-----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, Sr8DoCjYOoWBBQB2WEKKxO9uR6TOyvwwYx5bnfIAbUz3A72HVDKk0WPPfdflNVoP B9U6nkF6fZ7JkFWX7rx4DQ== 0000950149-97-001557.txt : 19970815 0000950149-97-001557.hdr.sgml : 19970815 ACCESSION NUMBER: 0000950149-97-001557 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERMEDIA CAPITAL PARTNERS IV L P CENTRAL INDEX KEY: 0001020817 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 943247750 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-11893 FILM NUMBER: 97660011 BUSINESS ADDRESS: STREET 1: 235 MONTGOMERY STREET STREET 2: SUITE 420 CITY: SAN FRANCISCO STATE: CA ZIP: 94120 BUSINESS PHONE: 4156164600 MAIL ADDRESS: STREET 1: 235 MONTGOMERY STREET STREET 2: SUITE 420 CITY: SAN FRANCISCO STATE: CA ZIP: 94104 10-Q 1 QUARTERLY REPORT FOR THE PERIOD ENDED 06/30/97 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JUNE 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______________ TO ______________ COMMISSION FILE NUMBER 333-11893 INTERMEDIA CAPITAL PARTNERS IV, L.P. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) CALIFORNIA 94-3247750 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 235 MONTGOMERY STREET, SUITE 420 SAN FRANCISCO, CA 94104 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (415) 616-4600 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ ================================================================================ 2 INTERMEDIA CAPITAL PARTNERS IV, L.P. INDEX TO REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1997 TABLE OF CONTENTS
PAGE(S) ------- PART I - FINANCIAL INFORMATION ITEM 1. Financial Statements.................................................. 1 ITEM 2. Management's Discussion and Analysis of Financial Condition and 11 Results of Operations................................................. PART II - OTHER INFORMATION ITEM 1. Legal Proceedings..................................................... 20 ITEM 2. Changes in Securities................................................. 20 ITEM 3. Defaults Upon Senior Securities....................................... 20 ITEM 4. Submission of Matters to a Vote of Security Holders................... 20 ITEM 5. Other Information..................................................... 20 ITEM 6. Exhibits and Reports on Form 8-K...................................... 25 SIGNATURES.......................................................................... 26
INFORMATION CONTAINED IN THIS REPORT INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE SECURITIES LAWS. ALL STATEMENTS, OTHER THAN STATEMENTS OF HISTORICAL FACT, REGARDING ACTIVITIES, EVENTS OR DEVELOPMENTS THAT THE COMPANY EXPECTS, BELIEVES OR ANTICIPATES WILL OR MAY OCCUR IN THE FUTURE, INCLUDING SUCH MATTERS AS, THE COMPANY'S OPERATING STRATEGIES, CAPITAL EXPENDITURES, THE EFFECTS OF COMPETITION, AND OTHER SUCH MATTERS, ARE FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, THESE FORWARD-LOOKING STATEMENTS ARE BASED UPON CERTAIN ASSUMPTIONS AND ARE SUBJECT TO A NUMBER OF RISKS AND UNCERTAINTIES, AND THE COMPANY CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM SUCH EXPECTATIONS INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN PART II, ITEM 5 "OTHER INFORMATION." 3 PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS INTERMEDIA CAPITAL PARTNERS IV, L.P. CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
JUNE 30, 1997 DECEMBER 31, ----------- 1996 ------------- (UNAUDITED) ASSETS Cash................................................................ $ 8,770 $ 7,462 Accounts receivable, net of allowance for doubtful accounts of $2,130 and $2,117, respectively................................... 17,539 18,047 Escrowed investments held to maturity............................... 28,237 28,829 Interest receivable on escrowed investments......................... 2,194 1,750 Receivable from affiliate........................................... 923 485 Prepaids............................................................ 2,768 1,273 Other current assets................................................ 232 221 -------- -------- Total current assets...................................... 60,663 58,067 Escrowed investments held to maturity............................... 60,518 45,999 Intangible assets, net.............................................. 634,087 590,345 Property & equipment, net........................................... 230,055 248,237 Deferred income taxes............................................... 9,910 13,372 Other non-current assets............................................ 1,466 1,790 -------- -------- Total assets.............................................. $ 996,699 $ 957,810 ======== ======== LIABILITIES AND PARTNERS' CAPITAL Accounts payable and accrued liabilities............................ $ 28,973 $ 21,372 Payable to affiliates............................................... 3,408 3,651 Deferred revenue.................................................... 11,753 13,682 Accrued interest.................................................... 20,322 20,384 -------- -------- Total current liabilities................................. 64,456 59,089 Deferred channel launch revenue..................................... 5,023 Long-term debt...................................................... 846,000 849,000 Other non-current liabilities....................................... 70 111 -------- -------- Total liabilities......................................... 910,526 913,223 -------- -------- Commitments and contingencies Minority interest Mandatorily redeemable preferred shares............................. 12,357 12,785 PARTNERS' CAPITAL Preferred limited partnership interest.............................. 22,962 20,044 General and limited partners' capital............................... 52,704 13,608 Note receivable from general partner................................ (1,850) (1,850) -------- -------- Total partners' capital................................... 73,816 31,802 -------- -------- Total liabilities and partners' capital................... $ 996,699 $ 957,810 ======== ========
See accompanying notes to consolidated financial statements 1 4 INTERMEDIA CAPITAL PARTNERS IV, L.P. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (DOLLARS IN THOUSANDS)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, -------------------- -------------------- 1996 1997 1996 1997 ------- -------- ------- -------- Basic and cable services.......................... $ 3,685 $ 42,392 $ 6,108 $ 83,680 Pay service....................................... 704 10,215 1,199 20,216 Other service..................................... 415 9,320 627 18,851 ------- -------- ------- -------- 4,804 61,927 7,934 122,747 ------- -------- ------- -------- Program fees...................................... 928 13,370 1,581 26,395 Other direct and operating expenses............... 552 6,489 902 13,341 Depreciation and amortization..................... 2,842 33,113 4,735 66,403 Selling, general and administrative expenses...... 990 11,827 1,601 23,583 Management and consulting fees.................... 838 1,675 ------- -------- ------- -------- 5,312 65,637 8,819 131,397 ------- -------- ------- -------- Loss from operations.............................. (508) (3,710) (885) (8,650) ------- -------- ------- -------- Other income (expense): Interest and other income....................... 433 1,403 452 2,781 Interest expense................................ (2,603) (19,614) (4,002) (38,877) Other expense................................... (132) (1) (302) ------- -------- ------- -------- (2,170) (18,343) (3,551) (36,398) ------- -------- ------- -------- Loss before income tax benefit and minority interest........................................ (2,678) (22,053) (4,436) (45,048) Income tax benefit................................ 1,974 3,462 ------- -------- ------- -------- Net loss before minority interest................. (2,678) (20,079) (4,436) (41,586) Minority interest................................. (214) (428) ------- -------- ------- -------- Net loss.......................................... $(2,678) $(20,293) $(4,436) $(42,014) ======= ======== ======= ========
See accompanying notes to consolidated financial statements 2 5 INTERMEDIA CAPITAL PARTNERS IV, L.P. CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DOLLARS IN THOUSANDS)
PREFERRED LIMITED GENERAL LIMITED NOTES PARTNER PARTNER PARTNERS RECEIVABLE TOTAL --------- ------- --------- ---------- --------- Syndication costs.................... $ (43) $ (7) $ (575) $ $ (625) ------ ------ ------ -------- -------- Balance at December 31, 1995......... (43) (7) (575) (625) Cash contributions................... 1,913 188,637 190,550 Notes receivable from General Partner............................ 1,850 (1,850) In-kind contributions, historical cost basis......................... 237,805 237,805 Conversion of GECC debt to equity.... 25,000 11,667 36,667 Allocation of RMG's and IPWT's historical equity balances......... (2,719) (239,368) (242,087) Distribution......................... (119,775) (119,775) Syndication costs.................... (69) (10) (911) (990) Net loss............................. (1,926) (290) (25,513) (27,729) ------ ------ ------ -------- -------- Balance at December 31, 1996......... 22,962 737 51,967 (1,850) 73,816 Net loss (unaudited)................. (2,918) (439) (38,657) (42,014) ------ ------ ------ -------- -------- Balance at June 30, 1997 (unaudited)........................ $ 20,044 $ 298 $ 13,310 $ (1,850) $ 31,802 ====== ====== ====== ======== ========
See accompanying notes to consolidated financial statements 3 6 INTERMEDIA CAPITAL PARTNERS IV, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (DOLLARS IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, ---------------------- 1996 1997 --------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss............................................................ $ (4,436) $(42,014) Minority interest................................................... 428 Loss on disposal of fixed assets.................................... 2 Depreciation and amortization....................................... 5,216 67,082 Changes in assets and liabilities: Accounts receivable.............................................. (880) (508) Interest receivable on escrowed investments...................... 444 Receivable from affiliates....................................... 63 438 Interest receivable.............................................. (347) Prepaids......................................................... (50) 1,495 Other current assets............................................. 11 Deferred income taxes............................................ (3,462) Other non-current assets......................................... (13) (324) Accounts payable and accrued liabilities......................... 1,352 (2,422) Payable to affiliate............................................. 454 243 Deferred revenue................................................. (3) 1,929 Accrued interest................................................. 171 62 Deferred channel launch revenue.................................. 5,023 Other non-current liabilities.................................... 12 41 --------- -------- Cash flows from operating activities................................ 1,539 28,468 --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of cable systems, net of cash acquired.................... (98,701) Property and equipment.............................................. (497) (45,989) Intangible assets................................................... (462) Note receivable..................................................... (15,000) Proceeds from sale of escrowed investments.......................... 13,927 --------- -------- Cash flows from investing activities................................ (114,198) (32,524) --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings from long-term debt...................................... 114,000 3,000 Debt issue costs.................................................... (506) (252) Syndication costs................................................... (96) --------- -------- Cash flows from financing activities................................ 113,398 2,748 --------- -------- Net change in cash.................................................... 739 (1,308) Cash, beginning of period............................................. 8,770 --------- -------- Cash, end of period................................................... $ 739 $ 7,462 ========= ========
See accompanying notes to consolidated financial statements. 4 7 INTERMEDIA CAPITAL PARTNERS IV, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (DOLLARS IN THOUSANDS) 1. THE COMPANY AND BASIS OF PRESENTATION: InterMedia Capital Partners IV, L.P. ("ICP-IV" or the "Company"), a California limited partnership, was formed on March 19, 1996, as a successor to InterMedia Partners IV, L.P. ("IP-IV") which was formed in October 1994, for the purpose of acquiring and operating cable television systems in three geographic clusters, all located in the southeastern United States. As of June 30, 1997, ICP-IV's systems served the following number of basic subscribers and encompassed the following number of homes passed:
BASIC HOMES SUBSCRIBERS PASSED ----------- ------- Nashville/Mid-Tennessee Cluster................ 331,456 515,889 Greenville/Spartanburg Cluster................. 149,100 210,918 Knoxville/East Tennessee Cluster............... 99,768 137,732 ------- ------- Total................................ 580,324 864,539 ======= =======
The accompanying unaudited interim consolidated financial statements include the accounts of ICP-IV and its directly and indirectly, majority-owned subsidiaries, InterMedia Partners IV, Capital Corp. ("IPCC"), IP-IV, InterMedia Partners Southeast ("IPSE"), InterMedia Partners of Tennessee ("IP-TN"), InterMedia Partners of West Tennessee, L.P. ("IPWT"), and Robin Media Group, Inc. ("RMG"). ICP-IV and its majority-owned subsidiaries are collectively referred to as the "Company." All significant intercompany accounts and transactions have been eliminated in consolidation. The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles and are presented in accordance with the rules and regulations of the Securities and Exchange Commission applicable to interim financial information. Accordingly, certain footnote disclosures have been condensed or omitted. In the Company's opinion, the interim unaudited consolidated financial statements reflect all adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation of the Company's financial position as of June 30, 1997, and its results of operations and cash flows for the three and six months ended June 30, 1997. The results of operations for these periods are not necessarily indicative of results that may be expected for the year ending December 31, 1997. These consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto contained in its Form 10-K for the year ended December 31, 1996. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Certain prior period items have been reclassified in the accompanying financial statements to conform with the 1997 presentation. 2. ACQUISITIONS On July 30, 1996 and August 1, 1996, the Company borrowed $558,000 under a new bank term loan and revolving credit agreement (the "Bank Facility"), issued $292,000 in senior notes (the "Notes"), and received 5 8 INTERMEDIA CAPITAL PARTNERS IV, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) (DOLLARS IN THOUSANDS) equity contributions from its partners of $360,000, consisting of: $190,550 in cash; $117,600 representing the fair market value of certain cable television systems (the "Greenville/Spartanburg System") contributed, net of cash paid to the contributing partner of $119,775; $13,333 representing the fair market value of general and limited partner interests in IPWT, an affiliate; $36,667 in exchange for notes receivable from IPWT; and $1,850 in the form of a note receivable from InterMedia Capital Management IV, L.P. ("ICM-IV"), the 1.1% general partner of ICP-IV (see Note 9 -- Subsequent Events). The Bank Facility, the Notes and the equity contributions are referred to as the "Financing." On July 30, 1996, the Company acquired cable television systems serving approximately 360,100 basic subscribers in Tennessee, South Carolina and Georgia through the Company's acquisition of controlling equity interests in IPWT and Robin Media Holdings, Inc. ("RMH"), an affiliate, and through the equity contribution of the Greenville/Spartanburg System to the Company by affiliates of Tele-Communications, Inc. ("TCI"). The Company acquired all of the general and limited partner interests of IPWT in exchange for a $13,333 limited partner interest in ICP-IV. Concurrently, General Electric Capital Corporation ("GECC") transferred to ICP-IV its $55,800 note receivable from IPWT and related interest receivable of $3,356 in exchange for an $11,667 limited partner interest in ICP-IV, a $25,000 preferred limited partner interest in ICP-IV and cash of $22,489. InterMedia Partners V, L.P. ("IP-V"), a former affiliate, owned all of the outstanding equity of RMH prior to the Company's acquisition of a majority of the voting interests in RMH. In conjunction with a recapitalization of RMH, ICP-IV purchased 3,285 shares of RMH's Class A Common Stock for $329. Concurrently, a wholly owned subsidiary of TCI converted its outstanding loan to IP-V into a limited partnership interest and, in dissolution of the IP-V partnership, received 365 shares of RMH Class B Common Stock valued at $37 and 12,000 shares of RMH Redeemable Preferred Stock valued at $12,000. Upon completion of the recapitalization, the Company has 60% of the voting interests of RMH, with TCI owning the remaining 40%. In connection with the acquisition, the Company assumed approximately $331,450 of long-term debt and $11,565 of accrued interest, which was repaid with proceeds from the Financing. Upon consummation of the acquisition, RMH merged into its wholly owned operating subsidiary RMG. All of the RMH stock just described was converted as a result of the merger into capital stock of RMG with the same terms. Affiliates of TCI contributed cash and transferred their interests in the Greenville/Spartanburg System to the Company in exchange for a 49.0% limited partner interest in ICP-IV and an assumption of $119,775 of debt which was simultaneously repaid by the Company with proceeds from the Financing. The cash paid of $119,775 for debt assumed has been recorded as a distribution to TCI in the accompanying consolidated financial statements. TCI held substantial direct and indirect ownership interests in each of RMH, IPWT and the Greenville/Spartanburg System. As a result of TCI's substantial continuing interest in RMG, IPWT and the Greenville/Spartanburg System after the Company's acquisitions, the acquired assets of these entities have been accounted for at their historical basis as of the acquisition date. Results of operations for these entities have been included in the Company's consolidated results only from the acquisition date. On August 1, 1996, the Company acquired certain cable television systems of Viacom in metropolitan Nashville, Tennessee (the "Nashville System") for an aggregate purchase price of $315,333.The Company's acquisition of the Nashville System has been accounted for as a purchase in accordance with Accounting Principles Bulletin No. 16 ("APB16") and the Nashville System's results of operations have been included in the Company's consolidated results only from the date of the acquisition. 6 9 INTERMEDIA CAPITAL PARTNERS IV, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) (DOLLARS IN THOUSANDS) During the year ended December 31, 1996, the Company acquired other cable television systems serving approximately 59,600 basic subscribers primarily in central and eastern Tennessee for an aggregate purchase price of $102,701 (the "Miscellaneous Acquisitions"). The Miscellaneous Acquisitions include the Company's acquisitions of certain cable television systems during the six month period ended June 30, 1996 located in counties near Nashville, Kingsport and Hendersonville, Tennessee, serving approximately 57,300 basic subscribers. These acquisitions have also been accounted for as purchases in accordance with APB16. Accordingly, results of operations of the Miscellaneous Acquisitions have been included in the Company's consolidated results only from the dates of acquisition. 3. ESCROWED INVESTMENTS HELD TO MATURITY The Company's investments held to maturity are carried at amortized cost and consist of U.S. Treasury Notes with maturities ranging from one to twenty-five months. The investments are held in an escrow account to be used by the Company to make interest payments on the Company's senior notes (see Note 4 -- Long-Term Debt). On February 1, 1997, the Company paid interest of $16,569 on the senior notes with the proceeds from and interest earned on escrowed investments that matured on January 31, 1997. The fair value and maturities of U.S. Treasury Notes held in escrow are as follows:
DECEMBER 31, 1996 JUNE 30, 1997 ----------------------- ----------------------- CARRYING ESTIMATED CARRYING ESTIMATED VALUE FAIR VALUE VALUE FAIR VALUE -------- ---------- -------- ---------- Matures within 1 year........................... $ 28,237 $ 28,333 $ 28,829 $ 29,026 Matures between 1 and 3 years................... 60,518 61,019 45,999 46,377 ------- ------- ------- ------- Total................................. $ 88,755 $ 89,352 $ 74,828 $ 75,403 ======= ======= ======= =======
The fair values of the investments are based on quoted market prices. 4. LONG-TERM DEBT Long-term debt consists of the following:
DECEMBER 31, JUNE 30, 1996 1997 ------------ --------- Bank revolving credit facility, $475,000 commitment as of June 30, 1997, interest currently at LIBOR plus 1.50% payable quarterly, matures July 1, 2004................ $334,000 $ 337,000 Bank term loan; interest at LIBOR plus 2.375% payable quarterly, matures January 1, 2005..................... 220,000 220,000 11 1/4% senior notes, interest payable semi-annually, due August 1, 2006......................................... 292,000 292,000 -------- -------- $846,000 $ 849,000 ======== ========
The Company's bank debt is outstanding under the revolving credit facility and term loan agreement executed by IP-IV and dated July 30, 1996. The revolving credit facility currently provides for $475,000 of available credit. Starting January 1, 1999, revolving credit facility commitments will be permanently reduced semi-annually by increments ranging from $22,500 to $47,500 through maturity on July 1, 2004. The term loan requires semi-annual principal payments of $500 starting January 1, 1999 through January 1, 2004, and final principal payments in two equal installments of $107,250 on July 1, 2004 and January 1, 2005. Advances under the Bank Facility are available under interest rate options related to the base rate of the administrative agent for the Bank Facility ("ABR") or LIBOR. Interest rates on borrowings under the term loan are at LIBOR plus 2.375% or ABR plus 1.125%. Interest rates vary on borrowings under the revolving credit facility 7 10 INTERMEDIA CAPITAL PARTNERS IV, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) (DOLLARS IN THOUSANDS) from LIBOR plus 0.75% to LIBOR plus 1.75% or ABR to ABR plus 0.50% based on the Company's ratio of senior debt to annualized quarterly operating cash flow. For purposes of this computation, senior debt, as defined, excludes the 11 1/4% senior notes. The Bank Facility requires quarterly interest payments, or more frequent interest payments if a shorter period is selected under the LIBOR option, and quarterly payment of fees on the unused portion of the revolving credit facility at 0.375% per annum when the senior leverage ratio is greater than 4.0:1.0 and at 0.25% when the senior leverage ratio is less than or equal to 4.0:1.0. At December 31, 1996 and June 30, 1997, the interest rate on borrowings outstanding under the revolving credit facility was 7.125% and 7.25%, respectively. Interest expense for the three and six months ended June 30, 1996 related to borrowings outstanding under a bank revolving loan agreement dated January 29, 1996 (the "Bridge Loan"), which provided for borrowings up to $130,000 and interest payable quarterly at the bank's reference rate plus 1% or LIBOR plus 2.25%. The Bridge Loan was repaid on July 30, 1996 with proceeds from the Bank Facility and the Notes. The Company has entered into interest rate swap agreements in the aggregate notional principal amount of $120,000 to establish long-term fixed interest rates on its variable senior bank debt. Under the swap agreements, the Company pays quarterly interest at fixed rates ranging from 6.28% to 6.3225% and receives quarterly interest payments equal to LIBOR. The differential to be paid or received in connection with an individual swap agreement is accrued as interest rates change over the period to which the payments or receipts relate. The agreements expire between May 1999 and February 2000. The estimated fair value of the interest rate swaps, which is gross of unrealized market gains or losses, is based on the current value in the market for transactions with similar terms and adjusted for the holding period. At December 31, 1996 and June 30, 1997, the fair market value of the interest rate swaps was $(2,700) and $(1,191), respectively. Borrowings under the Bank Facility are secured by the capital stock and partnership interests of IP-IV's subsidiaries. The 11 1/4% senior notes will be redeemable at the option of the Company, in whole or in part, subsequent to August 1, 2001 at specified redemption prices which will decline in equal annual increments and range from 105.625% beginning August 1, 2001 to 100.0% of the principal amount beginning August 1, 2004 through the maturity date, plus accrued interest. As of December 31, 1996 and June 30, 1997, ICP-IV has $90,949 and $76,578, respectively, in pledged securities, including interest, which represent sufficient funds to provide for payment in full of interest on the Notes through August 1, 1999 and are pledged as security for repayment of the Notes under certain circumstances. Proceeds from the pledged securities will be used by ICP-IV to make interest payments on the Notes through August 1, 1999. ICP-IV is the issuer of the Notes and, as a holding company, has no direct operations. The Notes are structurally subordinated to borrowings of IP-IV under the Bank Facility. The Bank Facility restricts IP-IV and its subsidiaries from paying dividends and making other distributions to ICP-IV. The debt agreements contain certain covenants which restrict the Company's ability to encumber assets, make investments or distributions, retire partnership interests, pay management fees currently, incur or guarantee additional indebtedness and purchase or sell assets. The debt agreements include financial covenants which require minimum interest and debt coverage ratios and specify maximum debt to cash flow ratios. 8 11 INTERMEDIA CAPITAL PARTNERS IV, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) (DOLLARS IN THOUSANDS) Based on recent trading prices of the Notes, the fair value of these securities at December 31, 1996 and June 30, 1997 is $297,665 and $314,265, respectively. Borrowings under the Bank Facility are at rates that would be otherwise currently available to the Company. Accordingly, the carrying amounts of bank borrowings outstanding as of December 31, 1996 and June 30, 1997 approximate their fair value. 5. COMMITMENTS AND CONTINGENCIES The Company is committed to provide cable television services under franchise agreements with remaining terms of up to twenty years. Franchise fees of up to 5% of gross revenues are payable under these agreements. Current FCC regulations require that cable television operators obtain permission to retransmit major network and certain local television station signals. The Company has entered into long-term retransmission agreements with all applicable stations in exchange for in-kind and/or other consideration. The Company is subject to litigation and other claims in the ordinary course of business. In the opinion of management, the ultimate outcome of any existing litigation or other claims will not have a material adverse effect on the Company's financial condition or results of operations. 6. RELATED PARTY TRANSACTIONS ICM-IV provides certain management services to ICP-IV and its subsidiaries for a per annum fee of 1% of the Company's total non-preferred capital contributions, or $3,350, of which ICM-IV will defer 20% per annum, payable in each following year, in order to support the Company's bank debt. However, pursuant to ICP-IV's Limited Partnership Agreement, ICM-IV's first year management fees of $3,350 were prepaid in July and August 1996. ICM-IV management fees of $838 and $1,675 were charged to expense for the three and six months ended June 30, 1997, respectively. ICM-IV management fee expense was not recognized during the first seven months of 1996, until the Company's capital contributions were received from its partners. InterMedia Management, Inc. ("IMI") is wholly owned by the managing general partner of ICM-IV (see Note 9 -- Subsequent Events). IMI has entered into agreements with all of ICP-IV's subsidiaries to provide accounting and administrative services at cost. IMI also provides such services to other cable systems which are affiliates of the Company. Administrative fees charged by IMI were $172 and $1,413 for the three months ended June 30, 1996 and 1997, respectively, and $296 and $3,088 for the six months ended June 30, 1996 and 1997, respectively. Receivable from affiliate represents advances to IMI, net of administrative fees charged by IMI, and operating expenses paid by IMI on behalf of ICP-IV's subsidiaries. As an affiliate of TCI, ICP-IV is able to purchase programming services from a subsidiary of TCI. Management believes that the overall programming rates made available through this relationship are lower than ICP-IV could obtain separately. The TCI subsidiary is under no obligation to continue to offer such volume rates to ICP-IV, and such rates may not continue to be available in the future should TCI's ownership in ICP-IV significantly decrease or if TCI or the programmers should otherwise decide not to offer such participation to the Company. Programming fees charged by the TCI subsidiary for the three months ended June 30, 1996 and 1997 amounted to $770 and $10,440, respectively, and $1,277 and $20,293 for the six months ended June 30, 1996 and 1997, respectively. Payable to affiliates includes programming fees payable to the TCI subsidiary of $3,353 and $3,625 as of December 31, 1996 and June 30, 1997, respectively. 7. CHANNEL LAUNCH REVENUE During the three months ended June 30, 1997, the Company received payments of $8,014 from certain programmers to launch and promote their new channels. Of the total amount received, the Company 9 12 INTERMEDIA CAPITAL PARTNERS IV, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) (DOLLARS IN THOUSANDS) recognized advertising revenue of $122 and $1,453 during the three and six months ended June 30, 1997, respectively, for advertisements provided by the Company to promote the new channels. The remaining payments received from the programmers are being amortized over the respective terms of the launch agreements which range between five and ten years. 8. SUPPLEMENTAL DISCLOSURES TO CONSOLIDATED STATEMENTS OF CASH FLOWS During the six months ended June 30, 1996 and 1997, the Company paid interest of $3,350 and $38,136, respectively. As described in Note 2, during 1996 the Company acquired several cable television systems located in central and eastern Tennessee. In conjunction with the Miscellaneous Acquisitions completed during the six months ended June 30, 1996, assets acquired and liabilities assumed were as follows: Fair value of assets acquired............................ $98,772 Liabilities assumed, net of current assets............... (71) ------- Net cash paid............................................ $98,701 =======
9. SUBSEQUENT EVENTS In February 1997, Leo J. Hindery, Jr., the managing general partner of ICM-IV and various other affiliated InterMedia partnerships, was appointed President of TCI. Subsequent to June 30, 1997, as part of Mr. Hindery's transition, TCI purchased substantially all of Mr. Hindery's interests in IMI and ICM-IV as well as various other affiliated InterMedia partnerships. Pursuant to the purchase, Mr. Hindery no longer holds a controlling interest in any of the various InterMedia corporations or partnerships, and ICP-IV and its subsidiaries' various senior debt and partnership agreements have been amended. See Part II, Item 5 "Other Information -- Change in Managing General Partner." 10 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis is intended to assist in an understanding of significant changes and trends related to the results of operations and financial condition of the Company and should be read in conjunction with the Company's Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Company's Form 10-K for the year ended December 31, 1996. This discussion contains, in addition to historical information, forward-looking statements that are based upon certain assumptions and are subject to a number of risks and uncertainties. The Company's actual results may differ significantly from the results predicted in such forward-looking statements. This discussion and analysis should be read in conjunction with the separate financial statements of the Company. OVERVIEW The Company generates substantially all of its revenues from monthly subscription fees for basic, expanded basic (also referred to as cable programming services, "CPS"), premium and ancillary services (such as rental of converters and remote control devices) and installation charges. Additional revenues have been generated from local and national advertising sales, pay-per-view programming and home shopping commissions. The Company has reported net losses primarily caused by high levels of depreciation and amortization and interest expense. Management believes that net losses are common for cable television companies and that the Company will incur net losses in the future. Historically, certain programmers have periodically increased the rates charged for their services. Management believes that such rate increases are common for the cable television industry and that the Company will experience program fee rate increases in the future. Acquisitions During the year ended December 31, 1996 the Company acquired cable television systems serving approximately 567,200 basic subscribers in Tennessee, South Carolina and Georgia through (i) the Company's acquisition on July 30, 1996 of controlling equity interests in IPWT and RMG, (ii) the equity contribution on July 30, 1996 of the Greenville/Spartanburg System to the Company by TCI, (iii) the purchase of the Nashville System on August 1, 1996, (iv) the purchases on January 29, 1996 and February 1, 1996 of cable television systems serving approximately 55,800 basic subscribers, and (v) the purchases on May 2, 1996, July 1, 1996, and August 6, 1996 of cable television systems serving approximately 3,800 basic subscribers (together with the January 29, 1996 and the February 1, 1996 acquisitions, the "Miscellaneous Acquisitions"). The Company paid cash of approximately $418.0 million, including related acquisition costs and fees, for the Miscellaneous Acquisitions and the purchase of the Nashville System. The Miscellaneous Acquisitions and the purchase of the Nashville System have been accounted for as purchases and results of operations are included in the Company's consolidated results only from the dates the systems were acquired. In connection with the Company's acquisitions of RMG and IPWT, the Company paid cash of $0.3 million for its equity interests in RMG and repaid in cash $365.5 million of the acquired entities' indebtedness, including $14.9 million of accrued interest. The Company also paid cash to TCI of $119.8 million in connection with TCI's contribution of the Greenville/Spartanburg System to the Company. The cash payment to TCI has been recorded as an equity distribution in the Company's December 31, 1996 consolidated financial statements. The Company acquired IPWT and extinguished $36.7 million of IPWT's indebtedness in exchange for non-cash consideration consisting of a limited partner interest in ICP-IV of $11.7 million and a preferred limited partner interest in ICP-IV of $25.0 million. TCI received non-cash consideration of $117.6 million in the form of a limited partner interest in ICP-IV in exchange for its contribution of the Greenville/Spartanburg System to the Company. 11 14 IPWT, RMG and the Greenville/Spartanburg System were acquired from entities in which TCI had a significant ownership interest. Because of TCI's substantial continuing interest in these entities as a 49.0% limited partner in ICP-IV, these acquisitions were accounted for at their historical cost basis as of the acquisition date. Results of these entities are included in the Company's consolidated results of operations only from the date of acquisition. Rate Regulation and Competition The Company's operations are regulated by the Federal Communications Commission ("FCC") and local franchise authorities under the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act") and the Telecommunications Act of 1996 (the "1996 Act"). Certain of the Company's cost of service cases justifying rates for the CPS or expanded basic tier of service are pending before the FCC. Additionally, pursuant to the FCC's regulations, several local franchising authorities are reviewing the Company's basic rate justifications and several other franchising authorities have requested that the FCC review the Company's basic rate justifications. Management believes that the Company has substantially complied in all material respects with related FCC regulations and the outcome of these proceedings will not have a material adverse effect on the Company. The Company is subject to competition from alternative providers of video services, including wireless service providers and local telephone companies. BellSouth has applied for cable franchises in certain areas where the Company operates. However, BellSouth has since acknowledged it is postponing its request for cable franchises in the state of Tennessee. On October 22, 1996 the Tennessee Cable Telecommunications Association and the Cable Television Association of Georgia filed a formal complaint with the FCC challenging certain alleged acts and practices that BellSouth is taking in certain areas of Tennessee and Georgia including, among others, subsidizing its deployment of cable television facilities with regulated services revenues that are not subject to competition. The Company is joined by several other cable operators as the "Complainant Cable Operators" in the complaint. The cross-subsidization claims are currently pending before the FCC's Common Carrier Bureau. The Company cannot predict the likelihood of success on this complaint. See Part II, Item 5 "Other Information -- Certain Factors Affecting Future Results -- Competition in Cable Television Industry; Rapid Technological Change." The Company cannot predict the extent to which competition will materialize or, if competition materializes, the extent of its effect on the Company. Transactions with Affiliates Due to TCI's equity ownership in the Company, the Company is able to purchase programming services from Satellite Services, Inc. ("SSI"), a subsidiary of TCI. Management believes that the aggregate programming rates obtained through this relationship are lower than the rates the Company could obtain through arm's-length negotiations with third parties. TCI is under no obligation to offer such benefits to the Company. The loss of the relationship with TCI could adversely affect the financial position and results of operations of the Company. During the three months ended June 30, 1996 and 1997, the Company paid 83.0% and 78.1%, respectively, of its program fees to SSI. During the six months ended June 30, 1996 and 1997, the Company paid 80.8% and 76.9%, respectively, of its program fees to SSI. The Company and its affiliated entities InterMedia Partners, a California limited partnership, and InterMedia Partners III, L.P. and their consolidated subsidiaries (together the "Related InterMedia Entities") have entered into agreements ("Administrative Agreements") with IMI, pursuant to which IMI provides accounting, operational, marketing, engineering, legal, regulatory compliance and other administrative services at cost. Effective August 5, 1997, IMI owns 95.0% of the equity interests in ICM-IV LLC, as herein defined, the managing general partner of the Company, and IMI is wholly owned by Robert J. Lewis. (See Part II, Item 5 "Other Information --Change in Managing General Partner.") Generally, IMI charges costs to the Related InterMedia Entities based on each entity's number of basic subscribers as a percentage of total basic subscribers for all of the Related InterMedia Entities. In addition to changes in IMI's aggregate cost of providing such services, changes in the number of the Company's basic subscribers and/or changes in the number of basic subscribers for the other Related InterMedia Entities will affect the level of IMI costs charged to the Company. IMI charged $0.2 million and $1.4 million to the Company for the three months 12 15 ended June 30, 1996 and 1997, respectively, and $0.3 million and $3.1 million for the six months ended June 30, 1996 and 1997, respectively. ICM-IV provides certain management services to the Company for an annual fee of one percent of the Company's total non-preferred capital contributions. See Part II, Item 5 "Other Information -- Certain Factors Affecting Future Results -- Related Party Transactions." In February of this year Leo J. Hindery, Jr. was appointed president of TCI. As part of Mr. Hindery's transition to TCI, substantially all of Mr. Hindery's interests in ICM-IV and its general partner IMI, as well as various other management partnerships for the Related InterMedia Entities, have been converted or sold. Pursuant to these transactions, Mr. Hindery no longer holds a controlling interest in IMI or ICM-IV. See Part II, Item 5 "Other information --Change in Managing General Partner." RESULTS OF OPERATIONS As described above, the Company acquired all of its cable television systems during the year ended December 31, 1996 ("1996 Acquisitions"). A significant portion of these acquisitions occurred in July and August 1996. Results of operations of the acquired cable television systems have been included in the Company's results of operations only from the dates the systems were acquired. The Company had no operations prior to its first acquisition on January 29, 1996. As a result, the comparability of the Company's results of operations for the three months and six months ended June 30, 1996 and 1997 is affected by the 1996 Acquisitions, particularly by the acquisitions which closed subsequent to the six months ended June 30, 1996 ("Late 1996 Acquisitions").
