, however, (i) any applicable Interest Period which would otherwise end on a day which is not a Business Day shall be extended to the next succeeding Business Day unless, with respect to LIBOR Advances only, such Business Day falls in another calendar month, in which case such Interest Period shall end on the immediately preceding Business Day, (ii) with respect to LIBOR Advances only, any Interest Period which begins on a day for which there is no numerically corresponding day in the calendar month during which such Interest Period is to end, shall (subject to clause (i) above) end on the last day of such calendar month, and (iii) no Interest Period shall extend beyond the Facility A Maturity Date, the Facility B Maturity Date or any Incremental Facility maturity date, as applicable, or such earlier date as would interfere with the Borrower's repayment obligations under Sections 2.5 and 2.7 hereof. Interest shall be due and payable with respect to any Advance as provided in Section 2.3 hereof. "Interest Rate Basis" shall mean the Prime Rate Basis or the LIBOR Basis, as applicable. "Investment" shall mean any investment or loan by the Borrower or any of the Borrower's Restricted Subsidiaries in any other Person which owns or operates Systems or any other Permitted Business (either domestically or internationally), which Person, (a) after giving effect to such investment, is not consolidated with the Borrower or such Subsidiary in accordance with GAAP, or (b) is designated in writing by the Borrower as an Unrestricted Subsidiary. "Lenders" shall mean those financial institutions whose names are set forth on the signature pages hereof as "Lenders" and any other Persons which hereafter become parties hereto as Lenders pursuant to and in accordance with the terms hereof; and "Lender" shall mean any of the foregoing Lenders. "LIBOR" means, for any Interest Period, the rate of interest per annum determined by the Administrative Agent to be the arithmetic mean (rounded upward to the next 1/100th of 1%) of the (a) offered rates for deposits in United States dollars for a period equal to such Interest Period quoted on the second Business Day prior to the first day of such Interest Period, as such rates appear on the Reuters Screen LIBO Page as of 11:00 a.m. (London time) on such date, if at least two such offered rates appear on the Reuters Screen LIBO Page, or (b) if, as of 11:00 a.m. (London time) on any such date fewer than two such rates -12- 18 appear on the Reuters Screen LIBO Page, the rate for deposits in United States dollars for a period equal to such Interest Period quoted on the second Business Day prior to the first day of such Interest Period, as such rate appears on the Dow Jones Screen LIBO Page as of 11:00 a.m. (London time) on such date, in each case as determined by the Administrative Agent and notified to the Lenders and the Company on such second prior Business Day. If LIBOR cannot be determined based on either the Reuters Screen LIBO Page or Dow Jones Screen LIBO Page, LIBOR means the rate per annum, as supplied to the Administrative Agent, quoted by the London branch of prime banks in the London interbank market for deposits in United States dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period in an amount approximately equal to the principal amount of the Loans to which such Interest Period is to apply and for a period of time comparable to such Interest Period. "LIBOR Advance" shall mean an Advance bearing interest at the LIBOR Basis which the Borrower requests to be made as a LIBOR Advance or which is reborrowed as a LIBOR Advance, in accordance with the provisions of Section 2.2 hereof, and which shall be in a principal amount of at least $2,000,000 and in an integral multiple of $500,000. "LIBOR Basis" shall mean a simple per annum interest rate (rounded upward to the nearest one-one hundredth (1/100th) of one percent) equal to the sum of (a) the quotient of (i) LIBOR divided by (ii) one minus the LIBOR Reserve Percentage, stated as a decimal, plus (b) the Applicable Margin then in effect. The LIBOR Basis shall apply to Interest Periods of one (1), two (2), three (3), six (6), nine (9) and twelve (12) months, and shall in all cases be subject to Article 10 hereof, and, once determined for any LIBOR Advance, shall remain unchanged during the applicable Interest Period, except for changes to reflect adjustments in the LIBOR Reserve Percentage. The interest payable on LIBOR Advances shall also be subject to adjustment as provided in Section 2.3(f). The Borrower may not elect an Interest Period in excess of six (6) months unless the Administrative Agent has notified the Borrower that each of the Lenders (in such Lender's discretion) has available to it deposits with an interest period of such length in the London Eurodollar market. "LIBOR Reserve Percentage" shall mean the percentage which is in effect and to which the applicable Lender is subject from time to time (but only for the actual number of days such Lender's Loans are subject to such reserve percentage during the applicable Interest Period) under Regulation D of the Board of Governors of the Federal Reserve System, as such regulation may be amended from time to time, as the maximum reserve requirement applicable with respect to Eurocurrency Liabilities (as that term is defined in Regulation D). "Licenses" shall mean any rights, whether based upon any agreement, statute, ordinance or otherwise, granted by any governmental authority to the Borrower or any Restricted Subsidiary of the Borrower to own and operate any Permitted Business, described as of the Agreement Date on Schedule 3 attached hereto, and any other such rights -13- 19 subsequently obtained by the Borrower or any Restricted Subsidiary of the Borrower, together with any amendment, modification or replacement with respect thereto. "Lien" shall mean, with respect to any property, any mortgage, lien, pledge, collateral assignment, charge, security interest, title retention agreement, levy, execution, attachment, garnishment or other encumbrance of any kind in respect of such property, whether or not choate, vested or perfected. "Loan Documents" shall mean, without limitation, this Agreement, the Notes, the Security Documents, any Interest Hedge Agreement between the Borrower, on the one hand, and the Administrative Agent or one or more of the Lenders, on the other hand, and the Notice of Incremental Facility Commitment and any other document or agreement executed in connection herewith. "Loans" shall mean, collectively, the Facility A Term Loans, the Facility B Term Loans, the Revolving Loans and, if applicable, the Incremental Facility Loans; and "Loan" shall mean any one of the foregoing Loans. "Majority Lenders" shall mean, at any time, Lenders having fifty-one percent (51%) or more of the aggregate principal amount of all of the following (a) the Facility A Term Loans then outstanding, (b) the Facility B Term Loans then outstanding, (c) the Incremental Facility Loans, if any, then outstanding, and (d)(i) until such time as the Revolving Loan Commitment has been terminated or cancelled, the Revolving Loan Commitment, and (ii) thereafter, the Revolving Loans then outstanding. "Manager" shall mean BCI (USA), LLC. "Materially Adverse Effect" shall mean any materially adverse effect upon the business, assets, properties, financial condition or results of operations of the Borrower and its Restricted Subsidiaries on a consolidated basis. "Member Debt Subordination Agreement " shall mean any Member Debt Subordination Agreement, each substantially in the form of Exhibit Q attached hereto, pursuant to which Member Subordinated Debt is subordinated to the Obligations. "Member Subordinated Debt" shall mean unsecured Indebtedness for Money Borrowed in favor of any of TCIC (or its successors or its Affiliates), the Blackstone Funds Related Parties (or any wholly owned Subsidiary thereof) or the Manager (or its Affiliates) or any other partner of BCC LP (or its Affiliates) that is subject to a Member Debt Subordination Agreement, and which Indebtedness does not have interest which is payable in cash other than as permitted under Section 7.7 (g) hereof. "Multiemployer Plan" shall have the meaning set forth in Section 4001(a)(3) of -14- 20 ERISA. "Nebraska Acquisition" shall mean that certain Acquisition described as the Nebraska Acquisition on Schedule 2 attached hereto. "Necessary Authorizations" shall mean all approvals and licenses from, and all filings and registrations with, any governmental or other regulatory authority, including without limiting the foregoing the applicable Licenses and approvals, licenses, filings and registrations under the Federal Communications Act of 1934, necessary in order to enable the Borrower and its Restricted Subsidiaries to acquire, construct, maintain and operate the Systems. "Net Income" shall mean, as applied to any Person for any period, the aggregate amount of net income of such Person, after taxes paid, for such period as determined in accordance with GAAP. "Net Proceeds" shall mean, with respect to any sale, lease, transfer, or other disposition of any assets or all or any material portion of any System (whether singly, or in a series of transactions) of the Borrower or its Restricted Subsidiaries permitted hereunder, the gross sales price received in cash for the assets being sold (including, without limitation, any payments received for a non-competition covenant received by the Borrower or its Restricted Subsidiaries, but excluding Exchanges) net of (a) amounts reserved, if any, for taxes payable and distributions permitted under Section 7.7(a) or (b) hereof to be made with respect to the sale, (b) reasonable and customary transaction costs payable by the Borrower or its Restricted Subsidiaries, to the extent actually paid including principal, interest, premiums, fees and other amounts payable in respect of Indebtedness (other than the Loans) associated with such sale, (c) contingencies with respect to such sale appropriately reserved for by the Borrower or its Restricted Subsidiaries, and (d) until actually received by the Borrower and its Restricted Subsidiaries, any portion of the sales price held in escrow or paid in installments (including the portion of lease payments allocable to "sales price"). "Notes" shall mean collectively the (a) Revolving Loan Notes, (b) Facility A Term Loan Notes, (c) Facility B Term Loan Notes and (d) Incremental Facility Notes, if any. "Notice of Incremental Facility Commitment" shall mean the notice by the Borrower of the Incremental Facility Commitment, which notice shall be substantially in the form of Exhibit H attached hereto and shall be delivered to the Administrative Agent and the Lenders. "Obligations" shall mean (a) all obligations of the Borrower to the Lenders and the Administrative Agent under this Agreement and the other Loan Documents (including, without limitation, obligations under Interest Hedge Agreements between the Borrower, on the one hand, and the Administrative Agent or one or more Persons (if such Persons were -15- 21 Lenders at the time such Interest Hedge Agreement was entered into (or extended, if such Interest Hedge Agreement has been extended beyond its initial term)), on the other hand), as they may be amended from time to time, or as a result of making the Loans, however arising or evidenced, whether now existing or hereafter arising, absolute or contingent, due or to become due, and (b) the obligation to pay an amount equal to the amount of any and all damage, if any, which the Lenders and the Administrative Agent or any of them may suffer by reason of a breach by the Borrower of any obligation, covenant or undertaking with respect to this Agreement or any other Loan Document. "Omega Acquisition" shall mean that certain Acquisition described as the Omega Acquisition on Schedule 2 attached hereto. "Operating Cash Flow" shall mean, as applied to the Borrower and its Restricted Subsidiaries, on a consolidated basis (or, if applicable, on a pro forma basis for the Contributed Assets as provided in the definition of Annualized Operating Cash Flow), in respect of any period, the sum of the Net Income of such Persons for such period plus Interest Expense (which for periods prior to the Agreement Date shall be on a pro forma basis), depreciation, amortization, tax expense, distributions in respect of monitoring fees paid (not to exceed $550,000 for any calendar year), deferred compensation expenses, any expense for the split dollar life insurance policy in respect of William Bresnan, including any finance expense with respect thereto, and other non-cash or non-recurring expenses deducted in determining such Net Income; provided, however, that extraordinary gains or losses shall not be taken into account in determining Net Income for purposes of determining Operating Cash Flow, and gains or losses from the sale of assets and investment activities shall be excluded from such calculation; and, provided, further, that payments in respect of the redemption of management participation units in the ordinary course of business shall be deemed to be a non-recurring expense. In the case of an Acquisition permitted hereunder, Operating Cash Flow of the Borrower and its Restricted Subsidiaries for the period during which such Acquisition occurs shall be adjusted (A) to give effect to such Acquisition, as if such Acquisition had occurred on the first day of such period, by excluding the Operating Cash Flow of such Acquisition during such period prior to the date of such Acquisition and adding to the Operating Cash Flow of the Borrower, if positive, or subtracting from such Operating Cash Flow, if negative, the product of (i) the actual Operating Cash Flow of such Acquisition for that portion of such period from the date of such Acquisition to the last day of such period, multiplied by (ii) a fraction the numerator of which is the number of calendar days in such period and the denominator of which is the number of days in such period from and including the date of such Acquisition through the last day of such period, and (B) by adding to the Operating Cash Flow of the Borrower such expenses incurred by the Borrower and its Restricted Subsidiaries as the Arranging Agents may reasonably agree relate to such Acquisition. Prior to the availability of financial statements or other financial information making the calculations referred to in the preceding sentence possible, Operating Cash Flow for any such Acquisition may be based upon financial statements for the most recent three-month period for which financial statements are available, or such other financial statements -16- 22 or other financial information as shall be reasonably acceptable to the Arranging Agents, and in either case shall give pro forma effect to programming discounts and reductions in contractually allocated overhead available to such Acquisition on account of its affiliation with the Borrower or any other Affiliate of the Borrower and other adjustments to reflect anticipated savings to be realized upon such Acquisition reasonably acceptable to the Majority Lenders and the Borrower. In the event the Lenders permit the Borrower to make any sale, transfer or other disposition of any assets or all or substantially all of a System or other communications related business which would otherwise be prohibited under Section 7.5(a)(ii) hereof, the Operating Cash Flow of the Borrower shall be adjusted to give effect to such sale, transfer or other disposition, as if it occurred on the first day of such period, by (x) excluding from such Operating Cash Flow all expenses and income which the Arranging Agents reasonably agree constitute components of Operating Cash Flow of such assets or are derived from such System or other communications related business, for that portion of such period occurring before such disposition, and (y) adding to the Operating Cash Flow of the Borrower such sale, transfer or other disposition-related operating expenses incurred by the Borrower as to which the Arranging Agents may reasonably agree. For purposes of this Agreement, "Operating Cash Flow" of the Borrower shall not include as an addition or a deduction (A) any portion of the Operating Cash Flow or losses of any Person in which the Borrower has made an Investment (including the AT&T Investment), and (B) losses associated with high speed data and telephony services up to an aggregate amount of $15,000,000 for all periods prior to and including December 31, 2003. "Partnership Agreement" shall mean that certain partnership agreement of BCC LP dated as of February 2, 1999. "Payment Date" shall mean the last day of the Interest Period for any Advance. "Permitted Business" shall have the meaning set forth in Section 5.2 hereof. "Permitted Liens" shall mean, as applied to any Person: (a) any security interest, mortgage or other Lien in favor of the Administrative Agent or the Lenders which secures all or any part of the Obligations; (b) (i) Liens on real estate for real estate taxes not yet delinquent and (ii) Liens for taxes, assessments, governmental charges or levies or claims either not due or the non-payment of which is being contested in good faith by appropriate proceedings and for which reserves which are required under GAAP shall have been set aside on such Person's books, but only so long as no foreclosure, distraint, sale or similar proceedings have been commenced with respect thereto and remain unstayed for a period of twenty (20) days after their commencement; (c) Liens of carriers, warehousemen, mechanics, laborers and materialmen -17- 23 and other similar Liens incurred in the ordinary course of business for sums not yet due or being contested in good faith, if such reserve or appropriate provision, if any, as shall be required by GAAP shall have been made therefor; (d) Liens incurred in the ordinary course of business in connection with workers compensation and unemployment insurance; (e) restrictions on the transfer of assets imposed by any License or by the Federal Communications Act of 1934 and any regulations thereunder; (f) Liens created under the Pole Agreements on cables and other property affixed to transmission poles or contained in underground conduits; (g) easements, rights-of-way, restrictions, minor imperfections of title and other similar encumbrances on the use of real property which do not interfere with the ordinary conduct of the business of such Person; (h) Liens incidental to the conduct of the business of such Person or to the ownership of its properties which were not incurred in connection with Indebtedness for Money Borrowed or other extensions of credit and which do not in the aggregate materially detract from the value of such properties or materially impair their use in the operation of the business of such Person; (i) Liens created solely to secure the purchase price or lease of assets acquired by such Person or created to secure Indebtedness in an amount not to exceed $25,000,000 outstanding at any time which is incurred solely for the purpose of financing or refinancing the acquisition or lease of such assets and incurred at the time of acquisition or lease or within 180 days thereafter, so long as each such Lien shall at all times be confined solely to the asset or assets so acquired and so long as the Indebtedness with respect thereto is permitted to be incurred pursuant to Section 7.1 hereof; (j) Liens in respect of judgments or awards for which appeals or proceedings for review are being prosecuted and in respect of which an Event of Default under Section 8.1(h) hereof does not result therefrom; (k) Liens as of the Agreement Date as set forth on Schedule 4 attached hereto; (l) Liens which remain upon the consummation of an Acquisition (or Exchanges) permitted hereunder, and which Liens (and the Indebtedness with respect thereto) were not created or incurred in contemplation of such Acquisition; (m) Liens on the securities of any Unrestricted Subsidiary held by the -18- 24 Borrower or any Restricted Subsidiary; (n) leases with respect to which the Borrower, any Restricted Subsidiary or any Unrestricted Subsidiary is a lessor which leases are entered into in the ordinary course of business or in connection with a disposition of assets permitted hereunder; (o) deposits or pledges to secure bids, tenders, contracts, Licenses, pole rentals, leases, statutory obligations, surety and appeal bonds and other obligations of like nature arising in the ordinary course of business; (p) Liens arising in the ordinary course of business in favor of landlords of real property to the extent of tangible assets actually located on the leased premises; and (q) Liens existing as of the Agreement Date which secure Indebtedness existing as of the Agreement date and set forth on Schedule 4 hereto; and any renewals or extensions thereof so long as the Indebtedness secured by such Lien is not increased to an amount otherwise prohibited hereby. "Person" shall mean an individual, corporation, limited liability company, partnership, trust or unincorporated organization, or a government or any agency or political subdivision thereof. "Plan" shall mean an employee benefit plan within the meaning of Section 3(3) of ERISA (other than a Multiemployer Plan) or any other plan in respect of which the Borrower or any of its Subsidiaries is an "employer" as defined in Section 414(b), (c), (m) or (o) of the Code. "Pole Agreements" shall mean the agreements entered into by the Borrower or any of its Restricted Subsidiaries permitting the Borrower or such Subsidiary to make use of transmission poles and conduits of such parties in distributing its cable television signals. "Prime Rate" shall mean, at any time, the greater of (a) the rate of interest adopted by The Toronto-Dominion Bank, as its reference rate for the determination of interest rates for loans of varying maturities in United States dollars to United States residents of varying degrees of creditworthiness and being quoted at such time by The Toronto-Dominion Bank as its "prime rate," and (b) the sum of (i) the Federal Funds Rate and (ii) one-half of one percent (1/2%). The Prime Rate is not necessarily the lowest rate of interest charged to borrowers of The Toronto-Dominion Bank. "Prime Rate Advance" shall mean an Advance bearing interest at the Prime Rate Basis, made as a Prime Rate Advance under Article 10 hereof or which the Borrower requests to be made as a Prime Rate Advance or is reborrowed as a Prime Rate Advance in -19- 25 accordance with the provisions of Section 2.2 hereof, and which shall be in a principal amount of at least $500,000 and in an integral multiple of $100,000, except for a Prime Rate Advance which is in an amount equal to the unused portion of the Revolving Loan Commitment, which Advance may be in such amount. "Prime Rate Basis" shall mean a simple per annum interest rate equal to the sum of (a) the Prime Rate and (b) the Applicable Margin then in effect. The Prime Rate Basis shall be adjusted automatically as of the opening of business on the effective date of each change in the Prime Rate to account for such change. The interest rate on Prime Rate Advances shall also be subject to adjustment as provided in Section 2.3(f). "Projections" shall mean Borrower's cash flow projections dated January 29, 1999, and provided to the Lenders on or prior to the Agreement Date. "Register" shall have the meaning ascribed to such term in Section 11.6(e) hereof. "Registered Noteholder" shall mean each Non-U.S. Lender that holds a Registered Note pursuant to Section 2.8(a) hereof or registers its Loans pursuant to Section 11.6(e) hereof. "Registered Notes" shall mean those certain Notes that have been issued in registered form in accordance with Sections 2.8(a) and 11.6(e) hereof and each of which bears the following legend: "This is a Registered Note, and this Registered Note and the Loans evidenced hereby may be assigned or otherwise transferred in whole or in part only by registration of such assignment or transfer on the Register and in compliance with all other requirements provided for in the Loan Agreement." "Reportable Event" shall have the meaning set forth in Title IV of ERISA, other than such an event for which the Pension Benefit Guaranty Corporation or any successor thereto has waived the thirty (30) day notice requirement applicable thereto (except that such waiver shall not affect an event referred to under Pension Benefit Guaranty Corporation Regulations Sections 2615-11, 2615-12, and 2615-16). "Request for Advance" shall mean any certificate signed by an Authorized Signatory of the Borrower requesting an Advance hereunder which will increase the aggregate amount of the Loans outstanding hereunder, which certificate shall be denominated a "Request for Advance," and shall be in substantially the form of Exhibit I attached hereto. Each Request for Advance shall, among other things, (i) specify the date of the Advance, which shall be a Business Day, the amount of the Advance, the type of Advance (LIBOR or Base Rate), and, with respect to LIBOR Advances, the Interest Period selected by the Borrower, (ii) state that, to the knowledge of the Person signing such request, there shall not exist, on the date of the requested Advance and after giving effect thereto, a Default, as of the date of such Advance and after giving effect thereto, (iii) the Applicable Margin, and (iv) designate the amount of -20- 26 the Revolving Loan Commitment and, if applicable, the Facility A Term Loan Commitment, the Facility B Term Loan Commitment and the Incremental Facility Commitment, being drawn. "Restricted Payments" shall mean, without duplication, (a) any direct or indirect distribution, dividend or other payment to any Person on account of any membership interest in, or other equity securities of, the Borrower; (b) any management, consulting or other similar fees, or any interest thereon, payable by the Borrower, or any Restricted Subsidiary of the Borrower, to the Borrower's members or any of their Affiliates including, without limitation, payments to the Manager (provided, however, that distributions in respect of management fees that constitute a pass through of operating expenses under GAAP and payments in respect of a split dollar life insurance policy on the life of William Bresnan do not constitute Restricted Payments and payment thereof is not restricted by this Agreement and may be made by the Borrower notwithstanding the existence of a Default or an Event of Default), (c) Tax Distributions and (d) payments in respect of Member Subordinated Debt. "Restricted Purchase" shall mean any payment on account of the purchase, redemption or other acquisition or retirement of any membership interest in, or other securities of, the Borrower. "Restricted Subsidiary" shall mean any Subsidiary of the Borrower other than an Unrestricted Subsidiary. "Reuters Screen LIBO Page" shall mean the display designated as page "LIBO" on the Reuters Monitor Money Rates service or such other page as may replace the "LIBO" page of that service for the purpose of displaying London interbank offered rates of major banks for dollar deposits. "Revolving Loan Commitment" shall mean the several obligations of the Lenders having Revolving Loan Commitments to advance to the Borrower the aggregate sum of up to $150,000,000 (as the same may be reduced from time to time in accordance with the terms hereof) in accordance with their respective Commitment Ratios for Revolving Loans and on the terms and conditions herein. "Revolving Loan Notes" shall mean those certain reducing revolving promissory notes in the aggregate principal amount of $150,000,000 one such note issued by the Borrower to each of the Lenders having Revolving Loan Commitments, each one substantially in the form of Exhibit E attached hereto, and any extensions, renewals, amendments, or substitutions to any of the foregoing. "Revolving Loans" shall mean, collectively, the amounts advanced by the Lenders having Revolving Loan Commitments to the Borrower under the Revolving Loan Commitment and which are evidenced by the Revolving Loan Notes. -21- 27 "Scheduled Principal Payments" shall mean, for any period, (a) for purposes of calculating Excess Cash Flow, the sum of (i) scheduled payments of principal made with respect to the Facility A Term Loan and the Facility B Term Loan during such period and (ii) the excess, if any, of (A) the weighted average of the Revolving Loans outstanding during such period over (B) the amount of the Revolving Loan Commitment on the last day of such period and (b) for all other purposes, the sum of (x) principal payments scheduled to be made in respect of the Facility A Term Loan and the Facility B Term Loan and (y) the difference (to the extent positive) between (1) the Revolving Loans outstanding on the calculation date and (2) the maximum permitted Revolving Loan Commitment on the last day of the period being tested. "Security Documents" shall mean the Borrower's Pledge Agreement, the Holdco Pledge Agreement, any Subsidiary Guaranty, any other agreement or instrument providing Collateral for the Obligations whether now or hereafter in existence, and any filings, instruments, agreements, certificates, stock powers and documents related thereto or to this Agreement, and providing the Administrative Agent, for the benefit of itself and the Lenders, with Collateral for the Obligations. "Security Interest" shall mean all Liens in favor of the Administrative Agent, for the benefit of itself and the Lenders, created hereunder or under any of the Security Documents to secure the Obligations. "SMATV Systems" shall mean any satellite master antenna television facilities used in providing cable television service to Basic Subscribers. "Structuring Fee" shall mean that certain fee payable by the Borrower to the partners of BCC LP on the Agreement Date based on 1% of the committed equity value not to exceed $4,500,000. "Subsidiary" shall mean, as applied to any Person, any corporation or limited liability company of which more than fifty percent (50%) of the outstanding stock (other than directors' qualifying shares) or membership interests having ordinary voting power to elect a majority of its board of directors, regardless of the existence at the time of a right of the holders of any class or classes of securities of such corporation or limited liability company to exercise such voting power by reason of the happening of any contingency, or any partnership of which more than fifty percent (50%) of the outstanding partnership interests, is at the time owned by such Person, or by one or more Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person. "Subsidiary Guaranty" shall mean, collectively, any Subsidiary Guaranty in favor of the Administrative Agent and the Lenders, issued by a Restricted Subsidiary of the Borrower pursuant to Section 5.12 hereof, in substantially the form of Exhibit J attached hereto. -22- 28 "Syndication Agent" shall mean Chase Securities Inc. "Systems" shall mean, collectively, the systems of any Permitted Business which are owned, operated and maintained by the Borrower or any of its Restricted Subsidiaries and shall include the systems and the systems of any Permitted Business hereafter acquired by the Borrower or any of its Restricted Subsidiaries in accordance with the terms and conditions of this Agreement. "Tax Distributions" shall mean, amounts distributed by the Borrower for the benefit of BCC LP to enable it to make distributions in respect of any benefited Person as required under Section 3.3(a) of the Partnership Agreement, as the same may be amended or modified from time to time in accordance with Section 8.1(r) hereof. "TCIC" shall mean TCI Communications, Inc., a Delaware corporation or any successor thereto. "TCID Michigan" shall mean TCID of Michigan, Inc., a Nevada corporation and any successor or assign which is a Subsidiary of TCIC. "TCI Subordinated Note" shall mean that certain subordinated note dated May 12, 1988, as amended, payable by BCC LP to the order of TCID Michigan. "Term Loans" shall mean, collectively, the Facility A Term Loans, the Facility B Term Loans and, if applicable, Incremental Facility Loans. "Total Funded Debt" shall mean, the sum of (a) Funded Debt and (b) all Indebtedness for Money Borrowed of Holdco and BCC LP which, during the test period, pays interest in cash on a current pay basis, exclusive of any Member Subordinated Debt. "Total Leverage Ratio" shall mean as of any date the ratio of (a) Total Funded Debt on such date to (b) Annualized Operating Cash Flow of the Borrower and its Restricted Subsidiaries. "Unrestricted Subsidiary" shall mean any Subsidiary of the Borrower which the Borrower designates as an Unrestricted Subsidiary by written notice to the Administrative Agent and the Lenders prior to the formation or Acquisition of such Subsidiary. "Year 2000 Compliant" shall have the meaning set forth in Section 4.1(u) hereof. Each definition of an agreement in this Article 1 shall include such agreement as amended from time to time with the prior written consent of the Majority Lenders, to the extent such consent is required to be obtained hereunder. -23- 29 ARTICLE 2. LOANS Loans Section 2.1 The Loans (a) Revolving Loan Commitment. The Lenders holding Revolving Loan Commitments agree, severally in accordance with their respective Revolving Loan Commitment Ratios and not jointly, upon the terms and subject to the conditions of this Agreement prior to the Facility A Maturity Date, to lend and relend to the Borrower an aggregate amount not to exceed the Revolving Loan Commitment. Subject to the terms and conditions hereof, Advances under the Revolving Loan Commitment may be repaid and reborrowed from time to time on a revolving basis. Notwithstanding the foregoing, Advances by each Lender under the Revolving Loan Commitment shall not exceed the amounts opposite the name of each Lender having a Revolving Loan Commitment as set forth in the definition of Commitment Ratios (as adjusted for reductions to the Revolving Loan Commitment and assignments permitted hereunder). (b) Facility A Term Loan Commitment. The Lenders having Facility A Term Loan Commitments agree, severally in accordance with their respective Facility A Term Loan Commitment Ratios and not jointly, upon the terms and subject to the conditions of this Agreement, to lend to the Borrower on the Agreement Date an amount not to exceed the amount opposite the name of each such Lender under the Facility A Term Loan Commitment column as set forth in the definition of Commitment Ratios. Advances under the Facility A Term Loan Commitment may be repaid and reborrowed as permitted by Section 2.2 hereof to effect changes in the Interest Rate Bases applicable to Advances under the Facility A Term Loans; provided, however, that there shall be no net increase in the amount of the Facility A Term Loans outstanding at any time following the making of the initial Advance under the Facility A Term Loan Commitment. (c) Facility B Term Loan Commitment. The Lenders having Facility B Term Loan Commitments agree, severally in accordance with their respective Facility B Term Loan Commitment Ratios and not jointly, upon the terms and subject to the conditions of this Agreement, to lend to the Borrower on the Agreement Date an amount not to exceed, the amount opposite the name of each such Lender under the Facility B Term Loan Commitment column as set forth in the definition of Commitment Ratios. Advances under the Facility B Term Loan Commitment may be repaid and reborrowed as provided in Section 2.2 hereof to effect changes in the Interest Rate Bases applicable to Facility B Term Loans; provided, however, that there shall be no net increase in the amount of the Facility B Term Loans outstanding at any time following the making of the initial Advance under the Facility B Term Loan on the Agreement Date. -24- 30 Section 2.2 Manner of Borrowing and Disbursement (a) Choice of Interest Rate, Etc. Any Advance shall, at the option of the Borrower, be made as a Prime Rate Advance or a LIBOR Advance; provided, however, that the Borrower may not receive a LIBOR Advance after the occurrence and during the continuance of a Default hereunder. LIBOR Advances shall in all cases be subject to Section 2.3(e) and Article 10 hereof. Any notice given to the Administrative Agent in connection with a requested Advance hereunder shall be given to the Administrative Agent prior to 11:00 a.m. (Houston, Texas time) on any Business Day in order for such Business Day to count toward the minimum number of Business Days required. Upon receipt by the Administrative Agent of any notice from the Borrower with respect to an Advance, the Administrative Agent shall promptly notify each Lender by telephone or telecopy of the contents thereof. (b) Prime Rate Advances. (i) Initial Advances. In the case of any Advance of the Loans hereunder which increases the outstanding principal amount of the Loans, the Borrower shall give the Administrative Agent in the case of Prime Rate Advances at least one (1) Business Day's irrevocable written notice in the form of a Request for Advance, or telephonic notice followed immediately by a Request for Advance; provided, however, that the Borrower's failure to confirm any telephonic notice with a Request for Advance shall not invalidate any notice so given, and that action taken in reliance on telephonic notice shall govern in the event of any conflict with the corresponding Request for Advance. (ii) Repayments and Reborrowings. Upon at least one (1) Business Day's irrevocable prior written notice to the Administrative Agent if a reborrowing is to occur, or on the same Business Day if no reborrowing is to occur, the Borrower may repay or prepay a Prime Rate Advance without regard to its Payment Date and (A) reborrow all or a portion of the principal amount thereof as one or more Prime Rate Advances, or (B) not reborrow all or any portion of such Prime Rate Advance, and (C) upon at least three (3) Business Days' irrevocable prior written notice to the Administrative Agent, the Borrower may repay or prepay a Prime Rate Advance without regard to its Payment Date and reborrow all or a portion of the principal thereof as one or more LIBOR Advances, or (D) elect a combination of the foregoing options (A) through (C). On the date indicated by the Borrower, such Prime Rate Advance shall be so repaid and, as applicable, reborrowed. (c) LIBOR Advances. Upon request of the Borrower, the Administrative Agent shall determine the LIBOR Bases available as of the date of such request, and shall -25- 31 notify the Borrower of such LIBOR Bases. (i) Initial Advances. In the case of any Advance of the Loans hereunder which increases the outstanding principal amount of the Loans, the Borrower shall give the Administrative Agent in the case of LIBOR Advances at least three (3) Business Days irrevocable written notice in the form of a Request for Advance, or telephonic notice followed immediately by a Request for Advance; provided, however, that the Borrower's failure to confirm any telephonic notice with a Request for Advance shall not invalidate any notice so given, and that action taken in reliance on telephonic notice shall govern in the event of any conflict with the corresponding Request for Advance; and provided further, however, that the Administrative Agent's determination of the applicable LIBOR Basis for such Advance shall be conclusive absent manifest error. (ii) Repayments and Reborrowings. At least three (3) Business Days prior to each Payment Date for a LIBOR Advance, the Borrower shall give the Administrative Agent written notice, or telephonic notice immediately confirmed in writing, specifying whether all or a portion of any LIBOR Advance outstanding on the Payment Date (A) is to be repaid and then reborrowed in whole or in part as a LIBOR Advance, (B) is to be repaid and then reborrowed in whole or in part as a Prime Rate Advance, (C) is to be repaid and not reborrowed, or (D) is to be subject to a combination of the foregoing options (A) through (C); provided, however, that Borrower's failure to confirm any telephonic notice in writing shall not invalidate any notice so given, and that action taken in reliance on telephonic notice shall govern in the event of any conflict with the corresponding written confirmation; and provided, further, however, that the Administrative Agent's determination of the applicable Interest Rate Basis for such Advance shall be conclusive absent manifest error. Upon such Payment Date, such LIBOR Advance will, subject to the provisions hereof, be so repaid and, as applicable, reborrowed. (d) Notification of Lenders. Upon receipt of a Request for Advance or a notice from the Borrower with respect to any outstanding Advance prior to the Payment Date for such Advance, the Administrative Agent shall promptly notify each Lender having the applicable commitment by telephone or telecopy of the contents thereof, if applicable, and the amount of such Lender's portion of the Advance. Each Lender having the applicable commitment shall, not later than 11:00 a.m. (Houston, Texas time) on the date specified in such notice, make available (or, at a time when such Lender is within its net debit cap under the Federal Reserve Bank's daylight overdraft provisions, initiate a wire transfer in the Federal Reserve System) to the Administrative Agent at the Administrative Agent's Office, or to such account as the Administrative Agent shall designate, the amount of its portion of the Advance in immediately available funds. -26- 32 (e) Disbursement. (i) Prior to 1:00 p.m. (Houston, Texas time) on the date of an Advance hereunder, the Administrative Agent shall, subject to the satisfaction of the conditions set forth in Article 3 hereof, disburse the amounts made available to the Administrative Agent by the Lenders in like funds by (a) transferring the amounts so made available by wire transfer pursuant to the Borrower's instructions, or (b) in the absence of such instructions, crediting the amounts so made available to the account of the Borrower maintained with the Administrative Agent or an affiliate of the Administrative Agent. (ii) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any borrowing that such Lender will not make available to the Administrative Agent such Lender's ratable portion of such borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such borrowing and the Administrative Agent may, in its sole discretion and in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. (iii) If and to the extent any Lender shall not have so made such ratable portion available to the Administrative Agent, such Lender agrees to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at the Federal Funds Rate. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender's Loan as part of such borrowing for purposes of this Agreement. If such Lender does not repay such corresponding amount immediately upon the Administrative Agent's demand therefor, the Administrative Agent shall notify the Borrower and the Borrower shall immediately pay such corresponding amount to the Administrative Agent. The failure of any Lender to make the Loan to be made by it as part of any borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Loan on the date of such borrowing, but no Lender shall be responsible for any such failure of any other Lender. (iv) In the event that, at any time when the Borrower is not in Default, a Lender for any reason fails or refuses to fund its portion of an Advance as to which the conditions precedent in Sections 3.1 and 3.2 are satisfied or waived, then, notwithstanding any other provision of this Agreement, commencing on the thirtieth (30th) day following such failure to fund, and continuing until such time as such Lender has funded its portion of such Advance (which late funding shall not absolve such Lender from any liability it may have to the Borrower), or all other Lenders have received payment in full from the Borrower (whether by repayment or prepayment), -27- 33 such non-funding Lender shall not have the right (A) to vote regarding any issue on which voting is required or advisable under this Agreement or any other Loan Document (other than events set forth in Section 11.13 hereof), and the amount of the Loans and Commitments of such Lender shall not be counted as outstanding for purposes of determining "Majority Lenders" hereunder, and (B) to receive payments of principal, interest or fees from the Borrower, the Administrative Agent or the other Lenders in respect of its Loans. Nothing in this Section 2.2(e) shall be deemed to relieve any Lender from its obligations to fulfill its commitments in accordance with the terms and conditions of this Agreement or to prejudice any rights which the Borrower may have as a result of any default by such Lender hereunder. Section 2.3 Interest (a) On Prime Rate Advances. Interest on each Prime Rate Advance shall be computed on the basis of a year of 365/366 days for the number of days actually elapsed and shall be payable at the Prime Rate Basis for such Advance, adjusted if applicable as provided in Section 2.3(f), quarterly in arrears on the applicable Payment Date. Interest on Prime Rate Advances then outstanding shall also be due and payable on the Facility A Maturity Date and the Facility B Maturity Date, as applicable. (b) On LIBOR Advances. Interest on each LIBOR Advance shall be computed on the basis of a 360-day year for the actual number of days elapsed and shall be payable at the LIBOR Basis for such Advance, adjusted if applicable as provided in Section 2.3(f), in arrears on the applicable Payment Date, and, in addition, if the Interest Period for a LIBOR Advance exceeds three (3) months, interest on such LIBOR Advance shall also be due and payable every three (3) months in arrears during such Interest Period. Interest on LIBOR Advances then outstanding shall also be due and payable on the Facility A Maturity Date and the Facility B Maturity Date, as applicable. (c) Interest if No Notice of Selection of Interest Rate Basis. If the Borrower fails to give the Administrative Agent timely notice of its selection of a LIBOR Basis, or if for any reason a determination of a LIBOR Basis for any Advance is not timely concluded due to the fault of the Borrower, the Prime Rate Basis shall apply to such Advance until timely selection is made. (d) Interest on Overdue Advances. If the Borrower shall fail to pay when due (whether at maturity, by reason of acceleration or otherwise) all or any portion of the principal amount of the Loans, any such unpaid amount shall, if requested by the Majority Lenders, bear interest at the Default Rate for each day from the date it became so due until paid in full, payable on demand. (e) LIBOR Contracts; Reborrowings. At no time may the number of outstanding LIBOR Advances exceed ten (10). -28- 34 (f) Applicable Margins. (i) With respect to any Facility A Loans, the Applicable Margin shall be as set forth in the table set forth below based upon the Total Leverage Ratio as of the end of the most recently completed calendar quarter. Changes to the Applicable Margin shall be effective as of the earlier of (A) the second (2nd) Business Day after the day on which such financial statements are required to be delivered pursuant to Section 6.1 or Section 6.2 hereof, as the case may be, and (B) the date on which such financial statements are actually delivered to the Administrative Agent and the Lenders; provided, that, in no event shall any reduction in the Applicable Margin which relates to a period for which interest has already been paid by the Borrower result in any refund, rebate, credit or setoff with respect to any such interest in favor of the Borrower. If the Borrower shall fail to deliver financial statements as required by Section 6.1 or 6.2 hereof within ninety (90) days from the date such financial statements were required to be delivered pursuant to such sections (unless the Majority Lenders agree to an extension with respect thereto), for purposes of determining the Applicable Margin only, it shall be conclusively presumed that the Total Leverage Ratio is 6.50 to 1 until such financial statements have been delivered. -29- 35
the Applicable the Applicable Margin for Margin for If the Total Leverage Prime Rate Advances LIBOR Advances Ratio is: then shall be and shall be --------- ---- -------- --- -------- Greater than or equal to 6.50:1 1.250% 2.250% Greater than or equal to 6.00:1, 1.000% 2.000% but less than 6.50:1 Greater than or equal to 5.50:1, 0.750% 1.750% but less than 6.00:1 Greater than or equal to 5.00:1, 0.500% 1.500% but less than or 5.50:1 Greater than or equal to 4.50:1, 0.250% 1.250% but less than or 5.00:1 Greater than or equal to 4.00:1, but less than or 4.50:1 0.000% 1.000% Less than 4.00:1 0.000% 0.750%
(ii) Notwithstanding the foregoing table above for all periods prior to the six (6) month anniversary of the Agreement Date, the Applicable Margin will be no less than (A) one percent (1.000%) for Prime Rate Advances and (B) two percent (2.000%) for LIBOR Advances. Section 2.4 Commitment Fee. The Borrower agrees to pay to the Administrative Agent for the benefit of each of the Lenders having a Revolving Loan Commitment, in accordance with their respective Revolving Loan Commitment Ratios (as set forth in the definition of Commitment Ratio), a commitment fee on the aggregate unborrowed balance of the Revolving Loan Commitment for each day from the Agreement Date through the Facility A Maturity Date, (a) for all times when the Total Leverage Ratio is greater than or equal to 5.00 to 1.00, at a rate of three-eighths of one percent (0.375%) per annum on the aggregate unborrowed balance of the Revolving Loan Commitment, and (b) for all times when the Total Leverage Ratio is less than 5.00 to 1.00, at a rate of one-quarter of one percent (0.250%) per annum on the aggregate unborrowed balance of the Revolving Loan Commitment. Such commitment fee shall be computed on the basis of a year of 360 days for the actual number of days elapsed, shall be payable quarterly in arrears on the last Business Day of each calendar quarter, commencing on March 31, 1999 for the calendar quarter then ended, and continuing on the -30- 36 last day of each calendar quarter thereafter during which the Revolving Loan Commitment is in effect and shall be fully earned when due and, subject to Section 11.11 hereof, non-refundable when paid. Section 2.5 Commitment Reductions (a) Optional. The Borrower may without penalty at any time terminate or reduce the Revolving Loan Commitment by giving the Administrative Agent and the Lenders having Revolving Loan Commitments at least three (3) Business Days' written notice; provided, however, that any such reduction shall be applied pro rata to the remaining reductions with respect to the Revolving Loan Commitment set forth in Section 2.5(b) hereof. Any reduction of the Revolving Loan Commitment hereunder shall be done only in conjunction with a pro rata prepayment of the principal amount of the Facility A Term Loans, the Facility B Term Loans and, unless otherwise agreed by the Incremental Facility Lenders, the Incremental Facility Loans then outstanding (which prepayment shall be subject to Section 2.6 hereof). Each such reduction shall reduce the Revolving Loan Commitment in an amount which is at least $5,000,000 and which is an integral multiple of $1,000,000. On the date of any such cancellation or reduction, the Revolving Loan Commitment shall be permanently reduced to the amount stated in the Borrower's notice, and the Borrower shall, subject to Section 2.10 hereof, pay to the Administrative Agent for the account of the applicable Lenders the amount necessary to reduce the principal amount of the Revolving Loans outstanding on such date to not more than the amount of the Revolving Loan Commitment, as so reduced, together with accrued interest on the amount so repaid. -31- 37 (b) Mandatory. Commencing on March 31, 2002 and on the last Business Day of each calendar quarter ending during the periods set forth below, the Revolving Loan Commitment as of March 30, 2002 shall be automatically and permanently reduced by the percentage amount as set forth below for such period:
Percentage of Revolving Loan Commitment as of March 30, 2002 Quarters Ended Terminated on the Last Day of Each Quarter -------------- ------------------------------------------ March 31, 2002, June 30, 2002, September 30, 2002 and December 31, 2002 2.500% March 31, 2003, June 30, 2003, September 30, 2003 and December 31, 2003 3.750% March 31, 2004, June 30, 2004, September 30, 2004 and December 31, 2004 3.750% March 31, 2005, June 30, 2005, September 30, 2005 and December 31, 2005 5.000% March 31, 2006, June 30, 2006, September 30, 2006 and December 31, 2006 6.250% March 31, 2007 and June 30, 2007 7.500%
Section 2.6 Prepayment of Advances. All prepayments of Facility A Term Loans, Facility B Term Loans, and, unless otherwise agreed by the Incremental Facility Lenders, the Incremental Facility Loans shall be made on a pro rata basis with respect to the principal amount of the Facility A Term Loans, the Facility B Term Loans and, unless otherwise agreed by the Incremental Facility Lenders, the Incremental Facility Loans then outstanding with a corresponding pro rata reduction of the Revolving Loan Commitment. Subject to the first sentence of this Section 2.6, LIBOR Advances (whether in respect of Revolving Loans, Facility A Term Loans, Facility B Term Loans or Incremental Facility Loans) may be prepaid or repaid on or prior to the applicable Payment Date, in the case of voluntary prepayments or repayments only upon three (3) Business Days' prior written notice to the Administrative Agent, and provided that the Borrower shall reimburse the Administrative Agent and the Lenders for any loss or usual and customary out-of-pocket expense incurred by the Lenders or any Lender or the Administrative Agent in connection with such prepayment, as set forth in Section 2.10 hereof. Subject to the first sentence of this Section -32- 38 2.6, Prime Rate Advances (whether in respect of Revolving Loans, Facility A Term Loans, Facility B Term Loans or, unless otherwise agreed by the Incremental Facility Lenders, Incremental Facility Loans) may be prepaid or repaid on or prior to the applicable Payment Date, provided that the Borrower provides written notice to the Administrative Agent no later than the date of such prepayment. Any notice of prepayment of the Facility A Term Loans, Facility B Term Loans, and, unless otherwise agreed by the Incremental Facility Lenders, the Incremental Facility Loans shall be irrevocable. Amounts prepaid on the Facility A Term Loans, Facility B Term Loans or, unless otherwise agreed by the Incremental Facility Lenders, the Incremental Facility Loans shall be applied to the scheduled payments set forth in Sections 2.7(a) and (b) and as set forth in any Notice of Incremental Facility Commitment, as applicable, on a pro rata basis across all remaining maturities. No partial prepayment shall be in a principal amount of less than $500,000 and integral multiples thereof, except to the extent that the balance owed is less than $500,000 or an integral multiple thereof. Upon receipt of any notice of prepayment, the Administrative Agent shall promptly notify each applicable Lender of the contents thereof by telephone or telecopy and of such Lender's portion of the prepayment. -33- 39 Section 2.7 Repayment. (a) Scheduled Facility A Term Loan Repayments. Commencing on March 31, 2002 and on the last Business Day of each calendar quarter ending during the periods set forth below, the principal balance of the Facility A Term Loans outstanding as of March 30, 2002 shall be amortized in consecutive quarterly installments as follows:
Percentage of Principal of Facility A Term Loan Outstanding on March 30, 2002 Quarters Ended Due on the Last Day of Each Quarter -------------- ----------------------------------- March 31, 2002, June 30, 2002, September 30, 2002 and December 31, 2002 2.500% March 31, 2003, June 30, 2003, September 30, 2003 and December 31, 2003 3.750% March 31, 2004, June 30, 2004, September 30, 2004 and December 31, 2004 3.750% March 31, 2005, June 30, 2005, September 30, 2005 and December 31, 2005 5.000% March 31, 2006, June 30, 2006, September 30, 2006 and December 31, 2006 6.250% March 31, 2007 and June 30, 2007 7.500%
The remaining balance of Facility A Term Loans shall be due and payable on the Facility A Maturity Date. (b) Scheduled Repayments of Facility B Term Loans. Commencing on March 31, 2002 and on the last Business Day of each calendar quarter through the Facility B Maturity Date, the Facility B Term Loans shall be repaid in an amount equal to one-quarter of one percent (0.250%) of the Facility B Term Loans outstanding on March 30, 2002. The remaining balance of the Facility B Term Loans shall be due and payable on the Facility B Maturity Date. (c) Revolving Loans in Excess of Revolving Loan Commitment (if applicable, and/or Incremental Facility Commitment). If, at any time, the amount of the Revolving Loans (if applicable, or the Incremental Facility Loans) then outstanding shall exceed the Revolving Loan Commitment (if applicable, or the Incremental Facility Commitment), the Borrower shall, on such date and subject to Sections 2.10 and 2.11 hereof, -34- 40 make a repayment of the principal amount of the Revolving Loans (if applicable, or the Incremental Facility Loans) in an amount equal to such excess, together with any accrued interest and fees with respect thereto. (d) Asset Sales. In the event of any sale, transfer, lease or other disposition of any assets or all or any material portion of any System (whether singly or in a series of related transactions) hereunder (excluding such sales, leases, transfers and other disposition of assets in the ordinary course of business and Exchanges), the Borrower shall, on the date of such sale, lease, transfer or other disposition, make a repayment of the principal of the Loans equal to the Net Proceeds of such sale, lease, transfer or other disposition; provided, however, that the Borrower shall not be required to make a repayment hereunder with respect to any such sale, lease, transfer and other disposition, (A) the aggregate Net Proceeds of which do not exceed $10,000,000, or (B) the Net Proceeds of which are used by the Borrower or its Restricted Subsidiaries within twelve (12) months from the receipt thereof by the Borrower or any of its Restricted Subsidiaries in connection with an Acquisition in accordance with Section 7.5(b) hereof, the purchase of similar assets or which are used in a manner consented to by the Majority Lenders. Any repayment hereunder shall be applied pro rata to the amount of the Facility A Loans, Facility B Term Loans and, unless otherwise agreed by the Incremental Facility Lenders, the Incremental Facility Loans then outstanding. Any repayment of the Facility A Loans outstanding shall be applied pro rata to the Revolving Loans and the Facility A Term Loans then outstanding. Amounts applied to the Facility A Term Loans, the Facility B Term Loans and, unless otherwise agreed by the Incremental Facility Lenders, the Incremental Facility Loans shall be applied to the remaining payments under Section 2.7(a), Section 2.7(b) and as set forth in any Notice of Incremental Facility Commitment, respectively, on a pro rata basis. Amounts applied to the Revolving Loans hereunder shall permanently reduce the Revolving Loan Commitment on a dollar for dollar basis, with such reduction applied pro rata to the remaining reductions under Section 2.5 (b) hereof. Section 2.8 Notes; Loan Accounts. (a) The Loans shall be repayable in accordance with the terms and provisions set forth herein and shall be evidenced by the Notes. One Facility A Term Loan Note, one Facility B Term Loan Note, one Revolving Loan Note and, if applicable, one Incremental Facility Note shall be payable to the order of each Lender, in accordance with such Lender's respective Facility A Term Loan Commitment Ratio, Facility B Term Loan Commitment Ratio, Revolving Loan Commitment Ratio, and any Incremental Facility Commitment, respectively. The Notes shall be issued by the Borrower to the Lenders and shall be duly executed and delivered by one or more Authorized Signatories. Any Lender (i) which is not a U.S. Person (a "Non-U.S. Lender") and (ii) which would become completely exempt from withholding of United States federal income taxes in respect of payment of any obligations due to such Lender hereunder relating to any of its Loans if such -35- 41 Loans were in registered form for United States federal income tax purposes may request the Borrower (through the Administrative Agent), and the Borrower agrees thereupon, at the cost and expense of such Lender, to register such Loans as provided in Section 11.6(e) hereof and to issue to such Lender Notes evidencing such Loans as Registered Notes or to exchange Notes evidencing such Loans for new Registered Notes, as applicable. Registered Notes may not be exchanged for Notes that are not in registered form. (b) Each Lender may open and maintain on its books in the name of the Borrower a loan account with respect to the Loans of such Lender and interest thereon. Each Lender which opens and maintains such a loan account shall debit such loan account for the principal amount of each Advance made by it and accrued interest thereon, and shall credit such loan account for each payment on account of principal of or interest on its Loans. The records of a Lender with respect to any loan account maintained by it shall be prima facie evidence of the Loans and accrued interest thereon. Section 2.9 Manner of Payment. (a) Each payment (including prepayments) by the Borrower on account of the principal of or interest on the Loans, commitment fees, arrangement fees, and any other amount owed to the Lenders or the Administrative Agent under this Agreement or the Notes shall be made not later than 11:00 a.m. (Houston, Texas time) on the date specified for payment under this Agreement to the Administrative Agent at the Administrative Agent's Office, for the account of the Lenders or the Administrative Agent, as the case may be, in lawful money of the United States of America in immediately available funds. Any payment received by the Administrative Agent after 2:00 p.m. (Houston, Texas time) shall be deemed received on the next Business Day. In the case of a payment for the account of a Lender, the Administrative Agent will promptly thereafter distribute the amount so received in like funds to such Lender. If the Administrative Agent shall not have received any payment from the Borrower as and when due, the Administrative Agent will promptly notify the Lenders accordingly. (b) Subject to the provisions of the definition of Interest Period, or unless otherwise set forth herein, if any payment under this Agreement or the Notes shall be specified to be made upon a day which is not a Business Day, it shall be made on the next succeeding day which is a Business Day. Any extension of time shall in such case be included in computing interest and fees, if any, in connection with such payment. (c) Subject to Section 2.9(e) hereof, the Borrower agrees to pay principal, interest, fees and all other amounts due hereunder or under the Notes without set-off or counterclaim or any deduction whatsoever. (d) Prior to the declaration by the Administrative Agent of an Event of -36- 42 Default under Section 8.2 hereof, if some but less than all amounts due from the Borrower are received by the Administrative Agent, the Administrative Agent shall distribute and apply such amounts in the following order of priority, all in accordance where applicable with the Commitment Ratios: (i) to the payment of all fees then due and payable hereunder, under the Notes, or under a certain Administrative Agent's Fee Letter between the Borrower and the Administrative Agent; (ii) to the payment of interest then due and payable on the Loans; (iii) to the payment of all other amounts not otherwise referred to in this Section 2.9(d) then due and payable hereunder or under the Notes; and (iv) to the payment of principal then due and payable on the Revolving Loans, the Facility A Term Loans, the Facility B Term Loans and the Incremental Facility Loans on a pro rata basis. Subsequent to the declaration of an Event of Default by the Administrative Agent under Section 8.2 hereof, the Administrative Agent shall distribute such amounts received as provided in Section 2.11 hereof. (e) On or prior to the Agreement Date, and prior to the date on which any Person becomes a Lender hereunder, and from time to time thereafter if required by law due to a change in circumstances or if reasonably requested by the Borrower or the Administrative Agent (unless such Lender is unable to do so by reasons of change in United States law), each Lender organized under the laws of a jurisdiction outside the United States shall provide the Administrative Agent and the Borrower with (i) an accurate and duly completed United States Internal Revenue Service Form 4224 or Form 1001, as the case may be, and Form W-8 or Form W-9, as the case may be, or other applicable or successor form, certificate or document prescribed by the United States Internal Revenue Service certifying as to such Lender's entitlement to full exemption from United States withholding tax with respect to all payments to be made to such Lender hereunder and under any Note, or (ii) in the case of a Lender that is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue Service Form 1001 or 4224 pursuant to clause (i) above, (A) an accurate and duly completed United States Internal Revenue Service Form W-8, or other applicable or successor form, certificate or document prescribed by the United States Internal Revenue Service certifying to such Lender's foreign status and (B) a certificate certifying to such Lender's entitlement to a complete exemption from United States withholding tax with respect to all payments hereunder and under any Note. In the event that the Borrower withholds a portion of any payment hereunder in accordance with this Section, the Borrower shall provide evidence that such taxes of any nature whatsoever in respect of this Agreement, any Loan or any Note shall have been paid to the appropriate taxing authorities by delivery to the Lender on whose account such payment was made of the official tax receipts or notarized copies of such receipts within thirty (30) days after payment of such tax. If the Borrower fails to make any such payment when due, the Borrower shall indemnify the Lenders for any incremental taxes, interest or penalties that may become payable by any Lender as a result of any such failure. For any period with respect to which a Lender has failed to provide the Borrower with the appropriate form described above (other than if such failure is due to a change in United States law occurring subsequent to the date on which a form originally was required to be provided), such Lender shall not be entitled to -37- 43 indemnification with respect to withholding taxes imposed by the United States and the Borrower shall be allowed to deduct from payments to Lender hereunder and under any Note, the amount of any such withholding taxes paid by the Borrower. (f) If, after the Agreement Date, any change in applicable law, rule or regulation, or change in interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof or compliance by any Lender with any request or directive (whether or not having the force of law) issued after the date hereof of any such authority, central bank or comparable agency shall subject any Lender to any tax, duty or other charge (net of any tax benefit resulting therefrom and excluding any charges included in the LIBOR Reserve Percentage) with respect to this Agreement, the Notes, the Loans or payments by the Borrower of principal, interest, fees or other amounts due from the Borrower hereunder or under the Notes (except for taxes on the overall net income of such Lender or its lending office) and which is not related to the credit rating of such Lender or its assets, or shall change the basis of taxation of payments to any Lender of the principal of or interest on its Loans or in respect of any other amounts due under this Agreement in respect of its Loans (except for changes in the rate of tax on the overall net income of such Lender imposed by the jurisdiction in which such Lender's principal executive office or any lending office is located), and the result of any of the foregoing is to increase the cost to such Lender of making or maintaining any such Loans, or to reduce the amount of any sum received or receivable by the Lender under this Agreement or under its Note with respect thereto, then, on the earlier of a date within fifteen (15) days after demand by such Lender or the Facility A Maturity Date or Facility B Maturity Date, as the case may be, the Borrower agrees to pay to such Lender such additional amount or amounts as will compensate such Lender for such increased costs to the extent such Lender is charging its other major corporate borrowers for such amounts. Each Lender will promptly notify the Borrower and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Lender to compensation pursuant to this Section 2.9(f) and will designate a different lending office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the sole judgment of such Lender made in good faith, be otherwise disadvantageous to such Lender. A certificate of any Lender claiming compensation under this Section 2.9(f) and setting forth the additional amount or amounts to be paid to it hereunder and calculations therefor shall be presumptively correct in the absence of manifest error. In determining such amount, such Lender may use any reasonable averaging and attribution methods. (g) At the election of the Borrower, amounts to be applied, pursuant to Sections 2.5(b), 2.7(c) or 2.7(d) hereof, to prepayment of principal bearing interest at LIBOR may be remitted into a specifically designated "Deposit Account" and shall not be applied to such prepayment until the end of the Interest Period ending after the date such payment would otherwise be required, so as to avoid incurrence of costs required pursuant to Section 2.10 hereof which might otherwise be incurred upon prepayment. In the event the aggregate -38- 44 amount to be prepaid by reason of Sections 2.5(b), 2.7(c) or 2.7(d) hereof exceeds the amount of principal to be prepaid at the end of the first such Interest Period to terminate after the relevant date of reduction, the excess shall remain in such specifically designated Deposit Account until the end of the next Interest Period, and so on, until the full amount required to be repaid under Sections 2.5(b), 2.7(c) or 2.7(d) hereof has been applied to the Loans. As used herein, the aforesaid "Deposit Account" shall be an account maintained with the Administrative Agent as collateral for the Obligations (and the Borrower hereby grants a security interest therein to the Administrative Agent for the Lenders), and the Borrower hereby authorizes the Administrative Agent to apply at any time, without further authorization from the Borrower, the balance of said Deposit Account (together with any interest accrued thereon) to the prepayments required hereunder or otherwise to the Obligations upon an Event of Default. Section 2.10 Reimbursement. Whenever any Lender shall sustain or incur any losses or out-of-pocket expenses in connection with (i) failure by the Borrower to borrow any LIBOR Advance after having given notice of its intention to borrow in accordance with Section 2.2 hereof (whether by reason of the Borrower's election not to proceed or the non-fulfillment of any of the conditions set forth in Article 3 or otherwise), or (ii) prepayment of any LIBOR Advance in whole or in part (including a prepayment pursuant to Sections 2.6, 10.2 and 10.3(b) hereof or by acceleration as a result of an Event of Default), the Borrower agrees to pay to such Lender, within ten (10) days after receipt of a bill setting forth such losses and usual and customary out-of-pocket expenses in reasonable detail, an amount sufficient to compensate such Lender for all such losses and usual and customary out-of-pocket expenses. Such Lender's good faith determination of the amount of such losses or usual and customary out-of-pocket expenses, absent manifest error, shall be binding and conclusive. Losses subject to reimbursement hereunder shall include, without limiting the generality of the foregoing, expenses incurred by any Lender in connection with the reemployment of funds prepaid, repaid, not borrowed, or paid, as the case may be, but in no event shall losses in respect of the Applicable Margin or lost profits be reimbursed. Section 2.11 Pro Rata Treatment. (a) Advances. Each Advance from the Lenders hereunder, shall be made pro rata on the basis of the respective Commitment Ratios (or, if applicable, the Incremental Facility Commitment Ratios) of the applicable Lenders. (b) Payments Prior to Declaration of an Event of Default. Prior to the declaration of an Event of Default by the Administrative Agent on behalf of the Lenders under Section 8.2 hereof, and except as set forth in Section 2.9(d) hereof, each payment and prepayment of the Loans, and each payment of interest on the Loans, shall be made to the Lenders pro rata on the basis of their respective unpaid principal amounts outstanding under -39- 45 the applicable Notes immediately prior to such payment or prepayment. If any Lender shall obtain any payment (whether involuntary, through the exercise of any right of set-off, or otherwise) on account of the Loans made by it in excess of its ratable share of the applicable Loans under its Commitment Ratio, such Lender shall forthwith purchase from the other Lenders such participations in the Loans of such type made by them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section may, to the fullest extent permitted by Applicable Law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. (c) Payments Subsequent to Declaration of An Event of Default. Subsequent to the declaration by the Administrative Agent of an Event of Default under Section 8.2 hereof, (i) in the event any Lender receives any payment or prepayment or otherwise collects any amount on account of the Loans, other than from the Administrative Agent, such Lender shall forthwith turn such payment or prepayment or amount collected over to the Administrative Agent, and (ii) in the event the Administrative Agent receives any payment or prepayment or collects any other amount on account of the Loans or any other Obligations, the Administrative Agent shall apply such amounts as follows: first, to the costs, fees and expenses incurred in connection with obtaining any such payment or prepayment or amount collected, as such costs are more fully described herein and in the other Loan Documents; second, to the payment of fees, interest, and principal on the Loans, in the order set forth in Section 2.9(d) hereof; and third, to the Borrower or as otherwise provided by Applicable Law. For purposes only of Section 2.11(c)(ii) and Section 2.9(d) hereof, the term "Loans" shall include all obligations of the Borrower pursuant to any Interest Hedge Agreement with the Administrative Agent or any Lender. Section 2.12 Funding Source. The denomination of any Advance of the Loans as a `Prime Rate Advance' or `LIBOR Advance' shall not oblige the Lenders or any Lender to obtain funds from any particular source of funds. Section 2.13 Capital Adequacy. If after the date hereof, any Lender shall have determined that the adoption after the date hereof of any Applicable Law regarding the capital adequacy of Lenders or bank holding companies, or any change therein after the date hereof, or any change after the date hereof in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by such Lender with any request or directive issued -40- 46 after the date hereof regarding capital adequacy (whether or not having the force of law) of any such governmental authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Lender's capital as a consequence of its obligations hereunder to a level below that which it could have achieved but for such adoption, change or compliance (taking into consideration such Lender's policies with respect to capital adequacy immediately before such adoption, change or compliance and assuming that such Lender's capital was fully utilized prior to such adoption, change or compliance) by an amount deemed by such Lender to be material, and the designation of a different lending office will not avoid the need for or reduce the amount of the additional compensation, then, (i) such Lender shall promptly notify the Administrative Agent and the Borrower in reasonable detail of such adoption, change, or compliance, (ii) such Lender shall calculate such reduced rate of return within one hundred eighty (180) days after such adoption, change, or compliance (and shall not be entitled to such compensation for amounts incurred more than one hundred eighty (180) days prior to submission of such notice and calculations), and (iii) upon the earlier of the tenth (10th) day after presentment by such Lender or the Facility A Maturity Date or Facility B Maturity Date, as the case may be, the Borrower shall immediately pay to such Lender additional amounts as shall be sufficient to compensate such Lender for such reduced return to the extent that such reduction of return is not affected by the credit rating of such Lender or its assets and only if such Lender is similarly charging its other major corporate borrowers in similar situations, together with interest on such amount from the tenth (10th) day after the date such payment becomes due, until payment in full thereof at the Default Rate. A certificate of such Lender setting forth the amount to be paid to such Lender by the Borrower as a result of any event referred to in this paragraph shall, absent manifest error, be conclusive, and, at the Borrower's request, such Lender shall demonstrate the basis for such determination. Each Lender agrees that if any amount or any portion of any amount described in this Section 2.13 is subsequently recovered by such Lender, such Lender shall promptly reimburse the Borrower to the extent of the amount so recovered. A certificate of such Lender setting forth the amount of such recovery and the basis therefor shall be conclusive absent manifest error. Section 2.14 Incremental Facility Advances. (a) Subject to the terms and conditions of this Agreement, the Borrower may request the Incremental Facility Commitment on any Business Day; provided, however, that the Borrower may not request the Incremental Facility Commitment or an Incremental Facility Advance during the continuance of a Default, including, without limitation, any Event of Default that would result after giving effect to any Incremental Facility Advance; and provided, further, that the Borrower may request up to four (4) Incremental Facility Commitments (each of which commitments may be from more than one Lender) which may be no less than $25,000,000 and no more than $200,000,000 in the aggregate. The aggregate amount, without duplication, of the Incremental Facility Commitment and the aggregate amount of outstanding Incremental Facility Advances shall not exceed $200,000,000. The -41- 47 final maturity date for all Incremental Facility Advances shall be no earlier than six (6) calendar months after the Facility B Maturity Date. The decision of any Lender to make an Incremental Facility Commitment to the Borrower shall be at such Lender's sole discretion. Persons not then Lenders may be included as Lenders having Incremental Facility Commitments with the written approval of the Borrower and the Administrative Agent (not to be unreasonably withheld or delayed). The Incremental Facility Commitments (i) may be in the form of a revolving or a term credit facility, (ii) must not (A) have a scheduled amortization providing for principal repayments earlier than, or in amounts on a percentage basis larger than, those dates or amounts set forth in the repayment schedule for the Facility A Term Loans and the Revolving Loan Commitment as set forth herein or (B) be secured by more or different collateral and (iii) must be governed by this Agreement and the other Loan Documents and be on terms and conditions not materially more restrictive when viewed as a whole than those set forth herein and therein for the Facility A Loans. (b) Prior to the effectiveness of any Incremental Facility Commitment, the Borrower shall (i) deliver to the Administrative Agent and the Lenders a Notice of Incremental Facility Commitment (which shall set forth terms and provisions with respect to interest rates and scheduled amortization with respect to such Incremental Facility Loan) and (ii) provide revised projections to the Administrative Agent and the Lenders, which shall be in form and substance reasonably satisfactory to the Administrative Agent and which shall demonstrate the Borrower's ability to timely repay such Incremental Facility Commitment and any Incremental Facility Advances thereunder and to comply with the covenants contained in Sections 7.8, 7.9, 7.10 and 7.11 hereof. (c) No Incremental Facility Commitment shall by itself result in any reduction of the Revolving Loan Commitment or of the Commitment Ratios with respect to the Revolving Loans of the Lender making such Incremental Facility Commitment. (d) Incremental Facility Advances (i) shall bear interest at the Prime Rate Basis or the LIBOR Basis or such other reasonable rate agreed to by the Lenders making such Incremental Facility Advances; (ii) subject to Section 2.14(a) hereof, shall be repaid as agreed to by the Borrower and the Lenders making such Incremental Facility Advances; (iii) shall for all purposes be Loans and Obligations hereunder and under the Loan Documents; (iv) shall be represented by Incremental Facility Notes in substantially the form of Exhibit F attached hereto; and (v) shall rank pari passu with the other Loans for purposes of Sections 2.9 and 8.2 hereof. (e) Incremental Facility Advances shall be requested by the Borrower pursuant to a request (which shall be in substantially the form of a Request for Advance) delivered in the same manner as a Request for Advance, but shall be funded pro rata only by those Lenders holding the Incremental Facility Commitments -42- 48 ARTICLE 3 CONDITIONS PRECEDENT Conditions Precedent Section 3.1 Conditions Precedent to Effectiveness and to the Initial Advances. The effectiveness of this Agreement and the making of the initial Advances hereunder are subject to the prior fulfillment of each of the following conditions: (a) The Administrative Agent or the Lenders, as the case may be, shall have received each of the following, in form and substance satisfactory to the Administrative Agent and the Lenders: (i) this Agreement duly executed; (ii) duly executed Notes (other than the Incremental Facility Notes); (iii) duly executed Borrower's Pledge Agreement, together with all pledged stock certificates or membership interests (if any) and stock powers or assignments separate from the certificate duly executed in blank; (iv) duly executed Holdco Pledge Agreement; (v) duly executed Guaranty by BCC LP substantially in the form of Exhibit P attached hereto; (vi) if then applicable, duly executed Subsidiary Guaranties for each Restricted Subsidiary of the Borrower on the Agreement Date; (vii) the loan certificate of the Borrower in substantially the form attached hereto as Exhibit K, including a certificate of incumbency with respect to each Authorized Signatory, together with appropriate attachments, including, without limitation, (A) a true, complete and correct copy of the certificate of formation of the Borrower, certified by the Delaware Secretary of State, (B) a true, complete and correct copy of the Operating Agreement of the Borrower, together with all amendments thereto, (C) a true, complete and correct copy of the authorizing resolutions of Bresnan Communications, Inc., authorizing it on behalf of the Borrower to execute, deliver and perform this Agreement and the other Loan Documents to which it is party, (D) a copy of the Articles of Incorporation of Bresnan Communications, Inc., certified to be true, complete and correct by the New York Secretary of State, (E) a true, complete and correct copy of the By-Laws of Bresnan -43- 49 Communications, Inc., as in effect on the date hereof, (F) certificates of good standing from appropriate jurisdictions for the Borrower, (G) a true, complete and correct copy of the Partnership Agreement, and (H) a true, complete and correct description of all material litigation pending or, to the best of the managing member's knowledge, threatened against the Borrower; (viii) the loan certificate of Holdco in substantially the form attached hereto as Exhibit L, including a certificate of incumbency with respect to each Authorized Signatory, together with appropriate attachments, including, without limitation, (A) a true, complete and correct copy of the certificate of formation of Holdco, certified by the Delaware Secretary of State, (B) a true, complete and correct copy of the Operating Agreement of Holdco, together with all amendments thereto and (c) certificates of good standing from appropriate jurisdictions for Holdco; (ix) duly executed Bresnan Assumption Agreement; (x) opinion of counsel to the Borrower, addressed to the Administrative Agent and each Lender and satisfactory to them, dated the Agreement Date, and substantially in the form attached hereto as Exhibit M; (xi) opinion of FCC counsel, addressed to the Administrative Agent and each Lender and satisfactory to them, dated the Agreement Date and substantially in the form attached hereto as Exhibit N; (xii) current Lien search results in jurisdictions requested by the Administrative Agent with respect to all material assets owned, or to be owned, by the Borrower as of the Agreement Date, when applicable terminations or releases are filed, will reflect no liens other than Permitted Liens; (xiii) all such other documents as the Administrative Agent or any Lender may reasonably request, certified by an appropriate governmental official or an Authorized Signatory if so requested; and (xiv) all fees and expenses to the Administrative Agent and the Lenders to the extent such fees and expenses have become payable on or prior to the Agreement Date, including, without limitation, all fees payable under any fee letters of even date herewith. (b) Except as set forth on Schedule 5 attached hereto, the Administrative Agent and the Lenders shall have received evidence reasonably satisfactory to them that all material Necessary Authorizations, including all necessary consents to the closing of this Agreement and the Contribution Agreement from the grantors of the material Licenses being transferred to the Borrower on or prior to the date of the initial Advance, have been obtained -44- 50 or made, are in full force and effect and are not subject to any pending or threatened reversal or cancellation, and the Administrative Agent shall have received a certificate of an Authorized Signatory so stating. (c) The Administrative Agent and the Arranging Agents shall have received evidence reasonably satisfactory to them that the Borrower or its Restricted Subsidiaries have received or will concurrently receive the cable systems being transferred on or prior to the date of the initial Advance consisting of approximately 400,000 cable customers previously owned by affiliates of TCIC and certain additional cable systems previously owned by BCC LP. (d) The Administrative Agent and the Arranging Agents shall have received evidence reasonably satisfactory to them that the Borrower has received or will concurrently receive an equity contribution of property and/or cash that corresponds to the gross proceeds of a cash equity contribution of at least $136,500,000 to BCC LP by the Blackstone Funds Related Parties and their Affiliates. (e) The Administrative Agent and the Arranging Agents shall have received evidence reasonably satisfactory to them that the Borrower has received or will concurrently receive an equity contribution of property and/or cash that corresponds to gross cash proceeds of not less than $295,000,000 from the issuance of the Holdco Notes. (f) The Administrative Agent and the Arranging Agents shall have received evidence reasonably satisfactory to them that all loans outstanding and all other amounts due in respect of existing Indebtedness for Money Borrowed of the Borrower (including the TCI Subordinated Note) and any Indebtedness for Money Borrowed associated with the contributed cable systems and the new properties shall have been paid in full and commitments under such existing credit agreements shall have been terminated. (g) The Lenders shall have received, in form and substance reasonably satisfactory to the Arranging Agents, combined financial statements with respect to the Systems previously owned by BCC LP and the Systems previously owned by TCIC which are being contributed to the Borrower for the nine months ended September 30, 1998. (h) The Lenders shall have received, in form and substance reasonably satisfactory to the Arranging Agents a pro forma balance sheet for the Borrower dated as of the Agreement Date (which will be as of December 31, 1998, but including the Holdco Notes and the initial Advance on a pro forma basis). (i) There has been no material adverse change in the financial condition, operations, assets, business or properties of BCC LP or of the contributed Systems of Affiliates of TCIC since December 31, 1999. -45- 51 Section 3.2 Conditions Precedent to Each Advance. The obligation of the Lenders to make each Advance which increases the principal amount of the Loans outstanding hereunder is subject to the fulfillment of each of the following conditions immediately prior to or contemporaneously with such Advance: (a) All of the representations and warranties of the Borrower under this Agreement, which, pursuant to Section 4.2 hereof, are made at and as of the time of such Advance, shall be true and correct at such time in all material respects, both before and after giving effect to the application of the proceeds of such Advance; (b) The incumbency of the Authorized Signatories shall be as stated in the certificate of incumbency delivered in the Borrower's loan certificate pursuant to Section 3.1(a)(viii) or as subsequently modified and reflected in a certificate of incumbency delivered to the Administrative Agent and each of the Lenders; and (c) There shall not exist, on the date of the making of the Advance and after giving effect thereto, a Default or an Event of Default hereunder and the Administrative Agent shall have received a Request for Advance so stating. The Lenders may, without waiving the foregoing conditions (a) through (c), consider each of them fulfilled and a representation by the Borrower to such effect made (but only with respect to Advances made under Section 2.2(b)(ii) or Section 2.2(c)(ii) which increase the principal amount of the Loans outstanding) if no written notice to the contrary, dated the date of such Advance, is received by the Lenders from the Borrower prior to the making of such Advance. ARTICLE 4 REPRESENTATIONS AND WARRANTIES Representations and Warranties Section 4.1 Representations and Warranties. The Borrower hereby represents and warrants to the Administrative Agent and the Lenders that: (a) Organization; Power; Qualification. The Borrower is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware. The Borrower has the limited liability company power and authority to own its properties and to carry on its business as now being and hereafter proposed to be conducted. The Borrower is authorized to do business and is in good standing in each jurisdiction in which the character of its properties or the nature of its businesses requires such qualification -46- 52 or authorization except where the failure to be so qualified could not be reasonably expected to have a Materially Adverse Effect. (b) Authorization; Enforceability. The Borrower has the limited liability company power and has taken all necessary action to authorize it to borrow hereunder, to execute, deliver and perform this Agreement and each of the other Loan Documents to which it is party in accordance with their respective terms and to consummate the transactions contemplated hereby and thereby. This Agreement has been duly executed and delivered by the Borrower and is, and each of the other Loan Documents to which the Borrower is a party is, a legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms, subject to the following qualifications: (i) an order of specific performance and an injunction are discretionary remedies and, in particular, may not be available where damages are considered an adequate remedy at law, and (ii) enforcement may be limited by bankruptcy, insolvency, liquidation, reorganization, reconstruction and other similar laws affecting enforcement of creditors' rights generally (insofar as any such law relates to the bankruptcy, insolvency or similar event of the Borrower) and to general principles of equity. (c) Subsidiaries: Authorization; Enforceability. The Borrower's Subsidiaries and the Borrower's direct and indirect ownership thereof as of the Agreement Date are as set forth on Schedule 6 attached hereto as it may be amended or supplemented by the Borrower from time to time, and to the extent such Subsidiaries are corporations, the Borrower has the unrestricted right to vote the issued and outstanding shares of such Subsidiaries which are Restricted Subsidiaries shown thereon and such shares of such Subsidiaries have been duly authorized and issued and are fully paid and nonassessable. Each Restricted Subsidiary of the Borrower has the corporate, partnership or limited liability company power and has taken all necessary corporate, partnership or limited liability company action to authorize it to execute, deliver and perform each of the Loan Documents to which it is a party in accordance with their respective terms and to consummate the transactions contemplated by this Agreement and by such Loan Documents. Each of the Loan Documents to which any Restricted Subsidiary of the Borrower is party is a legal, valid and binding obligation of such Restricted Subsidiary enforceable against such Restricted Subsidiary in accordance with its terms, subject, as to enforcement of remedies, to the following qualifications: (i) an order of specific performance and an injunction are discretionary remedies and, in particular, may not be available where damages are considered an adequate remedy at law and (ii) enforcement may be limited by bankruptcy, insolvency, liquidation, reorganization, reconstruction and other similar laws affecting enforcement of creditors' rights generally (insofar as any such law relates to the bankruptcy, insolvency or similar event of any such Subsidiary). Except as set forth on Schedule 6 attached hereto or as set forth in any written notice to the Lenders with respect thereto, the Borrower's ownership interest in each of its Restricted Subsidiaries represents a direct or indirect controlling interest of such Restricted Subsidiary for purposes of directing or causing the direction of the management and policies of each Subsidiary. -47- 53 (d) Compliance with Other Loan Documents and Contemplated Transactions. The execution, delivery and performance by the Borrower of this Agreement and each of the other Loan Documents to which it is party in accordance with their respective terms, and the consummation of the transactions contemplated hereby and thereby, do not and will not (i) require any consent or approval not already obtained, (ii) violate any Applicable Law respecting the Borrower, (iii) conflict with, result in a breach of, or constitute a default under the Partnership Agreement of BCC LP or the operating agreement of the Borrower, or under any material indenture, agreement, or other instrument, including, without limitation, the Licenses, the Management Agreement, and the Pole Agreements, to which the Borrower is a party or by which it or its properties may be bound, or (iv) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by the Borrower except Permitted Liens except, in each case if such lack of consent, violation, conflict or creation of a Lien could not be reasonably expected to have a Materially Adverse Effect. (e) Business. The Borrower and its Restricted Subsidiaries are engaged primarily in a Permitted Business and making Investments and Acquisitions. (f) Licenses, etc. Except to the extent set forth on Schedule 3 attached hereto or subsequently disclosed in writing to the Administrative Agent, or where the failure to so comply and to maintain such Licenses in full force and effect would not result in an Event of Default under Section 8.1(k), the material Licenses are in full force and effect and the Borrower, or, if applicable, each Restricted Subsidiary of the Borrower is in compliance in all material respects with all of the provisions thereof. Except as set forth on Schedule 5 attached hereto or as subsequently disclosed to the Administrative Agent in writing, the Borrower has secured all material Necessary Authorizations and all such Necessary Authorizations are in full force and effect. Neither any License nor any Necessary Authorization is the subject of any pending or, to the best of the Borrower's knowledge, threatened, attack or revocation, where such occurrence would result in an Event of Default under Section 8.1(k) hereof. Except as described on Schedule 3 attached hereto or subsequently disclosed to the Administrative Agent and the Lenders, no other license or franchise agreement with respect to the territory covered by any License has been granted, nor, to the best of Borrower's knowledge, is any application for such a license or franchise agreement pending, in each case where such occurrence would result in an Event of Default under Section 8.1(k) hereof. To the Borrower's actual knowledge, except as described on Schedule 7 attached hereto or subsequently disclosed to the Administrative Agent and the Lenders, no portion of the cable television Systems is presently subject to any material overbuilding, nor has another cable television franchise agreement been granted in any area covered by any of the cable television Licenses which, if they had been revoked, would result in an Event of Default under Section 8.1(k) hereof. Any SMATV System owned and operated by the Borrower is being operated pursuant to a valid and binding agreement for the operation of such SMATV System, and in accordance with Applicable Law except where the failure to so comply and to maintain such Licenses in full force and effect would not result in -48- 54 an Event of Default under Section 8.1(k). (g) Compliance with Law. The Borrower is in compliance with all Applicable Law, non-compliance with which could reasonably be expected to have a Materially Adverse Effect. (h) Title to Properties. The Borrower has marketable title to, or a valid leasehold interest in, all of its material assets (both singly and collectively). None of such assets is subject to any Liens, except for Permitted Liens. Except for financing statements evidencing Permitted Liens, or financing statements for which signed termination statements shall be tendered on the Agreement Date or as disclosed in the Lien searches described in clause (xi) of Section 3.1(a) hereof, (i) to the best of the Borrower's knowledge, no financing statement under the Uniform Commercial Code and no other filing which names the Borrower as debtor or which covers or purports to cover any of the Collateral is on file in any state or other jurisdiction, and (ii) the Borrower has not signed any financing statement or filing or any security agreement authorizing any secured party thereunder to file any financing statement or filing. (i) Litigation. Except as set forth on Schedule 7 attached hereto or pursuant to Section 6.5 hereof there is no action, suit, proceeding or investigation pending against (of which the Borrower has notice), or, to the best of the Borrower's knowledge, threatened against or in any other manner relating directly and adversely to the Borrower or any of its assets, including, without limitation, the Licenses, in any court or before any arbitrator of any kind or before or by any governmental body which (i) calls into question the validity of this Agreement or any other Loan Document, or (ii) could reasonably be expected, (A) to have a Materially Adverse Effect or (B) result in an Event of Default pursuant to Section 8.1(k) hereof, and which has not been waived by the Majority Lenders. The Borrower is not in default under any effective judgment, order or decree of any court or other governmental body except if such default would not have a Materially Adverse Effect. (j) Taxes. All material federal, state and other tax returns of the Borrower required by law to be filed have been duly filed and all material federal, state and other taxes, including, without limitation, withholding taxes, assessments and other governmental charges or levies required to be paid by the Borrower or imposed upon the Borrower or any of its properties, income, profits or assets, which are due and payable, have been paid, except any such (i) the payment of which the Borrower is contesting in good faith by appropriate proceedings, (ii) for which reserves which are required under GAAP have been provided on the books of the Borrower, and (iii) as to which no Lien other than a Permitted Lien has attached and no foreclosure, distraint, sale or similar proceedings have been commenced. The charges, accruals and reserves on the books of the Borrower are, in the judgment of the Borrower, in accordance with GAAP. (k) Financial Statements. The Borrower has furnished or caused to be -49- 55 furnished to the Administrative Agent and the Lenders copies of its unaudited pro forma balance sheet and related pro forma statements of income and cash flows for the Borrower as at and for the nine months ended September 30, 1998, which are complete and correct in all material respects and present fairly in accordance with GAAP the financial position on a pro forma basis of the Borrower on and as at such dates and the results of operations for the period then ended, subject to year end adjustments and to adjustments applicable upon the consummation of the transactions contemplated hereby. On the Agreement Date, the Borrower has no material liabilities, contingent or otherwise, other than as disclosed in the pro forma balance sheet delivered on the Agreement Date or, if after the Agreement Date, the date of the most recent financial statements of the Borrower delivered pursuant to Section 6.1 or Section 6.2 hereof, there are no material liabilities contingent or otherwise, other than those set forth therein or otherwise disclosed in writing to the Administrative Agent and the Lenders. (l) No Adverse Change. Since September 30, 1998, or, if after the Agreement Date, the date of the most recent financial statements of the Borrower delivered pursuant to Section 6.1 or Section 6.2 hereof, there has occurred no event which could reasonably be expected to have