-----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, JgDwafupx99HjvncrFR+jLZGKwYHeTdGA8zY8nnlZJdE+6HtTcOa7Pwz90OXKzsB shqfd4x9CqppPebOhbkctw== 0000940180-97-000435.txt : 19970513 0000940180-97-000435.hdr.sgml : 19970513 ACCESSION NUMBER: 0000940180-97-000435 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 51 FILED AS OF DATE: 19970509 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CCA HOLDINGS CORP CENTRAL INDEX KEY: 0001038334 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 431720013 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-26853 FILM NUMBER: 97599935 BUSINESS ADDRESS: STREET 1: 12444 POWERSCOURT DR STE 400 CITY: ST LOUIS STATE: MO ZIP: 63131 BUSINESS PHONE: 3149650555 MAIL ADDRESS: STREET 1: CCA HOLDINGS CORP STREET 2: 12444 POWERSCOURT DR STE 400 CITY: ST LOUIS STATE: MO ZIP: 63131 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CCA ACQUISITION CORP CENTRAL INDEX KEY: 0001038332 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 431696238 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-26853-01 FILM NUMBER: 97599936 BUSINESS ADDRESS: STREET 1: 12444 POWERSCOURT DR STE 400 CITY: ST LOUIS STATE: MO ZIP: 63131 BUSINESS PHONE: 3149650555 MAIL ADDRESS: STREET 1: CCA ACQUISITION CORP STREET 2: 12444 POWERSCOURT DR STE 400 CITY: ST LOUIS STATE: MO ZIP: 63131 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHARTER COMMUNICATIONS ENTERTAINMENT LP CENTRAL INDEX KEY: 0001038335 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 431723475 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-26853-02 FILM NUMBER: 97599937 BUSINESS ADDRESS: STREET 1: 12444 POWERSCOURT DR STE 400 CITY: ST LOUIS STATE: MO ZIP: 63131 BUSINESS PHONE: 3149650555 MAIL ADDRESS: STREET 1: CHARTER COMMUNICATIONS ENTERTAINMENT LP STREET 2: 12444 POWERSCOURT DR STE 400 CITY: ST LOUIS STATE: MO ZIP: 63131 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENCOM CABLE ENTERTAINMENT INC /NEW CENTRAL INDEX KEY: 0001038336 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 431258015 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-26853-03 FILM NUMBER: 97599938 BUSINESS ADDRESS: STREET 1: 12444 POWERSCOURT DR STE 400 CITY: ST LOUIS STATE: MO ZIP: 63131 BUSINESS PHONE: 3149650555 MAIL ADDRESS: STREET 1: CENCOM CABLE ENTERTAINMENT INC STREET 2: 12444 POWERSCOURT DR STE 400 CITY: ST LOUIS STATE: MO ZIP: 63131 S-4 1 FORM S-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 9, 1997 REGISTRATION NO. 33- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------- CCA HOLDINGS CORP. CCA ACQUISITION CORP. CENCOM CABLE ENTERTAINMENT, INC. CHARTER COMMUNICATIONS ENTERTAINMENT, L.P. (Exact Name of Registrants, as Specified in Their Charters) DELAWARE [4841] [43-1720013] DELAWARE [4841] [43-1696238] DELAWARE [4841] [43-1258015] DELAWARE [4841] [43-1723475] (State or Other (Primary Standard (I.R.S. Employer Jurisdiction of Industrial Identification Number) Incorporation or Classification Code Organization) Number) 12444 POWERSCOURT DRIVE, SUITE 400 ST. LOUIS, MISSOURI 63131 (314) 965-0555 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrants' Principal Executive Offices) ---------------- MARCY LIFTON, ESQ. COPIES TO: CHARTER COMMUNICATIONS, INC. JOEL M. SIMON, ESQ. 12444 POWERSCOURT DRIVE, SUITE 400 PAUL, HASTINGS, JANOFSKY & WALKER ST. LOUIS, MISSOURI 63131 LLP (314) 965-0555 399 PARK AVENUE NEW YORK, NEW YORK 10022 (Name, Address, Including Zip Code, (212) 318-6000 and Telephone Number, Including Area Code, of Agent For Service) ---------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the Registration Statement becomes effective. If any of the securities being registered on this Form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [_] CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
PROPOSED PROPOSED MAXIMUM MAXIMUM AMOUNT OFFERING AGGREGATE AMOUNT OF TITLE OF EACH CLASS OF TO BE PRICE OFFERING REGISTRATION SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(2) PRICE(2) FEE - ------------------------------------------------------------------------------- Senior Subordinated Notes due 1999(3).............. $82,000,000 100% $82,000,000 $24,848
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (1) Estimated solely for purposes of calculating the registration fee. (2) Exclusive of accrued interest. (3) Issued by CCA Holdings Corp. and guaranteed by CCA Acquisition Corp., Cencom Cable Entertainment, Inc. and Charter Communications Entertainment, L.P.. The registrants hereby amend this registration statement on such date or dates as may be necessary to delay its effective date until the registrants shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- CCA HOLDINGS CORP. CCA ACQUISITION CORP. CENCOM CABLE ENTERTAINMENT, INC. CHARTER COMMUNICATIONS ENTERTAINMENT, L.P. CROSS-REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K AND RULE 404(A) SHOWING LOCATION IN PROSPECTUS OF INFORMATION REQUIRED BY ITEMS IN S-4
REGISTRATION STATEMENT ITEM AND HEADING PROSPECTUS CAPTION - --------------------------------------- ------------------ 1. Forepart of Registration Statement and Outside Front Cover Page of Forepart of the Registration Prospectus........................ Statement; Outside Front Cover Page of Prospectus 2. Inside Front and Outside Back Cover Pages of Prospectus............... Inside Front and Outside Back Cover Pages of Prospectus 3. Risk Factors, Ratio of Earnings to Fixed Charges and Other Summary; Risk Factors; Unaudited Information....................... Summary Historical and Unaudited Pro Forma Financial Data of CCA and Subsidiaries; Unaudited Pro Forma Financial Statements 4. Terms of the Transaction........... Summary; The Exchange Offer 5. Pro Forma Financial Information.... Unaudited Summary Historical and Unaudited Pro Forma Financial Data of CCA and Subsidiaries; Unaudited Pro Forma Financial Statements; Supplemental Selected Historical Combined Financial Data 6. Material Contracts with Company Being Acquired...................... Not Applicable 7. Additional Information Required for Reoffering by Persons and Parties Deemed to be Underwriters......... Not Applicable 8. Interests of Named Experts and Counsel............................. Not Applicable 9. Disclosure of Commission Position on Indemnification for Securities Act Liabilities................... Not Applicable 10. Information With Respect to S-3 Registrants......................... Not Applicable 11. Incorporation of Certain Information by Reference............ Not Applicable 12. Information with Respect to S-2 or S-3 Registrants..................... Not Applicable 13. Incorporation of Certain Information by Reference............ Not Applicable 14. Information with Respect to Registrants Other than Prospectus Summary; Supplemental S-2 or S-3 Registrants............ Selected Historical Combined Financial Data; Unaudited Pro Forma Financial Statements; Management's Discussion and Analysis of Financial Condition and Results of Operations; Business 15. Information with Respect to S-3 Companies........................... Not Applicable 16. Information with Respect to S-2 or S-3 Companies....................... Not Applicable 17. Information with Respect to Companies Other than S-2 or S-3 Companies......................... Not Applicable 18. Information if Proxies, Consents or Authorizations are to be Solicited......................... Not Applicable 19. Information if Proxies, Consents or Authorizations are not to be Management; Certain Relationships and Solicited or in an Exchange Related Transactions; The Exchange Offer............................. Offer
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A + +REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE + +SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY + +OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT + +BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR + +THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE + +SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE + +UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF + +ANY SUCH STATE. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED MAY 9, 1997 CCA HOLDINGS CORP. [LOGO] CHARTER CCA ACQUISITION CORP. COMMUNICATIONS CENCOM CABLE ENTERTAINMENT, INC. CHARTER COMMUNICATIONS ENTERTAINMENT, L.P. OFFER TO EXCHANGE SERIES B SENIOR SUBORDINATED NOTES DUE 1999 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR ANY AND ALL OF ITS OUTSTANDING SERIES A SENIOR SUBORDINATED NOTES DUE 1999 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK TIME, ON , 1997, UNLESS EXTENDED (THE "EXPIRATION DATE"). CCA Holdings Corp., a Delaware corporation (the "Issuer" or "CCA"), hereby offers, upon the terms and subject to the conditions set forth in this Prospectus and the accompanying Letter of Transmittal, as the same may be amended or supplemented from time to time (which together constitute the "Exchange Offer"), to issue an aggregate of up to $82,000,000 principal amount of Series B Senior Subordinated Notes due 1999 (the "New Notes") in exchange for an identical face amount of outstanding Series A Senior Subordinated Notes due 1999 (the "Old Notes" and, with the New Notes, the "Notes"). The terms of the New Notes are identical in all material respects to the terms of the Old Notes except that the registration and other rights relating to the exchange of Old Notes for New Notes and the restrictions on transfer set forth on the face of the Old Notes will not appear on the New Notes. See "The Exchange Offer." The New Notes are being offered hereunder in order to satisfy certain obligations of the Issuer under a letter agreement dated as of November 15, 1996 (the "Letter Agreement"). Based on an interpretation by the staff of the Securities and Exchange Commission (the "Commission") set forth in no-action letters issued to third parties unrelated to the Issuer and the Guarantors (as defined below), New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold, and otherwise transferred by a holder thereof (other than a holder which is an "affiliate" of the Issuer or any of the Guarantors (as defined below) within the meaning of Rule 405 under the Securities Act of 1933, as amended (the "Securities Act")), without compliance with the registration and (except as provided below) the prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holder's business and such holder has no arrangement with any person to participate in or is engaged in or is planning to be engaged in the distribution of such New Notes. The Notes are unsecured obligations of the Issuer and are subordinated in right and priority of payment to all existing and future indebtedness of the Issuer, other than indebtedness that by its terms is expressly subordinated to the Notes. The obligations on the Notes are guaranteed (the "Guarantees") as set forth herein on a subordinated basis by two subsidiaries ("CAC" and "Cencom Cable") of the Issuer and by a limited partnership ("CCE, L.P.") in which the Issuer owns indirect limited and general partnership interests (collectively, the "Guarantors"). The Issuer and the Guarantors are holding companies that currently conduct substantially all their business through two limited partnerships ("CCE-I" and "CCE-II"); the Issuer and one of the Guarantors control CCE-I (and neither the Issuer nor any of the Guarantors controls CCE- II). Because the Issuer and the Guarantors currently do not have any other assets which generate revenue or distributions, the Issuer and the Guarantors are dependent primarily upon distributions from CCE-I and its subsidiaries to service the Notes and the Guarantees. The receipt of such distributions by the Issuer are governed by the terms of the CCE, L.P. Partnership Agreement (as defined herein). See "CCE, L.P. Transaction--The Partnership Agreements." The Notes, except under certain limited circumstances, will not have the benefit of distributions from CCE-II or any other affiliates of the Issuer or the Guarantors. The Guarantees, by their terms, are limited to the proceeds of distributions received by the Guarantors from CCE-I. The CCE, L.P. Guarantee cannot be enforced until the repayment in full and termination of the CCE-I Credit Facility and the CCE-II Credit Facility (as defined herein), and any other senior indebtedness of CCE-II and senior indebtedness of New CCE Subsidiaries (as defined herein). The Guarantees issued by CAC and Cencom Cable cannot be enforced until the repayment in full and termination of the CCE-I Credit Facility (as defined herein). As of December 31, 1996, the Issuer's and the Guarantors' only indebtedness other than the Notes was approximately $55.5 million of deferred income taxes. As of December 31, 1996, the aggregate indebtedness of CCE-I (including current liabilities of approximately $28.9 million and other long-term liabilities of approximately $2.5 million) was approximately $493.5 million. Except for certain fees and expenses payable or which may become payable by the Company (as defined herein) on an ongoing basis as described herein, the Company will not make any distributions or advances, by dividend or otherwise, to any of its shareholders before the Notes are repaid in full. See "Prospectus Summary--The Company," and "--Organizational Structure." Each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Issuer has agreed that, for a period of 180 days after the effective date hereof, it will make the Prospectus available to any broker- dealer for use in connection with any such resale. See "The Exchange Offer." The Issuer will not receive any proceeds from the Exchange Offer. HC Crown Corp. ("HC Crown," an affiliate of Hallmark Cards, Incorporated, which previously purchased the Notes from the Issuer) will pay all the expenses incident to the Exchange Offer. Tenders of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. If the Issuer terminates the Exchange Offer and does not accept for exchange any Old Notes, it will promptly return the Old Notes to the holders thereof. See "The Exchange Offer." Prior to this Exchange Offer, there has been no public market for the Old Notes or the New Notes. To the extent that Old Notes are tendered and accepted in the Exchange Offer, a holder's ability to sell untendered Old Notes could be adversely affected. If a market for the New Notes should develop, the New Notes could trade at a discount from their principal amount. The Issuer does not currently intend to list the New Notes on any securities exchange or to seek approval for quotation through any automated quotation system; however, the Notes have been designated for trading in the PORTAL market. There can be no assurance that an active public market for the New Notes will develop. The Exchange Agent for the Exchange Offer is Harris Trust and Savings Bank. SEE "RISK FACTORS" BEGINNING ON PAGE 24 FOR A DESCRIPTION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER. ---------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is June , 1997. STATEMENT OF AVAILABLE INFORMATION The Issuer and the Guarantors have filed with the Commission a Registration Statement on Form S-4 with respect to the New Notes being offered hereby (including all exhibits and amendments thereto, the "Registration Statement"). This Prospectus, which constitutes a part of the Registration Statement, does not contain all the information set forth in the Registration Statement and the exhibits and schedules thereto, certain portions of which have been omitted pursuant to the rules and regulations of the Commission. For further information with respect to the Issuer and the Guarantors and the securities offered hereby, reference is made to the Registration Statement and to the exhibits filed therewith. Statements made in this Prospectus as to the contents of any contract or other document referred to are not necessarily complete and, where applicable reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement, each such statement is qualified by such reference. As a result of the filing of the Registration Statement, the Company will become subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith will be required to file reports and other information with the Commission. Such reports, the Registration Statement and other information may be inspected and copied, at prescribed rates, at the public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at the regional offices of the Commission located at Seven World Trade Center, New York, New York 10048, and at 500 West Madison Street, Suite 1400 Northwestern Atrium Center, Chicago, Illinois 60611. Copies of such material may also be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The duty to file reports and other information with the Commission will be automatically suspended as to any fiscal year, after the fiscal year ended December 31, 1997, during which the Notes are held of record by fewer than 300 persons. In the event the Company is not subject to the reporting requirements of the Exchange Act at any time following the consummation of the Exchange Offer, the Company will be required under the Indenture, dated as of February 13, 1997 (the "Indenture"), among the Issuer, the Guarantors and Harris Trust and Savings Bank, as trustee (the "Trustee"), pursuant to which the Old Notes were, and the New Notes will be, issued, to deliver to the Trustee and each holder of $1.0 million or more in unpaid principal amount of the Notes the following information and reports: (a) within 45 days after the last day of each quarter (other than the fourth quarter) in each fiscal year, the unaudited consolidated statement of operations and statement of cash flows of the Issuer for such quarterly period and for the period from the beginning of the fiscal year to the end of such quarter and the unaudited consolidated balance sheet of the Issuer as of the end of such quarter period; and (b) within 90 days after the end of each fiscal year, the consolidated statements of operations, shareholders' investment and cash flows of the Issuer for such fiscal year, and the consolidated balance sheet of the Issuer as of the end of such fiscal year. Certain other information and reports shall also be delivered to the Trustee and the holders. Such information will be made available upon request, which should be directed to the Secretary of the Company at 12444 Powerscourt Drive, Suite 400, St. Louis, Missouri 63131 (telephone number: (314) 965-0555). PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements, including the notes thereto, appearing elsewhere in this Prospectus. As used in this Prospectus, unless the context otherwise requires, the term (i) "Issuer" or "CCA" refers to CCA Holdings Corp. and (ii) "Company" refers collectively to (a) CCA, and (b) CCA's direct and indirect consolidated and unconsolidated subsidiaries, including CAC, Cencom Cable, CCE, L.P., CCE-I, CCE-II and CC Radio. The term "CAC" refers to CCA Acquisition Corp., "Cencom Cable" refers to Cencom Cable Entertainment, Inc., "CCE, L.P." refers to Charter Communications Entertainment, L.P., "CCE-I" refers to Charter Communications Entertainment I, L.P., "CCE-II" refers to Charter Communications Entertainment II, L.P., "CC Radio" refers to Charter Communications Radio St. Louis, LLC, and "CASTL" refers to Cable Advertising St. Louis, L.L.C. CCE-I and CCE-II are collectively referred to herein as the "Operating Entities." All of the foregoing entities, excluding CCE-II and any other affiliated entities that are not controlled by the Issuer or the Guarantors, but including CCE, L.P., are sometimes collectively referred to as the "CCE-I Entities." See "Business--Background and Ownership Structure." A glossary of certain other terms appearing herein has been included in this Prospectus. See "Glossary." The Notes will be repaid by distributions to the Issuer from CAC, which CAC shall receive primarily from Cencom Cable, CCE, L.P. and CCE-I. Distributions made by Cencom Cable and CCE, L.P. will be made primarily from distributions received from CCE-I. Subject to certain limited exceptions, CCE-I may only make distributions once the obligations in respect of the senior credit facility of CCE-I (including any amendments or extensions or renewals of the commitments thereunder, the "CCE-I Credit Facility") are indefeasibly paid in full in cash and all commitments to lend in respect thereof are terminated. Although the CCE-I Credit Facility restricts CCE-I's ability to incur additional indebtedness, such restriction can be amended by mutual agreement of the lenders thereto and the obligors thereunder, without the consent of the holders. The benefit of distributions from CCE-II, if any, will not be available until the obligations under both the senior credit facility of CCE-II (including any amendments or extensions or renewals of the commitments thereunder, and including the commitments, and any amendments or extensions or renewals thereof, under the Long Beach Credit Facility (as defined herein), the "CCE-II Credit Facility"), the California Note (as defined herein), and any other indebtedness of CCE-II are indefeasibly paid in full in cash and all commitments to lend in respect of the CCE-II Credit Facility and any other indebtedness of CCE-II are terminated. Therefore, the presentation of information regarding the Company herein focuses on the CCE-I Entities. Holders of the Notes may ultimately benefit from distributions from CCE-II, but should not rely on distributions from CCE-II for payment of principal or interest on the Notes. Subject to certain restrictions, CCE, L.P. may establish new subsidiaries (the "New CCE Subsidiaries") from time to time, which could have financing arrangements that result in the sharing with other creditors of distributions to CCE, L.P. from CCE-II and/or such New CCE Subsidiaries. See "The Crown Transaction, Issuance of the Notes and Subordination Agreement--The Partnership Agreements" and "Certain Relationships and Related Transactions-- The Partnership Agreements," "Description of Notes--General" and "Description of Notes--Partnership Agreements" and "Description of Notes--Certain Covenants." 3 THE COMPANY The Company's principal business is the ownership, operation and development of cable television systems, which it currently conducts through two principal operating entities, CCE-I and CCE-II. CCE-I owns, operates and develops cable television systems in the St. Louis, Missouri metropolitan area including southwestern Illinois and in certain rural and suburban areas in Connecticut and Massachusetts ("CCE-I Systems"). As of December 31, 1996, CCE-I's cable television systems passed approximately 533,600 homes and served approximately 338,300 basic subscribers in western and northeastern Connecticut, Massachusetts, eastern Missouri and southwestern Illinois. CCE-II owns, operates and develops cable television systems in metropolitan areas of southern California ("CCE-II Systems"). As of December 31, 1996, CCE-II's cable television systems passed approximately 425,300 homes and served approximately 168,100 basic subscribers in southern California. CCE-I's and CCE-II's operations are managed by Charter Communications, Inc. ("Charter"), a privately-held owner and manager of cable television systems. As of December 31, 1996, Charter managed cable television systems which serve approximately 971,000 basic subscribers (including the Company's subscribers). Assuming completion of all publicly announced cable television industry transactions, management believes that Charter would be the 13th largest multiple system operator ("MSO") in the United States based on number of basic subscribers. The Company seeks to own and operate cable television systems serving an increased number of basic subscribers in the regions in which its cable television systems are presently located. The Issuer commenced operations in January 1995 in connection with consummation of the Crown Transaction (as defined herein, see "--The Crown Transaction, Issuance of the Notes and the Subordination Agreement--The Crown Transaction"), which included the purchase of the Crown Connecticut Systems (as defined herein) and the acquisition of Cencom Cable, an existing operator of cable systems in St. Louis. The cable television systems currently comprising CCE-I's operations were initially acquired pursuant to the Crown Transaction and as a result of several additional acquisitions completed in 1995 and 1996. The financial information contained herein with respect to periods prior to such acquisitions does not reflect any changes in the operation or management of such systems that CCE-I or the Company have implemented since the date of acquisition or that they intend to implement in the future; thus, this financial information is not necessarily indicative of the results of operations that would have been achieved had the systems been operated by the Company during all of the periods with respect to which financial information is presented herein or which may be achieved in the future. CCE-I owns and operates cable television systems which lie principally within two regions: northeastern and western Connecticut and central Massachusetts (the "Northeast Region"); and eastern Missouri and southwestern Illinois (the "Central Region" and collectively with the Northeast Region, the "Regions"). CCE-II owns and operates cable television systems which lie principally within southern California. The Company's cable television systems in the Northeast Region passed approximately 138,700 homes and served approximately 115,000 basic subscribers as of December 31, 1996. The Northeast Region is more diverse geographically than the Central Region, and consists of (i) the Newtown cluster in Connecticut (which includes 14 contiguous towns southwest of Hartford, Connecticut), and tends to be more affluent than other clusters within the Northeast Region, (ii) the Willimantic cluster, which includes 16 contiguous suburban and rural towns northeast of Hartford, and (iii) smaller clusters in Massachusetts consisting of rural communities near and suburbs of the cities of Boston, Springfield and Worcester, Massachusetts and Providence, Rhode Island. The Company's cable television systems in the Central Region passed approximately 394,900 homes and served approximately 223,300 basic subscribers in suburban St. Louis as of December 31, 1996. The Central Region does not include the City of St. Louis, but includes contiguous suburbs within other portions of St. Louis County and neighboring cities in eastern Missouri and southwestern Illinois. The Company, through CC Radio, owns a radio station in St. Louis. On January 27, 1997, the Company entered into an agreement to sell its interest in CC Radio, subject to regulatory approval, and expects to complete the sale in the second or third quarter of 1997. Since January 27, 1997, the radio station has been operated by the purchaser pursuant to a management agreement. 4 Organizational Structure The capital stock of the Issuer is owned 85% by Kelso Investment Associates V, L.P., an investment fund, together with an affiliate (collectively, "Kelso") and certain other individuals; and 15% by Charter, with distributions on exit varying depending on the rates of return on the stockholders' equity investment in the Issuer. Kelso and certain other individuals have invested an aggregate of $68.0 million and $17.0 million in the Issuer and CCT Holdings Corp. ("CCT"), respectively, and Charter has invested an aggregate of $12.0 million and $3.0 million in the Issuer and CCT, respectively. Except for management fees and financial advisory fees and related expenses payable or which may become payable by the Company to Charter and Kelso & Company (an affiliate of Kelso) on an on-going basis and investment banking fees payable to such entities under certain circumstances, the Company will not make any distributions or advances, by dividend or otherwise, to either Charter or Kelso before the Notes are repaid in full. See "Certain Relationships and Related Transactions--Management Agreements-- Transaction Fees" and "Description of Notes--Transactions with Affiliates." The Issuer holds through CAC a 1% general partnership interest in CCE, L.P. and a 1.22% general partnership interest in CCE-I. As of April 30, 1997, the organizational structure of the Company and certain of its affiliates is as follows: [ORGANIZATIONAL FLOW CHART] 5 Priority of CCE-I and CCE-II Distributions The Company conducts business principally through CCE-I and CCE-II, each of which maintains a credit facility with certain lenders and is the indirect obligor under certain promissory notes issued in partial payment of the purchase price for the acquisition of certain assets as described herein. After the obligations in respect of the CCE-I Credit Facility are indefeasibly paid in full in cash and all commitments to lend in respect thereof are terminated, CCE-I will be permitted to make distributions to CCE, L.P., which in turn will make distributions of such funds to Cencom Cable and CAC for distribution to the Issuer. Distributions made by CCE-II will not be available to repay the Notes until the obligations under the CCE-II Credit Facility, the California Note (as defined herein) and any other indebtedness of CCE-II are indefeasibly paid in full in cash and all commitments to lend in respect of the CCE-II Credit Facility or any other indebtedness of CCE-II are terminated. Distributions made by CCE-I and CCE-II will be directed to the Issuer in a manner consistent with the foregoing priorities pursuant to the agreement of limited partnership of CCE, L.P. (the "CCE, L.P. Partnership Agreement"). Subject to certain restrictions, the CCE, L.P. Partnership Agreement may be amended to enable CCE, L.P. to establish New CCE Subsidiaries. Subject to certain restrictions, CCE, L.P. may establish New CCE Subsidiaries from time to time, which could have financing arrangements that result in the sharing with other creditors of distributions to CCE, L.P. from CCE-II and/or such New CCE Subsidiaries. See "Certain Relationships and Related Transactions--the Partnership Agreements," "Description of Other Indebtedness," "Description of Notes--General," "Description of Notes--Partnership Agreements" and "Description of Notes--Certain Covenants." In addition, the Guarantee issued by CCE, L.P. is limited exclusively to funds received by CCE, L.P. from CCE-I. Except as otherwise described herein, no funds from CCE-II or the New CCE Subsidiaries will be available should payment be sought under the Guarantees. See "Description of Notes--Guarantees." Any payment made on the Guarantee issued by CCE, L.P. (i) would result in an event of default under the California Note (as defined herein), and such an event of default would result in a default under the CCE-II Credit Facility and (ii) could result in a default under any senior credit facility or other financing arrangement of a New CCE Subsidiary. In addition the Subordination Agreement (as defined herein) limits the ability of the Guarantees to be enforced. See "--The Crown Transaction, Issuance of the Notes and the Subordination Agreement" in this Prospectus Summary. BUSINESS STRATEGY Management believes clustered cable television systems offer significant growth opportunities, and management's principal objective is to increase the Company's operating cash flow by capitalizing upon such opportunities. To achieve its objective, the Company has pursued the following business strategies: Cluster Through Strategic Acquisitions in Metropolitan Markets The Company has sought to "cluster" its cable systems in suburban and ex- urban areas surrounding selected metropolitan markets. Management believes that such clustering offers significant opportunities to increase operating efficiencies and to improve operating margins and cash flow by spreading the Company's fixed costs over an expanding subscriber base. In addition, management believes that by concentrating its clusters in metropolitan markets, the Company will be able to generate higher growth in revenues and operating cash flow. Such metropolitan markets, because of their concentration of businesses and population, offer greater opportunities for advertising sales and telecommunications services such as competitive access service. In addition, because disposable income levels in many areas served by the Company's cable systems are generally higher than the national average, management believes that the Company will benefit from the opportunity to generate enhanced revenues from existing video services, such as pay television and pay-per-view services, as well as from future services, such as video-on- demand and Internet access services. Through strategic acquisitions, the Company seeks to enlarge the coverage of its current areas of operations, and if feasible, develop clusters in new geographic areas within existing regions. In developing and enhancing cable system clusters, the Company's acquisition strategy is opportunistic and depends in large part upon which 6 cable systems become available in the marketplace. Because many of the Company's operating areas include other significant cable operators with nearby systems, marketplace availability and pricing may be heavily influenced by the interest level of other potential purchasers. This strategy is also subject to the changing competitive telecommunications market. In determining whether to acquire a particular system, the Company evaluates, among other things, the (i) location, size and strategic fit of the system with the Company's existing operations, (ii) technical quality of the system and anticipated capital expenditure requirements which may be necessary to comply with franchising requirements or to upgrade systems to satisfy the Company's operating standards, (iii) demographic trends of the market, (iv) existing and potential competition in the market, (v) price of the system relative to other characteristics of the system and (vi) number of years remaining until the system's franchises must be renewed, along with the seller's relationship with the relevant franchising authorities. By virtue of its relationship with Charter, management believes that the Company has increased access to acquisition opportunities that might otherwise not be available to a company of comparable size. The Company is not currently a party to any letter of intent or definitive agreement with respect to any acquisitions. From time to time, the Company reviews and analyzes potential acquisitions, which may include the acquisition of other cable systems managed by Charter or as to which Charter has secured purchase rights. The Company anticipates that future acquisitions will be financed with additional debt, or, depending on the size and circumstances of the acquisition, possibly with additional equity. Realize Operating Efficiencies Each of the Company's regions has centralized management and offers certain services that benefit the clusters and all customers within the region. By establishing such clusters, the Company is typically able to create regional customer service centers and establish centralized administration and technological support for local management, which enables the Company to eliminate duplicative management personnel and operations. After consummating an acquisition from an independent third party, the Company incorporates the system within the existing centralized network of operational and organizational functions. By combining the acquired systems with an existing cluster, or by adding a new cluster within an existing regional structure, the Company is able to reduce the operating costs of the system it acquires, and at the same time, spread its fixed costs over an expanded subscriber base and thereby improve operating cash flow and margins. Focus on the Customer The Company continually seeks to improve its understanding of, and relationship with, its customers. The Company's emphasis on customer satisfaction is evident in its customer service policies, marketing, programming and technological plans. The Company seeks to provide a high level of customer service by employing a well-trained staff of customer service representatives and experienced field technicians. Upon acquisition of a new system, the Company implements a 24-hour customer service hotline, provides completed repair service in 24 hours (with in excess of 90% of "no picture" problems solved on the same day as reported) and also offers an installation and service guarantee within a two-hour window period. Management believes that the level of customer service provided by the Company to subscribers gained through acquisitions is generally better than that provided by previous owners of the systems acquired. The Company's programming packages offer different pricing options, including special value packages and add-on services. From a technological standpoint, the Company focuses on its customers through its emphasis on service reliability, improved picture quality and expanded channel capacity. In making any operational or organizational changes, the Company attempts to maintain strong community relations and enhance customer service. The Company is also working with Charter to develop a database that will assist management with its evaluation of the potential demand by existing and prospective customers for home entertainment, educational services and data transmission. Management believes this focus on the customer will, over time, increase both subscriber penetration and revenue per subscriber. 7 Maximize Benefits Provided by Relationship with Charter The Company receives significant benefits from its relationship with Charter. The Company benefits from the financial and operational expertise of Charter's principals (Barry L. Babcock, Jerald L. Kent and Howard L. Wood) and their familiarity with those of the Company's systems previously owned by a predecessor entity of the Company (the senior management team of which such individuals were a part). As of December 31, 1996, a majority of CCE-I's subscribers were served by systems formerly owned and operated by such predecessor entity. The Company also benefits from Charter's membership in the TeleSynergy programming cooperative, which offers its members certain programming benefits. Charter's prominence as one of the larger MSOs in the United States has also increased the Company's opportunities to investigate potential acquisitions, access debt financing and equity capital, and obtain marketing support and discounts on cable system equipment. The ten individuals principally responsible for the Company's operations (including Barry L. Babcock, Jerald L. Kent and Howard L. Wood, the co-founders of Charter) have more than 100 years of collective experience in the cable television industry. Messrs. Babcock, Kent and Wood formerly served as members of the senior management team of Cencom Cable Associates, Inc., which, during the nine year period prior to its sale in 1991 to Crown Media, Inc., purchased and developed the cable systems formerly owned by Cencom Cable. See "Business-- Business Strategy--Maximize Benefits Provided by Relationship with Charter." In addition, Kelso and certain other individuals have invested approximately $68.0 million in the Issuer. As a result of such investment, Kelso and such individuals own directly or indirectly 85% of the outstanding equity interests in the Issuer, with distributions on exit varying depending on the rate of return on the stockholders' equity investment in the Issuer. See "Risk Factors--Control of the Issuer and the Company by Kelso." THE CROWN TRANSACTION, ISSUANCE OF THE NOTES AND THE SUBORDINATION AGREEMENT The Crown Transaction In January 1995, the Company completed stock and asset acquisitions (the "Crown Transaction") from HC Crown and certain of its affiliates related to cable television systems. The cable television systems acquired in the Crown Transaction serve communities in St. Louis County, Missouri (the "Crown Missouri Systems") and in western and northeastern Connecticut (the "Crown Connecticut Systems"). The aggregate purchase price of the Crown Missouri Systems and the Crown Connecticut Systems was approximately $488.2 million, including related acquisition fees and expenses, and was a substantial component of a larger transaction in which HC Crown sold all of its cable television systems to a group of investors. Upon the completion of the Crown Transaction, the Crown Connecticut Systems were owned by CAC, a wholly owned subsidiary of the Issuer, and the Crown Missouri Systems were owned by Cencom Cable, a wholly owned subsidiary of CAC. The Crown Connecticut Systems and the Crown Missouri Systems were contributed by CAC and Cencom Cable to CCE-I in September 1995 concurrently with the consummation of the California Transaction (as defined herein) and in connection therewith, CCE-I assumed all obligations under the CCE-I Credit Facility in connection with such Systems being contributed to CCE-I. The Crown Connecticut Systems and the Crown Missouri Systems, together with the cable television systems constituting the Illinois Systems (as defined herein), the UVC Systems (as defined herein), the Park Hills Systems (as defined herein) and the Masada Systems (as defined herein) (together, the "Systems"), along with a radio station owned by CC Radio and a cable advertising business owned by CASTL (both subsidiaries of CCE-I), constitute the sole operating assets of CCE-I as of the date of this Prospectus. Issuance of the Notes and Subordination Agreement Senior Subordinated Notes due 1999 of the Issuer (the "Original Notes") were issued by the Issuer to HC Crown as partial payment of the purchase price in connection with the Crown Transaction, pursuant to the Senior Subordinated Loan Agreement (the "Original HC Crown Loan Agreement") between the Issuer and HC Crown dated as of January 18, 1995. In connection with the Original HC Crown Loan Agreement, HC Crown entered 8 into a Subordination Agreement, dated as of January 18, 1995 among HC Crown, the Issuer and certain of the lenders under the CCE-I Credit Facility (as originally executed and delivered and thereafter amended and restated, the "Subordination Agreement") with respect to the subordination of obligations under the Notes. In addition, CCE, L.P., CAC and Cencom Cable subsequently issued to HC Crown guarantees of payment under the Notes; these guarantees are limited to funds received directly or indirectly from CCE-I by one or more of the Guarantors and are not enforceable until the CCE-I Credit Facility (and the CCE-II Credit Facility, any other senior indebtedness of CCE-II and senior indebtedness of New CCE Subsidiaries, in the case of the guarantee issued by CCE, L.P.) has been indefeasibly repaid in full in cash and the commitments to lend thereunder have terminated. See "Certain Relationships and Related Transactions--The Guarantees," "Description of Notes--The Guarantees" and "Description of Other Indebtedness." The subordination under the Subordination Agreement is in addition to the provisions contained in the Original HC Crown Loan Agreement pursuant to which the Notes are subordinated to all Senior Debt (as defined in "Description of Notes--Certain Definitions") of the Issuer. The Original HC Crown Loan Agreement, the three outstanding Guarantees and the Subordination Agreement were amended and restated as of November 15, 1996. In connection with the resale of the Notes to "qualified institutional buyers" (as defined in Rule 144A under the Securities Act), the Amended and Restated HC Crown Loan Agreement and the Notes issued thereunder were converted into an indenture (the "Indenture") dated as of February 13, 1997 between the Issuer and Harris Trust and Savings Bank, as trustee (the "Trustee") and Senior Subordinated Notes issued thereunder containing substantially the same terms and conditions as are contained in the Amended and Restated HC Crown Loan Agreement and the Notes. In connection with the Crown Transaction and the establishment of the CCE-I Credit Facility, the Selling Securityholder agreed to subordinate its rights to receive payments on and exercise certain remedies with respect to the Notes prior to the indefeasible repayment in full in cash of and the termination of commitments to lend under the CCE-I Credit Facility. In particular, the holders do not have the right to compel payment of the Notes on the Stated Maturity Date or thereafter or to accelerate the maturity of the Notes upon the occurrence of a default under the Notes (including a payment default) prior to the indefeasible payment in full in cash of and termination of commitments to lend under the CCE-I Credit Facility. In the event the principal of and accrued interest on the Notes are not paid in full on the Stated Maturity Date, the annual rate at which interest on the Notes accrues will initially increase to 18% and will increase by an additional 2% on each successive anniversary of the Stated Maturity Date, up to 26%. A default rate of 3% per annum (the "Default Rate") may also be added if certain other events of default under the Notes occur and are continuing. Consequently, the maximum annual rate of interest at which the Notes may accrue interest is 29%. The CCE-I Credit Facility is scheduled to expire on December 31, 2004, but may, subject to certain limited exceptions, be extended or refinanced beyond that date without the consent of the holders. In connection with the establishment of the CCE-II Credit Facility, the holder of the California Note (as defined herein) agreed to subordinate its rights to receive payments on and exercise certain remedies with respect to the California Note (as defined herein) prior to the indefeasible repayment in full in cash of and the termination of commitments to lend under the CCE-II Credit Facility. In addition, distributions from CCE-II will only be available to service obligations in respect of the Notes after obligations in respect of the CCE-II Credit Facility, the California Note and any other indebtedness of CCE-II are indefeasibly paid in full in cash and all commitments to lend in respect of the CCE-II Credit Facility and any other indebtedness of CCE-II are terminated. See "Risk Factors--Segregation of Distributions to Service the Notes and the Guarantees; New CCE Subsidiaries." The Subordination Agreement has been amended and restated on substantially the same terms in connection with the issuance of the Notes pursuant to the Indenture. California Acquisitions and CCE, L.P. Transactions 1. The California Transaction and the California Note. In November 1994, Charter began to manage certain cable television systems in the Los Angeles, California metropolitan area (the "Los Angeles Systems") then owned by Cencom Cable Television, Inc., an affiliate (the "Gaylord Affiliate") of the Gaylord Entertainment Company ("Gaylord"). 9 In September 1995, CCT, an affiliate of the Issuer and Charter, purchased the Los Angeles Systems and certain other cable television systems from the Gaylord Affiliate (the "California Transaction") as part of a larger transaction. The Los Angeles Systems were immediately contributed by CCT to CCE, L.P., and by CCE, L.P. to CCE-II and constitute the sole assets of CCE-II. The consideration for the California Transaction consisted in part of a $165.7 million promissory note (the "California Note"), which was issued by CCT pursuant to a Senior Subordinated Loan Agreement dated as of September 29, 1995 (the "California Loan Agreement"). The portion of the aggregate purchase price attributable to the Los Angeles Systems was $340.9 million. 2. New Financings. Concurrently with the consummation of the California Transaction, CCE-I entered into the CCE-I Credit Facility to borrow up to $300.0 million, in connection with a corporate reorganization whereby the Crown Connecticut Systems and the Crown Missouri Systems acquired in the Crown Transaction were contributed to CCE, L.P., and by CCE, L.P. to the newly formed CCE-I. The CCE-I Credit Facility replaced the credit facility established to finance the Crown Transaction. CCE-II entered into the CCE-II Credit Facility to borrow up to $235.0 million. The CCE-I Credit Facility and the CCE-II Credit Facility are sometimes referred to herein as the "Credit Facilities." 3. Issuance of the Guarantees. Pursuant to the Original HC Crown Loan Agreement, in connection with the California Transaction, CCE, L.P., CAC and Cencom Cable issued the Guarantees to HC Crown. The Guarantees were amended and restated as of November 15, 1996 and were further amended and restated as of February 13, 1997 in connection with the issuance of the Notes pursuant to the Indenture on substantially the same terms as are contained in the Guarantees which were amended and restated as of November 15, 1996. The Guarantees, by their terms, are limited to the proceeds of distributions received by the Guarantors from CCE-I. The CCE, L.P. Guarantee cannot be enforced until the indefeasible repayment in full of and termination of commitments to lend under the CCE-I Credit Facility, the CCE-II Credit Facility, any other senior indebtedness of CCE-II and any senior indebtedness of New CCE Subsidiaries. In connection with the Long Beach Investment (as defined herein), CCE-II and Long Beach Acquisition Corp. ("LBAC") (which will be an affiliate of the Issuer and CCE-II) will become jointly and severally liable under the CCE-II Credit Facility, which would be increased by $140.0 million upon consummation of the Long Beach Investment. It is anticipated that $25.0 million would be borrowed by CCE-II under the CCE-II Credit Facility in order to make the Long Beach Investment. The CAC Guarantee and the Cencom Cable Guarantee cannot be enforced until the indefeasible repayment in full of and termination of the commitments to lend under the CCE-I Credit Facility. See "Certain Relationships and Related Transactions--The Guarantees," "Description of Notes--The Guarantees" and "Description of Other Indebtedness." 4. The Partnership Agreements. The partnership agreements of CCE, L.P., CCE-I and CCE-II each currently provide for, among other things, distributions to their respective partners in proportion to their respective partnership interests and, in the case of CCE, L.P., the creation of preferred capital accounts and preferred distributions related thereto. The effect of these provisions is (i) to direct any distributions from CCE-I to CCE, L.P. and, then, to Cencom Cable and CAC which, in turn, will make distributions to the Issuer for repayment of the Notes, and (ii) to direct any distributions from CCE-II to CCE, L.P. and, then, to CCT for repayment of the California Note. Subject to the formation of New CCE Subsidiaries as described below, if the CCE-II Credit Facility, the California Note and any other indebtedness of CCE- II and indebtedness of New CCE Subsidiaries is repaid prior to payment in full of all amounts payable under the Notes, then all further distributions to CCE, L.P. from both CCE-I and CCE-II will be used to make distributions to CAC and Cencom Cable for distribution to the Issuer, and if the Notes are repaid prior to the payment in full of all amounts payable under the California Note, then all further distributions to CCE, L.P. from both CCE-I and CCE-II will be used to make distributions to CCT. Subject to certain limitations, the Indenture permits the formation of New CCE 10 Subsidiaries below CCE, L.P. in the corporate structure and the contribution of additional assets to existing Subsidiaries other than CCE-I. New CCE Subsidiaries may engage in the cable television business or other businesses. In connection with their businesses, New CCE Subsidiaries, and in connection with such asset contributions to existing Subsidiaries, such existing Subsidiaries, may establish senior credit facilities and other financing arrangements (debt and/or equity), which may establish a basis for a new or revised preferred capital account in CCE, L.P. Once any applicable financing arrangement of CCE-II or any New CCE Subsidiary is repaid, the existence of the aforementioned new or revised preferred capital account in CCE, L.P. could result in any further distributions to CCE, L.P. from CCE-II and/or any New CCE Subsidiaries being shared pro rata between the Notes and any such new or existing financing arrangements (with such sharing to be based upon the then outstanding preferred capital accounts in CCE, L.P.). Holders of the Notes should not rely on any distributions from CCE-II or any New CCE Subsidiaries for payment of principal or interest on the Notes. In connection with the creation of New CCE Subsidiaries or the contribution of additional assets to existing Subsidiaries of CCE, L.P., the CCE, L.P. Partnership Agreement's distribution provisions may be amended. See "Description of Notes--Certain Covenants--Limitation on Changes to CCE, L.P. Partnership Agreement." For example (and without limiting the arrangements which could be entered into by a New CCE Subsidiary), in the event one or more New CCE Subsidiaries are formed below CCE, L.P. in the corporate structure in connection with the acquisition of new assets or equity interests and the issuance by an affiliate of CCE, L.P. of a note payable to the sellers of such assets or equity interests (i.e., a purchase money note, as was the case in the California Transaction and the Crown Transaction), then, the CCE, L.P. Partnership Agreement can be amended, so that (i) rather than all distributions to CCE, L.P. from CCE-II being available to service the Notes exclusively after payment of the California Note, such distributions would instead be available pro rata based on then outstanding preferred capital accounts (i.e., to service both the Notes and any new purchase money note owed to such sellers) and (ii) all cash generated by any New CCE Subsidiary would be used first to repay any credit facility entered into by such New CCE Subsidiary to accomplish the related acquisition. Any amounts thereafter distributed by such New CCE Subsidiary to CCE, L.P. would be used next to repay any new purchase money note, and after such new purchase money note is repaid, such distributions from such New CCE Subsidiary to CCE, L.P. would be available pro rata to service the Notes, the California Note and any other outstanding purchase money notes. See "Description of the Notes-- Certain Covenants--Limitation on Changes to the CCE, L.P. Partnership Agreement." Notwithstanding the foregoing, such credit facilities, other financing arrangements and asset contributions and the existence of new or revised preferred capital accounts will not affect distributions to the Issuer from CAC, Cencom Cable, CCE, L.P. (to the extent the funds to be distributed by CCE, L.P. were obtained from CCE-I) or CCE-I. UVC Acquisition In October 1995, CCE-I acquired certain cable television systems serving communities in western St. Louis County (which augmented the Central Region) and central and southeastern Massachusetts (which extended the Company's operations in the Northeast Region) from United Video Cablevision, Inc. (the "UVC Systems"), for an aggregate purchase price of approximately $96.0 million, including related acquisition fees and expenses (the "UVC Acquisition"). As of December 31, 1996, the UVC Systems served approximately 48,400 basic subscribers. The Park Hills, Missouri Acquisition In January 1996, CCE-I acquired certain cable television systems serving communities in the Park Hills, Missouri area from Mineral Area Cable Vision Co. (the "Park Hills Systems"), for an aggregate purchase price of approximately $9.4 million, including related acquisition fees and expenses (the "Park Hills Acquisition"). As of December 31, 1996, the Park Hills Systems served approximately 6,100 basic subscribers. 11 Illinois Acquisition In March 1996, CCE-I acquired certain cable television systems in that portion of Illinois located within the St. Louis metropolitan area (the "Illinois Systems") from Cencom Cable Income Partners, L.P., a Delaware limited partnership ("CCIP") whose general partner is an affiliate of Charter, for an aggregate purchase price of approximately $82.0 million, including related acquisition fees and expenses (the "Illinois Acquisition"). As of December 31, 1996, the Illinois Systems served approximately 45,500 basic subscribers. The Illinois Acquisition was part of a larger transaction whereby three Charter affiliates purchased all of the assets of CCIP and, in accordance with the terms of the partnership agreement of CCIP, independent appraisals were obtained valuing all of the assets of CCIP. The aggregate purchase price paid by the three Charter affiliates exceeded the appraisal value by 5 percent. The purchase price allocated to the Illinois Systems was determined by the three Charter affiliates based on the relative value of the Illinois Systems to the total assets being sold. On October 20, 1995, a purported class action lawsuit on behalf of the CCIP limited partners was filed in the Chancery Court of New Castle County, Delaware (the "Action"). The Action named as defendants the general partner of CCIP, the proposed purchasers of all the systems owned by CCIP (which includes CCE-I and certain other affiliates of Charter), Charter and certain individuals, including the directors and executive officers of the general partner of CCIP. On February 15, 1996, the Court of Chancery of the State of Delaware in and for New Castle County dismissed all of the plaintiff's claims for injunctive relief (including that which sought to prevent the consummation of the Illinois Acquisition); the plaintiff's claims for money damages which might result from the proposed sale by CCIP of its assets (including the Illinois Acquisition) remain pending. In October, 1996, the plaintiff filed a Consolidated Amended Class Action Complaint. The defendants filed an Answer to the amended complaint in December 1996. In January 1997, the defendants filed a Motion for Summary Judgment to dismiss all remaining claims as to all parties in the Action. Based upon, among other things, the advice of counsel, each of the defendants to the Action believes the Action to be without merit and is contesting it vigorously. There can be no assurance, however, that the plaintiff will not be awarded damages, some or all of which may be payable by CCE-I, in connection with the Action. Masada Acquisition On November 29, 1996, CCE-I acquired certain cable television systems serving suburban and ex-urban communities in Missouri that augment the St. Louis cluster, from Masada Cable Partners, L.P. (the "Masada Systems"), for an aggregate purchase price of approximately $23.7 million, before transaction costs and working capital adjustments (the "Masada Acquisition"). As of December 31, 1996, the Masada Systems served approximately 11,800 basic subscribers. Pending Long Beach Investment by CCE-II In the second quarter of 1997, CCE-II expects to make a $25.0 million investment (the "Long Beach Investment") in LBAC, in connection with the acquisition of LBAC by an affiliate of CCE-II and the Issuer. Such acquisition is subject to the approval of the relevant franchising authorities and customary closing conditions. LBAC owns cable television systems (the "Long Beach Systems") serving communities in Long Beach, California. The Long Beach Investment will be in the form of a loan convertible into 27.5% of the stock of LBAC. In connection with the Long Beach Investment, CCE-II and LBAC will become jointly and severally liable under the CCE-II Credit Facility, which will be increased by $140.0 million upon consummation of the Long Beach Investment. It is anticipated that $25.0 million would be borrowed by CCE-II under the CCE-II Credit Facility in order to make the Long Beach Investment. As of December 31, 1996, the Long Beach Systems served approximately 70,100 basic subscribers. The Notes do not contain any restrictions on the ability of CCE-II (or any New CCE Subsidiary) to incur additional indebtedness, including that contemplated in connection with the Long Beach Investment. The CCE-II Credit Facility restricts the ability of CCE-II to incur additional indebtedness, although such restriction can be amended by mutual agreement of the lenders thereto and the obligors thereunder, without the consent of the holders. See "Risk Factors-- High Degree of Leverage." As is 12 the case with the other assets owned by CCE-II, holders of the Notes should not rely on the assets to be acquired in the Long Beach Investment or the revenues which will be generated by them for payment of principal or interest on the Notes. CERTAIN REGULATORY AND LEGISLATIVE DEVELOPMENTS The cable television industry is subject to extensive regulation by federal, local and, in some instances, state government agencies. The Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act") significantly expanded the scope of cable television regulation on an industry- wide basis by imposing rate regulation, requirements related to the carriage of local broadcast stations, customer service obligations and other requirements. Under the FCC's initial rate regulations pursuant to the 1992 Cable Act, regulated cable systems (i.e., those systems not subject to effective competition) were required to reduce their rates by up to 17%. On a going forward basis, regulated cable systems may be required to justify their rates (including rate increases) under a benchmark approach, a utility-type cost of service approach, or, if applicable, a small system cost-of-service showing. On February 1, 1996, Congress passed the Telecommunications Act of 1996 (the "Telecommunications Act"). The Telecommunications Act was signed into law by the President on February 8, 1996, and substantially amends the Communications Act of 1934 (the "Communications Act") (including the re-regulation of subscriber rates under the 1992 Cable Act). The Telecommunications Act alters federal, state and local laws and regulations pertaining to cable television, telecommunications and other services. Certain provisions of the Telecommunications Act could materially affect the growth and operation of the cable television industry and the cable services provided by the Company. Although the new legislation is expected to substantially lessen regulatory burdens, the cable television industry may be subject to additional competition as a result thereof. There are numerous rulemakings which have been, and which will be undertaken by the FCC, which will interpret and implement the Telecommunications Act's provisions. In addition, certain provisions of the Telecommunications Act (such as the deregulation of cable programming rates) generally are not immediately effective. Furthermore, certain of the Telecommunications Act's provisions have been, and are likely to continue to be, judicially challenged. The Company is unable at this time to predict the outcome of such rulemakings or litigation or the substantive effect (financial or otherwise) of the new legislation and the rulemakings on the Company. See "Risk Factors--Regulation in the Cable Television Industry" and "Business--Regulation in the Cable Television Industry." 13 THE EXCHANGE OFFER Letter Agreement.............. The Old Notes were sold by the Issuer on Janu- ary 18, 1995 to HC Crown, which resold the Old Notes on February 10, 1997, through a placement agent to certain "qualified institutional buy- ers" (as defined in Rule 144A under the Securi- ties Act), including an affiliate of HC Crown. In connection with the resale of the Old Notes, the Issuer executed and delivered for the bene- fit of the holders of the Old Notes a letter agreement dated as of November 15, 1996 (the "Letter Agreement") providing, among other things, for the Exchange Offer. The Exchange Offer............ New Notes are being offered in exchange for a like principal amount of Old Notes. As of the date hereof, approximately $82 million aggre- gate principal amount of Old Notes are out- standing. The Issuer will issue the New Notes to holders of Old Notes promptly following the Expiration Date. See "Risk Factors--Conse- quences of Failure to Exchange." Based on interpretations by the staff of the Commission set forth in no-action letters is- sued to third parties unrelated to the Issuer, the Issuer believes that New Notes issued pur- suant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by any holder thereof (other than any such holder which is an "affil- iate" of the Issuer or any of the Guarantors within the meaning of Rule 405 under the Secu- rities Act) without compliance with the regis- tration and (except as provided in the follow- ing sentence) prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holder's business and that such holder is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, the distri- bution of such New Notes. Each broker or dealer that receives New Notes for its own account in exchange for Old Notes, where such Old Notes were acquired by such broker or dealer as a re- sult of market-making activities or other trad- ing activities, must acknowledge that it will deliver a prospectus in connection with any re- sale of such New Notes. See "Plan of Distribu- tion." Federal Income Tax Conse- The substitution of New Notes for Old Notes quences....................... pursuant to the Exchange Offer should not be treated as a sale, exchange, disposition or other taxable event with respect to the holders for Federal income tax purposes. A holder's ba- sis, holding period, issue price and amount of original issue discount, if any, with respect to a Note should not change upon the substitu- tion. Holders, however, are strongly urged to consult their own tax advisors. See "Certain Federal Income Tax Consequences." 14 Expiration Date............... 5:00 p.m., New York City Time, on , 1997, unless the Exchange Offer is extended, in which case the term "Expiration Date" means the latest date and time to which the Exchange Of- fer is extended. Conditions to the Exchange The Exchange Offer is subject to certain cus- Offer......................... tomary conditions, which may be waived by the Company. See "The Exchange Offer--Conditions." Procedures for Tendering Old Notes....................... Each holder of Old Notes wishing to accept the Exchange Offer must complete, sign and date the Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise de- liver such Letter of Transmittal, or such fac- simile, together with the Old Notes and any other required documentation to the exchange agent (the "Exchange Agent") at the address set forth herein. See "The Exchange Offer--Exchange Agent." Old Notes may be physically delivered, but physical delivery is not required if a con- firmation of a book-entry of such Old Notes to the Exchange Agent's account at The Depository Trust Company ("DTC" or the "Depositary") is delivered in a timely fashion. By executing the Letter of Transmittal, each holder will repre- sent to the Issuer that, among other things, the New Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Notes, whether or not such person is the hold- er, that neither the holder nor any such other person is engaged in, or intends to engage in, or has an arrangement or understanding with any person to participate in, the distribution of such New Notes and that neither the holder nor any such other person is an "affiliate," as de- fined under Rule 405 of the Securities Act, of the Issuer or any of the Guarantors. Each bro- ker or dealer that receives New Notes for its own account in exchange for Old Notes, where such Old Notes were acquired by such broker or dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. See "The Ex- change Offer- Procedures for Tendering" and "Plan of Distribution." Special Procedures for Bene- Any beneficial owner whose Old Notes are regis- ficial Owners............... tered in the name of a broker, dealer, commer- cial bank, trust company or other nominee and who wishes to tender should contact such regis- tered holder promptly and instruct such regis- tered holder to tender on such beneficial own- er's behalf. If such beneficial owner wishes to tender on such owner's own behalf, such owner must, prior to completing and executing the Letter of Transmittal and delivering the Old Notes, either make appropriate arrangements to register ownership of the Old Notes in such owner's name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take con- siderable time. See "The Exchange Offer--Proce- dures for Tendering." 15 Guaranteed Delivery Proce- Holders of Old Notes who wish to tender their dures......................... Old Notes and whose Old Notes are not entirely available or who cannot deliver their Old Notes, the Letter of Transmittal or any other documents required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date must tender their Old Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery Proce- dures." Withdrawal Rights............. Tenders may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expira- tion Date. See "The Exchange Offer--Withdrawal of Tenders." Acceptance of Old Notes and Delivery of New Notes....... The Issuer will accept for exchange any and all Old Notes which are properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date. The New Notes issued pursuant to the Exchange Offer will be delivered promptly following the Expi- ration Date. See "The Exchange Offer-- Terms of the Exchange Offer." Exchange Agent................ Harris Trust and Savings Bank is serving as Ex- change Agent in connection with the Exchange Offer. See "The Exchange Offer--Exchange Agent." 16 THE NEW NOTES The Exchange Offer applies to approximately $82.0 million aggregate principal amount of Old Notes outstanding as of the date hereof. The form and the terms of the New Notes will be identical in all material respects to the form and the terms of the Old Notes, except that the New Notes will have been registered under the Securities Act and, therefore, will not contain legends restricting the transfer thereof. The New Notes evidence the same debt as the Old Notes exchanged for the New Notes and will be entitled to the benefits of the same Indenture under which the Old Notes were issued. See "Description of the Notes." Certain capitalized terms listed below are defined under the caption "Description of Notes--Certain Definitions." Notes Offered................. $82,000,000 aggregate principal amount of Se- nior Subordinated Notes due 1999, plus accrued interest since January 18, 1995. Issuer........................ CCA Holdings Corp. Stated Maturity Date; Limitations on Payment and Exercise of Remedies.......... The stated maturity of the Notes is December 31, 1999 (the "Stated Maturity Date"). Pursuant to the terms of the Subordination Agreement, no payments are permitted to be made on the Notes (including on the Stated Maturity Date) until the indefeasible repayment in full in cash of and termination of commitments to lend under the CCE-I Credit Facility. Moreover, under the terms of the Notes and the Subordination Agree- ment, the holders do not have the right to com- pel payment of the Notes on the Stated Maturity Date or thereafter or to accelerate the matu- rity of the Notes upon the occurrence of a de- fault under the Notes (including a payment de- fault), except as permitted in the Indenture and the Subordination Agreement. See "Descrip- tion of Notes--Subordination." The CCE-I Credit Facility is scheduled to expire on December 31, 2004, but may, subject to certain limited ex- ceptions, be extended or refinanced beyond that date without the consent of the holders. If the Notes are not repaid by the Stated Maturity Date, then the interest rate thereon will in- crease (see "Interest" below). Interest...................... Interest accrues on the Notes at an annual rate of 13%, compounded semi-annually, until the Stated Maturity Date. If principal plus accrued interest on the Notes is not paid at the Stated Maturity Date, the annual rate at which inter- est accrues on the Notes will initially in- crease to 18% and will increase by an addi- tional 2% on each successive anniversary of the Stated Maturity Date (up to 26%), compounded semi-annually, until the Notes are repaid. In addition, the interest rate on the Notes shall be increased by an additional 3% per annum if certain other events of default occur or are continuing (the "Default Rate"). As of December 31, 1996, accrued interest on the Notes was $22,843,402. For U.S. Federal income tax pur- poses, purchasers of the Notes will be required to include amounts in gross income generally in advance of the receipt of the cash payments to which the income is attributable. See "Certain Federal Income Tax Consequences." 17 Optional Redemption........... The Notes are redeemable at the Issuer's op- tion, in whole or in part, at any time without premium or penalty provided that any such pre- payment of principal shall include all payments of accrued interest on the amount prepaid. There are no mandatory redemption or sinking fund provisions. Guarantees.................... The obligations on the Notes are guaranteed on a subordinated basis by CAC, Cencom Cable and CCE, L.P. The Guarantees, by their terms, are limited to the proceeds of distributions re- ceived by the Guarantors from CCE-I. The CCE, L.P. Guarantee cannot be enforced until the in- defeasible repayment in full in cash of and termination of commitments to lend under the CCE-I Credit Facility, the CCE-II Credit Facil- ity, any other senior indebtedness of CCE-II and senior indebtedness of New CCE Subsidiar- ies. The CAC Guarantee and the Cencom Cable Guarantee cannot be enforced until the indefea- sible repayment in full in cash of and termina- tion of commitments to lend under the CCE-I Credit Facility. See "Description of Notes-- General" and "Description of Notes--The Guaran- tees." Ranking....................... The Notes and the Guarantees are unsecured ob- ligations of the Issuer and the Guarantors and are subordinate in right and priority of pay- ment to all existing and future indebtedness of the Issuer and the Guarantors, other than in- debtedness that by its terms is expressly sub- ordinated in right and priority of payment to the Notes and the Guarantees. Except for cer- tain management fees and financial advisory fees and related expenses payable or which may become payable by the Company to Charter and Kelso & Company on an on-going basis and in- vestment banking fees payable to such entities in certain circumstances, the Company will not make any distributions or advances to either Charter or Kelso before the Notes are repaid in full. See "Description of Notes--Certain Cove- nants--Transactions with Affiliates." The Is- suer and the Guarantors are holding companies that currently conduct substantially all of their business through the Operating Entities. As a result, all distributions from CCE-I and CCE-II would be subject to the claims of credi- tors of CCE-I and CCE-II, respectively, includ- ing, without limitation, pursuant to the CCE-I Credit Facility, the CCE-II Credit Facility and any other indebtedness of CCE-I and CCE-II. The Issuer and the Guarantors control CCE-I and are primarily dependent upon distributions from CCE-I and its subsidiaries to service their ob- ligations, including the Notes and the Guaran- tees. See "--Distributions from CCE-I as Pri- mary Source of Repayment." The current priori- ties with respect to such distributions are set forth in the CCE, L.P. Partnership Agreement. See "Description of Notes--the Partnership Agreements." Subject to certain restrictions, the CCE, L.P. Partnership Agreement may be amended to provide for, among other things, the creation of New CCE Subsidiaries, which could have financing arrangements that result in the sharing with other creditors of 18 distributions to CCE, L.P. from CCE-II or such New CCE Subsidiaries. See "Certain Relation- ships and Related Transactions--the Partnership Agreements," "Description of Other In- debtedness," "Description of Notes--General," "Description of Notes--Partnership Agreements" and "Description of Notes--Certain Covenants." As of December 31, 1996, the Issuer and the Guarantors' indebtedness other than the Notes was approximately $55.5 million of deferred in- come taxes and approximately $0.4 million of current liabilities. As of December 31, 1996, the aggregate indebtedness (including current liabilities in an aggregate amount of approxi- mately $28.9 million and other long-term lia- bilities of approximately $2.5 million) of CCE- I was approximately $493.5 million and, as of such date, the aggregate indebtedness (includ- ing current liabilities in an aggregate amount of approximately $13.1 million, an intercompany note of $27.4 million and other long-term lia- bilities of $0.4 million) of CCE-II was approx- imately $234.9 million. As of December 31, 1996, approximately $191.3 million was outstanding under the California Note. For financial reporting purposes, the amount of the California Note is approximately $198.8 million because interest accruing under the California Note is based on the average rate of interest over the life of the Califor- nia Note (which approximates 15.43%) rather than the current stated interest rate. The CCE-I Credit Facility restricts CCE-I's ability to incur additional indebtedness. The Indenture does not contain any restriction on CCE-II's ability to incur additional indebted- ness. Although the CCE-II Credit Facility re- stricts the ability of CCE-II to incur addi- tional indebtedness, such restriction can be amended by mutual agreement of the lenders thereto and the obligors thereunder, without the consent of the holders. See "Description of Notes--General" and "Risk Factors--High Degree of Leverage." Distributions from CCE-I as Primary Source of Except under certain limited circumstances, the Repayment.................... Notes will only have the benefit of distribu- tions from CCE-I. As a result, the presentation of information regarding the Company focuses on the CCE-I Entities. Holders of the Notes may ultimately benefit from the CCE-II assets but should not rely on such assets or distributions generated by them for payment of principal or interest on the Notes. Certain Covenants............. The Indenture contains certain covenants by the Issuer, including, but not limited to, cove- nants with respect to the following matters: (i) reporting and information requirements; (ii) limitations on restricted payments by the Issuer and the Restricted Subsidiaries (as de- fined in the Indenture); (iii) limitations on mergers and consolidations; (iv) limitations on sales of assets; (v) limitations on changes of control of the Issuer; (vi) limitations on changes of management of CCE-I's cable televi- sion properties and of Char- 19 ter; (vii) maintenance of a minimum Operating Cash Flow (as defined in the Indenture); (viii) limitations on Indebtedness (as defined in the Indenture); (ix) limitations on the use of the proceeds of the sale of any of the Issuer's ca- ble television properties; (x) limitations, un- der certain circumstances, on permitting the extension of the maturity of the CCE-I Credit Facility beyond July 17, 2005; (xi) limitations on change of ownership of Restricted Subsidiar- ies; (xii) limitations on transfer of assets of the Issuer and the Restricted Subsidiaries; (xiii) limitations on certain transactions with affiliates; (xiv) limitations on Indebtedness of CCE, L.P.; (xv) limitations of certain af- filiate payments; (xvi) limitations on changes to the CCE, L.P. Partnership Agreement; (xvii) limitations on intercompany indebtedness; and (xviii) limitation on investing in radio opera- tions. These covenants are subject to important exceptions and qualifications. See "Description of Notes--Certain Covenants." Charter and Kelso separately have undertaken, in an agreement with HC Crown which was amended and restated as of November 15, 1996, to cause the Issuer to comply with the reporting re- quirements and dividend, merger, divestiture and indebtedness restrictions set forth in the Indenture. However, neither Charter nor Kelso has issued a guarantee with respect to such compliance. Holders of Notes should not expect to rely on either Charter or Kelso for payment of principal or interest on the Notes. Charter and Kelso have also undertaken, in that agree- ment, to maintain their control of the Issuer while the Notes remain outstanding. Registration Rights........... In addition to the rights of the holders under the Letter Agreement, under the Indenture the holders are collectively entitled to a single additional demand registration right, pursuant to which the Issuer and the Guarantors will use their reasonable best efforts to cause to be- come effective a shelf registration statement (a "Shelf Registration Statement") with respect to the resale of the Notes and use their rea- sonable best efforts to keep such shelf regis- tration statement continuously effective until nine months after the effective date thereof. Expenses related to the exercise of such addi- tional demand registration rights, if exer- cised, will be borne by the holders of the Notes so exercising such demand registration rights. RISK FACTORS Prospective purchasers of the Notes should consider carefully all of the information set forth in this Prospectus before making an investment in the Notes. In particular, prospective purchasers should consider the risks set forth under "Risk Factors." 20 UNAUDITED SUMMARY HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA OF CCA AND SUBSIDIARIES The Unaudited Summary Historical and Unaudited Pro Forma Financial Data set forth below presents (i) summary historical financial and operating data for the Crown Systems (as defined herein) (CCA's predecessor) through January 1, 1995 (which was the effective date on which the Crown Systems were acquired by CCA), (ii) summary historical financial and operating data for CCA and its subsidiaries since January 1, 1995 (the date CCA effectively commenced operations), and (iii) summary pro forma financial and operating data assuming certain transactions described in Note (a) below. The financial data set forth below has been derived from the audited and unaudited historical financial statements of CCA and the Crown Systems, and from the Unaudited Selected Historical and Unaudited Pro Forma Financial Data appearing elsewhere in this Prospectus, and should be read in conjunction with the historical financial statements and the notes thereto, and reports of independent public accountants. The unaudited pro forma financial and operating data include data derived from certain cable systems owned by entities other than CCA prior to their acquisition by CCA. Accordingly, the financial information contained herein with respect to periods prior to such acquisition does not reflect any changes in the operations or management of such systems that CCA has made since the date of acquisition or that it intends to make in the future; thus, this financial information is not necessarily indicative of the results of operations that would have been achieved had the systems been operated by CCA during all the periods with respect to which financial information is presented herein or that may be achieved in the future. There are no pro forma adjustments reflected in the pro forma balance sheet data as all acquisitions were consummated prior to December 31, 1996. 21 CCA AND SUBSIDIARIES UNAUDITED SUMMARY HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA (NUMBERS IN THOUSANDS, EXCEPT FOR FINANCIAL RATIOS AND SUBSCRIPTION DATA) (UNAUDITED)
PREDECESSOR OF CCA CCA -------------------------------- ----------------------------- YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, -------------------------------- ----------------------------- PRO FORMA (A) 1992 1993 1994 1995 1996 1996 -------- -------- -------- -------- -------- --------- STATEMENT OF OPERATIONS DATA: Revenues................ $ 81,557 $ 85,627 $ 87,623 $ 99,689 $143,023 $151,548 Operating Expenses: Operating, general and administrative........ 41,603 43,270 44,164 48,943 71,498 76,026 Management fees........ 2,617(b) 2,723(b) 2,781(b) 6,499 5,034 6,138(c) Depreciation and amortization.......... 47,662 54,804 54,272 51,194 65,757 68,958 -------- -------- -------- -------- -------- -------- Total operating expenses............. 91,882 100,797 101,217 106,636 142,289 151,122 -------- -------- -------- -------- -------- -------- Operating Income (loss)................. (10,325) (15,170) (13,594) (6,947) 734 426 Interest expense....... (19,547) (12,051) (15,053) (35,461) (46,654) (50,132) Interest income........ 66 -- 20 504 164 223 Other income (expense)............. 267 8 444 42 (1,058) (1,058) -------- -------- -------- -------- -------- -------- Loss before equity in loss of unconsolidated limited partnerships, provision for income taxes, loss from discontinued operation and minority interest in loss of subsidiary.. (29,539) (27,213) (28,183) (41,862) (46,814) (50,541) Equity in loss of unconsolidated limited partnerships.......... -- -- -- (1,402) (6,303) (6,303) Provision for income taxes................. -- -- -- -- -- -- Loss from discontinued operation............. -- -- -- -- (1,516) -- Minority interest in loss of subsidiary.... -- -- -- 1,503 15,999 17,676 -------- -------- -------- -------- -------- -------- Net loss................ $(29,539) $(27,213) $(28,183) $(41,761) $(38,634) $(39,168) ======== ======== ======== ======== ======== ======== Ratio of earnings to fixed charges (d)...... -- -- -- -- -- -- BALANCE SHEET DATA (AT END OF PERIOD): Total assets............ $666,139 $744,081 $744,081 Deferred taxes.......... 55,500 55,500 55,500 Total debt (including current maturities).... 447,439 572,843 572,843 Shareholders' investment (deficit).............. 38,239 (395) (395) FINANCIAL RATIOS AND OTHER DATA: EBITDA (e).............. $ 39,954 $ 42,357 $ 43,459 $ 50,746 $ 71,525 $ 75,522 EBITDA margin (f)....... 49.0% 49.5% 49.6% 50.9% 50.0% 49.8% Capital expenditures (g).................... $ 13,375 $ 19,128 $ 24,513 $ 22,024 $ 33,898 $ 35,461 Total debt to EBITDA.... 8.8x 8.0x 7.6x EBITDA to interest expense................ 1.4x 1.5x 1.5x OPERATING STATISTICAL DATA (AT END OF PERIOD, EXCEPT AVERAGES): Homes passed............ 339,142 344,418 350,404 413,930 533,563 533,563 Basic subscribers....... 185,767 196,087 206,948 266,119 338,284 338,284 Basic penetration....... 54.8% 56.9% 59.1% 64.3% 63.4% 63.4% Premium service units... 125,745 126,396 145,967 173,172 194,602 194,602 Premium penetration..... 67.7% 64.5% 70.5% 65.1% 57.5% 57.5% Average monthly revenue per basic subscriber (h).................... $ 36.59 $ 36.39 $ 35.28 $ 36.89 $ 38.20 $ 37.33
22 - -------- (a) The pro forma statement of operations data assumes the consummation of the Illinois Acquisition and the Masada Acquisition as if the applicable transactions had occurred on January 1, 1996. There are no pro forma adjustments reflected in the pro forma balance sheet data as all acquisitions were consummated prior to December 31, 1996. (b) Represents combined management fees for the Crown Systems (during periods prior to their acquisition by CCA), for those systems which paid management fees. These fees are not necessarily indicative of the management fees that would have been charged had the Crown Systems been operated by CCA or that may be expected for any future periods. (c) CCE-I pays annual management and financial advisory fees to Charter and Kelso & Company equal to certain specified contractual amounts set forth in the management and financial advisory agreements executed with Charter and Kelso & Company, which amounts increase upon the acquisition of additional cable television systems and decrease with the disposition of any cable television systems. As of December 31, 1996, CCE-I pays Charter $4,845,000 annually and Kelso & Company $552,500 annually based upon the current contracts. In addition, the management agreement with Charter provides for an annual bonus equal to 30% of the excess, if any, of operating cash flow (as defined in the management agreement) over the projected operating cash flow for the year; however, payment of such bonus is deferred until termination of the CCE-I Credit Facility. The accrued but unpaid bonus as of December 31, 1996 was $1,755,000 of which $740,000 was recorded during 1996. See "Certain Relationships and Related Transactions." (d) The combined earnings of the Crown Systems were inadequate to cover fixed charges by $29.5 million, $27.2 million and $28.2 million for the years ended December 31, 1992, 1993 and 1994, respectively. The earnings of CCA were inadequate to cover fixed charges by $41.8 million and $38.6 million for the years ended December 31, 1995 and 1996, respectively. (e) EBITDA represents income (loss) before interest expense, interest income, income taxes, depreciation and amortization, management fees, other income (expense), equity in loss of unconsolidated limited partnerships, loss from discontinued operation and minority interest in loss of subsidiary. EBITDA is calculated before payment of management fees. Management believes that EBITDA is a meaningful measure of performance because it is commonly used in the cable television industry to analyze and compare cable television companies on the basis of operating performance, leverage and liquidity. EBITDA is not presented in accordance with generally accepted accounting principles and should not be considered an alternative to, or more meaningful than, operating income or operating cash flows as an indicator of CCA's operating performance. EBITDA does not include CCA's debt obligations or other significant commitments. (f) Represents EBITDA as a percent of revenues. (g) Capital expenditures exclude cash consideration paid in connection with the acquisition of cable television systems. (h) Revenues divided by basic subscribers divided by 12 months. 23 RISK FACTORS An investment in the Notes is highly speculative. Prospective investors should carefully consider the following risk factors in addition to the other information set forth in this Prospectus. HIGH DEGREE OF LEVERAGE The Company is, and will continue to be, highly leveraged as a result of the substantial indebtedness it has incurred, and intends to incur, to finance acquisitions and expand its operations. As of December 31, 1996, the Company's aggregate indebtedness (including current liabilities in an aggregate amount of approximately $42.0 million, deferred taxes of $55.5 million, an intercompany note of $27.4 million and other long-term liabilities of $3.3 million) was approximately $889.1 million. As of December 31, 1996, the Issuer's and the Guarantors' indebtedness other than the Notes was approximately $55.5 million of deferred income taxes and approximately $.4 million of current liabilities. As of December 31, 1996, the aggregate indebtedness of CCE-I (including current liabilities in an aggregate amount of approximately $28.9 million and other long-term liabilities of $2.5 million) was approximately $493.5 million. As of December 31, 1996, the aggregate consolidated indebtedness of CCE-II (including current liabilities in an aggregate amount of approximately $13.1 million, an intercompany note of $27.4 million and other long-term liabilities of $0.4 million) was approximately $234.9 million. The California Note is a direct obligation of CCT and, therefore, is not treated as indebtedness of the Company or its subsidiaries; as of December 31, 1996, CCT's obligation on the California Note, including accrued interest, was $198.8 million for financial reporting purposes. As of December 31, 1996, the Company was approaching the maximum levels of indebtedness allowable under the Original HC Crown Loan Agreement. See "Description of Notes--Certain Covenants." The lenders under the CCE-II Credit Facility have a first priority right to the revenues and cash flow generated by and assets of CCE-II. In connection with the Long Beach Investment, CCE-II and LBAC (which will be an affiliate of the Issuer and CCE-II) will become jointly and severally liable under the CCE-II Credit Facility (approximately $194.0 million outstanding at December 31, 1996), which would be increased by $140.0 million upon consummation of the Long Beach Investment. After the repayment of the obligations under the CCE-II Credit Facility, distributions from CCE-II shall be directed to CCT for payments on the California Note. Subject to the creation of New CCE Subsidiaries and the contribution of additional assets to existing Subsidiaries of CCE, L.P., if any, once the obligations in respect of the CCE-II Credit Facility, the California Note and any other indebtedness of CCE-II are indefeasibly paid in full in cash and all commitments to lend in respect of the CCE-II Credit Facility and any other indebtedness of CCE-II are terminated, distributions from CCE-II will be available to service outstanding obligations under the Notes (on a shared basis with any other purchase money notes that might be outstanding as described in the third paragraph under "Risk Factors--Segregation of Distributions to Service the Notes and the Guarantees; New CCE Subsidiaries" in connection with future acquisition transactions). The Indenture does not contain any restriction on the ability of any subsidiary (other than CCE-I and its Restricted Subsidiaries) of CCE, L.P. including CCE-II to incur indebtedness, including indebtedness incurred in connection with the Long Beach Investment. See "Business--Description of the Systems--Pending Investment by CCE-II." The Company anticipates that, in light of the amount of its existing indebtedness, it will continue to be highly leveraged for the foreseeable future. The Company's highly leveraged capital structure, combined with the unavailability of CCE-II distributions until the CCE-II Credit Facility, the California Note and any other indebtedness of CCE-II are repaid, could adversely affect the Issuer's ability to service the Notes and could significantly limit the Company's ability to finance its operations and fund its capital expenditure requirements, to compete effectively, to expand its business, to comply with its obligations under its franchise agreements and to operate under adverse economic conditions. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." DEFICIENCY OF EARNINGS AVAILABLE TO COVER FIXED CHARGES The historical earnings of CCA and the Crown Systems were inadequate to cover their fixed charges by $28.2 million, $41.8 million and $38.6 million for the years ended December 31, 1994, 1995 and 1996, respectively. 24 In addition, the Company expects to service its other indebtedness and to fund general working capital needs and capital expenditure requirements with cash generated by CCE-I and borrowings from other sources. In the event that the Company is unable to meet its working capital needs and capital expenditure requirements with cash generated from the CCE-I operations or borrowings from other sources, the Company will have to consider various options, such as selling certain assets, refinancing outstanding indebtedness or obtaining additional equity capital. There can be no assurance that the Company will be able to raise new equity capital, refinance its outstanding indebtedness, or obtain new financing in the future, or that, if the Company is able to do so, the terms available will be favorable to the Company. SEGREGATION OF DISTRIBUTIONS TO SERVICE THE NOTES AND THE GUARANTEES; NEW CCE SUBSIDIARIES The CCE, L.P. Partnership Agreement provides, among other things, that while any amounts remain outstanding under both the Notes and the California Note, distributions to CCE, L.P. from CCE-I will be distributed by CCE, L.P. to CAC and Cencom Cable for distribution to the Issuer for use solely to service the Notes and distributions to CCE, L.P. from CCE-II will be distributed by CCE, L.P. to CCT for use solely to service the California Note. CCT, on the one hand, and CAC and Cencom Cable, on the other hand, have agreed to use all distributions so received to repay the California Note and the Notes, respectively. If the California Note is repaid prior to payment in full of all amounts payable under the Notes, then all distributions to CCE, L.P. from both CCE-I and CCE-II will, subject to the next two paragraphs, be distributed to service the Notes. If CCE-I is unable to make distributions to CCE, L.P., under the terms of the CCE, L.P. Partnership Agreement, CCE, L.P. will not be able to use any amounts distributed to it by CCE-II to make distributions to CAC, Cencom Cable and the Issuer until the CCE-II Credit Facility, the California Note and any other indebtedness of CCE-II are indefeasibly paid in full in cash and all commitments to lend in respect of the CCE-II Credit Facility and any other indebtedness of CCE-II are terminated. There can be no assurance that CCE-I or CCE-II will make any distributions to CCE, L.P., particularly since the CCE-I and CCE-II Credit Facilities and any other senior indebtedness of CCE-II must be indefeasibly repaid in full prior to CCE-I and CCE-II, respectively, making any distributions to CCE, L.P. The Guarantees are limited to the proceeds of distributions received by the Guarantors from CCE-I. Thus, even if CCE, L.P. were receiving distributions from CCE-II or any New CCE Subsidiary, such distributions would not be available under any circumstances through a claim on the Guarantees. Notwithstanding the foregoing, the CCE, L.P. Partnership Agreement provides for distributions from CCE-II to be applied towards repayment of the Notes, if the CCE-II Credit Facility, the California Note and any other senior indebtedness of CCE-II have been indefeasibly repaid in full in cash. Subject to certain limitations, the Indenture permits the formation of New CCE Subsidiaries and contributions of additional assets to existing Subsidiaries of CCE, L.P. New CCE Subsidiaries may engage in the cable television business or other businesses. In connection with their businesses, New CCE Subsidiaries, and, in connection with such asset contributions, existing Subsidiaries of CCE, L.P., may establish senior credit facilities and other financing arrangements (debt and/or equity), which may establish a basis for a new or revised preferred capital account in CCE, L.P. The contribution of assets to existing CCE, L.P. Subsidiaries could establish the basis for revised preferred capital accounts in CCE, L.P. Until any applicable financing arrangement of CCE-II or any New CCE Subsidiary is repaid, such arrangement could result in any distributions to CCE, L.P. from CCE-II and any New CCE Subsidiaries being shared pro rata between the Notes and any such new or existing financing arrangement (with such sharing to be based upon the then outstanding preferred capital accounts in CCE, L.P.). Holders of the Notes should not rely on any distributions from CCE-II or any New CCE Subsidiaries for payment of principal or interest on the Notes. In connection with the creation of New CCE Subsidiaries or the contribution of additional assets to existing Subsidiaries of CCE, L.P., the CCE, L.P. Partnership Agreement's distribution provisions may be amended. See "Description of Notes--Certain Covenants--Limitation on Changes to CCE, L.P. Partnership Agreement." For example (and without limiting the arrangements which could be entered into by a New CCE Subsidiary), in the event one or more New CCE Subsidiaries are formed in connection with the acquisition of new assets or equity interests and the issuance by 25 an affiliate of CCE, L.P. of a purchase money note payable to the sellers of such assets or equity interests (i.e., a purchase money note, as was the case in the California Transaction and the Crown Transaction), then, the CCE, L.P. Partnership Agreement can be amended, so that (i) rather than all distributions to CCE, L.P. from CCE-II being available to service the Notes after payment of the California Note, such distributions would instead be available pro rata based on preferred capital accounts to service both the Notes and any new purchase money note owed to such sellers and (ii) all cash generated by any New CCE Subsidiary would be used first to repay any senior credit facility entered into by such New CCE Subsidiary to accomplish the related acquisition. Any amounts thereafter distributed to CCE, L.P. by such New CCE Subsidiary would be used next to repay any new purchase money note, and after such new purchase money note is repaid, such distributions from such New CCE Subsidiary to CCE, L.P. would be available pro rata to service the Notes, the California Note and any other outstanding purchase money notes. See "Description of Notes--Certain Covenants." Such credit facilities, other financing arrangements and asset contributions and the existence of new or revised preferred capital accounts will not affect distributions to the Issuer from CAC, Cencom Cable, CCE, L.P. (to the extent the funds to be distributed by CCE, L.P. were obtained from CCE-I) or CCE-I. Holders of the Notes may benefit from distributions from CCE-II (and New CCE Subsidiaries referred to in the preceding paragraph), but should not rely on such distributions made by them for payment of principal or interest on the Notes. Accordingly, the presentation of information regarding the Company focuses on the CCE-I Entities. Thus, holders of the Notes should not rely on the assets of CCE-II (or any New CCE Subsidiary) or cash flow generated by such assets for payment of principal or interest on the Notes. See "Certain Relationship and Related Transactions--The Partnership Agreements." LIMITED RIGHTS AND REMEDIES ON DEFAULT; LIMITATION ON ENFORCEMENT OF GUARANTEES The holders have limited rights and remedies upon the occurrence of an Event of Default (as defined in the Indenture; see "Description of Notes--Events of Default" herein), including the failure to pay the Notes at the Stated Maturity Date. The holders do not have the right to compel payment on the Stated Maturity Date or thereafter or to accelerate the Notes or commence a bankruptcy action against the Issuer. Among such limited rights upon the occurrence of an Event of Default is the right of the holders to increased rates of interest on amounts outstanding under the Notes. Until the Stated Maturity Date, if an Event of Default occurs and shall be continuing for any reason other than failure to pay principal or interest when due, all principal, interest and other amounts due from the Issuer shall bear the 13% per annum stated rate of interest plus the 3% per annum Default Rate of interest set forth in Section 10.01 of the Indenture. If the Issuer fails to pay all of the outstanding principal on or prior to the Stated Maturity Date or all of the accrued and unpaid interest on or prior to the third day following the Stated Maturity Date, there shall be imposed upon the unpaid principal amount of each Note, in addition to the 13% per annum stated rate of interest and the 3% per annum Default Rate of interest, if applicable, a penalty rate of interest that increases yearly from 2000 to 2004. See "Description of Notes--Events of Default." Because of the restrictions contained in the Subordination Agreement, as long as such agreement is in effect it is expected that if an Event of Default occurs such Default Rate of interest and/or penalty rate of interest shall accrue but not be currently payable at such time. See "Description of Notes--Subordination." The CCE, L.P. Guarantee cannot be enforced until the repayment in full and termination of the CCE-I Credit Facility, the CCE-II Credit Facility, any other senior indebtedness of CCE-II and senior indebtedness of New CCE Subsidiaries. The Indenture prohibits CCE, L.P. from incurring indebtedness but does not contain any restriction on the ability of any subsidiary of CCE, L.P. to incur indebtedness (other than CCE-I and its Restricted Subsidiaries, as defined in the Indenture) or the ability of CCE-II to incur additional indebtedness, including but not limited to indebtedness incurred pursuant to the Long Beach Investment in connection with which CCE-II and LBAC will become jointly and severally liable under the CCE-II Credit Facility, which would be increased by $140.0 million upon consummation of the Long Beach Investment. See "Description of the Systems--Pending Investment by CCE-II." The CAC Guarantee and the Cencom Cable Guarantee cannot be enforced until the indefeasible repayment in full in cash of and termination of the commitments to lend under the CCE-I Credit Facility. The CCE-I Credit Facility restricts CCE-I's ability to incur additional indebtedness. 26 RESTRICTIONS IMPOSED BY LENDERS The lenders under the CCE-I Credit Facility and the lenders under the CCE-II Credit Facility who have security interests in all of the assets of CCE-I and CCE-II, respectively, as well as the lenders under the Long Beach Credit Facility who are expected to have security interests in all of the assets of CCE-II and security interests in the partnership interests of CCE-II held by certain subsidiaries and affiliates of the Issuer, will have available to them all of the remedies available to secured creditors under applicable law. Moreover, the Indenture and the Subordination Agreement (pursuant to which the holders of the Notes are and will continue to be bound) prohibit any and all payments on the Notes until all obligations owing under the CCE-I Credit Facility (including any refinancings thereof) are indefeasibly paid in full in cash and all commitments to lend in respect thereof are terminated. The final maturity dates of the CCE-I Credit Facility and the CCE-II Credit Facility (not including the Long Beach Credit Facility) are December 31, 2004 and September 29, 2005, respectively. The final maturity dates of the Credit Facilities may, subject to certain limited exceptions, be extended by mutual agreement of the lenders thereto and the obligors thereunder, without the consent of the holders. The final maturity dates of the Long Beach Credit Facility and any other senior indebtedness of CCE-II are unknown at this time. The CCE-I Credit Facility imposes restrictions that, among other things, limit the amount of additional indebtedness that may be incurred by CCE-I, and imposes limitations on, among other things, investments, loans and other payments, certain transactions with affiliates and certain mergers and acquisitions. In addition, the CCE-I Credit Facility substantially prohibits CCE-I from making any distributions to CCE, L.P. or to the other partners of CCE-I. The ability of CCE-I to comply with the applicable covenants and restrictions contained in the CCE-I Credit Facility can be affected by events beyond its control, and there can be no assurance that CCE-I will achieve operating results that would permit compliance with such provisions. The breach of any of the provisions of the CCE-I Credit Facility would, under certain circumstances, result in a default thereunder, permitting the lenders thereunder to accelerate the indebtedness under the CCE-I Credit Facility or foreclose upon the assets pledged to secure such payment. In such event, the holders of the Notes might not be able to receive payment until such time as the payment default is cured or waived, any such acceleration is rescinded or the obligations owing under the CCE-I Credit Facility are indefeasibly paid in full in cash and all commitments to lend in respect thereof are terminated. Any of such events would adversely affect the Issuer's ability to service the Notes. The CCE-II Credit Facility (not including the Long Beach Credit Facility) contains similar restrictions applicable to CCE-II. It is expected that the Long Beach Credit Facility and any other senior indebtedness of CCE- II will contain similar restrictions. HOLDING COMPANY STRUCTURE The Issuer is a holding company which has no significant assets, other than its indirect investments in CCE-I and CCE-II. The Issuer must rely upon distributions originating from CCE-I to generate the funds necessary to meet its obligations, including the payment of principal or interest on the Notes. The Issuer is dependent upon the receipt of distributions from CAC and Cencom Cable, both of which, in turn, are dependent upon the receipt of distributions from CCE, L.P., which, in turn, is dependent upon distributions from CCE-I to provide it with funds. Thus, the Issuer will not have sufficient funds available to repay the Notes in the event that CAC, Cencom Cable, CCE, L.P. or CCE-I, as the case may be, is prevented for any reason from making distributions. In this connection, it should be noted that the CCE-I Credit Facility substantially prohibits distributions from CCE-I to CCE, L.P., until the obligations under such credit facility are fully paid. The rights of the Issuer and its creditors, including the holders of the Notes, to realize upon the assets of any of the Company's subsidiaries upon any such subsidiary's bankruptcy, liquidation or reorganization (and the consequent rights of the holders of the Notes to participate in the realization of those assets), will be subject to the prior claims of such subsidiary's respective creditors, including the lenders under the CCE-I Credit Facility and, in the case of CCE- II, the lenders under the CCE-II Credit Facility, the holder of the California Note and the lenders under any other indebtedness of CCE-II, and in the case of any New CCE Subsidiary, any lender to such New CCE Subsidiary. In any such event, there may not be sufficient assets remaining to pay amounts due on any or all of the Notes then outstanding. See "Description of Notes-- Subordination" and "Description of Other Indebtedness." The CCE-I Credit Facility permits CCE-I to incur additional indebtedness under certain circumstances. See "Description of Notes." 27 CONTRACTUAL SUBORDINATION The Notes are unsecured obligations of the Issuer and by virtue of the terms of the Subordination Agreement and the terms of the Notes are subordinate in right and priority of payment to all existing indebtedness of the Issuer, other than indebtedness that by its terms is expressly subordinated in right and priority of payment to the Notes. The Issuer conducts its business principally through the Operating Entities. See "Business--Company's Background and Ownership Structure." CONTROL OF THE COMPANY BY KELSO Kelso and certain other individuals own an 85% interest in the Issuer, which holds through CAC a 1% general partnership interest in CCE, L.P. and a 1.22% general partnership interest in CCE-I. Kelso also owns an 85% interest in CCT, which in turn holds a 1% general partnership interest in CCE, L.P. and a 1% general partnership interest in CCE-II. Kelso and certain other individuals own approximately 19.9% of Charter. Because Kelso directly controls the Issuer and indirectly controls CAC and Cencom Cable, as well as the general partners of CCE, L.P., CCE-I and CCE-II, Kelso can, subject to applicable law, exercise effective control over the management and affairs of the Company, CCT and their subsidiaries. NONRECOURSE NATURE OF NOTES AS TO KELSO, CHARTER AND OTHERS The Issuer is the sole obligor under the Notes. Although Charter and Kelso have agreed to cause certain covenants under the Indenture to be complied with, none of Charter, Kelso or any of their respective directors, officers, partners, stockholders, employees or affiliates (other than the Guarantors) will be an obligor under or guarantor of the Notes. There should be no expectation that Charter, Kelso or any person other than the Issuer will, in the future, fund the operations or deficits of the Issuer or any of their respective subsidiaries. The CCE, L.P. Guarantee cannot be enforced until repayment in full of and termination of commitments to lend under the CCE-I Credit Facility, the CCE-II Credit Facility, any other senior indebtedness of CCE-II and senior indebtedness of new CCE Subsidiaries. The CAC Guarantee and the Cencom Cable Guarantee cannot be enforced until the repayment in full of and termination under the CCE-I Credit Facility. See "Description of Notes-- General" and "Description of Notes--The Guarantees." DEPENDENCE ON CHARTER AND KEY PERSONNEL OF CHARTER; POTENTIAL CONFLICTS OF INTEREST The Company's success depends on the management of its cable systems by Charter and, therefore, on Charter's ability to attract, motivate and retain highly qualified management, sales and technical personnel. In the event Charter is unable to continue to do so, the operations and growth prospects of the Company could be adversely affected. Charter is dependent upon the services of certain key personnel, including Messrs. Babcock, Kent and Wood. In the event Charter loses the services of any of Messrs. Babcock, Kent or Wood, or certain other key personnel, its ability to conduct its business, including management of the Systems, could be adversely affected. In addition, in certain circumstances, in the event that the partnership that controls Charter fails to be Controlled (as defined in the CCE-I Credit Facility) by at least one of Messrs. Babcock, Kent or Wood, or a majority of the voting equity and economic interests in such partnership fails to be owned by at least one of such individuals, an Event of Default (as defined in the CCE-I Credit Facility) shall occur under the CCE-I Credit Facility. Furthermore, Charter's management of other cable systems could adversely affect Charter's ability to manage the Systems by limiting the availability and accessibility of certain Charter personnel, including the personnel who service the Systems as well as other Charter-managed systems in the same operating region (but owned by other legal entities). In the event the Company's relationship with Charter is terminated for any reason, the Company will no longer benefit from, among other things, advantageous programming opportunities, acquisition opportunities and financing relationships which are made available to the Company through Charter. See "Business--Business Strategy--Maximize Benefits Provided by Relationship with Charter." In such event, the Company's operating expenses and access to capital could be adversely affected. 28 The other cable systems managed by Charter and owned by certain of its affiliated entities are located principally in Alabama, Georgia, Kentucky, Louisiana, Missouri, North Carolina, South Carolina, Tennessee and Texas. Although the Company's acquisition strategy calls for the acquisition of additional cable systems in the vicinity of the Company's existing operations, such systems may become available for sale in tandem with systems located in other portions of the country, for aggregate amounts which exceed the Company's purchasing ability, or which otherwise do not fit the Company's business strategy. It is possible, therefore, that systems in close proximity to the Regions which are identified for sale may be acquired by Charter itself or other Charter-affiliated entities. There can be no assurance that such systems, if acquired by Charter or a Charter-affiliated entity, would ultimately be sold or otherwise transferred to the Company, or that the Company will be able to take advantage of any other opportunity which becomes available to Charter or any of its affiliates. Subject to certain exceptions, the Issuer will not permit CCE-I to engage in any transaction with an affiliate on terms less advantageous to CCE-I than would be the case if such transaction were effected on an arm's length basis with a non-affiliate. This restriction shall not apply to any transaction (including the payment of fees and expenses) permitted under the CCE-I Credit Facility from time to time or, after the CCE-I Credit Facility Termination Date (as defined in "Description of Notes--Certain Definitions"), which is consistent with past practice. OPERATING HISTORY The Issuer was formed on November 17, 1994 to consummate the Crown Transaction in January 1995 and thereafter act as a holding company for CAC and Cencom Cable. The Company has grown principally through acquisitions. See "Business--Description of the Systems." Prospective investors, therefore, have limited historical financial information about the Company and about the results that can be achieved by Charter in managing the Systems to evaluate its performance and an investment in the Notes. In addition, as a result of the Company's rapid growth through acquisitions, past operating history is not necessarily indicative of future results. Further, there can be no assurance that the Company will be able to implement successfully its business strategy. RISKS RELATING TO ACQUISITION STRATEGY A significant element of the Company's strategy is to expand its operations by acquiring cable television systems located in reasonable proximity to existing systems or of a sufficient size to enable the acquired system to serve as the basis for a new cluster. There can be no assurance that the Company will be able to identify and acquire such systems or that it will be able to finance such acquisitions in the future. Furthermore, any acquisition may have an adverse effect upon the Company's operating results or cash flow, particularly for acquisitions of new systems which require significant capital expenditures. Thus, there can be no assurance that the Company will be able to integrate successfully any acquired business with its existing operations or realize any efficiencies therefrom, or that any such acquisition will be profitable or that the Company will be able to obtain any required financing to acquire additional systems in the future. See "Business--Description of the Systems" and "Business--Business Strategy." REGULATION IN THE CABLE TELEVISION INDUSTRY The cable television industry is subject to extensive regulation by federal, local and, in some instances, state governmental agencies. The Cable Communications Policy Act of 1984 (the "1984 Cable Act") and the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act," together with the 1984 Cable Act, the "Cable Acts"), both of which amended the Communications Act, established a national policy to guide the development and regulation of cable television systems. The 1992 Cable Act significantly expanded the scope of cable television regulation on an industry-wide basis by imposing rate regulation, carriage requirements for local broadcast stations, customer service obligations and other requirements. The 1992 Cable Act and the FCC's rules implementing that Act generally have increased the administrative and operational expenses and in certain instances required rate reductions for cable television systems and have resulted in additional regulatory oversight by the FCC and local or state franchise authorities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business--Regulation in the 29 Cable Television Industry." Under the FCC's initial rate regulations pursuant to the 1992 Cable Act, many cable systems were required to reduce their rates, some by 17%. See "Business--Regulation in the Cable Television Industry." Telecommunications Legislation The Telecommunications Act was signed into law by the President on February 8, 1996, and substantially amends the Communications Act by altering federal, state and local laws and regulations pertaining to cable television, telecommunications and other services. The Telecommunications Act also authorizes additional competition in the cable television industry, including competition from local exchange companies ("LECs"), which include the Regional Bell Operating Companies ("RBOCs"), and from public utilities. See "Business-- Regulation in the Cable Television Industry--Telecommunications Legislation." Telephone Company Provision of Video Programming Under the Telecommunications Act, telephone companies can compete directly with cable operators in the provisioning of video programming in the telephone company's service areas, with certain regulatory safeguards. The new legislation recognizes several multiple entry options for telephone companies to provide competitive video programming. Local exchange carriers, including the RBOCs, will be allowed to compete with cable operators both inside and outside the LECs' telephone service areas with certain limitations, including limitations on LEC buyouts of cable systems within the LEC's telephone service area, cable operator buyouts of LEC systems within the cable operator's franchise area, and joint ventures between cable operators and LECs in the same markets. However, there are some statutory exceptions, and the FCC may grant waivers of the buyout provisions in certain cases. See "Business-- Regulation in the Cable Television Industry." Miscellaneous Requirements and Provisions The Telecommunications Act also imposes other miscellaneous requirements on cable operators, including an obligation to fully scramble or block at no charge the audio and video portion of any channel not specifically subscribed to by a household. The Telecommunications Act also amends the definition of "cable system" so that a broader class of entities (including some entities which may compete with the Company) providing video programming will be exempt from regulation as a cable system under the Communications Act. Franchise Renewal A franchise relating to the CCE-I Systems (as defined herein) located in the State of Connecticut is currently being negotiated to be renewed. Connecticut regulates cable systems on a statewide basis (as opposed to franchising by the various municipalities). The Company's franchise for "Area 13" in Connecticut (the northeastern system) is scheduled to expire in July 1998. The Company requested the commencement of renewal proceedings in January 1996 with the Connecticut Department of Public Utility Control ("DPUC"). The DPUC granted the Company's request for an "informal renewal" and has requested, in conformance with general procedures, that the Company submit its Proposal for Renewal as the next step in the process. The DPUC has also undertaken, pursuant to its customary procedures, a community needs assessment. Management believes that it generally has a good relationship with the DPUC. Franchises, including the Connecticut franchise referenced above, covering an aggregate of approximately 40% of the Company's total subscriber base, are currently within the three year renewal window provided in the Communications Act. While there can be no assurance that all of these franchises will be renewed on commercially reasonable terms, the Company believes that it maintains generally good relationships with its franchising authorities. COMPETITION IN THE CABLE TELEVISION BUSINESS Cable television companies generally operate under non-exclusive franchises granted by local authorities that are subject to renewal and renegotiation from time to time. The 1992 Cable Act prohibits franchising authorities from granting exclusive cable television franchises and from unreasonably refusing to award additional competitive franchises. Cable system operators may therefore experience competition from other operators building a cable television system in a franchise area in which such a system had previously been constructed (i.e., an "overbuild"). The 1992 Cable Act also permits municipal authorities to operate cable television systems in their communities without franchises. 30 Cable television systems also face competition from alternative methods of receiving and distributing television signals and from other sources of home entertainment. Within the home video programming market, the Company competes primarily with home satellite and wireless cable providers and, when existing franchises become available for renewal, with other cable operators. In addition, the Telecommunications Act allows LECs to provide a wide variety of video services competitive with services provided by cable systems and to provide cable services directly to customers in the telephone companies' service areas, with some regulatory safeguards. In Connecticut, the DPUC recently granted to a subsidiary of a local telephone company a statewide franchise. The local telephone company subsidiary proposed to provide cable television services initially to customers in at least one community currently served by CCE-I. This new statewide cable franchise is currently being challenged by a regional cable association. The association recently filed an appeal in the Connecticut Superior Court challenging the DPUC's grant of the statewide franchise on several substantive and procedural grounds. The Company cannot predict the outcome of this litigation. According to the terms of its franchise, the service must pass all homes in Connecticut within eleven years. See "Business--Competition in the Cable Television Business." Management cannot predict the extent to which competition will materialize from other cable television operators, telephone companies, other distribution systems for delivering video programming to the home, or other potential competitors, including those from technologies not yet available in the marketplace, and, if such competition materializes, the extent of its effect on the Company. Many of the Company's competitors or potential competitors have greater technical, financial and other resources than the Company. See "Business-- Competition in the Cable Television Business." ORIGINAL ISSUE DISCOUNT CONSEQUENCES OF THE NOTES Under the Notes, interest is not due and payable until the final maturity of the Notes. Consequently, the holders of the Notes generally will be required to include amounts in gross income for Federal income tax purposes in advance of the receipt of the cash payments to which such income is attributable. See "Certain Federal Income Tax Consequences" for a more detailed discussion of the Federal income tax consequences to the holders of the Old Notes of the acquisition, ownership and disposition (including repayment or redemption) of the New Notes. ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON RESALE There is currently no established public market for the Notes. There can be no assurance as to (i) the liquidity of any market that may develop, (ii) the ability of the holders of Notes to sell their Notes or (iii) the price at which the holders of Notes would be able to sell their Notes. If such a market were to exist, the Notes could trade at prices that may be higher or lower than their principal amount or purchase price, depending on many factors, including prevailing interest rates, the market for similar securities and the financial performance of the Issuer. The Issuer does not presently intend to apply for the listing of the Notes on any national securities exchange or on the National Association of Securities Dealers Automated Quotation System; however, the Notes have been designated for trading in the PORTAL market. Accordingly, no assurance can be given as to the development or liquidity of any market for the Notes. Under the Indenture, the holders are collectively entitled to a single additional demand registration right (independent of the registration pursuant to which this Exchange Offer is being made), which, if exercised, will be at the expense of the holders of the Notes as described herein. See "Description of the Notes--Registration Rights." CONSEQUENCES OF FAILURE TO EXCHANGE; RESALES BY BROKER-DEALERS Holders of Old Notes who do not exchange their Old Notes for New Notes pursuant to the Exchange Offer will continue to be subject to the restrictions on transfer of such Old Notes as set forth in the legend thereon as a consequence of the issuance of the Old Notes pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the Old Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. The Issuer does not currently anticipate it will register the Old Notes under the Securities Act, except in the event that holders of $15 million or more of the Notes request registration pursuant to the registration right described in Section 12.01(b) of the 31 Indenture. Based on an interpretation by the staff of the Commission set forth in no-action letters issued to third parties unrelated to the Issuer, New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold or otherwise transferred by holders thereof (other than any such holder which is an "affiliate" of the Issuer or any of the Guarantors within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act provided that such New Notes are acquired in the ordinary course of such holders' business and such holders have no arrangement with any person to participate in the distribution of such Notes. Each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of Transmittal states that, by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Issuer has agreed that, for a period of 180 days after the effective date of this Prospectus, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." However, to comply with the securities laws of certain jurisdictions, if applicable, the New Notes may not be offered or sold unless they have been registered or qualified for sale in such jurisdictions or an exemption from registration or qualification is available and is complied with. To the extent that Old Notes are tendered and accepted in the Exchange Offer, the trading market for untendered and tendered but unaccepted Old Notes will be adversely affected. 32 THE EXCHANGE OFFER PURPOSE AND EFFECT OF THE EXCHANGE OFFER The Old Notes were sold by the Issuer on January 18, 1995 to HC Crown, which resold the Old Notes to "qualified institutional buyers" (as defined in Rule 144A under the Securities Act), including an affiliate of HC Crown. In connection with the sale of the Old Notes, the Issuer and HC Crown entered into a Letter Agreement dated as of November 15, 1996 (the "Letter Agreement") pursuant to which the Issuer agreed to file with the Commission a registration statement (the "Exchange Offer Registration Statement") with respect to an offer to exchange the Old Notes for New Notes. In addition, the Issuer agreed to use its best efforts to cause the Exchange Offer Registration Statement to become effective under the Securities Act and to issue the New Notes pursuant to the Exchange Offer. The Exchange Offer is being made pursuant to the Letter Agreement to satisfy the Issuer's obligations thereunder. The term "holder of Old Notes," with respect to the Exchange Offer, means any person in whose name Old Notes are registered on the books of the Company or any other person who has obtained a properly completed bond power from the registered holder, or any person whose Old Notes are held of record by the Depository Trust Company (the "Depositary"). The Issuer is not required to file any registration statement to register any outstanding Old Notes. Holders of Old Notes who do not tender their Old Notes or whose Old Notes are tendered but not accepted would have to rely on exemptions to registration requirements under the securities laws, including the Securities Act, if they wish to sell their Old Notes. Based on an interpretation by the staff of the Commission set forth in no- action letters issued to third parties, the Issuer believes that the New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by any holder of such New Notes (other than a person that is an "affiliate" of the Issuer or any of the Guarantors within the meaning of Rule 405 under the Securities Act and except as set forth in the next paragraph) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holder's business and such holder is not participating, and has no arrangement or understanding with any person to participate, in the distribution of such New Notes. If any person were to be participating in the Exchange Offer for the purpose of distributing securities in a manner not permitted by the staff's interpretation (i) the position of the staff of the Commission enunciated in interpretive letters would be inapplicable to such person and (ii) such person would be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes, where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. See "Plan of Distribution." Except as aforesaid, this Prospectus may not be used for any offer to resell, resale or other transfer of New Notes. The Exchange Offer is not being made to, nor will the Exchange Agent accept surrenders for exchange from, holders of Old Notes in any jurisdiction in which the Exchange Offer or the acceptance thereof would not be in compliance with the securities or Blue Sky laws of such jurisdiction. Prior to the Exchange Offer, however, the Issuer will use its best efforts to register or qualify the New Notes for offer and sale under the securities or Blue Sky laws of such jurisdictions as any such holder requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the New Notes. TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal the Company will accept any and all Old Notes validly tendered prior to 5:00 p.m., New York time, 33 on the Expiration Date (as defined below). The Issuer will issue up to $82.0 million aggregate principal amount of New Notes in exchange for a like principal amount of outstanding Old Notes which are validly tendered and accepted in the Exchange Offer. Subject to the conditions of the Exchange Offer described below, the Issuer will accept any and all Old Notes which are so tendered. Holders may tender some or all of their Old Notes pursuant to the Exchange Offer. The form and terms of the New Notes will be the same in all material respects as the form and terms of the Old Notes, except that the New Notes will be registered under the Securities Act and hence will not bear legends restricting the transfer thereof. Holders of Old Notes do not have any appraisal or dissenters' rights under the General Corporation Law of the State of Delaware or the Indenture in connection with the Exchange Offer. The Issuer intends to conduct the Exchange Offer in accordance with the provisions of the Letter Agreement. Old Notes which are not tendered for exchange or are tendered but not accepted in the Exchange Offer will remain outstanding and be entitled to the benefits of the Indenture. Under the Indenture, the holders are entitled to a single demand registration right (in addition to the registration pursuant to which this Exchange Offer is being made), pursuant to which the Issuer and the Guarantors will use their reasonable best efforts to cause to become effective a shelf registration statement with respect to the resale of the Notes and to keep such shelf registration statement continuously effective until nine months after the effective date thereof. The Issuer shall be deemed to have accepted validly tendered Old Notes when, as and if the Issuer has given oral or written notice thereof to Harris Trust and Savings Bank acting in its capacity as the exchange agent (the "Exchange Agent") for the Exchange Offer. The Exchange Agent will act as agent for the tendering holders for the purpose of receiving the New Notes from the Issuer. If any tendered Old Notes are not accepted for exchange because of an invalid tender, the occurrence of certain other events set forth herein or otherwise, certificates for any such unaccepted Old Notes will be returned, without expense, to the tendering holder thereof as promptly as practicable after the Expiration Date. Holders who tender Old Notes in the Exchange Offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes pursuant to the Exchange Offer. HC Crown will pay all charges and expenses, other than certain applicable taxes described below, in connection with the Exchange Offer. See "--Fees and Expenses." EXPIRATION DATE; EXTENSIONS; CLOSING The term "Expiration Date" shall mean 5:00 p.m., New York City time, on , 1997, unless the Issuer, in its sole discretion, extends the Exchange Offer, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. In order to extend the Exchange Offer, the Issuer will notify the Exchange Agent of any extension by oral or written notice and will announce such extension on the next business day after the previously scheduled Expiration Date. Such announcement will state that the Issuer is extending the Exchange Offer for a specified period of time. Without limiting the manner in which the Issuer may choose to make a public announcement of any extension of the Exchange Offer, the Issuer shall have no obligation to publish, advertise or otherwise communicate any such public announcement, other than by making a timely release to an appropriate news agency. CONDITIONS Notwithstanding any other term of the Exchange Offer, the Issuer will not be required to accept any Old Notes for exchange, or exchange any New Notes for any Old Notes, and may terminate or amend the Exchange Offer before the acceptance of any Old Notes for exchange, if the Exchange Offer violates any applicable law or interpretation by the staff of the Commission. 34 If the Issuer determines in its sole discretion that the foregoing condition exists, the Issuer may (i) refuse to accept any Old Notes and return all tendered Old Notes to the tendering holders, (ii) extend the Exchange Offer and retain all Old Notes tendered prior to the expiration of the Exchange Offer, subject, however, to the rights of holders who tendered such Old Notes to withdraw their tendered Old Notes, or (iii) waive such condition with respect to the Exchange Offer and accept all properly tendered Old Notes which have not been withdrawn. If such waiver constitutes a material change to the Exchange Offer, the Issuer will promptly disclose such waiver by means of a prospectus supplement that will be distributed to the holders, and the Issuer will extend the Exchange Offer as required by applicable law. PROCEDURES FOR TENDERING Only a holder of Old Notes may tender such Old Notes in the Exchange Offer. To tender in the Exchange Offer, a holder must complete, sign and date the Letter of Transmittal or a facsimile thereof, have the signatures thereon guaranteed if required by the Letter of Transmittal, and mail or otherwise deliver such Letter of Transmittal or such facsimile, together with the Old Notes (unless such tender is being effected pursuant to the procedure for book-entry transfer described below) and any other required documents, to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. Any financial institution that is a participant in the Depositary's Book- Entry Transfer Facility system may make book-entry delivery of the Old Notes by causing the Depositary to transfer such Old Notes into the Exchange Agent's account in accordance with the Depositary's procedure for such transfer. Although delivery of Old Notes may be effected through book-entry transfer into the Exchange Agent's account at the Depositary, the Letter of Transmittal (or facsimile thereof), with any required signature guarantees and any other required documents, must, in any case, be transmitted to and received or confirmed by the Exchange Agent at its addresses set forth in "Exchange Agent" below prior to 5:00 p.m., New York City time, on the Expiration Date. DELIVERY OF DOCUMENTS TO THE DEPOSITARY IN ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. The tender by a holder of Old Notes will constitute an agreement between such holder and the Issuer in accordance with the terms and subject to the conditions set forth herein and in the Letter of Transmittal. The method of delivery of Old Notes and the Letter of Transmittal and all other required documents to the Exchange Agent is at the election and risk of the holders of Old Notes. Instead of delivery by mail it is recommended that holders of Old Notes use an overnight or hand delivery service. In all cases sufficient time should be allowed to assure delivery to the Exchange Agent before the Expiration Date. No Letter of Transmittal or Old Notes should be sent to the Issuer. Holders of Old Notes may request their respective brokers, dealers, commercial banks, trust companies or nominees to effect the tenders for such Holders. Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed by an Eligible Institution (as defined below) unless the Old Notes tendered pursuant thereto are tendered (i) by a registered holder of Old Notes which has not completed the box entitled "Special Payment Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. In the event that signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantee must be by a member of a signature guarantee program within the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution"). If the Letter of Transmittal or any Old Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, owners of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and unless waived by the Issuer, evidence satisfactory to the Issuer of their authority to so act must be submitted with the Letter of Transmittal. All questions as to the validity, form, eligibility (including time of receipt) and acceptance and withdrawal of tendered Old Notes will be determined by the Issuer in its sole discretion, which determination will be final and binding. The Issuer reserves the absolute right to reject any and all Old Notes not properly tendered or any 35 Old Notes the Issuer's acceptance of which would, in the opinion of counsel for the Issuer, be unlawful. The Issuer also reserves the right to waive any defects, irregularities or conditions of tender as to particular Old Notes. The Issuer's interpretation of the terms and conditions of the Exchange Offer (including the instructions in the Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Old Notes must be cured within such times as the Issuer shall determine. Although the Issuer intends to request the Exchange Agent to notify holders of Old Notes of defects or irregularities with respect to tenders of Old Notes, neither the Issuer, the Exchange Agent nor any other person shall incur any liability for failure to give such notification. Tenders of Old Notes will not be deemed to have been made until such defects or irregularities have been cured or waived. Any Old Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering holders, unless otherwise provided in the Letter of Transmittal, as soon as practicable following the Expiration Date. In addition, the Issuer reserves the right in its sole discretion (subject to limitations contained in the Indenture) (i) to purchase or make offers for any Old Notes that remain outstanding subsequent to the Expiration Date and (ii) to the extent permitted by applicable law, purchase Old Notes in the open market, in privately negotiated transactions or otherwise. The terms of any such purchases or offers could differ from the terms of the Exchange Offer. By tendering, each holder of Old Notes will represent to the Issuer that, among other things, the New Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Notes, whether or not such person is the holder and that neither the holder nor any such other person (i) has an arrangement or understanding with any person to participate in the distribution of such New Notes, (ii) is an "affiliate", as defined in Rule 405 under the Securities Act, of the Issuer or any of the Guarantors or (iii) is engaged in, or intends to engage in, a distribution of the New Notes. If the holder is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, such holder by tendering will acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. See "Plan of Distribution." GUARANTEED DELIVERY PROCEDURES Holders who wish to tender their Old Notes and (i) whose Old Notes are not immediately available, or (ii) who cannot deliver their Old Notes and other required documents to the Exchange Agent, or cannot complete the procedure for book-entry transfer prior to the Expiration Date, may effect a tender if: (a) The tender is made through an Eligible Institution; (b) Prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the holder, the certificate number(s) of such Old Notes (if available) and the principal amount of Old Notes tendered together with a duly executed Letter of Transmittal (or a facsimile thereof), stating that the tender is being made thereby and guaranteeing that, within five business days after the Expiration Date, the certificate(s) representing the Old Notes to be tendered in proper form for transfer (or a confirmation of a book-entry transfer into the Exchange Agent's account at the Depositary of Old Notes delivered electronically) and any other documents required by the Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent; and (c) Such certificate(s) representing all tendered Old Notes in proper form for transfer (or confirmation of a book-entry transfer into the Exchange Agent's account at the Depositary of Old Notes delivered electronically) and all other documents required by the Letter of Transmittal are received by the Exchange Agent within three business days after the Expiration Date. Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to holders of Old Notes who wish to tender their Old Notes according to the guaranteed delivery procedures set forth above. 36 WITHDRAWAL OF TENDERS Except as otherwise provided herein, tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date, unless previously accepted for exchange. To withdraw a tender of Old Notes in the Exchange Offer, a written or facsimile transmission notice of withdrawal must be received by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City time, on the Expiration Date, and prior to acceptance for exchange thereof by the Issuer. Any such notice of withdrawal must (i) specify the name of the person having deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be withdrawn (including the certificate number or numbers and principal amount of such Old Notes), (iii) be signed by the Depositor in the same manner as the original signature on the Letter of Transmittal by which such Old Notes were tendered (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the Trustee with respect to the Old Notes register the transfer of such Old Notes into the name of the person withdrawing the tender, and (iv) specify the name in which any such Old Notes are to be registered, if different from that of the Depositor. All questions as to the validity, form and eligibility (including time of receipt) of such withdrawal notices will be determined by the Issuer, whose determination shall be final and binding on all parties. Any Old Notes so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer and no New Notes will be issued with respect thereto unless the Old Notes so withdrawn are validly re-tendered. Any Old Notes which have been tendered but which are not accepted for exchange or which are withdrawn will be returned to the holder thereof without cost to such holder as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Old Notes may be re- tendered by following one of the procedures described above under "Procedures for Tendering" at any time prior to the Expiration Date. EXCHANGE AGENT Harris Trust and Savings Bank has been appointed as Exchange Agent for the Exchange Offer. Questions and requests for assistance, requests for additional copies of this Prospectus or of the Letter of Transmittal and requests for Notices of Guaranteed Delivery should be directed to the Exchange Agent addressed as follows: By Registered or Certified Mail: Harris Trust and Savings Bank c/o Harris Trust Company of New York Wall Street Station P.O. Box 1010 New York, NY 10268-1010 Facsimile Transmission Number: (212) 701-7636 (212) 701-7637 By Hand/Overnight Delivery: Harris Trust and Savings Bank c/o Harris Trust Company of New York 77 Water Street, 5th Floor New York, NY 10005 FEES AND EXPENSES The expenses of soliciting tenders pursuant to the Exchange Offer will be borne by HC Crown. The principal solicitation for tenders pursuant to the Exchange Offer is being made by mail; however, additional solicitation may be made by telephone, facsimile or other electronic transmission or in person by officers and regular employees of the Issuer and their affiliates. The Issuer has not retained any dealer-manager in connection with the Exchange Offer and will not make any payments to brokers, dealers or others soliciting acceptances of the Exchange Offer. The Issuer, however, will pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith. HC Crown may also pay brokerage houses and other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding 37 copies of this Prospectus, Letters of Transmittal and related documents to the beneficial owners of the Old Notes and in handling or forwarding tenders for exchange. HC Crown will pay the other expenses to be incurred in connection with the Exchange Offer, including fees and expenses of the Trustee, accounting and legal fees and printing costs. HC Crown will pay all transfer taxes, if any, applicable to the exchange of Old Notes pursuant to the Exchange Offer. If, however, certificates representing New Notes or Old Notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be issued in the name of, any person other than the registered holder of Old Notes tendered, or if tendered Old Notes are registered in the name of any person other than the person signing the Letter of Transmittal, or if a transfer tax is imposed for any reason other than the exchange of Old Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES Generally, holders of Old Notes (other than any holder which is an "affiliate" of the Issuer or any of the Guarantors within the meaning of Rule 405 under the Securities Act) that exchange their Old Notes for New Notes pursuant to the Exchange Offer may offer such New Notes for resale, resell such New Notes, and otherwise transfer such New Notes without compliance with the registration and prospectus delivery provisions of the Securities Act, provided such New Notes are acquired in the ordinary course of the holders' business, and such holders have no arrangement with any person to participate in a distribution of such New Notes. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes, where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. See "Plan of Distribution." To comply with the securities laws of certain jurisdictions, it may be necessary to qualify for sale or register the New Notes prior to offering or selling such New Notes. Upon request by holders of Old Notes prior to the Exchange Offer, the Issuer will register or qualify the New Notes in certain jurisdictions subject to the conditions in the Letter Agreement. If a holder does not exchange such Old Notes for New Notes pursuant to the Exchange Offer, such Old Notes will continue to be subject to the restrictions on transfer contained in the legend thereon. In general the Old Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. To the extent that Old Notes are not tendered or are tendered but not accepted in the Exchange Offer, a holder's ability to sell untendered Old Notes could be adversely affected. ACCOUNTING TREATMENT The New Notes will be recorded at the same carrying value as the Old Notes, as reflected in the Issuer's accounting records on the date of the exchange. Accordingly, no gain or loss for accounting purposes will be recognized by the Issuer upon the consummation of the Exchange Offer. FEDERAL INCOME TAX CONSEQUENCES Under current Federal law, which is subject to retroactive change, the substitution of New Notes for Old Notes pursuant to the Exchange Offer should not be treated as a sale, exchange, disposition or other taxable event for the holders of the Old Notes for Federal income tax purposes. Holders should not recognize any taxable gain or loss or any interest income as a result of substituting New Notes for Old Notes pursuant to the Exchange Offer, and a holder should have the same adjusted tax basis and holding period in the New Notes as it had in the Old Notes immediately before the substitution and the New Notes should have the same issue price (and adjusted issue price immediately after the substitution) and the same amount of original issue discount, if any, as the Old Notes. Holders, however, are strongly urged to consult their own tax advisors regarding the consequences of the Exchange Offer, including the effect under Federal, state, local and any applicable foreign laws. For federal income tax consequences of ownership of the Notes generally, see "Certain Federal Income Tax Consequences." 38 THE COMPANY The Company's principal business is the ownership, operation and development of cable television systems. CCE-I owns, operates and develops cable television systems in the St. Louis, metropolitan area including southwestern Illinois and in certain rural and suburban areas in Connecticut and Massachusetts. As of December 31, 1996, the cable television systems owned by CCE-I passed approximately 533,600 homes and served approximately 338,300 basic subscribers in western and northeastern Connecticut, Massachusetts, eastern Missouri and southwestern Illinois. In addition, CCE-II owns, operates and develops cable television systems in metropolitan areas of southern California. The Company's operations are managed under the direction of Charter, a privately held owner and manager of cable television systems. As of December 31, 1996, Charter managed cable television systems which serve approximately 971,000 basic subscribers (including the Company's subscribers). Assuming completion of all publicly announced cable television industry transactions, management believes that Charter would be the 13th largest MSO in the United States based on number of basic subscribers. The Company seeks to own and operate cable television systems serving an increased number of basic subscribers in the Regions. The ten individuals principally responsible for the Company's operations (including Barry L. Babcock, Jerald L. Kent and Howard L. Wood, the co- founders of Charter) have more than 100 years of collective experience in the cable television industry. Messrs. Babcock, Kent and Wood formerly served as members of the senior management team of Cencom Cable Associates, Inc. ("Cencom"), which, during the nine-year period prior to its sale in 1991 to Crown Media, Inc. ("Crown Media"), purchased and developed cable television systems through acquisitions ("Cencom Systems"). See "Business--Business Strategy--Maximize Benefits Provided by Relationship with Charter." In addition, Kelso and certain other individuals have invested an aggregate of approximately $68.0 million in the Issuer. As a result of such investment, Kelso and such individuals own directly or indirectly 85% of the outstanding equity interests in the Issuer, with distributions on exit varying depending on the rates of return on the stockholders' equity investment in the Issuer. See "Risk Factors--Control of the Issuer and the Company by Kelso." The principal executive offices of the Issuer are located at 12444 Powerscourt Drive, Suite 400, St. Louis, Missouri 63131. Its telephone number is (314) 965-0555. 39 CAPITALIZATION The following table sets forth the consolidated unaudited capitalization of the Issuer as of December 31, 1996. This table should be read in conjunction with the audited and unaudited Financial Statements of the Issuer and the related Notes thereto included elsewhere in this Prospectus.