THREE MONTHS ENDED JUNE 30, -------------------------------------------- 1996 1997 -------------------- --------------------- PERCENTAGE PERCENTAGE AMOUNT OF REVENUE AMOUNT OF REVENUE ------- ---------- -------- ---------- (UNAUDITED) Statement of Operations Data: (dollars in thousands) Revenue................................................ $ 4,804 100.0% $ 61,927 100.0% Costs and Expenses: Program fees......................................... 928 19.3 13,370 21.6 Other direct and operating expenses(1)............... 552 11.5 6,489 10.5 Selling, general and administrative(2)............... 990 20.6 11,827 19.1 Management and consulting fees....................... 838 1.4 Depreciation and amortization........................ 2,842 59.2 33,113 53.5 ------- ----- -------- ----- Loss from operations................................... (508) (10.6) (3,710) (6.0) Interest and other income.............................. 433 9.0 1,403 2.3 Interest expense....................................... (2,603) (54.2) (19,614) (31.7) Other expense.......................................... (132) (0.2) Income tax benefit..................................... 1,974 3.2 Minority interest...................................... (214) (0.4) ------- ----- -------- ----- Net loss............................................... $(2,678) (55.7)% $(20,293) (32.8)% ======= ===== ======== ===== Other Data: EBITDA(3).............................................. $ 2,334 48.6% $ 29,403 47.5%
13 16
SIX MONTHS ENDED JUNE 30, -------------------------------------------- 1996 1997 -------------------- --------------------- PERCENTAGE PERCENTAGE AMOUNT OF REVENUE AMOUNT OF REVENUE ------- ---------- -------- ---------- (UNAUDITED) Statement of Operations Data: Revenue................................................ $ 7,934 100.0% $122,747 100.0% Costs and Expenses: Program fees......................................... 1,581 19.9 26,395 21.5 Other direct and operating expenses(1)............... 902 11.4 13,341 10.9 Selling, general and administrative(2)............... 1,601 20.2 23,583 19.2 Management and consulting fees....................... 1,675 1.4 Depreciation and amortization........................ 4,735 59.7 66,403 54.1 ------- ----- -------- ----- Loss from operations................................... (885) (11.2) (8,650) (7.1) Interest and other income.............................. 452 5.7 2,781 2.3 Interest expense....................................... (4,002) (50.4) (38,877) (31.7) Other expense.......................................... (1) 0.0 (302) (0.2) Income tax benefit..................................... 3,462 2.8 Minority interest...................................... (428) (0.3) ------- ----- -------- ----- Net loss............................................... $(4,436) (55.9)% $(42,014) (34.2)% ======= ===== ======== ===== Other Data: EBITDA(3).............................................. $ 3,850 48.5% $ 57,753 47.1%
- --------------- (1) Other direct and operating expenses consist of expenses relating to installations, plant repairs and maintenance and other operating costs directly associated with revenues. (2) Selling, general and administrative expenses consist mainly of costs related to system offices, customer service representatives and sales and administrative employees. (3) EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, minority interest and other expense. EBITDA is a commonly used measure of performance in the cable industry. However, it does not purport to represent cash flows from operating activities in related Consolidated Statements of Cash Flows and should not be considered in isolation or as a substitute for measures of performance in accordance with GAAP. For information concerning cash flows from operating, investing and financing activities, see Unaudited Financial Statements included elsewhere in this Report. Revenues The Company's revenues for the three and six months ended June 30, 1997 increased to $61.9 million and $122.7 million, respectively, as compared with $4.8 million and $7.9 million for the same periods ended June 30, 1996, respectively, due primarily to the Late 1996 Acquisitions. The Company's total revenues consisted of basic service revenues which represented 68.5% and 68.2% of total revenues for the three and six months ended June 30, 1997, respectively, compared to 76.7% and 77.0% for the same periods ended June 30, 1996, respectively. The decreases in basic service revenues as a percentage of total revenues is due primarily to proportionately higher volume of pay services, advertising sales, converter rental and other services provided by the systems acquired subsequent to June 30, 1996, as compared to those systems acquired during the six months ended June 30, 1996. Pay service revenues of $10.2 million and $20.2 for the three and six months ended June 30, 1997, respectively, represented 16.5% of total revenues, compared to 14.7% and 15.1% for the three and six months ended June 30, 1996, respectively. Other service revenues represented 15.1% and 15.4% of total revenues for the three and six months ended June 30, 1997, respectively, compared to 8.6% and 7.9% for the three and six months ended June 30, 1996, respectively. Other service revenues for the three and six months ended June 30, 1997 included non-recurring advertising revenue of $0.1 million and $1.5 million, respectively, earned from certain programmers to promote and launch their new services. The Company also recognized $0.4 million of revenues for the three and six months ended June 30, 1997 representing a portion of 14 17 the remaining payments received during the three months ended June 30, 1997 from such programmers to launch and promote their new channels (see Part I, Item 1 "Financial Statements -- Note 7 Channel Launch Revenue"). The Company served approximately 580,300 basic subscribers who subscribed to 455,200 pay units at June 30, 1997, compared to 57,400 basic subscribers and 23,800 pay units at June 30, 1996. Average basic service revenue per basic subscriber for the three and six months ended June 30, 1997 was $24.40 and $24.17, respectively, compared to $21.63 and $21.26 for the same periods ended June 30, 1996, respectively. The increase represents rate increases implemented by certain of the Company's cable systems in September 1996 and in early 1997 and higher effective basic service rates for the systems acquired subsequent to June 30, 1996, compared to those systems acquired during the six months ended June 30, 1996. Average pay service revenue per pay unit for the three and six months ended June 30, 1997 was $7.56 and $7.54, respectively, compared to $9.74 and $9.46 for the three and six months ended June 30, 1996, respectively. The decrease is due primarily to marketing promotions offered by the Company and the impact of the systems acquired subsequent to June 30, 1996 with lower average pay service revenue per pay unit compared with those systems acquired during the first six months of 1996. Program Fees Program fees for the three and six months ended June 30, 1997 increased to $13.4 million and $26.4 million, respectively, as compared with $0.9 million and $1.6 million for the same periods ended June 30, 1996, respectively, due primarily to the Late 1996 Acquisitions. Program fees for the three and six months ended June 30, 1997 represent 25.4% of basic and pay service revenues compared to 21.1% and 21.6% for the three and six months ended June 30, 1996, respectively. The increase as a percentage of basic and pay service revenues reflects the impact of program fee increases, which resulted from higher rates charged by certain programmers and higher pay-per-view program costs' outpacing revenue growth for the period. The increase in program fees, as a percentage of basic and pay service revenues, is also attributed to the higher number of channels offered by the systems acquired subsequent to June 30, 1996 compared to those acquired during the six months ended June 30, 1996 without the proportionately higher cable service revenues. Other Direct Expenses Other direct expenses, which include costs related to technical personnel, franchise fees and repairs and maintenance, amounted to $6.5 million and $13.3 million for the three and six months ended June 30, 1997, respectively, compared to $0.6 million and $0.9 million for the same periods ended June 30, 1996, respectively. The increase is a result of the Late 1996 Acquisitions. Other direct expenses as a percentage of total revenues, before non-recurring launch revenue, remained relatively constant at 10.6% and 11.1% for the three and six months ended June 30, 1997, respectively, compared to 11.5% and 11.4% for the same periods ended June 30, 1996, respectively. The slight decrease for the three and six months ended June 30, 1997 is due primarily to an increase in capitalized employee costs resulting from increased construction activities. Selling, General and Administrative Selling, general and administrative ("SG&A") expenses for the three and six months ended June 30, 1997 increased to $11.8 million and $23.6 million, respectively, compared to $1.0 million and $1.6 million for the same periods ended June 30, 1996, respectively, due primarily to the Late 1996 Acquisitions. SG&A as a percentage of total revenues, before non-recurring launch revenue, remained relatively constant at 19.3% and 19.6% for the three and six months ended June 30, 1997, respectively, compared to 20.6% and 20.2% for the same periods ended June 30, 1996, respectively. 15 18 Management and Consulting Fees Management and consulting fees of $0.8 million and $1.7 million for the three and six months ended June 30, 1997, respectively, represent fees charged by ICM-IV. ICM-IV provides certain management services to the Company for a per annum fee of 1.0% of the Company's total non-preferred capital contributions, or $3.4 million. ICM-IV management fees were not accrued on the Company's books prior to July 30, 1996, the date on which the Company's capital contributions were received from its partners. Depreciation and Amortization Depreciation and amortization expense for the three and six months ended June 30, 1997 increased to $33.1 million and $66.4 million, respectively, compared to $2.8 million and $4.7 million for the same periods ended June 30, 1996, respectively, as a result of the Late 1996 Acquisitions and capital expenditures of $83.7 million during the twelve months ended June 30, 1997, offset by the Company's use of an accelerated depreciation method that results in higher depreciation expense being recognized in the earlier years and lower expense in the later years. Interest and Other Income Interest and other income of $1.4 million and $2.8 million for the three and six months ended June 30, 1997, respectively, is comprised primarily of $1.1 million and $2.3 million of interest income earned on the escrowed securities for the three and six months ended June 30, 1997, respectively. Interest and other income also includes $0.1 million and $0.2 million of interest income earned on cash and cash equivalents for the three and six months ended June 30, 1997, respectively. The Company had no escrowed securities until it issued its 11.25% senior notes on July 30, 1996. Interest Expense Interest expense increased to $19.6 million and $38.9 million for the three and six months ended June 30, 1997, respectively, compared to $2.6 million and $4.0 million for the three and six months ended June 30, 1996, respectively, due primarily to higher debt balances during 1997 compared to the same periods in 1996. Interest expense for the three and six months ended June 30, 1997 includes interest on borrowings outstanding under the 11.25% senior notes and bank debt, which were incurred to finance the Company's acquisitions in July and August 1996. Interest expense for the three and six months ended June 30, 1996 includes interest on a bridge loan obtained by a subsidiary of ICP-IV for acquisitions of certain cable television systems during the first six months of 1996. Income Tax Benefit As partnerships, the tax attributes of ICP-IV and its subsidiaries other than RMG and IPCC accrue to the partners. Income tax benefit of $2.0 million and $3.5 million for the three and six months ended June 30, 1997, respectively, has been recorded based on RMG's stand alone tax provision. Prior to ICP-IV's acquisition of RMG on July 30, 1996, the Company had no income tax expense or benefit. Minority Interest Minority interest for the three and six months ended June 30, 1997, represents accrued dividends of $0.2 million and $0.4 million, respectively, on RMG's mandatorily redeemable preferred stock held by a subsidiary of TCI as the minority shareholder of RMG's common stock. Prior to ICP-IV's acquisition of RMG on July 30, 1996, ICP-IV's consolidated subsidiaries were wholly-owned by ICP-IV. Net Loss The Company's net loss for the three and six months ended June 30, 1997 increased to $20.3 million and $42.0 million, respectively, from $2.7 million and $4.4 million for the three and six months ended June 30, 1996, respectively. The increase is due primarily to the Late 1996 Acquisitions, which resulted in significantly higher expenses relative to the increased revenues. Net losses for the periods ended June 30, 1996 and 1997 16 19 were significantly impacted by the Company's significant amounts of depreciation, amortization and interest expense. LIQUIDITY AND CAPITAL RESOURCES The following table sets forth certain statement of cash flows information of the Company (in thousands) for the six months ended June 30, 1996 and 1997. The Company consummated acquisitions of cable television systems in January, February, May, July and August 1996. Cash flows from operating activities of the acquired systems have been included only from the dates of acquisition.
SIX MONTHS ENDED JUNE 30, ---------------------- 1996 1997 --------- -------- (UNAUDITED) STATEMENT OF CASH FLOWS DATA: Cash flows from operating activities.......................... $ 1,539 $ 28,468 Cash flows from investing activities.......................... (114,198) (32,524) Cash flows from financing activities.......................... 113,398 2,748
SIX MONTHS ENDED JUNE 30, 1996 The Company's cash balance increased from zero as of January 1, 1996 to $0.7 million as of June 30, 1996. Cash Flows From Operating Activities The Company generated cash flows from operating activities of $1.5 million for the six months ended June 30, 1996 reflecting (i) income from operations of $3.9 million before non-cash charges to income for depreciation and amortization of $4.7 million; (ii) interest paid of $3.4 million; and (iii) net working capital sources of approximately $1.0 million. Cash Flows From Investing Activities The Company used cash during the six months ended June 30, 1996 of $98.7 million to fund its purchase of certain cable television systems. The Company also purchased property and equipment of $0.5 million during the six months ended June 30, 1996 consisting primarily of cable system upgrades and rebuilds, plant extensions, converters and initial subscriber installations. In April 1996, prior to the Company's purchase of RMG, the Company loaned $15.0 million to RMG. Cash Flows From Financing Activities The Company financed the acquisitions described above with net proceeds from the Bridge Loan. SIX MONTHS ENDED JUNE 30, 1997 The Company's cash balance decreased by $1.3 million from $8.8 million as of January 1, 1997 to $7.5 million as of June 30, 1997. Cash Flows From Operating Activities The Company generated cash flows from operating activities of $28.5 million for the six months ended June 30, 1997 reflecting (i) income from operations of $57.8 million before non-cash charges to income for depreciation and amortization of $66.4 million; (ii) interest and other income received of $3.2 million, primarily from escrowed investments; (iii) interest paid of $38.1 million; (iv) $6.2 million in deferred revenue relating to payments received from certain programmers to launch and promote their new programs; and (v) other working capital uses and non-operating expenses of $0.6 million. Cash Flows From Investing Activities The Company purchased property and equipment of $46.0 million during the six months ended June 30, 1997 consisting primarily of cable system upgrades and rebuilds, plant extensions, converters and initial subscriber installations. 17 20 The Company received $13.9 million in proceeds from sale of its escrowed investments upon maturity on January 31, 1997. These proceeds and related interest received were used to fund interest payment obligations on the Notes of $16,569 on February 1, 1997. During the six months ended June 30, 1997, the Company also paid approximately $0.3 million for the right to provide cable services to a multiple dwelling unit in Greenville/Spartanburg. Cash Flows From Financing Activities The Company's cash flows from financing activities for the six months ended June 30, 1997 consisted primarily of net borrowings of $3.0 million under the bank revolving credit facility, which were used, along with cash available from operations, to fund the Company's capital requirements. PRO FORMA LIQUIDITY AND CAPITAL RESOURCES The Company has plans to make substantial expenditures for technological upgrades and rebuilds over the next several years under its Capital Improvement Program, which is reviewed and modified periodically by management. Management believes that substantial growth in revenues and operating cash flows is not achievable without implementing at least a significant portion of the Capital Improvement Program. For each of the years through maturity of the Notes, the Company's principal sources of liquidity are expected to be cash generated from operations and borrowings under the Company's revolving credit facility. The revolving credit facility provides for borrowings up to $475.0 million in the aggregate, with permanent annual commitment reductions beginning in 1999, and matures in 2004. As of June 30, 1997, the Company had $337.0 million outstanding under the revolving credit facility, leaving availability of $138.0 million. Prior to January 1, 1999, the Company has no mandatory amortization requirements under the Bank Facility. Management believes that the Company will be able to realize substantial growth rates in revenue over the next several years through a combination of household growth, increased penetration and new product offerings that the Company will be able to make available as technological upgrades are completed under the Capital Improvement Program. Management believes that, with the Company's ability to realize operating efficiencies and sustain substantial growth rates in revenue, it will be able to generate cash flows from operating activities which, together with available borrowing capacity under the revolving credit facility, will be sufficient to fund required interest payments and planned capital expenditures over the next several years. However, the Company may not be able to generate sufficient cash from operations or accumulate sufficient cash from other activities or sources to repay in full the principal amounts outstanding under the Notes on maturity. In order to satisfy its repayment obligations with respect to the Notes due August 1, 2006, the Company may be required to refinance the Notes. There can be no assurance that financing will be available at that time in order to accomplish any necessary refinancing on terms favorable to the Company. See Part II, Item 5 "Other Information -- Certain Factors Affecting Future Results -- Substantial Leverage; Deficiency of Earnings to Cover Fixed Charges"; and "-- Future Capital Requirements." Borrowings under the revolving credit facility are available under interest rate options related to ABR (which is based on the administrative agent's published prime rate) and LIBOR. Interest rates vary under each option based on IP-IV's senior leverage ratio. For ABR loans the rate varies from ABR to ABR plus 0.50%, and for LIBOR loans the rate varies from LIBOR plus 0.75% to LIBOR plus 1.75%. Interest periods are specified as one, two or three months for LIBOR loans. The Bank Facility requires quarterly interest payments, or more frequent interest payments if a shorter period is selected under the LIBOR option. The Bank Facility also requires IP-IV to pay quarterly a commitment fee of 0.25% or 0.375% per year, depending on the senior leverage ratio of IP-IV, on the unused portion of available credit. The obligations of IP-IV under the Bank Facility are secured by a first priority pledge of the capital stock and/or partnership interests of IP-IV's subsidiaries, a negative pledge on other assets of IP-IV and subsidiaries and a pledge of any inter-company notes. The obligations of IP-IV under the Bank Facility are guaranteed by IP-IV's subsidiaries. 18 21 The Bank Facility and the Indenture, as defined herein, restrict, among other things, the Company's ability to incur additional indebtedness, incur liens, pay distributions or make certain other restricted payments, consummate certain asset sales and enter into certain transactions with affiliates. In addition, the Bank Facility and Indenture restrict the ability of a subsidiary to pay distributions or make certain payments to ICP-IV, merge or consolidate with any other person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the assets of the Company. The Bank Facility also requires the Company to maintain specified financial ratios and satisfy certain financial condition tests. Such restrictions and compliance tests, together with the Company's substantial leverage and the pledge of substantially all of IP-IV's equity interests in its subsidiaries, could limit the Company's ability to respond to market conditions, to provide for unanticipated capital investments or to take advantage of business opportunities. As of June 30, 1997 the Company was in compliance with all of the debt covenants as provided by the Bank Facility and the Indenture. COMMITMENTS AND CONTINGENCIES The Company has continuing commitments under franchise agreements and FCC regulations and is subject to litigation and other claims in the ordinary course of business. See Note 5 to the Consolidated Financial Statements included herein. See Part II, Item 5 "Other Information -- Certain Factors Affecting Future Results -- Regulation of the Cable Television Industry" and "-- Expiration of Franchises." CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS Statements in this report which are prefaced with words such as expects, anticipates, believes and similar words and other statements of similar sense, are forward-looking statements. These statements are based on the Company's current expectations and estimates as to prospective events and circumstances which may or may not be within the Company's control and as to which there can be no firm assurances given. These forward-looking statements, like any other forward-looking statements, involve risks and uncertainties that could cause actual results to differ materially from those projected or anticipated. In addition to other risks and uncertainties that may be described elsewhere in this document, certain risks and uncertainties that could affect the Company's financial results include the following: the development, market acceptance and successful introduction of new services and enhancements; competitors' service introductions and enhancements; and risks associated with the 1996 Acquisitions, including the Company's ability to successfully integrate the acquired cable television systems. (For a description of the above risks and uncertainties, see the Certain Factors that May Affect Future Results section under Item 5 of PART II.) 19 22 PART II -- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS There are no material legal proceedings to which the Company is a party or to which the Company's properties are subject. The Company knows of no threatened or pending material legal action against it or its properties. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION CHANGE IN MANAGING GENERAL PARTNER In February of this year Leo J. Hindery, Jr. was appointed president of TCI. As part of Mr. Hindery's transition to TCI, substantially all of Mr. Hindery's interests in ICM-IV and its general partner IMI, as well as in various other management partnerships for the Related InterMedia Entities, were converted or sold. Pursuant to these transactions, Mr. Hindery no longer holds a controlling interest in IMI or ICM-IV and ICM-IV is no longer the managing general partner of the Company. On August 5, 1997, Robert J. Lewis purchased from Mr. Hindery all of the outstanding stock of IMI for $0.025 million. IMI retained its .002% general partner interest in ICM-IV and was appointed managing general partner of ICM-IV. Concurrently, Mr. Hindery withdrew as managing general partner of ICM-IV and converted his general partner interest in ICM-IV to a limited partner interest, and TCI purchased substantially all of the limited partner interests in ICM-IV. IMI owns 95% of the equity interests in InterMedia Capital Management, LLC ("ICM-IV LLC"), a newly formed limited liability company. ICM-IV LLC purchased from ICM-IV a .001% general partner interest in ICP-IV and the .01% managing general partner interests in certain of ICP-IV's subsidiaries for approximately $0.090 million. ICM-IV's remaining general partner interests in ICP-IV were converted to limited partner interests, and ICM-IV LLC was appointed the managing general partner of the Company. ICP-IV and its subsidiaries' various senior debt and partnership agreements have been amended to reflect the change in the Managing General Partner of the Company. In addition, pursuant to the transactions described above, certain arrangements have been entered into that would cause a change in the Managing General Partner. In the event that Mr. Lewis dies or Mr. Hindery leaves his employment with TCI, Mr. Hindery has the right to repurchase all of the stock of IMI from Mr. Lewis and thereby will hold a controlling interest in IMI which controls the Managing General Partner. In addition, the limited partners, have the right to remove the Managing General Partner in certain circumstances. INTERMEDIA PARTNERS IV, CAPITAL CORP. InterMedia Partners IV, Capital Corp., a Delaware corporation ("IPCC"), is the wholly owned subsidiary of the Company and was formed solely for the purpose of serving as a co-issuer of the Notes. The Notes are the joint and several obligation of the Company and IPCC. Separate financial statements and other disclosure concerning IPCC have not been provided because IPCC's financial position is not deemed to be material and it does not have any operations. 20 23 CERTAIN FACTORS AFFECTING FUTURE RESULTS SUBSTANTIAL LEVERAGE; DEFICIENCY OF EARNINGS TO COVER FIXED CHARGES The Company has indebtedness that is substantial in relation to partners' capital. On June 30, 1997, the Company's total debt balance was approximately $849.0 million and partners' capital balance was approximately $31.8 million. Under the Financing, ICP-IV received $360.0 million of new equity from its partners, comprised of cash and in-kind contributions. See Part I, Item 1 "Financial Statements -- InterMedia Capital Partners IV, L.P. -- Notes to Consolidated Financial Statements." In addition, subject to the restrictions in the indenture for the Notes (the "Indenture"), ICP-IV and its subsidiaries (other than IPCC) may incur additional indebtedness from time to time to finance acquisitions and capital expenditures or for general corporate purposes. The high level of the Company's indebtedness will have important consequences, including: (i) a substantial portion of the Company's cash flow from operations must be dedicated to debt service and will not be available for general corporate purposes or for the Capital Improvement Program; (ii) the Company's ability to obtain additional debt financing in the future for working capital, capital expenditures, acquisitions or for the Capital Improvement Program may be limited; and (iii) the Company's level of indebtedness could limit its flexibility in reacting to changes in the industry and economic conditions generally. See "-- Future Capital Requirements." There can be no assurance that the Company will generate earnings in future periods sufficient to cover its fixed charges, including its debt service obligations with respect to the Notes. In the absence of such earnings or other financial resources, the Company could face substantial liquidity problems. ICP-IV's ability to pay interest on the Notes and to satisfy its other debt obligations will depend upon its future operating performance, including the successful implementation of the Capital Improvement Program and will be affected by prevailing economic conditions and financial, business and other factors, many of which are beyond the Company's control. Based upon expected increases in revenue and cash flow, the Company anticipates that its cash flow, together with available borrowings, including borrowings under the Bank Facility, will be sufficient to meet its operating expenses and capital expenditure requirements and to service its debt requirements for the next several years. See Part I, Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations." However, in order to satisfy its repayment obligations with respect to the Notes, ICP-IV may be required to refinance the Notes on their maturity. There can be no assurance that financing will be available at that time in order to accomplish any necessary refinancing on terms favorable to the Company or at all. If the Company is unable to service its indebtedness, it will be forced to adopt an alternative strategy that may include actions such as reducing or delaying capital expenditures, selling assets, restructuring or refinancing its indebtedness or seeking additional equity capital. There can be no assurance that any of these strategies could be effected on satisfactory terms, if at all. Management believes that substantial growth in revenues and operating cash flows is not achievable without implementing at least a significant portion of the Capital Improvement Program. See Part I, Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations." HOLDING COMPANY STRUCTURE; STRUCTURAL SUBORDINATION The Notes are the general obligations of ICP-IV and IPCC and rank pari passu with all senior indebtedness of ICP-IV and IPCC, if any. The Company's operations are conducted through the direct and indirect subsidiaries of IP-IV. ICP-IV and IPCC hold no significant assets other than their investments in and advances to ICP-IV's subsidiaries, and ICP-IV and IPCC have no independent operations and, therefore, are dependent on the cash flow of ICP-IV's subsidiaries and other entities to meet their own obligations, including the payment of interest and principal obligations on the Notes when due. Accordingly, ICP-IV's and IPCC's ability to make interest and principal payments when due and their ability to purchase the Notes upon a Change of Control or Asset Sale (as defined in the Indenture) is dependent upon the receipt of sufficient funds from ICP-IV's subsidiaries and will be severely restricted by the terms of existing and future indebtedness of ICP-IV's subsidiaries. The Bank Facility was entered into by IP-IV and prohibits payment of distributions by any of ICP-IV's subsidiaries to ICP-IV or IPCC prior to February 1, 2000, and permits such distributions thereafter only to the extent necessary for ICP-IV to make cash interest payments on the Notes 21 24 at the time such cash interest is due and payable, provided that no default or event of default with respect to the Bank Facility exists or would exist as a result. RESTRICTIONS IMPOSED BY LENDERS The Bank Facility and, to a lesser extent, the Indenture contain a number of significant covenants that, among other things, restrict the ability of the Company to dispose of assets or merge, incur debt, pay distributions, repurchase or redeem capital stock, create liens, make capital expenditures and make certain investments or acquisitions and otherwise restrict corporate activities. The Bank Facility also contains, among other covenants, requirements that IP-IV maintain specified financial ratios, including maximum leverage and minimum interest coverage, and prohibits IP-IV and its subsidiaries from prepaying the Company's other indebtedness (including the Notes). The ability of the Company to comply with such provisions may be affected by events that are beyond the Company's control. The breach of any of these covenants could result in a default under the Bank Facility. In the event of any such default, lenders party to the Bank Facility could elect to declare all amounts borrowed under the Bank Facility, together with accrued interest and other fees, to be due and payable. If the indebtedness under the Bank Facility were to be accelerated, all indebtedness outstanding under such Bank Facility would be required to be paid in full before IP-IV would be permitted to distribute any assets or cash to ICP-IV. There can be no assurance that the assets of ICP-IV and its subsidiaries would be sufficient to repay all borrowings under the Bank Facility and the other creditors of such subsidiaries in full. In addition, as a result of these covenants, the ability of the Company to respond to changing business and economic conditions and to secure additional financing, if needed, may be significantly restricted, and the Company may be prevented from engaging in transactions that might otherwise be considered beneficial to the Company. FUTURE CAPITAL REQUIREMENTS Consistent with the Company's business strategy, and in order to comply with requirements imposed by certain of its franchising authorities and to address existing and potential competition, the Company has implemented the Capital Improvement Program. Pursuant to the Capital Improvement Program, the Company is expanding and upgrading the systems' plant to improve channel capacity and system reliability and to allow for interactive services such as enhanced pay-per-view, home shopping, data transmission (including Internet access) and other interactive services to the extent they become technologically viable and economically practicable. The Company expects to upgrade certain of its existing systems with a digital-capable, high-capacity, broadband hybrid fiber/coaxial network architecture to accomplish these objectives. Although the Company anticipates that it will continue to upgrade portions of its systems over the next several years, there can be no assurance that the Company will be able to upgrade its cable television systems at a rate that will allow it to remain competitive with competitors that either do not rely on cable into the home (e.g., MMDS and DBS) or have access to significantly greater amounts of capital and an existing communications network (e.g., certain telephone companies). The Company's business requires continuing investment to finance capital expenditures and related expenses for expansion of the Company's subscriber base and system development. There can be no assurance that the Company will be able to fund its Capital Improvement Program or any of its other capital expenditures. The Company's inability to upgrade its cable television systems or make its other planned capital expenditures could have a material adverse effect on the Company's operations and competitive position and could have a material adverse effect on the Company's ability to service its debt, including the Notes. LIMITED OPERATING HISTORY; DEPENDENCE ON MANAGEMENT ICP-IV was organized in March 1996. The partners of IP-IV transferred their partnership interests to ICP-IV in 1996. Therefore, there is limited historical financial information about the Company upon which to base an evaluation of its performance. Pursuant to the Acquisitions, the Company substantially increased the size of its operations. Therefore, the historical financial data of the Company may not be indicative of the Company's future results of operations. Further, there can be no assurance that the Company will be able to