a Materially Adverse Effect. (m) ERISA. The Borrower and each of its Plans are in substantial compliance with ERISA and the Code and the Borrower has not incurred any material accumulated funding deficiency with respect to any such Plan within the meaning of ERISA or the Code. The Borrower, and each other Person which is affiliated with the Borrower within the meaning of Section 414 of the Code, have complied in good faith with the requirements of Section 4980B of the Code. The Borrower has not incurred any material liability to the Pension Benefit Guaranty Corporation in connection with any such Plan. The assets of each such Plan which is subject to Title IV of ERISA are sufficient to provide the benefits under such Plan of which the Pension Benefit Guaranty Corporation would guarantee the payment if such Plan were terminated, and such assets are also sufficient to provide all other benefits due under the Plan. No Reportable Event has occurred and is continuing with respect to any such Plan. No such Plan or trust created thereunder, or party in interest (as defined in Section 3(14) of ERISA), or any fiduciary (as defined in Section 3(21) of ERISA), has engaged in a material "prohibited transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of the Code) which would subject such Plan or any other Plan of the Borrower, or any trust created thereunder, or any such party in interest or fiduciary, or any party dealing with any such Plan or any such trust to the tax or penalty on "prohibited transactions" imposed by Section 502 of ERISA or Section 4975 of the Code. The Borrower is not a participant in, nor is it obligated to make any payment to, a Multiemployer Plan. (n) Compliance with Regulations T, U and X. The Borrower is not engaged principally or as one of its important activities in the business of extending credit for the purpose of purchasing or carrying any margin stock within the meaning of Regulations T, -50- 56 U and X of the Board of Governors of the Federal Reserve System, nor will it use the proceeds of any Advance of the Loans for such purpose. (o) Governmental Regulation. Except as set forth in Schedule 5 or as subsequently disclosed in writing to the Administrative Agent and the Majority Lenders, the Borrower is not required to obtain any consent, approval, authorization, permit or license which has not already been obtained from, or effect any filing or registration which has not already been effected with, any federal, state or local regulatory authority in connection with its ownership and operation of the Systems the loss of which would result in an Event of Default under Section 8.1(k) hereof, or in connection with the execution and delivery of this Agreement or any other Loan Document. The Borrower is not required to obtain any material consent, approval, authorization, permit or license which has not already been obtained from, or effect any filing or registration which has not already been effected with, any federal, state or local regulatory authorization in connection with the performance (other than any enforcement of remedies by the Administrative Agent and the Lenders), in accordance with their respective terms, of this Agreement or any other Loan Document, and any borrowing hereunder. (p) Absence of Default. The Borrower is in compliance in all material respects with all of the provisions of its operating agreement, and no event has occurred and is continuing, which has not been remedied or waived, the occurrence or non-occurrence of which constitutes, or which with the passage of time or giving of notice or both would constitute, an Event of Default. (q) Accuracy and Completeness of Information. The Memorandum dated January 1999, together with all other information in writing delivered to the Lenders by the Borrower since such date and on or before the Agreement Date, taken as a whole, were, as of the Agreement Date, complete and correct in all material respects, and to the best knowledge of the Borrower, do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements were made; provided, however, that with respect to projections and other forward looking information, it is recognized that such projections and other forward looking information are as to future events and are not to be viewed as facts and actual results during the period or periods covered may differ materially from projected results and other forward looking information. (r) Solvency. As of the Agreement Date and after giving effect to the transactions contemplated by the Loan Documents: (i) the property of the Borrower, at a fair valuation, will exceed its debts; (ii) the capital of the Borrower will not be unreasonably small to conduct its business; (iii) the Borrower will not have incurred debts beyond its ability to pay such debts as they mature; and (iv) the present fair salable value of the assets of the Borrower will be greater than the amount that will be required to pay its probable liabilities (including debts) as they become absolute and matured. For purposes of this -51- 57 Section, "debt" means any liability on a claim, and "claim" means (a) the right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, undisputed, legal, equitable, secured or unsecured, or (b) the right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, undisputed, secured or unsecured. (s) Investment Company Act. The Borrower is not required to register under the provisions of the Investment Company Act of 1940, as amended, and neither the entering into or performance by the Borrower of this Agreement nor the issuance of the Notes violates any provision of such Act or requires any consent, approval or authorization of, or registration with, the Securities and Exchange Commission or any other governmental or public body or authority pursuant to any provisions of such Act. (t) Environmental Law. The Borrower and its Restricted Subsidiaries are in compliance with all Environmental Laws applicable to the operation of their business in all jurisdictions in which they are presently doing business, such that they will not incur or be subject to any liability or penalty thereunder which could, individually or in the aggregate, reasonably be expected to have a Materially Adverse Effect. The Borrower and its Restricted Subsidiaries do not manage any hazardous wastes, hazardous substances, hazardous materials, toxic substances or toxic pollutants in violation of any Environmental Law, and there are no known conditions or circumstances associated with the currently or previously owned or leased properties or operations of the Borrower or its Restricted Subsidiaries or tenants, which may give rise to any liabilities and costs under any Environmental Law which could reasonably be expected to have a Materially Adverse Effect. (u) Year 2000 Compliance. The Borrower has initiated a review and assessment of all areas within its and each of its Restricted Subsidiaries' businesses and operations (including those affected by suppliers and vendors) that could be adversely affected by the "Year 2000 Problem" (that is, the risk that computer applications used by the Borrower or any of its Restricted Subsidiaries (or its suppliers and vendors) may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date after December 31, 1999), which is described as of the Agreement Date on Schedule 8 attached hereto. The Borrower reasonably believes that all computer applications (including those of its suppliers and vendors) that are material to its or any of its Restricted Subsidiaries' businesses and operations will on a timely basis be able to perform properly date-sensitive functions for all dates before and after January 1, 2000 (that is, be "Year 2000 Compliant"), except to the extent that a failure to do so could not reasonably be expected to have a Materially Adverse Effect. Section 4.2 Survival of Representations and Warranties, etc. All representations and warranties made under this -52- 58 Agreement shall be deemed to be made, and shall be true and correct, at and as of the Agreement Date and at and as of the date of each Advance which increases the principal amount of the Loans outstanding, to the extent subsequently inapplicable, or to the extent that such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date. All representations and warranties made under this Agreement shall survive, and not be waived by, the execution hereof by the Lenders, any investigation or inquiry by the Administrative Agent or any Lender, or by the making of any Advance under this Agreement. ARTICLE 5 GENERAL COVENANTS General Covenants So long as any of the Obligations is outstanding and unpaid or the Borrower shall have the right to borrow hereunder (whether or not the conditions to borrowing have been or can be fulfilled), and unless the Majority Lenders shall otherwise consent in writing: Section 5.1 Preservation of Existence and Similar Matters. The Borrower will and will cause each Restricted Subsidiary to: (a) preserve and maintain, or timely obtain and thereafter preserve and maintain, its existence, rights, franchises, licenses and privileges in such states as required, including, without limiting the foregoing, the Licenses, all other Necessary Authorizations and the Pole Agreements, and (b) qualify and remain qualified and authorized to do business in each jurisdiction in which the character of its properties or the nature of its businesses requires such qualification or authorization, in each of the foregoing instances where the failure to do so would have a Materially Adverse Effect. Section 5.2 Business; Compliance with Applicable Law. The Borrower will and will cause each Restricted Subsidiary to: (a) engage primarily in the business of acquiring, investing in, constructing, maintaining and operating the Systems, and managing other cable television systems, the ownership, development or provision of cable television programming, SMATV Systems, wireline or wireless telephony systems, high speed data services, internet access, digital advertisement insertion, interactive services or any other communications business (each a "Permitted Business") and (b) comply -53- 59 in all material respects with the requirements of all Applicable Law where the failure to so comply would have a Materially Adverse Effect. Section 5.3 Maintenance of Properties. The Borrower will, and will cause each of its Restricted Subsidiaries to, maintain or cause to be maintained in the ordinary course of business in good repair, working order and condition (reasonable wear and tear excepted) all material assets used in its businesses (whether owned or held under lease) (which if sold or otherwise disposed of would require the consent of the Majority Lenders under Section 7.5 hereof), and from time to time make or cause to be made all appropriate repairs, renewals, replacements and additions thereto. Section 5.4 Accounting Methods and Financial Records. The Borrower will maintain a system of accounting established and administered in accordance with GAAP, keep adequate records and books of account in which complete entries will be made in accordance with such accounting principles consistently applied and reflecting all transactions required to be reflected by such accounting principles. The Borrower will maintain a fiscal year ending on December 31. Section 5.5 Insurance. The Borrower will and will cause each Restricted Subsidiary to: (a) maintain insurance from responsible companies in such amounts and against such risks as are customary in the cable television business for similar cable television companies; and (b) keep its assets insured at not less than replacement value by insurers on terms, in a manner and in such amounts as are customary in the cable television business against loss or damage by fire, theft, and other risks, all premiums thereon to be paid by the Borrower. Section 5.6 Payment of Taxes and Claims. The Borrower will, and will cause each Restricted Subsidiary to, pay and discharge all material taxes, assessments and governmental charges or levies imposed upon it or its income or profits or upon any properties belonging to it prior to the date on which penalties attach thereto, and all lawful claims for labor, materials and supplies which, if unpaid, could become a Lien or charge upon any of its properties; except that no such tax, assessment, charge, levy or claim need be paid which is being contested in good faith by appropriate proceedings and for which reserves which are required under GAAP shall have been set aside on the appropriate books, but only so long as such tax, assessment, charge, levy or claim does not become a Lien other than a Permitted Lien and no foreclosure, distraint, sale or similar proceedings shall have -54- 60 been commenced. The Borrower shall timely file all material information returns required by federal, state or local tax authorities. Section 5.7 Visits and Inspections. Upon reasonable advance notice to an Authorized Officer by the Administrative Agent or the Majority Lenders, as applicable, the Borrower will permit representatives of the Administrative Agent or of any of the Lenders to (a) visit and inspect the properties of the Borrower or its Subsidiaries during normal business hours, (b) inspect and make reasonable extracts from and copies of its books and records, and (c) discuss with its principal officers and auditors its businesses, assets, liabilities, financial positions, results of operations and business prospects, in each case without interfering with their business or operations. Section 5.8 Payment of Indebtedness. Subject to any provisions herein or in any other Loan Document regarding subordination, and to Section 5.6 hereof, the Borrower will pay, and will cause each Restricted Subsidiary to pay, any and all of its Indebtedness when and as the same becomes due, other than amounts duly disputed in good faith, or which would not result in an Event of Default under Sections 8.1(n) or (p) hereof. Section 5.9 Use of Proceeds. The Borrower will use the aggregate proceeds of all Advances under the facilities (a) to refinance existing BCC LP debt (including payment of the TCI Subordinated Note) and debt to be assumed in connection with the contribution to the Borrower of additional cable systems by BCC LP pursuant to the Contribution Agreement; (b) to make Capital Expenditures; (c) to make payments permitted under Section 7.7 hereof; (d) to make Acquisitions and Investments permitted hereunder or as otherwise consented to by the Majority Lenders; (e) for working capital or general corporate expenditures (including fees and expenses related to the transactions contemplated hereby or by the issuance of the Holdco Notes); (f) to pay the Structuring Fee and (g) as otherwise approved by the Majority Lenders. Section 5.10 Management. The Borrower will be managed by the Manager under the terms of the Partnership Agreement. Section 5.11 Interest Rate Hedging. Within ninety (90) days of Agreement Date, the Borrower shall enter into (and shall at all times thereafter maintain) one or more Interest Hedge Agreements having a notional amount aggregating not less than forty percent (40%) of the principal amount of the Loans and Holdco Notes then outstanding; provided, however, that to the extent any such Indebtedness bears interest at a fixed rate, such Indebtedness shall be deemed to be subject to an Interest Hedge Agreement solely for purposes of compliance with -55- 61 this Section. Such Interest Hedge Agreements covering forty percent (40%) of such Indebtedness shall provide such interest rate protection in conformity with ISDA Standards and for a weighted average period of not less than thirty-six (36) months from the date of such Interest Rate Hedge Agreement or, if earlier, until the Facility B Maturity Date, on terms reasonably acceptable to the Administrative Agent, such terms to include consideration of the creditworthiness of the other party to such Interest Hedge Agreements. All obligations of the Borrower to the Administrative Agent or any of the Lenders pursuant to any Interest Hedge Agreement shall rank pari passu with the Obligations. The requirements of this Section 5.11 shall be satisfied by any Interest Hedge Agreement which provides for interest rate caps such that, on the date such Interest Hedge Agreement is entered into, the interest rate related thereto shall not exceed two percent (2%) per annum in excess of the Treasury rate on the date of such Interest Hedge Agreement customarily applicable to Interest Hedge Agreements of similar duration. Section 5.12 Covenants Regarding Formation of Subsidiaries, Investments and Acquisitions. At the time of any Acquisition (other than in respect of an Unrestricted Subsidiary), Investment or the formation of any Subsidiary of the Borrower which is not an Unrestricted Subsidiary, the Borrower shall provide (a) all documentation that is reasonably requested by the Majority Lenders with respect to such Acquisition, Investment or the formation of such Subsidiary, (b) with respect to any Restricted Subsidiary, a duly executed Subsidiary Guaranty with respect to such Restricted Subsidiary and (c) with respect to any domestic Restricted Subsidiary, stock or other equity interest pledge agreement in substantially the form of the Borrower Pledge Agreement which, (i) with respect to any domestic Restricted Subsidiary, shall pledge all of the equity interests thereof owned directly or indirectly by the Borrower as Collateral for the Obligations, and (ii) with respect to any foreign Restricted Subsidiary shall pledge sixty-five percent (65%) of the equity interests of such Restricted Subsidiary owned directly or indirectly by the Borrower. Any such document, agreement or instrument executed or issued by the Borrower or any of its Restricted Subsidiaries to the Administrative Agent and the Lenders, or any of them, pursuant to this Section 5.12 shall be a "Loan Document" for purposes of this Agreement. Further, the representations, warranties and covenants contained herein shall with respect to the Borrower shall apply, mutatis mutandis, to any Restricted Subsidiary of the Borrower. Section 5.13 Payment of Wages. The Borrower shall at all times comply in all material respects with the applicable requirements of the Fair Labor Standards Act, as amended. Section 5.14 Indemnity. The Borrower will indemnify and hold harmless the Administrative Agent, the Syndication Agent, the Documentation Agents and each of the Lenders and each of their respective employees, representatives, trustees, officers and directors from and against any and all -56- 62 claims, liabilities, losses, damages, actions, and demands by any party (other than taxes (which are addressed in Article 2 hereof) and other than with respect to any claims, actions or demands made by other such indemnified parties or any liabilities, losses or damages caused thereby) against the Administrative Agent, the Syndication Agent, the Documentation Agent, the Lenders, or any of them resulting from any breach or alleged breach by the Borrower of any representation or warranty made hereunder, or otherwise arising out of (i) the Commitment or the making or administration of the Loans, (ii) allegations of any participation by the Administrative Agent, the Syndication Agent, the Documentation Agent, the Lenders, or any of them in the affairs of the Borrower or that the Administrative Agent, the Syndication Agent, the Documentation Agent, the Lenders, or any of them has any joint liability with the Borrower for any reason, and (iii) any claim against the Administrative Agent, the Syndication Agent, the Documentation Agent, the Lenders, or any of them by any holder of any subordinated debt unless, with respect to any one of the above, such Person is determined to have acted or failed to act with gross negligence or willful misconduct. Section 5.15 Environmental Compliance. The Borrower shall, and shall cause each of its Restricted Subsidiaries to use and operate all of its facilities and assets in compliance with all Environmental Laws, keep all necessary permits, approvals, certificates, licenses and other authorizations relating to environmental matters in effect and remain in compliance therewith, and handle all hazardous materials in material compliance with all applicable Environmental Laws, except where noncompliance with any of the foregoing could not reasonably be expected to have a Materially Adverse Effect. Section 5.16 Year 2000 Compliance. The Borrower will promptly notify the Administrative Agent in the event the Borrower or any of its Restricted Subsidiaries is made aware of or determines that any computer application (including those of its suppliers and vendors) that is material to the businesses and operations of the Borrower or of any of its Restricted Subsidiaries will not be Year 2000 Compliant on a timely basis, except to the extent that such failure could not reasonably be expected to have a Materially Adverse Effect. ARTICLE 6 INFORMATION COVENANTS Information Covenants So long as any of the Obligations is outstanding and unpaid or the Borrower has a right to borrow hereunder (whether or not the conditions to borrowing have been or can be fulfilled) and unless the Majority Lenders shall otherwise consent in writing, the Borrower will furnish or cause to be furnished to the Administrative Agent and to each Lender at their respective offices: -57- 63 Section 6.1 Quarterly Financial Statements and Information. Within forty-five (45) days after the last day of each of the first three calendar quarters in each fiscal year, the unaudited balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such quarter, and the related unaudited statement of operations and members' equity and related unaudited statement of cash flows of the Borrower and its consolidated Subsidiaries for the elapsed portion of the year ended with the last day of such quarter, all of which shall be certified by an Authorized Signatory having responsibility for financial matters of the Borrower to be, in his/her opinion, complete and correct in all material respects and to present fairly, in accordance with GAAP, the financial position of the Borrower and its consolidated Subsidiaries as at the end of such period and the results of operations for such period, and for the elapsed portion of the year ended with the last day of such period, subject only to normal year-end adjustments. Section 6.2 Annual Financial Statements and Information; Certificate of No Default. Within one hundred (100) days after the end of each fiscal year of the Borrower, the audited consolidated balance sheet of the Borrower and its consolidated Subsidiaries and the related audited consolidated statements of operations and related audited consolidated statements of cash flows of the Borrower and its consolidated Subsidiaries for such fiscal year and set forth in comparative form such figures as at the end of and for the previous fiscal year (except for the year ended December 31, 1998), all in reasonable detail and certified without qualification due to the scope of the audit by independent certified public accountants of recognized standing, whose opinion shall be customary in scope and substance. Section 6.3 Performance Certificates. At the time the financial statements are furnished pursuant to Sections 6.1 and 6.2 hereof, a certificate of an Authorized Signatory having responsibility for financial matters of the Borrower: (a) setting forth as at the end of such quarterly period or fiscal year, as the case may be, (i) the arithmetical calculations required to establish (A) any interest rate adjustment, as provided for in Section 2.3(f), and (B) whether or not the Borrower was in compliance with the requirements of Sections 7.8, 7.9, 7.10 and 7.11 hereof, (ii) the number of homes passed, basic subscribers and pay subscribers for the Systems, (iii) (A) amount of Net Proceeds received in connection with all assets sold during the twelve (12) months preceding the date of such certificate in a transaction where the Net Proceeds exceeded $10,000,000, (B) the extent to which such Net Proceeds have been reinvested and (C) the percentage of net Operating Cash Flow represented by each such asset sale (made without the consent of the Majority Lenders), and (iv) Tax Distributions made during the immediately -58- 64 preceding quarter, together with the calculations with respect thereto; and (b) stating that, to the best of his or her knowledge, no Default or Event of Default has occurred as at the end of such period, or year, or, if a Default or Event of Default has occurred, disclosing each such Default or Event of Default and its nature, when it occurred, whether it is continuing and the steps which have been taken and are being taken by the Borrower with respect to such Default or Event of Default. Section 6.4 Copies of Other Reports. (a) Promptly upon receipt thereof, copies of all material reports, if any, submitted to the Borrower by the Borrower's independent public accountants regarding the Borrower, including, without limitation, any management report prepared in connection with the annual audit referred to in Section 6.2 hereof. (b) Promptly after its preparation and in no event later than forty-five (45) days after the commencement of each of the Borrower's budget years, a copy of the annual budget, including the budget for Capital Expenditures, for the construction, operation and maintenance of the Systems and the budgeted tax schedule of the Borrower for such year. (c) Promptly upon receipt thereof, copies of any notice or report regarding any License from the grantor thereof or any successor thereto regarding the Systems, or any license from the Federal Communications Commission or any successor thereto, and, promptly upon learning thereof, information regarding any actual overbuilding or the granting of another competing cable television franchise agreement in any area covered by any of the cable television Licenses which, if such event had occurred prior to the Agreement Date, would have constituted an exception to the representation and warranty under Section 4.1(f) hereof. (d) From time to time and promptly upon each request, such data, certificates, reports, statements, opinions of counsel, documents or further information regarding the assets or the business, liabilities, financial position, projections, results of operations or business prospects of the Borrower, as the Administrative Agent or the Majority Lenders may reasonably request. (e) Prior to the making of any Investment or Acquisition, a certificate setting forth a brief description of the Investment or Acquisition, all relevant information (which, if the Investment or Acquisition involves a cable television system or a SMATV System, shall include information regarding the Basic Subscribers to be acquired by the Borrower and the cable television system or SMATV System with respect to the subject Investment or Acquisition), and such additional information as the Administrative Agent or the Majority Lenders may reasonably request. For purposes of the preceding sentence, -59- 65 "Basic Subscribers" shall include the Basic Subscribers being acquired in an Acquisition or an Investment. (f) Audited financial statements with respect to the Contributed Assets for the period ending December 31, 1998 promptly after they become available. Section 6.5 Notice of Litigation and Other Matters. Prompt notice of the following events after the Borrower has received notice or otherwise become aware thereof: (a) the commencement of all proceedings and investigations by or before any governmental body and all actions and proceedings in any court or before any arbitrator (i) against, or (ii) (to the extent known to the Borrower) in any other way relating directly and adversely to, the Borrower or any of its respective properties, assets or businesses or any License (which would be an Event of Default under Section 8.1(k) hereof) which, if such litigation had occurred prior to the Agreement Date, would have constituted an exception to the representation and warranty under Section 4.1(i) hereof; (b) any event which is likely to have a Materially Adverse Effect on the Borrower and its Restricted Subsidiaries; (c) any material amendment or change to any budget submitted under Section 6.4(b) hereof for the construction, operation and maintenance of the Systems; (d) any Default or Event of Default or the occurrence or non-occurrence of any event (x) which constitutes, or which with the passage of time or giving of notice or both would constitute a material breach by the Borrower under any material agreement other than this Agreement to which the Borrower is party or by which its assets may be bound, and (y) which could reasonably be expected to have a Materially Adverse Effect, giving in each case the details thereof and specifying the action proposed to be taken with respect thereto; (e) the occurrence of any Reportable Event or a material "prohibited transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of the Code) with respect to any Plan of the Borrower or the institution or threatened institution by the Pension Benefit Guaranty Corporation or any successor thereto of proceedings under ERISA to terminate or to partially terminate any such Plan or the commencement or threatened commencement of any litigation regarding any such Plan or naming it or the Trustee of any such Plan with respect to such Plan; and (f) the occurrence of any event subsequent to the Agreement Date which, if such event had occurred prior to the Agreement Date, would have constituted an exception -60- 66 to the representation and warranty in Section 4.1(m) of this Agreement. ARTICLE 7 NEGATIVE COVENANTS Negative Covenants So long as any of the Obligations is outstanding and unpaid or the Borrower has a right to borrow hereunder (whether or not the conditions to borrowing have been or can be fulfilled) and unless the Majority Lenders shall otherwise give their prior consent in writing: Section 7.1 Indebtedness of the Borrower. The Borrower shall not create, assume, incur or otherwise become or remain obligated in respect of, or permit to be outstanding, and shall not permit any Restricted Subsidiary to create, assume, incur or otherwise become or remain obligated in respect of any Indebtedness for Money Borrowed except that the Borrower and its Restricted Subsidiaries may incur the following additional Indebtedness for Money Borrowed: (a) Indebtedness under this Agreement and the Notes; (b) Accounts payable, subscriber deposits, accrued expenses and customer advance payments incurred in the ordinary course of business; (c) Capitalized Lease Obligations in an aggregate amount (together with all other Indebtedness for Money Borrowed permitted under Sections 7.1(d) and (g) hereof and all Guaranties permitted under Section 7.6(c) hereof) not in excess of $50,000,000 at any one time outstanding; (d) Indebtedness secured by Permitted Liens which, with respect to Indebtedness described in clause (i) of the definition of Permitted Liens, does not exceed when added to all Indebtedness for Money Borrowed incurred pursuant to Sections 7.1(c) and (g) hereof and Guaranties permitted under Section 7.6(c) hereof, $50,000,000 at any time outstanding; (e) accrued management fees and any interest thereon due to the Manager pursuant to the Partnership Agreement subject to the terms of this Agreement or other accrued or unpaid fees and interest thereon to the extent permitted to be incurred hereunder; (f) Indebtedness under Interest Hedge Agreements which are entered into for purposes of hedging interest rate or currency risk and not for speculative purposes; -61- 67 (g) other unsecured Indebtedness for Money Borrowed not to exceed in the aggregate (together with all other Indebtedness permitted under Section 7.1(c) and (d) hereof and all Guaranties permitted under Section 7.6(c) hereof) $50,000,000 at any time outstanding; (h) Indebtedness between or among the Borrower or any of its Restricted Subsidiaries; (i) Member Subordinated Debt; (j) Indebtedness in connection with one or more standby letters of credit or performance bonds issued in the ordinary course of business or pursuant to self-insurance obligations (including but not limited to workers' compensation); and (k) Indebtedness for Money Borrowed incurred or assumed in connection with the Contemplated Transactions (so long as such Indebtedness is not incurred in anticipation thereof). Section 7.2 Investments. The Borrower shall not, and shall not permit any of its Restricted Subsidiaries to, make any loan or advance, or make any investment (including without limitation any Investment) or otherwise acquire for a consideration evidences of Indebtedness, capital stock or other securities of any Person (other than a Restricted Subsidiary of the Borrower), except that: (a) the Borrower and its Subsidiaries may, directly or through a brokerage account (i) purchase marketable, direct obligations of the United States of America, its agencies and instrumentalities maturing within three hundred sixty-five (365) days of the date of purchase, (ii) purchase commercial paper issued by corporations, each of which shall have a combined net worth of at least $100,000,000 and each of which conducts a substantial part of its business in the United States of America, maturing within one hundred eighty (180) days from the date of the original issue thereof, and rated "P-1" or better by Moody's Investors Service, Inc., or any successor, or "A" or better by Standard and Poor's Ratings Group, a division of McGraw Hill, Inc., or any successor, and (iii) purchase repurchase agreements, bankers' acceptances, and certificates of deposit maturing within three hundred sixty-five (365) days of the date of purchase which are issued by, or time deposits maintained with, any Lender or a United States national or state bank the deposits of which are insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation and having capital, surplus and undivided profits totaling more than $100,000,000 and rated "A" or better by Moody's Investors Service, Inc., or any successor, or Standard and Poor's Ratings Group, a division of McGraw Hill, Inc., or any successor; (b) so long as no Default exists or would be caused thereby, the Borrower -62- 68 and its Restricted Subsidiaries may make Investments (including in Unrestricted Subsidiaries) not otherwise described herein in an aggregate amount at any time outstanding (after giving effect to returns of such Investments) not to exceed $50,000,000 (when added to all other Investments permitted under Section 7.2(c) hereof); (c) so long as no Default exists or would be caused thereby, the Borrower may make Investments in Unrestricted Subsidiaries which are engaged in the construction and provision of telephony services and high speed data facilities and services in an amount not to exceed in the aggregate at any time outstanding (after giving effect to returns of such Investments) the lesser of (i) $15,000,000 and (ii) the difference between (A) $50,000,000 and (B) all other Investments, then outstanding under Section 7.2(b) and this Section 7.2(c); (d) advances or loans to employees, officers and directors in the ordinary course of business in an amount which in the aggregate for all employees does not exceed at any time $1,000,000; (e) promissory notes or other Indebtedness, or equity interests, which do not exceed $10,000,000 in aggregate principal amount or initial value outstanding at the time received in connection with any disposition of assets permitted under Section 7.5(b) hereof or an insolvency, compromise or other similar circumstance with respect to a customer or vendor; (f) Investments permitted by Sections 7.5 and 7.6 hereof; (g) any Investment in respect of the AT&T Investment; provided, however that the aggregate amount of such Investments during the term hereof (after giving effect to amounts received by the Borrower in cash from the AT&T Investment) shall not exceed $25,000,000; and (h) capital contributions in and other Investments to any Restricted Subsidiary. Section 7.3 Limitation on Liens. The Borrower shall not, and shall not permit any of its Restricted Subsidiaries to, create, assume, incur or permit to exist or to be created, assumed, incurred or permitted to exist, directly or indirectly, any Lien on any of its assets, whether now owned or hereafter acquired, except Permitted Liens. Section 7.4 Amendment and Waiver. The Borrower shall not, and shall not permit any of its Restricted Subsidiaries to, enter into or permit or suffer any amendment or termination of, or agree to or accept any waiver of any material provisions of, its operating agreement (which amendment or waiver could be materially unfavorable to the Lenders). -63- 69 Section 7.5 Limitations on Mergers and Acquisitions. The Borrower shall not, and shall not permit any of its Restricted Subsidiaries to at any time: (a) (i) liquidate or dissolve itself (or suffer any liquidation or dissolution) or otherwise wind up, or (ii) sell, lease, abandon, transfer or otherwise dispose of all or any substantial part of its assets or business (other than stock or other ownership interests in any Unrestricted Subsidiary); provided, however, that so long as no Default exists or would be caused thereby, the Borrower and its Restricted Subsidiaries may without the consent of the Majority Lenders (but subject to the provisions of Section 2.7(d) hereof) sell, lease, transfer or otherwise dispose of all or any substantial part of any System (either singly or in a series of transactions) for fair market value (other than obsolete or surplus assets) which on the date of disposition individually does not contribute more than fifteen percent (15%) of the Borrower's Operating Cash Flow for the most recently completed four fiscal quarters (or Annualized Operating Cash Flow until March 31, 2000) or in the aggregate during the term hereof up to a maximum amount of disposed assets not exceeding thirty percent (30%) of the Borrower's Operating Cash Flow over the first five years of the Facilities (in each case calculated on a pro forma basis for dispositions within the first five years of the term of this Agreement) and in each case excluding from any restrictions dispositions consisting of or resulting in (1) Exchanges, (2) assets acquired in Acquisitions designated in writing to the Administrative Agent at the time of the Acquisition to be transferred pursuant to a sale or other disposition, (3) the Contemplated Transactions, (4) Net Proceeds used by the Borrower or a Restricted Subsidiary within twelve months from receipt thereof in connection with an Acquisition in accordance with Section 7.5(b) hereof or to purchase similar assets, and (5) as otherwise consented to by the Majority Lenders; (b) make any Acquisition; provided, however, that so long as no Default then exists or would be caused thereby, the Borrower may without the consent of the Majority Lenders make Acquisitions (including without limitation, Contemplated Transactions); provided (i) the Borrower complies with Sections 5.12 and 6.4(e) hereof, (ii) if the Total Leverage Ratio is greater than 5.50 to 1.00 (at the time of and after giving effect to such Acquisitions), the aggregate purchase price of all such Acquisitions during the term of this Agreement does not exceed $50,000,000 (exclusive of reinvestment of Net Proceeds of any disposition, any Exchange, the purchase price of the Contemplated Transactions, the purchase price of the Contributed Assets and assumed Indebtedness in connection with permitted Acquisitions and Exchanges), and (iii) the Borrower shall certify in writing to the Administrative Agent and the Lenders prior to the making of the Acquisition (A) that the Borrower is in compliance with Sections 7.8, 7.9, 7.10, and 7.11 hereof both before and after giving effect to such Acquisition, (B) that no Default then exists or would be caused thereby, (C) the total purchase price for the Acquisition and (D) with respect to the Nebraska Acquisition only, the Borrower shall provide revised projections reflecting such -64- 70 Acquisition (it being acknowledged that if the Total Leverage Ratio is equal to or less than 5.50 to 1.00 (at the time of and after giving effect to such Acquisition) the limit provided in clause (ii) shall not apply to such Acquisition); (c) enter into any merger unless (i) such merger is with another entity that is in a Permitted Business, (ii) the surviving entity is a Restricted Subsidiary of the Borrower or the Borrower and (iii) such merger complies with clause (b) above; or (d) create any Restricted Subsidiary except in compliance with Section 5.12 hereof. The Administrative Agent and each Lender agrees that, upon any disposition of a Restricted Subsidiary permitted hereunder, the Subsidiary Guaranty, the pledge of the equity interest and any pledge of notes with respect to such Restricted Subsidiary shall be deemed released automatically without any further action hereunder, and such Restricted Subsidiary shall have no obligations or liabilities under its Subsidiary Guaranty. Section 7.6 Limitation on Guaranties. The Borrower and the Restricted Subsidiaries shall not at any time issue any Guaranty, or assume, be obligated with respect to, or permit to be outstanding any Guaranty of, any obligation of any other Person other than (a) a guaranty by endorsement of negotiable instruments for collection in the ordinary course of business, (b) obligations under agreements of the Borrower or a Restricted Subsidiary entered into in connection with the acquisition of services, supplies and equipment in the ordinary course of business of the Borrower or a Restricted Subsidiary, (c) Guaranties which together with all Indebtedness for Money Borrowed permitted under Sections 7.1(c), 7.1(d) and 7.1(g) hereof do not exceed $50,000,000 at any time outstanding, (d) Guaranties of Indebtedness permitted under Section 7.1 and (e) Guaranties from Restricted Subsidiaries in favor of the Lenders. Section 7.7 Restricted Payments and Purchases. The Borrower shall not directly or indirectly declare or make any Restricted Payment or Restricted Purchase, except that so long as no Default or Event of Default hereunder then exists or would be caused thereby, the Borrower may make the following permitted Restricted Payments: (a) on or prior to the 180th day following the close of each fiscal year of BCC LP, a Tax Distribution for the benefit of Bresnan Communications, Inc. or any of its Affiliates with respect to such fiscal year; (b) (i) for each fiscal year of BCC LP ending prior to January 1, 2005, on or prior to the 180th day following the close of each such fiscal year of BCC LP in which the Borrower's Operating Cash Flow does not exceed or equal the projected "Operating Cash -65- 71 Flow After Corp (EBITDA)" for such period in the Projections, Tax Distributions for the benefit of the Blackstone Funds Related Parties with respect to such fiscal year in an amount not to exceed $5,000,000 in the aggregate during the period ending January 1, 2005, (ii) for each fiscal year of BCC LP ending prior to January 1, 2005, on or prior to the 180th day following the close of each such fiscal year of BCC LP in which the Borrower's Operating Cash Flow exceeds the projected "Operating Cash Flow After Corp (EBITDA)" for such period in the Projections, without restriction thereon, a Tax Distribution for the benefit of the Blackstone Funds Related Parties with respect to such fiscal year, and (iii) thereafter, on or prior to the 180th day following the close of each fiscal year of BCC LP, a Tax Distribution for the benefit of the Blackstone Funds Related Parties with respect to such fiscal year; (c) distributions to Holdco for the purpose of making interest payments in respect of the Holdco Notes and in respect of other Indebtedness for Money Borrowed incurred by Holdco or BCC LP which incurrence did not result in an Event of Default under Section 8.1(o); (d) so long as the Total Leverage Ratio shall have been less than 5.50 to 1.00 for the two (2) consecutive fiscal quarters immediately preceding the distribution date (and on the distribution date after giving effect to any Advance made with respect to such distribution), a single distribution in an amount not to exceed twenty-five percent (25%) of the Excess Cash Flow for the immediately preceding fiscal year; (e) distributions in respect of payments of monitoring fees as set forth in the Partnership Agreement in an amount not to exceed $550,000 per calendar year; (f) distributions in respect of management fees to be paid pursuant to the Partnership Agreement; provided, however, that the aggregate amount of such management fees does not exceed three percent (3%) of the gross revenues of the Borrower in any fiscal year, and, provided, further, that for purposes hereof, management fees shall not include operating expenses (as determined in accordance with GAAP), which shall not be subject to the restrictions of this Section; (g) repayments of, or distributions to pay, principal or interest on Member Subordinated Debt so long as (i) the Total Leverage Ratio (before and after giving effect to such repayment) is less than or equal to 5.50 to 1.00 and (ii) such Member Subordinated Debt has been outstanding for not less than two (2) full calendar quarters; (h) Restricted Payments contemplated to be made on or in connection with the Agreement Date and thereafter with respect to the purchase price of the Contributed Assets and payment of the Structuring Fee; (i) distributions to cover the ordinary course expenses of Holdco and BCC LP not to exceed $1,000,000 per calendar year; -66- 72 (j) distributions in respect of payments of up to $5,000,000 in the aggregate during the term hereof in respect of the redemption of management participation units; and (k) for purposes of clarification and subject to Section 7.2(g) hereof, Restricted Payments in respect of the AT&T Investment. Section 7.8 Senior Leverage Ratio. The Borrower shall not permit at any time, tested on the last day of each calendar quarter and on the date of each Advance which increases the principal amount of the Loans outstanding, the ratio of (i) Funded Debt to (ii) Annualized Operating Cash Flow for the quarter end being tested or the most recently completed quarter as applicable, to exceed the ratios set forth below during the following periods:
Period Ratio ------ ----- Agreement Date through December 31, 1999 5.75:1.00 From January 1, 2000 through September 30, 2000 5.50:1.00 From October 1, 2000 through March 31, 2001 5.00:1.00 From April 1, 2001 through September 30, 2001 4.75:1.00 From October 1, 2001 through March 31, 2002 4.50:1.00 From April 1, 2002 through September 30, 2002 4.25:1.00 From October 1, 2002 and thereafter 4.00:1.00
-67- 73 Section 7.9 Total Leverage Ratio. The Borrower shall not permit the Total Leverage Ratio at any time, tested on the last day of each calendar quarter and on the date of each Advance which increases the principal amount of the Loans outstanding, to exceed the following ratios set forth below during the following periods:
Period Ratio ------ ----- From Agreement Date through March 31, 2000 7.00:1.00 From April 1, 2000 through September 30, 2000 6.75:1.00 From October 1, 2000 through March 31, 2001 6.50:1.00 From April 1, 2001 through September 30, 2001 6.00:1.00 From October 1, 2001 through March 31, 2002 5.50:1.00 From April 1, 2002 and thereafter 5.00:1.00
Section 7.10 Annualized Operating Cash Flow to Debt Service Requirements Ratio. As of the end of any calendar quarter, the Borrower shall not permit the ratio of (a) its Annualized Operating Cash Flow for the calendar quarter being tested to (b) Debt Service Requirements for the four (4) calendar quarters immediately succeeding the calculation date to be less than 1.25:1.00. -68- 74 Section 7.11 Operating Cash Flow to Interest Expense. As of the end of each calendar quarter, the Borrower shall not permit the ratio of (a) Operating Cash Flow for the Borrower to (b) Interest Expense of the Borrower (measured, in each case, on a trailing twelve (12) month basis unless otherwise defined; provided, however, that for all periods prior to March 31, 2000, Operating Cash Flow in clause (a) hereof shall be replaced by Annualized Operating Cash Flow, and thereafter on a trailing twelve (12) month basis) of not less than:
Period Ratio ------ ----- Agreement Date through June 30, 2001 1.50:1.00 From July 1, 2001 through June 30, 2002 1.75:1.00 From July 1, 2002 and thereafter 2.00:1.00
Section 7.12 Affiliate Transactions. Except for transactions between or among the Borrower or any Restricted Subsidiary and except as contemplated by the Contribution Agreement, the Partnership Agreement or in connection with the transactions expressly contemplated hereby, the Borrower shall not at any time engage in any transaction with an Affiliate of the Borrower, nor make an assignment or other transfer of any of its assets to any Affiliate of the Borrower, on terms less advantageous to the Borrower than would be the case if such transaction had been effected with a non-Affiliate other than (i) employee loans and the purchase of a split dollar life insurance policy on the life of William Bresnan for the benefit of his heirs, (ii) Member Subordinated Debt and (iii) transactions permitted by Section 7.2, 7.5, 7.6 and 7.7. Section 7.13 Limitation on Leases. The Borrower shall not make or become obligated to make any payment in respect of any obligation as lessee under a lease except payments under leases to be used in connection with the operation of the Systems, and non-system related leases which, when aggregated with all other payments under such non-System related leases by the Borrower would not exceed in the aggregate for the Borrower during any one fiscal year of the Borrower, $5,000,000. For purposes of the preceding sentence, the term "lease" shall not include Pole Agreements. Section 7.14 ERISA Liabilities. The Borrower shall not permit the assets of any of its Plans to be less than the amount necessary to provide all accrued benefits under such Plans. The Borrower shall not without the prior written consent of the Majority Lenders, become a participant in any Multiemployer Plan. -69- 75 Section 7.15 Limitation on Capital Expenditures. So long as on the date of incurrence thereof the Total Leverage Ratio is greater than or equal to 5.50 to 1.00, the Borrower shall not permit the aggregate amount of its Capital Expenditures in any period set forth below to exceed as of the end of such period the sum of (a) the limit for such period as set forth below plus (b) any unexpended portion of the Capital Expenditure limit set forth below for the immediately preceding period (it being acknowledged that if the Total Leverage Ratio is less than 5.50 to 1.0 on the date of incurrence of the applicable Capital Expenditure there are no restrictions thereon): I. If the Nebraska Acquisition Does Not Close:
Annual Year Limit ---- ----- 1999 $125,000,000 2000 $ 95,000,000 2001 $ 60,000,000 2002 and thereafter $ 50,000,000
II. If the Nebraska Acquisition Does Close:
Annual Year Limit ---- ----- 1999 $135,000,000 2000 $100,000,000 2001 $ 65,000,000 2002 and thereafter $ 55,000,000