UNAUDITED AS OF DECEMBER 31, 1996 ------------------ ACTUAL ------------------ (IN MILLIONS) Debt: CCE-I Credit Facility................................... $468.0(a) Notes (including accrued interest)...................... 104.8 ------ Total debt............................................ 572.8 Equity: Total contributed capital............................... 80.0 Accumulated losses...................................... (80.4) ------ Total capitalization.................................... $572.4 ======
- -------- (a) As of December 31, 1996, $37.0 million was unused and available for borrowing, under the CCE-I Credit Facility. 40 UNAUDITED SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA The unaudited statements of operations, balance sheets, financial ratios and other data for the years ended December 31, 1995 and 1996, set forth below have been derived from the consolidated financial statements of CCA which have been audited by Arthur Andersen LLP. The unaudited combined statement of operations, financial ratios and other data for the year ended December 31, 1994, set forth below have been derived from the financial statements of Cencom Cable Entertainment, Inc.--Missouri System which have been audited by Arthur Andersen LLP, the financial statements of Crown Media, Inc.--Western Connecticut and Crown Cable, L.P. acquired from HC Crown (the "Crown Systems") which have been audited by KPMG Peat Marwick LLP, and represent CCA's predecessor. The unaudited combined statement of operations, financial ratios and other data for the year ended December 31, 1993, set forth below has been derived from the financial statements of Cencom Cable Entertainment, Inc.-- Missouri System, Crown Media, Inc.--Western Connecticut and Crown Cable, L.P., which have been audited by KPMG Peat Marwick LLP. The unaudited combined statement of operations, financial ratios and other data for the year ended December 31, 1992, set forth below have been derived from the unaudited financial statements of Cencom Cable Entertainment, Inc.--Missouri System and the unaudited financial statements of Tele-media Company of Northeastern Connecticut, L.P., the Housatonic CableVision Company, L.P., the New Milford CableVision Company and the Mid-Connecticut CableVision Company (which collectively represent the predecessor of the Crown Systems). The data set forth below should be read in conjunction with the historical financial statements, reports of the independent public accountants thereto and the other financial information included elsewhere in the Prospectus. The unaudited pro forma financial statements are based upon the historical financial statements of CCA, the Illinois Systems (prior to their acquisition by CCE-I) and the Masada Systems (prior to their acquisition by CCE-I). The unaudited pro forma balance sheet and pro forma statement of operations data has been derived from the audited and unaudited financial statements of operations included elsewhere in this Prospectus. The following unaudited pro forma statement of operations data for the year ended December 31, 1996 gives effect to the applicable pro forma adjustments, as if such pro forma adjustments had occurred on January 1, 1996. There are no pro forma adjustments reflected in the pro forma balance sheet data as all acquisitions were consummated prior to December 31, 1996. The historical acquisitions have been accounted for under the purchase method of accounting. The unaudited pro forma financial information may therefore not be indicative of the actual results of operations of CCA had the transactions been completed on the dates assumed, nor are such financial statements necessarily indicative of the results of operations of CCA that may exist in the future. The unaudited pro forma financial information should be read in conjunction with the historical financial statements and the related Notes thereto appearing elsewhere in this Prospectus. 41 CCA AND SUBSIDIARIES UNAUDITED SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA (NUMBERS IN THOUSANDS, EXCEPT FOR FINANCIAL RATIOS AND SUBSCRIBER DATA) (UNAUDITED)
PREDECESSOR OF CCA CCA --------------------------------- ------------------------------ YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, --------------------------------- ------------------------------ PRO FORMA (A) 1992 1993 1994 1995 1996 1996 -------- -------- --------- --------- -------- --------- STATEMENT OF OPERATIONS DATA: Revenues................ $ 81,557 $ 85,627 $ 87,623 $ 99,689 $143,023 $151,548 Operating Expenses: Operating, general and administrative......... 41,603 43,270 44,164 48,943 71,498 76,026 Management fees......... 2,617(b) 2,723(b) 2,781(b) 6,499 5,034 6,138(c) Depreciation and amortization........... 47,662 54,804 54,272 51,194 65,757 68,958 -------- -------- --------- --------- -------- -------- Total operating expenses............... 91,882 100,797 101,217 106,636 142,289 151,122 -------- -------- --------- --------- -------- -------- Operating Income (loss)................. (10,325) (15,170) (13,594) (6,947) 734 426 Interest expense........ (19,547) (12,051) (15,053) (35,461) (46,654) (50,132) Interest income......... 66 -- 20 504 164 223 Other income (expense).. 267 8 444 42 (1,058) (1,058) -------- -------- --------- --------- -------- -------- Loss before equity in loss of unconsolidated limited partnerships, provision for income taxes, loss from discontinued operation and minority interest in loss of subsidiary.. (29,539) (27,213) (28,183) (41,862) (46,814) (50,541) Equity in loss of unconsolidated limited partnerships........... -- -- -- (1,402) (6,303) (6,303) Provision for income taxes.................. -- -- -- -- -- -- Loss from discontinued operation.............. -- -- -- -- (1,516) -- Minority interest in loss of subsidiary..... -- -- -- 1,503 15,999 17,676 -------- -------- --------- --------- -------- -------- Net loss................ $(29,539) $(27,213) $ (28,183) $ (41,761) $(38,634) $(39,168) ======== ======== ========= ========= ======== ======== Ratio of earnings to fixed charges (d)...... -- -- -- -- -- -- BALANCE SHEET DATA (AT END OF PERIOD): Total assets............ $ 666,139 $744,080 $744,080 Deferred taxes.......... 55,500 55,500 55,500 Total debt (including current maturities).... 447,439 572,843 572,843 Shareholders' investment (deficit).............. 38,239 (395) (395) FINANCIAL RATIOS AND OTHER DATA: EBITDA (e).............. $ 39,954 $ 42,357 $ 43,459 $ 50,746 $ 71,525 $ 75,522 EBITDA margin (f)....... 49.0% 49.5% 49.6% 50.9% 50.0% 49.8% Capital expenditures (g).................... $ 13,375 $ 19,128 $ 24,513 $ 22,024 $ 33,898 35,461 Total debt to EBITDA.... 8.8x 8.0x 7.6x EBITDA to interest expense................ 1.4x 1.5x 1.5x OPERATING STATISTICAL DATA (AT END OF PERIOD, EXCEPT AVERAGES): Homes passed............ 339,142 344,418 350,404 413,930 533,563 533,563 Basic subscribers....... 185,767 196,087 206,948 266,119 338,284 338,284 Basic penetration....... 54.8% 56.9% 59.1% 64.3% 63.4% 63.4% Premium service units... 125,745 126,396 145,967 173,172 194,602 194,602 Premium penetration..... 67.7% 64.5% 70.5% 65.1% 57.5% 57.5% Average monthly revenue per basic subscriber (h).................... $ 36.59 $ 36.39 $ 35.28 $ 36.89 $ 38.20 37.33
42 - -------- (a) The pro forma statement of operations data assumes the consummation of the Illinois Acquisition and the Masada Acquisition as if the applicable transactions had occurred on January 1, 1996. There are no pro forma adjustments reflected in the pro forma balance sheet data as all acquisitions were consummated prior to December 31, 1996. (b) Represents combined management fees for the Crown systems during periods prior to their acquisition by CCA for those systems which paid management fees. These fees are not necessarily indicative of the management fees that would have been charged had the Crown systems been operated by CCA or that may be expected for any future periods. (c) CCE-I pays annual management and financial advisory fees to Charter and Kelso & Company equal to certain specified contractual amounts set forth in the management and financial advisory agreements executed with Charter and Kelso & Company, such amounts increase upon the acquisition of additional cable television systems and decrease with the disposition of any cable television systems. As of December 31, 1996, CCE-I pays Charter $4,845,000 annually and Kelso & Company $552,500 annually based upon the current contracts. In addition, the management agreement with Charter provides for an annual bonus equal to 30% of the excess, if any, of operating cash flow (as defined in the management agreement) over the projected operating cash flow for the year; however, payment of such bonuses is deferred until termination of the CCE-I Credit Facility. The accrued but unpaid bonus as of December 31, 1996 was $1,755,000 of which $740,000 was recorded during 1996. See "Certain Relationships and Related Transactions" and "Description of Notes." (d) The combined earnings of the Crown Systems were inadequate to cover fixed charges by $29.5 million, $27.2 million and $28.2 million for the years ended December 31, 1992, 1993 and 1994, respectively. The earnings of CCA's systems were inadequate to cover fixed charges by $41.8 million and $38.6 million for the years ended December 31, 1995 and 1996, respectively. (e) EBITDA represents income (loss) before interest expense, interest income, income taxes, depreciation and amortization, management fees, other income (expense), equity in loss of unconsolidated limited partnerships, loss from discontinued operation and minority interest in loss of subsidiary. Management believes EBITDA is a meaningful measure of performance because it is commonly used in the cable television industry to analyze and compare cable television companies on the basis of operating performance, leverage and liquidity. EBITDA is not presented in accordance with generally accepted accounting principles and should not be considered an alternative to, or more meaningful than, operating income or operating cash flows as an indicator of CCA's operating performance. EBITDA does not include CCA's debt obligations or significant commitments. (f) Represents EBITDA as a percent of revenues. (g) Capital expenditures exclude cash consideration paid in connection with the acquisition of cable systems. (h) Revenues divided by basic subscribers divided by 12 months. 43 UNAUDITED PRO FORMA FINANCIAL STATEMENTS The following unaudited pro forma financial statements are based upon the historical financial statements of CCA, the Illinois Systems (prior to their acquisition by CCE-I), and the Masada Systems (prior to their acquisition by CCE-I). The following unaudited pro forma statement of operations data for the year ended December 31, 1996, gives effect to the applicable pro forma adjustments, as if such pro forma adjustments had occurred on January 1, 1996. There are no pro forma adjustments reflected in the pro forma balance sheet data as all acquisitions were consummated prior to December 31, 1996. The acquisitions of the Illinois Systems and the Masada Systems have been accounted for under the purchase method of accounting. The unaudited pro forma financial statements may not be indicative of what the results of CCA would have been had the transactions been completed on the dates assumed, nor are such financial statements necessarily indicative of the results of operations of CCA that may exist in the future. The unaudited pro forma financial statements should be read in conjunction with the Notes thereto and with the historical financial statements and the related Notes thereto appearing elsewhere in this Prospectus. 44 CCA AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENT DATA (FOR THE YEAR ENDED AND AS OF DECEMBER 31, 1996) (NUMBERS IN THOUSANDS, EXCEPT FOR FINANCIAL RATIOS AND SUBSCRIBER DATA)
HISTORICAL PRO FORMA HISTORICAL HISTORICAL PRO FORMA HISTORICAL CCA ACQUISITIONS COMBINED ADJUSTMENTS ACQUISITIONS -------- ------------ ---------- ----------- ------------ STATEMENT OF OPERATIONS DATA: Revenues................ $143,023 $8,525 (a) $151,548 $ -- $151,548 Operating Expenses: Operating, general and administrative........ 71,498 4,528 (a) 76,026 -- 76,026 Management fees........ 5,034 503 (a) 5,537 601(b) 6,138 Depreciation and amortization.......... 65,757 3,629 (a) 69,386 (428)(c) 68,958 -------- ------ -------- ------ -------- Total operating expenses............. 142,289 8,660 150,949 173 151,122 -------- ------ -------- ------ -------- Operating Income (loss)................. 734 (135)(a) 599 (173) 426 Interest expense....... (46,654) (1,610)(a) (48,264) (1,868) (50,132) Interest income........ 164 59 (a) 223 -- 223 Other income (expense)............. (1,058) -- (1,058) -- (1,058) -------- ------ -------- ------ -------- Loss before equity in loss of unconsolidated limited partnerships, provision for income taxes, loss from dis- continued operation and minority interest in loss of subsidiary..... (46,814) (1,686) (48,500) (2,041) (50,541) Equity in loss of unconsolidated limited partnerships.......... (6,303) -- (6,303) -- (6,303) Provision for income taxes................. -- -- -- -- -- Loss from discontinued operation............. (1,516) 1,516 (i) -- -- -- Minority interest in loss of subsidiary.... 15,999 -- 15,999 1,677(j) 17,676 -------- ------ -------- ------ -------- Net loss................ $(38,634) $ (170) $(38,804) $ (364) $(39,168) ======== ====== ======== ====== ======== BALANCE SHEET (AT END OF PERIOD): Cash and cash equiva- lents.................. $ 2,935 $ 2,935 $ 2,935 Receivables, net........ 5,466 5,466 5,466 Systems and equipment, net.................... 206,351 206,351 206,351 Franchise costs, net.... 439,232 439,232 439,232 Other assets............ 10,158 10,158 10,158 Investment in unconsoli- dated limited partner- ships.................. 78,070 78,070 78,070 Net assets of discontin- ued operation.......... 1,869 1,869 1,869 -------- -------- -------- Total assets.......... $744,081 $744,081 $744,081 ======== ======== ======== Accounts payable and ac- crued expenses......... $ 24,678 $ 24,678 $ 24,678 Subscriber deposits and deferred revenue....... 1,182 1,182 1,182 Deferred taxes.......... 55,500 55,500 55,500 Total debt, including current maturities of $5,880................. 572,843 572,843 572,843 Minority interest in subsidiary............. 90,273 90,273 90,273 -------- -------- -------- Total liabilities..... 744,476 744,476 744,476 Shareholders' investment (deficit).............. (395) (395) (395) -------- -------- -------- Total liabilities and shareholders' invest- ment (deficit)......... $744,081 $744,081 $744,081 ======== ======== ======== FINANCIAL RATIOS AND OTHER DATA: EBITDA (e)............. $ 71,525 3,997 $ 75,522 $ 75,522 EBITDA margin (f)...... 50.0% 46.9% 49.8% 49.8% Capital expenditures (g)................... $ 33,898 $1,563 $ 35,461 $ 35,461 OPERATING STATISTICAL DATA (AT END OF PERIOD, EXCEPT AVERAGES): Homes passed............ 533,563 533,563 533,563 Basic subscribers....... 338,284 338,284 338,284 Basic penetration....... 63.4% 63.4% 63.4% Premium units........... 194,602 194,602 194,602 Premium penetration..... 57.5% 57.5% 57.5% Monthly revenue per ba- sic subscriber(h)...... $ 38.20 $32.52 $ 37.33 $ 37.33
45 NOTES TO THE UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS (FOR THE YEAR ENDED AND AS OF DECEMBER 31, 1996) (NUMBERS IN THOUSANDS) (a) Amounts reflect the historical 1996 results for the following systems which were acquired during 1996. Certain reclassifications have been made between operating, general and administrative expenses to conform the presentation to that of CCA.
MASADA SYSTEMS ILLINOIS SYSTEMS 1/1/96- 1/1/96-3/28/96 11/29/96 TOTAL ---------------- -------------- -------- Revenues............................. $4,190 $ 4,335 $8,525 Operating expenses: Operating, general and administrative.................... 2,133 2,395 4,528 Management fees.................... 210 293 503 Depreciation and amortization...... 1,010 2,619 3,629 ------ ------- -------- Total operating expenses......... 3,353 5,307 8,660 ------ ------- -------- Operating income..................... 837 (972) (135) Interest expense................... (516) (1,094) (1,610) Interest income.................... 13 46 59 ------ ------- -------- Net income........................... $ 334 $(2,020) $ (1,686) ====== ======= ========
(b) To eliminate the historical management fees expense and to record for the year ended December 31, 1996 management fee expense pursuant to CCE-I's management agreement. (c) To eliminate the historical depreciation and amortization expense and to record for the year ended December 31, 1996 depreciation and amortization expense based upon the allocation of purchase price to various categories of systems equipment and franchises and depreciated using methods and terms consistent with those utilized by CCE-I. The franchise costs are being amortized over 15 years. (d) To eliminate historical interest expense and to record for the year ended December 31, 1996 interest expense based upon CCE-I's pro forma borrowings under the CCE-I Credit Facility assuming an average interest rate of 8.05%. Also, includes amortization of all deferred debt issuance costs. (e) EBITDA represents income (loss) before interest expense, interest income, income taxes, depreciation and amortization, management fees, other income (expense), equity in loss of unconsolidated limited partnerships, loss from discontinued operation and minority interest in loss of subsidiary. EBITDA is calculated before payment of management fees so as to be consistent with certain financial terms contained in the CCE-I Credit Facility. Management believes that EBITDA is a meaningful measure of performance because it is commonly used in the cable television industry to analyze and compare cable television companies on the basis of operating performance, leverage and liquidity. EBITDA is not presented in accordance with generally accepted accounting principles and should not be considered an alternative to, or more meaningful than, operating income or operating distributions as an indicator of the CCE-I's operating performance. EBITDA does not include CCE-I's debt obligations or other significant commitments. (f) Represents EBITDA as a percent of revenues. (g) Capital expenditures exclude cash consideration paid in connection with the acquisition of cable television systems. (h) Revenues divided by basic subscribers divided by 12 months. (i) To eliminate the loss from discontinued operation. (j) To record minority interest (45%) in the Illinois Systems (January 1, 1996 to March 28, 1996) and the Masada Systems (January 1, 1996 to November 29, 1996). 46 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION The Company has operated cable television systems for a limited period of time and had no operations prior to January 1995. The Company acquired (i) the Crown Systems as of January 1, 1995 for aggregate consideration of approximately $488.2 million, (ii) the UVC Systems on October 30, 1995 for approximately $96.0 million and (iii) the Illinois Systems on March 29, 1996 for approximately $82.0 million (iv) the Masada Systems on November 29, 1996 for approximately $23.7 million (the Crown Systems, the UVC Systems, the Illinois Systems and the Masada Systems are sometimes referred to herein as the "CCE-I Systems"). The following discussion of results of operations for the years ended December 31, 1994, 1995 and 1996 is based on the historical results of operations of CCA and the Crown Systems. Since the Crown Systems were not acquired until 1995, the financial information contained herein with respect to periods prior to this acquisition does not reflect any changes in the operation or management of these systems that CCA has made since the date of such acquisition or that it intends to make in the future; thus, this financial information is not necessarily indicative of the results of operation that would have been achieved had the systems been operated by CCA during all of the periods with respect to which financial information is presented herein or which may be achieved in the future. Information relating to the payment of management fees, programming costs and other similar matters for years prior to the acquisition by CCA of the systems discussed herein is not comparable to the discussion of such matters after such systems have been fully integrated with the CCE-I Systems. See "Business--Description of the Systems" for a description of the CCE-I Systems. OVERVIEW The CCE-I Systems generate substantially all of their revenues from monthly customer fees for basic tier, expanded basic tier, premium and other cable television services (such as the rental of converters and remote control devices and installation charges). Additional revenues are generated from pay- per-view programming and the sale of advertising and commissions from home shopping networks. The CCE-I Systems have generated increases in revenues in each of 1994, 1995 and 1996. This growth was accomplished primarily through internal subscriber growth and the UVC Acquisition in 1995, the Illinois Acquisition and Masada Acquisition in 1996, which offset the adverse effects of FCC-required rate rollbacks in certain systems, that became effective in September 1993. Systems operating, general and administrative expenses have increased during such three year period due to increased customer growth and expenses related to implementing rate regulation (pursuant to the 1992 Cable Act and the FCC's regulations promulgated thereunder). In particular, programming costs, which comprise a substantial portion of systems operating expenses, have increased both in dollars and as a percentage of revenues for the past three years. This increase is due to several factors, including subscriber growth, the provision of additional channels to customers, the expiration of certain programming agreements with favorable terms, which were assigned to CCE-I in the Crown Transaction and industry-wide increases in costs to purchase cable programming. While CCE-I's retention of Charter as manager of the CCE-I Systems is expected to result in better control over programming costs, there can be no assurance that this result will be achieved. Furthermore, management believes it will be able, under the FCC's existing cable rate regulations, to increase its rates for cable services to offset increases in the costs of programming. The high level of depreciation and amortization associated with the acquisitions and capital expenditures related to continued construction, upgrade and expansion of the CCE-I Systems, together with interest costs related to CCE-I's financing activities, have caused the CCE-I Systems to report net losses. CCE-I believes that such net losses are common for cable television companies and that such net losses will continue for the foreseeable future. EBITDA (as defined herein), which is a common industry measure of performance, has been between 49.6% and 50.9% of revenues during the years ended December 31, 1994, 1995 and 1996. CCE-I pays annual management and financial advisory fees to Charter and Kelso & Company equal to certain specified amounts set forth in the management and financial advisory agreements executed with Charter and Kelso & Company; such amounts increase upon the acquisition of additional cable television systems and 47 decrease with the disposition of any cable television systems. As of December 31, 1996, CCE-I pays Charter $4,845,000 annually and Kelso & Company $552,500 annually. In addition, the management agreement with Charter provides for an annual bonus equal to 30% of the excess, if any, of operating cash flow (as defined in the management agreement) over the projected operating cash flow for the year; however, payment of such bonuses is deferred until termination of the CCE-I Credit Facility. The accrued but unpaid bonus as of December 31, 1996 was $1,755,000, of which $740,000 was recorded during 1996. See "Certain Relationships and Related Transactions" and "Description of Notes." 48
PREDECESSOR OF CCA CCA ------------------ --------------------------------------- YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, ------------------ --------------------------------------- 1994 1995 1996 ------------------ ------------------ -------------------- % OF % OF % OF AMOUNT REVENUES AMOUNT REVENUES AMOUNT REVENUES -------- -------- -------- -------- -------- -------- STATEMENT OF OPERATIONS DATA: Revenues................ $ 87,623 100.0% $ 99,689 100.0% $143,023 100.0% Operating Expenses: Operating, general and administrative........ 44,164 50.4% 48,943 49.1% 71,498 50.0% Management fees(a)..... 2,781 3.2% 6,499 6.5% 5,034 3.5% Depreciation and amortization.......... 54,272 61.9% 51,194 51.4% 65,757 46.0% -------- ------ -------- ------ -------- ----- Total operating expense.............. 101,217 115.5% 106,636 107.0% 142,289 99.5% -------- ------ -------- ------ -------- ----- Operating Income (loss)................. (13,594) (15.5%) (6,947) (7.0%) 734 0.5% Interest expense....... (15,053) (17.2%) (35,461) (35.6%) (46,654) (32.6%) Interest income........ 20 0.0% 504 0.5% 164 0.1% Other income (expense)............. 444 0.5% 42 0.0% (1,058) (0.7%) -------- ------ -------- ------ -------- ----- Loss before equity in loss of unconsolidated limited partnerships, provision for income taxes, loss from discontinued operation and minority interest in loss of subsidiary.. (28,183) (32.2%) (41,862) (42.0%) $(46,814) (32.7%) Equity in loss from unconsolidated limited partnerships.......... -- -- (1,402) (1.4%) (6,303) (4.4%) Provision for income taxes................. -- -- -- -- -- -- Loss from discontinued operation............. -- -- -- -- (1,516) (1.1%) Minority interest in loss of subsidiary.... -- -- 1,503 1.5% 15,999 11.2% -------- ------ -------- ------ -------- ----- Net loss................ $(28,183) (32.2%) $(41,761) (41.9%) $(38,634) (27.0%) ======== ====== ======== ====== ======== ===== EBITDA(b)............... $ 43,459 49.6% $ 50,746 50.9% $ 71,525(d) 50.0%(d)
- -------- (a) Represents combined management fees paid by the Crown Systems during periods prior to the acquisition of the systems by CCA for those systems which paid management fees. These fees are not necessarily indicative of the management fees that would have been charged had the Systems been operated by CCA and that may be expected for any future periods. CCE-I pays annual management and financial advisory fees to Charter and Kelso & Company equal to certain specified contractual amounts set forth in the management agreements executed with Charter and Kelso & Company; such amounts increase upon the acquisition of additional cable television systems and decrease with the disposition of any cable television systems. As of December 31, 1996, CCE-I pays Charter $4,845,000 annually and Kelso & Company $552,500 annually based upon the current contracts. In addition, the management agreement with Charter provides for an annual bonus equal to 30% of the excess, if any, of operating cash flow (as defined in the management agreement) over the projected operating cash flow for the year; however, payment of such bonuses is deferred until termination of the applicable CCE-I Credit Facility. The accrued but unpaid bonus as of December 31, 1996 was $1,775,000, of which $740,000 was recorded during 1996. See "Certain Relationships and Related Transactions" and "Description of Notes." (b) EBITDA represents income (loss) before interest expense, interest income, income taxes, depreciation and amortization, management fees, other income (expense), equity in loss of unconsolidated limited partnerships, loss from discontinued operation and minority interest in loss of subsidiary. Management believes EBITDA is a meaningful measure of performance because it is commonly used in the cable television industry to analyze and compare cable television companies on the basis of operating performance, leverage and liquidity. EBITDA is not presented in accordance with generally accepted accounting principles and should not be considered an alternative to, or more meaningful than, operating income or operating cash flows as an indicator of CCA's operating performance. EBITDA does not include CCA's debt obligations or significant commitments. 49 FISCAL 1996 TO FISCAL 1995 Revenues. Revenues increased by $43.3 million, or approximately 43.4%, from $99.7 million in fiscal 1995 to $143.0 million in fiscal 1996. Average monthly revenue per basic subscriber increased 3.6% from $36.89 in fiscal 1995 to $38.20 in fiscal 1996. Homes passed increased 28.9%, from 413,930 at December 31, 1995 to 533,563 at December 31, 1996. There was a significant increase in homes passed resulting from the acquisitions of the Illinois Systems in March 1996 and the Masada Systems in November 1996. Basic service subscribers increased 27.1%, from 266,119 at December 31, 1995 to 338,284 at December 31, 1996. The basic penetration rate decreased from 64.3% in fiscal 1995 to 63.4% in fiscal 1996, as a result of an increase in the number of homes passed without an equivalent increase in the number of basic subscribers. Revenues of the Crown Systems, excluding the activity of any other systems acquired during the periods, increased by $10.5 million, or approximately 10.9%, from $96.6 million in fiscal 1995 to $107.1 million in fiscal 1996. Operating, general and administrative expenses. Operating, general and administrative expenses increased by $22.6 million, or approximately 46.2%, from $48.9 million in fiscal 1995 to $71.5 million in fiscal 1996. These increases were due to a combination of factors, including a 27.1% increase in basic subscribers from December 31, 1995 to December 31, 1996, additional costs associated with the purchase of programming on the new channels offered to customers, industry-wide increases in programming rates charged by certain vendors, and the acquisitions of the UVC Systems in October 1995, the Illinois Systems in March 1996 and the Masada Systems in November 1996. Management fees. Management fees decreased by $1.5 million, or approximately 23.1%, from $6.5 million in fiscal 1995 to $5.0 million in fiscal 1996, representing a decrease, as a percentage of revenues, from 6.5% in fiscal 1995 to 3.5% in fiscal 1996. Depreciation and amortization. Depreciation and amortization expense increased by $14.6 million, or 28.5%, from $51.2 million in fiscal 1995 to $65.8 million in fiscal 1996. There was a significant increase in amortization resulting from the acquisitions of the UVC Systems in October 1995 the Illinois Systems in March 1996 and the Masada Systems in November 1996. In connection with such acquisitions, the acquired franchises were recorded at fair market value which resulted in a stepped-up basis upon acquisition. In addition, the increase in depreciation and amortization expense occurred as a result of the amortization of certain acquisition-related costs such as legal, accounting and due diligence expenses and deferred debt costs. Interest expense. Interest expense increased by $11.2 million, or approximately 31.5%, from $35.5 million in fiscal 1995 to $46.7 million in fiscal 1996. This increase resulted primarily from the additional indebtedness incurred in connection with the acquisitions of the UVC Systems in October 1995, the Illinois Systems in March 1996 and the Masada Systems in November 1996. Discontinued Operations. The Company acquired and began operating a radio station in April 1996. The revenues generated by the radio operation from April 1996 to December 31, 1996 were approximately $1.5 million. The net loss related to this operation during the same period of time was approximately $1.5 million and is classified as a discontinued operation. Subsequent to year-end, the Company entered into an agreement to sell the radio operation. Net Loss. Net loss decreased by approximately $3.2 million from approximately $41.8 million in fiscal 1995 to approximately $38.6 million in fiscal 1996. Significant increases in operating expenses and interest expense were offset by increased revenues and an allocation of CCE-I's loss to a minority interest holder in CCE-I. 50 The increase in revenues that resulted from cable television subscriber growth was not sufficient to offset the significant costs related to the acquisitions of the UVC Systems in October 1995, the Illinois Systems in March 1996, and the Masada Systems in November 1996, such acquisitions caused a substantial increase in interest expense due to increased borrowings. EBITDA. EBITDA increased by $20.8 million, or approximately 41.0%, from $50.7 million in fiscal 1995 to $71.5 million in fiscal 1996, due to an increase in revenues which was offset by an increase in systems operating expenses. EBITDA, as a percentage of revenues, decreased slightly from 50.9% in fiscal 1995 to 50.0% in fiscal 1996. Management believes that EBITDA is a meaningful measure of performance because it is commonly used in the cable television industry to analyze and compare cable television companies on the basis of operating performance, leverage and liquidity. EBITDA does not include debt obligations or other significant commitments. FISCAL 1995 COMPARED TO FISCAL 1994 Revenues. Revenues increased by $12.1 million, or approximately 13.8%, from $87.6 million in fiscal 1994 to $99.7 million in fiscal 1995. Average monthly revenue per basic subscriber increased from $35.28 in fiscal 1994 to $36.89, or 4.6%, in fiscal 1995. Homes passed increased 18.1% from 350,404 at December 31, 1994 to 413,930 at December 31, 1995. Basic service subscribers increased 28.6%, from 206,948 at December 31, 1994 to 266,119 at December 31, 1995. The basic penetration rate increased by 5.2% from fiscal 1994 to fiscal 1995 from 59.1% to 64.3%. There was an increase in revenues resulting from the acquisition of the UVC Systems on October 31, 1995. Revenue growth during 1994 and 1995 was limited by rate rollbacks of up to 17.0% beginning in July 1994 experienced by certain of the CCA Systems (such rate rollbacks have remained in effect throughout 1995, and have therefore had a more significant effect on revenue growth in 1995 than 1994). In fiscal 1994 and 1995, however, there were limited instances of rate increases representing a pass-through of certain external costs (such as copyright, programming and franchise fees). Revenues of the Crown Systems, excluding the activity of any other systems acquired during the periods, increased by $9.0 million, or approximately 10.3%, from $87.6 million in fiscal 1994 to $96.6 million in fiscal 1995. Operating, general and administrative expenses. Operating, general and administrative expenses increased by $4.7 million, or approximately 10.6%, from $44.2 million in fiscal 1994 to $48.9 million in fiscal 1995, and the expenses, as a percentage of revenues, decreased from 50.4% in fiscal 1994 to 49.1% in fiscal 1995. CCA experienced added costs relating to the UVC Acquisition on October 31, 1995. Management fees. Management fees increased by $3.7 million, or approximately 132.1%, from $2.8 million in fiscal 1994 to $6.5 million in fiscal 1995, representing an increase, as a percentage of revenues, from 3.2% in fiscal 1994 to 6.5% for fiscal 1995. Prior to their acquisition by CCA, the predecessor paid management fees to Crown. Depreciation and amortization. Depreciation and amortization expense decreased by $3.1 million, or approximately 5.7%, from $54.3 million in fiscal 1994 to $51.2 million in fiscal 1995. There was a decrease in amortization due to the Crown Transaction and the amortization policy used by CCE-I. Interest expense. Interest expense increased by $20.4 million, or approximately 135.1%, from $15.1 million in fiscal 1994 to $35.5 million in fiscal 1995. This increase resulted primarily from the additional indebtedness incurred in connection with the Crown Transaction and the UVC Transaction in fiscal 1995. Other Income. The Crown Systems generated other income of approximately $0.4 million in fiscal 1994 as compared to approximately $42,000 in fiscal 1995. The 1994 income was due primarily to the settlement of a lawsuit related to the Crown Missouri Systems. The income represents the reversal of accruals established in prior years related to such litigation. Net loss. Net loss increased by $13.6 million, or approximately 48.2%, from $28.2 million in fiscal 1994 to $41.8 million in fiscal 1995. This increase resulted primarily from an increase in interest expense due to increased borrowing. In addition, the net loss was decreased during fiscal 1995 as approximately $1.5 million of 51 CCE-I's loss was allocated to a minority interest holder in CCE-I. This amount was offset by an increase in net loss related to the loss incurred by an unconsolidated limited partnership of which CCA was allocated approximately $1.4 million of the loss. The loss prior to these allocations increased by $13.7 million, or approximately 48.6%, from $28.2 million in fiscal 1994 to $41.9 million in fiscal 1995. EBITDA. EBITDA increased by $7.2 million, or approximately 16.6%, from $43.5 million in fiscal 1994 to $50.7 million in fiscal 1995, due to an increase in revenues which was partially offset by an increase in systems operation expenses. EBITDA, as a percentage of revenues, increased slightly from 49.6% in fiscal 1994 to 50.9% in fiscal 1995. Management believes that EBITDA is a meaningful measure of performance because it is commonly used in the cable television industry to analyze and compare cable television companies on the basis of operating performance, leverage and liquidity. LIQUIDITY AND CAPITAL RESOURCES The cable television business has substantial ongoing capital requirements for construction, expansion and maintenance of plant. Historically, the Company has been able to meet its capital requirements through its operating cash flow, equity contributions and available borrowings. Subject to the availability of sufficient financing, the Company intends to continue the pursuit of a business strategy which includes selective strategic acquisitions. The CCE-I Credit Facility was increased by $85.0 million in 1996 in connection with the UVC Acquisition and by $120.0 million in 1996 in connection with the Illinois and Masada Acquisitions. As of December 31, 1996, CCE-I had an aggregate of approximately $468.0 million of indebtedness outstanding (and $37.0 million unused and available for borrowing) under the CCE-I Credit Facility. See "Description of Other Indebtedness." The historical cash flow provided by operating activities for CCA and the Crown Systems prior to their acquisition by CCE-I totaled approximately $27.1 million and $37.0 million for the years ended December 31, 1995 and 1996, respectively. Distributions provided by operating activities together with third party borrowings have been historically sufficient to fund CCE-I's debt service, capital expenditures and working capital requirements. Future distributions provided by operating activities and availability for borrowings under the CCE-I Credit Facility are anticipated to be sufficient, during the next 12 months, to meet CCE-I's ongoing debt service, capital expenditures and working capital needs. The Company anticipates that future acquisitions could be financed through borrowings, either presently available under the CCE-I Credit Facility or as a result of amending the CCE-I Credit Facility to allow for expanded borrowing capacity. Although to date, the Company has been able to obtain financing on satisfactory terms, there can be no assurance that this will continue to be the case in the future. CCE-I manages risk arising from fluctuations in interest rates through the use of interest rate swap and cap agreements required under the terms of the CCE-I Credit Facility. Interest rate swap and cap agreements are accounted for by CCE-I as a hedge of the related debt obligation. As a result, the net settlement amount of any such swap or cap agreement is recorded as an adjustment to interest expense in the period incurred. The effects of CCE-I's hedging practices on its weighted average borrowing rate and on reported interest expense were not material for the years ended December 31, 1996 and 1995. CCE-I has insurance covering risks incurred in the ordinary course of business, including general liability, property and business interruption coverage. As is typical in the cable television industry, CCE-I does not maintain insurance covering its underground plant, the cost of which management believes is currently 52 prohibitive. Management believes that CCE-I's insurance coverage is adequate and intends to monitor the insurance markets to attempt to obtain coverage for CCE-I underground plants at reasonable and cost-effective rates. Capital Expenditures The capital expenditures for CCE-I and the previous owner of the Crown Systems (excluding acquisition costs of systems) totaled approximately $24.5 million, $22.0 million and $33.9 million for the years ended December 31, 1994, 1995 and 1996, respectively. These expenditures were primarily for expansion and rebuild of cable plant and rewiring of associated headend equipment, converters, office expansion and relocation, upgrade and replacement of service vehicles, and routine maintenance and replacement of cable plant and related equipment. These capital expenditures were financed through a variety of sources which included (i) amounts available under credit facilities and (ii) distributions from operations. Capital expenditures in the future will include maintenance capital expenditures, expansion of the cable plant, converters, rewiring of associated electronic equipment, land and building renovation costs, new vehicles, test equipment and computer equipment. The remaining capital items will include capitalized labor and capital expenditures required to add new subscribers and to upgrade plant. CCE-I expects to finance the anticipated capital expenditures with distributions generated from operations and additional borrowings under the CCE-I Credit Facility. The Credit Facilities As of December 31, 1996, CCE-I had an aggregate of approximately $468.0 million of indebtedness outstanding ($37.0 million unused and available for borrowing) under the CCE-I Credit Facility. The CCE-I Credit Facility requires CCE-I to purchase and maintain interest rate protection on at least 50% of the outstanding principal under the CCE-I Credit Facility, so that the weighted average interest rate protection is not less than 18 months at all dates of determination. CCE-I may enter into interest cap agreements to satisfy this requirement, provided that the interest rate related thereto shall not exceed by 2% per annum the United States Treasury rate in effect on the date of the agreement for the applicable hedge period. For additional information on the terms of the CCE-I Credit Facility, see the historical financial statements and the notes thereto included elsewhere herein. CCE-I intends to utilize the CCE-I Credit Facility as it presently exists or as amended in the future to fund capital expenditures and working capital, to acquire additional cable systems and for related strategic acquisitions and for general corporate purposes. See "Business--Business Strategy." CCE-I expects that it will be able, during the next 12 months, to meet its debt service, working capital and capital expenditure requirements through its operating distributions and borrowings under the CCE-I Credit Facility. See "Description of Other Indebtedness." In addition to the CCE-I Credit Facility, CCA holds an indirect 55% unconsolidated limited partnership interest in CCE-II, which maintains its own credit facility, the CCE-II Credit Facility. As of December 31, 1996, CCE-II had an aggregate of approximately $194.0 million of indebtedness outstanding (and $41.0 million unused and available for borrowing) under the CCE-II Credit Facility. The Indenture does not contain any restriction on the ability of any subsidiary of CCE, L.P. to incur indebtedness (other than CCE-I and its Restricted Subsidiaries (as defined in the Indenture)) or the ability of CCE- II to incur additional indebtedness, including pursuant to a currently contemplated investment in which CCE-II and LBAC, which will become an affiliate of the Issuer and CCE-II, will become jointly and severally liable under the CCE-II Credit Facility, which will be increased by $140.0 million upon consummation of the Long Beach Investment. See "Description of the Systems--Pending Investment by CCE-II." It is anticipated that CCE-II will draw down $25.0 million under the CCE-II Credit Facility in order to make an investment in LBAC, which will own the Long Beach Systems. This investment will be in the form of an equity interest representing, or a loan convertible into, 27.5% of the stock of LBAC. See "Description of Other Indebtedness-- Charter Communications Entertainment II, L.P." 53 THE FOLLOWING DATA HAS NOT BEEN PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND DOES NOT COMPLY WITH ARTICLE 11 OF REGULATION S-X SUPPLEMENTAL SELECTED HISTORICAL COMBINED FINANCIAL DATA The supplemental table set forth below has not been prepared in accordance with generally accepted accounting principles or Article 11 of Regulation S-X. Since the acquisitions (depicted below) did not meet the specified criteria to be accounted for under the pooling-of-interests method, the reported operations of the acquired systems should not be combined and restated as operations of CCE-I. However, such data is included for the purpose of providing supplemental information to assist investors. For financial reporting purposes, CCE-I had no operations prior to its acquisition of the Crown Systems effective January 1995. The combined historical results of operations, balance sheet, selected financial ratios and operating statistical data set forth below (which have been derived by combining historical results of operations of systems acquired by CCE-I during 1995 and 1996, and which therefore reflect results of periods prior to CCE-I's management of such systems) do not purport to represent what CCE-I's actual results of operations would have been had the system been owned by CCE-I throughout the periods indicated. The combined historical results include the operations of the Systems prior to their acquisition by CCE-I. The unaudited combined statement of operations data for the year ended December 31, 1994 set forth below have been derived from the unaudited financial statements of the Crown Missouri Systems, Crown Connecticut Systems, the UVC Systems, the Illinois Systems and the Masada Systems. The unaudited combined statement of operations data for the year ended December 31, 1995 have been derived from the unaudited financial statements of CCE-I for the year ended December 31, 1995, the UVC Systems for the 10 months ended October 31, 1995, the Illinois Systems and the Masada Systems for the year ended December 31, 1995. The unaudited combined statement of operations data for the year ended December 31, 1996 have been derived from the unaudited financial statements of CCE-I for the year ended December 31, 1996, the Illinois Systems for the period ended March 29, 1996 and the Masada Systems for the period ended November 29, 1996. The unaudited balance sheet data as of December 31, 1996 set forth below have been derived from the unaudited financial statements of CCE-I. The data should be read in conjunction with the historical financial statements and notes related thereto, the reports of independent auditors, and the other financial information included elsewhere in this Prospectus. 54 CCE-I SUPPLEMENTAL SCHEDULE (NUMBERS IN THOUSANDS, EXCEPT FINANCIAL RATIOS AND SUBSCRIBER DATA)
COMBINED HISTORICAL -------------------------------- YEAR ENDED DECEMBER 31, -------------------------------- 1994 1995 1996 -------- -------- -------- (DOLLARS IN THOUSANDS, EXCEPT PER SUBSCRIBER DATA) UNAUDITED STATEMENT OF OPERATIONS DATA: Revenues................................... $124,344 $135,409 $151,548 Operating Expenses: Operating, general and administrative..... 62,994 66,639 75,653 Management fees........................... 4,184(a) 8,126(a) 5,537(a) Depreciation and amortization............. 66,482 61,494 69,386 -------- -------- -------- Total operating expenses.................. 133,660 136,259 150,576 -------- -------- -------- Operating Income (loss).................... (9,316) (850) 972 Interest expense.......................... (21,764) (32,256) (35,860) Interest income........................... 45 572 223 Other income (expense).................... 269 (53) (1,058) Loss from discontinued operation.......... -- -- (1,516) -------- -------- -------- Net loss................................... $(30,766) $(32,587) $(37,239) ======== ======== ======== Ratio of earnings to fixed charges(b)...... -- -- -- BALANCE SHEET DATA (AT END OF PERIOD): Total assets............................... $744,081 Total debt (including current maturities).. 592,843 Partners' capital.......................... (395) FINANCIAL RATIOS AND OTHER DATA: EBITDA(c).................................. 61,350 $ 68,770 $ 75,895 EBITDA margin(d)........................... 49.3% 50.8% 50.1% Capital expenditures(e).................... $ 29,876 $ 26,488 $ 35,461 Total debt to EBITDA....................... 7.3x EBITDA to interest expense................. 2.1x OPERATING STATISTICAL DATA (AT END OF PERIOD, EXCEPT AVERAGES): Homes passed............................... 508,605 515,769 533,563 Basic subscribers.......................... 304,685 322,309 338,284 Basic penetration.......................... 59.9% 62.5% 63.4% Premium service units...................... 209,428 205,535 194,602 Premium penetration........................ 68.7% 63.7% 57.5% Monthly revenue per basic subscriber(f).... $34.01 $35.01 $ 37.33
- -------- (a) Represents combined management fees for the CCE-I Systems during periods prior to their acquisition by CCE-I, for those systems which paid management fees. These fees are not necessarily indicative of the management fees that would have been charged had the CCE-I Systems been operated by CCE-I or that may be expected for any future periods. (b) The combined earnings of the CCE-I systems were inadequate to cover fixed charges by $30.8 million, $32.6 million and 37.2 million for the years ended December 31, 1994, 1995, and 1996, respectively. (c) EBITDA represents income (loss) before interest expense, interest income, income taxes, depreciation and amortization, management fees, other income (expense), equity in loss of unconsolidated limited partnerships, loss from discontinued operation and minority interest in loss of subsidiary. Management believes EBITDA is a meaningful measure of performance because it is commonly used in the cable television industry to analyze and compare cable television companies on the basis of operating performance, leverage and liquidity. EBITDA is not presented in accordance with generally accepted accounting principles and should not be considered an alternative to, or more meaningful than, operating income or operating cash flows as an indicator of CCE-I's operating performance. EBITDA does not include CCE-I's debt obligations or other significant commitments. 55 (d) Represents EBITDA as a percent of revenues. (e) Capital expenditures exclude cash consideration paid in connection with the acquisition of cable television systems. (f) Revenues divided by basic subscribers divided by 12 months. 56 BUSINESS GENERAL The Company's principal business is the ownership, operation and development of cable television systems, which it currently conducts through two principal operating entities, CCE-I and CCE-II. CCE-I owns, operates and develops cable television systems in the St. Louis, Missouri metropolitan area including southwestern Illinois and in certain rural and suburban areas in Connecticut and Massachusetts. As of December 31, 1996, CCE-I's cable television systems passed approximately 533,600 homes and served approximately 338,300 basic subscribers in western and northeastern Connecticut, central Massachusetts, eastern Missouri and southwestern Illinois. CCE-II owns, operates and develops cable television systems in metropolitan areas of southern California. As of December 31, 1996, CCE-II's cable television systems passed approximately 425,300 homes and served approximately 168,100 basic subscribers in southern California. CCE-I's and CCE-II's operations are managed by Charter. As of December 31, 1996, Charter managed cable television systems which serve approximately 971,000 basic subscribers (including the Company's subscribers). Assuming completion of all publicly announced cable television industry transactions, management believes that Charter would be the 13th largest multiple system operator in the United States based on number of basic subscribers. The Company seeks to own and operate cable television systems serving an increased number of basic subscribers in the regions in which its cable television systems are presently located. The ten individuals principally responsible for the Company's operations (including Barry L. Babcock, Jerald L. Kent and Howard L. Wood, the co- founders of Charter) have more than 100 years of collective experience in the cable television industry. Messrs. Babcock, Kent and Wood formerly served as members of the senior management team of Cencom Cable Associates, Inc., which, during the nine year period prior to its sale in 1991 to Crown Media, purchased and developed through acquisitions the Cencom Systems. See "Business--Business Strategy--Maximize Benefits Provided by Relationship with Charter." In addition, Kelso and certain other individuals have invested approximately $68.0 million in the Issuer. As a result of such investment, Kelso and such individuals own directly or indirectly 85% of the outstanding equity interests in the Company. In addition, Kelso and certain other individuals own approximately 19.9% of Charter. See "Risk Factors--Control of the Company by Kelso." CCE-I owns and operates cable television systems which lie principally within two clusters: northeastern and western Connecticut and central Massachusetts (the "Northeast Region"); and eastern Missouri and southwestern Illinois (the "Central Region" and collectively with the Northeast Region, the "Regions"). CCE-II owns and operates cable television systems which lie principally within southern California. In all, as of December 31, 1996, approximately 69.9% of the Company's basic subscribers are served by cable television systems which were part of the Cencom Systems. As such, management of the Company has a high degree of familiarity with a substantial portion of the Systems in the Regions. See "Business--Description of the Systems-- Historical Acquisitions" and "Recent Developments." The Company has sought to "cluster" its cable systems in concentrated geographic areas in top metropolitan markets. Management believes that such clustering offers significant opportunities to increase operating efficiencies and to improve operating margins and cash flow by spreading the Company's fixed costs over an expanding subscriber base. By establishing such clusters, the Company is typically able to create regional customer service centers and establish centralized administration and technological support for local management, which enables the Company to eliminate duplicative management personnel and operations. In addition, management believes that by concentrating its clusters in top metropolitan markets the Company will be able to generate higher growth in revenues and operating cash flow. Such metropolitan markets, because of their concentration of businesses and population, offer greater opportunities for advertising sales and telecommunications services such as competitive access service. In addition, because disposable income levels in the areas served by the CCE-I Systems are generally higher than the national average, management believes that the Company will benefit from the opportunity to generate enhanced revenues from existing video services, such as pay television and pay-per-view services, as well as from future services, such as video-on-demand and Internet access services. See "Business--Business Strategy--Realize Operating Efficiencies" and "The Company." 57 As part of its commitment to customer service, the Company emphasizes high technical standards in all of its cable television systems. As of December 31, 1996, CCE-I's cable systems had an average channel capacity of approximately 54 channels, and approximately 89% of CCE-I's subscribers were served by systems that offered addressable technology. Addressable technology enables the Company, from its office or at the headend (which processes and combines signals for distribution within the cable network), to change the premium channels being delivered to subscribers or to activate pay-per-view services. The CCE-I Systems are selectively upgraded to increase channel capacity and to improve picture quality and reliability for the delivery of additional programming and new services. The Company is currently installing fiber optic technology (which is capable of carrying significantly more video, data and voice channels than coaxial technology) in certain of its systems. The Company believes that the use of fiber optic technology improves system reliability and lowers operational costs, provides a platform for the further development and diversification of revenues from existing video services (such as pay-per- view and home shopping) and advertising sales, and also provides the potential to develop new and additional services, such as competitive access, interactive services and data services, such as Internet access. The Company expects to continue selectively upgrading its systems with fiber optic cable so that, by the year 2000, average channel capacity in the CCE-I Systems will increase to approximately 60-70 channels and substantially all of the Company's customers are expected to be served by systems that offer addressable technology. BUSINESS STRATEGY Management believes clustered cable television systems in major metropolitan markets offer superior growth opportunities, and management's principal objective is to increase the Company's operating cash flow by capitalizing upon such opportunities. To achieve its objective, the Company has pursued the following business strategies: Cluster Through Strategic Acquisitions in Metropolitan Markets The Company has sought to "cluster" its cable systems in suburban and rural areas surrounding selected metropolitan markets. Management believes that such clustering offers significant opportunities to increase operating efficiencies and to improve operating margins and cash flow by spreading the Company's fixed costs over an expanding subscriber base. In addition, management believes that by concentrating its clusters in metropolitan markets, the Company will be able to generate higher growth in revenues and operating cash flow. Such metropolitan markets, because of their concentration of businesses and population, offer greater opportunities for advertising sales and telecommunications services such as competitive access service. In addition, because disposable income levels in many areas served by the Company's cable systems are generally higher than the national average, management believes that the Company will benefit from the opportunity to generate enhanced revenues from existing video services, such as pay television and pay-per-view services, as well as from future services, such as video-on-demand and Internet access services. Through strategic acquisitions, the Company seeks to enlarge the coverage of its current areas of operations, and if feasible, develop clusters in new geographic areas within existing regions. In developing and enhancing cable system clusters, the Company's acquisition strategy is, by necessity, opportunistic and depends in large part upon which cable systems become available in the marketplace. Because many of the Company's operating areas include other significant cable operators with nearby systems, market place availability and pricing may be heavily influenced by the interest level of other potential purchasers. This strategy is also subject to the changing competitive telecommunications market. CCE-I owns and operates cable television systems which lie principally within two regions: the Northeast Region and the Central Region. CCE-II owns and operates cable television systems which lie principally within southern California. The Central Region's systems passed approximately 394,900 homes and served approximately 223,300 basic subscribers in the suburban St. Louis area as of December 31, 1996. The Central Region does not include the City of St. Louis, but includes contiguous suburbs in eastern Missouri and southwestern Illinois. 58 The Northeast Region includes selected areas of Connecticut and Massachusetts, and its systems passed approximately 138,700 homes and served approximately 115,000 basic subsidiaries as of December 31, 1996. The Northeast Region, which is composed of several clusters, is more diverse geographically than the Central Region. The Newtown cluster in Connecticut consists of 14 contiguous towns southwest of Hartford, Connecticut, and tends to be more affluent than other clusters within the region. The Willimantic cluster consists of 16 contiguous suburban and rural towns northeast of Hartford. Within Massachusetts, there are five clusters, consisting of rural and suburban communities surrounding the cities of Boston, Springfield and Worcester, Massachusetts and Providence, Rhode Island. In determining whether to acquire a particular system, the Company evaluates, among other things, the (i) location, size and strategic fit of the system with the Company's existing operations, (ii) technical quality of the system and anticipated capital expenditure requirements which may be necessary to comply with franchising requirements or to upgrade systems to satisfy the Company's operating standards, (iii) demographic trends of the market, (iv) existing and potential competition in the market, (v) price of the system relative to other characteristics of the system and (vi) number of years remaining until the system's franchises must be renewed, along with the seller's relationship with the relevant franchising authorities. By virtue of its relationship with Charter, management believes that the Company has increased access to acquisition opportunities that might otherwise not be available to a Company of comparable size. Except as described under "Description of the Systems--Masada Acquisition," below, the Company is not currently a party to any letter of intent or definitive agreement with respect to any acquisitions. From time to time, the Company reviews and analyzes potential acquisitions, which may include the acquisition of other cable systems managed by Charter or as to which Charter has secured purchase rights. The Company anticipates that future acquisitions will be financed with additional debt, or, depending on the size and circumstances of the acquisition, possibly with additional equity. Realize Operating Efficiencies Each region has centralized management and offers certain services that benefit the clusters and all customers within the region. By establishing such clusters, the Company is typically able to create regional customer service centers and establish centralized administration and technological support for local management, which enables the Company to eliminate duplicative management personnel and operations. After consummating an acquisition from an independent party, the Company incorporates the system within the existing centralized network of operational and organizational functions. By combining the acquired systems with an existing cluster, or by adding a new cluster within an existing regional structure, the Company is able to reduce the operating costs of the system it acquires, and at the same time, spread its fixed costs over an expanded subscriber base and thereby improve operating cash flow and margins. Focus on the Customer The Company continually seeks to improve its understanding of, and relationship with, its customers. The Company's emphasis on customer satisfaction is evident in its customer service policies, marketing, programming and technological plans. The Company seeks to provide a high level of customer service by employing a well-trained staff of customer service representatives and experienced field technicians. Upon acquisition of the new system, the Company implements a 24-hour customer service hotline, provides completed repair service in 24 hours (with in excess of 90% of "no picture" problems solved on the same day as reported) and also offers an installation and service guarantee within a two-hour window period. Management believes that the level of customer service provided by the Company to subscribers gained through acquisitions is generally better than that provided by previous owners of the systems acquired. The Company's programming packages offer different pricing options, including special value packages and add-on services. From a technological standpoint, the Company focuses on its customers through its emphasis on service reliability, improved picture quality and expanded channel capacity. In making any operations or organizational changes, the Company attempts to maintain strong community relations and enhance customer service. The Company is also working with Charter to develop a database that will assist management with its evaluation of the potential 59 demand by existing and prospective customers for home entertainment, educational services and data transmission. Management believes this focus on the customer will, over time, increase both subscriber penetration and revenue per subscriber. Maximize Benefits Provided by Relationship with Charter The Company receives significant benefits from its relationship with Charter. The Company benefits from the financial and operational expertise of Charter's principals (Messrs. Babcock, Kent and Wood, formerly part of the senior management team of a predecessor entity of the Company) and their familiarity with those of the Company's systems previously owned by such predecessor entity. As of December 31, 1996, a majority of CCE-I's subscribers were served by systems formerly owned and operated by such predecessor entity. The Company also benefits from Charter's financial and operational expertise, and from Charter's membership in the TeleSynergy programming cooperative, which Charter joined in October 1995 and which offers its members certain programming benefits. Charter's prominence as one of the larger MSO's has also increased the Company's opportunities to investigate potential acquisitions, access debt financing and equity capital and obtain marketing support and discounts on cable system equipment. THE CABLE TELEVISION INDUSTRY Cable television was introduced in the early 1950s to provide television signals to small or rural towns with little or no available off-air television signals and to communities with reception difficulties caused by terrain problems. Since that time, the cable television industry has added non- broadcast programming, utilized improved technology to increase channel capacity and expanded its service markets to include more densely populated areas and those communities in which off-air reception is not problematic. Enhanced channel capacity has increased the potential number of programming offerings available to the subscriber and, consequently, increased the potential revenue available per subscriber. State-of-the-art cable television systems are currently capable of providing approximately 36 to 108 channels of programming. Cable television systems offer customers various levels (or "tiers") of basic cable service consisting of off-air television signals of local networks, independent and educational stations, a limited number of television signals from "superstations" originating from distant cities, various satellite-delivered, non-broadcast channels and certain programming originated locally by the cable systems. For an extra monthly charge, cable systems also typically offer premium television services to their customers, consisting of satellite-delivered channels generally providing feature films, live sports events, concerts and other special entertainment features. See""--Marketing, Programming and Rates." A cable television system consists of two principal operating components: one or more signal origination points called "headends," which receive television, radio and data signals that are transmitted by means of off- air antennas, microwave relay systems and satellite earth stations, and a signal distribution system. Each headend includes a tower, antennae or other receiving equipment at a location favorable for receiving broadcast signals and one or more earth stations that receives signals transmitted by satellite. The headend facility also houses the electronic equipment which amplifies, modifies and modulates the signals, preparing them for passage over the system's network of cables. Cable television systems may also originate their own programming and other information services for distribution through the systems. The signal distribution system consists of amplifiers and trunk lines which originate at the headend and carry the signal to various parts of the system, smaller distribution cables and distribution amplifiers which carry the signal to the immediate vicinity of the subscriber and drop lines which carry the signal into the subscriber's home. In the past several years, many cable operators have utilized fiber optic (in place of co-axial cable) technology to transmit signals through the primary trunk lines. 60 DESCRIPTION OF THE SYSTEMS General The Company acquired the CCE-I Systems in a series of transactions commencing in January 1995. The CCE-I Systems, generally lie within two clusters: the Northeast Region in northeastern and western Connecticut and central Massachusetts; and the Central Region comprising suburbs of St. Louis in eastern Missouri and southwestern Illinois. As of December 31, 1996, the CCE-I Systems, passed approximately 533,600 homes and provided service to approximately 338,300 subscribers. Demographic Profile The following table sets forth certain subscriber and comparative demographic data relating to the Clusters as of December 31, 1996;
1994 MEDIAN BASIC HOUSEHOLD CLUSTERS HOMES PASSED SUBSCRIBERS PENETRATION INCOME -------- ------------ ----------- ----------- ----------- St. Louis County............ 394,900 223,300 56.5% $44,459(a) Connecticut/Massachusetts... 138,700 115,000 82.9% 48,966(a) ------- ------- Total....................... 533,600 338,300 -- -- ======= ======= St. Louis and Connecticut/Massachusetts Average.................... -- -- 63.4% $45,991(a) National Average............ -- -- 65.7% $37,070
- -------- (a) Based on latest available data from The 1994 County and City Data Book (the most recent edition) and The 1986 County and City Data Book for the counties in which CCE-I operates weighted by the number of basic subscribers in each county. As set forth in the table above, CCE-I serves subscribers with household income levels that are substantially higher than the national average. In the most recent year for which there is public data, the weighted average household income for subscribers served by CCE-I was $45,991, or 24% above the national average of $37,070. Over the last 15 years, the population of the counties comprising the St. Louis Cluster has grown 4.2% and the population of the counties comprising the Connecticut/Massachusetts Cluster has grown 6.3%. The City of St. Louis and its surrounding area is the 20th largest Designated Market Area ("DMA") and the 16th largest Metropolitan Statistical Area ("MSA") in the United States. Connecticut and Massachusetts are the 28th and 13th largest states in the United States ranked by population, respectively. The term "DMA" is defined by the A.C. Nielsen Company and reflects rankings based on population. The DMA rankings have been obtained from BIA Publications, Inc. (1996). The term "MSA" is as defined by the Office of Management and Budget on December 31, 1992 and as revised through July 1, 1994. The MSA rankings have been obtained from Rand McNally 1996 Commercial Atlas & Marketing Guide, BIA Publications, Inc. (1996). Historical Acquisitions Crown Systems Acquisition. In January 1995, the Company completed the acquisition of the Crown Missouri Systems and the Crown Connecticut Systems, for an aggregate purchase price of approximately $488.2 million, including related acquisition fees and expenses. As of December 31, 1996, the Crown Missouri Systems and the Crown Connecticut Systems provided service to approximately 140,300 and 86,300 basic subscribers, respectively. The Crown Transaction was part of a larger transaction in which HC Crown sold its cable television systems to a group of investors, including Charter, the Company and certain affiliates of Charter, for a total purchase price of approximately $900.0 million. As a result of this transaction, Charter- affiliated entities acquired certain of the cable television systems owned by HC Crown, serving approximately 260,000 basic subscribers in Connecticut, Kentucky, Missouri, North Carolina and South Carolina, adding to Charter's then-existing subscriber base of approximately 280,000. 61 UVC Systems Acquisition. In October 1995, the Company, through CCE-I, purchased the UVC Systems for an aggregate purchase price of approximately $96.0 million, including related acquisition fees and expenses. As of December 31, 1996, the UVC Systems passed approximately 60,900 homes and served approximately 48,400 basic subscribers in the western suburbs of St. Louis and in Massachusetts. Park Hills, Missouri, Systems Acquisition. In January 1996, the Company, through CCE-I, purchased the Park Hills Systems for an aggregate purchase price of approximately $9.4 million, including related acquisition fees and expenses. As of December 31, 1996, the Park Hills Systems passed approximately 9,700 homes and served approximately 6,100 basic subscribers in the Park Hills, Missouri area. Illinois Systems Acquisition. In March 1996, the Company, through CCE-I, purchased the Illinois Systems from CCIP, whose general partner is an affiliate of Charter, for an aggregate purchase price of approximately $82.0 million, including related acquisition fees and expenses. As of December 31, 1996, the Illinois Systems passed approximately 75,700 homes and served approximately 45,500 basic subscribers. The Illinois Acquisition was part of a larger transaction whereby three Charter affiliates purchased all of the assets of CCIP and, in accordance with the terms of the partnership agreement of CCIP, independent appraisals were obtained valuing all of the assets of CCIP. The aggregate purchase price paid by the three Charter affiliates exceeded the appraisal value by five percent. The purchase price allocated to the Illinois Systems was determined by the three Charter affiliates based on the relative value of the Illinois Systems to the total assets being sold. On October 20, 1995, a purported class action lawsuit on behalf of the CCIP limited partners was filed in the Chancery Court of New Castle County, Delaware. The Action named as defendants the general partner of CCIP, the proposed purchasers of all of the systems owned by CCIP (which includes CCE-I and certain other affiliates of Charter), Charter and certain individuals, including the directors and executive officers of the general partner of CCIP. On February 15, 1996, the Court of Chancery of the State of Delaware in and for New Castle County dismissed all of the plaintiff's claims for injunctive relief (including that which sought to prevent the consummation of the Illinois Acquisition); the plaintiff's claims for money damages which might result from the proposed sale by CCIP of its assets (including the Illinois Acquisition) remain pending. In October, 1996, the plaintiff filed a Consolidated Amended Class Action Complaint. The defendants filed an Answer to the amended complaint in December 1996. In January 1997, the defendants filed a Motion for Summary Judgment to dismiss all remaining claims as to all parties in the Action. Based upon, among other things, the advice of counsel, each of the defendants to the Action believes the Action to be without merit and is contesting it vigorously. There can be no assurance, however, that the plaintiff will not be awarded damages, some or all of which may be payable by CCE-I, in connection with the Action. The California Acquisition. In September 1995, CCT purchased the Los Angeles Systems and the certain other cable television systems from the Gaylord Affiliate for an aggregate purchase price of approximately $340.9 million, including related acquisition fees and expenses. In conjunction with the California Transaction, the Los Angeles Systems were immediately contributed to CCE-II; and such other systems were sold to Charter Communications Properties, Inc. As a result, the Los Angeles Systems constitute the sole assets of CCE-II. Masada Acquisition On November 29, 1996, the Company, through CCE-I, acquired certain cable television systems serving communities in the St. Louis, Missouri metropolitan area from Masada Cable Partners, L.P., for an aggregate purchase price of approximately $23.7 million, before transaction costs and working capital adjustments. As of December 31, 1996, the Masada Systems served approximately 11,800 basic subscribers. Pending Long Beach Investment by CCE-II In the second quarter of 1997, CCE-II expects to make a $25.0 million investment in LBAC, in connection with the acquisition of LBAC by an affiliate of CCE-II and the Issuer. Such acquisition is subject to the approval 62 of the relevant franchising authorities and customary closing conditions. LBAC owns the Long Beach Systems, serving communities in Long Beach, California. The Long Beach Investment will be in the form of a loan convertible into 27.5% of the stock of LBAC. In connection with the Long Beach Investment, CCE-II and LBAC will become jointly and severally liable under the CCE-II Credit Facility, which will be increased by $140.0 million upon consummation of the Long Beach Investment. It is anticipated that CCE-II will draw down $25.0 million under the CCE-II Credit Facility in order to make the Long Beach Investment. As of December 31, 1996, the Long Beach Systems served approximately 70,100 basic subscribers. As is the case with assets owned by CCE-II, holders of the Notes are unlikely to benefit from the assets to be acquired in the Long Beach Investment, and therefore should not rely on such assets or revenues generated by them for payment of principal or interest on the Notes. OPERATIONS AND MANAGEMENT BY CHARTER Charter manages the Company's operations under a decentralized management structure that is intended to maximize the Company's presence in each of its clusters and thereby enhance customer service and strengthen community relations. Each of the Company's clusters has a regional senior vice president of operations who is responsible for overseeing the day-to-day operations of the systems in such manager's cluster, including, in some cases, systems not owned by the Company. See "Risk Factors--Dependence on Charter and Key Personnel of Charter; Potential Conflicts of Interest." Regional management also provides full marketing support and has established a 24-hour customer service hotline. Regional costs, including personnel and other operating expenses, are allocated to the Systems and (where applicable) to certain other systems owned by affiliates of Charter, pro rata based on the number of subscribers. By spreading such costs over a broader base of subscribers, the Company experiences lower operating costs per subscriber than it would without its affiliation with Charter. The Company relies on Charter for all of its strategic and managerial advice, as well as administrative support, including accounts payable, accounts receivable, billing, payroll and human resources. Charter is dependent upon the services of certain key personnel, including Messrs. Babcock, Kent and Wood. Charter also coordinates and provides advice with respect to all programming arrangements, capital expenditure requirements, engineering planning, and acquisitions and financing of cable television systems. In the event the Company's relationship with Charter terminates for any reason, the Company will no longer benefit from, among other things, the cost savings on programming and access to acquisition opportunities and financing relationships that are made available to the Company through Charter. Charter also provides in-house legal support. See "Certain Relationships and Related Transactions." MARKETING, PROGRAMMING AND RATES The Company's marketing programs are based upon offering various packages of cable services designed to appeal to different market segments. Charter, in its capacity as manager of the CCE-I Systems, performs and utilizes market research on selected systems, compares the data to national research and tailors a marketing program for each individual market. The Company uses a coordinated array of marketing techniques to attract and retain subscribers, including door-to-door solicitation, telemarketing, media advertising and direct mail solicitations. The Company regularly implements these marketing efforts in order to gain new subscribers and to increase basic and premium service penetration in the communities served by its systems. In addition, the Company is in the process of developing a new five channel "customer choice" tier of programming, adding four new premium channels, enabling "multiplex" programming, and offering customers the ability to customize programming packages. The Company is in the process of developing an in-depth customer profile data base which will result in more targeted direct marketing efforts and is intended to increase sales per customer. Such information would then allow the Company to tailor its marketing efforts with respect to the specific programming. Charter has entered into various contracts to obtain basic and premium programming with a number of suppliers. This programming is made available to the Company for a fixed fee per subscriber. Charter's 63 programming contracts generally continue for a fixed period of time and are subject to negotiated renewal. Some program suppliers offer marketing and pricing support. In particular, Charter has negotiated programming agreements with premium service suppliers that offer cost incentives under which premium service unit prices decline as certain premium service growth thresholds are met. In October 1995, Charter joined the TeleSynergy programming cooperative, which consists of midsize MSOs, and which is expected to offer its members certain programming benefits. The Company's aggregate programming costs are expected to increase in the future due to additional programming being provided to customers, increased costs to produce or purchase cable programming, inflationary increases and other factors affecting the cable television industry. Under FCC rate regulation, opportunities exist for program suppliers to increase their rates, subject to certain limitations. See "--Regulation in the Cable Television Industry--Cable Acts and FCC Regulation." Management believes that the increases in the Company's programming costs which it expects to incur will be less than the possible increases the Company would otherwise expect to incur without the benefit of Charter's membership in TeleSynergy. Subject to the foregoing, management believes the Company will be able to pass-through expected increases in its programming costs to subscribers, although there can be no assurance that it will be able to do so. Management believes that the CCE-I Systems will continue to have access to programming services at competitive prices, although there can be no assurance that it will continue to do so. Although services vary from system to system due to differences in channel capacity, viewer interests and community demographics, each of the CCE-I Systems offers a "basic service tier," consisting of local television channels (network and independent stations) available over-the-air, local public channels, governmental, home-shopping and leased access channels. Each of the CCE-I Systems offers, for a monthly fee, an expanded basic tier of "superstations" originating from distant cities (such as WTBS, WGN and WWOR), various satellite-delivered, non-broadcast channels (such as Cable News Network ("CNN"), MTV, Music Television, the USA Network, Entertainment and Sports Programming Network ("ESPN") and Turner Network Television ("TNT")) and certain programming originated locally by the cable system (such as public, governmental and educational access programs) providing information with respect to news, time, weather and the stock market. In addition to these services, the CCE-I Systems typically provide four or more premium services purchased from independent suppliers and combined in different formats to appeal to the various segments of the viewing audience, such as Home Box Office ("HBO"), Cinemax, Showtime, The Movie Channel and The Disney Channel. These services are satellite-delivered channels consisting principally of feature films, original programming, live sports events, concerts and other special entertainment features, usually presented without commercial interruption. Such premium programming services are offered by the CCE-I Systems both on an a la carte basis and as part of premium service packages designed to enhance customer value and to enable the CCE-I Systems to take advantage of programming agreements offering cost incentives based on premium service unit growth. A "premium service unit" is a single premium service for which a subscriber must pay an additional monthly fee in order to receive the service. Subscribers may subscribe for one or more premium service units. The CCE-I Systems also typically provide one or more pay-per-view services purchased from independent suppliers such as Request, Viewer's Choice, Showtime Event Television, etc. These services are satellite-delivered channels, consisting principally of feature films, live sporting events, concerts and other special "events," usually presented without commercial interruption. Such pay-per-view services are offered by the Company on a "per viewing" basis, with subscribers only paying for programs which they select for viewing. Additionally, the Company plans to upgrade certain of its systems with fiber optic cable, which will allow the Company to expand its ability to use "tiered" packaging strategies for marketing premium services and promoting niche programming services. Management believes that this ability will increase basic and premium service penetration as well as revenue per subscriber. Rates to subscribers vary from market to market and in accordance with the type of service selected. As of December 31, 1996, the monthly basic fees for the basic service tier in the CCE-I Systems ranged from $6.31 to $18.55 for the Central Region Systems and $9.95 to $12.75 for the Northeast Region Systems and the monthly fees for the expanded basic service tier in the CCE-I Systems ranged from $13.64 to $18.28 for the Central Region Systems and 13.75 to 17.70 for the Northeast Region Systems. These rates reflect reductions enacted in response to the 1992 Cable Act's re-regulation of cable television industry rates, and in particular, the FCC's 64 rate regulations which became effective in 1993 and 1994 implementing the 1992 Cable Act. A one-time installation fee, which may be waived in part during certain promotional periods, is charged to new subscribers. Management believes that the Company's rate practices are generally consistent with the current practices in the industry. See "--Regulation in the Cable Television Industry." TECHNOLOGICAL DEVELOPMENTS AND STRATEGY As part of its commitment to customer service, the Company endeavors to maintain high technical performance standards in all of its cable systems. All acquired and existing systems are selectively upgraded to increase channel capacity and improve picture quality and reliability for the delivery of additional programming and new services. As part of its evaluation process, management considers a number of factors before initiating a system upgrade. Such factors include management's assessment of the (i) upgrades that may be required by a franchising authority in connection with the renewal of one of the Company's franchises, (ii) programming alternatives offered by competitors located near the CCE-I Systems and (iii) cost-effectiveness of any such upgrades. The following table sets forth certain information regarding the channel capacities, miles of plant and basic subscribers for CCE-I's existing owned and operated systems as of December 31, 1996.
37 TO 42 43 TO 54 55 TO 62 63 TO 78* CHANNELS CHANNELS CHANNELS CHANNELS TOTAL -------- -------- -------- --------- ------- OWNED SYSTEMS: Number of Systems................ 16 2 10 0 28 Miles of Plant................... 1,307 3,888 4,901 196 10,292 Basic Subscribers................ 56,971 132,886 143,179 5,264 338,300 % of Total Basic Subscribers..... 17 39 42 2 100
- -------- * While the capacity exists to carry this level of channels to the number of subscribers disclosed, this capability is currently not utilized as portions of the trunk and distribution plant associated with the headend do not have this capacity. The CCE-I Systems have an average capacity of approximately 54 channels and approximately 89% of CCE-I's subscribers are currently served by systems that offer addressable technology. Addressable technology enables the Company, from the office or headend, to change the premium channels being delivered to each subscriber or to activate pay-per-view services. These service level changes can be effectuated without the delay or expense associated with dispatching a technician to the subscriber's home. Addressable technology also reduces premium service theft and allows Charter automatically to disconnect delinquent accounts. The use of fiber optic technology in concert with coaxial cable has significantly enhanced cable system performance. Fiber optic strands are capable of carrying hundreds of video, data and voice channels over extended distances without the extensive signal amplification typically required for coaxial cable. To date, Charter has used fiber to interconnect headends, to eliminate headends by installing fiber backbones, and to reduce amplifier cascades, thereby improving both picture quality and system reliability. Digital compression and high capacity data modems may become commercially viable within the next few years. These developments may enable an increase in system channel capacity and may allow the introduction of alternative communications delivery systems for data and voice. Management does not currently plan to deploy digital technology, as it believes such technologies will not become cost-effective for the CCE-I Systems in the near term. However, the Company will continue to monitor the development of such technology and its utilization by other cable operators, and the cost- effectiveness of such technology. CUSTOMER SERVICE AND COMMUNITY RELATIONS The Company is dedicated to providing superior service to its customers. As part of this effort, the Company emphasizes improving system reliability, which includes enhancing technology of the systems, increasing the level of engineering resources and providing the highest level of customer service. The Company has also emphasized the availability of customer service and technical support response time by implementing a 24-hour customer service hotline and offering installation and service guarantees that provide free installation if 65 the Company's installer is late for a scheduled appointment and a $20 credit if the Company's service technician is late for a service call. As a result of the Company's clustering of its cable systems, the Company's technicians from each of the local clusters are able to assist each other as and when necessary. See "--Properties." Charter and the Company are also dedicated to fostering strong community relations in the towns and cities served by the CCE-I Systems. The Company supports local charities and community causes through marketing promotions. The Company installs and provides free basic cable service to public schools, government buildings and not-for-profit hospitals in the communities in which it operates. Management believes that its relations with the communities in which the Company operates are generally good. FRANCHISES The Company operates pursuant to an aggregate of 123 non-exclusive franchises, permits or similar authorizations issued by governmental authorities. Franchises or permits are awarded by a governmental authority and generally are not transferable without the consent of the authority. Most of the franchises pursuant to which the CCE-I Systems operate may be terminated prior to their stated expiration by the granting authority, after due process, following a breach of a material provision of such franchise. Under the terms of most of the franchises, a franchise fee of up to 5% of the gross revenues derived by a cable system from the provision of cable television services (the maximum amount that may be charged by a franchising authority under the 1984 Cable Act) is payable to the franchising authority. The table below illustrates the grouping of the franchises of the CCE-I Systems by date of expiration and sets forth the approximate number and percentage of basic service customers for each group of franchises as of March 31, 1997. CCE-I FRANCHISE INFORMATION
PERCENTAGE OF APPROXIMATE PERCENTAGE OF NUMBER OF TOTAL NUMBER OF TOTAL YEAR OF FRANCHISE EXPIRATION FRANCHISES FRANCHISES SUBSCRIBERS SUBSCRIBERS - ---------------------------- ---------- ------------- ----------- ------------- 1997-1998................. 17 14% 113,000 34% 1999-2001................. 45 36% 72,300 21% After 2001................ 61 50% 153,000 45% --- ----- ------- ----- Total................... 123 100.0% 338,300 100.0% === ===== ======= =====
The Cable Acts provide for an orderly franchise renewal process in which franchise renewal may not be unreasonably withheld. If a renewal is withheld and the franchising authority acquires ownership of the cable system or effects a transfer of ownership to another party, the franchise authority must pay the cable operator the "fair market value" for the system covered by such franchise. The Cable Acts also establish comprehensive renewal procedures requiring that an incumbent franchisee's renewal application be asserted on its own merit and not as part of a comparative process with competing applications. In connection with the franchise renewal process, many governmental authorities require the cable operator to commit to making certain technological upgrades to the system, which may require substantial capital expenditures. Management believes that the Company generally has good relationships with the franchising authorities. In the past, all of the material franchises relating to the CCE-I Systems eligible for renewal have been renewed or extended at or prior to their stated expirations. The Company's franchise for "Area 13" in Connecticut (the northeastern system), with 32,900 subscribers as of December 31, 1996, is scheduled to expire in July 1998. Connecticut regulates cable systems on a statewide basis (as opposed to franchising by the various municipalities). The Company requested the commencement of renewal proceedings in January 1996 with the DPUC. The DPUC granted the Company's request for an "informal renewal" and has requested, in conformance with general procedures, that the Company submit its Proposal for Renewal as the next step in the informal process. The DPUC has also undertaken, pursuant to its customary procedures, a community needs assessment. 66 Management believes that it generally has a good relationship with the DPUC. No material franchise authority has ever refused to consent to a franchise transfer to the Company, although there can be no assurance that all franchise authorities will consent to franchise transfers to the Company in the future, or that the terms and conditions of any such transfers will be acceptable to the Company. COMPETITION IN THE CABLE TELEVISION BUSINESS Cable television companies generally operate under non-exclusive franchises granted by local authorities that are subject to renewal and renegotiation from time to time. The 1992 Cable Act prohibits franchising authorities from granting exclusive cable television franchises and from unreasonably refusing to award additional competitive franchises. Cable system operators may therefore experience competition from other operators building a system in an existing franchise area (i.e., an "overbuild"). The 1992 Cable Act also permits municipal authorities to operate cable television systems in their communities without franchises. There are virtually no overbuilds in the areas in which the CCE-I Systems are located, although other cable operators may operate systems in the vicinity of the CCE-I Systems. Cable systems operators also compete for the right to construct systems in new housing developments adjoining or otherwise located in proximity to such operator's existing systems. Management believes that the selection of a cable operator to construct a system in a new housing development (which may be located near the cable systems of several different operators) is typically based upon an evaluation by the real estate developer of the programming and pricing offered by the different cable operators conducting business in proximity to such housing development. Cable television systems also face competition from alternative methods of receiving and distributing television signals and from other sources of home entertainment. Within the home video programming market, the Company competes primarily with other cable franchise holders and with home satellite and wireless cable providers, and, when existing franchises become available for renewal (or new franchises become available in the southeastern region of the United States), with other cable franchise holders. Management believes that direct broadcast satellite ("DBS"), a service by which packages of television programming are transmitted to individual homes which are serviced by a single satellite dish, is currently the most significant competitive threat to the CCE-I Systems. DBS involves the transmission of an encoded signal directly from a satellite to the home user. DBS provides video service using a relatively small dish located at each subscriber's premises. In 1994, two companies offering high-power DBS video service utilizing an 18-inch satellite receiver dish, DIRECTV, Inc. ("DIRECTV") and United States Satellite Broadcasting, began operations over DIRECTV's DBS satellites, and at present, together offer over 150 channels of programming. PrimeStar Partners, L.P. ("PrimeStar"), which offers 70 channels of programming, is a medium-power DBS service provider using larger (36-inch) satellite receiver dishes than high- power DBS providers. DIRECTV requires the consumer to purchase home dish equipment, while PrimeStar, which is owned primarily by a consortium of cable television operators (including TCI), leases its dishes to consumers. Both of these services provide the consumer with access to most satellite-delivered cable television programming, including premium channels, pay-per-view and national sporting events. Some of the services offered by DBS are not available through the Systems, including special events and packages of Major League Baseball, National Basketball Association, National Football League and National Hockey League games. The DBS systems use video compression technology to increase their channel capacity and are able to use 18-inch or 36-inch dish antennae to receive the satellite signals directly. Several companies including EchoStar Communications Corp., a venture between MCI Telecommunications Corporation and The News Corporation Limited, and PrimeStar have begun or are scheduled to begin offering high-power DBS services. Basic DBS service starts at approximately $30 per month nationally and increases depending on the programming selected. A DBS satellite dish for one television retails for as low as approximately $100, and recent reports indicate that prices may be reduced by the latter part of 1997 to as low as $50. Competition by DBS may suffer from the following factors: (i) lack of reception of local broadcast signals, (ii) topographical limitations which limit reception in hilly areas, (iii) high cost of additional outlets, (iv) the inability to view different channels on other television sets in the home without purchasing a second receiver, (v) the inability to 67 offer interactive services and (vi) signal degradation in heavy rain. The lack of reception of local broadcast signals may cause some DBS subscribers to continue their subscriptions to basic cable service in order to receive these channels, although the DBS industry is seeking to modify current law in order to retransmit these local channels to its customers. However, recent published reports indicate that there are now approximately 4.5 million subscribers to DBS services, which reflects a substantial increase in the number of such subscribers from those reported in previous years. In addition, many observers are projecting continued growth for the DBS industry through the end of the decade. Thus, although it is difficult to assess the ultimate magnitude of the impact that DBS will have on the cable industry or upon the Company's operations and revenues, DBS services now pose a significant competitive threat to cable television systems. Furthermore, recently announced plans by Newscorp/Echostar to seek approval to offer local broadcast channels on DBS commencing in the latter part of 1998, if implemented with effective technology and providing local channels to the markets served by the Company's Systems, could accelerate the timing and increase the impact of the competition. (This proposed plan calls for local stations on the DBS system in at least 75% of the country by the end of 1998, via the use of "spot beam" technology, which aims local signals down to small geographic areas.) Cable television systems also compete with wireless program distribution services such as multichannel multipoint distribution service ("MMDS"), which uses low power microwave frequencies to transmit video programming over-the- air to customers. The FCC has amended its regulations to enable MMDS systems to compete more effectively with cable systems by making available additional channels to the MMDS industry and by refining the procedures by which MMDS licenses are granted. The FCC also ruled that wireless cable operators may increase their channel capacity and service offerings through digital compression techniques. Such increased capacity and offerings may make wireless cable a more significant competitor in the video programming industry. The 1992 Cable Act generally prohibits a cable operator from holding an FCC MMDS license in its franchised cable service area. However, the Telecommunications Act allows such common ownership if the cable operator is subject to "effective competition." Additionally, the FCC allocated frequencies in the 28 GHz band for a new multichannel wireless video service similar to MMDS. The Company is unable to predict the economic viability of wireless video services, such as MMDS, or whether such services will present a competitive threat to the Company. Since 1992, a portion of the Los Angeles Systems, located in Riverside County, California (the "Riverside System"), has faced competition from Cross Country Wireless, Inc. ("Cross Country"), a major MMDS operator. Although Cross Country initially caused significant subscriber erosion due to an aggressive marketing campaign, their subscriber count has been essentially flat at approximately 40,000 over the past two years. (It should be noted that Cross Country serves all of Riverside County, including substantial areas not covered by the Riverside System.) In fact, the Riverside System has since substantially surpassed the subscriber and cash flow levels enjoyed prior to Cross Country's entry into the market. Additional forms of competition for cable systems are master antenna television ("MATV") and satellite master antenna television systems ("SMATV"). These systems are essentially small, closed cable systems which operate within specific hotels, apartment or condominium complexes and individual residences. Due to the widespread availability of earth stations, such private cable television systems can offer both improved reception of local television stations and many of the same satellite-delivered program services which are offered by franchised cable television systems. MATV and SMATV systems currently benefit from operating advantages not available to franchised cable television systems, including fewer regulatory burdens and no requirement to service low density or economically depressed communities. The Telecommunications Act, which to some extent deregulates or lessens the regulatory burden on the cable industry, may reduce some of the advantages of SMATV and MATV systems. However, since SMATV and MATV systems generally do not fall within the Cable Acts' definition of a "cable system," notwithstanding the enactment of such legislation, they could still be exempt from other requirements of the Cable Acts which were not amended. Furthermore, the Telecommunications Act broadens an exemption from regulation as a "cable system," which may exempt additional SMATV and MATV systems from regulation under the Cable Acts. 68 Federal cross-ownership restrictions have historically limited entry into the cable television business by potentially strong competitors such as telephone companies. The 1984 Cable Act codified the FCC's cross-ownership regulations, which, in part, prohibited local exchange telephone companies, including RBOCs (Regional Bell Operating Companies), from providing video programming directly to subscribers within their local exchange telephone service areas, except in rural areas or by specific waiver of FCC rules. Among other reasons, this federal cable television/telephone cross-ownership rule was particularly important to the cable industry, because these telephone companies already own certain facilities needed for cable television operators, such as poles, ducts and associated rights-of-way. The Telecommunications Act repeals the cable television/telephone cross-ownership ban adopted in the 1984 Cable Act, and contains restrictions on buying out incumbent cable operations in a telephone company's service area, especially in suburban and rural markets. Specifically, the Telecommunications Act authorizes LECs (local exchange companies) to provide a wide variety of video services competitive with services provided by cable systems and to provide cable services directly to customers in the telephone companies' service areas, with some regulatory safeguards. See "--Regulation in the Cable Television Industry--Telecommunications Legislation." Various LECs currently are seeking to provide video programming services within their telephone service areas through a variety of distribution methods, including both the deployment of broadband wire facilities and the use of wireless (MMDS) transmission. In Connecticut, the DPUC recently granted a subsidiary of a local telephone company, The Southern New England Telecommunications Corporation ("SNET"), a franchise to serve the entire state of Connecticut. The SNET subsidiary, SNET Personal Vision, Inc. ("Personal Vision") proposed to offer its services initially to a "primary franchise area" of several Connecticut communities, including one in which CCE-I provides cable television service, within its first two years of operation (beginning by January 1997). Pursuant to the terms of Personal Vision's eleven year franchise, its services must pass all homes in Connecticut within eleven years. See "Regulation in the Cable Television Industry." This new statewide cable franchise is currently being challenged by a regional cable association. The association recently filed an appeal in the Connecticut Superior Court challenging the DPUC's grant of the statewide franchise, on several substantive and procedural grounds. The Company cannot predict the outcome of this litigation. Some video programming services provided by telephone companies (e.g., "open video systems") do not require local franchises. Further, certain of the RBOCs have already entered the cable television business outside their service areas. Cable television systems could be placed at a competitive disadvantage if the delivery of video programming services by LECs becomes widespread. LECs may not be required, under certain circumstances, to obtain local franchises to deliver such video services or to comply with the variety of obligations imposed upon cable television systems under such franchises. Issues of cross-subsidization by LECs of video and telephony services also pose strategic disadvantages for cable operators seeking to compete with LECs that provide video services. Management believes that telephone companies will generally focus their efforts on cable acquisitions in larger metropolitan areas, although there can be no assurance that this will be the case. Other new technologies may become competitive with non-entertainment services that cable television systems can offer. Advances in communications technology as well as changes in the marketplace and the regulatory and legislative environment are constantly occurring. Management cannot predict the effect that ongoing or future developments might have on the cable television industry generally or the Company specifically. REGULATION IN THE CABLE TELEVISION INDUSTRY The cable television industry is subject to extensive regulation at the federal, local and, in some instances, state levels. In addition, recent legislative and regulatory changes and additional regulatory proposals under consideration may materially affect the cable television industry. The Cable Acts, both of which amended the Communications Act, establish a national policy to guide the development and regulation of cable television systems. The Communications Act was recently substantially amended by the Telecommunications Act, which alters federal, state and local laws pertaining to cable television, telecommunications and other services. Principal responsibility for implementing the policies of the Cable Acts and the Telecommunications Act is allocated 69 between the FCC and state or local franchising authorities. The FCC and state regulatory agencies are required to conduct numerous rulemaking and regulatory proceedings to implement the Telecommunications Act and such proceedings may materially affect the cable television industry. Cable Acts and FCC Regulation The Cable Acts and the FCC's implementing rules establish, among other things, (i) rate regulations, (ii) "anti-buy through" provisions, (iii) "must carry" and "retransmission consent" requirements that may require a cable system under certain circumstances to carry a local broadcast station or obtain consent to carry a distant or local station, (iv) rules for franchise renewals and transfers and (v) other regulations covering a variety of operational areas such as equal employment opportunity, public inspection files, technical standards, leased access and customer service requirements. The 1992 Cable Act and the FCC's rules implementing the 1992 Cable Act generally have increased the administrative and operational expenses of cable television systems and have resulted in additional regulatory oversight by the FCC and local (and in some instances, state) franchise authorities. Management is unable to predict the ultimate effect of the 1992 Cable Act or the ultimate outcome of various FCC rulemaking proceedings or the litigation challenging various aspects of the 1992 Cable Act and the FCC's regulations implementing the 1992 Cable Act. In August 1996, the United States Court of Appeals for the District of Columbia (the "D.C. Appeals Court") upheld the constitutionality of several provisions of the Cable Acts against a First Amendment constitutional challenge in a case that has been pending since 1993. The D.C. Appeals Court affirmed a lower court decision upholding the constitutionality of the federal statutory provisions authorizing (i) public, educational and governmental access channels, (ii) commercial leased access channels, (iii) rate regulation, (iv) liability for operators carrying obscene programming on access channels, and (v) municipal immunity from damage claims. The D.C. Appeals Court reversed the lower court's determination that the federal statutory provisions authorizing (i) advance subscriber notice for certain free premium channel previews and associated blocking requirements and (ii) direct broadcast satellite channel set-aside requirements were unconstitutional. The D.C. Appeals Court denied a request to review its decision en banc. The D.C Appeals Court deferred a ruling on the constitutional challenge to statutory requirements mandating program access and system ownership restrictions and determined that it will consider the validity of these provisions in a separate case involving a challenge to the FCC's regulations implementing these statutory provisions. Rate Regulation. The Cable Acts and FCC regulations have imposed rate requirements for basic services and equipment. Under the 1992 Cable Act, a local franchising authority in a community not subject to "effective competition" (as defined in the 1992 Cable Act) generally is authorized to regulate basic cable service rates after certifying to the FCC that, among other things, it will adopt and administer rate regulations consistent with FCC rules, and in a manner that will provide a reasonable opportunity to consider the views of interested parties. Under the FCC's initial rate regulations pursuant to the 1992 Cable Act, regulated cable systems were required to apply a benchmark formula to determine their maximum permitted rates. Those systems with rates which were above the benchmark on September 30, 1992 were required to reduce their rates to the benchmark or by 10%, whichever was less. Under revised rate regulations adopted in February 1994, regulated cable systems were required to reduce their rates so that regulated revenues per subscriber did not exceed September 30, 1992 levels, reduced by 17% (taking into account the previous 10% reduction). At this time, approximately 40% of the franchise authorities (covering approximately 80% of subscribers of CCE-I as of December 31, 1996) that oversee the franchises under which the Systems operate are certified to regulate basic tier rates. Several local franchising authorities are currently in the process of reviewing the basic service rates charged by certain Systems. However, because the 1992 Cable Act permits communities to certify at any time, it is possible that additional localities served by the Systems may choose to certify and regulate rates in the future. The Telecommunications Act expands the definition of "effective competition" to include any franchise area where a local exchange carrier or its affiliate (or any multichannel video programming distributor using the 70 facilities of such carrier or its affiliate) provides video programming services to subscribers by any means, other than through direct broadcast satellite. The local exchange carrier must provide "comparable" programming services in the franchise area. In regulating the basic service rates, certified local franchise authorities have the authority to order a rate refund of previously paid rates determined to be in excess of the maximum permitted reasonable rates. With respect to any of the Region's systems regulated by local authorities that have already been certified, during the year ended December 31, 1996, the Company paid no rate refunds to subscribers as a result of rate orders issued by its franchise authorities. Rate regulation of the basic service tier remains subject to regulation by local franchising authorities under the Telecommunications Act, except in certain circumstances for certain small cable operators. For a defined class of "small cable operators," the Telecommunications Act immediately eliminates regulation of cable programming rates. Rates for the basic tier of small cable operators are deregulated if the system offered only a single tier of services as of December 31, 1994. To qualify as a "small cable operator," the operator (and its affiliates) must serve in the aggregate fewer than one percent of all U.S. cable television subscribers and have affiliate gross revenues not exceeding $250 million. The exception applies in any franchise area in which the operator serves 50,000 or fewer subscribers. Under the 1992 Cable Act, rates for cable programming services not carried on the basic tier ("non-basic services") could be regulated by the FCC upon the filing of a complaint by franchise authorities or subscribers that indicates the cable operator's rates for these services are unreasonable. Rate complaints have been filed with the FCC with respect to certain of the Company's cable programming service tiers. As of the date of this Prospectus, one complaint with regard to the Missouri System was dismissed and several complaints were recently resolved adversely to the Company. Specifically, the FCC ruled that, during 1994, the Company charged in excess of its maximum permitted rates (under FCC rules) for its cable programming service tiers in certain systems operating in Connecticut. The FCC ordered the Company to refund to subscribers in the affected communities the excess amounts paid, plus interest to the date of the refunds. The Company believes this ruling will not have a material adverse effect on its business. The Telecommunications Act eliminates regulation of the cable programming service tier (non-basic programming) as of March 31, 1999. In the interim, rate regulation of the cable programming tier is circumscribed, as rate regulation can only be triggered by a franchising authority complaint to the FCC. A franchising authority complaint must be based on more than one subscriber complaint, which must be filed within 90 days after a rate increase. If the FCC determines that any of the Company's cable programming service tier rates (other than the 1994 rates for certain Connecticut systems, as to which the FCC has already ruled) are unreasonable, the FCC has the authority to order the Company to reduce those cable programming service tier rates and to refund to customers any overcharges occurring from the filing date of the rate complaint at the FCC. In jurisdictions that have not yet chosen to certify, refunds covering a one-year period on basic service may be ordered upon future certification if the Company is unable to justify its rates through a benchmark or cost-of-service filing pursuant to FCC rules. Management is unable to estimate at this time the total amount of refunds that may be payable by the Company in the event the Systems' rates (other than the 1994 rates for certain Connecticut systems, as to which the FCC has already ruled) are successfully challenged by franchising authorities or found to be unreasonable by the FCC, although management does not believe that the amount of any such refunds would have a material adverse effect on the Company. Notwithstanding mandated rate reductions, cable operators currently may adjust their regulated rates to reflect inflation and what the FCC has deemed to be external costs (such as increases in franchise fees and programming costs). In November 1994, the FCC adopted the so-called "going-forward rules" which, among other things, allow cable operators to raise rates over the next three years by adding channels to the expanded basic tier. Under the revised rules, cable operators were allowed to take a per channel markup of up to 20 cents for each channel added to the expanded basic tier, with an aggregate cap of $1.20 per subscriber per month. Accordingly, the Company was permitted to adjust rates on January 1, 1995 for channel additions occurring after May 14, 1994. In addition to rate adjustments permitted for additional channels, the "going-forward rules" allowed cable operators to recover an additional amount of 30 cents in the aggregate per subscriber per month for license fees associated with adding new channels through 1996. (During the third year, license fees are subject to the general 71 rate rules.) Thus, through 1996 the allowable rate increases for channel adjustments and license fees could have totaled up to $1.50 per subscriber per month. Under the "going-forward rules," in 1997, cable operators may make an additional flat fee increase of 20 cents per channel per month for channels added during that year, provided that the rate increases made by cable operators over the three-year period (exclusive of license fees) do not exceed $1.40 in the aggregate. For channels added after May 14, 1994, operators electing to take advantage of the 20 cents per channel adjustment may not take a 7.5% mark-up on programming cost increases that are otherwise currently permissible under the rate rules. The "going-forward rules" are scheduled to expire on December 31, 1997. The Company has incorporated the "going-forward rules" into all filings based on the benchmark methodology. The "going-forward rules" also allow cable operators to place channels that were not offered on the cable system prior to October 1, 1994 on a new separate unregulated tier as long as the regulated basic and expanded basic tiers remain intact. Cable operators may offer the same new channels simultaneously on both an expanded basic tier and a new unregulated tier, and may at any time move them to the new tier. Thus, operators may build up a following for new channels by putting them in the expanded basic tier before moving them to the new unregulated tier. Channels that were in the basic tier or the expanded basic tier prior to September 30, 1994 may not be moved to the new tier, nor may such channels be dropped from the basic or expanded basic tiers and then added to a new tier within the two-year period after the date upon which any such channel is dropped. In September 1995, the FCC developed an abbreviated cost-of-service form that permits cable operators to recover the costs of significant upgrades that provide benefits to subscribers of regulated cable services. Cable operators seeking to raise rates to cover the costs of an upgrade would submit only the costs of the upgrade instead of all current costs. In December 1995 and April 1996, the FCC revised its cost-of-service rules. In another action in September 1995, the FCC established a new optional rate adjustment methodology that encourages operators to limit their rate increases to once per year to reflect inflation and changes in external costs and in the number of channels. The rules permit cable operators to "project reasonably" changes in their costs for the 12 months following the rate change (in an effort to eliminate delays in recovering costs). The order also allows operators to recover increases in additional types of franchise-requirement costs. Permitted pass-through increases include increases in the costs of providing institutional networks, video services, data services to or from governmental and educational institutions, and certain other cost increases. The Company has made annual benchmark filings where appropriate. In November 1995, the FCC proposed to provide cable operators with the option of establishing uniform rates for similar service packages offered in multiple franchise areas located in the same region. Under the FCC's current rules, cable operators subject to rate regulation must establish rates on a franchise-specific basis. The FCC recently adopted an order that will permit a cable television system operator to submit a proposal to establish uniform rules across multiple franchise areas. The new rule could lower cable operators' marketing costs and may also allow operators to better respond to competition from alternative providers. The Company is unable to predict whether these rules will be of any benefit to the Systems. In July 1996, the FCC proposed to give operators more flexibility with respect to the relative pricing of different tiers of service. Under this proposal, once an operator has set rates in accordance with existing regulations, the operator could decrease its basic service tier ("BST") rate and then take a corresponding increase in its cable programming service tier ("CPST") rate to offset the lost revenue on the BST. In this proceeding, the FCC has also asked parties to comment on whether it should place a limit on the amount of any CPST rate increase or otherwise limit the amount by which the BST and CPST rates may be adjusted. The FCC expects that this proposal would give operators rate structure flexibility enjoyed by alternative providers of video services that are, or soon will be, attempting to compete with cable operators but are not subject to the rate regulation imposed by statute on cable operators. The Company is unable to predict whether these proposed rules will ultimately be promulgated by the FCC and, if they are promulgated, their effect on the Company. 72 The uniform rate requirements in the 1992 Cable Act, which required a cable operator to charge uniform rates throughout its franchise areas, are relaxed by the Telecommunications Act. Specifically, the Telecommunications Act clarifies that the uniform rate provision does not apply where a cable operator faces "effective competition." In addition, bulk discounts to multiple dwelling units are exempted from the uniform rate requirements. However, complaints concerning "predatory" pricing (including with respect to bulk discounts to multiple dwelling units) may be made to the FCC. The Telecommunications Act also permits cable operators to aggregate, on a franchise system, regional or company level, its equipment costs in broad categories. The Telecommunications Act should facilitate the rationalization of equipment rates across jurisdictional boundaries. However, these cost- aggregation rules do not apply to the limited equipment used by subscribers who only receive basic programming. "Anti-Buy Through" Provisions. The 1992 Cable Act and corresponding FCC regulations require cable systems to permit customers to be able to purchase video programming offered by the operator on a per channel or per program basis without having to subscribe to any tier of service (other than the basic tier), subject to available technology. The available technology exception sunsets on October 5, 2002. Although approximately 89% of CCE-I's subscribers are served by systems that offer addressable technology, most of CCE-I's subscribers do not currently have the requisite equipment in their homes to utilize such technology. As a result, most of CCE-I's cable television systems are currently exempt from complying with the requirements of the 1992 Cable Act. Management cannot predict the extent to which this provision of the 1992 Cable Act and the corresponding FCC rules may cause customers to discontinue optional non-basic service tiers in favor of the less expensive basic cable service. "Must Carry" Requirements/"Retransmission Consents." Under the 1992 Cable Act, cable television operators are subject to mandatory broadcast signal carriage requirements that allow local commercial and non-commercial television broadcast stations to elect once every three years to require a cable system to carry the station, subject to certain exceptions, or, in the case of commercial stations, to negotiate for "retransmission consent" to carry the station. In addition, there are requirements for cable systems to obtain retransmission consent for all "distant" commercial television stations (except for commercial/satellite-delivered independent "superstations" such as WTBS), commercial radio stations and certain low power television stations carried by such systems after October 6, 1993. The validity of mandatory signal carriage requirements was litigated in the United States Supreme Court, which recently upheld the "must carry" requirements on constitutional grounds. The carriage requirements remained in effect during the litigation. As a result of the mandatory carriage rules, some of the CCE-I Systems have been required to carry television broadcast stations that otherwise would not have been carried, thereby causing displacement of possibly more attractive programming. In one recent proceeding, the FCC ordered the Company's systems in Uxbridge, Massachusetts to carry a local broadcast channel pursuant to the must carry rules. The retransmission consent rules have resulted in the deletion of certain local and distant television broadcast stations which various systems were carrying. To the extent retransmission consent fees were paid for the continued carriage of certain television stations, such costs were not recoverable. Any future amounts paid in exchange for retransmission consent, however, may be passed along to subscribers as additional programming costs. Franchise Matters. The 1984 Cable Act affirms the right of franchising authorities (state or local, depending on the practice in the individual states) to award one or more franchises within their jurisdictions and prohibits nongrandfathered cable systems from operating without a franchise in such jurisdictions. The 1992 Cable Act encourages competition with existing cable systems by (i) allowing municipalities to operate their own cable systems without franchises, (ii) preventing franchising authorities from granting exclusive franchises or unreasonably refusing to award additional franchises covering an existing cable system's service area, and (iii) prohibiting (with limited exceptions) the common ownership of cable systems and co-located MMDS or SMATV systems. In January 1995, the FCC relaxed its restrictions on ownership of SMATV systems to permit a cable operator to acquire SMATV systems in the operator's existing franchise area so long as the programming services provided through the SMATV system are offered according to the terms and conditions of the cable operator's local franchise agreement. The Telecommunications Act provides that the cable/SMATV and cable/MMDS cross- ownership rules do not apply in any franchise area where the cable operator faces "effective 73 competition" as defined by federal law. The Telecommunications Act also permits local telephone companies to provide video programming services as traditional cable operators with local franchises. The 1984 Cable Act also provides that in granting or renewing franchises, local authorities may establish requirements for cable-related facilities and equipment, but not for video programming or information services other than in broad categories. Among the more significant provisions, the Cable Act limits franchise fees to 5% of a cable system's annual gross revenues and permits cable operators to obtain modification of franchise requirements by the franchising authority or judicial action if warranted by changed circumstances. The 1984 Cable Act contains franchise renewal procedures designed to protect incumbent franchisees against arbitrary denials of renewal. The 1992 Cable Act made several changes to the renewal process that could make it easier for a franchising authority to deny renewal. Moreover, even if a franchise is renewed, a franchising authority may seek to impose new and more onerous requirements, including requiring significant upgrades in facilities and services or increased franchise fees. If a franchising authority's consent is required for the purchase or sale of a cable television system, the franchising authority may also seek to impose new and more onerous requirements as a condition to the transfer. The acceptance of these new requirements, however, may not be made a condition of the transfer. Historically, franchises have been renewed for cable operators that have provided satisfactory services and have complied with the terms of their franchises. Although management believes that the Company has generally met the terms of its franchise agreements, has provided quality levels of service, and anticipates that the Company's future franchise renewal prospects generally will be favorable, there can be no assurance that any such franchises will be renewed or, if renewed, that the franchising authority will not impose more onerous requirements on the Company than previously existed. Connecticut regulates cable systems on a statewide basis (as opposed to franchising by the various municipalities). The Company's franchise for "Area 13" in Connecticut (the northeastern system) is scheduled to expire in July 1998. The Company requested the commencement of renewal proceedings in January 1996 with the DPUC. The DPUC granted the Company's request for an "informal renewal" and has requested, in conformance with general procedures, that the Company submit its Proposal for Renewal as the next step in the process. The DPUC has also undertaken, pursuant to its customary procedures, a community needs assessment. Management believes that it generally has a good relationship with the DPUC. In addition, many of the Company's other franchises are currently or will be in the near future within the three year renewal window provided in the Communications Act. Those franchises serve approximately 62% of the Company's total subscriber base. While there can be no assurance that all of these franchises will be renewed on commercially reasonable terms, the Company believes that it maintains generally good relationships with its franchising authorities. Under the Telecommunications Act, a franchising authority may not require a cable operator to provide telecommunications service or facilities, other than an institutional network, as a condition to a grant, renewal, or transfer of a cable franchise, and franchising authorities are preempted from requiring cable operators to obtain a franchise to provide telecommunications services. Various courts have considered whether franchising authorities have the legal right to limit franchise awards to a single cable operator and to impose certain substantive franchise requirements (i.e., access channels, universal service and other technical requirements). These decisions have been somewhat inconsistent and, until the United States Supreme Court rules definitively on the scope of cable operators' First Amendment protections, the legality of certain issues relating to the franchising process and of various specific franchise requirements is likely to be in a state of flux. It is not possible at the present time to predict the constitutionally permissible bounds of cable franchising and particular franchise requirements. Other FCC Regulations. The Company is subject to a variety of other FCC rules, covering such diverse areas as equal employment opportunity, programming, leased access, maintenance of records and public inspection of files, technical standards, customer service and cable inside wiring. The FCC has initiated a rulemaking proceeding to consider, among other issues, whether to adopt uniform regulations governing telephone and cable inside wiring. The regulation ultimately adopted by the FCC could affect the Company's ownership interests and access to inside wiring used to provide telephony and video programing services. In a related rulemaking proceeding, the FCC will consider the appropriate treatment of inside wiring in multiple 74 dwelling unit buildings ("MDUs"). The outcome of that proceeding could affect cable operators' access to inside wiring in MDUs. As required by the 1992 Cable Act, the FCC has adopted rules regulating the maximum reasonable rate a cable operator may charge for commercial use of the designated channel capacity for cable systems that have a certain number of channels, including such systems located at MDUs. The Commission recently reconsidered and revised its rules governing the rates that operators may charge for this designated channel capacity as well as its rules governing the use of such channels. Among other revisions to its rules, operators must compute the rates for these channels based on an average, rather than on the highest spread between program costs and subscriber revenues, and, consequently, the rates that operators will be permitted to charge for these channels will likely decrease. The FCC has authority to enforce its regulations through the imposition of substantial fines, the issuance of cease and desist orders and/or the imposition of other administrative sanctions, such as the revocation of FCC licenses needed to operate certain transmission facilities often used in connection with cable operations. Although management believes the Company is in compliance in all material respects with all applicable FCC requirements, there can be no assurance that the FCC would not find a violation and impose sanctions that could adversely affect the Company's operations. Telecommunications Legislation On February 1, 1996, Congress passed the Telecommunications Act. The Telecommunications Act was signed into law by the President on February 8, 1996, and substantially amends the Communications Act (including the re- regulation of subscriber rates under the 1992 Cable Act). The Telecommunications Act alters federal, state and local laws and regulations pertaining to cable television, telecommunications, and other services. In addition to the amendments previously discussed in this section, the legislation also allows additional competition in video programming by telephone companies, and makes other revisions to the Communications Act and the Cable Acts. The most far-reaching changes in the communications industry will result from the telephony provisions of the Telecommunications Act. These provisions promote local exchange competition as a national policy by eliminating legal barriers to competition in the local telephone business and setting standards to govern the relationships among telecommunications providers. The provisions also establish uniform requirements and standards for entry, competitive carrier interconnection, and unbundling of LEC (local exchange company) monopoly services. The Telecommunications Act expressly prohibits any legal barriers to competition in intrastate or interstate communications service under state and local laws. The Telecommunications Act empowers the FCC, after notice and an opportunity for comment, to preempt the enforcement of any statute, regulation or legal requirement that prohibits, or has the effect of prohibiting, the ability of any entity to provide any intrastate or interstate telecommunications service. The Telecommunications Act is intended, in part, to promote substantial competition in the marketplace for telephone local exchange service and in the delivery of video and other services, and permits cable television operators to enter the local telephone exchange market. The cable industry's ability to offer telephone services competitively may be adversely affected by the degree and form of regulatory flexibility afforded to LECs and, in part, will depend upon the outcome of various FCC rulemakings and judicial proceedings, including the proceedings dealing with the interconnection obligations of telecommunications carriers. The United States Court of Appeals for the Eighth Circuit recently stayed implementation of part of the FCC's recently issued interconnection order, which had been viewed favorably by companies seeking to compete with LECs in the provisioning of telephony services. Additionally, whether the cable industry will be able to provide competitive telephone services will depend, in part, on its ability to obtain access to public rights of way. The FCC currently is conducting a proceeding that could determine a franchise authority's scope of authority to impose monetary and other obligations on cable operators for the use of public rights of way to provide telecommunications services. 75 Telephone Company Provision of Video Programming. Under the Telecommunications Act, telephone companies can compete directly with cable operators in the provisioning of video programming. The new legislation recognizes several multiple entry options for telephone companies to provide competitive video programming, including over their telephone facilities, through either common carrier transport or an "open video system," by radio communications, or as a regular cable system. LECs, including RBOCs, will be allowed to compete with cable operators both inside and outside the LECs' telephone service areas. The Telecommunications Act repeals the statutory ban on telephone company provision of video programming services in the telephone company's service areas. The FCC's video dialtone regulations have also been repealed. Pursuant to authority granted to the FCC in the Telecommunications Act, the FCC ordered that video dialtone operators could only continue to offer service by electing, by November 6, 1996, one of the four permissible options for telephone companies to provide video programming which are described below. Video dialtone operators could apply for extensions to the November 6, 1996 deadline upon a demonstration of "good cause" for an extension. In particular, if a telephone company provides video via radio communications, it will be regulated under title III of the Communications Act (the general sections governing use of the airwaves), rather than cable regulation under title VI. If a telephone company provides common carriage transport of video programming, it will be subject to the requirements of title II of the Communications Act (the general common carrier provisions), rather than title VI cable regulation. Telephone companies providing video programming through any other means (other than as an "open video system," as described below) will be regulated under title VI cable regulation. The Telecommunications Act replaces the FCC's video dialtone rules with an "open video system" plan by which telephone companies can provide video programming service in their telephone service areas. Telephone companies that comply with the FCC's open video system regulations (which must be prescribed within six months from enactment) will be subject to a relaxed regulatory scheme. The open video system requirements are in lieu of title II common carrier regulation. The FCC has certified the operation of open video systems in various areas of the United States. The FCC was directed to and has prescribed rules that prohibit open video systems from discriminating among video programming providers with regard to carriage, and that ensure that open video system rates, terms and conditions for service are reasonable and non-discriminatory. Pursuant to the Telecommunications Act, the FCC has also adopted regulations prohibiting an open video system operator and its affiliates from occupying more than one- third of the system's activated channels when demand for channels exceeds supply. The Telecommunications Act also mandates other open video system regulations, including channel sharing and sports exclusivity. Open video systems will be subject to the authority of local governments to manage public rights-of-way. Local franchising authorities may require open video system operators to pay franchise-type fees, which may not exceed the rate at which franchise fees are imposed on any cable operator in the corresponding franchise area. The FCC's open video system regulations have been appealed. Buyouts. The Telecommunications Act generally prohibits LEC buyouts of cable systems (which includes any ownership interest exceeding 10%) within the LEC's telephone service area, cable operator buyouts of LEC systems within the cable operator's franchise area, and joint ventures between cable operators and LECs in the same markets. There are some statutory exceptions, including a rural exemption which permits buyouts where the purchased system serves an area with fewer than 35,000 inhabitants outside an urban area. Also, the FCC may grant waivers of the buyout provisions in cases where (1) the cable operator or LEC would be subject to undue economic distress; (2) the system or facilities would not be economically viable; or (3) the anticompetitive effects of the proposed transaction are clearly outweighed by the effect of the transaction in meeting community needs. The respective local franchising authority must approve any such waiver. Public Utility Competition. The Telecommunications Act also authorizes another potential competitor, registered utility holding companies and subsidiaries, to provide video programming services, notwithstanding the Public Utility Holding Company Act. Utilities must establish separate subsidiaries and must apply to the FCC 76 for operating authority. Several such utilities have been granted broad authority by the FCC to engage in activities which could include the provision of video programming. Cross-Ownership; Reduced Regulations. The Telecommunications Act makes several other changes to relax ownership restrictions and regulation of cable systems. It repeals the 1992 Cable Act's three-year holding requirement pertaining to sales of cable systems. The broadcast/cable cross-ownership restrictions are eliminated, although the FCC's regulations prohibiting broadcast/cable common ownership currently remain. The SMATV/cable cross- ownership and the MMDS/cable cross-ownership restrictions have been eliminated for cable operators subject to effective competition. The Telecommunications Act amends the definition of "cable system" so that a broader class of entities (including some entities which may compete with the Company) providing video programming will be exempt from regulation as a cable system under the Communications Act. Pole Attachments. The 1984 Cable Act requires the FCC to regulate the rates, terms and conditions imposed by certain public utilities for cable systems' use of utility pole and conduit space, unless state authorities can demonstrate under the Federal Pole Attachment Act that they adequately regulate cable television pole attachment rates, terms and conditions. In some cases utility companies have increased pole attachment fees for cable systems that have installed fiber optic cables in connection with the distribution of non-video services. The FCC recently concluded that, in the absence of state regulation, it has jurisdiction to determine whether utility companies have justified their demand for additional rental fees, and that the 1984 Cable Act does not permit disparate rates based on the type of service provided over the equipment attached to the utility's pole. Further, in the absence of state regulation, the FCC administers such pole attachment rates through use of a formula which it has devised and from time to time revises. The Telecommunications Act extends the regulation of rates, terms and conditions of pole attachments to telecommunications service providers, and requires the FCC to prescribe regulations to govern the charges for pole attachments used by telecommunications carriers to provide telecommunications services when the parties fail to resolve the dispute over such charges. The FCC recently adopted an Order to adopt certain of the Telecommunications Act's pole attachment provisions. The Telecommunications Act also increases significantly future pole attachment rates for cable systems which use pole attachments in connection with the provision of telecommunications services as a result of a new rate formula charged to telecommunications carriers for the non-useable space of each pole. These rates are to be phased in after a five-year period. Miscellaneous Requirements and Provisions. The Telecommunications Act also imposes other miscellaneous requirements on cable operators, including an obligation, on request, to fully scramble or block at no charge the audio and video portion of any channel not specifically subscribed to by a household. In addition, sexually explicit programming must be scrambled or blocked. If the cable operator is unable to scramble or block its signal completely, it must restrict transmission to those hours of the day when children are unlikely to view the programming, as determined by the FCC. On March 24, 1997, the U.S. Supreme Court let stand a lower court ruling that allows enforcement of this provision pending consideration of a constitutional challenge. In response to this ruling, the FCC has declared that its rules implementing the scrambling provision will become effective on May 18, 1997. Enforcement of the scrambling requirement could increase operating expenses for operators of cable television systems, including the Company, and provide a competitive advantage to less regulated providers of video programming services. The Telecommunications Act also directs the FCC to adopt regulations to ensure, with certain exceptions, that video programming is fully accessible through closed captioning. The FCC recently released a report to Congress on the level at which video programming is close captioned and commenced a proceeding to establish regulations to implement such closed captioning requirements. Although the new legislation may substantially lessen regulatory burdens, the cable television industry may be subject to additional competition as a result thereof. There are numerous rulemakings which have been, and which will be undertaken by the FCC which will interpret and implement the provisions of the Telecommunications Act. In addition, certain provisions of the Act (such as the deregulation of cable programming rates) are not immediately effective. Further, certain provisions of the Telecommunications Act have been, and are likely to continue to be, subject to legal challenges. Similarly, certain provisions of the 77 Telecommunications Act could materially affect the Company's ability to sell the Systems; however, the Company is unable at this time to predict the outcome of such rulemakings or litigation or the substantive effect (financial or otherwise) of the new legislation and the rulemakings on the Company. FCC Implementation. The FCC is presently, and will be, engaged in numerous proceedings to implement various provisions of the Telecommunications Act. Recently, the FCC adopted cable television equipment cost aggregation rules and adopted open video system rules. In addition to the proceedings previously discussed herein, the FCC has recently initiated a proceeding to implement most of the Cable Act reform provisions of the Telecommunications Act. In this proceeding, the FCC has set forth certain interim rules to govern while the FCC completes its implementation of the Telecommunications Act. Among other things, the FCC is requiring on an interim basis that for a LEC to be deemed to be offering "comparable" programming, such programming must include the signals of local broadcasters. Cable systems that meet all of the relevant criteria in the new effective competition test are exempt from rate regulation as of February 8, 1996 (the date the Telecommunications Act was signed into law by President Clinton). Cable systems may file a petition with the FCC at any time for a determination of effective competition. The FCC has also established interim rules governing the filing of rate complaints by local franchising authorities. Local franchising authorities may file rate complaints with the FCC when the local franchising authorities receive more than one subscriber complaint concerning an operator's rate increase. If the local franchising authority receives more than one subscriber complaint within the 90-day period and decides to file its own complaint with the FCC, it must do so within 180 days after the rate increase became effective. Before filing a complaint with the FCC, the local franchising authority must first provide the cable operator written notice of its intent to do so and must give the operator a minimum of 30 days to file with the local franchising authority the relevant FCC forms used to justify a rate increase. The local franchising authority must then forward its complaint and the operator's response to the FCC within the 180 day deadline. The FCC must issue a final order within 90 days after it receives a local franchising authority complaint. For interim purposes, the FCC has established that an operator serving fewer than 617,000 subscribers is a "small cable operator" if its annual revenues, when combined with the total annual revenues of all of its affiliates, do not exceed $250 million in the aggregate. For interim purposes, "affiliate" will be defined as a 20% or greater equity interest. In addition to the interim rules discussed above and other miscellaneous interim rules, the FCC is also engaged in a rulemaking proceeding to create and implement final rules relating to the cable reform provisions of the Telecommunications Act. Among other issues, the FCC is considering whether to establish a LEC market share that must be satisfied before a LEC will be deemed to constitute "effective competition" to an incumbent cable operator (which would free the cable operator from rate regulation). The Company cannot predict the outcome of this FCC proceeding or what its ultimate effect will be on the Company's business. Copyright Cable television systems are subject to Federal copyright licensing covering carriage of television and radio broadcast signals. In exchange for filing certain reports and contributing a percentage of their revenues to a Federal copyright royalty pool, cable operators can obtain blanket permission to retransmit copyrighted material on broadcast signals. The nature and amount of future copyright payments for broadcast signal carriage cannot be predicted. The possible simplification, modification or elimination of the compulsory copyright license is the subject of continuing legislative review. The elimination or substantial modification of the cable compulsory license could adversely affect the Company's ability to obtain suitable programming and could substantially increase the cost of programming that remained available for distribution to the Company's customers. Management cannot predict the result of such legislative activity or the effect of such activity on the Company's condition (financial or otherwise). 78 State and Local Regulation Cable television systems generally are operated pursuant to non-exclusive franchises, permits or licenses granted by a municipality or other state or local government entity. Franchises generally are granted for fixed terms and in many cases are terminable if the franchisee fails to comply with material provisions of its franchise agreement. The terms and conditions of franchises vary materially from jurisdiction to jurisdiction. A number of states subject cable television systems to the jurisdiction of centralized state governmental agencies, some of which impose regulation of a character similar to that of a public utility. Attempts in other states to regulate cable television systems are continuing and can be expected to increase. CCE-I's Systems in Connecticut are regulated on a statewide basis and subject to the jurisdiction of the DPUC. Management cannot predict whether any of the other states in which the Company currently operates, or in which it may operate in the future, will engage in such regulation in the future. State and local franchising jurisdiction is not unlimited, however, and must be exercised consistently with Federal law. The 1992 Cable Act immunizes franchising authorities from monetary damage awards arising from regulation of cable television systems or decisions made on franchise grants, renewals, transfers and amendments. The foregoing does not purport to describe all present and proposed federal, state, and local regulations and legislation affecting the cable industry. Other existing federal regulations, copyright licensing, and, in many jurisdictions, state and local franchise requirements, are currently the subject of judicial proceedings, legislative hearings and administrative and legislative proposals which could change, in varying degrees, the manner in which cable systems operate. Neither the outcome of these proceedings nor the impact on the cable television industry or the Company can be predicted. BACKGROUND AND OWNERSHIP STRUCTURE The Issuer was organized in 1994 as a Delaware corporation. Ownership interests in the Issuer are held by Kelso and certain other individuals, on the one hand, and Charter, on the other hand, which maintain an 85% and 15% interest in the Issuer, respectively, with distributions on exit varying depending on rates of return on the stockholders' equity investment in the Issuer. Kelso and certain other individuals have invested an aggregate of $68.0 million in the Issuer. Charter has invested an aggregate of $12.0 million in the Issuer. As a result of its investment, Kelso can exercise effective control over the management and affairs of the Issuer and the Company. Kelso and certain other individuals own approximately 19.9% of Charter and have invested an aggregate of $12.0 million in Charter. The Issuer has indirect interests in CCE-I and CCE-II, which were formed to acquire and operate cable television systems. The Issuer holds all equity interests in CAC, which in turn holds all equity interests in Cencom Cable. CAC and Cencom Cable each hold limited partnership interests in CCE, L.P. CAC also holds a 1% general partnership interest in CCE, L.P., a 1.22% general partnership interest in CCE-I and a 1.22% limited partnership interest in CCE- II. CCT holds limited partnership interests and a 1% general partnership interest in CCE, L.P. CCT also holds a 1% general partnership interest in CCE- II and a 1% limited partnership interest in CCE-I. CCE, L.P. holds a 97.78% limited partnership interest in each of CCE-I and CCE-II. The primary business activities engaged in by CCE-I and CCE-II are the ownership, development and operation of cable television systems and a radio station. EMPLOYEES The Company has no employees other than employees of CCE-I and CCE-II. As of December 31, 1996, CCE-I employed an aggregate of 607.5 full-time equivalent employees of which 41.5 are covered by a collective bargaining arrangement. At December 31, 1996, CCE-II employed an aggregate of 355.0 full-time equivalent employees. The Company considers its relationships with its employees to be good. Charter acts as the management company for each of CCE-I and CCE-II pursuant to certain management agreements. See "Certain Relationships and Related Transactions--Management Agreements." For a discussion of the directors and executive officers of Charter, see "Management." 79 PROPERTIES The principal physical assets of the Company consist of, among other things, the components of each of its cable systems, which include a headend, distribution cables and a local business office. The receiving apparatus is comprised of a tower and antennas for reception of over-the-air broadcast television signals and one or more earth stations for reception of satellite signals. Located near these receiving devices is a building that houses associated electronic gear and processing equipment. The Company owns the receiving and distribution equipment of its systems and owns or leases small parcels of real property for the receiving sites. Cable is either buried in trenches or is attached to utility poles pursuant to license agreements with the owners of the poles. The Company owns or leases the local business office of each system from which it dispatches service employees, monitors the technical quality of the system, handles customer service and billing inquiries and administers marketing programs. The office facilities of some systems include studios for local access program production, as required under the Company's franchises. Management believes that the Company's properties are generally in good condition. The physical components of the Company's cable systems, however, require maintenance and periodic upgrades to keep pace with technological advances and to comply with the requirements of certain franchising authorities. For a discussion of historical capital expenditures, see "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." INSURANCE The Company has insurance covering risks incurred in the ordinary course of business, including general liability, property coverage and business interruption insurance. As is typical in the cable television industry, the Company does not maintain insurance covering its underground plant. Management believes its insurance coverage is adequate. LEGAL PROCEEDINGS The Company is involved from time to time in routine legal matters incidental to its business. Management, after consultation with its legal counsel, believes that the resolution of such matters will not have a material adverse effect on the Company's financial position or results of operations. On October 20, 1995, a purported class action lawsuit on behalf of the CCIP limited partners was filed in the Chancery Court of New Castle County, Delaware. The Action named as defendants the general partner of CCIP, the proposed purchasers of all the systems owned by CCIP (which includes CCE-I and certain other affiliates of Charter), Charter and certain individuals, including the directors and executive officers of the general partner of CCIP. On February 15, 1996, the Court of Chancery of the State of Delaware in and for New Castle County dismissed all of the plaintiff's claims for injunctive relief (including that which sought to prevent the consummation of the Illinois Acquisition); the plaintiff's claims for money damages which might result from the proposed sale by CCIP of its assets (including the Illinois Acquisition) remain pending. In October, 1996, the plaintiff filed a Consolidated Amended Class Action Complaint. The defendants filed an Answer to the amended complaint in December 1996. In January 1997, the defendants filed a Motion for Summary Judgment to dismiss all remaining claims as to all parties in the Action. Based upon, among other things, the advice of counsel, each of the defendants to the Action believes the Action to be without merit and is contesting it vigorously. There can be no assurance, however, that the plaintiff will not be awarded damages, some or all of which may be payable by CCE-I, in connection with the Action. 80 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth certain information, as of April 30, 1997, with respect to the executive and certain other officers and directors of the Issuer, CAC (which serves as the general partner of CCE and CCE-I), Cencom Cable and Charter which, as the manager of the Systems, is responsible for providing advice with respect to the overall management and operations of the Company:
NAME AGE POSITIONS AND OFFICES ---- --- --------------------- Barry L. Babcock..... 50 Chairman and Secretary of the Issuer, CAC, Cencom Cable and Charter, and director of Cencom Cable and Charter Robert C. Bailey..... 60 Senior Vice President--Operations of Issuer, CAC, Cencom Cable and Charter Mary Pat Blake....... 41 Senior Vice President--Marketing of Charter and CAC Senior Vice President--Engineering of Charter and Thomas R. Jokerst.... 47 CAC Ralph G. Kelly....... 40 Senior Vice President--Treasurer of the Issuer, CAC, Cencom Cable and Charter Jerald L. Kent....... 40 President, Chief Financial Officer and Director of the Issuer, CAC, Cencom Cable and Charter Gene F. Knoblauch.... 39 Senior Vice President--Northeast Region of Charter George E. Matelich... 40 Director of Issuer and CAC Frank T. Nickell..... 49 Director of Issuer and CAC Senior Vice President--Central Region of Charter and Stephen J. Rabbit.... 48 CAC Curtis S. Shaw....... 48 Senior Vice President, General Counsel and Secretary of Issuer, CAC, Cencom Cable and Charter Glenn M. Stinchcomb.. 70 Director of Charter Thomas R. Wall, IV... 38 Director of Issuer and CAC Howard L. Wood....... 58 Chairman of the Management Committee and Director of the Issuer, CAC, Cencom Cable and Charter
See "Certain Relationships and Related Transactions--Stockholders' Agreement" for a description of the contractual agreement between the shareholders of the Issuer relating to the election of Directors. The following sets forth certain biographical information with respect to the persons listed above. BARRY L. BABCOCK is a co-founder and Chairman of Charter, and a member of its Management Committee, and also serves as General Counsel and Secretary. Prior to founding Charter, Mr. Babcock was associated with Cencom, where he served as the Executive Vice President from February 1986 to September 1991, and was named Chief Operating Officer in May of 1986. Mr. Babcock was one of Cencom's founders and, prior to the duties he assumed in early 1986, was responsible for all of Cencom's in-house legal work, contracts and governmental relations. Mr. Babcock serves as a director of Charter. In 1996, he was appointed Chairman of the Board of Community Telecommunications Association (CATA), Cable in the Classroom and the St. Louis Civic Entrepreneur's Organization. Mr. Babcock, an attorney, received his undergraduate and JD degrees from the University of Oklahoma. He also served four years as a line officer in the United States Navy. ROBERT C. BAILEY is Senior Vice President of Operations of Charter. Mr. Bailey joined Charter in January 1993. Prior to joining Charter, Mr. Bailey was associated with Cencom, serving as Group Vice President of Operations from August 1987 and as of September 1988 as Senior Vice President/Operations. From 1984 to 1987, Mr. Bailey served as Vice President of Construction for Group W Cable (Chicago office), where he managed all construction projects and related field service operations in the Chicago area. From 1981 to 1984, Mr. Bailey served as Vice President of Construction for Group W Cable (corporate office), with responsibility for all capital projects. Mr. Bailey is a Graduate of Capital Radio Engineering Institute of Washington, D.C. and Commercial Radio Institute of Baltimore, Maryland. MARY PAT BLAKE is Senior Vice President--Marketing of Charter. Ms. Blake joined Charter in August 1995 and is responsible for all aspects of marketing and sales. Prior to joining Charter, Ms. Blake was active in the 81 emerging business sector, and formed Blake Investments, Inc. in September 1993, which created, operated and sold a branded coffeehouse and bakery. From September 1990 to August 1993, Ms. Blake served as Director--Marketing for Brown Shoe Company. Ms. Blake has 18 years of experience with senior management responsibilities in marketing, sales, finance, systems, and general management with companies such as The West Coast Group, Pepsico Inc.-Taco Bell Division, General Mills, Inc. and ADP Network Services, Inc. Ms. Blake received a BS degree from the University of Minnesota, and an MBA degree from the Harvard Business School. THOMAS R. JOKERST is Senior Vice President--Engineering of Charter. Mr. Jokerst joined Charter in December 1993. Mr. Jokerst is responsible for all aspects of engineering and technology assessment for Charter. Prior to joining Charter, from March 1991 to March 1993, Mr. Jokerst served as Vice President, Office of Science & Technology for Cable Television Laboratories in Boulder, Colorado. From 1979 to March 1993, Mr. Jokerst was employed by Continental Cablevision of Illinois, Inc., where his responsibilities included the creation of a Regional Hub and Headend Interconnect for the St. Louis Region of Continental Cablevision's systems. Mr. Jokerst is a graduate of Ranken Technical Institute in St. Louis with a degree in Communications Electronics and Computer Technology and of Southern Illinois University in Carbondale, Illinois with a degree in Electronics Technology. RALPH G. KELLY joined Charter in 1993 as Vice President--Finance, a position he held until early 1994 when he became Chief Financial Officer of CableMaxx, Inc., a wireless cable television operator. Mr. Kelly returned as Senior Vice President--Treasurer of Charter in February 1996 and has overall responsibility for treasury operations and investor and financial reporting. Mr. Kelly has worked in the cable industry since 1984 when he joined Cencom as Controller. Mr. Kelly was promoted to Treasurer of Cencom in 1989, and was responsible for treasury management, loan compliance, budget administration, supervision of internal audit and SEC reporting. He has served on the Accounting Committee of the Board of Directors for National Cable Television Association. Mr. Kelly is a certified public accountant and was in the audit division of Arthur Andersen & Co. from 1979 to 1984. Mr. Kelly received his undergraduate degree in accounting from the University of Missouri--Columbia, and his MBA from Saint Louis University. JERALD L. KENT is a co-founder, President, Chief Financial Officer and a member of the Management Committee of Charter. Prior to founding Charter, Mr. Kent was associated with Cencom, where he served as Executive Vice President and Chief Financial Officer. Mr. Kent also served Cencom as Senior Vice President of Finance from May 1987, Senior Vice President of Acquisitions and Finance from July 1988, and Senior Vice President and Chief Financial Officer from January 1989. Prior to that time, Mr. Kent was employed by Arthur Andersen & Co., certified public accountants, where he attained the position of tax manager. Mr. Kent, a certified public accountant, received his undergraduate and MBA degrees with honors from Washington University (St. Louis). GENE F. KNOBLAUCH joined Charter in December 1994 as Senior Vice President of Northeast Operations. He has primary responsibility for all operations in the States of Connecticut and Massachusetts owned by Charter. Prior to joining Charter, Mr. Knoblauch was employed by United Video Cablevision, Inc. as Vice President--Eastern Region Operations from 1990 to 1994. At United Video Cablevision, Inc. he was responsible for all day-to-day operations and administration of system operations located in Maine, Massachusetts, New Hampshire and New York consisting of 82,000 customers. From 1986 to 1990, he served as Area Manager for a 40,000 customer system operated by ACT in Durham, North Carolina. Prior to serving as Area Manager, he received extensive Sales and Marketing experience in a number of management positions he held at various locations with ACT dating back to 1982. Mr. Knoblauch received a BA degree from the State University of New York at Plattsburgh. He has served on the New England Cable Television Association (NECTA) Executive Committee for the past three years. GEORGE E. MATELICH has been a director of the Issuer since February 1995. Mr. Matelich has been a Managing Director of Kelso & Company since 1990. Mr. Matelich joined Kelso & Company in 1985 as an Associate, and he served as a Vice President of Kelso & Company from 1986 to 1989. Mr. Matelich is also a director of CCT, Americold Corporation, Harris Specialty Chemicals, Inc., Humphreys Inc., and a Trustee of The University of Puget Sound. 82 FRANK T. NICKELL has been a director of the Issuer since February 1995. Mr. Nickell has been President and a director of Kelso & Company, since March 1989. From 1984 to 1989 Mr. Nickell was a general partner of Kelso & Company. He is also a director of The Bear Stearns Companies Inc., CCT, Earle M. Jorgensen Company and Tyler Refrigeration Corporation. STEPHEN J. RABBIT joined Charter in May 1996 as Senior Vice President of Central Region. He has primary responsibility for all cable operations in Charter's Central Region, including St. Louis metropolitan area, Illinois, Kentucky, Tennessee, Texas, Kansas and Colorado. Prior to joining Charter, Mr. Rabbit was employed by RCN, Inc., as an Executive Vice President from 1995 to 1996. From 1994 to 1995 he served as Executive Vice President and Chief Operating Officer of C-Tec Cable Systems, Inc. From 1992 to 1994 he was a Senior Vice President of Crown Media, Inc. From 1989 to 1992 he was a Vice President of Operations of Jones Intercable, Inc. and from 1986 to 1989 he was a General Manager of Storer Cable TV of CT. Mr. Rabbit received a BA from the University of Bridgeport and an MA from Fairleigh Dickinson University. CURTIS S. SHAW joined Charter in February 1997 as Senior Vice President, General Counsel and Secretary, and is responsible for all legal aspects of Charter's business, including major transactions and the duties of the corporate secretary. Prior to joining Charter, Mr. Shaw served as corporate Counsel to NYNEX since 1988. From 1983 until 1988 Mr. Shaw served as Associate General Counsel for Occidental Chemical Corporation, and, from 1986 until 1988, also as Vice President and General Counsel of its largest operating division. Mr. Shaw has 24 years of experience as a corporate lawyer, specializing in mergers and acquisitions, joint ventures, public offerings, financing, and federal securities and antitrust law. Mr. Shaw received a BA with honors from Trinity College and JD from Columbia University School of Law. GLENN M. STINCHCOMB has been a director of Charter since March 1993. Mr. Stinchcomb has been a Vice President, Treasurer, and director of the Oklahoma Publishing Company ("OPUBCO") since October 1991. Mr. Stinchcomb was Chief Financial Officer and Treasurer of OPUBCO from 1974 to 1991, and Vice President of OPUBCO from 1986 to 1991. Mr. Stinchcomb is also a director of American City Business Journals, Inc. Mr. Stinchcomb has been affiliated with OPUBCO since 1958, and served as director, Vice President and Treasurer until 1995. He remains a director of OPUBCO and also serves as director of Gaylord and Western Pacific Airlines, Inc. THOMAS R. WALL, IV has been a director of the Issuer since February 1995. Mr. Wall has been a Managing Director of Kelso & Company since 1990. From 1986 to 1989, Mr. Wall was a Vice President of Kelso & Company. Mr. Wall is also a director of CCT, Mitchell Supreme Fuel Company, Mosler Inc., Peebles Inc., Tyler Refrigeration Corporation and AMF Holdings Inc. HOWARD L. WOOD is a co-founder and Chairman of the Management Committee of Charter. Prior to founding Charter, Mr. Wood was associated with Cencom. Mr. Wood joined Cencom in July 1987 as President, Chief Financial Officer and Director and assumed the additional position of Chief Executive Officer effective January 1, 1989. Prior to that time, Mr. Wood was employed by Arthur Andersen & Co., certified public accountants, where he served as Partner-in- Charge of the St. Louis Tax Division from 1973 until joining Cencom. Mr. Wood has been involved in the cable industry since 1976 when he assisted Robert A. Brooks in financing the building of the cable television systems of T.C. Industries, Inc. Mr. Wood is a certified public accountant and a member of the American Institute of Certified Public Accountants and serves as a director of Charter, VanLiner Group, Inc., First State Bank and St. Louis Regional Commerce and Growth Association. He is also a past Chairman of the Board and former director of the St. Louis College of Pharmacy. Mr. Wood graduated with honors from Washington University (St. Louis) School of Business. EXECUTIVE COMPENSATION AND OTHER INFORMATION During 1996, none of the executive officers of the Issuer has received any compensation in his or her capacity as an officer or director of the Issuer or as an employee of the CCE-I System and none of such individuals expects to receive any compensation in such capacity at any time in the future. Such individuals are compensated by Charter in their capacities as officers and employees of Charter. Charter performs management services for the Company and other companies pursuant to the terms of management agreements including the management agreement between Charter and CCE-I. See "Business--Management Agreements" and "Certain Relationships and Related Transactions." 83 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS THE PARTNERSHIP AGREEMENTS The Partnership Agreements of CCE-I and CCE-II each provide for, among other things, distributions to the partners of CCE-I and CCE-II, respectively, in accordance with their respective interests in such partnerships. Accordingly, 97.78% of all distributions by CCE-I and CCE-II will be made to CCE, L.P. The Issuer holds through CAC a 1% general partnership interest in CCE, L.P. and a 1.22% general partnership interest in CCE-I. CCT holds a 1% general partnership interest in CCE, L.P. and a 1% general partnership interest in CCE-II. Certain distributions as permitted pursuant to the terms of the Credit Facilities will be made by CCE-I and CCE-II directly to CAC and Cencom Cable, and such amounts may be distributed by CAC and Cencom Cable to the Issuer in order to service the Notes. The Partnership Agreement of CCE, L.P. provides for, among other things, (i) "Preferred Capital Accounts" for CAC and Cencom Cable, on the one hand, and CCT, on the other hand, the amounts of which correspond to the amounts owing pursuant to the Notes and the California Note, respectively (e.g., as of December 31, 1996, CCT's Preferred Capital Account was in the amount of $191,261,264, which was the principal amount of the California Note plus stated accrued interest as of such date, and CAC's and Cencom Cable's Preferred Capital Accounts were in the amounts of $40,773,599 and $64,069,803, respectively, which amounts total the aggregate principal amounts of the Notes plus accrued interest thereon from January 18, 1995 through December 31, 1996); (ii) "Preferred Returns" for those partners with Preferred Capital Accounts, such Preferred Returns to be equal to the interest accruing during the relevant period on the Notes and the California Note, respectively; and (iii) distributions of cash or other property such that (A) to the extent each of CAC, Cencom Cable and CCT has a positive balance in its Preferred Capital Account, (1) amounts distributed to CCE, L.P. by CCE-I will be distributed to CAC and Cencom Cable to the extent of and pro rata in accordance with the positive balances in their respective Preferred Capital Accounts and (2) amounts distributed to CCE, L.P. by CCE-II will be distributed to CCT to the extent of the positive balance in its Preferred Capital Account and (B) to the extent that any partner in CCE, L.P. has a positive balance in its Preferred Capital Account, distributions will be made to such partner to the extent of and in accordance with such positive Preferred Capital Account balance. Accordingly, while any amounts remain outstanding under both the Notes and the California Note, distributions to CCE, L.P. from CCE-I will be used solely to make distributions to CAC and Cencom Cable and distributions to CCE, L.P. from CCE-II will be used solely to make distributions to CCT. If the California Note is repaid prior to payment in full of all amounts payable under the Notes, then all distributions to CCE, L.P. from both CCE-I and CCE-II will be used to make distributions to CAC and Cencom Cable, and vice versa. Subject to certain restrictions, CCE, L.P. may establish New CCE Subsidiaries from time to time, which could have financing arrangements that result in the sharing with other creditors of distributions to CCE, L.P. from CCE-II and/or such New CCE Subsidiaries. In connection with the creation of New CCE Subsidiaries, the CCE, L.P. Partnership Agreement's distribution provisions may be amended. See "Description of Notes--Certain Covenants--Limitation on Changes to the CCE, L.P. Partnership Agreement." For financial reporting purposes, CAC's and Cencom Cable's preferred capital contributions in CCE, L.P. have been reflected as debt since CCE, L.P. is a guarantor of the Notes. Furthermore, interest accruing under the California Note is based on the average rate of interest over the life of the California Note (which approximates 15.43%) rather than the stated interest rate, which is used in determining the amount of the Preferred Return. See "Risk Factors--Segregation of Distributions to Service the Notes and the Guarantees; New CCE Subsidiaries," "Description of Other Indebtedness," "Description of Notes--General" and "Description of Notes--the Partnership Agreements." See also "Description of Notes--the Guarantees" for potential impact of the Guarantees on any distributions. THE GUARANTEES Pursuant to the Original HC Crown Loan Agreement, in connection with the contribution by CAC and Cencom Cable, respectively, of the Crown Systems to CCE, L.P., and the contribution by CCE, L.P. of the Crown Systems to CCE-I, each of CAC, Cencom Cable and CCE, L.P. irrevocably guaranteed on a subordinated basis the obligations on the Notes. The Guarantees, which were amended and restated on November 15, 1996 84 and were further amended and restated on substantially the same terms and became part of the Indenture immediately prior to the sale of the Old Notes are limited by their terms to the proceeds of distributions received by the Guarantors from CCE-I. The CCE, L.P. Guarantee cannot be enforced until the indefeasible repayment in full in cash of and termination of commitments to lend under the CCE-I Credit Facility, the CCE-II Credit Facility, any other senior indebtedness of CCE-II and senior indebtedness of New CCE Subsidiaries. Thus, unlike the partnership agreement of CCE, L.P. which allows, provided that the CCE-II Credit Facility is indefeasibly repaid in full, for CCE-II funds to repay the California Note, the Guarantees do not enable any CCE-II or New CCE Subsidiaries funds to be applied to the Notes, except as otherwise provided herein. The CAC Guarantee and the Cencom Cable Guarantee cannot be enforced until the indefeasible repayment in full of and termination of commitments to lend under the CCE-I Credit Facility. STOCKHOLDERS' AGREEMENT The Issuer, Charter and Kelso have entered into a stockholders' agreement ("Stockholders' Agreement") restricting the transfer by Charter and Kelso of the common stock of the Issuer held by them except under certain circumstances. The Stockholders' Agreement provides Charter with certain rights to sell common stock if Kelso sells common stock to a third party, and provides Kelso with certain rights to cause Charter to sell its common stock to a third party if Kelso sells all of its common stock to such third party. Pursuant to the Stockholders' Agreement, the Issuer has a right of first refusal to purchase shares in connection with a proposed sale of common stock by Charter to a third party, and Charter has a right of first negotiation pursuant to which it may make an offer to purchase common stock owned by Kelso before Kelso negotiates with a third party with respect to a sale of its common stock. In the event that the Management Agreement (defined below) is terminated, or the term of the Management Agreement ends without being extended by the parties, Charter has the right to cause the Issuer to purchase its shares of common stock, and the Issuer has the right to cause Charter to sell its shares of common stock to the Issuer. The Stockholders' Agreement provides that, in the event of a sale of all of the common stock of the Issuer by Charter and Kelso, or the sale of all of the assets of the Issuer, any cash to be paid or distributed to Charter and Kelso shall be allocated based upon the ownership percentages of Charter and Kelso in the Issuer subject to certain adjustments based on criteria set forth in the Stockholders' Agreement. The Stockholders' Agreement provides that, until the earliest of January 18, 2005, the closing of an initial public offering or the termination of the Management Agreement, three of the five members of the board of directors of the Issuer will be chosen by KIA V and two will be chosen by Charter. REGISTRATION RIGHTS AGREEMENT The Issuer, Charter and Kelso have entered into a registration rights agreement ("Registration Rights Agreement") pursuant to which Charter and Kelso have certain rights with respect to the registration of the shares of common stock of the Issuer. The Registration Rights Agreement provides that any stockholder that owns 50% or more of the "Registrable Securities" of the Issuer (defined as common stock of the Issuer beneficially owned by Charter, Kelso or their successors or assignees) has the right to make four requests that the Issuer effect registration under the Securities Act of the Registrable Securities held by such stockholder. Kelso owns more than 50% of the stock of the Issuer. The Registration Rights Agreement also provides that at any time after an initial public offering of equity securities of the Issuer, Charter will have the right to make up to two requests that the Issuer effect registration under the Securities Act of any of the Registrable Securities held by Charter. In the event that the Issuer proposes to register any of its equity securities under the Securities Act, the Registration Rights Agreement provides that the Issuer must give notice to all holders of Registrable Securities and, upon request of any such holder, use its best efforts to effect the registration of the Registrable Securities held by such person, subject to customary cut-back provisions. CONTINGENT PAYMENT AGREEMENT Pursuant to an agreement entered into among the Gaylord Affiliate, CCE, L.P. and CCT ("Contingent Payment Agreement") in connection with the California Note, until such time as the California Note is paid in 85 full, the holders of the California Note are entitled to certain protections upon the occurrence of certain of the following events. The Contingent Payment Agreement provides for payments to be made to the Gaylord Affiliate if the California Note remains unpaid and CCT receives a distribution from CCE, L.P., CCE-I or CCE-II that is not used by CCT to pay outstanding principal on the California Note or certain expenses. The Contingent Payment Agreement also provides that if Kelso or Charter sells any equity securities of CCT, or if CCT or the Issuer sells any assets, including the partnership interests of either in subsidiary partnerships, then CCE, L.P. will be required to pay the Gaylord Affiliate an amount determined according to formulas set forth in the Contingent Payment Agreement. The ability of CCE, L.P. to make any of the foregoing payments to the Gaylord Affiliate is limited by the terms of the Indenture, which preclude certain distributions by CCE, L.P. and CCE-I until the CCE-I Credit Facility and the Notes are paid in full. See "Description of the Notes -- Certain Covenants -- Limitation on Restricted Payments." The Contingent Payment Agreement further provides that upon an initial public offering by CCT, CCE, L.P. or the Issuer, the Gaylord Affiliate will receive certain amounts of the publicly-offered securities. MANAGEMENT AGREEMENTS Pursuant to certain management agreements entered into between CCE-I and Charter (the "Management Agreement"), Charter is responsible for managing the day-to-day operations of the Systems. The term of the Management Agreement is 10 years, subject to earlier termination for Cause (as defined in the Management Agreement) or upon the sale of the Systems which are the subject of the Management Agreement. Annual management fees paid to Charter by CCE-I with respect to the year ended December 31, 1996 were $4.5 million in addition to an accrued but unpaid bonus of approximately $1.8 million as of December 31, 1996, of which $.7 million was recorded during 1996. The payment of the bonuses is deferred until termination of the CCE-I Credit Facility. The base amount of annual management fees payable to Charter was $4,845,000 as of December 31, 1996. TRANSACTION AND ADVISORY FEES In connection with specific acquisitions and financing transactions by CCE- I, Kelso & Company and Charter are typically each paid financial advisory and investment banking fees. Such fees are calculated as a percentage of the transaction, based upon the size of the transaction. Kelso & Company received investment banking fees of approximately $1.1 million with respect to the year ended December 31, 1996. Charter received investment banking fees of approximately $1.1 million with respect to the year ended December 31, 1996. The financial advisory fees paid to Kelso & Company were approximately $0.5 million with respect to the year ended December 31, 1996. Kelso & Company's annual financial advisory fee from CCE-I for fiscal year 1997 was initially established at approximately $552,500 as of December 31, 1996. In the event New CCE Subsidiaries are formed below CCE, L.P., Kelso & Company will receive annual financial advisory fees from such New CCE Subsidiaries. 86 PRINCIPAL SECURITYHOLDERS SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS The following table sets forth, as of December 31, 1996, the ownership of the Issuer. Kelso and certain other individuals, on the one hand, and Charter, on the other hand, own 85% and 15%, respectively, of the outstanding capital stock of the Issuer, with distributions on exit varying depending on rates of return on the stockholders' equity investment in the Issuer. For a more detailed discussion of certain ownership interests of the Issuer see "Business--Background and Ownership Structure."