successfully implement its business strategy. The future success of the Company will be largely dependent 22 25 upon the efforts of senior management of its general partner, ICM-IV LLC. Although ICM-IV LLC as general partner of ICP-IV may acquire systems on behalf of the Company, there is no obligation to do so. COMPETITION IN CABLE TELEVISION INDUSTRY; RAPID TECHNOLOGICAL CHANGE Cable television systems face competition from other sources of news, information and entertainment, such as off-air television broadcast programming, newspapers, movie theaters, live sporting events, interactive computer programs and home video products, including video tape cassette recorders. Competing sources of video programming include, but are not limited to, off-air broadcast television, DBS, MMDS, SMATV and other new technologies. Furthermore, the cable television industry is subject to rapid and significant changes in technology. The effect of any future technological changes on the viability or competitiveness of the Company's business cannot be predicted. In addition, the Telecommunications Act of 1996 has repealed the cable/telephone cross-ownership ban, and telephone companies will now be permitted to provide cable television service within their service areas. Certain of such potential service providers have greater financial resources than the Company, and in the case of local exchange carriers seeking to provide cable service within their service areas, have an installed plant and switching capabilities, any of which could give them competitive advantages with respect to cable television operators such as the Company. BellSouth has applied for cable franchises in certain of the Company's franchise areas and is acquiring a number of wireless cable companies in regions where the Company operates. However, BellSouth has since acknowledged it is postponing its request for cable franchises in the state of Tennessee. On October 22, 1996 the Tennessee Cable Telecommunications Association ("TCTA") and the Cable Television Association of Georgia filed a formal complaint with the FCC challenging certain acts and practices that BellSouth is taking in connection with its deployment of video distribution facilities in certain areas of Tennessee and Georgia. In addition, the TCTA also filed a petition for investigation with the Tennessee Regulatory Authority concerning certain alleged acts and practices that BellSouth is taking in connection with its construction and deployment of cable facilities in Tennessee. The Company is joined by several other cable operators in the complaint. The Company cannot predict the likelihood of success in this complaint or the petition nor can there be any assurance that the Company will be successful with either the complaint or the petition. Furthermore, the Company cannot predict either the extent to which competition from BellSouth or other potential service providers will materialize or, if such competition materializes, the extent of its effect on the Company. REGULATION OF THE CABLE TELEVISION INDUSTRY The cable television industry is subject to extensive regulation at the federal, state and local levels, and many aspects of such regulation are currently the subject of judicial proceedings and administrative or legislative proposals. In February 1996, Congress passed, and the President signed into law, major telecommunications reform legislation, the Telecommunications Act of 1996. Among other things, the 1996 Act reduces in some circumstances and by 1999 will eliminate, rate regulation for CPS packages for all cable television systems and immediately eliminates regulation of this service tier for small cable operators. The FCC is undertaking numerous rulemaking proceedings to interpret and implement the provisions of the 1996 Act. The 1996 Act and the FCC's implementing regulations could have a significant effect on the cable television industry. In addition, the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act") imposed substantial regulation on the cable television industry, including rate regulation, and significant portions of the 1992 Act remain in effect despite the enactment of the 1996 Act and remain highly relevant to the Company's operations. The Company's systems elected the benchmark or cost-of-service methodologies to justify their basic and CPS tier rates in effect prior to May 15, 1994, but relied primarily upon the cost-of-service methodology to justify regulated service rates in effect after May 14, 1994. The Company's cost-of-service cases justifying certain rates for the CPS tier of service are currently pending before the FCC. Additionally, pursuant to the FCC's regulations, several local franchising authorities are reviewing the Company's basic rate justifications 23 26 and several other franchising authorities have requested that the FCC review the Company's basic rate justifications. Although the Company generally believes that its rates are justified under the FCC's benchmark or cost-of-service methodologies, it cannot predict the ultimate resolution of these cases. Management believes that the regulation of the cable television industry will remain a matter of interest to Congress, the FCC and other regulatory bodies. There can be no assurance as to what, if any, future actions such legislative and regulatory authorities may take or the effect thereof on the industry or the Company. RELATED PARTY TRANSACTIONS Conflicts of interests may arise due to certain contractual relationships of the Company and the Company's relationship with the Related InterMedia Entities and its other affiliates. IMI, which is wholly owned by Robert J. Lewis, provides administrative services at cost to the Company and to the operating companies of the Related InterMedia Entities. See Part II, Item 5 "Other Information --Change in Managing General Partner." Conflicts of interest may arise in the allocation of management and administrative services as a result of such relationships. In addition, the Related InterMedia Entities and their respective related management partnerships have certain relationships, and will likely develop additional relationships in the future with TCI, which could give rise to conflicts of interest. EXPIRATION OF FRANCHISES In connection with a renewal of a franchise, the franchising authority may require the Company to comply with different conditions with respect to franchise fees, channel capacity and other matters, which conditions could increase the Company's cost of doing business. Although management believes that it generally will be able to negotiate renewals of its franchises, there can be no assurance that the Company will be able to do so and the Company cannot predict the impact of any new or different conditions that might be imposed by franchising authorities in connection with such renewals. LOSS OF BENEFICIAL RELATIONSHIP WITH TCI The Company's relationship with TCI currently enables the Company to (i) purchase programming services and equipment from a subsidiary of TCI at rates that management believes are generally lower than the Company could obtain through arm's-length negotiations with third parties, (ii) share in TCI's marketing test results, (iii) share in the results of TCI's research and development activities and (iv) consult with TCI's operating personnel with expertise in engineering, technical, marketing, advertising, accounting and regulatory matters. While the Company expects the relationship to continue, TCI is under no obligation to offer such benefits to the Company, and there can be no assurance that such benefits will continue to be available in the future should TCI's ownership in the Company significantly decrease or should TCI for any other reason decide not to continue to offer such benefits to the Company. The loss of the relationship with TCI could adversely affect the financial position and results of operations of the Company. Further, the Bank Facility provides that an event of default will exist if TCI does not own beneficially 35.0% or more of ICP-IV's non-preferred partnership interests. See Part I, Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Transactions with Affiliates." PURCHASE OF NOTES UPON A CHANGE OF CONTROL Upon the occurrence of a Change of Control, the ICP-IV and IPCC are required to make an offer to purchase all outstanding Notes at a purchase price equal to 101.0% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of purchase. There can be no assurance that ICP-IV and IPCC will have available funds sufficient to purchase the Notes upon a Change of Control. In addition, any Change of Control, and any repurchase of the Notes required under the Indenture upon a Change of Control, would constitute an event of default under the Bank Facility, with the result that the obligations of the borrowers thereunder could be declared due and payable by the lenders. Any acceleration of the obligations under the Indenture or the Bank Facility would make it unlikely that IP-IV could make adequate distributions 24 27 to ICP-IV in order to service the Notes and, accordingly, that IP-IV could make adequate distributions to ICP-IV as required to permit ICP-IV and IPCC to effect a purchase of the Notes upon a Change of Control. ABSENCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF EXCHANGE NOTE PRICE The Notes registered pursuant to the exchange offer completed in January (the "Exchange Notes") are new securities for which there is currently no market. The Company does not intend to apply for listing of the Exchange Notes on any securities exchange or for the inclusion of the Exchange Notes in any automated quotation system. Although the Company was advised by NationsBanc Capital Markets, Inc. ("NationsBanc") and Toronto Dominion Securities (USA) Inc. ("Toronto Dominion") that, following completion of the private offering in July 1996, NationsBanc and Toronto Dominion intend to make a market in the Notes, they are not obligated to do so and any such market making activities may be discontinued at any time without notice. Accordingly, there can be no assurance as to the development or liquidity of any market for the Exchange Notes. If a market for the Exchange Notes were to develop, the Exchange Notes could trade at prices that may be higher or lower than their initial offering price depending upon many factors, including prevailing interest rates, the Company's operating results and the markets for similar securities. Historically, the market for non-investment-grade debt has been subject to disruptions that have caused substantial volatility in the prices of securities similar to the Exchange Notes. There can be no assurance that, if a market for the Exchange Notes were to develop, such a market would not be subject to similar disruptions. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibit Index
EXHIBIT SEQUENTIALLY NUMBER EXHIBIT NUMBERED PAGES - ------- -------------------------------------------------------------------- -------------- 3.3 Amended and Restated Agreement of Limited Partnership of InterMedia Capital Partners IV, L.P. dated as of August 5, 1997 by and among InterMedia Capital Management, LLC, InterMedia Capital Management IV, L.P. and various other limited partners. (Exhibits omitted. The Company agrees to furnish a copy of any exhibit to the Commission upon request.) 10.12 Consent and Second Amendment to Revolving Credit and Term Loan Agreement, dated as of July 30, 1996 and amended as of August 6, 1996, dated as of February 28, 1997 among InterMedia Partners IV, L.P. and The Bank of New York, as Administrative Agent, and The Bank of New York, NationsBank of Texas, N.A., Toronto Dominion (Texas), Inc., as Arranging Agents, and NationsBank of Texas, N.A. and Toronto Dominion (Texas), Inc., as Syndication Agents, and the Financial Institution Parties thereto. (Exhibit omitted. The Company agrees to furnish a copy of any exhibit to the Commission upon request.) 24.1 Power of Attorney (included on page 26)............................. 27.1 Schedule of Financial Data for InterMedia Capital Partners IV, L.P. ...............................................................
(b) Reports on Form 8-K: No reports on Form 8-K were filed with the Securities and Exchange Commission during the fiscal quarter ended June 30, 1997. 25 28 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INTERMEDIA CAPITAL PARTNERS IV, L.P. By: InterMedia Capital Management IV, L.P., its General Partner By: InterMedia Management, Inc., its General Partner By: /s/ ROBERT J. LEWIS ------------------------------------ Robert J. Lewis President Date: August 13, 1997. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints Edon V. Hartley, and Thomas R. Stapleton and each of them, his true and lawful attorneys-in-fact and agents, each with full power of substation and resubstation, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, and fully to all intents and purposes as he might or could do in person, hereby ratifying and conforming all that each of said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1934, THIS REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE - ------------------------------------------ -------------------------------- ----------------- /s/ ROBERT J. LEWIS President, Chief Executive August 13, 1997 - ------------------------------------------ Officer and Sole Director of Robert J. Lewis InterMedia Management, Inc. (principal executive officer) /s/ EDON V. HARTLEY Chief Financial Officer of August 13, 1997 - ------------------------------------------ InterMedia Management, Inc. Edon V. Hartley (principal financial officer) /s/ THOMAS R. STAPLETON Vice President of InterMedia August 13, 1997 - ------------------------------------------ Management, Inc. Thomas R. Stapleton (principal accounting officer)
26 EX-3.3 2 AMENDED/RESTATED AGREEMENT OF LIMITED PARTNERSHIP 1 EXHIBIT 3.3 Execution Copy INTERMEDIA CAPITAL PARTNERS IV, L.P. AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP Dated as of August 5, 1997 2 TABLE OF CONTENTS
Page ---- ARTICLE 1 General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.1 Formation of the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.3 Principal Place of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.4 Agent for Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.5 Business of the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.6 Term of the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 ARTICLE 2 Capital Contributions, Withdrawals and Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.1 Contributions of Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 (a) In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 (b) General Partner as Limited Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 (c) Additional Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 (d) Additional Contributions by Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 (e) Additional Contributions by General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 (f) Payment of Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 (g) General Partner Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 (h) Limited Partner Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 (i) Return of Certain Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.2 Withdrawals of Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 (a) Withdrawals in General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 (b) Required Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 (c) Effective Date of Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 (d) Effect of Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 (e) Limitations on Withdrawal of Capital Account . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 (f) Interest on Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.3 Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 ARTICLE 3 Profits and Losses; Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.1 Profits and Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.2 Partnership Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 3.3 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 ARTICLE 4 Management of Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 4.1 Management Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 4.2 Specific Authority of the General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 4.3 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 4.4 Valuation of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 4.5 Revaluation of Partnership Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 4.6 Administration Fee and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 (a) Administration Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 (b) General Partner Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 4.7 Rights of the Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
-i- 3
Page ---- (a) No Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 (b) Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 (c) Annual Operating Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 (d) Advisory Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 (e) Dissolution or Bankruptcy of a Limited Partner . . . . . . . . . . . . . . . . . . . . . . . . . 22 4.8 Successor General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 (a) Removal of the General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 (b) Withdrawal of the General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 (c) Hindery's Return to the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 (d) General Provision Regarding Approvals by the Limited Partners. . . . . . . . . . . . . . . . . . 25 (e) Right To Recover Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 4.9 Sale Initiation Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 4.10 Nonvoting Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 ARTICLE 5 Tax Matters and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 5.1 Filing of Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 5.2 Tax Reports to Current and Former Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 5.3 Restriction on General Partner Activity With Respect to Publicly Traded Partnerships . . . . . . . . . . . 28 5.4 Duties and Obligations of the General Partner With Respect to Publicly Traded Partnerships . . . . . . . . 29 5.5 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 5.6 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 5.7 Method of Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 ARTICLE 6 Conflicts of Interest; Indemnification; Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 6.1 Outside Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 6.2 Contracts With the General Partner, Affiliates and Limited Partners . . . . . . . . . . . . . . . . . . . 31 6.3 Indemnification of the Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 6.4 Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 ARTICLE 7 Termination and Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 7.1 No Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 7.2 Events of Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 7.3 Winding-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 7.4 Order of Liquidating Payments and Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 7.5 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 7.6 Government Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 7.7 Orderly Methods of Liquidating Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 ARTICLE 8 Transfer of Interest, Failure To Pay Capital Contributions, Beneficial Owners . . . . . . . . . . . . . . 36 8.1 Transfer of Partnership Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 8.2 Transfer of IP Holdings Affiliates' Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 8.3 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 8.4 Failure To Pay Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 8.5 Increase in Beneficial Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 ARTICLE 9 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 9.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
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Page ---- 9.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 9.3 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 9.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 9.5 Waiver of Partition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 9.6 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 9.7 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 9.8 Confidentiality of Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 9.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 9.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 9.11 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 9.12 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 9.13 Nonrecourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 9.14 Foreign Person. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
-iii- 5 DEFINITIONS
Term Section - ---- ------- 1933 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Legend No. 1 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 Adjacent Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1 Administration Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6(a) Advisory Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.7(d) Adverse Regulatory Development . . . . . . . . . . . . . . . . . . . . . . . . 7.6(b) Affected Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6(b) AVR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exhibit 2 BHC LP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.10 Capital Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 FRB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.10 General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble Greenville/Spartanburg . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exhibit 1 Note 5 Contribution Agreement ICM-IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble ICM LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble IMI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2 Income Tax Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 Indemnified Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2(a) Indemnifying Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2(a) Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Legend No. 1 Investing Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.5(a) Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b) IP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exhibit 1 Note 3 IP-I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.9(b) IP-IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.5(a) IPSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exhibit 2
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Term Section - ---- ------- IPWT Contribution Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . Exhibit 1 Note 3 IPWT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exhibit 1 Note 3 LP Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble New Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(f) Net Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(j)(4) Nonvoting Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.10 Notice Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.9(d) Override Tax Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(i)(B) Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 Partnership Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(a) Preferred Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(d)(1) Regulatory Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6(b) Retrievable Tax Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(i)(B) RMG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exhibit 2 Shortfall . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(i) Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exhibit 1 Note 5 TCI Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exhibit 1 Note 5 TCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.9(a) The Cablevision Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exhibit 2
-v- 7 INTERMEDIA CAPITAL PARTNERS IV, L.P. AGREEMENT OF LIMITED PARTNERSHIP THE LIMITED PARTNERSHIP INTERESTS ("INTERESTS") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"). SUCH INTERESTS ARE BEING OFFERED AND SOLD UNDER THE EXEMPTION PROVIDED BY SECTION 4(2) OF THE 1933 ACT AND/OR PURSUANT TO RULE 506 OF REGULATION D THEREUNDER. A PURCHASER OF ANY INTEREST MUST BE PREPARED TO BEAR THE ECONOMIC RISK OF THE INVESTMENT FOR AN INDEFINITE PERIOD OF TIME BECAUSE THE INTERESTS HAVE NOT BEEN REGISTERED UNDER THE 1933 ACT AND, THEREFORE, CANNOT BE SOLD UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THERE IS NO OBLIGATION OF THE PARTNERSHIP TO REGISTER THE INTERESTS UNDER THE 1933 ACT. THE AGREEMENT RESTRICTS TRANSFER OF THE INTERESTS. ACCORDINGLY, PURCHASE OF THE INTERESTS IS ONLY SUITABLE FOR INVESTORS WILLING AND ABLE TO ACCEPT THE ECONOMIC RISK OF THE INVESTMENT AND LACK OF LIQUIDITY. * * * THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP (this "Agreement"), originally entered into and effective as of March 19, 1996 by and among INTERMEDIA CAPITAL MANAGEMENT IV, L.P., a California limited partnership, as general partner ("ICM-IV"), GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation ("GECC") as the preferred limited partner (the "Preferred Limited Partner") with respect to, and only with respect to, a portion of its interest and as a limited partner with respect to the remainder of its interest, all as set forth on Exhibit 1 hereto, and the limited partners listed on the signature pages hereto, who together with such other persons or entities who hereafter shall be admitted as additional or substituted limited partners pursuant to the terms hereof, all of which shall be listed on Exhibit 1 hereto, collectively shall be referred to as the "Limited Partners," as amended as of November 27, 1996, is hereby amended and restated in its entirety as of August 5, 1997, by and among INTERMEDIA CAPITAL MANAGEMENT, LLC, a Delaware limited liability company, as general partner ("ICM LLC" or the "General Partner"), ICM-IV, as a Limited Partner, GECC and the other Limited Partners listed on Exhibit 1 hereto. Unless otherwise specifically set forth herein, the term Limited Partners shall include the Preferred Limited Partner. The General Partner and the Limited Partners are collectively referred to as the Partners and individually as a Partner. W I T N E S S E T H: WHEREAS, pursuant to that certain Assignment and Assumption Agreement of Partnership Interests dated as of April 5, 1997, and subject to the conditions precedent contained therein, ICM-IV assigned a portion of its general partner interest in the Partnership to ICM LLC; -1- 8 WHEREAS, the Partners desire to admit ICM LLC to the Partnership as a general partner; WHEREAS, following the admission of ICM LLC to the Partnership, ICM-IV desires to withdraw as a general partner of the Partnership and to convert its remaining interest in the Partnership to a limited partner interest, which limited partner interest shall include ICM-IV's right to participate in the 20% carried interest specified in Sections 3.1(k)(5)(A) and 3.3(d)(4) of this Agreement and its right to the Administration Fee specified in Section 4.6(a) of the this Agreement (the "LP Interest"); WHEREAS, pursuant to that certain Contribution Agreement dated as of August 5, 1997, TCI of Spartanburg, Inc. transferred a $4.8 million limited partner interest in the Partnership to ICM-IV, as reflected on Exhibit 1 hereto; WHEREAS, the Partners consented to the preceding actions in that certain Consent of Partners of InterMedia Capital Partners IV, L.P. dated as of February 7, 1997; and WHEREAS, the Partners desire to amend and restate this Agreement to reflect the preceding actions and other related amendments; NOW THEREFORE, in consideration of the mutual promises and agreements herein made and intending to be legally bound, the Partners hereby agree as follows: ARTICLE 1 General Provisions 1.1 Formation of the Partnership. The Partners hereby admit ICM LLC as a general partner of the Partnership, acknowledge the withdrawal of ICM-IV as a general partner of the partnership immediately thereafter and the conversion of ICM-IV's remaining interest in the Partnership to the LP Interest, and continue a limited partnership (the "Partnership") pursuant to the California Revised Limited Partnership Act (the "Act"). The Partnership shall continue without interruption as a limited partnership pursuant to the Act. The persons and entities listed as Limited Partners on Exhibit 1 to this Agreement shall continue as Limited Partners upon execution of this Agreement. 1.2 Name. The name of the Partnership shall be: InterMedia Capital Partners IV, L.P. The name of the Partnership may be changed by the General Partner upon compliance with applicable laws and after notice by the General Partner to the Limited Partners. 1.3 Principal Place of Business. The principal place of business of the Partnership shall be 235 Montgomery Street, Suite 420, San Francisco, California 94104. The principal place of business of the Partnership may be changed by the General Partner after notice to the Limited Partners. 1.4 Agent for Service of Process. The agent for service of process for the Partnership and his address shall be Robert J. Lewis, 235 Montgomery -2- 9 Street, Suite 420, San Francisco, CA 94104. The agent for service of process of the Partnership may be changed by the General Partner upon notice to the Limited Partners. 1.5 Business of the Partnership. (a) The Partnership was organized for and continues to exist for the purpose of directly or indirectly making equity and debt investments in, including acting as a general partner and/or a limited partner of InterMedia Partners IV, L.P., a California limited partnership ("IP-IV") and various partnerships which operate cable television systems (each an "Investing Partnership"), and operating cable television systems and to engage in all necessary and appropriate activities and transactions as the General Partner may deem necessary, appropriate or advisable in connection therewith, provided, however, the Partnership will not make any investments, nor maintain any offices outside of the United States. Prior to January 1, 1996, the Partnership had no material assets or liabilities and had not engaged in any material business activities. (b) Pending the investment of Partnership funds as described in Section 1.5(a), and the distribution of funds as described in Section 3.3, the Partnership may invest in certificates of deposit and overnight time deposits in commercial banks with capital and surplus over $500 million, commercial paper, money market funds, repurchase agreements and U.S. Treasury bills and other government obligations and any other short-term, investment grade highly liquid investments. (c) The Partnership may enter into, deliver and perform all contracts, agreements and other undertakings and engage in all activities and transactions that are necessary or appropriate to carry out the foregoing purposes. Without limiting the foregoing, the Partnership may: (i) exercise all rights, powers, privileges, and other incidents of ownership or possession with respect to Partnership property and investments; (ii) borrow or raise money and secure the payment of any obligations of the Partnership, IP-IV or an Investing Partnership by mortgage upon, or pledge or hypothecation of, all or any part of the assets of the Partnership, IP-IV or an Investing Partnership; (iii) engage personnel, whether part-time or full-time and do such other acts as the General Partner may reasonably deem necessary or advisable in connection with the maintenance and administration of the Partnership, IP-IV or an Investing Partnership and their investments; and (iv) engage attorneys, independent accountants, investment bankers, consultants or such other persons for the Partnership, IP-IV or an Investing Partnership as the General Partner may deem necessary or advisable. 