ARTICLE 8 DEFAULT Default Section 8.1 Events of Default. -70- 76 Events of Default. Each of the following shall constitute an Event of Default, whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment or order of any court or any order, rule or regulation of any governmental or non-governmental body: (a) Any representation or warranty made under this Agreement shall prove incorrect or misleading in any material respect when made; (b) The Borrower shall default in the payment of (i) any principal under the Notes when due, or (ii) any interest under the Notes or any fees or other amounts payable to the Lenders and the Administrative Agent under any of the Loan Documents, when due, and, as to clause (ii) hereof, such Default shall not be cured by payment in full within five (5) Business Days from the date such payment of interest or fees or other amounts became due by payment of such late amount; (c) The Borrower shall default in the performance or observance of any agreement or covenant contained in Sections 7.7, 7.8, 7.9, 7.10, 7.11 or 7.15 hereof; (d) The Borrower shall default in the performance or observance of any other agreement or covenant contained in this Agreement not specifically referred to elsewhere in this Section 8.1, and such default shall not be cured to the Majority Lenders' reasonable satisfaction within a period of thirty (30) days from the date of notice by the Administrative Agent to the Borrower of such default; (e) There shall occur any default in the performance or observance of any agreement or covenant or breach of any representation or warranty contained in any of the Loan Documents (other than this Agreement), which shall not be cured to the Majority Lenders' satisfaction within a period of thirty (30) days from the date of notice by the Administrative Agent to the Borrower of such default or breach; (f) There shall be entered a decree or order by a court having jurisdiction in the premises constituting an order for relief in respect of the Borrower, any Restricted Subsidiary of the Borrower, Holdco or BCC LP under Title 11 of the United States Code, as now constituted or hereafter amended, or any other applicable federal or state bankruptcy law or other similar law, or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or similar official of the Borrower, any Restricted Subsidiary of the Borrower, Holdco or BCC LP or of any substantial part of their respective properties, or ordering the winding-up or liquidation of the affairs of the Borrower, any Restricted Subsidiary of the Borrower, Holdco or BCC LP or an involuntary petition or case is filed or commenced against the Borrower, any Restricted Subsidiary of the Borrower, Holdco or BCC LP, and a temporary stay entered and any such decree or order shall continue unstayed and in effect for a period of forty-five (45) consecutive days; -71- 77 (g) The Borrower, any Restricted Subsidiary of the Borrower, Holdco or BCC LP shall file a petition, answer or consent seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other applicable federal or state bankruptcy law or other similar law, or the Borrower, any Restricted Subsidiary of the Borrower, Holdco or BCC LP shall consent to the institution of proceedings thereunder or to the filing of any such petition or to the appointment or taking of possession of a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Borrower, any Restricted Subsidiary of the Borrower, Holdco or BCC LP or of any substantial part of their respective properties, or the Borrower, any Restricted Subsidiary of the Borrower, Holdco or BCC LP shall fail generally to pay its debts as they become due, or admit in writing its inability to pay its debts as they become due, or the Borrower, any Restricted Subsidiary of the Borrower, Holdco or BCC LP shall authorize any such action; (h) A final judgment shall be entered by any court against the Borrower or any Restricted Subsidiary of the Borrower for the payment of money which exceeds $15,000,000, or a warrant of attachment or execution or similar process shall be issued or levied against property of the Borrower or any Restricted Subsidiary of the Borrower which, together with all other such property of the Borrower or any Restricted Subsidiary of the Borrower subject to other such process, exceeds in value $15,000,000 in the aggregate, and if within sixty (60) days after the entry, issue or levy thereof, such judgment, warrant or process shall not have been paid or vacated, discharged, bonded or stayed pending appeal, or if, after the expiration of any such stay, such judgment, warrant or process shall not have been paid or discharged; (i) There shall be (i) at the end of any plan year any material "accumulated funding deficiency," as defined in ERISA or in Section 412 of the Code, with respect to any Plan maintained by the Borrower or any trust created thereunder or (ii) a failure to timely pay the full amount of all "required installments" (as defined in Section 412 of the Code) for any plan year; or a trustee shall be appointed by a United States District Court to administer any such Plan; or the Pension Benefit Guaranty Corporation or any successor thereto shall institute proceedings to terminate any such Plan; or the Borrower shall incur any material liability to the Pension Benefit Guaranty Corporation or any successor thereto in connection with the termination of any such Plan; or any Plan or trust created under any Plan of the Borrower shall engage in a "prohibited transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of the Code) which would subject any such Plan, any trust created thereunder, any trustee or administrator thereof, or any party dealing with any such Plan or trust to the tax or penalty on "prohibited transactions" imposed by Section 502 of ERISA or Section 4975 of the Code; or the Borrower shall enter into a Multiemployer Plan without the prior written consent of the Lenders and the result of all of the foregoing could reasonably be expected to have a Materially Adverse Effect; (j) The Manager shall cease providing management to the Borrower; -72- 78 (k) Any License shall be revoked and such revocation shall not be waived or stayed; or there shall occur a material default by the Borrower or any Restricted Subsidiary of the Borrower under any License which shall not have been waived or cured within forty-five (45) days of the occurrence thereof; or any proceedings shall in any way be brought to challenge (and shall continue uncontested for a period of sixty (60) days), the validity or enforceability of any License; or proceedings for the renewal of any License shall not be commenced at least one year prior to the expiration of such License; or any License shall expire due to termination, nonrenewal or for any other reason; in any instance where such License, together with other Licenses referred to in this Section 8.1(k), results in the loss of (i) ten percent (10%) or more of the Annualized Operating Cash Flow of the Borrower for the one-year period immediately preceding such termination or non-renewal or (ii) when aggregated with all prior Licenses which have been lost for such period, twenty-five percent (25%) or more of the Operating Cash Flow of the Borrower for the preceding five (5) year period immediately preceding such termination or non-renewal, calculated on a pro forma basis if applicable during the first five years of the term hereof unless in either case such Operating Cash Flow is substantially contemporaneously replaced by new Systems and assets; (l) Any Security Document shall for any reason, fail or cease (except by reason of lapse of time or failure to file a financing statement or continuation statement or any action or inaction of the secured party) to create a valid and perfected and first-priority Lien on or Security Interest in any material portion of the Collateral purported to be covered thereby, subject only to Permitted Liens; (m) There shall occur any material default under any Interest Hedge Agreement in respect of which the counterparty thereto has demanded net payments of $15,000,000 or more; (n) There shall occur any (i) default under any agreement or instrument evidencing Indebtedness for Money Borrowed of the Borrower having a principal amount of $15,000,000 or more the result of which is to accelerate such Indebtedness for Money Borrowed or (ii) default in the payment when due of $5,000,000 or more of any Indebtedness for Money Borrowed of the Borrower; (o) (i) at any time when the Total Leverage Ratio as of the end of the most recent quarter is greater than 5.50 to 1.00, Holdco or BCC LP shall incur or assume any Indebtedness for Money Borrowed other than (A) the Holdco Notes and Member Subordinated Debt and (B) other Indebtedness for Money Borrowed incurred or assumed and with respect to which (1) no Default or Event of Default then exists or would be caused thereby, (2) the Borrower provides to the Administrative Agent and the Lenders a certificate demonstrating pro forma compliance (after giving effect to such Indebtedness) with Sections 7.8, 7.9, 7.10 and 7.11 hereof through the Facility B Maturity Date, (3) the net proceeds thereof are applied to the prepayment of the Term Loans and reduction of the Revolving -73- 79 Loan Commitment (on a pro rata basis and pro rata across maturities) including the Incremental Facility unless otherwise agreed by the Incremental Facility Lenders, until the Total Leverage Ratio is not more than 5.50 to 1.00, (4) the financial covenants are not more restrictive than those set forth herein and the other terms and conditions thereof (taken as a whole) are not materially more restrictive than those set forth in this Agreement, and (5) such Indebtedness has a final maturity date no earlier than the sixth month after the Facility B Term Loan Maturity Date, or (ii) if at any time when the Total Leverage Ratio is less than or equal to 5.50 to 1.00, Holdco or BCC LP shall incur or assume Indebtedness for Money Borrowed other than (A) the Holdco Notes and Member Subordinated Debt, (B) any Indebtedness incurred in compliance with clause (i) above, and (C) other Indebtedness for Money Borrowed incurred or assumed and with respect to which (1) no Default or Event of Default then exists or would be caused thereby, (2) interest on such Indebtedness is payable only in kind or will accrete or accrue without payment for all periods prior to the fifth anniversary of the Agreement Date, (3) the financial covenants are not more restrictive than those set forth herein and the other terms and conditions thereof (taken as a whole) are not materially more restrictive than those set forth in this Agreement and (4) such Indebtedness has a final maturity date no earlier than the sixth month following the Facility B Maturity Date; (p) There shall occur any default which entitles the holders to accelerate the maturity thereof under any agreement or instrument evidencing Indebtedness for Money Borrowed of Holdco or BCC LP having an aggregate principal amount in excess of $15,000,000; (q) There shall occur any Change of Control; or (r) The Partnership Agreement shall be amended or modified in any manner which would be materially unfavorable to the Lenders (provided that revisions to the projections described therein and amendments of the Partnership Agreement related to such projections shall not be considered to be materially unfavorable to the Lenders) or BCC LP shall change its fiscal year end. Section 8.2 Remedies. If an Event of Default shall have occurred and shall be continuing: (a) With the exception of an Event of Default specified in Section 8.1(f) or (g) hereof with respect to the Borrower, the Administrative Agent, at the request of the Majority Lenders, shall by notice to the Borrower declare the principal of and interest on the Loans and the Notes and all other amounts owed under this Agreement, the Notes and each of the other Loan Documents to be forthwith due and payable without presentment, demand or protest of any kind, all of which are hereby expressly waived, anything in this Agreement or the Notes to the contrary notwithstanding, and the Commitments shall thereupon forthwith terminate. -74- 80 (b) Upon the occurrence and continuance of an Event of Default specified in Section 8.1(f) or Section 8.1(g) with respect to the Borrower, such principal, interest and other amounts shall thereupon and concurrently therewith become due and payable and the Commitments of the Lenders shall forthwith terminate, all without any action by the Administrative Agent or the Lenders or the Majority Lenders or the holders of the Notes and without presentment, demand, protest or other notice of any kind, all of which are expressly waived, anything in this Agreement or the Notes to the contrary notwithstanding. (c) The Administrative Agent on behalf of the Lenders may exercise all of the post-default rights granted to it or them under the Loan Documents or under Applicable Law. (d) The rights and remedies of the Administrative Agent and the Lenders hereunder shall be cumulative, and not exclusive. ARTICLE 9 ADMINISTRATIVE AGENT Administrative Agent Section 9.1 Appointment and Authorization. Each Lender hereby irrevocably appoints and authorizes, and hereby agrees that it will require any transferee of any of its interest in its Loans and in its Note (other than a holder of a participation in its Loan) irrevocably to appoint and authorize, the Administrative Agent to take such actions as agent on its behalf and to exercise such powers hereunder as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto. Neither the Administrative Agent nor any of its directors, officers, employees or agents shall be liable for any action taken or omitted to be taken by it or them hereunder or in connection herewith, except for its or their own gross negligence or willful misconduct. Section 9.2 Interest Lender Holders. The Administrative Agent and the Borrower may treat each Lender, or the Person designated in the last notice filed with the Administrative Agent under this Section, as the holder of all of the interests of such Lender in its Loans and in its Note until written notice of transfer in accordance with this Agreement, signed by such Lender (or the Person designated in the last notice filed with the Administrative Agent) and by the Person designated in such written notice of transfer, in form and substance satisfactory to the Administrative Agent, shall have been filed with the Administrative Agent. -75- 81 Section 9.3 Consultation with Counsel. The Administrative Agent may consult with such legal counsel selected by it and shall not be liable for any action taken or suffered by it in good faith in accordance with the advice or opinion of such counsel. Section 9.4 Documents. The Administrative Agent shall be under no duty to examine, inquire into, or pass upon the validity, effectiveness or genuineness of this Agreement, any Note or any instrument, document or communication furnished pursuant hereto or in connection herewith, and the Administrative Agent shall be entitled to assume that they are valid, effective and genuine, have been signed or sent by the proper parties and are what they purport to be. Section 9.5 Administrative Agent and Affiliates. With respect to its Commitment (and, if applicable, its Incremental Facility Commitment) and the Loans made by it, the Lender which is affiliated with the Administrative Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not affiliated with the Administrative Agent, and the Administrative Agent and its affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower, or any Affiliates of, or Persons doing business with, the Borrower, as if it were not affiliated with a Lender hereunder and without any obligation to account therefor. The Lenders acknowledge that the Lender which is affiliated with the Administrative Agent has extended credit facilities to Affiliates, and may in the future extend additional credit facilities to other Affiliates. Section 9.6 Responsibility of the Administrative Agent. The duties and obligations of the Administrative Agent under this Agreement are only those expressly set forth in this Agreement. The Administrative Agent shall be entitled to assume that no Default or Event of Default has occurred and is continuing unless the Administrative Agent has actual knowledge, or has been notified by the Borrower, of such fact, or has been notified by a Lender that such Lender considers that a Default or an Event of Default has occurred and is continuing, and such Lender shall specify in detail the nature thereof in writing. The Administrative Agent shall not be liable hereunder for any action taken or omitted to be taken except for its own gross negligence or willful misconduct. Section 9.7 Security Documents. The Administrative Agent is hereby authorized to act on behalf of the Lenders, in its own capacity and through other agents and sub-agents appointed by it, under the Security Documents. -76- 82 Section 9.8 Action by Administrative Agent. (a) The Administrative Agent shall be entitled to use its discretion with respect to exercising or refraining from exercising any rights which may be vested in it by, and with respect to taking or refraining from taking any action or actions which it may be able to take under or in respect of, this Agreement, unless the Administrative Agent shall have been instructed by the Majority Lenders or Lenders, as the case may be, to exercise or refrain from exercising such rights or to take or refrain from taking such action; provided that the Administrative Agent shall not exercise any rights under Section 8.2(a) of this Agreement without the request of the Majority Lenders. The Administrative Agent shall incur no liability under or in respect of this Agreement with respect to anything which it may do or refrain from doing in the reasonable exercise of its judgment or which may seem to it to be necessary or desirable in the circumstances, except for its gross negligence or willful misconduct. (b) The Administrative Agent shall not be liable to the Lenders or to any Lender in acting or refraining from acting under this Agreement in accordance with the instructions of the Majority Lenders (or as provided in Section 11.13 hereof, all Lenders) and any action taken or failure to act pursuant to such instructions shall be binding on all Lenders. Section 9.9 Notice of Default or Event of Default. In the event that the Administrative Agent shall acquire actual knowledge, or shall have been notified, of any Default or Event of Default, the Administrative Agent shall promptly notify the Lenders and shall take such action and assert such rights under this Agreement as the Majority Lenders shall request in writing, and the Administrative Agent shall not be subject to any liability by reason of its acting pursuant to any such request. If the Majority Lenders shall fail for ten (10) days after receipt of the notice of any Default or Event of Default to request the Administrative Agent to take action or to assert rights under this Agreement in respect of such Default or Event of Default, or shall request inconsistent action, the Administrative Agent may, but shall not be required to, take such action and assert such rights (other than rights under Article 8 hereof) as it deems in its discretion to be advisable for the protection of the Lenders, except that, if the Majority Lenders have instructed the Administrative Agent not to take such action or assert such right, in no event shall the Administrative Agent act contrary to such instructions. Section 9.10 Responsibility Disclaimed. The Administrative Agent shall be under no liability or responsibility whatsoever as Administrative Agent: (a) To the Borrower or any other person or entity as a consequence of any -77- 83 failure or delay in performance by or any breach by, any Lender or Lenders of any of its or their obligations under this Agreement; (b) To any Lender or Lenders, as a consequence of any failure or delay in performance by, or any breach by, the Borrower of any of its obligations under this Agreement or the Notes or any other Loan Document; or (c) To any Lender or Lenders, for any statements, representations or warranties in this Agreement, or any other document contemplated by this Agreement or any information provided pursuant to this Agreement, any other Loan Document, or any other document contemplated by this Agreement, or for the validity, effectiveness, enforceability or sufficiency of this Agreement, the Notes, any other Loan Document, or any other document contemplated by this Agreement. Section 9.11 Indemnification. The Lenders agree to indemnify the Administrative Agent (to the extent not reimbursed by the Borrower) pro rata according to their respective Commitment Ratios and Incremental Facility Commitment Ratios, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including fees and expenses of experts, agents, consultants and counsel), or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of this Agreement, any other Loan Document, or any other document contemplated by this Agreement or any action taken or omitted by the Administrative Agent under this Agreement, any other Loan Document, or any other document contemplated by this Agreement, except that no Lender shall be liable to the Administrative Agent for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, or disbursements resulting from the gross negligence or willful misconduct of the Administrative Agent. Section 9.12 Credit Decision. Each Lender represents and warrants to each other and to the Administrative Agent that: (a) In making its decision to enter into this Agreement and to make its Advances it has independently taken whatever steps it considers necessary to evaluate the financial condition and affairs of the Borrower and that it has made an independent credit judgment, and that it has not relied upon information provided by the Administrative Agent; and (b) So long as any portion of the Loans remains outstanding, it will continue to make its own independent evaluation of the financial condition and affairs of the Borrower. -78- 84 Section 9.13 Successor Administrative Agents. The Administrative Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower, and may be removed at any time for cause by the Majority Lenders or, at any time when the Administrative Agent hold no Loans hereunder, without cause by the Borrower or the Majority Lenders. Upon any such resignation or removal, the Majority Lenders shall have the right to appoint a successor Administrative Agent which, prior to an Event of Default, is reasonably satisfactory to the Borrower. If no successor Administrative Agent shall have been so appointed by the Majority Lenders and shall have accepted such appointment within ten (10) days after the retiring Administrative Agent's giving of notice of resignation or the Majority Lenders' removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent which shall be any Lender or a commercial bank organized under the laws of the United States of America or any political subdivision thereof which has combined capital and reserves in excess of $250,000,000 which, prior to an Event of Default, is reasonably satisfactory to the Borrower. Such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges, duties and obligations of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent. ARTICLE 10 CHANGE IN CIRCUMSTANCES AFFECTING LIBOR ADVANCES Change in Circumstances Affecting LIBOR Advances Section 10.1 LIBOR Basis Determination Inadequate or Unfair. If with respect to any proposed LIBOR Advance for any Interest Period, the Majority Lenders determine that deposits in dollars (in the applicable amount) are not being offered in the London Interbank Market for such Interest Period, such Lenders shall forthwith give notice thereof to the Borrower, the Administrative Agent, and the other Lenders, whereupon until the circumstances giving rise to such situation no longer exist (at which time such Lenders shall provide notice thereof to the Borrower, the Administrative Agent, and the other Lenders), the obligations of the Lenders to make LIBOR Advances shall be suspended. Section 10.2 Illegality. If, after the date -79- 85 of this Agreement, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency, shall make it unlawful or impossible for any Lender to make, maintain or fund its LIBOR Advances and such Lender shall promptly so notify the Administrative Agent, the Administrative Agent shall forthwith give notice thereof to the other Lenders and the Borrower. Before giving any notice to the Administrative Agent pursuant to this Section, such Lender shall designate a different lending office if such designation will avoid the need for giving such notice and will not, in the judgment of such Lender, be otherwise materially disadvantageous to such Lender. Upon receipt of such notice, notwithstanding anything contained in Article 2 hereof, each LIBOR Advance of such Lender, together with accrued interest thereon, either (a) on the last day of the then current Interest Period applicable to such LIBOR Advance if such Lender may lawfully continue to maintain and fund such LIBOR Advance to such day or (b) immediately, if such Lender may not lawfully continue to fund and maintain such LIBOR Advance to such day, shall automatically without further action by any party convert into a Prime Rate Advance from such Lender in an amount such that the outstanding principal amount of the Note held by such Lender shall be equal to the sum of (x) the outstanding principal amount of such Note immediately prior to such repayment, plus (y) accrued interest thereon together with any extra costs (other than penalties incurred as a result of such Lender's gross negligence or willful misconduct) required to be paid under Section 2.10 hereof or this Article 10. Section 10.3 Effect On Other Advances. If notice has been given pursuant to Section 10.1 or 10.2 suspending the obligation of the Lenders to make any LIBOR Advance, or requiring LIBOR Advances of the Lenders to be repaid or prepaid, then, unless and until the Majority Lenders notify the Borrower that the circumstances giving rise to such repayment no longer apply, all Advances which would otherwise be made by the Lenders as LIBOR Advances shall be made instead as Prime Rate Advances. -80- 86 ARTICLE 11 MISCELLANEOUS Miscellaneous Section 11.1 Notices (a) All notices and other communications under this Agreement shall be in writing and shall be deemed to have been given when received in the mail, designated as certified mail, return receipt requested, post-prepaid, or when entrusted to a reputable commercial overnight delivery service, or sent out by telecopier (and confirmed as received) addressed to the party to which such notice is directed at its address determined as provided in this Section 11.1. All notices and other communications under this Agreement shall be given to the parties hereto (including any assignee permitted under Section 11.6(b) hereof) at the following addresses or at addresses provided pursuant to Section 11.1(b): (i) If to the Borrower, to it at: Bresnan Telecommunications Company LLC 709 Westchester Avenue White Plains, New York 10604 Attention: Jeffrey S. DeMond, Claudia J. Chifos, Eric D. Cunningham and Legal Department Attention: Robert Bresnan, Esq. with a copy to: Paul, Hastings, Janofsky & Walker, LLP 399 Park Avenue, Thirty-First Floor New York, New York 10022 Attention: John P. Howitt, Esq. (ii) If to the Administrative Agent, to it at: Toronto Dominion (Texas), Inc. 909 Fannin, Suite 1700 Houston, Texas 77010 Attention: Manager, Agency -81- 87 with copies to: TD Securities (USA) Inc. 31 West 52nd Street New York, New York 10019-6101 Attention: Ms. Amy Josephson and Powell, Goldstein, Frazer & Murphy LLP 191 Peachtree Street, N.E., Sixteenth Floor Atlanta, Georgia 30303 Attention: Douglas S. Gosden, Esq. (iii) If to the Lenders, to them at the addresses set forth on Schedule 10 attached hereto: Copies shall be provided to persons other than parties hereto only in the case of notices under Section 8.2 hereof. (b) Any party hereto may change the address to which notices shall be directed under this Section 11.1 by giving ten (10) days' written notice of such change to the other parties. Section 11.2 Expenses. The Borrower will promptly pay: (a) all reasonable out-of-pocket expenses of the Administrative Agent and the Syndication Agent in connection with the preparation, negotiation, execution and delivery of this Agreement and the other Loan Documents, and the transactions contemplated hereunder and thereunder and the making of any Advances hereunder whether or not the Advances are made, including, but not limited to, the reasonable fees and disbursements of Powell, Goldstein, Frazer & Murphy, special counsel for the Administrative Agent (but no other counsel). (b) all reasonable out-of-pocket expenses of the Administrative Agent in connection with the administration of the transactions contemplated in this Agreement or the other Loan Documents, the restructuring, refinancing, and "work out" of such transactions, and the preparation, negotiation, execution and delivery of any waiver, amendment or consent by the Lenders relating to this Agreement or the other Loan Documents, including, but not limited to, the reasonable fees and disbursements of Powell, Goldstein, Frazer & Murphy, or other special counsel for the Administrative Agent (but no other counsel); and -82- 88 (c) all costs and out-of-pocket expenses of the Lenders of obtaining performance after an Event of Default under this Agreement or the other Loan Documents; and all costs and out-of-pocket expenses of the Lenders of collection if Default is made in the payment of the Notes, and the Notes are accelerated, which shall include the reasonable fees and expenses of special counsel for the Administrative Agent and the reasonable legal fees and expenses and administrative fees for each Lender. Section 11.3 Waivers. The rights and remedies of the Administrative Agent and the Lenders under this Agreement and the other Loan Documents shall be cumulative and not exclusive of any rights or remedies which they would otherwise have. No failure or delay by the Administrative Agent or the Majority Lenders or the Lenders in exercising any right shall operate as a waiver of such right. The Administrative Agent and the Lenders expressly reserve the right to require strict compliance with the terms of this Agreement in connection with any funding of a request for an Advance. In the event the Lenders decide to fund a request for an Advance at a time when the Borrower is not in strict compliance with the terms of this Agreement, such decision by the Lenders shall not be deemed to constitute an undertaking by the Lenders to fund any further requests for Advances or preclude the Lenders from exercising any rights available to the Lenders under the Loan Documents or at law or equity. Any waiver or indulgence granted by the Lenders or by the Majority Lenders shall not constitute a modification of this Agreement, except to the extent expressly provided in such waiver or indulgence, or constitute a course of dealing by the Lenders at variance with the terms of the Agreement such as to require further notice by the Lenders of the Lenders' intent to require strict adherence to the terms of this Agreement in the future. Any such actions shall not in any way affect the ability of the Lenders, in their discretion, to exercise any rights available to them under this Agreement or under any other agreement, whether or not the Lenders are party, relating to the Borrower. Section 11.4 Determination by Administrative Agent Conclusive and Binding. Any determination required or expressly permitted to be made by the Administrative Agent under this Agreement shall be made by the Administrative Agent reasonably and in good faith and, when made, shall, absent manifest error, be conclusive and binding on all parties. Section 11.5 Set-Off. In addition to any rights now or hereafter granted under Applicable Law and not by way of limitation of any such rights, upon the occurrence of an Event of Default under Section 8.1(b) hereof, the Lenders and any subsequent holder or holders of the Notes are hereby authorized by the Borrower at any time or from time to time, without notice to the Borrower or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, time or demand, including, but not limited to, Indebtedness evidenced by certificates of deposit, in each case whether matured or -83- 89 unmatured) and any other Indebtedness at any time held or owing by the Lenders or such holder to or for the credit or the account of the Borrower, against and on account of the obligations and liabilities of the Borrower then due and payable to the Lenders or such holder under this Agreement, the Notes and each other Loan Document, including, but not limited to, all claims of any nature or description arising out of or connected with this Agreement, the Notes or any other Loan Document, irrespective of whether or not (a) the Lenders or the holder of the Notes shall have made any demand hereunder and under the other Loan Documents or (b) the Lenders shall have declared the principal of and interest on the Loans and Notes and other amounts due hereunder and under the other Loan Documents to be due and payable as permitted by Section 8.2 and although such obligations and liabilities or any of them, shall be contingent or unmatured. Any sums obtained by any Lender or by any subsequent holder of the Notes shall be subject to the pro rata treatment provisions of Section 2.11 hereof. Upon direction by the Administrative Agent with the consent of the Majority Lenders, each Lender holding deposits of the Borrower shall exercise its set-off rights as so directed. Section 11.6 Assignment. (a) The Borrower may not assign or transfer any of its rights or obligations hereunder or under the Notes, the Incremental Facility Notes or any other Loan Documents without the prior written consent of the Lenders. (b) Each Lender may at any time (i) sell, assign, transfer or otherwise dispose of any part or all of its loans and commitments under the Facilities, in the minimum amount of $5,000,000 per sale or assignment (unless otherwise consented to by the Administrative Agent and the Borrower or unless such Lender is holding less than $5,000,000 in Loans or Commitments and is selling or assigning 100% of its interest therein), or (ii) without the consent of the Borrower or the Administrative Agent, sell a participation in or assign up to one hundred percent (100%) of its interest to (A) one or more Affiliates of such Lender (in the case of any Lender which is a fund, an Affiliate shall include, (1) the investment advisor thereof and (2) any other fund having the same investment advisor) or any other Lender, (B) any Federal Reserve Bank as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank (no such assignment or participation shall relieve such Lender from its obligations hereunder) and (C) in the case of any Lender that is a fund that invests in bank loans, such Lender may pledge all or any portion of its Loans and Notes to any trustee for, or any other representative of, holders of obligations owed, by such fund, as security for such obligations; provided that any foreclosure or similar action by such trustee or representatives shall be subject to the provisions of this Section concerning assignments (including, without limitation, all of the requirements of Section 11.6(b)(1); provided, however that all participations, sales, assignments and transfers pursuant to Section 11.6(b)(i) hereof shall be subject to each of the following: -84- 90 (1) As to assignments only, (A) No assignment shall be issued or sold without the consent of the Administrative Agent and the Borrower (except that the Borrower's consent is not required during the continuance of an Event of Default), which consents shall not be unreasonably withheld or delayed. (B) Any Person purchasing an assignment of the Loans from any Lender shall be required to represent and warrant that its purchase shall not constitute a "prohibited transaction" (as defined in Section 4.1(m) hereof). (C) The Borrower, the Lenders and the Administrative Agent agree that assignments permitted hereunder (including the assignment of any Advance or portion thereof) may be made with all voting rights and shall be made pursuant to an Assignment and Assumption Agreement substantially in the form attached hereto as Exhibit O. (D) The amount, terms and conditions of any assignments shall be as set forth in the Assignment and Assumption Agreement between the assigning Lender and the Person purchasing such assignment, and neither the Borrower, the Administrative Agent nor any other Lender shall have any responsibility or obligations with respect thereto, or to any Person to whom any such assignment may be issued, other than as set forth in the form of Assignment and Assumption Agreement attached hereto as Exhibit O. Assignees shall, however, be entitled to the benefits of Section 2.10 hereof to the same extent as the Lenders hereunder. (E) Each Lender agrees to provide the Administrative Agent and the Borrower with prompt written notice of any issuance of assignments of its interests hereunder. (F) An assignment fee of $3,500.00 shall be due and payable to the Administrative Agent by the assigning or assignee Lender (as such Persons may agree) at the time of the assignment. (G) No assignment shall give rise to, on the date of such assignment (or with respect to any prior period), taxes or increased costs payable by the Borrower under Sections 2.9, 2.10, 2.13, 10.2 or 10.3 hereof or otherwise increase any obligation of the Borrower hereunder or expose the Borrower to any additional liability. (H) In connection with any proposed assignment hereunder, the Lenders may disclose, on a confidential basis only, information about the -85- 91 Borrower to prospective assignees. (I) Each Person organized in a jurisdiction outside the United States purchasing an assignment shall provide to the Borrower the form described in clause (e) of Section 2.9 hereof. (2) As to participations only, (A) Any Person purchasing a participation of the Loans and the Incremental Facility Loans from any Lender shall be required to represent and warrant that its purchase shall not constitute a "prohibited transaction" (as defined in Section 4.1(m) hereof). (B) Each Lender agrees that (x) no participation agreement permitted hereunder shall confer any rights under this Agreement or under any other Loan Document to any purchaser thereof, (y) no Person to which a participation is issued shall have any right to exercise or enforce any rights under this Agreement or under any other Loan Document, and (z) any participation agreement permitted hereunder shall (A) expressly provide that the issuer thereof will at all times retain the right to vote or take any other actions with respect to its interests hereunder for the full Commitment Ratio and Incremental Facility Commitment Ratio assigned to such issuing Lender hereunder, both before and after the occurrence of any Default, (B) expressly reserve the unqualified right of such Lender to repurchase the participant's share of the Loans at par at any time, and the right of the Borrower to repay in full the amount of the issuing Lender's Note hereunder in the event the participant fails to cooperate with the Borrower, the Administrative Agent and the Lenders with respect to those issues described in Section 11.6(b)(2)(C) hereof and (C) contain an express representation by the participant that it is purchasing such participation for its own account and not as agent or trustee for any Plan or trust. (C) The participation agreement may also provide that the issuing Lender will not, without the consent of the participant to the extent of its participation, agree to any modification, amendment or waiver of this Agreement which would (A) reduce (other than by repayment or prepayment) the principal of, or any scheduled payment of principal of or interest on, the Loans, (B) change the terms for the payments of fees hereunder and (C) release any Collateral. (D) The amount, terms and conditions of any participations shall be as set forth in the participation agreement between the issuing Lender and the Person purchasing such participation, and neither the Borrower, the Administrative Agent nor any other Lender shall have any responsibility or obligations with respect thereto. Participants shall, however, be entitled to the benefits of Section 2.10 hereof to the same extent as the applicable selling Lenders hereunder, but no participation -86- 92 shall give rise to taxes or to costs payable by the Borrower under Section 2.9 or 2.13 or 10.2 hereof except those assessed by the participating Lender as if such participation had not occurred. (E) No participation shall relieve any issuing Lender from any of its obligations under this Agreement, and all actions hereunder shall be conducted as if no such participation had been granted. (F) In connection with any proposed participation hereunder, the Lenders may disclose, on a confidential basis only, information about the Borrower to prospective participants. (c) In the event that any Lender shall seek compensation from the Borrower for increased costs pursuant to Section 2.9 or 2.13 hereof, or shall fail or refuse to fund its pro rata portion of any Advance at any time when the Borrower is not in Default or shall fail to fund LIBOR Advances pursuant to Section 10.1 or 10.2 hereof, so long as no Default shall have occurred and shall be continuing, the Borrower may, at any time within 180 days after such Lender's request for payment under Section 2.9 or 2.13 hereof or such Lender's failure or refusal to fund its portion of such an Advance or LIBOR Advance (as applicable), arrange for the purchase of such Lender's interests in the Loans and the Incremental Facility Loans and the Commitment and the Incremental Facility Commitment by another third party financial institution reasonably acceptable to the Administrative Agent. Such purchase shall be effected by means of an Assignment and Assumption Agreement substantially in the form of Exhibit O attached hereto. The purchase price for the interests being purchased shall be the outstanding principal balance of such Lender's Loans and Incremental Facility Loans then outstanding, plus any accrued interest and fees then due and payable to such Lender hereunder or under any other Loan Document. The Borrower shall pay (or cause the assignee to pay) any assignment fee payable to the Administrative Agent in connection therewith. (d) Except as specifically set forth in Section 11.6(b) and (c) hereof, nothing in this Agreement and the Notes, expressed or implied, is intended to or shall confer on any Person other than the respective parties hereto and thereto and their successors and assignees permitted hereunder and thereunder any benefit or any legal or equitable right, remedy or other claim under this Agreement and the Notes. (e) The Administrative Agent, acting, for this purpose only, as agent of the Borrower shall maintain, at no extra charge or cost to the Borrower, a register (the "Register") at the address to which notices to the Administrative Agent are to be sent under Section 11.1 hereof on which Register the Administrative Agent shall enter the name, address and taxpayer identification number (if provided) of the registered owner of the Loans evidenced by a Registered Note or, upon the request of the registered owner, for which a Registered Note has been requested. A Registered Note and the Loans evidenced thereby -87- 93 may be assigned or otherwise transferred in whole or in part only by registration of such assignment or transfer of such Registered Note and the Loans evidenced thereby on the Register. Any assignment or transfer of all or part of such Loans and the Registered Note evidencing the same shall be registered on the Register only upon compliance with the other provisions of this Section 11.6 and surrender for registration of assignment or transfer of the Registered Note evidencing such Loans, duly endorsed by (or accompanied by a written instrument of assignment or transfer duly executed by) the Registered Noteholder thereof, and thereupon one or more new Registered Notes in the same aggregate principal amount shall be issued to the designated assignee(s) or transferee(s) and, if less than the aggregate principal amount of such Registered Notes is thereby transferred, the assignor or transferor. Prior to the due presentment for registration of transfer of any Registered Note, the Borrower and the Administrative Agent shall treat the Person in whose name such Loans and the Registered Note evidencing the same is registered as the owner thereof for the purpose of receiving all payments thereon and for all other purposes, notwithstanding any notice to the contrary. (f) The Register shall be available for inspection by the Borrower and any Lender at any reasonable time during the Administrative Agent's regular business hours upon reasonable prior notice. Section 11.7 Accounting Principles. Accounting terms used herein without definition shall be used as defined under GAAP. Section 11.8 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such separate counterparts shall together constitute but one and the same instrument. Section 11.9 Governing Law. This Agreement and the Notes shall be construed in accordance with and governed by the law of the State of New York without regard to principles of conflicts of law. Section 11.10 Severability. Any provision of this Agreement which is for any reason prohibited or found or held invalid or unenforceable by any court or governmental agency shall be ineffective to the extent of such prohibition or invalidity or unenforceability without invalidating the remaining provisions hereof in such jurisdiction or affecting the validity or enforceability of such provision in any other jurisdiction. -88- 94 Section 11.11 Interest and Charges. (a) The Borrower and the Lenders hereby agree that (i) the only charge imposed by the Lenders upon the Borrower for the use of money in connection with the Loan is and shall be the fees and the interest expressed herein and in the Loan Documents; and (ii) all other charges imposed by the Administrative Agent or the Lenders upon the Borrower in connection with the Loans, including without limitation, any commitment fees, default and late charges, prepayment fees, and charges for taxes and reserve requirements, are and shall be deemed to be charges made to compensate the Administrative Agent and the Lenders for administrative services and costs, and other services and costs performed and incurred, and to be performed and incurred, by the Administrative Agent and the Lenders in connection with the Loans, and shall under no circumstances be deemed to be charges for the use of money. (b) In no event shall the amount of interest or fees due or payable hereunder or under the Notes exceed the maximum rate of interest allowed by Applicable Law, and in the event any such payment is inadvertently made by the Borrower or inadvertently received by any Lender, then such excess sum shall be credited as a payment of principal, unless the Borrower shall notify such Lender in writing that it elects to have such excess sum returned forthwith. It is the express intent hereof that the Borrower not pay and the Lenders not receive, directly or indirectly in any manner whatsoever, interest in excess of that which may legally be paid by the Borrower under Applicable Law. Section 11.12 Headings. Headings used in this Agreement and in the Index hereto are for convenience only and shall not be used in connection with the interpretation of any provision hereof. Section 11.13 Amendment and Waiver. Neither this Agreement nor any term hereof may be amended orally, nor may any provision hereof be waived orally but only by an instrument in writing signed by the Majority Lenders and by the Borrower, except in connection with the Incremental Facility (which requires no consent) and in the event of (a) any reduction in a scheduled payment of principal, interest or fees due hereunder (other than the waiver of charging interest at the Default Rate), (b) any postponement of the timing of scheduled payments of principal, interest or fees hereunder to any Lender, (c) any waiver of any Default due to the Borrower's failure to pay any principal, interest or fees when scheduled to be due hereunder to any Lender, (d) any amendment of this Section 11.13 or of the definition of Majority Lenders, (e) any release of Collateral or guarantees (other than the BCC LP Guaranty or the Bresnan Assumption Agreement), (f) any changes in the several nature of the obligations of the Lenders, or (g) any change to the provisions of Section 2.11 hereof which provide for payments to be distributed to the Lenders on a pro rata basis, any amendment or waiver may be made only by an instrument in writing signed by the Administrative Agent and all the Lenders and by the Borrower. No Lender's Commitment -89- 95 hereunder may be increased without the written consent of such Lender. Section 11.14 Survival. Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements of the Borrower set forth in Sections 2.10, 2.13 and 5.14 shall survive the repayment of the Loans and the Notes and the termination of this Agreement. Section 11.15 Entire Agreement. Except as otherwise expressly provided herein, this Agreement and the other documents described or contemplated herein embody the entire Agreement and understanding among the parties hereto and thereto and supersede all prior agreements and understandings relating to the subject matter hereof and thereof. Section 11.16 Obligations Several. The obligations of the Administrative Agent and each of the Lenders hereunder are several, not joint. Section 11.17 Confidentiality. Each Lender and the Administrative Agent agrees to take and to cause its Affiliates to take normal and reasonable precautions and exercise due care to maintain the confidentiality of all information identified as "confidential" or "secret" by the Borrower and provided to it by the Borrower, or by the Administrative Agent on the Borrower's behalf, and neither such Lender, the Administrative Agent nor any of their respective Affiliates shall use any such information other than in connection with or in enforcement of the Loan Documents or in connection with other business now or hereafter existing or contemplated with the Borrower; except to the extent such information: (i) was or becomes generally available to the public other than as a result of disclosure by either the Administrative Agent or such Lender, (ii) was or becomes available on a non-confidential basis from a source other than the Borrower; provided that such source is not bound by a confidentiality agreement with the Borrower known to such Lender or the Administrative Agent, (iii) was in any such Lender's or the Administrative Agent's possession free of any obligation or confidence at the time of its receipt of such information, (iv) is developed by any such Lender or the Administrative Agent independently of and without reference to any confidential information, (v) is identified by the Borrower or the Administrative Agent as no longer proprietary or confidential, (vi) is disclosed to any direct or indirect contractual counterparty in swap agreements or such contractual counterparty's professional advisor (so long as such contractual or professional advisor to such contractual counterparty agrees to be bound by the provisions of this Section 11.17) or (vii) is disclosed to regulatory agencies, prospective transferees (who have agreed to be bound by this Section 11.17) or pursuant to subpoena or court order. Section 11.18 Securities Laws. Each Lender (including each assignee of a Lender) hereby -90- 96 represents that it is acquiring its Loans and Notes in the ordinary course of its lending business and not with any present view to the distribution thereof in violation of the registration requirements of the Securities Act of 1933, as amended, or any other securities law or regulation. ARTICLE 12 WAIVER OF JURY TRIAL Waiver of Jury Trial Section 12.1 Waiver of Jury Trial. EACH OF THE BORROWER, THE ADMINISTRATIVE AGENT, AND THE LENDERS HEREBY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY COURT AND IN ANY ACTION OR PROCEEDING OF ANY TYPE IN WHICH THE BORROWER, ANY OF THE LENDERS, THE ADMINISTRATIVE AGENT OR ANY OF THEIR RESPECTIVE SUCCESSORS OR ASSIGNS IS A PARTY, AS TO ALL MATTERS AND THINGS ARISING DIRECTLY OR INDIRECTLY OUT OF THIS AGREEMENT, ANY OF THE NOTES OR THE OTHER LOAN DOCUMENTS AND THE RELATIONS AMONG THE PARTIES LISTED IN THIS SECTION 12.1. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] -91- 97 IN WITNESS WHEREOF, the parties hereto have executed this Agreement or caused it to be executed by their duly authorized officers, all as of the day and year first above written. BORROWER: BRESNAN TELECOMMUNICATIONS COMPANY LLC By BRESNAN COMMUNICATIONS GROUP LLC, its managing member By BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP, its member By BCI (USA), LLC, its general partner By Bresnan Communications, Inc., its managing member By: /s/ Claudia J. Chifos ----------------------------------- Title: VP Finance/Assistant Treasurer 98 ADMINISTRATIVE AGENT TORONTO DOMINION (TEXAS), INC., as AND LENDERS: Administrative Agent and as a Lender By: /s/ Diane Bailey ---------------------------------- Title: Vice President 99 THE CHASE MANHATTAN BANK, as a Lender By: /s/ Bruce Langenkamp --------------------------------- Title: Vice President 100 THE BANK OF NOVA SCOTIA, as a Lender By: /s/ Paul A. Weissenberger ---------------------------------- Title: Authorized Signatory 101 THE BANK OF NEW YORK COMPANY, INC., as a Lender By: /s/ James Whitaker ------------------------------- Title: Authorized Signatory 102 NATIONSBANK, N.A., as a Lender By: /s/ Jennifer Zydney -------------------------------- Title: Vice President 103 ABN AMRO Bank N.V., as a Lender By: /s/ James Dunleavy ----------------------------------- Title: Senior Vice President By: /s/ David Carrington ----------------------------------- Title: Vice President 104 THIS SIGNATURE PAGE INTENTIONALLY LEFT BLANK 105 DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, as a Lender By: /s/ Laura G. Fazio ---------------------------------- Title: First Vice President By: /s/ Helen Ng, P.E. ----------------------------------- Title: Assistant Vice President 106 MEESPIERSON CAPITAL CORP., as a Lender By: /s/ Scott T. Webster ---------------------------------- Title: Assistant Vice President By: /s/ John T. Connors ---------------------------------- Title: President and Chief Operating Officer 107 SALOMON BROTHERS HOLDING COMPANY INC, as a Lender By: /s/ Mavis B. Taintor ---------------------------------- Title: Managing Director 108 BAYERISCHE HYPO-UND VEREINSBANK AG, NEW YORK BRANCH, as a Lender By: /s/ Sylvia K. Cheng ---------------------------------- Title: Director By: /s/ Carlo Lamberti ---------------------------------- Title: Associate Director 109 CITIZENS BANK OF RHODE ISLAND, as a Lender By: /s/ John F. Pedro ---------------------------------- Title: Assistant Vice President 110 COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE, as a Lender By: /s/ Brian O'Leary ---------------------------------- Title: Vice President By: /s/ Sean Mouier ---------------------------------- Title: First Vice President 111 CREDIT AGRICOLE INDOSUEZ, as a Lender By: /s/ Craig Welch ................ Title: First Vice President By: /s/ Rene LeBanc ................. Title: Vice President and Senior Relations Manager 112 CREDIT LOCAL DE FRANCE, NEW YORK AGENCY, as a Lender By: /s/ Robert N. Sloan Jr. ------------------------------------ Title: Vice President By: /s/ James R. Miller ------------------------------------ Title: General Manager CLF NY Agency 113 THE DAI-ICHI KANGYO BANK, LTD., as a Lender By: /s/ Dean Murdock ---------------------------------- Title: Vice President and DH 114 DEUTSCHE GENOSSENSCHAFTSBANK AG NEW YORK BRANCH, as a Lender By: /s/ Wolfgang Bollmann ---------------------------------- Title: Senior Vice President By: /s/ Karen A. Brinkman ---------------------------------- Title: Vice President 115 FIRST HAWAIIAN BANK, as a Lender By: /s/ James C. Polk ---------------------------------- Title: Assistant Vice President 116 THE FUJI BANK, LIMITED, as a Lender By: /s/ Teiji Teramoto ..................... Title: Vice President and Manager 117 GENERAL ELECTRIC CAPITAL CORPORATION, as a Lender By: /s/ Janet K. Williams ---------------------------------- Title: Duly Authorized Signatory 118 MICHIGAN NATIONAL BANK, as a Lender By: /s/ Eric Haege --------------------------------------- Title: Commercial Relationships Manager 119 NATEXIS BANQUE BFCE, as a Lender By: /s/ Cynthia E. Sachs ------------------------------------- Title: Vice President, Group Manager By: /s/ Evan S. Kraus ------------------------------------- Title: Assistant Vice President 120 PARIBAS, as a Lender By: /s/ Thomas G. Brandt ------------------------------------- Title: Director By: /s/ Ching Lim ------------------------------------- Title: Vice President 121 PNC BANK, NATIONAL ASSOCIATION, as a Lender By: /s/ Steven J. McGehrin ------------------------------------- Title: Vice President 122 SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION, as a Lender By: /s/ Cynthia D. Eggers ------------------------------------- Title: Vice President 123 U.S. BANK NATIONAL ASSOCIATION, as a Lender By: /s/ Melissa Forbes ------------------------------------- Title: Vice President 124 ALLSTATE LIFE INSURANCE COMPANY, as a Lender By: /s/ Jerry D. Zinkula .................... Title: Authorized Signatory By: /s/ Charles D. Mires ................. Title: Authorized Signatory 125 THIS SIGNATURE PAGE INTENTIONALLY LEFT BLANK 126 THIS SIGNATURE PAGE INTENTIONALLY LEFT BLANK 127 FRANKLIN FLOATING RATE TRUST, as a Lender By: /s/ Chauncey Laufkin ------------------------------------- Title: Vice President 128 MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, as a Lender By: /s/ John B. Wheeler ------------------------------------- Title: Managing Director 129 MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., as a Lender By: /s/ Joseph Matteo -------------------------------- Title: Authorized Signatory 130 MORGAN GUARANTY TRUST COMPANY OF NEW YORK AS TRUSTEE FOR THE COMMINGLED PENSION TRUST FUND, as a Lender By: /s/ David T. Ellis ------------------------------- Title: Vice President 131 MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST, as a Lender By: /s/ Sheila Finnerty ------------------------------- Title: Vice President 132 OAK HILL SECURITIES FUND, L.P., as a Lender By: Oak Hill Securities GenPar, L.P., its General Partner By: Oak Hill Securities MGP, Inc., its General Partner By: /s/ Scott D. Krase ------------------------------- Title: Vice President 133 OCTAGON LOAN TRUST, as a Lender By: Octagon Credit Investors, as Manager By: /s/ Andrew D. Gordon ------------------------------ Title: Managing Director 134 ORIX USA CORPORATION, as a Lender BY: /s/ Hiroyuki Miyauchi ...................... Title: Executive Vice President 135 THIS SIGNATURE PAGE INTENTIONALLY LEFT BLANK 136 THIS SIGNATURE PAGE INTENTIONALLY LEFT BLANK 137 THIS SIGNATURE PAGE INTENTIONALLY LEFT BLANK 138 STEIN ROE FLOATING RATE LIMITED LIABILTY COMPANY, as a Lender By: /s/ Brian W. Good -------------------------------- Title: Vice President, Stein Roe & Farnham Incorporated, as advisor to the Stein Roe Floating Rate Limited Liability Company 139 THE TRAVELERS INSURANCE COMPANY, as a Lender By: /s/ Pamela Westmoreland --------------------------------- Title: Investment Officer 140 THIS SIGNATURE PAGE INTENTIONALLY LEFT BLANK 141 KZH CYPRESSTREE-1 LLC, as a Lender By: /s/ Virginia Conway -------------------------------- Title: Authorized Agent 142 KZH ING-2 LLC, as a Lender By: /s/ Virginia Conway -------------------------------- Title: Authorized Agent 143 KZH RIVERSIDE LLC, as a Lender By: /s/ Virginia Conway ------------------------------ Title: Authorized Agent 144 KZH SOLEIL LLC, as a Lender By: /s/ Virginia Conway ------------------------------ Title: Authorized Agent 145 KZH WATERSIDE LLC, as a Lender By: /s/ Virginia Conway ------------------------------ Title: Authorized Agent 146 CYPRESSTREE INVESTMENT FUND, LLC, as a Lender By: Cypress Tree Investment Management Company, Inc., its Managing Member By: /s/ Peter K. Merrill ------------------------------ Title: Managing Director 147 NORTH AMERICAN SENIOR FLOATING RATE FUND, as a Lender By: CypressTree Investment Management Company, Inc., as Portfolio Manager By: /s/ Peter K. Merrill --------------------------------- Title: Managing Director 148 KZH SHENKMAN LLC, as a Lender By: /s/ Virginia Conway --------------------------------- Title: Authorized Agent 149 EXHIBIT A FORM OF ASSIGNMENT OF NOTES THIS ASSIGNMENT OF NOTES (this "Assignment") is made as of the ___ day of February, 1999, by ____________________________ (the "Pledgor") in favor of TORONTO DOMINION (TEXAS), INC. (the "Administrative Agent") for itself and on behalf of the Lenders defined below. W I T N E S S E T H WHEREAS, pursuant to the terms of that certain Loan Agreement dated as of February ___, 1999 (as amended, restated, supplemented or otherwise modified from time to time, the "Loan Agreement") among Bresnan Telecommunications Company LLC (the "Borrower"), the financial institutions defined as "Lenders" therein (the "Lenders") and the Administrative Agent, the Lenders have extended Loans (as defined therein) to the Borrower and the Pledgor has determined that the Borrower's and Lenders' performances of the Loan Agreement directly benefit the Pledgor; and WHEREAS, the Administrative Agent and the Lenders have required the execution and delivery of this Assignment by the Pledgor; and WHEREAS, the Pledgor is (or may in the future be) the owner and holder of certain promissory notes evidencing indebtedness by any of its Restricted Subsidiaries to the Pledgor, as more fully set forth as of the date hereof on Schedule 1 hereto (the "Pledged Notes"); NOW, THEREFORE, in consideration of the foregoing premises and other consideration in hand paid, the Pledgor hereby covenants and agrees with the Administrative Agent and the Lenders that capitalized terms used herein shall have the meanings ascribed thereto in the Loan Agreement unless otherwise defined or limited herein, and the parties further agree as follows: 1. Transfer and Assignment. To secure the payment and performance of, among other things, [THE OBLIGATIONS (AS DEFINED IN THE LOAN AGREEMENT)] [THE OBLIGATIONS OF THE PLEDGOR ARISING FROM THAT CERTAIN SUBSIDIARY GUARANTY OF EVEN DATE HEREWITH (THE "SUBSIDIARY GUARANTY") GIVEN BY THE PLEDGOR IN FAVOR OF THE ADMINISTRATIVE AGENT], and to induce the Lenders to enter into and perform the Loan Agreement, the Pledgor hereby delivers and pledges to and deposits with the Administrative Agent, for itself and for the benefit of the Lenders, and hereby grants to the Administrative Agent, for itself and for the benefit of the Lenders, a security interest in and security title to all of its right, title, and interest in and to the Pledged Notes and the proceeds thereof. 150 2. Further Assurances. The Pledgor agrees from time to time to execute and deliver any and all assignments or other forms or documents or further assurances and to take such other actions that the Administrative Agent may reasonably deem necessary or appropriate from time to time to assign the Pledged Notes or proceeds thereof to the Administrative Agent, for itself and for the benefit of the Lenders, or to preserve and maintain the security interest provided for hereby. 3. Covenants of the Pledgor. The Pledgor hereby covenants and agrees to appear in and defend any action arising out of or in any manner related to the Pledged Notes. 4. Pledge of After-Acquired Notes. The Pledgor acknowledges its intent that the Administrative Agent obtain a first priority, enforceable security interest in, to the fullest extent possible, all intercompany notes issued to the Pledgor by any Restricted Subsidiary of the Borrower (if any) whether such intercompany notes now exist or are hereafter created or acquired. Accordingly, immediately upon the Pledgor's acquisition of any intercompany note, with respect to which a Subsidiary of the Borrower is obligor, the Pledgor shall pledge and deliver such note (each such note, a "Future Pledged Note") to the Administrative Agent, and the Administrative Agent shall amend Schedule 1 attached hereto, as the case may be, to reflect the Administrative Agent's security interest in such Future Pledged Notes; provided, however, that any failure to make any such amendment or any error therein shall not affect the Administrative Agent's security interest in the Future Pledged Notes. At the earliest time permitted by Applicable Law, each such Future Pledged Note shall be deemed to be, and shall be treated hereunder as, a Pledged Note. The Pledgor, in each applicable case, shall promptly execute and deliver any assignments, waivers, consents, financing statements or other documents reasonably requested by the Administrative Agent in order to perfect the Administrative Agent's security interest in any Future Pledged Note. 5. Rights of the Administrative Agent upon Default. Upon the occurrence and during the continuance of an Event of Default, the Administrative Agent may, subject to compliance with Applicable Law, at its option, without notice, and without in any way waiving the Event of Default, do the following either in person, by agent or by a court-appointed receiver: (a) do all other acts which the Administrative Agent may reasonably deem necessary or proper to protect the Administrative Agent's security interest in the Pledged Notes granted hereunder; (b) without limiting the generality of the foregoing, the Administrative Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon the Pledgor or any other Person (all and each of which demands, defenses, advertisements and notices are, to the extent permitted by Applicable Law, hereby waived), may in such -2- 151 circumstances forthwith collect, receive, appropriate and realize upon the Pledged Notes, or any part thereof, and/or may forthwith sell, assign, give option or options to purchase or otherwise dispose of and deliver the Pledged Notes, or any part thereof (or contract to do any of the foregoing), in one or more parcels at a public or private sale or sales, in the over-the-counter market, at any exchange, broker's board or office of the Administrative Agent or any Lender or elsewhere upon such terms and conditions and at such prices as may be commercially reasonable, for cash or on credit or for future delivery without assumption of any credit risk. The Administrative Agent and the Lenders shall have the right upon any such public sale or sales, and, to the extent permitted by law (including under the applicable Uniform Commercial Code), upon any such private sale or sales, to purchase the whole or any part of the Pledged Notes so sold, free of any right or equity of redemption in the Pledgor, which right or equity is hereby waived or released. The Administrative Agent shall apply the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable costs and expenses incurred in respect thereof or incidental to the care or safekeeping of the Pledged Notes or in any way relating to the Pledged Notes or the rights of the Administrative Agent and the Lenders hereunder, including, without limitation, reasonable attorneys' fees and disbursements of counsel to the Administrative Agent, to the payment, in whole or in part, of the Obligations (as defined in the Loan Agreement), in accordance with the Loan Agreement, and only after such application, repayment in full of all the Obligations and after the payment by the Administrative Agent of any other amount required by any provision of law, including, without limitation, Section 9-504(1)(c) of the Uniform Commercial Code as in effect in the relevant jurisdiction, need the Administrative Agent account for the surplus, if any, to the Pledgor. To the extent permitted by applicable law, the Pledgor waives all claims, damages and demands it may acquire against the Administrative Agent or any of the Lenders arising out of the exercise by them of any rights hereunder except as may arise as a result of the bad faith, willful misconduct or gross negligence of such Persons. If any notice of a proposed sale or other disposition of the Pledged Notes shall be required by law, such notice shall be deemed reasonable and proper if given at least ten (10) days before such sale or other disposition; (c) proceed by suit or suits in law or in equity or by any other appropriate proceeding or remedy to enforce payment of the Obligations or the performance of any term, covenant, condition or agreement contained herein, and institution of such a suit or suits shall not abrogate the rights of the Administrative Agent and the Lenders to pursue any other remedies herein granted or to pursue any other remedy available to them either at law or in equity; and (d) in addition, and without limiting the generality of the foregoing, the Administrative Agent may exercise as to the Pledged Notes all of the rights, powers and remedies of the owner thereof, including, without limiting the generality of the foregoing, the following: -3- 152 (i) the right to declare the entire unpaid balance of the Pledged Notes immediately due and payable in the event of a default on the part of the maker under the Pledged Notes in accordance with the terms thereof; and (ii) the right to receive the unpaid balance or any part thereof or any interest becoming due and payable thereupon of the Pledged Notes, and upon receipt of the entire unpaid indebtedness evidenced thereby to execute, acknowledge and deliver, in its own name and on behalf of the Pledgor, a satisfaction of the Pledged Notes or an assignment thereof in form to be recorded and to retain for its own use the sums so received by it and to apply such sums to the Obligations. 6. Appointment of Attorney-In-Fact. The Pledgor hereby constitutes, effective after the occurrence and during the continuance of an Event of Default, the Administrative Agent as the attorney-in-fact of the Pledgor to take such actions and execute such documents as the Administrative Agent may reasonably deem appropriate in the exercise of the rights and powers granted to the Administrative Agent herein. The power of attorney granted hereby shall be irrevocable and coupled with an interest and shall terminate only upon the payment in full of the outstanding Obligations[, TERMINATION OF THE SUBSIDIARY GUARANTY] and the termination of any further obligation of the Lenders to make any Advances under the Loan Agreement. The Pledgor shall indemnify and hold the Administrative Agent and the Lenders, and each of them, harmless for all losses, costs, damages, fees and expenses suffered or incurred in connection with the exercise of this power of attorney, except as may arise as a result of the bad faith, gross negligence or willful misconduct of such Persons, and shall release the Administrative Agent and the Lenders, and each of them, from any and all liability arising in connection with the exercise of this power of attorney, except as may arise as a result of the bad faith, gross negligence or willful misconduct of such Persons. 7. Termination. Upon payment in full of the outstanding Obligations, and termination of any further obligation of the Lenders to make Advances under the Loan Agreement, this Assignment shall become null and void and the Administrative Agent shall forthwith execute appropriate documents so providing and shall return the Pledged Notes with appropriate endorsements thereon, together with any proceeds thereof received by the Administrative Agent and not theretofore applied against the Obligations, to the Pledgor. 8. Automatic Release. The Administrative Agent and each Lender agrees that, so long as no Default then exists, upon any disposition of a Restricted Subsidiary which is the obligor of a promissory note pledged pursuant to the terms of this Agreement, this Agreement shall be deemed released automatically without any further action hereunder, and the pledge in favor of the Administrative Agent shall terminate. 9. No Waiver. Nothing contained in this Assignment and no act done or omitted by the Administrative Agent or any Lender pursuant to the powers and rights granted hereunder shall be deemed to be a waiver by such Persons of their rights and remedies under -4- 153 any of the Loan Documents or otherwise, and this Assignment is made and accepted without prejudice to any of the rights or remedies granted to the Administrative Agent in any other document or agreement, including, without limitation, the Loan Documents (as defined in the Loan Agreement). The rights of the Administrative Agent and the Lenders to collect the Obligations and to enforce any other security held therefor by such Persons may be exercised by such Persons either prior to, simultaneously with or subsequent to any action taken by such Persons hereunder. It is intended that this Section be broadly construed so that all rights, powers and remedies herein provided or otherwise available to the Administrative Agent shall continue and be available to the Administrative Agent until such time as the Obligations have been paid in full and the Lenders no longer have any obligation to make Advances. 10. Notices. All notices and other communications required or permitted hereunder shall be delivered to the parties in the names and at the addresses set forth in, or pursuant to, Section 11.1 of the Loan Agreement. 11. Successors and Assigns. This Assignment shall be binding upon, inure to the benefit of and be enforceable by the legal representatives, heirs and permitted assigns of the Administrative Agent and the Lenders. 12. Modification. Neither this Assignment nor any provision hereof may be changed orally but only by a written instrument signed by the Administrative Agent and the Pledgor as provided in the Loan Agreement. 13. Governing Law. This Assignment shall be governed by and construed and enforced in accordance with the laws of the State of New York. 14. Counterparts. This Assignment may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. 15. Preservation of Collateral. The Administrative Agent's sole duty with respect to the custody, safekeeping and physical preservation of the Pledged Notes in its possession, under Section 9-207 of the Uniform Commercial Code as in effect in the State of New York, or otherwise, shall be to deal with it in the same manner as the Administrative Agent deals with similar property for its own account. Neither the Administrative Agent nor any of the Lenders nor any of their respective directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon all or any part of the Pledged Notes or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of the Pledged Notes upon the request of the Pledgor or otherwise. -5- 154 16. Powers Coupled With An Interest. All authorizations and agencies herein contained with respect to the Pledged Notes are irrevocable and powers coupled with an interest. 17. Administrative Agent. Each reference herein to any right granted to, benefit conferred upon or power exercisable by the "Administrative Agent" shall be a reference to the Administrative Agent for the benefit of all of the Lenders, and each action taken or right exercised hereunder shall be deemed to have been so taken or exercised by the Administrative Agent for the benefit of and on behalf of the all of the Lenders. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] -6- 155 IN WITNESS WHEREOF, the Pledgor has caused this Assignment to be executed by its duly authorized officers as of the day and year first above written. PLEDGOR: __________________________________ By: ______________________________ Its:_____________________________ 156 ACKNOWLEDGEMENT The undersigned, being the maker of a Pledged Note described in the foregoing Assignment, hereby acknowledges the foregoing Assignment and waives any security interest, lien, encumbrance or right of setoff which the undersigned may now or hereafter have or acquire in the Pledged Notes. The undersigned further acknowledges receipt of notice of the foregoing Assignment and agrees, after notice by the Administrative Agent of the occurrence of an Event of Default and receipt of evidence that the Administrative Agent is the holder of the Pledged Notes, to make or cause to be made all payments on account of the Pledged Notes directly to the Administrative Agent, for the benefit of the Lenders until directed to the contrary by the Administrative Agent. Capitalized terms used herein shall have the meanings ascribed thereto in the foregoing Assignment unless otherwise defined herein. NOTE MAKER: __________________________________ By: _______________________________________ Title: ____________________________________ 157 SCHEDULE 1 Description of Note Pledged
Date of Principal Amount Percent of Obligor Note Of Note Note Pledged ------- ---- ------- ------------ 100%
158 EXHIBIT B FORM OF BORROWER'S PLEDGE AGREEMENT THIS BORROWER'S PLEDGE AGREEMENT (this "Agreement") is entered into as of the ____ day of February, 1999, by and between BRESNAN TELECOMMUNICATIONS COMPANY LLC (the "Borrower"), and TORONTO DOMINION (TEXAS), INC. (the "Administrative Agent") as the secured party in its capacity, as administrative agent for itself and on behalf of the Lenders (defined in the Loan Agreement described below). W I T N E S S E T H: WHEREAS, the Borrower, the Lenders and the Administrative Agent are all parties to that certain Loan Agreement dated as of February 2, 1999 (as amended, restated, supplemented or otherwise modified from time to time, the "Loan Agreement"); and WHEREAS, pursuant to the Loan Agreement, the Borrower is required to execute and deliver this Agreement; and WHEREAS, to secure the payment and performance of, among other things, all Obligations (as defined in the Loan Agreement) under the Loan Agreement and the promissory notes issued by the Borrower to the Lenders thereunder (the "Notes"), and to induce the Lenders to enter into and perform the Loan Agreement, the Borrower and the Administrative Agent (for itself and on behalf of the Lenders) have agreed that the Ownership Interests (as defined below) owned by the Borrower in each of the Restricted Subsidiaries (as defined in the Loan Agreement) of the Borrower listed on Schedule 1 attached hereto, which are the only directly owned domestic Restricted Subsidiaries of the Borrower, shall be pledged by the Borrower to the Administrative Agent (for itself and on behalf of the Lenders) to secure the Obligations; NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that capitalized terms used herein shall have the meanings ascribed to them in the Loan Agreement to the extent not otherwise defined or limited herein, and further agree as follows: 1. Warranty. The Borrower hereby represents and warrants to the Administrative Agent and the Lenders that, except for the security interest created hereby, the Borrower owns the Ownership Interests, which constitutes the percentage of the issued and outstanding Ownership Interests of the Restricted Subsidiaries as set forth on Schedule 1 attached hereto, free and clear of all Liens, except Permitted Liens, that the Ownership Interests are duly issued, fully paid and non-assessable, and that the Borrower has the unencumbered right to pledge the Ownership Interests. In addition, the Borrower represents and warrants as follows: (a) the Ownership Interests represent all of the Borrower's shares of 159 capital stock, membership interests or partnership interests in any Restricted Subsidiary of the Borrower (limited to 65% of any foreign Restricted Subsidiary); (b) upon possession and retention of the Ownership Interests by the Administrative Agent, the Administrative Agent shall have a valid and perfected first priority security interest in the Ownership Interests, securing the payment of the Loans; and (c) except as noted on Schedule 2 attached hereto, the Ownership Interests represent all of the outstanding Ownership Interests issued by any direct Restricted Subsidiary of the Borrower. 2. Security Interest. Subject to the provisions of Section 13 hereof, the Borrower hereby unconditionally grants and assigns to the Administrative Agent, for itself and on behalf of the Lenders, and their respective permitted successors and assigns, a continuing security interest in and security title to the Ownership Interests (limited to 65% of any foreign Restricted Subsidiary)and any other shares of capital stock, membership interests or partnership interests of any Restricted Subsidiary of the Borrower obtained in the future, and in each case, all certificates representing such shares, all rights, options, warrant, stock or other securities or other property which may hereafter be received, receivable or distributed in respect of the Ownership Interests, together with all proceeds of the foregoing, including, without limitation, all dividends, cash, notes, securities or other property from time to time acquired, receivable or otherwise distributed in respect of, or in exchange for, the foregoing, whether now owned by the Borrower or hereafter acquired, and whether now existing or hereafter coming into existence, all of which shall constitute "Ownership Interests" hereunder. The Borrower has delivered to and deposited with the Administrative Agent all of its right, title and interest in and to the Ownership Interests, together with certificates representing the Ownership Interests, and undated stock powers endorsed in blank, if applicable, as security for the Obligations; it being the intention of the parties hereto that beneficial ownership of the Ownership Interests, including, without limitation, all voting, consensual and dividend rights, shall remain in the Borrower until the occurrence and during continuance of an Event of Default under the terms of the Loan Agreement and until the Administrative Agent shall notify the Borrower of the Administrative Agent's exercise of voting and dividend rights to the Ownership Interests pursuant to Section 9 of this Agreement. 3. Additional Shares. In the event that, during the term of this Agreement: (a) any stock dividend, stock split, reclassification, readjustment, or other change is declared or made in the capital structure of any directly owned Restricted Subsidiary, or any new stock is issued by such Restricted Subsidiary, or any new directly owned Restricted Subsidiary is formed or acquired, all new, substituted, and additional shares shall be issued to the Borrower and shall be promptly delivered to the Administrative Agent (limited to 65% of foreign Restricted Subsidiaries), together with undated stock powers endorsed in blank by the Borrower, and shall thereupon constitute Ownership Interests to be held by the Administrative Agent under the terms of this Agreement; and -2- 160 (b) all new stock or other securities acquired by the Borrower shall be promptly delivered to the Administrative Agent (limited to 65% of foreign Restricted Subsidiaries), together with undated stock powers endorsed in blank, and shall thereupon constitute Ownership Interests to be held by the Administrative Agent under the terms of this Agreement. 4. Default. In the event of the occurrence of an Event of Default and so long as any such Event of Default is continuing, subject, however, to Section 13 hereof, the Administrative Agent may sell or otherwise dispose of the Ownership Interests at a public or private sale or make other commercially reasonable disposition of the Ownership Interests or any portion thereof after fifteen (15) days' notice of the time and place of any such sale to the Borrower, and the Administrative Agent, the Lenders, or any of them, may, in accordance with applicable provisions of the Uniform Commercial Code as in effect in the applicable jurisdiction, purchase the Ownership Interests or any portion thereof at any public sale. The proceeds of the public or private sale or other disposition shall be applied first to the costs of the Administrative Agent incurred in connection with the sale, expressly including, without limitation, any costs under Section 7 hereof, and then to the Obligations as provided in the Loan Agreement. In the event the proceeds of the sale or other disposition of the Ownership Interests are insufficient to satisfy the Obligations, the Borrower shall remain liable for any such deficiency. The Borrower waives, to the extent permitted by Applicable Law, the rights of equity of redemption, appraisal, notice of acceptance, presentment, demand and marshalling, to the extent applicable. 5. Additional Rights of Secured Party. In addition to its rights and privileges under this Agreement, the Administrative Agent, for itself and on behalf of the Lenders, shall have all the rights, powers and privileges of a secured party under the Uniform Commercial Code as in effect in any applicable jurisdiction and other Applicable Law. 6. Return of Ownership Interests to the Borrower. (i) Upon payment in full of all principal and interest on the Notes and satisfaction in full of any other outstanding Obligations, and after such time as the Lenders shall have no obligation to make any further Advances to the Borrower, this Agreement shall terminate and the Administrative Agent shall promptly return the remaining Ownership Interests and all rights received by the Administrative Agent as a result of its possessory interest in the Ownership Interests to the Borrower and (ii) upon disposition of a Restricted Subsidiary in accordance with the applicable provisions of the Loan Agreement, the Administrative Agent shall return the Ownership Interests of such Restricted Subsidiary and all rights received by the Administrative Agent hereunder in respect of the Ownership Interests of such Restricted Subsidiary shall terminate and be deemed automatically released and Administrative Agent shall promptly return the remaining Ownership Interests to the Borrower. 7. Disposition of Ownership Interests by Administrative Agent. In the event that the Ownership Interests are not registered or qualified under the various federal or state -3- 161 securities laws of the United States, disposition thereof after an Event of Default may be restricted to one or more private (instead of public) sales. The Borrower understands that upon such disposition, the Administrative Agent may approach only a restricted number of potential purchasers and further understands that a sale under such circumstances may yield a lower price for the Ownership Interests than if the Ownership Interests were registered and qualified pursuant to federal and state securities laws and sold on the open market. The Borrower, therefore, agrees that: (a) if the Administrative Agent shall, pursuant to the terms of this Agreement, sell or cause the Ownership Interests or any portion thereof to be sold at a private sale, the Administrative Agent shall have the right to rely upon the advice and opinion of any national brokerage or investment firm having recognized expertise and experience in connection with shares of cable television companies (but shall not be obligated to seek such advice and the failure to do so shall not be considered in determining the commercial reasonableness of such action) as to the best manner in which to expose the Ownership Interests for sale and as to the best price reasonably obtainable at the private sale thereof; and (b) that such reliance shall be conclusive evidence that the Administrative Agent has handled such disposition in a commercially reasonable manner absent manifest error. 8. Borrower's Obligations Absolute. The obligations of the Borrower under this Agreement shall be direct and immediate and not conditional or contingent upon the pursuit of any remedies against the Borrower or any other Person, nor against other security or liens available to the Administrative Agent or any Lender. The Borrower hereby waives any right to require that an action be brought against any other Person or to require that resort be had to any other security or to any balance of any deposit account or credit on the books of the Administrative Agent or any of the Lenders in favor of any other Person prior to the exercise of remedies hereunder, or to require action hereunder prior to resort by the Administrative Agent to any other security or collateral for the Notes and the other Obligations. No amendment, modification, waiver, transfer or renewal, extension, assignment or termination of this Agreement or of the Loan Agreement or of any other Loan Document, or of any instrument or document executed and delivered by the Borrower or any other obligor with respect to the Obligations to the Lenders, the Administrative Agent, or any of them, nor additional advances made by the Lenders, the Administrative Agent, or any of them, to the Borrower, nor the taking of further security, nor the retaking or re-delivery or release of the Collateral or any other collateral or guaranty to the Borrower by the Lenders, the Administrative Agent, or any of them, nor any lack of validity or enforceability of any Loan Document or any term thereof, nor any other act of the Lenders, the Administrative Agent, or any of them, shall release the Borrower from any Obligation, except a release or discharge executed in writing by the Administrative Agent in accordance with the Loan Agreement with respect to such Obligation or upon full payment and satisfaction of all Obligations. None of the Administrative Agent or the Lenders shall, by any act, delay, omission or -4- 162 otherwise, be deemed to have waived any of its or their rights or remedies hereunder, unless such waiver is in writing and signed by the Administrative Agent in accordance with the Loan Agreement and then only to the extent therein set forth. A waiver by the Lenders, the Administrative Agent, or any of them, of any right or remedy on any occasion shall not be construed as a bar to the exercise of any such right or remedy which any such Person would otherwise have had on any other occasion. 9. Voting Rights. For so long as the Notes or any other Obligations remain unpaid, after and during the continuation of an Event of Default, but subject to the provisions of Section 13 hereof, (i) the Administrative Agent may exercise all voting rights, and all other ownership or consensual rights of the Ownership Interests, but under no circumstances is the Administrative Agent obligated by the terms of this Agreement to exercise such rights, and (ii) the Borrower hereby appoints the Administrative Agent, the Borrower's true and lawful attorney-in-fact and IRREVOCABLE PROXY to vote the Ownership Interests in any reasonable manner the Administrative Agent deems advisable for or against all matters submitted or which may be submitted to a vote of shareholders. The power-of-attorney granted hereby is coupled with an interest and shall be irrevocable. 10. Notices. All notices and other communications required or permitted hereunder shall be in writing, and shall be given in the manner and at the addresses set forth in Section 11.1 of the Loan Agreement. 11. Binding Agreement. The provisions of this Agreement shall be construed and interpreted, and all rights and obligations of the parties hereto determined, in accordance with the internal laws of the State of New York applicable to contracts made and to be performed in the State of New York. This Agreement, together with all documents referred to herein, constitutes the entire agreement between the parties with respect to the matters addressed herein and may not be modified except by a writing executed by the Administrative Agent and the Borrower and delivered by the Administrative Agent to the Borrower. 12. Severability. If any paragraph or part thereof shall for any reason be held or adjudged to be invalid, illegal or unenforceable by any court of competent jurisdiction, such paragraph or part thereof so adjudicated invalid, illegal or unenforceable shall be deemed separate, distinct and independent, and the remainder of this Agreement shall remain in full force and effect and shall not be affected by such holding or adjudication. 13. FCC Consent. Notwithstanding anything herein which may be construed to the contrary, no action shall be taken by any of the Administrative Agent or any Lender with respect to the Licenses (or any pledged Collateral relating to such Licenses) or any license, franchise of the FCC or the Ownership Interests unless and until all requirements of Applicable Law, including, without limitation, any state law, or any required approval under the Federal Communications Act of 1934, as amended, and any applicable rules and regulations thereunder, requiring the consent to or approval of such action by the FCC or any -5- 163 governmental or other authority, have been satisfied. The Borrower covenants that upon request of the Administrative Agent, after and during the continuance of an Event of Default, it will cause to be filed such applications and take such other action as may be requested by the Administrative Agent to obtain consent or approval of the FCC or any governmental or other authority which has granted any License to the Borrower to any action contemplated by this Agreement and to give effect to the security interest of the Administrative Agent, including, without limitation, the execution of an application for consent by the FCC to an assignment or transfer involving a change in ownership or control pursuant to the provisions of the Federal Communications Act of 1934, as amended. To the extent permitted by Applicable Law, the Administrative Agent is hereby irrevocably appointed the true and lawful attorney-in-fact of the Borrower, in its name and stead, to execute and file, upon the occurrence and during the continuance of an Event of Default after ten (10) Business Days' prior notice to the Borrower, all necessary applications with the FCC and with any governmental or other authority. The power of attorney granted herein is coupled with an interest and shall be irrevocable for so long as any of the Obligations remain unpaid or unperformed or any of the Lenders have any obligation to make Advances under the Loan Agreement, respectively, regardless of whether the conditions precedent to the making of any such Advances have been or can be fulfilled. 14. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original, but all such separate counterparts shall together constitute but one and the same instrument. 15. Administrative Agent. Each reference herein to any right granted to, benefit conferred upon or power exercisable by the "Administrative Agent" shall be a reference to the Administrative Agent for itself and for the benefit of all of the Lenders, and each action taken or right exercised hereunder shall be deemed to have been so taken or exercised by the Administrative Agent for itself and for the benefit of and on behalf of all of the Lenders. 16. Registration of Assignment. The registrar for the Ownership Interests shall be the issuer of such Ownership Interests (the "Registrar"). The registration records of each of the issuers of the Ownership Interests which are maintained by and in the possession of the Registrar (the "Registration Books") are the only records maintained to evidence the ownership and transfer of ownership or other interests, including security interests, in the Ownership interests. There is no registration of record or to the knowledge of the Borrower, any claim with respect thereto, of any Lien on the Ownership Interests, other than the Lien set forth herein. The assignment granted in the Ownership Interests hereby has been duly entered in the Registration Books maintained for such purpose by the Registrar and the Registrar has delivered to the Administrative Agent its certificate of even date herewith to such effect. The Registrar shall not cause, suffer or permit to occur any transfer of record of the Ownership Interests or any interest therein except in accordance with the prior written consent of the Administrative Agent or as permitted by the Loan Agreement. Upon receipt of written notice by the Administrative Agent that an Event of Default has occurred and is -6- 164 continuing and that all or any part of the Ownership Interests or any interest therein have been sold, assigned or otherwise disposed of by the Secured Parties in accordance with the terms hereof, and identifying the interests so assigned, the Registrar shall forthwith cause the Ownership Interests to be re-registered as appropriate to duly reflect of record such transfers. The Registrar shall not resign or retire or permit its removal except upon circumstances where the successor registrar shall provide to the Administrative Agent its agreement to be bound by the terms and conditions herein. 17. Further Assurances. The Borrower agrees from time to time to execute and deliver any and all assignments or other forms or documents or further assurances and to take such other actions that the Administrative Agent may reasonably deem necessary or appropriate from time to time to assign the Notes or proceeds thereof to the Administrative Agent, for itself and for the benefit of the Lenders, or to preserve and maintain the security interest provided for hereby. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -7- 165 IN WITNESS WHEREOF, the undersigned parties hereto have executed this Agreement by and through their duly authorized officers, as of the day and year first above written. BORROWER: BRESNAN TELECOMMUNICATIONS COMPANY LLC By BRESNAN COMMUNICATIONS GROUP LLC, its managing member By BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP, its managing member By BCI (USA), LLC, its general partner By Bresnan Communications, Inc., its managing member By:_____________________________________ Name:_______________________________ Title:______________________________ ADMINISTRATIVE AGENT: TORONTO DOMINION (TEXAS), INC., as Administrative Agent for the Lenders By:_____________________________________ Its:_________________________________ 166 RECEIPT AND CERTIFICATE OF REGISTRAR The undersigned hereby certifies, acknowledges and agrees as follows to and with TORONTO DOMINION (TEXAS), INC., as administrative agent (the "Administrative Agent") for the Lenders (as defined therein) parties to the Loan Agreement dated as of February 2, 1999 (as amended, modified or supplemented from time to time (the "Loan Agreement") by and among Bresnan Telecommunications Company LLC, such Lenders and the Administrative Agent: 1. Capitalized terms used and not defined herein shall have the meanings ascribed to such terms in the Loan Agreement. 2. The undersigned is the duly authorized and acting Registrar and as such has sole custody of and is solely responsible for the Registration Books for ____________________ (the "Company"); 3. The Borrower is a member, partner or stockholder of the Company and its interests in the Company (the "Pledged Interests") are reflected as such on the Registration Books. As of the date hereof, Schedule 1 hereto sets forth the Pledged Interests being ___ of all of the Ownership Interests in the Company. 4. The undersigned, by execution of this Certificate, acknowledges receipt of irrevocable instructions and direction from the Borrower contained in the Borrower's Pledge Agreement and herein, acknowledged and agreed to by the Company (a) to register on the Registration Books for the Company, the Lien in favor of the Administrative Agent for the benefit of itself and the Lenders upon the Pledged Interests as an assignment and security interest therein (the "Registered Assignment") as provided in the Borrower's Pledge Agreement and (b) to otherwise fully comply with the other provisions herein contained. The execution of this Certificate and the Borrower's Pledge Agreement by the Borrower and the Company shall constitute such irrevocable instructions and direction. 5. The Registered Assignment on the Pledged Interests has been duly registered of record on the Registration Books of the Company. There is no registration of record of, or to the knowledge of the Registrar any claim with respect to, any Lien or other interest or restriction of transfer on the Pledged Interests, other than the Registered Assignment. 6. The Registrar will not cause, suffer or permit to occur any transfer of record of (a) the Pledged Interests or any interest therein, or (b) any other interest in the Company the effect of which transfer would be to lessen the percentage interest in the Company of the Pledged Interests as specified in paragraph 3 above, except in accordance with the prior written consent or as provided below, at the direction of the Administrative Agent or as permitted by the Loan Agreement. 167 7. Upon receipt of written notice from the Administrative Agent that an Event of Default has occurred and that all or any part of the Pledged Interests or any interest therein has been sold, assigned or otherwise transferred by such holder pursuant to the Loan Documents, and identifying the Administrative Agent and the interest or interests assigned, the Registrar shall forthwith cause the Registration Books for the Company to be duly noted to reflect each of such transfers of record. 8. The Registrar shall not resign or retire or permit its removal except upon circumstances where the successor Registrar shall provide the Administrative Agent its written irrevocable acknowledgement of each of the above undertakings. Upon the payment in full of the Obligations then due and the termination of the Commitments under the Loan Agreement, the Administrative Agent shall instruct the Registrar to remove the Registered Assignment from the register and take such other action as the Borrower may reasonably request and at its expense. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] -2- 168 Done this the 2nd day of February, 1999. REGISTRAR: [NAME OF ISSUER] By BESNAN TELECOMMUNICATIONS COMPANY LLC, its managing member By BRESNAN COMMUNICATIONS GROUP LLC, its managing member By BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP, its managing member By BCI (USA),LLC, its general partner By BRESNAN COMMUNICATIONS, INC., its managing member By: _______________________________ Title:_____________________ Acknowledged and Agreed to this 2nd day of February, 1999. BRESNAN TELECOMMUNICATIONS COMPANY LLC By BRESNAN COMMUNICATIONS GROUP LLC, its managing member By BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP, its managing member By BCI (USA),LLC, its general partner By BRESNAN COMMUNICATIONS, INC., its managing member By:_______________________________ Title:___________________ -3- 169 EXHIBIT C FORM OF FACILITY A TERM LOAN NOTE New York, New York $_____________ As of February ____, 1999 FOR VALUE RECEIVED, the undersigned, BRESNAN TELECOMMUNICATIONS COMPANY LLC, a Delaware limited liability company (the "Borrower"), promises to pay to the order of ___________________ (hereinafter, together with its successors and assigns, called the "Lender"), at the office of the Administrative Agent or such other place as the Lender may designate in writing to the Borrower, the principal sum of _______________________________ AND ___/100s DOLLARS ($________________) of United States funds, plus interest as hereinafter provided. All capitalized terms used herein shall have the meanings ascribed to them in that certain Loan Agreement dated as of even date herewith (as hereafter amended, modified or supplemented from time to time, the "Loan Agreement") by and among the Borrower, the Lender and certain other Lenders signatories thereto (collectively, the "Lenders") and Toronto Dominion (Texas), Inc., as administrative agent (the "Administrative Agent") for the Lenders, except to the extent such capitalized terms are otherwise defined or limited herein. The Borrower shall repay principal outstanding hereunder from time to time as set forth in Section 2.7 of and as otherwise provided in the Loan Agreement. All amounts paid by the Borrower shall be applied to the Obligations in such order of application as provided in the Loan Agreement. A final payment of all principal amounts and other Obligations then outstanding hereunder and under the other Loan Documents shall be due and payable on the Facility A Maturity Date or such earlier date as payment of the Loans shall be due, whether by acceleration or otherwise, as provided in the Loan Agreement. The Borrower shall be entitled to borrow and re-pay the Lender's portion of the Loans hereunder pursuant to the terms and conditions of the Loan Agreement; provided, however, that there shall be no net increase in the aggregate principal amount outstanding hereunder at any time following the making of the initial Advance under the Facility A Term Loan Commitment. Prepayment of the principal amount hereof is permitted as provided in the Loan Agreement. The Borrower hereby promises to pay interest on the unpaid principal amount hereof as provided in Article 2 of the Loan Agreement. Interest under this Note shall also be due and payable when this Note shall become due (whether at maturity, by reason of acceleration 170 or as otherwise provided in the Loan Agreement). Overdue principal may bear interest payable on demand of the Default Rate as set forth in the Loan Agreement. In no event shall the amount of interest due or payable hereunder exceed the maximum rate of interest allowed by Applicable Law, and in the event any such payment is inadvertently made by the Borrower or inadvertently received by the Lender, then such excess sum shall be credited as a payment of principal, unless the Borrower shall notify the Lender in writing that it elects to have such excess sum returned forthwith. It is the express intent hereof that the Borrower not pay and the Lender not receive, directly or indirectly in any manner whatsoever, interest in excess of that which may legally be paid by the Borrower under Applicable Law. All parties now or hereafter liable with respect to this Note, whether the Borrower, any guarantor, endorser, or any other Person or entity, hereby waive presentment for payment, demand, notice of non-payment or dishonor, protest and notice of protest. No delay or omission on the part of the Lender or any holder hereof in exercising its rights under this Note, or delay or omission on the part of the Lender, the Administrative Agent, the Majority Lenders or the Lenders collectively, or any of them, in exercising its or their rights under the Loan Agreement or under any other Loan Document, or course of conduct relating thereto, shall operate as a waiver of such rights or any other right of the Lender or any holder hereof, nor shall any waiver by the Lender, the Administrative Agent, the Majority Lenders or the Lenders collectively, or any of them, or any holder hereof of any such right or rights on any one occasion be deemed a bar to, or waiver of, the same right or rights on any future occasion. This Note evidences the Lender's portion of the Facility A Term Loans made under the Facility A Term Loan Commitment under, and is entitled to the benefits and subject to the terms of the Loan Agreement, which contains provisions with respect to the acceleration of the maturity of this Note upon the happening of certain stated events, and provisions for prepayment. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] -2- 171 IN WITNESS WHEREOF, Borrower has caused its duly Authorized Signatory to execute this Note as of the day and year first above written. BRESNAN TELECOMMUNICATIONS COMPANY LLC By BRESNAN COMMUNICATIONS GROUP LLC, its managing member By BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP, its managing member By BCI (USA), LLC, its general partner By BRESNAN COMMUNICATIONS, INC., its managing member By: ________________________________ Title:_____________________ -3- 172 EXHIBIT D FORM OF FACILITY B TERM LOAN NOTE New York, New York $_____________ As of February _____, 1999 FOR VALUE RECEIVED, the undersigned, BRESNAN TELECOMMUNICATIONS COMPANY LLC, a Delaware limited liability company (the "Borrower"), promises to pay to the order of ___________________ (hereinafter, together with its successors and assigns, called the "Lender"), at the office of the Administrative Agent or such other place as the Lender may designate in writing to the Borrower, the principal sum of _______________________________ AND ___/100s DOLLARS ($________________) of United States funds, plus interest as hereinafter provided. All capitalized terms used herein shall have the meanings ascribed to them in that certain Loan Agreement dated as of even date herewith (as hereafter amended, modified or supplemented from time to time, the "Loan Agreement") by and among the Borrower, the Lender and certain other Lenders signatories thereto (collectively, the "Lenders") and Toronto Dominion (Texas), Inc., as administrative agent (the "Administrative Agent") for the Lenders, except to the extent such capitalized terms are otherwise defined or limited herein. The Borrower shall repay principal outstanding hereunder from time to time as set forth in Section 2.7 of and as otherwise provided in the Loan Agreement. All amounts paid by the Borrower shall be applied to the Obligations in such order of application as provided in the Loan Agreement. A final payment of all principal amounts and other Obligations then outstanding hereunder and under the other Loan Documents shall be due and payable on the Facility B Maturity Date or such earlier date as payment of the Loans shall be due, whether by acceleration or otherwise, as provided in the Loan Agreement. The Borrower shall be entitled to borrow and re-pay the Lender's portion of the Loans hereunder pursuant to the terms and conditions of the Loan Agreement; provided, however, that there shall be no net increase in the aggregate principal amount outstanding hereunder at any time following the making of the initial Advance under the Facility B Term Loan Commitment. Prepayment of the principal amount hereof is permitted as provided in the Loan Agreement. The Borrower hereby promises to pay interest on the unpaid principal amount hereof as provided in Article 2 of the Loan Agreement. Interest under this Note shall also be due and payable when this Note shall become due (whether at maturity, by reason of acceleration or as otherwise provided in the Loan Agreement). Upon and during the continuation of any 173 Event of Default, principal outstanding hereunder may bear interest payable on the earlier of demand or the Facility B Maturity Date at the Default Rate as provided in the Loan Agreement. In no event shall the amount of interest due or payable hereunder exceed the maximum rate of interest allowed by Applicable Law, and in the event any such payment is inadvertently made by the Borrower or inadvertently received by the Lender, then such excess sum shall be credited as a payment of principal, unless the Borrower shall notify the Lender in writing that it elects to have such excess sum returned forthwith. It is the express intent hereof that the Borrower not pay and the Lender not receive, directly or indirectly in any manner whatsoever, interest in excess of that which may legally be paid by the Borrower under Applicable Law. All parties now or hereafter liable with respect to this Note, whether the Borrower, any guarantor, endorser, or any other Person or entity, hereby waive presentment for payment, demand, notice of non-payment or dishonor, protest and notice of protest. No delay or omission on the part of the Lender or any holder hereof in exercising its rights under this Note, or delay or omission on the part of the Lender, the Administrative Agent, the Majority Lenders or the Lenders collectively, or any of them, in exercising its or their rights under the Loan Agreement or under any other Loan Document, or course of conduct relating thereto, shall operate as a waiver of such rights or any other right of the Lender or any holder hereof, nor shall any waiver by the Lender, the Administrative Agent, the Majority Lenders or the Lenders collectively, or any of them, or any holder hereof of any such right or rights on any one occasion be deemed a bar to, or waiver of, the same right or rights on any future occasion. This Note evidences the Lender's portion of the Facility B Term Loans made under the Facility B Term Loan Commitment under, and is entitled to the benefits and subject to the terms of the Loan Agreement, which contains provisions with respect to the acceleration of the maturity of this Note upon the happening of certain stated events, and provisions for prepayment. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] -2- 174 IN WITNESS WHEREOF, Borrower has caused its duly Authorized Signatory to execute this Note as of the day and year first above written. BRESNAN TELECOMMUNICATIONS COMPANY LLC By BRESNAN COMMUNICATIONS GROUP LLC, its managing member By BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP, its managing member By BCI (USA), LLC, its general partner By BRESNAN COMMUNICATIONS, INC., its managing member By:__________________________________ Title:______________________ -3- 175 EXHIBIT E FORM OF REVOLVING LOAN NOTE New York, New York $_____________ As of February ____, 1999 FOR VALUE RECEIVED, the undersigned, BRESNAN TELECOMMUNICATIONS COMPANY LLC, a Delaware limited liability company (the "Borrower"), promises to pay to the order of _________________________ (hereinafter, together with its successors and assigns, called the "Lender") at the office of the Administrative Agent or such other place as the Lender may designate in writing to the Borrower, the principal sum of ___________ AND ___/100s DOLLARS ($_____________) of United States funds, or, if less, so much thereof as may from time to time be advanced by the Lender to the Borrower hereunder, plus interest as hereinafter provided. Such Advance(s) and any repayments or prepayments in respect thereof may be endorsed from time to time on the grid attached hereto, but failure to make such notations shall not affect the validity of the Borrower's obligation to repay unpaid principal and accrued interest hereunder. All capitalized terms used herein shall have the meanings ascribed to them in that certain Loan Agreement of even date herewith (as hereafter amended, modified or supplemented from time to time, the "Loan Agreement") by and among the Borrower, the Lender and certain other Lenders signatories thereto (collectively, the "Lenders") and Toronto Dominion (Texas), Inc., as administrative agent (the "Administrative Agent") for the Lenders, except to the extent such capitalized terms are otherwise defined or limited herein. The Revolving Loan Commitment shall be reduced and the principal amount of this Note shall be paid in such amounts and at such times as are set forth in Section 2.5 of the Loan Agreement. The Borrower shall also repay principal outstanding hereunder from time to time, as necessary, in order to comply with Section 2.7(c) of the Loan Agreement, in accordance with the proration rules of Section 2.11 of the Loan Agreement. All amounts paid by the Borrower shall be applied to the Obligations in such order of application as provided in the Loan Agreement. A final payment of all principal amounts and other Obligations then outstanding hereunder and under the other Loan Documents shall be due and payable on the Facility A Maturity Date or such earlier date as payment of the Loans shall be due, whether by acceleration or otherwise, as provided in the Loan Agreement. The Borrower shall be entitled to borrow, re-pay and re-borrow the Lender's portion of the Revolving Loans hereunder pursuant to the terms and conditions of the Loan Agreement. Prepayment of the principal amount of any Revolving Loan is permitted as provided in the Loan Agreement. 176 The Borrower hereby promises to pay interest on the unpaid principal amount hereof as provided in Article 2 of the Loan Agreement. Interest under this Note shall also be due and payable when this Note shall become due (whether at maturity, by reason of acceleration or as otherwise provided in the Loan Agreement). Overdue principal may bear interest payable on demand at the Default Rate as set forth in the Loan Agreement. In no event shall the amount of interest due or payable hereunder exceed the maximum rate of interest allowed by Applicable Law, and in the event any such payment is inadvertently made by the Borrower or inadvertently received by the Lender, then such excess sum shall be credited as a payment of principal, unless the Borrower shall notify the Lender in writing that it elects to have such excess sum returned forthwith. It is the express intent hereof that the Borrower not pay and the Lender not receive, directly or indirectly in any manner whatsoever, interest in excess of that which may legally be paid by the Borrower under Applicable Law. All parties now or hereafter liable with respect to this Note, whether the Borrower, any guarantor, endorser, or any other Person or entity, hereby waive presentment for payment, demand, notice of non-payment or dishonor, protest and notice of protest. No delay or omission on the part of the Lender or any holder hereof in exercising its rights under this Note, or delay or omission on the part of the Lender, the Administrative Agent or the Lenders collectively, or any of them, in exercising its or their rights under the Loan Agreement or under any other Loan Document, or course of conduct relating thereto, shall operate as a waiver of such rights or any other right of the Lender or any holder hereof, nor shall any waiver by the Lender, the Administrative Agent or the Lenders collectively, or any of them, or any holder hereof of any such right or rights on any one occasion be deemed a bar to, or waiver of, the same right or rights on any future occasion. This Note evidences the Lender's portion of the Revolving Loans under, and is entitled to the benefits and subject to the terms of, the Loan Agreement, which contains provisions with respect to the acceleration of the maturity of this Note upon the happening of certain stated events, and provisions for prepayment. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 177 IN WITNESS WHEREOF, the Borrower has caused its duly Authorized Signatory to execute this Note as of the day and year first above written. BRESNAN TELECOMMUNICATIONS COMPANY LLC By BRESNAN COMMUNICATIONS GROUP LLC, its managing member By BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP, its managing member By BCI (USA), LLC, its general partner By BRESNAN COMMUNICATIONS, INC., its managing member By:______________________________________________________ Title:_________ 178 ADVANCES
- --------------------------------------------------------------------------------------------------------- Amount of Type of Amount of Principal Notation Date Advance Advance Paid or Prepaid Made By - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------
179 EXHIBIT F FORM OF INCREMENTAL FACILITY NOTE New York, New York $___________________ As of February ____, 1999 FOR VALUE RECEIVED, the undersigned, BRESNAN TELECOMMUNICATIONS COMPANY LLC, a Delaware limited liability company (the "Borrower"), promises to pay to the order of ________________________ (hereinafter, together with its successors and assigns, called the "Lender"), at the office of Toronto Dominion (Texas), Inc. in Houston, Texas or such other place as the Lender may designate in writing to the Borrower, the principal sum of ________________________ AND ___/100s DOLLARS ($__________________) of United States funds, or, if less, so much thereof as may from time to time be advanced by the Lender to the Borrower hereunder, plus interest as hereinafter provided. Such Incremental Facility Advance(s) and any repayments or prepayments in respect thereof may be endorsed from time to time on the grid attached hereto, but the failure to make such notations shall not affect the validity of the Borrower's obligation to repay unpaid principal and accrued interest hereunder. All capitalized terms used herein shall have the meanings ascribed to them in that certain Loan Agreement dated as of February 2, 1999 (as amended, modified, restated, or supplemented from time to time, the "Loan Agreement") by and among the Borrower, the Lender and certain other Lenders signatories thereto (collectively, the "Lenders") and Toronto Dominion (Texas), Inc., as administrative agent (the "Administrative Agent") for the Lenders, except to the extent such capitalized terms are otherwise defined or limited herein. A final payment of all principal amounts and other Obligations then outstanding hereunder and under the Loan Documents shall be due and payable as set forth in the Notice of Incremental Facility Commitment attached hereto, or such earlier date as payments of the Incremental Facility Loans shall be due, whether by acceleration or otherwise; provided, however, that the final maturity date shall be no earlier than six (6) calendar months after the Facility B Maturity Date. The Borrower shall be entitled to borrow, re-pay and re-borrow funds hereunder pursuant to the Incremental Facility Commitment and subject to the terms and conditions of the Loan Agreement; provided, however, that there shall be no net increase in the aggregate principal amount outstanding hereunder at anytime following the making of the initial Advance under the Incremental Facility Commitment. Prepayment of the principal amount of any Incremental Facility Advances is permitted as provided in the Loan Agreement. The Borrower hereby promises to pay interest on the unpaid principal amount hereof as provided in Article 2 of the Loan Agreement. Interest under this Note shall also be due 180 and payable when this Note shall become due (whether at maturity, by reason of acceleration or as otherwise provided in the Loan Agreement). Overdue principal may bear interest payable on demand at the Default Rate as set forth in the Loan Agreement. In no event shall the amount of interest due or payable hereunder exceed the maximum rate of interest allowed by Applicable Law, and in the event any such payment is inadvertently made by the Borrower or inadvertently received by the Lender, then such excess sum shall be credited as a payment of principal, unless the Borrower shall notify the Lender in writing that it elects to have such excess sum returned forthwith. It is the express intent hereof that the Borrower not pay and the Lender not receive, directly or indirectly in any manner whatsoever, interest in excess of that which may legally be paid by the Borrower under Applicable Law. All parties now or hereafter liable with respect to this Note, whether the Borrower, any guarantor, endorser, or any other Person or entity, hereby waive presentment for payment, demand, notice of non-payment or dishonor, protest and notice of protest. No delay or omission on the part of the Lender or any holder hereof in exercising its rights under this Note, or delay or omission on the part of the Lender, the Administrative Agent or the Lenders collectively, or any of them, in exercising its or their rights under the Loan Agreement or under any other Loan Document, or course of conduct relating thereto, shall operate as a waiver of such rights or any other right of the Lender or any holder hereof, nor shall any waiver by the Lender, the Administrative Agent, the Majority Lenders or the Lenders collectively, or any of them, or any holder hereof, of any such right or rights on any one occasion be deemed a bar to, or waiver of, the same right or rights on any future occasion. This Note evidences the Lender's portion of the Incremental Facility Advances under, and is entitled to the benefits and subject to the terms of, the Loan Agreement and the Notice of Incremental Facility Commitment, which contain provisions with respect to the acceleration of the maturity of this Note upon the happening of certain stated events, and provisions for prepayment. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] -2- 181 IN WITNESS WHEREOF, THE BORROWER HAS CAUSED ITS DULY AUTHORIZED SIGNATORY TO EXECUTE THIS NOTE AS OF THE DAY AND YEAR FIRST ABOVE WRITTEN. BRESNAN TELECOMMUNICATIONS COMPANY LLC By BRESNAN COMMUNICATIONS GROUP LLC, its managing member By BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP, its managing member By BCI (USA), LLC, its general partner By BRESNAN COMMUNICATIONS, INC., its managing member By: ____________________________________ Title: ____________________________ -3- 182 ADVANCES
__________________________________________________________________________________________ Amount of Type of Amount of Principal Notation Date Advance Advance Paid or Prepaid Made By __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________ __________________________________________________________________________________________
-4- 183 EXHIBIT G FORM OF HOLDCO PLEDGE AGREEMENT THIS PLEDGE AGREEMENT (this "Agreement") is entered into this ____ day of February, 1999, by and among Bresnan Communications Group LLC (the "Pledgor") and TORONTO DOMINION (TEXAS), INC., as the secured party in its capacity as administrative agent (the "Administrative Agent") for itself and on behalf of the Lenders (as defined in the Loan Agreement defined below). W I T N E S S E T H: WHEREAS, the Administrative Agent, the Lenders (as defined therein), and Bresnan Telecommunications Company LLC (the "Borrower") are parties to that certain Loan Agreement dated as of even date herewith (as heretofore and hereafter amended, modified, supplemented or restated from time to time, the "Loan Agreement"); and WHEREAS, the Borrower and the Pledgor are mutually dependent on each other in the conduct of their respective businesses; and WHEREAS, the Pledgor has determined that the Borrower's and the Lenders' performances of the Loan Agreement directly benefit the Pledgor, and to induce the Lenders to enter into the Loan Agreement, the Pledgor has further determined that its execution, delivery and performance of this Agreement directly benefits, and are within its corporate purposes and in its best interests; and WHEREAS, to secure the due and punctual payment and performance of the Obligations (as defined in the Loan Agreement), and to induce the Lenders to enter into and perform the Loan Agreement, the Pledgor wishes to pledge and assign to the Administrative Agent, for itself and for the benefit of the Lenders all of the Pledgor's right, title and interest existing in and to all of the membership interests in the Borrower, as more particularly described on Schedule 1 attached hereto and incorporated by reference herein (collectively, the "Ownership Interests"); NOW, THEREFORE, for and in consideration of the above premises and the mutual covenants and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Definitions. All capitalized terms used herein without definition shall have the meanings ascribed thereto in the Loan Agreement. For purposes hereof, "Secured Parties" shall mean, collectively, the Administrative Agent and the Lenders, and "Secured Party" shall mean any one of the foregoing. 184 2. Grant of Security Interest. As security for (a) the timely fulfillment and performance of each and every covenant and obligation of the Pledgor under this Agreement and any other documents executed and delivered in connection herewith to which the Pledgor is a party and (b) the payment of all Obligations, the Pledgor hereby pledges, mortgages, transfers, sets over and assigns to the Administrative Agent, on behalf of the Secured Parties, and grants the Administrative Agent, on behalf of the Secured Parties, a continuing Lien on and security interest in the following (exclusive of Excluded Distributions as defined below): (a) the Ownership Interests and all substitutions therefor and replacements thereof, and all rights related thereto, including, without limitation, the right to request that the Ownership Interests be registered in the name of the Administrative Agent, or any of its nominees and of all distributions, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in addition to, in substitution of, on account of or in exchange for any or all of the Ownership Interests (except for distributions which are permitted under the Loan Agreement); and (b) all proceeds of any and all of the foregoing; in each case, whether now owned or hereafter acquired by the Pledgor, howsoever its interest therein may arise or appear (whether beneficially or of record and whether by ownership, security interest, claim or otherwise). It is the intention of the parties hereto that beneficial ownership of the Ownership Interests, including, without limitation, all distributions and all voting, consensual and distribution rights, shall remain in the Pledgor and shall be exercised by it alone until the occurrence and during the continuance of an Event of Default and until the Administrative Agent shall notify the Pledgor of the Administrative Agent's exercise, on behalf of the Secured Parties, of voting, consensual and distribution rights to the Ownership Interests pursuant to Section 16 of this Agreement; provided, however, that, notwithstanding anything to the contrary contained in this Agreement, the Administrative Agent hereby agrees for itself and the other Secured Parties and for the express benefit of the Borrower, BCC LP, the Pledgor, BCI (USA), LLC (together with its successors and assignors, the "Manager") and the partners of BCC LP from time to time, and their successors and assigns (collectively, the "Beneficiaries") that, (i) the Borrower and the Pledgor shall be entitled at all times for so long as the Manager directly or indirectly manages the Borrower, including during a Default or Event of Default, to distribute and cause the distributions from the Borrower of, amounts that will be payable to the Manager (directly or as a further distribution through BCC LP) that constitute operating expenses in accordance with GAAP, (which amounts are referred to herein as the "Excluded Distribution") and (ii) Excluded Distributions are not subject to the Lien hereunder in favor of the Administrative Agent. The parties hereto agree that the provisions of this Section 2 may not be modified or amended without the written consent of the Manager. -2- 185 3. Administrative Agent Attorney-in-Fact. The Pledgor hereby constitutes and appoints the Administrative Agent as its true and lawful attorney-in-fact, in its name and stead, but only during the continuance of an Event of Default: (a) to collect any and all distributions of cash and other assets due the Pledgor from the Borrower, and (b) to use such measures, legal or equitable, as in its discretion may be deemed necessary or appropriate to enforce the payment thereof to the Administrative Agent and the Lenders. The power of attorney hereby created is coupled with an interest and is irrevocable so long as any of the Obligations shall remain unpaid or any of the Lenders shall have any obligation to make Advances under the Loan Agreement regardless of whether or not the conditions precedent to any such Advances have been or can be fulfilled. 4. Application of Distributions. Except as provided above with respect to the Excluded Distributions, during the continuance of an Event of Default, the Administrative Agent is hereby granted full irrevocable power and authority to hold, use and apply all cash and non-cash distributions (together with all interest earned thereon) in partial payment of the Obligations and may convert any such non-cash distributions to cash and apply the proceeds thereof as well as any cash distributions (a) in partial payment of the Obligations and (b) in payment of charges or expenses incurred by the Secured Parties, or any of them, in connection with any and all things which the Secured Parties, or any of them, may do or cause to be done hereunder. 5. Responsibilities of Administrative Agent and Lenders. None of the Secured Parties shall in any way be responsible for any failure to do any or all of the things for which rights, interests, power and authority are herein granted. The Secured Parties shall be responsible only for the application of such cash or other property as it actually receives under the terms hereof; provided, that the failure of the Administrative Agent to do any of the things or exercise any of the rights, interests, powers and authorities hereunder shall not be construed to be a waiver of any such rights, interests, powers and authorities. 6. Representations and Warranties. The Pledgor hereby represents and warrants to each of the Secured Parties as follows: (a) except for the security interest created hereby, the Pledgor is the legal and beneficial owner of the Ownership Interests, free and clear of all Liens; (b) all Ownership Interests have been duly authorized and validly issued, and constitute one hundred percent (100%) of the membership interests in the Borrower; (c) the Pledgor has the unencumbered right and power to pledge the Ownership Interests as provided herein; (d) so long as the Secured Parties retain possession of the certificate representing the Ownership Interests, all actions necessary to perfect, establish the first priority of, or otherwise protect, the security interest of the Secured Parties in the Ownership Interests have been duly taken, except for the filing of applicable financing statements; (e) subject to giving certain notices prior to the execution of the Liens on the Ownership Interests, the Federal Communications Act of 1934, as amended, and certain rights and regulations of the FCC, and -3- 186 any applicable laws or regulations regarding a change in control of the Borrower or its Subsidiaries, and subject to compliance with applicable state and federal securities laws, the exercise by the Administrative Agent, on behalf of the Secured Parties, of its or their rights and remedies hereunder will not contravene any law or governmental regulation or any contractual restriction binding on or affecting the Pledgor or any of its properties and will not result in or require the creation of any Lien upon or with respect to any of its properties; (f) no authorization or approval or other action by, and no notice to or filing with, any court, agency, department, commission, board, bureau or instrumentality of the United States or any state or other political subdivision thereof or regulatory body, or any other third party, except as has previously been obtained, is required either (i) for the pledge and assignment hereunder by the Pledgor of, or the grant by the Pledgor of the Lien and security interest created hereby in the Ownership Interests, or (ii) for the exercise by the Administrative Agent of its rights and remedies hereunder, except as may be required in respect of any such exercise by laws affecting the offering and sale of securities generally or by any Applicable Law and policies promulgated thereunder and state laws and regulations and the other laws and regulations mentioned in clause (e) above; and (g) this Agreement creates a valid Lien and security interest in favor of the Administrative Agent, on behalf of the Secured Parties, in the Ownership Interests, as security for the Obligations. 7. Covenants. So long as any of the Obligations remain outstanding and the Lenders have any obligation to make additional Loans to the Pledgor, the Pledgor shall not: (a) convey any of the Ownership Interests in any manner whatsoever, or consent to the admission of any new member or consent to any change in the business of the Borrower except as described in the Loan Agreement; (b) create or permit to exist any mortgage, pledge, lien, charge or other encumbrance upon or with respect to the Ownership Interests or any funds or property constituting a part thereof, other than the lien and security interest created hereunder in favor of the Administrative Agent, on behalf of the Secured Parties or any other Permitted Lien; (c) consent to any modification of or amendment to the operating agreement for the Borrower, which is material and adverse to the Lenders; (d) incur any Indebtedness for Money Borrowed except as described in Section 8 below; (e) take any action with respect to Ownership Interests which would constitute a Default or an Event of Default; or (f) cause, permit or allow the Borrower to be dissolved or liquidated or to acquire, be acquired by, merged or consolidated into or with any other Person except as permitted under the Loan Agreement. 8. Indebtedness of Pledgor. The Pledgor agrees that it shall not incur any Indebtedness for Money Borrowed other than Indebtedness for Money Borrowed incurred in accordance with Section 8.1(o) of the Loan Agreement. -4- 187 9. Indemnity and Expenses. (a) Except with respect to (i) any decrease in the principal amount of the Loans or (ii) loss of interest payable to the Secured Parties pursuant to the terms of the Loan Agreement, the Pledgor hereby agrees to indemnify the Secured Parties, or any of them, from and against any and all reasonable claims, losses and liabilities growing out of or resulting from exercising rights pursuant to this Agreement in connection with the enforcement of this Agreement during the continuance of an Event of Default, except to the extent such claims, losses or liabilities result from the gross negligence or willful misconduct of any Secured Party. (b) The Pledgor will, within thirty (30) days after demand from the Administrative Agent (supported by invoices in reasonable detail), pay to the Administrative Agent the amount of any and all reasonable expenses, including the disbursements and reasonable fees of the Administrative Agent's counsel and of any experts, consultants and agents, which the Administrative Agent may incur in connection with (i) the administration of this Agreement; or (ii) the exercise or enforcement of any of the rights of the Secured Parties hereunder; or (iii) the failure by the Pledgor to perform or observe any of the provisions hereof. 10. Additional Collateral Securities. In the event that, during the term of this Agreement: (a) any reclassification, readjustment, or other change is declared or made with respect to any of the Ownership Interests (including, without limitation, any certificate representing distribution in connection with any increase or reduction of capital, reclassification, merger, consolidation, sale of assets, combination of interests, spinoff, split-off or otherwise), promissory notes or other instruments is received from the Pledgor, by virtue of its being or having been an owner of any Ownership Interests, all new, substituted and additional interests, promissory notes, instruments or other securities issued by reason of any such change and received by the Pledgor or to which the Pledgor shall be entitled shall be immediately pledged to the Administrative Agent, together with any necessary endorsement or assignments endorsed in blank by the Pledgor, and shall thereupon constitute Ownership Interests to be subject to the Liens of the Administrative Agent, on behalf of the Secured Parties, as Ownership Interests under the terms of this Agreement; (b) all new interests or other securities acquired by any Pledgor shall be immediately pledged to the Administrative Agent and shall thereupon constitute Ownership Interests, to be encumbered by the Administrative Agent, on behalf of the Secured Parties, as Ownership Interests under the terms of this Agreement; and -5- 188 (c) any distribution payable in securities or property other than cash, or other distribution in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, is received by the Pledgor, by virtue of its being or having been an owner of any Ownership Interests, the Pledgor shall receive such payment or distribution in trust, for the benefit of the Secured Parties, shall segregate same from the Pledgor's other property and shall deliver it forthwith to the Administrative Agent in the exact form received, with any necessary endorsement or assignments duly executed in blank, to be encumbered by the Administrative Agent, on behalf of the Secured Parties, as Ownership Interests hereunder. 11. Default. In the event of the occurrence and during the continuance of an Event of Default, the Administrative Agent, on behalf of the Secured Parties, may sell, transfer or otherwise dispose of the Ownership Interests or any interest or right therein or any part thereof after ten (10) Business Days' prior written notice to the Pledgor, in one or more parcels, at the same or different times, at a public or private sale, or may make any other commercially reasonable disposition of the Ownership Interests or any portion thereof. The Secured Parties may, in accordance with the applicable provisions of the Uniform Commercial Code as in effect in the applicable jurisdiction, purchase the Ownership Interests or any portion thereof at any foreclosure sale. The proceeds of the sale or other disposition shall be applied to the Obligations in such order as set forth in the Loan Agreement. Any remaining proceeds shall be paid over to the Pledgor or others as provided by law. 12. Disposition of Ownership Interests by the Administrative Agent. To the extent that the Ownership Interests are not registered under the various federal or state securities acts, the disposition thereof after the occurrence and during the continuance of an Event of Default may be restricted to one or more private (instead of public) sales in view of the lack of such registration; the Pledgor understands that, upon such disposition, the Administrative Agent, on behalf of the Secured Parties, may approach only a restricted number of potential purchasers and further understands that a sale under such circumstances may yield a lower price for the Ownership Interests than if the Ownership Interests were registered pursuant to federal and state securities legislation and sold on the open market. The Ownership Interests are not, as of the date of this Agreement, registered under the various federal and state securities laws. The Pledgor, therefore, agrees that: (a) if the Administrative Agent, on behalf of the Secured Parties, shall, pursuant to the terms of this Agreement, sell or cause the Ownership Interests or any portion thereof to be sold at a private sale, the Secured Parties shall have the right to rely upon the advice and opinion of any national brokerage or investment firm having recognized expertise and experience in connection with shares or obligations of companies or entities in the same or similar business as the issuing company or entity, which brokerage or investment firm shall have reviewed financial data and other information available to the Secured Parties pertaining to the Pledgor and its Subsidiaries (but shall not be obligated to seek such advice, -6- 189 and the failure to do so shall not be considered in determining the commercial reasonableness of the Administrative Agent's action) as to the best manner in which to expose the Ownership Interests for sale and as to the best price reasonably obtainable at the private sale thereof; and (b) such reliance shall be conclusive evidence that the Secured Parties have handled such disposition in a commercially reasonable manner. 13. Additional Rights of Secured Parties. In addition to its rights and privileges under this Agreement, the Administrative Agent, on behalf of the Secured Parties, shall have all the rights, powers and privileges of a secured party under the Uniform Commercial Code as in effect in the applicable jurisdiction, and such other rights or remedies which it may have at law or in equity. 14. Termination and Release. Upon the payment in full of the Obligations then due and payable and cancellation of the Commitments under the Loan Agreement, the Lien granted hereunder shall automatically terminate and the Administrative Agent shall promptly take any actions reasonably necessary to terminate and release permanently the security interest in the Ownership Interests granted to the Administrative Agent, on behalf of Secured Parties hereunder, and any financing statements filed in connection herewith, and to cause the Ownership Interests and any instrument of transfer previously delivered to the Administrative Agent to be delivered to the Pledgor, all at the cost and expense of the Pledgor. 15. Pledgor's Obligations Absolute. (a) The obligations of the Pledgor under this Agreement shall be direct and immediate and not be conditional or contingent upon the pursuit of any other remedies against the Pledgor, or any other Person, nor against other security or Liens available to any Secured Party or its or their respective successors, assigns or agents. The Pledgor waives any right to require that an action be brought against any other Person or to require that any Secured Party resort to any security or to any balance of any deposit account or credit on the books of any Lender in favor of any other Person or to require resort to rights or remedies hereunder prior to the exercise of any other rights or remedies of the Secured Parties in connection with the Loans. (b) The obligations of the Pledgor hereunder shall remain in full force and effect without regard to, and shall not be impaired by: (i) any bankruptcy, insolvency, reorganization, arrangements, readjustment, composition, liquidation or the like of the Pledgor or any of its Subsidiaries; (ii) any exercise or non-exercise or any waiver by the Secured Parties of any rights, remedy, power or privilege under or in respect of the Obligations, this Agreement, the Loan Agreement, or any other document executed in connection therewith, or any security for any of the Obligations (other than this Agreement); -7- 190 or (iii) any amendment to or modification of the Obligations, this Agreement, the Loan Agreement or any other document executed in connection therewith or any security for any of the Obligations (other than this Agreement), whether or not any Pledgor shall have notice or knowledge of any of the foregoing, but nothing contained herein shall be deemed to authorize the amendment of any such documents to which any Pledgor is a party without the Pledgor's written agreement. 16. Voting Rights. Upon the occurrence and during the continuance of an Event of Default, (a) the Administrative Agent may, upon ten (10) Business Days' prior written notice to the Pledgor of its intention to do so, exercise all voting rights and all other ownership or consensual rights of, or with respect to, the Ownership Interests, except in respect of Excluded Distributions to the extent the Manager performs management services, but under no circumstances is the Administrative Agent obligated to exercise such rights, and (b) the Pledgor hereby appoints the Administrative Agent, which appointment shall be effective on the tenth (10th) Business Day following the giving of notice by the Administrative Agent as provided in Section 17 hereof, as the Pledgor's true and lawful attorney-in-fact and IRREVOCABLE PROXY to vote the Ownership Interests in any manner the Administrative Agent deems advisable, consistent with the provisions of the Loan Agreement, for or against all matters submitted or which may be submitted to a vote of members; provided that, until such occurrence and during the continuance of an Event of Default and the giving of the aforesaid notice by the Administrative Agent, the Pledgor shall retain all voting rights to its Ownership Interests. 17. Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be given in the manner prescribed in Section 11.1 of the Loan Agreement. Notice of change of address for notice shall also be governed by that Section. Notices given to the Pledgor shall be addressed to the Pledgor in care of the Borrower at the Borrower's address in Section 11.1 of the Loan Agreement. Notices given to any Secured Party shall be addressed as provided in Section 11.1 of the Loan Agreement. 18. Security Ownership Interests Absolute. All rights of the Secured Parties and all security interests and all obligations of the Pledgor hereunder shall be absolute and unconditional irrespective of: (a) any lack of validity or enforceability of the Loan Agreement, the Notes, or any other documents executed and delivered in connection therewith; (b) any change in the time, manner or place of payment of, or any other term in respect of, all or any of the Obligations, or any other amendment or waiver of or consent to any departure from the Loan Agreement, the Notes, or any other document executed or delivered in connection therewith; (c) any increase in, addition to, exchange or release of, or non-perfection of any lien on or security interest in any other collateral or any release of, amendment of, waiver of, consent to or departure from any security document or guaranty, for all or any of the Obligations; or (d) the absence of any action on the part of the Secured Parties to obtain payment or performance of the Obligations from any other loan party. -8- 191 19. Binding Agreement. The provisions of this Agreement shall be construed and interpreted, and all rights and obligations of the parties hereto determined, in accordance with the internal laws of the State of New York. This Agreement, together with all documents referred to herein, constitutes the entire Agreement among the Pledgor and the Administrative Agent, on behalf of the Secured Parties, with respect to the subject matter hereof, and may not be modified except by a writing executed by the Administrative Agent and delivered by the Administrative Agent to the Pledgor, and no waiver of any provision of this Agreement, and no consent to any departure by any Pledgor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Administrative Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. This Agreement shall be binding upon the Pledgor and its respective successors and assigns, and shall inure to the benefit of the Administrative Agent and the Secured Parties and their respective successors and assigns. 20. Severability. Whenever possible each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited or invalid under such law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision of this Agreement. 21. Miscellaneous. No failure to exercise, and no delay in exercising, any right hereunder or under any of the other documents executed by any Pledgor in connection herewith, held by the Secured Parties, shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or future exercise thereof or the exercise of any other right. The rights and remedies of the Secured Parties provided herein and in the other documents executed in connection herewith are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law. The rights and remedies of the Secured Parties hereunder or under any other documents executed in connection herewith against any party thereto are not conditional or contingent on any attempt by the Secured Parties to exercise any of its or their rights under any other documents executed in connection herewith against such party or against any other Person. 22. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which, when taken together, shall constitute one and the same instrument, and each of the parties hereto may execute this Agreement by signing any such counterpart. 23. FCC Consent. Notwithstanding anything herein which may be construed to the contrary, no action shall be taken by any of the Secured Parties with respect to the Licenses (or any pledged Collateral relating to such Licenses) or any license of the FCC or the Ownership Interests, unless and until all requirements of Applicable Law, including, -9- 192 without limitation, any state law, or any required approval under the Federal Communications Act of 1934, and any applicable rules and regulations thereunder, requiring the consent to or approval of such action by the FCC or any governmental or other authority, have been satisfied. The Pledgor covenants that upon request of the Administrative Agent, after and during the continuance of an Event of Default, it will cause to be filed such applications and take such other action as may be requested by the Administrative Agent to obtain consent or approval of the FCC or any governmental or other authority which has granted any License to the Pledgor to any action contemplated by this Agreement and to give effect to the Security Interest of the Administrative Agent, including, without limitation, the execution of an application for consent by the FCC to an assignment or transfer involving a change in ownership or control pursuant to the provisions of the Federal Communications Act of 1934. To the extent permitted by Applicable Law, the Administrative Agent is hereby irrevocably appointed the true and lawful attorney-in-fact of the Pledgor, in its name and stead, to execute and file, upon the occurrence and during the continuance of an Event of Default after ten (10) Business Days' prior notice to the Pledgor, all necessary applications with the FCC and with any governmental or other authority. The power of attorney granted herein is coupled with an interest and shall be irrevocable for so long as any of the Obligations remain unpaid or unperformed or any of the Lenders have any obligation to make Advances under the Loan Agreement, respectively, regardless of whether the conditions precedent to the making of any such Advances have been or can be fulfilled. 24. Registration of Assignment. The registrar for the Ownership Interests shall be the Borrower (the "Registrar"). The registration records of each of the issuers of the Ownership Interests which are maintained by and in the possession of the Registrar (the "Registration Books") are the only records maintained to evidence the ownership and transfer of ownership or other interests, including security interests, in the Ownership interests. There is no registration of record or to the knowledge of the Pledgor, any claim with respect thereto, of any Lien on the Ownership Interests, other than the Lien set forth herein. The assignment granted in the Ownership Interests hereby has been duly entered in the Registration Books maintained for such purpose by the Registrar and the Registrar has delivered to the Administrative Agent its certificate of even date herewith to such effect. The Registrar shall not cause, suffer or permit to occur any transfer of record of the Ownership Interests or any interest therein except in accordance with the prior written consent of the Administrative Agent. Upon receipt of written notice by the Administrative Agent that an Event of Default has occurred and is continuing and that all or any part of the Ownership Interests or any interest therein have been sold, assigned or otherwise disposed of by the Secured Parties in accordance with the terms hereof, and identifying the interests so assigned, the Registrar shall forthwith cause the Ownership Interests to be re-registered as appropriate to duly reflect of record such transfers. The Registrar shall not resign or retire or permit its removal except upon circumstances where the successor registrar shall provide to the Administrative Agent its agreement to be bound by the terms and conditions herein. -10- 193 25. Further Assurances. The Pledgor agrees from time to time to execute and deliver any and all assignments or other forms or documents or further assurances and to take such other actions that the Administrative Agent may reasonably deem necessary or appropriate from time to time to assign the Notes or proceeds thereof to the Administrative Agent, for itself and for the benefit of the Lenders, or to preserve and maintain the security interest provided for hereby. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] -11- 194 IN WITNESS WHEREOF, the undersigned have hereunto set their hands, by and through their duly authorized signatories, as of the day and year first above written. PLEDGOR: BRESNAN COMMUNICATIONS GROUP LLC By BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP, its sole member By BCI (USA), LLC, its general partner By Bresnan Communications, Inc., its managing member By: ------------------------------------- Name: ------------------------------- Title: ------------------------------ ADMINISTRATIVE AGENT: TORONTO DOMINION (TEXAS), INC., as Administrative Agent for itself and on behalf of the Lenders By: ------------------------------------- Name: ------------------------------- Title: ------------------------------ 195 SCHEDULE 1 DESCRIPTION OF PLEDGOR'S OWNERSHIP INTERESTS Interests Pledged Percentage of Pledgor's Company Owned Ownership Interests Pledged ------------- --------------------------- Bresnan Telecommunications Company LLC 100% 196 RECEIPT AND CERTIFICATE OF REGISTRAR The undersigned hereby certifies, acknowledges and agrees as follows to and with TORONTO DOMINION (TEXAS), INC., as administrative agent (the "Administrative Agent") for the Lenders (as defined therein) parties to the Loan Agreement dated as of February 2, 1999 (as amended, modified or supplemented from time to time (the "Loan Agreement") by and among Bresnan Telecommunications Company LLC, such Lenders and the Administrative Agent: 1. Capitalized terms used and not defined herein shall have the meanings ascribed to such terms in the Loan Agreement. 2. The undersigned is the duly authorized and acting Registrar and as such has sole custody of and is solely responsible for the Registration Books for Bresnan Telecommunications Company LLC (the "Company"); 3. The Pledgor is the sole member of the Company and its interests in the Company (the "Pledged Interests") are reflected as such on the Registration Books. As of the date hereof, Schedule 1 hereto sets forth the Pledged Interests being 100% of all member interests in the Company. 4. The undersigned, by execution of this Certificate, acknowledges receipt of irrevocable instructions and direction from the Pledgor contained in the Holdco Pledge Agreement and herein, acknowledged and agreed to by the Company (a) to register on the Registration Books for the Company, the Lien in favor of the Administrative Agent for the benefit of the Secured Parties upon the Pledged Interests as an assignment and security interest therein (the "Registered Assignment") as provided in the Holdco Pledge Agreement and (b) to otherwise fully comply with the other provisions herein contained. The execution of this Certificate and the Holdco Pledge Agreement by the Pledgor and the Company shall constitute such irrevocable instructions and direction. 5. The Registered Assignment on the Pledged Interests has been duly registered of record on the Registration Books of the Company. There is no registration of record of, or to the knowledge of the Registrar any claim with respect to, any Lien or other interest or restriction of transfer on the Pledged Interests, other than the Registered Assignment. 6. The Registrar will not cause, suffer or permit to occur any transfer of record of (a) the Pledged Interests or any interest therein, or (b) any other interest in the Company the effect of which transfer would be to lessen the percentage interest in the Company of the Pledged Interests as specified in paragraph 3 above, except in accordance with the prior written consent or as provided below, at the direction of the Administrative Agent. 197 7. Upon receipt of written notice from the Administrative Agent that an Event of Default has occurred and that all or any part of the Pledged Interests or any interest therein has been sold, assigned or otherwise transferred by such holder pursuant to the Loan Documents, and identifying the Administrative Agent and the interest or interests assigned, the Registrar shall forthwith cause the Registration Books for the Company to be duly noted to reflect each of such transfers of record. 8. The Registrar shall not resign or retire or permit its removal except upon circumstances where the successor Registrar shall provide the Administrative Agent its written irrevocable acknowledgement of each of the above undertakings. Upon the payment in full of the Obligations then due and the termination of the Commitments under the Loan Agreement, the Administrative Agent shall instruct the Registrar to remove the Registered Assignment from the register and take such other action as the Pledgor may reasonably request and at its expense. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] -2- 198 Done this the ___ day of February, 1999. REGISTRAR: BRESNAN TELECOMMUNICATIONS COMPANY LLC, as Registrar By BRESNAN COMMUNICATIONS GROUP LLC, its managing member By BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP, its managing member By BCI (USA), LLC, its general partner By Bresnan Communications, Inc., its managing member By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- Acknowledged and Agreed to this ____ day of February, 1999. BRESNAN COMMUNICATIONS GROUP LLC, its managing member By BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP, its managing member By BCI (USA), LLC, its general partner By Bresnan Communications, Inc., its managing member By: ---------------------------------------- Name: -------------------------------- Title: ------------------------------- -3- 199 EXHIBIT H FORM OF NOTICE OF INCREMENTAL FACILITY COMMITMENT BRESNAN TELECOMMUNICATIONS COMPANY LLC, a Delaware limited liability company (the "Borrower"), in connection with that certain Loan Agreement (the "Loan Agreement") dated as of February 2, 1999 (as amended, modified or supplemented from time to time, the "Loan Agreement") by and among the Borrower, the Lenders signatory thereto (collectively, together with any other financial institutions which hereafter become 'Lenders' under the Loan Agreement, the "Lenders") and Toronto Dominion (Texas), Inc., as administrative agent (the "Administrative Agent") for the Lenders, hereby certifies that: 1. The Borrower has obtained an agreement to provide an Incremental Facility Commitment in the aggregate amount of ______________________________________ AND ____/100 DOLLARS ($__________) from the Lenders set forth in Schedule 1 attached hereto in such amounts as set forth in Schedule 1 attached hereto. The terms for repayment of the Incremental Facility Commitment are set forth on Schedule 2 attached hereto. 2. All of the representations and warranties of the Borrower made under the Loan Agreement (including, without limitation, all representations and warranties with respect to the Borrower's Restricted Subsidiaries) are as of the date hereof, and will be as of the effective date of such Incremental Facility Commitment, true and correct in all material respects, except to the extent previously fulfilled, to the extent subsequently inapplicable or to the extent that such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date. 3. There does not exist, as of this date, and there will not exist after giving effect to the Incremental Facility Commitment, any Default under the Loan Agreement. 4. Attached hereto as Exhibit A are revised projections which demonstrate the Borrower's ability to timely repay any Incremental Facility Advances advanced under the Incremental Facility Commitment and to timely comply with the covenants contained in Sections 7.8, 7.9, 7.10, and 7.11 of the Loan Agreement. Capitalized terms used in this Notice of Incremental Facility Commitment and not otherwise defined herein are used as defined in the Loan Agreement. 200 IN WITNESS WHEREOF, the Borrower, acting through an Authorized Signatory, has signed this Notice of Incremental Facility Commitment as of the ___ day of ________, ____. BRESNAN TELECOMMUNICATIONS COMPANY LLC By BRESNAN COMMUNICATIONS GROUP LLC, its managing member By BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP, its managing member By BCI (USA), LLC, its general partner By Bresnan Communications, Inc., its managing member By: ------------------------------------- Title: ---------------------------- 201 EXHIBIT I Existing Subordinated Debt [To Be Completed Prior to Execution] 202 EXHIBIT J FORM OF SUBSIDIARY GUARANTY THIS SUBSIDIARY GUARANTY (this "Guaranty") is issued as of this ____day of ____________, 1999 by _____________________, a _________________ (the "Guarantor") in favor of the Credit Parties (as defined below). W I T N E S S E T H: WHEREAS, pursuant to that certain Loan Agreement dated as of February 2, 1999 (as amended, modified, supplemented or restated from time to time, the "Loan Agreement") by and among Bresnan Telecommunications Company LLC, a Delaware limited liability company (the "Borrower"), the Lenders (as defined therein) and Toronto Dominion (Texas), Inc., as administrative agent (in such capacity, and together with any successor administrative agent thereunder, the "Administrative Agent" and collectively with the Lenders, the "Credit Parties"), the Lenders have agreed to make loans to the Borrower; and WHEREAS, the Guarantor is a Restricted Subsidiary of the Borrower; and WHEREAS, the Borrower and the Guarantor are mutually dependent on each other in the conduct of their respective businesses as an integrated operation; and WHEREAS, the Guarantor has determined that its execution, delivery and performance of this Guaranty directly benefit, and are within the corporate purposes and in the best interests of, the Guarantor; and WHEREAS, as set forth in the Loan Agreement, the Guarantor has agreed to execute this Guaranty (the "Guaranty") guaranteeing the payment and performance by the Borrower of the Obligations (as defined below) and covenants under the Notes, the Loan Agreement and the other documents and instruments executed by the Borrower (the Loan Agreement, the Notes and the other documents and instruments executed by the Borrower in connection therewith, as they may be amended, modified or extended from time to time being hereinafter referred to as the "Guaranteed Agreements"); NOW, THEREFORE, in consideration of the above premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Guarantor hereby guarantees to the Credit Parties the full and prompt payment of the Obligations (as defined in the Loan Agreement), including any interest thereon (including interest accruing after the commencement of any bankruptcy or insolvency proceeding by or against the Borrower, whether or not allowed in such proceeding), plus reasonable, actual attorneys' fees and expenses if the obligations represented by this Guaranty are collected by law, through an attorney-at-law, or under advice therefrom. 203 The Guarantor and Credit Parties, hereby further agree that: 1. Definitions. All capitalized terms used herein without definition shall have the meanings ascribed thereto in the Loan Agreement. 2. Guaranty Absolute. Regardless of whether any proposed guarantor or any other Person or Persons is or are or shall become in any other way responsible to the Credit Parties, or any of them, for or in respect of the Obligations or any part thereof, and regardless of whether or not any Person or Persons now or hereafter responsible to the Credit Parties, or any of them, for the Obligations or any part thereof, whether under this Guaranty or otherwise, shall cease to be so liable, the Guarantor hereby declares and agrees that this Guaranty shall be a continuing guaranty and shall be operative and binding until the earlier of such time as (a) the Obligations shall have been paid or performed in full and none of the Lenders shall be under any further obligation to make any additional Advances to the Borrower under the Loan Agreement, or (b) the Guarantor shall have satisfied all of its obligations under this Guaranty. 3. Integration. Upon this Guaranty's being executed and coming into the hands of the Administrative Agent, this Guaranty shall be deemed to be finally executed and delivered by the Guarantor and shall not be subject to or affected by any prior or concurrent promise or condition affecting or limiting the Guarantor's liability, and no statement, representation, agreement or promise heretofore made on the part of the Credit Parties, the Borrower, or any of them, or any officer, employee or agent thereof unless contained herein forms any part of this Guaranty or has induced the making thereof or shall be deemed in any way to affect the Guarantor's liability hereunder. 4. Amendment and Waiver. No alteration or waiver of this Guaranty or of any of its terms, provisions or conditions shall be binding upon the parties against whom enforcement is sought unless made in writing and signed by an authorized officer of such party. 5. Dealings With Borrower, Etc. The Credit Parties, or any of them, may from time to time, without exonerating or releasing the Guarantor in any way under this Guaranty, (a) take such further or other security or securities for the Obligations or any part thereof as the Credit Parties may deem proper, or (b) release, discharge, abandon or otherwise deal with or fail to deal with any other guarantor of the Obligations or any security or securities therefor or any part thereof now or hereafter held by the Credit Parties, or any of them, or (c) amend, modify, extend, accelerate or waive in any manner any of the provisions, terms, or conditions of the Guaranteed Agreements, all as the Credit Parties may consider expedient or appropriate in their sole discretion. Without limiting the generality of the foregoing, or of Paragraph 6 hereof, it is understood that the Credit Parties, or any of them, may, without -2- 204 exonerating or releasing the Guarantor, give up, or modify or abstain from perfecting or taking advantage of any security for the Obligations and accept or make any compositions or arrangements, and realize upon any security for the Obligations when, and in such manner, and with or without notice, all as the Credit Parties may deem expedient. Without limiting the generality of the foregoing, or of Paragraph 6 hereof, it is understood that the Credit Parties, or any of them, may, without exonerating or releasing the Guarantor, give up, or modify or abstain from perfecting or taking advantage of any security for the Obligations and accept or make any compositions or arrangements, and realize upon any security for the Obligations when, and in such manner, as the Credit Parties, or any of them, may deem expedient, consistent with the Loan Agreement, all without notice to the Guarantor, except as required by Applicable Law. 6. Guaranty Unconditional. The Guarantor acknowledges and agrees that no change in the nature or terms of the Obligations or any of the Guaranteed Agreements, or other agreements, instruments or contracts evidencing, related to or attendant with the Obligations (including any novation), shall discharge all or any part of the liabilities and obligations of the Guarantor pursuant to this Guaranty; it being the purpose and intent of the Guarantor and the Credit Parties that the covenants, agreements and all liabilities and obligations of the Guarantor hereunder are absolute, unconditional and irrevocable under any and all circumstances. Without limiting the generality of the foregoing, the Guarantor agrees that until each and every one of the covenants and agreements of this Guaranty is fully performed, the Guarantor's undertakings hereunder shall not be released, in whole or in part, by any action or thing which might, but for this paragraph of this Guaranty, be deemed a legal or equitable discharge of a surety or guarantor, or by reason of any waiver, omission of the Credit Parties, or any of them, or their failure to proceed promptly or otherwise, or by reason of any action taken or omitted by the Credit Parties, or any of them, whether or not such action or failure to act varies or increases the risk of, or affects the rights or remedies of, the Guarantor or by reason of any further dealings between the Borrower on the one hand and the Credit Parties, or any of them, on the other hand or any other guarantor or surety, and the Guarantor hereby expressly waives and surrenders any defense to its liability hereunder based upon, and shall be deemed to have consented to, any of the foregoing acts, omissions, things, agreements or waivers. 7. Setoff. The Credit Parties may, without demand or notice of any kind upon or to the Guarantor, at any time or from time to time when any amount shall be due and payable hereunder by the Guarantor, if the Borrower shall not have timely paid any of the Obligations after the lapse of any applicable cure period, appropriate and apply to any portion of the Obligations hereby guaranteed, and in such order of application as the Credit Parties may from time to time elect, any property, balances, credit accounts or moneys of the Guarantor in the possession of the Credit Parties, or any of them, or under any of their control for any purpose. -3- 205 8. Loans In Excess of Maximum Guaranteed Amount. The creation or existence from time to time of Obligations in excess of the amount committed to or outstanding on the date of this Guaranty is hereby authorized, without notice to the Guarantor, and shall in no way impair or affect this Guaranty or the rights of the Credit Parties herein. The Guarantor agrees that the obligations guaranteed hereunder may at any time and from time to time exceed the Maximum Guaranteed Amount of the Guarantor, without impairing its liability under this Guaranty or affecting the rights and remedies of the Credit Parties hereunder. Anything in this Guaranty to the contrary notwithstanding, it is the intention of the Guarantor and the Credit Parties, that the Guarantor's obligations hereunder shall be, but not in excess of, the Maximum Guaranteed Amount. The "Maximum Guaranteed Amount" shall mean the greater of (a) the amount of economic benefit received (directly or indirectly) by the Guarantor pursuant to the Loan Agreement, and (b) the maximum amount which could be paid out by the Guarantor without rendering this Guaranty void or voidable under Applicable Law including, without limitation, (i) Title 11 of the United States Code, as amended, and (ii) applicable state law regarding fraudulent conveyances. 9. Bankruptcy of Borrower. Upon the bankruptcy or winding up or other distribution of assets of the Borrower or of any surety or guarantor other than the Guarantor for any Obligations of the Borrower to the Credit Parties, the Credit Parties' rights against the Guarantor shall not be affected or impaired by any Credit Party's omission to prove its or their claim, as appropriate, or to prove its or their full claim, as appropriate, and the Credit Parties may prove such claims as they see fit and may refrain from proving any claim and in their respective discretion they may value as they see fit or refrain from valuing any security held by the Credit Parties, or any of them, without in any way releasing, reducing or otherwise affecting the liability to the Credit Parties of the Guarantor. 10. Application of Payments. Any amount received by the Credit Parties, or any of them, from whatsoever source and applied toward the payment of the Obligations shall be applied in such order of application as is set forth in the Loan Agreement. 11. Waivers of Guarantor. The Guarantor hereby expressly waives: (a) notice of acceptance of this Guaranty, (b) notice of the existence or creation of all or any of the Obligations, (c) presentment, demand, notice of dishonor, protest and all other notices whatsoever, (d) all diligence in collection or protection of or realization upon the Obligations or any part thereof, any obligation hereunder, or any security for any of the foregoing and (e) all rights of subrogation, indemnification, contribution and reimbursement from the Borrower, all rights to enforce any remedy which the Credit Parties, or any of them, may have against the Borrower and any benefit of, or right to participate in, any collateral or security now or hereinafter held by any of the Credit Parties in respect of the Obligations, even upon payment in full of the Obligations, except to the extent such waiver would be expressly prohibited by Applicable Law. Any money received by the Guarantor in violation of this Section shall be held in trust by the Guarantor for the benefit of the Credit Parties. If a -4- 206 claim is ever made upon any of the Credit Parties for the repayment or recovery of any amount or amounts received by such Person in payment of any of the Obligations and such Person repays all or part of such amount by reason of (A) any judgment, decree or order of any court or administrative body having jurisdiction over such Person or any of its property or (B) any settlement or compromise of any such claim effected by such Person with any such claimant, including the Borrower, then in such event the Guarantor agrees that any such judgment, decree, order, settlement or compromise shall be binding upon the Guarantor, notwithstanding any revocation hereof or the cancellation of any promissory note or other instrument evidencing any of the Obligations, and the Guarantor shall be and remain obligated to such Person hereunder for the amount so repaid or recovered to the same extent as if such amount had never originally been received by such Person. 12. Assignment of Obligations. The Credit Parties may each, to the extent permitted under the Loan Agreement, and without notice of any kind, sell, assign or transfer all or any part of the Obligations, and in such event each and every immediate and successive assignee, transferee, or holder of all or any of the Obligations, shall have the right to enforce this Guaranty, by suit or otherwise, for the benefit of such assignee, transferee or holder as fully as if such assignee, transferee or holder were herein by name specifically given such rights, powers and benefits, but the Credit Parties shall have an unimpaired right, prior and superior to that of any such assignee, transferee or holder, to enforce this Guaranty for the benefit of the Credit Parties, as to so much of the Obligations as the Credit Parties have not sold, assigned or transferred. 13. Remedies Cumulative. No delay by the Credit Parties, or any of them, in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by the Credit Parties, or any of them, of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy. No action by the Credit Parties, or any of them, permitted hereunder shall in any way impair or affect this Guaranty. For the purpose of this Guaranty, the Obligations shall include, without limitation, all Obligations of the Borrower, to the Credit Parties, notwithstanding any right or power of any third party, individually or in the name of the Borrower, the Credit Parties, or any of them, to assert any claim or defense as to the invalidity or unenforceability of any such Obligations, and no such claim or defense shall impair or affect the obligations of the Guarantor hereunder. 14. Successors and Assigns. This Guaranty shall be binding upon the Guarantor, its successors and assigns and inure to the benefit of the successors and assigns of the Credit Parties. The Guarantor shall not assign its rights or obligations under this Guaranty without the prior written consent of the Credit Parties. 15. Guaranty of Payment; Notices. This is a guaranty of payment not of collection. In the event the Credit Parties, or any of them, make a demand upon the -5- 207 Guarantor under this Guaranty, whether or not made through the Administrative Agent, such Guarantor shall be held and bound to the Credit Parties directly as debtor in respect of the payment of the amounts hereby guaranteed. All costs and expenses, including reasonable attorneys' fees and expenses, incurred by the Credit Parties, or any of them, in obtaining performance of or collecting payments due under this Guaranty to the extent permitted by the Loan Agreement, shall be deemed part of the Obligations guaranteed hereby. Any notice or demand which the Credit Parties, or any of them, may wish to give shall be served upon the Guarantor in the fashion prescribed for notices in Section 11.1 of the Loan Agreement in care of the Borrower, and the notice so sent shall be deemed to be served as set forth in Section 11.1 of the Loan Agreement. 16. Loans Benefit Guarantor. The Guarantor expressly represents and acknowledges that any financial accommodations by the Credit Parties, or any of them, to the Borrower, including without limitation the extension of the Loans, are and will be of direct interest, benefit and advantage to the Guarantor. 17. Inspections; Records. The Guarantor covenants and agrees that so long as any amount is owing on account of the Loans, the Notes, or otherwise pursuant to this Guaranty, the Guarantor shall permit representatives of the Credit Parties to visit and inspect properties of the Guarantor during reasonable hours, inspect the Guarantor's books and records and discuss with the principal officers of the Guarantor its businesses, assets, liabilities, financial positions, results of operations and business prospects. 18. Solvency. The Guarantor expressly represents and warrants that as of the date hereof and after giving effect to the transactions contemplated by the Loan Agreement (a) the property of the Guarantor, at a fair valuation, will exceed its debt; (b) the capital of the Guarantor will not be unreasonably small to conduct its business; (c) the Guarantor will not have incurred debts, or have intended to incur debts, beyond its ability to pay such debts as they mature; and (d) the present fair salable value of the assets of the Guarantor will be materially greater than the amount that will be required to pay its probable liabilities (including debts) as they become absolute and matured. For purposes of this Section 18, "debt" means any liability on a claim, and "claim" means (A) the right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, undisputed, legal, equitable, secured or unsecured, or (B) the right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, undisputed, secured or unsecured. 19. Jurisdiction and Venue. If any action or proceeding shall be brought by the Administrative Agent in order to enforce any right or remedy under this Guaranty, the Guarantor hereby consents to the jurisdiction of any state or federal court of competent jurisdiction sitting within the area comprising the Southern District of New York on the date -6- 208 of this Guaranty. The Guarantor hereby agrees, to the extent permitted by Applicable Law that service of the summons and complaint and all other process which may be served in any such suit, action or proceeding may be effected by mailing by registered mail a copy of such process to the offices of the Borrower, as set forth in or otherwise provided pursuant to Section 11.1 of the Loan Agreement, and that personal service of process shall not be required. Nothing herein shall be construed to prohibit service of process by any other method permitted by law, or the bringing of any suit, action or proceeding in any other jurisdiction. The Guarantor agrees that final judgment in such suit, action or proceeding shall be conclusive and may be enforced in any other jurisdiction by suit on the judgment or in any other manner provided by Applicable Law. 20. Waiver of Jury Trial. The Guarantor waives any right to a trial by jury in any proceeding arising out of this Guaranty. 21. Time of the Essence. Time is of the essence with regard to the Guarantor's performance of its obligations hereunder. 22. Ratifications. The Guarantor hereby ratifies and affirms each representation, warranty, covenant and other agreement made on its behalf by the Borrower in the Loan Agreement. 23. Governing Law. This Guaranty shall be construed in accordance with the laws of the State of New York. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] -7- 209 IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed as of the date first above written. GUARANTOR: BRESNAN TELEPHONE OF MICHIGAN, L.L.C. By BRESNAN TELECOMMUNICATIONS COMPANY LLC, its managing member By BRESNAN COMMUNICATIONS GROUP LLC, its managing member By BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP, its managing member By BCI (USA), LLC, its general partner By Bresnan Communications, Inc., its managing member By: ----------------------------------------- Title: -------------------------------- 210 EXHIBIT K FORM OF BORROWER'S LOAN CERTIFICATE BRESNAN TELECOMMUNICATIONS COMPANY LLC I, __________________, do hereby certify that I am the duly elected and qualified _______________ of Bresnan Communications, Inc., a New York corporation. In connection with that certain Loan Agreement of even date herewith (the "Loan Agreement") among the Borrower, the Lenders signatories thereto (collectively, the "Lenders") and Toronto Dominion (Texas), Inc. as administrative agent (the "Administrative Agent") for the Lenders, I hereby certify, on behalf of the Borrower, that: (1) Attached hereto as Exhibit A is a true, complete and correct copy of the Certificate of Formation of the Borrower, together with all amendments thereto, certified by the Secretary of State for the State of Delaware as of recent date, which is in full force and effect on the date hereof. (2) Attached hereto as Exhibit B is a true, complete and correct copy of the Operating Agreement of the Borrower, together with all amendments thereto, which is in full force and effect on the date hereof. (3) Attached hereto as Exhibit C is a true, complete and correct copy of the corporate resolutions of the Manager (the "Resolutions") and a true, complete and correct copy of the consent of the members of the Borrower. The Resolutions remain in full force and effect and without modification in any respect. (4) Attached hereto as Exhibit D is a true, complete and correct copy of the Articles of Incorporation of the Manager, as amended, certified by the Secretary of State of the State of New York as of recent date, which are in full force and effect on the date hereof. (5) Attached hereto as Exhibit E is a true, complete and correct copy of the By-laws of the Manager, together with all amendments thereto, which are in full force and effect on the date hereof. (6) Attached hereto as Exhibit F are true, complete and correct copy of a certificate of good standing for the Borrower from the Secretary of State for the State of Delaware, and a true and correct copy of a certificate of good standing for the Manager from the Secretary of State for the State of New York, and for each other jurisdiction in which the Borrower and BCI are qualified to do business. To my knowledge, the Borrower and the Manager have, from the dates of such certificates, remained in good standing under the laws of such states. 211 (7) Attached hereto as Exhibit G is a copy of the Partnership Agreement as presently in effect. (8) Attached hereto as Exhibit H is a true, complete and correct description of all litigation pending or, to the best of my knowledge, threatened against the Borrower. (9) The following persons are hereby designated by the Borrower as Authorized Signatories of the Borrower, and set forth opposite their respective names below are their genuine signatures:
Name Title Signature - ------------------------------------ ----------------------------- ---------- - ------------------------------------ ----------------------------- ---------- - ------------------------------------ ----------------------------- ---------- - ------------------------------------ ----------------------------- ----------
Capitalized terms used herein and not otherwise defined are used as defined in the Loan Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] - 2 - 212 IN WITNESS WHEREOF, I have signed this Certificate this ____ day of February, 1999. BRESNAN COMMUNICATIONS GROUP LLC By BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP, its sole member By BCI (USA), LLC, its general partner By Bresnan Communications, Inc., its managing member By: ____________________________________ Name:__________________________ Title:_________________________ - 3 - 213 EXHIBIT L FORM OF HOLDCO LOAN CERTIFICATE BRESNAN COMMUNICATIONS GROUP LLC I, __________________, do hereby certify that I am the duly elected and qualified _______________ of BRESNAN COMMUNICATIONS, INC., a New York corporation. In connection with that certain Loan Agreement of even date herewith (the "Loan Agreement") among Bresnan Telecommunications Company LLC, a Delaware limited liability company and wholly-owned subsidiary of Holdco, the Lenders signatories thereto (collectively, the "Lenders"), and Toronto Dominion (Texas), Inc. as administrative agent for the Lenders (the "Administrative Agent"), I hereby certify that: (1) Attached hereto as Exhibit A is a true, complete and correct copy of the Certificate of Formation of Holdco, together with all amendments thereto, certified by the Secretary of State for the State of Delaware as of a recent date, which is in full force and effect on the date hereof. (2) Attached hereto as Exhibit B is a true, complete and correct copy of the Operating Agreement of Holdco, together with all amendments thereto, which is in full force and effect on the date hereof. (3) Attached hereto as Exhibit C are true, complete and correct copy of a certificate of good standing for Holdco from the Secretary of State for the State of Delaware and for each other jurisdiction in which Holdco qualified to do business. To my knowledge, Holdco has, from the dates of such certificates, remained in good standing under the laws of such states. (4) The following persons are hereby designated by Holdco as the Authorized Signatories, each of such persons having been duly elected, and set forth opposite their respective names below are their respective genuine signatures:
Name Title Signature - ------------------------------------- ---------------------------- --------- - ------------------------------------- ---------------------------- --------- - ------------------------------------- ---------------------------- --------- - ------------------------------------- ---------------------------- ---------
214 (5) To the best of the undersigned's knowledge and after due inquiry, no suit or proceeding for the dissolution or liquidation of Holdco has been instituted or is now threatened. Capitalized terms used herein and not otherwise defined are used as defined in the Loan Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] - 2 - 215 IN WITNESS WHEREOF, I have signed this Certificate and this ____ day of February, 1999. BRESNAN COMMUNICATIONS GROUP LLC By BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP, its sole member By BCI (USA), LLC, its general partner By Bresnan Communications, Inc., its managing member By:_____________________________________ Name:__________________________ Title:_________________________ - 3 - 216 EXHIBIT O FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT This Assignment and Assumption Agreement (this "Agreement") is made and entered into as of February, 1999, by and among ______________ (the "Assignor"), _________________ (the "Assignee") and Bresnan Telecommunications Company LLC, a Delaware limited liability company (the "Borrower"). Recitals A. The Borrower, the Assignor and certain other lenders (the "Lenders") and Toronto Dominion (Texas), Inc., as administrative agent (the "Administrative Agent") are all parties to that certain Loan Agreement dated as of February 2, 1999 (as amended, modified or supplemented from time to time, the "Loan Agreement"). Pursuant to the Loan Agreement, the Lenders have agreed to extend credit to the Borrower under the Commitments, of which the Assignor's portions of the Commitments are the amounts specified in Item 1 of Schedule 1 hereto (the "Assignor's Commitment"). The principal amount of outstanding Loans made by the Assignor to the Borrower pursuant to the Assignor's Commitments are specified in Item 2 of Schedule 1 hereto (the "Assignor's Loans"). All capitalized terms not otherwise defined herein are used herein as defined in the Loan Agreement. B. The Assignor wishes to sell and assign to the Assignee, and the Assignee wishes to purchase and assume from the Assignor, (i) the portions of the Assignor's Commitments specified in Item 3 of Schedule 1 hereto which are equivalent to the percentages of the Assignor's Commitments specified in Item 4 of Schedule 1 (the "Assigned Commitments"), and (ii) the portions of the Assignor's Loans under the Commitments specified in Item 5 of Schedule 1 hereto (the "Assigned Loans"). The parties agree as follows: 1. Assignment. Subject to the terms and conditions set forth herein, the Assignor hereby sells and assigns to the Assignee, and the Assignee purchases and assumes from the Assignor, without recourse to the Assignor, on the date set forth above (the "Assignment Date") (a) all right, title, and interest of the Assignor to the Assigned Loans and (b) all obligations of the Assignor under the Loan Agreement with respect to the Assigned Commitments and Assigned Loans. As full consideration for the sale of the Assigned Loans and the Assigned Commitments, the Assignee shall pay to the Assignor on the Assignment Date such amount as shall have been agreed to between the Assignor and the Assignee (the "Purchase Price"). 217 2. Consents and Undertaking. The Administrative Agent and the Borrower hereby consent to the assignments made herein (to the extent such consents are required), and the Borrower shall undertake within ten (10) Business Days from written notice of the Assignment Date to provide new Notes to the Administrative Agent, for the benefit of the Assignee and the Assignor, as appropriate to reflect the portions of the Commitments held by each of the Assignee and the Assignor after giving effect to the assignment contemplated by this Agreement. The Assignor agrees on the Business Day following receipt of notice from the Administrative Agent of its receipt of the new Notes, to return its superseded Notes to the Administrative Agent, which shall thereupon transmit the new Notes to the Assignor and the Assignee and the superseded Notes to the Borrower for cancellation. 3. Representations and Warranties. (a) Each of the Assignor and the Assignee represents and warrants to the other, to the Administrative Agent and to the Borrower that (i) it has full power and legal right to execute and deliver this Agreement and to perform the provisions of this Agreement; (ii) the execution, delivery, and performance of this Agreement have been duly authorized by all necessary action, corporate or otherwise, on its part and do not violate any provisions of its charter or by-laws or any contractual obligations or requirement of law binding on it; and (iii) this Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. Assignee represents that its purchase of the Assigned Loan and the Assigned Commitment does not constitute a "prohibited transaction" as defined in Section 4.1(m) of the Loan Agreement. The Assignor represents that it is the legal and beneficial owner of the interest being assigned, and that such interest is free and clear of any adverse claim. (b) The Assignee agrees that it will (i) be bound by the provisions of the Loan Agreement and the other Loan Documents and will perform in accordance with its terms all the obligations which by the terms of the Loan Agreement or other Loan Documents are required to be performed by it as Lender and (ii) makes the representations set forth in Section 11.18 of the Loan Agreement for the benefit of the Assignor, Holdco and the Borrower. 4. Conditions Precedent. The obligations of the Assignor and the Assignee hereunder shall be subject to the fulfillment of the conditions that (a) the Assignor shall have received payment in full of the Purchase Price and (b) the Assignor and the Assignee shall have complied with other applicable provisions of Section 11.6(b) of the Loan Agreement. 5. Notice of Assignment. The Assignor hereby gives notice of the assignment and assumption of the Assigned Loans and the Assigned Commitments to the Administrative Agent and hereby instructs the Borrower to make payments with respect to the Assigned Loans and the Assigned Commitments directly to the Administrative Agent for the benefit of the Assignee as provided in the Loan Agreement; provided, however, that the Borrower and the Administrative Agent shall be entitled to continue to deal solely and directly with the - 2 - 218 Assignor in connection with the interests so assigned until (a) the Administrative Agent shall have received a copy of this Agreement duly executed by the Assignor, the Assignee, and the Borrower, and shall have received from the Assignor or Assignee, the assignment fee described in Section 11.6(b)(1)(F) of the Loan Agreement if such fee is required, and (b) the Assignor shall have delivered to the Administrative Agent any Note that shall be subject to such assignment. From and after the date (the "Effective Date") on which the Administrative Agent shall notify the Borrower, the Assignee and the Assignor that (a) and (b) have occurred and all consents (if any) required have been given, the Assignee shall be deemed to be a party to the Loan Agreement and, to the extent that rights and obligations thereunder shall have been assigned to Assignee as provided herein, shall have the rights and obligations of a Lender under the Loan Agreement and the Assignor shall relinquish its rights under the Loan Agreement to such extent. After the Effective Date, and with respect to all such amounts accrued from the Assignment Date, (A) all interest, principal, fees, and other amounts that would otherwise be payable to the Assignor in respect of the Assigned Loans and the Assigned Commitments shall be paid to the Assignee, (B) if the Assignor receives any payment on account of the Assigned Loans or the Assigned Commitments that is payable to the Assignee, the Assignor shall promptly deliver such payment to the Assignee, and (C) if the Assignee receives any payment in respect of Obligations of the Borrower accrued prior to the Effective Date, then Assignee shall pay over the same to Assignor. The Assignee agrees to deliver to the Borrower and the Administrative Agent on or before the Effective Date such Internal Revenue Service forms as may be required to establish that the Assignee is entitled to receive payments under the Loan Agreement without deduction or withholding of tax. 6. Independent Investigation. The Assignee acknowledges that it is purchasing the Assigned Loans and the Assigned Commitments from the Assignor without recourse and, except as provided in Section 3(a) and Section 4 hereof, without representation or warranty. The Assignee further acknowledges that it has made its own independent investigation and credit evaluation of the Borrower in connection with its purchase of the Assigned Loans and the Assigned Commitments and has received copies of all Loan Documents and financial statements and other information that it has requested. Except for the representations or warranties set forth in Section 3(a) and Section 4, the Assignee acknowledges that it is not relying on any representation or warranty of the Assignor, expressed or implied, including without limitation, any representation or warranty relating to the legality, validity, genuineness, enforceability, collectibility, interest rate, repayment schedule, or accrual status of the Assigned Loans or the Assigned Commitments, the legality, validity, genuineness, or enforceability of the Loan Agreement, the Notes, or any other Loan Document referred to in or delivered pursuant to the Loan Agreement, or the financial condition or creditworthiness of the Borrower. The Assignor has not acted and will not be acting as either the representative, agent or trustee of the Assignee with respect to matters arising out of or relating to the Loan Agreement or this Agreement. From and after the Effective Date, the Assignor shall have no rights or obligations with respect to the Assigned Loans or the Assigned Commitments. - 3 - 219 7. Method of Payment. All payments to be made by the Assignor or the Assignee party hereunder shall be in funds available at the place of payment on the same day and shall be made by wire transfer to the account designated by the party to receive payment. 8. Appointment and Authorization. The Assignee hereby irrevocably appoints and authorizes, and hereby agrees that it will require any transferee of any of its interest in its Loans and in its Notes irrevocably to appoint and authorize, the Administrative Agent to take such actions as its agent on its behalf and to exercise such powers under the Loan Documents as are delegated by the terms thereof, together with such powers as are reasonably incidental thereto. 9. Integration. This Agreement shall supersede any prior agreement or understanding between the parties (other than the Loan Agreement or other Loan Documents) as to the subject matter hereof. 10. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and shall be binding upon the parties, their successors and assigns. 11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN NEW YORK. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] - 4 - 220 IN WITNESS WHEREOF, the Assignor and Assignee have executed and delivered this Agreement as of the date first above written. [ASSIGNOR] By: _______________________________ Title: ___________________ [ASSIGNEE] By: _______________________________ Title: ___________________ Agreed and Accepted: BRESNAN TELECOMMUNICATIONS COMPANY LLC By BRESNAN COMMUNICATIONS GROUP LLC, its managing member By BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP, its managing member By BCI (USA), LLC, its general partner By Bresnan Communications, Inc., its managing member By: _______________________________ Title: ____________________________ - 5 - 221 Acknowledged: TORONTO DOMINION (TEXAS), INC., as Administrative Agent By: _______________________________ Title: ____________________________ - 6 - 222 SCHEDULE 1 TO ASSIGNMENT AND ASSUMPTION AGREEMENT Loan Agreement among Bresnan Telecommunications Company LLC, the Lenders parties thereto and Toronto Dominion (Texas), Inc., as Administrative Agent Dated as of February 2, 1999
Item 1. Assignor's Commitments: Facility A Term Loan Commitment $ ---------------------- Facility B Term Loan Commitment $ ---------------------- Revolving Loan Commitment $ ---------------------- Item 2. Assignor's Loans Outstanding: with respect to -- Facility A Term Loan (a) Prime Rate Advance $ ---------------------- (b) LIBOR Advance $ ---------------------- Facility B Term Loan (a) Prime Rate Advance $ ---------------------- (b) LIBOR Advance $ ---------------------- Revolving Loans (a) Prime Rate Advances $ ---------------------- (b) LIBOR Advances $ ---------------------- Item 3. Amount of Assigned Commitments: with respect to -- Facility A Term Loan Commitment $ ---------------------- Facility B Term Loan Commitment $ ---------------------- Revolving Loan Commitment $ ----------------------
223
Item 4. Percentage of Commitments Assigned: with respect to -- Facility A Term Loan Commitment ---------------------- % Facility B Term Loan Commitment ---------------------- % Revolving Loan Commitment ---------------------- % Item 5. Amount of Assigned Loans: with respect to -- Facility A Term Loan (a) Prime Rate Advance $ ---------------------- (b) LIBOR Advance $ ---------------------- Facility B Term Loan (a) Prime Rate Advance $ ---------------------- (b) LIBOR Advance $ ---------------------- Revolving Loans (a) Prime Rate Advances $ ---------------------- (b) LIBOR Advances $ ---------------------- Item 6. Lending Office of Assignee and Address for Notices under Loan Agreement ---------------------- ---------------------- ---------------------- ----------------------