NAME AND ADDRESS % OF OF BENEFICIAL OWNERS TYPE OF INTEREST COMMON STOCK - -------------------- ---------------- ------------ KELSO INVESTMENT ASSOCIATES V, L.P.(1)............ Common Stock 85.0%(2) 320 Park Avenue 24th Floor New York, New York 10022 CHARTER COMMUNICATIONS, INC....................... Common Stock 15.0% 12444 Powerscourt Drive Suite 400 St. Louis, Missouri 63131
- -------- (1) The General Partner of KIA V is Kelso Partners V, L.P., the general partners of which are: Frank T. Nickell, George E. Matelich, Thomas R. Wall, IV and Joseph S. Schuchert, all of whom may be deemed to beneficially own all the shares held of record by KIA V, all of whom disclaim such beneficial ownership, and three of whom, Messrs. Nickell, Matelich and Wall, are directors of the Issuer. (2) The percentage of Common Stock includes shares owned by another limited partnership which is an affiliate of KIA V and certain unaffiliated designees of KIA V. KIA V does not beneficially own the shares of Common Stock owned by such designees. 87 DESCRIPTION OF NOTES $82.0 million aggregate principal amount of Old Notes were issued pursuant to the Indenture dated as of February 13, 1997 between the Issuer and Harris Trust and Savings Bank, as Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended ("Trust Indenture Act") and in effect on the Closing Date. The Notes are subject to all such terms, and the following summary of certain provisions of the Indenture does not purport to be complete and is qualified in its entirety by reference to the Indenture, including the definitions therein of certain terms used below. The definitions of certain terms used in the following summary are set forth below under "-- Certain Definitions." The Indenture is an exhibit to the Registration Statement of which this Prospectus is a part. The terms of the New Notes are identical in all materials respects to the Old Notes, except that the New Notes will not contain certain transfer restrictions and registration and other rights relating to the exchange of the Old Notes for New Notes. The Trustee will authenticate and deliver New Notes for original issue only in exchange for a like principal amount of Old Notes. Any Old Notes that remain outstanding after the consummation of the Exchange Offer, together with the New Notes, will be treated as a single class of securities under the Indenture. GENERAL The Notes are unsecured obligations of the Issuer and are subordinated in right and priority of payment to all existing and future indebtedness of the Issuer, other than indebtedness that by its terms is expressly subordinated to the Notes. The Notes can only be held or transferred in denominations of $1.0 million or more. The obligations on the Notes are guaranteed on a subordinated basis by two subsidiaries of the Issuer and by CCE, L.P. Initially, the Trustee will act as Paying Agent and Registrar for the Notes. The Notes may be presented for registration or transfer and exchange at the offices of the Registrar, which initially will be at the Trustee's corporate trust office. The Issuer may change any Paying Agent and Registrar without notice to holders of the Notes. The Issuer will pay principal, premium, if any, and interest on the Notes at the Trustee's corporate office in New York, New York. The Notes will be issued only in fully registered form, without coupons, in denominations of $1.0 million or more. The Issuer and the Guarantors are holding companies that currently conduct substantially all their business through CCE-I and CCE-II. The Issuer and the Guarantors control CCE-I (but not CCE-II) and are primarily dependent upon distributions from CCE-I and its subsidiaries to service the Notes and the Guarantees. The Notes, except under certain limited circumstances, will not have the benefit of distributions from CCE-II or any other affiliated entities that are not controlled by the Issuer or the Guarantors. The Guarantees, by their terms, are limited to the proceeds of distributions received by the Guarantors from CCE-I. The CCE, L.P. Guarantee cannot be enforced until the indefeasible repayment in full of and termination of commitments to lend under both the CCE-I Credit Facility, the CCE-II Credit Facility, any other senior indebtedness of CCE-II and any senior indebtedness of New CCE Subsidiaries. The CAC Guarantee and the Cencom Cable Guarantee cannot be enforced until the indefeasible repayment in full of and termination of commitments to lend under the CCE-I Credit Facility. The Issuer's and the Guarantors' only indebtedness other than the Notes was approximately $55.5 million of deferred income taxes. As of December 31, 1996, the aggregate indebtedness of CCE-I (including current liabilities of approximately $28.9 million and other long-term liabilities of approximately $2.5 million) was approximately $493.5 million. Subject to certain limitations, the Indenture permits the formation of New CCE Subsidiaries below CCE, L.P. in the corporate structure and the contribution of additional assets to existing Subsidiaries of CCE, L.P. New CCE Subsidiaries may engage in the cable television business or other businesses. In connection with their 88 businesses, New CCE Subsidiaries and, in connection with such asset contributions to existing Subsidiaries, such existing Subsidiaries may establish senior credit facilities and other financing arrangements (debt and/or equity), which may establish a basis for a new or revised preferred capital account in CCE, L.P. Once the applicable financing arrangement is repaid, the existence of the aforementioned new or revised preferred capital account in CCE, L.P. could result in any further distributions to CCE, L.P. from CCE-II or any New CCE Subsidiaries being shared pro rata between the Notes and any such new or existing financing arrangements (with such sharing to be based upon the then outstanding preferred capital accounts in CCE, L.P.). Holders of the Notes should not rely on any distributions from CCE-II or any New CCE Subsidiaries for payment of principal or interest on the Notes. In connection with the creation of New CCE Subsidiaries or the contribution of additional assets to existing Subsidiaries of CCE, L.P., the CCE, L.P. Partnership Agreement's distribution provisions may be amended. For example (and without limiting the arrangements which could be entered into by a New CCE Subsidiary), in the event one or more New CCE Subsidiaries are formed below CCE, L.P. in the corporate structure through the acquisition of new assets or equity interests and the issuance by an affiliate of CCE, L.P. of a note payable to the sellers of such assets or equity interests (i.e., a purchase money note, as was the case in the California Transaction and the Crown Transaction), then the CCE, L.P. Partnership Agreement can be amended, so that (i) rather than all distributions to CCE, L.P. from CCE-II being available to service the Notes after payment of the California Note, such distributions would instead be available pro rata based on preferred capital accounts to service both the Notes and any new purchase money note owed to such sellers and (ii) all cash generated by any New CCE Subsidiary would be used first to repay any senior credit facility entered into by such New CCE Subsidiary to accomplish the related acquisition. Any amounts thereafter distributed to CCE, L.P. would be used next to repay any new purchase money note, and after such new purchase money note is repaid, such distributions from such New CCE Subsidiary to CCE, L.P. would be available pro rata to service the Notes, the California Note and any other outstanding purchase money notes. Such credit facilities, other financing arrangements and asset contributions and the existence of new or revised preferred capital accounts will not affect distributions to the Issuer from CAC, Cencom Cable, CCE, L.P. (to the extent the funds to be distributed by CCE, L.P. were obtained from CCE-I) or CCE-I. PRINCIPAL, MATURITY AND INTEREST The Stated Maturity Date of the Notes is December 31, 1999. Interest accrues on the Notes at an annual rate of 13%, compounded semi-annually, until the Stated Maturity Date. If principal plus accrued interest on the Notes is not paid at the Stated Maturity Date, the annual rate at which interest accrues on the Notes will initially increase to 18% and will increase by an additional 2% on each successive anniversary of the Stated Maturity Date (up to 26%), compounded semi-annually, until the Notes are repaid. In addition to the foregoing, the interest rate on the Notes shall be increased by the Default Rate of 3% per annum if certain other events of default occur and are continuing. The maximum interest rate on the Notes is 29% per annum subject to any applicable legal restrictions. As of December 31, 1996, accrued interest on the Notes was $22,843,402. For U.S. Federal income tax purposes, purchasers of the Notes will be required to include amounts in gross income generally in advance of the receipt of the cash payments to which the income is attributable. See "Certain Federal Income Tax Consequences." The Notes are not entitled to the benefit of any mandatory sinking fund. OPTIONAL REDEMPTION The Notes are redeemable, at the Issuer's option in whole at any time or in part from time to time, without premium or penalty, provided that any such prepayment of principal shall include all accrued interest on the amount prepaid. 89 SUBORDINATION Subordination Provisions Applicable to All Senior Debt of the Issuer The payment of all Obligations on the Notes is subordinated in right of payment to the prior payment in full in cash of all obligations owing in respect of the Senior Debt. Upon any distribution to creditors upon dissolution, winding-up, liquidation or reorganization of the Issuer (whether voluntary or involuntary and whether in bankruptcy, insolvency or receivership proceedings or upon an assignment for the benefit of creditors or any other marshalling of the assets and liabilities of the Issuer or otherwise), all obligations due in respect of all Senior Debt will first be paid in full in cash, before any payment or distribution of any kind or character is made on the account of any Obligations in respect of the Notes. If any default occurs and is continuing in the payment when due, whether at maturity, acceleration or otherwise with respect to any Senior Debt, no payment of any kind or character shall be made by or on behalf of the Issuer or any of its Subsidiaries with respect to any Obligations in respect of the Notes or to acquire any of the Notes for cash or property. By reason of such subordination, in the event of the insolvency of the Issuer, creditors of the Issuer who are not holders of Senior Debt, including the holders of the Notes, may recover less, ratably, than holders of Senior Debt. Special Subordination Provisions Relating to CCE-I Credit Facility The Indenture provides that no holder will exercise any right or remedy against the Issuer or any of its Subsidiaries with respect to the Indenture or any Note until after the earlier of the CCE-I Credit Facility Termination Date and January 18, 2019, provided that: (a) Upon the election of holders of a majority in principal amount of the Notes, the holders may exercise the right to pursue a claim of specific performance or an injunction against the Issuer: (i) unless expressly permitted by the terms of the Indenture, if the Issuer merges or consolidates with or permits any Restricted Subsidiary (other than CCE-I and any of its Subsidiaries) to merge or consolidate with, any entity and the Issuer or such Restricted Subsidiary is not the survivor of such merger or consolidation (other than a merger between two Restricted Subsidiaries, a merger between the Issuer and a Restricted Subsidiary in which the Issuer is the surviving entity or a merger of a Restricted Subsidiary with another entity in which either such Restricted Subsidiary is the surviving entity or such other entity becomes a Restricted Subsidiary of the Issuer); or (ii) unless expressly permitted by the terms of the Indenture, if the Issuer sells, leases or otherwise disposes of, or permits any of its Restricted Subsidiaries to sell, lease or otherwise dispose of assets (other than cable television assets sold in exchange for other cable television assets pursuant to an asset swap transaction or series thereof) which generate Adjusted Consolidated Annualized Operating Cash Flow (including all such dispositions by the Issuer and its Restricted Subsidiaries) representing more than 50% of CCE-I's Adjusted Consolidated Annualized Operating Cash Flow (as determined by reference to the most recent audited annual financial statements of the Issuer which are required to be delivered to the holders under the Indenture prior to such sale, lease or other disposition) in any transaction or series of transactions (other than sales in the ordinary course of business); or (iii) if the Issuer incurs, or permits any Restricted Subsidiary to incur, Indebtedness for Money Borrowed, which, when consolidated with all Indebtedness for Money Borrowed of the Issuer on an Adjusted Consolidated basis (excluding the Indebtedness for Money Borrowed represented by or otherwise arising in respect of the Notes or the Indenture), causes the Adjusted Consolidated Indebtedness of the Issuer (other than the Indebtedness represented by the Notes) to exceed at the end of any calendar quarter period ending after December 31, 1996, 7.0 times its Adjusted Consolidated Annualized Operating Cash Flow for such quarter; or 90 (iv) if the Issuer or its Restricted Subsidiaries (other than CCE-I and its Subsidiaries) incur Indebtedness for Money Borrowed (other than that evidenced by the Notes and the Indenture) which is senior in right of payment of principal or interest by its terms to the Notes, but subordinated in right of payment of principal or interest by its terms to the CCE-I Credit Facility; or (v) if the Issuer breaches the terms of the covenants referenced under paragraph (c) of "Certain Covenants--Limitation on Asset Sales"; or paragraph (a) of "Certain Covenants--Limitation on Restricted Payments" herein. (b) Upon the occurrence of an Event of Default, the holders may exercise the right to cause interest to accrue on the unpaid principal amount of the Notes at the interest rate then in effect, including, if applicable, the Default Rate of interest described in Section 10.01 of the Indenture and the penalty rate of interest described in the proviso in paragraph (b) under the section entitled "Events of Default." (c) Under the Subordination Agreement, the payment of all Obligations in respect of the Notes is subordinated in right of payment to the prior indefeasible payment in full in cash of all obligations of CCE-I under the CCE-I Credit Facility. In the event of any dissolution of the Issuer, the lenders under the CCE-I Credit Facility are entitled to collect and receive any payments or distributions which may be payable with respect to the Notes. As long as the obligations under the CCE-I Credit Facility have not been indefeasibly paid in full in cash and all commitments to lend in respect thereof have not been terminated, the holders may not, prior to January 18, 2019, compel payment of the Notes, or accelerate the maturity of the Notes upon the occurrence of a default under the Notes (including a payment default), nor may the holders commence any proceedings (other than as permitted under clause (a) above) against the Issuer with respect to the Obligations under the Notes. (d) In accordance with the Indenture, by accepting a Note each holder authorizes and directs the Trustee, on such holder's behalf, to take such action as may be necessary or appropriate to effectuate, as between the holders of Senior Debt and the holders, the subordination provided in the subordination provisions of the Indenture, including executing and delivering a Subordination Agreement, and appoints the Trustee his attorney-in-fact for any and all such purposes and acknowledges that such holder will be bound by such provisions and such agreement. THE GUARANTEES Pursuant to the Original HC Crown Loan Agreement, in connection with the contribution by CAC and Cencom Cable, respectively, of the Crown Systems to CCE, L.P., and the contribution by CCE, L.P. of the Crown Systems to CCE-I, each of CAC, Cencom Cable and CCE, L.P. irrevocably guaranteed on a subordinated basis the obligations on the Notes. The Guarantees, which were amended and restated as of November 15, 1996 and which were further amended and restated on substantially the same terms and became part of the Indenture on February 13, 1997, by their terms, are limited to the proceeds of distributions received by the Guarantors from CCE-I. The CCE, L.P. Guarantee cannot be enforced until the indefeasible repayment in full in cash of and termination of commitments to lend under the CCE-I Credit Facility, the CCE-II Credit Facility, any other senior indebtedness of CCE-II and senior indebtedness of New CCE Subsidiaries. The CAC Guarantee and the Cencom Cable Guarantee cannot be enforced until the indefeasible repayment in full in cash of and termination of commitments to lend under the CCE-I Credit Facility. THE PARTNERSHIP AGREEMENTS By the terms of the partnership agreements of CCE-I, CCE-II and CCE, L.P., distributions from CCE-I, when permissible, are to go to CAC and Cencom Cable and distributions from CCE-II, when permissible, are to go to CCT (or a subsidiary thereof); provided, however, that if the obligations owing under the Credit Facilities (including refinancings thereof) are indefeasibly paid in full in cash and all commitments to lend in respect thereof are terminated, then (x) if the Notes are outstanding and the California Note has been repaid, all distributions related to CCE-II are to go to CAC and Cencom Cable to make payments on the Notes (if the California Note has not been repaid, then such distributions are to go to CCT to make payments on the California 91 Note) or (y) if the Notes have been repaid and the California Note is outstanding, all distributions related to CCE-I are to go to CCT (or a subsidiary thereof) to make payments on the California Note. Subject to certain limitations, the Indenture permits the formation of New CCE Subsidiaries below CCE, L.P. in the corporate structure and the contribution of additional assets to existing Subsidiaries of CCE, L.P. New CCE Subsidiaries may engage in the cable television business or other businesses. In connection with their businesses, New CCE Subsidiaries and, in connection with such asset contributions to existing Subsidiaries, such existing Subsidiaries, may establish senior credit facilities and other financing arrangements (debt or equity), which may establish a basis for a new or revised preferred capital account in CCE, L.P. Once the applicable financing arrangement of CCE-II or any New CCE Subsidiary is repaid, the existence of the aforementioned new or revised preferred capital account could result in any further distributions to CCE, L.P. from CCE-II or any New CCE Subsidiary being shared pro rata between the Notes and any such new or existing financing arrangements (with such sharing to be based upon the then outstanding preferred capital accounts in CCE, L.P.). Holders of the Notes should not rely on any distributions from CCE-II or any New CCE Subsidiaries for payment of principal or interest on the Notes. Moreover, in connection with the creation of New CCE Subsidiaries or the contribution of additional assets to existing Subsidiaries of CCE, L.P., the CCE, L.P. Partnership Agreement's distribution provisions may be amended. See "Certain Covenants--Limitation on Changes to CCE, L.P. Partnership Agreement." For example (and without limiting the arrangements which could be entered into by a New CCE Subsidiary), in the event one or more New CCE Subsidiaries are formed below CCE, L.P. in the corporate structure through the acquisition of new assets or equity interests and the issuance by an affiliate of CCE, L.P. of a note payable to the sellers of such assets or equity interests (i.e., a purchase money note, as was the case in the California Transaction and the Crown Transaction), then, the CCE, L.P. Partnership Agreement can be amended, so that (i) rather than all distributions to CCE, L.P. from CCE-II being available to service the Notes after payment of the California Note, such distributions would instead be available pro rata based on preferred capital accounts to service both the Notes and any new purchase money note owed to such sellers and (ii) all cash generated by any New CCE Subsidiary would be used first to repay any credit facility entered into by such New CCE Subsidiary to accomplish the related acquisition. Any amounts thereafter distributed to CCE, L.P. would be used next to repay any new purchase money note, and after such new purchase money note is repaid, such distributions from such New CCE Subsidiary to CCE, L.P. would be available pro rata to service the Notes, the California Note and any other outstanding purchase money notes. Such credit facilities, other financing arrangements and asset contributions and the existence of new or revised preferred capital accounts will not affect distributions to the Issuer from CAC, Cencom Cable, CCE, L.P. (to the extent the funds to be distributed by CCE, L.P. were obtained from CCE-I) or CCE-I. CERTAIN COVENANTS The Indenture contains, among others, the following covenants: Limitation on Additional Indebtedness (a) The Issuer will not permit the Adjusted Consolidated Indebtedness of the Issuer (other than any Indebtedness represented by the Notes) at the end of any calendar quarter after December 31, 1996, to exceed 6.75 times its Adjusted Consolidated Annualized Operating Cash Flow for such quarter. (b) The Issuer will not permit any Indebtedness of the Issuer and the Restricted Subsidiaries (other than that evidenced by the Notes) which is subordinated to the Senior Debt, whether as to right of payment of principal or interest or otherwise, to not be subordinated to the Indebtedness evidenced by the Notes to the same extent that the Indebtedness evidenced by the Notes is subordinated to the Senior Debt under the subordination provisions of the Indenture. (c) The Issuer will not incur any Indebtedness which would be reasonably expected, in the circumstances at the time of incurrence, to cause the Issuer to violate the provisions of paragraph (a) of this covenant. (d) The Issuer will not, on or after the date when the ratio of the Adjusted Consolidated Indebtedness of the Issuer for Money Borrowed (other than any Indebtedness represented by the Notes) to its Adjusted Consolidated Annualized Operating Cash Flow is less than 5.0 to 1, permit the extension of any maturity date under the CCE-I Credit Facility beyond July 17, 2005 without the consent of the holders of a majority in principal amount of the Notes. 92 Operating Cash Flow The Issuer will not permit the Adjusted Consolidated Annualized Operating Cash Flow of the Issuer, for the three months ending on the last day of each calendar quarter, to be less than 1.2 times its total Adjusted Consolidated Debt Service for the 12 months ending on such last day. Limitation on Indebtedness of CCE, L.P. The Issuer will not permit CCE, L.P. to incur any Indebtedness (including, without limitation, the issuance of any guarantees) other than (a) the Guarantee of the Notes issued by CCE, L.P., and (b) Indebtedness to the Issuer or any of its Subsidiaries to the extent such Indebtedness is subordinate to CCE, L.P.'s Guarantee of the Notes. Limitation on Changes to the CCE, L.P. Partnership Agreement The Issuer will not permit any amendment, modification or other change to the CCE, L.P. Partnership Agreement, other than amendments, modifications or other changes (a) which do not alter the priority, amount and timing of distributions (or remedies with respect thereto) to partners of CCE, L.P. to be made out of the proceeds of distributions received by CCE, L.P. from its Subsidiaries (including, without limitation, CCE-I), or (b) in connection with the creation of one or more New CCE Subsidiaries (and the admission of additional partners resulting therefrom) or the contribution of additional assets to an existing Subsidiary of CCE, L.P., provided that (x) no distributions to CCE, L.P. from such New CCE Subsidiary or CCE-II may be distributed by CCE, L.P. to its partners other than to repay any outstanding CCE Purchase Money Indebtedness incurred in connection with acquiring assets or equity interests owned or to be owned, directly or indirectly, by the New CCE Subsidiary making the distribution or CCE-II, respectively, and provided that any such distributions remaining after the payment in full of such CCE Purchase Money Indebtedness shall be used to repay, on a pro rata basis based on the aggregate amounts owed, any other CCE Purchase Money Indebtedness outstanding, and shall thereafter be used to make distributions to CCE, L.P.'s partners and (y) such amendment, modification or other change does not alter the priority, amount and timing of distributions (or remedies with respect thereto) to partners of CCE, L.P. to be made out of the proceeds of distributions received by CCE, L.P. from CCE-I. Limitation on Asset Sales (a) The Issuer will not sell, lease or otherwise dispose of, or permit any of its Restricted Subsidiaries to sell, lease or otherwise dispose of, an aggregate (including all such dispositions by the Issuer and its Restricted Subsidiaries) of more than 10% of CCE-I's assets in any transaction or series of transactions (other than sales in the ordinary course of business) or sell, lease or otherwise dispose of any of CCE-I's cable television systems; provided that (A) the Issuer or any of its Restricted Subsidiaries may exchange any and all of its cable television systems and related property for cable television systems and related property of unrelated third parties on terms that are commercially reasonable to CCE-I; (B) the Issuer and the Restricted Subsidiaries may make sales of assets but only to the extent they comply with the paragraph (b) below; (C) the Issuer and its Restricted Subsidiaries may transfer assets to a "joint venture subsidiary" (defined in paragraph (c) below) but only to the extent the Issuer complies with the paragraph (c) below; and (D) the Issuer and the Restricted Subsidiaries may otherwise make sales if, but only if, the Issuer and the Restricted Subsidiaries have made arrangements reasonably satisfactory to the holders of a majority in principal amount of the Notes to apply the entire after-tax proceeds of any such sale to payment of the outstanding principal of and accrued interest on the Notes, it being understood that the satisfaction and discharge of the Indenture in the manner described under "Satisfaction and Discharge" shall be deemed an arrangement reasonably satisfactory to such holders for the application of such proceeds pursuant to this clause (D); provided, further, that, in connection with any such sale, lease or other disposition of assets by the Issuer or one of its Restricted Subsidiaries to an Affiliate of such Person (other than a sale, lease or other disposition the proceeds of which are promptly applied to repay in full in cash all amounts, including principal and accrued and unpaid interest owing on the Notes, whether or not then due and payable), such Person shall first obtain an opinion from an investment banking or brokerage firm which is nationally recognized for its expertise in the cable television industry to the effect that such transaction is fair to all holders of Notes from a financial point of view. 93 (b) After the sale by CCE-I of any cable television property owned directly by it, the Issuer (A) will cause the entire cash net proceeds of such sale to be used to pay down the Senior Debt and (B) thereafter will maintain the Senior Debt at a level not in excess of the level to which such Senior Debt has been paid down plus $20.0 million (the "New Senior Debt Level"); provided that at any time during the 24 month period following any such sale, the Issuer may increase the level of Senior Debt beyond the New Senior Debt Level solely to the extent such increase arises from acquisition borrowings to acquire cable television properties in any of the Issuer's and its Restricted Subsidiaries' Areas of Dominant Influence. (c) Except as permitted under the "Merger or Consolidation" covenant, the Issuer will not permit the transfer of any or all of the cable television properties of the Issuer or the Restricted Subsidiaries to one or more Restricted Subsidiaries which is not wholly owned by the Issuer or such Restricted Subsidiary (the "joint venture subsidiary(ies)"), unless (A) all Restricted Subsidiaries of the Issuer which hold an interest in the joint venture subsidiary or subsidiaries provide a guarantee of, or an assumption agreement for, the Notes and (B) such transfer does not otherwise materially disadvantage the holders of the Notes in connection with their rights, position and powers under the Notes. Limitation on Restricted Payments (a) The Issuer will not directly or indirectly, declare or pay any dividend on, or make any distribution to the holders of any class of its Capital Stock in respect of such shares of Capital Stock (including pursuant to a merger or consolidation of the Issuer), other than dividends or distributions payable solely in Capital Stock of the Issuer. Neither the Issuer nor any of its Subsidiaries may purchase, redeem or otherwise acquire or retire for value any of the Capital Stock of the Issuer. (b) Except for distributions by CCE, L.P. in accordance with the CCE, L.P. Partnership Agreement, the Issuer will not permit any of its Restricted Subsidiaries, directly or indirectly, to declare or pay any dividend or make any distribution other than (i) dividends or distributions to the Issuer or to another Restricted Subsidiary which declares or pays or distributes the full amount of any such dividend or makes any such distribution, directly or indirectly, to the Issuer and the Issuer uses such dividend or distribution towards the repayment of the Notes, (ii) dividends or distributions by CCE-I to CCT, as a limited partner of CCE-I, pursuant to the CCE-I Partnership Agreement and (iii) dividends or distributions by any subsidiary of CCE-I (a "CCE-I Subsidiary") to CCE-I or another CCE-I Subsidiary that is a parent company of such CCE-I Subsidiary, provided that the proceeds of such dividends or distributions in the case of this clause (iii) are (A) retained by CCE-I or such other CCE-I Subsidiary, (B) used to repay indebtedness of CCE-I or such other CCE-I Subsidiary or (C) otherwise used in a manner not violative of the terms of the Indenture. Change of Control The Issuer will not, except with the approval of holders of a majority of the principal amount of the Notes (such approval not to be unreasonably withheld), suffer, permit or allow to occur any voting arrangement, proxy, assignment, pledge or other transfer with respect to or of its shares so that one or more of KIA V and its affiliates, the directors of Kelso & Company and Charter own and vote directly or indirectly less than 51 percent of the voting shares (i.e., shares entitled to elect a majority of the directors) of the Issuer, provided that after the Issuer completes an initial public offering of the voting shares, such percentage may be less than 51 percent so long as a majority of the Issuer's directors are nominees of one or more of KIA V and its affiliates and the directors of Kelso & Company and Charter. Change of Management (a) The Issuer will not suffer or permit any company or entity not approved by the holders of a majority in principal amount of the Notes (such approval not to be unreasonably withheld), other than Charter to manage any of the cable television properties of CCE-I. For purposes of this covenant, if one or more of Howard Wood, Jerald Kent or Barry Babcock (or any other person reasonably acceptable to the holders of a majority in principal amount of the Notes) and their heirs at law, collectively, own and vote less than 51 percent of the voting shares of Charter, the Issuer will be deemed to have violated this covenant. 94 (b) The Issuer will not, without the approval of the holders of a majority in principal amount of the Notes (such approval not to be unreasonably withheld), suffer or permit Charter's principal executive or operating officers not to include at least one of Howard Wood, Barry Babcock or Jerald Kent. Change of Ownership of Restricted Subsidiaries The Issuer will not permit any new investment in a Restricted Subsidiary by a non-Affiliate, unless such investment is structured in such a way that (x) there is no adverse impact on the ability of the Issuer to repay the Notes, (y) the holders of the Notes have an interest as to distributions by such Restricted Subsidiary arising from the assets created or acquired as a direct or indirect result of such new investment which is subordinate only to the CCE-I Credit Facility and the obligations to repay Indebtedness or other forms of non-Affiliate financing related to such acquisition and (z) the Issuer continues to Control, directly or indirectly, CCE-I. The Issuer will not and will not permit any Restricted Subsidiary to dispose of any equity interest, whether direct or indirect, which it currently holds in CCE-I, other than to (i) the Issuer, (ii) another Restricted Subsidiary, or (iii) a third party, so long as such third party contributes cash or other assets to CCE-I and the equity interest received by such third party in distributions received from CCE-I will be subordinated to the preferred equity interest of CCE, L.P. in distributions received from CCE-I. Transactions with Affiliates (a) Except as permitted under the "Limitations on Restricted Payments" and "Merger or Consolidation" covenants and clause (a) of the "Limitation on Asset Sales" covenant, the Issuer will not permit CCE-I to, at any time engage in any transaction with an Affiliate, or make an assignment or other transfer of any of its properties or assets to an Affiliate on terms less advantageous to CCE-I than would be the case if such transactions had been effected on an arm's length basis with a non-Affiliate, other than any transaction (including the payment of fees and expenses) permitted under the CCE-I Credit Facility from time to time or, after the CCE-I Credit Facility Termination Date, consistent with past practice. In addition, CCE-I shall receive the full benefit of any discounts, rebates or special payment terms available to Charter (in its capacity as manager of the CCE-I Systems) which Charter (in such capacity) is permitted to pass through to CCE-I. (b) In addition, the Issuer will not permit any of CCE-I and any of the Restricted Subsidiaries to make any advance, loan, payment or cash distribution to Charter or KIA V or any of their respective Affiliates (other than Restricted Subsidiaries) before all Obligations in respect of the Notes are paid in full, other than as permitted under paragraph (a) above. Limitation on Intercompany Indebtedness The Issuer will not permit any Restricted Subsidiary to incur any Indebtedness to any Affiliate, other than Indebtedness to another Restricted Subsidiary or a direct or indirect Restricted Subsidiary of a Restricted Subsidiary, on terms less advantageous than would be the case if such loan had been effected on an arm's length basis with a non-Affiliate. Merger or Consolidation Except as permitted under clause (a) of the "Limitation on Asset Sales" covenant, the Issuer will not merge or consolidate with, or permit any Restricted Subsidiary to merge or consolidate with, any entity (other than a merger between two Restricted Subsidiaries, a merger between the Issuer and a Restricted Subsidiary in which the Issuer is the surviving entity or a merger of a Restricted Subsidiary with another entity in which either such Restricted Subsidiary is the surviving entity or such other entity becomes a Restricted Subsidiary of the Issuer). Restriction on Investing in Radio Operations The Issuer will neither invest nor permit any Restricted Subsidiary to invest more than $20.0 million in any Restricted Subsidiary thereof relating to the operation and ownership of licensed radio station(s) in the St. Louis, Missouri area. 95 Reporting and Information Requirements To the extent required by law, the Issuer will comply with the requirements to file reports with the SEC pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and will deliver any such reports to the Trustee and the holders within 30 days after the filing thereof with the SEC. If the Issuer does not file any such reports with the SEC, the Issuer will deliver to the Trustee (which shall make such information available to securities analysts and prospective purchasers of the Notes) and the holders, copies of the following: (a) within 45 days after the last day of each quarter (other than the fourth quarter) in each fiscal year, the unaudited consolidated statement of operations and statement of cash flows of the Issuer for such quarterly period and for the period from the beginning of the fiscal year to the end of such quarter and the unaudited consolidated balance sheet of the Issuer as of the end of such quarterly period; and (b) within 90 days after the end of each fiscal year, the consolidated statements of operations, shareholders' investment and cash flows of the Issuer for such fiscal year, and the consolidated balance sheet of the Issuer as of the end of such fiscal year. Certain other information and reports shall also be delivered to the Trustee and the holders. EVENTS OF DEFAULT (a) The following events are defined in the Indenture as "Events of Default": (i) The failure to pay, when due, principal of any Note; or (ii) The failure to pay, when due, interest on any Note, or any other amount due under the Indenture or under any Note and such failure shall have continued for a period of three business days; or (iii) Certain events of bankruptcy, insolvency or reorganization with respect to the Issuer; or (iv) A default in the performance or observance of any covenant contained in the Indenture and which default continues for a period of 30 business days after notice from any holder to the Issuer; or (v) A default by the Issuer (as principal or as guarantor or other surety), unless such default shall have been waived or cured, in any payment of principal of or interest on any Indebtedness for Money Borrowed (other than Indebtedness incurred under the Indenture and the Notes) in the aggregate amount of the lesser of $7.5 million or the amounts provided in the most nearly comparable provisions of the Senior Debt (the "Senior Debt Threshold") or, if such obligation or obligations is or are payable or repayable on demand, shall fail to pay or repay such obligation or obligations when demanded, in each case allowing any applicable grace period to lapse, or the Issuer shall default (unless such default has been waived or cured) in the observance of any covenant, term or condition contained in any agreement or instrument by which such obligation or obligations are created, secured or evidenced if the effect of such default is to cause all or part of such obligation or obligations to become due before its or their otherwise stated maturity; or (vi) One or more final judgments for the payment of money shall have been entered against the Issuer which judgment or judgments in the aggregate exceed the lesser of $7.5 million or the Senior Debt Threshold in the aggregate and which remain undischarged for a period (during which execution shall not be effectively stayed) of 30 days. (b) The Indenture provides that, subject in all cases to the terms of Article XIII of the Indenture, if an Event of Default occurs and is continuing or shall exist, (i) any holder, if an Event of Default occurs under paragraph (a)(i) or (a)(ii) above or (ii) the holders of a majority in principal amount of the Notes if an Event of Default occurs and is continuing other than under paragraph (a)(i) or (a)(ii) above, may, at such holder's option, by written notice to the Issuer or to the Trustee elect to declare the unpaid principal amount of the Notes which they hold, interest accrued thereon and all other amounts owed by the Issuer under the Indenture or under Notes which they hold to be immediately due and payable. Pursuant to the terms of Article XIII of the Indenture and the Second Amended and Restated Subordination Agreement made by the Trustee and dated as of February 13, 1997 (the "Subordination Agreement"), neither the holders nor the Trustee will be able to take action to cause the Issuer to make payment of principal or interest upon the occurrence of an Event of Default until the earlier of January 18, 2019 or payment in full of all amounts due on all Senior Debt. Until the Stated Maturity 96 Date, if an Event of Default occurs and shall be continuing for any reason other than under paragraph (a)(i) or (a)(ii) above, all principal, interest and other amounts due from the Issuer under the Notes shall bear the 13% per annum stated rate of interest set forth in Section 3.01 of the Indenture plus the Default Rate of 3% per annum set forth in Section 10.01 of the Indenture. If the Issuer fails to pay all of the outstanding principal on or prior to the Stated Maturity Date or all of the accrued and unpaid interest on or prior to the third day following the Stated Maturity Date, there shall be imposed upon the unpaid principal amount of each Note (in addition to the 13% per annum interest rate set forth in Section 3.01 of the Indenture and, for the applicable period, the 3% per annum Default Rate of interest set forth in Section 10.01 of the Indenture) a penalty rate of interest as follows (which shall accrue through the date of repayment and be based on a year of 360 days):
PER ANNUM PENALTY YEAR ENDING DECEMBER 31, RATE OF INTEREST ------------------------ ----------------- 2000.................................................. 5% 2001.................................................. 7% 2002.................................................. 9% 2003.................................................. 11% 2004 and thereafter................................... 13%
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE In addition to the Issuer's right to redeem the Notes in whole or in part at the option of the Issuer at any time, without premium or penalty, the Issuer may, at its option and at any time, elect to have the Obligations of the Issuer discharged with respect to the outstanding Notes ("defeasance"). Such defeasance means that the Issuer shall be deemed to have paid and discharged the entire indebtedness represented by the outstanding Notes and to have satisfied all other obligations under the Notes and the Indenture, except for (i) the rights of holders of the outstanding Notes to receive, solely from the trust fund described below, payments in respect of the principal of and interest on such Notes when such payments are due, (ii) the Issuer's obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes, and the maintenance of an office or agency for payment and money for security payments held in trust, (iii) the rights, powers, trusts, duties and immunities of the Trustee under the Indenture, and (iv) the defeasance provisions of the Indenture. In addition, the Issuer may, at its option and at any time, elect to have its obligations released with respect to certain covenants that are described in the Indenture ("covenant defeasance") and any omission to comply with such obligations shall not constitute a Default or an Event of Default with respect to the Notes. In the event that a covenant defeasance occurs, certain events (not including non-payment, bankruptcy and insolvency events) described under "--Events of Default" will no longer constitute Events of Default with respect to the Notes. In order to exercise either defeasance or covenant defeasance, (i) the Issuer will irrevocably (x) select a date for the payment of principal of and accrued interest on the outstanding Notes and (y) deposit with the Trustee, as trust funds in trust, for the benefit of the holders of the Notes, cash in United States dollars, U.S. Government Obligations (as defined in the Indenture), or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants or a nationally recognized investment banking firm, to pay and discharge the principal of and interest on the outstanding Notes to redemption or maturity, as the case may be; (ii) the Issuer will have delivered to the Trustee an opinion of counsel in the United States to the effect that the holders of the outstanding Notes will not recognize income, gain or loss for Federal income tax purposes as a result of such defeasance or covenant defeasance as the case may be, and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance or covenant defeasance had not occurred (in the case of defeasance, such opinion must refer to and be based upon a ruling of the Internal Revenue Service or a change in applicable Federal income tax laws); (iii) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or insofar as clause (iii), under the first paragraph under "--Events of Default" is concerned, at any time during the period ending on the 91st day after the date of such deposit; (iv) such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a Default under, the 97 Indenture or any other agreement or instrument to which the Issuer is a party or by which it is bound; (v) the Issuer shall have delivered to the Trustee an opinion of counsel to the effect that (A) the trust funds will not be subject to any rights of holders of Indebtedness (other than holders of the Notes) and (B) after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; and (vi) the Issuer will have delivered to the Trustee an officers' certificate and an opinion of counsel, each stating that all conditions precedent under the Indenture to either defeasance or covenant defeasance, as the case may be, have been complied with and that no violations under agreements governing any other outstanding Indebtedness would result therefrom. SATISFACTION AND DISCHARGE The Indenture will cease to be of further effect (except as to surviving rights of registration or transfer or exchange of the Notes, as expressly provided for in the Indenture) as to all outstanding Notes when (i) either (a) all the Notes theretofore authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid) have been delivered to the Trustee for cancellation or (b) all Notes not theretofore delivered to the Trustee for cancellation have become due and payable and the Issuer has irrevocably deposited or caused to be deposited with the Trustee an amount in United States dollars sufficient to pay and discharge the entire indebtedness on the Notes not theretofore delivered to the Trustee for cancellation, for the principal of and interest on such Notes to the date of deposit; (ii) the Issuer has paid or caused to be paid all other sums payable under the Indenture by the Issuer; and (iii) the Issuer has delivered to the Trustee an officers' certificate and an opinion of counsel each stating that all conditions precedent under the Indenture relating to the satisfaction and discharge of the Indenture have been complied with. MODIFICATIONS AND AMENDMENTS Modifications and amendments of the Indenture or the Notes may be made by the Issuer and the Trustee with the written consent of the holders of not less than a majority in aggregate principal amount of the outstanding Notes; provided, however, that no such modification or amendment may, without the consent of the holder of each outstanding Note affected thereby: (i) change the Stated Maturity Date or the time at which the principal of, or interest on, any Note becomes due and payable, or reduce the principal amount thereof or the rate of interest thereon, or change the coin or currency in which the principal of any Note or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment when due and payable (or, in the case of redemption, on or after the redemption date), provided, however, that this clause (i) shall, in all cases, be subject to the provisions of clause (d) of "--Certain Covenants--Limitation on Additional Indebtedness" which, indirectly, could have the effect of changing the time at which principal of or interest on the Notes becomes due and payable with the consent of only the holders of a majority in aggregate principal amount of the Notes; (ii) reduce the percentage in principal amount of outstanding Notes, the consent of whose holders is required to amend or supplement the Indenture or the consent of whose holders is required for any waiver of compliance with certain provisions of the Indenture or certain Defaults thereunder and their consequences provided for in the Indenture; (iv) modify any of the provisions relating to supplemental indentures requiring the consent of holders or relating to the waiver of past defaults or relating to the waiver of certain covenants, except to increase the percentage of outstanding Notes required for such actions or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of the holder of each Note affected thereby; (v) except as otherwise permitted under "--Certain Covenants--Merger or Consolidation", allow the assignment or transfer by the Issuer of any of its rights and obligations under the Indenture or (vi) modify or in any other way affect the ranking of the Notes in a manner adverse to the holders of the Notes. The holders of a majority in aggregate principal amount of the Notes then outstanding may waive compliance with certain restrictive covenants and provisions of the Indenture. 98 THE TRUSTEE The Indenture provides that, except during the continuance of an Event of Default, the Trustee thereunder will perform only such duties as are specifically set forth in the Indenture. If an Event of Default has occurred and is continuing, the Trustee will exercise such rights and powers vested in it under the Indenture and use the same degree of care and skill in its exercise as a prudent person would exercise under the circumstances in the conduct of such person's own affairs. The Indenture and, upon issuance of the Exchange Notes or effectiveness of a shelf registration statement, provisions of the Trust Indenture Act incorporated by reference therein, contain limitations on the rights of the Trustee, should it become a creditor of the Issuer, to obtain payment of claims in certain cases or to realize on certain property received by it in respect of any such claims, as security or otherwise. The Trustee is permitted to engage in other transactions with the Issuer or any Affiliate of the Issuer; provided that if it acquires any conflicting interest (as defined in the Indenture or in the Trust Indenture Act) it must eliminate such conflict or resign as trustee. GOVERNING LAW The Indenture and the Notes will be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to the conflict of laws principles thereof. CERTAIN AGREEMENTS BY CHARTER AND KELSO IN FAVOR OF HC CROWN Charter and Kelso separately have undertaken, in an agreement with HC Crown, to cause the Issuer to comply with the reporting requirements and dividend, merger, divestiture and indebtedness restrictions set forth in the Indenture. Charter and Kelso have also undertaken, in that agreement, to maintain their control of the Issuer while the Notes remain outstanding. BOOK-ENTRY; DELIVERY AND FORM The Old Notes were deposited on the date of closing of sale of the Old Notes, and the New Notes will be deposited on the date of closing of the Exchange Offer, with or on behalf of the Depositary and registered in the name of Cede & Co., as nominee of the Depositary (such nominee being referred to herein as the "DTC Nominee"). DTC is (i) a limited purpose trust company organized under the banking laws of the State of New York (and is a "banking organization" within the meaning of such laws), (ii) a member of the Federal Reserve System, (iii) a "clearing corporation" within the meaning of the New York Uniform Commercial Code, as amended, and (iv) a "Clearing Agency" registered pursuant to Section 17A of the Exchange Act. DTC was created to hold securities for its participating organizations (the "participants") and to facilitate the clearance and settlement of securities transactions between participants through electronic book-entry changes to the accounts of its participants. DTC's participants include securities brokers and dealers, commercial banks, trust companies, clearing corporations and certain other organizations. DTC is owned by a number of its direct participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to DTC's system is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. Persons who are not participants may beneficially own securities held by or on behalf of the DTC only through the DTC's direct or indirect participants. Pursuant to procedures established by the Depositary, (i) upon deposit of the Global Notes, the Depositary will credit the accounts of participants in connection with the Notes with portions of the principal amount of the Global Notes and (ii) ownership of the Notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by the Depositary (with respect to the interests of the Depositary's participants), the Depositary's participants and the Depositary's indirect participants. 99 So long as DTC's Nominee is the registered owner of the Global Notes, DTC or DTC's Nominee, as the case may be, is considered the sole owner and holder under the Indenture of the underlying notes. Unless DTC notifies the Issuer that it is unwilling or unable to continue serving as depositary for such Notes, DTC ceases to be a clearing agency registered under the Exchange Act, the Issuer determines to permit the Global Notes to be exchanged for certificated Notes, or an Event of Default has occurred and is continuing with respect to the Notes, owners of beneficial interests in the Global Notes will not be entitled to have the Notes registered in their names, will not receive or be entitled to receive physical delivery of certificated Notes in definitive and fully registered form, and will not be considered to be the owners or holders of any Notes under the Indenture or such Notes for any purposes. Neither the Issuer nor the Trustee has any responsibility or liability for any aspect of the records of DTC or for maintaining, supervising or reviewing any records of DTC relating to the Notes. Payments in respect of the principal of, premium, if any, and interest on the Global Notes are payable by the Trustee to DTC or DTC's Nominee, as the case may be, as the registered holder under the Indenture. Under the terms of the Indenture, the Issuer and the Trustee may treat the Persons in whose names Notes are registered as the owners thereof for the purpose of receiving such payments. Consequently, neither the Issuer nor the Trustee has any responsibility or liability for the payment of such amounts to beneficial owners of Notes (including principal, premium, if any, and interest). The Issuer believes, however, that it is currently the policy of DTC to immediately credit the accounts of the relevant participants with such payments, in amounts proportionate to their respective holdings of beneficial interests in the relevant security as shown by the records of DTC. Payments by DTC's direct and indirect participants to beneficial owners of Notes are governed by standing instructions and customary practice and are the responsibility of DTC's direct and indirect participants. CERTIFICATED SECURITIES Subject to certain conditions, any Person having a beneficial interest in the Global Notes may, upon request to the Trustee, exchange such beneficial interest for Notes in the form of Certificated Notes. Upon any such issuance, the Trustee is required to register such Certificated Notes in the name of, and cause the same to be delivered to, such Person or Persons (or the nominee of any thereof). In addition, if (i) the Issuer notifies the Trustee in writing that DTC is no longer willing or able to act as a depositary and the Issuer is unable to locate a qualified successor within 90 days or (ii) the Issuer, at its option, notifies the Trustee in writing that it elects to cause the issuance of Notes in the form of Certificated Notes under the Indenture, then, upon surrender by DTC's Nominee of its Global Notes, Notes in such form will be issued to each Person that DTC's Nominee and DTC identify as being the beneficial owner of the related Notes. Neither the Issuer nor the Trustee is liable for any delay by DTC or DTC's Nominee, as the case may be, in identifying the beneficial owners of Notes and the Issuer and the Trustee may conclusively rely on, and will be protected in relying on, instructions from DTC or DTC's Nominee for all purposes. Neither DTC nor DTC's Nominee will consent or vote in any manner with respect to the Notes. Pursuant to its customary procedures, in the case of any matter as to which the consent or vote of holders of the Notes is sought, DTC will mail an Omnibus Proxy to the Issuer as soon as practicable after the record date for the determination of holders eligible to consent or vote on the matter to be acted upon. The Omnibus Proxy serves to assign DTC's Nominee's right to consent or vote to the direct participants whose accounts it maintains as of the record date. Notices of redemption and repurchase with respect to Notes held by direct participants in the DTC system will be forwarded to DTC's Nominee. In the case of a partial redemption, DTC's practice is to determine, by lot, the amount of the beneficial interest in the Notes to be redeemed of each of its direct participants. Beneficial owners who elect to participate in a tender offer or purchase of their securities, must provide notice of such election, through its direct or indirect participant in DTC's system, to the appropriate depositary, tender or purchase agent, and effect delivery of their Notes by causing the direct participant in DTC's system to transfer the indirect participant's interest in the Notes, as reflected in DTC's records, to such depositary, tender 100 or purchase agent. The requirement for physical delivery of certificates evidencing the Notes in connection with the aforementioned transactions will be deemed satisfied when the beneficial ownership rights in the Global Notes are transferred by direct participants on DTC's records. The conveyance of all notices and other communications by DTC to its direct participants, among DTC's direct and indirect participants and by DTC's direct and indirect participants to owners of beneficial interests in the Notes is governed by customary arrangements among them, subject to statutory or regulatory requirements in effect with respect thereto from time to time. Although DTC has agreed to the foregoing procedures to facilitate transfers of interest in the Global Notes among participants of DTC, it is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. Neither the Issuer nor the Trustee has any responsibility for the performance by DTC or its participants of their respective obligations under the rules and procedures governing their operations. SAME-DAY SETTLEMENT AND PAYMENT The Indenture requires that payments in respect of the Notes represented by the Global Notes (including principal, premium, if any, and interest) be made in immediately available funds. With respect to Certificated Notes, however, the Company makes all payments of principal, premium, if any, and interest, by mailing a check to each holder's registered address. Secondary trading in long-term notes and debentures of corporate issuers is generally settled in clearing-house or next-day funds. In contrast, the Notes are eligible to trade in the PORTAL Market and to trade in DTC's Same-Day Funds Settlement System, and any permitted secondary market trading activity in such Notes will, therefore, be required by DTC to be settled in immediately available funds. The Issuer expects that secondary trading in the Certificated Notes will also be settled in immediately available funds. REGISTRATION RIGHTS Immediately prior to sale of the Old Notes, HC Crown, pursuant to the Letter Agreement, exercised its demand registration rights with respect to the Notes, with a view toward the Notes being registered under the Securities Act. HC Crown and the Issuer agreed that the Issuer would use its reasonable best efforts to cause to become effective a registration statement with respect to the Exchange Offer. Under the Indenture the holders are collectively entitled to a single demand registration right in addition to the registration rights under the Letter Agreement, pursuant to which the Issuer and the Guarantors will use their reasonable best efforts to cause to become effective a shelf registration statement with respect to the resale of the Notes and use their reasonable best efforts to keep such shelf registration statement continuously effective until nine months after the effective date thereof. Expenses related to the exercise of the additional demand registration right, if exercised, will be at the expense of the holders of the Notes exercising the demand registration right. CERTAIN DEFINITIONS Set forth below is a summary of certain of the defined terms used in the Indenture. Reference is made to the Indenture for the full definition of all such terms, as well as any other terms used herein for which no definition is provided. "Adjusted Consolidated" means, with respect to any Person, such Person and its Subsidiaries (other than Subsidiaries which are not Restricted Subsidiaries) on a consolidated basis. "Affiliate" means, when used with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the person specified. "Anniversary Date" means December 31 in any year or the next succeeding Business Day if such date is not a Business Day. 101 "Annualized Operating Cash Flow" means an amount equal to Operating Cash Flow for the calendar quarter specified, multiplied by 4. "Areas of Dominant Influence" has the meaning set forth in 47 CFR 76.55(e). "CAC" means CCA Acquisition Corp., a Delaware corporation. "Capital Stock" of any Person means any and all shares, interests, participations and other equivalents (however designated) of corporate stock, equity interests in partnerships or other entities or options, convertible instruments, rights or warrants to purchase such corporate stock, or equity interests in partnerships or other entities. "CCE, L.P. Partnership Agreement" means the Agreement of Limited Partnership of Charter Communications Entertainment, L.P., dated as of September 29, 1995, as the same may be amended, restated or modified from time to time in accordance with the Indenture. "CCE-I Credit Agreement" means that certain amended and restated loan agreement dated as of September 29, 1995, by and among CCE-I, the CCE-I Credit Facility Lenders and Toronto Dominion (Texas), Inc., as administrative agent for the CCE-I Credit Facility Lenders, as amended as of October 31, 1995, January 16, 1996, March 29, 1996, May 24, 1996, November 27, 1996 and February 7, 1997, and as the same may be amended, extended, renewed, restated, supplemented or otherwise modified from time to time. "CCE-I Credit Facility " means the credit facilities extended to CCE-I pursuant to the CCE-I Credit Agreement. "CCE-I Credit Facility Lenders" means Toronto Dominion (Texas), Inc. and The Chase Manhattan Bank (formerly Chemical Bank), as Documentation Agents; Toronto Dominion (Texas), Inc., The Chase Manhattan Bank (formerly Chemical Bank), CIBC Inc., Credit Lyonnais Cayman Island Branch and NationsBank, N.A., as Managing Agents; Banque Paribas, Union Bank of California, N.A. (formerly, Union Bank), Fleet Bank, N.A., CoreStates Bank, N.A., ABN AMRO Bank N.V., Societe Generale and The First National Bank of Boston, as Co-Agents; Toronto Dominion (Texas), Inc., as Administrative Agent; and the financial institutions party to the CCE-I Credit Agreement, together with their respective successors and assigns. "CCE-I Credit Facility Termination Date" means the date on which all Obligations (as such term is defined in the Subordination Agreement) shall have been indefeasibly paid in full in cash and all commitments to lend in respect of the CCE-I Credit Facility shall have been terminated. "CCE-I Partnership Agreement" means the Agreement of Limited Partnership of CCE-I, dated as of September 29, 1995, as the same shall be amended, restated or modified from time to time. "CCE Purchase Money Indebtedness"means any Indebtedness or any Qualifying Equity Interest incurred or issued by any partners or future partners of CCE, L.P. or any Persons (other than Charter, KIA V or any of their respective Affiliates that are not or do not become direct or indirect partners of CCE, L.P.) controlling such partners, now outstanding or hereafter incurred or issued in connection with acquiring assets owned or to be owned, directly or indirectly, by any Subsidiary of CCE, L.P., and shall (i) include (a) the Indebtedness evidenced by the Notes and (b) any other Indebtedness to or any Qualifying Equity Interest owned by a seller of such assets and (ii) exclude Indebtedness to or any Qualifying Equity Interest owned by Charter, KIA V or any of their respective Affiliates that are not or do not become direct or indirect partners of CCE, L.P. "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through ownership of voting securities, by contract or otherwise, and "Controlling" and "Controlled" shall have meanings correlative thereto. "Debt Service" means, without duplication, payment of principal, interest, fees, premiums and penalties on or with respect to any Indebtedness. 102 "GAAP" means generally accepted accounting principles, as in effect in the U.S. from time to time, consistently applied. "Holder" means HC Crown or any other holder of a Note or Notes. "Indebtedness" means, with respect to a Person, (a) all items, which, in accordance with GAAP would be included in determining total liabilities as shown on the liability side of a balance sheet of such Person, except (i) accounts payable which by their terms are less than 60 days past due, (ii) items of partners' equity or capital stock or surplus, or (iii) items of general contingency or deferred tax reserves, (b) all direct or indirect obligations secured by any Lien to which any property or asset owned by such Person is subject (but if the obligation secured thereby shall not have been assumed, then only to the extent of the higher of the fair market value or the book value of the property or asset subject to such Lien), (c) all obligations of such Person with respect to leases constituting part of a sale and lease- back arrangement, (d) all reimbursement obligations with respect to outstanding letters of credit, and (e) all obligations of such Person under Interest Rate Hedge Agreements. "Indebtedness for Money Borrowed" means, with respect to any Person, money borrowed and Indebtedness represented by notes payable and drafts accepted representing extensions of credit, all obligations evidenced by bonds, debentures, notes or other similar instruments, all Indebtedness upon which interest charges are customarily paid, and all Indebtedness issued or assumed as full or partial payment for property or services, whether or not any such notes, drafts, obligations or Indebtedness represent Indebtedness for money borrowed. For purposes of this definition, interest which is accrued but not paid on the original due date for such interest shall be deemed Indebtedness for Money Borrowed. Where obligations are evidenced by bonds, debentures, notes or other similar instruments whose face amount exceeds the amount received by such Person with respect thereto, only the amount received plus debt discount amortized as of the calculation date need be taken into account as Indebtedness for Money Borrowed. "Interest Expense" means, for any period, the aggregate amount of all interest paid or accrued in respect of Indebtedness for Money Borrowed and the portion of payments under Capitalized Lease Obligations which constitutes imputed interest, in each case, of any Person on an Adjusted Consolidated basis during such period. "Interest Rate Hedge Agreement" means the obligations of any Person pursuant to any arrangement with any other person whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such other person calculated by applying a fixed or a floating rate of interest on the same notional amount and shall also include, without limitation, interest rate swaps, caps, swaptions, captions, floors, collars and similar agreements. "Lien" means, with respect to any property, any mortgage, lien, pledge, assignment, charge, security interest, title retention agreement, levy, execution, seizure, attachment, garnishment or other encumbrance of any kind in respect of such property, whether or not choate, vested or perfected. "Net Income" means, as applied to any Person, for any fiscal period, the aggregate amount of net income (or net loss) after taxes, for such period for such Person on an Adjusted Consolidated basis. "Obligations" means all unpaid principal or interest under the Notes, and all other obligations of the Issuer to any holder arising under the Indenture. "Operating Cash Flow" means, for any Person in respect of any quarterly or annual period, as applicable, without duplication, the remainder of (a) the sum of Net Income of such Person, plus, to the extent deducted in calculating Net Income of such Person, (i) Interest Expense of such Person, (ii) depreciation, (iii) amortization, (iv) management fees and financial advisory fees paid, (v) income tax expense and (vi) other non-cash items, less (b) extraordinary income, all as determined in accordance with GAAP. 103 "Person" means an individual, corporation, partnership, limited liability company, trust or unincorporated organization, or a government or any agency or political subdivision thereof. "Qualifying Equity Interest" means a preferred equity interest in any Person which, for at least so long as the Notes are outstanding, (i) shall have a stated liquidation preference and a stated dividend rate and (ii) shall, if such preferred equity interest is convertible into a common (or equivalent) equity interest, contain a provision whereby upon such conversion (a) the preferred capital account, if any, related to the converted portion of such preferred equity interest shall terminate and (b) such converted portion of such preferred equity interest shall no longer be a Qualifying Equity Interest. "Restricted Subsidiary" means CAC, Cencom Cable, CCE, L.P., CCE-I, any Subsidiary of CCE-I and any other direct or indirect Subsidiary of the Issuer which has, or comes to have in the future, a direct or indirect ownership interest in CCE-I, or any of its Subsidiaries. "Semi-Annual Date" means each June 30 or the next succeeding business day if such date is not abusiness day. "Senior Debt" means all monetary obligations (whether fixed or contingent and whether outstanding or hereafter created, incurred or assumed) of the Issuer, including, without limitation, obligations in respect of principal, interest (including post-petition interest in any proceeding under bankruptcy law), reimbursement obligations, indemnities, fees and expenses in respect of any Indebtedness for Money Borrowed of the Issuer and the Restricted Subsidiaries, whether currently or afterwards outstanding, unless any instrument creating or affecting such Indebtedness (a) provides that such Indebtedness is not superior in right of payment to the principal of and interest on any of the Notes or (b) provides that such Indebtedness is subordinate in right of payment to the payment of the principal of and interest on any other Indebtedness for Money Borrowed of the Issuer and its Subsidiaries. The fact that certain indebtedness is not secured, or is junior in security to other Indebtedness, shall not be relevant to the issue of whether it is Senior Debt. Notwithstanding anything to the contrary in the foregoing, Senior Debt shall not include (a) indebtedness or amounts owed for compensation to employees, for goods or materials purchased in the ordinary course of business or for services, (b) indebtedness of the Issuer or any Restricted Subsidiary to any Restricted Subsidiary, or any, shareholder, partner or officer of the Issuer or any Restricted Subsidiary, (c) obligations for television, program and syndicated series exhibition rights or (d) payments due under or in connection with a cable television franchise, including any management fees. "Subordination Agreement" means, collectively, the Amended and Restated Subordination Agreement dated as of November 15, 1996 by and between HC Crown and the Company in favor of the CCE-I Credit Facility Lenders and Toronto Dominion (Texas), Inc., as administrative agent for the CCE-I Credit Facility Lenders, and each other Subordination Agreement by and between any holder (or the trustee under the Indenture, on behalf of any such holder) and the Issuer in favor of the CCE-I Credit Facility Lenders and Toronto Dominion (Texas), Inc., as administrative agent for the CCE-I Credit Facility Lenders, as the same may be amended, replaced, restated, supplemented or otherwise modified from time to time. "Subsidiary" means, in respect of any Person, any corporation of which such Person owns more than 50% of the equity interest and any partnership or other Person to the extent any Person owns more than 50% of the equity interest in same. 104 CERTAIN FEDERAL INCOME TAX CONSEQUENCES The following is a summary of certain federal income tax consequences relevant to the acquisition, ownership and disposition of the New Notes by the holders acquiring New Notes pursuant to the Exchange Offer but does not purport to be a complete discussion of all potential tax effects. In this regard, this discussion does not address the tax consequences to subsequent purchasers or holders of New Notes. The discussion is based upon provisions of the Internal Revenue Code of 1986, as amended (the "Code"), existing and proposed Treasury regulations, rulings and judicial decisions thereunder as of the date hereof, all of which may be repealed, revoked or modified retroactively in a manner that could adversely affect a holder of the Notes. The summary deals only with Notes held as capital assets (generally property held for investment and not for sale to customers in the ordinary course of a trade or business) by holders who or which are (i) citizens or residents of the United States, (ii) domestic corporations, partnerships or other entities or (iii) otherwise subject to U.S. federal income taxation on a net income basis in respect of income and gain from the Notes. It does not address all aspects of the U.S. federal income tax consequences of holding Notes that may be relevant to a holder's particular circumstances or to holders with special situations, such as dealers in securities, financial institutions, life insurance companies, tax-exempt organizations or persons holding Notes as a position in a "straddle" or "conversion transaction" for tax purposes. The summary does not address tax consequences of holding Notes under state, local or foreign tax laws. Set forth below is a summary of the principal original issue discount ("OID") considerations applicable to holders of the New Notes. The OID rules are complicated and raise various interpretational questions, and because of their recent enactment, there remains little authoritative guidance as to their application in specific factual settings. In addition, the OID rules depend upon factual inquiries as to which there can be no independent legal assurance. Accordingly, the precise application of the OID rules to debt instruments such as the Notes that have complex terms is subject to some uncertainty. No ruling will be sought from the Internal Revenue Service (the "IRS") with respect to any of the issues discussed herein. There can be no assurance that the IRS will not take a different position concerning the matters discussed below and that such position would not be sustained. Among other consequences, such an adverse determination could result in the acceleration of the recognition of, and/or increase in the amount of, OID on the Notes. EACH HOLDER SHOULD CONSULT ITS OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO IT OF ACQUIRING, OWNING AND DISPOSING OF THE NEW NOTES, INCLUDING THE EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS. EXCHANGE OF NOTES The substitution of New Notes for Old Notes pursuant to the Exchange Offer should not be treated as a sale, exchange, disposition or other taxable event with respect to the holders for Federal income tax purposes. Holders should not recognize any taxable gain or loss or any interest income as a result of substituting New Notes for Old Notes pursuant to the Exchange Offer, and a holder should have the same adjusted tax basis and holding period in the New Notes as it had in the Old Notes immediately before the substitution and the New Notes should have the same issue price (and adjusted issue price immediately after the substitution) and the same amount of OID, if any, as the Old Notes. The following discussion assumes that the substitution of New Notes for Old Notes pursuant to the Exchange Offer will not be treated as a sale, exchange, disposition or other taxable event for Federal income tax purposes, and that the Old Notes and the New Notes will be treated as the same securities for Federal income tax purposes. ORIGINAL ISSUE DISCOUNT ON THE NOTES The Old Notes originally were issued with OID and, as a result, a holder of the New Notes (including a cash basis holder) will be required to include such OID in income (to the extent it accrues during such holder's 105 period of ownership of the Notes) as interest income on a constant yield to maturity method basis, generally in advance of the receipt of the cash payments to which such income is attributable and generally in increasing amounts until the retirement of the New Notes. The total amount of OID with respect to a Note is equal to the excess of the "stated redemption price at maturity" of such Note over the "issue price" of such Note. The "stated redemption price at maturity" of a Note is equal to the sum of all payments, whether denominated as interest or principal, required to be made on such Note other than payments of "qualified stated interest." Because interest is not payable on the Notes until December 31, 1999, none of the stated interest payments will be payments of qualified stated interest and all such payments are included in the stated redemption price at maturity of the Notes. Because the Old Notes originally were issued in partial consideration for non-publicly-traded property, and because the Notes provide for adequate stated interest, the "issue price" of the Notes is the "stated principal amount" of the Notes, i.e., the aggregate amount of all payments due under the Notes, excluding any amount of stated interest. In general, the amount of OID required to be included in a holder's income for any taxable year (regardless of whether the holder uses the cash or accrual method of accounting) is the sum of the daily portions of OID with respect to the Notes for each day during the taxable year or portion of the taxable year in which the holder holds such Note. The daily portion is determined by allocating to each day in any "accrual period" a pro rata portion of the OID allocable to that accrual period. Accrual periods with respect to a Note may be of any length selected by the holder and may vary in length over the term of such Note as long as (i) no accrual period is longer than one year and (ii) each scheduled payment of interest or principal on such Note occurs on either the first or final day of an accrual period. The amount of OID allocable to each accrual period generally will be equal to the product of the adjusted issue price of a Note at the beginning of an accrual period and the yield to maturity of such Note (determined on the basis of a compounding assumption that reflects the length of the accrual period). The adjusted issue price of a Note at the beginning of an accrual period will be equal to its original issue price increased by all previously accrued OID (disregarding any reduction on account of acquisition premium described below) and reduced by the amount of all previous cash payments on such Note. The yield to maturity is that interest rate, expressed as a constant annual interest rate, that when used in computing the present value of all payments of principal and interest to be paid in connection with the Notes produces an amount equal to the issue price of the Notes. For purposes of calculating the amount of OID on the Notes, the Issuer intends to determine the yield and maturity of the Notes by assuming that the Notes will be retired on December 31, 1999, the stated maturity date of the Notes. The Issuer will provide certain information to the IRS, and will furnish annually to certain record holders of the Notes information with respect to OID accruing during the calendar year. See "Backup Withholding." Because this information is based upon the adjusted issue price of each Note as if the current holder of each Old Note was the original holder of the instrument, current holders of the Old Notes who originally purchased the Old Notes for an amount other than the adjusted issue price and/or on a date other than the end of an accrual period may be required to determine for themselves the amount of OID. See "Acquisition Premium and Market Discount." If the New Notes are offered in physical form, the Issuer will be required to place a legend on the New Notes providing information with respect to the computation of OID on the Notes. The Notes may be determined to be subject to the rules under the Code regarding "applicable high yield discount obligations" ("AHYDO") because their yield to maturity exceeds the relevant applicable Federal rate ("AFR") by more than five percentage points. Under Section 163(e) and 163(i) of the Code, a C corporation that is an issuer of debt obligations subject to the AHYDO rules may not deduct any portion of OID on the obligations until such portion is actually paid. A debt obligation is generally subject to the AHYDO rules if (i) its maturity date is more than five years from the date of issue, (ii) its yield to maturity equals or exceeds the sum of the AFR plus five percentage points and (iii) it has "significant OID." A debt obligation will have significant OID for this purpose if, as of the close of any accrual period ending more than five years after issuance, the total amount of income includable by a holder with respect to the debt instrument exceeds the sum of (i) the total amount of "interest" paid under the obligation before the close of such accrual period and (ii) the product of the issue price of the debt instrument and its yield to maturity. In addition, if the yield to maturity on 106 an AHYDO obligation exceeds the sum of the AFR plus six percentage points, a portion of the OID, equal to the product of the total OID times the ratio of (a) the excess of the yield to maturity over the sum of the AFR plus six percentage points to (b) the yield to maturity, will not be deductible by the issuer and will be treated for some purposes as dividends to the holders of the obligations (to the extent that such amounts would have been treated as dividends to the holders if they had been distributions with respect to the issuer's stock). Amounts treated as dividends will be nondeductible by the issuer, and may qualify for the dividends received deduction for corporate U.S. holders, but will be treated as OID and not as dividends for withholding tax purposes. The Issuer intends to take the position that the Notes are not subject to the AHYDO rules because the stated maturity date of the Notes is less than five years from the date of their issuance. ACQUISITION PREMIUM AND MARKET DISCOUNT A holder who originally purchased an Old Note for an amount that was greater than its adjusted issue price as of the purchase date and less than the sum of all amounts payable on the instrument after its purchase by the holder will be considered to have purchased such Note at an "acquisition premium." The amount of OID that such holder must include in its gross income with respect to such Note for any taxable year is generally reduced by the portion of such acquisition premium properly allocable to such year. If a holder originally purchased an Old Note for an amount that was less than its "revised issue price" as of the purchase date, the amount of the difference generally will be treated as "market discount," unless such difference is less than a specified de minimis amount. The Code provides that the revised issue price of a Note equals its issue price plus the amount of OID includable in the income of all holders for periods prior to the purchase date (disregarding any deduction for acquisition premium). Under the market discount rules generally, a holder will be required to treat any gain recognized on the sale, exchange, retirement or other disposition of a New Note as ordinary income to the extent of the market discount that has accrued while the instrument was held by such holder and that has not previously been included in income. In addition, the holder may be required to defer, until the maturity date of a New Note or its earlier disposition in a taxable transaction, the deduction of all or a portion of the interest expense on any indebtedness incurred or continued to purchase or carry such New Note. The New Notes provide for optional prepayment, in whole or part, prior to maturity. If the New Notes were prepaid, a holder generally would be required to include in gross income as ordinary income the portion of the gain recognized on the redemption to the extent of the accrued market discount on the Notes, if any. Any market discount will be considered to accrue ratably during the period from the date of acquisition to the maturity date of a Note, unless the holder elects to accrue market discount on a constant interest method. A holder of a Note may elect to include market discount in income currently as it accrues (under either the ratable or constant interest method). This election to include currently, once made, applies to all market discount obligations acquired in or after the first taxable year to which the election applies and may not be revoked without the consent of the IRS. If a holder of Notes makes such an election, the foregoing rules with respect to the recognition of ordinary income on sales and other dispositions of such instruments, and with respect to the deferral of interest deductions on debt incurred or maintained to purchase or carry such debt instruments, would not apply. ELECTION TO TREAT ALL INTEREST AS OID A holder of a Note may elect to include all interest that accrues on such Note in gross income on a constant-yield basis. For purposes of this election, interest includes stated interest, acquisition discount, OID, de minimis OID, market discount, de minimis market discount and unstated interest, as adjusted by any amortizable bond premium or acquisition premium. In applying the constant-yield method to a Note with respect to which this election has been made, the issue price of such Note will equal the holder's basis in such Note immediately after its acquisition, the issue date of such Note will be the date of its acquisition by the holder, and no payments on such Note will be treated as payments of qualified stated interest. The election will generally apply only to a Note with respect to which it is made and may not be revoked without the consent of the IRS. 107 If the election to apply the constant-yield method to all interest on a Note is made with respect to a Note on which there is market discount, the electing holder will be treated as having made the election described above under "Acquisition Premium and Market Discount" to include market discount in income currently over the life of all debt instruments held or thereafter acquired by such holder. SALE, EXCHANGE, REDEMPTION AND RETIREMENT OF NOTES A holder's adjusted tax basis in a Note will, in general, equal the holder's cost for such Note, increased by any amounts included in income as OID, market discount or de minimis market discount which the holder has previously elected to accrue in gross income on an annual basis and reduced by any cash payments in respect of such Note. Upon the sale, exchange, redemption, retirement or other disposition of a New Note, a holder generally will recognize gain or loss equal to the difference between the amount realized on such sale, exchange, redemption or retirement (except to the extent of accrued OID on Notes, which will be taxable as such) and the holder's tax basis in such New Note. Except as described above regarding market discount, gain or loss recognized by a holder on the sale, exchange, redemption or retirement of a New Note will be capital gain or loss and will be long-term capital gain or loss if such Note had been held for more than one year at the time of such disposition. BACKUP WITHHOLDING In general, information reporting requirements will apply to payments of principal, the proceeds of a sale before maturity, and the accrual and payment of OID on a Note with respect to non-corporate holders. "Backup withholding" at a rate of 31% will apply to such payments if the holder fails to provide an accurate taxpayer identification number, to report all interest and dividends required to be shown on its federal income tax returns, or otherwise establish an exemption. Backup withholding tax is not an additional tax and may be credited against a holder's regular U.S. federal income tax liability or refunded, provided appropriate proof is provided under rules established by the IRS. The amount of OID reported by the Issuer in respect of a Note may not equal the amount of OID required to be included in income by a holder who purchased such Note. THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSIDERATIONS DOES NOT CONSIDER THE FACTS AND CIRCUMSTANCES OF ANY PARTICULAR HOLDER'S SITUATION OR STATUS. THE SUMMARY IS BASED ON THE PROVISIONS OF THE CODE, REGULATIONS, PROPOSED REGULATIONS, RULINGS AND JUDICIAL DECISIONS NOW IN EFFECT, ALL OF WHICH ARE SUBJECT TO CHANGE, POSSIBLY ON A RETROACTIVE BASIS. EACH CURRENT HOLDER OF OLD NOTES SHOULD CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO IT, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS, OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE NEW NOTES. 108 DESCRIPTION OF OTHER INDEBTEDNESS THE CREDIT FACILITIES Charter Communications Entertainment I, L.P. CCE-I is the borrower under a credit agreement dated as of September 29, 1995 with a consortium of lenders and Toronto Dominion (Texas), Inc. as the administrative agent, as amended on October 31, 1995, January 16, 1996, March 29, 1996, May 24, 1996 and November 29, 1996 (the "CCE-I Credit Agreement"). Borrowing Amount The CCE-I Credit Agreement provides for an eight year term credit facility in the amount of $280.0 million, an eight year revolving credit facility in the amount of $140.0 million and a nine year term credit facility in the amount of $85.0 million. As of December 31, 1996, CCE-I had an aggregate of approximately $468.0 million of indebtedness outstanding (leaving $37.0 million unused and available for borrowing) under the CCE-I Credit Facility. Interest Rates Loans under the CCE-I Credit Facility bear interest at a rate per annum based upon certain spreads plus a base rate, with the base rate being, at CCE- I's election, the prime rate of interest, the interest rate on certain certificates of deposit, or LIBOR. With respect to the eight year term credit facility and the eight year revolving credit facility, the applicable spreads are based on the ratio of outstanding amounts under the CCE-I Credit Facility to annualized operating cash flow with a range of 0 to 1.375%, 1.25 to 2.5% and 1.125 to 2.375%, respectively. With respect to the nine year term credit facility, the applicable spreads are 1.75%, 2.875% and 2.75%, respectively. In addition, a quarterly commitment fee of 0.375% per annum is payable on the unused portion of the CCE-I Credit Agreement. Security The CCE-I Credit Facility is secured by substantially all of the assets of CCE-I, and a pledge of all partnership interests in CCE-I. Amortization and Maturity Commencing with the quarter ending September 30, 1997, quarterly reductions of the eight year term credit facility and the eight year revolving credit facility are currently required to be made on the last day of each March, June, September and December through June 30, 2004. Commencing with the quarter ending March 31, 1998, quarterly reductions of the nine year term credit facility are currently required to be made on the last day of each March, June, September and December through December 31, 2004. Covenants The CCE-I Credit Agreement contains certain affirmative and negative covenants, including, but not limited to, (i) maintenance of ratios of total debt to annualized operating cash flow, annualized operating cash flow to fixed charges and annualized operating cash flow to pro forma debt service, (ii) restrictions on capital expenditures, (iii) limitations on additional indebtedness, creation of liens and encumbrances, mergers and sales of assets, acquisitions, investments, guarantees, and operating leases, (iv) restrictions on payments of management fees (v) limitations on transaction with affiliates and (vi) limitations on distributions. Events of Default The CCE-I Credit Agreement contains certain events of default, including, but not limited to, failure to perform covenants and payment obligations set forth in the CCE-I Credit Agreement, commencement of any case or proceeding pursuant to any Federal or state bankruptcy or insolvency law beyond any applicable grace 109 period, entry of certain judgments, the occurrence of a materially adverse effect, the occurrence of certain events of default under certain other contracts, the revocation or expiration of certain licenses, certain changes in ownership of the borrower and the general partner of the borrower, certain changes in the partners of the partnership that controls Charter or such partners' voting equity or economic interests in such partnership, and any demand on the CCE, L.P. Guarantee. Use of Proceeds Proceeds of the CCE-I Credit Facility were initially used to refinance existing indebtedness which was originally incurred in connection with the acquisition of the Crown Missouri Systems and the Crown Connecticut Systems, to finance capital expenditures, for working capital and for certain investments and acquisitions permitted under the CCE-I Credit Agreement. Charter Communications Entertainment II, L.P. CCE-II is the borrower under a credit agreement dated as of September 29, 1995 with a consortium of lenders and NationsBank of Texas, N.A. as the administrative agent, as amended on February 29, 1996 (the "CCE-II Credit Agreement"). Borrowing Amount The CCE-II Credit Agreement provides for an eight year term credit facility in the amount of $70.0 million, an eight year revolving credit facility in the amount of $115.0 million and a nine year term credit facility in the amount of $50.0 million. As of December 31, 1996, CCE-II had an aggregate of approximately $194.0 million of indebtedness outstanding (leaving $41.0 million unused and available for borrowing) under the CCE-II Credit Facility. Interest Rates Loans under the CCE-II Credit Facility bear interest at a rate per annum based upon certain spreads plus a base rate, with the base rate being, at CCE- II's election, the prime rate of interest or LIBOR. With respect to the eight year term credit facility and the eight year revolving credit facility, the applicable spreads are based on the ratio of debt to annualized operating cash flow with a range of 0 to .750% and .75 to 1.750%, respectively. With respect to the nine year term credit facility, the applicable spreads are 1.250% and 2.250%, respectively. In addition, a quarterly commitment fee of 0.375% per annum is payable on the unused portion of the CCE-II Credit Agreement. Security The CCE-II Credit Facility is secured by substantially all of the assets of CCE-II, and a pledge of all partnership interests in CCE-II. Amortization and Maturity Commencing with the quarter ending June 30, 1998, quarterly reductions of the eight year term credit facility and the eight year revolving credit facility are currently required to be made on the last day of each March, June, September and December through September 30, 2003. Commencing with the quarter ending June 30, 1998, quarterly reductions of the nine year term credit facility are currently required to be made on the last day of each March, June, September and December through September 30, 2004. Covenants The CCE-II Credit Agreement contains certain affirmative and negative covenants, including, but not limited to, (i) maintenance of ratios of debt to annualized operating cash flow, operating cash flow to fixed charges and annualized operating cash flow to pro forma debt service, (ii) restrictions on capital expenditures, (iii) limitations on additional indebtedness, creation of liens and encumbrances, mergers and sales of assets, acquisitions, and investments, (iv) restrictions on payments of management fees and (v) limitations on distributions and payments on subordinated indebtedness. 110 Events of Default The CCE-II Credit Agreement contains certain events of default, including, but not limited to, failure to perform covenants and payment obligations set forth in the CCE-II Credit Agreement, commencement of a case or proceeding pursuant to any Federal or state bankruptcy or insolvency law beyond any applicable grace period, entry of certain judgments, the occurrence of certain events of default under certain other contracts, the revocation or expiration of certain licenses, and certain changes in control of CCE-II, including but not limited to, certain changes in the partners of the partnership that controls Charter or such partners' voting equity or economic interests in such partnership. Use of Proceeds Proceeds of the CCE-II Credit Facility have been and will be used to finance capital expenditures, for working capital and for certain investments and acquisitions permitted under the CCE-II Credit Agreement. THE CALIFORNIA LOAN AGREEMENT The California Note was issued under a senior subordinated loan agreement dated as of September 29, 1995 (the "California Loan Agreement"). General The California Note is the unsecured obligation of CCT ranking subordinate in right of payment to all senior indebtedness of CCT. CCT is a holding company that conducts substantially all of its business through CCE-II, and the California Note will be effectively subordinated to the claims of creditors of CCE-II. As of December 31, 1996, CCT had no Indebtedness other than the California Note. Any and all payments on the California Note is prohibited until the obligations owing under the CCE-II Credit Facility (including refinancings thereof) are paid in full. Moreover, substantially all rights and remedies under the California Note, including the right to accelerate the maturity upon an event of default (including a payment default) are suspended until such obligations under the CCE-II Credit Facility are paid in full. Maturity, Interest and Principal The California Note has an aggregate principal amount $165.7 million and will mature on September 29, 2005. As of December 31, 1996, the amount outstanding under the California Note was $191.3 million. For financial reporting purposes, the amount of the California Note is $198.8 million because interest accruing under the California Note is based on the average rate of interest over the life of the California Note (which approximates 15.43%) rather than the stated interest rate. Interest on the California Note will accrue at the following rates per annum, compounded annually:
YEAR FROM CLOSING DATE PER ANNUM RATE ---------------------- -------------- Years 1--5............................................... 12% Year 6................................................... 15% Year 7................................................... 17% Year 8................................................... 19% Year 9................................................... 21% Year 10.................................................. 23%
For purposes of the foregoing, a "year" shall be the twelve-month period ending on any Anniversary Date (as defined in the California Loan Agreement). Interest will be computed on the basis of a 360 day year of twelve 30-day months, and on each Anniversary Date (as defined in the California Loan Agreement) unpaid interest shall compound at the then applicable per annum rate by adding the same to the then unpaid principal balance. Interest shall be due and payable on the Maturity Date (as defined in the California Loan Agreement) or upon the earlier maturity of the Indebtedness (as defined in the California Loan Agreement) evidenced by the California Note. From and after maturity (by acceleration or otherwise), all principal, interest or any other 111 amounts due from CCT under the California Loan Agreement or under the California Note shall bear interest at an increased rate (as described in Section 5.02 of California Loan Agreement). In no event shall the interest payable in respect of the Indebtedness (as defined in the California Loan Agreement) evidenced by the California Note exceed the maximum amount collectible under applicable law. The California Note is not entitled to the benefit of any mandatory sinking fund. Prepayment The California Note is prepayable at CCT's option in whole at any time or in part from time to time, without premium or penalty, provided that any such prepayment of principal shall include all accrued interest on the amount prepaid. Events of Default (a) The following are events of default under the California Loan Agreement: (i) CCT shall fail to pay, when due (whether by acceleration of maturity or otherwise), principal of or any interest on any Note; or (ii) CCT shall fail to pay, when due, any other amount due thereunder or under any Note and such failure shall have continued for a period of three business days; or (iii) Any representation or warranty as to a material matter made by CCT under the California Loan Agreement or any statement made by CCT in any financial statement, certificate, report, exhibit or document furnished by CCT to any Holder (as defined in the California Loan Agreement) pursuant to the California Loan Agreement shall prove to have been false or misleading in any material respect at the time when made; or (iv) A case or proceeding shall have been instituted in respect of CCT (and shall have remained undismissed for a period of 60 consecutive days if not instituted by CCT): A. seeking a declaration or entailing a finding that CCT is insolvent or a similar declaration or finding, or seeking dissolution, liquidation, reorganization, arrangement, adjustment, composition or other similar relief with respect to CCT, its assets or its debts under any law relating to bankruptcy, insolvency, relief of debtors or protection of creditors, forfeiture of charter, or any other similar law now or hereafter in effect; or B. seeking appointment of a receiver, trustee, custodian, liquidator, assignee, sequestrator or other similar official for CCT or for all or any substantial part of its property; or (v) CCT shall become insolvent, shall become generally unable to pay its debts as they become due or shall not generally pay its debts as they become due, shall make a general assignment for the benefit of creditors, shall institute a case or proceeding described in Section (iv)A. above or shall consent to any such order for relief, declaration, finding or relief described therein, shall institute a proceeding described in Section (iv)B. above or shall consent to any such appointment or to the taking of possession by any such official of all or any substantial part of its property whether or not any such proceeding is instituted, shall dissolve, wind-up or liquidate itself or any substantial part of its property, or shall take any action to authorize or in furtherance of any of the foregoing; or (vi) Any default shall occur in the performance or observance of any covenant contained in Section 4.02 of the California Loan Agreement; or (vii) Any default shall occur in the performance or observance of any other covenant or agreement of CCT under the California Loan Agreement and shall have continued for a period of 30 days after notice from any Holder (as defined in the California Loan Agreement) to CCT; or (viii) CCT (i) shall default (as principal or as guarantor or other surety), unless such default shall have been waived or cured, in any payment of principal of or interest on any permitted Indebtedness (as defined 112 in the California Loan Agreement) for Money Borrowed (as defined in the California Loan Agreement) in the aggregate amount of $15 million or, if such Indebtedness is payable or repayable on demand, shall fail to pay or repay such Indebtedness when demanded or (ii) shall default (unless such default has been waived or cured) in the observance of any covenant, term or condition contained in any agreement or instrument by which such Indebtedness is created, secured or evidenced if the effect of such default is to cause, all or part of such Indebtedness to become due before its otherwise stated maturity; or (ix) One or more final judgments for the payment of money shall have been entered against CCT which judgment or judgments exceed $15 million in the aggregate and which remains undischarged for a period (during which execution shall not be effectively stayed) of 30 days. For purposes of Sections (iv), (v), (viii) and (ix), all references to "CCT" shall be deemed to include any Subsidiary or Subsidiaries which, in the aggregate, in the most recent fiscal year of CCT accounted for more than 10% of the revenues of CCT and its Subsidiaries (as defined in the California Loan Agreement) on a consolidated basis, or at the end of such fiscal year owned more than 10% of the consolidated assets of CCT, all as shown on the consolidated financial statements for such year, it being understood, however, that the word "Subsidiary" or "Subsidiaries" as used in this paragraph shall not include CCE-I or any future subsidiaries of CCE, L.P. that are not subsidiaries of CCE-II. (b) The California Loan Agreement provides that, subject in all cases to the terms of the section entitled "Subordination," if an Event of Default occurs and is continuing or shall exist, (i) any holder of the California Note, if an Event of Default occurs under paragraph (a)(i) or (a)(ii) above, or (ii) if there is more than one holder of the California Note, the holders of a majority in principal amount of the California Note if an Event of Default occurs and is continuing other than under paragraph (a)(i) or (a)(ii) above, may, at such holder or holders' option, by written notice to CCT elect to declare the unpaid principal amount of the California Note(s) which it (they) hold(s), interest accrued thereon and all other amounts owed by CCT under the California Loan Agreement or under the California Note which it (they) hold(s) to be immediately due and payable. Upon any such acceleration during years 1-5 any accrued and unpaid interest shall be added to principal, and interest shall accrue on the aggregate unpaid principal balance of the Indebtedness evidenced by the California Note, as so adjusted, at the rate of 15% per annum through year 5 and thereafter at the rates set forth above. Subordination The Indebtedness evidenced by the California Note and the payment of the principal of and interest on the California Note is subordinated in right of payment, to the extent and in the manner provided in Article VI of the California Loan Agreement, to the prior payment in full of all amounts then due on all Senior Debt (as defined in the California Loan Agreement). 113 PLAN OF DISTRIBUTION Each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired as a result of market-making activities or other trading activities. The Issuer has agreed that, for a period of 180 days after the effective date of this Prospectus, it will make this Prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. The Issuer will not receive any proceeds from any sale of New Notes by broker-dealers. New Notes received by broker-dealers for their own accounts pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Notes or a combination of such methods of resale, at market prices at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer that resells New Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such New Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of New Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the effective date of this Prospectus, the Issuer will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. By acceptance of the Exchange Offer, each broker-dealer that receives New Notes pursuant to the Exchange Offer hereby agrees to notify the Issuer prior to using the Prospectus in connection with the sale or transfer of New Notes, and acknowledges and agrees that, upon receipt of notice from the Issuer of the happening of any event which makes any statement in the Prospectus untrue in any material respect or which requires the making of any changes in the Prospectus in order to make the statements therein not misleading (which notice the Issuer agrees to deliver promptly to such broker-dealer), such broker-dealer will suspend use of the Prospectus until the Issuer has delivered an amended or supplemented prospectus to such broker-dealer. 114 LEGAL MATTERS Certain legal matters with respect to the Notes will be passed upon for the Issuer by Paul, Hastings, Janofsky & Walker LLP, New York, New York. INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The financial statements included in this Prospectus and elsewhere in the Registration Statement, to the extent and for the periods indicated in their reports, have been audited by Arthur Andersen LLP, KPMG Peat Marwick LLP, Ernst & Young, LLP, or Piaker & Lyons, P.C., independent certified public accountants, as indicated in their reports with respect thereto. 115 GLOSSARY The following is a description of certain terms used in this Prospectus. A LA CARTE--The purchase of individual basic or expanded basic programming services on a per-channel basis. BASIC PENETRATION--The measurement of the take-up of basic cable service expressed by calculating the number of basic service subscribers outstanding on such date as a percentage of the total number of homes passed in the system. BASIC SERVICE--A package of over-the-air broadcast and satellite-delivered cable television services. BASIC SUBSCRIBER--A subscriber to a cable or other television distribution system who receives the basic level of television service and who is usually charged a flat monthly rate for a number of channels. CABLE PLANT--A network of co-axial and/or fiber optic cables that transmit multiple channels carrying images, sound and data between a central facility and an individual customer's television set. Networks may allow one-way (from a headend to a residence and/or business) or two-way (from a headend to a residence and/or business with a data return path to the headend) transmission. CLUSTERING--A general term used to describe the strategy of operating cable television systems in a specific geographic region, thus allowing for the achievement of economies of scale and operating efficiencies in such areas as system management, marketing and technical functions. DIGITAL COMPRESSION--The conversion of the standard analog video signal into a digital signal, and the compression of that signal so as to facilitate multiple channel transmission through a single channel's bandwidth. DIRECT BROADCAST SATELLITE (DBS)--A service by which packages of television programming are transmitted to individual homes, each serviced by a single satellite dish. EBITDA--Represents income (loss) before interest expense, income taxes, depreciation and amortization, management fees and other income (expense). FCC--Federal Communications Commission. HEADEND--A collection of hardware, typically including satellite receivers, modulators, amplifiers and video cassette playback machines, within which signals are processed and then combined for distribution within the cable network. HOMES PASSED--Homes that can be connected to a cable distribution system without further extension of the distribution network. MATV--Master Antenna Television system. A system which uses a master antenna to pick up television signals for distribution over a cable to a small group of subscribers, such as an apartment block or hotel. MMDS--Multichannel Multipoint Distribution Service. A one-way radio transmission of television channels over microwave frequencies from a fixed station transmitting to multiple receiving facilities located at fixed points. OVERBUILD--The construction of a second cable television system in a franchise area in which such a system had previously been constructed. PAY-PER-VIEW--Payment made for individual movies, programs or events as opposed to a monthly subscription for a whole channel or group of channels. 116 PREMIUM PENETRATION--The measurement of the take-up of premium cable service expressed by calculating the number of premium units outstanding on such a date as a percentage of the total number of basic service subscribers. PREMIUM SERVICE--An individual cable programming service available only for additional subscription over and above the basic or expanded basic levels of television service. PREMIUM UNITS--The number of subscriptions to premium services which are paid for on an individual basis. SMATV--Satellite Master Antenna Television system. A video programming delivery system to multiple dwelling units utilizing satellite transmissions. VIDEO DIALTONE--A general term used to describe a video programming delivery system through telephone lines. LIST OF ENTITIES The following is a partial list of entities referred to in this Prospectus. CAC--CCA Acquisition Corp. CCA--CCA Holdings Corp. CCE-I--Charter Communications Entertainment I, L.P. CCE-II--Charter Communications Entertainment II, L.P. CCE, L.P.--Charter Communications Entertainment, L.P. CCT--CCT Holdings Corp. CENCOM CABLE--Cencom Cable Entertainment, Inc. CHARTER--Charter Communications, Inc. CROWN MEDIA--Crown Media, Inc. HC CROWN--HC Crown Corp. (also referred to as the "Selling Securityholder"). KELSO--Kelso Investment Associates V, L.P. and an affiliate. KIAV--Kelso Investment Associates V, L.P. LBAC--Long Beach Acquisition Corp. 117 INDEX TO AUDITED FINANCIAL STATEMENTS CCA HOLDINGS CORP. AND SUBSIDIARIES: Report of Independent Public Accountants............................... F-3 Consolidated Balance Sheets as of December 31, 1996 and 1995........... F-4 Consolidated Statements of Operations for the Years Ended December 31, 1996 and 1995......................................................... F-6 Consolidated Statements of Shareholders' Investment for the Years Ended December 31, 1996 and 1995............................................ F-7 Consolidated Statements of Cash Flows for the Years Ended to December 31, 1996 and 1995..................................................... F-8 Notes to Consolidated Financial Statements............................. F-9 CCA ACQUISITION CORP. AND SUBSIDIARIES: Report of Independent Public Accountants............................... F-23 Consolidated Balance Sheets as of December 31, 1996 and 1995........... F-24 Consolidated Statements of Operations for the Years Ended December 31, 1996 and 1995......................................................... F-26 Consolidated Statements of Shareholder's Investment for the Years Ended December 31, 1996 and 1995............................................ F-27 Consolidated Statements of Cash Flows for the Years Ended December 31, 1996 and 1995......................................................... F-28 Notes to Consolidated Financial Statements............................. F-30 CENCOM CABLE ENTERTAINMENT, INC.: Report of Independent Public Accountants............................... F-44 Balance Sheets as of December 31, 1996 and 1995........................ F-45 Statements of Operations for the Years Ended December 31, 1996 and 1995.................................................................. F-46 Statements of Shareholder's Investment for the Years Ended December 31, 1996 and 1995......................................................... F-47 Statements of Cash Flows for the Years Ended December 31, 1996 and 1995.................................................................. F-48 Notes to Financial Statements.......................................... F-49 CHARTER COMMUNICATIONS ENTERTAINMENT, L.P.: Report of Independent Public Accountants............................... F-55 Balance Sheets as of December 31, 1996 and 1995........................ F-56 Statements of Operations for the Years Ended December 31, 1996 and 1995.................................................................. F-57 Statements of Partners' Capital for the Years Ended December 31, 1996 and 1995.............................................................. F-58 Statements of Cash Flows for the Years Ended December 31, 1996 and 1995.................................................................. F-59 Notes to Financial Statements.......................................... F-60 CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P.: Report of Independent Public Accountants............................... F-67 Balance Sheets as of December 31, 1996 and 1995........................ F-68 Statements of Operations for the Years Ended December 31, 1996 and 1995.................................................................. F-69 Statements of Partners' Capital for the Years Ended December 31, 1996 and 1995.............................................................. F-70 Statements of Cash Flows for the Years Ended December 31, 1996 and 1995.................................................................. F-71 Notes to Financial Statements.......................................... F-72 CHARTER COMMUNICATIONS ENTERTAINMENT II, L.P.: Report of Independent Public Accountants............................... F-84 Balance Sheets as of December 31, 1996 and 1995........................ F-85 Statements of Operations for the Year ended December 31, 1996 and for the Period from Inception to December 31, 1995........................ F-86 Statements of Partners' Capital for the Year ended December 31, 1996 and for the Period from Inception to December 31, 1995................ F-87 Statements of Cash Flows for the Year ended December 31, 1996 and for the Period from Inception to December 31, 1995........................ F-88 Notes to Financial Statements.......................................... F-89 CENCOM CABLE ENTERTAINMENT, INC.--MISSOURI SYSTEM: Report of Independent Public Accountants............................... F-99 Independent Auditors' Report........................................... F-100 Balance Sheet as of December 31, 1994.................................. F-101 Statements of Operations for the Years Ended December 31, 1994 and 1993.................................................................. F-102 Statement of System's Equity for the Years Ended December 31, 1994 and 1993.................................................................. F-103 Statements of Cash Flows for the Years Ended December 31, 1994 and 1993.................................................................. F-104 Notes to Financial Statements.......................................... F-105
F-1 CENCOM CABLE INCOME PARTNERS, L.P.--ILLINOIS SYSTEM: Report of Independent Public Accountants............................... F-112 Independent Auditors' Report........................................... F-113 Balance Sheets as of December 31, 1995 and 1994........................ F-114 Statements of Operations for the Years Ended December 31, 1995, 1994 and 1993.............................................................. F-115 Statements of System's Equity for the Years Ended December 31, 1995, 1994 and 1993......................................................... F-116 Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993.............................................................. F-117 Notes to Financial Statements.......................................... F-118 CENCOM CABLE TELEVISION, INC.--LOS ANGELES AND RIVERSIDE SYSTEMS: Report of Independent Public Accountants............................... F-126 Combined Balance Sheets as of September 29, 1995 and December 31, 1994.................................................................. F-127 Combined Statements of Operations for the Nine Months ended September 29, 1995 and the Years Ended December 31, 1994 and 1993............... F-128 Combined Statements of Systems' Equity for the Nine Months ended September 29, 1995 and the Years ended December 31, 1994 and 1993..... F-129 Combined Statements of Cash Flows for the Nine Months ended September 29, 1995 and the Years ended December 31, 1994 and 1993............... F-130 Notes to Combined Financial Statements................................. F-131 MISSOURI CABLE TELEVISION SYSTEM TO BE SOLD BY MASADA CABLE PARTNERS, L.P. TO CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P.: Report of Independent Auditors......................................... F-139 Balance Sheets as of November 29, 1996 and December 31, 1995........... F-140 Statements of Operations for the Period from January 1, 1996 to November 29, 1996 and for the Years Ended December 31, 1995 and 1994.. F-142 Statements of Changes in System Capital (Deficiency) for the Period from January 1, 1996 to November 29, 1996 and for the Years Ended December 31, 1995 and 1994............................................ F-143 Statements of Cash Flows for the Period from January 1, 1996 to November 29, 1996 and for the Years ended December 31, 1995 and 1994.. F-144 Notes to Financial Statements.......................................... F-145 UNITED VIDEO CABLEVISION, INC.--MASSACHUSETTS AND MISSOURI DIVISIONS: Independent Auditors' Report........................................... F-150 Divisional Balance Sheets as of October 31, 1995 and December 31, 1994 and 1993.............................................................. F-151 Statements of Divisional Operations for the Ten Months Ended October 31, 1995 and the Years Ended December 31, 1994 and 1993............... F-152 Statements of Divisional Cash Flows for the Ten Months Ended October 31, 1995 and the Years Ended December 31, 1994 and 1993............... F-153 Statements of Divisional Equity for the Ten Months Ended October 31, 1995 and the Years Ended December 31, 1994 and 1993................... F-154 Notes to Divisional Financial Statements............................... F-155 CROWN MEDIA, INC.--WESTERN CONNECTICUT: Independent Auditors' Report........................................... F-158 Balance Sheets as of December 31, 1994 and 1993........................ F-159 Statements of Operations for the Year Ended December 31, 1994 and the Period from December 28, 1992 through December 31, 1993............... F-160 Statements of Division Equity for the Year Ended December 31, 1994 and the Period from December 28, 1992 through December 31, 1993........... F-161 Statements of Cash Flows for the Year Ended December 31, 1994 and the Period from December 28, 1992 through December 31, 1993............... F-162 Notes to Financial Statements.......................................... F-163 CROWN CABLE, L.P.: Independent Auditors' Report........................................... F-166 Balance Sheets as of December 31, 1994 and 1993........................ F-167 Statements of Operations for the Year Ended December 31, 1994 and the Period from December 10, 1992 through December 31, 1993............... F-168 Statements of Partners' Capital for the Year Ended December 31, 1994 and the Period from December 10, 1992 through December 31, 1993....... F-169 Statements of Cash Flows for the Year Ended December 31, 1994 and the Period from December 10, 1992 through December 31, 1993............... F-170 Notes to Financial Statements.......................................... F-171
F-2 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To CCA Holdings Corp.: We have audited the accompanying consolidated balance sheets of CCA Holdings Corp. (a Delaware corporation) and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of operations, shareholders' investment (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CCA Holdings Corp. and subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for the years then ended, in conformity with generally accepted accounting principles. Arthur Andersen LLP St. Louis, Missouri, February 21, 1997 F-3 CCA HOLDINGS CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS--DECEMBER 31, 1996 AND 1995
1996 1995 ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents........................... $ 2,934,939 $ 11,430,931 Accounts receivable, net of allowance for doubtful accounts of $371,166 and $251,419, respectively......................... 5,465,750 3,324,186 Prepaid expenses and other.......................... 490,443 641,558 Net assets of discontinued operation................ 108,827 -- ------------ ------------ Total current assets............................. 8,999,959 15,396,675 ------------ ------------ INVESTMENT IN CABLE TELEVISION PROPERTIES: Property, plant and equipment....................... 206,351,379 178,149,968 Franchise costs, net of accumulated amortization of $51,761,758 and $21,512,225, respectively.......... 439,232,345 370,268,109 Covenant not to compete, net of accumulated amortization of $20,000,000 and $10,000,000, respectively....................................... -- 10,000,000 ------------ ------------ 645,583,724 558,418,077 ------------ ------------ OTHER ASSETS......................................... 9,667,356 7,649,949 ------------ ------------ RESTRICTED FUNDS HELD IN ESCROW...................... -- 301,598 ------------ ------------ INVESTMENT IN UNCONSOLIDATED LIMITED PARTNERSHIPS.... 78,069,816 84,372,806 ------------ ------------ NET NONCURRENT ASSETS OF DISCONTINUED OPERATION...... 1,760,015 -- ------------ ------------ $744,080,870 $666,139,105 ============ ============
(Continued on the following page) F-4 CCA HOLDINGS CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS--DECEMBER 31, 1996 AND 1995 (CONTINUED)
1996 1995 ------------ ------------ LIABILITIES AND SHAREHOLDERS' INVESTMENT CURRENT LIABILITIES: Current maturities of long-term debt.............. $ 5,880,000 $ -- Accounts payable and accrued expenses............. 18,890,302 13,274,646 Subscriber deposits............................... 473,601 711,663 Payables to affiliates............................ 2,630,149 2,907,529 Other current liabilities......................... 1,401,951 -- ------------ ------------ Total current liabilities...................... 29,276,003 16,893,838 ------------ ------------ DEFERRED REVENUE................................... 708,339 780,612 ------------ ------------ DEFERRED INCOME TAXES.............................. 55,500,000 55,500,000 ------------ ------------ LONG-TERM DEBT, less current maturities............ 462,120,000 355,000,000 ------------ ------------ DEFERRED MANAGEMENT FEES PAYABLE TO AFFILIATE...... 1,755,000 1,015,000 ------------ ------------ NOTE PAYABLE....................................... 82,000,000 82,000,000 ------------ ------------ ACCRUED INTEREST ON NOTE PAYABLE................... 22,843,402 10,438,805 ------------ ------------ MINORITY INTEREST IN SUBSIDIARY.................... 90,273,351 106,272,025 ------------ ------------ COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' INVESTMENT (DEFICIT): Class A Voting Common Stock, $.01 par value, 100,000 shares authorized; 75,515 shares issued and outstanding.................................. 755 755 Class B Voting Common Stock, $.01 par value, 20,000 shares authorized; 4,300 shares issued and outstanding...................................... 43 43 Class C Non-Voting Common Stock, $.01 par value, 5,000 shares authorized; 185 shares issued and outstanding...................................... 2 2 Additional paid-in capital........................ 79,999,200 79,999,200 Accumulated deficit............................... (80,395,225) (41,761,175) ------------ ------------ Total shareholders' investment (deficit)....... (395,225) 38,238,825 ------------ ------------ $744,080,870 $666,139,105 ============ ============
The accompanying notes are an integral part of these consolidated balance sheets. F-5 CCA HOLDINGS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995 ------------ ------------ SERVICE REVENUES: Basic service..................................... $ 96,560,920 $ 65,075,541 Premium service................................... 19,201,801 15,484,951 Other............................................. 27,260,540 19,128,918 ------------ ------------ 143,023,261 99,689,410 ------------ ------------ EXPENSES: Operating costs................................... 59,869,348 41,800,111 General and administrative........................ 11,628,513 7,142,567 Depreciation and amortization..................... 65,757,387 51,193,702 Management and financial advisory service fees-- related parties.................................. 5,034,375 6,499,167 ------------ ------------ 142,289,623 106,635,547 ------------ ------------ Loss from operations........................... 733,638 (6,946,137) ------------ ------------ OTHER INCOME (EXPENSE): Interest income................................... 164,476 503,585 Interest expense.................................. (46,654,019) (35,461,026) Other, net........................................ (1,058,271) 41,622 ------------ ------------ (47,547,814) (34,915,819) ------------ ------------ Loss before equity in loss of unconsolidated limited partnerships, loss from discontinued operation, provision for income taxes and minority interest in loss of subsidiary....... (46,814,176) (41,861,956) EQUITY IN LOSS OF UNCONSOLIDATED LIMITED PARTNER- SHIPS............................................. (6,302,990) (1,402,194) ------------ ------------ Loss before provision for income taxes, loss from discontinued operation, provision for income taxes and minority interest in loss of subsidiary.................................... (53,117,166) (43,264,150) PROVISION FOR INCOME TAXES......................... -- -- ------------ ------------ Loss before loss from discontinued operation and minority interest in loss of subsidiary... (53,117,166) (43,264,150) LOSS FROM DISCONTINUED OPERATION................... (1,515,558) -- ------------ ------------ Loss before minority interest in loss of sub- sidiary....................................... (54,632,724) (43,264,150) MINORITY INTEREST IN LOSS OF SUBSIDIARY............ 15,998,674 1,502,975 ------------ ------------ Net loss....................................... $(38,634,050) $(41,761,175) ============ ============
The accompanying notes are an integral part of these consolidated statements. F-6 CCA HOLDINGS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT (DEFICIT) FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
ADDITIONAL COMMON PAID-IN ACCUMULATED STOCK CAPITAL DEFICIT TOTAL ------ ----------- ------------ ------------ BALANCE, January 1, 1995........ $-- $ -- $ -- $ -- Issuance of common stock....... 800 79,999,200 -- 80,000,000 Net loss....................... -- -- (41,761,175) (41,761,175) ---- ----------- ------------ ------------ BALANCE, December 31, 1995...... 800 79,999,200 (41,761,175) 38,238,825 Net loss....................... -- -- (38,634,050) (38,634,050) ---- ----------- ------------ ------------ BALANCE, December 31, 1996...... $800 $79,999,200 $(80,395,225) $ (395,225) ==== =========== ============ ============
The accompanying notes are an integral part of these consolidated statements. F-7 CCA HOLDINGS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss.......................................... $(38,634,050) $(41,761,175) Adjustments to reconcile net loss to net cash provided by operating activities-- Depreciation and amortization.................... 65,757,387 51,193,702 Loss on sale of property, plant and equipment.... 1,256,945 -- Loss from discontinued operations................ 1,515,558 -- Equity in loss of unconsolidated limited partnerships..................................... 6,302,990 1,402,194 Minority interest in loss of subsidiary.......... (15,998,674) (1,502,975) Changes in assets and liabilities, net of effects from acquisitions-- Accounts receivable, net........................ (1,748,468) (1,387,654) Prepaid expenses and other...................... 279,406 (250,428) Accounts payable and accrued expenses........... 4,429,157 4,249,587 Subscriber deposits............................. (257,062) (11,303) Payables to affiliates, including deferred management fees................................. 462,620 3,922,529 Other current liabilities....................... 1,401,951 -- Deferred revenue................................ (144,748) 780,612 Accrued interest on note payable................ 12,404,597 10,438,805 ------------ ------------ Net cash provided by operating activities..... 37,027,609 27,073,894 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment........ (33,898,020) (22,023,524) Proceeds from sale of property, plant and equipment......................................... 986,359 -- Payments for acquisitions, net of cash acquired... (122,017,267) (523,679,458) Payments of organizational expenses............... (242,875) (1,297,203) Payments of franchise costs....................... (569,167) (53,266) Payments of brokerage commissions.................. (310,385) -- Restricted funds held in escrow.................... 301,598 (301,598) Investment in unconsolidated limited partnerships...................................... -- (85,775,000) Minority investment in subsidiary................. -- 107,775,000 ------------ ------------ Net cash used in investing activities......... (155,749,757) (525,355,049) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Payments of debt issuance costs................... (2,773,844) (7,287,914) Borrowings under revolving credit and term loan facility.......................................... 120,500,000 355,000,000 Payments of revolving credit and term loan facility.......................................... (7,500,000) -- Borrowings under note payable..................... -- 82,000,000 Issuance of common stock.......................... -- 80,000,000 ------------ ------------ Net cash provided by financing activities..... 110,226,156 509,712,086 ------------ ------------ NET INCREASE IN CASH AND CASH EQUIVALENTS.......... (8,495,992) 11,430,931 CASH AND CASH EQUIVALENTS, beginning of year....... 11,430,931 -- ------------ ------------ CASH AND CASH EQUIVALENTS, end of year............. $ 2,934,939 $ 11,430,931 ============ ============ CASH PAID FOR INTEREST............................. $ 33,921,715 $ 22,907,403 ============ ============ CASH PAID FOR TAXES................................ $ -- $ -- ============ ============
The accompanying notes are an integral part of these consolidated statements. F-8 CCA HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996 AND 1995 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: ORGANIZATION AND BASIS OF PRESENTATION CCA Holdings Corp. (CCA Holdings), a Delaware corporation, was formed on November 17, 1994. CCA Holdings commenced operations in January 1995 in connection with consummation of the Crown Transaction (as defined below). The accompanying consolidated financial statements include the accounts of CCA Holdings; its wholly-owned subsidiary, CCA Acquisition Corp. (CAC); CAC's wholly-owned subsidiary, Cencom Cable Entertainment, Inc. (CCE); and Charter Communications Entertainment I, L.P. (CCE-I), which is controlled by CAC through its general partnership interest (collectively referred to as the "Company"). CCA Holdings is owned approximately 85% by Kelso Investment Associates V, L.P., an investment fund, together with an affiliate (collectively referred to as "Kelso" herein) and certain other individuals and approximately 15% by Charter Communications, Inc. (Charter), manager of CCE- I's cable television systems (see Note 10). All material intercompany transactions and balances have been eliminated. In January 1995, CAC completed the acquisition of certain cable television systems from Crown Media, Inc. (Crown), a subsidiary of Hallmark Cards, Incorporated (Hallmark) (the "Crown Transaction"). On September 29, 1995, CAC and CCT Holdings Corp. (CCT Holdings), an entity affiliated with CCA Holdings by common ownership, entered into an Asset Exchange Agreement whereby CAC exchanged a 1% undivided interest in all of its assets for a 1.22% undivided interest in certain assets to be acquired by CCT Holdings from an affiliate of Gaylord Entertainment Company, Inc. (Gaylord). Effective September 30, 1995, CCT Holdings acquired certain cable television systems from Gaylord. Upon execution of the Asset Purchase Agreement, CAC and CCT Holdings entered into a series of agreements to contribute the assets acquired under the Crown Transaction to CCE-I and certain assets acquired in the Gaylord acquisition to Charter Communications Entertainment II, L.P. (CCE-II). As a result of entering into these agreements, CCA Holdings owns a 55% interest and CCT Holdings owns a 45% interest in the combined operations of CCE-I and CCE-II, respectively. The net loss of CCE-I for the period prior to September 29, 1995, was allocated entirely to CCA Holdings. As of December 31, 1996, CCE-I provided cable television service to approximately 125 franchises serving approximately 338,300 basic subscribers in Connecticut, Illinois, Massachusetts, Missouri and New Hampshire. CASH EQUIVALENTS Cash equivalents at December 31, 1996 and 1995, consist primarily of repurchase agreements with original maturities of 90 days or less. These investments are carried at cost, which approximates market value. The Company is subject to loss for amounts invested in repurchase agreements in the event of nonperformance by the financial institution which acts as the counterparty under such agreements; however, such noncompliance is not anticipated. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is recorded at cost, including all direct and certain indirect costs associated with the construction of cable transmission and distribution facilities, and the cost of new customer installation. The costs of disconnecting a residence are charged to expense in the period incurred. Expenditures for repairs and maintenance are charged to expense as incurred, and equipment replacement costs and betterments are capitalized. F-9 CCA HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Depreciation is provided using the composite method on a straight-line basis over the estimated useful life of the related asset as follows: Trunk and distribution systems................................. 10 years Subscriber installations....................................... 10 years Buildings and headends......................................... 10-20 years Converters..................................................... 5 years Vehicles and equipment......................................... 4-8 years Office equipment............................................... 5-10 years
FRANCHISE COSTS Costs incurred in obtaining and renewing cable franchises are initially deferred and amortized over the legal lives of the franchises. Costs relating to unsuccessful franchise applications are charged to expense when it is determined that the efforts to obtain the franchise will not be successful. Franchise rights acquired through the purchase of cable television systems represent the excess of the cost of properties acquired over the amounts assigned to the net tangible assets at date of acquisition. Acquired franchise rights are amortized using the straight-line method over 15 years. COVENANT NOT TO COMPETE Covenant not to compete was amortized over the term of the respective agreement (two years). OTHER ASSETS Organizational expenses are being amortized using the straight-line method over five years. Debt issuance costs are being amortized over the term of the debt. During 1995, the Company adopted SFAS No. 121 entitled, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." In accordance with SFAS No. 121, the Company periodically reviews the carrying value of its long-lived assets, identifiable intangibles and franchise costs in relation to historical financial results, current business conditions and trends (including the impact of existing legislation and regulation) to identify potential situations in which the carrying value of such assets may not be recoverable. If a review indicates that the carrying value of such assets may not be recoverable, the carrying value of such assets in excess of their fair value will be recorded as a reduction of the assets' cost as if a permanent impairment has occurred. No impairments have occurred and accordingly, no adjustments to the financial statements of the Company have been recorded relating to SFAS No. 121. RESTRICTED FUNDS HELD IN ESCROW In connection with the acquisition of cable television systems from Mineral Area Cablevision Co., L.P. (Omega) as further discussed in Note 4, the Company agreed to deposit a portion of the purchase price into an escrow account in 1995 which was transferred to Omega at the closing of the asset purchase in January 1996. INVESTMENT IN UNCONSOLIDATED LIMITED PARTNERSHIPS CCA Holdings has a 1% general partnership interest and a 54% limited partnership interest in Charter Communications Entertainment, L.P. (CCE, L.P.). CCT Holdings has a 1% general partnership interest and a 44% limited partnership interest in CCE, L.P. CCE, L.P. has a 97.78% limited partnership interest in both CCE-I and CCE-II. CCA Holdings' interest in CCE, L.P., together with its 1.22% general partnership interest in CCE-I and its 1.22% limited partnership interest in CCE-II, provide CCA Holdings with a 55% interest in both CCE-I F-10 CCA HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) and CCE-II. CCT Holdings, owns the remaining 45% interest in both CCE-I and CCE-II, including a 1% general partnership interest in CCE-II. CCE-II is controlled by CCT Holdings through its general partnership interest in CCE-II and provisions in CCE-II's partnership agreement and CCE, L.P. is jointly controlled by the Company and CCT Holdings through their general partnership interests in CCE, L.P. and provisions in CCE, L.P.'s partnership agreement; therefore, CCA Holdings' investment in CCE L.P. and CCE-II is accounted for using the equity method. Under this method, the investment in CCE L.P. and CCE-II is originally recorded at cost and is subsequently adjusted to recognize CCA Holdings' share of net earnings or losses as they occur and distributions when received. REVENUES Cable service revenues are recognized when the related services are provided. Installation revenues are recognized to the extent of direct selling costs incurred. The remainder, if any, is deferred and amortized to income over the average estimated period that customers are expected to remain connected to the cable television system. Franchise fees collected from cable subscribers and paid to local franchises are reported as revenues. OTHER INCOME (EXPENSE) Other includes gain and loss on disposition of fixed assets and other miscellaneous income and expense items, which are not directly related to the Company's primary business. A loss of $1,256,945 was recognized on the sale of two buildings for the year ended December 31, 1996. INCOME TAXES Income taxes are recorded in accordance with SFAS No. 109, "Accounting for Income Taxes." DERIVATIVE FINANCIAL INSTRUMENTS The Company manages risk arising from fluctuations in interest rates by using interest rate swap and cap agreements, as required by its credit agreement. These agreements are treated as off-balance sheet financial instruments. The interest rate swap and cap agreements are being accounted for as a hedge of the debt obligation, and accordingly, the net settlement amount is recorded as an adjustment to interest expense in the period incurred. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities 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 those estimates. RECLASSIFICATIONS Certain reclassifications have been made to the 1995 financial statements to conform with current year presentation. 2. INVESTMENT IN UNCONSOLIDATED LIMITED PARTNERSHIPS: Effective September 30, 1995, CCT Holdings acquired certain assets from Gaylord for approximately $340.9 million, which included cable television systems in California. As described above, these assets were contributed to CCE-II. To finance the acquisition, CCE-II entered into a revolving credit and term loan facility and CCT Holdings executed a subordinated seller note to Gaylord (the "Gaylord Note"). F-11 CCA HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) As of December 31, 1996, CCE-II provided cable television service to approximately 168,100 basic subscribers in southern California. Summary financial information of CCE-II as of December 31, 1996 and 1995, and for the period from inception (April 20, 1995) to December 31, 1995, and for the year ended December 31, 1996, which is not consolidated with the operating results of the Company, is as follows:
1996 1995 ------------ ------------ Current assets............................... $ 10,904,830 $ 11,043,867 Noncurrent assets--primarily investment in cable television properties................. 338,316,421 348,029,594 ------------ ------------ Total assets............................. $349,221,251 $359,073,461 ============ ============ Current liabilities.......................... $ 13,098,198 $ 14,217,036 Long-term debt............................... 221,418,000 218,600,000 Other long-term liabilities.................. 383,070 474,460 Partners' capital............................ 114,321,983 125,781,965 ------------ ------------ Total liabilities and partners' capital.. $349,221,251 $359,073,461 ============ ============ Service revenues............................. $ 90,368,332 $ 21,156,209 ============ ============ Income from operations....................... $ 5,039,834 $ 983,638 ============ ============ Net loss..................................... $(11,459,982) $ (3,458,535) ============ ============
3. COMMON STOCK: The Class A Voting Common Stock (Class A Common Stock) and Class C Non- Voting Common Stock (Class C Common Stock) have certain preferential rights upon liquidation of CCA Holdings. In the event of liquidation, dissolution or "winding up" of CCA Holdings, holders of Class A and Class C Common Stock are entitled to a preference of $1,000 per share. After such amount is paid, holders of Class B Voting Common Stock (Class B Common Stock) are entitled to receive $1,000 per share. Thereafter, Class A and Class C shareholders shall ratably receive the remaining proceeds. If upon liquidation, dissolution or "winding up" the assets of CCA Holdings are insufficient to permit payment to Class A and Class C shareholders for their full preferential amounts, all assets of CCA Holdings shall then be distributed ratably to Class A and Class C shareholders. Furthermore, if the proceeds from liquidation are inadequate to pay Class B shareholders their full preferential amounts, the proceeds are to be distributed on a pro rata basis to Class B shareholders. Upon the occurrence of any Conversion Event (as defined within the Amended and Restated Certificate of Incorporation) Class C shareholders may convert any or all of their outstanding shares into the same number of Class A Common Stock. Furthermore, CCA Holdings may automatically convert outstanding Class C shares into the same number of Class A shares. CCA Holdings is restricted from making cash dividends on its common stock until the balance outstanding under the HC Crown Note (as defined in Note 8) is repaid. Charter and Kelso entered into a Stockholders' Agreement providing for certain restrictions on the transfer, sale or purchase of CCA Holdings' Common Stock. F-12 CCA HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 4. ACQUISITIONS: In January 1995, CAC completed the acquisition of certain cable television systems from Crown for an aggregate purchase price of approximately $488.2 million. The assets were later contributed through a series of transactions to CCE-I effective January 1, 1995. The acquisition of these systems was part of a series of larger transactions in which Crown sold its cable television systems to a group of investors, including Charter, CAC, certain affiliates of Charter, and third parties, for a total purchase price of approximately $900.0 million. To finance this acquisition, CCE-I entered into a revolving credit and term loan facility (see Note 9), and CCA Holdings executed a subordinated seller note to an affiliate of Hallmark for $82.0 million. In October 1995, CCE-I acquired the net assets of certain systems from United Video Cablevision, Inc. (United), which include cable television systems in Massachusetts and Missouri, for an aggregate purchase price of approximately $96.0 million. In January 1996, CCE-I acquired the net assets of certain systems from Omega, which include cable television systems in Missouri, for an aggregate purchase price of approximately $9.4 million. In March 1996, CCE-I acquired the net assets of the Illinois system from Cencom Cable Income Partners, L.P. (CCIP), an affiliated entity, for an aggregate purchase price of approximately $82.1 million (the "CCIP Acquisition"). In November 1996, CCE-I acquired the net assets of certain systems from Masada Cable Partners, L.P. (Masada), which include cable television systems in Missouri, for an aggregate purchase price of approximately $24.2 million. These acquisitions were accounted for using the purchase method of accounting, and accordingly, results of operations of the acquired assets have been included in the financial statements from the respective dates of acquisition. The following shows the purchase price and the allocation of the purchase price to assets acquired and liabilities assumed:
CROWN UNITED OMEGA CCIP MASADA ------------ ----------- ---------- ----------- ----------- Purchase price: Cash paid to seller.... $341,030,472 $93,542,306 $9,178,086 $80,103,013 $23,625,358 Seller note executed by CCA Holdings.......... 82,000,000 -- -- -- -- Assumed liabilities, including deferred taxes of $55,500,000.. 55,638,033 282,000 32,000 -- 82,950 Transaction costs...... 9,545,039 2,216,101 200,000 2,025,000 480,000 ------------ ----------- ---------- ----------- ----------- $488,213,544 $96,040,407 $9,410,086 $82,128,013 $24,188,308 ============ =========== ========== =========== ===========
F-13 CCA HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CROWN UNITED OMEGA CCIP MASADA ------------ ----------- ---------- ----------- ----------- Allocation of purchase price to assets acquired: Cash................... $ 5,073,954 $ 539 $ 200 $ 1,053,410 $ -- Accounts receivable.... 1,933,859 2,673 5,190 387,906 -- Prepaid expenses and other................. 279,745 111,385 7,440 90,368 30,483 Property, plant and equipment............. 162,432,874 12,439,879 1,054,878 11,980,833 2,147,338 Franchise costs........ 307,370,555 84,356,513 8,427,122 69,663,726 22,155,487 Covenant not to compete............... 20,000,000 -- -- -- -- Accounts payable and accrued expenses...... (8,877,443) (147,616) (84,744) (975,755) (126,000) Subscriber deposits.... -- (722,966) -- -- (19,000) Deferred revenue....... -- -- -- (72,475) -- ------------ ----------- ---------- ----------- ----------- Purchase price........ $488,213,544 $96,040,407 $9,410,086 $82,128,013 $24,188,308 ============ =========== ========== =========== ===========
The following are the unaudited pro forma operating results as though the 1996 and 1995 acquisitions by CCE-I and CCE-II had been made on January 1 of the respective year prior to such acquisitions:
FOR THE YEARS ENDED DECEMBER 31 -------------------------- 1996 1995 ------------ ------------ (UNAUDITED) Service revenues.............................. $151,548,000 $137,021,602 Income (loss) from operations................. $ 446,000 $ (2,049,590) Net loss...................................... $(39,157,000) $(41,587,611)
5. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment is stated at cost and consist of the following at December 31:
1996 1995 ------------ ------------ Trunk and distribution systems................. $125,248,708 $110,330,189 Subscriber installations....................... 45,636,572 34,114,600 Land, buildings and headends................... 33,135,716 21,069,307 Converters..................................... 27,097,454 21,046,326 Vehicles and equipment......................... 7,180,068 4,737,430 Office equipment............................... 7,603,973 5,597,301 Construction-in-progress....................... 3,243,405 -- ------------ ------------ 249,145,896 196,895,153 Less--Accumulated depreciation................. (42,794,517) (18,745,185) ------------ ------------ $206,351,379 $178,149,968 ============ ============
F-14 CCA HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 6. OTHER ASSETS: Other assets consist of the following at December 31:
1996 1995 ---------- ---------- Debt issuance costs, net of accumulated amortization of $1,656,817 and $648,064, respectively...................................... $8,404,941 $6,639,850 Organizational expenses, net of accumulated amortization of $574,589 and $287,104, respectively...................................... 965,489 1,010,099 Brokerage commissions, net of accumulated amortization of $13,459 and $-0-, respectively.... 296,926 -- ---------- ---------- $9,667,356 $7,649,949 ========== ==========
7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES: Accounts payable and accrued expenses consist of the following at December 31:
1996 1995 ----------- ----------- Accrued salaries and related benefits............. $ 1,613,024 $ 888,972 Accounts payable.................................. 1,763,895 646,744 Accrued interest.................................. 2,442,525 2,114,818 Programming expenses.............................. 2,726,803 2,046,640 Franchise fees.................................... 3,187,335 2,467,564 Capital expenditures.............................. 3,482,531 3,525,747 Other............................................. 3,674,189 1,584,161 ----------- ----------- $18,890,302 $13,274,646 =========== ===========
8. NOTE PAYABLE: In connection with the Crown Transaction, the Company entered into an $82.0 million senior subordinated loan agreement with a subsidiary of Hallmark, HC Crown Corp., and pursuant to such loan agreement issued a senior subordinated note (the "HC Crown Note"). The HC Crown Note is an unsecured obligation. The HC Crown Note is limited in aggregate principal amount to $82.0 million and has a stated maturity date of December 31, 1999 (the "Stated Maturity Date"). Interest accrues at 13% per annum, compounded semiannually, but is not due and payable until the Stated Maturity Date. If principal plus accrued interest is not paid at the Stated Maturity Date, the annual rate at which interest accrues will initially increase to 18% and will increase by an additional 2% on each successive anniversary of the Stated Maturity Date (up to a maximum of 26%) until the HC Crown Note is repaid; in addition, a 3% default rate of interest can, in certain instances, be in effect simultaneously with the stated rate of interest on the HC Crown Note. The HC Crown Note is redeemable in whole or in part at the option of the Company at any time, without premium or penalty, provided that accrued interest is paid on the portion of the HC Crown Note so redeemed. Borrowings under the HC Crown Note are subject to certain financial and nonfinancial covenants and restrictions. The most restrictive covenant requires maintenance of a ratio of debt (excluding the HC Crown Note) to adjusted consolidated annualized operating cash flow, as defined, not to exceed 7.25 to 1 at December 31, 1996. In addition to the subordination in right of payment provisions contained in the HC Crown Note, the HC Crown Note is subject to a subordination agreement in favor of senior bank debt of CCE-I. Pursuant to the subordination agreement, substantially all rights and remedies under the HC Crown Note, including the rights to F-15 CCA HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) accelerate the maturity upon an event of default (including a payment of default), are suspended until the obligations under the Credit Agreement (as defined herein) are paid in full. The HC Crown Note is subordinated to the Credit Agreement. Pursuant to the terms of the Credit Agreement, payments on the HC Crown Note are prohibited until the indefeasible payment in full in cash, and the termination of commitments to lend under the Credit Agreement. The HC Crown Note will not have the benefit of any distributions from CCE-II until repayment in full of CCE-II's credit facility and the Gaylord Note. The obligations owing on the HC Crown Note are guaranteed by CAC, CCE and CCE, L.P. (collectively referred to as the "Guarantors"). The CCE, L.P. guarantee cannot be enforced until the repayment in full and termination of the Credit Agreement (as defined herein) and the CCE-II credit facility. The CAC and CCE guarantees cannot be enforced until the repayment in full and termination of the Credit Agreement. The guarantees, by their terms, are limited to the proceeds of distributions received from CCE-I, and income, if any, generated by the Guarantors. CCA Holdings and the Guarantors are dependent primarily upon distributions from CCE-I to service the HC Crown Note. Subsequent to year-end, HC Crown Corp. sold the majority of the HC Crown Note through a private placement. The fair value of the HC Crown Note plus accrued interest, based upon the proceeds received, was approximately $89.5 million at December 31, 1996. 9. LONG-TERM DEBT: In January 1995, CCE-I entered into a revolving credit and term loan facility (the "Credit Agreement") with a consortium of banks for borrowings up to $300.0 million. CCE-I has amended, on several occasions, the Credit Agreement to allow for total borrowings of $505.0 million for the purpose of making certain acquisitions. Principal payments are due in quarterly installments beginning September 30, 1997, and continuing through June 30, 2004. Borrowings under the Credit Agreement bear interest at rates based upon a certain spread plus a base rate, with the base rate being, at CCE-I's election, the Base Rate, as defined in the Credit Agreement, LIBOR, or prevailing bid rates on certificates of deposit. The applicable spread is based on the ratio of debt to annualized operating cash flow. The interest rates ranged from 7.63% to 9.42% at December 31, 1996. The weighted average interest rates and weighted average borrowings were 8.05% and 8.71%, and approximately $425,067,000 and $272,885,000 during 1996 and 1995, respectively. As this debt instrument bears interest at current market rates, its carrying amount approximates fair market value at December 31, 1996 and 1995. Borrowings under the Credit Agreement are collateralized by the assets of CCE-I. In addition, CAC, CCE and CCT Holdings have pledged their partnership interests as additional security to the Credit Agreement. Borrowings under the Credit Agreement are subject to certain financial and nonfinancial covenants and restrictions, the most restrictive of which requires maintenance of a ratio of debt to annualized operating cash flow, as defined, not to exceed 6.50 to 1 at December 31, 1996. A quarterly commitment fee of 0.375% per annum is payable on the unused portion of the Credit Agreement. F-16 CCA HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Commencing September 30, 1997, and March 31, 1998, the principal balances of the term and fund loans, respectively, shall be amortized in consecutive quarterly installments until paid in full. In addition, commencing September 30, 1997, and at the end of each calendar quarter thereafter, available borrowings under the revolving credit facility shall be reduced. The following table sets forth such information on an annual basis.