1.6 Term of the Partnership. The term of the Partnership shall be from the date the Certificate of Limited Partnership was filed with the -3- 10 California Secretary of State until December 31, 2007, unless the Partnership is earlier dissolved pursuant to Article 7. ARTICLE 2 Capital Contributions, Withdrawals and Capital Accounts 2.1 Contributions of Capital. (a) In General. The committed capital contributions of the Partners shall be contributed in cash, in the respective amounts set forth next to each Partner's name on Exhibit 1 attached hereto in the manner provided by Section 2.1(f). Notwithstanding the foregoing, committed capital contributions shall be contributed in the form of property pursuant to the Greenville/Spartanburg Contribution Agreement and the IPWT Contribution Agreement (both as defined on Exhibit 1 hereto). The General Partner shall contribute an amount of capital to the Partnership such that the General Partner's capital contribution will be at least one one-thousandth of one percent (.001%) of the aggregate capital contributions of all of the Partners, a portion of which may be contributed in the form of a note as set forth on Exhibit 1 hereto. (b) General Partner as Limited Partner. The General Partner shall also be a Limited Partner to the extent that it purchases an interest as a Limited Partner or it purchases or becomes a transferee of all of or any part of the interest of a Limited Partner, and to such extent shall be treated in all respects as a Limited Partner, and the consent of the Limited Partners to such a purchase or transfer and admission of the General Partner as a Limited Partner need not be obtained; provided, however, the General Partner shall not be entitled to consent as a Limited Partner on those matters set forth in Section 4.7(b)(iv). The General Partner's capital contributions referred to in Sections 2.1(a) and 2.1(e) hereof will be made in its capacity as the General Partner and such capital contribution as the General Partner will not entitle the General Partner to any rights of a Limited Partner. (c) Additional Limited Partners. Until the aggregate committed capital contributions to the Partnership total $335,000,000 (not including the preferred limited partner interest of the Preferred Limited Partner), and subject to the condition that each new Limited Partner shall execute a signature page of this Agreement, which execution shall be deemed to represent the execution of a counterpart of this Agreement, and certain other agreements in connection with its subscription, and such Limited Partner meets the suitability requirements imposed on the original Limited Partners pursuant to the subscription agreements, the General Partner may admit one or more additional Limited Partners and may appropriately amend this Agreement to reflect such admissions, only with the consent of seventy percent (70%) in interest of the Limited Partners. Admission of a new Limited Partner shall not be a cause for dissolution of the Partnership. Upon the aggregate committed capital contributions to the Partnership equaling $335,000,000 (not including the preferred limited partner interest of the Preferred Limited Partner), the General Partner may admit any additional Limited Partners to increase the aggregate committed capital contributions beyond $335,000,000 only with the consent of one hundred -4- 11 percent (100%) in interest of the Limited Partners or accept any additional commitment to make capital contributions from the Limited Partners only with the consent of ninety percent (90%) in interest of the Limited Partners; provided, however, that the General Partner shall offer, on a pro rata basis, preemptive rights in connection with any additional cash capital contributions to the existing Limited Partners and any such additional commitments to make cash capital contributions shall be on terms no more favorable than those offered to the existing Limited Partners. The Limited Partners will have fifteen (15) days from the date of the written notice to exercise such preemptive rights. (d) Additional Contributions by Limited Partners. Until the aggregate committed capital contributions to the Partnership total $335,000,000 (not including the preferred limited partner interest of the Preferred Limited Partner), the General Partner shall permit one or more Limited Partners to make additional contributions to the Partnership until July 31, 1997 and may appropriately amend this Agreement to reflect such additional contributions, without the consent of any Limited Partner. A Partner which desires to make such additional contributions during such period shall notify the General Partner of its desire to do so not later than fifteen (15) days before such proposed contribution. (e) Additional Contributions by General Partner. The General Partner shall from time to time make additional capital contributions to the extent required to cause its aggregate capital contributions to equal at least one one-thousandth of one percent (.001%) of the aggregate capital contributions of all Partners. Any such additional capital contribution required of the General Partner shall be made within ten (10) days of the capital contribution of the Limited Partner(s) giving rise to such requirement. (f) Payment of Capital Contributions. The capital contributions to be contributed in the form of property pursuant to the Greenville/ Spartanburg Contribution Agreement or the IPWT Contribution Agreement shall be made at the time and in the manner set forth in those agreements which in the case of the Partners contributing assets pursuant to those agreements shall represent their entire commitment. In no event shall the TCI Entities be required to contribute more than forty-nine percent (49%) of the total capital contributions to the Partnership (excluding the capital contributions of the Preferred Limited Partner with respect to the Preferred Limited Partnership Interest). Except as otherwise agreed to by the Partnership and any Partner, the provisions of this Section 2.1(f) shall apply to all committed capital contributions to be made in cash. Included in the first capital call by the Partnership, the Partners will pay the portion of their committed capital contributions necessary to pay the organizational expenses of the Partnership up to a maximum of $300,000 (in aggregate). The committed capital contributions of the Limited Partners shall be paid on fifteen (15) business days written notice in the following manner: (i) as the General Partner determines is necessary or appropriate for meeting the funding requirements of the Partnership or to comply with the Partnership's obligations to make capital contributions to IP-IV or any Investing Partnership, (ii) commencing on January 1, 1996, on the first day of each calendar quarter of each year to the extent determined necessary by the General Partner for the payment of Partnership expenses or the reimbursement of the General Partner for Partnership expenses described in Section 3.2; and (iii) as necessary to pay the Administration Fee as set -5- 12 forth in Section 4.6. The amount to be paid by each Partner in respect of each such capital call shall be determined by first requiring any additional Partner admitted to the Partnership pursuant to Section 2.1(c) (and any other Partner to the extent of any non-pro rata increase in its capital commitment pursuant to Section 2.1(d)) ("New Partner") to pay an amount such that the proportion of capital contributions paid by such New Partner in relation to the committed capital contributions of such New Partner is the same as the proportion of capital contributions previously made by the other Partners, other than Partners who contributed property pursuant to the Greenville/Spartanburg Contribution Agreement and the IPWT Contribution Agreement, in relation to the committed capital contributions of such other Partners, and then by dividing each Partner's committed capital contribution by the aggregate committed capital contributions of all the Partners and multiplying such fraction by the total remaining amount of capital to be called. In the event a Partner executes and contributes a promissory note in respect of its capital commitment, any payment of principal pursuant to such note shall constitute a funding of its capital contribution. No capital contributions for the Partnership or for investments in Investing Partnerships will be called by the General Partner after December 31, 2000. References herein to a Partner's capital contribution shall mean the amount of cash or the principal amount of any note contributed by the General Partner or the value of property contributed as set forth in the Greenville/Spartanburg Contribution Agreement or the IPWT Contribution Agreement. (g) General Partner Obligations. The General Partner shall not be personally obligated to contribute cash or other assets to the Partnership to make up any reduction in the Capital Accounts of the Limited Partners either during the term of the Partnership or upon dissolution, subject to the obligation of the General Partner to return to the Partnership certain distributions as provided in the Act. (h) Limited Partner Obligations. Limited Partners shall not be personally obligated for the debts, liabilities and obligations of the Partnership or of any other Partner, except that, any other provision of this Agreement to the contrary notwithstanding, each Limited Partner shall only be obligated to make its full capital contribution to the Partnership in the amount set forth in Exhibit 1 hereto to the extent required by this Section 2.1, and each Limited Partner (and any former Limited Partner) shall be obligated to return to the Partnership distributions only to the extent provided in section 15666 of the Act. (i) Return of Certain Distributions. If upon the liquidation of the Partnership pursuant to Section 7.3 hereof, the Partners have not received the full amount described in Sections 3.3(d)(1), 3.3(d)(2) and 3.3(d)(3) hereof (such deficiency being referred to as the "Shortfall"), then notwithstanding anything in this Agreement to the contrary, including Section 2.1(g), ICM-IV shall be obligated to contribute to the Partnership the lesser of: (A) the amount necessary to provide the Partnership with sufficient funds to allow the Partnership to make distributions in an amount equal to the Shortfall; and (B) an amount equal to the sum of all distributions made to ICM-IV pursuant to Section 3.3(a) which are attributable to -6- 13 allocations of income and gain pursuant to Section 3.1(k)(5)(A) ("Override Tax Distributions"), but not in excess of the Retrievable Tax Benefit. For purposes of this Section 2.1(i), the term "Retrievable Tax Benefit" means an amount equal to the excess, if any, of the Override Tax Distributions over ICM-IV's net aggregate actual tax liability arising out of allocations of income and gain pursuant to Section 3.1(k)(5)(A). Such tax liability shall be computed by taking into account any offsets, allowable for Federal income tax purposes, against such allocations for (y) allocations of loss and deduction to ICM-IV pursuant to Section 3.1(j)(4)(A) and (z) any loss or deduction arising out of any payment to be made under this Section 2.1(i). 2.2 Withdrawals of Capital Accounts. No Partner shall be entitled to withdraw any amount from its Capital Account, other than as provided in this Section 2.2. (a) Withdrawals in General. A Limited Partner may not withdraw from the Partnership in whole or in part prior to dissolution of the Partnership, except (i) as required by Section 2.2(b), or (ii) with the unanimous written consent of all of the Partners. In the event a Limited Partner elects to withdraw with the consent of the Partners, or upon withdrawal of a Limited Partner pursuant to Section 2.2(b), the Partnership Interest of such Limited Partner shall be withdrawn in its entirety and shall be valued pursuant to Section 4.4 as of the date of withdrawal. Notwithstanding the foregoing, the value of the Preferred Limited Partnership Interest shall be deemed to be the amount of such Partner's Capital Contribution plus the Preferred Return, reduced by any distributions received by the Preferred Limited Partner prior to such valuation. The Capital Account of such withdrawing Limited Partner shall be paid for in the manner provided in this Section 2.2(a) as expeditiously as possible, at a time determined by the General Partner. The General Partner shall not be required to sell, liquidate, pledge or encumber any Partnership asset or security to effect such withdrawal. The General Partner shall have sole discretion to make the payment in respect of the Capital Account of any withdrawing Limited Partner in cash or, at the option of the General Partner, with a promissory note bearing interest at a rate per annum equal to the rate announced from time to time by Bank of America NT&SA as its prime rate. The promissory note will be payable only after the payment of all third party debt and payment of preferred return to the Preferred Limited Partner and any payments on such promissory notes will be paid pari passu with payments due to the other Partners (excluding the Preferred Limited Partner) with respect to the event giving rise to such payment to the withdrawing Limited Partner upon the earlier of (i) final dissolution of the Partnership, (ii) sale of all or substantially all of the Partnership's assets, or (iii) December 31, 2007. For purposes of the foregoing, the amount to be paid pari passu shall be determined by treating the amount that would have been paid to each Partner if no payment were made to the withdrawing Partner as if it also were represented by a promissory note and pro rating the amount available for distribution to each Partner and withdrawing Partner on that basis. Any portion of any payments made to a withdrawing Limited Partner in kind pursuant to this Section 2.2 shall be made, based upon the balance in a Partner's Capital Account as of the date of withdrawal, ratably in proportion to the value that each security or asset then held by the -7- 14 Partnership, including any interest in an Investing Partnership, determined pursuant to Section 4.4, bears to the value of all assets of the Partnership determined pursuant to Section 4.4. (b) Required Withdrawals. The General Partner may terminate the interest of any Limited Partner in the Partnership, with cause, at the end of any calendar month upon fifteen (15) days prior written notice. For purposes of this Agreement, "cause" shall be determined by the General Partner and shall mean the following: (i) the continued participation of such Limited Partner is likely, in the sole judgment of the General Partner, to cause the Partnership or the General Partner to register as an investment company or elect to be a "business development company" under the Investment Company Act of 1940 (the "Investment Company Act"), the General Partner or any of its partners to register as an investment adviser under the Investment Advisers Act of 1940, or the Partnership or any Partner to violate any law, or (ii) such Limited Partner fails to make a required capital contribution and the General Partner requires withdrawal pursuant to Section 8.4(b). Notwithstanding the foregoing, termination of the Partnership Interest of any Limited Partner as the result of an Adverse Regulatory Development (as defined in Section 7.6(b)) shall be treated as set forth in Section 7.6. (c) Effective Date of Withdrawal. For purposes of this Agreement, the effective date of a Partner's withdrawal shall mean the last day of the calendar month in which the General Partner consents to such withdrawal pursuant to Section 2.2(a) or such Partner's notice period lapses pursuant to Section 2.2(b). (d) Effect of Withdrawal. In the event of the withdrawal of any Limited Partner pursuant to this Section 2.2, the withdrawing Limited Partner shall not otherwise share in the income, gains and losses of the Partnership from the valuation date of its Partnership Interest and shall not have any other rights under this Agreement other than payment to it of its Capital Account as revalued pursuant to Section 4.5. The interest of a Limited Partner who withdraws pursuant to this Section 2.2 shall not thereafter be included in calculating the percentage in interest of the Limited Partners required to take any action under this Agreement. (e) Limitations on Withdrawal of Capital Account. The right of any withdrawn Partner or its legal representatives to have distributed the Capital Account of such Partner pursuant to this Section 2.2 is subject to the provision by the General Partner for all Partnership liabilities in accordance with section 15666 of the Act, and for estimates for contingencies and expenses. The unused portion of any such estimates shall be distributed after the General Partner shall have determined that the need therefor shall have ceased. (f) Interest on Capital Accounts. No interest or compensation shall be paid on or with respect to the Capital Account or capital contributions of any of the Partners, except as otherwise expressly provided herein. 2.3 Capital Accounts. The Partnership shall maintain for each Partner a separate capital account (a "Capital Account") in accordance with the capital accounting rules of section 704(b) of the Internal Revenue Code of 1986 (the "Code"), and the regulations thereunder (the "Income Tax -8- 15 Regulations") (including particularly section 1.704-1(b)(2)(iv) of the Income Tax Regulations). (a) In general, under such capital accounting rules (but subject to any contrary requirements of the Code and the Income Tax Regulations), a Partner's Capital Account shall be (i) increased by the amount of money and the fair market value (determined in accordance with Section 4.4 or as otherwise provided in the Greenville/Spartanburg Contribution Agreement or the IPWT Contribution Agreement) of other property (net of liabilities secured by such contributed property that the Partnership is considered to take subject to or assume under section 752 of the Code) contributed by the Partner to the Partnership and allocations to the Partner of Partnership income and gain (or items thereof), including income and gains exempt from tax, and (ii) decreased by the amount of money and the fair market value (determined in accordance with Section 4.4) of other property distributed (net of liabilities secured by such distributed property that the Partner is considered to take subject to or assume under section 752 of the Code) to the Partner by the Partnership and allocations to the Partner of Partnership loss and deduction (or items thereof), including Partnership expenditures not deductible in computing its taxable income and not properly chargeable to Capital Account. For purposes of making allocations of all items of income, gain, loss and deduction and for purposes of crediting or charging distributions to Capital Accounts, the Preferred Limited Partner shall be considered to have a Capital Account separate and distinct from its Capital Account attributable to its additional interest as a Limited Partner. (b) When Partnership property is revalued by the General Partner pursuant to Section 4.5 or distributed in kind (whether in connection with dissolution and liquidation of the Partnership or otherwise), the Capital Accounts of the Partners first shall be adjusted to reflect the manner in which the unrealized income, gain, loss or deduction inherent in such property (that has not previously been allocated to Capital Accounts) would be allocated among the Partners if there were a taxable disposition of such property for its fair market value (determined in accordance with Section 4.4 and taking into account section 7701(g) of the Code) and such income, gain, loss or deduction had been recognized for federal income tax purposes immediately upon such distribution or the event requiring such revaluation. (c) Where section 704(c) of the Code applies to Partnership property or when Partnership property is revalued pursuant to section 1.704-1(b)(2)(iv)(f) of the Income Tax Regulations, Capital Accounts of the Partners shall be adjusted in accordance with section 1.704-1(b)(2)(iv)(g) of the Income Tax Regulations as to allocations to the Partners of depreciation, depletion, amortization and gain or loss, as computed for book purposes with respect to such property. (d) The General Partner shall direct the Partnership's accountant to make all necessary adjustments in each Partner's Capital Account as required by the rules of section 704(b) of the Code and the regulations thereunder. -9- 16 ARTICLE 3 Profits and Losses; Distributions 3.1 Profits and Losses. A Partner's distributive share of the Partnership's total income, gain, loss, deduction or credit (or items thereof), which total shall be as shown on the annual federal income tax return prepared by the Partnership's accountants or as finally determined by the Internal Revenue Service or the courts, and as modified by the capital accounting rules of section 704(b) of the Code and the Income Tax Regulations thereunder as implemented by Section 2.3, as applicable, shall be determined as provided in this Section 3.1. (a) Except as otherwise provided in this Section 3.1, items of Partnership income, gain, loss, deduction and credit shall be allocated among the Partners in proportion to their respective actual capital contributions (each, a "Partnership Interest"). (b) Solely for tax purposes, in determining each Partner's allocable share of the taxable income or loss of the Partnership, depreciation, depletion, amortization and gain or loss with respect to any contributed property, or with respect to revalued property where Partnership property is revalued pursuant to section 1.704-1(b)(2)(iv)(f) of the Income Tax Regulations, shall be allocated to the Partners under the remedial method as provided in section 1.704-3(d) of the Income Tax Regulations. (c) Notwithstanding anything to the contrary in this Section 3.1, if there is a net decrease in Partnership Minimum Gain or Partner Nonrecourse Debt Minimum Gain (as such terms are defined in sections 1.704-2(b) and 1.704-2(i)(2), respectively, of the Income Tax Regulations) during a Partnership taxable year, then each Partner shall be allocated items of Partnership income and gain for such year (and, if necessary, for subsequent years), to the extent required by, and in the manner provided in, section 1.704-2 of the Income Tax Regulations. This provision is intended to be a "minimum gain chargeback" within the meaning of sections 1.704-2(f) and 1.704-2(i)(4) of the Income Tax Regulations and shall be interpreted and implemented as therein provided. (d) Subject to the provisions of Section 3.1(c), but otherwise notwithstanding anything to the contrary in this Section 3.1, if any Partner's Capital Account has a deficit balance in excess of such Partner's obligation to restore its Capital Account balance, computed in accordance with the rules of section 1.704-1(b)(2)(ii)(d) of the Income Tax Regulations (including such Partner's share of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain as provided in sections 1.704-2(g) and 1.704-2(i)(5) of the Income Tax Regulations), then sufficient amounts of income and gain (consisting of a pro rata portion of each item of Partnership income, including gross income, and gain for such year) shall be allocated to such Partner in an amount and manner sufficient to eliminate such deficit as quickly as possible. This provision is intended to be a "qualified income offset" within the meaning of section 1.704-1(b)(2)(ii)(d) of the Income Tax Regulations and shall be interpreted and implemented as therein provided. -10- 17 (e) Subject to the provisions of section 704(c) of the Code, Sections 3.1(b) through 3.1(d) and Sections 3.1(k)(1) and 3.1(l)(1) hereof, gain recognized (or deemed recognized under the provisions hereof) upon the sale or other disposition of Partnership property, which is subject to depreciation recapture, shall be allocated to the Partner who was entitled to deduct such depreciation. (f) Except as otherwise provided in Section 3.1(j), if and to the extent any Partner is deemed to recognize income as a result of any loans described herein pursuant to the rules of sections 1272, 1273, 1274, 1274A, 7872, 482 or 483 of the Code, or any similar provision now or hereafter in effect, any corresponding resulting deduction of the Partnership shall be allocated to the Partner who is charged with the income. Subject to the provisions of section 704(c) of the Code and Sections 3.1(b) through 3.1(d) hereof, if and to the extent the Partnership is deemed to recognize income as a result of any loans described herein pursuant to the rules of sections 1272, 1273, 1274, 1274A, 7872, 482 or 483 of the Code, or any similar provision now or hereafter in effect, such income shall be allocated to the Partner who is entitled to any corresponding resulting deduction. (g) Except as otherwise required by law, tax credits shall be allocated among the Partners pro rata in accordance with the manner in which Partnership profits are allocated to the Partners under this Section 3.1, as of the time the credit property is placed in service or if no property is involved, as of the time the credit is earned. Recapture of any tax credit required by the Code shall be allocated to the Partners in the same proportion in which such tax credit was allocated. (h) Except as provided in Sections 3.1(f) and 3.1(g) or as otherwise required by law, if the Partnership Interests of the Partners are changed hereunder during any taxable year, all items to be allocated to the Partners for such entire taxable year shall be prorated on the basis of the portion of such taxable year which precedes each such change and the portion of such taxable year on and after each such change according to the number of days in each such portion, and the items so allocated for each such portion shall be allocated to the Partners in the manner in which such items are allocated as provided in this Section 3.1 during each such portion of the taxable year in question. (i) Any special allocation of income or gain pursuant to Section 3.1(d) shall be taken into account in computing subsequent allocations of income and gain pursuant to this Section 3.1 so that the net amount of all such allocations to each Partner shall, to the extent possible, be equal to the net amount that would have been allocated to each such Partner pursuant to the provisions of this Section 3.1 if such special allocations of income or gain under Section 3.1(d) had not occurred. (j) (1) Items of deduction and loss attributable to recourse liabilities of the Partnership (within the meaning of section 1.752-1(a)(1) of the Income Tax Regulations but excluding Partner nonrecourse debt within the meaning of section 1.704-2(b)(4) of the Income Tax Regulations) shall be allocated among the Partners in accordance with the ratio in which the Partners -11- 18 share the economic risk of loss (within the meaning of section 1.752-2 of the Income Tax Regulations) for such liabilities. (2) Items of deduction and loss attributable to Partner nonrecourse debt within the meaning of section 1.704-2(b)(4) of the Income Tax Regulations shall be allocated to the Partners bearing the economic risk of loss with respect to such debt in accordance with section 1.704-2(i) of the Income Tax Regulations. (3) Items of deduction and loss attributable to Partnership nonrecourse liabilities within the meaning of section 1.704-2(b)(1) of the Income Tax Regulations shall be allocated among the Partners proportionately in accordance with their Partnership Interests. (4) All other items of deduction or loss ("Net Loss") shall be allocated (A) First, if allocations of items of income or gain have been made to any Partner under Section 3.1(k)(5)(A), then to such Partner in the amount of, and proportionate to, the amount of such items of income or gain; (B) Second, among any New Partners (as defined in Section 2.1(f)), an amount of Net Loss sufficient to reduce its Capital Account balance to what it would have been had all Partners been admitted to the Partnership as of the date hereof, with losses so allocated to each New Partner in the proportion which such New Partner's capital contribution bears to the capital contributions of all New Partners; and (C) Third, among (i) the Partners (other than the Preferred Limited Partner), proportionately in accordance with their Partnership Interests, except that Net Loss shall not be allocated to any Partner to the extent it would create a deficit balance in excess of such Partner's obligation to restore its capital account balance, computed in accordance with the rules of section 1.704-1(b)(2)(ii)(d) of the Income Tax Regulations and including such Partner's share of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain as provided in sections 1.704-2(g) and 1.704-2(i)(5) of the Income Tax Regulations and (ii) thereafter to the Preferred Limited Partner to the extent of its Capital Account balance until the balance of its Capital Account is equal to zero (but never reduced below zero). Any Net Loss which cannot be allocated to a Partner because of the limitation set forth in the previous sentence shall be allocated first to the other Partners to the extent such other Partners would not be subject to such limitation and second any remaining amount to the Partners in the manner required by the Code and the Income Tax Regulations. (k) Subject to the provisions of Sections 3.1(c) through 3.1(j), items of income and gain shall be allocated to the Partners in the following priority: (1) First, to the Preferred Limited Partner, (i) first, in an amount equal to the excess of the amount of losses previously allocated to it pursuant to Section 3.1(j)(4) over -12- 19 the amount of income previously allocated to it pursuant to this clause (i) of Section 3.1(k)(1) and (ii) thereafter in the amount of any distributions of the Preferred Return made to it pursuant to Section 3.3(d)(1)(i). (2) Second, to those Partners who have had items of loss or deductions allocated to them under section 3.1(j)(1), in the amount of, and proportionate to, the amount of such items of loss or deduction (provided, however, that no such allocation shall be made with respect to previously allocated items of loss or deduction to the extent of any income and gains previously deemed recognized under Section 2.3(b)). (3) Third, if allocations of Net Loss have been made to the Partners under Section 3.1(j)(4)(C)(i), then in the amount of, and proportionate to, the amount of such Net Loss (provided, however, that no such allocation shall be made with respect to previously allocated Net Loss to the extent of any income and gains previously deemed recognized under Section 2.3(b)). (4) Fourth, to the Partners (other than the Preferred Limited Partner), in amounts sufficient, after taking into account all amounts previously distributed to such Partner and including such Partner's actual capital contributions, to yield a pre-tax internal rate of return of fifteen percent (15%), on such Partner's actual capital contributions and in proportion to the amount required for each Partner. (5) Fifth, (A) twenty percent (20%) of the balance to ICM-IV; and (B) eighty percent (80%) of the balance among the Partners (other than the Preferred Limited Partner) in proportion to their relative Partnership Interests; (l) Notwithstanding Section 3.1(k), but subject to the provisions of Section 3.1(c) through 3.1(j), gain which is recognized (or deemed to be recognized) upon the sale, exchange or other disposition of all or substantially all of the assets of the Partnership or upon the dissolution of the Partnership shall be allocated in the following order: (1) First, to the Preferred Limited Partner, in an amount sufficient to bring its Capital Account balance (computed in the same manner as provided parenthetically in subparagraph 2 below) to an amount equal to the amount of its accrued and unpaid Preferred Return and its unrepaid capital contribution. (2) Second, to the Partners (other than the Preferred Limited Partner) having deficit balances in their Capital Accounts (computed after giving effect to all contributions, distributions, allocations and other Capital Account adjustments for all taxable years, including the year during which such liquidation or dissolution occurs and including each Partner's share of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain as provided in sections 1.704-2(g) and 1.704-2(i)(5) of the Income Tax Regulations), to the extent of, and in proportion to, those deficits; and -13- 20 (3) Thereafter, so as to bring the relationship of the credit balance in each Partner's (other than the Preferred Limited Partner) Capital Account (computed in the same manner as provided parenthetically in the preceding subparagraph (2)), as nearly as possible, the amount such Partner would receive in a distribution, if the distribution were made in accordance with the provisions of Section 3.3(d). (m) Unless otherwise specified by the instruments of transfer, any Partner transferring part of its interest pursuant to this Agreement shall be deemed to be transferring that portion of its share in future allocations of the Partnership attributable to the portion of its total Capital Account transferred by it. (n) All matters not expressly provided for by the terms of this Agreement concerning the valuation of assets of the Partnership, the allocation of profits, gains, deductions, losses and credits among the Partners, including taxes thereon, and accounting procedures shall be reasonably determined by the General Partner, whose determination shall be final and conclusive as to all of the Partners, provided that such action does not materially decrease the amount or postpone the timing of any distributions, including distributions upon liquidation, that any Partner would otherwise be entitled to receive pursuant to this Agreement. (o) Any financing or refinancing of TCI Debt (as defined in section 2.3(b) of the Greenville/Spartanburg Contribution Agreement) shall be a "non-recourse" liability of the Partnership as such term is used in Section 1.752-1(a)(ii) of the Income Tax Regulations. 3.2 Partnership Expenses. To the extent not paid by IP-IV or an Investing Partnership, the Partnership shall pay (or reimburse the General Partner or ICM-IV for) all expenses relating to the Partnership's business, investments or reports not required to be borne by the General Partner or ICM-IV pursuant to Section 4.6(b), including, without limitation, the following expenses: organization and offering expenses, placement fees, interest, legal, accounting, consulting and investment banking fees and expenses of the Partnership in connection with its investments, preparation of federal and state tax returns, cost of Partnership meetings (if any), all costs of acquisition and disposition of assets, securities or investments (including legal, overhead expenses, accounting, banking and advisory fees, expenses and commissions), all costs of research, market and statistical information which are paid to unrelated third parties in connection with a potential transaction, directors and advisers fees paid to unrelated third parties, fees and expenses incurred in connection with investigation, prosecution, or defense of any claims by or against the Partnership, all costs of insurance and any extraordinary or other expenses which the General Partner reasonably determines should properly be considered related to the investment of the Partnership's assets or the operations of the Partnership or its assets or investments. 3.3 Distributions. (a) Subject to Section 3.3(e), prior to dissolution of the Partnership, the General Partner shall, to the extent of available cash, distribute in cash, no later than ninety (90) days after the close of each fiscal year, -14- 21 the excess, if any, of (i) forty percent (40%) of an amount equal to the excess, if any, of the cumulative items of income and gain over the cumulative items of deduction, loss and credit (grossed up to a deduction equivalent at a forty percent (40%) tax rate) of the Partnership as shown on the federal income tax returns of the Partnership for all periods over (ii) the sum of amounts previously distributed pursuant to Section 3.3(a), 3.3(b) or 3.3(c), provided that the General Partner shall make such distributions on a quarterly basis as soon as possible to address any Partner's quarterly payments of estimated tax if such early distribution is feasible in terms of available cash and accurate anticipation of the fiscal year's net tax position. The General Partner, in its reasonable discretion, may adjust the rate of distribution provided in this Section 3.3(a) to reflect any changes made to the ordinary income and capital gains tax rates of the Code which may have the effect of requiring the Partners to pay more or less taxes on ordinary income or capital gains generated by Partnership activities. Distributions pursuant to this Section 3.3(a) shall be made to the Partners ratably in the proportions in which the net recognized income and gains (but not income and gains deemed recognized under Section 2.3(b)) for such fiscal periods have been allocated to them for federal income tax purposes pursuant to Section 3.1. For purposes of this Section 3.3(a), in the case of property contributed to the capital of the Partnership, items of income, gain, deduction and loss shall be computed as if the tax basis of such property were equal to its fair market value at the time of such contribution as determined in the Greenville/Spartanburg Contribution Agreement or the IPWT Contribution Agreement, or as otherwise provided herein. (b) Subject to Sections 3.3(a) and 3.3(e), prior to dissolution of the Partnership, the General Partner shall distribute the net proceeds from the sale or other disposition of any investment, after payment of all indebtedness with respect thereto and less reasonable estimates for the Partnership's expenses, liabilities, contingencies and working capital requirements, no later than ninety (90) days after the close of such sale. (c) Subject to the mandatory distribution provisions set forth in Sections 3.3(a) and 3.3(b) and to Section 3.3(e), prior to dissolution of the Partnership, the General Partner shall distribute to the Partners no less frequently than on a quarterly basis cash received by the Partnership from operations, any transaction not described in Section 3.3(b), and any dividends, interest or other cash distributions from any corporation or other entity in which the Partnership has invested and which is not necessary in the reasonable judgment of the General Partner for the payment of Partnership expenses or debt or the maintenance of reasonable reserves for the Partnership's expenses, liabilities, contingencies and working capital requirements. With the consent of seventy percent (70%) in interest of the Limited Partners, and with the consent of the Preferred Limited Partner with respect to distributions to such Partner, distributions may be made in assets of the Partnership other than those described in the preceding sentence. (d) Distributions pursuant to Sections 3.3(b) and 3.3(c) shall be made as follows: (1) First, to the Preferred Limited Partner (i) in payment of its accrued Preferred Return until it has received -15- 22 the full amount thereof, and (ii) then in payment of its unrepaid capital contribution. For purposes of this Agreement, the "Preferred Return" shall be an amount equal to eleven and three quarters percent (11.75%), per annum, compounded semi-annually, multiplied by its unrepaid capital contributions; for purposes of calculating Preferred Return for a subsequent period, any accrued and unpaid Preferred Return shall be added to the principal amount of the unrepaid capital contribution; and (2) Second, to those Partners (other than the Preferred Limited Partner) that have not received distributions pursuant to this Section 3.3 equal to their actual capital contributions, in proportion to their relative actual capital contributions until the Partners (other than the Preferred Limited Partner) have received distributions pursuant to this Section 3.3 equal to their actual capital contributions; and (3) Third, to those Partners (other than the Preferred Limited Partner) that have not received distributions pursuant to this Section 3.3 of amounts sufficient to yield a pre-tax internal rate of return of fifteen percent (15%) on their actual capital contributions, until such time that they have each received distributions pursuant to this Section 3.3 of amounts sufficient to yield a pre-tax internal rate of return of fifteen percent (15%) on their actual capital contributions and in proportion to the amount required for each such Partner; and (4) Fourth, twenty percent (20%) of the balance to ICM-IV and eighty percent (80%) of the balance to the Partners (other than the Preferred Limited Partner) in proportion to their relative Partnership Interests. All distributions made pursuant to this Section 3.3 (other than pursuant to Section 3.3(d)(1)) shall be treated as a return of Partners' capital contributions until their respective actual capital contributions are returned in full. Except as otherwise provided herein, no Partner shall have a priority over any other Partner as to returns of capital contributions or as to compensation as a Partner by way of income. (e) Any other provision of this Agreement to the contrary notwithstanding, no distribution shall be made which would render the Partnership insolvent or which is prohibited by the terms of any indebtedness of the Partnership, IP-IV or an Investing Partnership, provided, however, that the General Partner shall use its reasonable best efforts to obtain the right to make tax distributions pursuant to Section 3.3(a) above under the terms of any such indebtedness. ARTICLE 4 Management of Partnership 4.1 Management Generally. Except as otherwise provided herein, the business of the Partnership shall be conducted and managed exclusively by -16- 23 the General Partner and administered by ICM-IV under the supervision of the General Partner. The General Partner will not be obligated to do or perform any act in connection with the business of the Partnership not expressly set forth in this Agreement. The General Partner (including Robert J. Lewis as chief executive officer of the managing member of the General Partner) shall devote such time, effort and skill to the business and affairs of the Partnership, IP-IV and any Investing Partnerships and their management as may be reasonable and necessary or appropriate for the welfare and success of the Partnership, IP-IV and the Investing Partnerships. The General Partner shall have the rights and powers and be subject to all the restrictions and liabilities of a partner in a partnership without limited partners. 