- 2 - 224 Notes to Schedule 1 1. Insert the dollar amount of Assignor's portions of the Commitments prior to assignment. 2. Insert the total amount of outstanding Loans of Assignor, showing a breakdown by type. Description of the type of Loans should conform to the description in the Loan Agreement. 3. Insert the dollar amounts of the Assignor's Commitments, including outstanding Loans, being assigned. 4. Assigned Commitments as of a percentage of total Commitments of all Lenders. 5. Insert the total amounts of outstanding Loans of Assignor being assigned to Assignee. Description of the type of Loans should be consistent with Item 2. 6. Insert the name and address of the lending office of the Assignee. 225 EXHIBIT P FORM OF BCC LP GUARANTY THIS GUARANTY (the "Guaranty") is made as of the ____ day of February, 1999, by BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP, a Michigan Limited Partnership (the "Guarantor"), in favor of the Guarantied Parties (as defined below). W I T N E S S E T H: WHEREAS, Bresnan Telecommunications Company LLC (the "Borrower"), the financial institutions defined as "Lenders" therein, and Toronto Dominion (Texas), Inc., as administrative agent thereunder (the "Administrative Agent") are all parties to that certain Loan Agreement dated as of even date herewith (as amended, restated or otherwise modified from time to time, the " Loan Agreement"); and WHEREAS, pursuant to the terms of the Loan Agreement, the Guarantor is required to execute and deliver this Guaranty; and WHEREAS, the Borrower is an indirect wholly-owned Subsidiary of the Guarantor; and WHEREAS, the Guarantor is dependent, in part, on the Borrower in the conduct of its business as an integrated operation with the Borrower, and Borrower's ability to obtain financing needed from time to time is dependent, in part, on the ability of the Guarantor to supply capital or obtain financing, including, without limitation this Guaranty; and WHEREAS, the Guarantor has determined that the Borrower's and the Lenders' performances of the Loan Agreement directly benefit the Guarantor, and to induce the Lenders to enter into the Loan Agreement, the Guarantor has further determined that its execution, delivery and performance of this Guaranty directly benefit, and are within the limited partnership purposes and in the best interests of, the Guarantor; and WHEREAS, as a condition to the extension of the Loans by the Lenders and the Administrative Agent (together, the "Guarantied Parties") and to induce the Lenders to enter into and perform the Loan Agreement, the Guarantor has agreed to execute this Guaranty guaranteeing the payment and performance by the Borrower of its obligations and covenants under the Loan Agreement, the Notes and the other Loan Documents (the Loan Agreement, the Notes and the other Loan Documents, as executed on the date hereof and as they may be amended, modified or extended from time to time being hereinafter referred to as the "Guaranteed Agreements"); and WHEREAS, capitalized terms used herein and not otherwise defined shall be used as defined in the Loan Agreement; 226 NOW, THEREFORE, in consideration of the above premises, Ten Dollars ($10.00) in hand paid and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged the Guarantor hereby unconditionally guarantees to the Guarantied Parties full and prompt payment and performance when due whether at maturity, by acceleration or otherwise of all Obligations under the Loan Agreement (the "Guarantied Obligations"). Each Guarantied Obligation shall rank pari passu with each other Guarantied Obligation. The Guarantor hereby further agrees, for the benefit of the Guarantied Parties, that: 1. Obligations Several. Regardless of whether any proposed guarantor or any other Person or Persons is, are or shall become in any other way responsible to the Guarantied Parties, or any of them, for or in respect of the Guarantied Obligations or any part thereof, and regardless of whether or not any Person or Persons now or hereafter responsible to the Guarantied Parties, or any of them, for the Guarantied Obligations or any part thereof, whether under this Guaranty or otherwise, shall cease to be so liable, the Guarantor hereby declares and agrees that this Guaranty is and shall continue to be a several obligation, shall be a continuing guaranty and shall be operative and binding, and that the Guarantor shall have no right of subrogation with respect to this Guaranty. 2. Guaranty Final. Upon the execution and delivery of this Guaranty to the Administrative Agent, this Guaranty shall be deemed to be finally executed and delivered by the Guarantor and shall not be subject to or affected by any promise or condition affecting or limiting the Guarantor's liability, and no statement, representation, agreement or promise on the part of the Guarantied Parties, the Borrower, or any of them, or any officer, employee or agent thereof, unless contained herein forms any part of this Guaranty or has induced the making hereof or shall be deemed in any way to affect the Guarantor's liability hereunder. 3. Amendment and Waiver. No alteration or waiver of this Guaranty or of any of its terms, provisions or conditions shall be binding upon the Persons against whom enforcement is sought unless made in writing and signed by an authorized officer of such Person. 4. Dealings with Borrower. The Guarantied Parties, or any of them, may, from time to time, without exonerating or releasing the Guarantor in any way under this Guaranty, (i) take such further or other security or securities for the Guarantied Obligations or any part thereof as the Guarantied Parties, or any of them, may deem proper, consistent with the Loan Agreement, or (ii) release, discharge, abandon or otherwise deal with or fail to deal with any guarantor of the Guarantied Obligations or any security or securities therefor or any part thereof now or hereafter held by the Guarantied Parties, or any of them, or (iii) consistent with the Loan Agreement, amend, modify, extend, accelerate or waive in any manner any of the provisions, terms, or conditions of the Guaranteed Agreements. Without limiting the generality of the foregoing, or of Section 5 hereof, it is understood that the Guarantied -2- 227 Parties, or any of them, may, without exonerating or releasing the Guarantor, give up, or modify or abstain from perfecting or taking advantage of any security for the Guarantied Obligations and accept or make any compositions or arrangements, and realize upon any security for the Guarantied Obligations when, and in such manner, as the Guarantied Parties, or any of them, may deem expedient, consistent with the Loan Agreement, all without notice to the Guarantor, except as required by Applicable Law. 5. Guaranty Unconditional. The Guarantor acknowledges and agrees that no change in the nature or terms of the Guarantied Obligations or any of the Guaranteed Agreements, or other agreements, instruments or contracts evidencing, related to or attendant with the Guarantied Obligations (including any novation), nor any determination of lack of enforceability thereof, shall discharge all or any part of the liabilities and obligations of the Guarantor pursuant to this Guaranty; it being the purpose and intent of the Guarantor and the Guarantied Parties that the covenants, agreements and all liabilities and obligations of the Guarantor hereunder are absolute, unconditional and irrevocable under any and all circumstances. 6. Set-off. The Guarantied Parties, or any of them, may, without demand or notice of any kind upon or to the Guarantor, at any time or from time to time when any amount shall be due and payable hereunder by the Guarantor, if the Borrower shall not have timely paid or cured its Guarantied Obligations, set off and appropriate any property, balances, credit accounts or moneys of the Guarantor (other than those held in a trust) in the possession of the Guarantied Parties, or any of them, or under the control of any of them for any purpose, which property, balances, credit accounts or moneys shall thereupon be turned over and remitted to the Administrative Agent, to be held and applied to the Guarantied Obligations by the Administrative Agent in accordance with the Loan Agreement, and the Guarantor hereby grants to the Guarantied Parties, a security interest in all such property. The Administrative Agent shall give written notice to the Borrower of the exercise of any of the foregoing rights within one (1) Business Day following the exercise thereof. 7. Bankruptcy. Upon the bankruptcy or winding up or other distribution of assets of the Borrower or any Restricted Subsidiary of the Borrower or of any surety or guarantor for the Guarantied Obligations, the rights of the Guarantied Parties, or any of them, against the Guarantor shall not be affected or impaired by the omission of the Guarantied Parties, or any of them, to prove its or their claim, as appropriate, or to prove its or their full claim, as appropriate, and the Guarantied Parties may prove such claims as they see fit and may refrain from proving any claim and in their respective discretion they may value as they see fit or refrain from valuing any security held by the Guarantied Parties, or any of them, without in any way releasing, reducing or otherwise affecting the liability to the Guarantied Parties of the Guarantor. 8. Application of Payments. Any amount received by the Guarantied Parties, or any of them, from whatsoever source and applied toward the payment of the Guarantied -3- 228 Obligations shall be applied in such order of application as is set forth in the Loan Agreement. 9. Waivers by Guarantor. The Guarantor hereby expressly waives, to the extent permitted by Applicable Law: (a) notice of acceptance of this Guaranty, (b) notice of the existence or creation of all or any of the Guarantied Obligations, (c) presentment, demand, notice of dishonor, protest, and all other notices whatsoever, (d) all diligence in collection or protection of or realization upon the Guarantied Obligations or any part thereof, any obligation hereunder, or any security for any of the foregoing and (e) all rights of subrogation, indemnification, contribution and reimbursement against the Borrower, all rights to enforce any remedy the Guarantied Parties, or any of them, may have against the Borrower and any benefit of, or right to participate in, any collateral or security now or hereinafter held by the Guarantied Parties, or any of them, in respect of the Guarantied Obligations, until payment in full of the Guarantied Obligations. Any money received by the Guarantor in violation of this Section 9 shall be held in trust by the Guarantor for the benefit of the Guarantied Parties. If a claim is ever made upon the Guarantied Parties, or any of them, for the repayment or recovery of any amount or amounts received by any of them in payment of any of the Guarantied Obligations and such Person repays all or part of such amount by reason of (a) any judgment, decree, or order of any court or administrative body having jurisdiction over such Person or any of its property, or (b) any good faith settlement or compromise of any such claim effected by such Person with any such claimant, including, without limitation, the Borrower, then in such event the Guarantor agrees that any such judgment, decree, order, settlement, or compromise shall be binding upon the Guarantor, notwithstanding any revocation hereof or the cancellation of any promissory note or other instrument evidencing any of the Guarantied Obligations, and the Guarantor shall be and remain obligated to such Person hereunder for the amount so repaid or recovered to the same extent as if such amount had never originally been received by such Person. 10. Assignment by the Guarantied Parties. To the extent permitted under the Loan Agreement, the Guarantied Parties may each, and without notice of any kind, except as otherwise required by the Loan Agreement, sell, assign or transfer all or any of the Guarantied Obligations, and in such event each and every immediate and successive assignee, transferee, or holder of all or any of the Guarantied Obligations, shall have the right to enforce this Guaranty, by suit or otherwise, for the benefit of such assignee, transferee or holder as fully as if such assignee, transferee or holder were herein by name specifically given such rights, powers and benefits. 11. Remedies Cumulative. No delay by the Guarantied Parties, or any of them, in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by the Guarantied Parties, or any of them, of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy. No action by the Guarantied Parties, or any of them, permitted hereunder shall in any way impair or affect this Guaranty. For the purpose of this Guaranty, the Guarantied Obligations shall include, without limitation, all Guarantied Obligations of the Borrower to the Guarantied Parties -4- 229 notwithstanding any right or power of any third party, individually or in the name of either Borrower or any other Person, to assert any claim or defense as to the invalidity or unenforceability of any such Obligation, and no such claim or defense shall impair or affect the obligations of the Guarantor hereunder. 12. Successors and Assigns. This Guaranty shall be binding upon the Guarantor, its successors and assigns and inure to the benefit of the successors and assigns of the Guarantor and the Guarantied Parties. The Guarantor shall not assign its rights or obligations under this Guaranty without the consent of all the Guarantied Parties, nor shall the Guarantor amend this Guaranty, without the consent of the Required Lenders. 13. Miscellaneous. This is a Guaranty of payment and not of collection. In the event of a demand upon the Guarantor under this Guaranty, the Guarantor shall be held and bound to the Guarantied Parties directly as debtor in respect of the payment of the amounts hereby guaranteed. All reasonable costs and expenses, including, without limitation, attorneys' fees and expenses, incurred by the Guarantied Parties, or any of them, in obtaining performance of or collecting payments due under this Guaranty shall be deemed part of the Guarantied Obligations guaranteed hereby. Any notice or demand which the Guarantied Parties, or any of them, may wish to give shall be served upon the Guarantor in the fashion prescribed for notices in Section 11.1 of the Loan Agreement in care of the Borrower at the address for the Borrower set forth in or otherwise provided pursuant to Section 11.1 of the Loan Agreement, and the notice so sent shall be deemed to be served as set forth in Section 11.1 of the Loan Agreement. 14. Loans Benefit Guarantor. The Guarantor expressly represents and acknowledges that any financial accommodations by the Guarantied Parties, or any of them, to the Borrower, including, without limitation the extension of the Loans, are and will be of direct interest, benefit and advantage to the Guarantor. 15. Governing Law. This Guaranty shall be construed in accordance with and governed by the internal laws of the State of New York applicable to contracts made and to be performed in the State of New York. 16. Jurisdiction and Venue. If any action or proceeding shall be brought by the Administrative Agent in order to enforce any right or remedy under this Guaranty, the Guarantor hereby consents to the jurisdiction of any state or federal court of competent jurisdiction sitting within the area comprising the Southern District of New York on the date of this Guaranty. The Guarantor hereby agrees, to the extent permitted by Applicable Law that service of the summons and complaint and all other process which may be served in any such suit, action or proceeding may be effected by mailing by registered mail a copy of such process to the offices of the Borrower, as set forth in or otherwise provided pursuant to Section 11.1 of the Loan Agreement, and that personal service of process shall not be required. Nothing herein shall be construed to prohibit service of process by any other method permitted by law, or the bringing of any suit, action or proceeding in any other -5- 230 jurisdiction. The Guarantor agrees that final judgment in such suit, action or proceeding shall be conclusive and may be enforced in any other jurisdiction by suit on the judgment or in any other manner provided by Applicable Law. 17. WAIVER OF JURY TRIAL. THE GUARANTOR WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY PROCEEDING ARISING OUT OF THIS GUARANTY. 18. Administrative Agent. Each reference herein to any right granted to, benefit conferred upon or power exercisable by the "Administrative Agent" shall be a reference to the Administrative Agent for the benefit of all the Guarantied Parties, and each action taken or right exercised hereunder shall be deemed to have been so taken or exercised by the Administrative Agent for the benefit of and on behalf of the Guarantied Parties. 19. Ratifications. The Guarantor hereby ratifies and affirms each representation, warranty, covenant and other agreement made on its behalf by the Borrower in the Loan Agreement. 20. Termination and Release. Upon the payment in full of the Obligations then due and payable and cancellation of the Commitments under the Loan Agreement, the Guaranty granted hereunder shall automatically terminate and the Administrative Agent shall promptly take any actions reasonably necessary to terminate and release permanently the Guaranty granted hereunder to the Guarantied Parties hereunder, and to cause any instrument of transfer previously delivered to the Administrative Agent to be delivered to the Guarantor, all at the cost and expense of the Guarantor. 21. Non-Recourse. The Administrative Agent and the Lenders acknowledge and agree that this Guaranty is an obligation of the Guarantor only and there is no recourse in respect of the Obligations to any limited partner of the Guarantor (or any of its officers, directors, managers, partners or members) provided that recourse to the general partner shall not be so limited, but shall be to the fullest extent provided by applicable law (but in no event to any of its officers, directors, managers, partners or members, except in the case the general partner is a partnership, any general partner of such partnership). [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] -6- 231 IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed by an Authorized Signatory as of the date first above written. GUARANTOR: BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP By BCI (USA), LLC, its general partner By BRESNAN COMMUNICATIONS, INCf., its managing member By: ------------------------------------- Title: ----------------------------- 232 EXHIBIT Q FORM OF MEMBER DEBT SUBORDINATION AGREEMENT THIS MEMBER DEBT SUBORDINATION AGREEMENT dated as of February ___, 1999 (as the same may be amended, supplemented or otherwise modified, this "Agreement") is made by and among ______________________ (the "Member"), BRESNAN TELECOMMUNICATIONS COMPANY LLC (the "Borrower") and TORONTO DOMINION (TEXAS), INC., as administrative agent (the "Administrative Agent") for the Lenders (as defined in the Loan Agreement defined below). RECITALS A. WHEREAS, the Borrower has entered into the Loan Agreement, pursuant to which the Lenders party thereto have agreed to extend credit on the terms and subject to the conditions set forth therein; and B. WHEREAS, the Borrower may hereafter from time to time become indebted or otherwise obligated to, the Member in respect of Indebtedness for money borrowed related to or resulting from any loan or advance from the Member, and all such Indebtedness for money borrowed owing to the Member now or hereafter existing (whether created directly or acquired by assignment or otherwise), and interest, premiums and fees, if any, thereon and other amounts payable in respect thereof, and all rights and remedies of the Member with respect thereto, are hereinafter referred to as the "Subordinated Debt"; NOW, THEREFORE, in consideration of the Recitals and in order to induce the Lenders to enter into and maintain the Obligations (as defined in the Loan Agreement) and extend credit, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: AGREEMENT SECTION 1. Definitions. Capitalized terms used herein without definition shall have the meanings ascribed thereto in the Loan Agreement. As used in this Agreement, the following terms shall have the meanings specified below: "Loan Agreement" means the Loan Agreement dated as of February 2, 1999 by and among the Borrower, the signatory Lenders thereto and the Administrative Agent, as the same may from time to time be amended, restated, modified, refunded, restructured, refinanced or expanded in whole or in part with the same or other Lenders. 233 "Senior Default" means an "Event of Default" or "Default" as defined in any of (i) the Loan Agreement, or (ii) the failure to pay when due any installment of principal, premium, if any, or interest on any note or other instrument issued thereunder. "Subordinated Debt" has the meaning set forth in Recital B hereto. SECTION 2. Agreement to Subordinate. (a) The Member and the Borrower each agree that the Subordinated Debt is and shall be subject, subordinate and rendered junior, to the extent and in the manner hereinafter set forth, in right of payment, to the prior payment in full of all Obligations now existing or hereafter arising. For the purposes of this Agreement, the Obligations shall not be deemed to have been paid in full until the Lenders shall have received full payment of the outstanding Obligations, which payment shall have been retained by the Lenders for a period of time in excess of all applicable preference or other similar periods under applicable bankruptcy, insolvency or creditors' rights laws. The Borrower and the Member waive notice of acceptance of this Agreement by the Lenders, and the Member waives notice of and consents to the making, amount and terms of the Obligations which may exist or be created from time to time and any renewal, extension, amendment or modification thereof and any other action which any Lender or Lenders in its and their sole and absolute discretion may take or omit to take with respect thereto. This Section 2 shall constitute a continuing offer to all Lenders; its provisions are made for the benefit of the Lenders, and such Lenders are made obligees hereunder and they or each of them may enforce such provisions. (b) In the event that the Borrower or any Restricted Subsidiary shall make, and/or the Member shall receive, any payment on Subordinated Debt in contravention of this Agreement then and in any such event such payment shall be deemed to be the property of, segregated, received and held in trust for the benefit of, and shall be immediately paid over and delivered, to the Administrative Agent. (c) The Borrower shall not make and shall not permit any Restricted Subsidiary to make, and the Member shall not receive or accept, any payment in respect of Subordinated Debt unless and until the Obligations have been indefeasibly paid in full, provided, however, that the Borrower may make, and the Member may accept and receive, such a payment if immediately prior to and after giving effect to such payment, (i) no Event of Default has occurred and is continuing or would result therefrom, (ii) the Total Leverage Ratio (before and after giving effect to such repayment) is less than or equal to 5.50 to 1.0 and (iii) such Subordinated Debt has been outstanding for not less than two consecutive calendar quarters. -2- 234 SECTION 3. In Furtherance of Subordination. (a) Upon any distribution of all or any of the assets of the Borrower in the event of (i) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relative to the Borrower or to its creditors, as such, or to its assets, or (ii) any liquidation, dissolution or other winding up of the Borrower, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or (iii) any assignment for the benefit of creditors or any other marshalling of assets and liabilities of the Borrower, then and in any such event the Lenders shall receive indefeasible payment in full of all amounts due or to become due (whether or not an Event of Default has occurred or the Obligations have been declared due and payable prior to the date on which they would otherwise have become due and payable) on or in respect of all Obligations (including post-petition debt whether or not allowed as a claim) before the Member shall be entitled to receive any payment on account of principal of (or premium, if any) or interest on or other amounts payable in respect of the Subordinated Debt, and to that end, any payment or distribution of any kind or character, whether in cash, property or securities, which may be payable or deliverable in respect of the Subordinated Debt, in any such case, proceeding, dissolution, liquidation or other winding up or event, shall be paid or delivered directly to the Lenders (or the Administrative Agent on their behalf) pro rata, for application (in the case of cash) to the payment or prepayment of, or to be held as collateral (in all other cases) for, the Obligations, until the Obligations shall have been indefeasibly paid in full. (b) If any bankruptcy proceeding, liquidation, dissolution or winding up referred to in subsection (a) above is commenced by or against the Borrower or any Restricted Subsidiary: (i) The Administrative Agent is hereby irrevocably authorized and empowered (in its own name or in the name of the Member or otherwise), but shall have no obligation, to demand, sue for, collect and receive every payment or distribution referred to in subsection (a) above and give acquittance therefor and to file claims and proofs of claim and take such other action (including, without limitation, voting the Subordinated Debt or enforcing any security interest or other lien securing payment of the Subordinated Debt) as the Administrative Agent may deem necessary or advisable for the exercise or enforcement of any of the rights or interests of the Lenders hereunder, provided that in the event the Administrative Agent takes such action, it shall apply all proceeds first to the payment of costs under this Agreement, then to the pro rata indefeasible payment in full of the Obligations and any surplus proceeds remaining thereafter shall be paid over to the Member for amounts due and payable under the Subordinated Debt; and -3- 235 (ii) The Member shall duly and promptly take such action as the Administrative Agent may request (A) to collect the Subordinated Debt for account of the Lenders and the Administrative Agent and to file appropriate claims or proofs of claim in respect of the Subordinated Debt, (B) to execute and deliver to Administrative Agent such powers of attorney, assignments, or other instruments as the Administrative Agent may request in order to enable it to enforce any and all claims with respect to, and any security interests and other liens securing payment of, the Subordinated Debt and (C) to collect and receive any and all payments or distributions which may be payable or deliverable upon or with respect to the Subordinated Debt. (c) All payments or distributions upon or with respect to the Subordinated Debt which are received by the Member contrary to the provisions of this Agreement shall be received in trust for the pro rata benefit of the Lenders, shall be segregated from other funds and property held by the Member and shall be forthwith paid over, in the same form as so received (with any necessary endorsement), to the Administrative Agent for the benefit of the Lenders pro rata, for application (in the case of cash) to the payment or prepayment of, or to be held as collateral (in all other cases) for, the payment or prepayment of the Obligations, whether matured or unmatured, in accordance with the terms of this Agreement. (d) The Lenders are hereby authorized to demand specific performance of this Agreement, whether or not the Borrower shall have complied with any of the provisions hereof applicable to it, at any time when the Member shall have failed to comply with any of the provisions of this Agreement applicable to it. The Member hereby irrevocably waives any defense based on the adequacy of a remedy at law which might be asserted as a bar to such remedy of specific performance. SECTION 4. No Enforcement or Commencement of Any Proceedings. The Member agrees that, so long as any of the outstanding Obligations shall remain unpaid, it will not, in its capacity as a creditor, it being agreed that it may take or authorize such action in its capacity as an equity holder, accelerate the maturity of the Subordinated Debt or take any action or commence any proceeding to enforce or collect same, or commence, or join any creditor other than the Lenders in commencing, any proceeding referred to in Section 3(a) hereof. SECTION 5. Rights of Subrogation. The Member agrees that no payment or distribution to the Lenders or the Administrative Agent pursuant to the provisions of this Agreement shall entitle the Member to exercise any rights of subrogation in respect thereof until the Obligations shall have been indefeasibly paid in full. The Member agrees that the subordination provisions contained herein shall not be affected by any action, or failure to act by the Administrative Agent or the Lenders which results, or may result, in affecting, -4- 236 impairing or extinguishing any right of reimbursement or subrogation or other right or remedy of the Member. SECTION 6. Subordination Legend, Further Assurances. The Member and the Borrower will cause each instrument or other contract or agreement, if any, evidencing Subordinated Debt to be endorsed with the following legend: The indebtedness evidenced by this instrument or contract or agreement is subordinated to the prior payment in full of the Obligations (as defined in the Member Debt Subordination Agreement hereinafter referred to) pursuant to, and to the extent provided in, the Member Debt Subordination Agreement, dated as of ____________ by and among the Borrower and the Member (as defined in such Member Debt Subordination Agreement) in favor of the Lenders (as defined in such Member Debt Subordination Agreement), the provisions of which are incorporated herein and by this reference made a part hereof. The Member and the Borrower each will further mark, and in the case of the Borrower, cause each Restricted Subsidiary to mark, its books of account in such a manner as shall be effective to give proper notice of the effect of this Agreement and will, in the case of any Subordinated Debt which is not evidenced by any instrument or other contract or agreement, upon the Administrative Agent's request cause such Subordinated Debt to be evidenced by an appropriate instrument or other contract or agreement endorsed with the above legend. The Member and the Borrower each will at its expense and at any time and from time to time promptly execute and deliver all further instruments and documents and take all further action that may be necessary or desirable or that the Administrative Agent may reasonably request in order to protect any right or interest granted or purported to be granted hereby, during the continuance of an Event of Default, or to enable the Administrative Agent to exercise and enforce its rights and remedies hereunder. SECTION 7. No Change in or Disposition of Subordinated Debt. The Member will not: (a) Cancel or otherwise discharge any of the Subordinated Debt (except upon payment in full thereof in accordance with the terms of this Agreement); (b) Sell, assign, transfer, endorse, pledge, encumber or otherwise dispose of any of the Subordinated Debt (other than to Affiliates of the Member which are, or simultaneously therewith become, the Member pursuant to the terms hereof); -5- 237 (c) Permit the terms of any of the Subordinated Debt to be changed in such a manner as to have a material adverse effect upon the rights or interests of the Lenders or the Administrative Agent hereunder; or (d) Take, or permit to be taken, any action to assert, collect or enforce the Subordinated Debt or any part thereof, except that portion of the Subordinated Debt, if any, to which the Member is entitled hereunder, unless such action would otherwise be prohibited hereunder. SECTION 8. Agreements by the Borrower. The Borrower agrees that it will not make, and will not permit any Restricted Subsidiary to make, any payment on any of the Subordinated Debt, or take any other action, in contravention of the provisions of this Agreement. The Borrower further agrees with the Subordinated Lender that it shall not incur Indebtedness for Money Borrowed (other than the Obligations) which is senior in right of payment to the Subordinated Debt unless such Indebtedness for Money Borrowed is subordinated on terms which are the same as set forth in this Agreement, including, without limitation, the terms set forth in Section 2(c). SECTION 9. Obligations Hereunder Not Affected. All rights and interests of the Lenders and the Administrative Agent hereunder, and all agreements and obligations of the Member and the Borrower hereunder, shall remain in full force and effect irrespective of: (a) Any lack of validity or enforceability of any document evidencing the Obligations; (b) Any change in the time, manner or place of payment of, or any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to departure from any of the documents evidencing the Obligations; (c) Any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Obligations; (d) Any failure of any Lender or the Administrative Agent to assert any claim or to enforce any right or remedy against any other party hereto under the provisions of this Agreement, the Loan Agreement, any note issued pursuant to the Loan Agreement or under any other agreement or instrument evidencing the Obligations; (e) Any reduction, limitation, impairment or termination of any Obligations of the Borrower for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and the Borrower hereby -6- 238 waives any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, any Obligations; and (f) Any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Borrower in respect of the Obligations or the Member in respect of this Agreement. This Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Obligations is rescinded or must otherwise be returned by any Lender or the Administrative Agent upon the insolvency, bankruptcy or reorganization of the Borrower or any Restricted Subsidiary or otherwise, all as though such payment had not been made. The Member acknowledges and agrees that the Lenders and the Administrative Agent may, without notice or demand and without affecting or impairing the Member's obligations hereunder, from time to time (i) renew, compromise, extend, increase, accelerate or otherwise change the time for payment of, or otherwise change the terms of the Obligations or any part thereof, including, without limitation, to increase or decrease the rate of interest thereon or the principal amount thereof; (ii) take or hold security for the payment of the Obligations and exchange, enforce, foreclose upon, waive and release any such security; (iii) apply such security and direct the order or manner of sale thereof as the Administrative Agent and the Lenders, in their sole discretion, may determine; (iv) release and substitute one or more endorsers, warrantors, borrowers or other obligors; and (v) exercise or refrain from exercising any rights against the Borrower, any Restricted Subsidiary or any other Person. SECTION 10. Representations and Warranties. The Member and the Borrower each hereby represent and warrant as follows: (a) The Member owns the Subordinated Debt now outstanding free and clear of any lien, security interest, charge and encumbrance. (b) This Agreement constitutes a legal, valid and binding obligation of the Member and the Borrower, enforceable in accordance with its terms, subject to the following qualifications: (i) an order of specific performance and an injunction are discretionary remedies and, in particular, may not be available where damages are considered an adequate remedy at law, and (ii) enforcement may be limited by bankruptcy, insolvency, liquidation, reorganization, reconstruction and other similar laws affecting enforcement of creditors' rights generally (insofar as any such law relates to the bankruptcy, insolvency or similar event of either the Member or the Borrower) and to general principles of equity. -7- 239 SECTION 11. Amendments, Waivers. Subject to the consent required, if any, of the Majority Lenders under their respective agreement or instrument evidencing the Obligations, no amendment or waiver of any provision of this Agreement nor consent to any departure by the Member or the Borrower herefrom, shall in any event be effective unless the same shall be in writing and signed by the parties hereto, and then such waiver, amendment or consent shall be effective only in the specific instance and for the specific purpose for which given. Any waiver, forbearance, failure or delay by the Administrative Agent in exercising, or the exercise or beginning of exercise by the Administrative Agent of, any right, power or remedy, simultaneous or later shall not preclude the further, simultaneous or later exercise thereof, and every right, power or remedy of the Administrative Agent shall continue in full force and effect until such right, power or remedy is specifically waived in a writing executed or authorized by such Majority Lenders. The parties shall promptly deliver to the Lenders or their agent copies of all amendments, waivers or other modifications to this Agreement. SECTION 12. Expenses. The Member and the Borrower jointly and severally agree to pay, within thirty (30) days after demand by the Administrative Agent (supported by invoices in reasonable detail) to the Administrative Agent or the Lenders, as applicable, any and all reasonable costs and expenses, including, without limitation, reasonable attorneys' fees and disbursements, which the Lenders or the Administrative Agent may incur in connection with the exercise or enforcement of any of the rights or interests of the Lenders or the Administrative Agent hereunder. SECTION 13. Addresses for Notices. All notices and other communications provided for hereunder shall be in writing and, if to the Member, mailed telecopied or hand delivered at its address set forth opposite its name on the signature pages hereto; if to the Borrower, the Administrative Agent or any Lender, hand delivered to it, addressed to it at the address of the Borrower, the Administrative Agent or such Lender (as the case may be) listed in the applicable agreement evidencing the Obligations; or as to each party or other Person at such other address as shall be designated by such party or Person in a written notice to each other party complying as to delivery with the terms of this Section. All such notices and other communications shall be effective upon receipt. SECTION 14. Entire Agreement; Severability. This Agreement contains the entire subordination agreement among the parties hereto with respect to the obligations in respect of Indebtedness for Money Borrowed of the Borrower to the Member. If any of the provisions of this Agreement shall be held invalid or unenforceable, this Agreement shall be construed as if not containing those provisions, and the rights and obligations of the parties hereto shall be construed and enforced accordingly. SECTION 15. Cumulative Rights. The rights, powers and remedies of the Lenders and the Administrative Agent under this Agreement shall be in addition to all rights, powers -8- 240 and remedies given to the Lenders by virtue of any statute or rule of law, all of which rights, powers and remedies shall be cumulative and may be exercised successively or concurrently. The parties hereto expressly acknowledge and agree that the Lenders have entered into the Loan Agreement and any other agreement evidencing the Obligations, as the case may be, in reliance on the execution and delivery of this Agreement, and the Administrative Agent and the Lenders are intended third party beneficiaries hereof. SECTION 16. Continuing Agreement; Transfer of Notes. This Agreement is a continuing agreement of subordination and the Lenders may, from time to time and without notice to the Member, extend credit to or make other financial arrangements with the Borrower or any Restricted Subsidiary in reliance hereon until written notice of termination shall be delivered by the Member to the Administrative Agent by courier or hand delivery. The receipt by the Administrative Agent of such notice shall not affect this Agreement as it relates to any of the Obligations then existing, to any of the Obligations incurred thereafter pursuant to a previous commitment by the Lenders or to any amendments to, or extensions or renewals of, any such Obligations. This Agreement shall (a) remain in full force and effect until the outstanding Obligations shall have been indefeasibly paid in full, (b) be binding upon the Member, the Borrower and their respective successors and assigns, heirs and legatees, and (c) inure to the benefit of and be enforceable by each Lender and its respective permitted successors, transferees, and assigns. Without limiting the generality of the foregoing subsection (c), any Lender may, subject to the provisions of the agreement or instrument governing its Obligations, assign or otherwise transfer the Obligation held by it to any other Person or entity, and such other Person or entity shall thereupon become vested with all the rights in respect thereof granted to such Lender herein or otherwise. SECTION 17. Governing Law. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York, without regard to principles of conflict of laws. SECTION 18. Recourse. The Administrative Agent and the Lenders acknowledge and agree that this Agreement is an obligation of the Borrower only and there is no recourse in respect of the Obligations to Member (or any of its officers, directors, managers, partners or members). SECTION 19. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] -9- 241 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the date first above written. MEMBER: ------------------------------------ By: --------------------------------- Title: ----------------------- BORROWER: BRESNAN TELECOMMUNICATIONS COMPANY LLC By BRESNAN COMMUNICATIONS GROUP LLC, its managing member By BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP, its managing member By BCI (USA), LLC, its general partner By Bresnan Communications, Inc., its managing member By: --------------------------------- Title: ----------------------- ADMINISTRATIVE AGENT: TORONTO DOMINION (TEXAS), INC., as Administrative Agent for itself and the Lenders By: --------------------------------- Title: ----------------------- EX-12 15 RATIO OF EARNINGS TO FIXED CHARGES CALCULATION 1 Bresnan Communications Group Systems Ratio of Earnings to Fixed Charges (in thousands)
Pro-forma 1994 1995 1996 1997 12/31/98 12/31/98 Fixed Charge Coverage Earnings: Net Income/Loss before tax 28,886 18,847 19,848 37,831 65,364 14664 Plus: Fixed Charge Interest 12,557 16,063 15,032 18,715 18,296 72,650 Portion of rent=Interest 360 463 471 640 640 640 -------------------------------------------------------------------------------------- Earnings as defined 41,803 35,373 35,351 57,186 84,300 87,954 Fixed Charges: Interest Expense 12,557 16,063 15,032 18,715 18,296 72,650 Capitalized interest 10 181 1,005 324 47 47 Portion of rent=interest 360 463 471 640 640 640 -------------------------------------------------------------------------------------- Total Fixed Charges 12,927 16,707 16,508 19,679 18,983 73,337 -------------------------------------------------------------------------------------- Earnings/(Deficiency) 28,876 18,666 18,843 37,507 65,317 14,617 ====================================================================================== 3.233774271 2.11725624 2.141423523 2.905908059 4.44081547 1.199313
EX-21 16 SUBSIDIARIES OF THE COMPANY 1 LIST OF SUBSIDIARIES OF BRESNAN COMMUNICATIONS GROUP LLC Bresnan Capital Corporation, a Delaware corporation Bresnan Telecommunications Company LLC, a Delaware limited liability company Bresnan Telephone of Minnesota, L.L.C., a Delaware limited liability company Bresnan Telephone of Michigan, L.L.C., a Delaware limited liability company LIST OF SUBSIDIARIES OF BRESNAN CAPITAL CORPORATION None. EX-23.2 17 CONSENT OF KPMG LLP 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT AUDITORS The Board of Directors Tele-Communications, Inc. We consent to the use of our report dated April 2, 1999, with respect to the combined balance sheets of Bresnan Communications Group Systems as of December 31, 1997 and 1998, and the related Combined Statements of Operations and parents' Investment and Cash Flows for each of the years in the three year period ended December 31, 1998 included herein and to the reference to our firm under the heading "Experts" in the prospectus. /S/ KPMG LLP Denver, Colorado May 3, 1999 EX-25.1 18 STATEMENT OF ELIGIBILITY 1 Exhibit 25.1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM T-1 -------- STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE Check if an Application to Determine Eligibility of a Trustee Pursuant to Section 305(b)(2) STATE STREET BANK AND TRUST COMPANY (Exact name of trustee as specified in its charter) Massachusetts 04-1867445 (Jurisdiction of incorporation or (I.R.S. Employer organization if not a U.S. national bank) Identification No.) 225 Franklin Street, Boston, Massachusetts 02110 (Address of principal executive offices) (Zip Code)
Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel 225 Franklin Street, Boston, Massachusetts 02110 (617) 654-3253 (Name, address and telephone number of agent for service) BRESNAN COMMUNICATIONS GROUP LLC BRESNAN CAPITAL CORPORATION (Exact name of obligor as specified in its charter) DELAWARE (38-2558446) (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) DELAWARE (13-3887244) (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)
709 WESTCHESTER AVENUE WHITE PLAINS, NY 10604 (Address of principal executive offices) (Zip Code) 8% SENIOR NOTES DUE 2009 AND 9 -1/4% SENIOR DISCOUNT NOTES DUE 2009 (Title of indenture securities) 2 GENERAL ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE: (a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO WHICH IT IS SUBJECT. Department of Banking and Insurance of The Commonwealth of Massachusetts, 100 Cambridge Street, Boston, Massachusetts. Board of Governors of the Federal Reserve System, Washington, D.C., Federal Deposit Insurance Corporation, Washington, D.C. (b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. Trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. The obligor is not an affiliate of the trustee or of its parent, State Street Corporation. (See note on page 2.) ITEM 3. THROUGH ITEM 15. NOT APPLICABLE. ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY. 1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT. A copy of the Articles of Association of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION. A copy of a Statement from the Commissioner of Banks of Massachusetts that no certificate of authority for the trustee to commence business was necessary or issued is on file with the Securities and Exchange Commission as Exhibit 2 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE. A copy of the authorization of the trustee to exercise corporate trust powers is on file with the Securities and Exchange Commission as Exhibit 3 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS CORRESPONDING THERETO. A copy of the by-laws of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 4 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Eastern Edison Company (File No. 33-37823) and is incorporated herein by reference thereto. 1 3 5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN DEFAULT. Not applicable. 6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY SECTION 321(b) OF THE ACT. The consent of the trustee required by Section 321(b) of the Act is annexed hereto as Exhibit 6 and made a part hereof. 7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING AUTHORITY. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority is annexed hereto as Exhibit 7 and made a part hereof. NOTES In answering any item of this Statement of Eligibility which relates to matters peculiarly within the knowledge of the obligor or any underwriter for the obligor, the trustee has relied upon information furnished to it by the obligor and the underwriters, and the trustee disclaims responsibility for the accuracy or completeness of such information. The answer furnished to Item 2. of this statement will be amended, if necessary, to reflect any facts which differ from those stated and which would have been required to be stated if known at the date hereof. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, State Street Bank and Trust Company, a corporation organized and existing under the laws of The Commonwealth of Massachusetts, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Boston and The Commonwealth of Massachusetts, on the 30th day of April, 1999. STATE STREET BANK AND TRUST COMPANY By: /s/ Cauna M. Silva _____________________________ NAME CAUNA M. SILVA TITLE ASSISTANT VICE PRESIDENT 2 4 EXHIBIT 6 CONSENT OF THE TRUSTEE Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of 1939, as amended, in connection with the proposed issuance by BRESNAN COMMUNICATIONS GROUP LLC AND BRESNAN CAPITAL CORPORATION. of its 8% SENIOR NOTES DUE 2009 and 9 -1/4% SENIOR DISCOUNT NOTES DUE 2009, we hereby consent that reports of examination by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor. STATE STREET BANK AND TRUST COMPANY By: /s/ Cauna M. Silva _____________________________________ NAME CAUNA M. SILVA TITLE ASSISTANT VICE PRESIDENT DATED: APRIL 30, 1999 3 5 EXHIBIT 7 Consolidated Report of Condition of State Street Bank and Trust Company, Massachusetts and foreign and domestic subsidiaries, a state banking institution organized and operating under the banking laws of this commonwealth and a member of the Federal Reserve System, at the close of business December 31, 1998, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act and in accordance with a call made by the Commissioner of Banks under General Laws, Chapter 172, Section 22(a).
Thousands of ASSETS Dollars - ------ ------- Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin ............................................... 1,209,293 Interest-bearing balances ........................................................................ 12,007,895 Securities ................................................................................................ 9,705,731 Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and its Edge subsidiary ............................................. 9,734,476 Loans and lease financing receivables: Loans and leases, net of unearned income ...........6,973,125 Allowance for loan and lease losses ...................84,308 Allocated transfer risk reserve .......................0 Loans and leases, net of unearned income and allowances .......................................... 6,888,817 Assets held in trading accounts ........................................................................... 1,574,999 Premises and fixed assets ................................................................................. 523,514 Other real estate owned ................................................................................... 0 Investments in unconsolidated subsidiaries ................................................................ 612 Customers' liability to this bank on acceptances outstanding .............................................. 47,334 Intangible assets ......................................................................................... 212,743 Other assets .............................................................................................. 1,279,224 ----------- Total assets .............................................................................................. 43,184,638 =========== LIABILITIES Deposits: In domestic offices .............................................................................. 10,852,862 Noninterest-bearing .......................8,331,830 Interest-bearing ..........................2,521,032 In foreign offices and Edge subsidiary ........................................................... 16,761,573 Noninterest-bearing ..........................83,010 Interest-bearing .........................16,678,563 Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge subsidiary .......................................... 10,041,324 Demand notes issued to the U.S. Treasury .................................................................. 108,420 Trading liabilities ...................................................................... 1,240,938 Other borrowed money ...................................................................................... 322,331 Subordinated notes and debentures.......................................................................... 0 Bank's liability on acceptances executed and outstanding .................................................. 47,334 Other liabilities ......................................................................................... 1,126,058 Total liabilities ......................................................................................... 40,500,840 ---------- EQUITY CAPITAL Perpetual preferred stock and related surplus ............................................................. 0 Common stock .............................................................................................. 29,931 Surplus ................................................................................................... 468,511 Undivided profits and capital reserves/Net unrealized holding gains (losses) .............................. 2,164,055 Net unrealized holding gains (losses) on available-for-sale securities ................... 21,638 Cumulative foreign currency translation adjustments ....................................................... (337) Total equity capital ...................................................................................... 2,683,798 ----------- Total liabilities and equity capital ...................................................................... 43,184,638 -----------
4 6 I, Rex S. Schuette, Senior Vice President and Comptroller of the above named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Rex S. Schuette We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. David A. Spina Marshall N. Carter Truman S. Casner 5 EX-27.1 19 FINANCIAL DATA SCHEDULE OF THE COMPANY
5 0001085399 BRESNAN COMMUNICATIONS GROUP LLC 1,000 U. S. DOLLARS YEAR DEC-31-1998 JAN-01-1998 DEC-31-1998 1 6,636 0 9,622 (748) 0 62,709 497,415 (190,752) 664,437 16,588 212,428 0 0 0 381,748 664,437 261,964 261,964 0 92,182 54,308 0 18,296 65,574 210 65,364 0 0 0 65,364 0 0
EX-27.2 20 FINANCIAL DATA SCHEDULE OF BCC
5 0001013692 BRESNAN CAPITAL CORPORATION 1 U. S. DOLLARS YEAR DEC-31-1998 JAN-01-1998 DEC-31-1998 1 0 0 1 0 0 1 0 0 1 0 0 1 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
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