PERCENTAGE OF PRINCIPAL DUE PERCENTAGE REDUCTION --------------------- OF REVOLVING CREDIT YEAR TERM LOANS FUND LOANS FACILITY COMMITMENT ---- ---------- ---------- -------------------- 1997............................ 2.10% -- % 2.10% 1998............................ 9.00 .50 9.00 1999............................ 12.00 .50 12.00 2000............................ 12.25 1.00 12.25 2001............................ 16.50 1.00 16.50 2002............................ 20.25 1.00 20.25 2003............................ 21.25 17.40 21.25 2004............................ 6.65 78.60 6.65 ------ ------ ------ 100.00% 100.00% 100.00% ====== ====== ======
In addition to the foregoing, effective April 30, 1999, and on each April 30th thereafter, CCE-I is required to make a repayment of principal of the term and fund loans (pro rata) in an amount equal to 75% of Annual Excess Cash Flow, as defined in the Credit Agreement, for the preceding year if the leverage ratio is greater than 5.5 to 1, or 50% of Annual Excess Cash Flow if the leverage ratio is less than 5.5 to 1. These repayments shall be applied to principal in inverse order of maturity. Based upon outstanding indebtedness at December 31, 1996, and the amortization of term loans and fund loans and scheduled reductions in available borrowings depicted above, aggregate future principal payments on the Credit Agreement at December 31, 1996, are as follows:
YEAR AMOUNT ---- ------------ 1997.......................................................... $ 5,880,000 1998.......................................................... 25,625,000 1999.......................................................... 34,025,000 2000.......................................................... 47,640,000 2001.......................................................... 70,150,000 Thereafter.................................................... 284,680,000 ------------ $468,000,000 ============
F-17 CCA HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) As a requirement of the Credit Agreement, CCE-I has secured interest rate protection agreements. The Credit Agreement requires CCE-I to enter into interest rate protection agreements for notional amounts of not less than 50% of the outstanding obligations. In addition, the interest rate protection agreements must provide rate protection for a weighted average period of not less than 18 months. The fair value of the interest rate caps or swaps is the estimated amount CCE-I would receive (pay) to eliminate the cap or swap agreement at the reporting date, taking into account current interest rates and the credit-worthiness of the counterparties. The following summarizes certain information pertaining to the interest rate protection agreements as of December 31, 1996:
FAIR VALUE/ NOTIONAL FIXED CONTRACT EXPIRATION REDEMPTION AMOUNT TYPE RATE DATE PRICE ------------ ---- ----- ---------------------------------------- ---------- $ 25,000,000 Swap 5.5% December 1, 1997........................ $(60,812) 25,000,000 Swap 5.5 December 1, 1997........................ (19,135) 75,000,000 Swap 5.5 December 1, 1998........................ * 25,000,000 Swap 4.9 March 28, 1998.......................... (4,956) 20,000,000 Cap 8.5 April 14, 1998.......................... (8,978) 30,000,000 Cap 8.5 September 23, 1999...................... 42,045 50,000,000 Cap 8.5 February 2, 1999........................ 1,085,601 ------------ ---------- $250,000,000 6.6% Weighted Average Fixed Rate............. $1,033,765 ============ ==========
*This contract has not been marked to market since its effective date is after the reporting date. Management believes that the counterparties of the interest rate protection agreements will be able to meet their obligations under the agreements. The purpose of CCE-I's involvement in these interest rate protection agreements is to minimize CCE-I's exposure to interest rate fluctuations on its floating rate debt. Management believes that it has no material concentration of credit or market risks with respect to its interest rate protection agreements. 10. RELATED-PARTY TRANSACTIONS: Charter provides management services to CCE-I under the terms of a contract which provides for base fees equal to $4,845,000 and $3,925,000 as of December 31, 1996 and 1995, respectively, per annum plus an annual bonus equal to 30% of the excess, if any, of operating cash flow (as defined in the management agreement) over the projected operating cash flow for the year. Payment of the annual bonus is deferred until termination of the Credit Agreement due to restrictions provided within the Credit Agreement. The annual bonus for the year ended December 31, 1996 and 1995, totaled $740,000 and $1,015,000, respectively. In addition, CCE-I receives financial advisory services from an affiliate of Kelso, under terms of a contract which provides for fees equal to $552,500 and $450,000 at December 31, 1996 and 1995, respectively, per annum. These agreements were amended during 1996 and 1995 in conjunction with each acquisition of cable television systems to increase the annual base fees for Charter and Kelso. Expenses recognized by CCE-I under these contracts during 1996 and 1995 were approximately $5,034,000 and $6,499,000, respectively. Management and financial advisory service fees currently payable of $1,181,300 and $1,029,000 are included in Payables to affiliates at December 31, 1996 and 1995, respectively. CCE-I pays certain acquisition advisory fees to an affiliate of Kelso and Charter, which typically equal approximately 1% of the total purchase price paid for cable television systems acquired. Total acquisition fees paid to the affiliate of Kelso in 1996 and 1995 were $1,140,000 and $5,250,000, respectively. Total acquisition fees paid to Charter in 1996 and 1995 were $1,140,000 and $950,000, respectively. In addition, Charter received $4,300,000 of equity interests in CCA Holdings during 1995 in conjunction with the Crown acquisition. F-18 CCA HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) CCE-I and all entities affiliated with Charter collectively utilize a combination of insurance coverage and self-insurance programs for medical, dental and workers' compensation claims. CCE-I is allocated charges monthly based upon its total number of employees, historical claims and medical cost trend rates. Management considers this allocation to be reasonable for the operations of CCE-I. During 1996 and 1995, CCE-I expensed approximately $1,401,300 and $840,000, respectively, relating to insurance allocations. In 1996, CCE-I and other affiliated entities employed the services of Charter's National Data Center (the "National Data Center"). The National Data Center performs certain subscriber billing services and provides computer network, hardware and software support to CCE-I and other affiliated entities. The cost of these services is allocated based on the number of subscribers. Management considers this allocation to be reasonable for the operations of CCE-I. During 1996, CCE-I expensed approximately $340,600 relating to these services. CCE-I maintains a regional office. The regional office performs certain operational services on behalf of CCE-I and other affiliated entities. The cost of these services is allocated to CCE-I and affiliated entities based on their number of subscribers. Management considers this allocation to be reasonable for the operations of CCE-I. During 1996 and 1995, CCE-I expensed approximately $799,400 and $512,000, respectively, relating to these services. CCE-II has similar arrangements as discussed above, which have been reflected in CCE-II's operations. 11. COMMITMENTS AND CONTINGENCIES: LEASES CCE-I leases certain facilities and equipment under noncancelable operating leases. Rent expense incurred under these leases during 1996 and 1995 was approximately $617,600 and $533,000, respectively. Approximate aggregate future minimum lease payments are as follows: 1997.............................................................. $484,500 1998.............................................................. 438,900 1999.............................................................. 259,600 2000.............................................................. 159,200 2001.............................................................. 111,200 Thereafter........................................................ 422,100
CCE-I rents utility poles in its operations. Generally, pole rental agreements are short term, but CCE-I anticipates that such rentals will recur. Rent expense for pole attachments during 1996 and 1995 was approximately $1,773,100 and $1,363,000, respectively. INSURANCE COVERAGE CCE-I currently does not have, and does not in the near term anticipate having, property and casualty insurance on its underground distribution plant. Due to large claims incurred by the property and casualty insurance industry, the pricing of insurance coverage has become inflated to the point where, in the judgment of the Company's management, the price is cost prohibitive. Management believes that its experience and policy with such insurance coverage is consistent with general industry practices. Management will continue to monitor the insurance markets to attempt to obtain coverage for CCE-I's distribution plant at reasonable rates. LITIGATION A purported class action lawsuit on behalf of the CCIP limited partners was filed in 1995 (the "Action"), which sought, among other things, to enjoin permanently the CCIP Acquisition. On February 15, 1996, all of the plaintiff's claims for injunctive relief were dismissed (including that which sought to prevent the consummation of the CCIP Acquisition); the plaintiff's claims for money damages which may have resulted from the CCIP F-19 CCA HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Acquisition remain pending. Each of the defendants in the Action, including CCE-I believes the Action, which remains pending, to be without merit and is contesting it vigorously. In October 1996, the plaintiff filed a Consolidated Amended Class Action Complaint (the "Amended Complaint"). The general partner of CCIP believes that portions of the Amended Complaint are legally inadequate and in January 1997 filed a motion for summary judgment to dismiss all remaining claims in the Action. There can be no assurance, however, that the plaintiff will not be awarded damages, some or all of which may be payable by CCE-I, in connection with the Action. The Company is also a party to lawsuits which are generally incidental to its business. In the opinion of management, after consulting with legal counsel, the outcome of these lawsuits will not have a material adverse effect on the Company's consolidated financial position and results of operations. SEVERANCE PAYMENT During 1996, CCE-I and other affiliated entities entered into a Settlement Agreement and Mutual Release with a former executive, whereby CCE-I will make severance payments totaling $500,000. The funds are to be paid in 12 equal installments, which commenced April 1, 1996. 12. REGULATION IN THE CABLE TELEVISION INDUSTRY: The cable television industry is subject to extensive regulation at the federal, local and, in some instances, state levels. In addition, recent legislative and regulatory changes and additional regulatory proposals under consideration may materially affect the cable television industry. Congress enacted the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"), which became effective on December 4, 1992. The 1992 Cable Act generally allows for a greater degree of regulation of the cable television industry. Under the 1992 Cable Act's definition of effective competition, nearly all cable systems in the United States are subject to rate regulation of basic cable services, provided the local franchising authority becomes certified to regulate basic service rates. The 1992 Cable Act and the Federal Communications Commission's (FCC) rules implementing the 1992 Cable Act have generally increased the administrative and operational expenses of cable television systems and have resulted in additional regulatory oversight by the FCC and local franchise authorities. While management believes that CCE-I and CCE-II has complied in all material respects with the rate provisions of the 1992 Cable Act, in jurisdictions that have not yet chosen to certify, refunds covering a one-year period on basic services may be ordered upon future certification if CCE-I and CCE-II are unable to justify their rates through a benchmark or cost-of-service filing pursuant to FCC rules. Management is unable to estimate at this time the amount of refunds, if any, that may be payable by CCE-I and CCE-II in the event certain of their rates are successfully challenged by franchising authorities or found to be unreasonable by the FCC. Management does not believe that the amount of any such refunds would have a material adverse effect on the consolidated financial position or results of operations of the Company. The 1992 Cable Act modified the franchise renewal process to make it easier for a franchising authority to deny renewal. Historically, franchises have been renewed for cable operators that have provided satisfactory services and have complied with the terms of the franchise agreement. Although management believes that the Company has generally met the terms of its franchise agreements and has provided quality levels of service, and anticipates the Company's future franchise renewal prospects generally will be favorable, there can be no assurance that any such franchises will be renewed or, if renewed, that the franchising authority will not impose more onerous requirements on the Company than previously existed. During 1996, Congress passed and the President signed into law the Telecommunications Act of 1996 (the "Telecommunications Act"), which alters federal, state, and local laws and regulations pertaining to cable television, telecommunications and other services. Under the Telecommunications Act, telephone companies can compete directly with cable operators in the provision of video programming, subject to certain regulatory safeguards. F-20 CCA HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Certain provisions of the Telecommunications Act could materially affect the growth and operation of the cable television industry and the cable services provided by the Company. Although the new legislation may substantially lessen regulatory burdens, the cable television industry may be subject to additional competition as a result thereof. There are numerous rule makings to be undertaken by the FCC which will interpret and implement the Telecommunications Act's provisions. In addition, certain provisions of the Telecommunications Act (such as the deregulation of cable programming rates) are not immediately effective. Further, certain of the Telecommunications Act's provisions have been and are likely to be subject to judicial challenges. Management is unable at this time to predict the outcome of such rule makings or litigation or the substantive effect of the new legislation and the rule makings on the consolidated financial position and results of operations of the Company. 13. INCOME TAXES: Income taxes are recorded in accordance with SFAS No. 109. In accordance with SFAS No. 109, deferred tax assets and liabilities are recognized for the estimated future tax consequence attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using the enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Deferred income tax expense or benefit is the result of changes in the liability or asset recorded for deferred taxes. A valuation allowance must be established for any portion of a deferred tax asset for which it is more likely than not that a tax benefit will not be realized. During 1996 and 1995, changes in the Company's temporary differences and losses from operations, which pertain primarily to depreciation and amortization, resulted in a deferred tax benefits of approximately $12.5 million and $9.0 million, respectively. These amounts were offset by valuation allowances of equal amounts. No current provision (benefit) for income taxes was recorded during 1996 and 1995. Deferred taxes are comprised of the following at December 31:
1996 1995 ------------ ------------ Deferred income tax assets: Accounts receivable......................... $ 148,000 $ 100,000 Covenant not to compete..................... 6,933,000 3,467,000 Investment in unconsolidated limited partnership................................ -- 556,000 Accrued expenses and payables to affiliates................................. 2,273,000 1,978,000 Deferred revenue............................ 283,000 312,000 Deferred management fees payable to affiliate.................................. 702,000 406,000 Tax loss carryforwards...................... 44,352,000 26,119,000 Valuation allowance......................... (21,528,000) (9,042,000) ------------ ------------ Total deferred income tax assets......... 33,163,000 23,896,000 ------------ ------------ Deferred income tax liabilities: Property, plant and equipment............... (37,191,000) (31,867,000) Franchise costs............................. (44,362,000) (47,285,000) Investment in unconsolidated limited partnerships............................... (3,767,000) -- Minority interest in subsidiary............. (3,343,000) (244,000) ------------ ------------ Total deferred income tax liabilities.... (88,663,000) (79,396,000) ------------ ------------ Net deferred income tax liability........ $(55,500,000) $(55,500,000) ============ ============
F-21 CCA HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) At December 31, 1996, the Company had net operating loss (NOL) carryforwards for regular income tax purposes aggregating approximately $110.9 million, which expire in various years through 2011. Utilization of the NOLs is subject to certain limitations. The Company's regular tax NOLs are recognized for financial statement purposes as a reduction of the deferred tax liability or an increase of the deferred tax asset. 14. DISCONTINUED OPERATION: CCE-I approved a plan to discontinue the radio operation maintained by its subsidiary, Charter Communications Radio St. Louis, LLC. Pursuant to a sales agreement dated January 23, 1997, such operations will cease upon FCC approval of the transfer of the radio license. The net losses of this operation prior to December 31, 1996, are included in the consolidated statement of operations under "Loss from discontinued operation." Revenues from such operation were $1,532,572 for the period then ended. The noncurrent net assets of this operation are comprised primarily of property, plant and equipment, license fees and other deferred costs. No material gain or loss is anticipated in connection with the disposition of these net assets. 15. COMPETITION: The Connecticut Department of Public Utility Control granted a franchise to a subsidiary of a local telephone company to serve the entire State of Connecticut. This provider has proposed to offer its cable service initially to a primary franchise area of several Connecticut communities, including one served by CCE-I. Management is unable to predict the ultimate impact of this development upon the Company's consolidated financial position or results of operations. CCE-II's Riverside, California system, providing service to approximately 48,000 basic subscribers, faces competition from a multipoint distribution system acquired by Pacific Telesis Group. At this time management is uncertain what impact, if any, this acquisition will have on the Company's consolidated financial position or results of operations. 16. EMPLOYEE BENEFIT PLANS: 401(K) PLAN In 1995, CCE-I adopted the Charter Communications, Inc. 401(k) Plan (the "401(k) Plan") for the benefit of its employees. All employees who have completed one year of employment are eligible to participate in the 401(k) Plan. The 401(k) Plan is a tax-qualified retirement savings plan to which employees may elect to make pretax contributions up to the lesser of 10% of their compensation or dollar thresholds established under the Internal Revenue Code. CCE-I contributes an amount equal to 50% of the first 5% contributed by each employee. During 1996 and 1995, CCE-I contributed approximately $269,900 and $177,000, to the 401(k) Plan, respectively. APPRECIATION RIGHTS PLAN In 1996, certain of CCE-I's employees became participants in the 1996 Charter Communications/Kelso & Company Appreciation Rights Plan (the "Appreciation Rights Plan"). The Appreciation Rights Plan covers certain key employees and consultants within the group of companies and partnerships controlled by affiliates of Kelso and managed by Charter (collectively, the "Investment Group"). F-22 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To CCA Acquisition Corp.: We have audited the accompanying consolidated balance sheets of CCA Acquisition Corp. (a Delaware corporation) and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of operations, shareholder's investment (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CCA Acquisition Corp. and subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for the years then ended, in conformity with generally accepted accounting principles. Arthur Andersen LLP St. Louis, Missouri, February 21, 1997 F-23 CCA ACQUISITION CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS--DECEMBER 31, 1996 AND 1995
1996 1995 ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents........................... $ 2,934,939 $ 11,430,931 Accounts receivable, net of allowance for doubtful accounts of $371,166 and $251,419, respectively.... 5,465,750 3,324,186 Prepaid expenses and other.......................... 490,443 641,558 Net assets of discontinued operation................ 108,827 -- ------------ ------------ Total current assets............................. 8,999,959 15,396,675 ------------ ------------ INVESTMENT IN CABLE TELEVISION PROPERTIES: Property, plant and equipment....................... 206,351,379 178,149,968 Franchise costs, net of accumulated amortization of $51,761,758 and $21,512,225, respectively.......... 439,232,345 370,268,109 Covenant not to compete, net of accumulated amortization of $20,000,000 and $10,000,000, respectively....................................... -- 10,000,000 ------------ ------------ 645,583,724 558,418,077 ------------ ------------ OTHER ASSETS......................................... 9,667,356 7,649,949 ------------ ------------ RESTRICTED FUNDS HELD IN ESCROW...................... -- 301,598 ------------ ------------ INVESTMENT IN UNCONSOLIDATED LIMITED PARTNERSHIPS.... 78,069,816 84,372,806 ------------ ------------ NET NONCURRENT ASSETS OF DISCONTINUED OPERATION...... 1,760,015 -- ------------ ------------ $744,080,870 $666,139,105 ============ ============
(Continued on the following page) F-24 CCA ACQUISITION CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS--DECEMBER 31, 1996 AND 1995 (CONTINUED)
1996 1995 ------------ ------------ LIABILITIES AND SHAREHOLDER'S INVESTMENT (DEFICIT) CURRENT LIABILITIES: Current maturities of long-term debt.............. $ 5,880,000 $ -- Accounts payable and accrued expenses............. 18,517,774 $ 13,274,646 Subscriber deposits............................... 473,601 711,663 Payables to affiliates............................ 2,630,149 2,907,529 Other current liabilities......................... 1,401,951 -- ------------ ------------ Total current liabilities...................... 28,903,475 16,893,838 ------------ ------------ DEFERRED REVENUE................................... 708,339 780,612 ------------ ------------ DEFERRED INCOME TAXES.............................. 55,500,000 55,500,000 ------------ ------------ LONG-TERM DEBT, less current maturities............ 462,120,000 355,000,000 ------------ ------------ DEFERRED MANAGEMENT FEES PAYABLE TO AFFILIATE...... 1,755,000 1,015,000 ------------ ------------ NOTE PAYABLE....................................... 82,000,000 82,000,000 ------------ ------------ ACCRUED INTEREST ON NOTE PAYABLE................... 22,843,402 10,438,805 ------------ ------------ MINORITY INTEREST IN SUBSIDIARY.................... 90,273,351 106,272,025 ------------ ------------ COMMITMENTS AND CONTINGENCIES SHAREHOLDER'S INVESTMENT (DEFICIT): Common stock, $.01 par value, 100 shares authorized; 100 shares issued and outstanding.................................. 1 1 Additional paid-in capital........................ 79,999,999 79,999,999 Accumulated deficit............................... (80,022,697) (41,761,175) ------------ ------------ Total shareholder's investment (deficit)....... (22,697) 38,238,825 ------------ ------------ $744,080,870 $666,139,105 ============ ============
The accompanying notes are an integral part of these consolidated balance sheets. F-25 CCA ACQUISITION CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995 ------------ ------------ SERVICE REVENUES: Basic service.................................... $ 96,560,920 $ 65,075,541 Premium service.................................. 19,201,801 15,484,951 Other............................................ 27,260,540 19,128,918 ------------ ------------ 143,023,261 99,689,410 ------------ ------------ EXPENSES: Operating costs.................................. 59,869,348 41,800,111 General and administrative....................... 11,255,985 7,142,567 Depreciation and amortization.................... 65,757,387 51,193,702 Management and financial advisory service fees-- related parties................................. 5,034,375 6,499,167 ------------ ------------ 141,917,095 106,635,547 ------------ ------------ Income (loss) from continuing operations....... 1,106,166 (6,946,137) ------------ ------------ OTHER INCOME (EXPENSE): Interest income.................................. 164,476 503,585 Interest expense................................. (46,654,019) (35,461,026) Other, net....................................... (1,058,271) 41,622 ------------ ------------ (47,547,814) (34,915,819) ------------ ------------ Loss before equity in loss of unconsolidated limited partnerships, provision for income taxes, loss from discontinued operation and minority interest in loss of subsidiary....... (46,441,648) (41,861,956) EQUITY IN LOSS OF UNCONSOLIDATED LIMITED PARTNER- SHIPS............................................. (6,302,990) (1,402,194) ------------ ------------ Loss before provision for income taxes, loss from discontinued operation and minority in- terest in loss of subsidiary.................. (52,744,638) (43,264,150) PROVISION FOR INCOME TAXES......................... -- -- ------------ ------------ Loss before loss from discontinued operation and minority interest in loss of subsidiary... (52,744,638) (43,264,150) LOSS FROM DISCONTINUED OPERATION................... (1,515,558) -- ------------ ------------ Loss before minority interest in loss of sub- sidiary....................................... (54,260,196) (43,264,150) MINORITY INTEREST IN LOSS OF SUBSIDIARY............ 15,998,674 1,502,975 ------------ ------------ Net loss....................................... $(38,261,522) $(41,761,175) ============ ============
The accompanying notes are an integral part of these consolidated statements. F-26 CCA ACQUISITION CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDER'S INVESTMENT (DEFICIT) FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
ADDITIONAL COMMON PAID-IN ACCUMULATED STOCK CAPITAL DEFICIT TOTAL ------ ----------- ------------ ------------ BALANCE, January 1, 1995........ $-- $ -- $ -- $ -- Issuance of common stock...... 1 79,999,999 -- 80,000,000 Net loss...................... -- -- (41,761,175) (41,761,175) ---- ----------- ------------ ------------ BALANCE, December 31, 1995...... 1 79,999,999 (41,761,175) 38,238,825 Net loss...................... -- -- (38,261,522) (38,261,522) ---- ----------- ------------ ------------ BALANCE, December 31, 1996...... $ 1 $79,999,999 $(80,022,697) $ (22,697) ==== =========== ============ ============
The accompanying notes are an integral part of these consolidated statements. F-27 CCA ACQUISITION CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995 ------------ ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss......................................... $(38,261,522) $ (41,761,175) Adjustments to reconcile net loss to net cash provided by operating activities-- Depreciation and amortization................... 65,757,387 51,193,702 Loss on sale of property, plant and equipment... 1,256,945 -- Loss from discontinued operation................ 1,515,558 -- Equity in loss of unconsolidated limited part- nerships....................................... 6,302,990 1,402,194 Minority interest in loss of subsidiary......... (15,998,674) (1,502,975) Changes in assets and liabilities, net of ef- fects from acquisitions-- Accounts receivable, net....................... (1,748,468) (1,387,654) Prepaid expenses and other..................... 279,406 (250,428) Accounts payable and accrued expenses.......... 4,056,629 4,249,587 Subscriber deposits............................ (257,062) (11,303) Payables to affiliates, including deferred man- agement fees.................................. 462,620 3,922,529 Other current liabilities...................... 1,401,951 -- Deferred revenue............................... (144,748) 780,612 Accrued interest on note payable............... 12,404,597 10,438,805 ------------ ------------- Net cash provided by operating activities..... 37,027,609 27,073,894 ------------ ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment....... (33,898,020) (22,023,524) Proceeds from sale of property, plant and equip- ment............................................ 986,359 -- Payments for acquisitions, net of cash acquired.. (122,017,267) (523,679,458) Payments of organizational expenses.............. (242,875) (1,297,203) Payments of franchise costs...................... (569,167) (53,266) Payments of brokerage commissions................ (310,385) -- Restricted funds held in escrow.................. 301,598 (301,598) Investment in unconsolidated limited partner- ships........................................... -- (85,775,000) Minority investment in subsidiary................ -- 107,775,000 ------------ ------------- Net cash used in investing activities......... (155,749,757) (525,355,049) ------------ ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Payments of debt issuance costs.................. (2,773,844) (7,287,914) Borrowings under revolving credit and term loan facility........................................ 120,500,000 355,000,000 Payments of revolving credit and term loan facil- ity............................................. (7,500,000) -- Borrowings under note payable.................... -- 82,000,000 Issuance of common stock......................... -- 80,000,000 ------------ ------------- Net cash provided by financing activities..... 110,226,156 509,712,086 ------------ ------------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVA- LENTS............................................ (8,495,992) 11,430,931 CASH AND CASH EQUIVALENTS, beginning of year...... 11,430,931 -- ------------ ------------- CASH AND CASH EQUIVALENTS, end of year............ $ 2,934,939 $ 11,430,931 ============ ============= CASH PAID FOR INTEREST............................ $ 33,921,715 $ 22,907,403 ============ ============= CASH PAID FOR TAXES............................... $ -- $ -- ============ =============
The accompanying notes are an integral part of these consolidated statements. F-28 CCA ACQUISITION CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995--(CONTINUED)
1996 1995 ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Payments of debt issuance costs.................. $ (2,773,844) $ (7,287,914) Borrowings under revolving credit and term loan facility......................................... 120,500,000 355,000,000 Payments of revolving credit and term loan facility......................................... (7,500,000) -- Borrowings under note payable.................... -- 82,000,000 Issuance of common stock......................... -- 80,000,000 ------------ ------------ Net cash provided by financing activities...... 110,226,156 509,712,086 ------------ ------------ NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS........................................ (8,495,992) 11,430,931 CASH AND CASH EQUIVALENTS, beginning of year....... 11,430,931 -- ------------ ------------ CASH AND CASH EQUIVALENTS, end of year............. $ 2,934,939 $ 11,430,931 ============ ============ CASH PAID FOR INTEREST............................. $ 33,921,715 $ 22,907,403 ============ ============ CASH PAID FOR TAXES................................ $ -- $ -- ============ ============
The accompanying notes are an integral part of these consolidated statements. F-29 CCA ACQUISITION CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996 AND 1995 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Organization and Basis of Presentation CCA Acquisition Corp. (CAC), a Delaware corporation, was formed on June 27, 1994, and is a wholly-owned subsidiary of CCA Holdings Corp. (CCA Holdings). CAC commenced operations in January 1995 in connection with consummation of the Crown Transaction (as defined below). The accompanying consolidated financial statements include the accounts of CAC; its wholly-owned subsidiary, Cencom Cable Entertainment, Inc. (CCE); and Charter Communications Entertainment I, L.P. (CCE-I), which is controlled by CAC through its general partnership interest (collectively referred to as the "Company"). CCA Holdings is owned approximately 85% by Kelso Investment Associates V, L.P., an investment fund, together with an affiliate (collectively referred to as "Kelso" herein) and certain other individuals, and approximately 15% by Charter Communications, Inc. (Charter), manager of CCE-I's cable television systems (see Note 9). All material intercompany transactions and balances have been eliminated. In January 1995, CAC completed the acquisition of certain cable television systems from Crown Media, Inc. (Crown), a subsidiary of Hallmark Cards, Incorporated (Hallmark) (the "Crown Transaction"). On September 29, 1995, CAC and CCT Holdings Corp. (CCT Holdings), an entity affiliated with CCA Holdings by common ownership, entered into an Asset Exchange Agreement whereby CAC exchanged a 1% undivided interest in all of its assets for a 1.22% undivided interest in certain assets to be acquired by CCT Holdings from an affiliate of Gaylord Entertainment Company, Inc. (Gaylord). Effective September 30, 1995, CCT Holdings acquired certain cable television systems from Gaylord. Upon execution of the Asset Purchase Agreement, CAC and CCT Holdings entered into a series of agreements to contribute the assets acquired under the Crown Transaction to CCE-I and certain assets acquired in the Gaylord acquisition to Charter Communications Entertainment II, L.P. (CCE-II). As a result of entering into these agreements, CAC owns a 55% interest and CCT Holdings owns a 45% interest in the combined operations of CCE-I and CCE-II, respectively. The net loss of CCE-I for the period prior to September 29, 1995, was allocated entirely to CAC. As of December 31, 1996, CCE-I provided cable television service to approximately 125 franchises serving approximately 338,300 basic subscribers in Connecticut, Illinois, Massachusetts, Missouri and New Hampshire. Cash Equivalents Cash equivalents at December 31, 1996 and 1995, consist primarily of repurchase agreements with original maturities of 90 days or less. These investments are carried at cost, which approximates market value. The Company is subject to loss for amounts invested in repurchase agreements in the event of nonperformance by the financial institution which acts as the counterparty under such agreements; however, such noncompliance is not anticipated. Property, Plant and Equipment Property, plant and equipment is recorded at cost, including all direct and certain indirect costs associated with the construction of cable transmission and distribution facilities, and the cost of new customer installation. The costs of disconnecting a residence are charged to expense in the period incurred. Expenditures for repairs and maintenance are charged to expense as incurred, and equipment replacement costs and betterments are capitalized. F-30 CCA ACQUISITION CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Depreciation is provided using the composite method on a straight-line basis over the estimated useful life of the related asset as follows: Trunk and distribution systems............................... 10 years Subscriber installations..................................... 10 years Buildings and headends....................................... 10-20 years Converters................................................... 5 years Vehicles and equipment....................................... 4-8 years Office equipment............................................. 5-10 years
Franchise Costs Costs incurred in obtaining and renewing cable franchises are initially deferred and amortized over the legal lives of the franchises. Costs relating to unsuccessful franchise applications are charged to expense when it is determined that the efforts to obtain the franchise will not be successful. Franchise rights acquired through the purchase of cable television systems represent the excess of the cost of properties acquired over the amounts assigned to the net tangible assets at date of acquisition. Acquired franchise rights are amortized using the straight-line method over 15 years. Covenant Not to Compete Covenant not to compete was amortized over the term of the respective agreement (two years). Other Assets Organizational expenses are being amortized using the straight-line method over five years. Debt issuance costs are being amortized over the term of the debt. During 1995, the Company adopted SFAS No. 121 entitled, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." In accordance with SFAS No. 121, the Company periodically reviews the carrying value of its long-lived assets, identifiable intangibles and franchise costs in relation to historical financial results, current business conditions and trends (including the impact of existing legislation and regulation) to identify potential situations in which the carrying value of such assets may not be recoverable. If a review indicates that the carrying value of such assets may not be recoverable, the carrying value of such assets in excess of their fair value will be recorded as a reduction of the assets' cost as if a permanent impairment has occurred. No impairments have occurred and accordingly, no adjustments to the financial statements of the Company have been recorded relating to SFAS No. 121. Restricted Funds Held in Escrow In connection with the acquisition of cable television systems from Mineral Area Cablevision Co., L.P. (Omega) as further discussed in Note 3, the Company agreed to deposit a portion of the purchase price into an escrow account in 1995 which was transferred to Omega at the closing of the asset purchase in January 1996. Investment in Unconsolidated Limited Partnerships CAC has a 1% general partnership interest and a 54% limited partnership interest in Charter Communications Entertainment, L.P. (CCE, L.P.). CCT Holdings has a 1% general partnership interest and a 44% limited partnership interest in CCE, L.P. CCE, L.P. has a 97.78% limited partnership interest in both CCE-I and CCE-II. CAC's interest in CCE, L.P., together with its 1.22% general partnership interest in CCE-I and its 1.22% limited partnership interest in CCE-II, provide CAC with a 55% interest in both CCE-I and CCE-II. CCT Holdings, owns the remaining 45% interest in both CCE-I and CCE-II, including a 1% general partnership F-31 CCA ACQUISITION CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) interest in CCE-II. CCE-II is controlled by CCT Holdings through its general partnership interest in CCE-II and provisions in CCE-II's partnership agreement and CCE, L.P. is jointly controlled by the Company and CCT Holdings through their general partnership interests in CCE, L.P. and provisions in CCE, L.P.'s partnership agreement; therefore, CAC's investment in CCE L.P. and CCE-II, is accounted for using the equity method. Under this method, the investment in CCE L.P. and CCE-II, is originally recorded at cost and is subsequently adjusted to recognize CAC's share of net earnings or losses as they occur and distributions when received. Revenues Cable service revenues are recognized when the related services are provided. Installation revenues are recognized to the extent of direct selling costs incurred. The remainder, if any, is deferred and amortized to income over the average estimated period that customers are expected to remain connected to the cable television system. Franchise fees collected from cable subscribers and paid to local franchises are reported as revenues. Other Income (Expense) Other includes gain and loss on disposition of fixed assets and other miscellaneous income and expense items, which are not directly related to the Company's primary business. A loss of $1,256,945 was recognized on the sale of two buildings for the year ended December 31, 1996. Income Taxes Income taxes are recorded in accordance with SFAS No. 109, "Accounting for Income Taxes." Derivative Financial Instruments The Company manages risk arising from fluctuations in interest rates by using interest rate swap and cap agreements, as required by its credit agreement. These agreements are treated as off-balance sheet financial instruments. The interest rate swap and cap agreements are being accounted for as a hedge of the debt obligation, and accordingly, the net settlement amount is recorded as an adjustment to interest expense in the period incurred. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities 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 those estimates. Reclassifications Certain reclassifications have been made to the 1995 financial statements to conform with current year presentation. 2. INVESTMENT IN UNCONSOLIDATED LIMITED PARTNERSHIPS: Effective September 30, 1995, CCT Holdings acquired certain assets from Gaylord for approximately $340.9 million, which included cable television systems in California. As described above, these assets were contributed to CCE-II. To finance the acquisition, CCE-II entered into a revolving credit and term loan facility and CCT Holdings executed a subordinated seller note to Gaylord (the "Gaylord Note"). F-32 CCA ACQUISITION CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) As of December 31, 1996, CCE-II provided cable television service to approximately 168,100 basic subscribers in southern California. Summary financial information of CCE-II as of December 31, 1996 and 1995, and for the period from inception (April 20, 1995) to December 31, 1995, and for the year ended December 31, 1996, which is not consolidated with the operating results of the Company, is as follows:
1996 1995 ------------ ------------ Current assets................................. $ 10,904,830 $ 11,043,867 Noncurrent assets--primarily investment in cable television properties................... 338,316,421 348,029,594 ------------ ------------ Total assets................................ $349,221,251 $359,073,461 ============ ============ Current liabilities............................ $ 13,098,198 $ 14,107,036 Long-term debt................................. 221,418,000 218,600,000 Other long-term liabilities.................... 383,070 584,460 Partners' capital.............................. 114,321,983 125,781,965 ------------ ------------ Total liabilities and partners' capital..... $349,221,251 $359,073,461 ============ ============ Service revenues............................... $ 90,368,332 $ 21,156,209 ============ ============ Income from operations......................... $ 5,039,834 $ 983,638 ============ ============ Net loss....................................... $(11,459,982) $ (3,458,535) ============ ============
3. ACQUISITIONS: In January 1995, CAC completed the acquisition of certain cable television systems from Crown for an aggregate purchase price of approximately $488.2 million. The assets were later contributed through a series of transactions to CCE-I effective January 1, 1995. The acquisition of these systems was part of a series of larger transactions in which Crown sold its cable television systems to a group of investors, including Charter, CAC, certain affiliates of Charter, and third parties, for a total purchase price of approximately $900.0 million. To finance this acquisition, CCE-I entered into a revolving credit and term loan facility (see Note 8), and CCA Holdings executed a subordinated seller note to an affiliate of Hallmark for $82.0 million (the "HC Crown Note"). In October 1995, CCE-I acquired the net assets of certain systems from United Video Cablevision, Inc. (United), which include cable television systems in Massachusetts and Missouri, for an aggregate purchase price of approximately $96.0 million. In January 1996, CCE-I acquired the net assets of certain systems from Omega, which include cable television systems in Missouri, for an aggregate purchase price of approximately $9.4 million (the "CCIP Acquisition"). In March 1996, CCE-I acquired the net assets of the Illinois system from Cencom Cable Income Partners, L.P. (CCIP), for an aggregate purchase price of approximately $82.1 million (the "CCIP Acquisition"). In November 1996, CCE-I acquired the net assets of certain systems from Masada Cable Partners, L.P. (Masada), which include cable television systems in Missouri, for an aggregate purchase price of approximately $24.2 million. F-33 CCA ACQUISITION CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) These acquisitions were accounted for using the purchase method of accounting, and accordingly, results of operations of the acquired assets have been included in the financial statements from the respective dates of acquisition. The following shows the purchase price and the allocation of the purchase price to assets acquired and liabilities assumed:
CROWN UNITED OMEGA CCIP MASADA ------------ ----------- ---------- ----------- ----------- Purchase price: Cash paid to seller.... $341,030,472 $93,542,306 $9,178,086 $80,103,013 $23,625,358 Seller note executed by CCA Holdings.......... 82,000,000 -- -- -- -- Assumed liabilities, including deferred taxes of $55,500,000.. 55,638,033 282,000 32,000 -- 82,950 Transaction costs...... 9,545,039 2,216,101 200,000 2,025,000 480,000 ------------ ----------- ---------- ----------- ----------- $488,213,544 $96,040,407 $9,410,086 $82,128,013 $24,188,308 ============ =========== ========== =========== =========== Allocation of purchase price to assets acquired: Cash.................. $ 5,073,954 $ 539 $ 200 $ 1,053,410 $ -- Accounts receivable... 1,933,859 2,673 5,190 387,906 -- Prepaid expenses and other................ 279,745 111,385 7,440 90,368 30,483 Property, plant and equipment............ 162,432,874 12,439,879 1,054,878 11,980,833 2,147,338 Franchise costs....... 307,370,555 84,356,513 8,427,122 69,663,726 22,155,487 Covenant not to compete.............. 20,000,000 -- -- -- -- Accounts payable and accrued expenses..... (8,877,443) (147,616) (84,744) (975,755) (126,000) Subscriber deposits... -- (722,966) -- -- (19,000) Deferred revenue...... -- -- -- (72,475) -- ------------ ----------- ---------- ----------- ----------- Purchase price...... $488,213,544 $96,040,407 $9,410,086 $82,128,013 $24,188,308 ============ =========== ========== =========== ===========
The following are the unaudited pro forma operating results as though the 1996 and 1995 acquisitions by CCE-I and CCE-II had been made on January 1 of the respective year prior to such acquisitions:
FOR THE YEARS ENDED DECEMBER 31, -------------------------- 1996 1995 ------------ ------------ (UNAUDITED) Service revenues................................ $151,548,000 $137,021,602 Income (loss) from operations................... $ 818,000 $ (2,049,590) Net loss........................................ $(39,529,000) $(41,916,360)
F-34 CCA ACQUISITION CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 4. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment is stated at cost and consist of the following at December 31:
1996 1995 ------------ ------------ Trunk and distribution systems................... $125,248,708 $110,330,189 Subscriber installations......................... 45,636,572 34,114,600 Land, buildings and headends..................... 33,135,716 21,069,307 Converters....................................... 27,097,454 21,046,326 Vehicles and equipment........................... 7,180,068 4,737,430 Office equipment................................. 7,603,973 5,597,301 Construction-in-progress......................... 3,243,405 -- ------------ ------------ 249,145,896 196,895,153 Less-- Accumulated depreciation.................. (42,794,517) (18,745,185) ------------ ------------ $206,351,379 $178,149,968 ============ ============
5. OTHER ASSETS: Other assets consist of the following at December 31:
1996 1995 ---------- ---------- Debt issuance costs, net of accumulated amortization of $1,656,817 and $648,064, respectively............ $8,404,941 $6,639,850 Organizational expenses, net of accumulated amortization of $574,589 and $287,104, respectively........................................ 965,489 1,010,099 Brokerage commissions, net of accumulated amortization of $13,459 and $-0-, respectively...... 296,926 -- ---------- ---------- $9,667,356 $7,649,949 ========== ==========
6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES: Accounts payable and accrued expenses consist of the following at December 31:
1996 1995 ----------- ----------- Accrued salaries and related benefits............... $ 1,283,024 $ 888,972 Accounts payable.................................... 1,763,895 646,744 Accrued interest.................................... 2,442,525 2,114,818 Programming expenses................................ 2,726,803 2,046,640 Franchise fees...................................... 3,187,335 2,467,564 Capital expenditures................................ 3,482,531 3,525,747 Other............................................... 3,631,662 1,584,161 ----------- ----------- $18,517,775 $13,274,646 =========== ===========
F-35 CCA ACQUISITION CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 7. NOTE PAYABLE: In connection with the Crown Transaction, CAC issued a guarantee of payment to the holder of the HC Crown Note. Accordingly, the debt has been reflected as a liability of the Company in the accompanying financial statements. The HC Crown Note is also guaranteed by CCE and CCE, L.P. The HC Crown Note is an unsecured obligation. The HC Crown Note is limited in aggregate principal amount to $82.0 million and has a stated maturity date of December 31, 1999 (the "Stated Maturity Date"). Interest accrues at 13% per annum, compounded semiannually, but is not due and payable until the Stated Maturity Date. If principal plus accrued interest is not paid at the Stated Maturity Date, the annual rate at which interest accrues will initially increase to 18% and will increase by an additional 2% on each successive anniversary of the Stated Maturity Date (up to a maximum of 26%) until the HC Crown Note is repaid; in addition, a 3% default rate of interest can, in certain instances, be in effect simultaneously with the stated rate of interest on the HC Crown Note. The HC Crown Note is redeemable in whole or in part at the option of CCA Holdings at any time, without premium or penalty, provided that accrued interest is paid on the portion of the HC Crown Note so redeemed. Borrowings under the HC Crown Note are subject to certain financial and nonfinancial covenants and restrictions. The most restrictive covenant requires maintenance of a ratio of debt (excluding the HC Crown Note) to adjusted consolidated annualized operating cash flow, as defined, not to exceed 7.25 to 1 at December 31, 1996. In addition to the subordination in right of payment provisions contained in the HC Crown Note, the HC Crown Note is subject to a subordination agreement in favor of senior bank debt of CCE-I. Pursuant to the subordination agreement, substantially all rights and remedies under the HC Crown Note, including the rights to accelerate the maturity upon an event of default (including a payment of default), are suspended until the obligations under the Credit Agreement (as defined herein) are paid in full. The HC Crown Note is subordinated to the Credit Agreement. Pursuant to the terms of the Credit Agreement, payments on the HC Crown Note are prohibited until the indefeasible payment in full in cash, and the termination of commitments to lend under the Credit Agreement. The HC Crown Note will not have the benefit of any distributions from CCE-II until repayment in full of CCE-II's credit facility and the Gaylord Note. The obligations owing on the HC Crown Note are guaranteed by CAC, CCE and CCE, L.P. (collectively referred to as the "Guarantors"). The CCE, L.P. guarantee cannot be enforced until the repayment in full and termination of the Credit Agreement (as defined herein) and the CCE-II credit facility. The CAC and CCE guarantees cannot be enforced until the repayment in full and termination of the Credit Agreement. The guarantees, by their terms, are limited to the proceeds of distributions received from CCE-I, and income, if any, generated by the Guarantors. CCA Holdings and the Guarantors are dependent primarily upon distributions from CCE-I to service the HC Crown Note. Subsequent to year-end, HC Crown Corp. sold the majority of the HC Crown Note through a private placement. The fair value of the HC Crown Note plus accrued interest, based upon the proceeds received, was approximately $89.5 million at December 31, 1996. 8. LONG-TERM DEBT: In January 1995, CCE-I entered into a revolving credit and term loan facility (the "Credit Agreement") with a consortium of banks for borrowings up to $300.0 million. CCE-I has amended, on several occasions, the Credit Agreement to allow for total borrowings of $505.0 million for the purpose of making certain acquisitions. Principal payments are due in quarterly installments beginning September 30, 1997, and continuing through June 30, 2004. Borrowings under the Credit Agreement bear interest at rates based upon a certain spread plus a base rate, with the base rate being, at CCE-I's election, the Base Rate, as defined in the Credit Agreement, LIBOR, or prevailing bid rates on certificates of deposit. The applicable spread is based on the ratio of debt to annualized operating cash flow. The interest rates ranged from 7.63% and 9.42% at December 31, 1996. The weighted F-36 CCA ACQUISITION CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) average interest rates and weighted average borrowings were 8.05% and 8.71% and approximately $425,067,000 and $272,885,000 during 1996 and 1995, respectively. As this debt instrument bears interest at current market rates, its carrying amount approximates fair market value at December 31, 1996 and 1995. Borrowings under the Credit Agreement are collateralized by the assets of CCE-I. In addition, CAC, CCE and CCT Holdings have pledged their partnership interests as additional security to the Credit Agreement. Borrowings under the Credit Agreement are subject to certain financial and nonfinancial covenants and restrictions, the most restrictive of which requires maintenance of a ratio of debt to annualized operating cash flow, as defined, not to exceed 6.50 to 1 at December 31, 1996. A quarterly commitment fee of 0.375% per annum is payable on the unused portion of the Credit Agreement. Commencing September 30, 1997, and March 31, 1998, the principal balances of the term and fund loans, respectively, shall be amortized in consecutive quarterly installments until paid in full. In addition, commencing September 30, 1997, and at the end of each calendar quarter thereafter, available borrowings under the revolving credit facility shall be reduced. The following table sets forth such information on an annual basis.
PERCENTAGE OF PRINCIPAL DUE PERCENTAGE REDUCTION --------------------- OF REVOLVING CREDIT YEAR TERM LOANS FUND LOANS FACILITY COMMITMENT ---- ---------- ---------- -------------------- 1997............................ 2.10% -- % 2.10% 1998............................ 9.00 .50 9.00 1999............................ 12.00 .50 12.00 2000............................ 12.25 1.00 12.25 2001............................ 16.50 1.00 16.50 2002............................ 20.25 1.00 20.25 2003............................ 21.25 17.40 21.25 2004............................ 6.65 78.60 6.65 ------ ------ ------ 100.00% 100.00% 100.00% ====== ====== ======
In addition to the foregoing, effective April 30, 1999, and on each April 30th thereafter, CCE-I is required to make a repayment of principal of the term and fund loans (pro rata) in an amount equal to 75% of Annual Excess Cash Flow, as defined in the Credit Agreement, for the preceding year if the leverage ratio is greater than 5.5 to 1, or 50% of Annual Excess Cash Flow if the leverage ratio is less than 5.5 to 1. These repayments shall be applied to principal in inverse order of maturity. Based upon outstanding indebtedness at December 31, 1996, and the amortization of term loans and fund loans, and scheduled reductions in available borrowings depicted above, aggregate future principal payments on the Credit Agreement at December 31, 1996, are as follows:
YEAR AMOUNT ---- ------------ 1997.......................................................... $ 5,880,000 1998.......................................................... 25,625,000 1999.......................................................... 34,025,000 2000.......................................................... 47,640,000 2001.......................................................... 70,150,000 Thereafter.................................................... 284,680,000 ------------ $468,000,000 ============
As a requirement of the Credit Agreement, CCE-I has secured interest rate protection agreements. The Credit Agreement requires CCE-I to enter into interest rate protection agreements for notional amounts of not F-37 CCA ACQUISITION CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) less than 50% of the outstanding obligations. In addition, the interest rate protection agreements must provide rate protection for a weighted average period of not less than 18 months. The fair value of the interest rate caps or swaps is the estimated amount CCE-I would receive (pay) to eliminate the cap or swap agreement at the reporting date, taking into account current interest rates and the credit-worthiness of the counterparties. The following summarizes certain information pertaining to the interest rate protection agreements as of December 31, 1996:
FAIR VALUE/ NOTIONAL FIXED REDEMPTION AMOUNT TYPE RATE CONTRACT EXPIRATION DATE PRICE ------------ ---- ----- --------------------------- ---------- $ 25,000,000 Swap 5.5% December 1, 1997 $ (60,812) 25,000,000 Swap 5.5 December 1, 1997 (19,135) 75,000,000 Swap 5.5 December 1, 1998 * 25,000,000 Swap 4.9 March 28, 1998 (4,956) 20,000,000 Cap 8.5 April 14, 1998 (8,978) 30,000,000 Cap 8.5 September 23, 1999 42,045 50,000,000 Cap 8.5 February 2, 1999 1,085,601 ------------ ---------- $250,000,000 6.6% Weighted Average Fixed Rate $1,033,765 ============ ==========
- -------- * This contract has not been marked to market since its effective date is after the reporting date. Management believes that the counterparties of the interest rate protection agreements will be able to meet their obligations under the agreements. The purpose of CCE-I's involvement in these interest rate protection agreements is to minimize CCE-I's exposure to interest rate fluctuations on its floating rate debt. Management believes that it has no material concentration of credit or market risks with respect to its interest rate protection agreements. 9. RELATED-PARTY TRANSACTIONS: Charter provides management services to CCE-I under the terms of a contract which provides for base fees equal to $4,845,000 and $3,925,000 as of December 31, 1996 and 1995, respectively, per annum plus an annual bonus equal to 30% of the excess, if any, of operating cash flow (as defined in the management agreement) over the projected operating cash flow for the year. Payment of the annual bonus is deferred until termination of the Credit Agreement due to restrictions provided within the Credit Agreement. The annual bonus for the year ended December 31, 1996 and 1995, totaled $740,000 and $1,015,000, respectively. In addition, CCE-I receives financial advisory services from an affiliate of Kelso under terms of a contract which provides for fees equal to $552,500 and $450,000 at December 31, 1996 and 1995, respectively, per annum. These agreements were amended during 1996 and 1995 in conjunction with each acquisition of cable television systems to increase the annual base fees for Charter and Kelso. Expenses recognized by CCE-I under these contracts during 1996 and 1995 were approximately $5,034,000 and $6,499,000, respectively. Management and financial advisory service fees currently payable of $1,181,300 and $1,029,000 are included in Payables to affiliates at December 31, 1996 and 1995, respectively. CCE-I pays certain acquisition advisory fees to an affiliate of Kelso and Charter, which typically equal approximately 1% of the total purchase price paid for cable television systems acquired. Total acquisition fees paid to the affiliate of Kelso in 1996 and 1995 were $1,140,000 and $5,250,000, respectively. Total acquisition fees paid to Charter in 1996 and 1995 were $1,140,000 and $950,000, respectively. In addition, Charter received $4,300,000 of equity interests in CCA Holdings during 1995 in conjunction with the Crown acquisition. CCE-I and all entities affiliated with Charter collectively utilize a combination of insurance coverage and self-insurance programs for medical, dental and workers' compensation claims. CCE-I is allocated charges F-38 CCA ACQUISITION CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) monthly based upon its total number of employees, historical claims and medical cost trend rates. Management considers this allocation to be reasonable for the operations of CCE-I. During 1996 and 1995, CCE-I expensed approximately $1,401,300 and $840,000, respectively, relating to insurance allocations. In 1996, CCE-I and other affiliated entities employed the services of Charter's National Data Center (the "National Data Center"). The National Data Center performs certain subscriber billing services and provides computer network, hardware and software support to CCE-I and other affiliated entities. The cost of these services is allocated based on the number of subscribers. Management considers this allocation to be reasonable for the operations of CCE-I. During 1996, CCE-I expensed approximately $340,600 relating to these services. In 1996, certain of CCE-I's employees became participants in the 1996 Charter Communications/Kelso & Company Appreciation Rights Plan (the "Appreciation Rights Plan"). The Appreciation Rights Plan covers certain key employees and consultants within the group of companies and partnerships controlled by affiliates of Kelso and managed by Charter (collectively, the "Investment Group"). CCE-I maintains a regional office. The regional office performs certain operational services on behalf of CCE-I and other affiliated entities. The cost of these services is allocated to CCE-I and affiliated entities based on their number of subscribers. Management considers this allocation to be reasonable for the operations of CCE-I. During 1996 and 1995, CCE-I expensed approximately $799,400 and $512,000, respectively, relating to these services. CCE-II has similar arrangements as discussed above, which have been reflected in CCE-II's operations. 10. COMMITMENTS AND CONTINGENCIES: Leases CCE-I leases certain facilities and equipment under noncancelable operating leases. Rent expense incurred under these leases during 1996 and 1995 was approximately $617,600 and $533,000, respectively. Approximate aggregate future minimum lease payments are as follows: 1997.............................................................. $484,500 1998.............................................................. 438,900 1999.............................................................. 259,600 2000.............................................................. 159,200 2001.............................................................. 111,200 Thereafter........................................................ 422,100
CCE-I rents utility poles in its operations. Generally, pole rental agreements are short term, but CCE-I anticipates that such rentals will recur. Rent expense for pole attachments during 1996 and 1995 was approximately $1,773,100 and $1,363,000, respectively. Insurance Coverage CCE-I currently does not have, and does not in the near term anticipate having, property and casualty insurance on its underground distribution plant. Due to large claims incurred by the property and casualty insurance industry, the pricing of insurance coverage has become inflated to the point where, in the judgment of the Company's management, the price is cost prohibitive. Management believes that its experience and policy with such insurance coverage is consistent with general industry practices. Management will continue to monitor the insurance markets to attempt to obtain coverage for CCE-I's distribution plant at reasonable rates. F-39 CCA ACQUISITION CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Litigation A purported class action lawsuit on behalf of the CCIP limited partners was filed in 1995 (the "Action"), which sought, among other things, to enjoin permanently the CCIP Acquisition. On February 15, 1996, all of the plaintiff's claims for injunctive relief were dismissed (including that which sought to prevent the consummation of the CCIP Acquisition); the plaintiff's claims for money damages which may have resulted from the CCIP Acquisition remain pending. Each of the defendants in the Action, including CCE-I believes the Action, which remains pending, to be without merit and is contesting it vigorously. In October 1996, the plaintiff filed a Consolidated Amended Class Action Complaint (the "Amended Complaint"). The general partner of CCIP believes that portions of the Amended Complaint are legally inadequate and in January 1997 filed a motion for summary judgment to dismiss all remaining claims in the Action. There can be no assurance, however, that the plaintiff will not be awarded damages, some or all of which may be payable by CCE-I, in connection with the Action. The Company is also a party to lawsuits which are generally incidental to its business. In the opinion of management, after consulting with legal counsel, the outcome of these lawsuits will not have a material adverse effect on the Company's consolidated financial position and results of operations. Severance Payment During 1996, CCE-I and other affiliated entities entered into a Settlement Agreement and Mutual Release with a former executive, whereby CCE-I will make severance payments totaling $500,000. The funds are to be paid in 12 equal installments, which commenced April 1, 1996. 11. REGULATION IN THE CABLE TELEVISION INDUSTRY: The cable television industry is subject to extensive regulation at the federal, local and, in some instances, state levels. In addition, recent legislative and regulatory changes and additional regulatory proposals under consideration may materially affect the cable television industry. Congress enacted the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"), which became effective on December 4, 1992. The 1992 Cable Act generally allows for a greater degree of regulation of the cable television industry. Under the 1992 Cable Act's definition of effective competition, nearly all cable systems in the United States are subject to rate regulation of basic cable services, provided the local franchising authority becomes certified to regulate basic service rates. The 1992 Cable Act and the Federal Communications Commission's (FCC) rules implementing the 1992 Cable Act have generally increased the administrative and operational expenses of cable television systems and have resulted in additional regulatory oversight by the FCC and local franchise authorities. While management believes that CCE-I and CCE-II have complied in all material respects with the rate provisions of the 1992 Cable Act, in jurisdictions that have not yet chosen to certify, refunds covering a one-year period on basic services may be ordered upon future certification if CCE-I and CCE-II are unable to justify their rates through a benchmark or cost-of- service filing pursuant to FCC rules. Management is unable to estimate at this time the amount of refunds, if any, that may be payable by CCE-I and CCE-II in the event certain of their rates are successfully challenged by franchising authorities or found to be unreasonable by the FCC. Management does not believe that the amount of any such refunds would have a material adverse effect on the consolidated financial position or results of operations of the Company. The 1992 Cable Act modified the franchise renewal process to make it easier for a franchising authority to deny renewal. Historically, franchises have been renewed for cable operators that have provided satisfactory services and have complied with the terms of the franchise agreement. Although management believes that F-40 CCA ACQUISITION CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) CCE-I and CCE-II have generally met the terms of their franchise agreements and have provided quality levels of service, and anticipates CCE-I's and CCE- II's future franchise renewal prospects generally will be favorable, there can be no assurance that any such franchises will be renewed or, if renewed, that the franchising authority will not impose more onerous requirements on CCE-I and CCE-II than previously existed. During 1996, Congress passed and the President signed into law the Telecommunications Act of 1996 (the "Telecommunications Act"), which alters federal, state, and local laws and regulations pertaining to cable television, telecommunications and other services. Under the Telecommunications Act, telephone companies can compete directly with cable operators in the provision of video programming, subject to certain regulatory safeguards. Certain provisions of the Telecommunications Act could materially affect the growth and operation of the cable television industry and the cable services provided by CCE-I and CCE-II. Although the new legislation may substantially lessen regulatory burdens, the cable television industry may be subject to additional competition as a result thereof. There are numerous rule makings to be undertaken by the FCC which will interpret and implement the Telecommunications Act's provisions. In addition, certain provisions of the Telecommunications Act (such as the deregulation of cable programming rates) are not immediately effective. Further, certain of the Telecommunications Act's provisions have been and are likely to be subject to judicial challenges. Management is unable at this time to predict the outcome of such rule makings or litigation or the substantive effect of the new legislation and the rule makings on the consolidated financial position and results of operations of the Company. 12. INCOME TAXES: CAC is part of the CCA Holdings consolidated group which files consolidated income tax returns. Income taxes are recorded in accordance with SFAS No. 109. In accordance with SFAS No. 109, deferred tax assets and liabilities are recognized for the estimated future tax consequence attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using the enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Deferred income tax expense or benefit is the result of changes in the liability or asset recorded for deferred taxes. A valuation allowance must be established for any portion of a deferred tax asset for which it is more likely than not that a tax benefit will not be realized. During 1996 and 1995, changes in the Company's temporary differences and losses from operations, which pertain primarily to depreciation and amortization, resulted in a deferred tax benefits of approximately $7.4 million and $4.9 million, respectively. These amounts were offset by valuation allowances of equal amounts. No current provision (benefit) for income taxes was recorded during 1996 and 1995. F-41 CCA ACQUISITION CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Deferred taxes are comprised of the following at December 31: 1996 1995 ------------ ------------ Deferred income tax assets: Accounts receivable........................ $ 148,000 $ 100,000 Covenant not to compete.................... 6,933,000 3,467,000 Investment in unconsolidated limited partnerships.............................. -- 556,000 Accrued expenses and payables to affiliates................................ 2,230,000 1,978,000 Deferred revenue........................... 283,000 312,000 Deferred management fees payable to affiliate................................. 702,000 406,000 Tax loss carryforwards..................... 35,197,000 21,943,000 Valuation allowance........................ (12,330,000) (4,866,000) ------------ ------------ Total deferred income tax assets......... 33,163,000 23,896,000 ------------ ------------ Deferred income tax liabilities: Property, plant and equipment.............. (37,191,000) (31,867,000) Franchise costs............................ (44,362,000) (47,285,000) Investment in unconsolidated limited partnerships.............................. (3,767,000) -- Minority interest in subsidiary............ (3,343,000) (244,000) ------------ ------------ Total deferred income tax liabilities.... (88,663,000) (79,396,000) ------------ ------------ Net deferred income tax liability........ $(55,500,000) $(55,500,000) ============ ============
At December 31, 1996, the Company had net operating loss (NOL) carryforwards for regular income tax purposes aggregating approximately $88.0 million, which expire in various years through 2011. Utilization of the NOLs is subject to certain limitations. The Company's regular tax NOLs are recognized for financial statement purposes as a reduction of the deferred tax liability or an increase of the deferred tax asset. 13. DISCONTINUED OPERATION: CCE-I approved a plan to discontinue the radio operation maintained by its subsidiary, Charter Communications Radio St. Louis, LLC. Pursuant to a sales agreement dated January 23, 1997, such operations will cease upon FCC approval of the transfer of the radio license. The net losses of this operation prior to December 31, 1996, are included in the consolidated statement of operations under "Loss from discontinued operation." Revenues from such operation were $1,532,572 for the period then ended. The noncurrent net assets of this operation are comprised primarily of property, plant and equipment, license fees and other deferred costs. No material gain or loss is anticipated in connection with the disposition of these net assets. 14. COMPETITION: The Connecticut Department of Public Utility Control granted a franchise to a subsidiary of a local telephone company to serve the entire state of Connecticut. This provider has proposed to offer its cable service initially to a primary franchise area of several Connecticut communities, including one served by CCE-I. Management is unable to predict when the franchise will be awarded, and the ultimate impact of this development upon the Company's consolidated financial position or results of operations. F-42 CCA ACQUISITION CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) CCE-II's Riverside, California system, providing service to approximately 48,000 basic subscribers, faces competition from a multipoint distribution system acquired by Pacific Telesis Group. At this time, management is uncertain what impact, if any, this acquisition will have on the Company's consolidated financial position or results of operations. 15. 401(K) PLAN: In 1995, CCE-I adopted the Charter Communications, Inc. 401(k) Plan (the "401(k) Plan") for the benefit of its employees. All employees who have completed one year of employment are eligible to participate in the 401(k) Plan. The 401(k) Plan is a tax-qualified retirement savings plan to which employees may elect to make pretax contributions up to the lesser of 10% of their compensation or dollar thresholds established under the Internal Revenue Code. CCE-I contributes an amount equal to 50% of the first 5% contributed by each employee. During 1996 and 1995, CCE-I contributed approximately $269,900 and $177,000 to the 401(k) Plan, respectively. F-43 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Cencom Cable Entertainment, Inc.: We have audited the accompanying balance sheets of Cencom Cable Entertainment, Inc. (a Delaware corporation) as of December 31, 1996 and 1995, and the related statements of operations, shareholder's investment (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cencom Cable Entertainment, Inc. as of December 31, 1996 and 1995, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. Arthur Andersen LLP St. Louis, Missouri, February 21, 1997 F-44 CENCOM CABLE ENTERTAINMENT, INC. BALANCE SHEETS--DECEMBER 31, 1996 AND 1995
1996 1995 ------------ ------------ ASSETS INVESTMENT IN UNCONSOLIDATED LIMITED PARTNERSHIP... $122,582,298 $137,119,099 ------------ ------------ $122,582,298 $137,119,099 ============ ============ LIABILITIES AND SHAREHOLDER'S INVESTMENT (DEFICIT) NOTE PAYABLE....................................... $ 82,000,000 $ 82,000,000 ------------ ------------ ACCRUED INTEREST ON NOTE PAYABLE................... 22,843,403 10,438,805 ------------ ------------ DEFERRED INCOME TAXES.............................. 55,500,000 55,500,000 ------------ ------------ COMMITMENTS AND CONTINGENCIES SHAREHOLDER'S INVESTMENT (DEFICIT): Common stock, $1 par value, 300,000 shares autho- rized; 245,973 shares issued and outstanding........................... 245,973 245,973 Additional paid-in capital........................ 21,954,139 21,954,139 Accumulated deficit............................... (59,961,217) (33,019,818) ------------ ------------ Total shareholder's investment (deficit)........ (37,761,105) (10,819,706) ------------ ------------ $122,582,298 $137,119,099 ============ ============
The accompanying notes are an integral part of these balance sheets. F-45 CENCOM CABLE ENTERTAINMENT, INC. STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995 ------------ ------------ EQUITY IN LOSS OF UNCONSOLIDATED LIMITED PARTNERSHIP....................................... $(14,536,801) $(22,581,013) INTEREST EXPENSE.................................. (12,404,598) (10,438,805) ------------ ------------ Net loss...................................... $(26,941,399) $(33,019,818) ============ ============
The accompanying notes are an integral part of these statements. F-46 CENCOM CABLE ENTERTAINMENT, INC. STATEMENTS OF SHAREHOLDER'S INVESTMENT (DEFICIT) FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
ADDITIONAL COMMON PAID-IN ACCUMULATED STOCK CAPITAL DEFICIT TOTAL -------- ----------- ------------ ------------ BALANCE, January 1, 1995...... $245,973 $21,954,139 $ -- $ 22,200,112 Net loss.................... -- -- (33,019,818) (33,019,818) -------- ----------- ------------ ------------ BALANCE, December 31, 1995.... 245,973 21,954,139 (33,019,818) (10,819,706) Net loss.................... -- -- (26,941,399) (26,941,399) -------- ----------- ------------ ------------ BALANCE, December 31, 1996.... $245,973 $21,954,139 $(59,961,217) $(37,761,105) ======== =========== ============ ============
The accompanying notes are an integral part of these statements. F-47 CENCOM CABLE ENTERTAINMENT, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss.......................................... $(26,941,399) $(33,019,818) Adjustments to reconcile net loss to net cash from operating activities-- Equity in loss of unconsolidated limited partnership..................................... 14,536,801 22,581,013 Changes in assets and liabilities-- Accrued interest on note payable................ 12,404,598 10,438,805 ------------ ------------ Net cash from operating activities............. -- -- ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES............... -- -- ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES............... -- -- ------------ ------------ CASH, beginning and end of year.................... $ -- $ -- ============ ============ CASH PAID FOR INTEREST............................. $ -- $ -- ============ ============ CASH PAID FOR TAXES................................ $ -- $ -- ============ ============
The accompanying notes are an integral part of these statements. F-48 CENCOM CABLE ENTERTAINMENT, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 AND 1995 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Organization and Basis of Presentation Cencom Cable Entertainment, Inc. (CCE or the "Company"), a Delaware corporation, is a wholly owned subsidiary of CCA Acquisition Corp. (CAC). CAC is a wholly owned subsidiary of CCA Holdings Corp. (CCA Holdings). CCA Holdings is owned approximately 85% by Kelso Investment Associates V, L.P., an investment fund, together with an affiliate (collectively referred to as "Kelso" herein) and certain other individuals and approximately 15% by Charter Communications, Inc. (Charter), manager of Charter Communications Entertainment I, L.P.'s (CCE-I) and Charter Communications Entertainment II, L.P.'s (CCE-II) cable television systems. All material intercompany transactions and balances have been eliminated. In January 1995, CAC completed certain acquisitions, including stock and asset acquisitions of CCE and cable television systems located in Connecticut from Crown Media, Inc. (Crown), a subsidiary of Hallmark Cards, Incorporated (Hallmark) (the "Crown Transaction"). CCE's assets were comprised primarily of cable television systems serving communities in St. Louis County, Missouri (the "Missouri System"). On September 29, 1995, CAC and CCT Holdings Corp. (CCT Holdings), an entity affiliated with CCA Holdings by common ownership, entered into an Asset Exchange Agreement whereby CAC exchanged a 1% undivided interest in all of its assets (including CCE's assets) for a 1.22% undivided interest in certain assets to be acquired by CCT Holdings from an affiliate of Gaylord Entertainment Company, Inc. (Gaylord). In September 1995, CCT Holdings acquired certain cable television systems from Gaylord. Upon execution of the Asset Purchase Agreement, CAC and CCT Holdings entered into a series of agreements to contribute their assets to Charter Communications Entertainment, L.P. (CCE, L.P.). CCE, L.P. immediately contributed the assets acquired under the Crown Transaction to CCE-I and certain assets acquired in the Gaylord acquisition to CCE-II. The series of transactions representing the contribution of assets to CCE-I acquired under the Crown Transaction is a reorganization of entities under common control and has been accounted for in a manner similar to a pooling of interests. Accordingly, CCE-I's financial statements reflect the activity of these systems for the entire year. Thus, the net loss of CCE-I generated by the Missouri System for the period prior to September 29, 1995, was allocated entirely to CCE. As a result of these transactions, CCE owns a 33% limited partnership interest in CCE, L.P., CAC owns a 21% limited partnership interest in CCE, L.P. and CCT Holdings owns a 44% limited partnership interest in CCE, L.P. In addition, CAC and CCT Holdings each own a 1% general partnership interest in CCE, L.P. Investment in Unconsolidated Limited Partnership CCE has a 33% limited partnership interest in CCE, L.P. CCE, L.P. is controlled by CAC and CCT Holdings through their general partnership interests and provisions within its partnership agreement, therefore, CCE's investment is accounted for using the equity method of accounting. Under this method, the investment is originally recorded at cost and is subsequently adjusted to recognize CCE's share of net earnings or losses as they occur and distributions when received. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities 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 those estimates. F-49 CENCOM CABLE ENTERTAINMENT, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) 2. INVESTMENTS IN UNCONSOLIDATED LIMITED PARTNERSHIPS: Summary financial information of CCE-I and CCE-II as of December 31, 1996 and 1995, and for the years then ended (CCE-I) and for the period from inception (April 20, 1995) to December 31, 1995, and for the year ended December 31, 1996 (CCE-II), which is not consolidated with the operating results of the Company, is as follows:
CCE-I CCE-II -------------------------- -------------------------- 1996 1995 1996 1995 ------------ ------------ ------------ ------------ Current assets.......... $ 8,999,959 $ 15,396,675 $ 10,904,830 $ 11,043,867 Noncurrent assets-- primarily investment in cable television properties............. 657,011,095 566,369,624 338,316,421 348,029,594 ------------ ------------ ------------ ------------ Total assets........ $666,011,054 $581,766,299 $349,221,251 $359,073,461 ============ ============ ============ ============ Current liabilities..... $ 28,903,475 $ 15,138,838 $ 13,098,198 $ 14,107,036 Long-term debt.......... 462,120,000 355,000,000 221,418,000 218,600,000 Other long-term liabilities............. 2,463,339 3,550,612 383,070 584,460 Partners' capital....... 172,524,240 208,076,849 114,321,983 125,781,965 ------------ ------------ ------------ ------------ Total liabilities and partners' capital............ $666,011,054 $581,766,299 $349,221,251 $359,073,461 ============ ============ ============ ============ Service revenues........ $143,023,261 $ 99,689,410 $ 90,368,332 $ 21,156,209 ============ ============ ============ ============ Income (loss) from operations.............. $ 1,106,166 $ (6,946,137) $ 5,039,834 $ 983,638 ============ ============ ============ ============ Net loss................ $(35,552,609) $(31,423,151) $(11,459,982) $ (3,458,535) ============ ============ ============ ============
As of December 31, 1996, CCE-I provided cable television service to approximately 338,300 basic subscribers in Connecticut, Illinois, Massachusetts, Missouri and New Hampshire, and CCE-II provided cable television service to approximately 168,100 basic subscribers in southern California. 3. ACQUISITIONS BY UNCONSOLIDATED LIMITED PARTNERSHIPS: In January 1995, CAC completed the acquisition of certain cable television systems from Crown for an aggregate purchase price of approximately $488.2 million. The assets were later contributed through a series of transactions to CCE-I. The acquisition of these systems was part of a series of larger transactions in which Crown sold its cable television systems to a group of investors, including Charter, CAC, certain affiliates of Charter, and third parties, for a total purchase price of approximately $900.0 million. To finance this acquisition, CCE-I entered into a revolving credit and term loan facility (the "CCE-I Credit Agreement") and CCA Holdings executed a subordinated seller note (the "HC Crown Note"), pursuant to a senior subordinated loan agreement with an affiliate of Hallmark for $82.0 million (see Note 4). In September 1995, CCT Holdings acquired certain assets from Gaylord for approximately $340.9 million, which included cable television systems in southern California. As previously described, these assets were contributed to CCE-II. To finance the acquisition, CCE-II entered into a revolving credit and term loan facility (the "CCE-II Credit Agreement") and CCT Holdings executed a subordinated seller note to Gaylord (the "Gaylord Note"). In October 1995, CCE-I acquired the net assets of certain systems from United Video Cablevision, Inc., which include cable television systems in Massachusetts and Missouri, for an aggregate purchase price of approximately $96.0 million. F-50 CENCOM CABLE ENTERTAINMENT, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) In January 1996, CCE-I acquired the net assets of certain systems from Mineral Area Cablevision Co. L.P., which include cable television systems in Missouri, for an aggregate purchase price of approximately $9.4 million. In March 1996, CCE-I acquired the net assets of the Illinois system from Cencom Cable Income Partners, L.P. (CCIP), an affiliated entity, for an aggregate purchase price of approximately $82.1 million (the "CCIP Acquisition"). In November 1996, CCE-I acquired the net assets of certain systems from Masada Cable Partners, L.P., which include cable television systems in Missouri, for an aggregate purchase price of approximately $24.2 million. 4. NOTE PAYABLE: In connection with the Crown Transaction, CCE issued a guarantee of payment to the holder of the HC Crown Note. Accordingly, the debt has been reflected as a liability of the Company in the accompanying financial statements. The HC Crown Note is also guaranteed by CAC and CCE, L.P. The HC Crown Note is an unsecured obligation. The HC Crown Note is limited in aggregate principal amount to $82.0 million and has a stated maturity date of December 31, 1999 (the "Stated Maturity Date"). Interest accrues at 13% per annum, compounded semiannually, but is not due and payable until the Stated Maturity Date. If principal plus accrued interest is not paid at the Stated Maturity Date, the annual rate at which interest accrues will initially increase to 18% and will increase by an additional 2% on each successive anniversary of the Stated Maturity Date (up to a maximum of 26%) until the HC Crown Note is repaid; in addition, a 3% default rate of interest can, in certain instances, be in effect simultaneously with the stated rate of interest on the HC Crown Note. The HC Crown Note is redeemable in whole or in part at the option of CCA Holdings at any time, without premium or penalty, provided that accrued interest is paid on the portion of the HC Crown Note so redeemed. Borrowings under the HC Crown Note are subject to certain financial and nonfinancial covenants and restrictions. The most restrictive covenant requires maintenance of a ratio of debt (excluding the HC Crown Note) to adjusted consolidated annualized operating cash flow, as defined, not to exceed 7.25 to 1 at December 31, 1996. In addition to the subordination in right of payment provisions contained in the HC Crown Note, the HC Crown Note is subject to a subordination agreement in favor of senior bank debt of CCE-I. Pursuant to the subordination agreement, substantially all rights and remedies under the HC Crown Note, including the rights to accelerate the maturity upon an event of default (including a payment of default), are suspended until the obligations under the CCE-I Credit Agreement are paid in full. The HC Crown Note is subordinated to the CCE-I Credit Agreement. Pursuant to the terms of the CCE-I Credit Agreement, payments on the HC Crown Note are prohibited until the indefeasible payment in full in cash, and the termination of commitments to lend under the CCE I Credit Agreement. The HC Crown Note will not have the benefit of any distributions from CCE-II until repayment in full of the CCE-II Credit Agreement and the Gaylord Note. The obligations owing on the HC Crown Note are guaranteed by CAC, CCE and CCE, L.P. (collectively referred to as the "Guarantors"). The CCE, L.P. guarantee cannot be enforced until the repayment in full and termination of the CCE-I Credit Agreement and the CCE-II Credit Agreement. The CAC and CCE guarantees cannot be enforced until the repayment in full and termination of the CCE I Credit Agreement. The guarantees, by their terms, are limited to the proceeds of distributions received from CCE-I, and income, if any, generated F-51 CENCOM CABLE ENTERTAINMENT, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) by the Guarantors. CCA Holdings and the Guarantors are dependent primarily upon distributions from CCE-I to service the HC Crown Note. Subsequent to year-end, HC Crown Corp. sold the majority of the HC Crown Note through a private placement. The fair value of the HC Crown Note plus accrued interest, based upon the proceeds received, was approximately $89.5 million at December 31, 1996. 5. COMMITMENTS AND CONTINGENCIES: Litigation A purported class action lawsuit on behalf of the CCIP limited partners was filed in 1995 (the "Action"), which sought, among other things, to enjoin permanently the CCIP Acquisition. On February 15, 1996, all of the plaintiff's claims for injunctive relief were dismissed (including that which sought to prevent the consummation of the CCIP Acquisition); the plaintiff's claims for money damages which may have resulted from the CCIP Acquisition remain pending. Each of the defendants in the Action, including CCE-I, believes the Action, which remains pending, to be without merit and is contesting it vigorously. In October 1996, the plaintiff filed a Consolidated Amended Class Action Complaint (the "Amended Complaint"). The general partner of CCIP believes that portions of the Amended Complaint are legally inadequate and in January 1997 filed a motion for summary judgment to dismiss all remaining claims in the Action. There can be no assurance, however, that the plaintiff will not be awarded damages, some or all of which may be payable by CCE-I, in connection with the Action. The Company is also a party to lawsuits which are generally incidental to its business. In the opinion of management, after consulting with legal counsel, the outcome of these lawsuits will not have a material adverse effect on the Company's financial position and results of operations. 6. REGULATION IN THE CABLE TELEVISION INDUSTRY: The cable television industry is subject to extensive regulation at the federal, local and, in some instances, state levels. In addition, recent legislative and regulatory changes and additional regulatory proposals under consideration may materially affect the cable television industry. Congress enacted the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"), which became effective on December 4, 1992. The 1992 Cable Act generally allows for a greater degree of regulation of the cable television industry. Under the 1992 Cable Act's definition of effective competition, nearly all cable systems in the United States are subject to rate regulation of basic cable services, provided the local franchising authority becomes certified to regulate basic service rates. The 1992 Cable Act and the Federal Communications Commission's (FCC) rules implementing the 1992 Cable Act have generally increased the administrative and operational expenses of cable television systems and have resulted in additional regulatory oversight by the FCC and local franchise authorities. Management believes that CCE-I and CCE-II have complied in all material respects with the rate provisions of the 1992 Cable Act; however, in jurisdictions that have not yet chosen to certify, refunds covering a one-year period on basic services may be ordered upon future certification if CCE-I and CCE-II are unable to justify their rates through a benchmark or cost-of- service filing pursuant to FCC rules. Management is unable to estimate at this time the amount of refunds, if any, that may be payable by CCE-I and CCE-II in the event certain of their F-52 CENCOM CABLE ENTERTAINMENT, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) rates are successfully challenged by franchising authorities or found to be unreasonable by the FCC. Management does not believe that the amount of any such refunds would have a material adverse effect on the financial position or results of operations of the Company. The 1992 Cable Act modified the franchise renewal process to make it easier for a franchising authority to deny renewal. Historically, franchises have been renewed for cable operators that have provided satisfactory services and have complied with the terms of the franchise agreement. Although management believes that CCE-I and CCE-II have generally met the terms of their franchise agreements and have provided quality levels of service, and anticipates CCE- I's and CCE-II's future franchise renewal prospects generally will be favorable, there can be no assurance that any such franchises will be renewed or, if renewed, that the franchising authority will not impose more onerous requirements on CCE-I and CCE-II than previously existed. During 1996, Congress passed and the President signed into law the Telecommunications Act of 1996 (the "Telecommunications Act"), which alters federal, state and local laws and regulations pertaining to cable television, telecommunication and other services. Under the Telecommunications Act, telephone companies can complete directly with cable operators in the provision of video programming, subject to certain regulatory safeguards. Certain provisions of the Telecommunications Act could materially affect the growth and operation of the cable television industry and the cable services provided by CCE-I and CCE-II. Although the new legislation may substantially lessen regulatory burdens, the cable television industry may be subject to additional competition as a result thereof. There are numerous rule makings to be undertaken by the FCC which will interpret and implement the Telecommunications Act's provisions. In addition, certain provisions of the Telecommunications Act (such as the deregulation of cable programming rates) are not immediately effective. Further, certain of the Telecommunications Act's provisions have been and are likely to be subject to judicial challenges. Management is unable at this time to predict the outcome of such rule makings or litigation or the substantive effect of the new legislation and the rule makings on the financial position and results of operations of the Company. 7. INCOME TAXES: CCE is part of the CCA Holdings consolidated group which files consolidated tax returns. Income taxes are recorded in accordance with SFAS No. 109. In accordance with SFAS No. 109, deferred tax assets and liabilities are recognized for the estimated future tax consequence attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using the enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Deferred income tax expense or benefit is the result of changes in the liability or asset recorded for deferred taxes. A valuation allowance must be established for any portion of a deferred tax asset for which it is more likely than not that a tax benefit will not be realized. During 1996 and 1995, changes in the Company's temporary differences and losses from operations, resulted in deferred tax benefits of approximately $6.1 million and $.7 million, respectively. These amounts were offset by valuation allowances of equal amounts. No current provision (benefit) for income taxes was recorded during 1996 and 1995. F-53 CENCOM CABLE ENTERTAINMENT, INC. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) Deferred income taxes are comprised of the following at December 31:
1996 1995 ------------ ------------ Deferred income tax assets: Tax loss carryforwards............................ $ 24,046,000 $ 17,866,000 Valuation allowance............................... (6,843,000) (663,000) ------------ ------------ Total deferred income tax assets................ 17,203,000 17,203,000 Deferred income tax liabilities: Investments in unconsolidated limited partner- ships............................................ (72,703,000) (72,703,000) ------------ ------------ Net deferred income tax liability............... $(55,500,000) $(55,500,000) ============ ============
At December 31, 1996, the Company had net operating loss (NOL) carryforwards for regular income tax purposes aggregating approximately $60.1 million, which expire in various years through 2011. Utilization of the NOLs is subject to certain limitations. The Company's regular tax NOLs are recognized for financial statement purposes as a reduction of the deferred tax liability or an increase of the deferred tax asset. 8. COMPETITION: The Connecticut Department of Public Utility Control granted a franchise to a subsidiary of a local telephone company to serve the entire state of Connecticut. This provider has proposed to offer its cable service initially to a primary franchise area of several Connecticut communities, including one served by CCE-I. Management is unable to predict the ultimate impact of this development upon the Company's financial position or results of operations. CCE-II's Riverside, California system, providing service to approximately 48,000 basic subscribers, faces competition from a multipoint distribution system acquired by Pacific Telesis Group. At this time, management is uncertain what impact, if any, this acquisition will have on the Company's financial position or results of operations. F-54 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Charter Communications Entertainment, L.P.: We have audited the accompanying balance sheets of Charter Communications Entertainment, L.P. (a Delaware limited partnership) as of December 31, 1996 and 1995, and the related statements of operations, partners' capital and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Charter Communications Entertainment, L.P. as of December 31, 1996 and 1995, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. Arthur Andersen LLP St. Louis, Missouri, February 21, 1997 F-55 CHARTER COMMUNICATIONS ENTERTAINMENT, L.P. BALANCE SHEETS--DECEMBER 31, 1996 AND 1995
1996 1995 ------------ ------------ ASSETS INVESTMENT IN UNCONSOLIDATED LIMITED PARTNERSHIPS... $279,854,790 $325,823,701 SUBORDINATED NOTE RECEIVABLE FROM UNCONSOLIDATED LIMITED PARTNERSHIP................................ 25,000,000 25,000,000 INTEREST RECEIVABLE FROM UNCONSOLIDATED LIMITED PARTNERSHIP........................................ 2,418,000 500,000 ------------ ------------ $307,272,790 $351,323,701 ============ ============ LIABILITIES AND PARTNERS' CAPITAL NOTE PAYABLE........................................ $ 82,000,000 $ 82,000,000 ACCRUED INTEREST ON NOTE PAYABLE.................... 22,843,403 10,438,805 COMMITMENTS AND CONTINGENCIES PARTNERS' CAPITAL: General partners................................... 624,614 4,928,458 Limited partners-- Ordinary Capital Accounts......................... 10,543,510 83,187,453 ------------ ------------ Preferred Capital Account......................... 191,261,263 170,768,985 ------------ ------------ Total partners' capital......................... 202,429,387 258,884,896 ------------ ------------ $307,272,790 $351,323,701 ============ ============
The accompanying notes are an integral part of these balance sheets. F-56 CHARTER COMMUNICATIONS ENTERTAINMENT, L.P. STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995 ------------ ------------ EQUITY IN LOSS OF UNCONSOLIDATED LIMITED PARTNERSHIPS...................................... $(45,968,911) $(34,730,760) INTEREST EXPENSE.................................. (12,404,598) (10,438,805) INTEREST INCOME--UNCONSOLIDATED LIMITED PARTNERSHIP....................................... 1,918,000 500,000 ------------ ------------ Net loss.................................... (56,455,509) (44,669,565) PREFERRED RETURN.................................. (20,492,278) (5,081,095) ------------ ------------ Loss applicable to partners' capital accounts.................................... $(76,947,787) $(49,750,660) ============ ============ LOSS ALLOCATION TO PARTNERS' CAPITAL ACCOUNTS: General partners................................ $ (4,303,844) $ (2,782,632) Limited partners--Preferred Capital Account..... -- -- ------------ ------------ NET LOSS APPLICABLE TO LIMITED PARTNERS--ORDINARY CAPITAL ACCOUNTS................................. $(72,643,943) $(46,968,028) ============ ============
The accompanying notes are an integral part of these statements. F-57 CHARTER COMMUNICATIONS ENTERTAINMENT, L.P. STATEMENTS OF PARTNERS' CAPITAL FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
LIMITED PARTNERS -------------------------- ORDINARY PREFERRED GENERAL CAPITAL CAPITAL PARTNERS ACCOUNTS ACCOUNT TOTAL ----------- ------------ ------------ ------------ BALANCE, January 1, 1995..................... $ -- $ -- $ -- $ -- Partners' capital contributions......... 7,711,090 130,155,481 165,687,890 303,554,461 Net loss............... (2,498,438) (42,171,127) -- (44,669,565) Preference allocation.. (284,194) (4,796,901) 5,081,095 -- ----------- ------------ ------------ ------------ BALANCE, December 31, 1995..................... 4,928,458 83,187,453 170,768,985 258,884,896 Net loss............... (3,157,670) (53,297,839) -- (56,455,509) Preference allocation.. (1,146,174) (19,346,104) 20,492,278 -- ----------- ------------ ------------ ------------ BALANCE, December 31, 1996..................... $ 624,614 $ 10,543,510 $191,261,263 $202,429,387 =========== ============ ============ ============
The accompanying notes are an integral part of these statements. F-58 CHARTER COMMUNICATIONS ENTERTAINMENT, L.P. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss.......................................... $(56,455,509) $(44,669,565) Adjustments to reconcile net loss to net cash from operating activities-- Equity in loss of unconsolidated limited partnerships..................................... 45,968,911 34,730,760 Changes in assets and liabilities-- Interest receivable from unconsolidated limited partnership..................................... (1,918,000) (500,000) Accrued interest on note payable................ 12,404,598 10,438,805 ------------ ------------ Net cash from operating activities............ -- -- ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Investment in unconsolidated limited partnerships...................................... -- (360,554,461) ------------ ------------ Net cash used in investing activities......... -- (360,554,461) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: General partners' contributions................... -- 7,711,090 Limited partners' contributions................... -- 295,843,371 Issuance of note receivable to unconsolidated limited partnership............................... -- (47,000,000) Payments on note receivable from unconsolidated limited partnership............................... -- 22,000,000 Proceeds from note payable........................ -- 82,000,000 ------------ ------------ Net cash provided by financing activities..... -- 360,554,461 ------------ ------------ CASH, beginning and end of year.................... $ -- $ -- ============ ============ CASH PAID FOR INTEREST............................. $ -- $ -- ============ ============ CASH PAID FOR TAXES................................ $ -- $ -- ============ ============
The accompanying notes are an integral part of these statements. F-59 CHARTER COMMUNICATIONS ENTERTAINMENT, L.P. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 AND 1995 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Organization and Basis of Presentation In connection with a reorganization under common control, the assets of certain cable television systems located in Connecticut and Missouri were contributed from CCA Acquisition Corp. (CAC) and its wholly owned subsidiary, Cencom Cable Entertainment, Inc. (CCE), respectively, to Charter Communications Entertainment, L.P. (the "Partnership"). CAC and CCE owned and operated the systems during the first nine months of 1995. These systems were immediately contributed to a newly formed partnership, Charter Communications Entertainment I, L.P. (CCE-I). The Partnership, CAC, CCE and CCE-I are all indirectly owned approximately 85% by Kelso Investment Associates V, L.P., an investment fund, together with an affiliate (collectively referred to as "Kelso" herein) and certain other individuals, and approximately 15% by Charter Communications, Inc. (Charter). Therefore, this series of transactions is a reorganization of entities under common control and has been accounted for in a manner similar to a pooling of interests. Accordingly, the financial statements reflect the activity of these systems for the entire year. In January 1995, CAC completed the acquisition of certain cable television systems from Crown Media, Inc. (Crown), a subsidiary of Hallmark Cards, Incorporated (Hallmark) (the "Crown Transaction"). On September 29, 1995, CAC and CCT Holdings Corp. (CCT Holdings), an entity affiliated with CCA Holdings Corp. (CCA Holdings) by common ownership, entered into an Asset Exchange Agreement whereby CAC exchanged a 1% undivided interest in all of its assets for a 1.22% undivided interest in certain assets to be acquired by CCT Holdings from an affiliate of Gaylord Entertainment Company, Inc. (Gaylord). In September 1995, CCT Holdings acquired certain cable television systems from Gaylord. Upon execution of the Asset Purchase Agreement, CAC and CCT Holdings entered into a series of agreements to contribute the assets acquired under the Crown Transaction (see Note 3) to CCE-I and certain assets acquired in the Gaylord acquisition (see Note 3) to Charter Communications Entertainment II, L.P. (CCE-II). As a result of entering into these agreements, CCA Holdings, the parent company of CAC, owns a 55% interest and CCT Holdings owns a 45% interest in the combined operations of CCE-I and CCE-II, respectively. The net loss of CCE-I for the period prior to September 29, 1995, was allocated entirely to CCA Holdings. As a result of these transactions, CCE owns a 33% limited partnership interest in the Partnership, CAC owns a 21% limited partnership interest in the Partnership and CCT Holdings owns a 44% limited partnership interest in the Partnership. CAC and CCT Holdings each own a 1% general partnership interest in the Partnership. The Partnership will terminate no later than December 31, 2055, as provided in its partnership agreement (the "Partnership Agreement"). Investment in Unconsolidated Limited Partnerships The Partnership has a 97.78% limited partnership interest in both CCE-I and CCE-II. CCE-I is controlled by CAC and CCE-II is controlled by CCT Holdings through their general partnership interests and provisions within the various partnership agreements; therefore, the Partnership's investment in these entities is accounted for using the equity method of accounting. Under this method, the investments are originally recorded at cost and are subsequently adjusted to recognize the Partnership's share of net earnings or losses as they occur and distributions when received. Income Taxes Income taxes are the responsibility of the partners and as such are not provided in the accompanying financial statements. F-60 CHARTER COMMUNICATIONS ENTERTAINMENT, L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities 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 those estimates. 2. INVESTMENTS IN UNCONSOLIDATED LIMITED PARTNERSHIPS: Summary financial information of CCE-I and CCE-II as of December 31, 1996 and 1995, and for the year then ended (CCE-I), and for the year ended December 31, 1996 and for the period from inception (April 20, 1995) to December 31, 1995 (CCE-II), which is not consolidated with the operating results of the Partnership, is as follows:
CCE-I CCE-II -------------------------- -------------------------- 1996 1995 1996 1995 ------------ ------------ ------------ ------------ Current assets.......... $ 8,999,959 $ 15,396,675 $ 10,904,830 $ 11,043,867 Noncurrent assets-- primarily investment in cable television properties............. 657,011,095 566,369,624 338,316,421 348,029,594 ------------ ------------ ------------ ------------ Total assets...... $666,011,054 $581,766,299 $349,221,251 $359,073,461 ============ ============ ============ ============ Current liabilities..... $ 28,903,475 $ 15,138,838 $ 13,098,198 $ 14,107,036 Long-term debt.......... 462,120,000 355,000,000 221,418,000 218,600,000 Other long-term liabilities............. 2,463,339 3,550,612 383,070 584,460 Partners' capital....... 172,524,240 208,076,849 114,321,983 125,781,965 ------------ ------------ ------------ ------------ Total liabilities and partners' capital.......... $666,011,054 $581,766,299 $349,221,251 $359,073,461 ============ ============ ============ ============ Service revenues........ $143,023,261 $ 99,689,410 $ 90,368,332 $ 21,156,209 ============ ============ ============ ============ Income (loss) from operations.............. $ 1,106,166 $ (6,946,137) $ 5,039,834 $ 983,638 ============ ============ ============ ============ Net loss................ $(35,552,609) $(31,423,151) $(11,459,982) $ (3,458,535) ============ ============ ============ ============
As of December 31, 1996, CCE-I provided cable television service to approximately 338,300 basic subscribers in Connecticut, Illinois, Massachusetts, Missouri and New Hampshire, and CCE-II provided cable television service to approximately 168,100 basic subscribers in southern California. 3. ACQUISITIONS BY UNCONSOLIDATED LIMITED PARTNERSHIPS: In January 1995, CAC completed the acquisition of certain cable television systems from Crown for an aggregate purchase price of approximately $488.2 million. The assets were later contributed through a series of transactions to CCE-I. The acquisition of these systems was part of a series of larger transactions in which Crown sold its cable television systems to a group of investors, including Charter, CAC, certain affiliates of Charter, and third parties, for a total purchase price of approximately $900.0 million. To finance this acquisition, CCE-I entered into a revolving credit and term loan facility (the "CCE-I Credit Agreement"), and CCA Holdings executed a subordinated seller note (the "HC Crown Note") pursuant to a senior subordinated loan agreement with an affiliate of Hallmark for $82.0 million (see Note 5). F-61 CHARTER COMMUNICATIONS ENTERTAINMENT, L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) In September 1995, CCT Holdings acquired certain assets from Gaylord for approximately $340.9 million, which included cable television systems in southern California. As previously described, these assets were contributed to CCE-II. To finance the acquisition, CCE-II entered into a revolving credit and term loan facility (the CCE-II Credit Agreement), and CCT Holdings executed a subordinated seller note to Gaylord (the "Gaylord Note"). In October 1995, CCE-I acquired the net assets of certain systems from United Video Cablevision, Inc., which include cable television systems in Massachusetts and Missouri, for an aggregate purchase price of approximately $96.0 million. In January 1996, CCE-I acquired the net assets of certain systems from Mineral Area Cablevision Co., L.P., which include cable television systems in Missouri, for an aggregate purchase price of approximately $9.4 million. In March 1996, CCE-I acquired the net assets of the Illinois system from Cencom Cable Income Partners, L.P. (CCIP), an affiliated entity, for an aggregate purchase price of approximately $82.1 million (the "CCIP Acquisition"). In November 1996, CCE-I acquired the net assets of certain systems from Masada Cable Partners, L.P., which include cable television systems in Missouri, for an aggregate purchase price of approximately $24.2 million. 4. SUBORDINATED NOTE RECEIVABLE FROM UNCONSOLIDATED LIMITED PARTNERSHIP: In connection with the formation of CCE-II, CCE-II issued a Promissory Note (the "Note") to the Partnership in the amount of $47.0 million. Immediately upon closing of the Gaylord acquisition, CCE-II used proceeds from borrowings under the CCE-II Credit Agreement to repay $22.0 million on the Note. All principal or interest amounts due under the Note are subordinated with respect to the CCE-II Credit Agreement. The Note matures on March 31, 2005. The Note bears interest at an annual rate equal to the weighted average interest rate payable on the loans outstanding under the CCE-II Credit Agreement which was 7.66% and 8.20% during 1996 and 1995, respectively. The interest rate was 7.41% and 7.82% at December 31, 1996 and 1995, respectively. 5. NOTE PAYABLE: In connection with the Crown Transaction, the Partnership issued a guarantee of payment to the holder of the HC Crown Note. Accordingly, the debt has been reflected as a liability of the Partnership in the accompanying financial statements. The HC Crown Note is also guaranteed by CAC and CCE. The HC Crown Note is an unsecured obligation. The HC Crown Note is limited in aggregate principal amount to $82.0 million and has a stated maturity date of December 31, 1999 (the "Stated Maturity Date"). Interest accrues at 13% per annum, compounded semiannually, but is not due and payable until the Stated Maturity Date. If principal plus accrued interest is not paid at the Stated Maturity Date, the annual rate at which interest accrues will initially increase to 18% and will increase by an additional 2% on each successive anniversary of the Stated Maturity Date (up to 26%) until the HC Crown Note is repaid; in addition, a 3% default rate of interest can, in certain instances, be in effect simultaneously with the stated rate of interest on the HC Crown Note. The HC Crown Note is redeemable in whole or in part at the option of CCA Holdings at any time, without premium or penalty, provided that accrued interest is paid on the portion of the HC Crown Note so redeemed. F-62 CHARTER COMMUNICATIONS ENTERTAINMENT, L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) Borrowings under the HC Crown Note are subject to certain financial and nonfinancial covenants and restrictions. The most restrictive covenant requires maintenance of a ratio of debt (excluding the HC Crown Note) to adjusted consolidated annualized operating cash flow, as defined, not to exceed 7.25 to 1 at December 31, 1996. In addition to the subordination in right of payment provisions contained in the HC Crown Note, the HC Crown Note is subject to a subordination agreement in favor of senior bank debt of CCE-I. Pursuant to the subordination agreement, substantially all rights and remedies under the HC Crown Note, including the rights to accelerate the maturity upon an event of default (including a payment of default), are suspended until the obligations under the CCE-I Credit Agreement, are paid in full. The HC Crown Note is subordinated to the CCE-I Credit Agreement. Pursuant to the terms of the CCE-I Credit Agreement payments on the HC Crown Note are prohibited until the indefeasible payment in full in cash, and the termination of commitments to lend under the CCE-I Credit Agreement. The HC Crown Note will not have the benefit of any distributions from CCE-II until repayment in full of the CCE-II Credit Agreement and the Gaylord Note. The obligations owing on the HC Crown Note are guaranteed by CAC, CCE and the Partnership (collectively referred to as the "Guarantors"). The Partnership's guarantee cannot be enforced until the repayment in full and termination of the CCE-I Credit Agreement and the CCE-II Credit Agreement. The CAC and CCE guarantees cannot be enforced until the repayment in full and termination of the CCE-I Credit Agreement. The guarantees, by their terms, are limited to the proceeds of distributions received from CCE-I and income, if any, generated by the Guarantors. CCA Holdings and the Guarantors are dependent primarily upon distributions from CCE-I to service the HC Crown Note. Subsequent to year-end, HC Crown Corp. sold the majority of the HC Crown Note through a private placement. The fair value of the HC Crown Note plus accrued interest, based upon the proceeds received, was approximately $89.5 million at December 31, 1996. 6. PARTNERSHIP INTERESTS: Under the terms of the Partnership Agreement, the profits and losses for income tax reporting purposes are allocated among the partners in accordance with their percentage interests subject to any adjustments required by the Internal Revenue Code and Treasury Regulations. For financial reporting purposes, profits and losses, and the preferred return (described below) are allocated in accordance with the liquidation provisions in the Partnership Agreement. Proceeds from the liquidation of the Partnership shall be distributed as follows: (i) to the payment of liquidation expenses; (ii) to the payment of creditors of the Partnership and the establishment of reserves to provide for contingent liabilities; (iii) to CCT Holdings, equal to the amount of its Preferred Capital Account; (iv) to each partner to the extent of such positive balance in the ratio in which its respective ordinary capital account balance bears to all such ordinary capital account balances; and (v) the remaining balance to the partners in accordance with their percentage interests at the time of liquidation. CCT Holdings is entitled to an annual preferred return computed in accordance with the provisions in the Partnership Agreement. F-63 CHARTER COMMUNICATIONS ENTERTAINMENT, L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) Pursuant to the Partnership Agreement, while any amounts remain outstanding under both the HC Crown Note and the Gaylord Note, distributions to the Partnership by CCE-I will be distributed by the Partnership to CAC and CCE (pro rata) for use solely to service the HC Crown Note and distributions to the Partnership by CCE-II will be distributed by the Partnership to CCT Holdings to service the Gaylord Note. If the Gaylord Note is repaid prior to payment in full of the HC Crown Note, then all distributions to the Partnership from both CCE-I and CCE-II will be used to service the HC Crown Note. If the HC Crown Note is repaid prior to payment in full of the Gaylord Note, then all distributions to the Partnership from both CCE-I and CCE-II will be used to service the Gaylord Note. In connection with the Gaylord acquisition, CCT Holdings, the Partnership, and Gaylord entered into a contingent payment agreement (the "Contingent Agreement"). The Contingent Agreement indicates CCE, L.P. will pay Gaylord 15% of any amount distributed to CCT Holdings in excess of the total of the Gaylord Note, the HC Crown Note and $450.0 million. 7. COMMITMENTS AND CONTINGENCIES: Litigation A purported class action lawsuit on behalf of the CCIP limited partners was filed in 1995 (the "Action"), which sought, among other things, to enjoin permanently the CCIP Acquisition. On February 15, 1996, all of the plaintiff's claims for injunctive relief were dismissed (including that which sought to prevent the consummation of the CCIP Acquisition); the plaintiff's claims for money damages which may have resulted from the CCIP Acquisition remain pending. Each of the defendants in the Action, including CCE-I believes the Action, which remains pending, to be without merit and is contesting it vigorously. In October 1996, the plaintiff filed a Consolidated Amended Class Action Complaint (the "Amended Complaint"). The general partner of CCIP believes that portions of the Amended Complaint are legally inadequate and filed a motion for summary judgment to dismiss all remaining claims in the Action in January 1997. There can be no assurance, however, that the plaintiffs will not be awarded damages, some or all of which may be payable by CCE-I, in connection with the Action. The Partnership is also a party to lawsuits which are generally incidental to its business. In the opinion of management, after consulting with legal counsel, the outcome of these lawsuits will not have a material adverse effect on the Partnership's financial position and results of operations. 8. REGULATION IN THE CABLE TELEVISION INDUSTRY: The cable television industry is subject to extensive regulation at the federal, local and, in some instances, state levels. In addition, recent legislative and regulatory changes and additional regulatory proposals under consideration may materially affect the cable television industry. Congress enacted the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"), which became effective on December 4, 1992. The 1992 Cable Act generally allows for a greater degree of regulation of the cable television industry. Under the 1992 Cable Act's definition of effective competition, nearly all cable systems in the United States are subject to rate regulation of basic cable services, provided the local franchising authority becomes certified to regulate basic service rates. The 1992 Cable Act and the Federal Communications Commission's (FCC) rules implementing the 1992 Cable Act have generally increased the administrative and operational expenses of cable television systems and have resulted in additional regulatory oversight by the FCC and local franchise authorities. Management believes that CCE-I and CCE-II have complied in all material respects with the rate provisions of the 1992 Cable Act; however, in jurisdictions that have not yet chosen to certify, refunds covering a one-year period on basic services may be ordered upon future certification if CCE-I and CCE-II are unable to justify their F-64 CHARTER COMMUNICATIONS ENTERTAINMENT, L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) rates through a benchmark or cost-of-service filing pursuant to FCC rules. Management is unable to estimate at this time the amount of refunds, if any, that may be payable by CCE-I and CCE-II in the event certain of their rates are successfully challenged by franchising authorities or found to be unreasonable by the FCC. Management does not believe that the amount of any such refunds would have a material adverse effect on the financial position or results of operations of the Partnership. The 1992 Cable Act modified the franchise renewal process to make it easier for a franchising authority to deny renewal. Historically, franchises have been renewed for cable operators that have provided satisfactory services and have complied with the terms of the franchise agreement. Although management believes that CCE-I and CCE-II have generally met the terms of their franchise agreements and have provided quality levels of service, and anticipates CCE- I's and CCE-II's future franchise renewal prospects generally will be favorable, there can be no assurance that any such franchises will be renewed or, if renewed, that the franchising authority will not impose more onerous requirements on CCE-I and CCE-II than previously existed. During 1996, Congress passed and the President signed into law the Telecommunications Act of 1996 (the "Telecommunications Act"), which alters federal, state, and local laws and regulations pertaining to cable television, telecommunications and other services. Under the Telecommunications Act, telephone companies can compete directly with cable operators in the provision of video programming, subject to certain regulatory safeguards. Certain provisions of the Telecommunications Act could materially affect the growth and operation of the cable television industry and the cable services provided by CCE-I and CCE-II. Although the new legislation may substantially lessen regulatory burdens, the cable television industry may be subject to additional competition as a result thereof. There are numerous rule-makings to be undertaken by the FCC which will interpret and implement the Telecommunications Act's provisions. In addition, certain provisions of the Telecommunications Act (such as the deregulation of cable programming rates) are not immediately effective. Further, certain of the Telecommunications Act's provisions have been and are likely to be subject to judicial challenges. Management is unable at this time to predict the outcome of such rule-makings or litigation or the substantive effect of the new legislation and the rule-makings on the financial position and results of operations of the Partnership. 9. NET LOSS FOR INCOME TAX PURPOSES: The following reconciliation summarizes the differences between the Partnership's net loss for financial reporting purposes and net loss for federal income tax purposes for the year ended December 31, 1996 and 1995:
1996 1995 ------------ ------------ Net loss for financial reporting purposes...... $(56,455,509) $(44,669,565) Differences in net loss of unconsolidated limited partnerships for financial reporting and tax reporting............................. (2,767,108) 31,239,817 Differences in expenses for financial reporting and tax reporting............................. 12,404,598 10,438,805 ------------ ------------ Net loss for federal income tax purposes... $(46,818,019) $ (2,990,943) ============ ============ The following summarizes the significant cumulative temporary differences between the Partnership's financial reporting basis and federal income tax reporting basis as of December 31, 1996 and 1995: 1996 1995 ------------ ------------ Assets: Investment in unconsolidated limited partnerships.................................. $ 4,912,673 $ 7,679,781 ============ ============
F-65 CHARTER COMMUNICATIONS ENTERTAINMENT, L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) 10. COMPETITION: The Connecticut Department of Public Utility Control granted a franchise to a subsidiary of a local telephone company to serve the entire state of Connecticut. This provider has proposed to offer its cable service initially to a primary franchise area of several Connecticut communities, including one served by CCE-I. Management is unable to predict the ultimate impact of this development upon the Partnership's financial position or results of operations. CCE-II's Riverside, California system, providing service to approximately 48,000 basic subscribers, faces competition from a multipoint distribution system acquired by Pacific Telesis Group. At this time, management is uncertain what impact, if any, this acquisition will have on the Partnership's financial position or results of operations. 11. SIGNIFICANT NONCASH TRANSACTIONS: The Partnership engaged in the following significant noncash financing transaction during the years ended December 31:
1996 1995 ----------- ---------- Preference allocation--Preferred Capital Account (see Note 6)...................................... $20,492,278 $5,081,095
F-66 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Charter Communications Entertainment I, L.P.: We have audited the accompanying balance sheets of Charter Communications Entertainment I, L.P. (a Delaware limited partnership) as of December 31, 1996 and 1995, and the related statements of operations, partners' capital and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Charter Communications Entertainment I, L.P. as of December 31, 1996 and 1995, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. Arthur Andersen LLP St. Louis, Missouri, February 21, 1997 F-67 CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. BALANCE SHEETS--DECEMBER 31, 1996 AND 1995
1996 1995 ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents........................... $ 2,934,939 $ 11,430,931 Accounts receivable, net of allowance for doubtful accounts of $371,166 and $251,419....................................... 5,465,750 3,324,186 Prepaid expenses and other.......................... 490,443 641,558 Net assets of discontinued operation................ 108,827 -- ------------ ------------ Total current assets............................. 8,999,959 15,396,675 ------------ ------------ INVESTMENT IN CABLE TELEVISION PROPERTIES: Property, plant and equipment....................... 206,351,379 178,149,968 Franchise costs, net of accumulated amortization of $51,761,758 and $21,512,225........................ 439,232,345 370,268,109 Covenant not to compete, net of accumulated amorti- zation of $20,000,000 and $10,000,000.................................... -- 10,000,000 ------------ ------------ 645,583,724 558,418,077 ------------ ------------ OTHER ASSETS......................................... 9,667,356 7,649,949 ------------ ------------ RESTRICTED FUNDS HELD IN ESCROW...................... -- 301,598 ------------ ------------ NET NONCURRENT ASSETS OF DISCONTINUED OPERATION...... 1,760,015 -- ------------ ------------ $666,011,054 $581,766,299 ============ ============ LIABILITIES AND PARTNERS' CAPITAL CURRENT LIABILITIES: Current maturities of long-term debt................ $ 5,880,000 $ -- Accounts payable and accrued expenses............... 18,517,774 13,274,646 Subscriber deposits................................. 473,601 711,663 Payables to affiliates.............................. 2,630,149 2,907,529 Other current liabilities........................... 1,401,951 -- ------------ ------------ Total current liabilities........................ 28,903,475 16,893,838 ------------ ------------ DEFERRED REVENUE..................................... 708,339 780,612 ------------ ------------ LONG-TERM DEBT....................................... 462,120,000 355,000,000 ------------ ------------ DEFERRED MANAGEMENT FEES PAYABLE TO AFFILIATE........ 1,755,000 1,015,000 ------------ ------------ COMMITMENTS AND CONTINGENCIES PARTNERS' CAPITAL: General Partner..................................... 1,862,703 2,797,869 Limited Partners-- Ordinary Capital Accounts.......................... 65,818,135 112,840,175 Preferred Capital Account.......................... 104,843,402 92,438,805 ------------ ------------ Total partners' capital.......................... 172,524,240 208,076,849 ------------ ------------ $666,011,054 $581,766,299 ============ ============
The accompanying notes are an integral part of these balance sheets. F-68 CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995 ------------ ------------ SERVICE REVENUES: Basic service................................... $ 96,560,920 $ 65,075,541 Premium service................................. 19,201,801 15,484,951 Other........................................... 27,260,540 19,128,918 ------------ ------------ 143,023,261 99,689,410 ------------ ------------ EXPENSES: Operating costs................................. 59,869,348 41,800,111 General and administrative...................... 11,255,985 7,142,567 Depreciation and amortization................... 65,757,387 51,193,702 Management and financial advisory service fees-- related parties................................ 5,034,375 6,499,167 ------------ ------------ 141,917,095 106,635,547 ------------ ------------ Income (loss) from continuing operations...... 1,106,166 (6,946,137) ------------ ------------ OTHER INCOME (EXPENSE): Interest income................................. 164,476 503,585 Interest expense................................ (34,249,422) (25,022,221) Other........................................... (1,058,271) 41,622 ------------ ------------ (35,143,217) (24,477,014) ------------ ------------ Net loss from continuing operations........... (34,037,051) (31,423,151) LOSS FROM DISCONTINUED OPERATION.................. (1,515,558) -- ------------ ------------ Net loss...................................... (35,552,609) (31,423,151) PREFERRED RETURN.................................. (12,404,597) (3,020,613) ------------ ------------ Net loss application to partner's capital accounts..................................... (47,957,206) $(34,443,764) ------------ ------------ NET LOSS ALLOCATION: General Partner................................. (935,166) (124,031) Limited Partners--Preferred Capital Account..... -- -- ------------ ------------ (935,166) (124,031) ------------ ------------ NET LOSS APPLICABLE TO LIMITED PARTNERS--ORDINARY CAPITAL ACCOUNTS................................. $(47,022,040) $(34,319,733) ============ ============
The accompanying notes are an integral part of these statements. F-69 CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. STATEMENTS OF PARTNERS' CAPITAL FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
LIMITED PARTNERS -------------------------- ORDINARY PREFERRED GENERAL CAPITAL CAPITAL PARTNER ACCOUNTS ACCOUNT TOTAL ---------- ------------ ------------ ------------ BALANCE, January 1, 1995.. $ -- $ -- $ -- $ -- Capital contributions.... 2,921,900 147,159,908 89,418,192 239,500,000 Allocation of net loss... (65,129) (31,358,022) -- (31,423,151) Allocation of preferred return.................. (58,902) (2,961,711) 3,020,613 -- ---------- ------------ ------------ ------------ BALANCE, December 31, 1995...................... 2,797,869 112,840,175 92,438,805 208,076,849 Capital contributions.... -- -- -- -- Allocation of net loss... (693,276) (34,859,333) -- (35,552,609) Allocation of preferred return.................. (241,890) (12,162,707) 12,404,597 -- ---------- ------------ ------------ ------------ BALANCE, December 31, 1996...................... $1,862,703 $ 65,818,135 $104,843,402 $172,524,240 ========== ============ ============ ============
The accompanying notes are an integral part of these statements. F-70 CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss.......................................... $(35,552,609) $(31,423,151) Adjustments to reconcile net loss to net cash pro- vided by operating activities-- Depreciation and amortization.................... 65,757,387 51,193,702 Loss on sale of property, plant and equipment.... 1,256,945 -- Loss from discontinued operation................. 1,515,558 -- Changes in assets and liabilities, net of effects from acquisitions-- Accounts receivable, net........................ (1,748,468) (1,387,654) Prepaid expenses and other...................... 279,406 (250,428) Accounts payable and accrued expenses........... 4,056,629 4,249,587 Subscriber deposits............................. (257,062) (11,303) Payables to affiliates.......................... 462,620 3,922,529 Other current liabilities....................... 1,401,951 -- Deferred revenue................................ (144,748) 780,612 ------------ ------------ Net cash provided by operating activities...... 37,027,609 27,073,894 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment........ (33,898,020) (22,023,524) Proceeds from sale of property, plant and equip- ment............................................. 986,359 -- Payments for acquisitions, net of cash acquired... (122,017,267) (579,179,458) Payments of organizational expenses............... (242,875) (1,297,203) Payments of franchise costs....................... (569,167) (53,266) Payments of brokerage commissions................. (310,385) -- Restricted funds held in escrow................... 301,598 (301,598) ------------ ------------ Net cash used in investing activities.......... (155,749,757) (602,855,049) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Payments of debt issuance costs................... (2,773,844) (7,287,914) Borrowings under revolving credit and term loan facility......................................... 120,500,000 356,000,000 Payments of revolving credit and term loan facili- ty............................................... (7,500,000) (1,000,000) Limited Partners' contributions................... -- 236,578,100 General Partner's contribution.................... -- 2,921,900 ------------ ------------ Net cash provided by financing activities...... 110,226,156 587,212,086 ------------ ------------ NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS........................................ (8,495,992) 11,430,931 CASH AND CASH EQUIVALENTS, beginning of year....... 11,430,931 -- CASH AND CASH EQUIVALENTS, end of year............. $ 2,934,939 $ 11,430,931 ============ ============ CASH PAID FOR INTEREST............................. $ 33,921,715 $ 22,907,403 ============ ============ CASH PAID FOR TAXES................................ $ -- $ -- ============ ============
The accompanying notes are an integral part of these statements. F-71 CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 AND 1995 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Organization and Basis of Presentation Charter Communications Entertainment I, L.P. (the "Partnership"), a Delaware limited partnership, was formed effective January 1995, for the purpose of acquiring and operating existing cable television systems. The Partnership commenced operations effective January 1995, with the assignment of its general and limited partnership interests. The Partnership will terminate no later than December 31, 2055, as provided in its partnership agreement (the "Partnership Agreement"). CCA Acquisition Corp. (CAC), the General Partner, holds a 1.22% interest in the Partnership. CAC is a wholly owned subsidiary of CCA Holdings Corp. (CCA Holdings). Charter Communications Entertainment, L.P. (CCE) and CCT Holdings Corp. (CCT Holdings) hold limited partnership interests of 97.78% and 1%, respectively, in the Partnership. CCT Holdings and CCA Holdings hold partnership interests of 45% and 55%, respectively, in CCE. CCA Holdings and CCT Holdings are each owned by Kelso Investment Associates V, L.P., an investment fund, together with an affiliate (collectively referred to as "Kelso" herein) and certain other individuals and Charter Communications, Inc. (Charter), manager of the Partnership's cable television systems (see Note 8). As of December 31, 1996, the Partnership provided cable television service to approximately 125 franchises serving approximately 338,300 basic subscribers in Connecticut, Illinois, Massachusetts, Missouri and New Hampshire. Cash Equivalents Cash equivalents at December 31, 1996 and 1995, consist primarily of repurchase agreements with original maturities of 90 days or less. These investments are carried at cost, which approximates market value. The Partnership is subject to loss for amounts invested in repurchase agreements in the event of nonperformance by the financial institution which acts as the counterparty under such agreements; however, such noncompliance is not anticipated. Property, Plant and Equipment Property, plant and equipment is recorded at cost, including all direct and certain indirect costs associated with the construction of cable transmission and distribution facilities, and the cost of new customer installation. The costs of disconnecting a residence are charged to expense in the period incurred. Expenditures for repairs and maintenance are charged to expense as incurred, and equipment replacement costs and betterments are capitalized. Depreciation is provided using the composite method on a straight-line basis over the estimated useful life of the related asset as follows: Trunk and distribution systems................................ 10 years Subscriber installations...................................... 10 years Buildings and headends........................................ 10-20 years Converters.................................................... 5 years Vehicles and equipment........................................ 4-8 years Office equipment.............................................. 5-10 years
F-72 CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) Franchise Costs Costs incurred in obtaining and renewing cable franchises are initially deferred and amortized over the legal lives of the franchises. Costs relating to unsuccessful franchise applications are charged to expense when it is determined that the efforts to obtain the franchise will not be successful. Franchise rights acquired through the purchase of cable television systems represent the excess of the cost of properties acquired over the amounts assigned to the net tangible assets at date of acquisition. Acquired franchise rights are amortized using the straight-line method over 15 years. Covenant Not to Compete Covenant not to compete was amortized over the term of the respective agreement (two years). Other Assets Organizational expenses are being amortized using the straight-line method over five years. Debt issuance costs are being amortized over the term of the debt. During 1995, the Partnership adopted Statement of Financial Accounting Standards (SFAS) No. 121 entitled, "Accounting for the Impairment of Long- Lived Assets and for Long-Lived Assets to be Disposed of." In accordance with SFAS No. 121, the Partnership periodically reviews the carrying value of its long-lived assets, identifiable intangibles and franchise costs in relation to historical financial results, current business conditions and trends (including the impact of existing legislation and regulation) to identify potential situations in which the carrying value of such assets may not be recoverable. If a review indicates that the carrying value of such assets may not be recoverable, the carrying value of such assets in excess of their fair value will be recorded as a reduction of the assets' cost as if a permanent impairment has occurred. No impairments have occurred and accordingly, no adjustments to the financial statements of the Partnership have been recorded relating to SFAS No. 121. Restricted Funds Held in Escrow In connection with the acquisition of cable television systems from Mineral Area Cablevision Co., L.P. (Omega) as further discussed in Note 3, the Partnership agreed to deposit a portion of the purchase price into an escrow account in 1995, which was transferred to Omega at the closing of the asset purchase in January 1996. Revenues Cable service revenues are recognized when the related services are provided. Installation revenues are recognized to the extent of direct selling costs incurred. The remainder, if any, is deferred and amortized to income over the average estimated period that customers are expected to remain connected to the cable television system. Franchise fees collected from cable subscribers and paid to local franchises are reported as revenues. Other Income (Expense) Other includes gain and loss on disposition on fixed assets and other miscellaneous income and expense items, which are not directly related to the Partnership's primary business. A loss of $1,256,945 was recognized on the sale of two buildings for the year ended December 31, 1996. F-73 CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) Derivative Financial Instruments The Partnership manages risk arising from fluctuations in interest rates by using interest rate swap and cap agreements, as required by its credit agreement. These agreements are treated as off-balance sheet financial instruments. The interest rate swap and cap agreements are being accounted for as a hedge of the debt obligation, and accordingly, the net settlement amount is recorded as an adjustment to interest expense in the period incurred. Income Taxes Income taxes are the responsibility of the partners and as such are not provided for in the accompanying financial statements, except for taxes imposed by the state of Illinois. The state income tax benefit generated by partnership losses for the year ended December 31, 1996, was offset by a valuation allowance of an equal amount. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities 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 those estimates. Reclassifications Certain reclassifications have been made to the 1995 financial statements to conform with current year presentation. 2. PARTNERSHIP INTERESTS: Under the terms of the Partnership Agreement, the profits and losses for income tax reporting purposes are allocated among the partners in accordance with their percentage interests subject to any adjustments required by the Internal Revenue Code and Treasury Regulations. For financial reporting purposes, profits and losses, and the preferred return (described below) are allocated in accordance with the liquidation provisions in the Partnership Agreement. Proceeds from the liquidation of the Partnership shall be distributed as follows: (i) to the payment of liquidation expenses; (ii) to the payment of creditors of the Partnership and the establishment of reserves to provide for contingent liabilities; (iii) to CCE, equal to the amount of its Preferred Capital Account; (iv) to each partner to the extent of such positive balance in the ratio in which its respective ordinary capital account balance bears to all such ordinary capital account balances; and (v) the remaining balance to the partners in accordance with their percentage interests at the time of liquidation. The Partnership Agreement provides for, among other things, distributions to the respective partners in proportion to their respective partnership interests, and the creation of a preferred capital account and preferred distributions related thereto. CCE is entitled to an annual preferred return computed in accordance with the provisions in the Partnership Agreement. The effect of these provisions is to direct the proceeds of distributions from the Partnership to CCE for repayment of the HC Crown Note (as defined herein). Furthermore, the Credit Agreement (as defined herein) establishes limitations on distributions. F-74 CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) 3. ACQUISITIONS: In January 1995, CAC completed the acquisition of certain cable television systems from Crown Media, Inc. (Crown), a subsidiary of Hallmark Cards, Incorporated (Hallmark) for an aggregate purchase price of approximately $488.2 million. The assets were later contributed through a series of transactions to the Partnership effective January 1, 1995. The acquisition of these systems was part of a series of larger transactions in which Crown sold its cable television systems to a group of investors, including Charter, CAC, certain affiliates of Charter, and third parties, for a total purchase price of approximately $900.0 million. To finance this acquisition, the Partnership entered into a revolving credit and term loan facility (see Note 7), and pursuant to a senior subordinated loan agreement, CCA Holdings executed a subordinated seller note to HC Crown Corp., an affiliate of Hallmark for $82.0 million (the "HC Crown Note"). The obligations of the HC Crown Note are guaranteed by CAC, Cencom Cable Entertainment, Inc., a wholly owned subsidiary of CAC, and CCE (collectively, the "Guarantors"). The guarantees, by their terms, are limited to the proceeds of distributions received from the Partnership, and income, if any, generated by the Guarantors. CCA Holdings and the Guarantors are dependent primarily on distributions from the Partnership to service the obligations owing under the HC Crown Note. Upon repayment in full of the obligations of the revolving credit and term loan facility and termination of all commitments to lend in respect thereof, the HC Crown Note will have the benefit of distributions from the Partnership. The Partnership's assets are not pledged as collateral to the HC Crown Note. In October 1995, the Partnership acquired the net assets of certain systems from United Video Cablevision, Inc. (United) which include cable television systems in Massachusetts and Missouri for an aggregate purchase price of approximately $96.0 million. In January 1996, the Partnership acquired the net assets of Omega, which include cable television systems in Missouri, for an aggregate purchase price of approximately $9.4 million. In March 1996, the Partnership acquired the net assets of the Illinois system from Cencom Cable Income Partners, L.P. (CCIP), an affiliated entity, for an aggregate purchase price of approximately $82.1 million. In November 1996, the Partnership acquired the net assets of certain systems from Masada Cable Partners, L.P. (Masada), which include cable television systems in Missouri, for an aggregate purchase price of approximately $24.2 million. F-75 CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) These acquisitions were accounted for using the purchase method of accounting, and accordingly, results of operations of the acquired assets have been included in the financial statements from the respective date of acquisition. The following shows the purchase price and the allocation of the purchase price to assets acquired and liabilities assumed:
CROWN UNITED OMEGA CCIP MASADA ------------ ----------- ---------- ----------- ----------- Purchase price: Cash paid to seller.... $341,030,472 $93,542,306 $9,178,086 $80,103,013 $23,625,358 Seller note executed by CCA Holdings.......... 82,000,000 -- -- -- -- Assumed liabilities, including deferred income taxes of $55,500,000 for Crown................. 55,638,033 282,000 32,000 -- 82,950 Transaction costs...... 9,545,039 2,216,101 200,000 2,025,000 480,000 ------------ ----------- ---------- ----------- ----------- $488,213,544 $96,040,407 $9,410,086 $82,128,013 $24,188,308 ============ =========== ========== =========== =========== Allocation of purchase price to assets acquired: Cash.................. $ 5,073,954 $ 539 $ 200 $ 1,053,410 $ -- Accounts receivable... 1,933,859 2,673 5,190 387,906 -- Prepaid expenses and other................ 279,745 111,385 7,440 90,368 30,483 Property, plant and equipment............ 162,432,874 12,439,879 1,054,878 11,980,833 2,147,338 Franchise costs....... 307,370,555 84,356,513 8,427,122 69,663,726 22,155,487 Covenant not to compete.............. 20,000,000 -- -- -- -- Accounts payable and accrued expenses..... (8,877,443) (147,616) (84,744) (975,755) (126,000) Subscriber deposits... -- (722,966) -- -- (19,000) Deferred revenue...... -- -- -- (72,475) -- ------------ ----------- ---------- ----------- ----------- Purchase price...... $488,213,544 $96,040,407 $9,410,086 $82,128,013 $24,188,308 ============ =========== ========== =========== ===========
The following is the unaudited pro forma operating results for the 1996 and 1995 acquisitions as though they had been made on January 1 of the respective year prior to such acquisitions:
FOR THE YEARS ENDED DECEMBER 31, -------------------------- 1996 1995 ------------ ------------ (UNAUDITED) Service revenues................................ $151,548,000 $137,021,602 Income (loss) from operations................... $ 819,000 $ (2,049,590) Net loss........................................ $(37,743,000) $(41,916,360)
F-76 CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) 4. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment is stated at cost and consist of the following at December 31:
1996 1995 ------------ ------------ Trunk and distribution systems................... $125,248,708 $110,330,189 Subscriber installations......................... 45,636,572 34,114,600 Land, buildings and headends..................... 33,135,716 21,069,307 Converters....................................... 27,097,454 21,046,326 Vehicles and equipment........................... 7,180,068 4,737,430 Office equipment................................. 7,603,973 5,597,301 Construction-in-progress......................... 3,243,405 -- ------------ ------------ 249,145,896 196,895,153 Less--Accumulated depreciation................... (42,794,517) (18,745,185) ------------ ------------ $206,351,379 $178,149,968 ============ ============
5. OTHER ASSETS: Other assets consist of the following at December 31:
1996 1995 ---------- ---------- Debt issuance costs, net of accumulated amortization of $1,656,817 and $648,064......................................... $8,404,941 $6,639,850 Organizational expenses, net of accumulated amortization of $574,589 and $287,104......................................... 965,489 1,010,099 Brokerage commissions, net of accumulated amortization of $13,459 and $--.............................................. 296,926 -- ---------- ---------- $9,667,356 $7,649,949 ========== ==========
6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES: Accounts payable and accrued expenses consist of the following at December 31:
1996 1995 ----------- ----------- Accrued salaries and related benefits............... $ 1,283,024 $ 888,972 Accounts payable.................................... 1,763,895 646,744 Accrued interest.................................... 2,442,525 2,114,818 Programming expenses................................ 2,726,803 2,046,640 Franchise fees...................................... 3,187,335 2,467,564 Capital expenditures................................ 3,482,531 3,525,747 Other............................................... 3,631,661 1,584,161 ----------- ----------- $18,517,774 $13,274,646 =========== ===========
7. LONG-TERM DEBT: Long-term debt consists of the following at December 31:
1996 1995 ------------ ------------ Credit Agreement: Term loans...................................... $280,000,000 $280,000,000 Fund loans...................................... 85,000,000 75,000,000 Revolving credit facility....................... 103,000,000 -- ------------ ------------ 468,000,000 355,000,000 Less--Current maturities........................ (5,880,000) -- ------------ ------------ $462,120,000 $355,000,000 ============ ============
F-77 CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) In January 1995, the Partnership entered into a revolving credit and term loan facility (the "Credit Agreement") with a consortium of banks for borrowings up to $300.0 million. The Credit Agreement has been amended on several occasions to increase total borrowings to $505.0 million for the purpose of making certain acquisitions. Principal payments are due in quarterly installments beginning September 30, 1997, and continuing through June 30, 2004. Borrowings under the Credit Agreement bear interest at rates based upon a certain spread plus a base rate, with the base rate being, at the Partnership's election, the Base Rate, as defined in the Credit Agreement, LIBOR, or prevailing bid rates on certificates of deposit. The applicable spread is based on the ratio of debt to annualized operating cash flow. The interest rates ranged from 7.63% to 9.42% at December 31, 1996. The weighted average interest rates and weighted average borrowings were 8.05% and 8.71%, and approximately $425.1 million and $272.9 million during 1996 and 1995, respectively. As this debt instrument bears interest at current market rates, its carrying amount approximates fair market value at December 31, 1996 and 1995. Borrowings under the Credit Agreement are collateralized by the assets of the Partnership. In addition, CAC, CCE and CCT Holdings have pledged their partnership interests as additional security to the Credit Agreement. Borrowings under the Credit Agreement are subject to certain financial and nonfinancial covenants and restrictions, the most restrictive of which requires maintenance of a ratio of debt to annualized operating cash flow, as defined, not to exceed 6.50 to 1 at December 31, 1996. A quarterly commitment fee of 0.375% per annum is payable on the unused portion of the Credit Agreement. Commencing September 30, 1997, and March 31, 1998, the principal balances of the term and fund loans, respectively, shall be amortized in consecutive quarterly installments until paid in full. In addition, commencing September 30, 1997, and at the end of each calendar quarter thereafter, available borrowings under the revolving credit facility shall be reduced. The following table sets forth such information on an annual basis.