4.2 Specific Authority of the General Partner. Except as otherwise provided in this Agreement, the General Partner shall have full power and authority to do all things and to perform all acts that it reasonably deems necessary or advisable to conduct the business affairs of the Partnership, IP-IV and the Investing Partnerships, or incidental thereto, without the consent of any Limited Partner, including, without limitation, full power and authority to take any of the following actions, each of which is hereby expressly authorized by the parties hereto: (a) Enter into contracts and perform the obligations of the Partnership undertaken in such contracts, including, without limitation, any contract entered into with the General Partner or a Limited Partner pursuant to Section 6.2; (b) Make all decisions with respect to the investigation, selection, negotiation, structure, acquisition, operation and disposition of the assets of the Partnership, IP-IV or any Investing Partnership; and employ such agents, consultants, advisers, directors, attorneys, accountants, investment bankers and other personnel as may be necessary or appropriate for the business of the Partnership, IP-IV or the Investing Partnerships on such terms and conditions as the General Partner shall determine are reasonable; provided, however, that concurrent with the formation of a new Investing Partnership or any partnership which provides financing to any Investing Partnership, the General Partner will obtain an opinion of counsel, reasonably satisfactory to the Advisory Committee, that such Investing Partnership is taxable as a partnership. (c) Open, maintain and close bank accounts and draw checks and other orders for the payment of money; (d) Collect accounts receivable, income and other payments due to the Partnership, IP-IV or any Investing Partnership; (e) Keep the books and records of the Partnership and hire independent certified public accountants; (f) Pay accounts payable and other expenses of the Partnership; (g) Transfer, hypothecate, compromise or release any Partnership claim; -17- 24 (h) Administer the financial affairs of the Partnership, IP-IV and any Investing Partnership, make tax and accounting elections, including an election or elections under section 754 of the Code (which election shall be made upon the request of any Limited Partner), file all required tax returns relating to the Partnership, pay the liabilities of the Partnership and distribute the profits of the Partnership to the Partners; (i) Borrow money on behalf of the Partnership, IP-IV or any Investing Partnership and make, issue, accept, endorse and execute promissory notes, drafts, bills of exchange, guarantees, and other instruments and evidences of indebtedness in the name of the Partnership, IP-IV or any Investing Partnership, including, without limitation, in connection with and as part of purchasing assets and securities for the Partnership, IP-IV or any Investing Partnership and mortgage, pledge, assign or grant security interests in all or any part of the assets then owned or thereafter acquired by the Partnership, IP-IV or any Investing Partnership in connection therewith; (j) Cause the Partnership, IP-IV and any Investing Partnership to purchase and maintain any insurance, in amounts and on terms customary in the industry, covering the potential liabilities of the Partnership, the General Partner and its members, partners, employees and agents, and the officers, directors and employees of the members of the General Partner, as well as the potential liabilities of any person serving at the request of the Partnership, IP-IV or any Investing Partnership as a director, officer, employee, agent, partner, consultant or adviser of any corporation or other entity in which the Partnership, IP-IV or any Investing Partnership has an investment; provided, however, the General Partner shall cause the Partnership to purchase insurance for the liabilities of directors and officers to the extent such insurance is available on commercially reasonable terms; (k) Commence or defend litigation that pertains to the Partnership, IP-IV or any Investing Partnership or any assets of the Partnership, IP-IV or any Investing Partnership and investigate potential claims; (l) Execute and file fictitious business name statements and similar documents; (m) Admit additional Limited Partners and permit additional capital contributions as provided in Sections 2.1(c) and 2.1(d) (and appropriately amend this Agreement to reflect such admissions and additional capital contributions) without the consent of any Limited Partner except as provided in Section 2.1(c) and admit an assignee of a Limited Partner's interest to be a substituted Limited Partner in the Partnership (and appropriately amend this Agreement and the Partnership records to reflect such assignment), without the consent of any Limited Partner; (n) Terminate the Partnership pursuant to Section 7.2(vi), (vii) or (viii); and (o) Execute and deliver all documents and instruments necessary or advisable to carry out the foregoing. -18- 25 4.3 Reports. The General Partner will distribute annual audited financial statements of the Partnership, prepared by a "big six" accounting firm, to the Limited Partners within ninety (90) days after the end of each Partnership fiscal year. The General Partner will distribute unaudited quarterly progress reports on the Partnership's investment activities to the Limited Partners within forty-five (45) days of the end of the first three fiscal quarters. The General Partner will distribute monthly income statements of the Partnership to the Limited Partners as soon as practicable after such statements are prepared, but in no event more than twenty-five (25) days after the end of such month. The General Partner will distribute any default notices with respect to the debt of the Partnership, IP-IV or any Investing Partnership to the Limited Partners within five (5) days of the receipt thereof from a lender or the delivery thereof by the Partnership, IP-IV or any Investing Partnership to a lender. 4.4 Valuation of Assets. (a) The General Partner shall value the assets of the Partnership whenever the General Partner may, in its sole discretion, deem appropriate, and whenever else required by this Agreement or under the Code, and on any date provided for in this Agreement on which valuation is required due to the withdrawal of a Limited Partner pursuant to Section 2.2 or Section 7.6, and shall within ninety (90) days of each such date furnish to each Limited Partner a statement showing the value of each system and the net worth of the Partnership. If the Partnership is dissolved and the assets are not sold, the General Partner shall value the assets of the Partnership as of the date of dissolution and shall as promptly as practicable thereafter furnish the Limited Partners with the statement showing the value of each system and the net worth of the Partnership. The value of any system of the Partnership determined by the General Partner pursuant to this Section 4.4(a) shall be conclusive and binding on all of the Partners and all parties claiming through or under them except as provided in Section 4.4(c). (b) In the event of the withdrawal of a Limited Partner from the Partnership pursuant to Section 2.2 or Section 7.6, the General Partner shall within a reasonable period of time notify the Limited Partners in writing of the valuation of the total amount of the assets of the Partnership attributable to the withdrawing Limited Partner. (c) If (i) any of the Limited Partners object in writing to the valuation of the systems and/or net worth of the Partnership made pursuant to Section 4.4(a) by the General Partner or (ii) the withdrawing Limited Partner objects in writing to the valuation of the systems and/or net worth of the Partnership made pursuant to Section 4.4(b) by the General Partner, in either case, within thirty (30) days after the General Partner has furnished the Limited Partners with the statement provided by Section 4.4(a) or 4.4(b) as of such date, the General Partner shall give notice to all the Limited Partners of such objection and the General Partner shall attempt to determine an alternative value for the systems and net worth of the Partnership (with respect to a valuation pursuant to Section 4.4(a)) or the assets of the Partnership attributable to the withdrawing Partner (with respect to a valuation pursuant to Section 4.4(b)). If the General Partner and (i) seventy percent (70%) in interest of the Limited Partners (with respect to a valuation pursuant to 4.4(a)) or (ii) the withdrawing Limited Partner (with respect to a valuation pursuant to Section 4.4(b)) are unable to -19- 26 determine an alternative value for the systems and/or net worth of the Partnership within sixty (60) days after such objections, the matter in dispute shall be submitted to three appraisers of which one shall be chosen by the General Partner, one by (x) seventy percent (70%) in interest of the Limited Partners (with respect to a valuation pursuant to Section 4.4(a)) or (y) the withdrawing Limited Partner (with respect to a valuation pursuant to Section 4.4(b)) and the third by means of the written agreement of the two appraisers selected by such Partners, provided that such third individual is not associated with any of the Partners. Each appraiser appointed in accordance with this paragraph shall complete its appraisal within sixty (60) days of its appointment. The two appraisals closest to one another shall be averaged and such valuation shall be final and binding on the Partners. If performed in connection with Section 4.4(a), the Partnership shall bear all of the costs and expenses of such appraisal. The Partnership and the withdrawing Limited Partner shall each bear one-half (1/2) of the costs and expenses of such appraisal if performed in connection with Section 4.4(b). 4.5 Revaluation of Partnership Assets. The General Partner shall revalue Partnership property to its fair market value (determined as provided in Section 4.4) as of the date when any additional or existing Partner makes a non-pro rata contribution of money or property to the Partnership in exchange for an interest in the Partnership or when the Partnership distributes money or property to a withdrawing or continuing Partner in exchange for all or part of its interest in the Partnership. 4.6 Administration Fee and Expenses. (a) Administration Fee. The Partnership will pay to ICM-IV in cash during the period the Partnership is in existence, as full payment for administrative services rendered to the Partnership, an annual administration fee (the "Administration Fee") equal to one percent (1%) per annum of the total capital contributions that have been funded by Partners to the Partnership (other than with respect to the preferred limited partner interest of the Preferred Limited Partner) determined as of the beginning of each calendar quarter in each fiscal year of the Partnership; provided, however, if the acquisition of a cable system by the Partnership, IP-IV or an Investing Partnership is made with debt financing of more than two-thirds of the purchase price of such cable system, capital contributions of one-third of such purchase price shall be deemed to have been made and the Administration Fee shall be paid on such deemed contributions. At such time as any such debt financing is replaced with actual capital contributions of the Partners, the Administration Fee shall be based on such actual capital contributions rather than a deemed contribution for such amount. Notwithstanding the foregoing, in no event shall an Administration Fee be payable on any amounts in excess of the total capital commitments to the Partnership. Except with respect to acquisitions of cable systems with debt financing as set forth above, ICM-IV agrees that it will not receive an administration fee from the Investing Partnerships of the Partnership greater than one percent (1%) of the capital contributions to the Investing Partnerships and the Partnership. The Administration Fee for the first year on any capital contribution shall be paid in advance upon payment of such capital contribution and shall begin to accrue from the closing of the first cable television system purchased by the Partnership. The Administration Fee for all subsequent periods shall be paid quarterly, in advance, one- -20- 27 fourth of one percent (.25%) per quarter, on the first business day of each calendar quarter, beginning with the first calendar quarter that begins after the first anniversary of the payment of such capital contribution. Any Administration Fee due for the period from the expiration of such first year and the next scheduled payment of the Administration Fee shall be paid at such next payment date. The Administration Fee shall be offset, on a cumulative basis, by any administration fee received by ICM-IV or any affiliate of ICM-IV from IP-IV or any Investing Partnership. The Administration Fee for the Partnership's last annual fiscal year, if less than a full year, shall be prorated based upon the number of days in such period. (b) General Partner Expenses. The General Partner and ICM-IV will bear and be charged with the following expenses: salaries and other expenses (including bonuses and health, welfare, retirement and other benefits) and overhead expenses (including rents, travel and costs) of the General Partner, ICM-IV, and the chief operating officer and the directors of development, finance and accounting of ICM-IV and their related staffs. 4.7 Rights of the Limited Partners. (a) No Control. The Limited Partners shall not take part in the control, management, direction or operation of the business of the Partnership, nor, except as specified in Section 4.7(b) and Section 4.9, have the right, power or authority to be consulted with respect to investment decisions or the other affairs of the Partnership nor have the power to sign documents for or otherwise bind the Partnership and shall have no right to consent on any matter except those expressly set forth in this Agreement or otherwise specified in Section 4.7(b) and Section 4.9. (b) Consents. The Limited Partners shall have a right to consent only with respect to those matters expressly set forth in this Agreement and the matters listed below, which actions may be taken only with the written consent of the General Partner (except with respect to item (iv) which action may be taken without the consent of the General Partner and except to the extent provided in Section 4.9) and the affirmative consent of the percent in interest of the Limited Partners so indicated. The Preferred Limited Partner shall not be entitled to consent, initiate or cause any sale of the Partnership's cable systems or otherwise vote on or take action with respect to any matters in this Agreement, including without limitation Section 4.9 hereof, unless required by law and the preferred limited partnership interest of the Preferred Limited Partner shall not be included in either the numerator or the denominator of any computation of the required percentage in interest of the Limited Partners hereunder for all such purposes (except where the consent of the Preferred Limited Partner is required); provided, that the Preferred Limited Partner shall be entitled to consent on any matter which requires the unanimous consent of the Limited Partners and provided further that the Preferred Limited Partner's consent shall be required for any settlement with a tax authority which would affect the income, gain, loss, deductions or credits allocated to it. For any matters on which the Preferred Limited Partner is not entitled to consent, the required consent shall be the required percent of interest of the Limited Partners other than the Preferred Limited Partner Interest of the Preferred Limited Partner. In the event one Limited Partner holds seventy percent (70%) of the interests of the Limited Partners, all references in this Agreement to seventy percent (70%) shall be changed to seventy-five -21- 28 percent (75%). For purposes of this Agreement a Limited Partner's interest in the Partnership shall be determined on the basis of its actual capital contributions. The Limited Partners shall be entitled to consent on the following matters: (i) The amendment of this Agreement pursuant to Section 9.3 hereof upon the affirmative consent of seventy percent (70%) in interest of the Limited Partners; provided, however, that this Agreement may not be amended without the approval of the Partner being affected if the amendment would change the allocation to any Partner of any income or loss or distribution of cash or property from that which is provided or contemplated herein (other than as a result of any dilution in their Partnership Interests resulting from the admission of any new Limited Partners as contemplated by Section 2.1(c) or additional contributions by Partners pursuant to Section 2.1(d) or 2.1(e) hereof, as Section 2.1(c), Section 2.1(d) or 2.1(e) may be amended from time to time); (ii) The amendment of the allocations and distributions to the Limited Partners other than as permitted by Section 3.1 upon the affirmative consent of each Partner adversely affected; (iii) The admission of a new general partner where there is an existing General Partner upon the affirmative consent of seventy percent (70%) in interest of the Limited Partners; (iv) The approval of a transaction in which the General Partner or any of its affiliates has an actual or potential conflict of interest with the Limited Partners or the Partnership and which is not permitted by Section 6.1 or 6.2 or otherwise expressly permitted by the terms of this Agreement, upon the affirmative consent of seventy percent (70%) in interest of the disinterested Limited Partners; provided, however, the transactions set forth on Exhibit 2 hereto may be consummated by the Partnership, IP-IV or any Investing Partnership without any further consent of the Limited Partners; (v) The continuation of the Partnership to effect an orderly dissolution of the Partnership in accordance with Article 7 upon the affirmative consent of seventy percent (70%) in interest of the Limited Partners; (vi) The agreement to enter into any Investing Partnership or make any investments in excess of $15,000,000 upon the affirmative consent of seventy percent (70%) in interest of the Limited Partners; provided, however, each of the acquisitions set forth on Exhibit 2 hereto may be consummated by the Partnership, IP-IV or any Investing Partnership without any further consent of the Limited Partners; (vii) The merger of or consolidation of the Partnership with any other entity upon the affirmative consent of each Partner; -22- 29 (viii) The taking of any act that would make it impossible to carry on the business of the Partnership except upon the dissolution of the Partnership in accordance with this Agreement upon the affirmative consent of each Partner; (ix) Confessing a judgment against the Partnership, IP-IV or any Investing Partnership in excess of one hundred fifty thousand dollars ($150,000) or settling a judgment against the Partnership, IP-IV or any Investing Partnership in excess of three hundred thousand dollars ($300,000) upon the affirmative consent of each Partner; (x) Using any funds or assets of the Partnership other than for the benefit of the Partnership upon the affirmative consent of each Partner; (xi) Taking any action that would subject the Limited Partners to personal liability as a general partner in any jurisdiction upon the affirmative consent of each Partner; (xii) The making of, execution of, or delivery of any general assignment for the benefit of the Partnership's creditors upon the affirmative consent of each Partner; (xiii) Any matter in the partnership agreement of IP-IV or any Investing Partnership that requires the consent of the Limited Partners or of the limited partner or a general partner other than the managing general partner of IP-IV or an Investing Partnership; provided, however, that the consent required under this clause (xiii) shall require the approval of the applicable percentage of Limited Partners that would have been required if such consent were required under this Agreement or if no percentage is specified hereunder, seventy percent (70%); and provided further, that the amount or timing of any distributions to the Partnership from any Investing Partnership or IP-IV may not be changed in a manner inconsistent with the amount or timing of distributions under this Agreement without the unanimous consent of the Limited Partners and the General Partner; (xiv) The approval of a transaction with Tele-Communications, Inc. or any of its affiliates in an amount greater than five hundred thousand dollars ($500,000) or transactions less than five hundred thousand dollars ($500,000), which exceed an aggregate of two million dollars ($2,000,000), in any twelve (12) month period, upon the affirmative consent of a majority in interest of the Limited Partners (other than TCI or any of its affiliates); provided, however, that purchases of programming and equipment on no less favorable to the Partnership than arms'-length terms and in the ordinary course of business shall not require any approval by the Limited Partners; and provided further, that the transactions set forth on Exhibit 2 hereto may be consummated by the Partnership, IP-IV or any Investing Partnership without any further consent of the Limited Partners; -23- 30 (xv) The approval of any waiver of rights of the Partnership under the IPWT Contribution Agreement if such waiver would result in the Partnership forgoing rights valued in excess of five percent (5%) of the total consideration paid by the Partnership for the contribution of partnership interests and debt transferred under such agreement; and (xvi) The designation of management personnel by the managing general partner of ICM-IV for allocation of the "IRR Bonus" provided for in the Incentive Bonus Program for management employees of the general partner of ICM-IV upon the affirmative consent of seventy percent (70%) in interest of the Limited Partners, which consent shall not unreasonably be withheld, in the event that the Limited Partners have not received a fifteen percent (15%) cumulative internal rate or return on their investment upon termination of the Partnership (calculated in accordance with Section 3.3(d)(3)); provided, however, that if TCI or an affiliate of TCI votes against such designation and a majority in interest of the Limited Partners (excluding TCI) agree to the designation, then such designation will be deemed approved. (c) Annual Operating Plan. The General Partner shall prepare and submit to the Limited Partner having the largest interest as a Limited Partner in the Partnership for approval (which approval shall not be unreasonably withheld) each year an annual operating plan for the Partnership (including IP-IV and the Investing Partnerships) which shall also set forth the amounts to be expended by the Partnership, IP-IV or any Investing Partnership for capital expenditures in the following categories: system rebuild, plant extensions, converters and related equipment, plant maintenance and miscellaneous expenditures. A copy of the final approved operating plan shall be sent to each Limited Partner. Notwithstanding any provision of this Agreement to the contrary, the General Partner, as general partner of IP-IV and each Investing Partnership shall cause IP-IV and each Investing Partnership not to make any expenditures which would cause expenditures in any enumerated category of the annual operating plan to exceed the approved amount for such category by more than ten percent (10%) without the consent of the largest Limited Partner as set forth above. (d) Advisory Committee. The Partnership will form an Advisory Committee (the "Advisory Committee") consisting of one representative from each of the seven (7) Limited Partners with the largest aggregate interests in the Partnership (for purposes of selection of the Advisory Committee, (i) each of the interests of GECC as a Preferred Limited Partner and a Limited Partner shall be aggregated, (ii) each of the interests of NationsBanc Investment Corp. and Atlantic Equity Corporation as Limited Partners shall be aggregated, (iii) each of the interests of Mellon Bank, N.A., as Trustee for Third Plaza Trust and the interests of Mellon Bank, N.A., as Trustee for Fourth Plaza Trust as Limited Partners shall be aggregated, and (iv) each of the interests of the IP Holdings Affiliates (as that term is defined in Exhibit 1 hereto) shall be aggregated). For purposes of this Agreement, the determination of aggregate Limited Partner interests in the Partnership shall be based on the aggregate Limited Partner interests in the Partnership held by a Limited Partner and any affiliates thereof, which aggregate holdings shall entitle such Limited Partner and affiliates, if any, to one representative on the Advisory Committee. The General Partner will be responsible for administration of the Advisory -24- 31 Committee and shall have the right to attend any meeting of the Advisory Committee, but shall be excluded from Advisory Committee membership. The General Partner will distribute to the Advisory Committee monthly profit and loss statements of the Partnership and any other monthly financial statements prepared for management personnel. The General Partner will distribute to the Advisory Committee quarterly profit and loss statements, balance sheets and statements of cash flow of the Partnership. The General Partner will distribute to the Advisory Committee the proposed annual operating plan at the same time that it is submitted pursuant to Section 4.7(c) to the Limited Partner having the largest interest in the Partnership, and each member of the Advisory Committee shall have the right to consult with the General Partner regarding such plan for ten (10) days after receipt. In addition, the General Partner will distribute the foregoing reports to any Limited Partner that would be entitled to be on the Advisory Committee but due to regulatory requirements is precluded from membership on the Advisory Committee. The Advisory Committee (including any Limited Partner that because of regulatory requirements is precluded from membership on the Advisory Committee) will meet quarterly in a location approved by the General Partner and a majority of the members of the Advisory Committee, and will consult with and advise the General Partner with respect to the business of the Partnership and perform such other advisory functions as may be requested by the General Partner from time to time; provided, however, that the Advisory Committee shall not perform any functions or duties, which, if performed by a Limited Partner, would constitute participation in the control of the business of the Partnership under the Act. The doing of any act or the failure to do any act by any member of the Advisory Committee, acting in its capacity as such, the effect of which may cause or result in loss, liability, damage or expense to the Partnership or any Partner, shall not subject such member to any liability to the Partnership or to any Partner, except that such member may be so liable if it acted fraudulently or in bad faith or was guilty of willful misconduct or a breach of this Agreement. The Partnership shall pay all reasonable expenses of each member of the Advisory Committee incurred in connection with attendance at Advisory Committee meetings or otherwise in the performance of his or her duties as a member of the Advisory Committee. In the event that interests in the Partnership are converted into or exchanged for interests in a corporation (other than in connection with a sale of interests in the Partnership), the General Partner will take all actions necessary to cause a director of such corporation at all times to be a person designated by each Limited Partner entitled to a representative on the Advisory Committee, so long as such Limited Partner owns an interest in such corporation. (e) Dissolution or Bankruptcy of a Limited Partner. In the event of the dissolution, liquidation, bankruptcy or insolvency of a Limited Partner, the interest of such Limited Partner will continue at the risk of the Partnership business until the dissolution and winding up of the Partnership. The legal representative of a Limited Partner who has dissolved, liquidated or been declared bankrupt or become insolvent will succeed to such Limited Partner's interest in the Partnership, but will not be a substituted Limited Partner without the prior written consent of the General Partner which consent may be granted or denied in the sole and absolute discretion of the General Partner without the consent of any Limited Partner. -25- 32 4.8 Successor General Partner. (a) Removal of the General Partner. (i) Seventy percent (70%) in interest of the Limited Partners (or a majority in interest of the non-TCI Limited Partners with respect to Section 4.8(a)(i)(D)) may initiate removal of the General Partner by delivering written notice to the General Partner (x) specifying one or more grounds for removal that the Limited Partners believe exist, and, (y) if the notice specifies grounds for removal described in Section 4.8(a)(i)(A), selecting an individual to arbitrate whether such grounds exist in accordance with Section 4.8(a)(ii). For purposes of this Section 4.8(a), grounds for removal means any of the following: (A) conduct by or on behalf of the General Partner in connection with the Partnership that constitutes willful misconduct, bad faith, gross negligence, reckless disregard of its duties, criminal intent, or a material breach of this Agreement; (B) acceleration of the senior debt of the Partnership, IP-IV, any Investing Partnership or any operating company for any reason; (C) the occurrence of any event of default that permits acceleration of the Partnership's, IP-IV's, any Investing Partnership's or any operating company's senior debt, if such event of default has not been waived or cured within sixty (60) days of the date the General Partner knew or should have known of its occurrence; or (D) the death or permanent disability of Leo J. Hindery, Jr. ("Hindery"), or the refusal by Hindery, in the event that he ceases to be employed by TCI or an affiliate of TCI at any time prior to the sale of all or substantially all of the assets of the Partnership, to return to a position with the Partnership such that his relationship with the Partnership is substantially similar to the relationship he had with the Partnership prior to February 7, 1997. (ii) The existence of grounds for removal with respect to matters described in Section 4.8(a)(i)(A) shall be determined by arbitration. Within ten (10) business days after its receipt of the Limited Partners' notice described in Section 4.8(a)(i), the General Partner shall send a written notice to the Limited Partners selecting a second individual to arbitrate whether grounds for removal exist. If the General Partner fails to select a second arbitrator within the time period specified in the preceding sentence, the existence of grounds for removal shall be determined by the arbitrator selected by the Limited Partners (and such arbitrator shall be deemed to be the "arbitration panel" for purposes of this Section 4.8(a)). If the General Partner selects a second arbitrator within the specified time period, the existence of grounds for removal shall be determined by an arbitration panel consisting of the arbitrator selected by the Limited Partners, the arbitrator selected by the General Partner, and a third arbitrator selected by the two arbitrators previously selected. None -26- 33 of the arbitrators selected pursuant to this Section 4.8(a) shall be associated or affiliated with any of the Partners or with any member of the General Partner. The arbitration panel shall conduct its proceedings in San Francisco in accordance with the commercial rules of the American Arbitration Association then in effect and the determination of such panel shall be final and binding upon and enforceable against all Partners. (iii) If the required percent of the Limited Partners (with respect to matters described in Section 4.8(a)(i)(B), (C) or (D) or the arbitration panel (with respect to matters described in Section 4.8(a)(i)(A)) determines that grounds for removal exist, then: (A) A successor general partner of the Partnership shall be selected by seventy percent (70%) in interest of the Limited Partners. If the Limited Partners are unable to agree on a successor general partner within sixty (60) days after the determination under Section 4.8(a)(i)(B) or (C) that grounds for removal exist, the Partnership shall be dissolved in accordance with Article 7. If the Limited Partners are unable to agree on a successor general partner after the determination under Section 4.8(a)(i)(D) that grounds for removal exist, the General Partner shall continue to serve as general partner of the Partnership until a successor general partner is selected. (B) Promptly following the determination that grounds for removal exist, or upon the designation of a successor general partner in accordance with Section 4.8(c), the Partners and the members of the General Partner shall undertake to obtain any government consents and approvals necessary to permit the actions described in the following paragraphs of this Section 4.8(a)(iii) to be taken. Such actions shall be taken as soon as practicable after all such consents and approvals have been obtained; provided, however, that if all such consents and approvals shall not have been obtained within one (1) year after the determination by the arbitration panel that grounds for removal exist, the Partnership shall be dissolved in accordance with Article 7. (C) The successor general partner designated in accordance with Section 4.8(a)(iii)(A) or Section 4.8(c) shall be admitted as the general partner of the Partnership and the General Partner shall be converted into a limited partner of the Partnership as set forth in Section 4.8(a)(iii)(D). The successor general partner shall, beginning on the date of admission, have the same authority and obligations that the removed general partner had and shall have such rights to distributions and allocations as are determined by the unanimous consent of the Limited Partners and the removed General Partner. Upon the admission of the successor general partner, the rights to distributions and allocations of the Partners shall be modified to the extent required to reflect the rights accorded to the successor general partner. The admission of a successor general partner to the Partnership shall be deemed to have occurred prior to the effective date of the conversion of the General Partner. -27- 34 (D) Upon removal of the General Partner as general partner of the Partnership, its interest in the Partnership shall be converted to a limited partnership interest and the Partnership Agreement shall be amended to reflect the events set forth in this Section 4.8. (E) The removed General Partner shall remain liable for any obligations and liabilities incurred by it as general partner prior to the effective date of its removal but shall be free of any and all obligations or liabilities incurred on account of the activities of the general partner of the Partnership from and after that time. (b) Withdrawal of the General Partner. (i) For purposes of this Section 4.8(b), "withdrawal of the General Partner" shall include the occurrence of any of the following: (A) any event that causes the General Partner to cease to be the General Partner; (B) the bankruptcy, insolvency, or appointment of a trustee to manage the affairs of the General Partner or Robert J. Lewis; (C) the dissolution, whether or not required by operation of law or judicial decree, of the General Partner; (D) the death of Robert J. Lewis; (E) the incapacity of Robert J. Lewis such that he is unable to perform substantially all of his duties as chief executive officer of the managing member of the General Partner for a period of nine (9) months; or (F) any other event that causes the General Partner to cease to be controlled directly or indirectly through one or more intermediaries by Robert J. Lewis (ii) Upon the withdrawal of the General Partner, the provisions of Section 4.8(a)(iii) shall be complied with, however, the time frames set forth in Sections 4.8(a)(iii)(A) and (B) shall run from the date of withdrawal of the General Partner. (c) Hindery's Return to the Partnership. In the event that Hindery ceases to be employed by TCI or an affiliate of TCI at any time prior to the sale of all or substantially all of the assets of the Partnership, Hindery may elect, in his sole discretion, directly or indirectly to return to a position with the Partnership such that his relationship with the Partnership is substantially similar to the relationship he had with the Partnership prior to February 7, 1997. In the event that Hindery elects to return to such a position with the Partnership and his return requires removal of the General Partner, then Hindery shall designate a successor general partner and the Partners shall comply with the provisions contained in Sections 4.8(a)(iii)(B) through 4.8(a)(iii)(E) to replace the General -28- 35 Partner (or any successor general partner then in existence) with the successor general partner designated in accordance with this Section 4.8(c) by Hindery. (d) General Provision Regarding Approvals by the Limited Partners. For purposes of any provision of this Section 4.8 that refers to the approval of a specified interest of the Limited Partners, any Limited Partner that is an affiliate of the General Partner shall not be entitled to consent or approve the matter at issue and such Limited Partner's interest shall not be taken into account in determining whether the matter at issue has been approved by Limited Partners holding the requisite interest. (e) Right To Recover Damages. (i) Removal of the General Partner pursuant to this Section 4.8 shall not limit the right of the Partnership or any Partner to recover any direct compensatory damages suffered by such person as a result of any breach of this Agreement by the General Partner or any other person. (ii) Removal of the General Partner, except pursuant to the terms of this Agreement, shall entitle the General Partner to receive, in cash compensation, damages for all direct and indirect economic consequences of such removal, including, but not limited to, damages for all lost profits. Such removed General Partner's interest in the Partnership shall be converted to a limited partnership interest pursuant to Section 4.8(a)(iii)(D). 4.9 Sale Initiation Rights. (a) Any time after July 31, 1999, Partners (other than Tele-Communications, Inc. or any directly or indirectly controlled affiliate thereof which is a Partner (collectively "TCI")) comprising twenty percent (20%) or more of the Interests in the Partnership may petition the General Partner to review, report on and recommend (or not) a sale of some or all of the Partnership's cable systems. (b) Any time after July 31, 2001, (i) Partners (other than TCI, the General Partner and InterMedia Partners, a California limited partnership ("IP-I")), comprising a majority or more of the Interests in the Partnership (other than Interests in the Partnership held by TCI, the General Partner and IP-I) may force a sale of one (1) or both of the Partnership's two significant cable system clusters (i.e., (a) middle Tennessee and (b) eastern Tennessee, eastern Georgia and western South Carolina), by sending a notice to such effect (the "Sale Notice") to the General Partner; provided that TCI shall have a "right of first offer" related thereto as provided in Section 4.9(d) and the terms of any such sale shall be approved by Partners (other than TCI, the General Partner and IP-I) comprising a majority or more of the Interests in the Partnership (other than Interests in the Partnership held by TCI, the General Partner and IP-I), provided that any Sale Notice must include the sale of all of the systems in each cluster and shall include all significant clusters, or (ii) Partners (including TCI, the General Partner and IP-I) comprising seventy percent (70%) or more of -29- 36 the Interests in the Partnership may force a sale of some or all of the Partnership's cable systems by sending a Sale Notice to the General Partner and the terms of any such sale shall be approved by Partners (including TCI, the General Partner and IP-I) comprising seventy percent (70%) or more of the Interests in the Partnership unless such sale is to TCI in which case the foregoing percentage required to approve the terms of the sale to TCI shall be 75%. The Sale Notice shall indicate which cable television systems are desired to be sold and any desired price. The General Partner shall promptly respond to the Partners that sent the Sale Notice (the "Sale Partners") with a good faith proposal for effectuating the sale of the assets specified in the Sale Notice, such proposal to be approved by the Sale Partners. Immediately upon approval of such proposal, the General Partner shall use its best efforts to effect the sale on such terms as soon as is reasonably practicable and the General Partner will provide the Partners with monthly progress reports on the sale process. (c) In addition to Section 4.9(b), at any time, the General Partner may elect to (i) sell all or substantially all of the Partnership's cable systems subject to obtaining the consent of Partners (other than TCI) comprising a majority or more of the Partnership Interests (other than Partnership Interests held by TCI); provided that, if the General Partner makes an election to sell pursuant to this Section 4.9(c)(i) prior to July 31, 2001, TCI shall have a "right of first refusal" related thereto in accordance with the procedures set forth in Section 4.9(e) or (ii) sell some or all of the Partnership's cable systems subject to obtaining the consent of Partners (including TCI) comprising at least seventy percent (70%) of the Partnership Interests unless the sale is to TCI in which case the foregoing percentage shall be 75%. (d) Before the Partnership shall offer to sell any of the Partnership's cable television systems pursuant to Section 4.9(b)(i), the General Partner shall (i) first deliver a notice to TCI offering to sell all such assets to TCI and specifying the purchase price and other terms on which the General Partner would propose to sell such assets to any third party (the date of such notice being the "Notice Date") and (ii) deliver to each Limited Partner a copy of an appraisal of any such cable television system conducted by an independent appraisal firm to be selected by the General Partner to the reasonable satisfaction of the Advisory Committee, provided, that such appraisal firm has no current or pre-existing relationship with the General Partner or any of its Affiliates other than transactions in which the appraisal firm (i) represents the General Partner or any of its Affiliates as a buyer or seller, (ii) represents the other party to a transaction with the General Partner or any of its Affiliates as a buyer or seller or (iii) any other transaction in the ordinary course of business with such appraisal firm on arm's-length terms. Within thirty (30) days after the Notice Date, TCI may, by giving notice to the General Partner elect, to purchase all such assets for such purchase price and on such other terms specified in such notice and shall enter into an agreement binding it to such purchase within ninety (90) days after its election to exercise the right under such notice. If TCI fails to notify the General Partner of its agreement to purchase all of such assets as of the end of such thirty (30) day period, fails to enter into a purchase agreement within ninety (90) days of such election date, or fails to purchase the assets within either (i) one hundred fifty (150) days after entering into a purchase agreement or (ii) the earlier of ten (10) days after all regulatory and franchise approvals have been obtained or three hundred sixty (360) days after the Notice Date (each an "Abandonment Date"), TCI will not have the right to purchase any of such assets except as provided in the subsequent provisions of this Section 4.9(d) or if the failure to purchase such assets -30- 37 is due to a breach of such purchase agreement by the Partnership and, in the event of such abandonment, the TCI affiliates who are Limited Partners will be deemed to have approved any subsequent sale by the Partnership pursuant to the terms of this Section 4.9(d); provided, however, that nothing contained herein shall preclude TCI and its affiliates from participating in any auction of such assets by the Partnership. If TCI elects not to or does not purchase such assets offered in accordance with the terms of this Section 4.9(d), the General Partner may thereafter sell such assets to any third party only at a price equal to or greater than the price and on terms and conditions not materially more favorable to the purchaser than those specified in the notice delivered pursuant to this Section 4.9(d), provided that a binding agreement for such sale is executed within two hundred ten (210) days after the Abandonment Date and such sale shall be consummated within four hundred fifty (450) days of the Abandonment Date and, provided, further that in the event TCI enters into a purchase agreement with respect to such assets, but fails to close (other than due to a breach of the agreement by the Partnership), then the Partnership will be free to sell such assets at a price less than the price, and on terms and conditions materially more favorable to the purchaser than those, agreed to with TCI, but TCI will be permitted to participate in any auction by the Partnership for such assets. If a binding agreement is not executed within such two hundred ten (210) day period or such sale is not consummated within such four hundred fifty (450) day period, then the Partnership shall be required to again offer such assets to TCI pursuant to and must otherwise comply with the terms of this Section 4.9(d) unless the Partnership had previously entered into an agreement with respect to such assets and TCI had failed to close such agreement due to failure to obtain regulatory or franchise consents or due to a breach by TCI. The rights of TCI pursuant to this Section shall terminate if TCI enters into a binding agreement with respect to any of the Partnership's cable television systems and fails to close such purchase due to its breach; provided that TCI and its affiliates may participate in any auction by the Partnership of its assets. (e) If the Partnership desires to sell any of its cable systems as provided in Section 4.9(c)(i) to a third party pursuant to a bona fide written offer (which shall set forth all material terms of the proposed sale but may be subject to reasonable and customary conditions in the cable television industry) by such third party to purchase such cable systems for cash, then the Partnership shall first offer to sell such cable systems to TCI at the price and on the other terms stated in such bona fide written offer. The Partnership's offer to TCI shall be in writing and shall be accompanied by a copy of the third party bona fide offer. TCI shall have thirty (30) days from the date of receipt of such offer in which to accept it by giving written notice of such acceptance to the General Partner. If TCI fails to accept the Partnership's offer within such thirty (30) day period, the Partnership will be free to sell such cable systems for a period of three hundred sixty (360) days after the end of the thirty (30) day right of first refusal period, or such longer or shorter period as may be specified in the original bona fide offer, but only at a price and on terms not more favorable to the purchaser than those contained in the bona fide offer. If TCI timely accepts the Partnership's offer, TCI must enter into an agreement binding it to such purchase within ninety (90) days after its acceptance of such offer and must purchase such cable systems within either (i) one hundred fifty (150) days after entering into a purchase agreement or (ii) the earlier of ten (10) days after all regulatory and franchise -31- 38 approvals have been obtained or three hundred sixty (360) days after receipt of the Partnership's offer, or in either case, such longer or shorter period as may have been specified in the original bona fide offer. If TCI accepts the Partnership's offer but fails to enter into a purchase agreement or fails to purchase the cable systems, in either case within the respective periods specified in the preceding sentence, then the Partnership may sell such cable systems at a price and on terms not more favorable to the purchaser than those contained in the bona fide written offer within the time period specified in such offer or, if no time period is specified in the offer, within three hundred sixty (360) days and TCI will not have the right to purchase any of such cable systems within such period. Any sale to any third party pursuant to this Section 4.9(e) shall not be connected in any way with any other transaction (including the sale of any other assets) under which consideration of any kind is transferred to the third party by the Partnership such that the price purported to be paid for the Partnership's cable systems (as specified in the bona fide offer) could overstate the value assigned thereto by the third party. (f) For purposes of this Section 4.9, all references to the Partnership's cable systems shall mean any cable system in which the Partnership has an ownership interest either directly or indirectly through IP-IV or any Investing Partnership. 4.10 Nonvoting Interests. Notwithstanding anything to the contrary in this Agreement, if (i) a Limited Partner or any affiliate of such Limited Partner is subject to the Bank Holding Company Act of 1956, as amended, and Regulation Y of the Board of Governors of the Federal Reserve System (the "FRB") promulgated thereunder (such Limited Partner and any of its affiliates hereinafter collectively referred to as a "BHC LP"), (ii) the limited partnership interests of the Partnership (the "Interests") held by the BHC LP exceed 5.0% of the then total outstanding Interests (exclusive of the Nonvoting Interests, as defined below); and (iii) the BHC LP has not received the approval of the FRB to hold more than 5.0% of the Interests, then the overline amount of the Interests in excess of 5.0% shall constitute a separate class of limited partnership interests hereinafter referred to as "Nonvoting Interests". In addition, the aggregate amount of the Interests and Nonvoting Interests held by a BHC LP, that has not received the approval of the FRB to hold more than 5.0% of the Interests, shall at no time exceed 24.9% of the aggregate amount of all outstanding Interests and Nonvoting Interests. The rights, privileges, benefits and liabilities appertaining to the Nonvoting Interests shall be identical in all respects to the rights, privileges, benefits and liabilities appertaining to the Interests, except that (i) holders of Nonvoting Interests shall not be entitled to vote upon or give consents in respect of any action by the Partners, except those matters that, in the judgment of the BHC LP, acting upon advice of legal counsel, would significantly and adversely affect the rights or preference of its Interests or Nonvoting Interests, including but not limited to the issuance of additional Interests or Nonvoting Interests; any modification or amendment relating to the terms of its Interests, Nonvoting Interests or this Agreement; or the dissolution of the Partnership and (ii) the Nonvoting Interests (other than such Nonvoting Interests that are subject to the exception set forth in the immediately preceding clause (i)) shall not be included in either the numerator or the denominator of any computation of the required percentage in interest of the Limited Partners hereunder for -32- 39 all such purposes (except where the consent of the holders of the Nonvoting Interests is required). ARTICLE 5 Tax Matters and Reports 5.1 Filing of Tax Returns. The General Partner, at the expense of the Partnership, shall prepare and file, or cause the accountants of the Partnership to prepare and file, all required tax returns, including a federal information tax return in compliance with section 6031 of the Code and any required state and local income tax and information returns for each tax year of the Partnership. The General Partner shall act as the Tax Matters Partner of the Partnership as that term is defined in section 6231(a)(7) of the Code. 5.2 Tax Reports to Current and Former Partners. Within ninety (90) days of the end of each fiscal year, the Partnership shall prepare and mail, or cause its accountants to prepare and mail, to each Partner and, to the extent necessary, to each former Partner (or its legal representatives), a report setting forth in sufficient detail such information as is required to be furnished to the Partners by law (e.g., section 6031(b) of the Code and regulations thereunder) and as shall enable such Partner or former Partner (or his or its legal representatives) to prepare their respective federal and state income tax or informational returns in accordance with the laws, rules and regulations then prevailing. Partners subject to ERISA will receive information necessary for them to calculate the fair market value of their Partnership Interests (determined in accordance with Section 4.4). 5.3 Restriction on General Partner Activity With Respect to Publicly Traded Partnerships. Without the consent of all of the Limited Partners, the General Partner shall not have the authority on behalf of the Partnership to: (a) list, recognize, or facilitate the trading of partnership interests (or any interest therein) on any "established securities market" within the meaning of section 7704 of the Code, or permit any of its affiliates to take such actions, if as a result thereof the Partnership might be taxed for federal income tax purposes as an association taxable as a corporation; or (b) create for the partnership interests (or any interest therein) a "secondary market (or the substantial equivalent thereof)" within the meaning of section 7704 of the Code or otherwise permit, recognize or facilitate the trading of such interests (or any interest therein) on any such market, or permit any of its affiliates (or to the extent the General Partner has rights with respect thereto, the selling agents or any of their affiliates) to take such actions, if as a result thereof the Partnership might be taxed for federal income tax purposes as an association taxable as a corporation. 5.4 Duties and Obligations of the General Partner With Respect to Publicly Traded Partnerships. The General Partner shall monitor the transfers of partnership interests to determine if such interests are being -33- 40 traded on an "established securities market" or a "secondary market (or the substantial equivalent thereof)" within the meaning of section 7704 of the Code, and shall take (and cause its affiliates to take) all steps within its power and authority as are reasonably necessary or appropriate to prevent any such trading of interests. 5.5 Books and Records. Complete books and records accurately reflecting the accounts, business, transactions and Partners of the Partnership shall be maintained and kept by the General Partner at the Partnership's principal place of business. The books and records of the Partnership required to be maintained by section 15615 of the Act shall be open at reasonable business hours on prior appointment for inspection and copying by the Partners. Notwithstanding anything to the contrary in this Agreement, the General Partner shall have the right to keep confidential from the Limited Partners for such period of time as the General Partner deems reasonable, any information which the Partnership is required by law or by agreement with a third party to keep confidential and any information which relates to its purchasing of individual items of programming, plant or equipment which it reasonably deems confidential. 5.6 Fiscal Year. Except as may otherwise be required by the federal tax laws, the fiscal year of the Partnership for both financial and tax reporting purposes shall end on December 31. 5.7 Method of Accounting. The books and accounts of the Partnership shall be maintained using the accrual method of accounting for financial reporting purposes and for tax purposes and shall be annually audited by a "Big Six" accounting firm (or a successor thereof). Those documents relating to allocations of items of Partnership income, gain, loss, deduction or credit and Capital Accounts shall be kept under federal income tax accounting principles as provided herein. ARTICLE 6 Conflicts of Interest; Indemnification; Exculpation 6.1 Outside Activities. Without the consent of seventy percent (70%) in interest of the Limited Partners, the General Partner (and its members, partners, employees, agents and affiliates, including, but not limited to, Robert J. Lewis) may not begin the offer and sale of interests in other enterprises with the purpose of investing in cable television systems until the earlier of July 31, 1997 or such time as sixty-six and two-thirds percent (66-2/3%) of the committed capital contributions to the Partnership shall be invested or committed for investment. Without the consent of a majority in interest of the Limited Partners, the General Partner (and its members, partners, employees, agents and affiliates, including, but not limited to, Robert J. Lewis) may not begin to actively supervise the investment of capital of such other enterprises or partnerships until the earlier of July 31, 1997 or such time as ninety-five percent (95%) of the committed capital contributions to the Partnership shall be invested or committed for investment. The General Partner shall first offer any investment opportunities within the scope of the Partnership, IP-IV's and the Investing Partnerships' business purpose and for which the Partnership, IP-IV or the Investing Partnerships have adequate resources to take advantage of the -34- 41 opportunity to the Partnership, IP-IV and the Investing Partnerships and, to the extent that the Partnership and the Investing Partnerships, after good faith consideration by the General Partner, do not invest in such opportunity or take all of such opportunity, the General Partner may elect to give or share such investment opportunity to or with one or more of the following: any Partner, any officer, director, shareholder, member, partner, employee or affiliate of a Partner, any enterprise or partnership in which the General Partner has an interest, or any nonaffiliated person. Notwithstanding the foregoing, in the event the General Partner is permitted under the provisions of this Section 6.1 to begin the offer and sale of interests in other enterprises with the purpose of investing in cable television systems, and the General Partner believes such enterprises may invest in cable television systems in areas contiguous to those owned by the Partnership, IP-IV or any Investing Partnership, the General Partner will offer the Limited Partners an opportunity to invest in such enterprise. Except as set forth in this Section 6.1, the General Partner or its members, partners, employees, agents or affiliates shall not be prohibited from engaging directly or indirectly in other activities, or from directly or indirectly purchasing, selling and holding securities or assets in cable television systems or corporations for their account or for the accounts of others. Any Limited Partner (and their members, partners, employees, agents and affiliates) may engage in any other enterprises, including enterprises in competition or in conflict with the Partnership. The Partnership shall not have any right to any income or profit derived by any Partner, or its members, partners, officers, directors, employees, agents or affiliates from any enterprise, opportunity or transactions permitted by this paragraph. Each Limited Partner shall have the right to transact business with the Partnership, IP-IV or the Investing Partnerships. Neither the General Partner nor any of its affiliates shall sell securities or assets to or purchase securities or assets from the Partnership without the unanimous consent of the Limited Partners; provided that the transactions set forth in Exhibit 2 hereto may be consummated by the Partnership, IP-IV or any Investing Partnership without any further consent of the Limited Partners. The General Partner may, on behalf of the Partnership or cable systems of IP-IV or any Investing Partnership, enter into cost and revenue sharing agreements with cable systems adjacent to those owned by the Partnership, IP-IV or any Investing Partnership including those systems purchased by any enterprise or partnership in which the General Partner, any affiliate of the General Partner or the Partnership or any member of the General Partner has an interest (the "Adjacent Systems"), to operate the Adjacent Systems as a single system with the cable systems of the Partnership, IP-IV or any Investing Partnership with costs equitably allocated between the various systems as the General Partner and the owner or operator of such Adjacent System shall determine based on the relative costs associated with such systems and, if determined by the General Partner and the owner or operator of such Adjacent System to be in the best interests of the Partnership, IP-IV, the Investing Partnerships and the Adjacent Systems, to sell such systems as a single system and allocate the sales revenues in such manner as such parties deem appropriate based on the relative values of such systems; provided, however, the terms of any such arrangement are disclosed to the Limited Partners and are on arm's-length terms and conditions. The parties hereto hereby waive, and covenant not to sue on the basis of, any law (statutory, common law or otherwise) respecting the rights and obligations of the Partners inter se which is or may be inconsistent with this Section 6.1 with respect to the matters covered by this Section 6.1, but in no event shall the foregoing be -35- 42 construed as limiting any rights or remedies with respect to a breach of this Section 6.1. 6.2 Contracts With the General Partner, Affiliates and Limited Partners. The General Partner may, on behalf of the Partnership, IP-IV or portfolio companies of the Investing Partnerships, enter into contracts with itself or any of its members, partners, employees, agents or affiliates, including but not limited to InterMedia Management, Inc. ("IMI"), a corporation wholly owned by Robert J. Lewis; provided, however, that such transactions shall be on terms no less favorable to the Partnership than are generally afforded from unrelated third parties or shall require the approval of seventy percent (70%) in interest of the Limited Partners, excluding any interest as a Limited Partner owned or controlled directly or indirectly by the General Partner, which approval shall not be unreasonably withheld. The validity of any transaction, agreement or payment involving the Partnership, IP-IV or an Investing Partnership and the General Partner or any affiliate of the General Partner or a Limited Partner shall not be affected by reason of (a) the relationship between the Partnership, IP-IV or portfolio companies of an Investing Partnership, and the General Partner or such member, partner, employee, agent or affiliate of the General Partner or a Limited Partner or the relationship between such member, partner, employee, agent or affiliate of the General Partner or a Limited Partner and the General Partner or (b) the absence of approval of said transaction, agreement or payment by the Limited Partners if the proceeds therefrom offset but do not exceed the Administration Fee. 6.3 Indemnification of the Partners. The Partnership shall indemnify and hold harmless the General Partner, any Limited Partner, any Advisory Committee member and any member, partner, employee or agent of the General Partner, any Limited Partner or any Advisory Committee member and any employee or agent of the Partnership and/or the legal representatives of any of them, and each other person who may incur liability as a general partner in connection with the management of the Partnership or any corporation or other entity in which the Partnership has an investment, against all liabilities and expenses (including amounts paid in satisfaction of judgments, in compromise, and as counsel fees) reasonably incurred by him or it in connection with the defense or disposition of any civil action, suit or other proceeding, in which he or it may be involved or with which he or it may be threatened, while a general partner or serving in such other capacity or thereafter, by reason of its being or having been a general partner, or by serving in such other capacity, except with respect to any matter which constitutes willful misconduct, bad faith, gross negligence or reckless disregard of the duties of its office, or material breach of this Agreement. The Partnership shall advance, in the sole discretion of the General Partner, to the General Partner, any Limited Partner, any Advisory Committee member and any member, partner, employee or agent of the General Partner, any Limited Partner, any Advisory Committee member or the Partnership reasonable attorneys' fees and other costs and expenses incurred in connection with the defense of any such action or proceeding. The General Partner hereby agrees, and each member, partner, employee or agent of the General Partner and the Partnership shall agree in writing prior to any such advancement, that in the event he or it receives any such advance, such indemnified party shall reimburse the Partnership for such fees, costs and expenses to the extent that it shall be determined that he or it was not entitled to indemnification under this Section. The rights accruing to a -36- 43 General Partner, any Limited Partner and each member, partner, employee or agent of the General Partner, any Limited Partner or the Partnership under this paragraph shall not exclude any other right to which it or they may be lawfully entitled; provided, that any right of indemnity or reimbursement granted in this paragraph or to which any indemnified party may be otherwise entitled may only be satisfied out of the assets of the Partnership, and no withdrawn General Partner, and no Limited Partner, shall be personally liable with respect to any such claim for indemnity or reimbursement. Notwithstanding any of the foregoing to the contrary, the provisions of this Section 6.3 shall not be construed so as to provide for the indemnification of the General Partner, any Limited Partner, and Advisory Committee member or any member, partner, employee or agent of the General Partner, any Limited Partner or Advisory Committee member for any liability to the extent (but only to the extent) that such indemnification would be in violation of applicable law or such liability may not be waived, modified or limited under applicable law, but shall be construed so as to effectuate the provisions of this Section 6.3 to the fullest extent permitted by law. 6.4 Exculpation. The General Partner and any member, partner, employee or agent of the General Partner or the Partnership shall not be liable to any Limited Partner or the Partnership for mistakes of judgment or for action or inaction which the General Partner or any such member, partner, employee or agent of the General Partner or the Partnership reasonably believed to be in the best interests of the Partnership unless such action or inaction constitutes willful misconduct, bad faith, gross negligence, reckless disregard of its duties or material breach of this Agreement. The General Partner may consult with counsel, accountants and other experts in respect of Partnership affairs and be fully protected and justified in any action or inaction which is taken in accordance with the advice or opinion of such counsel, accountants or other experts, provided that they shall have been selected with reasonable care. Notwithstanding any of the foregoing to the contrary, the provisions of this Section 6.4 shall not be construed so as to relieve (or attempt to relieve) the General Partner and any member, partner, employee or agent of the General Partner or the Partnership of any liability, to the extent (but only to the extent) that such liability may not be waived, modified or limited under applicable law, but shall be construed so as to effectuate the provisions of this Section 6.4 to the fullest extent permitted by law. ARTICLE 7 Termination and Dissolution 7.1 No Dissolution. The Partnership shall not be dissolved by the admission of substituted Limited Partners or by the admission of a new General Partner in accordance with the terms of this Agreement. The dissolution or bankruptcy of a Limited Partner shall not cause a dissolution of the Partnership. 