PERCENTAGE OF PRINCIPAL DUE PERCENTAGE REDUCTION ------------------------------ OF REVOLVING CREDIT YEAR TERM LOANS FUND LOANS FACILITY COMMITMENT ------------- ------------- -------------------- 1997............... 2.10% -- % 2.10% 1998............... 9.00 .50 9.00 1999............... 12.00 .50 12.00 2000............... 12.25 1.00 12.25 2001............... 16.50 1.00 16.50 2002............... 20.25 1.00 20.25 2003............... 21.25 17.40 21.25 2004............... 6.65 78.60 6.65 ------------- ------------- ------ 100.00% 100.00% 100.00% ============= ============= ======
In addition to the foregoing, effective April 30, 1999, and on each April 30th thereafter, the Partnership is required to make a repayment of principal of the outstanding term and fund loans in an amount equal to 75% of Annual Excess Cash Flow, as defined in the Credit Agreement, for the preceding year if the leverage ratio is greater than 5.5 to 1, or 50% of Annual Excess Cash Flow if the leverage ratio is less than 5.5 to 1. These repayments shall be applied to principal in inverse order of maturity. F-78 CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) Based upon outstanding indebtedness at December 31, 1996, the amortization of term and fund loans and scheduled reductions in available borrowings depicted above, aggregate future principal payments on the Credit Agreement at December 31, 1996, are as follows:
REVOLVING CREDIT TOTAL TERM LOANS FUND LOANS FACILITY AMOUNT ------------ ----------- ------------ ------------ 1997................... $ 5,880,000 $ -- $ -- $ 5,880,000 1998................... 25,200,000 425,000 -- 25,625,000 1999................... 33,600,000 425,000 -- 34,025,000 2000................... 34,300,000 850,000 12,490,000 47,640,000 2001................... 46,200,000 850,000 23,100,000 70,150,000 Thereafter............. 134,820,000 82,450,000 67,410,000 284,680,000 ------------ ----------- ------------ ------------ $280,000,000 $85,000,000 $103,000,000 $468,000,000 ============ =========== ============ ============
As a requirement of the Credit Agreement, the Partnership has secured interest rate protection agreements. The Credit Agreement requires the Partnership to enter into interest rate protection agreements for notional amounts of not less than 50% of the outstanding obligations. In addition, the interest rate protection agreements must provide rate protection for a weighted average period of not less than 18 months. The fair value of the interest rate caps or swaps is the estimated amount the Partnership would (pay) receive to eliminate the cap or swap agreement at the reporting date, taking into account current interest rates and the credit-worthiness of the counterparties. The following summarizes certain information pertaining to the interest rate protection agreements as of December 31, 1996:
FAIR VALUE/ NOTIONAL FIXED REDEMPTION AMOUNT TYPE RATE CONTRACT EXPIRATION DATE PRICE -------- ---- ----- --------------------------- ---------- $ 25,000,000 Swap 5.5% December 1, 1997 $ (60,812) 25,000,000 Swap 5.5 December 1, 1997 (19,135) 30,000,000 Cap 8.5 March 28, 1998 (4,956) 50,000,000 Cap 8.5 April 14, 1998 (8,978) 25,000,000 Swap 4.9 December 1, 1998 * 75,000,000 Swap 5.5 February 2, 1999 1,085,601 20,000,000 Cap 8.5 September 23, 1999 42,045 ------------ ---------- $250,000,000 6.6% Weighted Average Fixed Rate $1,033,765 ============ ==========
- -------- * This contract has not been marked to market since its effective date is after the reporting date. Management believes that the counterparties of the interest hedge agreements will be able to meet their obligations under the agreements. The purpose of the Partnership's involvement in these interest hedge agreements is to minimize the Partnership's exposure to interest rate fluctuations on its floating rate debt. Management believes that it has no material concentration of credit or market risks with respect to its interest hedge agreements. 8. RELATED-PARTY TRANSACTIONS: Charter provides management services to the Partnership under the terms of a contract which provides for base fees equal to $4,845,000 and $3,925,000 as of December 31, 1996 and 1995, respectively, per annum plus an annual bonus equal to 30% of the excess, if any, of operating cash flow (as defined in the management agreement) over the projected operating cash flow for the year. Payment of the annual bonus is prohibited until termination of the Credit Agreement due to restrictions provided within the Credit Agreement. The annual bonus for the year ended December 31, 1996 and 1995, totaled $740,000 and $1,015,000, respectively. In addition, the Partnership receives financial advisory services from an affiliate of Kelso under terms of a contract which F-79 CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) provides for fees equal to $552,500 and $450,000 at December 31, 1996 and 1995, respectively, per annum. These agreements were amended during 1996 and 1995 in conjunction with each acquisition of cable television systems to increase the annual base fees for Charter and Kelso. Expenses recognized by the Partnership under these contracts during 1996 and 1995 were approximately $5,034,000 and $6,499,000, respectively. Management and financial advisory service fees currently payable of $1,181,300 and $1,029,000 are included in Payables to affiliates at December 31, 1996 and 1995, respectively. The Partnership pays certain acquisition advisory fees to an affiliate of Kelso and Charter, which typically equal approximately 1% of the total purchase price paid for cable television systems acquired. Total acquisition fees paid to the affiliate of Kelso in 1996 and 1995 were $1,140,000 and $5,250,000, respectively. Total acquisition fees paid to Charter in 1996 and 1995 were $1,140,000 and $950,000, respectively. In addition, Charter received $4,300,000 of equity interests in CCA Holdings during 1995 in conjunction with the Crown acquisition. The Partnership and all entities affiliated with Charter collectively utilize a combination of insurance coverage and self-insurance programs for medical, dental and workers' compensation claims. The Partnership is allocated charges monthly based upon its total number of employees, historical claims and medical cost trend rates. Management considers this allocation to be reasonable for the operations of the Partnership. During 1996 and 1995, the Partnership expensed approximately $1,401,300 and $840,000, respectively, relating to insurance allocations. In 1996, the Partnership and other affiliated entities employed the services of Charter's National Data Center (the "National Data Center"). The National Data Center performs certain subscriber billing services and provides computer network, hardware and software support for the Partnership and other affiliated entities. The cost of billing services is allocated based on the number of subscribers. Management considers this allocation to be reasonable for the operations of the Partnership. During 1996, the Partnership expensed approximately $340,600 relating to these services. In 1996, certain of the Partnership's employees became participants in the 1996 Charter Communications/Kelso & Company Appreciation Rights Plan (the "Appreciation Rights Plan"). The Appreciation Rights Plan covers certain key employees and consultants within the group of companies and partnerships controlled by affiliates of Kelso and managed by Charter (collectively, the "Investment Group"). The Partnership maintains a regional office. The regional office performs certain operational services on behalf of the Partnership and other affiliated entities. The cost of these services is allocated to the Partnership and affiliated entities based on their number of subscribers. Management considers this allocation to be reasonable for the operations of the Partnership. During 1996 and 1995, the Partnership expensed approximately $799,400 and $512,000, respectively, relating to these services. 9. COMMITMENTS AND CONTINGENCIES: Leases The Partnership leases certain facilities and equipment under noncancelable operating leases. Rent expense incurred under these leases during 1996 and 1995 was approximately $617,600 and $533,000, respectively. Approximate aggregate future minimum lease payments are as follows: AMOUNT -------- 1997................................................................ $484,500 1998................................................................ 438,900 1999................................................................ 259,600 2000................................................................ 159,200 2001................................................................ 111,200 Thereafter.......................................................... 422,100
F-80 CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) The Partnership rents utility poles in its operations. Generally, pole rental agreements are short term, but the Partnership anticipates that such rentals will recur. Rent expense for pole attachments during 1996 and 1995 was approximately $1,773,100 and $1,363,000, respectively. Insurance Coverage The Partnership currently does not have, and does not in the near term anticipate having, property and casualty insurance on its underground distribution plant. Due to large claims incurred by the property and casualty insurance industry, the pricing of insurance coverage has become inflated to the point where, in the judgment of the Partnership's management, the price is cost prohibitive. Management believes that its experience and policy with such insurance coverage is consistent with general industry practices. Management will continue to monitor the insurance markets to attempt to obtain coverage for the Partnership's distribution plant at reasonable rates. Litigation A purported class action lawsuit on behalf of the CCIP limited partners was filed in 1995 (the "Action"), which sought, among other things, to enjoin permanently the CCIP Acquisition. On February 15, 1996, all of the plaintiff's claims for injunctive relief were dismissed (including that which sought to prevent the consummation of the CCIP Acquisition); the plaintiff's claims for money damages which may have resulted from the CCIP Acquisition remain pending. Each of the defendants in the Action, including the Partnership, believes the Action, which remains pending, to be without merit and is contesting it vigorously. In October 1996, the plaintiff filed a Consolidated Amended Class Action Complaint (the "Amended Complaint"). The general partner of CCIP believes that portions of the Amended Complaint are legally inadequate and in January 1997 filed a motion for summary judgment to dismiss all remaining claims in the Action. There can be no assurance, however, that the plaintiff will not be awarded damages, some or all of which may be payable by the Partnership, in connection with the Action. The Partnership is also a party to lawsuits which are generally incidental to its business. In the opinion of management, after consulting with legal counsel, the outcome of these lawsuits will not have a material adverse effect on the Partnership's financial position and results of operations. Severance Payment During 1996, the Partnership and other affiliated entities entered into a Settlement Agreement and Mutual Release with a former executive, whereby the Partnership will make severance payments totaling $500,000. The funds are to be paid in 12 monthly installments, which commenced April 1, 1996. 10. REGULATION IN THE CABLE TELEVISION INDUSTRY: The cable television industry is subject to extensive regulation at the federal, local and, in some instances, state levels. In addition, recent legislative and regulatory changes and additional regulatory proposals under consideration may materially affect the cable television industry. Congress enacted the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"), which became effective on December 4, 1992. The 1992 Cable Act generally allows for a greater degree of regulation of the cable television industry. Under the 1992 Cable Act's definition of effective competition, nearly all cable systems in the United States are subject to rate regulation of basic cable services, provided the local franchising authority becomes certified to regulate basic service rates. The 1992 Cable Act and the Federal Communications Commission's (FCC) rules implementing the 1992 Cable Act have generally increased the administrative and operational expenses of cable television systems and have resulted in additional regulatory oversight by the FCC and local franchise authorities. F-81 CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) While management believes that the Partnership has complied in all material respects with the rate provisions of the 1992 Cable Act, in jurisdictions that have not yet chosen to certify, refunds covering a one-year period on basic services may be ordered upon future certification if the Partnership is unable to justify its rates through a benchmark or cost-of-service filing pursuant to FCC rules. Management is unable to estimate at this time the amount of refunds, if any, that may be payable by the Partnership in the event certain of its rates are successfully challenged by franchising authorities or found to be unreasonable by the FCC. Management does not believe that the amount of any such refunds would have a material adverse effect on the financial position or results of operations of the Partnership. The 1992 Cable Act modified the franchise renewal process to make it easier for a franchising authority to deny renewal. Historically, franchises have been renewed for cable operators that have provided satisfactory services and have complied with the terms of the franchise agreement. Although management believes that the Partnership has generally met the terms of its franchise agreements and has provided quality levels of service, and anticipates the Partnership's future franchise renewal prospects generally will be favorable, there can be no assurance that any such franchises will be renewed or, if renewed, that the franchising authority will not impose more onerous requirements on the Partnership than previously existed. During 1996, Congress passed and the President signed into law the Telecommunications Act of 1996 (the "Telecommunications Act"), which alters federal, state, and local laws and regulations pertaining to cable television, telecommunications and other services. Under the Telecommunications Act, telephone companies can compete directly with cable operators in the provision of video programming, subject to certain regulatory safeguards. Certain provisions of the Telecommunications Act could materially affect the growth and operation of the cable television industry and the cable services provided by the Partnership. Although the new legislation may substantially lessen regulatory burdens, the cable television industry may be subject to additional competition as a result thereof. There are numerous rule makings to be undertaken by the FCC which will interpret and implement the Telecommunications Act's provisions. In addition, certain provisions of the Telecommunications Act (such as the deregulation of cable programming rates) are not immediately effective. Further, certain of the Telecommunications Act's provisions have been and are likely to be subject to judicial challenges. Management is unable at this time to predict the outcome of such rule makings or litigation or the substantive effect of the new legislation and the rule makings on the financial position and results of operations of the Partnership. 11. NET LOSS FOR INCOME TAX PURPOSES: The following reconciliation summarizes the differences between the Partnership's net loss for financial reporting purposes and net loss for federal income tax purposes for the year ended December 31, 1996 and 1995: 1996 1995 ------------ ------------ Net loss for financial reporting purposes...... $(35,552,609) $(31,423,151) Depreciation differences between financial reporting and tax reporting................... (9,527,020) (2,376,770) Differences in losses from property sales recorded for financial reporting and tax reporting..................................... 774,144 -- Amortization differences between financial reporting and tax reporting................... 19,754,275 16,395,856 Differences in expenses recorded for financial reporting and tax reporting................... 6,192,786 6,484,716 Differences in revenue reported for financial reporting and tax reporting................... 18,973 780,612 ------------ ------------ Net loss for federal income tax purposes....... $(18,339,451) $(10,138,737) ============ ============
F-82 CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) The following summarizes the significant cumulative temporary differences between the Partnership's financial reporting basis and federal income tax reporting basis as of December 31, 1996 and 1995: 1996 1995 -------------- ------------- ASSETS: Accounts receivable....................... $ 371,166 $ 251,419 Net assets of discontinued operation...... 303,673 -- Accrued expenses and payables to affiliates............................... 5,640,188 4,944,033 Deferred revenue.......................... 708,339 780,612 Deferred management fees payable to affiliate................................ 1,755,000 1,015,000 -------------- ------------- $ 8,778,366 $ 6,991,064 ============== ============= LIABILITIES: Property, plant and equipment............. $ (91,977,838) $ (79,667,302) Franchise costs........................... (110,904,002) (118,213,073) -------------- ------------- $(202,881,840) $(197,880,375) ============== =============
12. DISCONTINUED OPERATION: The Partnership approved a plan to discontinue the radio operation maintained by its subsidiary, Charter Communications Radio St. Louis, LLC. Pursuant to a sales agreement dated January 23, 1997, such operations will cease upon FCC approval of the transfer of the radio license. The net losses of this operation prior to December 31, 1996, are included in the consolidated statement of operations under "Loss from discontinued operation." Revenues from such operation were $1,532,572 for the period then ended. The noncurrent net assets of this operation are comprised primarily of property, plant and equipment, license fees and other deferred costs. No material gain or loss is anticipated in connection with the disposition of these net assets. 13. COMPETITION: The Connecticut Department of Public Utility Control granted a franchise to a subsidiary of a local telephone company to serve the entire state of Connecticut. This provider has proposed to offer its cable service initially to a "primary franchise area" of several Connecticut communities, including one served by the Partnership. Management is unable to predict the ultimate impact upon the Partnership's financial position or results of operations. 14. 401(K) PLAN: In 1995, the Partnership adopted the Charter Communications, Inc. 401(k) Plan (the "401(k) Plan") for the benefit of its employees. All employees who have completed one year employment are eligible to participate in the 401(k) Plan. The 401(k) Plan is a tax-qualified retirement savings plan to which employees may elect to make pretax contributions up to the lesser of 10% of their compensation or dollar thresholds established under the Internal Revenue Code. The Partnership contributes an amount equal to 50% of the first 5% contributed by each employee. During 1996 and 1995, the Partnership contributed approximately $269,900 and $177,000 to the 401(k) Plan, respectively. 15. SIGNIFICANT NONCASH TRANSACTIONS: The Partnership engaged in the following significant noncash financing transactions during 1996 and 1995:
1996 1995 ----------- ---------- Preference allocation--Preferred Capital Account (see Note 2)...................................... $12,404,597 $3,020,613
F-83 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Charter Communications Entertainment II, L.P.: We have audited the accompanying balance sheets of Charter Communications Entertainment II, L.P. (a Delaware limited partnership) as of December 31, 1996 and 1995, and the related statements of operations, partners' capital and cash flows for the year ended December 31, 1996, and for the period from inception (April 20, 1995) to December 31, 1995. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Charter Communications Entertainment II, L.P. as of December 31, 1996 and 1995, and the results of its operations and its cash flows for the year ended December 31, 1996, and for the period from inception (April 20, 1995) to December 31, 1995, in conformity with generally accepted accounting principles. Arthur Andersen LLP St. Louis, Missouri, February 21, 1997 F-84 CHARTER COMMUNICATIONS ENTERTAINMENT II, L.P. BALANCE SHEETS--DECEMBER 31, 1996 AND 1995
1996 1995 ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents........................... $ 6,050,650 $ 5,897,105 Accounts receivable, net of allowance for doubtful accounts of $325,137 and $220,697....................................... 3,486,418 3,842,278 Prepaid expenses and other.......................... 1,367,762 1,304,484 ------------ ------------ Total current assets.............................. 10,904,830 11,043,867 ------------ ------------ INVESTMENT IN CABLE TELEVISION PROPERTIES: Property, plant and equipment....................... 119,701,617 112,901,956 Franchise costs, net of accumulated amortization of $19,628,548 and $3,810,099..................................... 215,279,033 231,773,954 ------------ ------------ 334,980,650 344,675,910 ------------ ------------ OTHER ASSETS......................................... 3,335,771 3,353,684 ------------ ------------ $349,221,251 $359,073,461 ============ ============ LIABILITIES AND PARTNERS' CAPITAL CURRENT LIABILITIES: Accounts payable and accrued expenses............... $ 11,588,865 $ 12,660,930 Subscriber deposits................................. 418,500 444,339 Payables to affiliates.............................. 1,090,833 1,111,767 ------------ ------------ Total current liabilities......................... 13,098,198 14,217,036 ------------ ------------ DEFERRED REVENUE..................................... 383,070 474,460 ------------ ------------ LONG-TERM DEBT....................................... 194,000,000 193,100,000 ------------ ------------ SUBORDINATED NOTE PAYABLE TO LIMITED PARTNER......... 27,418,000 25,500,000 ------------ ------------ COMMITMENTS AND CONTINGENCIES PARTNERS' CAPITAL: General Partner..................................... -- -- Limited Partners-- Ordinary Capital Accounts.......................... -- -- Preferred Capital Account.......................... 114,321,983 125,781,965 ------------ ------------ Total partners' capital........................... 114,321,983 125,781,965 ------------ ------------ $349,221,251 $359,073,461 ============ ============
The accompanying notes are an integral part of these balance sheets. F-85 CHARTER COMMUNICATIONS ENTERTAINMENT II, L.P. STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996, AND FOR THE PERIOD FROM INCEPTION TO DECEMBER 31, 1995
1996 1995 ----------- ----------- SERVICE REVENUES: Basic service...................................... $51,070,996 $12,047,565 Premium service.................................... 11,799,695 2,837,578 Other.............................................. 27,497,641 6,271,066 ----------- ----------- 90,368,332 21,156,209 ----------- ----------- EXPENSES: Operating costs.................................... 42,972,828 9,904,836 General and administrative......................... 7,039,142 1,816,167 Depreciation and amortization...................... 31,716,528 7,441,568 Management and financial advisory service fees-- related parties.................................... 3,600,000 1,010,000 ----------- ----------- 85,328,498 20,172,571 ----------- ----------- Income from operations........................... 5,039,834 983,638 ----------- ----------- OTHER INCOME (EXPENSE): Interest income.................................... 172,008 98,185 Interest expense................................... (16,742,021) (4,540,358) Other.............................................. 70,197 -- ----------- ----------- (16,499,816) (4,442,173) ----------- ----------- Net loss......................................... (11,459,982) (3,458,535) ----------- ----------- PREFERRED RETURN.................................... -- (1,680,890) ----------- ----------- Net loss applicable to partners' capital accounts.. (11,459,982) (5,139,425) =========== =========== NET LOSS ALLOCATION: General Partner.................................... -- (1,292,405) ----------- ----------- Limited Partners--Preferred Capital Account........ (11,459,982) (2,270,286) (11,459,982) (3,562,691) ----------- ----------- NET LOSS APPLICABLE TO LIMITED PARTNERS--ORDINARY CAPITAL ACCOUNTS................................... $ -- $(1,576,734) =========== ===========
The accompanying notes are an integral part of these statements. F-86 CHARTER COMMUNICATIONS ENTERTAINMENT II, L.P. STATEMENTS OF PARTNERS' CAPITAL FOR THE YEAR ENDED DECEMBER 31, 1996, AND FOR THE PERIOD FROM INCEPTION TO DECEMBER 31, 1995
LIMITED PARTNERS ------------------------ ORDINARY PREFERRED GENERAL CAPITAL CAPITAL PARTNER ACCOUNTS ACCOUNT TOTAL ---------- ---------- ------------ ------------ BALANCE, at inception...... $ -- $ -- $ -- $ -- Capital contributions.... 1,292,405 1,576,734 126,371,361 129,240,500 Allocation of net loss... (535,247) (653,002) (2,270,286) (3,458,535) Allocation of preferred return................... (757,158) (923,732) 1,680,890 -- ---------- ---------- ------------ ------------ BALANCE, December 31, 1995....................... -- -- 125,781,965 125,781,965 Allocation of net loss... -- -- (11,459,982) (11,459,982) ---------- ---------- ------------ ------------ BALANCE, December 31, 1996....................... $ -- $ -- $114,321,983 $114,321,983 ========== ========== ============ ============
The accompanying notes are an integral part of these statements. F-87 CHARTER COMMUNICATIONS ENTERTAINMENT II, L.P. STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1996, AND FOR THE PERIOD FROM INCEPTION TO DECEMBER 31, 1995
1996 1995 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss.......................................... $(11,459,982) $ (3,458,535) Adjustments to reconcile net loss to net cash provided by operating activities-- Depreciation and amortization.................... 31,716,528 7,441,568 Changes in assets and liabilities, net of effects from acquisition-- Accounts receivable, net........................ 355,860 (1,442,510) Prepaid expenses and other...................... (63,278) (549,005) Accounts payable and accrued expenses........... (437,065) 4,400,371 Subscriber deposits............................. (25,839) (5,972) Payables to affiliates.......................... (20,934) 1,111,767 Deferred revenue................................ (91,390) (8,179) Accrued interest on subordinated note payable to Limited Partner................................. 1,918,000 500,000 ------------ ------------ Net cash provided by operating activities...... 21,891,900 7,989,505 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment........ (22,174,686) (4,876,992) Payment for Gaylord Entertainment, Inc. acquisition....................................... -- (340,939,879) Payments of organizational expenses............... (127,854) (315,403) Other............................................. 16,268 (8,155) ------------ ------------ Net cash used in investing activities.......... (22,286,272) (346,140,429) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under revolving credit and term loan facility.......................................... 6,500,000 193,100,000 Payments of revolving credit and term loan facility.......................................... (5,600,000) -- Proceeds from subordinated note payable to Limited Partner........................................... -- 47,000,000 Payment of subordinated note payable to Limited Partner........................................... -- (22,000,000) Limited Partners' capital contributions........... -- 127,948,095 General Partner's capital contribution............ -- 1,292,405 Payments of debt issuance costs................... (352,083) (3,292,471) ------------ ------------ Net cash provided by financing activities...... 547,917 344,048,029 ------------ ------------ NET INCREASE IN CASH AND CASH EQUIVALENTS.......... 153,545 5,897,105 CASH AND CASH EQUIVALENTS, beginning of period..... 5,897,105 -- ------------ ------------ CASH AND CASH EQUIVALENTS, end of period........... $ 6,050,650 $ 5,897,105 ============ ============ CASH PAID FOR INTEREST............................. $ 17,511,868 $ 298,839 ============ ============ CASH PAID FOR TAXES................................ $ -- $ -- ============ ============
The accompanying notes are an integral part of these statements. F-88 CHARTER COMMUNICATIONS ENTERTAINMENT II, L.P. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 AND 1995 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Organization and Basis of Presentation Charter Communications Entertainment II, L.P. (the "Partnership"), a Delaware limited partnership, was formed on April 20, 1995, for the purpose of acquiring and operating existing cable television systems. The Partnership commenced operations effective September 30, 1995, through the acquisition of certain cable television systems in southern California. The Partnership will terminate no later than December 31, 2055, as provided in its partnership agreement (the "Partnership Agreement"). CCT Holdings Corp. (CCT Holdings), the General Partner, holds a 1% interest in the Partnership. Charter Communications Entertainment, L.P. (CCE) and CCA Acquisition Corp. (CAC) hold limited partnership interests of 97.78% and 1.22%, respectively, in the Partnership. CCT Holdings and CAC hold partnership interests of 45% and 55%, respectively, in CCE. CAC is a wholly owned subsidiary of CCA Holdings Corp. (CCA Holdings). CCA Holdings and CCT Holdings are each owned by Kelso Investment Associates V, L.P., an investment fund, together with an affiliate (collectively referred to as "Kelso" herein) and certain other individuals and Charter Communications, Inc. (Charter), manager of the cable television systems (see Note 8). As of December 31, 1996, the Partnership provided cable television service to 25 franchises serving approximately 168,100 basic subscribers in southern California. Cash Equivalents Cash equivalents at December 31, 1996 and 1995, consist primarily of repurchase agreements with original maturities of 90 days or less. These investments are carried at cost, which approximates market value. The Partnership is subject to loss for amounts invested in repurchase agreements in the event of nonperformance by the financial institution which acts as the counterparty under such agreements; however, such noncompliance is not anticipated. Property, Plant and Equipment Property, plant and equipment is recorded at cost, including all direct and certain indirect costs associated with the construction of cable transmission and distribution facilities, and the cost of new customer installation. The costs of disconnecting a residence are charged to expense in the period incurred. Expenditures for repairs and maintenance are charged to expense as incurred, and equipment replacement costs and betterments are capitalized. Depreciation is provided using the composite method on a straight-line basis over the estimated useful life of the related asset as follows: Trunk and distribution systems................................. 10 years Subscriber installations....................................... 10 years Buildings and headends......................................... 10-20 years Converters..................................................... 5 years Vehicles and equipment......................................... 4-8 years Office equipment............................................... 5-10 years
F-89 CHARTER COMMUNICATIONS ENTERTAINMENT II, L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) Franchise Costs Costs incurred in obtaining and renewing cable franchises are initially deferred and amortized over the legal lives of the franchises. Costs relating to unsuccessful franchise applications are charged to expense when it is determined that the efforts to obtain the franchise will not be successful. Franchise rights acquired through the purchase of cable television systems represent the excess of the cost of properties acquired over the amounts assigned to the net tangible assets at date of acquisition. Acquired franchise rights are amortized using the straight-line method over 15 years. Other Assets Organizational expenses are being amortized using the straight-line method over five years. Debt issuance costs are being amortized over the term of the debt. During 1995, the Partnership adopted Statement of Financial Accounting Standards (SFAS) No. 121 entitled, "Accounting for the Impairment of Long- Lived Assets and for Long-Lived Assets to be Disposed of." In accordance with SFAS No. 121, the Partnership periodically reviews the carrying value of its long-lived assets, identifiable intangibles and franchise costs in relation to historical financial results, current business conditions and trends (including the impact of existing legislation and regulation) to identify potential situations in which the carrying value of such assets may not be recoverable. If a review indicates that the carrying value of such assets may not be recoverable, the carrying value of such assets in excess of their fair value will be recorded as a reduction of the assets' cost as if a permanent impairment has occurred. No impairments have occurred and accordingly, no adjustments to the financial statements of the Partnership have been recorded relating to SFAS No. 121. Revenues Cable service revenues are recognized when the related services are provided. Installation revenues are recognized to the extent of direct selling costs incurred. The remainder, if any, is deferred and amortized to income over the average estimated period that customers are expected to remain connected to the cable television system. Franchise fees collected from cable subscribers and paid to local franchises are reported as revenues. Derivative Financial Instruments The Partnership manages risk arising from fluctuations in interest rates by using interest rate swap and cap agreements, as required by its credit agreement. These agreements are treated as off-balance sheet financial instruments. The interest rate swap and cap agreements are being accounted for as a hedge of the debt obligation, and accordingly, the net settlement amount is recorded as an adjustment to interest expense in the period incurred. Income Taxes Income taxes are the responsibility of the partners and as such are not provided for in the accompanying financial statements. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities 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 those estimates. F-90 CHARTER COMMUNICATIONS ENTERTAINMENT II, L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) Reclassifications Certain reclassifications have been made to the 1995 financial statements to conform with current year presentation. 2.PARTNERSHIP INTERESTS: Under the terms of the Partnership Agreement, the profits and losses for income tax reporting purposes are allocated among the partners in accordance with their percentage interests subject to any adjustments required by the Internal Revenue Code and Treasury Regulations. For financial reporting purposes, profits and losses, and the preferred return (described below) are allocated in accordance with the liquidation provisions in the Partnership Agreement. Proceeds from the liquidation of the Partnership shall be distributed as follows: (i) to the payment of liquidation expenses; (ii) to the payment of creditors of the Partnership and the establishment of reserves to provide for contingent liabilities; (iii) to CCE, equal to the amount of its Preferred Capital Account; (iv) to each partner to the extent of such positive balance in the ratio in which its respective ordinary capital account balance bears to all such positive ordinary capital account balances; and (v) the remaining balance to the partners in accordance with their percentage interests at the time of liquidation. The Partnership Agreement provides for, among other things, distributions to the respective partners in proportion to their respective partnership interests, and the creation of a preferred capital account and preferred distributions related thereto. The effect of these provisions is to direct the proceeds of distributions from the Partnership to CCE for repayment of the Gaylord Note (as defined herein). Furthermore, the Credit Agreement (as defined herein) establishes limitations on distributions. CCE is entitled to an annual preferred return computed in accordance with the provisions in the Partnership Agreement. The 1996 preferred return of approximately $24,424,000 and the cumulative preferred return totaling approximately $30,260,000 have not been reflected in CCE's capital account as of December 31, 1996, since the General Partner's capital account and Limited Partners' ordinary capital account have been reduced to $-0-. 3.ACQUISITION: Effective September 30, 1995, the General Partner acquired the assets of certain cable television systems from an affiliate of Gaylord Entertainment Company, Inc. (Gaylord) for an aggregate purchase price of approximately $340.9 million, which included cable television systems in southern California which were transferred to the Partnership. To finance the acquisition, the Partnership entered into a revolving credit and term loan facility (see Note 7) and the General Partner executed a subordinated seller note to Gaylord (the "Gaylord Note"). Upon repayment in full of the obligations of the revolving credit and term loan facility, and termination of all commitments to lend in respect thereof, the Gaylord Note will have the benefit of distributions from the Partnership. The Partnership's assets are not pledged as collateral to this note. The acquisition was accounted for using the purchase method of accounting, and accordingly, results of operations of the acquired assets have been included in the financial statements from the date of acquisition. The following shows the final purchase price and the allocation of the purchase price to assets acquired and liabilities assumed: Purchase price: Cash paid to seller........................................... $177,847,738 Seller note executed by the General Partner................... 156,240,500 Assumed liabilities........................................... 1,020,000 Transaction costs............................................. 5,831,641 ------------ $340,939,879 ============
F-91 CHARTER COMMUNICATIONS ENTERTAINMENT II, L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) Amounts allocated to: Accounts receivable............................................ $ 2,399,768 Prepaid expenses and other.................................... 755,479 Property, plant and equipment................................. 111,402,243 Franchise costs............................................... 235,575,898 Accounts payable and accrued expenses......................... (8,260,559) Subscriber deposits........................................... (450,311) Deferred revenue.............................................. (482,639) ------------ Purchase price............................................. $340,939,879 ============
The following is the unaudited pro forma operating results for the above acquisition as though it had been made on January 1, 1995:
FOR THE YEAR ENDED DECEMBER 31, 1995 ------------ (UNAUDITED) Service revenues.............................................. $ 83,017,772 Income from operations........................................ $ 3,021,453 Net loss...................................................... $(14,717,823)
4.PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment consists of the following at December 31:
1996 1995 ------------ ------------ Trunk and distribution systems.................. $ 66,775,942 $ 58,375,261 Subscriber installations........................ 32,957,225 27,078,945 Land, buildings and headends.................... 6,647,140 4,636,945 Converters...................................... 26,886,074 22,116,731 Vehicles and equipment.......................... 2,585,140 1,999,164 Office equipment................................ 2,602,400 2,072,189 ------------ ------------ 138,453,921 116,279,235 Less--Accumulated depreciation.................. (18,752,304) (3,377,279) ------------ ------------ $119,701,617 $112,901,956 ============ ============
5.OTHER ASSETS: Other assets consist of the following at December 31:
1996 1995 ---------- ---------- Debt issuance costs, net of accumulated amortization of $533,049 and $96,838............................. $3,111,505 $3,195,633 Organizational expenses, net of accumulated amortization of $218,991 and $157,352............... 224,266 158,051 ---------- ---------- $3,335,771 $3,353,684 ========== ==========
F-92 CHARTER COMMUNICATIONS ENTERTAINMENT II, L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) 6.ACCOUNTS PAYABLE AND ACCRUED EXPENSES: Accounts payable and accrued expenses consist of the following at December 31:
1996 1995 ------------ ------------ Accrued interest................................. $ 1,053,672 $ 3,741,519 Accrued salaries and related benefits............ 1,208,099 1,026,385 Accounts payable................................. 1,511,336 172,958 Capital expenditures............................. 1,582,391 1,633,606 Programming expenses............................. 1,882,896 1,672,241 Franchise fees................................... 2,176,770 2,196,814 Other............................................ 2,383,701 2,317,407 ------------ ------------ $ 11,798,865 $ 12,760,930 ============ ============ 7.LONG-TERM DEBT: Long-term debt consists of the following at December 31: 1996 1995 ------------ ------------ Credit Agreement: Term loans...................................... $120,000,000 $120,000,000 Revolving credit facility....................... 74,000,000 73,100,000 ------------ ------------ 194,000,000 193,100,000 Less-- Current maturities....................... -- -- ------------ ------------ $194,000,000 $193,100,000 ============ ============
During September 1995, the Partnership entered into a revolving credit and term loan facility (the "Credit Agreement") with a consortium of banks for borrowings up to $235.0 million. The Credit Agreement provides for the availability of $120.0 million of term loans and a revolving credit facility of $115.0 million. Principal payments are due in quarterly installments beginning June 30, 1998, and continuing through September 30, 2004. Borrowings under the Credit Agreement bear interest at rates based upon a certain spread plus a base rate, with the base rate being, at the Partnership's election, the prime rate of NationsBank of Texas, N.A. (the Administrative Agent bank), the Federal Funds Effective Rate or Eurodollar rates. The applicable spread is based on the ratio of debt to annualized operating cash flow. At December 31, 1996, interest rates ranged from 7.19% to 7.75%. The weighted average interest rates and weighted average borrowings were 7.66% and 8.20%, and approximately $193.6 million and $193.1 million during 1996 and the period from inception to December 31, 1995, respectively. As this debt instrument bears interest at current market rates, its carrying amount approximates fair market value at December 31, 1996. Borrowings under the Credit Agreement are collateralized by the assets of the Partnership. In addition, CCT Holdings, CCE and CAC have pledged their partnership interests as additional security to the Credit Agreement. Borrowings under the Credit Agreement are subject to certain financial and nonfinancial covenants and restrictions, the most restrictive of which requires maintenance of a ratio of debt to annualized operating cash flow, as defined, not to exceed 5.25 to 1 at December 31, 1996. A quarterly commitment fee of 0.375% per annum is payable on the unused portion of the Credit Agreement. F-93 CHARTER COMMUNICATIONS ENTERTAINMENT II, L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) Commencing June 30, 1998, the principal balances of the term loans shall be amortized in consecutive quarterly installments until paid in full. In addition, commencing June 30, 1998, and at the end of each calendar quarter thereafter, available borrowings under the revolving credit facility shall be reduced. The following table sets forth such information on an annual basis.
AMOUNT OF REDUCTION PRINCIPAL DUE OF REVOLVING CREDIT YEAR ON TERM LOANS FACILITY COMMITMENT ---- ------------- ------------------- 1998....................................... $ 9,330,000 $ 6,900,000 1999....................................... 12,540,000 10,925,000 2000....................................... 13,380,000 12,995,000 2001....................................... 13,380,000 20,470,000 2002....................................... 13,380,000 29,900,000 2003....................................... 18,990,000 33,810,000 2004....................................... 39,000,000 -- ------------ ------------ $120,000,000 $115,000,000 ============ ============
Based upon outstanding indebtedness at December 31, 1996, and the amortization of term loans and scheduled reductions in available borrowings depicted above, aggregate future principal payments on the Credit Agreement at December 31, 1996, are as follows:
REVOLVING TERMS CREDIT YEAR LOANS FACILITY TOTAL AMOUNT ---- ------------ ----------- ------------ 1997................................... $ -- $ -- $ -- 1998................................... 9,330,000 -- 9,330,000 1999................................... 12,540,000 -- 12,540,000 2000................................... 13,380,000 -- 13,380,000 2001................................... 13,380,000 10,290,000 23,670,000 Thereafter............................. 71,370,000 63,710,000 135,080,000 ------------ ----------- ------------ $120,000,000 $74,000,000 $194,000,000 ============ =========== ============
As a requirement of the Credit Agreement, the Partnership has secured interest rate protection agreements. The Credit Agreement requires the Partnership to enter into interest rate protection agreements for notional amounts of not less than 50% of the outstanding borrowings within 180 days from inception of the Credit Agreement. In addition, the interest rate protection agreements must provide rate protection for a weighted average period of not less than 18 months. The fair value of the interest rate swaps is the estimated amount the Partnership would receive (pay) to eliminate the swap agreement at the reporting date, taking into account current interest rates and the creditworthiness of the counterparties. The following summarizes certain information pertaining to the interest rate protection agreements as of December 31, 1996:
NOTIONAL FIXED AMOUNT TYPE RATE CONTRACT EXPIRATION DATE FAIR VALUE/REDEMPTION PRICE ------------ ---- ----- --------------------------- --------------------------- $ 25,000,000 Swap 5.18% December 19, 1997 $ 214,548 50,000,000 Swap 6.00 December 15, 1998 (87,530) 25,000,000 Swap 5.48 December 29, 1998 126,056 ------------ --------- $100,000,000 5.67% Weighted Average Fixed Rate $ 253,074 ============ =========
F-94 CHARTER COMMUNICATIONS ENTERTAINMENT II, L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) Management believes that the counterparties of the interest hedge agreements will be able to meet their obligations under the agreements. The purpose of the Partnership's involvement in these interest hedge agreements is to minimize the Partnership's exposure to interest rate fluctuations on its floating rate debt. Management believes that it has no material concentration of credit or market risks with respect to these interest hedge agreements. 8.RELATED-PARTY TRANSACTIONS: Charter provides management services to the Partnership under terms of a contract which provides for base fees equal to $3,200,000, per annum plus an annual bonus equal to 30% of the excess, if any, of operating cash flow (as defined in the management agreement) over the projected operating cash flow for the year. Payment of the management services bonus is prohibited until termination of the Credit Agreement due to restrictions provided within the Credit Agreement. For the year ended December 31, 1996, and for the period from inception to December 31, 1995, operating cash flows was not in excess of projected operating cash flow, and thus, no bonus was recognized. In addition, the Partnership receives financial advisory services from an affiliate of Kelso, another related party, under terms of a contract which provides for fees equal to $400,000 per annum. Expenses recognized by the Partnership under these contracts during 1996 and the period from inception to December 31, 1995, were $3,600,000 and $1,010,000, respectively. Management and financial advisory service fees currently payable of $900,000 are included in Payables to affiliates at December 31, 1996 and 1995. The Partnership pays certain acquisition advisory fees to an affiliate of Kelso, which typically equal approximately 1% of the total purchase price paid for cable television systems acquired. Total acquisition fees paid to the affiliate of Kelso in 1995 were $2.0 million. Charter received $3.0 million in equity interests in CCT Holdings in conjunction with the Gaylord acquisition. The Partnership and all entities affiliated with Charter collectively utilize a combination of insurance coverage and self-insurance programs for medical, dental and workers' compensation claims. The Partnership is allocated charges monthly based upon its total number of employees, historical claims and medical cost trend rates. Management considers this allocation to be reasonable for the operations of the Partnership. During 1996 and the period from inception to December 31, 1995, the Partnership expensed approximately $664,000 and $173,000, respectively, relating to insurance allocations. In conjunction with the acquisition described in Note 3, the Partnership executed a promissory note to CCE in the amount of $47.0 million. Immediately upon closing of the Gaylord acquisition, the Partnership used proceeds from borrowings under the Credit Agreement to repay $22.0 million on the promissory note. All principal and interest amounts due under this note are subordinated with respect to the Credit Agreement set forth in Note 7. The note matures on March 31, 2005. The note bears interest at an annual rate equal to the weighted average interest rate payable on the loans outstanding under the Credit Agreement. Principal and interest amounts due under this note are included in Subordinated Note Payable to Limited Partner on the accompanying balance sheets. In 1996, certain of the Partnership's employees became participants in the 1996 Charter Communications/Kelso & Company Appreciation Rights Plan (the "Appreciation Rights Plan"). The Appreciation Rights Plan covers certain key employees and consultants within the group of companies and partnerships controlled by affiliates of Kelso and managed by Charter (collectively, the "Investment Group"). In 1996, the Partnership and other affiliated entities employed the services of Charter's National Data Center (the "National Data Center"). The National Data Center performs certain subscriber billing services and provider computer network, hardware and software support for the Partnership and other affiliated entities. The cost of billing services is allocated based on the number of subscribers. Management considers this allocation to be reasonable for the operations of the Partnership. During 1996, the Partnership expensed approximately $125,000 relating to these services. F-95 CHARTER COMMUNICATIONS ENTERTAINMENT II, L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) 9.COMMITMENTS AND CONTINGENCIES: Leases The Partnership leases certain facilities and equipment under noncancelable operating leases. Rent expense incurred under these leases during 1996 and the period from inception to December 31, 1995, was approximately $1,086,000 and $287,000, respectively. Approximate aggregate future minimum lease payments are as follows: 1997.............................................................. $1,133,600 1998.............................................................. 1,126,700 1999.............................................................. 1,123,000 2000.............................................................. 1,100,300 2001.............................................................. 981,000 Thereafter........................................................ 1,129,000
The Partnership rents utility poles in its operations. Generally, pole rental agreements are short term, but the Partnership anticipates that such rentals will recur. Rent expense for pole attachments during 1996 and the period from inception to December 31, 1995, were approximately $557,000 and $115,000, respectively. Insurance Coverage The Partnership currently does not have and does not in the near term anticipate having property and casualty insurance on its underground distribution plant. Due to large claims incurred by the property and casualty insurance industry, the pricing of insurance coverage has become inflated to the point where, in the judgment of the Partnership's management, the price is cost prohibitive. Management believes that its experience and policy with respect to such insurance coverage is consistent with general industry practices. Management will continue to monitor the insurance markets to attempt to obtain coverage for the Partnership's distribution plant at reasonable rates. Litigation The Partnership is a party to lawsuits which are generally incidental to its business. In the opinion of management, after consulting with legal counsel, the outcome of these lawsuits will not have a material adverse effect on the Partnership's financial position and results of operations. 10.RATE REGULATION IN THE CABLE TELEVISION INDUSTRY: The cable television industry is subject to extensive regulation at the federal, local and, in some instances, state levels. In addition, recent legislative and regulatory changes and additional regulatory proposals under consideration may materially affect the cable television industry. Congress enacted the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"), which became effective on December 4, 1992. The 1992 Cable Act generally allows for a greater degree of regulation of the cable television industry. Under the 1992 Cable Act's definition of effective competition, nearly all cable systems in the United States are subject to rate regulation of basic cable services, provided the local franchising authority becomes certified to regulate basic service rates. The 1992 Cable Act and the Federal Communications Commission's (FCC) rules implementing the 1992 Cable Act have generally increased the administrative and operational expenses of cable television systems and have resulted in additional regulatory oversight by the FCC and local franchise authorities. While management believes that the Partnership has complied in all material respects with the rate provisions of the 1992 Cable Act, in jurisdictions that have not yet chosen to certify, refunds covering a one-year F-96 CHARTER COMMUNICATIONS ENTERTAINMENT II, L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) period on basic services may be ordered upon future certification if the Partnership is unable to justify its rates through a benchmark or cost-of- service filing pursuant to FCC rules. Management is unable to estimate at this time the amount of refunds, if any, that may be payable by the Partnership in the event certain of its rates are successfully challenged by franchising authorities or found to be unreasonable by the FCC. Management does not believe that the amount of any such refunds would have a material adverse effect on the financial position or results of operations of the Partnership. The 1992 Cable Act modified the franchise renewal process to make it easier for a franchising authority to deny renewal. Historically, franchises have been renewed for cable operators that have provided satisfactory services and have complied with the terms of the franchise agreement. Although management believes that the Partnership has generally met the terms of its franchise agreements and has provided quality levels of service, and anticipates the Partnership's future franchise renewal prospects generally will be favorable, there can be no assurance that any such franchises will be renewed or, if renewed, that the franchising authority will not impose more onerous requirements on the Partnership than previously existed. During 1996, Congress passed and the President signed into law the Telecommunications Act of 1996 (the "Telecommunications Act") which alters federal, state and local laws and regulations pertaining to cable television, telecommunications and other services. Under the Telecommunications Act, telephone companies can compete directly with cable operators in the provision of video programming, subject to certain regulatory safeguards. Certain provisions of the Telecommunications Act could materially affect the growth and operation of the cable television industry and the cable services provided by the Partnership. Although the new legislation may substantially lessen regulatory burdens, the cable television industry may be subject to additional competition as a result thereof. There are numerous rule-makings to be undertaken by the FCC which will interpret and implement the Telecommunications Act's provisions. In addition, certain provisions of the Telecommunications Act (such as the deregulation of cable programming rates) are not immediately effective. Further, certain of the Telecommunications Act's provisions have been and are likely to be subject to judicial challenges. Management is unable at this time to predict the outcome of such rule-makings or litigation or the substantive effect of the new legislation and the rule-makings on the financial position and results of operations of the Partnership. 11.NET LOSS FOR INCOME TAX PURPOSES: The following reconciliation summarizes the differences between the Partnership's net loss for financial reporting purposes and net loss for federal income tax purposes for the year ended December 31, 1996, and for the period from inception to December 31, 1995:
1996 1995 ------------ ----------- Net loss for financial reporting purposes....... $(11,459,982) $(3,458,535) Depreciation differences between financial reporting and tax reporting...................................... (20,426,991) (839,467) Amortization differences between financial reporting and tax reporting.................... 475,629 177,759 Differences in expenses recorded for financial reporting and tax reporting.................... (33,833) 2,059,052 Differences in revenue reported for financial reporting and tax reporting.................... (91,395) 474,460 Other........................................... 33,500 -- ------------ ----------- Net loss for federal income tax purposes.... $(31,503,072) $(1,586,731) ============ ===========
F-97 CHARTER COMMUNICATIONS ENTERTAINMENT II, L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) The following summarizes the significant cumulative temporary differences between the Partnership's financial reporting basis and the federal income tax reporting basis as of December 31, 1996 and 1995:
1996 1995 ------------ ----------- Assets: Accounts receivable............................. $ 325,137 $ 220,697 Accrued expenses and payables to affiliates..... 3,151,778 1,825,374 Deferred revenue................................ 383,070 474,460 ------------ ----------- $ 3,859,985 $ 2,520,531 ============ =========== Liabilities: Property, plant and equipment................... $(21,266,975) $ (839,467) Franchise costs................................. (4,140,301) (9,112,533) ------------ ----------- $(25,407,276) $(9,952,000) ============ ===========
12.COMPETITION: The Riverside, California system, providing service to approximately 47,000 basic subscribers, faces competition from a multipoint distribution system acquired by Pacific Telesis Group. At this time, management is uncertain what impact, if any, this acquisition will have on the Partnership's financial position or results of operations. 13.401(K) PLAN: In 1995, the Partnership adopted the Charter Communications, Inc. 401(k) Plan (the "Plan") for the benefit of its employees. The Plan is a tax- qualified retirement savings plan to which employees may elect to make pretax contributions up to the lesser of 10% of their compensation or dollar thresholds established under the Internal Revenue Code. The Partnership contributes an amount equal to 50% of the first 5% contributed by each employee. During 1996 and the period from inception to December 31, 1995, the Partnership contributed approximately $165,000 and $34,000, respectively, to the Plan. 14.SIGNIFICANT NONCASH TRANSACTION: The Partnership engaged in the following significant noncash financing transaction during the period from inception to December 31, 1995:
1996 1995 --------- ---------- Preference allocation--Preferred Capital Account (see Note 2).............................................. $ -- $1,680,890
F-98 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Cencom Cable Entertainment, Inc.: We have audited the accompanying balance sheet of Cencom Cable Entertainment, Inc.--Missouri System (as defined in Note 1) as of December 31, 1994, and the related statements of operations, system's equity and cash flows for the year then ended. These financial statements are the responsibility of the System's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cencom Cable Entertainment, Inc.--Missouri System as of December 31, 1994, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP St. Louis, Missouri, July 31, 1996 F-99 INDEPENDENT AUDITORS' REPORT The Board of Directors Cencom Cable Entertainment, Inc.: We have audited the accompanying statements of operations, System's equity and cash flows of Cencom Cable Entertainment, Inc.--Missouri System for the year ended December 31, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the results of operations and the cash flows of Cencom Cable Entertainment, Inc.--Missouri System for the year ended December 31, 1993, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Dallas, Texas July 26, 1996 F-100 CENCOM CABLE ENTERTAINMENT, INC.-- MISSOURI SYSTEM BALANCE SHEET
DECEMBER 31, 1994 ------------ ASSETS CURRENT ASSETS: Cash................................................................. $ -- Accounts receivable, net of allowance for doubtful accounts of $64,824............................................................. 1,120,640 Prepaid expenses and other........................................... 392,970 ------------ Total current assets.............................................. 1,513,610 PROPERTY, PLANT AND EQUIPMENT, net.................................... 103,602,349 INTANGIBLE ASSETS, net................................................ 136,734,126 ------------ $241,850,085 ============ LIABILITIES AND SYSTEM'S EQUITY CURRENT LIABILITIES--Accounts payable and accrued expenses............ $ 2,182,624 COMMITMENTS AND CONTINGENCIES SYSTEM'S EQUITY....................................................... 239,667,461 ------------ $241,850,085 ============
The accompanying notes are an integral part of this balance sheet. F-101 CENCOM CABLE ENTERTAINMENT, INC.-- MISSOURI SYSTEM STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31 -------------------------- 1994 1993 ------------ ------------ SERVICE REVENUES................................... $ 55,627,936 $ 54,281,429 ------------ ------------ OPERATING EXPENSES: Operating, general and administrative............ 26,625,458 25,827,879 Depreciation and amortization.................... 36,285,180 36,939,821 Management fee--related party.................... 2,781,397 2,722,796 ------------ ------------ 65,692,035 65,490,496 ------------ ------------ Loss from operations........................... (10,064,099) (11,209,067) ------------ ------------ OTHER INCOME (EXPENSE): Interest expense................................. (10,154,497) (8,400,499) Interest income.................................. 19,933 -- Other............................................ 656,568 (78,259) ------------ ------------ (9,477,996) (8,478,758) ------------ ------------ Net loss....................................... $(19,542,095) $(19,687,825) ============ ============
The accompanying notes are an integral part of these statements. F-102 CENCOM CABLE ENTERTAINMENT, INC.-- MISSOURI SYSTEM STATEMENT OF SYSTEM'S EQUITY
SYSTEM'S EQUITY ------------ BALANCE, December 31, 1992........................................ $296,375,356 Net activity with Parent........................................ (9,528,237) Net loss........................................................ (19,687,825) ------------ BALANCE, December 31, 1993........................................ 267,159,294 Net activity with Parent........................................ (7,949,738) Net loss........................................................ (19,542,095) ------------ BALANCE, December 31, 1994........................................ $239,667,461 ============
The accompanying notes are an integral part of this statement. F-103 CENCOM CABLE ENTERTAINMENT, INC.-- MISSOURI SYSTEM STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31 -------------------------- 1994 1993 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss......................................... $(19,542,095) $(19,687,825) Adjustments to reconcile net loss to net cash provided by operating activities-- Depreciation and amortization.................. 36,285,180 36,939,821 Loss on retirements of property, plant and equipment..................................... 84,902 232,528 Changes in assets and liabilities-- Accounts receivable, net..................... 477,006 (572,684) Prepaid expenses and other................... 116,207 20,920 Accounts payable and accrued expenses........ 184,389 64,178 ------------ ------------ Net cash provided by operating activities.. 17,605,589 16,996,938 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment....... (9,655,851) (7,468,701) ------------ ------------ Net cash used in investing activities...... (9,655,851) (7,468,701) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net change in capital account with Parent........ (7,949,738) (9,528,237) ------------ ------------ Net cash used in financing activities...... (7,949,738) (9,528,237) ------------ ------------ CASH, beginning and end of year.................... $ -- $ -- ============ ============
The accompanying notes are an integral part of these statements. F-104 CENCOM CABLE ENTERTAINMENT, INC.-- MISSOURI SYSTEM NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 AND 1993 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Organization and Basis of Presentation The accompanying financial statements include the accounts of a certain cable television system which is owned and operated by Cencom Cable Entertainment, Inc. (CCE). The financial statements include the historical assets, liabilities and operations of the Missouri System (the "System") providing service to communities in and around St. Louis and northeast Missouri. In November 1991, Crown Cable, Inc., an indirect wholly owned subsidiary of Hallmark Cards, Incorporated (Hallmark) acquired Cencom Cable Associates, Inc. (CCA) such that CCA became a 99% owned subsidiary of Crown Cable, Inc. CCE is a wholly owned subsidiary of CCA. The stock of CCA was transferred to Crown Media, Inc., (the "Parent" or Crown) in January 1992. In November, 1994, CCE merged into CCA with CCA surviving. CCA was subsequently renamed CCE. As of December 31, 1994, the System passed approximately 248,000 homes and serviced approximately 126,000 basic subscribers in approximately 59 franchise areas. In January, 1995, Crown sold the stock of CCE. The sale was part of a larger transaction in which Crown sold its cable television systems to a group of investors, including Charter Communications, Inc. (Charter), certain affiliates of Charter and third parties. 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 those estimates. Cash Management and System Equity Account The cash management function for the System is performed by the Parent. Excess cash funds are transferred to the Parent using the System's equity account. In addition, the Parent makes disbursements on behalf of the System for items such as payroll, payroll taxes, employee benefits and other costs. Such amounts are transferred to the System through the System's equity account and are recognized in the accompanying statements of operations. Property, Plant and Equipment Property, plant and equipment is recorded at cost, including all direct and certain indirect costs associated with the construction of cable transmission and distribution facilities, and the cost of new customer installation. The costs of disconnecting a customer are charged to expense in the period incurred. Expenditures for repairs and maintenance are charged to expense as incurred, and equipment replacement costs and betterments are capitalized. Depreciation is provided using the composite method on a straight-line basis over the estimated useful lives of the related assets as follows: Trunk and distribution systems................................. 15 years Subscriber installations....................................... 10 years Converters..................................................... 5 years Buildings and headends......................................... 5-20 years Vehicles and equipment......................................... 4-8 years Office equipment............................................... 5-10 years
F-105 CENCOM CABLE ENTERTAINMENT, INC.-- MISSOURI SYSTEM NOTES TO FINANCIAL STATEMENTS--(CONTINUED) Leasehold improvements are amortized using the straight-line method over their useful life or lease term, whichever is shorter. Other Assets Costs incurred in obtaining and renewing cable franchises are initially deferred and amortized over the legal lives of the franchises. Franchise rights acquired through the purchase of cable systems are stated at estimated fair value at the date of acquisition and amortized using the straight-line method over the remaining term of the individual franchises acquired. Goodwill is amortized using the straight-line method over 15 years from the date of acquisition. The System's management continually evaluates the recoverability of carrying amounts and estimated recovery periods of long-term and intangible assets. Such evaluation is based on System estimates of current liquidation values of the cable system on a combined, undiscounted basis using a cash flow multiple approach. Based on this valuation, the System believes that no impairment of the carrying amount of intangible assets exists at December 31, 1994, and no adjustment of estimated recovery periods is warranted. Revenues Cable service revenues are recognized when the related services are provided. Installation revenues are recognized to the extent of direct selling costs incurred. The remainder, if any, is deferred and amortized to income over the average estimated period that customers are expected to remain connected to the cable television system. Franchise fees collected from cable subscribers and paid to local franchises are reported as revenues. Interest Expense Interest expense allocated to the System has been determined by applying the ratio of System's subscribers to total CCE subscribers at the date of CCE's acquisition by Crown to total CCE interest expense for the year. CCE makes disbursements on behalf of the System for interest expense. Management considers this allocation method to be reasonable for the operations of the System. CCE's debt balance totaled $261,130,000 at December 31, 1994. The borrowings pertaining to the System are reflected within system's equity. The weighted average interest rate on CCE borrowings was 5.25% and 4.3% during the years ended December 31, 1994 and 1993, respectively. The interest rate at December 31, 1994, is 6.0%. Income Taxes Income taxes are the responsibility of the Parent and as such are not provided for in the accompanying financial statements. Crown is part of the Hallmark consolidated group which files a consolidated federal income tax return. Crown accounts for income taxes under the asset and liability method as prescribed by Financial Accounting Standards No. 109, "Accounting for Income Taxes." Consolidated tax balances of Crown are not allocated to individual systems or subsidiaries. On a separate, stand-alone basis, the System would not have recognized any income tax benefit of operating losses as the System has generated operating losses for income tax purposes since their inception and is expected to generate such losses for the foreseeable future. F-106 CENCOM CABLE ENTERTAINMENT, INC.-- MISSOURI SYSTEM NOTES TO FINANCIAL STATEMENTS--(CONTINUED) 2. PREPAID EXPENSES AND OTHER: Prepaid expenses and other consists of the following:
DECEMBER 31, 1994 ------------ Deposits........................................................ $221,670 Prepaid programming............................................. 143,057 Other prepaid expenses and current assets....................... 28,243 -------- $392,970 ========
3. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment consist of the following:
DECEMBER 31, 1994 ------------ Trunk and distribution systems................................. $76,587,091 Subscriber installations....................................... 27,672,725 Converters..................................................... 20,824,406 Land, buildings and headends................................... 17,173,797 Vehicles and equipment......................................... 4,559,094 Office equipment............................................... 4,786,441 ------------ 151,603,554 Less--Accumulated depreciation................................. (48,001,205) ------------ $103,602,349 ============
4. INTANGIBLE ASSETS: Other assets consist of the following:
DECEMBER 31, 1994 ------------ Franchise cost, net of accumulated amortization of $54,746,844................................................. $105,719,281 Goodwill, net of accumulated amortization of $8,024,819...... 31,014,845 ------------ $136,734,126 ============
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES: Accounts payable and accrued expenses consist of the following:
DECEMBER 31, 1994 ------------ Accrued franchise fees.......................................... $576,869 Accrued salary, COMMISSION and benefits......................... 502,253 Accounts payable................................................ 267,021 Accrued vacation................................................ 194,332 Accrued copyright fees.......................................... 146,508 Accrued billing expense......................................... 144,607 Other........................................................... 351,034 ---------- $2,182,624 ==========
F-107 CENCOM CABLE ENTERTAINMENT, INC.-- MISSOURI SYSTEM NOTES TO FINANCIAL STATEMENTS--(CONTINUED) 6. RELATED-PARTY TRANSACTIONS: CCA managed CCE's cable television operations for a standard management fee equal to 5% of the System's gross service revenues. CCA provided management services including, but not limited to, accounting, legal, marketing and negotiation of programming contracts. For the years ended December 31, 1994 and 1993, the System expensed approximately $2,781,000 and $2,723,000, respectively, related to this arrangement. Management believes these charges are indicative of the expense which would have been incurred as a stand-alone entity. 7. COMMITMENTS AND CONTINGENCIES: Leases The System leases certain facilities and equipment under noncancelable operating leases. Rent expense incurred under leases during 1994 and 1993 was approximately $302,000 and $377,000, respectively. Future minimum lease payments are as follows: 1995................................................................ $308,000 1996................................................................ 211,000 1997................................................................ 7,000 1998................................................................ 1,000 1999................................................................ 1,000 2000 and Thereafter................................................. 1,000
The System rents utility poles in its operations. Generally, pole rental agreements are short term, but the System anticipates that such rentals will recur. Rent expense incurred for pole attachments during 1994 and 1993 was approximately $611,000 and $525,000, respectively. Insurance Coverage The System currently does not have and does not in the near term anticipate having property and casualty insurance on its underground distribution plant. Due to large claims incurred by the property and casualty insurance industry, the pricing of insurance coverage has become inflated to the point where, in the judgment of the System's management, the price is cost prohibitive. Management believes that its experience and policy with respect to such insurance coverage is consistent with general industry practices. Management will continue to monitor the insurance markets to attempt to obtain coverage for the System's distribution plant at reasonable rates. Litigation The System settled a lawsuit for which the System had previously accrued a loss contingency. Accordingly, the approximate $650,000 excess of the accrual over the settlement amount was credited to other income in the accompanying 1994 statement of operations. The System is a party to lawsuits which are generally incidental to its business. In the opinion of management, after consulting with legal counsel, the outcome of these lawsuits will not have a material adverse effect on the System's financial position and results of operations. F-108 CENCOM CABLE ENTERTAINMENT, INC.-- MISSOURI SYSTEM NOTES TO FINANCIAL STATEMENTS--(CONTINUED) 8. REGULATION IN THE CABLE TELEVISION INDUSTRY: The cable television industry is subject to extensive regulation at the federal, local and, in some instances, state levels. In addition, recent legislative and regulatory changes and additional regulatory proposals under consideration may materially affect the cable television industry. 1992 Cable Act and FCC Regulation Congress enacted the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"), which became effective on December 4, 1992. This legislation has caused significant changes to the regulatory environment in which the cable television industry operates. The 1992 Cable Act generally allows for a greater degree of regulation of the cable television industry. Under the 1992 Cable Act's definition of effective competition, nearly all cable systems in the United States are subject to rate regulation of basic cable services, provided the local franchising authority becomes certified to regulate the basic service rates. The 1992 Cable Act and the Federal Communications Commission's (FCC) rules implementing the 1992 Cable Act have generally increased the administrative and operational expenses of cable television systems and have resulted in additional regulatory oversight by the FCC and local franchise authorities. Management is unable to predict the ultimate effect of the 1992 Cable Act or the ultimate outcome of various FCC rule-making proceedings or the litigation challenging various aspects of the 1992 Cable Act and the FCC's regulations implementing the 1992 Cable Act. The 1992 Cable Act and FCC regulations have imposed rate requirements for basic services and equipment, including rate roll-backs. Under the 1992 Cable Act, a local franchising authority in a community not subject to "effective competition" generally is authorized to regulate basic cable rates after certifying to the FCC that, among other things, it will adopt and administer rate regulation consistent with FCC rules, and in a manner that will provide a reasonable opportunity to consider the views of interested parties. Upon certification, the franchising authority obtains the right to approve the basic rates charged by the cable system operator. In regulating the basic service rates, certified local franchise authorities have the authority to order a rate refund of previously paid rates determined to be in excess of the maximum permitted reasonable rates. The Telecommunications Act (the "Telecommunications Act"), passed by Congress on February 1, 1996, and signed into law by the President on February 8, 1996, broadens the definition of "effective competition" to include any franchise area where a local exchange carrier (or its affiliate) provides video programming services to subscribers by any means, other than through Direct Broadcast Satellite. Rate regulation of the basic service tier remains subject to regulation by local franchising authorities under the Telecommunications Act, except in certain circumstances for "small cable operators." For a defined class of "small cable operators," the Telecommunications Act immediately eliminates regulation of cable programming rates. Rates for basic tier of "small cable operators" are deregulated if the System offered a single tier of services as of December 31, 1994. Under the 1992 Cable Act, rates for cable programming services not carried on the basic tier (nonbasic services) could be regulated by the FCC upon the filing of a complaint by franchise authorities or subscribers that indicates the cable operator's rates for these services are unreasonable. Rate complaints have been filed with the FCC with respect to certain of the System's cable programming services; several complaints are pending as of the date of the financial statements. The Telecommunications Act eliminates regulation of nonbasic programming as of March 31, 1999. In the interim, rate regulation of the nonbasic programming tier can only be triggered by a franchising authority complaint to the FCC. If the FCC determines that the System's nonbasic programming service tier rates are unreasonable, the FCC has the authority to order the System to reduce nonbasic programming service tier rates and to refund to customers any overcharges occurring from the filing date of the rate complaint with the FCC. F-109 CENCOM CABLE ENTERTAINMENT, INC.-- MISSOURI SYSTEM NOTES TO FINANCIAL STATEMENTS--(CONTINUED) Under the FCC's initial rate regulations pursuant to the 1992 Cable Act, regulated cable systems were required to apply a benchmark formula to determine their maximum permitted rates. Those systems whose rates were above the benchmark on September 30, 1992, were required to reduce their rates to the benchmark or by 10%, whichever was less. Under revised rate regulations adopted February 1994, regulated cable systems were required to set their rates so that regulated revenues per subscriber did not exceed September 30, 1992, levels, reduced by 17% (taking into account the previous 10% reduction). Notwithstanding mandated rate regulations, cable operators currently may adjust their regulated rates to reflect inflation and what the FCC has deemed to be external costs (such as increases in franchise fees). In September 1995, the FCC developed an abbreviated cost-of-service form that permits cable operators to recover costs of significant upgrades that provide benefits to subscribers of regulated cable services. Cable operators seeking to raise rates to cover costs of an upgrade would submit only the costs of the upgrade instead of all current costs. In December 1995, the FCC revised its cost-of-service rules. At this time, the System's management is unable to predict the effect of these revised rules on the System's financial position or results of operations. In another action in September 1995, the FCC established a new optional rate adjustment methodology that encourages operators to limit their rate increases to once a year to reflect inflation and changes in external costs and the number of channels. The rules permit cable operators to "project reasonably" changes in their costs for the 12 months following the rate change (in an effort to eliminate delays in recovering costs). The order allows operators to recover increases in additional types of franchise-requirement costs. Permitted pass-through increases include increases in the cost of providing institutional networks, video services, data services to or from governmental and educational institutions, and certain other cost increases. The System's management is unable to predict the effect of these new rules on the System's business. In November 1995, the FCC proposed to provide cable operators with the option of establishing uniform rates for similar service packages offered in multiple franchise areas located in the same region. Under the FCC's current rules, cable operators subject to rate regulation must establish rates on a franchise-specific basis. The proposed rules could lower cable operator's marketing costs and may also allow operators to better respond to competition from alternative providers. The System's management is unable to predict if these proposed rules will ultimately be promulgated by the FCC, and if they are promulgated, their effect on the System's financial position and results of operations. While management believes that the System has complied in all material respects with the rate provisions of the 1992 Cable Act, in jurisdictions that have not yet chosen to certify, refunds covering a one-year period on basic services may be ordered upon future certification if the System is unable to justify its rates through a benchmark or cost-of-service filing or small system cost-of-service filing pursuant to FCC rules. Management is unable to estimate at this time the amount of refunds, if any, that may be payable by the System in the event certain of its rates are successfully challenged by franchising authorities or found to be unreasonable by the FCC. Management does not believe that the amount of any such refunds would have a material adverse effect on the financial position or results of operations of the System. "Must Carry" Requirements/"Retransmission Consents" Under the 1992 Cable Act, cable television operators are subject to mandatory signal carriage requirements that allow local commercial and noncommercial television broadcast stations to elect to require a cable system to carry the station, subject to certain exceptions, or, in the case of commercial stations, to negotiate for "retransmission consent" to carry the station. In addition, there are requirements for cable systems to obtain F-110 CENCOM CABLE ENTERTAINMENT, INC.-- MISSOURI SYSTEM NOTES TO FINANCIAL STATEMENTS--(CONTINUED) retransmission consent for all "distant" commercial television stations, commercial radio stations and certain low power television stations carried by such system after October 6, 1993. As a result of the mandatory system carriage rules, the System has been required to carry television broadcast stations that otherwise would not have been carried, thereby causing displacement of possibly more attractive programming. The validity of the mandatory signal carriage requirements is being litigated; however, the carriage requirements remain in effect pending the outcome of the proceedings. Franchise Matters The 1992 Cable Act modified the franchise renewal process to make it easier for a franchising authority to deny renewal. Historically, franchises have been renewed for cable operators that have provided satisfactory services and have complied with the terms of the franchise agreement. Although management believes that the System has generally met the terms of its franchise agreements and has provided quality levels of service, and anticipates the System's future franchise renewal prospects generally will be favorable, there can be no assurance that any such franchises will be renewed or, if renewed, that the franchising authorities will not impose more onerous requirements on the System than previously existed. Recent Telecommunications Legislation The Telecommunications Act alters federal, state, and local laws and regulations pertaining to cable television, telecommunications and other services. Under the Telecommunications Act, telephone companies can compete directly with cable operators in the provision of video programming. This new legislation recognizes several multiple entry options for telephone companies to provide competitive video programming. The Telecommunications Act eliminates broadcast/cable cross-ownership restrictions, but leaves in place FCC regulations prohibiting local cross- ownership between television stations and cable systems. Certain provisions of the Telecommunications Act could materially affect the growth and operation of the cable television industry and the cable services provided by the System. Although the new legislation may substantially lessen regulatory burdens, the cable television industry may be subject to additional competition as a result thereof. There are numerous rule makings to be undertaken by the FCC which will interpret and implement the Telecommunications Act's provisions. In addition, certain provisions of the Telecommunications Act (such as the deregulation of cable programming rates) are not immediately effective. Further, certain of the Telecommunications Act's provisions have been and are likely to be subject to judicial challenges. The System's management is unable at this time to predict the outcome of such rule makings or litigation or the substantive effect of the new legislation and the rule makings on the financial position and results of operations of the System. F-111 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Cencom Cable Income Partners, L.P.: We have audited the accompanying balance sheets of Cencom Cable Income Partners, L.P.--Illinois System (as defined in Note 1) as of December 31, 1995 and 1994, and the related statements of operations, System's equity and cash flows for the years then ended. These combined financial statements are the responsibility of the System's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cencom Cable Income Partners, L.P.--Illinois System as of December 31, 1995 and 1994, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. Arthur Andersen LLP St. Louis, Missouri, July 31, 1996 F-112 INDEPENDENT AUDITORS' REPORT The Partners Cencom Cable Income Partners, L.P.: We have audited the accompanying statements of operations, System's equity and cash flows for Cencom Cable Income Partners, L.P.--Illinois System for the year ended December 31, 1993. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the results of operations and the cash flows of Cencom Cable Income Partners, L.P.--Illinois System for the year ended December 31, 1993, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Dallas, Texas July 26, 1996 F-113 CENCOM CABLE INCOME PARTNERS, L.P.-- ILLINOIS SYSTEM BALANCE SHEETS
DECEMBER 31 ------------------------- 1995 1994 ------------ ------------ ASSETS CURRENT ASSETS: Cash............................................... $ -- $ -- Accounts receivable, net of allowance for doubtful accounts of $33,462 and $37,079, respectively..... 433,638 412,627 Prepaid expenses and other......................... 67,786 133,811 ------------ ------------ Total current assets............................. 501,424 546,438 PROPERTY, PLANT AND EQUIPMENT, net................... 12,586,022 13,661,411 FRANCHISE COSTS, net of accumulated amortization of $8,532,620 and $8,097,619, respectively............. 643,819 1,078,820 ------------ ------------ $ 13,731,265 $ 15,286,669 ============ ============ LIABILITIES AND SYSTEM'S EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses.............. $ 868,435 $ 785,604 Subscriber deposits and prepayments................ 187,994 182,983 ------------ ------------ Total current liabilities........................ 1,056,429 968,587 DEFERRED REVENUE..................................... 74,545 -- COMMITMENTS AND CONTINGENCIES SYSTEM'S EQUITY...................................... 12,600,291 14,318,082 ------------ ------------ $ 13,731,265 $ 15,286,669 ============ ============
The accompanying notes are an integral part of these balance sheets. F-114 CENCOM CABLE INCOME PARTNERS, L.P.-- ILLINOIS SYSTEM STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31 ---------------------------------------- 1995 1994 1993 ------------ ------------ ------------ SERVICE REVENUES..................... $ 15,464,952 $ 14,357,807 $ 14,375,095 ------------ ------------ ------------ OPERATING EXPENSES: Operating, general and administra- tive.............................. 7,521,763 7,086,264 6,777,285 Depreciation and amortization...... 4,198,041 4,158,970 4,328,818 Management fee--related party...... 793,303 735,499 719,566 ------------ ------------ ------------ 12,513,107 11,980,733 11,825,669 ------------ ------------ ------------ Income from operations........... 2,951,845 2,377,074 2,549,426 ------------ ------------ ------------ OTHER INCOME (EXPENSE): Interest expense................... (2,161,313) (1,536,742) (1,347,089) Interest income.................... 68,491 25,002 18,530 Other, net......................... 1,000 4,000 (49,101) ------------ ------------ ------------ (2,091,822) (1,507,740) (1,377,660) ------------ ------------ ------------ Net income....................... $ 860,023 $ 869,334 $ 1,171,766 ============ ============ ============
The accompanying notes are an integral part of these statements. F-115 CENCOM CABLE INCOME PARTNERS, L.P.-- ILLINOIS SYSTEM STATEMENTS OF SYSTEM'S EQUITY
SYSTEM'S EQUITY ------------ BALANCE, December 31, 1992........................................ $ 18,089,694 Net activity with Parent........................................ (3,259,946) Net income...................................................... 1,171,766 ------------ BALANCE, December 31, 1993........................................ 16,001,514 Net activity with Parent........................................ (2,552,766) Net income...................................................... 869,334 ------------ BALANCE, December 31, 1994........................................ 14,318,082 Net activity with Parent........................................ (2,577,814) Net income...................................................... 860,023 ------------ BALANCE, December 31, 1995........................................ $ 12,600,291 ============
The accompanying notes are an integral part of these statements. F-116 CENCOM CABLE INCOME PARTNERS, L.P.-- ILLINOIS SYSTEM STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31 ------------------------------------- 1995 1994 1993 ----------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income............................ $ 860,023 $ 869,334 $ 1,171,766 Adjustments to reconcile net income to net cash provided by operating activ- ities-- Depreciation and amortization....... 4,198,041 4,158,970 4,328,818 Changes in assets and liabilities-- Accounts receivable, net.......... (21,011) (43,173) (68,231) Prepaid expenses and other........ 66,025 (9,646) (4,225) Accounts payable and accrued ex- penses........................... 82,831 134,659 167,343 Subscriber deposits and prepay- ments............................ 5,011 (26) (390) Deferred revenue.................. 74,545 -- -- ----------- ----------- ----------- Net cash provided by operating activities..................... 5,265,465 5,110,118 5,595,081 ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment............................ (2,616,594) (2,462,071) (2,225,654) Other................................. (71,057) (95,281) (109,481) ----------- ----------- ----------- Net cash used in investing ac- tivities....................... (2,687,651) (2,557,352) (2,335,135) ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES-- Net change in capital account with parent............................... (2,577,814) (2,552,766) (3,259,946) ----------- ----------- ----------- Net cash used in financing ac- tivities....................... (2,577,814) (2,552,766) (3,259,946) ----------- ----------- ----------- CASH, beginning and end of period....... $ -- $ -- $ -- =========== =========== ===========
The accompanying notes are an integral part of these statements. F-117 CENCOM CABLE INCOME PARTNERS, L.P.-- ILLINOIS SYSTEM NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Organization and Basis of Presentation The financial statements include the accounts of a certain cable television system which is owned and operated by Cencom Cable Income Partners, L.P. (CCIP). Cencom Properties, Inc. is the General Partner (as referred to herein) of CCIP. These financial statements include the historical assets, liabilities and operations of the cable television system of Illinois, providing service to communities in southwestern Illinois, referred to herein as the "System." As of December 31, 1995, the System passed approximately 75,000 homes and serviced approximately 44,000 basic subscribers in approximately 28 franchise areas. The System comprises approximately 40% of the total CCIP subscribers at December 31, 1995. On March 29, 1996, CCIP consummated the sale of the System to Charter Communications Entertainment I, L.P. (CCE-I), an affiliated entity of CCIP for an aggregate purchase price of approximately $86.0 million, including related acquisition fees and expenses (the "Sale Transaction"). The purchase price for the System was determined in the context of two independent appraisals of all of CCIP's cable television assets (which included systems other than the System) conducted in accordance with the terms of the limited partnership agreement of CCIP. The sale was approved by a majority of CCIP's Limited Partners following the distribution of a Disclosure Statement dated October 3, 1995, as supplemented on November 1, 1995, and on December 18, 1995. In connection with the Sale Transaction, a class action lawsuit (the "Action") was filed in November 1995, on behalf of CCIP's Limited Partners which sought among other things, to permanently enjoin the sale of all of CCIP's systems. On February 15, 1996, all of the plaintiff's claims for injunctive relief were dismissed (including that which sought to prevent consummation of the sale of the System); the plaintiff's claims for an unspecified amount of monetary damages remain pending. Based upon (among other things) the advice of legal counsel, each of the defendants to such action believes the remaining claims to be without merit and is contesting the claims vigorously. Cash Management and Systems' Equity Account The cash management function for the System is performed by the holding company of CCIP. Excess cash funds are transferred to the holding company of CCIP using the System's equity account. In addition, the holding company of CCIP makes disbursements on behalf of the System for certain items such as payroll, payroll taxes, employee benefits and other costs, and incurs debt borrowings for the System. Such amounts are transferred to the System through the System's equity account and are recognized in the appropriate expense categories in the accompanying statements of operations. Property, Plant and Equipment Property, plant and equipment is recorded at cost, including all direct and certain indirect costs associated with the construction of cable transmission and distribution facilities, and the cost of new customer installation. The costs of disconnecting a customer are charged to expense in the period incurred. Expenditures for repairs and maintenance are charged to expense as incurred, and equipment replacement costs and betterments are capitalized. F-118 CENCOM CABLE INCOME PARTNERS, L.P.-- ILLINOIS SYSTEM NOTES TO FINANCIAL STATEMENTS--(CONTINUED) Depreciation is provided using the composite method on a straight-line basis over the estimated useful lives of the related assets as follows: Trunk and distribution systems................................. 10 years Subscriber installations....................................... 10 years Converters..................................................... 3-5 years Buildings and headends......................................... 9-20 years Vehicles and equipment......................................... 4-8 years Office equipment............................................... 5-10 years
Franchise Costs Franchise costs are being amortized using the straight-line method over the term of the individual franchises. During 1995, the System adopted Statement of Financial Accounting Standards (SFAS) No. 121, entitled "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." In accordance with SFAS No. 121, the System's management periodically reviews the carrying value of its long- lived assets, identifiable intangibles and franchise costs in relation to historical financial results, current business conditions and trends (including the impact of existing legislation and regulation) to identify potential situations in which the carrying value of such assets may not be recoverable. If a review indicates that the carrying value of such assets may not be recoverable, the carrying value of such assets in excess of their fair value will be recorded as a reduction of the assets' cost as if a permanent impairment has occurred. The adoption of SFAS No. 121 did not impact the financial statements of the System. Revenues Cable service revenues are recognized when the related services are provided. Installation revenues are recognized to the extent of direct selling costs incurred. The remainder, if any, is deferred and amortized to income over the average estimated period that customers are expected to remain connected to the cable television system. Franchise fees collected from cable subscribers and paid to local franchises are reported as revenues. General and Administrative Expenses Included in general and administrative expenses is the allocation of certain expenses incurred by the holding company of CCIP on behalf of the System. These expenses were allocated to the System based on the ratio of total System's subscribers to total CCIP subscribers. Management considers this allocation method to be reasonable for the operations of the System. Expense allocated to the System totaled $139,025, $162,458 and $174,706 during 1995, 1994 and 1993, respectively. Intercompany Interest Expense Interest expense allocated to the System has been determined by applying the ratio of the System's total subscribers to total CCIP subscribers at each year-end to total CCIP interest expense for the respective years. Management considers this allocation method to be reasonable for the operations of the System. CCIP makes disbursements on behalf of the System for interest expense. CCIP maintains a loan agreement with a bank for borrowings up to $80,000,000, secured by all of CCIP's assets, including the assets of the System. At December 31, 1995 and 1994, CCIP had borrowings of $76,500,000 and $72,300,000, respectively, related to this debt agreement. The weighted average borrowings for CCIP for 1995 and 1994 were $73,993,000 and $66,358,000, respectively. The borrowings pertaining to the System is reflected within System's Equity. At December 31, 1995 and 1994, the interest rate was 6.9375% and ranged from 7.375% to 9.5%, respectively. The weighted average interest rates of CCIP for 1995, 1994 and 1993 were 7.30%, 5.73% and 4.60%, respectively. F-119 CENCOM CABLE INCOME PARTNERS, L.P.-- ILLINOIS SYSTEM NOTES TO FINANCIAL STATEMENTS--(CONTINUED) In November 1990, CCIP issued $30,000,000 of 9.64% Deferred Interest Senior Notes, which were collateralized by a first lien on all of CCIP's assets (other than real property), including the System's assets, and the General Partner's interest in CCIP. These notes were retired on May 10, 1993, at their accreted value of $37,760,962 with funds from the bank loan agreement. Interest expense related to these notes has been allocated to the Systems in the manner described in the preceding paragraph. Income Taxes Income taxes are the responsibility of the partners of CCIP and as such are not provided for in the accompanying financial statements. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities 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 those estimates. 2. PREPAID EXPENSES AND OTHER: Prepaid expenses and other consist of the following at December 31:
1995 1994 ------- -------- Prepaid insurance.......................................... $ 5,738 $ 66,409 Prepaid programming........................................ 49,576 46,361 Other prepaid expenses and current assets.................. 12,472 21,041 ------- -------- $67,786 $133,811 ======= ========
3. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment consist of the following at December 31:
1995 1994 ------------ ------------ Trunk and distribution systems................... $ 20,936,805 $ 20,014,931 Subscriber installations......................... 8,944,170 7,949,512 Converters....................................... 8,082,233 7,665,703 Land, buildings and headends..................... 4,260,054 4,130,402 Vehicles and equipment........................... 1,354,198 1,241,708 Office equipment................................. 1,000,656 974,767 ------------ ------------ 44,578,116 41,977,023 Less--Accumulated depreciation................... (31,992,094) (28,315,612) ------------ ------------ $ 12,586,022 $ 13,661,411 ============ ============
F-120 CENCOM CABLE INCOME PARTNERS, L.P.-- ILLINOIS SYSTEM NOTES TO FINANCIAL STATEMENTS--(CONTINUED) 4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES: Accounts payable and accrued expenses consist of the following at December 31:
1995 1994 -------- -------- Accrued franchise fees.................................... $223,888 $222,252 Accounts payable.......................................... 103,733 138,089 Accrued salary, commission and benefits................... 120,480 89,156 Accrued copyright fees.................................... 79,387 73,198 Accrued programming....................................... 52,264 59,219 Other..................................................... 288,683 203,690 -------- -------- $868,435 $785,604 ======== ========
5. SYSTEM'S EQUITY: As of December 31, 1995 and 1994, CCIP had recorded in its capital accounts an accumulated deficit of approximately $32,900,000 and $25,200,000, respectively, represented by earnings net of partner distributions. 6. RELATED-PARTY TRANSACTIONS: During 1994, Cencom Cable Associates, Inc., a former affiliated entity, assigned management services under contract with CCIP to the General Partner. The management service contract provides for the payment of fees equal to 5% of the System's gross service revenues. Expenses recognized by the System under this contract were $793,303, $735,499 and $719,566 during 1995, 1994 and 1993, respectively. Management believes these charges are indicative of the expense which would have been incurred as a stand-alone entity. 7. COMMITMENTS AND CONTINGENCIES: Leases The System leases certain facilities and equipment under noncancelable operating leases. Rent expense incurred under leases during 1995, 1994 and 1993 was $16,767, $10,705 and $16,296, respectively. Approximate future minimum lease payments are as follows: 1996................................................................. $15,300 1997................................................................. 13,800 1998................................................................. 9,700 1999................................................................. 4,900 2000................................................................. 1,500 Thereafter........................................................... --
The System rents utility poles in its operations. Generally, pole rental agreements are short term, but the System's management anticipates that such rentals will recur. Rent expense incurred for pole attachments during 1995, 1994 and 1993 was approximately $124,800, $101,900 and $106,000 respectively. F-121 CENCOM CABLE INCOME PARTNERS, L.P.-- ILLINOIS SYSTEM NOTES TO FINANCIAL STATEMENTS--(CONTINUED) Insurance Coverage The System currently does not have and does not in the near term anticipate having property and casualty insurance on its underground distribution plant. Due to large claims incurred by the property and casualty insurance industry, the pricing of insurance coverage has become inflated to the point where, in the judgment of the System's management, the insurance coverage is cost prohibitive. Management believes that its experience and policy with such issuance coverage is consistent with general industry practices. Management will continue to monitor the insurance markets to attempt to obtain coverage for the System's distribution plant at reasonable rates. Litigation The System is a party to lawsuits which are generally incidental to its business. In the opinion of management, after consulting with legal counsel, the outcome of these lawsuits will not have a material adverse effect on the System's financial position and results of operations. 8. REGULATION IN THE CABLE TELEVISION INDUSTRY: The cable television industry is subject to extensive regulation at the federal, local and, in some instances, state levels. In addition, recent legislative and regulatory changes and additional regulatory proposals under consideration may materially affect the cable television industry. 1992 Cable Act and FCC Regulation Congress enacted the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"), which became effective on December 4, 1992. This legislation has caused significant changes to the regulatory environment in which the cable television industry operates. The 1992 Cable Act generally allows for a greater degree of regulation of the cable television industry. Under the 1992 Cable Act's definition of effective competition, nearly all cable systems in the United States are subject to rate regulation of basic cable services, provided the local franchising authority becomes certified to regulate basic service rates. The 1992 Cable Act and the Federal Communications Commission's (FCC) rules implementing the 1992 Cable Act have generally increased the administrative and operational expenses of cable television systems and have resulted in additional regulatory oversight by the FCC and local franchise authorities. Management is unable to predict the ultimate effect of the 1992 Cable Act or the ultimate outcome of various FCC rule-making proceedings or the litigation challenging various aspects of the 1992 Cable Act and the FCC's regulations implementing the 1992 Cable Act. The 1992 Cable Act and FCC regulations have imposed rate requirements for basic services and equipment, including rate roll-backs. Under the 1992 Cable Act, a local franchising authority in a community not subject to "effective competition" generally is authorized to regulate basic cable rates after certifying to the FCC that, among other things, it will adopt and administer rate regulation consistent with FCC rules, and in a manner that will provide a reasonable opportunity to consider the views of interested parties. Upon certification, the franchising authority obtains the right to approve the basic rates charged by the cable system operator. In regulating the basic service rates, certified local franchise authorities have the authority to order a rate refund of previously paid rates determined to be in excess of the maximum permitted reasonable rates. The Telecommunications Act (the "Telecommunications Act"), passed by Congress on February 1, 1996, and signed into law by the President on February 8, 1996, broadens the definition of "effective competition" to include any franchise area where a local exchange carrier (or its affiliate) provides video programming services to subscribers by any means, other than through Direct Broadcast Satellite. Rate regulation of the basic service tier remains subject to regulation by local franchising authorities under the Telecommunications Act, except in certain circumstances for "small cable operators." For a defined class of F-122 CENCOM CABLE INCOME PARTNERS, L.P.-- ILLINOIS SYSTEM NOTES TO FINANCIAL STATEMENTS--(CONTINUED) "small cable operators," the Telecommunications Act immediately eliminates regulation of cable programming rates. Rates for basic tier of "small cable operators" are deregulated if the system offered a single tier of services as of December 31, 1994. Under the 1992 Cable Act, rates for cable programming services not carried on the basic tier (nonbasic services) could be regulated by the FCC upon the filing of a complaint by franchise authorities or subscribers that indicates the cable operator's rates for these services are unreasonable. Rate complaints have been filed with the FCC with respect to certain of the Partnership's cable programming services; several complaints are pending as of the date of the financial statements. The Telecommunications Act eliminates regulation of nonbasic programming as of March 31, 1999. In the interim, rate regulation of the nonbasic programming tier can only be triggered by a franchising authority complaint to the FCC. If the FCC determines that the System's nonbasic programming service tier rates are unreasonable, the FCC has the authority to order the System to reduce nonbasic programming service tier rates and to refund to customers any overcharges occurring from the filing date of the rate complaint with the FCC. Under the FCC's initial rate regulations pursuant to the 1992 Cable Act, regulated cable systems were required to apply a benchmark formula to determine their maximum permitted rates. Those systems whose rates were above the benchmark on September 30, 1992, were required to reduce their rates to the benchmark or by 10%, whichever was less. Under revised rate regulations adopted February 1994, regulated cable systems were required to set their rates so that regulated revenues per subscriber did not exceed September 30, 1992, levels, reduced by 17% (taking into account the previous 10% reduction). Notwithstanding mandated rate regulations, cable operators currently may adjust their regulated rates to reflect inflation and what the FCC has deemed to be external costs (such as increases in franchise fees). In September 1995, the FCC developed an abbreviated cost-of-service form that permits cable operators to recover costs of significant upgrades that provide benefits to subscribers of regulated cable services. Cable operators seeking to raise rates to cover costs of an upgrade would submit only the costs of the upgrade instead of all current costs. In December 1995, the FCC revised its cost-of-service rules. At this time, the System's management is unable to predict the effect of these revised rules on the System's financial position or results of operations. In another action in September 1995, the FCC established a new optional rate adjustment methodology that encourages operators to limit their rate increases to once a year to reflect inflation and changes in external costs and the number of channels. The rules permit cable operators to "project reasonably" changes in their costs for the 12 months following the rate change (in an effort to eliminate delays in recovering costs). The order allows operators to recover increases in additional types of franchise-requirement costs. Permitted pass-through increases include increases in the cost of providing institutional networks, video services, data services to or from governmental and educational institutions, and certain other cost increases. The System's management is unable to predict the effect of these new rules on the System's business. In November 1995, the FCC proposed to provide cable operators with the option of establishing uniform rates for similar service packages offered in multiple franchise areas located in the same region. Under the FCC's current rules, cable operators subject to rate regulation must establish rates on a franchise-specific basis. The proposed rules could lower cable operator's marketing costs and may also allow operators to better respond to competition from alternative providers. The System's management is unable to predict if these proposed rules will ultimately be promulgated by the FCC, and if they are promulgated, their effect on the System's financial position and results of operations. While management believes that the System has complied in all material respects with the rate provisions of the 1992 Cable Act, in jurisdictions that have not yet chosen to certify, refunds covering a one-year period on F-123 CENCOM CABLE INCOME PARTNERS, L.P.-- ILLINOIS SYSTEM NOTES TO FINANCIAL STATEMENTS--(CONTINUED) basic services may be ordered upon future certification if the System is unable to justify its rates through a benchmark or cost-of-service filing or small system cost-of-service filing pursuant to FCC rules. Management is unable to estimate at this time the amount of refunds, if any, that may be payable by the System in the event certain of its rates are successfully challenged by franchising authorities or found to be unreasonable by the FCC. Management does not believe that the amount of any such refunds would have a material adverse effect on the financial position or results of operations of the System. "Must Carry" Requirements/"Retransmission Consents" Under the 1992 Cable Act, cable television operators are subject to mandatory signal carriage requirements that allow local commercial and noncommercial television broadcast stations to elect to require a cable system to carry the station, subject to certain exceptions, or, in the case of commercial stations, to negotiate for "retransmission consent" to carry the station. In addition, there are requirements for cable systems to obtain retransmission consent for all "distant" commercial television stations, commercial radio stations and certain low power television stations carried by such system after October 6, 1993. As a result of the mandatory system carriage rules, the System has been required to carry television broadcast stations that otherwise would not have been carried, thereby causing displacement of possibly more attractive programming. The validity of the mandatory signal carriage requirements is being litigated; however, the carriage requirements remain in effect pending the outcome of the proceedings. Franchise Matters The 1992 Cable Act modified the franchise renewal process to make it easier for a franchising authority to deny renewal. Historically, franchises have been renewed for cable operators that have provided satisfactory services and have complied with the terms of the franchise agreement. Although management believes that the System has generally met the terms of its franchise agreements and has provided quality levels of service, and anticipates the System's future franchise renewal prospects generally will be favorable, there can be no assurance that any such franchises will be renewed or, if renewed, that the franchising authorities will not impose more onerous requirements on the System than previously existed. Recent Telecommunications Legislation The Telecommunications Act alters federal, state, and local laws and regulations pertaining to cable television, telecommunications and other services. Under the Telecommunications Act, telephone companies can compete directly with cable operators in the provision of video programming. This new legislation recognizes several multiple entry options for telephone companies to provide competitive video programming. The Telecommunications Act eliminates broadcast/cable cross-ownership restrictions, but leaves in place FCC regulations prohibiting local cross- ownership between television stations and cable systems. Certain provisions of the Telecommunications Act could materially affect the growth and operation of the cable television industry and the cable services provided by the System. Although the new legislation may substantially lessen regulatory burdens, the cable television industry may be subject to additional competition as a result thereof. There are numerous rule makings to be undertaken by the FCC which will interpret and implement the Telecommunications Act's provisions. In addition, certain provisions of the Telecommunications Act (such as the deregulation of cable programming rates) are not immediately effective. Further, certain of the Telecommunications Act's provisions have been and are likely to be subject to judicial challenges. The System's management is unable at this time to predict the outcome of such rule makings or litigation or the substantive effect of the new legislation and the rule makings on the financial position and results of operations of the System. F-124 CENCOM CABLE INCOME PARTNERS, L.P.-- ILLINOIS SYSTEM NOTES TO FINANCIAL STATEMENTS--(CONTINUED) 9. NET INCOME FOR INCOME TAX PURPOSES: The following summarizes the differences between CCIP's net income for financial reporting and federal income tax purposes for the years ended December 31:
1995 1994 1993 ---------- ---------- ---------- Net income for financial reporting pur- poses................................... $3,453,270 $3,811,203 $3,367,720 Depreciation differences between finan- cial reporting and tax reporting........ 1,804,940 (301,487) 79,190 Amortization differences between finan- cial reporting and tax reporting........ 57,969 80,844 609,197 Differences in expenses recorded for fi- nancial reporting and reported for tax purposes................................ 844,798 85,052 (16,286) Revenue reported for tax reporting de- ferred for financial reporting.......... 187,957 -- -- Other.................................... 31,496 7,768 -- ---------- ---------- ---------- Net income for federal income tax purpos- es...................................... $6,380,430 $3,683,380 $4,039,821 ========== ========== ==========
The following summarizes the significant cumulative temporary differences between CCIP's financial reporting basis and federal income tax reporting basis as of December 31:
1995 1994 ------------ ------------ Assets: Accounts receivable........................... $ 95,346 $ 87,228 Franchise costs............................... 37,384,139 37,326,170 Accrued expenses.............................. 2,520,653 1,667,737 Deferred revenue.............................. 187,957 -- ------------ ------------ $ 40,188,095 $ 39,081,135 ============ ============ Liabilities--Property, plant and equipment...... $(19,682,850) $(21,816,974) ============ ============
As discussed in Note 1, the System comprises approximately 40% of CCIP's total basic subscribers. F-125 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and Board of Directors of Cencom Cable Television, Inc.: We have audited the accompanying combined balance sheets of Cencom Cable Television, Inc.--Los Angeles and Riverside Systems as of December 31, 1994, and September 29, 1995, and the related combined statements of operations, Systems' equity and cash flows for the two years ended December 31, 1993 and 1994, and for the nine months ended September 29, 1995. These combined financial statements are the responsibility of the Systems' management. Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Cencom Cable Television, Inc.--Los Angeles and Riverside Systems as of December 31, 1994, and September 29, 1995, and the results of their operations and their cash flows for the two years ended December 31, 1993 and 1994, and for the nine months ended September 29, 1995, in conformity with generally accepted accounting principles. Arthur Andersen LLP Dallas, Texas, November 22, 1995 F-126 CENCOM CABLE TELEVISION, INC.--LOS ANGELES AND RIVERSIDE SYSTEMS COMBINED BALANCE SHEETS
DECEMBER 31, SEPTEMBER 29, 1994 1995 ------------ ------------- CURRENT ASSETS: Cash.............................................. $ -- $ -- Accounts receivable, net of allowance for doubtful accounts of $427,936 and $248,355, respectively.. 2,887,129 2,659,333 Prepaid expenses and other........................ 1,749,372 732,128 ------------ ------------ Total current assets........................... 4,636,501 3,391,461 PROPERTY, PLANT AND EQUIPMENT, net.................. 117,394,950 111,422,525 FRANCHISE COSTS AND OTHER, net...................... 55,497,894 38,909,434 ------------ ------------ $177,529,345 $153,723,420 ============ ============ LIABILITIES AND SYSTEMS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses............. $ 6,799,377 $ 5,862,550 Current maturities of long-term debt.............. 126,977 -- Subscriber deposits and prepayments............... 480,716 416,242 ------------ ------------ Total current liabilities...................... 7,407,070 6,278,792 NONCURRENT LIABILITIES: Long-term debt, less current maturities........... 155,521 228,773 Deferred revenue.................................. -- 482,640 ------------ ------------ Total noncurrent liabilities................... 155,521 711,413 COMMITMENTS AND CONTINGENCIES SYSTEMS' EQUITY..................................... 169,966,754 146,733,215 ------------ ------------ $177,529,345 $153,723,420 ============ ============
The accompanying notes are an integral part of these statements. F-127 CENCOM CABLE TELEVISION, INC.--LOS ANGELES AND RIVERSIDE SYSTEMS COMBINED STATEMENTS OF OPERATIONS
NINE YEAR ENDED DECEMBER 31, MONTHS ENDED -------------------------- SEPTEMBER 1993 1994 29, 1995 ------------ ------------ ------------ SERVICE REVENUES...................... $ 74,542,733 $ 78,647,795 $61,861,563 OPERATING EXPENSES: Operating costs...................... 23,314,140 24,746,916 20,354,512 Selling, general, and administra- tive................................ 19,772,950 19,671,911 14,627,383 Depreciation and amortization........ 56,518,726 54,092,418 33,379,558 Management fee--related party........ 943,681 1,026,869 2,150,374 ------------ ------------ ----------- 100,549,497 99,538,114 70,511,827 ------------ ------------ ----------- Loss from operations................ (26,006,764) (20,890,319) (8,650,264) OTHER INCOME (EXPENSE): Interest income...................... 402 36,193 -- Interest expense..................... (39,935) (31,779) (38,264) Other................................ (318,223) 8,500 398,079 ------------ ------------ ----------- (357,756) 12,914 359,815 ------------ ------------ ----------- Net loss............................ $(26,364,520) $(20,877,405) $(8,290,449) ------------ ------------ -----------
The accompanying notes are an integral part of these statements. F-128 CENCOM CABLE TELEVISION, INC.--LOS ANGELES AND RIVERSIDE SYSTEMS COMBINED STATEMENTS OF SYSTEMS' EQUITY
SYSTEMS' EQUITY ------------ BALANCE, December 31, 1992........................................ $242,746,018 Net activity with Parent......................................... (8,405,824) Net loss......................................................... (26,364,520) ------------ BALANCE, December 31, 1993........................................ 207,975,674 Net activity with Parent......................................... (17,131,515) Net loss......................................................... (20,877,405) ------------ BALANCE, December 31, 1994........................................ 169,966,754 Net activity with Parent......................................... (14,943,090) Net loss......................................................... (8,290,449) ------------ BALANCE, September 29, 1995....................................... $146,733,215 ============
The accompanying notes are an integral part of these statements. F-129 CENCOM CABLE TELEVISION, INC.--LOS ANGELES AND RIVERSIDE SYSTEMS COMBINED STATEMENTS OF CASH FLOWS
NINE YEAR ENDED DECEMBER 31, MONTHS ENDED -------------------------- SEPTEMBER 1993 1994 29, 1995 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss............................. $(26,364,520) $(20,877,405) $(8,290,449) Adjustments to reconcile net loss to net cash provided by operating activities-- Depreciation and amortization....... 56,518,726 54,092,418 33,379,558 Changes in assets and liabilities-- Accounts receivable, net........... (2,139,746) 1,068,078 227,796 Prepaid expenses and other......... (288,134) (22,632) 1,017,244 Accounts payable and accrued ex- penses............................ (647,804) 842,710 (936,827) Subscriber deposits and prepay- ments............................. 12,655 (157,691) (64,474) Deferred revenue................... -- -- 482,640 ------------ ------------ ----------- Net cash provided by operating ac- tivities.......................... 27,091,177 34,945,478 25,815,488 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment.. (11,503,376) (17,720,620) (10,818,674) Acquisition of KTS Corporation....... (7,055,000) 75,814 -- ------------ ------------ ----------- Net cash used in investing activi- ties............................. (18,558,376) (17,644,806) (10,818,674) CASH FLOWS FROM FINANCING ACTIVITIES: Payment of long-term debt............ (126,977) (169,157) (53,724) Net change in capital account with Parent.............................. (8,405,824) (17,131,515) (14,943,090) ------------ ------------ ----------- Net cash used in financing activi- ties............................. (8,532,801) (17,300,672) (14,996,814) ------------ ------------ ----------- NET INCREASE IN CASH AND CASH EQUIVA- LENTS................................ -- -- -- ------------ ------------ ----------- CASH AND CASH EQUIVALENTS, beginning and end of period.................... $ -- $ -- $ -- ------------ ------------ ----------- CASH PAID FOR INCOME TAXES............ $ -- $ 800 $ 800 ------------ ------------ ----------- CASH PAID FOR INTEREST................ $ 33,187 $ 34,528 $ 44,268 ------------ ------------ -----------
The accompanying notes are an integral part of these statements. F-130 CENCOM CABLE TELEVISION, INC.--LOS ANGELES AND RIVERSIDE SYSTEMS NOTES TO COMBINED FINANCIAL STATEMENTS 1.SALE OF ASSETS: On September 29, 1995, Cencom Cable Television, Inc. (CCT) sold substantially all of its assets to CCT Holdings Corp., an entity jointly owned by investment partnerships affiliated with Kelso & Company, Inc. and Charter Communications, Inc. ("Charter"), the manager of CCT's cable systems. Proceeds from the sale, after a working capital adjustment of $5.5 million, consisted of $198.8 million in cash and a ten-year, $165.7 million subordinated note with an interest rate of 12% per year which increases to 15% on the fifth anniversary and increases 2% on each anniversary thereafter, with principal and interest payable at maturity. In addition, CCT received the contractual right to 15% of the net distributable proceeds (after certain debt repayments and equity distributions) from certain future sales by Charter Communications Entertainment, L.P., a newly formed joint venture created to operate cable television systems, to which CCT Holdings Corp. contributed the assets of the cable systems located in Los Angeles and Riverside, California ("Systems"), which were purchased from CCT. Immediately prior to the closing of the sale, CCT's parent paid Charter $10.6 million to acquire Charter's 2.9% interest in CCT. 2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Organization and Basis of Presentation The accompanying combined financial statements include the accounts of the Systems, which were owned and operated by CCT. Prior to the closing of the sale on September 29, 1995, CCT was 97.1% owned by Gaylord Broadcasting Company (the "Parent"), which is a wholly owned subsidiary of Gaylord Entertainment Company ("Gaylord"), and 2.9% owned by Charter. All intersystem balances and transactions have been eliminated for presentation in the combined financial statements. As of September 29, 1995, the Systems passed 420,353 homes and serviced 165,265 basic subscribers in 33 franchise areas. The Systems comprise approximately 89% of total CCT subscribers at September 29, 1995. 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 those estimates. Property, Plant and Equipment Property, plant and equipment is recorded at cost, including all direct and certain indirect costs associated with the construction of cable transmission and distribution facilities, and the cost of new customer installation. The costs of disconnecting a customer are charged to expense in the period incurred. Expenditures for repairs and maintenance are charged to expense as incurred, and equipment replacement costs and betterments are capitalized. F-131 CENCOM CABLE TELEVISION, INC.--LOS ANGELES AND RIVERSIDE SYSTEMS NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED) Depreciation is provided using the composite method on a straight-line basis over the estimated useful lives of assets as follows: Trunk and distribution system................................... 10 years Subscriber installations........................................ 10 years Converters...................................................... 5-10 years Buildings and headends.......................................... 9-20 years Vehicles and equipment.......................................... 4-8 years Office equipment................................................ 5-10 years
Franchise Costs and Other Franchise costs are being amortized on a straight-line basis over the remaining terms of the related franchises, the majority of which expire prior to December 31, 1999. Noncompete covenants are being amortized on a straight- line basis over three or five years, depending on the terms of the related agreements. During 1995, the Systems' management adopted Statement of Financial Accounting Standards (SFAS) No. 121 entitled, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." In accordance with SFAS No. 121, the Systems' management periodically reviews the carrying value of its long-lived assets, identifiable intangibles and franchise costs in relation to historical financial results, current business conditions and trends (including the impact of existing legislation and regulation) to identify potential situations in which the carrying value of such assets may not be recoverable. If a review indicates that the carrying value of such assets may not be recoverable, the carrying value of such assets in excess of their fair value will be recorded as a reduction of the assets' cost as if a permanent impairment has occurred. The adoption of SFAS No. 121 did not impact the financial statements of the Systems'. Service Revenues Cable service revenues are recognized when the related services are provided. Franchise fees collected from cable subscribers and paid to local franchises are reported as revenues. Selling, General and Administrative Expenses Included in selling, general, and administrative expenses is the allocation of certain expenses incurred by the holding company of CCT on behalf of the Systems. These expenses were allocated to the Systems based on the ratio of total Systems' subscribers to total CCT subscribers. Management considers this allocation method to be reasonable for the operations of the Systems. Income Taxes The Systems have not recorded the benefit of the net operating losses as the benefit will be retained by the Parent in accordance with the shareholders' agreement among CCT, Charter, and the Parent. Cash Management and Systems' Equity Account The cash management function for the Systems is performed by the holding company of CCT. Excess cash funds are transferred to the holding company of CCT using the Systems' equity account. In addition, the holding company of CCT makes disbursements on behalf of the Systems for certain items such as programming fees, payroll, payroll taxes, employee benefits, and other costs. Such amounts are transferred to the Systems through the Systems' equity account and are recognized in the appropriate expense categories in the accompanying combined statements of operations. F-132 CENCOM CABLE TELEVISION, INC.--LOS ANGELES AND RIVERSIDE SYSTEMS NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED) 3.PREPAID EXPENSES AND OTHER: Prepaid expenses and otehr consisted of the following:
DECEMBER 31, SEPTEMBER 29, 1994 1995 ------------ ------------- Prepaid management fee............................. $ 901,236 $ -- Prepaid programming................................ 206,701 182,657 Prepaid property tax............................... 346,573 -- Deposits........................................... 229,816 148,776 Other.............................................. 65,046 400,695 ---------- -------- $1,749,372 $732,128 ========== ========
4.PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment consisted of the following:
DECEMBER 31, SEPTEMBER 29, 1994 1995 ------------ ------------- Trunk and distribution systems................... $116,037,825 $117,825,006 Subscriber installations......................... 37,452,040 41,788,065 Converters....................................... 36,474,366 40,108,987 Land, buildings and headends..................... 7,323,537 7,373,297 Vehicles and equipment........................... 4,532,000 4,915,015 Office equipment................................. 2,875,564 3,450,381 ------------ ------------ 204,695,332 215,460,751 Less-Accumulated depreciation.................... (87,300,382) (104,038,226) ------------ ------------ $117,394,950 $111,422,525 ============ ============
5.FRANCHISE COSTS AND OTHER: Franchise costs and other consisted of the following:
DECEMBER 31, SEPTEMBER 29, 1994 1995 ------------ ------------- Franchise costs, net of accumulated amortization of $145,225,911 and $161,743,118, respectively.................... $54,952,146 $38,472,736 Noncompete covenants, net of accumulated amortization of $169,381 and $278,431, respectively........................ 545,748 436,698 ----------- ----------- $55,497,894 $38,909,434 =========== ===========
During 1994, approximately $49 million of noncompete covenants expired and the cost and related accumulated amortization were removed from the December 31, 1994, balance sheet. F-133 CENCOM CABLE TELEVISION, INC.--LOS ANGELES AND RIVERSIDE SYSTEMS NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED) 6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES: Accounts payable and accrued expenses consisted of the following:
DECEMBER 31, SEPTEMBER 29, 1994 1995 ------------ ------------- Accounts payable.................................. $ 419,065 $ 174,353 Accrued franchise fees............................ 2,267,289 1,601,008 Accrued construction in progress.................. 1,432,163 1,760,849 Accrued salaries and related benefits............. 904,766 628,949 Accrued sales and use tax......................... 464,944 313,210 Accrued program guides............................ 281,040 309,032 Other............................................. 1,030,110 1,075,149 ---------- ---------- $6,799,377 $5,862,550 ========== ==========
7. SYSTEMS' EQUITY: As of September 29, 1995, CCT had recorded in its capital account an accumulated deficit of approximately $236,670,000, represented by losses and partner distributions. 8. RELATED-PARTY TRANSACTIONS: Pursuant to a management agreement (the "Management Agreement"), Crown Communications, Inc. ("Crown") managed CCT's cable television operations during 1993 and through November 18, 1994, for a standard management fee equal to 3% of CCT's operating cash flow, as defined. For the years ended December 31, 1993 and 1994, the Systems expensed $943,681 and $904,209, respectively, relating to the Management Agreement with Crown. Effective November 19, 1994, Crown assigned its rights and obligations under the Management Agreement to Charter, and the Management Agreement was amended to increase the standard management fee from 3% to 8% of CCT's cash flow, as defined, beginning January 1, 1995. For the period from November 19, 1994, through December 31, 1994, and January 1, 1995, through September 29, 1995, the Systems expensed $122,660 and $2,150,374, respectively, relating to the Management Agreement with Charter. As of December 31, 1994, the Systems had prepaid management fees to Charter of $901,236. 9. COMMITMENT AND CONTINGENCIES: Leases The Systems lease certain facilities and equipment under noncancelable operating leases. Rent expenses incurred under leases during 1993, 1994 and 1995 were $1,149,951, $1,131,333 and $821,634, respectively. Future minimum lease payments are as follows: 1996............................................................ $ 838,569 1997............................................................ 839,486 1998............................................................ 842,712 1999............................................................ 857,564 2000 and thereafter............................................. 1,707,276 ---------- Total....................................................... $5,085,607 ==========
F-134 CENCOM CABLE TELEVISION, INC.--LOS ANGELES AND RIVERSIDE SYSTEMS NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED) The Systems rent utility poles in their operations. Generally, pole rental agreements are short term, but the Systems' management anticipates that such rentals will continue to recur. Rent expense incurred for pole attachments during 1993, 1994 and 1995 were $440,797, $454,393 and $342,478, respectively. Insurance Coverage The Systems currently do not have and do not in the near term anticipate having property and casualty insurance on their underground distribution plants. Due to large claims incurred by the property and casualty insurance industry, the pricing of insurance coverage has become inflated to the point where, in the judgment of the Systems' management, the insurance coverage is cost prohibitive. Management believes its experience and policy with such insurance coverage is consistent with general industry practices. Management will continue to monitor the insurance markets to attempt to obtain coverage for the Systems' distribution plants at reasonable rates. Litigation The Systems are a party to lawsuits which are generally incidental to its business. In the opinion of management, after consulting with legal counsel, the outcome of these lawsuits will not have a material adverse effect on the Systems' financial position and results of operations. 10.REGULATION IN THE CABLE INDUSTRY: The cable television industry is subject to extensive regulation at the federal, local and, in some instances, state levels. In addition, recent legislative and regulatory changes and additional regulatory proposals under consideration may materially affect the cable television industry. 1992 Cable Act and FCC Regulation Congress enacted the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"), which became effective on December 4, 1992. This legislation has caused significant changes to the regulatory environment in which the cable television industry operates. The 1992 Cable Act generally allows for a greater degree of regulation of the cable television industry. Under the 1992 Cable Act's definition of effective competition, nearly all cable systems in the United States are subject to rate regulation of basic cable services, provided the local franchising authority becomes certified to regulate basic service rates. The 1992 Cable Act and the Federal Communications Commission's (FCC) rules implementing the 1992 Cable Act have generally increased the administrative and operational expenses of cable television systems and have resulted in additional regulatory oversight by the FCC and local franchise authorities. Management is unable to predict the ultimate effect of the 1992 Cable Act or the ultimate outcome of various FCC rule-making proceedings or the litigation challenging various aspects of the 1992 Cable Act and the FCC's regulations implementing the 1992 Cable Act. The 1992 Cable Act and FCC regulations have imposed rate requirements for basic services and equipment, including rate roll-backs. Under the 1992 Cable Act, a local franchising authority in a community not subject to "effective competition" generally is authorized to regulate basic cable rates after certifying to the FCC that, among other things, it will adopt and administer rate regulation consistent with FCC rules, and in a manner that will provide a reasonable opportunity to consider the views of interested parties. Upon certification, the franchising authority obtains the right to approve the basic rates charged by the cable system operator. In regulating the basic service rates, certified local franchise authorities have the authority to order a rate refund of previously paid rates determined to be in excess of the maximum permitted reasonable rates. The Telecommunications Act of 1996 (the "Telecommunications Act"), passed by Congress on February 1, 1996, F-135 CENCOM CABLE TELEVISION, INC.--LOS ANGELES AND RIVERSIDE SYSTEMS NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED) and signed into law by the President on February 8, 1996, broadens the definition of "effective competition" to include any franchise area where a local exchange carrier (or its affiliate) provides video programming services to subscribers by any means, other than through Direct Broadcast Satellite. Rate regulation of the basic service tier remains subject to regulation by local franchising authorities under the Telecommunications Act, except in certain circumstances for "small cable operators." For a defined class of "small cable operators," the Telecommunications Act immediately eliminates regulation of cable programming rates. Rates for basic tier of "small cable operators" are deregulated if the system offered a single tier of services as of December 31, 1994. Under the 1992 Cable Act, rates for cable programming services not carried on the basic tier (non-basic services) could be regulated by the FCC upon the filing of a complaint by franchise authorities or subscribers that indicates the cable operator's rates for these services are unreasonable. Rate complaints have been filed with the FCC with respect to certain of the Systems' cable programming services; several complaints are pending as of the date of the financial statements. The Telecommunications Act eliminates regulation of non-basic programming as of March 31, 1999. In the interim, rate regulation of the non-basic programming tier can only be triggered by a franchising authority complaint to the FCC. If the FCC determines that the Systems' non-basic programming service tier rates are unreasonable, the FCC has the authority to order the Systems to reduce non-basic programming service tier rates and to refund to customers any overcharges occurring from the filing date of the rate complaint with the FCC. Under the FCC's initial rate regulations pursuant to the 1992 Cable Act, regulated cable systems were required to apply a benchmark formula to determine their maximum permitted rates. Those systems whose rates were above the benchmark on September 30, 1992, were required to reduce their rates to the benchmark or by 10%, whichever was less. Under revised rate regulations adopted February 1994, regulated cable systems were required to set their rates so that regulated revenues per subscriber did not exceed September 30, 1992, levels, reduced by 17% (taking into account the previous 10% reduction). Notwithstanding mandated rate regulations, cable operators currently may adjust their regulated rates to reflect inflation and what the FCC has deemed to be external costs (such as increases in franchise fees). In September 1995, the FCC developed an abbreviated cost-of-service form that permits cable operators to recover costs of significant upgrades that provide benefits to subscribers of regulated cable services. Cable operators seeking to raise rates to cover costs of an upgrade would submit only the costs of the upgrade instead of all current costs. In December 1995, the FCC revised its cost-of-service rules. At this time, the Systems' management is unable to predict the effect of these revised rules on the Systems' financial position or results of operations. In another action in September 1995, the FCC established a new optional rate adjustment methodology that encourages operators to limit their rate increases to once a year to reflect inflation and changes in external costs and the number of channels. The rules permit cable operators to "project reasonably" changes in their costs for the 12 months following the rate change (in an effort to eliminate delays in recovering costs). The order allows operators to recover increases in additional types of franchise-requirement costs. Permitted pass-through increases include increases in the cost of providing institutional networks, video services, data services to or from governmental and educational institutions, and certain other cost increases. The Systems' management is unable to predict the effect of these new rules on the Systems' business. F-136 CENCOM CABLE TELEVISION, INC.--LOS ANGELES AND RIVERSIDE SYSTEMS NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED) In November 1995, the FCC proposed to provide cable operators with the option of establishing uniform rates for similar service packages offered in multiple franchise areas located in the same region. Under the FCC's current rules, cable operators subject to rate regulation must establish rates on a franchise-specific basis. The proposed rules could lower cable operators' marketing costs and may also allow operators to better respond to competition from alternative providers. The Systems' management is unable to predict if these proposed rules will ultimately be promulgated by the FCC, and if they are promulgated, their effect on the Systems' financial position and results of operations. While management believes that the Systems have complied in all material respects with the rate provisions of the 1992 Cable Act, in jurisdictions that have not yet chosen to certify, refunds covering a one-year period on basic services may be ordered upon future certification if the Systems are unable to justify their rates through a benchmark or cost-of-service filing or small system cost-of-service filing pursuant to FCC rules. Management is unable to estimate at this time the amount of refunds, if any, that may be payable by the Systems in the event certain of their rates are successfully challenged by franchising authorities or found to be unreasonable by the FCC. Management does not believe that the amount of any such refunds would have a material adverse effect on the financial position or results of operations of the Systems. "Must Carry" Requirements/"Retransmission Consents" Under the 1992 Cable Act, cable television operators are subject to mandatory signal carriage requirements that allow local commercial and non- commercial television broadcast stations to elect to require a cable system to carry the station, subject to certain exceptions, or, in the case of commercial stations, to negotiate for "retransmission consent" to carry the station. In addition, there are requirements for cable systems to obtain retransmission consent for all "distant" commercial television stations, commercial radio stations and certain low power television stations carried by such system after October 6, 1993. As a result of the mandatory system carriage rules, the Systems have been required to carry television broadcast stations that otherwise would not have been carried, thereby causing displacement of possibly more attractive programming. The validity of the mandatory signal carriage requirements is being litigated; however, the carriage requirements remain in effect pending the outcome of the proceedings. Franchise Matters The 1992 Cable Act modified the franchise renewal process to make it easier for a franchising authority to deny renewal. Historically, franchises have been renewed for cable operators that have provided satisfactory services and have complied with the terms of the franchise agreement. Although management believes that the Systems have generally met the terms of their franchise agreements and have provided quality levels of service, and anticipates the Systems' future franchise renewal prospects generally will be favorable, there can be no assurance that any such franchises will be renewed or, if renewed, that the franchising authorities will not impose more onerous requirements on the Systems than previously existed. Recent Telecommunications Legislation The Telecommunications Act alters federal, state and local laws and regulations pertaining to cable television, telecommunications and other services. Under the Telecommunications Act, telephone companies can compete directly with cable operators in the provision of video programming. This new legislation recognizes several multiple entry options for telephone companies to provide competitive video programming. The Telecommunications Act eliminates broadcast/cable cross-ownership restrictions, but leaves in place FCC regulations prohibiting local cross- ownership between television stations and cable systems. F-137 CENCOM CABLE TELEVISION, INC.--LOS ANGELES AND RIVERSIDE SYSTEMS NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED) Certain provisions of the Telecommunications Act could materially affect the growth and operation of the cable television industry and the cable services provided by the Systems. Although the new legislation may substantially lessen regulatory burdens, the cable television industry may be subject to additional competition as a result thereof. There are numerous rule makings to be undertaken by the FCC which will interpret and implement the Telecommunications Act's provisions. In addition, certain provisions of the Telecommunications Act (such as the deregulation of cable programming rates) are not immediately effective. Further, certain of the Telecommunications Act's provisions have been and are likely to be subject to judicial challenges. The Systems' management is unable at this time to predict the outcome of such rule-makings or litigation or the substantive effect of the new legislation and the rule-makings on the financial position and results of operations of the Systems. F-138 REPORT OF INDEPENDENT AUDITORS The Board of Directors Charter Communications Entertainment I, L.P. We have audited the accompanying balance sheets of the Missouri Cable Television System to be sold by Masada Cable Partners, L.P. to Charter Communications Entertainment I, L.P., as of November 29, 1996 and December 31, 1995 and the related statements of operations, changes in system capital (deficiency) and cash flows for the period ended November 29, 1996 and years ended December 31, 1995 and 1994. These financial statements are the responsibility of the System's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As described in Note 1, the System was a part of Masada Cable Partners, L.P. as of November 29, 1996 and, as such, had no separate legal status or existence. Transactions with Masada Cable Partners, L.P. are described in Notes 4 and 5. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Missouri Cable Television System to be sold by Masada Cable Partners, L.P. to Charter Communications Entertainment I, L.P. at November 29, 1996 and December 31, 1995 and the results of its operations and its cash flows for the period ended November 29, 1996 and years ended December 31, 1995 and 1994, in conformity with generally accepted accounting principles. Ernst & Young LLP Birmingham, Alabama February 17, 1997 F-139 MISSOURI CABLE TELEVISION SYSTEM TO BE SOLD BY MASADA CABLE PARTNERS, L.P. TO CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. BALANCE SHEETS
NOVEMBER 29, DECEMBER 31, 1996 1995 ------------ ------------ ASSETS Current assets: Cash and cash equivalents........................... $ 25,478 $ 69,729 Prepaid expenses and other.......................... 32,401 15,377 ----------- ---------- Total current assets................................. 57,879 85,106 Net property and equipment (Note 3).................. 2,501,879 3,312,153 Deferred charges: Franchise costs..................................... 4,869,519 4,869,519 Acquisition costs................................... 110,637 -- Goodwill............................................ 2,826,763 2,826,763 Other deferred charges.............................. 210,834 201,402 ----------- ---------- 8,017,753 7,897,684 Accumulated amortization............................ (4,718,452) (4,120,568) ----------- ---------- Net deferred charges................................. 3,299,301 3,777,116 $ 5,859,059 $7,174,375 =========== ==========
F-140 MISSOURI CABLE TELEVISION SYSTEM TO BE SOLD BY MASADA CABLE PARTNERS, L.P. TO CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P.