7.2 Events of Dissolution. The Partnership shall dissolve upon the first to occur of the following: (i) expiration of the term of the Partnership specified in Section 1.6 hereof, (ii) the bankruptcy, insolvency or appointment of a trustee or receiver to manage the affairs of the General Partner, (iii) the voluntary resignation of Robert J. Lewis as chief -37- 44 executive officer of the managing member of the General Partner if a successor general partner has not been appointed in accordance with Section 4.8 hereof, (iv) the removal of the General Partner pursuant to Section 4.8(a) if a successor general partner of the Partnership is not appointed pursuant to Section 4.8 hereof, (v) dissolution being required by operation of law or judicial decree including, without limitation, the withdrawal of the General Partner where there is no remaining or surviving general partner, (vi) the determination by the General Partner with the affirmative consent of seventy percent (70%) in interest of the Limited Partners, (vii) the Partnership becoming taxable as a corporation for federal tax purposes or, (viii) the determination by the General Partner, based upon advice of counsel, that the Partnership would be required to register as an investment company under the Investment Company Act and there is no reasonably practicable means of avoiding such requirement. Notwithstanding anything to the contrary in this Section 7.2, without the unanimous consent of the Limited Partners, the General Partner agrees not to voluntarily withdraw as a general partner of the Partnership, and Robert J. Lewis agrees not to voluntarily resign as chief executive officer of the managing member of the General Partner, and the General Partner and Robert J. Lewis each agrees that it or he will not voluntarily take or permit any action that would cause the Partnership to cease to be controlled directly or indirectly by Robert J. Lewis and if any of such persons effects such withdrawal or cessation of control in violation of this Agreement, the Partnership may recover damages for breach of this Agreement. 7.3 Winding-up. Upon the occurrence of an event of dissolution, the Partnership shall be wound up and liquidated. The General Partner or, if there is no general partner or if the General Partner or the managing member of the General Partner wrongfully caused the dissolution of the Partnership, a liquidator appointed by a majority in interest of the Limited Partners, shall proceed with the dissolution and the final distribution. In the dissolution, the General Partner or such liquidator shall use its best efforts to reduce to cash and cash equivalent items such assets of the Partnership as the General Partner or such liquidator shall deem it advisable to sell, subject to obtaining fair value for such assets and any tax or other legal considerations. A reasonable time shall be allowed for the orderly winding up of the business and affairs of the Partnership and the liquidation of its assets in order to minimize any losses otherwise attendant upon such a winding up, provided that the liquidation is carried out in conformity with the requirements of Section 7.4 and section 1.704-1(b)(2)(ii)(b)(2) and (3) of the Income Tax Regulations. 7.4 Order of Liquidating Payments and Distributions. In settling accounts after dissolution, the assets of the Partnership shall be distributed as expeditiously as possible in the following order not later than the end of the taxable year of the liquidation (i.e., the date upon which the Partnership ceases to be a going concern as provided in section 1.704-1(b)(2)(ii)(g) of the Income Tax Regulations) or if later, within ninety (90) days after the date of such liquidation: (a) To creditors, including the Partners to the extent of any unpaid expenses or any outstanding loan or advance; (b) To the payment of the costs of winding up the affairs of, liquidating and dissolving the Partnership including, without limitation, -38- 45 expenses of selling assets of the Partnership, discharging the liabilities of the Partnership, distributing the assets of the Partnership and terminating the Partnership in accordance with Section 7.3 hereof; (c) To the establishment of reasonable reserves to provide for obligations to creditors; (d) To the Partners with respect to which any other debts of the Partnership are owing, other than debts arising out of the expulsion or withdrawal of a Partner; (e) To the Preferred Limited Partner in an amount equal to the positive balance in its Capital Account as determined after all adjustments to such account for the taxable year of the Partnership during which the liquidation occurs as are required by this Agreement and section 1.704-1(b) of the Income Tax Regulations, such adjustments to be made within the time specified in such Regulations; (f) To the Partners (other than the Preferred Limited Partner) in the proportion of their respective Capital Accounts as those accounts are determined after all adjustments to such accounts for the taxable year of the Partnership during which the liquidation occurs as are required by this Agreement and section 1.704-1(b) of the Income Tax Regulations, such adjustments to be made within the time specified in such Regulations. 7.5 Termination. The Partnership shall terminate following its dissolution and liquidation pursuant to this Article 7 when all of the Partnership assets as to which it is practicable to do so in the sole discretion of the General Partner or the liquidator shall have been converted into cash, the net proceeds therefrom, as well as any other assets of the Partnership, after payment of or due provision for all debts, liabilities and obligations of the Partnership, shall have been distributed to the Partners as provided for herein and the Partnership shall have been terminated in the manner required by the Act. 7.6 Government Regulation. (a) The General Partner shall use its best efforts to insure that it and the Partnership are in substantial compliance with those provisions, if any, of ERISA with which they are obligated by that statute to comply, and to qualify as a venture capital operating company (as defined in the Department of Labor regulations promulgated under ERISA) subject to the following provisions of this Section 7.6. (b) In the event that at any time after its admission to the Partnership, (i) any Limited Partner delivers to the General Partner a written opinion of counsel, reasonably satisfactory to the General Partner, to the effect that, by reason of the adoption of any law, rule or regulation or the issuance of any order or directive by any governmental authority (a "Regulatory Change"), such Limited Partner's continued participation in the Partnership or the making by such Limited Partner of any additional capital contribution to the Partnership would violate any law, rule, regulation, license, permit or other regulatory requirement binding upon or required of such Limited Partner or would subject such Limited Partner to any penalty or tax to which it was not subject at the time of its admission to the Partner- -39- 46 ship and which is, in the reasonable judgment of such Limited Partner, material in relation to its investment in the Partnership and is not applicable to such Limited Partner's investments generally or (ii) the General Partner delivers to any Limited Partner an opinion of the Partnership's counsel to the same effect or to the effect that, by reason of a Regulatory Change, such Limited Partner's continued participation in the Partnership would materially restrict the continued conduct of the Partnership's business (any such event described in clause (i) or (ii) of this paragraph (b) is referred to as an "Adverse Regulatory Development" and the Limited Partner affected thereby is referred to as the "Affected Partner"), then the General Partner and the Affected Partner shall cooperate with each other in taking or causing to be taken such action as shall eliminate such Adverse Regulatory Development. Any such opinion of counsel shall describe the applicable Regulatory Change and its effect on the Affected Partner and the Partnership and, insofar as practicable, the actions which would eliminate such Adverse Regulatory Development. (c) If an Adverse Regulatory Development cannot otherwise be resolved to the mutual satisfaction of the Affected Partner and the General Partner, the General Partner and the Affected Partner shall each use its best efforts to find a purchaser for all the Affected Partner's interest in the Partnership, or such part thereof as shall be sufficient to eliminate the Adverse Regulatory Development, on terms and conditions reasonably acceptable to the Affected Partner, and if acceptable to the Affected Partner, the General Partner shall consent to the sale of such interest as long as, in the reasonable judgment of the General Partner, the purchaser thereof has sufficient financial resources to satisfy any remaining obligation to contribute capital to the Partnership to be assumed by such purchaser from the Affected Partner with respect to the interest in the Partnership to be purchased by it and meets the requirements for transfer set forth in Section 8.1. (d) If, within thirty (30) business days after the delivery of an opinion referred to in paragraph (b) above or such later time as the General Partner and the Affected Partner shall agree, the General Partner and the Affected Partner have not resolved to their mutual satisfaction the Adverse Regulatory Development, then the Partnership may take any of the following actions with respect to the Affected Partner's interest in the Partnership, but only upon the delivery to the Affected Partner of an opinion of the Partnership's counsel (which opinion shall be reasonably acceptable to the Affected Partner) to the effect that the taking of such action should eliminate the Adverse Regulatory Development: (i) release the Affected Partner from making any capital contribution with respect to any new investment by the Partnership (and appropriate provisions shall be made in this Agreement to preserve such Affected Partner's interest in all existing investments and to eliminate such Affected Partner's participation in future investments); (ii) redeem the Affected Partner's interest in the Partnership in exchange for the assignment to the Affected Partner of the percentage share of the Partnership's cash and short-term investments which the Affected Partner would receive if all such assets were then distributed to the Partners plus the percentage share in each of the Partnership's other investments and any other assets of the Partnership equal to the share of all such assets it would receive if the Partnership were dissolved at such time and all such assets were liquidated for their then value as determined in accordance with Section 4.4(b), or a cash payment in lieu thereof in an -40- 47 amount equal to the fair market value (as determined pursuant to Section 4.4) of their Partnership Interest as of the date of the determination of an Adverse Regulatory Development; or (iii) terminate and dissolve the Partnership and, if in the judgment of the General Partner it is prudent to do so, distribute all or any portion of the Partnership's investments to the Partners in kind so that, as nearly as practicable, each Partner receives an equal portion of its total distribution in each investment distributed in kind, in which event the General Partner shall offer to establish a successor partnership on terms and conditions in all material respects the same as this Partnership by contributing the property distributed to them by this Partnership. The Partnership shall seek to take the foregoing actions in the order stated and shall take an action subsequently stated only if, in accordance with the opinion of counsel referred to above, none of the actions previously stated should eliminate the Adverse Regulatory Development. (e) If, within sixty (60) business days after the delivery of the opinion referred to in paragraph (b) above or such later time as the General Partner and the Affected Partner shall agree upon, the General Partner and the Affected Partner have not resolved to their mutual satisfaction the Adverse Regulatory Development or the Partnership has not taken any of the actions permitted by paragraph (d) above to eliminate the Adverse Regulatory Development, the Affected Partner, by notice to the Partnership, may require the Partnership to take any of such actions but only upon the delivery to the Partnership of an opinion of counsel (which opinion and counsel shall be reasonably acceptable to the General Partner) to the effect that the taking of such action should eliminate the Adverse Regulatory Development; provided that the Affected Partner shall require the Partnership to take any of the actions stated in paragraph (d) only if, in the opinion of counsel delivered pursuant to this paragraph (e), none of the actions stated in paragraph (d) before the action proposed to be taken would likely eliminate the Adverse Regulatory Development; and provided further that the Partnership shall not be required to take the actions referred to in clause (iii) of paragraph (d) if the Regulatory Change is the imposition on the Affected Partner of a penalty or tax of the type referred to in paragraph (b) and the General Partner reasonably determines that such action would have an effect on the other Limited Partners that is material and adverse in relation to their investment in the Partnership. (f) The Partnership and the Affected Partner shall each bear all expenses it may respectively incur in connection with taking any of the actions permitted or required of it by paragraphs (b) through (e) of this Section 7.6, including the costs of providing any opinions of counsel it is required to provide. (g) Whenever the General Partner proposes to make any cash payment to an Affected Partner as permitted by paragraph (d) or as may otherwise be agreed upon by the Affected Partner and the General Partner or to take any other action pursuant to this Section 7.6 which would adversely and materially affect the interest of the other Limited Partners in relation to their investment in the Partnership, the General Partner shall first obtain the approval of seventy percent (70%) of such Limited Partners for such payment or action. -41- 48 (h) The Partnership or an Affected Partner may take the actions contemplated by this Section 7.6 either (i) in advance of any Regulatory Change coming into effect if all necessary governmental action has occurred to cause such Regulatory Change to come into effect or (ii) prior to expiration of the time periods provided hereunder for the taking of such actions if in the opinion of counsel referred to herein doing so is necessary to avoid an Adverse Regulatory Development coming into effect with respect to an Affected Partner. 7.7 Orderly Methods of Liquidating Payments. Notwithstanding anything to the contrary in this Article 7, if required to maximize the proceeds of liquidation, the General Partner (or the liquidator chosen in accordance with Section 7.3) may, with the consent of seventy percent (70%) in interest of the Limited Partners, implement the distribution provisions of Section 7.4(f) hereof by transfer, on behalf of the Partners, of the assets of the Partnership to a liquidating trustee or trustees. ARTICLE 8 Transfer of Interest, Failure To Pay Capital Contributions, Beneficial Owners 8.1 Transfer of Partnership Interest. No Limited Partner shall sell, assign, mortgage, encumber, hypothecate or otherwise transfer, whether voluntarily or involuntarily, its interest in the Partnership or any part thereof, unless (x) any such transferee entity meets the suitability requirements originally imposed under the subscription agreement on the transferring Limited Partner and (y) such assignment or transfer will not (and, upon request of the General Partner, the transferring Limited Partner provides an opinion of counsel in form and substance satisfactory to the General Partner that such assignment or transfer will not) (A) violate any applicable federal or state securities laws or regulations, subject the Partnership to registration as an investment company or election as a "business development company" under the Investment Company Act; (B) require the General Partner or any of its members to register as an investment adviser under the Investment Advisers Act of 1940; (C) violate any other federal, state or local laws; (D) effect a termination of the Partnership under section 708 of the Code; or (E) cause the Partnership to be treated as an association taxable as a corporation for federal income tax purposes, or violate this Agreement. Notwithstanding the preceding sentence, a Partner may assign or transfer its interest in the Partnership if any such assignment or transfer effects a termination of the Partnership under section 708 of the Code so long as the transferring Partner agrees to indemnify and hold harmless the Partnership and all other Partners against any and all costs and expenses incurred as a direct result of a termination of the Partnership under section 708 of the Code. No transferee or assignee of all or any part of a Limited Partner's interest shall become a Limited Partner without the prior written consent of the General Partner which consent shall not be unreasonably withheld so long as such Partner sells the lesser of all its Partnership Interests or a Partnership Interest representing an initial contribution of at least $5,000,000 and in no event shall the substitution of an assignee or transferee as a Limited Partner require the consent of any Limited Partner. Any purported transfer of any interest of a Limited Partner in the Partnership or any part thereof not in compliance with this -42- 49 Section 8.1 shall be void and of no force or effect and the transferring Partner shall be liable to the other Partners and the Partnership for all liabilities, obligations, damages, losses, costs and expenses (including reasonable attorneys' fees and court costs) arising as a result of such noncomplying transfer. 8.2 Transfer of IP Holdings Affiliates' Interests. Notwithstanding the provisions of Section 8.1, any IP Holdings Affiliate (as that term is defined in Exhibit 1 hereto) may transfer any or all of its interest in the Partnership to any other IP Holdings Affiliate at any time, provided that such transfer is made in compliance with clauses (x) and (y) of Section 8.1. 8.3 Indemnification. (a) Each Limited Partner and substituted Limited Partner (each an "Indemnifying Person") shall indemnify and hold harmless the Partnership, the General Partner and every other Limited Partner (each an "Indemnified Person") who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of or arising from (including without limitation from any actual or alleged misrepresentation or misstatement of facts or omission to represent or state facts made by such Limited Partner in connection with) (i) any assignment, transfer, encumbrance or other disposition of all or any part of such Limited Partner's Partnership Interest, or (ii) the admission of such substituted Limited Partner, against losses, liabilities and expenses for which the Partnership or other person has not otherwise been reimbursed (including attorneys' fees, judgments, fines and amounts paid in settlement) actually and reasonably incurred by it in connection with such action, suit or proceeding. (b) Each Indemnifying Person agrees that no Indemnifying Person will, without the prior written consent of the Indemnified Person, settle, compromise or consent to the entry of any judgment in any pending or threatened action in respect of which indemnification may be sought under this Agreement unless such settlement includes an unconditional release of the Indemnified Person from all liability arising therefrom. Any Indemnifying Person shall have no indemnification obligations with respect to any such claim or demand which has been settled by an Indemnified Person without the prior written consent of such Indemnifying Person, which consent will not be unreasonably withheld or delayed. 8.4 Failure To Pay Capital Contributions. The parties hereto agree that prompt payment of the installments of required capital contributions hereunder is of the essence and that failure of any Partner to make such payments as provided herein will cause substantial injury to the Partnership and the other Partners; further, the amount of damages caused by such injury will be difficult to calculate. Accordingly, the parties hereto agree that in the event that any Limited Partner fails to pay any installment of its required capital contribution to the Partnership promptly when due, the General Partner shall give such defaulting Limited Partner written notice thereof, and if such defaulting Limited Partner shall fail to make such required payment in full within fifteen (15) days following the mailing of such notice or such other longer period as the General Partner may elect, the General Partner may elect, in its sole discretion, either of the following alternatives: -43- 50 (a) to commence legal proceedings against such defaulting Limited Partner to collect the due and unpaid payment, plus interest from the date due at the reference rate as announced from time to time by Bank of America NT&SA, plus two (2) percentage points, plus the expenses of collection, including attorneys' fees; or (b) to rescind and terminate all of the defaulting Limited Partner's interest in the Partnership. In such event, the defaulting Limited Partner will receive, upon termination of the Partnership, the lesser of (1) its paid-in capital or (2) seventy-five percent (75%) of its Capital Account at the time of default (reduced by what its Partnership Interest in subsequent deductions and losses would have been had it remained a Partner in the Partnership) and in such event the remaining amount that would have been distributed to such Limited Partners shall be available for distribution to the remaining Partners in accordance with Article 3. Notwithstanding the foregoing, without the consent of the Limited Partner having the largest interest as a Limited Partner (other than with respect to a default by such Limited Partner) or if the defaulting Limited Partner has not then paid to the Partnership at least one-third of its commitment of equity to the Partnership as in effect on the date hereof, the General Partner shall not have the option to pursue remedies against the defaulting Limited Partner under the terms of clause 8.3(b) above, but instead may only pursue remedies against such Limited Partner pursuant to clause 8.3(a) above or as otherwise provided herein, at law or in equity. The foregoing alternatives, to the extent available as provided above, are in addition to and not in limitation of any other right or remedy of the Partnership under this Agreement, at law or in equity. Losses attributable to a defaulting Limited Partner pursuant to Section 3.1 shall be calculated as if such installment had been paid when due. 8.5 Increase in Beneficial Owners. Notwithstanding any other provision of this Agreement, no Limited Partner shall increase the number of its beneficial owners if (a) at such time, such Limited Partner owns more than ten percent (10%) of the Partnership Interests in the Partnership and has more than ten percent (10%) of its assets invested in private investment companies which are not registered under the Investment Company Act of 1940, as amended, because such companies have less than one hundred (100) beneficial owners and do not presently propose to make a public offering of their interests, or (b) such Limited Partner was formed for the purpose of investing in a Partnership Interest. ARTICLE 9 Miscellaneous 9.1 Notices. All notices, approvals, consents and other communications required or permitted to be given under this Agreement shall be in writing and shall be hand delivered (including by messenger or recognized commercial delivery or courier service), sent by facsimile transmission or sent by registered or certified mail, postage prepaid, addressed to the Partner intended at the address set forth below its name on Exhibit 1 hereto or at such other address as such Partner may designate by notice given to -44- 51 the other Partners in the manner aforesaid and shall be deemed given and received on the date it is delivered, in the case of delivery by hand or by facsimile (if sent on a business day, or if not sent on a business day, the next business day thereafter) or, in the case of delivery by mail, actual delivery as shown by the addressee's return receipt. Rejection or other refusal to accept or inability to deliver because of a change of address of which no notice was given shall be deemed to be receipt of the notice. 9.2 Governing Law. This Agreement and this limited partnership continued hereby shall be governed by and construed in accordance with the laws of the State of California. 9.3 Amendments. This Agreement may be modified or amended only by an instrument in writing signed by the General Partner and by seventy percent (70%) in interest of the Limited Partners (or such other percentage as required by Section 4.7(b)); provided that, in addition to any amendments otherwise authorized herein, this Agreement may be amended from time to time by the General Partner without the consent of any of the Limited Partners to (i) add to the representations, duties or obligations of the General Partner or surrender any right or power granted to the General Partner herein, (ii) add to the rights or powers granted to the Limited Partners, (iii) clarify any inconsistency between sections hereof and correct any printing, stenographic or clerical errors or omissions; and (iv) to comply with legal or tax requirements provided such compliance does not materially decrease the amount or timing of any distributions, including distributions upon liquidation, or materially change allocations of income or losses, that the Limited Partners would otherwise be entitled to receive pursuant to this Agreement, provided however, that nothing herein shall be construed to permit the General Partner to add to the rights or powers of the Limited Partners if such addition could reasonably be expected to cause the Limited Partners to have liability as general partners or to cause any Limited Partner to be required to consolidate the Partnership for financial reporting purposes, and provided that the General Partner shall not relinquish any rights or powers if such relinquishment could reasonably be expected to prevent it from performing its duties and obligations hereunder or to cause any Limited Partner to be required to consolidate the Partnership for financial purposes. 9.4 Entire Agreement. This instrument together with the Subscription Agreements of the Partners constitute the entire agreement between the Partners with respect to the Partnership and supersede all prior agreements, understandings, offers and negotiations, oral or written. 9.5 Waiver of Partition. Each Partner hereby irrevocably waives any and all rights that it may have to maintain an action for partition of the Partnership or any of the Partnership's property. 9.6 Consents. All consents, agreements and approvals required or permitted by this Agreement shall be in writing and a signed copy thereof shall be filed and kept with the books of the Partnership. 9.7 Successors. Subject to Article 8, all rights and duties of the Partners hereunder shall inure to the benefit of and be binding upon their respective successors and assigns. -45- 52 9.8 Confidentiality of Investors. Neither the General Partner nor the Partnership shall disclose to any person or entity (other than to another Partner or potential partner or to lenders or potential lenders to the Partnership) the fact that a Limited Partner is an investor in the Partnership except to the extent (a) required by law or legal process upon prior written notice to such Limited Partner or (b) authorized by any such Limited Partner in writing. 9.9 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument. 9.10 Severability. Each provision of this Agreement shall be considered severable and if for any reason any provision which is not essential to the effectuation of the basic purposes of the Agreement is determined by a court of competent jurisdiction to be invalid or unenforceable and contrary to the Act or existing or future applicable law, such invalidity shall not impair the operation of or affect those provisions of this Agreement which are valid. In that case, this Agreement shall be construed so as to limit any term or provision so as to make it enforceable or valid within the requirements of any applicable law, and in the event such term or provision cannot be so limited, this Agreement shall be construed to omit such invalid or unenforceable provisions. 9.11 Affiliate. For purposes of this Agreement, an affiliate of any person shall mean any other person that (i) directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, the specified person; (ii) is a director or officer of, partner in, member of, or trustee of, or serves in a similar capacity with respect to, the specified person or of which the specified person is a director, officer, partner, or trustee, or with respect to which the specified person serves in a similar capacity; (iii) directly or indirectly through one or more intermediaries is the beneficial owner of ten percent (10%) or more of any class of equity securities of the specified person or of which the specified person is directly or indirectly through one or more intermediaries the owner of ten percent (10%) or more of any class of equity securities; (iv) directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, a person described in clause (iii), (v) is acting at the direction and primarily in furtherance of the interests of the specified person or (vi) is an immediate family member of the specified person. Notwithstanding the foregoing, for purposes of Sections 4.7(d), 4.8, 4.9, 6.1 and 6.2 of this Agreement in no event shall any person that is under the direct or indirect control of Robert J. Lewis be deemed to be an affiliate of Tele-Communications, Inc. or its related entities and for purposes of Sections 4.7(d), 4.8 and 6.1, IP-I shall not be deemed to be an affiliate of the General Partner, the Partnership, ICM-IV, IP-IV or any Investing Partnership. 9.12 Power of Attorney. Each Limited Partner, including any additional or substituted Limited Partner, hereby irrevocably constitutes and appoints the General Partner, and each member of the General Partner, and each of them acting singly, its true and lawful agent and attorney-in-fact, with full power and authority of substitution, to make, amend, execute, acknowledge, swear to, deliver, file and record for and on behalf of such Limited Partner, such documents and instruments as may be reasonably -46- 53 necessary to carry out the provisions of, and which is permitted by, this Agreement, including a Certificate of Limited Partnership and any amendments thereto required by law, any amendments to this Agreement by reason of admissions, substitutions or withdrawals of Limited Partners or any amendments to give effect to the voting of the Partners and any amendments permitted by Section 9.3 without the consent of the Limited Partners. The foregoing power of attorney, being coupled with an interest, is hereby declared to be irrevocable, and shall survive the death, dissolution or incapacity of any Limited Partner. 9.13 Nonrecourse. Neither the Partnership nor the Partners shall have recourse to any member, partner, officer, director or shareholder of any Partner or to the assets of any member, partner, officer, director or shareholder of any Partner with respect to the obligations and liabilities of such Partner under this Agreement, except that this Section 9.13 shall not limit or impair the exercise or enforcement of rights and remedies in respect of any agreement to which such person is a party in accordance with the terms and provisions of such agreement. -47- 54 9.14 Foreign Person. Should any Partner be subject to withholding pursuant to the Code or any applicable state, local or foreign law, the Partnership may withhold all amounts otherwise distributable to such Partner or otherwise under this Agreement or such other amount as may be required by law and any amounts so withheld shall be deemed to have been distributed to the Partner under this Agreement. If any sums are withheld pursuant to this provision, the Partnership shall remit the sums so withheld to and file the required forms with the Internal Revenue Service or other applicable government agency and, in the event of any claimed over-withholding, the Partner shall be limited to an action against the Internal Revenue Service or other applicable government agency for refund and hereby waives any claim or right of action against the Partnership on account of such withholding. Moreover, if the amounts required to be withheld exceed the amounts which would otherwise have been distributed to such Partner, such Partner shall contribute any deficiency to the Partnership within five (5) days after receipt of notice from the General Partner. -48- 55 IN WITNESS WHEREOF, the General Partner has executed this Amended and Restated Agreement of Limited Partnership on behalf of the Partners as attorney-in-fact as of the date first hereinabove written. GENERAL PARTNER: INTERMEDIA CAPITAL MANAGEMENT, LLC By /s/ Robert J. Lewis ------------------------------ Robert J. Lewis Member PREFERRED LIMITED PARTNER: GENERAL ELECTRIC CAPITAL CORPORATION By *** ---------------------------------- Name -------------------------------- Title ------------------------------- LIMITED PARTNERS: ATLANTIC EQUITY CORPORATION By *** ---------------------------------- Name -------------------------------- Title ------------------------------- BANCORP HAWAII, INC. By *** ---------------------------------- Name -------------------------------- Title ------------------------------- -49- 56 By *** ---------------------------------- Name -------------------------------- Title ------------------------------- THE BANK OF NEW YORK COMPANY, INC. By *** ---------------------------------- Name -------------------------------- Title ------------------------------- CABLE PARTNERS, AN ILLINOIS GENERAL PARTNERSHIP By *** ---------------------------------- Name -------------------------------- Title ------------------------------- GENERAL ELECTRIC CAPITAL CORPORATION By *** ---------------------------------- Name -------------------------------- Title ------------------------------- MELLON BANK, N.A., AS TRUSTEE FOR THIRD PLAZA TRUST By *** ---------------------------------- Name -------------------------------- Title ------------------------------- -50- 57 MELLON BANK, N.A., AS TRUSTEE FOR FOURTH PLAZA TRUST By *** --------------------------------- Name -------------------------------- Title ------------------------------- *** ------------------------------------ WILLIAM D. HORVITZ INDOSUEZ CAPITAL By Indosuez CM II, Inc. Its Managing General Partner By *** ---------------------------------- Name -------------------------------- Title ------------------------------- By *** ---------------------------------- Name -------------------------------- Title ------------------------------- *** ------------------------------------- THIERRY DEVERGNES INTER CABLE INVESTORS, A CALIFORNIA LIMITED PARTNERSHIP By *** ---------------------------------- Name -------------------------------- Title ------------------------------- -51- 58 INTERMEDIA CAPITAL MANAGEMENT IV, L.P. By InterMedia Management, Inc. Its General Partner By *** ---------------------------------- Robert J. Lewis President and Chief Executive Officer INTERMEDIA PARTNERS, a California limited partnership By InterMedia Capital Management, LLC Its General Partner By *** ---------------------------------- Robert J. Lewis Member IP HOLDINGS L.P., By Centre Partners, L.P. Its General Partner By Park Road Corporation Its General Partner By *** ---------------------------------- Name -------------------------------- Title ------------------------------- -52- 59 CENTRE CAPITAL INVESTORS II, L.P. CENTRE CAPITAL TAX-EXEMPT INVESTORS II, L.P. By Centre Partners II, L.P. as general partner of such partnerships By Centre Partners Management LLC, attorney-in fact By *** ---------------------------------- Bruce G. Pollack Managing Director CENTRE PARTNERS COINVESTMENT, L.P. CENTRE PARALLEL MANAGEMENT PARTNERS, L.P. By Centre Partners II, LLC, a general partner By *** ---------------------------------- Bruce G. Pollack Managing Director SBA CABLE CORP. By *** ---------------------------------- Bruce G. Pollack Treasurer OVERSEAS CABLE CORP. By *** ---------------------------------- Bruce G. Pollack Treasurer -53- 60 LJR LIMITED PARTNERSHIP By *** ---------------------------------- Name -------------------------------- Title ------------------------------- NATIONSBANC INVESTMENT CORP. By *** ---------------------------------- Name -------------------------------- Title ------------------------------- RMS LIMITED PARTNERSHIP By *** ---------------------------------- Name -------------------------------- Title ------------------------------- ROYAL BANK OF CANADA By *** ---------------------------------- Name -------------------------------- Title ------------------------------- SUMITOMO CORPORATION By *** ---------------------------------- Name -------------------------------- Title ------------------------------- -54- 61 SUMITOMO CORPORATION OF AMERICA By *** ---------------------------------- Name -------------------------------- Title ------------------------------- TCI OF GREENVILLE, INC. By *** ---------------------------------- Name -------------------------------- Title ------------------------------- TCI OF PIEDMONT, INC. By *** ---------------------------------- Name -------------------------------- Title ------------------------------- TCI OF SPARTANBURG, INC. By *** ---------------------------------- Name -------------------------------- Title ------------------------------- TORONTO DOMINION INVESTMENTS, INC. By *** ---------------------------------- Name -------------------------------- Title ------------------------------- -55- 62 WLD LAMONT PARTNERS By *** ---------------------------------- Name -------------------------------- Title ------------------------------- Robert J. Lewis agrees to be bound by the terms of Section 6.1 and Section 7.2 to the extent such Sections relate to him. Agreed and Accepted this 5th day of August, 1997 /s/ Robert J. Lewis - ------------------------------ Robert J. Lewis InterMedia Capital Management IV, L.P. a California limited partnership as Attorney-in-Fact for each Limited Partner marked with *** By: InterMedia Management, Inc. Its general partner /s/ Robert J. Lewis - ------------------------------ Robert J. Lewis President -56- EX-10.12 3 CONSENT AND SECOND AMENDMENT DATED 2/28/97 1 EXHIBIT 10.12 CONSENT AND SECOND AMENDMENT TO REVOLVING CREDIT AND TERM LOAN AGREEMENT CONSENT AND SECOND AMENDMENT TO REVOLVING CREDIT AND TERM LOAN AGREEMENT, dated as of February 28, 1997 (this "Consent and Second Amendment"), to Revolving Credit and Term Loan Agreement dated as of July 30, 1996 and amended as of August 6, 1996 (as amended, the "Original Agreement"), among InterMedia Partners IV, L.P., a California limited partnership (the "Borrower"), The Bank of New York, as administrative agent, The Bank, of New York, NationsBank of Texas, N.A. and Toronto-Dominion (Texas), Inc., as syndication agents, The Bank of New York, NationsBank of Texas, N.A. and Toronto Dominion (Texas), Inc., as arranging agents, and the financial institutions parties thereto. Capitalized terms used and not otherwise defined in this Consent and Second Amendment shall have the meanings ascribed thereto in the Original Agreement as amended by this Consent and Second Amendment. WITNESSETH WHEREAS, the parties hereto are parties to the Original Agreement; WHEREAS, the Borrower and IP-IV Capital have requested the Lenders' consent to (i) the sale by Leo J. Hindery, Jr. of 100% of the outstanding equity interests in InterMedia Management, Inc., a California corporation ("IMI"), to Robert J. Lewis and the appointment of Robert J. Lewis as president of IMI, (ii) the conversion of Leo J. Hindery, Jr.'s interest as managing general partner of InterMedia Capital Management IV, L.P., a California limited partnership ("ICM IV"), into a limited partnership interest in ICM IV, (iii) the direct or indirect sale by ICM IV to InterMedia Capital Management, LLC, a Delaware limited liability company ("ICM LLC"), of a .001% interest in IP-IV Capital, the conversion of ICM IV's remaining interest as a general partner in IP-IV Capital into a limited partnership interest and the admission of ICM LLC as a general partner of IP-IV Capital, (iv) the direct or indirect sale by ICM IV to ICM LLC of a .01% interest in the Borrower and the admission of ICM LLC as a general partner of the Borrower, (v) the direct or indirect sale by ICM IV to ICM LLC of a .01% partnership interest in InterMedia Partners Southeast, -1- 2 A California general partnership ("IP Southeast"), and the admission of ICM LLC as managing general partner of IP Southeast and (vi) the direct or indirect sale by ICM IV to ICM LLC of a .01% partnership interest in InterMedia Partners of Tennessee, a California general partnership ("IP Tennessee"), and the admission of ICM LLC as managing general partner of IP Tennessee (the transactions described in clauses (i) through (vi) above are referred to herein as the "Restructuring Transactions"); WHEREAS, the Borrower and ICM IV have requested that the Lenders amend certain provisions contained in the original Agreement and certain other Credit Documents to permit the Restructuring Transactions; and WHEREAS, the Lenders executing this Consent and Second Amendment are willing to consent to the Restructuring Transactions and to agree to the necessary amendments to the original Agreement and such other Credit Documents. NOW, THEREFORE, the parties hereby agree as follows: ARTICLE I Amendments and Consent Section 1.1 The Administrative Agent, the Syndication Agents, the Arranging Agents and the Lenders executing this Consent and Second Amendment hereby consent, notwithstanding the terms of the Original Agreement as amended by this Consent and Second Amendment and the Credit Documents, to the consummation of the Restructuring Transactions. Section 1.2 The original Agreement is hereby amended by adding the following definitions to Section 1.01: "ICM LLC" means InterMedia Capital Management, LLC, a Delaware limited liability company. "ICM LLC Hypothecation Agreement" means the Security and Hypothecation Agreement executed by ICM LLC substantially in the form of Exhibit G, as it may be amended or supplemented from time to time. Section 1.3 The Original Agreement is hereby amended by adding "ICM LLC," after "ICM IV," in the definition of "Hypothecation Agreements, in Section 1.01. -2- 3 Section 1.4 The definition of "Management Agreements" set forth in Section 1.01(b) of the Original Agreement is hereby amended to read in its entirety as follows: "'Management Agreements', means (i) the Administration Agreement between ICM IV and IP West Tennessee dated as of July 30, 1996, as amended, (ii) the Administration Agreement between ICM IV and RMG dated as of July 30, 1996, as amended, (iii) an Administration Agreement between either IMI or ICM IV and the Borrower, (iv) an Administration Agreement between either IMI or ICM IV and IP Southeast and (v) an Administration Agreement between either IMI or ICM IV and IP Tennessee." Section 1.5 The definition of "Management Fees" set forth in Section 1.01(b) of the Original Agreement is hereby amended to read in its entirety as follows: "'Management Fees' means the fees payable pursuant to the Management Agreements." Section 1.6 The definition of "Administration Agreements" set forth in Section 1.01(b) of the Original Agreement is hereby amended to read in its entirety as follows: "'Administration Agreements' means the (i) Service Agreement between IMI and IP-Southeast dated as of July 30, 1996 as amended, (ii) the Service Agreement between IMI and IP Tennessee dated as of January 19, 1995, as amended, (iii) the Amended and Restated Service Agreement between IMI and IP West Tennessee dated as of December 27, 1990 as amended, and (iv) the Service Agreement between IMI, the Borrower and IP-IV Capital dated as of March 19, 1996, as amended." Section 1.7 The definition of "Permitted Administration Fee Payments" set forth in Section 1.01(b) of the Original Agreement is hereby amended to read in its entirety as follows: "'Permitted Administration Fee Payments' means the fees payable by Borrower to IMI pursuant to the Administration Agreements to the extent of -3- 4 costs and expenses actually incurred under the relevant Administration Agreement." Section 1.8 The Original Agreement is hereby amended by replacing "Robert J. Lewis" for "Leo J. Hindery, Jr.' in the definition of "Responsible Person" in Section 1.01. Section 1.9 Section 6.01(a)(ii) of the Original Agreement is hereby amended by adding "or limited liability companies, as the case may be" after "limited partnerships in the second line thereof. Section 1.10 Section 6.01(b)(i) of the original Agreement is hereby amended by replacing "ICM IV" with "ICM LLC" in each instance. Section 1.11 Sections 6.01(b)(ii), (e) through (h), (j), (p), (q), (r), (v) and (w) of the Original Agreement are hereby amended by adding "ICM LLC," after "IP-IV Capital," in each instance. Section 1.12 Section 6.01(d) of the Original Agreement is hereby amended by adding the following as clause (v) thereto: "(v) ICM LLC has full power and authority to execute, deliver and perform each of the Credit Documents and each of the Related Documents to which it is a party, to grant to the Lenders the security interests and Liens described therein and to incur the obligations provided for therein, all of which have been duly authorized by all proper and necessary action of ICM LLC and its members. No consent or approval of the members of ICM LLC is required as a condition to the validity or performance of, or the exercise by the Lenders or the Agent of any of their rights and remedies under the Credit Documents to which ICM LLC is a party (other than the execution of such Credit Documents by the member(s)) except for such consents and approvals which have been obtained and are in full force and effect." Section 1.13 Sections 6.01(b)(ii) and 6.01(h) of the Original Agreement are each hereby further amended by adding, "limited liability company agreement" after the words "partnership agreements" in the second line of Section -4- 5 6.01(b)(ii) and after the words "partnership agreement" in the eighth line of Section 6.01(h). Section 1.14 Sections 9.01(k), (1) and (m) of the Original Agreement are hereby replaced with the following: "(k) There shall have occurred a breach of the Borrower Partnership Agreement, resulting in ICM LLC and IP-IV Capital no longer acting as the general partners thereof or there shall have occurred a breach of the ICM IV Partnership Agreement, resulting in IMI no longer acting as the general partner thereof or there shall have occurred a breach of the IP-IV Capital Partnership Agreement, resulting in ICM LLC no longer acting as the sole general partner thereof; or (1) Robert J. Lewis shall (1) no longer act as President or no longer be the sole shareholder of IMI or (2) no longer be the managing member of ICM LLC or no longer directly or indirectly control ICM LLC, except in the case of his death or physical or mental incapacity; or (m) IP-IV Capital shall fail to own directly 99.99% of the Borrower or ICM LLC shall fail to own .01% of the Borrower; or" Section 1.15 Section 12.06 of the Original Agreement is hereby amended by replacing "Leo J. Hindery, Jr." in the notice address for the Borrower with "Robert J. Lewis". ARTICLE II Related Document Amendments Section 2.1 The Lenders hereby consent to the execution and delivery by the Borrower of amendments to any and all of the Related Documents as necessary to permit the consummation of the Restructuring Transactions and to permit certain other amendments necessary or incidental thereto (such amendments to the Related Documents, together with the additional Related Documents executed in connection with the Restructuring Transactions are herein referred to collectively as the "Related Document Amendments"), and hereby agree to waive the restriction provided in Section -5- 6 8.02 (1) of the Original Agreement to the extent necessary to permit the execution and delivery of the Related Document Amendments. ARTICLE III Representations and Warranties Section 3.1 The Borrower and, to the extent any of the following representations are applicable to IP-IV Capital, IP-IV Capital, represent and warrant to the Lenders that upon the effectiveness of this Consent and Second Amendment and immediately before and after giving effect to Restructuring Transactions: (a) Authority. (i) The Borrower has full power and authority to execute, deliver and perform its obligations under this Consent and Second Amendment and each of the Related Document Amendments to which it is a party and to incur the obligations provided for herein and therein, all of which have been duly authorized by all proper and necessary partnership action of the Borrower and its partners. No consent or approval of the partners of the Borrower is required as a condition to the validity or performance of, or the exercise by the Lenders, the Administrative Agent, the Syndication Agents or the Arranging Agents of any of their rights and remedies under, the Credit Documents to which it is a party (other than the execution of such Credit Documents by the general partner(s) of the Borrower), except for such consents and approvals which have been obtained and are in full force and effect and except where the failure to obtain and maintain in full force and effect any such consent or approval, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (ii) IP-IV Capital has full power and authority to execute, deliver and perform its obligations under this Consent and Second Amendment and each of the Related Document Amendments to which it is a party and incur the obligations provided for herein and therein, all of which have been duly authorized by all proper and necessary partnership action of IP-IV Capital and its general partners. No consent or approval of the general partners of IP-IV Capital is required as a condition to the validity or performance of, or the exercise by the Lenders, the Administrative Agent, the Syndication Agents or the Arranging Agents of any of their rights and remedies under, -6- 7 this Consent and Second Amendment (other than the execution of this Consent and Second Amendment by the general partner(s) of IP-IV Capital), except for such consents and approvals which have been obtained and are in full force and effect and except where the failure to obtain and maintain in full force and effect any such consent or approval, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (b) Authorizations. All material authorizations, consents, approvals, registrations, notices, exemptions and licenses with, to or from Governmental Authorities and other Persons which are necessary in connection with the execution of this Consent and Second Amendment, the execution of each of the Related Document Amendments to which the Borrower, IP-IV Capital, ICM IV, ICM LLC or any Restricted Subsidiary is a party, the performance by the Borrower of its obligations under the Original Agreement as amended by this Consent and Second Amendment, the performance by the Borrower, IP-IV Capital, ICM IV, ICM LLC or a Restricted Subsidiary, as the case may be, of each Related Document Amendment, the consummation of the Restructuring Transactions and the exercise by the Administrative Agent, the Syndication Agents, the Arranging Agents and the Lenders of their remedies under the Original Agreement as amended by this Consent and Second Amendment have been effected or obtained and are in full force and effect, except where the failure to effect or obtain any such authorization, consent, approval, registration, notice, exemption or license, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (c) Binding Agreement. This Consent and Second Amendment, each of the Related Document Amendments to which the Borrower, IP-IV Capital, ICM IV, ICM LLC or any Restricted Subsidiary is a party constitutes the valid and legally binding obligations of the Borrower, IP-IV Capital, ICM IV, ICM LLC or a Restricted Subsidiary, as the case may be, enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. (d) Litigation. There are no proceedings, investigations or labor controversies pending or, so far as the Borrower knows, threatened before any court or arbitrator or before or by any Governmental Authority which are related to this Consent and Second Amendment, any Related Document Amendment or the Restructuring Transactions -7- 8 which, in any one case or in the aggregate, if determined adversely to the interests of the Borrower, could have a Material Adverse Effect. (e) No Conflicts. There is no statute, regulation, rule, order or judgment, and no provision of any agreement or instrument binding on IP-IV Capital, the Borrower, its partners or a Restricted Subsidiary or affecting their respective properties and no provision of the Borrower Partnership Agreement or the partnership agreement, by-laws or operating agreement, as the case may be, of IP-IV Capital, ICM LLC or any of the Restricted Subsidiaries or any general partner or shareholder thereof which would prohibit, or in any material way be inconsistent with or prevent the execution, delivery, or performance of the terms of the Original Agreement as amended by this Consent and Second Amendment or any Related Document Amendment or result in or require the creation or imposition of any Lien (other than Permitted Encumbrances) on any of the properties of the Borrower, IP-IV Capital, ICM LLC or any of the Restricted Subsidiaries as a consequence of the execution, delivery and performance of this Consent and Second Amendment, any Related Document Amendment or the Restructuring Transactions. The execution, delivery and performance by the Borrower, IP-IV Capital, ICM LLC and the Restricted Subsidiaries of this Consent and Second Amendment and any Related Document Amendment to which they are a party do not, and will not, as the case may be, (i) violate any provision of law applicable to the Borrower, IP-IV Capital, ICM LLC or any Restricted Subsidiary or any of their general partners or shareholders, the Borrower Partnership Agreement or the partnership agreement or operating agreement, as the case may be, of any of the Borrower's general partners or the partnership agreement or by-laws of any Restricted Subsidiary, or any order, judgment or decree of any court or other agency of government binding on the Borrower, any of its general partners or any Restricted Subsidiary, (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any agreement or instrument binding on the Borrower, any of its general partners or any Restricted Subsidiary, or affecting their respective properties, or (iii) require any approval of partners or shareholders (other than the execution thereof by the partner(s) or authorized officer(s) of the Borrower or any Restricted Subsidiary) or any approval or consent of any Person under any agreement or instrument binding on the Borrower or any of its partners or any Restricted Subsidiary, or affecting their respective properties, other than approvals which have been previously obtained and are in full force and effect, and except for -8- 9 conflicts, inconsistencies, liens, violations, breaches, approvals or consents which individually, or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. (f) Security Interests. The provisions of the Hypothecation Agreements (including the Hypothecation Agreement delivered on the effective date of this Consent and Second Amendment by ICM LLC) are effective to maintain, or, in the case of the aforementioned Hypothecation Agreement delivered by ICM LLC, create, in favor of the Lenders a valid, binding and enforceable security interest or lien in all right, title and interest of the Borrower and the hypothecators in the collateral described therein, and constitute a fully perfected first priority security interest, lien or mortgage in all right, title and interest of the Borrower or other hypothecator, as the case may be, in such collateral, superior in right to any Lien except for the Liens, if any, permitted to be prior hereunder or under any Hypothecation Agreement, existing or future, except, with respect to future Liens, as otherwise provided in the applicable Uniform Commercial Code, which the Borrower or any third Person may have against such collateral or interests therein. ARTICLE IV Conditions Precedent Section 4.1 The effectiveness of this Consent and Second Amendment is subject to the conditions precedent that: (a) Execution of Agreement. This Consent and Second Amendment shall have been executed by the Borrower, each Lender required by the terms of the Original Agreement to effect the consents and amendments contemplated herein, the Administrative Agent, the Syndication Agent, each Arranging Agent, and consented to by IP-IV Capital, ICM IV, TCID-IP V, Inc., each Restricted Subsidiary and IP-Southeast. (b) Opinion of Borrower's Counsel. The Administrative Agent shall have received a favorable written opinion of Pillsbury Madison, & Sutro LLP, counsel for the Borrower, dated the date hereof, substantially in the form of Exhibit A hereto. -9- 10 (c) Evidence of Action. The Administrative Agent shall have received copies on all action taken by the Borrower, its partners and its affiliates to authorize this Consent and Second Amendment certified by the Borrower as true and correct as of the date hereof. (d) Consent of Equity Investors. IP-IV Capital shall have obtained all consents and approvals necessary from its limited partners to effect the Restructuring Transactions and the Administrative Agent shall have received evidence thereof reasonably satisfactory to the Administrative Agent. (e) No Default. No event of default, and no event which, with the giving of notice or lapse of time, or both, would constitute an event of default under the Original Agreement as amended by this Consent and Second Amendment or any other Credit Document shall have occurred and be continuing or shall result from the effectiveness of this Consent and Second Amendment or the consummation of the Restructuring Transactions, and the Administrative Agent shall have received a certificate to the above effect from the Borrower. (f) ICM LLC Hypothecation Agreement. ICM LLC shall have duly authorized, executed and delivered to the Administrative Agent a Security and Hypothecation Agreement substantially in the form of Exhibit G to the Original Agreement. (g) Representations And Warranties. The representations and warranties contained in Article III shall be true and correct as of the effective date of this Consent and Second Amendment and the Administrative Agent shall have received a certificate of the Borrower to the foregoing effect. (h) Related Document Amendments. Each of the Related Document Amendments, each of which shall be in form and substance reasonably acceptable to the Administrative Agent, shall have been duly authorized, executed and delivered by the parties thereto and true and correct copies thereof shall have been delivered to the Administrative Agent. -10- 11 ARTICLE V Miscellaneous SECTION 5.1 Other Credit Documents. The Lenders hereby consent to the sale by ICM IV to ICM LLC of its .01% general partnership interest in the Borrower, its .01% managing general partnership interest in IP Southeast and its .01% managing General partnership interest in IP Tennessee as part of the Restructuring Transactions and agree to waive the restriction provided in Section 5(b)(ii) of the Security and Hypothecation Agreement, dated as of July 30, 1996, made by ICM IV in favor of The Bank of New York in its capacity as Agent for the benefit of the Lenders (the "ICM IV Hypothecation Agreement"), to the extent necessary to permit the foregoing sale; provided, however, that the foregoing sale is made subject to the Lien created in the ICM IV Hypothecation Agreement, and ICM LLC takes such interests subject to such Lien. Upon the consummation of the Restructuring Transactions and the sale described in the immediately preceding sentence, the Hypothecation Agreement made by ICM IV in favor of the Agent shall be terminated and of no further force or effect. SECTION 5.2 Continuing Agreement. Except as amended hereby, all of the terms of the Original Agreement and the Credit Documents shall remain and continue in full force and effect and are hereby confirmed in all respects. SECTION 5.3 GOVERNING LAW. THIS CONSENT AND SECOND AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA. SECTION 5.4 Counterparts. This Consent and Second Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when, so executed and delivered, shall be an original, but all the counterparts shall together constitute one and the same instrument. 11 12 IN WITNESS WHEREOF, THE PARTIES THERETO HAVE CAUSED THIS CONSENT AND SECOND AMENDMENT TO BE DULY EXECUTED AS OF THE DATE FIRST ABOVE WRITTEN. INTERMEDIA PARTNERS IV, L.P. BY: INTERMEDIA CAPITAL MANAGEMENT IV, L.P. BY: INTERMEDIA MANAGEMENT, INC. By: /s/ Leo J. Hindery, Jr. -------------------------- NAME: Leo J. Hindery, Jr. TITLE: President THE BANK OF NEW YORK, as Agent and Arranging Agent By: /s/ Wade E. Layton ------------------------------ NAME: Wade E. Layton TITLE: Vice President NATIONSBANK OF TEXAS, N.A., as Arranging Agent and Syndication Agent By: /s/ Whitney L. Busse ------------------------------ NAME: Whitney L. Busse TITLE: Vice President TORONTO-DOMINION (TEXAS), INC., as Arranging Agent and Syndication Agent By: /s/ L. Allison ------------------------------ NAME: Lisa Allison TITLE: Vice President -12- 13 THE BANK OF NEW YORK COMPANY, INC. , as Lender By: /s/ James Whitaker ------------------------------ NAME: James W. Whitaker TITLE: Authorized Signer NATIONSBANK OF TEXAS, N.A., as Lender By: /s/ Whitney L. Busse ------------------------------ NAME: Whitney L. Busse TITLE: Vice President TORONTO-DOMINION (TEXAS), INC., as Lender By: /s/ L. Allison ------------------------------ NAME: Lisa Allison TITLE: Vice President BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION, as Co-Agent and Lender By: /s/ Shannon T. Ward ------------------------------ NAME: Shannon T. Ward TITLE: Vice President BANK OF HAWAII, as Co-Agent and Lender By: /s/ J. Bryan Scearce ------------------------------ NAME: J. Bryan Scearce TITLE: Vice President 13 14 THE BANK OF NOVA SCOTIA, as Co-Agent and Lender By: /s/ Margot C. Bright ------------------------------ Name: Margot C. Bright Title: Authorized Signatory BARCLAYS BANK PLC, as Co-Agent and Lender By: /s/ Les Bek ------------------------------ Name: Les Bek Title: Director CIBC INC., as Co-Agent and Lender By: /s/ Lorain C. Granberg ------------------------------ Name: Lorain C. Granberg Title: Director CREDIT LYONNAIS NEW YORK BRANCH, as Co-Agent and Lender By: /s/ Mark D. Thorsheim ------------------------------ Name: Mark D. Thorsheim Title: Vice President FIRST HAWAIIAN BANK, as Co-Agent and Lender By: /s/ Donald Young ------------------------------ Name: Donald Young Title: Assistant Vice President -14- 15 FLEET BANK, N.A., as Co-Agent and Lender By: /s/ Garret Komjathy ------------------------------ Name: Garret Komjathy Title: Vice President THE LONG-TERM CREDIT BANK OF JAPAN, LTD., LOS ANGELES AGENCY, as Co-Agent and Lender By: /s/ T. Morgan Edwards II ------------------------------ Name: T. Morgan Edwards II Title: Deputy General Manager MELLON BANK, N.A., as Co-Agent and Lender By: /s/ Michael Hrycenko ------------------------------ Name: Michael Hrycenko Title: Vice President PNC BANK, NATIONAL ASSOCIATION, as Co-Agent and Lender By: /s/ Cynthia L. Rogers ------------------------------ Name: Cynthia L. Rogers Title: Banking Officer ROYAL BANK OF CANADA, as Co-Agent and Lender By: /s/ Edward Salazar ------------------------------ Name: Edward Salazar Title: Senior Manager -15- 16 SOCIETE GENERALE, as Co-Agent and Lender By: /s/ Mark Vigil ------------------------------ Name: Mark Vigil Title: Vice President BANK BRUSSELS LAMBERT, NEW YORK BRANCH, as Lender By: /s/ Dominick N.J. Vangaever ------------------------------ Name: Dominick N.J. Vangaever Title: Senior Vice President By: /s/ Denise Isherwood ------------------------------ Name: Denise Isherwood Title: Assistant Vice President BANK OF MONTREAL, CHICAGO BRANCH, as Lender By: /s/ Karen S. Klapper ------------------------------ Name: Karen S. Klapper Title: Director BANQUE PARIBAS, as Lender By: /s/ Sonia Isaacs ------------------------------ Name: Sonia Isaacs Title: Vice President By: /s/ Harry Collyns ------------------------------ Name: Harry Collyns Title: Vice President -16- 17 BANQUE NATIONALE DE PARIS, as Lender By: /s/ L. Tourne ------------------------------ NAME: L. Tourne TITLE: Vice President By: /s/ Mylene Dab ------------------------------ NAME: Mylene Dab TITLE: Assistant Vice President CORESTATES BANK, N.A., as Lender By: /s/ Lynae S. Young ------------------------------ NAME: Lynae S. Young TITLE: Assistant Vice President CRESTAR BANK, as Lender By: /s/ J. Eric Millham ------------------------------ NAME: J. Eric Millham TITLE: Vice President THE DAI-ICHI KANGYO BANK, LTD. LOS ANGELES AGENCY, as Lender By: /s/ Masatsugu Morishita ------------------------------ NAME: Masatsugu Morishita TITLE: Sr. Vice President DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLANDS BRANCH, as Lender By: /s/ Steven M. Godeke ------------------------------ NAME: Steven M. Godeke TITLE: Vice President By: /s/ John R. Lilly ------------------------------ NAME: John R. Lilly TITLE: Vice President -17- 18 DRESDNER BANK AG, NEW YORK & GRAND CAYMAN BRANCHES, as Lender By: /s/ Jane A. Majeski ------------------------------ Name: Jane A. Majeski Title: Vice President By: /s/ Brian Haughney ------------------------------ Name: Brian Haughney Title: Assistant Treasurer FIRST AMERICAN NATIONAL BANK, as Lender By: /s/ Corey Napier ------------------------------ Name: Corey Napier Title: Vice President FIRST NATIONAL BANK OF MARYLAND, as Lender By: /s/ Mark L. Cook ------------------------------ Name: Mark L. Cook Title: Senior Vice President THE FUJI BANK, LIMITED LOS ANGELES AGENCY, as Lender By: /s/ Nobuhiro Umemura ------------------------------ Name: Nobuhiro Umemura Title: Joint General Manager THE INDUSTRIAL BANK OF JAPAN, LIMITED, as Lender By: /s/ Takahide Akiyama ------------------------------ Name: Takahide Akiyama Title: Joint General Manager -18- 19 MEESPIERSON, N.V., as Lender By: /s/ John O'Connor ------------------------------ NAME: John O'Connor TITLE: Senior Vice President By: /s/ Hendrik J. Vroege ------------------------------ NAME: Hendrik J. Vroege TITLE: Vice President BANK OF TOKYO-MITSUBISHI TRUST CO., as Lender By: /s/ Glenn B. Eckert ------------------------------ NAME: Glenn B. Eckert TITLE: Vice President THE MITSUBISHI TRUST AND BANKING CORPORATION, as Lender By: /s/ Patricia Loret de Mola ------------------------------ NAME: Patricia Loret de Mola TITLE: Senior Vice President THE NIPPON CREDIT BANK, LTD., LOS ANGELES AGENCY, as Lender By: /s/ Jay Schwartz ------------------------------ NAME: Jay Schwartz TITLE: Vice President & Manager THE SAKURA BANK, LIMITED, as Lender By: /s/ Seiichi Tagusari ------------------------------ NAME: Seiichi Tagusari TITLE: Senior Vice President & Joint General Manager -19- 20 THE SANWA BANK, LIMITED LOS ANGELES BRANCH, as Lender By: /s/ ------------------------------ Name: Title: THE SUMITOMO BANK, LIMITED, as Lender By: /s/ Bradford E. Chambers ------------------------------ Name: Bradford E. Chambers Title: Vice President By: /s/ Judith M. Bresnen ------------------------------ Name: Judith M. Bresnen Title: Vice President SUNTRUST BANK, CENTRAL FLORIDA, N.A., as Lender By: /s/ Janet P. Sammons ------------------------------ Name: Janet P. Sammons Title: Vice President UNION BANK OF CALIFORNIA, N.A., as Lender By: /s/ Robert Wilson ------------------------------ Name: Robert Wilson Title: Vice President -20- 21 BANKERS TRUST COMPANY, as Lender By: /s/ Virginia M. Sermier ------------------------------ Name: Virginia M. Sermier Title: Managing Director KEYPORT LIFE INSURANCE COMPANY, as Lender By: Chancellor LGT Senior Secured Management, Inc., as Portfolio Advisor By: /s/ Gregory L. Smith ------------------------------ Name: Gregory L. Smith Title: Vice President MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., as Lender By: /s/ Gilles Marchand ------------------------------ Name: Gilles Marchand, CFA Title: Authorized Signatory PILGRIM AMERICA PRIME RATE TRUST, as Lender By: /s/ Howard Tiffen ------------------------------ Name: Howard Tiffen Title: Senior Vice President ML CBO IV (CAYMAN) LTD., as Lender By: Protective Life Insurance Company, as Collateral Manager By: /s/ James Dondero ------------------------------ Name: James Dondero, CPA, CFA Title: President -21- 22 VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST, as Lender By: /s/ Jeffrey W. Maillet ------------------------------ Name: Jeffrey W. Maillet Title: Senior Vice President and Director SENIOR DEBT PORTFOLIO, as Assignee By: Boston Management and Research, an Investment Advisor By: /s/ Payson F. Swaffield ------------------------------ Name: Payson F. Swaffield Title: Vice President CAPTIVA FINANCE, LTD., as Assignee By: /s/ Derrie Boggess ------------------------------ Name: Derrie Boggess Title: Director AERIES FINANCE LTD., as Assignee By: /s/ Andrew Wignall ------------------------------ Name: Andrew Ian Wignall Title: Director -22- 23 Executed for purposes of Section 5.1 as of the date first above written: INTERMEDIA CAPITAL MANAGEMENT IV, L.P., a California limited partnership By InterMedia Management, Inc., a California corporation, its General Partner By: /s/ Leo J. Hindery, Jr. ------------------------- Name: Leo J. Hindery, Jr. Title: President Acknowledged, accepted, agreed and consented to as of the date first above written: INTERMEDIA CAPITAL PARTNERS IV, L.P., a California limited partnership By InterMedia Capital Management IV, L.P., a California limited partnership, its Managing General Partner By InterMedia Management, Inc., a California corporation, its General Partner By: /s/ Leo J. Hindery, Jr. ------------------------- Name: Leo J. Hindery, Jr. Title: President INTERMEDIA CAPITAL MANAGEMENT IV, L.P., a California limited partnership By InterMedia Management Inc., a California corporation, its General Partner By: /s/ Leo J. Hindery, Jr. ------------------------- Name: Leo J. Hindery, Jr. Title: President -23- 24 INTERMEDIA PARTNERS SOUTHEAST, a California general partnership By InterMedia Capital Management IV, L.P., a California limited partnership, its Managing General Partner By InterMedia Management, Inc., a California corporation, its General Partner By: /s/ Leo J. Hindery, Jr. ------------------------- Name: Leo J. Hindery, Jr. Title: President INTERMEDIA PARTNERS OF TENNESSEE, a California general partnership By InterMedia Capital Management IV, L.P., a California limited partnership, its Managing General Partner By InterMedia Management, Inc., a California corporation, its General Partner By: /s/ Leo J. Hindery, Jr. ------------------------- Name: Leo J. Hindery, Jr. Title: President -24- 25 INTERMEDIA PARTNERS OF WEST TENNESSEE, L.P. a California limited partnership By InterMedia Partners IV, L.P. a California limited partnership, its General Partner By InterMedia Capital Management IV, L.P., a California limited partnership, its Managing General Partner By InterMedia Management, Inc., a California corporation, its General Partner By: /s/ Leo J. Hindery, Jr. ------------------------- Name: Leo J. Hindery, Jr. Title: President ROBIN MEDIA GROUP, INC. By: /s/ Leo J. Hindery, Jr. ------------------------- Name: Leo J. Hindery, Jr. Title: President TCID-IP V, INC. By: /s/ Leo J. Hindery, Jr. ------------------------- Name: Leo J. Hindery, Jr. Title: President -25- EX-27.1 4 FINANCIAL DATA SCHEDULE
5 INTERMEDIA CAPITAL PARTNERS IV, L.P. 1,000 U.S. DOLLARS 3-MOS DEC-31-1997 APR-01-1997 JUN-30-1997 1 7,462 74,828 18,047 (2,117) 0 58,067 248,237 0 957,810 59,089 0 12,785 0 0 31,802 957,810 61,927 61,927 13,370 65,637 132 0 19,614 (22,053) (1,974) (20,293) 0 0 0 (20,293) 0 0 PP&E IS SHOWN NET OF ACCUMULATED DEPRECIATION. INCLUDES PROGRAM FEES AND OTHER DIRECT EXPENSES
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