NOVEMBER 29, DECEMBER 31, 1996 1995 ------------ ------------ LIABILITIES AND SYSTEM DEFICIENCY Current liabilities: Accounts payable.................................... $ 25,223 $ 82,742 Subscriber deposits and advance payments............ 37,957 38,422 Accrued interest.................................... 82,949 251,928 Accrued franchise fee............................... 99,098 105,238 Accrued programming fee............................. 74,633 78,581 Accrued pole rent................................... 25,091 32,516 Other accrued liabilities........................... 140,324 343,079 ---------- ---------- Total current liabilities............................ 485,275 932,506 Notes payable allocated to the System (Note 4)....... 12,295,000 15,500,000 ---------- ---------- Total liabilities.................................... 12,780,275 16,432,506 Contingencies (Note 6) System capital (deficiency).......................... (6,921,216) (9,258,131) ---------- ---------- $5,859,059 $7,174,375 ========== ==========
See accompanying notes. F-141 MISSOURI CABLE TELEVISION SYSTEM TO BE SOLD BY MASADA CABLE PARTNERS, L.P. TO CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. STATEMENTS OF OPERATIONS
PERIODS ENDED ------------------------------------- NOVEMBER 29, DECEMBER 31, 1996 1995 1994 ----------- ----------- ----------- Subscriber service revenue............... $ 4,381,706 $ 4,558,494 $ 4,572,833 Operating expenses: Operating costs......................... 1,951,529 1,993,744 1,883,309 Selling, general and administrative..... 443,075 408,840 384,975 Depreciation............................ 2,021,476 2,460,662 2,551,456 Amortization............................ 597,884 636,383 652,211 ----------- ----------- ----------- Total operating expenses................. 5,013,964 5,499,629 5,471,951 ----------- ----------- ----------- Loss from operations..................... (632,258) (941,135) (899,118) Other income (expense): Interest and fees....................... (1,093,796) (2,244,678) (1,574,024) Other, net (Note 5)..................... (292,865) (304,476) (192,819) ----------- ----------- ----------- Total other income (expense)............. (1,386,661) (2,549,154) (1,766,843) ----------- ----------- ----------- Net loss................................. $(2,018,919) $(3,490,289) $(2,665,961) =========== =========== ===========
See accompanying notes. F-142 MISSOURI CABLE TELEVISION SYSTEM TO BE SOLD BY MASADA CABLE PARTNERS, L.P. TO CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. STATEMENTS OF CHANGES IN SYSTEM CAPITAL (DEFICIENCY)
SYSTEM CAPITAL (DEFICIENCY) ------------ Balance, December 31, 1993........................................ $(5,674,798) Net loss......................................................... (2,665,961) Net change in current accounts with partnership.................. (2,007,978) ----------- Balance, December 31, 1994........................................ (10,348,737) Net loss......................................................... (3,490,289) Net change in current accounts with partnership.................. 4,580,895 ----------- Balance, December 31, 1995........................................ $(9,258,131) Net loss......................................................... (2,018,919) Net change in current accounts with partnership.................. 4,355,834 ----------- Balance, November 29, 1996........................................ $(6,921,216) ===========
See accompanying notes. F-143 MISSOURI CABLE TELEVISION SYSTEM TO BE SOLD BY MASADA CABLE PARTNERS, L.P. TO CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. STATEMENTS OF CASH FLOWS
PERIODS ENDED ------------------------------------- NOVEMBER 29, DECEMBER 31, 1996 1995 1994 ----------- ----------- ----------- OPERATING ACTIVITIES Net loss............................... $(2,018,919) $(3,490,289) $(2,665,961) Net change in current accounts with partnership........................... 4,355,834 4,580,895 (2,007,978) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization........ 2,619,360 3,097,045 3,203,667 Gain on sale of fixed assets......... -- (4,478) -- Loss on write-off of deferred charges............................. -- 120,616 -- Changes in operating assets and liabilities: Accounts receivable................. -- 28,261 28,048 Prepaid expenses and other.......... (17,024) (5,201) (395) Accounts payable.................... (57,519) 47,623 (46,894) Deposits and advances............... (465) (14,470) (31,017) Accrued interest.................... (168,979) 156,011 (144,404) Other accrued liabilities........... (220,268) 326,863 27,894 ----------- ----------- ----------- Net cash provided by (used in) operating activities.................. 4,492,020 4,842,876 (1,637,040) INVESTING ACTIVITIES Purchase of property and equipment..... (1,211,202) (367,324) (342,094) Proceeds from sale of fixed assets..... -- 4,478 -- Additions to deferred charges.......... (120,069) (152,440) (3,174) ----------- ----------- ----------- Net cash used in investing activities.. (1,331,271) (515,286) (345,268) FINANCING ACTIVITIES Issuance (payments) of notes payable... (3,205,000) (4,295,440) 1,982,802 ----------- ----------- ----------- Net cash provided by (used in) financing activities.................. (3,205,000) (4,295,440) 1,982,802 ----------- ----------- ----------- Increase (decrease) in cash and cash equivalents........................... (44,251) 32,150 494 Cash and cash equivalents at beginning of year............................... 69,729 37,579 37,085 ----------- ----------- ----------- Cash and cash equivalents at end of year.................................. $ 25,478 $ 69,729 $ 37,579 =========== =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for interest and fees....... $ 1,262,775 $ 2,088,667 $ 1,718,428 =========== =========== ===========
See accompanying notes. F-144 MISSOURI CABLE TELEVISION SYSTEM TO BE SOLD BY MASADA CABLE PARTNERS, L.P. TO CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. NOTES TO FINANCIAL STATEMENTS NOVEMBER 29, 1996 AND DECEMBER 31, 1995 AND 1994 1. ORGANIZATION AND BASIS OF PRESENTATION The accompanying financial statements include the accounts of the Missouri Cable Television System (System) to be sold by Masada Cable Partners, L.P. (Masada) to Charter Communications Entertainment I, L.P. (Charter) pursuant to a sale agreement between Masada and Charter. The System has no separate legal status or existence. These financial statements are presented as if the System had existed as an entity separate from Masada during the periods presented, and includes the historical assets, liabilities, sales and expenses that are directly related to the System's operations. These financial statements include certain Masada partnership asset, liability and expense allocations, primarily a portion of Masada's acquisition costs and debt and interest related thereto. Masada, a Delaware limited partnership, was organized on April 10, 1988 to acquire, construct and operate cable television systems. The managing general partner is Masada Cable Management, Inc. and the co-general partner is BHI Associates III, L.P. (Bariston). The financial information presented herein reflects the financial position and results of operations of the System and is not necessarily indicative of the financial position or results of operations had the System actually operated as a separate, stand-alone entity during the reporting periods. The results of operations for such periods do not necessarily reflect any trends or future prospects for the System as an independent entity. On November 29, 1996, Masada Cable Partners L.P. entered into an agreement for the sale of three cable systems, including the System, for $53,000,000. In connection with the sale, $25,000,000 of the sale price will be remitted directly by the purchaser to Canadian Imperial Bank as a reduction of the outstanding principal balance due under a term loan agreement. A distribution of $27,000,000 will be made to the limited partners. The purchaser will deposit $500,000 in a pole agreement escrow account, and $957,000 in an indemnity escrow account. 2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Recognition of Revenue Subscriber service revenue is recognized in the month the cable service is provided. Property and Equipment Property and equipment is stated at cost. Depreciation is calculated on the straight-line basis using the following useful lives: Cable distribution systems............................ 7 years Computer equipment.................................... 5 years Transportation equipment.............................. 5 years Deferred Charges Deferred charges are recorded at cost. Amortization is provided on a straight-line basis using the following lives: Franchise costs....................................... 10 years Debt issuance costs................................... Term of the related debt Acquisition costs..................................... 7 years Organization costs.................................... 5 years Goodwill and other.................................... 20 years F-145 MISSOURI CABLE TELEVISION SYSTEM TO BE SOLD BY MASADA CABLE PARTNERS, L.P. TO CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) Long-Lived Assets In March 1995, the Financial Accounting Standards Board issued Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of, which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. Statement 121 also addresses the accounting for long-lived assets that are expected to be disposed of. Statement 121 is effective for financial statements for periods beginning on or after December 15, 1995 although earlier adoption is permitted. Based on present circumstances, no adjustment to the recorded amounts for System net property and equipment, franchise costs or goodwill was necessary when Statement 121 was adopted as of November 29, 1996. Cash and Cash Equivalents The System considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. Income Taxes The accompanying financial statements do not include a provision for income taxes because the taxable income or loss of the System is included in the tax returns of the partners. Management Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires the use of management's estimates and assumptions. Actual results could differ from these estimates. 3.PROPERTY AND EQUIPMENT Property and equipment consisted of the following:
NOVEMBER 29, DECEMBER 31, 1996 1995 ------------ ------------ Property and equipment: Land $ -- $ -- Buildings and improvements -- -- Cable distribution systems......................... 19,309,052 18,165,951 Other equipment.................................... 199,851 205,668 ------------ ------------ 19,508,903 18,371,619 Accumulated depreciation........................... (17,007,024) (15,059,466) ------------ ------------ Net property and equipment.......................... $ 2,501,879 $ 3,312,153 ============ ============
4.NOTES PAYABLE TO THE SYSTEM For purposes of the financial statements presented herein, the System has been allocated a portion of the term loan and subordinated note payable by Masada and associated interest and fees. This allocation was determined by applying the ratio of total System assets to total Masada assets at November 29, 1996 and December 31, 1995 and 1994. The calculation resulted in 49%, 62% and 42% of the debt and related interest F-146 MISSOURI CABLE TELEVISION SYSTEM TO BE SOLD BY MASADA CABLE PARTNERS, L.P. TO CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) expense being allocated to the Missouri Cable System at November 29, 1996 and December 31, 1995 and 1994 respectively. In the opinion of management, this method of allocation is reasonable. Since such debt does not represent a liability of the System, but rather an allocation of Masada long term debt, and there are neither repayment terms nor a formal agreement between the System and Masada, such debt has been classified as noncurrent. Management believes the market value of its notes payable approximates the carrying value in the accompanying balance sheets due to the variable rate of interest on the notes payable. Notes payable allocated to the System consisted of the following:
NOVEMBER DECEMBER 29, 1996 31, 1995 ----------- ----------- Revolving credit and term loan......................... $12,295,000 $15,500,000 Subordinated note payable.............................. -- -- ----------- ----------- $12,295,000 $15,500,000 =========== ===========
The terms and conditions of Masada's total term loan and subordinated debt which has been allocated to the System, as described above, are summarized below. Revolving Credit and Term Loan Masada had a revolving credit and term loan agreement (Term Loan Agreement) with three financial institutions which provided for aggregate borrowings of up to $53,000,000 on a revolving basis through March 31, 1993. At that time the then outstanding loan balance of $50,150,000 converted to a term loan note, scheduled to be paid in twenty-five quarterly installments in amounts varying from 2.25% to 7.67% of the original principal balance beginning September 30, 1993. Concurrent with the sale of the Georgia Cable Television System by Masada in July 1995, the purchaser remitted directly to Canadian Imperial Bank of Commerce $17,752,875 towards the principal resulting in a new principal balance of $25,000,000. On the same day, the existing term loan was replaced with a new facility for the remaining $25 million, secured by substantially all remaining transferable assets of Masada as noted below. Interest on the loan is payable quarterly and the entire principal balance is due on January 31, 1997. Under the terms of the Term Loan Agreement, Masada has the option to have interest computed using a LIBOR rate and/or a variable rate. With the LIBOR selection, the Term Loan Agreement provides for interest to be paid quarterly at a rate based on LIBOR plus a variable margin ranging from 3.00% to 3.50%. The LIBOR rate was in effect at November 29, 1996 for all of the principal amount outstanding and was 8.375 %. Borrowings under the Term Loan Agreement are secured by senior liens, in favor of the lender, on substantially all transferable assets of Masada. Under the terms of the agreement, Masada pays a one-time fee of 1% of the outstanding balance of the term loans one year after the effective date of the new loan. Under the provisions of the agreement, Masada is required to maintain certain levels of annualized net operating income, as defined, as compared to total debt (total leverage), senior debt (senior leverage) and net cash flow, as defined, as compared to debt service (debt service coverage) and certain ratios of cable subscribers to total debt. Masada is also required to limit capital expenditures, management and investment banking fees and distributions to the partners to amounts specified in the agreement. F-147 MISSOURI CABLE TELEVISION SYSTEM TO BE SOLD BY MASADA CABLE PARTNERS, L.P. TO CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) Subordinated Notes Payable In connection with the execution of the Term Loan Agreement, Masada borrowed $3,000,000 on July 11, 1991 under a subordinated note agreement with an unaffiliated party which is due December 31, 1999. Under the provisions of this subordinated agreement, interest accrues at 25% per annum with interest payments which began on October 31, 1993 under one of three options given to the Partnership, the minimum being the payment of 10% interest quarterly with the remaining 15% being converted to additional principal. Masada also has the option to pay interest currently as it becomes due. Borrowings under the subordinated note agreement are secured by subordinate liens, in favor of the lender, on substantially all transferable assets of Masada. Proceeds from the sale of another cable television system by Masada in July 1995 have been used to pay the subordinated notes in order to obtain release of the liens on assets subject to the sale. Masada is also required to maintain certain ratios of annualized net operating income (as defined) to total debt and to limit capital expenditures, additional indebtedness, management and investment banking fees and distributions to partners to amounts specified in the agreements. 5. RELATED PARTY TRANSACTIONS Masada Cable Management, Inc. provides management services to Masada for a fee of 5% of total revenues. Management fee expense incurred by the System was approximately $219,000 $233,000 and $234,000 in 1996, 1995 and 1994, respectively, and is included in other expenses in the accompanying statements of operations. Accrued management fees were approximately $21,000, $7,000 and $3,000 at November 29, 1996 and December 31, 1995 and 1994 respectively, and are included in other accrued liabilities in the accompanying balance sheets. Bariston Associates, Inc. an affiliate of Bariston, provides ongoing investment banking services to Masada. Fees incurred by the System for these investment banking services amounted to approximately $48,000, $48,000 and $48,000 in 1996, 1995, and 1994, respectively, and are included in other expenses in the accompanying statements of operations. 6. CONTINGENCIES Congress enacted the Cable Television Consumer Protection and Competition Act of 1992 (the 1992 Cable Act), which became effective on December 4, 1992. This legislation caused significant changes to the regulatory environment in which the cable television industry operates. The 1992 Cable Act generally allows for a greater degree of regulation of the cable television industry. Under the 1992 Cable Act's definition of effective competition, nearly all cable systems in the United States are subject to rate regulation of basic cable services. In addition, the 1992 Cable Act allows the Federal Communications Commission (FCC) to regulate rates for nonbasic service tiers other than premium services in response to complaints filed by franchising authorities and/or cable subscribers. In April 1993, the FCC adopted regulations governing rates for basic and nonbasic services. The FCC's rules became effective on September 1, 1993. F-148 MISSOURI CABLE TELEVISION SYSTEM TO BE SOLD BY MASADA CABLE PARTNERS, L.P. TO CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. NOTES TO FINANCIAL STATEMENTS--(CONTINUED) On February 22, 1994, the FCC adopted several additional rate orders including an order which revised its earlier announced regulatory scheme with respect to rates. The FCC's new regulations will generally require rate reductions, absent a successful cost-of-service showing of 17% of September 30, 1992 rates, adjusted for inflation, channel modifications, equipment costs and increases in programming costs. However, the FCC held rate reductions in abeyance in certain systems. The new regulations became effective on May 15, 1994, but operators could elect to defer rate reductions to July 14, 1994, so long as they made no changes in their rates and did not restructure service offerings between May 15 and July 14, 1994. On February 22, 1994, the FCC also adopted interim cost-of-service regulations. Rate reductions will not be required where it is successfully demonstrated that rates for basic and other regulated programming services are justified and reasonable using cost-of-service standards. The FCC established an interim industry-wide 11.25% permitted rate of return, and requested comments on whether this standard and other interim cost-of-service standards should be made permanent. Management believes that it has generally complied with all provisions of the 1992 Cable Act, including its cable programming service rate-setting provisions. F-149 INDEPENDENT AUDITORS' REPORT July 25, 1996 To the Board of Directors and Stockholders of United Video Cablevision, Inc. We have audited the accompanying divisional balance sheets of UNITED VIDEO CABLEVISION, INC.--MASSACHUSETTS AND MISSOURI DIVISIONS as of October 31, 1995 and December 31, 1994 and 1993, and the related statements of divisional operations, cash flows and equity for the ten months ended October 31, 1995 and for the years ended December 31, 1994 and 1993. These financial statements are the responsibility of the Divisions' management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the divisional financial position of United Video Cablevision, Inc.--Massachusetts and Missouri Divisions as of October 31, 1995 and December 31, 1994 and 1993, and the results of its divisional operations and its cash flows for the ten months ending October 31, 1995 and the years ending December 31, 1994 and 1993, in conformity with generally accepted accounting principles. Piaker & Lyons, P.C. Vestal, New York F-150 UNITED VIDEO CABLEVISION, INC.-- MASSACHUSETTS AND MISSOURI DIVISIONS DIVISIONAL BALANCE SHEETS OCTOBER 31, 1995 DECEMBER 31, 1994 AND 1993
1995 1994 1993 ------------ ------------ ------------ ASSETS Current assets Cash and cash equivalents............. $ 31,601 $ 21,455 $ 56,441 ------------ ------------ ------------ Accounts receivable (Note 1) Accounts receivable--trade.......... 30,092 142,218 63,690 Accounts receivable--other.......... 8,024 10,705 3,315 Less: Allowance for doubtful accounts........................... (16,289) (17,845) (17,808) ------------ ------------ ------------ Net accounts receivable........... 21,827 135,078 49,197 ------------ ------------ ------------ Prepaid expenses...................... 95,519 69,250 86,320 ------------ ------------ ------------ Total current assets.............. 148,947 225,783 191,958 ------------ ------------ ------------ Property, plant and equipment--at cost Land.................................. 109,619 109,619 149,747 Buildings and improvements............ 294,254 285,581 291,413 Vehicles.............................. 1,075,983 1,132,689 1,078,300 Cable television distribution systems.............................. 40,601,642 39,334,667 38,100,070 Office furniture, tools and equipment............................ 501,830 497,427 443,763 Less: Accumulated depreciation (Note 1).. (29,962,342) (27,626,213) (24,257,829) ------------ ------------ ------------ Net property, plant and equipment........................ 12,620,986 13,733,770 15,805,464 ------------ ------------ ------------ Intangible Assets Goodwill.............................. 15,867,456 15,867,456 15,867,456 Franchise rights...................... 706,532 706,532 719,375 Non compete agreements................ 742,068 742,068 700,510 Deferred loan costs................... 190,666 190,666 -- Less: Accumulated amortization (Note 1)................................... (4,026,772) (3,579,220) (2,922,892) ------------ ------------ ------------ Net intangible assets............. 13,479,950 13,927,502 14,364,449 ------------ ------------ ------------ Total assets...................... $ 26,249,883 $ 27,887,055 $ 30,361,871 ============ ============ ============ LIABILITIES AND DIVISIONAL EQUITY Current liabilities Accounts payable and accrued expenses............................. $ 639,210 $ 917,370 $ 715,970 Subscriber deposits and unearned income............................... 728,280 795,177 860,701 Accrued franchise fees................ 103,056 182,848 75,958 Accrued programming fees.............. 366,494 357,622 338,618 ------------ ------------ ------------ Total current liabilities......... 1,837,040 2,253,017 1,991,247 Divisional equity....................... 24,412,843 25,634,038 28,370,624 ------------ ------------ ------------ Total liabilities and divisional equity........................... $ 26,249,883 $ 27,887,055 $ 30,361,871 ============ ============ ============
See the accompanying notes to divisional financial statements. F-151 UNITED VIDEO CABLEVISION, INC.-- MASSACHUSETTS AND MISSOURI DIVISIONS STATEMENTS OF DIVISIONAL OPERATIONS FOR THE TEN MONTHS ENDED OCTOBER 31, 1995 AND FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
1995 1994 1993 ----------- ----------- ----------- Revenues (Note 1)...................... $15,632,849 $17,790,050 $17,329,551 Operating expenses Programming.......................... 3,676,125 4,131,467 3,931,693 Plant and operation.................. 1,701,840 2,281,757 2,308,160 General and administrative........... 2,188,773 2,795,654 2,720,003 Marketing and advertising............ 128,859 254,671 288,307 Corporate overhead (Note 3).......... 627,768 678,582 736,081 Depreciation and amortization (Note 1).................................. 3,004,770 4,847,490 4,482,391 ----------- ----------- ----------- Total expenses..................... 11,328,135 14,989,621 14,466,635 ----------- ----------- ----------- Operating income....................... 4,304,714 2,800,429 2,862,916 ----------- ----------- ----------- Other (income) expense Interest expense (Note 1)............ 2,827,886 3,599,961 3,638,186 Gain on sale of fixed assets......... (4,181) (25,805) (13,725) ----------- ----------- ----------- Total other (income) expense....... 2,823,705 3,574,156 3,624,461 ----------- ----------- ----------- Income (loss) before provision for in- come taxes............................ 1,481,009 (773,727) (761,545) Provision for income taxes (Note 1).. 13,424 11,718 (32,927) ----------- ----------- ----------- Net income (loss)...................... $ 1,467,585 $ (785,445) $ (728,618) =========== =========== ===========
See the accompanying notes to divisional financial statements. F-152 UNITED VIDEO CABLEVISION, INC.-- MASSACHUSETTS AND MISSOURI DIVISIONS STATEMENTS OF DIVISIONAL CASH FLOWS FOR THE TEN MONTHS ENDED OCTOBER 31, 1995 AND FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
1995 1994 1993 ----------- ----------- ----------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Operating activities: Net income (loss)..................... $ 1,467,585 $ (785,445) $ (728,618) ----------- ----------- ----------- Adjustments to reconcile net income (loss) to net cash provided by operations: Depreciation......................... 2,557,217 4,256,041 3,878,639 Amortization of intangibles.......... 447,553 591,449 603,752 Allowance for doubtful accounts...... (1,556) 37 (1,226) Gain on sale of assets............... (4,181) (25,805) (13,725) Changes in operating assets and liabilities, Net of effects from acquisition of corporate entities: Accounts receivable and other receivables...................... 114,807 (85,918) 78,207 Prepaid expenses.................. (26,269) 17,070 (9,165) Accounts payable and accrued expenses......................... (349,080) 327,294 (250,526) Subscriber deposits and unearned income........................... (66,897) (65,524) (77,909) ----------- ----------- ----------- Total adjustments................ 2,671,594 5,014,644 4,208,047 ----------- ----------- ----------- Net cash provided by operating activities...................... 4,139,179 4,229,199 3,479,429 ----------- ----------- ----------- Cash flows from investing activities: Purchase of property, plant and equipment............................ (1,480,206) (2,559,469) (2,958,045) Acquisqition of intangible assets..... -- (154,505) (12,843) Proceeds from sale of assets.......... 39,953 400,930 17,050 ----------- ----------- ----------- Net cash used in investing activities...................... (1,440,253) (2,313,044) (2,953,838) ----------- ----------- ----------- Cash flows from financing activities: Payments to corporate division, net... (2,688,780) (1,951,141) (537,630) ----------- ----------- ----------- Net increase (decrease) in cash and cash equivalents...................... 10,146 (34,986) (12,039) Cash and cash equivalents at beginning of year.............................. 21,455 56,441 68,480 ----------- ----------- ----------- Cash and cash equivalents at end of year................................. $ 31,601 $ 21,455 $ 56,441 =========== =========== =========== Supplemental disclosures of cash flow information: Interest paid, net of amount capitalized.......................... $ 2,832,391 $ 3,599,555 $ 3,857,328 Income taxes paid..................... -- -- --
DISCLOSURE OF ACCOUNTING POLICY: For the purposes of cash flows, the Divisions consider a highly liquid debt instrument purchased with a maturity of three months or less to be cash equivalents. See the accompanying notes to divisional financial statements. F-153 UNITED VIDEO CABLEVISION, INC.-- MASSACHUSETTS AND MISSOURI DIVISIONS STATEMENTS OF DIVISIONAL EQUITY FOR THE TEN MONTHS ENDED OCTOBER 31, 1995 AND FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
1995 1994 1993 ----------- ----------- ----------- Balance, January 1....................... $25,634,038 $28,370,624 $29,636,872 Net income (loss)........................ 1,467,585 (785,445) (728,618) Decrease in divisional equity............ (2,688,780) (1,951,141) (537,630) ----------- ----------- ----------- Balance--Ending.......................... $24,412,843 $25,634,038 $28,370,624 =========== =========== ===========
See the accompanying notes to divisional financial statements. F-154 UNITED VIDEO CABLEVISION, INC.-- MASSACHUSETTS AND MISSOURI DIVISIONS NOTES TO DIVISIONAL FINANCIAL STATEMENTS OCTOBER 31, 1995 NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business Activity--The accompanying divisional financial statements include the Massachusetts and Missouri Divisions of United Video Cablevision, Inc. (The "Divisions"). The Divisions are engaged in providing cable television programming services to subscribers in its franchised areas. The Corporate division allocates debt to the operating divisions based upon the respective acquisition and construction costs relative to the debt incurred. Accordingly, interest has been allocated to the operating divisions by the Corporate division, in that manner. For the purpose of the divisional financial statements, no debt has been allocated to the Divisions from the corporate division of United Video Cablevision, Inc. Concentrations of Credit Risk--The Divisions' trade receivables are comprised of amounts due from subscribers in varying regions throughout the states. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers comprising the Divisions' customer base and geographic dispersion. Use of Estimates--The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities 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 those estimates. Revenue Recognition--The Divisions recognize service revenues on the accrual basis in the month in which the service is to be provided. Payments received in advance are included in deferred revenue until the month they become due at which time they are recognized as income. Capitalization and Depreciation--In accordance with Statement #51 of the Financial Accounting Standards Board, the Divisions have adopted the policy of capitalizing certain expenses applicable to the construction and operation of a cable television system during the period while the cable television system is partially under construction and partially in service. During 1995, 1994 and 1993, the total capitalized costs amounted to $189,399, $120,406 and $45,912, respectively. The Divisions, for financial reporting purposes, provide depreciation on the straight-line method, which is considered adequate for the recovery of the cost of the properties over their estimated useful lives. For income tax purposes, however, the Divisions utilize both accelerated methods and the accelerated cost recovery system. For the ten months ended October 31, 1995 and the years ended December 31, 1994 and 1993, the provision for depreciation in the accompanying statements of operations amounted to $2,557,217, $4,256,041 and $3,878,639, respectively. F-155 UNITED VIDEO CABLEVISION, INC.-- MASSACHUSETTS AND MISSOURI DIVISIONS NOTES TO DIVISIONAL FINANCIAL STATEMENTS--(CONTINUED) Depreciation lives for financial statement purposes are as follows: Headend equipment Tower........................................................... 12 Years Antennae........................................................ 7 Years Other headend equipment......................................... 8 Years Trunk and distribution equipment Traps, descramblers, converters, decoders....................... 5 Years Other trunk and distribution equipment.......................... 8 Years Test equipment.................................................... 5 Years Local origination equipment....................................... 8 Years Vehicles.......................................................... 3 Years Furniture and fixtures............................................ 10 Years Leasehold improvements............................................ 8 Years Computer and EDP equipment........................................ 5 Years
Amortization--The Divisions are amortizing to expense various intangible assets acquired and incurred on a straight-line basis, generally from 5 to 40 years. For the ten months ended October 31, 1995 and the years ended December 31, 1994 and 1993, the provision for amortization in the accompanying statements of operations amounted to $447,553, $591,449 and $603,752, respectively. Income Taxes--The Divisions are a part of United Video Cablevision, Inc. which has elected to be taxed as a small business corporation under "Sub- Chapter S" of the Internal Revenue Code effective January 1, 1987, wherein the stockholders of United Video Cablevision, Inc. are taxed on any earnings or losses of the Company. Bad Debts--The Divisions have adopted the reserve method for recognizing bad debts for financial statement purposes and continues to utilize the direct write-off method for tax purposes. NOTE 2--COMMITMENTS The Divisions are committed to annual pole rentals of approximately $300,000, $400,000 and $200,000 at October 31, 1995 and December 31, 1994 and 1993, respectively, to various utilities. These agreements are subject to termination rights by both parties. The Divisions lease in various systems the land upon which its towers and antennae are constructed. The annual rental payments under these leases amount to approximately $17,000, $19,000 and $21,000 at October 31, 1995 and December 31, 1994 and 1993, respectively. NOTE 3--MANAGEMENT AGREEMENT WITH RELATED PARTY The Divisions are being provided with certain management and technical services by a related party by means of a management agreement. During 1995, 1994 and 1993, the allocated billings amounted to $551,548, $667,077 and $736,081, respectively. NOTE 4--EMPLOYEES PROFIT SHARING AND 401(K) PLAN The Divisions participated in a contributory employees' profit sharing plan for eligible employees until July 1994. Prior to the plan's termination in 1994, the Divisions' contributions to the plan were at the discretion of the Board of Directors, but could not exceed the maximum allowable deduction permitted under the Internal F-156 UNITED VIDEO CABLEVISION, INC.-- MASSACHUSETTS AND MISSOURI DIVISIONS NOTES TO DIVISIONAL FINANCIAL STATEMENTS--(CONTINUED) Revenue Code at the time of the contribution. During 1991, the profit sharing plan was amended to incorporate a 401(K) feature. The Divisions provided $35,920, $28,657 and $67,601 in the form of employer matching contributions and profit sharing contributions for 1995, 1994 and 1993, respectively. In order to be eligible to participate in the plans, employees must complete one year of service and attain 21 years of age. NOTE 5--SALE OF DIVISIONS On July 13, 1995, United Video Cablevision, Inc. entered into an agreement by which it sold substantially all of the net assets and associated current liabilities in its Massachusetts and Missouri franchise areas (the Divisions) for approximately $94,000,000. Upon the completion of the transaction, United Video Cablevision, Inc. realized a gain of approximately $63,000,000. F-157 INDEPENDENT AUDITORS' REPORT The Board of Directors Crown Media, Inc.: We have audited the accompanying balance sheets of Crown Media, Inc.-- Western Connecticut as of December 31, 1994 and 1993, and the related statements of operations, division equity and cash flows for the year ended December 31, 1994 and the period from December 28, 1992 through December 31, 1993. These financial statements are the responsibility of the management of Crown Media, Inc. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Crown Media, Inc.--Western Connecticut as of December 31, 1994 and 1993 and the results of its operations and its cash flows for the year ended December 31, 1994 and the period from December 28, 1992 through December 31, 1993 in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Dallas, Texas January 18, 1995 F-158 CROWN MEDIA, INC.--WESTERN CONNECTICUT BALANCE SHEETS DECEMBER 31, 1994 AND 1993
1994 1993 ----------- ----------- ASSETS Current assets: Cash and cash equivalents............................ $ 102,205 $ -- Accounts receivable, net of allowance for doubtful accounts of $65,862 and $71,776..................... 589,681 483,473 Prepaid expenses..................................... 23,002 219,777 ----------- ----------- Total current assets............................... 714,888 703,250 Property and equipment, net (note 3)................... 45,043,268 35,548,957 Intangible assets, net (note 4)........................ 39,500,660 45,000,112 ----------- ----------- $85,258,816 $81,252,319 =========== =========== LIABILITIES AND DIVISION EQUITY Current liabilities: Bank overdraft....................................... $ -- $ 3,897,629 Accounts payable and accrued expenses................ 4,003,405 3,006,730 ----------- ----------- Total current liabilities.......................... 4,003,405 6,904,359 Division equity (note 5)............................... 81,255,411 74,347,960 Commitments and contingencies (note 6) ----------- ----------- $85,258,816 $81,252,319 =========== ===========
See accompanying notes to financial statements. F-159 CROWN MEDIA, INC.--WESTERN CONNECTICUT STATEMENTS OF OPERATIONS
THE PERIOD FROM DECEMBER 28, YEAR ENDED 1992 THROUGH DECEMBER 31, DECEMBER 31, 1994 1993 ------------ --------------- Service revenues................................... $20,398,196 $19,744,788 ----------- ----------- Operating expenses: Operating, general and administrative (note 6)... 12,240,210 11,681,267 Depreciation and amortization.................... 9,031,362 8,458,969 ----------- ----------- Total operating expenses....................... 21,271,572 20,140,236 ----------- ----------- Loss from operations........................... (873,376) (395,448) ----------- ----------- Other income (expense): Interest expense................................. (2,736,146) (1,983,285) Other, net....................................... (186,000) 47,784 ----------- ----------- (2,922,146) (1,935,501) ----------- ----------- Net loss....................................... $(3,795,522) $(2,330,949) =========== ===========
See accompanying notes to financial statements. F-160 CROWN MEDIA, INC.--WESTERN CONNECTICUT STATEMENTS OF DIVISION EQUITY YEAR ENDED DECEMBER 31, 1994 AND THE PERIOD FROM DECEMBER 28, 1992 THROUGH DECEMBER 31, 1993 Acquisition of assets on December 28, 1992 (note 2)................ $78,187,793 Net change in current accounts with Parent......................... (1,508,884) Net loss........................................................... (2,330,949) ----------- Division equity at December 31, 1993............................. 74,347,960 Net change in current accounts with Parent......................... 10,702,973 Net loss........................................................... (3,795,522) ----------- Division equity at December 31, 1994............................. $81,255,411 ===========
See accompanying notes to financial statements. F-161 CROWN MEDIA, INC.--WESTERN CONNECTICUT STATEMENTS OF CASH FLOWS
THE PERIOD FROM DECEMBER 28, YEAR ENDED 1992 THROUGH DECEMBER 31, DECEMBER 31, 1994 1993 ------------ --------------- Cash flows from operating activities: Net loss....................................... $ (3,795,522) $ (2,330,949) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization................ 9,031,362 8,458,969 Changes in current assets and liabilities: Accounts receivable, net................... (106,208) (483,473) Prepaid expenses........................... 196,775 (219,777) Accounts payable and accrued expenses...... 996,675 2,706,730 ------------ ------------ Net cash provided by operating activi- ties.................................... 6,323,082 8,131,500 ------------ ------------ Cash flows from investing activities: Purchase of equipment.......................... (13,053,554) (10,400,938) Other.......................................... 27,333 (119,307) ------------ ------------ Net cash used in investing activities.... (13,026,221) (10,520,245) ------------ ------------ Cash flows from financing activities: Net change in current accounts with Parent..... 10,702,973 (1,508,884) Increase (decrease) in bank overdraft.......... (3,897,629) 3,897,629 ------------ ------------ Net cash provided by financing activities.............................. 6,805,344 2,388,745 ------------ ------------ Net increase in cash and cash equivalents........ 102,205 -- Cash and cash equivalents, beginning of the year............................................ -- -- ------------ ------------ Cash and cash equivalents, end of the year....... $ 102,205 $ -- ============ ============ Cash paid for interest........................... $ 2,394,715 $ 1,983,285 ============ ============
See accompanying notes to financial statements. F-162 CROWN MEDIA, INC.--WESTERN CONNECTICUT NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 AND 1993 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Organization On December 28, 1992, Crown Media, Inc. (the "Parent") acquired from the former owner the New Milford, Housatonic and Mid-Connecticut cable television franchises located in western Connecticut. Subsequent to acquisition, these franchises were consolidated into one franchise which is referred to as Crown Media, Inc.--Western Connecticut (the "Division"). The Division's financial statements reflect the operations of the cable television systems comprising the consolidated franchise from the date of acquisition. On January 18, 1995, the Parent, including the Division, was sold to two unaffiliated third parties. (b) Basis of Accounting The financial information as of December 31, 1994 and 1993 presented herein reflects the financial position and results of operations of the Division and is not necessarily indicative of the financial position or results of operations had the Division operated as a separate, stand-alone entity during the reporting period. The results of operations for such period do not necessarily reflect any trends or future prospects for the Division as an independent entity. (c) Revenue Recognition Revenues are recognized when the related services are provided. (d) Property and Equipment Property and equipment is carried at cost, including acquisition cost allocated to tangible assets acquired. The Division charges depreciation to operations using the composite method on a straight-line basis over the estimated useful lives of the related property and equipment as follows: Trunk and distribution systems.................................. 5-15 years Subscriber installations........................................ 5-15 years Buildings and headends.......................................... 5-20 years Converters...................................................... 5 years Vehicles and equipment.......................................... 3-8 years Office equipment................................................ 5-10 years
Replacements, renewals and improvements are capitalized and repairs are charged to expense as incurred. (e) Intangible Assets Costs incurred in obtaining and renewing cable franchises are initially deferred and amortized over the legal lives of the franchises. Franchise rights acquired through the purchase of cable systems are stated at estimated fair value at the date of acquisition and amortized using the straight-line method over the estimated remaining term of the individual original franchises acquired. Goodwill is amortized using the straight-line method over 40 years. The Division continually evaluates the recoverability of its intangible assets as well as their useful lives using an analysis of projected undiscounted cash flows from Division operations over the remaining carrying lives of its intangible assets. (f) Income Taxes Income taxes are not provided in the accompanying financial statements as such taxes are the responsibility of the Parent. F-163 CROWN MEDIA, INC.--WESTERN CONNECTICUT NOTES TO FINANCIAL STATEMENTS--(CONTINUED) (g) Cash Management and Equity Account The cash management function for the Division is performed by the Parent. Excess cash funds are transferred to the Parent using the Division equity account. In addition, the Parent makes disbursements on behalf of the Division for items such as payroll, payroll taxes, employee benefits and other costs. Such amounts are transferred to the Division through the equity account and recognized in the accompanying statements of operations. (2) ACQUISITION On December 28, 1992, the Division, through its Parent, acquired the assets of certain cable television systems for consideration of $78,187,793 in a transaction accounted for as a purchase. Assets of the Division were revalued based on their estimated fair market values at the date of purchase. The purchase price was allocated to the Division's assets and liabilities as follows: Property and equipment........................................ $28,063,232 Franchise costs............................................... 47,954,589 Goodwill...................................................... 2,469,972 Accrued expenses.............................................. (300,000) ----------- Initial Division equity..................................... $78,187,793 ===========
(3) PROPERTY AND EQUIPMENT Property and equipment consists of the following at December 31, 1994 and 1993:
1994 1993 ----------- ----------- Trunk and distribution systems................. $34,234,112 $24,852,634 Subscriber installations....................... 5,293,292 3,738,961 Land, buildings and headends................... 5,499,520 4,845,004 Converters..................................... 4,602,877 3,477,669 Vehicles and equipment......................... 1,478,411 1,249,491 Office equipment............................... 358,154 300,411 Materials, supplies and distribution equip- ment.......................................... 15,215 -- ----------- ----------- Property and equipment, at cost.............. 51,481,581 38,464,170 Accumulated depreciation....................... (6,438,313) (2,915,213) ----------- ----------- Property and equipment, net.................. $45,043,268 $35,548,957 =========== =========== (4) INTANGIBLE ASSETS Intangible assets consist of the following at December 31, 1994 and 1993: 1994 1993 ----------- ----------- Franchise costs, net of accumulated amortiza- tion of $10,919,212 and $5,481,509............ $37,154,687 $42,592,387 Goodwill, net of accumulated amortization of $123,999 and $62,247.......................... 2,345,973 2,407,725 ----------- ----------- $39,500,660 $45,000,112 =========== ===========
F-164 CROWN MEDIA, INC.--WESTERN CONNECTICUT NOTES TO FINANCIAL STATEMENTS--(CONTINUED) (5) DIVISION EQUITY Division equity consists of the following at December 31, 1994 and 1993:
1994 1993 ----------- ----------- Interest-bearing investment by Parent............ $52,087,793 $52,087,793 Noninterest-bearing investment by Parent......... 26,100,000 26,100,000 Current accounts with Parent..................... 9,194,089 (1,508,884) Accumulated losses............................... (6,126,471) (2,330,949) ----------- ----------- $81,255,411 $74,347,960 =========== ===========
The Division is charged interest by the Parent on $52,087,793 of the Parent's investment at the lesser of the LIBOR rate plus .5% or a base rate determined by a specific bank. The interest is paid by crediting the Division equity account on a quarterly basis. At December 31, 1994, the interest rate was under the LIBOR-based option and was 6%. The remainder of the Division equity account is noninterest-bearing. (6) COMMITMENTS AND CONTINGENCIES The Division leases certain facilities and equipment under non-cancelable operating leases. Rent expense incurred under these leases for the years ended December 31, 1994 and 1993 was $102,596 and $79,457, respectively. These lease agreements, which expire on various dates through 2005, require future annual minimum rental payments of less than $81,000. The Parent allocates to the Division a portion of corporate expenses incurred by the Parent based on the relative number of subscribers in the Division's cable television systems. Such allocation is paid by the Division through its equity account and totaled approximately $537,720 and $473,000 for the years ended December 31, 1994 and 1993, respectively. In October 1992, Congress enacted the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"). During May 1993, pursuant to authority granted to it under the 1992 Cable Act, the Federal Communications Commission (the "FCC") issued its rate regulation rules which became effective September 1, 1993. These rules required cable systems not subject to effective competition, as defined, to set rates for basic and cable programming services, as well as related equipment and installations, pursuant to general cost-of-service standards or FCC prescribed benchmarks. These FCC benchmarks were based on an average 10% competitive differential between competitive and non-competitive systems. Effective September 1, 1993, cable systems not electing cost-of-service were required to reduce rates to the higher of the prescribed benchmarks or rates that were 10% below those in effect on September 1, 1992. In February 1994, the FCC announced further changes in its rate regulation rules and announced its interim cost-of-service standards. In connection with these changes, the FCC issued revised benchmark formulas, based on a revised competitive differential of 17%, which became effective May 15, 1994 or July 14, 1994, if certain conditions were met. Regulated cable systems were required to reduce rates to the higher of the new FCC prescribed benchmarks or rates that are 17% below those in effect on September 1, 1992. The Division believes that it has complied with all of the material provisions of the 1992 Cable Act, including the rate regulation rules currently in effect. Under the 1992 Cable Act, Congress delegated regulatory responsibility for the basic service tier and related equipment and installations to the local franchising authority and regulatory responsibility for the cable programming service tier to the FCC. If it is determined by the respective regulatory authority that the rates charged for such regulated services are inconsistent with the rate regulation rules, the Division could be responsible for refund liability. The amount of such refunds, if any, is not currently estimable by the Division. F-165 INDEPENDENT AUDITORS' REPORT The Partners Crown Cable, L.P.: We have audited the accompanying balance sheets of Crown Cable, L.P. as of December 31, 1994 and 1993, and the related statements of operations, partners' capital and cash flows for the year ended December 31, 1994 and the period from December 10, 1992 through December 31, 1993. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Crown Cable, L.P. as of December 31, 1994 and 1993, and the results of its operations and its cash flows for the year ended December 31, 1994 and the period from December 10, 1992 through December 31, 1993 in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Dallas, Texas January 18, 1995 F-166 CROWN CABLE, L.P. (A DELAWARE LIMITED PARTNERSHIP) BALANCE SHEETS DECEMBER 31, 1994 AND 1993
1994 1993 ----------- ----------- ASSETS Current assets: Cash and cash equivalents............................ $ 142,165 $ -- Accounts receivable, net of allowance for doubtful accounts of $20,828 and $50,958, respectively....... 300,424 309,194 Prepaid expenses..................................... 28,610 23,956 Intercompany receivable from parent.................. 4,845,742 3,624,115 ----------- ----------- Total current assets............................... 5,316,941 3,957,265 Property and equipment, net (note 3)................... 12,579,329 12,073,161 Intangibles and other assets, net (note 4)............. 26,974,928 34,570,187 ----------- ----------- $44,871,198 $50,600,613 =========== =========== LIABILITIES AND PARTNERS' CAPITAL Current liabilities: Bank overdraft....................................... $ -- $ 1,169,636 Accounts payable and accrued expenses................ 1,935,249 1,648,088 ----------- ----------- Total current liabilities.......................... 1,935,249 2,817,724 ----------- ----------- Long-term debt (note 5)................................ 41,175,652 41,175,652 Partners' capital (note 6) General partner...................................... 1,742,695 6,541,165 Limited partner...................................... 17,602 66,072 ----------- ----------- Total partners' capital............................ 1,760,297 6,607,237 Commitments and contingencies (note 7) ----------- ----------- $44,871,198 $50,600,613 =========== ===========
See accompanying notes to financial statements. F-167 CROWN CABLE, L.P. (A DELAWARE LIMITED PARTNERSHIP) STATEMENTS OF OPERATIONS
PERIOD FROM DECEMBER 10, YEAR ENDED 1992 THROUGH DECEMBER 31, DECEMBER 31, 1994 1993 ------------ ------------ Service revenues.................................... $11,596,931 $11,600,781 ----------- ----------- Operating expenses: Operating, general and administrative............. 5,298,470 5,760,704 Depreciation and amortization..................... 8,955,775 9,404,808 ----------- ----------- Total operating expenses........................ 14,254,245 15,165,512 ----------- ----------- Loss from operations............................ (2,657,314) (3,564,731) ----------- ----------- Other income (expense): Interest expense.................................. (2,162,839) (1,666,836) Other, net........................................ (26,787) 38,804 ----------- ----------- (2,189,626) (1,628,032) ----------- ----------- Net loss........................................ $(4,846,940) $(5,192,763) =========== ===========
See accompanying notes to financial statements. F-168 CROWN CABLE, L.P. (A DELAWARE LIMITED PARTNERSHIP) STATEMENTS OF PARTNERS' CAPITAL YEAR ENDED DECEMBER 31, 1994 AND THE PERIOD FROM DECEMBER 10, 1992 THROUGH DECEMBER 31, 1993
GENERAL LIMITED PARTNER PARTNER TOTAL ----------- -------- ----------- Initial capital contribution, December 10, 1992..................................... $11,682,000 $118,000 $11,800,000 Net loss.................................. (5,140,835) (51,928) (5,192,763) ----------- -------- ----------- Balance, December 31, 1993................ 6,541,165 66,072 6,607,237 Net loss.................................. (4,798,470) (48,470) (4,846,940) ----------- -------- ----------- Balance, December 31, 1994................ $ 1,742,695 $ 17,602 $ 1,760,297 =========== ======== ===========
See accompanying notes to financial statements. F-169 CROWN CABLE, L.P. (A DELAWARE LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS
PERIOD FROM DECEMBER 10, YEAR ENDED 1992 THROUGH DECEMBER 31, DECEMBER 31, 1994 1993 ------------ ------------ Cash flows from operating activities: Net loss........................................... $(4,846,940) $(5,192,763) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization..................... 8,955,775 9,404,808 Changes in certain assets and liabilities: Accounts receivable, net......................... 8,770 (460,797) Prepaid expenses................................. (4,654) 121,458 Accounts payable and accrued expenses............ 287,161 (66,054) ----------- ----------- Net cash provided by operating activities....... 4,400,112 3,806,652 ----------- ----------- Cash flows from investing activities: Purchase of equipment.............................. (1,803,173) (1,258,685) Other.............................................. (63,511) (93,488) ----------- ----------- Net cash used in investing activities............ (1,866,684) (1,352,173) ----------- ----------- Cash flows from financing activities: Advances to parent, net............................ (1,221,627) (3,624,115) Change in bank overdraft........................... (1,169,636) 1,169,636 ----------- ----------- Net cash used in financing activities............ (2,391,263) (2,454,479) ----------- ----------- Net change in cash and cash equivalents.............. 142,165 -- Cash and cash equivalents: Beginning of year.................................. -- -- ----------- ----------- End of year........................................ $ 142,165 $ -- =========== =========== Cash paid for interest............................... $ 1,893,034 $ 1,666,836 =========== ===========
See accompanying notes to financial statements. F-170 CROWN CABLE, L.P. (A DELAWARE LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 AND 1993 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Organization Crown Cable, L.P., a Delaware limited partnership (the "Partnership"), formerly Tele-Media Company of Northeast Connecticut, L.P. ("Tele-Media"), was formed on May 10, 1982 for the purpose of owning and operating existing cable television systems. The name of the Partnership was changed, effective December 10, 1992 (note 2). The Partnership will terminate no later than December 31, 2014 as provided in the Partnership Agreement. The general partner is Crown Cable Company of Northeastern Connecticut, a wholly-owned subsidiary of Crown Media, Inc. (the "Parent"). (b) Revenue Recognition Revenues are recognized when the related services are provided. (c) Property and Equipment Property and equipment is carried at cost, including acquisition cost allocated to tangible assets acquired. The Partnership charges depreciation to operations using the composite method on a straight-line basis over the estimated useful lives of the related property and equipment as follows: Trunk and distribution systems.................................. 5-15 years Subscriber installations........................................ 5-15 years Buildings and headends.......................................... 5-20 years Converters...................................................... 5 years Vehicles and equipment.......................................... 3-8 years Office equipment................................................ 5-10 years
Replacements, renewals and improvements are capitalized and repairs are charged to expense as incurred. (d) Intangible and Other Assets Costs incurred in obtaining and renewing cable franchises are initially deferred and amortized over the legal lives of the franchises. Franchise rights acquired through purchase of cable systems are stated at estimated fair value at the date of acquisition and amortized using the straight-line method over the estimated remaining term of the individual franchises. Goodwill is amortized using the straight-line method over 40 years. Noncompete agreements are amortized on a straight-line basis over the original term of the agreements. The Partnership continually evaluates the recoverability of its intangible assets as well as their useful lives using an analysis of projected undiscounted cash flows from operations over the remaining carrying lives of its intangible assets. (e) Income Taxes Income taxes are not provided in the accompanying financial statements as such taxes are the responsibility of the partners. (f) Cash Management and Intercompany Account The cash management function for the Partnership is performed by the Parent. Excess cash funds are transferred to the Parent using the Partnership's intercompany account. In addition, the Parent makes disbursements on behalf of the Partnership for items such as payroll, payroll taxes, employee benefits and other costs. To the extent that the disbursements represent expenses applicable to the business of the Partnership, such amounts are transferred to the Partnership through its intercompany account and recognized in the accompanying statement of operations. The net intercompany receivable is unsecured and non-interest bearing. F-171 CROWN CABLE, L.P. (A DELAWARE LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS--(CONTINUED) (2) ACQUISITION On December 10, 1992, the general partner and sole limited partner (also a wholly-owned subsidiary of the Parent) acquired all outstanding partnership interests of Tele-Media for consideration of $11,800,000 in a transaction accounted for as a purchase. Assets and liabilities of the Partnership were revalued based on their estimated fair market values at the date of purchase. The purchase price was allocated to the Partnership's assets and liabilities as follows: Net working capital deficit assumed......................... $ (1,727,308) Property and equipment...................................... 12,205,962 Franchise costs............................................. 32,520,431 Noncompete agreements....................................... 5,425,000 Goodwill.................................................... 4,544,590 Other assets................................................ 6,977 Long-term debt.............................................. (41,175,652) ------------ Initial capital contribution.............................. $ 11,800,000 ============
(3) PROPERTY AND EQUIPMENT Property and equipment consists of the following at December 31, 1994 and 1993:
1994 1993 ----------- ----------- Trunk and distribution systems................... $ 9,164,749 $ 8,396,269 Subscriber installations......................... 1,563,975 1,092,307 Land, buildings and headends..................... 1,477,223 1,349,184 Converters....................................... 2,579,715 2,218,852 Vehicles and equipment........................... 409,364 294,526 Office equipment................................. 125,954 113,509 ----------- ----------- Property and equipment, at cost................ 15,320,980 13,464,647 Accumulated depreciation......................... (2,741,651) (1,391,486) ----------- ----------- Property and equipment, net.................... $12,579,329 $12,073,161 =========== ===========
(4) INTANGIBLES AND OTHER ASSETS Intangibles and other assets consist of the following at December 31, 1994 and 1993:
1994 1993 ----------- ----------- Franchise costs, net of accumulated amortization of $11,656,186 and $5,982,876........................ $20,957,733 $26,631,043 Goodwill, net of accumulated amortization of $233,645 and $120,029............................. 4,310,945 4,424,561 Noncompete agreements, net of accumulated amortization of $3,718,750 and $1,910,417......... 1,706,250 3,514,583 ----------- ----------- $26,974,928 $34,570,187 =========== ===========
(5) LONG-TERM DEBT The Partnership has a long-term interest bearing payable with the Parent in the amount of $41,175,652 as a result of the purchase of partnership interests on December 10, 1992 (note 2). The liability is unsecured and bears interest at the lesser of the LIBOR rate plus .5% or a base rate determined by a specified bank. Interest is F-172 CROWN CABLE, L.P. (A DELAWARE LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS--(CONTINUED) paid quarterly through the Partnership's intercompany account. At December 31, 1994, the interest rate was under the LIBOR-based option and was 6%. The liability was due in January 1996; however, as a result of the sale of the Parent on January 18, 1995, the liability was cancelled. (6) DISTRIBUTIONS AND ALLOCATIONS Profits and losses are allocated in proportion to the partners' original capital contributions on December 10, 1992. Losses are allocated to the limited partner only to the extent that such allocation would reduce the limited partner's capital account to zero. All remaining losses are allocated to the general partner. The Partnership is required to distribute all cash available for distribution. Distributions are to be made within 120 days after the end of each fiscal year and are allocated in the same proportion as profits and losses. The Parent charges the Partnership a management fee based on the number of subscribers in the Partnership's cable systems. Such management fee is paid by the Partnership through its intercompany account and totaled approximately $331,000 in 1994 and $299,000 in 1993. (7) COMMITMENTS AND CONTINGENCIES The Partnership leases certain facilities and equipment under non-cancelable operating leases. Rent expense incurred under these leases for the years ended December 31, 1994 and 1993 were $74,000 and $49,000, respectively. These lease agreements, which expire on various dates through 2005, require future annual minimum rental payments of less than $84,000. The Partnership is a party to lawsuits which are generally incidental to its business. In the opinion of management, after consulting with legal counsel, the outcome of these lawsuits will not have a material adverse effect on the Partnership's financial position. In October 1992, Congress enacted the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"). During May 1993, pursuant to authority granted to it under the 1992 Cable Act, the Federal Communications Commission (the "FCC") issued its rate regulation rules which became effective September 1, 1993. These rate regulation rules required cable systems not subject to effective competition, as defined, to set rates for basic and cable programming services, as well as related equipment and installations, pursuant to general cost-of-service standards or FCC prescribed benchmarks. These FCC benchmarks were based on an average 10% competitive differential between competitive and non-competitive systems. Effective September 1, 1993, cable systems not electing cost-of-service were required to reduce rates to the higher of the prescribed benchmarks or rates that were 10% below those in effect on September 1, 1992. In February 1994, the FCC announced further changes in its rate regulation rules and announced its interim cost-of-service standards. In connection with these changes, the FCC issued revised benchmark formulas, based on a revised competitive differential of 17%, which became effective May 15, 1994 or July 14, 1994, if certain conditions were met. Regulated cable systems were required to reduce rates to the higher of the new FCC prescribed benchmarks or rates that are 17% below those in effect on September 1, 1992. The Partnership believes that it has complied with all of the provisions of the 1992 Cable Act, including the rate regulation rules currently in effect. Under the 1992 Cable Act, Congress delegated regulatory responsibility for the basic service tier and related equipment and installations to the local franchising authority and regulatory responsibility for the cable programming service tier to the FCC. If it is determined by the respective regulatory authority that the rates charged for such regulated services are inconsistent with the rate regulation rules, the Partnership could be responsible for refund liability. The amount of such refunds, if any, is not currently estimable by the Partnership. F-173 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE ISSUER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE ISSUER SINCE THE DATE HEREOF. ---------------- TABLE OF CONTENTS
PAGE ---- Prospectus Summary........................................................ 3 Risk Factors.............................................................. 24 The Exchange Offer ....................................................... 33 The Company............................................................... 39 Capitalization............................................................ 40 Unaudited Selected Historical and Unaudited Pro Forma Financial Data...... 41 Unaudited Pro Forma Financial Statements ................................. 44 Management's Discussion and Analysis of Financial Condition and Results of Operations............................................................... 47 Business.................................................................. 57 Management................................................................ 81 Certain Relationships and Related Transactions............................................................. 84 Principal Securityholders................................................. 87 Description of Notes...................................................... 88 Certain Federal Income Tax Consequences................................... 105 Description of Other Indebtedness......................................... 109 Plan of Distribution...................................................... 114 Legal Matters............................................................. 115 Independent Certified Public Accountants.................................. 115 Glossary.................................................................. 116 List of Entities.......................................................... 117 Index to Audited Financial Statements..................................... F-1
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- An Affiliate of [LOGO] CHARTER COMMUNICATIONS $82,000,000 CCA HOLDINGS CORP. SENIOR SUBORDINATED NOTES DUE 1999 ------------------------ PROSPECTUS ------------------------ JUNE , 1997 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 145 of the General Corporation Law of the State of Delaware provides that a corporation has the power to indemnify a director, officer, employee or agent of the corporation and certain other persons serving at the request of the corporation in related capacities against amounts paid and expenses incurred in connection with an action or proceeding to which he is or is threatened to be made a party by reason of such position, if such person shall have acted in god faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, in any criminal proceeding, if such person had no reasonable cause to believe his conduct was unlawful, provided that, in the case of actions brought by or in the right of the corporation, no indemnification shall be made with respect to any matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the adjudicating court determines that such indemnification is proper under the circumstances. CCA's Certificate of Incorporation provides that CCA shall indemnify its directors and officers to the fullest extent permitted by Section 145 of the Delaware General Corporation Law. CCA's Certificate of Incorporation also provides that no director shall be liable to the Company or its stockholders for monetary damages for breach of his fiduciary duty as director, except for liability (i) of any breach of the director's duty of loyalty to CCA or its stockholders, (ii) for acts or omissions not in good faith or which involved intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law or (iv) for any transaction in which the director derived an improper personal benefit. CAC's Certificate of Incorporation provides that CAC shall indemnify its directors and officers to the fullest extent permitted by Section 145 of the Delaware General Corporation Law. CAC's Certificate of Incorporation also provides that no director shall be liable to the Company or its stockholders for monetary damages for breach of his fiduciary duty as director, except for liability (i) for any breach of the director's duty or loyalty to CAC or its stockholders, (ii) for acts or omissions not in good faith or which involved intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law or (iv) for any transaction in which the director derived an improper personal benefit. Cencom Cable's Certificate of Incorporation provides that Cencom Cable shall indemnify its directors and officers to the fullest extent permitted by Section 145 of the Delaware General Corporation Law. Cencom Cable's Certificate of Incorporation also provides that no director shall be liable to the Company or its stockholders for monetary damages for breach of his fiduciary duty as director, except for liability (i) of any breach of the director's duty of loyalty to Cencom Cable's or its stockholders, (ii) for acts or omissions not in good faith or which involved intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law or (iv) for any transaction in which the director derived an improper personal benefit. Section 17-108 of the Revised Limited Partnership Act of the State of Delaware provides that subject to such standards and restrictions, if any, as are set forth in its a partnership agreement, a limited partnership may, and shall have the power to, indemnify and hold harmless any partner or other person from and against any and all claims and demands whatsoever. CCE, L.P.'s Agreement of Limited Partnership provides that CCE, L.P. shall indemnify its directors and officers to the fullest extent permitted by applicable law. CCE, L.P.'s Agreement of Limited Partnership also provides that none of the general partners or any of their affiliates or the partners, officers, directors or employees of such general partner or affiliate shall be liable to the partnership or any partner for any act or omission taken or omitted by such person in good faith, provided that such act or omission did not constitute gross negligence, fraud, willful violation of the law, willful violation of the Agreement of Limited Partnership or reckless disregard of the duties of such person. II-1 ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Exhibits.
EXHIBIT NO. DESCRIPTION ------- ----------- 1.1 Placement Agreement, dated February 10, 1997, among CCA Holdings Corp., HC Crown Corp. and Furman Selz LLC 3.1 Amended and Restated Certificate of Incorporation of CCA Holdings Corp. 3.2 Amended and Restated By-laws of CCA Holdings Corp. 3.3 Certificate of Incorporation of CCA Acquisition Corp. 3.4 Amended and Restated By-laws of CCA Acquisition Corp. 3.5 Certificate of Incorporation of Cencom Cable Entertainment, Inc. 3.6 Amended and Restated By-laws of Cencom Cable Entertainment, Inc. 3.7 Certificate of Limited Partnership of Charter Communications Entertainment, L.P. 3.8 Amendment to Certificate of Limited Partnership of Charter Communications Entertainment, L.P. 3.9 Agreement of Limited Partnership of Charter Communications Entertainment, L.P. 4.1 Indenture, dated February 13, 1997, between CCA Holdings Corp. and Harris Trust and Savings Bank, as Trustee 4.2 Second Amended and Restated Guaranty, dated February 13, 1997, issued by CCA Acquisition Corp. 4.3 Second Amended and Restated Guaranty, dated February 13, 1997, issued by Cencom Cable Entertainment, Inc. 4.4 Second Amended and Restated Guaranty, dated February 13, 1997, issued by Charter Communications Entertainment, L.P. 4.5 Second Amended and Restated Subordination Agreement between Harris Trust and Savings Bank, as Trustee, CCA Holdings Corp. and Toronto Dominion (Texas) Inc., as Administrative Agent, dated February 13, 1997 4.6 Letter Agreement, dated November 15, 1996, between CCA Holdings Corp. and HC Crown Corp. 4.7 Form of Old Note (included in Exhibit 4.1) 4.8 Form of New Note (included in Exhibit 4.1) *5.1 Legal Opinion 10.1 Amended and Restated Loan Agreement dated as of September 29, 1995 (the "CCE-I Loan Agreement") among Charter Communications Entertainment I, L.P., as Borrower, Toronto Dominion (Texas), Inc. and Chemical Bank, as Documentation Agents, Toronto Dominion (Texas), Inc., Chemical Bank, CIBC Inc., Credit Lyonnais Cayman Island Branch and Nationsbank, N.A. (Carolinas), as Managing Agents, Banque Paribas and Union Bank, as Co-Agents, the Signatory Banks thereto, and Toronto Dominion (Texas), Inc., as Administrative Agent 10.2 First Amendment to the CCE-I Loan Agreement dated as of October 31, 1995 10.3 Second Amendment to the CCE-I Loan Agreement dated as of January 16, 1996 10.4 Third Amendment to the CCE-I Loan Agreement dated as of March 29, 1996 10.5 Fourth Amendment to the CCE-I Loan Agreement dated as of May 24, 1996 10.6 Fifth Amendment to the CCE-I Loan Agreement dated as of November 29, 1996 10.7 Sixth Amendment to the CCE-I Loan Agreement dated as of February 7, 1997
II-2
EXHIBIT NO. DESCRIPTION ------- ----------- 10.8 Amended and Restated Shareholders' Agreement dated as of January 18, 1995 between Kelso & Company, L.P., Charter Communications, Inc. and HC Crown Corp. 10.9 Amended and Restated Management Agreement dated as of September 29, 1995 between Charter Communications Entertainment I, L.P. and Charter Communications, Inc. 10.10 Amendment Number One to Amended and Restated Management Agreement dated as of October 31, 1995 between Charter Communications Entertainment I, L.P. and Charter Communications, Inc. 10.11 Amendment Number Two to Amended and Restated Management Agreement dated as of March 29, 1996 between Charter Communications Entertainment I, L.P. and Charter Communications, Inc. 10.12 Amendment Number Three to Amended and Restated Management Agreement dated as of November 29, 1996 between Charter Communications Entertainment I, L.P. and Charter Communications, Inc. 10.13 Certificate of Limited Partnership of Charter Communications Entertainment I, L.P. 10.14 Amendment to the Certificate of Limited Partnership of Charter Communications Entertainment I, L.P. 10.15 Agreement of Limited Partnership of Charter Communications Entertainment I, L.P. 10.16 Certificate of Limited Partnership of Charter Communications Entertainment II, L.P. 10.17 Agreement of Limited Partnership of Charter Communications Entertainment II, L.P. 10.18 Contingent Payment Agreement dated as of September 29, 1995 among Charter Communications Entertainment, L.P., CCT Holdings Corp. and Cencom CableTelevision, Inc. 10.19 Amended and Restated Stockholders' Agreement dated as of September 29, 1995 among CCA Holdings Corp., Kelso Investment Associates V, L.P., Kelso Equity Partners V, L.P. and Charter Communications, Inc. 10.20 Registration Rights Agreement dated as of January 18, 1995 (the "Registration Rights Agreement") among CCA Holdings Corp., Kelso Investment Associates V, L.P., Kelso Equity Partners V, L.P. and Charter Communications, Inc. 10.21 Amendment Number One to the Registration Rights Agreement dated as of September 29, 1995 12.1 Crown Systems, Ratio of Earnings to Fixed Charges Calculation 12.2 CCA Holdings Corp. and subsidiaries, Ratio of Earnings to Fixed Charges Calculation 21.1 List of Subsidiaries of Registrants 23.1 Consent of Arthur Andersen LLP. 23.2 Consent of Ernst & Young LLP 23.3 Consent of KPMG Peat Marwick LLP 23.4 Consent of Piaker & Lyons, P.C. 25.1 Statement of Eligibility of Harris Trust and Savings Bank, as Trustee, on Form T-1 27.1 Financial Data Schedule CCA Holdings Corp. 27.2 Financial Data Schedule CCA Acquisition Corp. 27.3 Financial Data Schedule Cencom Cable Entertainment, Inc. 27.4 Financial Data Schedule Charter Communications Entertainment, L.P. 99.1 Letter of Transmittal
- -------- *To be filed by amendment. (b) Financial Statement Schedules. Reports of Independent Certified Public Accountants incorporated by reference herein. II-3 ITEM 22. UNDERTAKINGS The undersigned hereby undertake with respect to the securities offered by them: 1. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the "Act") may be permitted as to directors, officers and controlling persons of the registrants pursuant to the foregoing provisions or otherwise, the Registrants have been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event a claim for indemnification against such liabilities (other than the payment by the Registrants of expenses incurred or paid by a director, officer or controlling person of the Registrants in the successful defense of any action, suit, or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrants will, unless in the opinion of its respective counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. 2. The Registrants hereby undertake to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. 3. The undersigned Registrants hereby undertake to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. 4. The undersigned Registrants hereby undertake that, for purposes of determining any liability under the Securities Act of 1933, each filing of each of the Registrants' annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of St. Louis, State of Missouri, on the 9th day of May, 1997. CCA Holdings Corp. /s/ Jerald L. Kent By:__________________________________ Name: Jerald L. Kent Title: President Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated: SIGNATURE TITLE DATE /s/ Jerald L. Kent President, Chief May 9, 1997 - ------------------------------------- Financial Officer JERALD L. KENT (Principal Financial Officer) and Director /s/ Howard L. Wood Chairman of the May 9, 1997 - ------------------------------------- Management HOWARD L. WOOD Committee and Director /s/ Ralph G. Kelly Senior Vice May 9, 1997 - ------------------------------------- President-- RALPH G. KELLY Treasurer (Principal Accounting Officer) /s/ George E. Matelich Director May 9, 1997 - ------------------------------------- GEORGE E. MATELICH /s/ Frank T. Nickell Director May 9, 1997 - ------------------------------------- FRANK T. NICKELL /s/ Thomas R. Wall IV Director May 9, 1997 - ------------------------------------- THOMAS R. WALL IV II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of St. Louis, State of Missouri, on the 9th day of May, 1997. CCA Acquisition Corp. /s/ Jerald L. Kent By:__________________________________ Name: Jerald L. Kent Title: President Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated: SIGNATURE TITLE DATE /s/ Jerald L. Kent President, Chief May 9, 1997 - ------------------------------------- Financial Officer JERALD L. KENT (Principal Financial Officer) and Director /s/ Howard L. Wood Chairman of the May 9, 1997 - ------------------------------------- Management HOWARD L. WOOD Committee and Director /s/ Ralph G. Kelly Senior Vice May 9, 1997 - ------------------------------------- President-- RALPH G. KELLY Treasurer (Principal Accounting Officer) /s/ George E. Matelich Director May 9, 1997 - ------------------------------------- GEORGE E. MATELICH /s/ Frank T. Nickell Director May 9, 1997 - ------------------------------------- FRANK T. NICKELL /s/ Thomas R. Wall IV Director May 9, 1997 - ------------------------------------- THOMAS R. WALL IV II-6 EXHIBIT INDEX CCA HOLDINGS, CORP.
EXHIBIT SEQUENTIAL NO. DESCRIPTION PAGE NO. ------- ----------- ---------- 1.1 Placement Agreement, dated February 10, 1997, among CCA Holdings Corp., HC Crown Corp. and Furman Selz LLC....... 3.1 Amended and Restated Certificate of Incorporation of CCA Holdings Corp............................................ 3.2 Amended and Restated By-laws of CCA Holdings Corp........ 3.3 Certificate of Incorporation of CCA Acquisition Corp..... 3.4 Amended and Restated By-laws of CCA Acquisition Corp..... 3.5 Certificate of Incorporation of Cencom Cable Entertainment, Inc....................................... 3.6 Amended and Restated By-laws of Cencom Cable Entertainment, Inc....................................... 3.7 Certificate of Limited Partnership of Charter Communications Entertainment, L.P........................ 3.8 Amendment to Certificate of Limited Partnership of Charter Communications Entertainment, L.P....................................... 3.9 Agreement of Limited Partnership of Charter Communications Entertainment, L.P........................ 4.1 Indenture, dated February 13, 1997, between CCA Holdings Corp. and Harris Trust and Savings Bank, as Trustee...... 4.2 Second Amended and Restated Guaranty, dated February 13, 1997, issued by CCA Acquisition Corp. ................... 4.3 Second Amended and Restated Guaranty, dated February 13, 1997, issued by Cencom Cable Entertainment, Inc. ........ 4.4 Second Amended and Restated Guaranty, dated February 13, 1997, issued by Charter Communications Entertainment, L.P. .................................................... 4.5 Second Amended and Restated Subordination Agreement between Harris Trust and Savings Bank, as Trustee, CCA Holdings Corp. and Toronto Dominion (Texas) Inc., as Administrative Agent, dated February 13, 1997............ 4.6 Letter Agreement, dated November 15, 1996, between CCA Holdings Corp. and HC Crown Corp............................................ 4.7 Form of Old Note (included in Exhibit 4.1)............... 4.8 Form of New Note (included in Exhibit 4.1)............... *5.1 Legal Opinion............................................ 10.1 Amended and Restated Loan Agreement dated as of September 29, 1995 (the "CCE-I Loan Agreement") among Charter Communications Entertainment I, L.P., as Borrower, Toronto Dominion (Texas), Inc. and Chemical Bank, as Documentation Agents, Toronto Dominion (Texas), Inc., Chemical Bank, CIBC Inc., Credit Lyonnais Cayman Island Branch and Nationsbank, N.A. (Carolinas), as Managing Agents, Banque Paribas and Union Bank, as Co-Agents, the Signatory Banks thereto, and Toronto Dominion (Texas), Inc., as Administrative Agent............................ 10.2 First Amendment to the CCE-I Loan Agreement dated as of October 31, 1995......................................... 10.3 Second Amendment to the CCE-I Loan Agreement dated as of January 16, 1996......................................... 10.4 Third Amendment to the CCE-I Loan Agreement dated as of March 29, 1996........................................... 10.5 Fourth Amendment to the CCE-I Loan Agreement dated as of May 24, 1996............................................. 10.6 Fifth Amendment to the CCE-I Loan Agreement dated as of November 29, 1996........................................ 10.7 Sixth Amendment to the CCE-I Loan Agreement dated as of February 7, 1997......................................... 10.8 Amended and Restated Shareholders' Agreement dated as of January 18, 1995 between Kelso & Company, L.P., Charter Communications, Inc. and HC Crown Corp. ................. 10.9 Amended and Restated Management Agreement dated as of September 29, 1995 between Charter Communications Entertainment I, L.P. and Charter Communications, Inc. .. 10.10 Amendment Number One to Amended and Restated Management Agreement dated as of October 31, 1995 between Charter Communications Entertainment I, L.P. and Charter Communications, Inc. ....................................
EXHIBIT SEQUENTIAL NO. DESCRIPTION PAGE NO. ------- ----------- ---------- 10.11 Amendment Number Two to Amended and Restated Management Agreement dated as of March 29, 1996 between Charter Communications Entertainment I, L.P. and Charter Communications, Inc. .................................... 10.12 Amendment Number Three to Amended and Restated Management Agreement dated as of November 29, 1996 between Charter Communications Entertainment I, L.P. and Charter Communications, Inc. .................................... 10.13 Certificate of Limited Partnership of Charter Communications Entertainment I, L.P. .................... 10.14 Amendment to the Certificate of Limited Partnership of Charter Communications Entertainment I, L.P. ............ 10.15 Agreement of Limited Partnership of Charter Communications Entertainment I, L.P. .................... 10.16 Certificate of Limited Partnership of Charter Communications Entertainment II, L.P. ................... 10.17 Agreement of Limited Partnership of Charter Communications Entertainment II, L.P. ................... 10.18 Contingent Payment Agreement dated as of September 29, 1995 among Charter Communications Entertainment, L.P., CCT Holdings Corp. and Cencom Cable Television, Inc. ........................................ 10.19 Amended and Restated Stockholders' Agreement dated as of September 29, 1995 among CCA Holdings Corp., Kelso Investment Associates V, L.P., Kelso Equity Partners V, L.P. and Charter Communications, Inc..................... 10.20 Registration Rights Agreement dated as of January 18, 1995 (the "Registration Rights Agreement") among CCA Holdings Corp., Kelso Investment Associates V, L.P., Kelso Equity Partners V, L.P. and Charter Communications, Inc...................................................... 10.21 Amendment Number One to the Registration Rights Agreement dated as of September 29, 1995........................... 12.1 Crown Systems, Ratio of Earnings to Fixed Charges Calculation.............................................. 12.2 CCA Holdings Corp. and subsidiaries, Ratio of Earnings to Fixed Charges Calculation................................ 21.1 List of Subsidiaries of Registrants...................... 23.1 Consent of Arthur Andersen LLP........................... 23.2 Consent of Ernst & Young LLP............................. 23.3 Consent of KPMG Peat Marwick LLP......................... 23.4 Consent of Piaker & Lyons, P.C........................... 25.1 Statement of Eligibility of Harris Trust and Savings Bank, as Trustee, on Form T-1............................ 27.1 Financial Data Schedule CCA Holdings Corp. .............. 27.2 Financial Data Schedule CCA Acquisition Corp. ........... 27.3 Financial Data Schedule Cencom Cable Entertainment, Inc. .................................................... 27.4 Financial Data Schedule Charter Communications Entertainment, L.P. ..................................... 99.1 Letter of Transmittal....................................
- -------- *To be filed by amendment. EX-1.1 2 PLACEMENT AGMNT DATED 2/10/97 CCA HOLDINGS & CROWN EXHIBIT 1.1 SENIOR SUBORDINATED NOTES DUE 1999 OF CCA HOLDINGS CORP. PLACEMENT AGREEMENT ------------------- February 10, 1997 FURMAN SELZ LLC 230 Park Avenue New York, New York 10169 Ladies and Gentlemen: HC Crown Corp. ("HC Crown"), a Delaware corporation and a wholly-owned subsidiary of Hallmark Cards Incorporated, proposes to sell to Furman Selz LLC (the "Placement Agent") an aggregate of $82,000,000 aggregate principal amount of Senior Subordinated Notes due 1999 (the "Notes"), plus accrued interest since January 18, 1995, the original date of issue of the Original Notes (as defined herein). CCA Holding Corp. ("CCA"), a Delaware corporation originally sold to HC Crown on January 18, 1995 Senior Subordinated Notes due 1999 (the "Original Notes") pursuant to a Senior Subordinated Loan Agreement, dated as of January 18, 1995, between CCA and HC Crown (as amended and restated by the Amended and Restated HC Loan Agreement dated as of November 15, 1996 (revised), the "HC Crown Loan Agreement"). Immediately prior to the Closing Time (as defined herein) the HC Crown Loan Agreement shall be converted into an indenture (the "Indenture"), between CCA and a trustee. The Notes issued pursuant to the Indenture will contain substantially the same terms and conditions as are contained in the HC Crown Loan Agreement and the Original Notes issued thereunder. Terms used herein but not defined herein shall have the meaning assigned to them in the Offering Memorandum (as defined herein). Pursuant to the terms of a Subordination Agreement, dated as of January 18, 1995 among HC Crown, CCA and certain lenders under a credit facility of CCE-I (as originally executed and delivered and thereafter amended and restated, the "Subordination Agreement" and, together with each other subordination agreement between any holder (or the trustee on behalf of such holder) of Notes and certain lenders under a credit facility of CCA, the "Subordination Agreements"), the Notes will be subordinated in right and priority of payment to all existing indebtedness of CCA, other than indebtedness that by its terms is expressly subordinated in right and priority of payment to the Notes. The obligations of the Original Notes were, and the obligations of the Notes will be, guaranteed (the "Guarantees") on a subordinated basis by two subsidiaries of CCA and by a limited partnership in which CCA owns indirect limited and general partnership interests. The Notes and the Guarantees are more fully described in the Offering Memorandum referred to below. The Notes will be offered and sold by HC Crown to the Placement Agent without registration under the Securities Act of 1933, as amended (the "Securities Act"), in reliance upon exemptions from the registration requirements of the Securities Act. In connection with the sale of the Notes, CCA has prepared a preliminary offering memorandum dated November 19, 1996 (the "Preliminary Offering Memorandum") and a final offering memorandum dated the date hereof (such final offering memorandum, in the form first furnished to the Placement Agent for use in connection with the offering and sale of the Notes, or if such form is not so used, in the form subsequently furnished for such use, the "Offering Memorandum"), each setting forth certain information concerning CCA, the Notes and HC Crown. CCA hereby confirms that it has authorized the use of the Preliminary Offering Memorandum and the Offering Memorandum in connection with the offer and resale of the Notes by the Placement Agent under Rule 144A of the Securities Act, subject to the provisions of Section 4(c) hereof. Unless stated to the contrary, all references herein to the Offering Memorandum are to the Offering Memorandum at the date hereof (the "Execution Time") and are not meant to include any amendment or supplement thereto subsequent to the Execution Time. If CCA prepares a supplement dated the date hereof to the Preliminary Offering Memorandum containing only pricing related information, then the term "Offering Memorandum" for purposes of this Agreement shall refer collectively to the Preliminary Offering Memorandum and such supplement. CCA and HC Crown understand that the Placement Agent proposes to make an offering of the Notes only on the terms, subject to the conditions and in the manner set forth in the Offering Memorandum and Section 3 hereof, as soon as the Placement Agent deems advisable after this Agreement has been executed and delivered. Pursuant to the HC Crown Loan Agreement, holders of the Original Notes were entitled to demand that CCA register the Original Notes pursuant to the Securities Act on two separate occasions, subject to the terms and provisions thereof. HC Crown has exercised the first demand registration right with respect to the Notes All expenses (other than internal expenses of CCA and the expenses of any annual audit) related to the first such exercise of registration rights by HC Crown will be paid by or on behalf of HC Crown pursuant to -2- the terms and provisions of a letter agreement dated November 15, 1999 between CCA and HC Crown (the "Letter Agreement"). Pursuant to the Letter Agreement, CCA has agreed to comply with HC Crown's request to file and use its best efforts to effect the registration of notes of CCA having terms substantially identical to those set forth in the Notes, which will be exchanged for the Notes (except that such notes as exchanged will not contain terms with respect to transfer restrictions under applicable securities laws). Additionally, the holders of the Notes shall be entitled to a second demand registration right pursuant to the Indenture after March 31, 1997. All expenses (other than internal expenses of CCA and the expenses of any annual audit) related to the second demand registration, if exercised, will be paid by the holders of the Notes exercising such registration rights in accordance with the terms and provisions of the Indenture. All references in this Agreement to financial statements and schedules and other information that is "contained," "included" or "stated" in the Offering Memorandum (and all other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information that is incorporated by reference in the Offering Memorandum; and all references in this Agreement to amendments or supplements to the Offering Memorandum shall be deemed to mean and include the filing of any document under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that is incorporated by reference in the Offering Memorandum. Section 1. Representations and Warranties. (a) CCA represents and ------------------------------ warrants to and agrees with the Placement Agent that: (i) CCA is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware with corporate power and authority under such laws to own, lease and operate its properties and conduct its business as described in the Offering Memorandum. (ii) CCA has all corporate power and authority to execute, deliver and perform its obligations under this Agreement. the Letter Agreement and the Indenture. (iii) As of the Closing Time this Agreement, the Indenture and the Letter Agreement will have been duly authorized, executed and delivered by CCA and upon such execution by CCA (assuming the due authorization, execution and delivery thereof by the other-parties thereto) will constitute the valid and binding obligations of CCA enforceable against CCA in accordance with their respective terms, except as enforcement -3- thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium, liquidation, receivership or other similar laws now or hereafter in effect relating to the enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law), and except as any rights to indemnity and contribution may be limited by federal and state securities laws and public policy considerations. (iv) The execution and delivery by CCA of, and its performance under this Agreement, the Indenture, and the Letter Agreement, and the consummation by CCA of the transactions contemplated hereby and thereby, do not and will not result in any violation of the charter or By-Laws of CCA, and do not and will not conflict in any material respect with, or result in a material breach of any of the terms or provisions of, or constitute a material default under, or result in the creation or imposition of any material lien, charge or encumbrance upon any property or assets of CCA under any indenture, mortgage, deed of trust, trust (constructive or other), loan agreement, lease, franchise, license or other agreement or instrument to which CCA is a party or by which CCA or any of its properties are bound, any statute, or any judgment, order, decree, rule or regulation of any court or governmental agency or body applicable to, or having jurisdiction over CCA or its properties. (v) The Notes have been duly authorized, executed and delivered, have been validly issued and constitute valid and binding obligations of CCA, entitled to the benefits of the Indenture and enforceable against CCA in accordance with their terms, except that (a) enforceability thereof may be limited by (i) bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium, liquidation, receivership or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity), (b) any rights to indemnification and contribution may be limited by federal and state securities laws and public policy considerations, (c) any waiver of stay or extension of usury laws contained in the Indenture may be unenforceable and (d) any liquidated damages provisions -4- contained therein may be unenforceable, in whole or in part. (vi) The Notes satisfy the eligibility requirements of Rule 144A(d)(3) under the Securities Act. (vii) As of their respective dates, none of the Offering Memorandum or any amendment or supplement thereto, and as of the Closing Time, the Offering Memorandum, as amended or supplemented to such time, contained or will contain an untrue statement of a material fact or omitted or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; except that this representation and warranty does not apply to statements or omissions made in (i) reliance upon and in conformity with information furnished in writing or confirmed in writing to CCA by or on behalf of the Placement Agent or HC Crown expressly for use in the Offering Memorandum or (ii) respect of events, facts or circumstances relating to the Crown Missouri Systems and the Crown Connecticut Systems (collectively, the "Crown Systems") during the period prior to January 18, 1995. (viii) The financial statements of CCA and certain affiliates included or incorporated by reference in the offering Memorandum present fairly the consolidated financial position of CCA and such affiliates as of the dates indicated and the consolidated results of operations and the consolidated statements of cash flows of CCA and such affiliates for the periods specified. The selected consolidated financial data of CCA and certain affiliates included or incorporated by reference in the Offering Memorandum present fairly the information shown therein and have been compiled on a basis consistent with that of the audited financial statements of CCA included or incorporated by reference in the Offering Memorandum. The consolidated financial statements of CCA included in or incorporated by reference in the Offering Memorandum have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved. (ix) None of CCA, its affiliates (as such term is defined in Rule 501(b) of Regulation D under the Securities Act ("Regulation D")), or any person acting on behalf of the foregoing has, directly or indirectly, made offers or sales of any security, or solicited offers to buy any security, under circumstances that would require the registration of the Notes under the Securities Act. -5- (x) None of CCA, its affiliates (as such term is defined in Rule 501(b) of Regulation D under the Securities Act ("Regulation D")), or any person acting on behalf of CCA has engaged, in connection with the offering of the Notes or any security of the same class or series as the Notes, (A) in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act or (B) in any directed selling efforts within the meaning of Rule 902 under the Securities Act in the United States in connection with the Notes being offered and sold pursuant to Regulation S under the Securities Act, and each of them has complied with the offering restrictions requirement of Regulation S under the Securities Act, CCA has not entered and will not enter into any contractual arrangement with respect to the distribution of the Notes except for this Agreement, the HC Crown Loan Agreement, the Letter Agreement, the Indenture, and the Subordination Agreements. (xi) CCA has not taken and will not take, directly or indirectly, any action designed to cause or result in stabilization or manipulation of the price of the Notes. (xii) No authorization, approval, consent or license of any governmental instrumentality or court (other than under United States securities or state securities or "blue sky" laws and the rules and regulations of the NASD), is required for the performance by CCA of its obligations under this Agreement and the Indenture. (b) HC Crown represents and warrants to and agrees with the Placement Agent that: (i) HC Crown has all corporate power and authority to execute, deliver and perform its obligations under this Agreement, the Letter Agreement and the HC Crown Loan Agreement. (ii) As of the Closing Time, this Agreement and the Letter Agreement will have been duly authorized, executed and delivered by HC Crown and upon such execution by HC Crown (assuming the due authorization, execution and delivery thereof by the other parties thereto) will constitute the valid and binding obligations of HC Crown enforceable against HC Crown in accordance with their respective terms, except as enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium (general or specific), liquidation, receivership or similar laws reflecting enforcement of creditors' rights generally and except as -6- enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law), and except as any rights to indemnity and contribution may be limited by federal and state securities laws and public policy considerations. (iii) The performance of this Agreement and the consummation of the transactions contemplated hereby will not result in a material breach or violation by HC Crown of any of the terms or provisions of, or constitute a material default by HC Crown under, any indenture, mortgage, deed of trust, trust (constructive or other), loan agreement, lease, franchise, license or other agreement or instrument to which HC Crown is a party or by which HC Crown or any of its properties is bound, any statute, or any judgment, decree, order, rule or regulation of any court or governmental agency or body applicable to HC Crown or any of its properties. (iv) HC Crown has good and valid title to the Notes proposed to be sold by HC Crown hereunder and full corporate power and authority to enter into this Agreement and to sell, assign, transfer and deliver such Notes hereunder. (v) Assuming the Placement Agent acquires the Notes from HC Crown in good faith and without notice of any adverse claim (as such term is defined in Section 8-302 of the Uniform Commercial Code currently in effect in the State of New York), upon delivery of such Notes and payment therefor in accordance with the terms of the Placement Agreement, the Placement Agent will have acquired good and valid title to such Notes, free and clear of any pledges, liens, claims, encumbrances, security interests and other adverse claims other than those created by the action or inaction of the Placement Agent. (vi) As of their respective dates, none of the Offering Memorandum or any amendment or supplement thereto, and as of the Closing Time, the Offering Memorandum, as amended or supplemented to such time, contained or will contain an untrue statement of a material fact or omitted or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; except that this representation and warranty does not apply to statements or omissions made in reliance upon and in conformity with information furnished in writing or confirmed in writing (x) to CCA or HC Crown by or on behalf of the Placement Agent -7- expressly for use in the Offering Memorandum or (y) by or on behalf of CCA expressly for use in the Offering Memorandum. (vii) None of HC Crown, its affiliates (as such term is defined in Rule 501(b) of Regulation D), or any person acting on the behalf of HC Crown (exclusive of the Placement Agent) has engaged, in connection with the offering of the Notes or any security of the same class or series as the Notes, (A) in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act or (B) in any directed selling efforts within the meaning of Rule 902 under the Securities Act in the United States in connection with the Notes being offered and sold pursuant to Regulation S under the Securities Act, and each of them has complied with the offering restrictions requirement of Regulation S under the Securities Act, HC Crown has not entered and will not enter into any contractual arrangement with respect to the distribution of the Notes except for this Agreement, the Indenture, the Letter Agreement and the HC Crown Loan Agreement. (viii) None of HC Crown, its affiliates (as such term is defined in Rule 501(b) of Regulation D under the Securities Act ("Regulation D")), or any person acting on behalf of the foregoing (exclusive of the Placement Agent) has, directly or indirectly, made offers or sales of any security, or solicited offers to buy any security, under circumstances that would require the registration of the Notes under the Securities Act. (ix) HC Crown has not taken and will not take, directly or indirectly, any action designed to or which has constituted or which might reasonably be expected to cause or result in stabilization or manipulation of the price of any security of CCA to facilitate the sale or resale of the Notes. (x) Assuming the accuracy of the representations and warranties and compliance with the agreements of CCA set forth in Section 1 hereof and of the Placement Agent in Section 3 hereof, it is not necessary in connection with the offer, sale and delivery of the Notes to the Placement Agent, or in connection with the initial resale of the Notes by the Placement Agent in accordance with this Agreement, to register the Notes under the Securities Act. (xi) HC Crown is not required to be registered under the Investment Company Act of 1940, as amended. -8- (xii) No authorization, approval, consent or license of any governmental instrumentality or court (other than under United States securities or state securities or "blue sky" laws and the rules and regulations of the NASD), is required for the performance by HC Crown of its obligations under this Agreement and the Indenture. (c) Any certificate signed by any officer of HC Crown and delivered to the Placement Agent or to counsel for the Placement Agent shall be deemed a representation and warranty by HC Crown to the Placement Agent as to the matters covered thereby. Section 2. Sale and Delivery to the Placement Agent; Closing. (a) ------------------------------------------------- On the basis of the representations and warranties herein contained, and subject to the terms and conditions herein set forth, HC Crown agrees to sell to the Placement Agent, and the Placement Agent agrees to purchase from HC Crown, at the purchase price of $87,711,000 an aggregate of $82,000,000 principal amount of Notes. (b) Payment of the purchase price for, and delivery of certificates for, the Notes shall be made at the offices of Paul, Hastings, Janofsky & Walker LLP, 399 Park Avenue, New York, New York 10022, at 10:00 A.M., eastern standard time, on February 13, 1997 or such later date and time not more than two full business days thereafter as the Placement Agent, HC Crown and CCA shall mutually determine (such date and time of payment and delivery being herein called the "Closing Time"). (c) Certificates for the Notes to be purchased by the Placement Agent shall be in such denominations and registered in such names as the Placement Agent may request in writing at least two full business days before the Closing Time. The certificates for the Notes will be made available in New York City for examination and packaging by the Placement Agent not later than 10:00 A.M. on the business day immediately prior to the Closing Time. Section 3. Resale of the Notes. The Placement Agent represents and ------------------- warrants to, and agrees with, CCA and HC Crown that: (a) it is a Qualified Institutional Buyer within the meaning of Rule 144A(a)(i) under the Securities Act and an "accredited investor" within the meaning of Rule 501(a) under the Securities Act; (b) it has not offered or sold, and will not offer or sell, any Notes except (i) to persons whom it reasonably believes to be Qualified Institutional Buyers, (ii) to a -9- limited number of other institutional accredited investors whom it believes to be "accredited investors" (as defined in Rule 501(a) (1), (2), (3) or (7) of Regulation D) that, prior to their purchase of the Notes, deliver to it a letter substantially in a form acceptable to CCA and HC Crown or (iii) to non-U,S, persons outside the United States to whom it reasonably believes offers and sales of the Notes may be made in reliance upon Regulation S under the Securities Act; (c) none of it, any of its affiliates, or any person acting on its or their behalf has made or will make offers or sales of the Notes in the United States by (i) means of any form of general solicitation or general advertising (within the meaning of Regulation D) or (ii) in any manner involving a public offering (within the meaning of Section 4(2) under the Securities Act) in the United States or in any manner which does not comply with the provisions of the Securities Act or the rules and regulations thereunder; (d) in connection with the transactions described in Section 3(b)(iii), it will sell Notes in such transactions only in accordance with Regulation S under the Securities Act and has not offered or sold, and will not offer or sell, the Notes to, or for the account or benefit of, U.S. persons (i) as part of its distribution at any time or (ii) otherwise until one year after the Closing Time, and it will send to each distributor, dealer or other person receiving a selling concession, fee or remuneration to which it sells the Notes during the restricted period a confirmation or other notice setting forth the restrictions on offers and sales of the Notes within the United States or to, or for the account or benefit of, U.S. persons. Terms used in this paragraph have the meanings given to them by Regulation S under the Securities Act; (e) it (i) has not offered or sold and will not offer or sell any Notes to persons in the United Kingdom, except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or payment) for the purposes of their businesses or otherwise in circumstances which do not constitute an offer to the public in the United Kingdom for purposes of the Public Offers of Securities Regulations 1995, (ii) has complied and will comply with all applicable provisions of the Financial Services Act 1986 of the United Kingdom with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom, and (iii) has only issued or passed on and will only issue or pass on in the United Kingdom any document in connection with the issue of the Notes to a person who is of a kind described in Article 8 of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) (No. 2) Order 1995 of the United Kingdom or is a -10- person to whom the document may otherwise lawfully be issued or passed on; and (f) in the case of a non-bank subsequent purchaser of a Note acting as a fiduciary for one or more third parties, in connection with an offer and sale to such purchaser pursuant to clause (b) above, each such third party shall, in the judgment of the Placement Agent, be an "accredited investor" or a Qualified Institutional Buyer, as such terms are defined above, or a non-U.S. person outside the United States. Section 4. Certain Covenants of CCA and HC Crown. CCA and HC Crown ------------------------------------- each severally (and not jointly) with respect to itself only covenants, to the extent applicable, with the Placement Agent as follows: (a) CCA will furnish to the Placement Agent, HC Crown and their respective counsel, without charge, as many copies of the Preliminary Offering Memorandum and the Offering Memorandum and any amendments or supplements thereto as they may reasonably request (it being understood that CCA's ability to comply with this clause (a) is subject to receipt of sufficient copies from the financial printing firm, whose fees and expenses are being paid by or on behalf of HC Crown). (b) CCA will give the Placement Agent and HC Crown timely notice of its intention to prepare any amendment or supplement to the Preliminary Offering Memorandum or the Offering Memorandum, and will not distribute any such amendment or supplement to which the Placement Agent or counsel for the Placement Agent shall reasonably object. (c) If at any time prior to completion of the distribution of the Notes by the Placement Agent to purchasers who are not affiliates of the Placement Agent (as determined by the Placement Agent) any event shall occur or condition exist as a result of which it is necessary, in the reasonable opinion of the Placement Agent, counsel for the Placement Agent, HC Crown, counsel for HC Crown, CCA or counsel for CCA, to amend or supplement the Offering Memorandum in order that the Offering Memorandum, as then amended or supplemented, will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, CCA will, subject to paragraph (b) of this Section 4, promptly prepare such amendment or supplement as may be necessary to correct such untrue statement or omission (in form and substance reasonably agreed upon by counsel to the Placement Agent, counsel to CCA and counsel to HC Crown), so that as so amended or supplemented, the statements in the Offering Memorandum will -11- not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading and furnish to the Placement Agent such number of copies of such amendment or supplement as the Placement Agent may reasonably request (it being understood that CCA's ability to comply with this clause (c) is subject to receipt of sufficient copies from the financial printing firm, whose fees and expenses are being paid by or on behalf of HC Crown), CCA agrees to notify the Placement Agent and HC Crown in writing to suspend use of the Offering Memorandum as promptly as practicable after the officers of CCA become aware of any event or circumstances which would require an amendment or supplement to the Offering Memorandum pursuant to this paragraph (c), and the Placement Agent and HC Crown hereby agree upon receipt of such notice from CCA to suspend use of the Offering Memorandum until CCA has amended or supplemented the Offering Memorandum to correct such misstatement or omission. (d) Notwithstanding any provision of paragraph (b) or (c) of this Section 4 to the contrary, however, CCA's obligations under paragraphs (b) and (c) of this Section 4 and the Placement Agent's and HC Crown's obligations under paragraph (c) of this Section 4 shall terminate on the earlier to occur of (i) the effective date of a registration statement with respect to the Notes filed pursuant to the Letter Agreement and (ii) the date upon which the Placement Agent and its affiliates cease to hold Notes acquired as part of their initial distribution, but in any event (in the case of this clause (ii)) not later than nine months from the Closing Time. (e) None of CCA, HC Crown or any of their respective affiliates (as defined in Rule 501(b) under the Securities Act), nor any person acting on behalf of the foregoing, will engage in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with any offer or sale of the Notes in the United States, or engage in any directed selling efforts (as defined in Rule 902 under the Securities Act) with respect to the Notes prior to the effectiveness of a registration statement with respect to the Notes, and each of them will comply with the offering restrictions requirement of Regulation S with respect to the Notes. Terms used in this clause (e) have the meanings ascribed to them by Regulation S. No covenant is made hereby with respect to the conduct of the Placement Agent or its affiliates (as such term is defined in Rule 501(b) under the Securities Act). (f) None of CCA, HC Crown or any of their respective affiliates (as defined in Rule 501(b) under the Securities Act), will, directly or indirectly, make offers or -12- sales of any securities, or solicit offers to buy any security, under circumstances that would require the registration of the Notes under the Securities Act. No covenant is made hereby with respect to the conduct of the Placement Agent or its affiliates (as such term is defined in Rule 501(b) under the Securities Act). (g) Each Note will bear a legend substantially in the following form until such legend shall no longer be necessary or advisable because the Notes are no longer subject to the restrictions on transfer described herein: THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR -------------- SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW, BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) or (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY, EXCEPT (A) TO THE ISSUER, OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE OR REGISTRAR), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND, IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THE SECURITY, IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, WRITTEN LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, AS USED -13- HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT, (h) The Placement Agent will arrange for the registration and qualification of the Notes for offering and sale under the applicable securities or "blue sky" laws of such states and other U.S. jurisdictions as the Placement Agent may reasonably designate in connection with the resale of the Notes as contemplated by this Agreement and the Offering Memorandum and will continue such qualifications in effect for as long as may be necessary to complete the distribution of the Notes; provided that in no event shall HC Crown be obligated -------- to (i) qualify itself or CCA as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to so qualify but for this Section 4(i), (ii) file any general consent to service of process in any jurisdiction where it is not at the Closing Tie then so subject, (iii) subject itself to taxation in any such jurisdiction if it is not so subject or (iv) register the Notes under the Securities Act except in accordance with the Letter Agreement and the Indenture, CCA and HC Crown, as applicable, shall promptly advise the Placement Agent of the receipt by CCA or HC Crown of any notification with respect to the suspension of the qualification or exemption from qualification of the Notes for offering or sale in any jurisdiction or the institution of any proceeding for such purpose. Section 5. Payment of Expenses. HC Crown will pay all costs and ------------------- expenses incident to the performance of the obligations under this Agreement, including (a) the preparation and printing of the Preliminary Offering Memorandum and the Offering Memorandum (including financial statements and exhibits) and any amendments or supplements thereto, and the cost of delivery thereto to the Placement Agent, (b) the preparation, issuance, printing and distribution of the Notes and any survey of state securities or "blue sky" laws or legal investment memoranda ("Blue Sky Survey"), (c) the delivery of the Notes to the Placement Agent, including any stock transfer taxes payable upon the sale of the Notes to the Placement Agent, (d) the delivery of the Notes by the Placement Agent to the purchasers thereof, including any stock transfer taxes payable upon the sale of the Notes by the Placement Agent, (e) the reasonable fees and disbursements of CCA's counsel (Paul, Hastings, Janofsky & Walker LLP and Debevoise & Plimpton, it being understood that HC Crown's obligation to reimburse the fees and disbursements of Debevoise & Plimpton shall not exceed $40,000) and accountants, (f) the qualification of the Notes under the applicable state securities or "blue sky" laws in accordance with Section 4(i) hereof, including all filing fees and -14- reasonable fees and disbursements of counsel for the Placement Agent in connection therewith and in connection with the Blue Sky Survey, (g) any filing fees in connection with any filing for review of the offering with the National Association of Securities Dealers, Inc. ("NASD"), (h) any fees charged by rating agencies for rating the Notes, (i) the fees and expenses of the transfer agent and registrar for the Notes including the reasonable fees and disbursements of counsel for such transfer agent and registrar in connection herewith and (j) all fees and expenses of the Placement Agent including the reasonable fees and disbursements of counsel for the Placement Agent. If the sale of the Notes provided for herein is not consummated because this Agreement is terminated pursuant to Section 10(a) (i) hereof or because any condition to the obligations of the Placement Agent set forth in Section 6 hereof is not satisfied, other than by reason of a default by the Placement Agent hereunder, HC Crown shall reimburse the Placement Agent promptly upon demand for all reasonable out-of-pocket expenses (including reasonable fees and disbursements of counsel to the Placement Agent) that shall have been incurred by it in connection with the proposed purchase and sale of the Notes; provided, however, that in no event shall CCA or any of its affiliates be obligated with respect to any of such expenses (subject to the immediately preceding paragraph). Section 6. Conditions of Placement Agent's Obligations. The ------------------------------------------- obligations of the Placement Agent to purchase and pay for the Notes that it has agreed to purchase pursuant to this Agreement are subject to the accuracy in all material respects of the representations and warranties of CCA and HC Crown contained herein or in certificates of any officer of CCA, HC Crown or any of their respective subsidiaries delivered pursuant to the provisions hereof, to the performance by CCA and HC Crown of their respective obligations hereunder, and to the following conditions: (a) At the Closing Time, the Placement Agent and HC Crown shall have received a signed opinion of Paul, Hastings, Janofsky & Walker LLP, counsel for CCA, dated as of the Closing Time, in form and substance reasonably satisfactory to counsel for the Placement Agent and HC Crown, to the effect that: (i) CCA is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware with corporate power and authority under such laws to own, lease and operate its properties and conduct its business, as described in the Offering Memorandum. -15- (ii) CCA is duly qualified to transact business as a foreign corporation and is in good standing in Massachusetts and California. (iii) This Agreement, the Letter Agreement and the Indenture have each been duly authorized, executed and delivered by CCA and constitute a valid and binding agreement of CCA enforceable against CCA in accordance with their respective terms, except to the extent that (a) enforcement thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, liquidation, receivership, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors' rights generally, (ii) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity) and (iii) usury laws, (b) any right to indemnity and contribution may be limited by state or federal securities laws and public policy considerations, (c) any waiver of stay or extension or usury laws contained in the Indenture may be unenforceable and (d) any liquidated damages provisions contained therein may be unenforceable, in whole or in part. (iv) The Initial Notes have been duly authorized, executed, and delivered and, when authenticated by the Trustee, will be validly issued and constitute valid and binding obligations of CCA, entitled to the benefits of the Indenture and enforceable against CCA in accordance with their terms, except that (a) enforceability thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, liquidation, receivership, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors' rights generally, (ii) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity) and (iii) usury laws, (b) any right to indemnity and contribution may be limited by state or federal securities laws and public policy considerations, (c) any waiver of stay or extension or usury laws contained in the Indenture may be unenforceable and (d) any liquidated damages provisions contained therein may be unenforceable, in whole or in part, (v) To the knowledge of such counsel, no authorization, approval consent or license of any governmental instrumentality or court that, in the opinion of such counsel, is normally applicable to transactions of the type contemplated by this Agreement (other than under United States securities or state securities or "blue sky" laws and the rules and regulations of the NASD, as to which no opinion need be -16- expressed), is required for the performance by CCA of its obligations under this Agreement and the Indenture. (vi) The execution and delivery by CCA of, and its performance under this Agreement, the Indenture, and the Letter Agreement, and the consummation by CCA of the transactions contemplated hereby and thereby, do not and will not result in any violation of the charter or By-Laws of CCA, and do not and will not conflict in any material respect with, or result in a material breach of any of the terms or provisions of, or constitute a material default under, or result in the creation or imposition of any material lien, charge or encumbrance upon any property or assets of CCA under (A) any agreement or instrument of which such counsel is aware to which CCA is a party identified in such counsel's opinion, (B) any existing applicable law (other than state securities Blue Sky laws), or (C) to the knowledge of such counsel, any judgment, order or decree of which such counsel is aware under applicable laws of any New York, Delaware or federal government, governmental instrumentality or court having jurisdiction over CCA or its properties. Such counsel need express no opinion, however, as to whether the execution, delivery and performance by CCA of any of the agreements executed and delivered in connection with the transactions contemplated hereby will constitute a violation of or a default under any covenant, restriction or provision with respect to financial ratios or tests or any aspect of the financial condition or results of operations of CCA and the Restricted Subsidiaries. (vii) When the Notes were issued such securities were not of the same class (within the meaning of Rule 144A under the Securities Act) as securities of CCA listed on a national securities exchange registered under Section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer quotation system. (viii) The terms of the Indenture, the Letter Agreement and the Notes have been reviewed by such counsel and conform in all material respects to the summary descriptions thereof in the Offering Memorandum. (ix) Statements set forth in the Offering Memorandum, insofar as such statements constitute a summary of the legal matters, documents or legal proceedings or refer to statements of regulation, law or legal conclusions, fairly present the information called for with respect to such legal matters, documents or legal proceedings and statements, and are accurate in all material respects. -17- In addition, such opinion shall include a statement, subject to such qualifications as are customarily applied to such statements by such counsel, that such counsel have participated in the preparation of the Offering Memorandum and in conferences with officers and other representatives of CCA, representatives of the independent public accountants for CCA and certain of its affiliates, officers and representatives of HC Crown and with the Placement Agent's representatives at which the contents of the Offering Memorandum and related matters were discussed and, although such counsel need not pass upon or assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Offering Memorandum, on the basis of the foregoing, no facts have come to the attention of such counsel that have caused them to believe that the Offering Memorandum or any amendment or supplement thereto (except for the financial statements, notes, schedules, statistical and other financial data included therein or omitted therefrom, as to which such counsel need express no statement) at the time any such amended or supplemented Offering Memorandum was issued or at the Closing Time, contained or contains an untrue statement of a material tact or omitted or omits to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that such counsel need express no opinion or belief with respect to (i) the financial statements, notes, schedules, statistical and other financial data included therein or omitted therefrom or (ii) events, facts or circumstances relating to the Crown Systems during the period prior to January 18, 1995. In giving such opinion, such counsel may state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon the representations and warranties contained in this Agreement, certificates of officers of CCA and its affiliates, and certificates of public officials. (b) At the Closing Time, the Placement Agent shall have received a signed opinion of Dow, Lohnes & Albenson, counsel to HC Crown, dated as of the Closing Time, in form and substance reasonably satisfactory to counsel for the Placement Agent, to the effect that: Assuming and based solely upon (a) the accuracy of the representations and warranties of CCA and HC Crown set forth in Section 1 of this Agreement and of the Placement Agent set forth in Section 3 of this Agreement, (b) the due performance by CCA and HC Crown of the covenants and agreements set forth in Section 4 of this Agreement and the due performance by the Placement Agent of the covenants and agreements set forth in Section 3 of -18- this Agreement, (c) compliance by the Placement Agent with the offering and transfer procedures and restrictions described in the Offering Memorandum, (d) the accuracy of the representations and warranties made in accordance with this Agreement and Offering Memorandum by purchasers to whom the Placement Agent initially resells Notes and (e) that purchasers to whom the Placement Agent initially resells Notes receive a copy of the Offering Memorandum prior to such sale, the offer, sale and delivery of the Notes to the Placement Agent in the manner contemplated by this Agreement and the Offering Memorandum and the initial resale of the Notes by the Placement Agent in the manner contemplated in the Offering Memorandum and this Agreement, do not require registration under the Securities Act, it being understood that such counsel need express no opinion as to any subsequent resale of any Notes. In addition, such opinion shall include a statement, subject to such qualifications as are customarily applied to such statements by such counsel, that such counsel have participated in the preparation of the Offering Memorandum and in conferences with officers and other representatives of HC Crown, officers and representatives of CCA and its counsel, representatives of the independent public accountants for CCA, and with the Placement Agent's representatives at which the contents of the Offering Memorandum and related matters were discussed and, although such counsel need not pass upon or assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Offering Memorandum, on the basis of the foregoing, no facts have come to the attention of such counsel that have caused them to believe that the Offering Memorandum or any amendment or supplement thereto (except for the financial statements, schedules, statistical and other financial data included therein or omitted therefrom, as to which such counsel need express no statement) at the time any such amended or supplemented Offering Memorandum was issued or at the Closing Time, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that such counsel need express no opinion or belief with respect to the financial statements, schedules, statistical and other financial data included therein or omitted therefrom. In giving such opinion, such counsel may state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon representations, warranties and certifications made by HC Crown and its -19- officers and representatives and upon certificates of public officials. (c) At the Closing Time, the Placement Agent shall have received a signed opinion of Dwight Arn, in-house counsel to HC Crown, dated as of the Closing Time, in form and substance reasonably satisfactory to counsel for the Placement Agent, to the effect that: (i) HC Crown is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, (ii) HC Crown has full corporate power and authority to enter into this Agreement and to sell, assign, transfer and deliver such Notes hereunder, (iii) Assuming the Placement Agent acquires the Notes from HC Crown in good faith and without notice of any adverse claim (as such term is defined in Section 8-302 of the Uniform Commercial Code currently in effect in the State of New York), upon delivery of such Notes and payment therefor in accordance with the terms of the Placement Agreement, the Placement Agent will have acquired good and valid title to such Notes, free and clear of any adverse claims other than those created by the action or inaction of the Placement Agent, (iv) This Agreement and the Letter Agreement have each been duly authorized, executed and delivered by HC Crown and constitute a valid and binding agreement of HC Crown enforceable against HC Crown in accordance with its respective terms, except to the extent that (a) enforcement hereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium (general or specific), liquidation, receivership, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity), (b) the right to indemnity and contribution may be limited by state or federal securities laws or public policy and (c) any liquidated damages provisions contained therein ma! he unenforceable, in whole or in part, (v) The execution and delivery by HC Crown of, and its performance under, this Agreement, the Letter Agreement and the HC Crown Loan Agreement and the consummation by HC Crown of the transactions contemplated hereby and thereby, do not and will not result in any violation of the charter or By-Laws of HC Crown, and do -20- not and will not conflict in any material respect with, or result in a material breach of any of the terms or provisions of, or constitute a material default under, or result in the creation or imposition of any material lien, charge or encumbrance upon any property or assets of HC Crown under (A) an! agreement or instrument to which HC Crown is a party specifically identified in such counsel's opinion, (B) any existing federal law or Missouri law (excluding state securities or "blue sky" laws and the rules and regulations of the National Association of Securities Dealers, as to which no opinion need be expressed), or (C) to the knowledge of such counsel, any judgment, order or decree of any New York, Delaware, Missouri or federal government, governmental instrumentality or court having jurisdiction over HC Crown or its properties (excluding state securities or "blue sky" laws and the rules and regulations of the National Association of Securities Dealers, as to which no opinion need be expressed), Such counsel need express no opinion, however, as to whether the execution, delivery and performance by HC Crown of any of the agreements executed and delivered in connection with the transactions contemplated hereby will constitute a violation of or a default under any covenant, restriction or provision with respect to financial ratios or tests or any aspect of the financial condition or results of operations of HC Crown, (vi) HC Crown is not required to be registered under the Investment Company Act of 1940, as amended, (vii) To the knowledge of such counsel, no authorization, approval, consent or license of any governmental instrumentality or court that, in the opinion of such counsel, is normally applicable to transactions of the type contemplated by this Agreement (other than under United States securities or state securities or "blue sky" laws and the rules and regulations of the NASD, as to which no opinion need be expressed), is required for the performance by HC Crown of its obligations under this Agreement and the Indenture, Such opinion shall be to such effect with respect to other legal matters relating to this Agreement and the Notes as counsel for the Placement Agent may reasonably request, In giving such opinion, such counsel may state that, insofar as such opinion involves factual matters they have relied, to the extent they deem proper, upon certificates of public officials and affiliates of HC Crown. -21- (d) At the Closing Time, (i) the Offering Memorandum, as it may then be amended or supplemented, shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they are made, not misleading, (ii) except as may be disclosed in the Offering Memorandum, there shall not have been, since the respective dates as of which information is given in the Offering Memorandum, any material adverse change in the condition (financial or otherwise), earnings, business affairs or business prospects of CCA, and its subsidiaries, considered as one enterprise, whether or not arising in the ordinary course of business, (iii) CCA and HC Crown, as applicable, shall each have complied in all material respects with all agreements and satisfied in all material respects all conditions on its part to be performed or satisfied at or prior to the Closing Time and (iv) the representations and warranties of CCA and HC Crown set forth in Section 1(a) and Section 1(c) shall be accurate in all material respects as though expressly made at and as of the Closing Time. At the Closing Time, the Placement Agent shall have received (i) a certificate of the Senior Vice President, Finance and Acquisition of CCA, dated as of the Closing Time, to such effect, except that such certificate need not relate to any events, facts or circumstances relating to the Crown Systems during the period prior to January 18, 1995 and (ii) a certificate of the Chief Executive Officer and the Chief Financial Officer of HC Crown, dated as of the Closing Time, to such effect, except that such certificate need only relate to any events, facts or circumstances relating to the Crown Systems during the period prior to January 18, 1995 and any other information furnished to CCA by HC Crown expressly for use in the Offering Memorandum (or any amendment or supplement thereto), or any Preliminary Offering Memorandum, (e) At the time that this Agreement is executed by CCA, the Placement Agent shall have received from Arthur Andersen LLP a letter, dated such date, in form and substance reasonably satisfactory to the Placement Agent, confirming that they are independent public accountants with respect to CCA within the meaning of the Securities Act and the applicable published rules and regulations thereunder, and otherwise reasonably satisfactory to the Placement Agent (it being understood that different offices of Arthur Andersen LLP are the auditors of CCA and HC Crown), (f) At the Closing Time, the Placement Agent shall have received from Arthur Andersen LLP a letter, in form and substance reasonably satisfactory to the Placement Agent and dated as of the Closing Time, to the effect that they reaffirm the statements made in the letters furnished pursuant to Section 6(e) hereof, -22- (g) All proceedings taken by CCA and HC Crown, at or prior to the Closing Time in connection with the authorization and sale of the Notes as contemplated in this Agreement shall be reasonably satisfactory in form and substance to the Placement Agent and to counsel for the Placement Agent, (h) At the Closing Time, each of this Agreement, the Letter Agreement and the Indenture, shall have been executed and delivered by the parties thereto and shall be in full force and effect, (i) At the Closing Time, there shall not be any pending or threatened legal or governmental proceedings against CCA or HC Crown with respect to any of the transactions contemplated in this Agreement other than such pending or threatened legal or governmental proceeding which would not reasonably be deemed to cause a material adverse effect on CCA or the transactions contemplated herein, If any of the conditions specified in this Section 6 shall not have been fulfilled when and as required by this Agreement, this Agreement may be terminated by the Placement Agent on notice to CCA and HC Crown at any time at or prior to the Closing Time, and such termination shall be without liability of any party to any other party, except as provided in Section S hereof, Notwithstanding any such termination, the provisions of Sections 7 and 8 hereof shall remain in effect, The Placement Agent may in its sole discretion waive any conditions to the obligations of the Placement Agent hereunder. Section 7. Indemnification --------------- (a) CCA agrees to indemnify and hold harmless the Placement Agent, HC Crown, their respective officers, directors, members and stockholders, and each person, if any, who controls any of them within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to the extent and in the manner set forth in clauses (i), (ii) and (iii) below: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of an untrue statement or alleged untrue statement of a material fact included in any Preliminary Offering Memorandum or the Offering Memorandum (or any amendment or supplement thereto), including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not -23- misleading, but only after final judgment has been rendered in a litigation or proceeding in respect thereof; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or investigation or proceeding b- any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section -------- 7(d) below) any such settlement is effected with the prior written consent of CCA; and (iii) against any and all expense whatsoever (including, subject to Section 7(d) hereof, the reasonable fees and disbursements of counsel chosen by the Placement Agent and HC Crown), reasonably incurred in investigating preparing or defending against any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent such expense is not paid under clause (i) or (ii) above because the litigation, investigation or proceeding was terminated without liability prior to final judgment or settlement; provided, however, that the foregoing indemnity agreement does not apply to any loss, liability, claim, damage or expense to the extent arising (i) out of any untrue statement or omission or alleged untrue statement or omission in respect of events, facts or circumstances relating to the Crown Systems during the period prior to January 18, 1995, (ii) out of an untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to CCA or HC Crown by the Placement Agent or HC Crown expressly for use in the Offering Memorandum (or any amendment or supplement thereto), or any Preliminary Offering Memorandum, or (iii) any breach by the Placement Agent of any representation, warranty or other provision of this Agreement; provided further that the foregoing indemnification with respect -------- ------- to any Preliminary Offering Memorandum shall not inure to the benefit of the Placement Agent (or any person controlling the Placement Agent) from whom the person asserting any such losses, claims, damages or liabilities purchased any of the Notes if a copy of the Offering Memorandum (as then amended or supplemented if CCA shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of the Placement Agent on the initial resale to such person, if such is required by -24- law, at or prior to the written confirmation of the sale of such Notes to such person and if the Offering Memorandum (as so amended or supplemented) would have cured the defect giving rise to such loss, claim, damage or liability. (b) HC Crown agrees to indemnify and hold harmless the Placement Agent, CCA, their respective directors, officers, partners, stockholders and members, and each person, if any, who controls the Placement Agent within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to the extent and in the manner set forth in clauses (i!, (ii) and (iii) below: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of an untrue statement or alleged untrue statement of a material fact included in any Preliminary Offering Memorandum or the Offering Memorandum (or any amendment or supplement thereto), including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, but only after final judgment has been rendered in a litigation or proceeding in respect thereof; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section -------- 7(d) below) any such settlement is effected with the prior written consent of HC Crown; (iii) against any and all expense whatsoever (including, subject to Section 7(d) hereof, the reasonable tees and disbursements of counsel chosen by the Placement Agent), reasonably incurred in investigating, preparing or defending against any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent such expense is not paid under clause (i) or (ii) above because the litigation, investigation or proceeding was terminated without liability prior to final judgment or settlement; and -25- (iv) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any breach by the Placement Agent of its representations and warranties contained in Section 3(c)(ii) hereof, provided, however, that the indemnification and holding harmless provided for in this Section 7(b)(iv) shall only be for the benefit of CCA, its directors, officers, partners, stockholders and members, and each person, if any, who controls CCA within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act: provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising (i) in respect of the indemnification and holding harmless of-CCA, its directors, officers, partners, stockholders and members, and each person, if any, who controls CCA within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, out of any untrue statement or omission or alleged untrue statement or omission in respect of events, facts or circumstances relating to the Crown Systems during the period subsequent to January 18, 1995, other than untrue statements or omissions, or alleged untrue statements or omissions, made in the Offering Memorandum (or any amendment or supplement thereto) or any Preliminary Offering Memorandum in reliance upon and in conformity with written information furnished to CCA by the HC Crown expressly for use in the Offering Memorandum (or any amendment or supplement thereto), or such Preliminary Offering Memorandum, (ii) out of an untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to CCA or HC Crown by the Placement Agent expressly for use in the Offering Memorandum (or any amendment or supplement thereto), or any Preliminary Offering Memorandum: provided, further that the foregoing indemnification with respect to -------- ------- any Preliminary Offering Memorandum shall not inure to the benefit of the Placement Agent (or any person controlling the Placement Agent) from whom the person asserting any such losses, claims, damages or liabilities purchased any of the Notes if a copy of the Offering Memorandum (as then amended or supplemented if HC Crown or CCA shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of the Placement Agent on the initial resale to such person, if such is required by law, at or prior to the written confirmation of the sale of such Notes to such person and if the Offering Memorandum (as so amended or supplemented) would have cured the defect giving rise to such loss, claim, damage or liability. (c) The Placement Agent agrees to indemnify and hold harmless CCA and HC Crown, their respective directors, -26- officers, partners, stockholders and members and each person, if any, who controls any of them within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any and all loss, liability, claim, damage and expense described in the indemnity agreement in Section 7(a) hereof, as incurred, but only with respect to (i) untrue statements or omissions, or alleged untrue statements or omissions, made in the Offering Memorandum (or any amendment or supplement thereto) or any Preliminary Offering Memorandum in reliance upon and in conformity with written information furnished to CCA or HC Crown by the Placement Agent expressly for use in the Offering Memorandum (or any amendment or supplement thereto), or such Preliminary (Offering Memorandum or (ii) any breach by the Placement Agent of the representations, warranties or other provisions of this Agreement (d) Each indemnified party shall give prompt notice to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve it from any liability that it may have otherwise than on account of this indemnity agreement, An indemnifying party may participate at its own expense in the defense of such action In no event shall the indemnifying party or parties be liable for the fees and expenses of more than one counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, if it so elects within a reasonable time after receipt of such notice, an indemnifying party, jointly with any other indemnifying parties receiving such notice, may assume the defense of such action with counsel chosen by it (subject to the approval of the indemnified parties defendant in such action, which approval shall not be unreasonably withheld or delayed) unless such indemnified parties reasonably object to such assumption on the ground that there may be legal defenses available to them which are different from or are in conflict with those available to such indemnifying party, If an indemnifying party assumes the defense of such action, the indemnifying parties shall not be liable for any fees and expenses of counsel for the indemnified parties incurred thereafter in connection with such action. Section 8. Contribution. In order to provide for just and equitable ------------ contribution in circumstances under which the indemnity provided for in Section 7 is for any reason held to be unenforceable by the indemnified parties although applicable in accordance with its terms, CCA, HC Crown and the Placement Agent shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by such indemnity incurred by CCA, HC Crown, and -27- the Placement Agent, as incurred, in such proportions that (a) the Placement Agent is responsible for that portion represented by the percentage that the Placement Agent's Discount appearing on the cover page of the Offering Memorandum bears to the offering price appearing thereon and (b) CCA and HC Crown are severally responsible for the balance on the same basis, if at all, as each of them would have been obligated to provide indemnification pursuant to Section 7; provided, however, that no person guilty of fraudulent --------- -------- misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation, for purposes of this Section each person, if any, who controls the Placement Agent within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Placement Agent, and each director and officer of CCA and HC Crown and each person who controls CCA or HC Crown within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as CCA or HC Crown, as the case may be, Section 9. Representations, Warranties and Agreements to Survive ----------------------------------------------------- Delivery, The representations, warranties, indemnities, agreements and other - --------- statements of CCA and HC Crown or their officers and of the Placement Agent or its officers set forth in or made pursuant to this Agreement will remain operation and in full force and effect regardless of any investigation made by or on behalf of CCA, HC Crown, the Placement Agent or any controlling person thereof, and will survive delivery of and payment for the Notes. Section 10. Termination of Agreement. (a) The Placement Agent may ------------------------ terminate this Agreement, by notice to HC Crown, at any time at or prior to the Closing Time (i) if there has been, since the respective dates as of which information is given in the Offering Memorandum, any material adverse change in the condition (financial or otherwise), earnings, business affairs or business prospects of CCA and its subsidiaries, considered as one enterprise, whether or not arising in the ordinary course of business, (ii) if there has occurred any material adverse change in the financial markets in the United States or internationally or any outbreak of hostilities or escalation of existing hostilities or other calamity or crisis the effect of which on the financial markets of the United States or internationally is such as to make it, in the reasonable judgment of the Placement Agent, impracticable to market the Notes, or enforce contracts for the sale of the Notes or (iii) if a banking moratorium has been declared by either federal or New York State authorities, If this Agreement is terminated pursuant to this Section, such -28- termination shall be without liability of any party to any other party, except to the extent provided in Section 5, Notwithstanding any such termination, the provisions of Sections 7 and 8 shall remain in effect. This Agreement may also be terminated pursuant to the provisions of Section 6, with the effect stated in such Section. Section 11. Notices. All notices and other communications under this ------- Agreement shall be in writing and shall be deemed to have been duly given, upon receipt, if delivered, mailed or transmitted by any standard form of telecommunication, Notices to the Placement Agent shall be directed to the Placement Agent at 230 Park Avenue, New York, New York 10269 (telecopier no.: (212) 692-9608), attention of B. Andrew H. Spence; notices to CCA shall be directed to it at CCA Holdings Corp., 12444 Powerscourt Drive, Suite 400, St. Louis, Missouri 63131 (telecopier no.: (314) 965-8793), attention of Jerald L. Kent, with a copy to the General Counsel; and notices to HC Crown shall be directed to it at HC Crown Corp., 2501 McGee, Kansas City, Missouri 64141 (telecopier no.: (816) 274-7171), attention of Dwight Arn, Esq. Copies of all notices shall be directed to Schulte Roth & Zabel LLP, 900 Third Avenue, New York, New York 10022 (telecopier no.: (212) 593-5955), attention of Burton Lehman, to Dow, Lohnes & Albertson PLLC, 1200 New Hampshire Avenue, N.W., Washington, D.C. 20036 (telecopier no. (202) 776-2222), attention of Leonard J. Baxt, Esq. and to Paul, Hastings, Janofsky & Walker LLP, 399 Park Avenue, New York, New York 10022 (telecopier no.:(212) 319-4090), attention of Joel M. Simon, Esq. Section 12. Parties. This Agreement is made solely for the benefit ------- of the Placement Agent, CCA and HC Crown and, to the extent expressed, any person who controls CCA, HC Crown or the Placement Agent within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and the directors of CCA, HC Crown, their partners, stockholders, members, officers, employees and trustees, and their respective executors, administrators, successors and assigns and no other person shall acquire or have any right under or by virtue of this Agreement. The term "successors and assigns" shall not include any purchaser, as such purchaser, from the Placement Agent of the Notes. The parties acknowledge and agree that the Placement Agent has been engaged by and has acted and will be acting solely on behalf of HC Crown, Section 13. Governing Law and Time. This Agreement shall be governed ---------------------- by the laws of the State of New York, without effect to the provisions thereof relating to conflicts -29- of law. Specified times of the day refer to New York City time. Section 14. Counterparts. This Agreement may be executed in one or ------------ more counterparts and when a counterpart has been executed by each party, all such counterparts taken together shall constitute one and the same agreement. If the foregoing is in accordance with the Placement Agent's understanding of the agreement, please sign and return to us a counterpart hereof, whereupon this instrument will become a binding agreement among CCA, HC Crown and the Placement Agent in accordance with its terms. Very truly yours, CCA HOLDINGS CORP. By: /s/ Kent Kalkwarf _________________________ Name: Kent Kalkwarf Title: Vice President HC CROWN CORP. By: /s/ Dwight Arn _________________________ Name: Dwight Arn Title: Vice President Confirmed and accepted as of the date first above written: FURMAN SELZ LLC By: /s/ William A. Shutzer ____________________________ Name: William A. Shutzer Title: Executive Vice President -30- EX-3.1 3 AMEND & RESTATD CERT. OF INCORP. CCA HLDGS. CORP. EXHIBIT 3.1 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF CCA HOLDINGS CORP. CCA Holdings Corp., a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), hereby certifies as follows: 1. The name of the Corporation is CCA Holdings Corp. 2. The original Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on November 17, 1994. 3. This Amended and Restated Certificate of Incorporation restates and further amends the Certificate of Incorporation of the Corporation as heretofore amended and has been duly adopted by the Board of Directors and approved by the stockholders of the Corporation in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware. The text of the Certificate of Incorporation as amended and restated shall be read in full as follows: 1. The name of the Corporation is CCA Holdings Corp. 2. The address of its registered office in the State of Delaware is the Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company. 3. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. 4. The total number of shares of all classes of stock which the Corporation shall have authority to issue is One Hundred Twenty Five Thousand (125,000) shares, consisting of One Hundred Thousand (100,000) shares of Class A Voting Common Stock, par value $.01 per share (the "Class A Common Stock"), Twenty Thousand (20,000) shares of Class B Voting Common Stock, par value $.01 per share (the "Class B Common Stock"), and Five Thousand (5,000) shares of Class C Non-Voting Common Stock, par value $.01 per share (the "Class C Common Stock"). A. Voting Rights of Common Stock. Except as otherwise provided herein or ----------------------------- may otherwise be required by law, (i) the Class C Common Stock shall have no voting rights and the holders of Class A Common Stock and Class B Common Stock shall be entitled to one vote per share on all matters to be voted on by the stockholders of the Corporation and (ii) the holders of the Class A Common Stock and the Class B Common Stock shall vote together as a single class with respect to all matters. Except as otherwise provided herein, all shares of Class A Common Stock, Class B Common Stock and Class C Common Stock shall be identical and shall entitle the holders thereof to the same rights and privileges. B. Dividend Rights of Common Stock. Subject to any other provisions of ------------------------------- this Amended and Restated Certificate of Incorporation, as it may be amended from time to time, holders of the Class A Common Stock, the Class B Common Stock and the Class C Common Stock shall be entitled to receive such dividends and other distributions in cash, in property or in shares of capital stock of the Corporation as may be declared thereon by the Board of Directors of the Corporation from time to time out of assets or funds of the Corporation legally available therefor; provided, however, that if -------- ------- dividends are declared which are payable in shares of any class of Common Stock, dividends will be declared which are payable at the same rate on each class of Common Stock, and share dividends payable to holders of each class will be payable only in shares of such class. C. Liquidation Rights of Common Stock. ---------------------------------- (i) Preference of Class A Common Stock and Class C Common Stock. In ----------------------------------------------------------- the event of any liquidation, dissolution or winding up of the Corporation, whether -2- voluntary or involuntary, the holders of the Class A Common Stock and the Class C Common Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, whether such assets are capital, surplus or earnings, before any payment or declaration and setting apart for payment of any amount shall be made in respect of the Class B Common Stock, an amount equal to $1,000.00 per share plus an amount equal to all declared and unpaid dividends, if any, thereon, shall be tendered to the holders of the Class A Common Stock and the Class C Common Stock with respect to such liquidation, dissolution or winding up. If upon any liquidation, dissolution, or winding up of the Corporation, whether voluntary or involuntary, the assets to be distributed to the holders of the Class A Common Stock and the Class C Common Stock shall be insufficient to permit the payment to such stockholders of the full preferential amounts aforesaid, then all of the assets of the Corporation to be distributed shall be distributed ratably to the holders of the Class A Common Stock and the Class C Common Stock on the basis of the number of shares of Class A Common Stock or Class C Common Stock, as the case may be, held. (ii) Preference of Class B Common Stock. After the payment or ---------------------------------- distribution to the holders of the Class A Common Stock and the Class C Common Stock of the full preferential amounts as provided in the preceding paragraph (i), in the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of the shares of Class B Common Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, whether such assets are capital, surplus or earnings, before any further payment to the holders of the Class A Common Stock and the Class C Common Stock, an amount equal to $1,000.00 per share plus an amount equal to all declared and unpaid dividends, if any, thereon, shall be tendered to the holders of the shares of Class B Common Stock with respect to such liquidation, dissolution or winding up. If upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the assets to be distributed to the holders of the Class A Common Stock and the Class C Common Stock shall be sufficient to permit the payment of the full preferential amounts aforesaid but the assets to be distributed to the holders of the -3- Class B Common Stock shall be insufficient to permit the payment to such stockholders of the full preferential amounts aforesaid, then all of the assets of the Corporation to be distributed shall be distributed ratably to the holders of the Class B Common Stock on the basis of the number of shares of Class B Common Stock held. (iii) Remaining Assets. After the payment or distribution to the ---------------- holders of the Class A Common Stock, the Class C Common Stock and the Class B Common Stock of the full preferential amounts aforesaid, the holders of the Class A Common Stock and the Class C Common Stock then outstanding shall be entitled to receive ratably all remaining assets of the Corporation to be distributed. D. Conversion Rights of Class C Common Stock. The holders of the Class C ----------------------------------------- Common Stock shall have the following conversion rights: (i) Upon the occurrence of any Conversion Event (as defined herein), each record holder of Class C Common Stock shall be entitled to convert into the same number of shares of Class A Common Stock any or all of the shares of such holder's Class C Common Stock being sold, distributed or otherwise disposed of or converted in connection with the occurrence of such Conversion Event. For purposes of this Section D, (a) a "Conversion Event" shall mean any transfer of shares of Class C Common Stock to any person or persons who are not affiliates of the transferor, including, without limitation, pursuant to any public offering or public sale of securities of the Corporation (including a public offering registered under the Securities Act of 1933 and a public sale pursuant to Rule 144 under the Securities Act of 1933 or any similar rule then in force), (b) a "person" shall mean any natural person or any corporation, partnership, joint venture, trust, unincorporated organization and any other entity or organization and (c) an "affiliate," with respect to any person, shall mean such person's spouse, parents, members of such person's family or such person's lineal descendants and any other person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such person. In addition, all of the Corporation's Class C Common Stock shall be automatically and mandatorily converted into the same -4- number of shares of Class A Common Stock without any action on the part of any holder upon notice to such effect by the Corporation to the record holders of Class C Common Stock. (ii) Subject to clause (i), each conversion of shares of Class C Common Stock into shares of Class A Common Stock at the option of the holder shall be effected by the surrender of the certificate or certificates representing the shares to the converted at the principal office of the Corporation at any time (including within a reasonable time prior to the occurrence of any Conversion Event, if necessary to effect the conversion of shares related thereto, provided, however, that the holders -------- ------- of such shares will not be entitled to vote on any matters to be voted on by the Corporation's stockholders during such interim period, such certificates being deemed to represent only shares of Class C Common Stock for such purpose) during normal business hours, together with a written notice by the holder of such Class C Common Stock stating that a Conversion Event has occurred or is expected to occur and that such holder desires to convert the shares, or a stated number of the shares, of such Class C Common Stock represented by such certificate or certificates into shares of Class A Common Stock (and including instructions for issuance of the Class A Common Stock to be issued upon such conversion). Each conversion at the option of the holder shall be deemed to have been effected as of the close of business on the later of (a) the date on which the Conversion Event has occurred and (b) the date on which such certificate or certificates have been surrendered and such notice has been received, and at such later time the rights of the holder of the converted Class C Common Stock, as a holder of Class C Common Stock, shall cease and the person or persons in whose name or names the certificate or certificates for shares of Class A Common Stock are to be issued upon such conversion shall be deemed to have become the holder or holders or record of the shares represented thereby. Promptly after the Conversion Event has occurred and the surrender of certificates and the receipt of written notice, the Corporation shall issue and deliver in accordance with the surrendering holder's instructions (x) the certificate or certificates for the shares of Class A Common Stock issuable upon such conversion and (y) a certificate representing any shares of Class C Common Stock which -5- were represented by the certificate or certificates delivered to the Corporation in connection with such conversion but which were not converted. If any shares of Class C Common Stock are converted into shares of Class A Common Stock in connection with a Conversion Event and such shares of Class A Common Stock are not actually sold, distributed or otherwise disposed of so that a Conversion Event does not actually occur, such shares of Class C Common Stock shall be automatically converted back into the same number of shares of Class C Common Stock. Any mandatory conversion of shares of Class C Common Stock into Class A Common Stock shall be effected by the Corporation delivering to the holders of such shares, to the last address appearing for such holders on the books of the Corporation, written notice to the effect that the Board of Directors has determined to mandatorily convert the Class C Common Stock into Class A Common Stock and upon and after such notice all of the shares of Class C Common Stock so converted shall be deemed to be no longer outstanding, any right to receive dividends thereon shall cease and all rights and privileges with respect to the Class C Common Stock so converted shall cease except for the right of the holder thereof to receive any previously declared but unpaid dividends on the Class C Common Stock, and the certificates which theretofore had represented Class C Common Stock shall for all purposes represent only Class A Common Stock; provided, -------- however, that no dividends on the Common Stock shall be paid to such holder ------- unless and until the certificates for the Class C Common Stock have been surrendered to the Corporation, which shall upon such surrender issue certificates for the Class A Common Stock to such holder and pay to such holder any dividends on the Class A Common Stock which have been declared as of a record date, and which otherwise would have been paid, since the date the shares of Class C Common Stock were deemed to be converted. (iii) The issuance of certificates upon conversion will be made without charge to the holders of such shares for any issuance tax in respect thereof or other cost incurred by the Corporation in connection with such conversion, except that the holder of any such shares shall be responsible for the payment of all applicable transfer taxes if the shares of Common Stock -6- are issued in the name of a person or persons other than such holder. (iv) The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Class A Common Stock solely for the purpose of issuance upon the conversion of the Class C Common Stock, such number of shares of Class A Common Stock issuable upon the conversion of all outstanding shares of Class C Common Stock. All shares of Class A Common Stock which are so issuable shall, when issued, be duly and validly issued, fully paid and non-assessable and free from all taxes, liens and charges. The Corporation shall take all such actions as it deems necessary or appropriate to assure that all such shares of Class A Common Stock may be so issued without violation of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Class A Common Stock may be listed. (v) Except as provided in the last sentence of the first paragraph of clause (ii), shares of Class C Common Stock that are converted into shares of Class A Common Stock as provided herein shall be retired and cancelled and shall not be reissued. 5. The Corporation is to have perpetual existence. 6. Elections of directors of the Corporation need not be by written ballot unless the By-laws of the Corporation so provide. 7. (a) A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware or (iv) for any transaction from which the director derives an improper personal benefit. If the General Corporation Law of the State of Delaware is amended after the date of filing of this Amended and Restated Certificate of -7- Incorporation to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of the State of Delaware as so amended. Any repeal or modification of the foregoing paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing in respect of any act or omission occurring prior to the time of such repeal or modification. (b) The Corporation shall indemnify, to the fullest extent now or hereafter permitted by the General Corporation Law of the State of Delaware, any 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 the fact that he or she is or was or has agreed to become a director or officer of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to be taken or omitted in such capacity, and may to the same extent indemnify any person who was or is a party or is threatened to be made a party to such an action, suit or proceeding by reason of the fact that he or she is or was or has agreed to become an employee or agent of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement in connection with such action, suit or proceeding or any appeal therefrom. -8- IN WITNESS WHEREOF, CCT Holdings Corp. has caused this Amended and Restated Certificate of Incorporation to be signed by Jerald L. Kent, its Executive Vice President, and attested by Theodore W. Browne, II, its Secretary, this 18th day of January 1995. By: /s/ Jerald L. Kent _____________________________ Jerald L. Kent Executive Vice President ATTEST: By: /s/ Theodore W. Browne II __________________________ Theodore W. Browne, II Secretary -9- THIS PAGE MUST BE KEPT AS THE LAST PAGE OF THE DOCUMENT. SoftSolution Network ID: NY-101567.1 Type: CER -10- EX-3.2 4 AMEND & RESTATED BY-LAWS CCA HOLDINGS CORP. EXHIBIT 3.2 AMENDED AND RESTATED BYLAWS OF CCA HOLDINGS CORP. TABLE OF CONTENTS -----------------
Page ---- ARTICLE I OFFICES.................................................. 1 Section 1.01 REGISTERED OFFICE.......................................... 1 Section 1.02 OTHER OFFICES.............................................. 1 ARTICLE II MEETINGS OF STOCKHOLDERS................................. 1 Section 2.01 ANNUAL MEETINGS............................................ 1 Section 2.02 SPECIAL MEETINGS........................................... 1 Section 2.03 NOTICE OF MEETING.......................................... 1 Section 2.04 LIST OF STOCKHOLDERS....................................... 2 Section 2.05 QUORUM..................................................... 2 Section 2.06 ADJOURNMENTS............................................... 2 Section 2.07 VOTING..................................................... 2 Section 2.08 PROXIES.................................................... 3 Section 2.09 JUDGES OF ELECTION......................................... 3 Section 2.10 WRITTEN CONSENT............................................ 3 ARTICLE III BOARD.................................................... 3 Section 3.01 NUMBER..................................................... 3 Section 3.02 ELECTION AND TERM OF OFFICE................................ 3 Section 3.03 VACANCIES AND ADDITIONAL DIRECTORSHIPS..................... 4 Section 3.04 POWERS..................................................... 4 Section 3.05 RESIGNATION OF DIRECTORS................................... 4 Section 3.06 REMOVAL OF DIRECTORS....................................... 4 Section 3.07 COMPENSATION OF DIRECTORS.................................. 4 Section 3.08 RELIANCE ON ACCOUNTS AND REPORTS, ETC...................... 4 ARTICLE IV MEETING OF THE BOARD..................................... 4 Section 4.01 PLACE...................................................... 4 Section 4.02 REGULAR MEETINGS........................................... 5 Section 4.03 SPECIAL MEETINGS........................................... 5 Section 4.04 QUORUM..................................................... 5 Section 4.05 ADJOURNED MEETINGS......................................... 5 Section 4.06 WRITTEN CONSENT............................................ 5 Section 4.07 COMMUNICATIONS EQUIPMENT................................... 5 Section 4.08 WAIVER OF NOTICE........................................... 5 Section 4.09 OFFICERS OF THE BOARD...................................... 5 ARTICLE V COMMITTEES OF THE BOARD.................................. 6 Section 5.01 DESIGNATION, POWER AND ALTERNATE MEMBERS AND TERM OF OFFICE........................................... 6 Section 5.02 MEETINGS, NOTICES AND RECORDS.............................. 6 Section 5.03 QUORUM AND MANNER OF ACTING................................ 6 Section 5.04 RESIGNATIONS............................................... 7 Section 5.05 REMOVAL.................................................... 7 Section 5.06 VACANCIES.................................................. 7
i ARTICLE VI OFFICERS................................................. 7 Section 6.01 OFFICERS AND MANAGEMENT COMMITTEE.......................... 7 Section 6.02 DUTIES..................................................... 7 Section 6.03 RESIGNATIONS............................................... 8 Section 6.04 REMOVAL.................................................... 8 Section 6.05 VACANCIES.................................................. 8 Section 6.06 SECRETARY.................................................. 8 Section 6.07 ASSISTANT SECRETARIES...................................... 8 Section 6.08 TREASURER.................................................. 8 Section 6.09 ASSISTANT TREASURERS....................................... 9 ARTICLE VII INDEMNIFICATION.......................................... 9 Section 7.01 ACTIONS OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION............................... 9 Section 7.02 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION............ 9 Section 7.03 DETERMINATION OF RIGHT OF INDEMNIFICATION................ 9 Section 7.04 INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY..... 9 Section 7.05 ADVANCE OF EXPENSES...................................... 10 Section 7.06 OTHER RIGHTS AND REMEDIES................................ 10 Section 7.07 INSURANCE................................................ 10 Section 7.08 CONSTITUENT CORPORATIONS................................. 10 Section 7.09 EMPLOYEE BENEFIT PLANS................................... 10 Section 7.10 BROADEST LAWFUL INDEMNIFICATION.......................... 11 Section 7.11 TERM..................................................... 11 Section 7.12 SEVERABILITY............................................. 11 Section 7.13 AMENDMENTS............................................... 11 ARTICLE VIII DEPOSIT OF CORPORATE FUNDS............................... 12 Section 8.01 BORROWING.................................................. 12 Section 8.02 DEPOSITS................................................... 12 Section 8.03 CHECKS, DRAFTS, ETC........................................ 12 ARTICLE IX CERTIFICATES OF STOCK.................................... 12 Section 9.01 STOCK CERTIFICATES......................................... 12 Section 9.02 BOOKS OF ACCOUNT AND RECORD OF STOCKHOLDERS................ 12 Section 9.03 TRANSFER OF SHARES......................................... 13 Section 9.04 REGULATIONS................................................ 13 Section 9.05 LOST, STOLEN OR DESTROYED CERTIFICATES..................... 13 Section 9.06 STOCKHOLDER'S RIGHT OF INSPECTION.......................... 13 Section 9.07 REPRESENTATIONS OF SHARES OF OTHER CORPORATIONS............ 13 ARTICLE X MISCELLANEOUS............................................ 14 Section 10.01 BUDGETS................................................... 14 Section 10.02 RECORD DATES.............................................. 14 Section 10.03 DIVIDENDS................................................. 14 Section 10.04 FISCAL YEAR............................................... 14 Section 10.05 CORPORATE SEAL............................................ 14 Section 10.06 AMENDMENTS................................................ 14
ii AMENDED AND RESTATED BYLAWS OF CCA HOLDINGS CORP. a Delaware Corporation (the "Corporation") ARTICLE I OFFICES 1.01 REGISTERED OFFICE. The registered office shall be maintained at 1209 Orange Street, Wilmington, New Castle County, Delaware 19801 and The Corporation Trust Company is the registered agent. 1.02 OTHER OFFICES. The Corporation may also have other offices, either within or without the State of Delaware, at such place or places as the Board of Directors (the "Board") may from time to time appoint or the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS 2.01 ANNUAL MEETING. The date of the annual meeting of the stockholders for the election of directors and for the transaction of such other business as properly may come before such meeting shall be determined by resolution of the Board to be a specific day in each year, if not a legal holiday, and, if a legal holiday, on the next succeeding business day, at the time and place and within or without the State of Delaware as may be designed by the Board and set forth in the notice of the meeting or a duly executed waiver of notice thereof, provided, however, that in any year, in advance of the date specified for the annual meeting, the Board may act to change the meeting date for that year. 2.02 SPECIAL MEETINGS. Special meetings of the stockholders for any proper purpose or purposes may be called at any time by the Board or an Executive Officer, to be held on the date, at the time and place within or without the State of Delaware as the Board or an Executive Officer, whichever has called the meeting, shall direct. A special meeting of the stockholders also shall be called whenever stockholders owning a majority of the shares of the Corporation then issued and outstanding and entitled to vote on all of the matters to be submitted to stockholders of the Corporation at such special meeting shall make written application to an Executive Officer. Any such written request shall state a proper purpose or purposes of the meeting and shall be delivered to an Executive Officer. 2.03 NOTICE OF MEETING. Notice, signed by the Secretary of the Corporation or an Executive Officer, of every annual or special meeting of stockholders shall be prepared in writing and personally delivered; mailed, postage prepaid; or sent by facsimile transmission to each stockholder entitled to vote at such meeting not less than ten (10) nor more than sixty (60) days before the meeting, except as otherwise provided by statute. Every notice of a meeting of the stockholders shall state the place, date and hour of the meeting, and in the case of a special meeting, shall also state the purpose or purposes for which the meeting is called. If mailed, such notice shall be directed to a stockholder at his address as it shall appear on the stock record book of the Corporation, unless the stockholder shall have filed with the Secretary a written request that notice intended for him or her be mailed to some other address, in which case it shall be mailed to the address designated in such request. Notice shall be deemed given when personally delivered or deposited in -1- the United States mail, as the case may be; provided, however, that such notice may also be given by telegram, facsimile or other means of electronically transmitted written copy and in such case shall be deemed given when ordered or, if a delayed delivery is ordered, as of such delayed delivery time. 2.04 LIST OF STOCKHOLDERS. A complete list of the stockholders entitled to vote at each meeting of stockholders, arranged in alphabetical order and showing the address of each such stockholder and the number of shares registered in the name of each such stockholder, shall be open to the examination of any stockholder, for any purpose germane to such meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of such meeting, or, if not specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting and during the whole time thereof, and may be inspected by any stockholder who is present. 2.05 QUORUM. The presence at any meeting, in person or by proxy, of the holders of record of a majority of the shares then issued and outstanding and entitled to vote shall be necessary and sufficient to constitute a quorum for the transaction of business, except where otherwise provided by statute. 2.06 ADJOURNMENTS. In the absence of a quorum, stockholders representing a majority of the shares then issued and outstanding and entitled to vote, present in person or by proxy, or, if no stockholder entitled to vote is present in person or by proxy, any officer entitled to preside at or act as secretary of such meeting, may adjourn the meeting from time to time without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting originally noticed. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. 2.07 VOTING. (a) At each meeting of the stockholders, each stockholder shall be entitled to vote in person or by proxy each share or fractional share of the stock of the Corporation which has voting rights on the matter in question and which shall have been held by him or her and registered in his name on the books of the Corporation: (i) on the date fixed pursuant to Section 10.02 of these Bylaws as the record date for the determination of stockholders entitled to notice of and to vote at such meeting, or (ii) if no such record date shall have been so fixed, then (x) at the close of business on the day next preceding the day on which notice of the meeting shall be given or (y) if notice of the meeting shall be waived, at the close of business on the day next preceding the day on which the meeting shall be held. (b) Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors in such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes. Persons holding stock of the Corporation in a fiduciary capacity shall be entitled to vote such stock. Persons whose stock is pledged shall be entitled to vote, unless in the transfer by the pledgor on the books of the Corporation he or she shall have expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his or her proxy, may represent such stock and vote thereon. Stock having voting power standing of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, -2- tenants by the entirety or otherwise, or with respect to which two or more persons have the same fiduciary relationship, shall be voted in accordance with the provisions of the General Corporation Law of Delaware. (c) At any meeting of the stockholders all matters except as otherwise provided in the Certificate of Incorporation, in these Bylaws, or by law, shall be decided by the vote of a majority in voting interest of the stockholders present in person or by proxy and entitled to vote thereat and thereon. The vote at any meeting of the stockholders on any question need not be by ballot, unless so directed by the chairman of the meeting. On a vote by ballot, each ballot shall be signed by the stockholder voting, or by his proxy if there be such proxy, and it shall state the number of shares voted. 2.08 PROXIES. Any stockholder is entitled to vote by proxy, provided that the instrument authorizing such proxy to act shall have been executed in writing (which shall include telegram, facsimile or other means of electronically transmitted written copy) by the stockholder himself or herself or by his or her duly authorized attorney-in-fact and delivered to the secretary of the meeting. Except as provided in the Stockholders' Agreement among CCA Holdings Corp., Kelso Investment Associates V, L.P., Kelso Equity Partners V, L.P. and Charter Communications, Inc., as amended from time to time (the "Stockholders' Agreement"), no proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. Every proxy shall be revocable at the pleasure of the stockholder executing it, except as provided in the Stockholders' Agreement. The attendance at any meeting of a stockholder who may theretofore have given a proxy shall not have the effect of revoking the same unless he shall in writing so notify the secretary of the meeting prior to the voting of the proxy. 2.09 JUDGES OF ELECTION. The Board may appoint judges of election to serve at any election of directors and at balloting on any other matter that may properly come before a meeting of stockholders. If no such appointment shall be made, or if any of the judges so appointed shall fail to attend, or refuse or be unable to serve, then such appointment may be made by the presiding officer of the meeting at the meeting. 2.10 WRITTEN CONSENT. Any action which may be taken at any annual or special meeting of stockholders may be taken without a meeting and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Whenever any such action is taken without a meeting by less than unanimous consent, all stockholders who have not consented in writing must be promptly informed in writing of such action. ARTICLE III BOARD 3.01 NUMBER. The number of directors which shall constitute the whole Board shall be fixed at five (5) persons, until changed from time to time by resolution of the Board or stockholders at the annual meeting or any special meeting called for that purpose; provided, however, that such action shall not be in contravention of the Stockholders' Agreement. 3.02 ELECTION AND TERM OF OFFICE. Directors shall be elected at the annual meeting of the stockholders except as provided in Section 3.03 of this Article III. Each director (whether elected at an annual meeting or to fill a vacancy or otherwise) shall continue in office until a successor shall have been -3- elected and qualified or until his or her death, resignation or removal in the manner hereinafter provided, whichever shall first occur. 3.03 VACANCIES AND ADDITIONAL DIRECTORSHIPS. If any vacancy shall occur among the directors by reason of death, resignation, or removal, or as the result of an increase in the number of directorships, the directors then in office shall continue to act and may fill any such vacancy by a vote of the majority of directors then in office, though less than a quorum (unless otherwise provided in the Certificate of Incorporation or the Stockholders' Agreement), and each director so chosen shall hold office until the next annual election of directors and until his or her successor shall be duly elected and shall qualify, or until his or her earlier death, resignation or removal. 3.04 POWERS. The business of the Corporation shall be managed by its Board, which may exercise all powers of the Corporation and do all lawful acts and things as are not by law or by the Certificate of Incorporation or these Bylaws reserved to the stockholders. 3.05 RESIGNATION OF DIRECTORS. Any director may resign at any time by giving written notice of such resignation to the Board or an Executive Officer. Any such resignation shall take effect at the time specified therein or, if no time be specified, upon receipt thereof by the Board or an Executive Officer; and unless specified therein, the acceptance of such resignation shall not be necessary to make it effective. 3.06 REMOVAL OF DIRECTORS. Unless otherwise provided in the Stockholders' Agreement, at the annual meeting or any special meeting of the stockholders, duly called as provided in these Bylaws, any director or directors may, by the affirmative vote of the holders of a majority of the shares of stock issued and outstanding and entitled to vote for the election of directors, be removed from office, either with or without cause. At such meeting a successor or successors may be elected by a majority of the votes cast, or if any such vacancy is not so filled, it may be filled by the directors as provided in Section 3.03 of this Article III, provided such action is not in contravention of the Stockholders' Agreement. 3.07 COMPENSATION OF DIRECTORS. Directors may receive such reasonable compensation for their services, whether in the form of salary or a fixed fee for attendance at Board or Board committee meetings, with expenses, if any, as the Board may from time to time determine. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. 3.08 RELIANCE ON ACCOUNTS AND REPORTS, ETC. A director, or a member of any committee designed by the Board shall, in the performance of his duties, be fully protected in relying in good faith upon the records of the Corporation and upon information, opinions, reports or statements presented to the Corporation by any of the Corporation's officers or employees, or committees designated by the Board, or by any other person as to the matters the director or member reasonably believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation. ARTICLE IV MEETINGS OF THE BOARD 4.01 PLACE. The Board of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware. -4- 4.02 REGULAR MEETINGS. The Board by resolution may provide for the holding of regular meetings and may fix the times and places at which such meetings shall be held. Notice of regular meetings shall not be required to be given if the time and place has been fixed by Board resolution, provided that whenever the time or place of regular meetings shall be fixed or changed, notice of such action shall be mailed promptly to each director who shall not have been present at the meeting at which such action was taken. If the time and place for regular meetings has not been fixed by the Board, then at least 10 days written notice addressed to him or her at his or her residence or usual place of business, unless he or she shall have filed with the Secretary a written request that notices intended for him or her be mailed to some other address, in which case it shall be mailed to the address designated in such request, or shall be sent to him or her at such place by telegram, facsimile or other means of electronically transmitted written copy. 4.03 SPECIAL MEETINGS. Special meetings of the Board may be called by any Executive Officer and shall be called by any Executive Officer at the written request of any director. Except as otherwise required by statute, notice of each special meeting shall be given to each director, if by mail, when addressed to him or her at his or her residence or usual place of business, unless he or she shall have filed with the Secretary a request that notices intended for him or her be mailed to some other address, in which case it shall be mailed to the address designated in such request, at least 72 hours before, or shall be sent to him or her at such place by telegram, facsimile, telephone or other means of electronically transmitted written copy, or delivered to him or her personally, at least 48 hours before the date on which the meeting is to be held. Such notice shall state the time and place of such meeting, but need not state the purposes thereof, unless otherwise required by statute, the Certificate of Incorporation of the Corporation or these Bylaws. 4.04 QUORUM. At any meeting of the Board two-thirds (2/3) of the whole Board shall constitute a quorum for the transaction of business, and the act of the majority of those present at any meeting at which a quorum is present shall be sufficient for the act of the Board, except as may be otherwise specifically provided by statute or by the Certificate of Incorporation of the Corporation. 4.05 ADJOURNED MEETINGS. If a quorum shall not be present at a meeting of the Board, the directors present thereat may adjourn the meeting from time to time, until a quorum shall be present. Seventy-two (72) hours' notice of any such adjournment shall be given personally to each director who was not present at the meeting at which such adjournment was taken, and unless announced at the meeting, to the other directors; provided, that then ten (10) days' notice shall be given if notice is given by mail. 4.06 WRITTEN CONSENT. Any action required or permitted to be taken at any meeting of the Board may be taken without a meeting if all the members of the Board consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of the Board. 4.07 COMMUNICATIONS EQUIPMENT. Any one or more members of the Board may participate in any meeting of the Board by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation by such means shall be deemed to constitute presence in person at such meeting. 4.08 WAIVER OF NOTICE. Notice of any meeting need not be given to any directors who shall attend such meeting in person or shall waive notice thereof, before or after such meeting, in writing or by telegram, facsimile or other means of electronically transmitted written copy. 4.09 OFFICERS OF THE BOARD. The Board shall have a Chairman of the Board and may, at the discretion of the Board, have one or more Vice Chairmen. The Chairman of the Board and the Vice Chairmen shall be appointed from time to time by the Board and shall have such powers and duties as shall be designated by the Board. -5- ARTICLE V COMMITTEES OF THE BOARD 5.01 DESIGNATION, POWER AND ALTERNATE MEMBERS AND TERM OF OFFICE. The Board may, by resolution passed by a majority of the whole Board, designate one (1) or more committees. Each such committee shall consist of one (1) or more of the directors of the Corporation. Any such committee, to the extent provided in such resolution, shall have and may exercise the power of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. The Board may designate one (1) or more directors as alternate members of any committee who, in the order specified by the Board, may replace any absent or disqualified member at any meeting of the committee. If at a meeting of any committee one (1) or more of the members thereof should be absent or disqualified, and if either the Board has not so designated any alternate member or members, or the number of absent or disqualified members exceeds the number of alternate members who are present at such meeting, then the member or members of such committee (including alternates) present at any meeting and not disqualified from voting, whether or not he or she or they constitute a quorum, may unanimously appoint another director to act at the meetings in the place of any such absent or disqualified member. The term of office of the members of each committee shall be as fixed from time to time by the Board, subject to the term of office of the directors and these Bylaws; provided, however, that any -------- committee member who ceases to be a member of the Board shall ipso facto cease ---- ----- to be a committee member. Each committee shall appoint a secretary, who may be the Secretary or an Assistant Secretary of the Corporation. 5.02 MEETINGS, NOTICES AND RECORDS. Each committee may provide for the holding of regular meetings, with or without notice, and a majority of the members of any such committee may fix the time, place and procedure for any such meeting. Special meetings of each committee shall be held upon call by or at the direction of its chairman or, if there be no chairman, by or at the direction of any two (2) of its members, at the time and place specified in the respective notices or waivers of notice thereof. Notice of each special meeting of a committee shall be mailed to each member of such committee, addressed to him or her at his or her residence or usual place of business, unless he or she shall have filed with the Secretary a written request that notices intended for him or her be mailed to some other address, in which case it shall be mailed to the address designated in such request, at least 72 hours before the day on which the meeting is to be held, or shall be sent by telegram, facsimile or other means of electronically transmitted written copy, addressed to him at such place, or telephoned or delivered to him or her personally, at least 48 hours before the day on which the meeting is to be held. Notice of any meeting of a committee need not be given to any member thereof who shall attend the meeting in person or who shall waive notice thereof by telegram, facsimile or other means of electronically transmitted written copy. Notice of any adjourned meeting need not be given. Each committee shall keep a record of its proceedings. Each committee may meet and transact any and all business delegated to that committee by the Board by means of a conference telephone or similar communications equipment provided that all persons participating in the meeting are able to hear and communicate with each other. Participation in a meeting by means of conference telephone or similar communication shall constitute presence in person at such meeting. 5.03 QUORUM AND MANNER OF ACTING. At each meeting of any committee the presence of a majority of its members then in office shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the members present at any meeting at which a quorum is present shall be the act of such committee; in the absence of a quorum, a majority of the members present at the time and place of any meeting may adjourn the meeting from time to time until a quorum shall be present. Subject to the foregoing and other provisions of these Bylaws and except as otherwise determined by the Board, each committee may make rules for the conduct of its business. Any determination made in writing and signed by all the members of such committee shall be as effective as if made by such committee at a meeting. -6- 5.04 RESIGNATIONS. Any member of a committee may resign at any time by giving written notice of such resignation to the Corporation, the Board, or an Executive Officer of the Corporation. Unless otherwise specified in such notice, such resignation shall take effect upon receipt thereof by the Board or any Executive Officer of the Corporation. 5.05 REMOVAL. Any member of any committee may be removed at any time by the affirmative vote of a majority of the whole Board with or without cause. 5.06 VACANCIES. If any vacancy shall occur in any committee by reason of death, resignation, disqualification, removal or otherwise, the remaining members of such committee, though less than a quorum, shall continue to act until such vacancy is filled by the Board. ARTICLE VI OFFICERS 6.01 OFFICERS AND MANAGEMENT COMMITTEE. The Board shall determine the titles and duties of the officers of the Corporation who shall be responsible for the overall supervision, direction and control of the business and affairs of the Corporation (hereinafter referred to as the "Executive Officers"), and shall elect persons to hold such positions. The Corporation also shall have one or more Executive Vice-Presidents and Senior Vice- Presidents, as well as a Treasurer and a Secretary. The Board also may, but shall not be required to, appoint a Management Committee which shall be comprised of the Executive Officers plus such other officers as may be selected by the Board or in the absence of Board action by the Chairman of the Management Committee. Any Executive Officer or Executive Vice President may, if so designated by the Board, function in the capacity of Chief Executive Officer, Chief Financial Officer, or Chief Operating Officer. In the absence or disability of an elected Executive Officer, another Executive Officer shall perform such other officer's duties. One of the Executive Officers shall preside at meetings of stockholders. The officers of the Corporation may also include one or more Regional or other Vice-Presidents and one or more Assistant Secretaries or Assistant Treasurers, each of whom shall be elected by the Board or appointed by the Executive Officers Any number of offices may be held by the same person subject to any limits imposed by the General Corporation Law of the State of Delaware; provided that different officers shall have such titles and duties as may be necessary to enable the Corporation to sign instruments and stock certificates which comply with Sections 103(a)(2) and 158 of the General Corporation Law of the State of Delaware. Each officer of the corporation elected by the Board or appointed by the Executive Officers shall hold office until his or her successor is duly elected or appointed and qualified or until his or her earlier resignation or removal. The Board may act by resolution to authorize such officers of the Corporation as are proposed by Charter Communications, Inc., pursuant to Section 9.1 of the Stockholders' Agreement, to act on behalf of the Corporation in connection with the Management Agreement referenced in the Stockholders' Agreement. 6.02 DUTIES. All officers, as between themselves and the Corporation, shall have such authority and perform such duties in the management of the Corporation as may be provided in these Bylaws, or, to the extent not so provided, as may be provided by resolution of the Board or the supervising Executive Officers. -7- 6.03 RESIGNATIONS. Any officer may resign at any time by giving written notice of such resignation to the Board or any Executive Officer. Unless otherwise specified in such written notice, such resignation shall take effect upon receipt thereof by the Board or any such Executive Officer. 6.04 REMOVAL. All officers serve at the sole pleasure and in the sole discretion of the Board. Any Executive Officer or other officer elected by the Board may be removed at any time, either with or without cause, by the vote of a majority of all of the directors then in office. Any officers appointed by an Executive Officer may be removed at any time by an Executive Officer with or without cause. Such power of removal from office shall not be abridged by any employment contract or other agreement. 6.05 VACANCIES. A vacancy in any office by reason of death, resignation, removal, disqualification or any other cause shall be filled for the unexpired portion of the term in the manner prescribed by these Bylaws for regular election or appointment to such office. 6.06 SECRETARY. The Secretary shall: (a) record all the proceedings of the meetings of the stockholders, the Board, and all committees of the Board in a book or books to be kept for that purpose; (b) cause all notices to be duly given in accordance with the provisions of these Bylaws as required by statute; (c) whenever any committee shall be appointed in pursuance of a resolution of the Board, furnish the chairman of such committee with a copy of such resolution; (d) be custodian of the records and of the seal of the Corporation, and cause such seal to be affixed to all certificates representing capital stock of the Corporation prior to the issuance thereof and to all instruments the execution of which on behalf of the Corporation under its seal shall have been duly authorized; (e) see that the lists, books, reports, statements, certificates and other documents and records required by statute are properly kept and filed; (f) have charge of the stock record and stock transfer books of the Corporation, and exhibit such stock books at all reasonable times to such persons who are entitled by statute to have access thereto; and (g) in general, perform all duties incident to the office of Secretary and such other duties as are given to him or her by these Bylaws or as from time to time may be assigned to him or her by the Board or the Executive Officers. 6.07 ASSISTANT SECRETARIES. At the request of the Secretary or in his or her absence or disability, the Assistant Secretary designated by him or her (or in the absence of such designation, the Assistant Secretary designated by the Board or any Executive Officer) shall perform all the duties of the Secretary, and, when so acting, shall have all the powers of and be subject to all restrictions upon the Secretary. The Assistant Secretaries shall perform such other duties as from time to time may be assigned to them by the Board or the Executive Officers. 6.08 TREASURER. The Treasurer shall: (a) have charge of and supervision over and be responsible for the funds, securities, receipts and disbursements of the Corporation; (b) cause the monies and other valuable effects of the Corporation to be deposited in the name and to the credit of the Corporation in banks or trust companies or with bankers or other depositories or to be otherwise dealt with in such manner as the Board may direct; (c) select authorized depositories of the Corporation and cause the funds of the Corporation to be disbursed by checks or drafts upon the authorized depositories of the Corporation, and cause to be taken and preserved proper vouchers for all monies disbursed; (d) render to the Board and the Executive Officers, whenever requested, a statement of the financial condition of the Corporation and of all his or her transactions as Treasurer; (e) cause to be kept at the Corporation's principal office correct books of account of all its business and transactions and such duplicate books of account as he or she shall determine and upon application cause such books or duplicates thereof to be exhibited to any Director; (f) be empowered, from time to time, to require from the officers or agents of the Corporation reports or statements giving such information concerning transactions of the Corporation; and (g) in general, perform all duties incident to the office of Treasurer and such other duties as are given to him or her by these Bylaws or as from time to time may be assigned to him by the Board or the Executive Officers. -8- 6.09 ASSISTANT TREASURERS. At the request of the Treasurer or any of the Executive Officers, the Assistant Treasurer shall perform all the duties of the Treasurer, and, when so acting, shall have all the powers of and be subject to all restrictions upon the Treasurer. The Assistant Treasurer shall perform such other duties as from time to time may be assigned by the Board, the Executive Officers or the Treasurer. ARTICLE VII INDEMNIFICATION Section 7.01 ACTIONS OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION. The Corporation shall indemnify any 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 (other than an action by or in the right of the Corporation) by reason of the fact that he is or was or has agreed to become a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or as a member of any committee or similar body, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, that he had reasonable cause to believe that his conduct was unlawful. Section 7.02 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was or has agreed to become a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or as a member of any committee or similar body, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. Section 7.03 DETERMINATION OF RIGHT OF INDEMNIFICATION. Any indemnification under Section 7.01 or 7.02 of these Bylaws (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Sections 7.01 and 7.02 of these Bylaws. Such determination shall be made (a) by the Board by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (b) if such a quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (c) by the stockholders. Section 7.04 INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY. Notwithstanding the other provisions of this Article VII, to the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding -9- referred to in Section 7.01 or 7.02 of these Bylaws, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. Section 7.05 ADVANCE OF EXPENSES. Expenses (including attorneys' fees) incurred by an officer or director in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board upon receipt of an undertaking by or on behalf of the director or officer, to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article VII. Such expenses (including attorneys' fees) incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board deems appropriate. The Board may authorize the Corporation's counsel to represent such director, officer, employee or agent in any action, suit or proceeding, whether or not the Corporation is a party to such action, suit or proceeding. Section 7.06 OTHER RIGHTS AND REMEDIES. The indemnification and advancement of expenses provided by, or granted pursuant to, the other Sections of this Article VII shall not be deemed exclusive and are declared expressly to be nonexclusive of any other rights to which those seeking indemnification or advancements of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. Section 7.07 INSURANCE. Upon resolution passed by the Board, the Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or as a member of any committee or similar body against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article VII. Section 7.08 CONSTITUENT CORPORATIONS. For the purposes of this Article VII, references to "the Corporation" include in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or as a member of any committee or similar body, shall stand in the same position under the provisions of this Article VII with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. Section 7.09 EMPLOYEE BENEFIT PLANS. For the purposes of this Article VII, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the `Corporation'" as referred to in this Article VII. -10- Section 7.10 BROADEST LAWFUL INDEMNIFICATION. In addition to the foregoing, the Corporation shall, to the broadest and maximum extent permitted by Delaware law, as the same exists from time to time (but, in case of any amendment to or change in Delaware law, only to the extent that such amendment or change permits the Corporation to provide broader rights of indemnification than is permitted to the Corporation prior to such amendment or change), indemnify each 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 the fact that he is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding. In addition, the Corporation shall, to the broadest and maximum extent permitted by Delaware law, as the same may exist from time to time (but, in case of any amendment to or change in Delaware law, only to the extent that such amendment or change permits the Corporation to provide broader rights of payment of expenses incurred in advance of the final disposition of an action, suit or proceeding than is permitted to the Corporation prior to such amendment or change), pay to such person any and all expenses (including attorneys' fees) incurred in defending or settling any such action, suit or proceeding in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer, to repay such amount if it shall ultimately be determined by a final judgment or other final adjudication that he is not entitled to be indemnified by the Corporation as authorized in this Section 7.10. The first sentence of this Section 7.10 to the contrary notwithstanding, the Corporation shall not indemnify any such person with respect to any of the following matters: (a) remuneration paid to such person if it shall be determined by a final judgment or other final adjudication that such remuneration was in violation of law; or (b) any accounting of profits made from the purchase or sale by such person of the Corporation's securities within the meaning of Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar provisions of any federal, state or local statutory law; or (c) actions brought about or contributed to by the dishonesty of such person, if a final judgment or other final adjudication adverse to such person establishes that acts of active and deliberate dishonesty were committed or attempted by such person with actual dishonest purpose and intent and were material to the adjudication; or (d) actions based on or attributable to such person having gained any personal profit or advantage to which he was not entitled, in the event that a final judgment or other final adjudication adverse to such person establishes that such person in fact gained such personal profit or other advantage to which he was not entitled; or (e) any matter in respect of which a final decision by a court with competent jurisdiction shall determine that indemnification is unlawful; provided, however, that the Corporation shall perform its obligations under the second sentence of this Section 7.10 on behalf of such person until such time as it shall be ultimately determined by a final judgment or other final adjudication that he is not entitled to be indemnified by the Corporation as authorized by the first sentence of this Section 7.10 by virtue of any of the preceding clauses (a) (b) (c) (d) or (e). Section 7.11 TERM. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VII shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. Section 7.12 SEVERABILITY. If any part of this Article VII shall be found, in any action, suit or proceeding or appeal therefrom or in any other circumstances or as to any particular officer, director, employee or agent to be unenforceable, ineffective or invalid for any reason, the enforceability, effect and validity of the remaining parts or of such parts in other circumstances shall not be affected, except as otherwise required by applicable law. Section 7.13 AMENDMENTS. The foregoing provisions of this Article VII shall be deemed to constitute an agreement between the Corporation and each of the persons entitled to indemnification hereunder, for as long as such provisions remain in effect. Any amendment to the foregoing provisions of this Article VII which limits or otherwise adversely affects the scope of indemnification or rights of any such -11- persons hereunder shall, as to such persons, apply only to claims arising, or causes of action based on actions or events occurring, after such amendment and delivery of notice of such amendment is given to the person or persons so affected. Until notice of such amendment is given to the person or persons whose rights hereunder are adversely affected, such amendment shall have no effect on such rights of such persons hereunder. Any person entitled to indemnification under the foregoing provisions of this Article VII shall, as to any act or omission occurring prior to the date of receipt of such notice, be entitled to indemnification to the same extent as had such provisions continued as Bylaws of the Corporation without such amendment. ARTICLE VIII DEPOSIT OF CORPORATE FUNDS 8.01 BORROWING. No loans or advances shall be obtained or contracted for, by or on behalf of the Corporation and no negotiable paper shall be issued in its name, unless and except as authorized by the Board. Such authorization may be general or confined to specific instances. 8.02 DEPOSITS. All funds of the Corporation not otherwise employed shall be deposited from time to time to its credit in such banks or trust companies or with such bankers or other depositories as the Board may select, or as may be selected by any officer or officers or agent or agents authorized to do so by the Board. 8.03 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the payment of money, and all negotiable and non-negotiable notes or other negotiable or non-negotiable evidences of indebtedness issued in the name of the Corporation, shall be signed or endorsed by such person or persons and in such manner as from time to time shall be determined by the Board or the Executive Officers. The Corporation shall obtain a fidelity bond for such persons with such signing authority as the Board or the Executive Officers may require. ARTICLE IX CERTIFICATES OF STOCK 9.01 STOCK CERTIFICATES. Every holder of capital stock of the Corporation shall be entitled to have a certificate or certificates in such form as shall be approved by the Board, certifying the number of shares of capital stock of the Corporation owned by him or her. The certificates representing shares of capital stock shall be signed in the name of the Corporation by an Executive Officer and by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer (which signatures may be facsimiles) and sealed with the seal of the Corporation (which seal may be a facsimile). If any officer, transfer agent or registrar who shall have signed or whose facsimile signatures has been placed upon such certificate shall have ceased to be such officer, transfer agent or registrar before such certificates are issued, they may nevertheless be issued by the Corporation with the same effect as if such officer, transfer agent, or registrar were still such at the date of their issue. 9.02 BOOKS OF ACCOUNT AND RECORD OF STOCKHOLDERS. The books and records of the Corporation may be kept at such places, within or without the State of Delaware, as the Board may from time to time determine. The stock record books and the blank stock certificate books shall be kept by the Secretary or by any other officer or by the transfer agent or registrar, if any, designated by the Board. There shall be entered on the stock books of the Corporation the number of each certificate issued, the number of shares represented thereby, the name of the person to whom such certificate was issued and the date of issuance thereof. -12- 9.03 TRANSFER OF SHARES. Transfers of shares of capital stock of the Corporation shall be made on the stock records of the Corporation only upon authorization by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary or with the transfer agent, and on surrender of the certificate or certificates for such shares properly endorsed or accompanied by a duly executed stock transfer power and the payment of all taxes thereon, if any. Except as otherwise provided by law, the Corporation shall be entitled to recognize the exclusive right of a person in whose name any share or shares stand on the record of stockholders as the owner of such share or shares for all purposes, including, without limitation, the rights to receive dividends or other distributions, and to vote as such owner, and the Corporation shall not be bound to recognize any equitable or legal claim to or interest in any such share or shares on the part of any other person whether or not the Corporation shall have express or other notice thereof. 9.04 REGULATIONS. The Board may make such additional rules and regulations, not inconsistent with these Bylaws, as it may deem expedient concerning the issue, transfer and registration of certificates for shares of the capital stock of the Corporation. It may appoint, or authorize any officer or officers to appoint, one or more transfer agents or one or more registrars and may further provide that no stock certificate shall be valid until countersigned by one of such transfer agents and registered by one of such registrars. Nothing herein shall be construed to prohibit the Corporation from acting as its own transfer agent or registrar. 9.05 LOST, STOLEN OR DESTROYED CERTIFICATES. The holder of any certificate representing any share or shares of the capital stock of the Corporation shall immediately notify the Corporation of any loss, theft, or destruction of such certificate. The Board may direct that a new certificate or certificates be issued in the place of any certificate or certificates theretofore issued by it which the owner thereof shall allege to have been lost, stolen or destroyed upon the furnishing to the Corporation of an affidavit to that effect by the person claiming that the certificate has been lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board may, in its discretion, require such owner or his or her legal representatives to give to the Corporation and its transfer agent(s) and registrar(s) a bond in such sum, limited or unlimited, and in such form and with such surety or sureties as the Board in its absolute discretion shall determine, sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate, or the issuance of a new certificate. 9.06 STOCKHOLDER'S RIGHT OF INSPECTION. Any stockholder of record of the Corporation, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the Corporation's stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorized the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the Corporation at its registered office in Delaware or at its principal place of business. 9.07 REPRESENTATION OF SHARES OF OTHER CORPORATIONS. Any Executive Officer, Executive Vice President or the Secretary of this Corporation is authorized to vote, represent and exercise on behalf of this Corporation all rights incident to all shares of any other corporation or corporations standing in the name of this Corporation. The authority herein granted to said officers to vote or represent on behalf of this Corporation any and all shares held by this Corporation in any other corporation or corporations may be exercised either by such officers in person or by any person authorized so to do by proxy or power of attorney duly executed by said officers. -13- ARTICLE X MISCELLANEOUS 10.01 BUDGETS. The Board shall approve all annual and other significant operating budgets of the Corporation. 10.02 RECORD DATES. In order that the Corporation may determine the stockholders entitled to notice of, or to vote at, any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or to receive payment of any dividend or other distribution or allotment of any rights, or to exercise any rights in respect of any change, conversion or exchange of stock or in respect of any other lawful action, the Board may fix, in advance, a record date, which shall be not more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. Only those stockholders of record on the date so fixed shall be entitled to any of the foregoing rights, notwithstanding the transfer of any such stock on the books of the Corporation after any such record date fixed by the Board. 10.03 DIVIDENDS. Subject to any agreement to which the Corporation is a party or by which it is bound, the Board may declare to be payable, in cash, in other property or in stock of the Corporation of any class or series, such dividends in respect of outstanding stock of the Corporation of any class or series as the Board may at any time deem to be advisable. Before declaring any such dividend, the Board may cause to be set aside any funds or other property or assets of the Corporation legally available for the payment of dividends. 10.04 FISCAL YEAR. The fiscal year of the Corporation shall be determined by resolution of the Board. 10.05 CORPORATE SEAL. The Corporate Seal shall be circular in form and shall bear the name of the Corporation and the words and figures denoting its organization under the laws of the State of Delaware and the year thereof and otherwise shall be in such form as shall be approved from time to time by the Board. 10.06 AMENDMENTS. All Bylaws of the Corporation may be amended, altered or repealed, and new Bylaws may be enacted, by the affirmative vote of the holders of record of a majority of the issued and outstanding stock of the Corporation entitled to vote at any annual or special meeting, or by the affirmative vote of a majority of the directors present at any regular or special meeting of the Board. -14- CERTIFICATE OF SECRETARY The undersigned certifies: (1) That the undersigned is duly elected and acting Secretary of CCA HOLDINGS CORP., a Delaware corporation; and (2) That the foregoing Amended and Restated Bylaws constitute the Bylaws of the Corporation adopted by the Board on the 10th day of August, 1995. IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of the Corporation this 10th day of August, 1995. /s/ Theodore W. Browne, II _________________________________ Theodore W. Browne, II, Secretary [SEAL] EX-3.3 5 CERTIFICATE OF INCORP. CCA ACQUISITION CORP. EXHIBIT 3.3 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF CCA ACQUISITION CORP. CCA Acquisition Corp., a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), hereby certifies as follows: 1. The name of the Corporation is CCA Acquisition Corp. 2. The original Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on June 27, 1994. 3. This Amended and Restated Certificate of Incorporation restates and further amends the Certificate of Incorporation of the Corporation as heretofore amended and has been duly adopted by the Board of Directors and approved by the stockholders of the Corporation in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware. The text of the Certificate of Incorporation as amended and restated shall be read in full as follows: 1. The name of the Corporation is CCA Acquisition Corp. 2. The address of its registered office in the State of Delaware is the Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company. 3. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. 4. The Corporation is authorized to issue One Hundred (100) shares of Common Stock, $.01 par value per share. 5. The Corporation is to have perpetual existence. 6. Elections of directors of the Corporation need not be by written ballot unless the By-laws of the Corporation so provide. 7. (a) A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware or (iv) for any transaction from which the director derives an improper personal benefit. If the General Corporation Law of the State of Delaware is amended after the date of filing of this Amended and Restated Certificate of Incorporation to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of the State of Delaware as so amended. Any repeal or modification of the foregoing paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing in respect of any act or omission occurring prior to the time of such repeal or modification. (b) The Corporation shall indemnify, to the fullest extent now or hereafter permitted by the General Corporation Law of the State of Delaware, any 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 the fact that he or she is or was or has agreed to become a director or officer of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to be taken or omitted in such capacity, and may to the same extent indemnify any person who was or is a party or is threatened to be made a party to such an action, suit or proceeding by reason of the fact that he or she is -2- or was or has agreed to become an employee or agent of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement in connection with such action, suit or proceeding or any appeal therefrom. -3- IN WITNESS WHEREOF, CCA Acquisition Corp. has caused this Amended and Restated Certificate of Incorporation to be signed by Jerald L. Kent, its Executive Vice President, and attested by Theodore W. Browne, II, its Secretary, this 9th day of February, 1995. By: /s/ Jerald L. Kent __________________________ Jerald L. Kent Executive Vice President ATTEST: By: /s/ Theodore W. Browne, II ___________________________ Theodore W. Browne, II Secretary -4- EX-3.4 6 AMEND & RESTATED BY-LAWS CCA ACQUISITION EXHIBIT 3.4 AMENDED AND RESTATED BYLAWS OF CCA ACQUISITION CORP. TABLE OF CONTENTS -----------------
Page ---- ARTICLE I OFFICES............................................... 1 Section 1.01 REGISTERED OFFICE....................................... 1 Section 1.02 OTHER OFFICES........................................... 1 ARTICLE II MEETINGS OF STOCKHOLDERS.............................. 1 Section 2.01 ANNUAL MEETINGS......................................... 1 Section 2.02 SPECIAL MEETINGS........................................ 1 Section 2.03 NOTICE OF MEETING....................................... 1 Section 2.04 LIST OF STOCKHOLDERS.................................... 2 Section 2.05 QUORUM.................................................. 2 Section 2.06 ADJOURNMENTS............................................ 2 Section 2.07 VOTING.................................................. 2 Section 2.08 PROXIES................................................. 3 Section 2.09 JUDGES OF ELECTION...................................... 3 Section 2.10 WRITTEN CONSENT......................................... 3 ARTICLE III BOARD................................................. 3 Section 3.01 NUMBER.................................................. 3 Section 3.02 ELECTION AND TERM OF OFFICE............................. 3 Section 3.03 VACANCIES AND ADDITIONAL DIRECTORSHIPS.................. 4 Section 3.04 POWERS.................................................. 4 Section 3.05 RESIGNATION OF DIRECTORS................................ 4 Section 3.06 REMOVAL OF DIRECTORS.................................... 4 Section 3.07 COMPENSATION OF DIRECTORS............................... 4 Section 3.08 RELIANCE ON ACCOUNTS AND REPORTS, ETC................... 4 ARTICLE IV MEETING OF THE BOARD.................................. 4 Section 4.01 PLACE................................................... 4 Section 4.02 REGULAR MEETINGS........................................ 5 Section 4.03 SPECIAL MEETINGS........................................ 5 Section 4.04 QUORUM.................................................. 5 Section 4.05 ADJOURNED MEETINGS...................................... 5 Section 4.06 WRITTEN CONSENT......................................... 5 Section 4.07 COMMUNICATIONS EQUIPMENT................................ 5 Section 4.08 WAIVER OF NOTICE........................................ 5 Section 4.09 OFFICERS OF THE BOARD................................... 5 ARTICLE V COMMITTEES OF THE BOARD............................... 6 Section 5.01 DESIGNATION, POWER AND ALTERNATE MEMBERS AND TERM OF OFFICE........................................ 6 Section 5.02 MEETINGS, NOTICES AND RECORDS........................... 6 Section 5.03 QUORUM AND MANNER OF ACTING............................. 6 Section 5.04 RESIGNATIONS............................................ 7 Section 5.05 REMOVAL................................................. 7 Section 5.06 VACANCIES............................................... 7
i ARTICLE VI OFFICERS.............................................. 7 Section 6.01 OFFICERS AND MANAGEMENT COMMITTEE....................... 7 Section 6.02 DUTIES.................................................. 7 Section 6.03 RESIGNATIONS............................................ 8 Section 6.04 REMOVAL................................................. 8 Section 6.05 VACANCIES............................................... 8 Section 6.06 SECRETARY............................................... 8 Section 6.07 ASSISTANT SECRETARIES................................... 8 Section 6.08 TREASURER............................................... 8 Section 6.09 ASSISTANT TREASURERS.................................... 9 ARTICLE VII INDEMNIFICATION....................................... 9 Section 7.01 ACTIONS OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION.............................. 9 Section 7.02 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION........... 9 Section 7.03 DETERMINATION OF RIGHT OF INDEMNIFICATION............... 9 Section 7.04 INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY.... 9 Section 7.05 ADVANCE OF EXPENSES..................................... 10 Section 7.06 OTHER RIGHTS AND REMEDIES............................... 10 Section 7.07 INSURANCE............................................... 10 Section 7.08 CONSTITUENT CORPORATIONS................................ 10 Section 7.09 EMPLOYEE BENEFIT PLANS.................................. 10 Section 7.10 BROADEST LAWFUL INDEMNIFICATION......................... 11 Section 7.11 TERM.................................................... 11 Section 7.12 SEVERABILITY............................................ 11 Section 7.13 AMENDMENTS.............................................. 11 ARTICLE VIII DEPOSIT OF CORPORATE FUNDS............................ 12 Section 8.01 BORROWING............................................... 12 Section 8.02 DEPOSITS................................................ 12 Section 8.03 CHECKS, DRAFTS, ETC..................................... 12 ARTICLE IX CERTIFICATES OF STOCK................................. 12 Section 9.01 STOCK CERTIFICATES...................................... 12 Section 9.02 BOOKS OF ACCOUNT AND RECORD OF STOCKHOLDERS............. 12 Section 9.03 TRANSFER OF SHARES...................................... 13 Section 9.04 REGULATIONS............................................. 13 Section 9.05 LOST, STOLEN OR DESTROYED CERTIFICATES.................. 13 Section 9.06 STOCKHOLDER'S RIGHT OF INSPECTION....................... 13 Section 9.07 REPRESENTATIONS OF SHARES OF OTHER CORPORATIONS......... 13 ARTICLE X MISCELLANEOUS......................................... 14 Section 10.01 BUDGETS................................................. 14 Section 10.02 RECORD DATES............................................ 14 Section 10.03 DIVIDENDS............................................... 14 Section 10.04 FISCAL YEAR............................................. 14 Section 10.05 CORPORATE SEAL.......................................... 14 Section 10.06 AMENDMENTS.............................................. 14
ii AMENDED AND RESTATED BYLAWS OF CCA ACQUISITION CORP. a Delaware Corporation (the "Corporation") ARTICLE I OFFICES 1.01 REGISTERED OFFICE. The registered office shall be maintained at 1209 Orange Street, Wilmington, New Castle County, Delaware 19801 and The Corporation Trust Company is the registered agent. 1.02 OTHER OFFICES. The Corporation may also have other offices, either within or without the State of Delaware, at such place or places as the Board of Directors (the "Board") may from time to time appoint or the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS 2.01 ANNUAL MEETING. The date of the annual meeting of the stockholders for the election of directors and for the transaction of such other business as properly may come before such meeting shall be determined by resolution of the Board to be a specific day in each year, if not a legal holiday, and, if a legal holiday, on the next succeeding business day, at the time and place and within or without the State of Delaware as may be designed by the Board and set forth in the notice of the meeting or a duly executed waiver of notice thereof, provided, however, that in any year, in advance of the date specified for the annual meeting, the Board may act to change the meeting date for that year. 2.02 SPECIAL MEETINGS. Special meetings of the stockholders for any proper purpose or purposes may be called at any time by the Board or an Executive Officer, to be held on the date, at the time and place within or without the State of Delaware as the Board or an Executive Officer, whichever has called the meeting, shall direct. A special meeting of the stockholders also shall be called whenever stockholders owning a majority of the shares of the Corporation then issued and outstanding and entitled to vote on all of the matters to be submitted to stockholders of the Corporation at such special meeting shall make written application to an Executive Officer. Any such written request shall state a proper purpose or purposes of the meeting and shall be delivered to an Executive Officer. 2.03 NOTICE OF MEETING. Notice, signed by the Secretary of the Corporation or an Executive Officer, of every annual or special meeting of stockholders shall be prepared in writing and personally delivered; mailed, postage prepaid; or sent by facsimile transmission to each stockholder entitled to vote at such meeting not less than ten (10) nor more than sixty (60) days before the meeting, except as otherwise provided by statute. Every notice of a meeting of the stockholders shall state the place, date and hour of the meeting, and in the case of a special meeting, shall also state the purpose or purposes for which the meeting is called. If mailed, such notice shall be directed to a stockholder at his address as it shall appear on the stock record book of the Corporation, unless the stockholder shall have filed with the Secretary a written -1- request that notice intended for him or her be mailed to some other address, in which case it shall be mailed to the address designated in such request. Notice shall be deemed given when personally delivered or deposited in the United States mail, as the case may be; provided, however, that such notice may also be given by telegram, facsimile or other means of electronically transmitted written copy and in such case shall be deemed given when ordered or, if a delayed delivery is ordered, as of such delayed delivery time. 2.04 LIST OF STOCKHOLDERS. A complete list of the stockholders entitled to vote at each meeting of stockholders, arranged in alphabetical order and showing the address of each such stockholder and the number of shares registered in the name of each such stockholder, shall be open to the examination of any stockholder, for any purpose germane to such meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of such meeting, or, if not specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting and during the whole time thereof, and may be inspected by any stockholder who is present. 2.05 QUORUM. The presence at any meeting, in person or by proxy, of the holders of record of a majority of the shares then issued and outstanding and entitled to vote shall be necessary and sufficient to constitute a quorum for the transaction of business, except where otherwise provided by statute. 2.06 ADJOURNMENTS. In the absence of a quorum, stockholders representing a majority of the shares then issued and outstanding and entitled to vote, present in person or by proxy, or, if no stockholder entitled to vote is present in person or by proxy, any officer entitled to preside at or act as secretary of such meeting, may adjourn the meeting from time to time without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting originally noticed. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. 2.07 VOTING. (a) At each meeting of the stockholders, each stockholder shall be entitled to vote in person or by proxy each share or fractional share of the stock of the Corporation which has voting rights on the matter in question and which shall have been held by him or her and registered in his name on the books of the Corporation: (i) on the date fixed pursuant to Section 10.02 of these Bylaws as the record date for the determination of stockholders entitled to notice of and to vote at such meeting, or (ii) if no such record date shall have been so fixed, then (x) at the close of business on the day next preceding the day on which notice of the meeting shall be given or (y) if notice of the meeting shall be waived, at the close of business on the day next preceding the day on which the meeting shall be held. (b) Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors in such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes. Persons holding stock of the Corporation in a fiduciary capacity shall be entitled to vote such stock. Persons whose stock is pledged shall be entitled to vote, unless in the transfer by the pledgor on the books of the Corporation he or she shall have expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his or her proxy, may represent such stock and vote thereon. Stock having voting power standing of record in the -2- names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or with respect to which two or more persons have the same fiduciary relationship, shall be voted in accordance with the provisions of the General Corporation Law of Delaware. (c) At any meeting of the stockholders all matters except as otherwise provided in the Certificate of Incorporation, in these Bylaws, or by law, shall be decided by the vote of a majority in voting interest of the stockholders present in person or by proxy and entitled to vote thereat and thereon. The vote at any meeting of the stockholders on any question need not be by ballot, unless so directed by the chairman of the meeting. On a vote by ballot, each ballot shall be signed by the stockholder voting, or by his proxy if there be such proxy, and it shall state the number of shares voted. 2.08 PROXIES. Any stockholder is entitled to vote by proxy, provided that the instrument authorizing such proxy to act shall have been executed in writing (which shall include telegram, facsimile or other means of electronically transmitted written copy) by the stockholder himself or herself or by his or her duly authorized attorney-in-fact and delivered to the secretary of the meeting. No proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. The attendance at any meeting of a stockholder who may theretofore have given a proxy shall not have the effect of revoking the same unless he shall in writing so notify the secretary of the meeting prior to the voting of the proxy. 2.09 JUDGES OF ELECTION. The Board may appoint judges of election to serve at any election of directors and at balloting on any other matter that may properly come before a meeting of stockholders. If no such appointment shall be made, or if any of the judges so appointed shall fail to attend, or refuse or be unable to serve, then such appointment may be made by the presiding officer of the meeting at the meeting. 2.10 WRITTEN CONSENT. Any action which may be taken at any annual or special meeting of stockholders may be taken without a meeting and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Whenever any such action is taken without a meeting by less than unanimous consent, all stockholders who have not consented in writing must be promptly informed in writing of such action. ARTICLE III BOARD 3.01 NUMBER. The number of directors which shall constitute the whole Board shall be fixed at five (5) persons, until changed from time to time by resolution of the Board or stockholders at the annual meeting or any special meeting called for that purpose. 3.02 ELECTION AND TERM OF OFFICE. Directors shall be elected at the annual meeting of the stockholders except as provided in Section 3.03 of this Article III. Each director (whether elected at an annual meeting or to fill a vacancy or otherwise) shall continue in office until a successor shall have been elected and qualified or until his or her death, resignation or removal in the manner hereinafter provided, whichever shall first occur. 3.03 VACANCIES AND ADDITIONAL DIRECTORSHIPS. If any vacancy shall occur among the directors by reason of death, resignation, or removal, or as the result of an increase in the number of -3- directorships, the directors then in office shall continue to act and may fill any such vacancy by a vote of the majority of directors then in office, though less than a quorum, and each director so chosen shall hold office until the next annual election of directors and until his or her successor shall be duly elected and shall qualify, or until his or her earlier death, resignation or removal. 3.04 POWERS. The business of the Corporation shall be managed by its Board, which may exercise all powers of the Corporation and do all lawful acts and things as are not by law or by the Certificate of Incorporation or these Bylaws reserved to the stockholders. 3.05 RESIGNATION OF DIRECTORS. Any director may resign at any time by giving written notice of such resignation to the Board or an Executive Officer. Any such resignation shall take effect at the time specified therein or, if no time be specified, upon receipt thereof by the Board or an Executive Officer; and unless specified therein, the acceptance of such resignation shall not be necessary to make it effective. 3.06 REMOVAL OF DIRECTORS. At the annual meeting or any special meeting of the stockholders, duly called as provided in these Bylaws, any director or directors may, by the affirmative vote of the holders of a majority of the shares of stock issued and outstanding and entitled to vote for the election of directors, be removed from office, either with or without cause. At such meeting a successor or successors may be elected by a majority of the votes cast, or if any such vacancy is not so filled, it may be filled by the directors as provided in Section 3.03 of this Article III. 3.07 COMPENSATION OF DIRECTORS. Directors may receive such reasonable compensation for their services, whether in the form of salary or a fixed fee for attendance at Board or Board committee meetings, with expenses, if any, as the Board may from time to time determine. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. 3.08 RELIANCE ON ACCOUNTS AND REPORTS, ETC. A director, or a member of any committee designed by the Board shall, in the performance of his duties, be fully protected in relying in good faith upon the records of the Corporation and upon information, opinions, reports or statements presented to the Corporation by any of the Corporation's officers or employees, or committees designated by the Board, or by any other person as to the matters the director or member reasonably believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation. ARTICLE IV MEETINGS OF THE BOARD 4.01 PLACE. The Board of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware. 4.02 REGULAR MEETINGS. The Board by resolution may provide for the holding of regular meetings and may fix the times and places at which such meetings shall be held. Notice of regular meetings shall not be required to be given if the time and place has been fixed by Board resolution, provided that whenever the time or place of regular meetings shall be fixed or changed, notice of such action shall be mailed promptly to each director who shall not have been present at the meeting at which such action was taken. If the time and place for regular meetings has not been fixed by the Board, then at least 10 days written notice addressed to him or her at his or her residence or usual place of business, unless he or she shall have filed with the Secretary a written request that notices intended for him or her be mailed to some other address, in -4- which case it shall be mailed to the address designated in such request, or shall be sent to him or her at such place by telegram, facsimile or other means of electronically transmitted written copy. 4.03 SPECIAL MEETINGS. Special meetings of the Board may be called by any Executive Officer and shall be called by any Executive Officer at the written request of any director. Except as otherwise required by statute, notice of each special meeting shall be given to each director, if by mail, when addressed to him or her at his or her residence or usual place of business, unless he or she shall have filed with the Secretary a request that notices intended for him or her be mailed to some other address, in which case it shall be mailed to the address designated in such request, at least 72 hours before, or shall be sent to him or her at such place by telegram, facsimile, telephone or other means of electronically transmitted written copy, or delivered to him or her personally, at least 48 hours before the date on which the meeting is to be held. Such notice shall state the time and place of such meeting, but need not state the purposes thereof, unless otherwise required by statute, the Certificate of Incorporation of the Corporation or these Bylaws. 4.04 QUORUM. At any meeting of the Board two-thirds (2/3) of the whole Board shall constitute a quorum for the transaction of business, and the act of the majority of those present at any meeting at which a quorum is present shall be sufficient for the act of the Board, except as may be otherwise specifically provided by statute or by the Certificate of Incorporation of the Corporation. 4.05 ADJOURNED MEETINGS. If a quorum shall not be present at a meeting of the Board, the directors present thereat may adjourn the meeting from time to time, until a quorum shall be present. Seventy-two (72) hours' notice of any such adjournment shall be given personally to each director who was not present at the meeting at which such adjournment was taken, and unless announced at the meeting, to the other directors; provided, that then ten (10) days' notice shall be given if notice is given by mail. 4.06 WRITTEN CONSENT. Any action required or permitted to be taken at any meeting of the Board may be taken without a meeting if all the members of the Board consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of the Board. 4.07 COMMUNICATIONS EQUIPMENT. Any one or more members of the Board may participate in any meeting of the Board by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation by such means shall be deemed to constitute presence in person at such meeting. 4.08 WAIVER OF NOTICE. Notice of any meeting need not be given to any directors who shall attend such meeting in person or shall waive notice thereof, before or after such meeting, in writing or by telegram, facsimile or other means of electronically transmitted written copy. 4.09 OFFICERS OF THE BOARD. The Board shall have a Chairman of the Board and may, at the discretion of the Board, have one or more Vice Chairmen. The Chairman of the Board and the Vice Chairmen shall be appointed from time to time by the Board and shall have such powers and duties as shall be designated by the Board. -5- ARTICLE V COMMITTEES OF THE BOARD 5.01 DESIGNATION, POWER AND ALTERNATE MEMBERS AND TERM OF OFFICE. The Board may, by resolution passed by a majority of the whole Board, designate one (1) or more committees. Each such committee shall consist of one (1) or more of the directors of the Corporation. Any such committee, to the extent provided in such resolution, shall have and may exercise the power of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. The Board may designate one (1) or more directors as alternate members of any committee who, in the order specified by the Board, may replace any absent or disqualified member at any meeting of the committee. If at a meeting of any committee one (1) or more of the members thereof should be absent or disqualified, and if either the Board has not so designated any alternate member or members, or the number of absent or disqualified members exceeds the number of alternate members who are present at such meeting, then the member or members of such committee (including alternates) present at any meeting and not disqualified from voting, whether or not he or she or they constitute a quorum, may unanimously appoint another director to act at the meetings in the place of any such absent or disqualified member. The term of office of the members of each committee shall be as fixed from time to time by the Board, subject to the term of office of the directors and these Bylaws; provided, however, that any -------- committee member who ceases to be a member of the Board shall ipso facto cease ---- ----- to be a committee member. Each committee shall appoint a secretary, who may be the Secretary or an Assistant Secretary of the Corporation. 5.02 MEETINGS, NOTICES AND RECORDS. Each committee may provide for the holding of regular meetings, with or without notice, and a majority of the members of any such committee may fix the time, place and procedure for any such meeting. Special meetings of each committee shall be held upon call by or at the direction of its chairman or, if there be no chairman, by or at the direction of any two (2) of its members, at the time and place specified in the respective notices or waivers of notice thereof. Notice of each special meeting of a committee shall be mailed to each member of such committee, addressed to him or her at his or her residence or usual place of business, unless he or she shall have filed with the Secretary a written request that notices intended for him or her be mailed to some other address, in which case it shall be mailed to the address designated in such request, at least 72 hours before the day on which the meeting is to be held, or shall be sent by telegram, facsimile or other means of electronically transmitted written copy, addressed to him at such place, or telephoned or delivered to him or her personally, at least 48 hours before the day on which the meeting is to be held. Notice of any meeting of a committee need not be given to any member thereof who shall attend the meeting in person or who shall waive notice thereof by telegram, facsimile or other means of electronically transmitted written copy. Notice of any adjourned meeting need not be given. Each committee shall keep a record of its proceedings. Each committee may meet and transact any and all business delegated to that committee by the Board by means of a conference telephone or similar communications equipment provided that all persons participating in the meeting are able to hear and communicate with each other. Participation in a meeting by means of conference telephone or similar communication shall constitute presence in person at such meeting. 5.03 QUORUM AND MANNER OF ACTING. At each meeting of any committee the presence of a majority of its members then in office shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the members present at any meeting at which a quorum is present shall be the act of such committee; in the absence of a quorum, a majority of the members present at the time and place of any meeting may adjourn the meeting from time to time until a quorum shall be present. Subject to the foregoing and other provisions of these Bylaws and except as otherwise determined by the Board, each committee may make rules for the conduct of its business. Any determination made in writing and signed by all the members of such committee shall be as effective as if made by such committee at a meeting. -6- 5.04 RESIGNATIONS. Any member of a committee may resign at any time by giving written notice of such resignation to the Corporation, the Board, or an Executive Officer of the Corporation. Unless otherwise specified in such notice, such resignation shall take effect upon receipt thereof by the Board or any Executive Officer of the Corporation. 5.05 REMOVAL. Any member of any committee may be removed at any time by the affirmative vote of a majority of the whole Board with or without cause. 5.06 VACANCIES. If any vacancy shall occur in any committee by reason of death, resignation, disqualification, removal or otherwise, the remaining members of such committee, though less than a quorum, shall continue to act until such vacancy is filled by the Board. ARTICLE VI OFFICERS 6.01 OFFICERS AND MANAGEMENT COMMITTEE. The Board shall determine the titles and duties of the officers of the Corporation who shall be responsible for the overall supervision, direction and control of the business and affairs of the Corporation (hereinafter referred to as the "Executive Officers"), and shall elect persons to hold such positions. The Corporation also shall have one or more Executive Vice-Presidents and Senior Vice- Presidents, as well as a Treasurer and a Secretary. The Board also may, but shall not be required to, appoint a Management Committee which shall be comprised of the Executive Officers plus such other officers as may be selected by the Board or in the absence of Board action by the Chairman of the Management Committee. Any Executive Officer or Executive Vice President may, if so designated by the Board, function in the capacity of Chief Executive Officer, Chief Financial Officer, or Chief Operating Officer. In the absence or disability of an elected Executive Officer, another Executive Officer shall perform such other officer's duties. One of the Executive Officers shall preside at meetings of stockholders. The officers of the Corporation may also include one or more Regional or other Vice-Presidents and one or more Assistant Secretaries or Assistant Treasurers, each of whom shall be elected by the Board or appointed by the Executive Officers. Any number of offices may be held by the same person subject to any limits imposed by the General Corporation Law of the State of Delaware; provided that different officers shall have such titles and duties as may be necessary to enable the Corporation to sign instruments and stock certificates which comply with Sections 103(a)(2) and 158 of the General Corporation Law of the State of Delaware. Each officer of the corporation elected by the Board or appointed by the Executive Officers shall hold office until his or her successor is duly elected or appointed and qualified or until his or her earlier resignation or removal. 6.02 DUTIES. All officers, as between themselves and the Corporation, shall have such authority and perform such duties in the management of the Corporation as may be provided in these Bylaws, or, to the extent not so provided, as may be provided by resolution of the Board or the supervising Executive Officers. 6.03 RESIGNATIONS. Any officer may resign at any time by giving written notice of such resignation to the Board or any Executive Officer. Unless otherwise specified in such written notice, such resignation shall take effect upon receipt thereof by the Board or any such Executive Officer. -7- 6.04 REMOVAL. All officers serve at the sole pleasure and in the sole discretion of the Board. Any Executive Officer or other officer elected by the Board may be removed at any time, either with or without cause, by the vote of a majority of all of the directors then in office. Any officers appointed by an Executive Officer may be removed at any time by an Executive Officer with or without cause. Such power of removal from office shall not be abridged by any employment contract or other agreement. 6.05 VACANCIES. A vacancy in any office by reason of death, resignation, removal, disqualification or any other cause shall be filled for the unexpired portion of the term in the manner prescribed by these Bylaws for regular election or appointment to such office. 6.06 SECRETARY. The Secretary shall: (a) record all the proceedings of the meetings of the stockholders, the Board, and all committees of the Board in a book or books to be kept for that purpose; (b) cause all notices to be duly given in accordance with the provisions of these Bylaws as required by statute; (c) whenever any committee shall be appointed in pursuance of a resolution of the Board, furnish the chairman of such committee with a copy of such resolution; (d) be custodian of the records and of the seal of the Corporation, and cause such seal to be affixed to all certificates representing capital stock of the Corporation prior to the issuance thereof and to all instruments the execution of which on behalf of the Corporation under its seal shall have been duly authorized; (e) see that the lists, books, reports, statements, certificates and other documents and records required by statute are properly kept and filed; (f) have charge of the stock record and stock transfer books of the Corporation, and exhibit such stock books at all reasonable times to such persons who are entitled by statute to have access thereto; and (g) in general, perform all duties incident to the office of Secretary and such other duties as are given to him or her by these Bylaws or as from time to time may be assigned to him or her by the Board or the Executive Officers. 6.07 ASSISTANT SECRETARIES. At the request of the Secretary or in his or her absence or disability, the Assistant Secretary designated by him or her (or in the absence of such designation, the Assistant Secretary designated by the Board or any Executive Officer) shall perform all the duties of the Secretary, and, when so acting, shall have all the powers of and be subject to all restrictions upon the Secretary. The Assistant Secretaries shall perform such other duties as from time to time may be assigned to them by the Board or the Executive Officers. 6.08 TREASURER. The Treasurer shall: (a) have charge of and supervision over and be responsible for the funds, securities, receipts and disbursements of the Corporation; (b) cause the monies and other valuable effects of the Corporation to be deposited in the name and to the credit of the Corporation in banks or trust companies or with bankers or other depositories or to be otherwise dealt with in such manner as the Board may direct; (c) select authorized depositories of the Corporation and cause the funds of the Corporation to be disbursed by checks or drafts upon the authorized depositories of the Corporation, and cause to be taken and preserved proper vouchers for all monies disbursed; (d) render to the Board and the Executive Officers, whenever requested, a statement of the financial condition of the Corporation and of all his or her transactions as Treasurer; (e) cause to be kept at the Corporation's principal office correct books of account of all its business and transactions and such duplicate books of account as he or she shall determine and upon application cause such books or duplicates thereof to be exhibited to any Director; (f) be empowered, from time to time, to require from the officers or agents of the Corporation reports or statements giving such information concerning transactions of the Corporation; and (g) in general, perform all duties incident to the office of Treasurer and such other duties as are given to him or her by these Bylaws or as from time to time may be assigned to him by the Board or the Executive Officers. 6.09 ASSISTANT TREASURERS. At the request of the Treasurer or any of the Executive Officers, the Assistant Treasurer shall perform all the duties of the Treasurer, and, when so acting, shall have all the powers of and be subject to all restrictions upon the Treasurer. The Assistant Treasurer shall perform such other duties as from time to time may be assigned by the Board, the Executive Officers or the Treasurer. -8- ARTICLE VII INDEMNIFICATION Section 7.01 ACTIONS OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION. The Corporation shall indemnify any 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 (other than an action by or in the right of the Corporation) by reason of the fact that he is or was or has agreed to become a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or as a member of any committee or similar body, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, that he had reasonable cause to believe that his conduct was unlawful. Section 7.02 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was or has agreed to become a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or as a member of any committee or similar body, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. Section 7.03 DETERMINATION OF RIGHT OF INDEMNIFICATION. Any indemnification under Section 7.01 or 7.02 of these Bylaws (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Sections 7.01 and 7.02 of these Bylaws. Such determination shall be made (a) by the Board by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (b) if such a quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (c) by the stockholders. Section 7.04 INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY. Notwithstanding the other provisions of this Article VII, to the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 7.01 or 7.02 of these Bylaws, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. -9- Section 7.05 ADVANCE OF EXPENSES. Expenses (including attorneys' fees) incurred by an officer or director in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board upon receipt of an undertaking by or on behalf of the director or officer, to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article VII. Such expenses (including attorneys' fees) incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board deems appropriate. The Board may authorize the Corporation's counsel to represent such director, officer, employee or agent in any action, suit or proceeding, whether or not the Corporation is a party to such action, suit or proceeding. Section 7.06 OTHER RIGHTS AND REMEDIES. The indemnification and advancement of expenses provided by, or granted pursuant to, the other Sections of this Article VII shall not be deemed exclusive and are declared expressly to be nonexclusive of any other rights to which those seeking indemnification or advancements of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. Section 7.07 INSURANCE. Upon resolution passed by the Board, the Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or as a member of any committee or similar body against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article VII. Section 7.08 CONSTITUENT CORPORATIONS. For the purposes of this Article VII, references to "the Corporation" include in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or as a member of any committee or similar body, shall stand in the same position under the provisions of this Article VII with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. Section 7.09 EMPLOYEE BENEFIT PLANS. For the purposes of this Article VII, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the 'Corporation' " as referred to in this Article VII. Section 7.10 BROADEST LAWFUL INDEMNIFICATION. In addition to the foregoing, the Corporation shall, to the broadest and maximum extent permitted by Delaware law, as the same exists from time to time (but, in case of any amendment to or change in Delaware law, only to the extent that such amendment or change permits the Corporation to provide broader rights of indemnification than is permitted to the Corporation prior to such amendment or change), indemnify each 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, -10- criminal, administrative or investigative by reason of the fact that he is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding. In addition, the Corporation shall, to the broadest and maximum extent permitted by Delaware law, as the same may exist from time to time (but, in case of any amendment to or change in Delaware law, only to the extent that such amendment or change permits the Corporation to provide broader rights of payment of expenses incurred in advance of the final disposition of an action, suit or proceeding than is permitted to the Corporation prior to such amendment or change), pay to such person any and all expenses (including attorneys' fees) incurred in defending or settling any such action, suit or proceeding in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer, to repay such amount if it shall ultimately be determined by a final judgment or other final adjudication that he is not entitled to be indemnified by the Corporation as authorized in this Section 7.10. The first sentence of this Section 7.10 to the contrary notwithstanding, the Corporation shall not indemnify any such person with respect to any of the following matters: (a) remuneration paid to such person if it shall be determined by a final judgment or other final adjudication that such remuneration was in violation of law; or (b) any accounting of profits made from the purchase or sale by such person of the Corporation's securities within the meaning of Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar provisions of any federal, state or local statutory law; or (c) actions brought about or contributed to by the dishonesty of such person, if a final judgment or other final adjudication adverse to such person establishes that acts of active and deliberate dishonesty were committed or attempted by such person with actual dishonest purpose and intent and were material to the adjudication; or (d) actions based on or attributable to such person having gained any personal profit or advantage to which he was not entitled, in the event that a final judgment or other final adjudication adverse to such person establishes that such person in fact gained such personal profit or other advantage to which he was not entitled; or (e) any matter in respect of which a final decision by a court with competent jurisdiction shall determine that indemnification is unlawful; provided, however, that the Corporation shall perform its obligations under the second sentence of this Section 7.10 on behalf of such person until such time as it shall be ultimately determined by a final judgment or other final adjudication that he is not entitled to be indemnified by the Corporation as authorized by the first sentence of this Section 7.10 by virtue of any of the preceding clauses (a) (b) (c) (d) or (e). Section 7.11 TERM. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VII shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. Section 7.12 SEVERABILITY. If any part of this Article VII shall be found, in any action, suit or proceeding or appeal therefrom or in any other circumstances or as to any particular officer, director, employee or agent to be unenforceable, ineffective or invalid for any reason, the enforceability, effect and validity of the remaining parts or of such parts in other circumstances shall not be affected, except as otherwise required by applicable law. Section 7.13 AMENDMENTS. The foregoing provisions of this Article VII shall be deemed to constitute an agreement between the Corporation and each of the persons entitled to indemnification hereunder, for as long as such provisions remain in effect. Any amendment to the foregoing provisions of this Article VII which limits or otherwise adversely affects the scope of indemnification or rights of any such persons hereunder shall, as to such persons, apply only to claims arising, or causes of action based on actions or events occurring, after such amendment and delivery of notice of such amendment is given to the person or persons so affected. Until notice of such amendment is given to the person or persons whose rights hereunder are adversely affected, such amendment shall have no effect on such rights of such persons hereunder. Any person entitled to indemnification under the foregoing provisions of this Article VII shall, as to any act or -11- omission occurring prior to the date of receipt of such notice, be entitled to indemnification to the same extent as had such provisions continued as Bylaws of the Corporation without such amendment. ARTICLE VIII DEPOSIT OF CORPORATE FUNDS 8.01 BORROWING. No loans or advances shall be obtained or contracted for, by or on behalf of the Corporation and no negotiable paper shall be issued in its name, unless and except as authorized by the Board. Such authorization may be general or confined to specific instances. 8.02 DEPOSITS. All funds of the Corporation not otherwise employed shall be deposited from time to time to its credit in such banks or trust companies or with such bankers or other depositories as the Board may select, or as may be selected by any officer or officers or agent or agents authorized to do so by the Board. 8.03 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the payment of money, and all negotiable and non-negotiable notes or other negotiable or non-negotiable evidences of indebtedness issued in the name of the Corporation, shall be signed or endorsed by such person or persons and in such manner as from time to time shall be determined by the Board or the Executive Officers. The Corporation shall obtain a fidelity bond for such persons with such signing authority as the Board or the Executive Officers may require. ARTICLE IX CERTIFICATES OF STOCK 9.01 STOCK CERTIFICATES. Every holder of capital stock of the Corporation shall be entitled to have a certificate or certificates in such form as shall be approved by the Board, certifying the number of shares of capital stock of the Corporation owned by him or her. The certificates representing shares of capital stock shall be signed in the name of the Corporation by an Executive Officer and by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer (which signatures may be facsimiles) and sealed with the seal of the Corporation (which seal may be a facsimile). If any officer, transfer agent or registrar who shall have signed or whose facsimile signatures has been placed upon such certificate shall have ceased to be such officer, transfer agent or registrar before such certificates are issued, they may nevertheless be issued by the Corporation with the same effect as if such officer, transfer agent, or registrar were still such at the date of their issue. 9.02 BOOKS OF ACCOUNT AND RECORD OF STOCKHOLDERS. The books and records of the Corporation may be kept at such places, within or without the State of Delaware, as the Board may from time to time determine. The stock record books and the blank stock certificate books shall be kept by the Secretary or by any other officer or by the transfer agent or registrar, if any, designated by the Board. There shall be entered on the stock books of the Corporation the number of each certificate issued, the number of shares represented thereby, the name of the person to whom such certificate was issued and the date of issuance thereof. 9.03 TRANSFER OF SHARES. Transfers of shares of capital stock of the Corporation shall be made on the stock records of the Corporation only upon authorization by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary or with the transfer agent, and on surrender of the certificate or certificates for such shares properly endorsed or accompanied by a duly executed stock transfer power and the payment of all taxes thereon, if any. Except as -12- otherwise provided by law, the Corporation shall be entitled to recognize the exclusive right of a person in whose name any share or shares stand on the record of stockholders as the owner of such share or shares for all purposes, including, without limitation, the rights to receive dividends or other distributions, and to vote as such owner, and the Corporation shall not be bound to recognize any equitable or legal claim to or interest in any such share or shares on the part of any other person whether or not the Corporation shall have express or other notice thereof. 9.04 REGULATIONS. The Board may make such additional rules and regulations, not inconsistent with these Bylaws, as it may deem expedient concerning the issue, transfer and registration of certificates for shares of the capital stock of the Corporation. It may appoint, or authorize any officer or officers to appoint, one or more transfer agents or one or more registrars and may further provide that no stock certificate shall be valid until countersigned by one of such transfer agents and registered by one of such registrars. Nothing herein shall be construed to prohibit the Corporation from acting as its own transfer agent or registrar. 9.05 LOST, STOLEN OR DESTROYED CERTIFICATES. The holder of any certificate representing any share or shares of the capital stock of the Corporation shall immediately notify the Corporation of any loss, theft, or destruction of such certificate. The Board may direct that a new certificate or certificates be issued in the place of any certificate or certificates theretofore issued by it which the owner thereof shall allege to have been lost, stolen or destroyed upon the furnishing to the Corporation of an affidavit to that effect by the person claiming that the certificate has been lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board may, in its discretion, require such owner or his or her legal representatives to give to the Corporation and its transfer agent(s) and registrar(s) a bond in such sum, limited or unlimited, and in such form and with such surety or sureties as the Board in its absolute discretion shall determine, sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate, or the issuance of a new certificate. 9.06 STOCKHOLDER'S RIGHT OF INSPECTION. Any stockholder of record of the Corporation, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the Corporation's stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorized the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the Corporation at its registered office in Delaware or at its principal place of business. 9.07 REPRESENTATION OF SHARES OF OTHER CORPORATIONS. Any Executive Officer, Executive Vice President or the Secretary of this Corporation is authorized to vote, represent and exercise on behalf of this Corporation all rights incident to all shares of any other corporation or corporations standing in the name of this Corporation. The authority herein granted to said officers to vote or represent on behalf of this Corporation any and all shares held by this Corporation in any other corporation or corporations may be exercised either by such officers in person or by any person authorized so to do by proxy or power of attorney duly executed by said officers. -13- ARTICLE X MISCELLANEOUS 10.01 BUDGETS. The Board shall approve all annual and other significant operating budgets of the Corporation. 10.02 RECORD DATES. In order that the Corporation may determine the stockholders entitled to notice of, or to vote at, any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or to receive payment of any dividend or other distribution or allotment of any rights, or to exercise any rights in respect of any change, conversion or exchange of stock or in respect of any other lawful action, the Board may fix, in advance, a record date, which shall be not more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. Only those stockholders of record on the date so fixed shall be entitled to any of the foregoing rights, notwithstanding the transfer of any such stock on the books of the Corporation after any such record date fixed by the Board. 10.03 DIVIDENDS. Subject to any agreement to which the Corporation is a party or by which it is bound, the Board may declare to be payable, in cash, in other property or in stock of the Corporation of any class or series, such dividends in respect of outstanding stock of the Corporation of any class or series as the Board may at any time deem to be advisable. Before declaring any such dividend, the Board may cause to be set aside any funds or other property or assets of the Corporation legally available for the payment of dividends. 10.04 FISCAL YEAR. The fiscal year of the Corporation shall be determined by resolution of the Board. 10.05 CORPORATE SEAL. The Corporate Seal shall be circular in form and shall bear the name of the Corporation and the words and figures denoting its organization under the laws of the State of Delaware and the year thereof and otherwise shall be in such form as shall be approved from time to time by the Board. 10.06 AMENDMENTS. All Bylaws of the Corporation may be amended, altered or repealed, and new Bylaws may be enacted, by the affirmative vote of the holders of record of a majority of the issued and outstanding stock of the Corporation entitled to vote at any annual or special meeting, or by the affirmative vote of a majority of the directors present at any regular or special meeting of the Board. -14- CERTIFICATE OF SECRETARY The undersigned certifies: (1) That the undersigned is duly elected and acting Secretary of CCA Acquisition Corp., a Delaware corporation; and (2) That the foregoing Amended and Restated Bylaws constitute the Bylaws of the Corporation adopted by the Board on the 10th day of August, 1995. IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of the Corporation this 10th day of August, 1995 /s/ Theodore W. Browne, II _________________________________ Theodore W. Browne, II, Secretary [SEAL] AMENDED AND RESTATED BYLAWS OF CCA ACQUISITION CORP. EX-3.5 7 CERT. OF INCORP. CENCOM CABLE ENTERTAINMENT, INC. EXHIBIT 3.5 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF CENCOM CABLE ENTERTAINMENT, INC. Cencom Cable Entertainment, Inc., a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), hereby certifies as follows: 1. The name of the Corporation is Cencom Cable Entertainment, Inc. 2. The original Certificate of Incorporation of the corporation was filed with the Secretary of the State of Delaware on May 3, 1982. 3. This amended and Restated Certificate of Incorporation amends and restates the Certificate of Incorporation of the Corporation heretofore amended and restated and has been duly adopted by the Board of Directors and approved by the stockholders of the Corporation in accordance with the provisions of Section 242 and 245 of the General Corporation Law of the State of Delaware. The text of the Certificate of Incorporation, as amended and restated, shall read in full as follows: 1. The name of the Corporation is Cencom Cable Entertainment, Inc. 2. The address of the registered office of the Corporation in the State of Delaware is the Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company. 3. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. 4. The total number of shares which the Corporation shall have authority to issue is Three Hundred Thousand (300,000) shares of Common Stock with a par value of One Dollar ($1.00) per share, amounting in the aggregate to Three Hundred Thousand Dollars $300,000.00. 5. The Corporation is to have perpetual existence. 6. The number of directors which shall constitute the whole Board of Directors shall be fixed by and in the manner provided in the Bylaws of the Corporation. 7. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, repeal, alter, amend and rescind the Bylaws of the Corporation. 8. Election of directors at an annual or special meeting of the stockholders need not be by written ballot unless the Bylaws of the Corporation shall so provide. 9. No director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director; provided, however, that this Section 9 shall not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derives an improper personal benefit. If the General Corporation Law of the State of Delaware is amended after the date of filing of this Certificate of Incorporation to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of the State of Delaware as so amended. Any repeal or modification of the foregoing paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing in respect of any act or omission occurring prior to the time of such repeal or modification. 10. The Corporation shall, to the fullest extent now or hereafter permitted by Section 145 of the General Corporation Law of the State of Delaware, as amended from time to time, indemnify all persons whom it may indemnify pursuant thereto. 11. The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation in the manner now or hereafter prescribed by statute, and all rights conferred on stockholders herein are granted subject to this reservation. IN WITNESS WHEREOF, said Cencom Cable Entertainment, Inc. has caused this Amended and Restated Certificate of Incorporation to be signed by Theodore W. Browne, II, its Executive Vice President, and attested by Marcy Lifton, its Assistant Secretary, this 11th day of April, 1996. CENCOM CABLE ENTERTAINMENT, INC. ATTEST: By: /s/ Theodore W. Browne, II ----------------------------------- Theodore W. Browne, II /s/ Marcy Lifton - --------------------------------- Marcy Lifton, Assistant Secretary 2 EX-3.6 8 AMEND & RESTATD BY-LAWS OF CENCOM CABLE ENT. INC. EXHIBIT 3.6 AMENDED AND RESTATED BYLAWS OF CENCOM CABLE ENTERTAINMENT, INC. TABLE OF CONTENTS -----------------
Page ---- ARTICLE I OFFICES............................................. 1 Section 1.01 REGISTERED OFFICE...................................... 1 Section 1.02 OTHER OFFICES.......................................... 1 ARTICLE II MEETINGS OF STOCKHOLDERS............................ 1 Section 2.01 ANNUAL MEETINGS........................................ 1 Section 2.02 SPECIAL MEETINGS....................................... 1 Section 2.03 NOTICE OF MEETING...................................... 1 Section 2.04 LIST OF STOCKHOLDERS................................... 2 Section 2.05 QUORUM................................................. 2 Section 2.06 ADJOURNMENTS........................................... 2 Section 2.07 VOTING................................................. 2 Section 2.08 PROXIES................................................ 3 Section 2.09 JUDGES OF ELECTION..................................... 3 Section 2.10 WRITTEN CONSENT........................................ 3 ARTICLE III BOARD............................................... 3 Section 3.01 NUMBER................................................. 3 Section 3.02 ELECTION AND TERM OF OFFICE............................ 3 Section 3.03 VACANCIES AND ADDITIONAL DIRECTORSHIPS................. 4 Section 3.04 POWERS................................................. 4 Section 3.05 RESIGNATION OF DIRECTORS............................... 4 Section 3.06 REMOVAL OF DIRECTORS................................... 4 Section 3.07 COMPENSATION OF DIRECTORS.............................. 4 Section 3.08 RELIANCE ON ACCOUNTS AND REPORTS, ETC.................. 4 ARTICLE IV MEETING OF THE BOARD................................ 4 Section 4.01 PLACE.................................................. 4 Section 4.02 REGULAR MEETINGS....................................... 4 Section 4.03 SPECIAL MEETINGS....................................... 5 Section 4.04 QUORUM................................................. 5 Section 4.05 ADJOURNED MEETINGS..................................... 5 Section 4.06 WRITTEN CONSENT........................................ 5 Section 4.07 COMMUNICATIONS EQUIPMENT............................... 5 Section 4.08 WAIVER OF NOTICE....................................... 5 Section 4.09 OFFICERS OF THE BOARD.................................. 5 ARTICLE V COMMITTEES OF THE BOARD............................. 6 Section 5.01 DESIGNATION, POWER AND ALTERNATE MEMBERS AND TERM OF OFFICE...................................... 6 Section 5.02 MEETINGS, NOTICES AND RECORDS.......................... 6 Section 5.03 QUORUM AND MANNER OF ACTING............................ 6 Section 5.04 RESIGNATIONS........................................... 7 Section 5.05 REMOVAL................................................ 7 Section 5.06 VACANCIES.............................................. 7
i ARTICLE VI OFFICERS............................................ 7 Section 6.01 OFFICERS AND MANAGEMENT COMMITTEE...................... 7 Section 6.02 DUTIES................................................. 7 Section 6.03 RESIGNATIONS........................................... 7 Section 6.04 REMOVAL................................................ 8 Section 6.05 VACANCIES.............................................. 8 Section 6.06 SECRETARY.............................................. 8 Section 6.07 ASSISTANT SECRETARIES.................................. 8 Section 6.08 TREASURER.............................................. 8 Section 6.09 ASSISTANT TREASURERS................................... 8 ARTICLE VII INDEMNIFICATION..................................... 9 Section 7.01 ACTIONS OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION..................................... 9 Section 7.02 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION.......... 9 Section 7.03 DETERMINATION OF RIGHT OF INDEMNIFICATION.............. 9 Section 7.04 INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY... 9 Section 7.05 ADVANCE OF EXPENSES.................................... 10 Section 7.06 OTHER RIGHTS AND REMEDIES.............................. 10 Section 7.07 INSURANCE.............................................. 10 Section 7.08 CONSTITUENT CORPORATIONS............................... 10 Section 7.09 EMPLOYEE BENEFIT PLANS................................. 10 Section 7.10 BROADEST LAWFUL INDEMNIFICATION........................ 10 Section 7.11 TERM................................................... 11 Section 7.12 SEVERABILITY........................................... 11 Section 7.13 AMENDMENTS............................................. 11 ARTICLE VIII DEPOSIT OF CORPORATE FUNDS.......................... 12 Section 8.01 BORROWING.............................................. 12 Section 8.02 DEPOSITS............................................... 12 Section 8.03 CHECKS, DRAFTS, ETC.................................... 12 ARTICLE IX CERTIFICATES OF STOCK............................... 12 Section 9.01 STOCK CERTIFICATES..................................... 12 Section 9.02 BOOKS OF ACCOUNT AND RECORD OF STOCKHOLDERS............ 12 Section 9.03 TRANSFER OF SHARES..................................... 13 Section 9.04 REGULATIONS............................................ 13 Section 9.05 LOST, STOLEN OR DESTROYED CERTIFICATES................. 13 Section 9.06 STOCKHOLDER'S RIGHT OF INSPECTION...................... 13 Section 9.07 REPRESENTATIONS OF SHARES OF OTHER CORPORATIONS........ 13 ARTICLE X MISCELLANEOUS....................................... 14 Section 10.01 BUDGETS............................................... 14 Section 10.02 RECORD DATES.......................................... 14 Section 10.03 DIVIDENDS.............................................. 14 Section 10.04 FISCAL YEAR........................................... 14 Section 10.05 CORPORATE SEAL........................................ 14 Section 10.06 AMENDMENTS............................................ 14
ii AMENDED AND RESTATED BYLAWS OF CENCOM CABLE ENTERTAINMENT, INC. a Delaware Corporation (the "Corporation") ARTICLE I OFFICES 1.01 REGISTERED OFFICE. The registered office shall be maintained at 1209 Orange Street, Wilmington, New Castle County, Delaware 19801 and The Corporation Trust Company is the registered agent. 1.02 OTHER OFFICES. The Corporation may also have other offices, either within or without the State of Delaware, at such place or places as the Board of Directors (the "Board") may from time to time appoint or the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS 2.01 ANNUAL MEETING. The date of the annual meeting of the stockholders for the election of directors and for the transaction of such other business as properly may come before such meeting shall be determined by resolution of the Board to be a specific day in each year, if not a legal holiday, and, if a legal holiday, on the next succeeding business day, at the time and place and within or without the State of Delaware as may be designed by the Board and set forth in the notice of the meeting or a duly executed waiver of notice thereof, provided, however, that in any year, in advance of the date specified for the annual meeting, the Board may act to change the meeting date for that year. 2.02 SPECIAL MEETINGS. Special meetings of the stockholders for any proper purpose or purposes may be called at any time by the Board or an Executive Officer, to be held on the date, at the time and place within or without the State of Delaware as the Board or an Executive Officer, whichever has called the meeting, shall direct. A special meeting of the stockholders also shall be called whenever stockholders owning a majority of the shares of the Corporation then issued and outstanding and entitled to vote on all of the matters to be submitted to stockholders of the Corporation at such special meeting shall make written application to an Executive Officer. Any such written request shall state a proper purpose or purposes of the meeting and shall be delivered to an Executive Officer. 2.03 NOTICE OF MEETING. Notice, signed by the Secretary of the Corporation or an Executive Officer, of every annual or special meeting of stockholders shall be prepared in writing and personally delivered; mailed, postage prepaid; or sent by facsimile transmission to each stockholder entitled to vote at such meeting not less than ten (10) nor more than sixty (60) days before the meeting, except as otherwise provided by statute. Every notice of a meeting of the stockholders shall state the place, date and hour of the meeting, and in the case of a special meeting, shall also state the purpose or purposes for which the meeting is called. If mailed, such notice shall be directed to a stockholder at his address as it shall appear on the stock record book of the Corporation, unless the stockholder shall have filed with the Secretary a written -1- request that notice intended for him or her be mailed to some other address, in which case it shall be mailed to the address designated in such request. Notice shall be deemed given when personally delivered or deposited in the United States mail, as the case may be; provided, however, that such notice may also be given by telegram, facsimile or other means of electronically transmitted written copy and in such case shall be deemed given when ordered or, if a delayed delivery is ordered, as of such delayed delivery time. 2.04 LIST OF STOCKHOLDERS. A complete list of the stockholders entitled to vote at each meeting of stockholders, arranged in alphabetical order and showing the address of each such stockholder and the number of shares registered in the name of each such stockholder, shall be open to the examination of any stockholder, for any purpose germane to such meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of such meeting, or, if not specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting and during the whole time thereof, and may be inspected by any stockholder who is present. 2.05 QUORUM. The presence at any meeting, in person or by proxy, of the holders of record of a majority of the shares then issued and outstanding and entitled to vote shall be necessary and sufficient to constitute a quorum for the transaction of business, except where otherwise provided by statute. 2.06 ADJOURNMENTS. In the absence of a quorum, stockholders representing a majority of the shares then issued and outstanding and entitled to vote, present in person or by proxy, or, if no stockholder entitled to vote is present in person or by proxy, any officer entitled to preside at or act as secretary of such meeting, may adjourn the meeting from time to time without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting originally noticed. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. 2.07 VOTING. (a) At each meeting of the stockholders, each stockholder shall be entitled to vote in person or by proxy each share or fractional share of the stock of the Corporation which has voting rights on the matter in question and which shall have been held by him or her and registered in his name on the books of the Corporation: (i) on the date fixed pursuant to Section 10.02 of these Bylaws as the record date for the determination of stockholders entitled to notice of and to vote at such meeting, or (ii) if no such record date shall have been so fixed, then (x) at the close of business on the day next preceding the day on which notice of the meeting shall be given or (y) if notice of the meeting shall be waived, at the close of business on the day next preceding the day on which the meeting shall be held. (b) Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors in such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes. Persons holding stock of the Corporation in a fiduciary capacity shall be entitled to vote such stock. Persons whose stock is pledged shall be entitled to vote, unless in the transfer by the pledgor on the books of the Corporation he or she shall have expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his or her proxy, may represent such stock and vote thereon. Stock having voting power standing of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, -2- tenants by the entirety or otherwise, or with respect to which two or more persons have the same fiduciary relationship, shall be voted in accordance with the provisions of the General Corporation Law of Delaware. (c) At any meeting of the stockholders all matters except as otherwise provided in the Certificate of Incorporation, in these Bylaws, or by law, shall be decided by the vote of a majority in voting interest of the stockholders present in person or by proxy and entitled to vote thereat and thereon. The vote at any meeting of the stockholders on any question need not be by ballot, unless so directed by the chairman of the meeting. On a vote by ballot, each ballot shall be signed by the stockholder voting, or by his proxy if there be such proxy, and it shall state the number of shares voted. 2.08 PROXIES. Any stockholder is entitled to vote by proxy, provided that the instrument authorizing such proxy to act shall have been executed in writing (which shall include telegram, facsimile or other means of electronically transmitted written copy) by the stockholder himself or herself or by his or her duly authorized attorney-in-fact and delivered to the secretary of the meeting. No proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. The attendance at any meeting of a stockholder who may theretofore have given a proxy shall not have the effect of revoking the same unless he shall in writing so notify the secretary of the meeting prior to the voting of the proxy. 2.09 JUDGES OF ELECTION. The Board may appoint judges of election to serve at any election of directors and at balloting on any other matter that may properly come before a meeting of stockholders. If no such appointment shall be made, or if any of the judges so appointed shall fail to attend, or refuse or be unable to serve, then such appointment may be made by the presiding officer of the meeting at the meeting. 2.10 WRITTEN CONSENT. Any action which may be taken at any annual or special meeting of stockholders may be taken without a meeting and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Whenever any such action is taken without a meeting by less than unanimous consent, all stockholders who have not consented in writing must be promptly informed in writing of such action. ARTICLE III BOARD 3.01 NUMBER. The number of directors which shall constitute the whole Board shall be fixed at three (3) persons, until changed from time to time by resolution of the Board or stockholders at the annual meeting or any special meeting called for that purpose. 3.02 ELECTION AND TERM OF OFFICE. Directors shall be elected at the annual meeting of the stockholders except as provided in Section 3.03 of this Article III. Each director (whether elected at an annual meeting or to fill a vacancy or otherwise) shall continue in office until a successor shall have been elected and qualified or until his or her death, resignation or removal in the manner hereinafter provided, whichever shall first occur. -3- 3.03 VACANCIES AND ADDITIONAL DIRECTORSHIPS. If any vacancy shall occur among the directors by reason of death, resignation, or removal, or as the result of an increase in the number of directorships, the directors then in office shall continue to act and may fill any such vacancy by a vote of the majority of directors then in office, though less than a quorum, and each director so chosen shall hold office until the next annual election of directors and until his or her successor shall be duly elected and shall qualify, or until his or her earlier death, resignation or removal. 3.04 POWERS. The business of the Corporation shall be managed by its Board, which may exercise all powers of the Corporation and do all lawful acts and things as are not by law or by the Certificate of Incorporation or these Bylaws reserved to the stockholders. 3.05 RESIGNATION OF DIRECTORS. Any director may resign at any time by giving written notice of such resignation to the Board or an Executive Officer. Any such resignation shall take effect at the time specified therein or, if no time be specified, upon receipt thereof by the Board or an Executive Officer; and unless specified therein, the acceptance of such resignation shall not be necessary to make it effective. 3.06 REMOVAL OF DIRECTORS. At the annual meeting or any special meeting of the stockholders, duly called as provided in these Bylaws, any director or directors may, by the affirmative vote of the holders of a majority of the shares of stock issued and outstanding and entitled to vote for the election of directors, be removed from office, either with or without cause. At such meeting a successor or successors may be elected by a majority of the votes cast, or if any such vacancy is not so filled, it may be filled by the directors as provided in Section 3.03 of this Article III. 3.07 COMPENSATION OF DIRECTORS. Directors may receive such reasonable compensation for their services, whether in the form of salary or a fixed fee for attendance at Board or Board committee meetings, with expenses, if any, as the Board may from time to time determine. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. 3.08 RELIANCE ON ACCOUNTS AND REPORTS, ETC. A director, or a member of any committee designed by the Board shall, in the performance of his duties, be fully protected in relying in good faith upon the records of the Corporation and upon information, opinions, reports or statements presented to the Corporation by any of the Corporation's officers or employees, or committees designated by the Board, or by any other person as to the matters the director or member reasonably believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation. ARTICLE IV MEETINGS OF THE BOARD 4.01 PLACE. The Board of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware. 4.02 REGULAR MEETINGS. The Board by resolution may provide for the holding of regular meetings and may fix the times and places at which such meetings shall be held. Notice of regular meetings shall not be required to be given if the time and place has been fixed by Board resolution, provided that whenever the time or place of regular meetings shall be fixed or changed, notice of such action shall bemailed promptly to each director who shall not have been present at the meeting at which such action was taken. If the time and place for regular meetings has not been fixed by the Board, then at least 10 days written -4- notice addressed to him or her at his or her residence or usual place of business, unless he or she shall have filed with the Secretary a written request that notices intended for him or her be mailed to some other address, in which case it shall be mailed to the address designated in such request, or shall be sent to him or her at such place by telegram, facsimile or other means of electronically transmitted written copy. 4.03 SPECIAL MEETINGS. Special meetings of the Board may be called by any Executive Officer and shall be called by any Executive Officer at the written request of any director. Except as otherwise required by statute, notice of each special meeting shall be given to each director, if by mail, when addressed to him or her at his or her residence or usual place of business, unless he or she shall have filed with the Secretary a request that notices intended for him or her be mailed to some other address, in which case it shall be mailed to the address designated in such request, at least 72 hours before, or shall be sent to him or her at such place by telegram, facsimile, telephone or other means of electronically transmitted written copy, or delivered to him or her personally, at least 48 hours before the date on which the meeting is to be held. Such notice shall state the time and place of such meeting, but need not state the purposes thereof, unless otherwise required by statute, the Certificate of Incorporation of the Corporation or these Bylaws. 4.04 QUORUM. At any meeting of the Board two-thirds (2/3) of the whole Board shall constitute a quorum for the transaction of business, and the act of the majority of those present at any meeting at which a quorum is present shall be sufficient for the act of the Board, except as may be otherwise specifically provided by statute or by the Certificate of Incorporation of the Corporation. 4.05 ADJOURNED MEETINGS. If a quorum shall not be present at a meeting of the Board, the directors present thereat may adjourn the meeting from time to time, until a quorum shall be present. Seventy-two (72) hours' notice of any such adjournment shall be given personally to each director who was not present at the meeting at which such adjournment was taken, and unless announced at the meeting, to the other directors; provided, that then ten (10) days' notice shall be given if notice is given by mail. 4.06 WRITTEN CONSENT. Any action required or permitted to be taken at any meeting of the Board may be taken without a meeting if all the members of the Board consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of the Board. 4.07 COMMUNICATIONS EQUIPMENT. Any one or more members of the Board may participate in any meeting of the Board by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation by such means shall be deemed to constitute presence in person at such meeting. 4.08 WAIVER OF NOTICE. Notice of any meeting need not be given to any directors who shall attend such meeting in person or shall waive notice thereof, before or after such meeting, in writing or by telegram, facsimile or other means of electronically transmitted written copy. 4.09 OFFICERS OF THE BOARD. The Board shall have a Chairman of the Board and may, at the discretion of the Board, have one or more Vice Chairmen. The Chairman of the Board and the Vice Chairmen shall be appointed from time to time by the Board and shall have such powers and duties as shall be designated by the Board. -5- ARTICLE V COMMITTEES OF THE BOARD 5.01 DESIGNATION, POWER AND ALTERNATE MEMBERS AND TERM OF OFFICE. The Board may, by resolution passed by a majority of the whole Board, designate one (1) or more committees. Each such committee shall consist of one (1) or more of the directors of the Corporation. Any such committee, to the extent provided in such resolution, shall have and may exercise the power of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. The Board may designate one (1) or more directors as alternate members of any committee who, in the order specified by the Board, may replace any absent or disqualified member at any meeting of the committee. If at a meeting of any committee one (1) or more of the members thereof should be absent or disqualified, and if either the Board has not so designated any alternate member or members, or the number of absent or disqualified members exceeds the number of alternate members who are present at such meeting, then the member or members of such committee (including alternates) present at any meeting and not disqualified from voting, whether or not he or she or they constitute a quorum, may unanimously appoint another director to act at the meetings in the place of any such absent or disqualified member. The term of office of the members of each committee shall be as fixed from time to time by the Board, subject to the term of office of the directors and these Bylaws; provided, however, that any -------- committee member who ceases to be a member of the Board shall ipso facto cease ---- ----- to be a committee member. Each committee shall appoint a secretary, who may be the Secretary or an Assistant Secretary of the Corporation. 5.02 MEETINGS, NOTICES AND RECORDS. Each committee may provide for the holding of regular meetings, with or without notice, and a majority of the members of any such committee may fix the time, place and procedure for any such meeting. Special meetings of each committee shall be held upon call by or at the direction of its chairman or, if there be no chairman, by or at the direction of any two (2) of its members, at the time and place specified in the respective notices or waivers of notice thereof. Notice of each special meeting of a committee shall be mailed to each member of such committee, addressed to him or her at his or her residence or usual place of business, unless he or she shall have filed with the Secretary a written request that notices intended for him or her be mailed to some other address, in which case it shall be mailed to the address designated in such request, at least 72 hours before the day on which the meeting is to be held, or shall be sent by telegram, facsimile or other means of electronically transmitted written copy, addressed to him at such place, or telephoned or delivered to him or her personally, at least 48 hours before the day on which the meeting is to be held. Notice of any meeting of a committee need not be given to any member thereof who shall attend the meeting in person or who shall waive notice thereof by telegram, facsimile or other means of electronically transmitted written copy. Notice of any adjourned meeting need not be given. Each committee shall keep a record of its proceedings. Each committee may meet and transact any and all business delegated to that committee by the Board by means of a conference telephone or similar communications equipment provided that all persons participating in the meeting are able to hear and communicate with each other. Participation in a meeting by means of conference telephone or similar communication shall constitute presence in person at such meeting. 5.03 QUORUM AND MANNER OF ACTING. At each meeting of any committee the presence of a majority of its members then in office shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the members present at any meeting at which a quorum is present shall be the act of such committee; in the absence of a quorum, a majority of the members present at the time and place of any meeting may adjourn the meeting from time to time until a quorum shall be present. Subject to the foregoing and other provisions of these Bylaws and except as otherwise determined by the Board, each committee may make rules for the conduct of its business. Any determination made in writing and signed by all the members of such committee shall be as effective as if made by such committee at a meeting. -6- 5.04 RESIGNATIONS. Any member of a committee may resign at any time by giving written notice of such resignation to the Corporation, the Board, or an Executive Officer of the Corporation. Unless otherwise specified in such notice, such resignation shall take effect upon receipt thereof by the Board or any Executive Officer of the Corporation. 5.05 REMOVAL. Any member of any committee may be removed at any time by the affirmative vote of a majority of the whole Board with or without cause. 5.06 VACANCIES. If any vacancy shall occur in any committee by reason of death, resignation, disqualification, removal or otherwise, the remaining members of such committee, though less than a quorum, shall continue to act until such vacancy is filled by the Board. ARTICLE VI OFFICERS 6.01 OFFICERS AND MANAGEMENT COMMITTEE. The Board shall determine the titles and duties of the officers of the Corporation who shall be responsible for the overall supervision, direction and control of the business and affairs of the Corporation (hereinafter referred to as the "Executive Officers"), and shall elect persons to hold such positions. The Corporation also shall have one or more Executive Vice-Presidents and Senior Vice- Presidents, as well as a Treasurer and a Secretary. The Board also may, but shall not be required to, appoint a Management Committee which shall be comprised of the Executive Officers plus such other officers as may be selected by the Board or in the absence of Board action by the Chairman of the Management Committee. Any Executive Officer or Executive Vice President may, if so designated by the Board, function in the capacity of Chief Executive Officer, Chief Financial Officer, or Chief Operating Officer. In the absence or disability of an elected Executive Officer, another Executive Officer shall perform such other officer's duties. One of the Executive Officers shall preside at meetings of stockholders. The officers of the Corporation may also include one or more Regional or other Vice-Presidents and one or more Assistant Secretaries or Assistant Treasurers, each of whom shall be elected by the Board or appointed by the Executive Officers Any number of offices may be held by the same person subject to any limits imposed by the General Corporation Law of the State of Delaware; provided that different officers shall have such titles and duties as may be necessary to enable the Corporation to sign instruments and stock certificates which comply with Sections 103(a)(2) and 158 of the General Corporation Law of the State of Delaware. Each officer of the corporation elected by the Board or appointed by the Executive Officers shall hold office until his or her successor is duly elected or appointed and qualified or until his or her earlier resignation or removal. 6.02 DUTIES. All officers, as between themselves and the Corporation, shall have such authority and perform such duties in the management of the Corporation as may be provided in these Bylaws, or, to the extent not so provided, as may be provided by resolution of the Board or the supervising Executive Officers. 6.03 RESIGNATIONS. Any officer may resign at any time by giving written notice of such resignation to the Board or any Executive Officer. Unless otherwise specified in such written notice, such resignation shall take effect upon receipt thereof by the Board or any such Executive Officer. -7- 6.04 REMOVAL. All officers serve at the sole pleasure and in the sole discretion of the Board. Any Executive Officer or other officer elected by the Board may be removed at any time, either with or without cause, by the vote of a majority of all of the directors then in office. Any officers appointed by an Executive Officer may be removed at any time by an Executive Officer with or without cause. Such power of removal from office shall not be abridged by any employment contract or other agreement. 6.05 VACANCIES. A vacancy in any office by reason of death, resignation, removal, disqualification or any other cause shall be filled for the unexpired portion of the term in the manner prescribed by these Bylaws for regular election or appointment to such office. 6.06 SECRETARY. The Secretary shall: (a) record all the proceedings of the meetings of the stockholders, the Board, and all committees of the Board in a book or books to be kept for that purpose; (b) cause all notices to be duly given in accordance with the provisions of these Bylaws as required by statute; (c) whenever any committee shall be appointed in pursuance of a resolution of the Board, furnish the chairman of such committee with a copy of such resolution; (d) be custodian of the records and of the seal of the Corporation, and cause such seal to be affixed to all certificates representing capital stock of the Corporation prior to the issuance thereof and to all instruments the execution of which on behalf of the Corporation under its seal shall have been duly authorized; (e) see that the lists, books, reports, statements, certificates and other documents and records required by statute are properly kept and filed; (f) have charge of the stock record and stock transfer books of the Corporation, and exhibit such stock books at all reasonable times to such persons who are entitled by statute to have access thereto; and (g) in general, perform all duties incident to the office of Secretary and such other duties as are given to him or her by these Bylaws or as from time to time may be assigned to him or her by the Board or the Executive Officers. 6.07 ASSISTANT SECRETARIES. At the request of the Secretary or in his or her absence or disability, the Assistant Secretary designated by him or her (or in the absence of such designation, the Assistant Secretary designated by the Board or any Executive Officer) shall perform all the duties of the Secretary, and, when so acting, shall have all the powers of and be subject to all restrictions upon the Secretary. The Assistant Secretaries shall perform such other duties as from time to time may be assigned to them by the Board or the Executive Officers. 6.08 TREASURER. The Treasurer shall: (a) have charge of and supervision over and be responsible for the funds, securities, receipts and disbursements of the Corporation; (b) cause the monies and other valuable effects of the Corporation to be deposited in the name and to the credit of the Corporation in banks or trust companies or with bankers or other depositories or to be otherwise dealt with in such manner as the Board may direct; (c) select authorized depositories of the Corporation and cause the funds of the Corporation to be disbursed by checks or drafts upon the authorized depositories of the Corporation, and cause to be taken and preserved proper vouchers for all monies disbursed; (d) render to the Board and the Executive Officers, whenever requested, a statement of the financial condition of the Corporation and of all his or her transactions as Treasurer; (e) cause to be kept at the Corporation's principal office correct books of account of all its business and transactions and such duplicate books of account as he or she shall determine and upon application cause such books or duplicates thereof to be exhibited to any Director; (f) be empowered, from time to time, to require from the officers or agents of the Corporation reports or statements giving such information concerning transactions of the Corporation; and (g) in general, perform all duties incident to the office of Treasurer and such other duties as are given to him or her by these Bylaws or as from time to time may be assigned to him by the Board or the Executive Officers. 6.09 ASSISTANT TREASURERS. At the request of the Treasurer or any of the Executive Officers, the Assistant Treasurer shall perform all the duties of the Treasurer and, when so acting, shall have all the powers of the be subject to all restrictions upon the Treasurer. The Assistant Treasurer shall perform such other duties as from time to time may be assigned by the Board, the Executive Officers of the Treasurer. -8- ARTICLE VII INDEMNIFICATION Section 7.01 ACTIONS OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION. The Corporation shall indemnify any 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 (other than an action by or in the right of the Corporation) by reason of the fact that he is or was or has agreed to become a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or as a member of any committee or similar body, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, that he had reasonable cause to believe that his conduct was unlawful. Section 7.02 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was or has agreed to become a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or as a member of any committee or similar body, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. Section 7.03 DETERMINATION OF RIGHT OF INDEMNIFICATION. Any indemnification under Section 7.01 or 7.02 of these Bylaws (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Sections 7.01 and 7.02 of these Bylaws. Such determination shall be made (a) by the Board by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (b) if such a quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (c) by the stockholders. Section 7.04 INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY. Notwithstanding the other provisions of this Article VII, to the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 7.01 or 7.02 of these Bylaws, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. -9- Section 7.05 ADVANCE OF EXPENSES. Expenses (including attorneys' fees) incurred by an officer or director in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board upon receipt of an undertaking by or on behalf of the director or officer, to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article VII. Such expenses (including attorneys' fees) incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board deems appropriate. The Board may authorize the Corporation's counsel to represent such director, officer, employee or agent in any action, suit or proceeding, whether or not the Corporation is a party to such action, suit or proceeding. Section 7.06 OTHER RIGHTS AND REMEDIES. The indemnification and advancement of expenses provided by, or granted pursuant to, the other Sections of this Article VII shall not be deemed exclusive and are declared expressly to be nonexclusive of any other rights to which those seeking indemnification or advancements of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. Section 7.07 INSURANCE. Upon resolution passed by the Board, the Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or as a member of any committee or similar body against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article VII. Section 7.08 CONSTITUENT CORPORATIONS. For the purposes of this Article VII, references to "the Corporation" include in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or as a member of any committee or similar body, shall stand in the same position under the provisions of this Article VII with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. Section 7.09 EMPLOYEE BENEFIT PLANS. For the purposes of this Article VII, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the 'Corporation' " as referred to in this Article VII. Section 7.10 BROADEST LAWFUL INDEMNIFICATION. In addition to the foregoing, the Corporation shall, to the broadest and maximum extent permitted by Delaware law, as the same exists from time to time (but, in case of any amendment to or change in Delaware law, only to the extent that such amendment or change permits the Corporation to provide broader rights of indemnification than is permitted to the Corporation prior to such amendment or change), indemnify each 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 the fact that he is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of -10- another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding. In addition, the Corporation shall, to the broadest and maximum extent permitted by Delaware law, as the same may exist from time to time (but, in case of any amendment to or change in Delaware law, only to the extent that such amendment or change permits the Corporation to provide broader rights of payment of expenses incurred in advance of the final disposition of an action, suit or proceeding than is permitted to the Corporation prior to such amendment or change), pay to such person any and all expenses (including attorneys' fees) incurred in defending or settling any such action, suit or proceeding in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer, to repay such amount if it shall ultimately be determined by a final judgment or other final adjudication that he is not entitled to be indemnified by the Corporation as authorized in this Section 7.10. The first sentence of this Section 7.10 to the contrary notwithstanding, the Corporation shall not indemnify any such person with respect to any of the following matters: (a) remuneration paid to such person if it shall be determined by a final judgment or other final adjudication that such remuneration was in violation of law; or (b) any accounting of profits made from the purchase or sale by such person of the Corporation's securities within the meaning of Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar provisions of any federal, state or local statutory law; or (c) actions brought about or contributed to by the dishonesty of such person, if a final judgment or other final adjudication adverse to such person establishes that acts of active and deliberate dishonesty were committed or attempted by such person with actual dishonest purpose and intent and were material to the adjudication; or (d) actions based on or attributable to such person having gained any personal profit or advantage to which he was not entitled, in the event that a final judgment or other final adjudication adverse to such person establishes that such person in fact gained such personal profit or other advantage to which he was not entitled; or (e) any matter in respect of which a final decision by a court with competent jurisdiction shall determine that indemnification is unlawful; provided, however, that the Corporation shall perform its obligations under the second sentence of this Section 7.10 on behalf of such person until such time as it shall be ultimately determined by a final judgment or other final adjudication that he is not entitled to be indemnified by the Corporation as authorized by the first sentence of this Section 7.10 by virtue of any of the preceding clauses (a) (b) (c) (d) or (e). Section 7.11 TERM. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VII shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. Section 7.12 SEVERABILITY. If any part of this Article VII shall be found, in any action, suit or proceeding or appeal therefrom or in any other circumstances or as to any particular officer, director, employee or agent to be unenforceable, ineffective or invalid for any reason, the enforceability, effect and validity of the remaining parts or of such parts in other circumstances shall not be affected, except as otherwise required by applicable law. Section 7.13 AMENDMENTS. The foregoing provisions of this Article VII shall be deemed to constitute an agreement between the Corporation and each of the persons entitled to indemnification hereunder, for as long as such provisions remain in effect. Any amendment to the foregoing provisions of this Article VII which limits or otherwise adversely affects the scope of indemnification or rights of any such persons hereunder shall, as to such persons, apply only to claims arising, or causes of action based on actions or events occurring, after such amendment and delivery of notice of such amendment is given to the person or persons so affected. Until notice of such amendment is given to the person or persons whose rights hereunder are adversely affected, such amendment shall have no effect on such rights of such persons hereunder. Any person entitled to indemnification under the foregoing provisions of this Article VII shall, as to any act or omission occurring prior to the date of receipt of such notice, be entitled to indemnification to the same extent as had such provisions continued as Bylaws of the Corporation without such amendment. -11- ARTICLE VIII DEPOSIT OF CORPORATE FUNDS 8.01 BORROWING. No loans or advances shall be obtained or contracted for, by or on behalf of the Corporation and no negotiable paper shall be issued in its name, unless and except as authorized by the Board. Such authorization may be general or confined to specific instances. 8.02 DEPOSITS. All funds of the Corporation not otherwise employed shall be deposited from time to time to its credit in such banks or trust companies or with such bankers or other depositories as the Board may select, or as may be selected by any officer or officers or agent or agents authorized to do so by the Board. 8.03 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the payment of money, and all negotiable and non-negotiable notes or other negotiable or non-negotiable evidences of indebtedness issued in the name of the Corporation, shall be signed or endorsed by such person or persons and in such manner as from time to time shall be determined by the Board or the Executive Officers. The Corporation shall obtain a fidelity bond for such persons with such signing authority as the Board or the Executive Officers may require. ARTICLE IX CERTIFICATES OF STOCK 9.01 STOCK CERTIFICATES. Every holder of capital stock of the Corporation shall be entitled to have a certificate or certificates in such form as shall be approved by the Board, certifying the number of shares of capital stock of the Corporation owned by him or her. The certificates representing shares of capital stock shall be signed in the name of the Corporation by an Executive Officer and by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer (which signatures may be facsimiles) and sealed with the seal of the Corporation (which seal may be a facsimile). If any officer, transfer agent or registrar who shall have signed or whose facsimile signatures has been placed upon such certificate shall have ceased to be such officer, transfer agent or registrar before such certificates are issued, they may nevertheless be issued by the Corporation with the same effect as if such officer, transfer agent, or registrar were still such at the date of their issue. 9.02 BOOKS OF ACCOUNT AND RECORD OF STOCKHOLDERS. The books and records of the Corporation may be kept at such places, within or without the State of Delaware, as the Board may from time to time determine. The stock record books and the blank stock certificate books shall be kept by the Secretary or by any other officer or by the transfer agent or registrar, if any, designated by the Board. There shall be entered on the stock books of the Corporation the number of each certificate issued, the number of shares represented thereby, the name of the person to whom such certificate was issued and the date of issuance thereof. -12- 9.03 TRANSFER OF SHARES. Transfers of shares of capital stock of the Corporation shall be made on the stock records of the Corporation only upon authorization by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary or with the transfer agent, and on surrender of the certificate or certificates for such shares properly endorsed or accompanied by a duly executed stock transfer power and the payment of all taxes thereon, if any. Except as otherwise provided by law, the Corporation shall be entitled to recognize the exclusive right of a person in whose name any share or shares stand on the record of stockholders as the owner of such share or shares for all purposes, including, without limitation, the rights to receive dividends or other distributions, and to vote as such owner, and the Corporation shall not be bound to recognize any equitable or legal claim to or interest in any such share or shares on the part of any other person whether or not the Corporation shall have express or other notice thereof. 9.04 REGULATIONS. The Board may make such additional rules and regulations, not inconsistent with these Bylaws, as it may deem expedient concerning the issue, transfer and registration of certificates for shares of the capital stock of the Corporation. It may appoint, or authorize any officer or officers to appoint, one or more transfer agents or one or more registrars and may further provide that no stock certificate shall be valid until countersigned by one of such transfer agents and registered by one of such registrars. Nothing herein shall be construed to prohibit the Corporation from acting as its own transfer agent or registrar. 9.05 LOST, STOLEN OR DESTROYED CERTIFICATES. The holder of any certificate representing any share or shares of the capital stock of the Corporation shall immediately notify the Corporation of any loss, theft, or destruction of such certificate. The Board may direct that a new certificate or certificates be issued in the place of any certificate or certificates theretofore issued by it which the owner thereof shall allege to have been lost, stolen or destroyed upon the furnishing to the Corporation of an affidavit to that effect by the person claiming that the certificate has been lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board may, in its discretion, require such owner or his or her legal representatives to give to the Corporation and its transfer agent(s) and registrar(s) a bond in such sum, limited or unlimited, and in such form and with such surety or sureties as the Board in its absolute discretion shall determine, sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate, or the issuance of a new certificate. 9.06 STOCKHOLDER'S RIGHT OF INSPECTION. Any stockholder of record of the Corporation, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the Corporation's stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorized the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the Corporation at its registered office in Delaware or at its principal place of business. 9.07 REPRESENTATION OF SHARES OF OTHER CORPORATIONS. Any Executive Officer, Executive Vice President or the Secretary of this Corporation is authorized to vote, represent and exercise on behalf of this Corporation all rights incident to all shares of any other corporation or corporations standing in the name of this Corporation. The authority herein granted to said officers to vote or represent on behalf of this Corporation any and all shares held by this Corporation in any other corporation or corporations may be exercised either by such officers in person or by any person authorized so to do by proxy or power of attorney duly executed by said officers. -13- ARTICLE X MISCELLANEOUS 10.01 BUDGETS. The Board shall approve all annual and other significant operating budgets of the Corporation. 10.02 RECORD DATES. In order that the Corporation may determine the stockholders entitled to notice of, or to vote at, any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or to receive payment of any dividend or other distribution or allotment of any rights, or to exercise any rights in respect of any change, conversion or exchange of stock or in respect of any other lawful action, the Board may fix, in advance, a record date, which shall be not more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. Only those stockholders of record on the date so fixed shall be entitled to any of the foregoing rights, notwithstanding the transfer of any such stock on the books of the Corporation after any such record date fixed by the Board. 10.03 DIVIDENDS. Subject to any agreement to which the Corporation is a party or by which it is bound, the Board may declare to be payable, in cash, in other property or in stock of the Corporation of any class or series, such dividends in respect of outstanding stock of the Corporation of any class or series as the Board may at any time deem to be advisable. Before declaring any such dividend, the Board may cause to be set aside any funds or other property or assets of the Corporation legally available for the payment of dividends. 10.04 FISCAL YEAR. The fiscal year of the Corporation shall be determined by resolution of the Board. 10.05 CORPORATE SEAL. The Corporate Seal shall be circular in form and shall bear the name of the Corporation and the words and figures denoting its organization under the laws of the State of Delaware and the year thereof and otherwise shall be in such form as shall be approved from time to time by the Board. 10.06 AMENDMENTS. All Bylaws of the Corporation may be amended, altered or repealed, and new Bylaws may be enacted, by the affirmative vote of the holders of record of a majority of the issued and outstanding stock of the Corporation entitled to vote at any annual or special meeting, or by the affirmative vote of a majority of the directors present at any regular or special meeting of the Board. -14- CERTIFICATE OF SECRETARY The undersigned certifies: (1) That the undersigned is duly elected and acting Secretary of Cencom Cable Entertainment, Inc., a Delaware corporation; and (2) That the foregoing Bylaws constitute the Amended and Restated Bylaws of the Corporation adopted by the Board on the 10th day of August, 1995. IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of the Corporation this 10th day of August, 1995. /s/ Theodore W. Browne, II --------------------------------- Theodore W. Browne, II, Secretary [SEAL] EX-3.7 9 CERT. OF LIMITED PARTNERSHIP CHARTER COMM EXHIBIT 3.7 CERTIFICATE OF LIMITED PARTNERSHIP OF CHARTER COMMUNICATIONS ENTERTAINMENT, L.P. This Certificate of Limited Partnership of Charter Communications Entertainment, L.P. (the "Partnership"), dated as of April 19, 1995, is being duly executed and filed by CCT Holdings Corp., and CCA Holdings Corp., each a Delaware corporation, as general partners, to form a limited partnership pursuant to the Delaware Revised Uniform Limited Partnership Act, Title 6 Delaware Code, Chapter 17. 1. The name of the limited partnership is Charter Communications Entertainment, L.P. 2. The address of the Partnership's registered office in the State of Delaware is the Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. The name of the Partnership's registered agent for service of process at such address is The Corporation Trust Company. 3. The name and business address of the general partners of the Partnership is: CCT Holdings Corp. c/o Charter Communications, Inc. 12444 Powerscourt Drive St. Louis, Missouri 63131 CCA Holdings Corp. c/o Charter Communications, Inc. 12444 Powerscourt Drive St. Louis, Missouri 63131 IN WITNESS WHEREOF, the undersigned has executed this Certificate of Limited Partnership of Charter Communications Entertainment, L.P. as of the date first above written. CHARTER COMMUNICATIONS ENTERTAINMENT, L.P. By: CCT Holdings Corp., a general partner By: /s/ Neil A. Torpey ------------------------------- Name: Neil A. Torpey Title: Assistant Secretary By: CCA Holdings Corp., a general partner By: /s/ Neil A. Torpey ------------------------------- Name: Neil A. Torpey Title: Assistant Secretary EX-3.8 10 AMEND TO CERT OF LIMITED PARTNERSHIP CHARTER COMM EXHIBIT 3.8 AMENDMENT TO THE CERTIFICATE OF LIMITED PARTNERSHIP OF CHARTER COMMUNICATIONS ENTERTAINMENT, L.P. The undersigned, desiring to amend the Certificate of Limited Partnership of Charter Communications Entertainment, L.P. pursuant to the provisions of Section 17-202 of the Revised Uniform Limited Partnership Act of the State of Delaware, does hereby certify as follows: FIRST: The name of the limited partnership is Charter Communications Entertainment, L.P. SECOND: Article 3 of the Certificate of Limited Partnership shall be amended to read in its entirety as follows: "3. The name and business address of the sole general partner of the Partnership is: CCA Acquisition Corp. c/o Charter Communications, Inc. 12444 Powerscourt Drive, Suite 400 St. Louis, Missouri 63131" IN WITNESS WHEREOF, the undersigned executed this Amendment to the Certificate of Limited Partnership on this 29th day of September, 1995. CHARTER COMMUNICATIONS ENTERTAINMENT, L.P. By: CCA Acquisition Corp., general partner By: /s/ Robert C. Bailey ___________________________________ Robert C. Bailey Sr. Vice President EX-3.9 11 AGREE. OF LIMITED PARTNERSHIP OF CHARTER COMM EXHIBIT 3.9 ================================================================================ AGREEMENT OF LIMITED PARTNERSHIP OF CHARTER COMMUNICATIONS ENTERTAINMENT, L.P. Dated as of September 29, 1995 ================================================================================ Table of Contents
Page Article I Formation of the Partnership........................................ 1 ---------------------------- 1.1 Formation...................................................... 1 1.2 Partnership Name............................................... 1 1.3 Purpose........................................................ 1 1.4 Place of Business.............................................. 2 1.5 Registered Office and Registered Agent......................... 2 1.6 Term........................................................... 2 1.7 Partnership Powers............................................. 2 Article II Capital............................................................. 3 2.1 Capital Contributions.......................................... 3 2.2 Additional Capital............................................. 4 2.3 Liability, etc................................................. 4 2.4 Withdrawal of Capital.......................................... 4 2.5 Priority....................................................... 4 2.6 Capital Accounts............................................... 4 2.7 Adjustments.................................................... 5 Article III Accounting, Distributions and Taxes................................. 5 3.1 Allocations of Net Profits and Net Losses...................... 5 3.2 Qualified Income Offsets, Restorative Allocations.............. 7 3.3 Partnership Minimum Gain....................................... 7 3.4 Minimum Gain Attributable to Partner Nonrecourse Debt.......... 7 3.5 Nonrecourse Deductions......................................... 8 3.6 Partner Nonrecourse Deductions................................. 8 3.7 Section 754 Adjustments........................................ 8
3.8 Tax Allocations; Section 704(c)................................ 8 3.9 Distributions.................................................. 9 3.10 Accounting Method............................................. 10 3.11 Certain Federal Income Tax Matters............................ 10 3.12 Election under Section 754.................................... 10 3.13 Tax Withholdings.............................................. 10 Article IV General Partners.................................................... 11 4.1 Management..................................................... 11 4.2 Vote of General Partners....................................... 11 4.3 Reliance on Authority of General Partners...................... 11 4.4 Interested Party Contracts..................................... 11 4.5 Expenditures By General Partners............................... 12 4.6 Other Relationships............................................ 12 4.7 Proscriptions.................................................. 12 4.8 Bank Accounts.................................................. 12 Article V Restrictions Regarding Transfer, Substitution, etc.................. 13 5.1 Transfer of Interests or Resignations or Withdrawals by General Partners............................... 13 5.2 Substitution of General Partners............................... 13 5.3 Transfer of Interests by Limited Partners...................... 13 5.4 Substitution of Limited Partners............................... 13 Article VI Initial Public Offering............................................. 14 Article VII Indemnification..................................................... 14 7.1 Exculpatory Provisions......................................... 14 7.2 Indemnification of General Partners............................ 14 7.3 Advance of Expenses............................................ 15 7.4 Non-Exclusivity................................................ 15
ii 7.5 Satisfaction from Partnership Assets........................... 15 7.6 Notices of Claims, etc......................................... 15 7.7 Exculpation and Indemnification of Manager..................... 16 Article VIII Dissolution and Liquidation......................................... 16 8.1 Events of Dissolution; Accounting.............................. 16 8.2 Liquidating Trustee............................................ 16 8.3 Distribution in Liquidation.................................... 17 Article IX Power of Attorney................................................... 18 Article X Construction........................................................ 18 10.1 Headings...................................................... 18 10.2 Notices....................................................... 18 10.3 Governing Law................................................. 20 10.4 Entire Understanding and Amendment............................ 20 10.5 Miscellaneous................................................. 20 Article XI Definitions......................................................... 21
SCHEDULE A -- Partners, Capital Contributions and Capital Accounts iii AGREEMENT OF LIMITED PARTNERSHIP OF CHARTER COMMUNICATIONS ENTERTAINMENT, L.P. AGREEMENT OF LIMITED PARTNERSHIP, dated as of September 29, 1995, among CCA Acquisition Corp., a Delaware corporation ("CAC"), and CCT Holdings Corp., a Delaware corporation ("CCT"), as general partners (which entities, together with any other entities who, in accordance with the terms hereof, may be admitted hereafter as general partners, are herein collectively referred to as the "General Partners"), and the entities identified as limited partners in Schedule A hereto, as limited partners (which entities, together with any other entities who, in accordance with the terms hereof, may be admitted hereafter as limited partners, are herein collectively referred to as the "Limited Partners"). Capitalized terms used herein without definition are defined in Article XI. Article I ---------- Formation of the Partnership ---------------------------- 1.1 Formation. The parties to this Agreement hereby form a limited --------- partnership (the "Partnership") pursuant to and in accordance with the provisions of the Delaware Revised Uniform Limited Partnership Act (as amended from time to time, the "Act"). The Certificate of Limited Partnership of the Partnership was filed with the Secretary of State of the State of Delaware on April 20, 1995. 1.2 Partnership Name. The name of the Partnership shall be Charter ---------------- Communications Entertainment, L.P. 1.3 Purpose. The purpose of the Partnership is, directly or ------- indirectly, to acquire, finance, franchise, construct, develop, own, alter, repair, maintain, promote, program, operate, manage, lease, sell, exchange or otherwise dispose of cable television systems and to engage in such activities as the General Partners, subject to the terms set forth herein, deem necessary, advisable or incidental to the foregoing. 1.4 Place of Business. The principal place of business of the ----------------- Partnership shall be c/o Charter Communications, Inc., 12444 Powerscourt Drive, Suite 400, St. Louis, Missouri 63131, or such other place or places as may be designated at any time and from time to time by the General Partners. The General Partners will inform the Limited Partners of any change in the principal office of the Partnership. 1.5 Registered Office and Registered Agent. The registered office of -------------------------------------- the Partnership in the State of Delaware shall be c/o The Corporation Trust Company, Corporation Trust Company Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801, and the registered agent for service of process on the Partnership in the State of Delaware at such address is The Corporation Trust Company. 1.6 Term. Unless sooner terminated by the unanimous consent of the ---- General Partners, the Partnership shall continue until the earliest to occur of: (a) The assignment for the benefit of creditors by a General Partner, appointment of a receiver for or adjudication of bankruptcy of a General Partner which appointment or order remains unstayed for more than 90 days, or seizure by a judgment creditor of a General Partner's interest in the Partnership; 2 (b) The sale, exchange or involuntary conversion of all, or substantially all, of the assets of the Partnership; (c) The resignation or withdrawal of the last remaining General Partner; or (d) December 31, 2055. 1.7 Partnership Powers. In furtherance of the Partnership's purpose ------------------ specified in Section 1.3, the Partnership shall have all of the powers available to it as a limited partnership under the laws of the State of Delaware, including, without limitation, the power to engage in all activities and transactions necessary or advisable to carry out the Partnership's purpose. The General Partners are authorized to exercise all such powers in the name and on behalf of the Partnership, including, without limitation, the authority: (a) to invest in any other entity and to sell, transfer, assign, convey, exchange or otherwise dispose of any or all of the properties or assets of the Partnership or its Subsidiaries for cash, stock, securities or any combination thereof on such terms and conditions as may, at any time and from time to time, be determined by the unanimous consent of the General Partners; (b) (i) to enter into any instruments or agreements constituting - Indebtedness; (ii) to apply the proceeds of any borrowings under any -- instruments or agreements evidencing or creating any Indebtedness in such manner and for such purposes as any General Partner shall determine; (iii) --- to grant security interests in assets of the Partnership or its Subsidiaries to secure the obligations of the Partnership, CAC, CCT, CCA Holdings Corp., Cencom Cable Entertainment, Inc. or the Subsidiaries with respect to any Indebtedness; and (iv) to guarantee the obligations -- 3 of the Partnership, CAC, CCT or the Subsidiaries with respect to any Indebtedness; (c) to enter into, deliver, perform and carry out contracts and agreements of every kind necessary or incidental to the Partnership's purpose; (d) to open, maintain, and close bank accounts and draw checks or other orders for the payment of money; and (e) to take or perform such acts and to execute such agreements, certificates, documents and instruments necessary or advisable to carry out the Partnership's purpose. Article II ---------- Capital ------- 2.1 Capital Contributions. As of the date of this Agreement, each --------------------- Partner shall have contributed or caused to be contributed to the capital of the Partnership property having an agreed upon value equal to the amount set forth opposite such Partner's name on Schedule A hereto. 2.2 Additional Capital. No additional capital contributions or ------------------ assessments therefor beyond the amounts provided for in Section 2.1 shall be required from any Partner. No additional capital contribution will be accepted from any person (including the Partners) except for capital contributions approved by the unanimous consent of the General Partners. Upon the making of any additional capital contribution by any Partner, the General Partner shall amend Schedule A to reflect the capital contribution of such Partner. 2.3 Liability, etc. The Limited Partners shall not have any personal -------------- liability with respect to the liabili- 4 ties or the obligations of the Partnership. The Partners shall not be required to lend funds to the Partnership for any purpose. The Limited Partners, in their capacity as such, shall not (a) take part in the management of the business of the Partnership, except to the extent provided herein and as permitted under the Act, (b) transact any business for the Partnership or (c) have the power to sign for or to bind the Partnership. 2.4 Withdrawal of Capital. No Partner shall be entitled to the --------------------- return of such Partner's capital contribution except by reason of the distribution to such Partner of cash or other property pursuant to Section 3.9 or 8.3 or upon the unanimous written consent of the General Partners. No Partner shall have the right to receive a distribution of property other than cash from the Partnership. 2.5 Priority. Except as expressly otherwise provided herein, there -------- shall be no priority of one or more of the Partners over the other Partners as to return of contributions, withdrawals or distributions of cash or other property. 2.6 Capital Accounts. There shall be established and maintained for ---------------- each Partner on the books of the Partnership a capital account (each, a "Capital Account"), which shall be comprised of two subaccounts, an Ordinary Capital Account and a Preferred Capital Account. The opening balance in each Partner's Capital Account shall be as shown in Schedule A hereto. Whenever this Agreement refers to the balance in a Partner's Capital Account, such reference shall mean the sum of the balances of such Partner's Ordinary Capital Account and Preferred Capital Account. 2.7 Adjustments. (a) As of each Adjustment Date, the balance of ----------- each Ordinary Capital Account shall be adjusted by (i) increasing such balance - ---------- by such Partner's (x) allocable share of Net Profits (allocated in accordance - with Section 3.1) and (y) the amount of money or the fair - 5 market value of any property contributed to the Partnership by such Partner (net of any liabilities secured by such contributed property that the Partnership is considered to assume or take subject to under Section 752 of the Code) and (ii) -- decreasing such balance by (x) the amount of cash or the fair market value of - ---------- - property distributed or deemed distributed to such Partner pursuant to Sections 3.9 (other than Sections 3.9(b)(i) or (ii)) and 8.3 (net of any liabilities secured by such distributed property that the distributee Partner is considered to assume or take subject to under Section 752 of the Code) and (y) such - Partner's allocable share of Net Losses (allocated in accordance with Section 3.1). Each Partner's Capital Account shall be further adjusted with respect to any special allocations pursuant to Sections 3.2 through 3.7. (b) As of each Adjustment Date, the balance of each Preferred Capital Account shall be adjusted by (i) increasing such balance by any Preferred Return - ---------- during the relevant Fiscal Period and (ii) decreasing such balance by any -- ---------- payments made pursuant to Section 3.9(b)(i) or (ii) during the relevant Fiscal Period. Such increase shall and any related payment pursuant to Section 3.9(b)(i) or (ii) shall be treated for all purposes of this Agreement as a payment described in Section 707(c) of the Code. (c) Any question with respect to a Partner's Capital Account shall be resolved by the General Partners, collectively, in good faith and in their reasonably exercised discretion, applying principles consistent with this Agreement. The provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations Section 1.704- 1(b) and shall be interpreted and applied in a manner consistent with such Treasury Regulations. Article III ----------- Accounting, Distributions and Taxes ----------------------------------- 6 3.1 Allocations of Net Profits and Net Losses. (a) The Net Profit ----------------------------------------- and Net Loss of the Partnership, including each item of income, gain, loss, credit and deduction, shall be allocated with respect to each Fiscal Year as of the end of such Fiscal Year. (b) Net Profit and Net Loss of the Partnership shall be allocated among the Partners so as to reduce, proportionately, in the case of a Net Profit, the difference between their respective Target Capital Accounts and Partially Adjusted Capital Accounts and, in the case of a Net Loss, the difference between their respective Partially Adjusted Capital Accounts and Target Capital Accounts as of the end of such Fiscal Year. No portion of Net Profit or Net Loss for any Fiscal Year shall be allocated to a Partner, in the case of a Net Profit, whose Partially Adjusted Capital Account is greater than or equal to its Target Capital Account or, in the case of a Net Loss, whose Target Capital Account is greater than or equal to its Partially Adjusted Capital Account for such Fiscal Year. (c) If (i) the Partnership has a Net Profit for any Fiscal Year - (determined prior to giving effect to this Section 3.1(c)) and, notwithstanding the application of Section 3.1(b), the balance of any Partner's Partially Adjusted Capital Account is greater than the balance of its Target Capital Account, then the Partner with such excess balance shall be specially allocated items of Partnership expense or loss (to the extent available) equal to the difference between its Partially Adjusted Capital Account and its Target Capital Account; (ii) the Partnership has a Net Loss for any Fiscal Year -- (determined prior to giving effect to this Section 3.1(c)) and, notwithstanding the application of Section 3.1(b), the balance of any Partner's Partially Adjusted Capital Account is less than the balance of its Target Capital Account, then the Partner with such deficient balance shall be specially allocated items of Partnership income or gain for such Fiscal Year (to the extent available) equal to the difference between its Partially Adjusted Capital Account and its Target Capital Account; and (iii) the Part --- 7 nership has neither a Net Profit nor a Net Loss for any Fiscal Year (determined prior to giving effect to this Section 3.1(c)) and, notwithstanding the application of Section 3.1(b), the balance of any Partner's Partially Adjusted Capital Account differs from the balance of its Target Capital Account, then the Partner with an excess or deficient balance, as the case may be, shall be specially allocated items of Partnership expense or loss or income or gain, as the case may be, for such Fiscal Year (to the extent available) equal to the difference between its Partially Adjusted Capital Account and its Target Capital Account. 3.2 Qualified Income Offsets, Restorative Allocations. (a) If (i) -------------------------------------------------- - any Partner unexpectedly receives any adjustment, allocation or distribution described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) and (ii) such adjustment, allocation or distribution causes or increases a -- deficit in such Partner's Adjusted Capital Account as of the end of the Fiscal Period to which such adjustment, allocation or distribution relates (a "Deficit"), then items of gross income for such Fiscal Period and each subsequent Fiscal Period shall be specifically allocated to each such Partner pro rata in proportion to its Deficits in an amount and manner sufficient to - --- ---- eliminate, to the extent required by the Treasury Regulations, such Deficit as quickly as possible, provided that an allocation pursuant to this Section 3.2 -------- shall be made only if and to the extent that such Partner would have a Deficit after all other allocations provided for in this Article III have been tentatively made as if this Section 3.2 were not in this Agreement. (b) Any special allocations of items of income or gain pursuant to this Section 3.2 shall be taken into account in computing subsequent allocations pursuant to this Agreement, so that the net amount for any item so allocated and all other items allocated to each Partner pursuant to this Agreement shall be equal, to the extent possible, to the net amount that would have been allocated to each Part- 8 ner pursuant to the provisions of this Agreement if such special allocations had not occurred. 3.3 Partnership Minimum Gain. Except as otherwise provided in ------------------------ Treasury Regulations Section 1.704-2(f), if there is a net decrease in Partnership Minimum Gain during any Partnership Fiscal Year, each Partner shall be specially allocated items of Partnership income and gain for such period (and, if necessary, subsequent periods) in proportion to, and to the extent of, an amount equal to the portion of such Partner's share of the net decrease in Partnership Minimum Gain, determined in accordance with Treasury Regulations Section 1.704-2(g). This Section 3.3 is intended to comply with the chargeback of items of income and gain requirement in Treasury Regulations Section 1.704- 2(f) and shall be interpreted consistently therewith. 3.4 Minimum Gain Attributable to Partner Nonrecourse Debt. Except as ----------------------------------------------------- otherwise provided in Treasury Regulations Section 1.704-2(i), if there is a net decrease in Minimum Gain Attributable to Partner Nonrecourse Debt during any Partnership Fiscal Year, each Partner with a share of Minimum Gain Attributable to Partner Nonrecourse Debt shall be specially allocated items of Partnership income and gain for such period (and, if necessary, subsequent periods) in proportion to, and to the extent of, an amount equal to the portion of such Partner's share of the net decrease in the Minimum Gain Attributable to Partner Nonrecourse Debt, determined in accordance with Treasury Regulations Section 1.704-2(i)(4). This Section 3.4 is intended to comply with the chargeback of items of income and gain requirement in Treasury Regulations Section 1.704- 2(i)(4) and shall be interpreted consistently therewith. 3.5 Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal ---------------------- Year shall be allocated to the Partners in the same ratios that Net Profits are allocated for the Fiscal Year in accordance with Treasury Regulations Section 1.704-2(b)(1). 9 3.6 Partner Nonrecourse Deductions. Partner Nonrecourse Deductions ------------------------------ for any Fiscal Year shall be allocated 100% to the Partner that bears the economic risk of loss (as defined in Treasury Regulations Section 1.704-2(b)) with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable in accordance with Treasury Regulations Section 1.704-2(i). If more than one Partner bears the economic risk of loss with respect to a Partner Nonrecourse Debt, such Partner Nonrecourse Deductions attributable thereto shall be allocated between or among such Partners in accordance with the ratios in which they share such economic risk of loss. 3.7 Section 754 Adjustments. To the extent an adjustment to the ----------------------- adjusted basis of any Partnership asset pursuant to Section 734(b) of the Code or Section 743(c) of the Code is required, pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Partners in a manner consistent with the manner in which their Adjusted Capital Accounts are required to be adjusted pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m). 3.8 Tax Allocations; Section 704(c). (a) Except as provided in ------------------------------- subsection (b) below, the income, gains, losses, credits and deductions recognized by the Partnership shall be allocated among the Partners, for U.S. federal, state and local income tax purposes, to the extent permitted under the Code and the Treasury Regulations, in the same manner that each such item affects the balances in the Partners' Capital Accounts. (b) In accordance with Section 704(c) of the Code and the Treasury Regulations thereunder, income, gain, loss and deduction with respect to any property contributed to the capital of the Partnership shall, solely for tax 10 purposes, be allocated among the Partners so as to take account of any variation between the adjusted basis of such property to the Partnership for federal income tax purposes and its fair market value as determined by the General Partners. 3.9 Distributions. The General Partners may from time to time by ------------- unanimous consent declare distributions of cash or other Partnership property. Such distributions shall be made or applied as follows: (a) First, all distributions received from the Subsidiaries for Permitted Expenses shall be distributed in a manner designed to permit payment of such expenses. (b) Following the Partnership's distribution of amounts pursuant to Section 3.9(a) above, the Partnership shall make all other distributions in the following order of priority: (i) to the extent that each of CAC, Cencom Cable and CCT has a positive balance in its Preferred Capital Account, (x) amounts distributed - to the Partnership by CCE I, L.P., to the extent not previously applied pursuant to subsection (a) above, shall be distributed to CAC and Cencom Cable to the extent of, and pro rata in accordance with, the positive balances in their respective Preferred Capital Accounts and (y) amounts - distributed to the Partnership by CCE II, L.P., to the extent not previously applied pursuant to subsection (a) above, shall be distributed to CCT to the extent of the positive balance in its Preferred Capital Account; (ii) to the extent that any Partner has a positive balance in its Preferred Capital Account, to any such Partner having a positive balance in its Preferred Capital Account to the extent of, and pro rata in accordance with, such positive Preferred Capital Account balances; 11 (iii) to the Partners until each such Partner shall have received amounts pursuant to this clause (iii) sufficient to place such Partner in the same position it would have been in had the preceding clause (i) or (ii) not been in this Agreement and pro rata among such Partners in accordance with their respective Percentage Interests; and (iv) thereafter, to the Partners in accordance with their Percentage Interests. 3.10 Accounting Method. The books of account of the Partnership shall ----------------- be kept pursuant to the accrual method of accounting. Except to the extent required by law, the Partnership shall not change its accounting principles in a manner adverse to any Partner without the consent of such Partner. 3.11 Certain Federal Income Tax Matters. The Partners understand and ---------------------------------- intend that under the Code the Partnership constitutes a "limited partnership." CCT shall be the "tax matters partner" of the Partnership pursuant to Section 6231(a)(7) of the Code. Each Partner hereby consents to such designation and agrees that upon the request of CCT it will execute, certify, acknowledge, deliver, swear to, file and record at the appropriate public offices such documents as may be necessary or appropriate to evidence such consent. 3.12 Election under Section 754. The General Partners, on behalf of -------------------------- the Partnership, may in their sole discretion file an election under Section 754 of the Code in accordance with the procedures set forth in the applicable Treasury Regulations. 3.13 Tax Withholdings. The Partnership shall at all times be entitled ---------------- to make payments with respect to any Partner in amounts required to discharge any legal obligation of the Partnership pursuant to any provision of the Code or any other tax provision or any provision enacted in 12 the future imposing a similar obligation on the Partnership to withhold or make payments to any governmental authority with respect to any U.S. federal, state and local tax liability of such Partner arising as a result of such Partner's interest in the Partnership. Each such payment shall be deemed to be a loan by the Partnership to such Partner and shall not be deemed to be a distribution. The amount of such payments made with respect to any Partner, plus interest at an annual rate equal to the interest rate publicly announced by Toronto Dominion (Texas), Inc. from time to time as its base rate on each such amount from the date of each such payment until such amount is repaid to the Partnership, shall be repaid to the Partnership by (i) deduction from the current or next - succeeding distribution or distributions otherwise payable to such Partner pursuant to this Agreement or (ii) earlier payment of such amounts and interest -- by the Partner to the Partnership. Article IV ----------- General Partners ---------------- 4.1 Management. The management and control of and the determination ---------- of policy with respect to the Partnership and its affairs shall be vested exclusively in the General Partners and in connection therewith the General Partners may exercise all of the powers and authority set forth in Section 1.7. Notwithstanding the foregoing, the General Partners may retain the Manager to manage the Partnership and its Subsidiaries and may delegate such powers and authority to the Manager and assign such duties to the Manager as the General Partners in their reasonable discretion deem necessary or advisable, such powers, authority and duties to be set forth, and limited in the manner set forth, in the Management Agreements. 4.2 Vote of General Partners. Unless expressly otherwise provided ------------------------ herein, whenever this Agreement shall provide for any action, decision, approval or consent to be 13 taken, made or given by the General Partners, such action, decision, approval or consent may be taken, made or given by any General Partner. 4.3 Reliance on Authority of General Partners. Nothing herein ----------------------------------------- contained shall impose any obligation on any person or firm doing business with the Partnership to inquire as to whether or not the General Partners have exceeded their authority in executing or causing to be executed any contract, lease, deed or other instrument on behalf of the Partnership, and any such third person shall be fully protected in relying upon such authority. 4.4 Interested Party Contracts. The General Partners may by -------------------------- unanimous consent cause the Partnership to enter into contracts and transactions with any of the General Partners or any of their respective affiliates, provided -------- that the terms of any such contract or transaction are entered into in good faith, and are fair and reasonable to the Partnership. 4.5 Expenditures By General Partners. The General Partners shall be -------------------------------- entitled to reimbursement by the Partnership for any reasonable expenditures incurred by the General Partners on behalf of the Partnership which are paid by or on behalf of the General Partners other than out of the funds of the Partnership. No General Partner shall be compensated for its services as a General Partner of the Partnership. 4.6 Other Relationships. Each General Partner shall devote so much ------------------- of its time to the business of the Partnership as in the judgment of such General Partner the conduct of the Partnership's business shall reasonably require. Any General Partner may engage in other business ventures of any nature and description independently or with others, and neither the Partnership nor any of the other Partners shall have any rights in and to such independent ventures or the income or profits derived therefrom. Except as otherwise specifically provided herein, nothing contained 14 in this Agreement shall, or shall be deemed to, prohibit, restrict or limit in any manner any business or investment activities of either of the General Partners or any of their respective affiliates, including, without limitation, rendering any business, management or consulting advice to the Partnership or its Subsidiaries. 4.7 Proscriptions. Without the written consent of or ratification by ------------- 90% or more of the Percentage Interests of the Limited Partners, the General Partners shall have no authority to do any act in contravention of this Agreement or of the Act. 4.8 Bank Accounts. All funds of the Partnership shall be deposited ------------- in the Partnership name in such bank account or accounts and in such bank or banks as shall be designated from time to time by the General Partners. All withdrawals therefrom shall be made upon the signature of a General Partner or of such other person or persons as the General Partners may from time to time designate. The Partnership's funds shall not be commingled with funds not belonging to the Partnership and shall be used only for the affairs or business of the Partnership as herein provided. Article V ---------- Restrictions Regarding Transfer, Substitution, etc. --------------------------------------------------- 5.1 Transfer of Interests or Resignations or Withdrawals by General --------------------------------------------------------------- Partners. Without the prior written consent of all of the other General - -------- Partners and a Majority in Interest, no General Partner may (a) sell, transfer, - assign, convey, or otherwise dispose of, all or a portion of its general partner interest in the Partnership or (b) resign or withdraw from the Partnership. - 5.2 Substitution of General Partners. Without the prior written -------------------------------- consent of all of the other General Partners and a Majority in Interest, no General Partner may 15 substitute a general partner in its stead. No party shall become an additional or substitute General Partner hereof unless and until it has executed such certificates and other documents and performed such acts as may be necessary in the judgment of the remaining General Partner(s) to constitute such party as a general partner, and to preserve the status of the Partnership as a limited partnership. 5.3 Transfer of Interests by Limited Partners. Without the prior ----------------------------------------- written consent of all of the General Partners, which consent may be granted or withheld in their sole discretion, no Limited Partner may sell, transfer, assign, convey, or otherwise dispose of, all or a portion of its limited partner interest in the Partnership; provided, however, such consent will be granted for -------- ------- any transfer by a Limited Partner of its entire limited partner interest to another Partner or to any successor in interest upon the sale or transfer of substantially all the assets of such Limited Partner, or the merger or consolidation of such Limited Partner with such successor. 5.4 Substitution of Limited Partners. Without the prior written -------------------------------- consent of all of the General Partners, which consent may be granted or withheld in their sole discretion, no Limited Partner may substitute a limited partner in its stead and no additional Limited Partners may be admitted to the Partnership. No party shall become an additional or substitute Limited Partner hereof unless and until it has executed such certificates and other documents and performed such acts as may be necessary to constitute such party as a limited partner, and to preserve the status of the Partnership as a limited partnership. Article VI ---------- Initial Public Offering ----------------------- In the event of a determination by the unanimous consent of the General Partners to cause a transfer of all or substantially all 16 or substantially all of the assets of the partnership or the interests in the partnership to a corporation ("Newco") in anticipation of an initial public offering of the stock of such corporation (an "IPO"), each Partner shall take such steps to affect the IPO as may be requested by the General Partners, including, without limitation, transferring its interests in the Partnership to Newco in exchange for capital stock of Newco. Article VII ----------- Indemnification --------------- 7.1 Exculpatory Provisions. None of the General Partners or any of ---------------------- their respective affiliates, or the partners, officers, directors, employees or control persons (as such term is defined in the Securities Act of 1933, as amended, and the rules and regulations thereunder) of such General Partner or affiliate (collectively, the "Indemnified Persons") shall be liable, directly or indirectly, to the Partnership or any Partner for any act or omission (in relation to the Partnership or this Agreement) taken or omitted by such Indemnified Person in good faith, provided that such act or omission did not -------- constitute gross negligence, fraud, willful violation of the law, willful violation of this Agreement or reckless disregard of the duties of such Indemnified Person. 7.2 Indemnification of General Partners. The Partnership shall, to ----------------------------------- the fullest extent permitted by applicable law, indemnify and hold harmless each Indemnified Person against all claims, liabilities and expenses of whatever nature ("Claims") relating to activities undertaken in connection with the Partnership, including but not limited to amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and counsel, accountants' and experts' and other fees, costs and expenses reasonably incurred in connection with the investigation, defense or disposition (including by settlement) of any 17 action, suit or other proceeding, whether civil or criminal, before any court or administrative body in which such Indemnified Person may be or may have been involved, as a party or otherwise, or with which such Indemnified Person may be or may have been threatened, while acting as such Indemnified Person, provided -------- that no indemnity shall be payable hereunder against any liability incurred by such Indemnified Person by reason of gross negligence, fraud, willful violation of the law, willful violation of this Agreement, reckless disregard of the duties of such Indemnified Person or with respect to any matter as to which such Indemnified Person shall have been adjudicated not to have acted in good faith, and provided further that as to any action, suit or other proceeding disposed of -------- by settlement or a compromise payment, pursuant to a consent decree or otherwise, no indemnification (whether for such payment or for any other Claim) shall be provided unless there has been a determination that such compromise is in or not opposed to the best interests of the Partnership and that such Indemnified Person has acted in good faith and did not involve gross negligence, fraud, willful violation of the law, willful violation of this Agreement or reckless disregard of the duties of such Indemnified Person. 7.3 Advance of Expenses. Expenses incurred by an Indemnified Person ------------------- in defense or settlement of any Claim that may be subject to a right of indemnification hereunder may be advanced by the Partnership prior to the final disposition thereof upon receipt of an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall ultimately be determined that the Indemnified Person is not entitled to be indemnified by the Partnership. 7.4 Non-Exclusivity. The right of any Indemnified Person to the --------------- indemnification provided herein shall be cumulative of, and in addition to, any and all rights to which such Indemnified Person may otherwise be entitled by contract or as a matter of law or equity and shall extend to such Indemnified Person's successors, assigns and legal representatives. 18 7.5 Satisfaction from Partnership Assets. All judgments against the ------------------------------------ Partnership or an Indemnified Person, in respect of which such Indemnified Person is entitled to indemnification, shall first be satisfied from Partnership assets before the Indemnified Person is responsible therefor. 7.6 Notices of Claims, etc. Promptly after receipt by an Indemnified ----------------------- Person of notice of the commencement of any action or proceeding or threatened action or proceeding involving a Claim referred to in this Article VII, such Indemnified Person will, if a claim for indemnification in respect thereof is to be made against the Partnership, give written notice to the Partnership of the commencement of such action, provided that the failure of any Indemnified Person -------- to give notice as provided herein shall not relieve the Partnership of its obligations under this Article VII, except to the extent that the Partnership is actually prejudiced by such failure to give notice. Each such Indemnified Person shall keep the General Partners apprised of the progress of any such proceeding. 7.7 Exculpation and Indemnification of Manager. Notwithstanding the ------------------------------------------ foregoing provisions of this Article VII, the liability of the Manager to the Partnership and the Partnership's obligation to indemnify the Manager acting solely in its capacity as Manager with respect to any action or inaction in connection with the performance of the services and duties contemplated by the Management Agreements shall be governed by the provisions of the Management Agreements. For purposes of this Section 7.7, the Manager shall include its officers, directors, employees and affiliates. Article VII ----------- Dissolution and Liquidation --------------------------- 19 8.1 Events of Dissolution; Accounting. (a) The Partnership shall --------------------------------- dissolve upon the earliest to occur of the events described in Section 1.6. (b) In the event of the dissolution and liquidation of the Partnership, a proper accounting shall be made of the Capital Account of each Partner and of the Net Profits or Net Losses of the Partnership from the date of the last previous accounting to the date of dissolution. Financial statements presenting such accounting shall be audited and shall include a report of a nationally recognized accounting firm. 8.2 Liquidating Trustee. Upon the dissolution and liquidation of the ------------------- Partnership's business for any reason, the General Partners shall act as liquidating trustees, or, if there shall then be no General Partner, the Limited Partners may elect a liquidating trustee. The liquidating trustee(s) shall have full power to sell, assign and encumber Partnership assets. 8.3 Distribution in Liquidation. In the event of the termination of --------------------------- the Partnership pursuant to this Article VIII or for any other reason, the Partnership assets shall be liquidated. The proceeds of such liquidation shall be distributed as follows: (a) first, to the payment of the expenses of the liquidation; (b) second, to the (i) payment of creditors of the Partnership and - (ii) establishment of reserves to provide for contingent liabilities, if -- any, in the order of priority as provided by law; (c) third, to each Partner whose Preferred Capital Account balance shall be greater than zero (determined after all adjustments for the Fiscal Period in which such 20 dissolution occurs) to the extent of such positive balance in accordance with the priorities set forth in Sections 3.9(b)(i) and (ii); (d) fourth, to each Partner whose Ordinary Capital Account balance shall be greater than zero (as such Ordinary Capital Account has been adjusted pursuant to Section 2.7, after giving effect to allocations pursuant to Article III) to the extent of such positive balance in the ratio which its respective Ordinary Capital Account balance bears to all such positive Ordinary Capital Account balances; and (e) thereafter, to the Partners in accordance with their Percentage Interests at the time of liquidation. Payments to Partners described in subsections (a) through (e) above may be made in cash or in kind if so determined by the General Partners or a liquidating trustee appointed pursuant to Section 8.2. Any distributions to Partners upon liquidation shall be made by the end of the taxable year in which the liquidation of the Partnership occurs (or, if later, within 90 days after the date of such liquidation). Article IX ---------- Power of Attorney ----------------- Concurrently with the execution of this Agreement, each Limited Partner hereby appoints the General Partners as its true and lawful attorneys coupled with an interest, in its name, place and stead to sign, execute, acknowledge, swear to and file any and all documents which in the reasonable discretion of such attorneys are required to be signed, executed, acknowledged, sworn to or filed by each Limited Partner to discharge the purposes of the Partnership as hereinabove stated. Without limitation, among the documents which the General Partners may execute on behalf 21 of each Limited Partner shall be a Certificate of Limited Partnership and all amendments thereto required by applicable law or by the provisions of this Agreement. Article X --------- Construction ------------ 10.1 Headings. The headings, titles and subtitles herein are -------- inserted for convenience of reference only and shall not control or affect the meaning or construction of any of the provisions hereof. 10.2 Notices. All notices, requests, demands, letters, waivers and ------- other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if (a) delivered - personally, (b) mailed, by certified or registered mail with postage prepaid, - (c) sent by next-day or overnight mail or delivery or (d) transmitted by - - telecopy or telegram, as follows: (i) If to the General Partners, to each of them: c/o Charter Communications, Inc. 12444 Powerscourt Drive Suite 400 St. Louis, Missouri 63131 Attention: Jerald L. Kent with a copy to: Kelso & Company 350 Park Avenue, 21st Floor New York, New York 10022 Attention: James J. Connors, II, Esq. 22 Paul, Hastings, Janofsky & Walker 399 Park Avenue New York, New York 10022 Attention: Neil A. Torpey, Esq. Debevoise & Plimpton 875 Third Avenue New York, New York 10022 Attention: Richard D. Bohm, Esq. (ii) If to the Limited Partners, to each of them: c/o Charter Communications, Inc. 12444 Powerscourt Drive Suite 400 St. Louis, Missouri 63131 Attention: Jerald L. Kent with a copy to: Kelso & Company 350 Park Avenue, 21st Floor New York, New York 10022 Attention: James J. Connors, II, Esq. Paul, Hastings, Janofsky & Walker 399 Park Avenue New York, New York 10022 Attention: Neil A. Torpey, Esq. Debevoise & Plimpton 875 Third Avenue New York, New York 10022 Attention: Richard D. Bohm, Esq. 23 or to such other person or address as any party shall specify by notice in writing to the other Partners. All such notices, requests, demands, letters, waivers and other communications shall be deemed to have been received (w) if by - personal delivery on the day after such delivery, (x) if by certified or - registered mail, on the fifth business day after the mailing thereof, (y) if by - next-day or overnight mail or delivery, on the day delivered or (z) if by - telecopy or telegram, on the next day following the day on which such telecopy or telegram was sent, provided that a copy is also sent by certified or registered mail. 10.3 Governing Law. This Agreement, and its validity, construction ------------- and performance, shall be governed by the laws of the State of Delaware, without regard to the conflict of laws rules thereof. 10.4 Entire Understanding and Amendment. This Agreement embodies the ---------------------------------- entire agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, representations, warranties, covenants or undertakings among the parties hereto relating to the subject matter contained herein, other than those expressly set forth or referred to herein. This Agreement supersedes all prior agreements and understandings among the parties with respect to such subject matter. This Agreement may be amended or modified with the written consent of the General Partners. Notwithstanding the foregoing, this Agreement may not be amended or modified without the prior written consent of all of the General Partners, which consent may be granted or withheld in their sole discretion, and, if in the judgment of the General Partners such amendment or modification would materially and adversely affect the rights of a Limited Partner, a Majority in Interest. 10.5 Miscellaneous. Except as provided in Article V, this Agreement ------------- may not be assigned or transferred by operation of law or otherwise. This Agreement is not intended to confer upon any other person except the parties 24 hereto any rights or remedies hereunder. If any provision of this Agreement or the application thereof to any person or circumstance shall be prohibited by or invalid under applicable law, the remainder of this Agreement or the application of such provision to other persons or circumstances shall not be affected thereby. This Agreement may be executed in one or more counterparts, all of which shall constitute one and the same instrument. Each counterpart may consist of a number of copies each signed by less than all, but together signed by all, the parties hereto. Article XI ---------- Definitions ----------- As used in this Agreement and the Schedules hereto, the following terms shall have the following meanings: Act: as defined in Section 1.1 of this Agreement. --- Adjusted Capital Account: means, with respect to any Partner, as of ------------------------ the end of any Fiscal Year, such Partner's Capital Account balance (whether positive or negative) as of the end of such Fiscal Year, (i) increased by the - --------- sum of (A) such Partner's share of Partnership Minimum Gain and (B) any amount - - for which such Partner is personally liable with respect to liabilities of the Partnership as of the end of such Fiscal Year (except to the extent that such amount would duplicate the amount of any increase under clause (A) above) and (ii) decreased by such Partner's share of the reasonably expected net - --- --------- allocations and distributions described in Treasury Regulations Sections 1.704- 1(b)(2)(ii)(d)(4), (5) and (6). Adjustment Date: means (a) the close of business on the last day of --------------- - each Fiscal Year of the Partnership, (b) the day before the effective date of - the admission 25 of any additional Partner to the Partnership, (c) the day before any - distribution is made by the Partnership or (d) any other date selected by the - General Partners, in their reasonable discretion, for an interim closing of the Partnership books. For purposes of this definition, the day before the date of this Agreement shall be considered an Adjustment Date. CAC: as defined in the first paragraph of this Agreement. --- Capital Account: as defined in Section 2.6 of this Agreement. --------------- CCE I, L.P.: means Charter Communications Entertainment I, L.P., a ----------- Delaware limited partnership. CCE II, L.P.: means Charter Communications Entertainment II, L.P., a ------------ Delaware limited partnership. CCE II Loan Agreement: means the Loan Agreement, dated as of --------------------- September 29, 1995, among CCE II, L.P., Chemical Bank as Documentation Agent, and Nationsbank of Texas, N.A., as Administrative Agent, and the lenders named therein, including any amendment, renewal, extension, substitution, refinancing, replacement or other modification thereof. CCT: as defined in the first paragraph of this Agreement. --- Cencom Cable: means Cencom Cable Entertainment, Inc., a Delaware ------------ corporation. Cencom Loan Agreement: means the Senior Subordinated Loan Agreement, --------------------- dated as of September 29, 1995, between CCT and Cencom Cable Television, Inc., including any amendment, renewal, extension, substitution, refinancing, replacement or other modification thereof. 26 Claims: as defined in Section 7.2 of this Agreement. ------ Code: means the Internal Revenue Code of 1986, as amended. ---- Deficit: as defined in Section 3.2 of this Agreement. ------- Fiscal Period: means a period beginning on the day following any ------------- Adjustment Date and ending on the next succeeding Adjustment Date. Fiscal Year: means a year beginning on January 1 of one calendar year ----------- and ending on December 31 of the same calendar year, provided, however, that the -------- ------- term "Fiscal Year" shall mean with respect to the Partnership's first period of operations the period commencing on the date hereof and ending on December 31 of the same calendar year. General Partners: as defined in the first paragraph of this ---------------- Agreement. Hallmark Loan Agreement: means the Senior Subordinated Loan ----------------------- Agreement, dated as of January 18, 1995, between CCA Holdings Corp. and H C Crown Corp., including any amendment, renewal, extension, substitution, refinancing, replacement or other modification thereof. Indebtedness: means any indebtedness, whether or not for money ------------ borrowed, including any amendment, renewal, extension, substitution, refinancing, replacement or other modification thereof, directly or indirectly created, incurred or assumed by any entity, including, without limitation, indebtedness arising under or pursuant to the TD Loan Agreement, the Hallmark Loan Agreement, the CCE II Loan Agreement and the Cencom Loan Agreement. Indemnified Party: as defined in Section 7.1 of this Agreement. ----------------- 27 IPO: as defined in Article VI of this Agreement. --- Limited Partners: as defined in the first paragraph of this ---------------- Agreement. Majority in Interest: means a majority in interest of the Limited -------------------- Partners, based on their Percentage Interests. Management Agreements: means (i) the Amended and Restated Management --------------------- - Agreement, dated as of September 29, 1995, as the same shall be amended from time to time, between CCE I, L.P. and the Manager and (ii) the Management -- Agreement, dated as of September 29, 1995, as the same shall be amended from time to time, between CCE II, L.P. and the Manager. Manager: means Charter Communications, Inc., a Delaware corporation, ------- or any successor manager approved by the unanimous consent of the General Partners. Minimum Gain Attributable to Partner Nonrecourse Debt: means that ----------------------------------------------------- amount determined in accordance with the principles of Treasury Regulations Section 1.704-2(i)(3), (4) and (5). Net Profits and Losses: means, for any Fiscal Period, (a) the ---------------------- - Partnership's share of the net income and net loss for such Fiscal Period of each Subsidiary that is a partnership for federal income tax purposes, as determined in accordance with the operating agreement for such Subsidiary, and (b) in the case of any other item, the net income or net loss of the Partnership - for such Fiscal Period, including any items that are separately stated for purposes of Section 702(a) of the Code, as determined in accordance with federal income tax accounting principles with the following adjustments: (i) any income of the Partnership that is exempt from federal income tax shall be included as income; 28 (ii) any expenditures of the Partnership described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(1) shall be treated as current expenses; (iii) no effect shall be given to any adjustments made pursuant to Section 734 or Section 743 of the Code; (iv) the basis of property contributed to the Partnership shall initially be treated as equal to the agreed upon valuation of such property as reflected on Schedule A hereto and all gain, loss, depreciation and amortization on such property shall be determined based on such agreed upon value in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(g); (v) if the Partnership distributes any property in kind, the Partnership shall be deemed to have sold such property for its fair market value immediately before such distribution and the proceeds of such deemed sale shall be deemed to have been distributed to the Partners for all purposes of this Agreement; and (vi) notwithstanding any other provisions of this definition, any items which are specially allocated pursuant to Sections 3.2 through 3.8 shall not be taken into account. Newco: as defined in Article VI of this Agreement. ----- Nonrecourse Deductions: has the meaning set forth in Treasury ---------------------- Regulations Section 1.704-2(b)(1). Nonrecourse Liability: has the meaning set forth in Treasury --------------------- Regulations Section 1.704-2(b)(3). 29 Ordinary Capital Account: as described in Section 2.6 of this ------------------------ Agreement. Partially Adjusted Capital Account: shall mean, with respect to any ---------------------------------- Partner and any Adjustment Date, the Capital Account of such Partner as of the beginning of the Fiscal Year ending on such Adjustment Date, adjusted as set forth in Section 2.7 for all Capital Contributions and distributions during such Fiscal Year and for any special allocations pursuant to Sections 3.2 through 3.7 but before giving effect to any allocations of Net Profit or Net Loss for such Fiscal Year pursuant to Section 3.1. Partner Nonrecourse Debt: means debt of the Partnership within the ------------------------ meaning of Treasury Regulations Section 1.704-2(b)(4). Partner Nonrecourse Deductions: has the meaning set forth in Treasury ------------------------------ Regulations Sections 1.704-2(i)(1) and 1.704-2(i)(2). Partners: means the General Partners and the Limited Partners. -------- Partnership: as defined in Section 1.1 of this Agreement. ----------- Partnership Minimum Gain: has the meaning set forth in Sections ------------------------ 1.704-2(b)(2) and 1.704-2(d) of the Treasury Regulations. Percentage Interest: means each Partner's proportionate share of the ------------------- Net Profits or Net Losses of the Partnership, as set forth in Schedule A hereto. Permitted Expenses: means, to the extent permitted pursuant to any ------------------ instrument or agreement constituting Indebtedness, general and administrative expenses, all U.S. federal and state income taxes, state franchise taxes, accounting fees, fees and expenses of technical and other 30 consultants, and fees and expenses of other professionals of the Partnership, the General Partners and Cencom Cable, including, without limitation, those fees and expenses due and payable under the Management Agreements. Preferred Capital Account: as defined in Section 2.6 of this ------------------------- Agreement. Preferred Return: means, for any Fiscal Period, (i) in the case of ---------------- - CAC or Cencom Cable, as the case may be, the product of (x) the interest - accruing during such Fiscal Period under the Hallmark Loan Agreement and (y) a - fraction, the numerator of which is the positive Preferred Capital Account balance of CAC or Cencom Cable, as the case may be, and the denominator of which is the sum of the positive Preferred Capital Account balances of CAC and Cencom Cable and (ii), in the case of CCT, the interest accruing during such period -- under the Cencom Loan Agreement. Subsidiaries: means CCE I and CCE II and any other corporation, ------------ partnership, limited liability company or other entity of which the Partnership owns, directly or indirectly, more than 50% of the equity. Target Capital Account: shall mean, with respect to any Partner and ---------------------- any Adjustment Date, an amount (which may be either a positive or a deficit balance) equal to the amount such Partner would receive as a distribution if all assets of the Partnership as of such Adjustment Date were sold for cash equal to the Partnership's gross book values of such assets, all Partnership liabilities were satisfied to the extent required by their terms and the net proceeds were distributed pursuant to Section 3.9. TD Loan Agreement: means the Amended and Restated Loan Agreement, ----------------- dated as of September 29, 1995, among CCE I, L.P., Toronto Dominion (Texas), Inc. as documentation agent and managing agent and the other banks signatory thereto, including any amendment, renewal, extension, substitution, refinancing, replacement or other modification thereof. 31 Treasury Regulations: means the Regulations of the Treasury -------------------- Department of the United States issued pursuant to the Code. 32 IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the day and year first above written. GENERAL PARTNERS: LIMITED PARTNERS: CCA ACQUISITION CORP. CCT HOLDINGS CORP. By/s/ Theodore W. Browne, II By/s/ Theodore W. Browne, II -------------------------- -------------------------- Executive Vice President Executive Vice President CCT HOLDINGS CORP. CCA ACQUISITION CORP. By/s/ Theodore W. Browne, II By/s/ Theodore W. Browne, II -------------------------- -------------------------- Executive Vice President Executive Vice President CENCOM CABLE ENTERTAINMENT, INC. By/s/ Theodore W. Browne, II -------------------------- Executive Vice President 33 SCHEDULE A General Partner ---------------
Initial Initial Initial Ordinary Preferred Percentage Capital Capital Capital Partner Interest Contribution Account Account ------- -------- ------------ ------- ------- CCA 1% Acquisition Corp. CCT Holdings Corp. 1%
Limited Partner ---------------
Initial Initial Initial Ordinary Preferred Percentage Capital Capital Capital Partner Interest Contribution Account Account ------- -------- ------------ ------- ------- CCA Acquisition Corp. 21% Cencom Cable Entertainment, Inc. 33% CCT Holdings Corp. 44%
EX-4.1 12 INDENTURE DATED 2/13/97 BET CCA & HARRIS TRUST EXHIBIT 4.1 CCA HOLDINGS CORP. as Issuer Harris Trust and Savings Bank, as Trustee INDENTURE Dated as of February 13, 1997 $82,000,000 Series A Senior Subordinated Notes due 1999 and Series B Senior Subordinated Notes due 1999 TABLE OF CONTENTS -----------------
PAGE ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 1.01. Definitions....................................... 1 Section 1.02. Other Definitions................................. 12 Section 1.03. Rules of Construction............................. 13 Section 1.04. Form of Documents Delivered to Trustee............ 14 Section 1.05. Acts of Holders................................... 15 Section 1.06. Notices, etc., to the Trustee and the Issuer............................................ 16 Section 1.07. Notice to Holders; Waiver......................... 17 Section 1.08. Conflict with TIA................................. 17 Section 1.09. Effect of Headings and Table of Contents.......................................... 17 Section 1.10. Successors and Assigns............................ 18 Section 1.11. Separability Clause............................... 18 Section 1.12. Benefits of Indenture............................. 18 Section 1.13. GOVERNING LAW..................................... 18 Section 1.14. No Recourse Against Others........................ 18 Section 1.15. Independence of Covenants......................... 19 Section 1.16. Exhibits.......................................... 19 Section 1.17. Counterparts...................................... 19 Section 1.18. Duplicate Originals............................... 19 Section 1.19. Incorporation by Reference of TIA................. 19 ARTICLE II FORM OF SECURITIES Section 2.01. Form and Dating................................... 19 Section 2.02. Execution and Authentication; Aggregate Principal Amount.................................. 21 Section 2.03. Restrictive Legends............................... 22 Section 2.04. Book-Entry Provisions for Global Security.......................................... 24 Section 2.05. Special Transfer Provisions....................... 25 ARTICLE III THE NOTES Section 3.01. Terms............................................. 27
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PAGE ---- Section 3.02. Denominations..................................... 28 Section 3.03. Temporary Notes................................... 28 Section 3.04. Registration, Registration of Transfer and Exchange...................................... 29 Section 3.05. Mutilated, Destroyed, Lost and Stolen Notes............................................. 30 Section 3.06. Method of Payment................................. 31 Section 3.07. Persons Deemed Owners............................. 31 Section 3.08. Cancellation...................................... 32 Section 3.09. Legal Holidays.................................... 32 Section 3.10. CUSIP Number...................................... 32 ARTICLE IV DEFEASANCE OR COVENANT DEFEASANCE Section 4.01. Issuer's Option to Effect Defeasance or Covenant Defeasance............................... 33 Section 4.02. Defeasance and Discharge.......................... 33 Section 4.03. Covenant Defeasance............................... 34 Section 4.04. Conditions to Defeasance or Covenant Defeasance........................................ 34 Section 4.05. Deposited Money and U.S. Government Obligations To Be Held in Trust; Other Miscellaneous Provisions.......................... 36 Section 4.06. Reinstatement..................................... 37 ARTICLE V REMEDIES Section 5.01. Events of Default................................. 38 Section 5.02. Consequences of an Event of Default............... 39 Section 5.03. Collection of Indebtedness and Suits for Enforcement by Trustee........................ 40 Section 5.04. Trustee May File Proofs of Claims................. 41 Section 5.05. Trustee May Enforce Claims Without Possession of Notes............................... 42 Section 5.06. Application of Money Collected.................... 42 Section 5.07. Limitation on Suits............................... 43 Section 5.08. Unconditional Right of Holders To Receive Principal and Interest.................... 44 Section 5.09. Restoration of Rights and Remedies................ 44 Section 5.10. Rights and Remedies Cumulative.................... 44 Section 5.11. Delay or Omission Not Waiver...................... 45 Section 5.12. Control by Majority............................... 45
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PAGE ---- Section 5.13. Waiver of Past Defaults............................45 Section 5.14. Undertaking for Costs..............................46 ARTICLE VI THE TRUSTEE Section 6.01. Certain Duties and Responsibilities................46 Section 6.02. Notice of Defaults.................................47 Section 6.03. Certain Rights of Trustee..........................47 Section 6.04. Trustee Not Responsible for Recitals, Dispositions of Notes or Application of Proceeds Thereof...................................50 Section 6.05. Trustee and Agents May Hold Notes; Collections; etc...................................50 Section 6.06. Money Held in Trust................................50 Section 6.07. Compensation and Indemnification of Trustee and Its Prior Claim........................50 Section 6.08. Conflicting Interests..............................51 Section 6.09. Corporate Trustee Required; Eligibility........................................52 Section 6.10. Resignation and Removal; Appointment of Successor Trustee..................................52 Section 6.11. Acceptance of Appointment by Successor.............54 Section 6.12. Successor Trustee by Merger, etc...................55 Section 6.13. Preferential Collection of Claims Against Issuer.....................................55 ARTICLE VII HOLDERS' LISTS AND REPORTS BY TRUSTEE AND ISSUER Section 7.01. Preservation of Information; Issuer To Furnish Trustee Names and Addresses of Holders............................................56 Section 7.02. Communications of Holders..........................56 Section 7.03. Reports by Trustee.................................56 Section 7.04. Reports by Issuer..................................57 ARTICLE VIII SUCCESSOR ENTITY Section 8.01. Merger and Consolidation...........................57 Section 8.02. Successor Entity Substituted.......................57
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PAGE ---- ARTICLE IX AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 9.01. Without Consent of Holders.........................58 Section 9.02. With Consent of Holders............................58 Section 9.03. Compliance with TIA................................60 Section 9.04. Revocation and Effect of Consents; Record Date for Consents...........................60 Section 9.05. Notation on or Exchange of Notes...................61 Section 9.06. Trustee May Sign Amendments, etc...................61 ARTICLE X COVENANTS Section 10.01. Payment of Principal and Interest..................62 Section 10.02. Maintenance of Office or Agency....................62 Section 10.03. Money for Note Payments To Be Held in Trust..............................................63 Section 10.04. Corporate Existence................................64 Section 10.05. Change of Ownership................................65 Section 10.06. Management of Cable Properties.....................65 Section 10.07. Annualized Cash Flow...............................65 Section 10.08. Reporting and Information Requirements.............66 Section 10.09. [Intentionally Omitted.]...........................68 Section 10.10. Changes in CCE, L.P. Partnership Agreement..........................................68 Section 10.11. Limitation on Indebtedness.........................68 Section 10.12. Limitation on Restricted Payments..................69 Section 10.13. Limitation on Transaction with Affiliates.........................................71 Section 10.14. Disposition of Proceeds of Asset Sales.............71 Section 10.15. Change of Control..................................72 Section 10.16. Sale of Assets.....................................72 ARTICLE XI SATISFACTION AND DISCHARGE Section 11.01. Satisfaction and Discharge of Indenture............73 Section 11.02. Application of Trust Money.........................74
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PAGE ---- ARTICLE XII REGISTRATION Section 12.01. Cooperation in Registration....................... 75 ARTICLE XIII SUBORDINATION Section 13.01. Special Provisions Relating to the CCE- I Credit Facility................................. 79 Section 13.02. Agreement to Subordinate; Authorization to Trustee to Take Action to Effectuate Subordination..................................... 81 Section 13.03. Definitions of Senior Debt........................ 81 Section 13.04. Liquidation; Dissolution; Bankruptcy.............. 82 Section 13.05. Default on Senior Debt............................ 83 Section 13.06. Subrogation....................................... 83 Section 13.07. Relative Rights................................... 84 ARTICLE XIV GUARANTEE Section 14.01. Guarantee of Notes................................ 84 Section 14.02. Future Guarantees................................. 84 ARTICLE XV REDEMPTION OF NOTES Section 15.01. Applicability of Article.......................... 85 Section 15.02. Optional Redemption............................... 85 Section 15.03. Election to Redeem; Notice to Trustee............. 85 Section 15.04. Selection by Trustee of Notes To Be Redeemed.......................................... 85 Section 15.05. Notice of Redemption.............................. 86 Section 15.06. Deposit of Redemption............................. 87 Section 15.07. Notes Payable on Redemption....................... 87 Section 15.08. Notes Redeemed in Part............................ 87 TESTIMONIUM.............................................................109
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PAGE ---- SIGNATURES............................................................. 109 Exhibit A - Form of Initial Note............................. A-1 Exhibit B - Form of Exchange Note............................ B-1 Exhibit C - Form of Certificate To Be Delivered in Connection with Transfers to Non-QIB Accredited Investors.......................... C-1 Exhibit D - Form of Certificate To Be Delivered in Connection with Transfers Pursuant to Regulation S.................................. D-1 Exhibit E - Form of Subordination Agreement.................. E-1 Exhibit F-I - Form of Guaranty (CCA Acquisition)............... F-1 Exhibit F-II - Form of Guaranty (CCE, L.P.)..................... F-5 Exhibit F-III - Form of Guaranty (Cencom Cable).................. F-9 Exhibit F-IV - Form of Guaranty (New Restricted Subsidiary)......................F-13
Note: This Table of Contents shall not, for any purpose, be deemed to be part of the Indenture. -vi- CROSS-REFERENCE TABLE
Trust Indenture Act of 1939 Section Indenture Section - ----------------------------------- ----------------- (S)310 (a)(1) ............................................... 6.09 (a)(2) ............................................... 6.09 (a)(3) ............................................... Not Applicable (a)(4) ............................................... Not Applicable (a)(5) ............................................... 6.09 (b) ............................................... 6.08, 6.10 (c) ............................................... Not Applicable (S)311 (a) ............................................... 6.13 (b) ............................................... 6.13 (c) ............................................... Not Applicable (S)312 (a) ............................................... 7.01 (b) ............................................... 7.02 (c) ............................................... 7.02 (S)313 (a) ............................................... 7.03 (b) ............................................... 7.03 (c) ............................................... 7.03 (d) ............................................... 7.03 (S)314 (a) ............................................... 7.04 (a)(4) ............................................... 10.08 (b) ............................................... Not Applicable (c)(1) ............................................... 1.04, 4.04 (c)(2) ............................................... 1.04, 4.04 (c)(3) ............................................... Not Applicable (d) ............................................... Not Applicable (e) ............................................... 1.04 (S)315 (a) ............................................... 6.01(a) (b) ............................................... 6.02 (c) ............................................... 6.01(b) (d) ............................................... 6.01(c) (e) ............................................... 5.14 (S)316 (a) (last sentence) ............................................... 1.01 (a)(1)(A) ............................................... 5.12, 5.13 (a)(1)(B) ............................................... 5.13 (a)(2) ............................................... Not Applicable (b) ............................................... 5.08 (c) ............................................... 9.04 (S)317 (a)(1) ............................................... 5.03 (a)(2) ............................................... 5.04 (b) ............................................... 10.03 (S)318 (a) ............................................... 1.08
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture. -1- INDENTURE, dated as of February 13, 1997, by and between CCA HOLDINGS CORP., a Delaware corporation (the "Issuer"), and Harris Trust and Savings Bank, ------ as trustee (the "Trustee"). ------- The Issuer has duly authorized the creation of an issue of Series A Senior Subordinated Notes due 1999 (the "Initial Notes") and Series B Senior ------------- Subordinated Notes due 1999 (the "Exchange Notes" and together with the Initial -------------- Notes, the "Notes") and, to provide therefor, the Issuer has duly authorized the ----- execution and delivery of this Indenture. All corporate actions necessary have been done to make the Notes, when executed by the Issuer and authenticated and delivered hereunder and duly issued by the Issuer, the valid obligation of the Issuer and to make this Indenture a valid agreement of the Issuer, in accordance with the terms hereof. Each party hereto agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Notes: ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 1.01. Definitions. ----------- "Adjusted Consolidated" means, with respect to any Person, such Person and --------------------- its Subsidiaries (other than Subsidiaries which are not Restricted Subsidiaries) on a consolidated basis. "Affiliate" means, when used with respect to a specified Person, another --------- Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. "Agent" means any Paying Agent or Registrar of the Notes. ----- "Anniversary Date" means December 31 in any year or the next succeeding ---------------- Business Day if such date is not a Business Day. "Annualized Operating Cash Flow" means an amount equal to Operating Cash ------------------------------ Flow for the calendar quarter specified, multiplied by four (4). "Areas of Dominant Influence" has the meaning set forth in 47 CFR 76.55(e). --------------------------- -1- "Bankruptcy Law" means Title 11 of the United States Code or any similar -------------- United States federal or state law relating to bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or relief of debtors or the law of any other jurisdiction relating to bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or relief of debtors or any amendment to, succession to or change in any such law. "Bankruptcy Order" means any court order made in a proceeding pursuant to ---------------- or within the meaning of any Bankruptcy Law, containing an adjudication of bankruptcy or insolvency, or providing for liquidation, receivership, winding- up, dissolution or reorganization, or appointing a Custodian of a debtor or of all or any substantial part of a debtor's property, or providing for the staying, arrangement, adjustment or composition of indebtedness or other relief of a debtor. "Board of Directors" means the board of directors, management committee or ------------------ similar governing body or any authorized committee thereof responsible for the management of the business and affairs of the Issuer. "Board Resolution" means a copy of a resolution certified by the Secretary ---------------- or an Assistant Secretary of the Issuer to have been duly adopted by the Board of Directors or an authorized committee thereof and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means any day other than a Saturday, Sunday, public holiday ------------ under the laws of the State of Missouri and the State of Illinois or other day on which banking institutions are authorized or obligated to close in St. Louis, Missouri, and Chicago, Illinois. "Capital Stock" of any Person means any and all shares, interests, ------------- participations and other equivalents (however designated) of corporate stock, equity interests in partnerships or other entities or options, convertible instruments, rights or warrants to purchase such corporate stock, or equity interests in partnerships or other entities. "Capitalized Lease Obligation" means the portion of any obligation of the ---------------------------- Issuer or the Restricted Subsidiaries as lessee under a lease which at the time would be required to be capitalized on the balance sheet of such lessee in accordance with GAAP. -2- "CCA Acquisition" means CCA Acquisition Corp., a Delaware corporation. --------------- "CCE, L.P." means Charter Communications Entertainment, L.P., a Delaware --------- limited partnership. "CCE, L.P. Partnership Agreement" means the Agreement of Limited ------------------------------- Partnership of CCE, L.P., dated as of September 29, 1995, as the same may be amended, restated or modified from time to time in accordance with this Indenture. "CCE-I" means Charter Communications Entertainment I, L.P., a Delaware ----- limited partnership. "CCE-I Bank Facility Lenders" means Toronto Dominion (Texas), Inc. and The --------------------------- Chase Manhattan Bank (formerly, Chemical Bank), as Documentation Agents, Toronto Dominion (Texas), Inc., The Chase Manhattan Bank (formerly, Chemical Bank), CIBC Inc., Credit Lyonnais Cayman Island Branch and NationsBank, N.A., as Managing Agents, Banque Paribas, Union Bank of California, N.A. (formerly, Union Bank), Fleet Bank, N.A., CoreStates Bank, N.A., ABN AMRO Bank, N.V., Societe Generale and The First National Bank of Boston, as Co-Agents, Toronto Dominion (Texas), Inc., as Administrative Agent and the financial institutions party to the CCE-I Credit Agreement, together with their respective successors and assigns. "CCE-I Credit Agreement" means that certain amended and restated loan ---------------------- agreement dated as of September 29, 1995, by and among CCE-I, the CCE-I Bank Facility Lenders and Toronto Dominion (Texas), Inc., as administrative agent for the CCE-I Bank Facility Lenders, as amended as of October 31, 1995, January 16, 1996, March 29, 1996, May 24, 1996, November 29, 1996 and February 7, 1997, and as the same may be amended, extended, renewed, restated, supplemented or otherwise modified from time to time. "CCE-I Credit Facility" means the credit facilities extended to CCE-I --------------------- pursuant to the CCE-I Credit Agreement. "CCE-I Credit Facility Termination Date" means the date on which all -------------------------------------- Obligations (as such term is defined in the Subordination Agreement) shall have been indefeasibly paid in full in cash and all commitments to lend in respect of the CCE-I Credit Facility shall have been terminated. "CCE-I Partnership Agreement" means the Agreement of Limited Partnership of --------------------------- CCE-I, dated as of September 29, 1995, -3- as the same may be amended, restated or modified from time to time. "CCE Purchase Money Indebtedness" means any Indebtedness or any Qualifying ------------------------------- Equity Interest incurred or issued by any partners or future partners of CCE, L.P. or any Persons (other than Charter, KIAV or any of their respective Affiliates that are not or do not become direct or indirect partners of CCE, L.P.) controlling such partners, now outstanding or hereafter incurred or issued in connection with acquiring assets owned or to be owned, directly or indirectly, by any Subsidiary of CCE, L.P., and shall (i) include (a) the Indebtedness evidenced by the Notes and (b) any other Indebtedness to or any Qualifying Equity Interest owned by a seller of such assets and (ii) exclude Indebtedness to or any Qualifying Equity Interest owned by Charter, KIAV or any of their respective Affiliates that are not or do not become direct or indirect partners of CCE, L.P. "Cencom Cable" means Cencom Cable Entertainment, Inc., a Delaware ------------ corporation. "Charter" means Charter Communications, Inc., a Delaware corporation. ------- "Company Request" or "Company Order" means a written request or order of --------------- ------------- the Issuer delivered to the Trustee. "Control" means the possession, directly or indirectly, of the power to ------- direct or cause the direction of the management or policies of a Person, whether through ownership of voting securities, by contract or otherwise, and "Controlling" and "Controlled" shall have meanings correlative thereto. "Corporate Trust Office" means the office of the Trustee at which at any ---------------------- particular time its corporate trust business shall be principally administered, which office at the date of execution of this Indenture is located at 311 West Monroe Street, Chicago, Illinois 60606. "Custodian" means any receiver, interim receiver, receiver and manager, --------- receiver-manager, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law or any other Person with like powers whether appointed judicially or out of court and whether pursuant to an interim or final appointment. -4- "Debt Service" means, without duplication, payment of principal, interest, ------------ fees, premiums and penalties on or with respect to any Indebtedness. "Default" means any event that is or with the passing of time or giving of ------- notice or both would be an Event of Default. "Depository" means The Depository Trust Company, its nominees and ---------- successors. "Exchange Act" means the Securities Exchange Act of 1934, as amended. ------------ "Exchange Notes" has the meaning provided in the second introductory -------------- paragraph of this Indenture. "GAAP" means generally accepted accounting principles, as in effect in the ---- United States from time to time, consistently applied. "Global Note" has the meaning provided in Section 2.01. ----------- "Holder" or "Noteholder" means a Person in whose name a Note is registered ------ ---------- in the Note Register. "Indebtedness" means, with respect to a Person, (a) all items, which, in ------------ accordance with GAAP would be included in determining total liabilities as shown on the liability side of a balance sheet of such Person, except (i) accounts payable which by their terms are less than sixty (60) days past due, (ii) items of partners' equity or capital stock or surplus, or (iii) items of general contingency or deferred tax reserves, (b) all direct or indirect obligations secured by any Lien to which any property or asset owned by such Person is subject (but if the obligation secured thereby shall not have been assumed, then only to the extent of the higher of the fair market value or the book value of the property or asset subject to such Lien), (c) all obligations of such Person with respect to leases constituting part of a sale and lease-back arrangement, (d) all reimbursement obligations with respect to outstanding letters of credit, and (e) all obligations of such Person under Interest Rate Hedge Agreements. "Indebtedness for Money Borrowed" means, with respect to any Person, money ------------------------------- borrowed and Indebtedness represented by notes payable and drafts accepted representing extensions of credit, all obligations evidenced by bonds, debentures, notes or other similar instruments, all Indebtedness upon which interest charges are customarily paid, and all Indebtedness -5- issued or assumed as full or partial payment for property or services, whether or not any such notes, drafts, obligations or Indebtedness represent Indebtedness for money borrowed. For purposes of this definition, interest which is accrued but not paid on the original due date for such interest shall be deemed Indebtedness for Money Borrowed. Where obligations are evidenced by bonds, debentures, notes or other similar instruments whose face amount exceeds the amount received by such Person with respect thereto, only the amount received plus debt discount amortized as of the calculation date need be taken into account as Indebtedness for Money Borrowed. "Indenture" means this instrument as originally executed (including all --------- exhibits and schedules hereto) and as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof. "Initial Holder" means HC Crown Corp., a Delaware corporation. -------------- "Initial Notes" has the meaning provided in the second introductory ------------- paragraph of this Indenture. "Institutional Accredited Investor" means an institution that is an --------------------------------- "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "Interest Expense" means, for any period, the aggregate amount of all ---------------- interest paid or accrued in respect of Indebtedness for Money Borrowed and the portion of payments under Capitalized Lease Obligations which constitutes imputed interest, in each case, of any Person on an Adjusted Consolidated basis during such period. "Interest Rate Hedge Agreement" means the obligations of any Person ----------------------------- pursuant to any arrangement with any other Person whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such other person calculated by applying a fixed or a floating rate of interest on the same notional amount and shall also include, without limitation, interest rate swaps, caps, swaptions, captions, floors, collars and similar agreements. "Issuer" means the Person named as the "Issuer" in the first introductory ------ paragraph of this Indenture, until a -6- successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Issuer" means such successor Person. "KIAV" means Kelso Investment Associates V, L.P., a Delaware limited ---- partnership. "Lien" means, with respect to any property, any mortgage, lien, pledge, ---- assignment, charge, security interest, title retention agreement, levy, execution, seizure, attachment, garnishment or other encumbrance of any kind in respect of such property, whether or not choate, vested or perfected. "Net Income" means, as applied to any Person, for any fiscal period, the ---------- aggregate amount of net income (or net loss) after taxes, for such period for such Person on an Adjusted Consolidated basis. "Non-U.S. Person" means a person who is not a U.S. person, as defined in --------------- Regulation S. "Notes" means the Initial Notes and the Exchange Notes treated as a single ----- class of securities, as amended or supplemented from time to time in accordance with the terms hereof, that are issued pursuant to this Indenture. "Obligations" means all unpaid principal and interest under the Notes, and ----------- all other obligations of the Issuer to any Holder arising under this Indenture. "Offering Memorandum" means the offering memorandum dated February 10, ------------------- 1997, pursuant to which the Initial Notes were offered and sold by the Initial Holder, and any supplement thereto. "Officer" means, with respect to any Person, the Chairman, the Chairman of ------- the Board, the Chairman of the Management Committee, the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Treasurer, the Controller, or the Secretary of such Person (or, if such Person is a partnership, of the general partner of such Person), or any other officer designated by the Board of Directors serving in a similar capacity. "Officers' Certificate" means a certificate signed by the Chairman, the --------------------- Chairman of the Board, the Chairman of the Management Committee, the Chief Executive Officer, the President, the Chief Financial Officer, the Treasurer or a -7- Vice President, and by the Secretary or an Assistant Secretary, of the Issuer, and delivered to the Trustee. "Operating Cash Flow" means, for any Person in respect of any quarterly or ------------------- annual period, as applicable, without duplication, the remainder of (a) the sum of Net Income of such Person, plus, to the extent deducted in calculating Net Income of such Person, (i) Interest Expense of such Person, (ii) depreciation, (iii) amortization, (iv) management fees and financial advisory fees paid, (v) income tax expense, and (vi) other non-cash items, less (b) extraordinary income, all as determined in accordance with GAAP. "Opinion of Counsel" means a written opinion of counsel, who may be counsel ------------------ for the Issuer (including the general counsel, or other senior in-house counsel, of the Issuer or CCE-I) or the Trustee, and who shall be acceptable to the Trustee, which opinion is delivered to the Trustee. "Outstanding" means, as of the date of determination, all Notes theretofore ----------- authenticated and delivered under this Indenture, except: (i) Notes theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (ii) Notes, or portions thereof, for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Issuer or any Affiliate thereof) in trust for the Holders of such Notes, provided, that if such -------- Notes are to be redeemed, notice of such redemption has been duly and irrevocably given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; (iii) Notes with respect to which the Issuer has effected defeasance or covenant defeasance as provided in Article IV, to the extent provided in Sections 4.02 and 4.03; and (iv) Notes in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to this Indenture, other than any such Notes in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Notes are held by a bona fide ---- ---- purchaser in whose hands the Notes are valid obligations of the Issuer; -8- provided, that in determining whether the Holders of the requisite principal - -------- amount of Outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Notes owned by the Issuer or any other obligor under the Notes or any Affiliate of the Issuer or such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes which the Trustee knows to be so owned shall be so disregarded. Notes so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Notes and that the pledgee is not the Issuer or any other obligor under the Notes or any Affiliate of the Issuer or such other obligor. "Paying Agent" means any Person authorized by the Issuer to pay the ------------ principal of or interest on any Notes on behalf of the Issuer. "Person" means any individual, corporation, partnership, limited liability ------ company, trust or unincorporated organization, or a government or any agency or political subdivision thereof. "Predecessor Note" means, with respect to any particular Note, every ---------------- previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purposes of this definition, any Note authenticated and delivered under Section 3.05 in exchange for a mutilated Note or in lieu of a lost, destroyed or stolen Note shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Note. "Private Placement Legend" means the legend initially set forth on the ------------------------ Initial Notes in the form set forth in Section 2.03. "Qualified Institutional Buyer" or "QIB" shall have the meaning specified ----------------------------- --- in Rule 144A under the Securities Act. "Qualifying Equity Interest" means a preferred equity interest in any -------------------------- Person which, for at least so long as the Notes are outstanding (i) shall have a stated liquidation preference and a stated dividend rate, and (ii) shall, if such preferred equity interest is convertible into a common (or equivalent) equity interest, contain a provision whereby upon such conversion (a) the preferred capital account, if any, -9- related to the converted portion of such preferred equity interest shall terminate and (b) such converted portion of such preferred equity interest shall no longer be a Qualifying Equity Interest. "Redemption Date" means, with respect to any Note to be redeemed, any date --------------- fixed for such redemption by or pursuant to this Indenture and the terms of the Notes. "Redemption Price" means, with respect to any Note to be redeemed, the ---------------- price at which it is to be redeemed pursuant to this Indenture and the terms of the Notes. "Registrar" has the meaning provided in Section 3.04. --------- "Regular Record Date" means each April 21 and October 21 in any year. ------------------- "Regulation S" means Regulation S under the Securities Act. ------------ "Responsible Officer" means, with respect to the Trustee, the chairman or ------------------- vice chairman of the board of directors, the chairman or vice chairman of the executive committee of the board of directors, the president, any vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any trust officer or assistant trust officer, the controller and any assistant controller or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer of the Trustee to whom any corporate trust matter is referred because of his or her knowledge of and familiarity with the particular subject. "Restricted Security" has the meaning assigned to such term in Rule ------------------- 144(a)(3) under the Securities Act, provided, that the Trustee shall be entitled -------- to request and conclusively rely on an Opinion of Counsel with respect to whether any Initial Note constitutes a Restricted Security. "Restricted Subsidiary" means CCA Acquisition, Cencom Cable, CCE, L.P., --------------------- CCE-I, any Subsidiary of CCE-I and any other, direct or indirect, Subsidiary of the Issuer which has, or comes to have in the future, a direct or indirect ownership interest in CCE-I or its Subsidiaries. "Rule 144A" means Rule 144A under the Securities Act. --------- -10- "SEC" means the Securities and Exchange Commission, as from time to time --- constituted, or, if at any time after the execution of this Indenture such commission is not existing and performing the applicable duties now assigned to it, then the body or bodies performing such duties at such time. "Securities Act" means the Securities Act of 1933, as amended. -------------- "Semi-Annual Date" means each June 30th or the next succeeding Business Day ---------------- if such date is not a Business Day. "Special Record Date" means a date fixed by the Trustee for determination ------------------- of the Holders of record of the Notes prior to a Redemption Date. "Stated Maturity Date" means December 31, 1999. -------------------- "Subordinated Indebtedness" means any Indebtedness of which the Issuer is ------------------------- an obligor that by its terms is expressly subordinated in right and priority of payment to the Notes. "Subordination Agreement" means, collectively, (i) the Amended and Restated ----------------------- Subordination Agreement dated as of November 15, 1996 by and between HC Crown Corp., a Delaware corporation and the Issuer in favor of the CCE-I Bank Facility Lenders and Toronto Dominion (Texas), Inc., as administrative agent for the CCE- I Bank Facility Lenders, and (ii) each other Subordination Agreement by and between any Holder (or the Trustee, on behalf of any such Holder) and the Issuer in favor of the CCE-I Bank Facility Lenders and Toronto Dominion (Texas), Inc., as administrative agent for the CCE-I Bank Facility Lenders, in each case, as the same may be amended, replaced, restated, supplemented or otherwise modified from time to time. "Subsidiary" means, in respect of any Person, any corporation of which such ---------- Person owns more than 50% of the equity interest and any partnership or other Person to the extent said Person owns more than 50% of the equity interest in same. "Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939, as ------------------- --- amended, and as in effect from time to time. "Trustee" means the Person named as the "Trustee" in the first paragraph of ------- this Indenture, until a successor Trustee shall have become such pursuant to the applicable provisions -11- of this Indenture, and thereafter "Trustee" means such successor Trustee. "U.S. Government Obligations" means securities that are (i) direct --------------------------- obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt, provided that (except as required by law) -------- such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt. Section 1.02. Other Definitions. -----------------
DEFINED TERM IN SECTION ---- ---------- "Act"....................................... 1.05 "Agent Members"............................. 2.04 "Authenticating Agent"...................... 2.02 "covenant defeasance"....................... 4.03 "Default Rate".............................. 10.01 "Defaulted Interest"........................ 3.06 "defeasance"................................ 4.01 "Defeased Notes"............................ 4.01 "due" and/or "payable"...................... 3.01 "Event of Default".......................... 5.01 "Guarantees"................................ 14.01 "Global Note................................ 2.01 "joint venture subsidiary(ies)"............. 8.01 "New Senior Debt Level"..................... 10.14 "New Restricted Subsidiary Guarantee........ 14.02 "Non-Global Purchasers"..................... 2.01 "Notice of Default"......................... 5.01 "Offshore Physical Note".................... 2.01
-12- DEFINED TERM IN SECTION ---- ---------- "Offshore Physical Note Holder"............. 2.01 "Payment Date".............................. 4.04 "Physical Notes"............................ 2.01 "Registrar "................................ 3.04 "Registration Expenses"..................... 12.01 "Senior Debt"............................... 13.03 "Senior Debt Threshold...................... 5.01 "U.S. Physical Notes"....................... 2.01
Section 1.03. Rules of Construction. --------------------- For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (b) all other terms used herein which are defined in the TIA, either directly or by reference therein, have the meanings assigned to them therein; (c) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP; (d) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; (e) all references to "$" or "dollars" refer to the lawful currency of the United States of America; (f) the words "include," "included" and "including" as used herein shall be deemed in each case to be followed by the phrase "without limitation"; and (g) any reference to an Article, Section, subsection, Exhibit or Annex refers to such Article, Section, subsection, Exhibit or Annex of this Indenture unless otherwise specified. -13- Section 1.04. Form of Documents Delivered to Trustee. -------------------------------------- Upon any request or application by the Issuer to the Trustee to take any action under this Indenture, the Issuer shall furnish to the Trustee (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with, (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of counsel, all such conditions have been complied with, and (c) where applicable, a certificate or opinion by an accountant that complies with Section 314(c) of the TIA. Each certificate and Opinion of Counsel with respect to compliance with a condition or covenant provided for in this Indenture shall include: (a) a statement that the Person making such certificate or rendering such Opinion of Counsel has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements contained in such certificate or Opinion of Counsel are based; (c) a statement that, in the opinion of such Person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. -14- Any certificate or opinion of an officer of the Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Issuer stating that the information with respect to such factual matters is in the possession of the Issuer, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated, with proper identification of each matter covered therein, and form one instrument. Section 1.05. Acts of Holders. --------------- (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in Person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are received by the Trustee and, where it is hereby expressly required, to the Issuer. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution (as provided below in subsection (b) of this Section 1.05) of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.01) conclusive in favor of the Trustee and the Issuer, if made in the manner provided in this Section 1.05. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved in any reasonable manner which the Trustee deems sufficient including, without limitation, by verification from a notary public or signature guarantee. -15- (c) The ownership of Notes shall be proved by the Note Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Note shall bind every future Holder of the same Note or the Holder of every Note issued upon the transfer thereof or in exchange therefor or in lieu thereof to the same extent as the original Holder, in respect of anything done, suffered or omitted to be done by the Trustee, any Paying Agent or the Issuer in reliance thereon, whether or not notation of such action is made upon such Note. Section 1.06. Notices, etc., to the Trustee and the Issuer. -------------------------------------------- Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with: (a) the Trustee by any Holder or by the Issuer shall be sufficient for every purpose hereunder if made, given, furnished or filed, in writing (by means of facsimile transmission (which shall be deemed to have been duly given or made upon receipt), sent by U.S. mail (postage prepaid), or sent prepaid via a nationally recognized private courier service), to or with the Trustee at the Corporate Trust Office or at any other address previously furnished in writing to the Holders and the Issuer by the Trustee or at the Office of any drop agent specified to the Holders and the Issuer from time to time; and (b) the Issuer by the Trustee or by any Holder shall be sufficient for every purpose (except as otherwise expressly provided herein) hereunder if in writing (by means of facsimile transmission (which shall be deemed to have been duly given or made upon receipt), sent by U.S. mail (postage prepaid), or sent prepaid via a nationally recognized private courier service), to the Issuer, c/o Charter Communications, Inc., addressed to it at: 12444 Powerscourt Drive, Suite 400, St. Louis, Missouri 63131, Attention: Chief Financial Officer, or at any other address previously furnished in writing to the Trustee by the Issuer. -16 Section 1.07. Notice to Holders; Waiver. ------------------------- Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise expressly provided herein) if in writing and mailed, first-class postage prepaid, or sent prepaid via a nationally recognized private courier service, to each Holder affected by such event, at the address of such Holder as it appears in the Note Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Any notice when mailed to a Holder in the aforesaid manner shall be conclusively deemed to have been received by such Holder whether or not actually received by such Holder. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause, it shall be impracticable to mail notice of any event as required by any provision of this Indenture, then any method of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice. Section 1.08. Conflict with TIA. ----------------- If any provision hereof limits, qualifies or conflicts with any provision of the TIA or another provision which is required or deemed to be included in this Indenture by any of the provisions of the TIA, such provision or requirement of the TIA shall control. If any provision of this Indenture modifies or excludes any provision of the TIA that may be so modified or excluded, such provision of the TIA shall be deemed to apply to this Indenture as so modified or excluded, as the case may be. Section 1.09. Effect of Headings and Table of Contents. ---------------------------------------- The Article and Section headings herein and the table of contents are for reference purposes only and shall not control -17- or affect the construction of this Indenture or the interpretation hereof in any respect. Section 1.10. Successors and Assigns. ---------------------- All covenants and agreements in this Indenture by the Issuer and Trustee shall bind their respective successors and assigns, whether so expressed or not. Section 1.11. Separability Clause. ------------------- In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 1.12. Benefits of Indenture. --------------------- Nothing in this Indenture or in the Notes issued pursuant hereto, express or implied, shall give to any Person (other than the parties hereto and their successors hereunder, any Paying Agent and the Holders) any benefit or any legal or equitable right, remedy or claim under this Indenture. Section 1.13. GOVERNING LAW. ------------- THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF). THE TRUSTEE, THE ISSUER, ANY OTHER OBLIGOR IN RESPECT OF THE NOTES AND THE HOLDERS AGREE TO SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE COURT LOCATED IN THE BOROUGH OF MANHATTAN, IN THE CITY OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE NOTES. Section 1.14. No Recourse Against Others. -------------------------- No director, officer, partner, affiliate, employee or stockholder of the Issuer or of any other obligor on the Notes as such, shall have any liability for any obligations of the Issuer or such other obligor under the Notes or this Indenture. Each holder of Notes by accepting a Note waives and releases all such liability, and such waiver and release is part of the consideration for the issuance of the Notes. -18- Section 1.15. Independence of Covenants. ------------------------- All covenants and agreements in this Indenture shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitations of, another covenant shall not avoid the occurrence of a Default if such action is taken or condition exists. Section 1.16. Exhibits. -------- All exhibits attached hereto are by this reference made a part hereof with the same effect as if herein set forth in full. Section 1.17. Counterparts. ------------ This Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. Section 1.18. Duplicate Originals. ------------------- The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. Section 1.19. Incorporation by Reference of TIA. --------------------------------- Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in, and made a part of, this Indenture. Any terms incorporated by reference in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them therein. ARTICLE II FORM OF SECURITIES Section 2.01. Form and Dating. --------------- The Initial Notes and the Trustee's certificate of authentication relating thereto shall be substantially in the form of Exhibit A hereto. The Exchange Notes and the Trustee's certificate of authentication relating thereto shall be -19- substantially in the form of Exhibit B hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or depository rule or usage. The Issuer and the Trustee shall approve the form of the Notes and the Issuer shall approve any notation, legend or endorsement on them. Each Note shall be dated the date of its issuance and shall show the date of its authentication. The terms and provisions contained in the Notes, in the forms annexed hereto as Exhibits A and B, shall constitute, and are hereby expressly made, a part of this Indenture and, to the extent applicable, the Issuer and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. Initial Notes offered and sold in reliance on Rule 144A shall be issued initially in the form of one or more permanent global Notes in registered form, substantially in the form set forth in Exhibit A (the "Global Note"), and ----------- deposited with the Trustee, as custodian for the Depository, duly executed by the Issuer and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depository, as hereinafter provided. Initial Notes originally purchased by or transferred to (i) Institutional Accredited Investors who are not QIBs, (ii) except as described below, Persons outside the United States pursuant to sales in accordance with Regulation S under the Securities Act or (iii) any other Persons who are not QIBs (collectively, "Non-Global Purchasers") will be issued in registered form --------------------- without coupons substantially in the form of Exhibit A (the "U.S. Physical ------------- Notes"). Upon the transfer to a QIB of U.S Physical Notes initially issued to a - ----- Non-Global Purchaser, such U.S. Physical Notes will be exchanged for an interest in the Global Note or in the Notes in the custody of the Trustee representing the principal amount of Notes being transferred. Initial Notes originally purchased by Persons outside the United States pursuant to sales in accordance with Regulation S under the Securities Act will be represented upon issuance by a temporary global note certificate substantially in the form of Exhibit A (the "Offshore Physical Notes" and ----------------------- together with the U.S. Physical Notes, the "Physical Notes") which will not be -------------- exchangeable for U.S. Physical Notes or the Global Note until the expiration of the "40-day restricted period" within the meaning of Rule 903(c)(3) of ------------------------ Regulation S under the -20- Securities Act. The Offshore Physical Notes will be registered in the name of, and be held by, an offshore physical note holder (the "Offshore Physical Note ---------------------- Holder") until the expiration of such 40-day period, at which time the Offshore - ------ Physical Notes will be delivered to the Trustee in exchange for either definitive certificated Notes registered in the names requested by the Offshore Physical Note Holder or, in the case of any such Notes to be registered in the name of a QIB, an interest in the Global Note representing the principal amount of Notes so being exchanged. In addition, until the expiration of such 40-day period, transfers of interests in the Offshore Physical Notes can only be effected through the Offshore Physical Note Holder in accordance with the requirements of Section 2.05. Section 2.02. Execution and Authentication; Aggregate Principal Amount. -------------------------------------------------------- Two Officers, or an Officer and an Assistant Secretary, shall sign, or one Officer shall sign and one Officer or an Assistant Secretary (each of whom, shall, in each case, have been duly authorized by all requisite corporate actions) shall attest to, the Notes for the Issuer by manual or facsimile signature. If an Officer or Assistant Secretary whose signature is on a Note was an Officer or Assistant Secretary at the time of such execution but no longer holds that office or position at the time the Trustee authenticates the Note, the Note shall nevertheless be valid. A Note shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication and the Note. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall authenticate (i) Initial Notes for original issue in the aggregate principal amount not to exceed $82,000,000, and (ii) Exchange Notes from time to time for issue only in exchange for a like principal amount of Initial Notes, in each case upon written orders of the Issuer in the form of an Officers' Certificate. The Officers' Certificate shall specify the amount of Notes to be authenticated, the date on which the Notes are to be authenticated and the aggregate principal amount of the Notes outstanding on the date of authentication, whether the Notes are to be Initial Notes or Exchange Notes, and shall further specify the amount of such Notes to be issued as the Global Notes, Offshore -21- Physical Notes or U.S. Physical Notes. The aggregate principal amount of Notes outstanding at any time may not exceed $82,000,000, except as provided in Section 3.05. The Trustee may appoint an authenticating agent (the "Authenticating -------------- Agent") reasonably acceptable to the Issuer to authenticate Notes. Unless - ----- otherwise provided in the appointment, an Authenticating Agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such Authenticating Agent. An Authenticating Agent has the same rights as an Agent to deal with the Issuer or with any Affiliate of the Issuer. Section 2.03. Restrictive Legends. ------------------- Each Global Note and U.S. Physical Note that constitutes a Restricted Security shall bear the following legend (the "Private Placement Legend") on the ------------------------ face thereof until the date which is three years after the original issuance of the Initial Notes unless otherwise agreed by the Issuer and the Holder thereof: THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE -------------- OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY, EXCEPT (A) TO THE ISSUER, OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE OR REGISTRAR), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE -22- 904 OF REGULATION S UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THE SECURITY, IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, WRITTEN LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. Each Global Note shall also bear the following legend on the face thereof: UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR BY ANY SUCH NOMINEE OF THE DEPOSITORY, OR BY THE DEPOSITORY OR NOMINEE OF SUCH SUCCESSOR DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF --- TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO. HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY -23- SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.05 OF THE INDENTURE. Section 2.04. Book-Entry Provisions for Global Security. ----------------------------------------- (a) The Global Note initially shall (i) be registered in the name of the Depository or the nominee of such Depository, (ii) be delivered to the Trustee as custodian for such Depository, and (iii) bear legends as set forth in Section 2.03. Members of, or participants in, the Depository ("Agent Members") shall have ------------- no rights under this Indenture with respect to any Global Note held on their behalf by the Depository, or the Trustee as its custodian, or under the Global Note, and the Depository may be treated by the Issuer, the Trustee and any Agent of the Issuer or the Trustee as the absolute owner of the Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Issuer, the Trustee or any Agent of the Issuer or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices governing the exercise of the rights of a holder of any Note. (b) Transfers of the Global Note shall be limited to transfers in whole, but not in part, to the Depository, its successors or their respective nominees. Interests of beneficial owners in the Global Note may be transferred or exchanged for Physical Notes in accordance with the rules and procedures of the Depository and the provisions of Section 2.05. In addition, Physical Notes shall be transferred to all beneficial owners in exchange for their beneficial interests in the Global Note if (i) the Depository notifies the Issuer that it is unwilling or unable to continue as Depository for the Global Note and a successor depositary is not appointed by the Issuer within 90 days of such notice or (ii) an Event of Default has occurred and is continuing and the Registrar has received a written request from the Depository to issue Physical Notes. (c) In connection with any transfer or exchange of a portion of the beneficial interest in the Global Note to beneficial owners pursuant to paragraph (b), the Registrar shall (if one or more Physical Notes are to be issued) reflect on its books and records the date and a decrease in the principal amount of the Global Note in an amount equal to the principal amount of the beneficial interest in the Global Note -24- to be transferred, and the Issuer shall execute, and the Trustee shall authenticate and deliver, one or more Physical Notes of like tenor and amount. (d) In connection with the transfer of the entire Global Note to beneficial owners pursuant to paragraph (b), the Global Note shall be deemed to be surrendered to the Trustee for cancellation, and the Issuer shall execute, and the Trustee shall authenticate and deliver, to each beneficial owner identified by the Depository in exchange for its beneficial interest in the Global Note, an equal aggregate principal amount of Physical Notes of authorized denominations. (e) Any Physical Note constituting a Restricted Security delivered in exchange for an interest in the Global Note pursuant to paragraph (b) or (c) shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of Section 2.05, bear the legend regarding transfer restrictions applicable to the Physical Notes set forth in Section 2.03. (f) The Holder of the Global Note may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes. Section 2.05. Special Transfer Provisions. --------------------------- (a) Transfers to Non-QIB Institutional Accredited Investors and Non-U.S. -------------------------------------------------------------------- Persons. The following provisions shall apply with respect to the registration - ------- of any proposed transfer of an Initial Note constituting a Restricted Security to any Institutional Accredited Investor which is not a QIB or to any Non-U.S. Person: (i) the Registrar shall register the transfer of any Note constituting a Restricted Security, whether or not such Note bears the Private Placement Legend, if (x) the requested transfer is after the date which is three years after the original issuance of the Initial Notes or (y) (1) in the case of a transfer to an Institutional Accredited Investor which is not a QIB (excluding Non-U.S. Persons), the proposed transferee has delivered to the Registrar a certificate substantially in the form of Exhibit C hereto or (2) in the case of a transfer to a Non-U.S. Person, the proposed transferor has delivered to the Registrar a certificate substantially in the form of Exhibit D hereto; and -25- (ii) if the proposed transferor is an Agent Member holding a beneficial interest in the Global Note, upon receipt by the Registrar of (x) the certificate, if any, required, by paragraph (i) above and (y) written instructions given in accordance with the Depository's and the Registrar's procedures, whereupon (a) the Registrar shall reflect on its books and records the date and (if the transfer does not involve a transfer of outstanding Physical Notes) a decrease in the principal amount of the Global Note in an amount equal to the principal amount of the beneficial interest in the Global Note to be transferred, and (b) the Issuer shall execute and the Trustee shall authenticate and deliver one or more Physical Notes of like tenor and amount. (b) Transfers to QIBs. The following provisions shall apply with respect ----------------- to the registration of any proposed transfer of a Note constituting a Restricted Security to a QIB (excluding transfers to Non-U.S. Persons): (i) the Registrar shall register the transfer if such transfer is being made by a proposed transferor who has checked the box provided for on the form of Note stating, or has otherwise advised the Issuer and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Note stating, or has otherwise advised the Issuer and the Registrar in writing, that it is purchasing the Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Issuer as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A; and (ii) if the proposed transferee is an Agent Member, and the Notes to be transferred consist of Physical Notes which after transfer are to be evidenced by an interest in the Global Note, upon receipt by the Registrar of written instructions given in accordance with the Depository's and the Registrar's procedures, the Registrar shall reflect on its books and records the date -26- and an increase in the principal amount of the Global Note in an amount equal to the principal amount of the Physical Notes to be transferred, and the Trustee shall cancel the Physical Notes so transferred. (c) Private Placement Legend. Upon the transfer, exchange or replacement ------------------------ of Initial Notes not bearing the Private Placement Legend, the Registrar shall deliver Initial Notes that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Initial Notes bearing the Private Placement Legend, the Registrar shall deliver only Initial Notes that bear the Private Placement Legend unless (i) the requested transfer is after the date which is three years after the original issuance of the Notes or (ii) there is delivered to the Registrar an Opinion of Counsel (which shall be furnished at the expense of the transferring Holder) reasonably satisfactory to the Issuer and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act. (d) General. By its acceptance of any Initial Note bearing the Private ------- Placement Legend, each Holder of such a Note acknowledges the restrictions on transfer of such Note set forth in this Indenture and in the Private Placement Legend and agrees that it will transfer such Note only as provided in this Indenture. The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.04 or this Section 2.05. The Issuer shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time during the Registrar's normal business hours upon the giving of reasonable written notice to the Registrar. ARTICLE III THE NOTES Section 3.01. Terms. ----- The aggregate principal amount of Notes which may be authenticated and delivered under this Indenture is limited to $82,000,000 in aggregate principal amount, except for Notes authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Notes pursuant to Section 3.03, 3.04, 3.05, 9.05, or 15.08. The Exchange Notes will only be issued in exchange for an equal principal amount of Initial Notes. -27- The unpaid principal amount of the Notes shall bear interest for each day until due at the rate of 13% per annum. Interest will accrue from the most recent date to which interest has been paid, or if no interest has been paid, from January 18, 1995. Interest will be computed on the basis of a 360-day year of twelve 30-day months, and unpaid interest shall compound on each Anniversary Date and on each Semi-Annual Date at the then applicable per annum rate. Unless due and payable earlier under the terms of this Indenture or the Notes but subject, in all cases, to the terms of Article XIII, the Issuer shall pay on the Stated Maturity Date the unpaid principal amount, together with accrued and unpaid interest. If payment is not so made, the Notes shall be subject to penalty as provided in Section 5.02. Notwithstanding anything set forth in this Indenture or the Notes to the contrary, principal of and interest on the Notes shall not be "due" and/or "payable" until the earlier of (i) the earliest date on or after the Stated Maturity Date which is on or after the CCE-I Credit Facility Termination Date and (ii) January 18, 2019. Section 3.02. Denominations. ------------- The Notes shall be issuable only in registered form without coupons and only in denominations of $1,000,000 or more. Section 3.03. Temporary Notes. --------------- Pending the preparation of definitive Notes, the Issuer may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Notes. Temporary Notes may be printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Notes in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Notes may determine, as conclusively evidenced by their execution of such Notes. If temporary Notes are issued, the Issuer will cause definitive Notes to be prepared without unreasonable delay. After the preparation of definitive Notes, the temporary Notes shall be exchangeable for definitive Notes upon surrender of the temporary Notes at the office or agency of the Issuer designated for such purpose pursuant to Section 10.02, without charge to the Holders. Upon surrender for cancellation of any one or more temporary Notes the Issuer shall execute and the Trustee shall authenticate and deliver in exchange therefor a -28- like principal amount of definitive Notes of authorized denominations. Until so exchanged, the temporary Notes shall in all respects be entitled to the same benefits under this Indenture as definitive Notes. Section 3.04. Registration, Registration of Transfer and Exchange. --------------------------------------------------- The Issuer shall cause to be kept at the Corporate Trust Office a register (the register maintained in such office and in any other office or agency designated pursuant to Section 10.02 being herein sometimes referred to as the "Note Register") in which, subject to such reasonable regulations as the Person - -------------- appointed as being responsible for the keeping of the Note Register (the "Registrar") may prescribe, the Issuer shall provide for the registration of - ---------- Notes and of transfers of Notes. The Trustee is hereby initially appointed Registrar for the purpose of registering Notes and transfers of Notes as herein provided. Upon surrender for registration of transfer of any Note at the office or agency of the Issuer designated pursuant to Section 10.02, the Issuer shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Notes of any authorized denomination or denominations, of a like aggregate principal amount. At the option of the Holder, Notes in certificated form may be exchanged for other Notes of any authorized denomination or denominations, of a like aggregate principal amount, upon surrender of the Notes to be exchanged at such office or agency. Whenever any Notes are so surrendered for exchange, the Issuer shall execute, and the Trustee shall authenticate and deliver, the Notes which the Holder making the exchange is entitled to receive. All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Issuer, evidencing the same Indebtedness, and entitled to the same benefits under this Indenture, as the Notes surrendered upon such registration of transfer or exchange and no such transfer or exchange shall constitute a repayment of any obligation or create any new obligations of the Issuer. Every Note presented or surrendered for registration of transfer, or for exchange or redemption, shall (if so required by the Issuer or the Registrar) be duly endorsed or be accompanied by a written instrument of transfer in form -29- satisfactory to the Issuer and the Registrar, duly executed by the Holder thereof or its attorney duly authorized in writing. Upon the registration of transfer or exchange or redemption of Notes, the Issuer may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Notes, and any other expenses (including the fees and expenses of the Trustee) connected therewith, other than exchanges pursuant to Section 3.03 or 9.05 not involving any transfer. The Issuer shall not be required to register the transfer of or exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of Notes being redeemed in part. When Notes are presented to the Registrar with a request to register the transfer or to exchange them for an equal principal amount of Notes of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transactions are met. To permit registrations of transfers and exchanges, the Issuer shall execute and the Trustee shall authenticate Notes at the Registrar's request. Section 3.05. Mutilated, Destroyed, Lost and Stolen Notes. ------------------------------------------- If (a) any mutilated Note is surrendered to the Trustee, or (b) the Issuer and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Note, and there is delivered to the Issuer and the Trustee, such security or indemnity, in each case, as may be required by them to save each of them harmless from any loss which any of them may suffer if a Note is replaced, then, in the absence of notice to the Issuer or the Trustee that such Note has been acquired by a bona fide purchaser, the Issuer shall execute and upon a Company Order the Trustee shall authenticate and deliver, in exchange for any such mutilated Note or in lieu of any such destroyed, lost or stolen Note, a replacement Note of like tenor and principal amount, bearing a number not contemporaneously outstanding. Upon the issuance of any replacement Notes under this Section, the Issuer may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses -30- (including the fees and expenses of the Trustee) connected therewith. Every replacement Note issued pursuant to this Section in lieu of any destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Issuer, whether or not the destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes. Section 3.06. Method of Payment. ----------------- All payments and prepayments to be made in respect of principal, interest, fees or other amounts due from the Issuer hereunder or under any Note shall be payable before 12:00 noon Central Time, on the day when due without presentment, demand for payment, protest or notices of protest, nonpayment or dishonor of any kind, all of which are hereby expressly waived, and an action therefor shall immediately accrue, subject, in all cases, to the terms of Articles VI and XIII. Such payments shall be made in U.S. dollars, without set-off of any nature. Payments shall be made in immediately available funds to such U.S. bank account of which three Business Days' prior written notice has been given by any Holder; otherwise they shall be made by check at the last known address of a Holder. Section 3.07. Persons Deemed Owners. --------------------- Prior to and at the time of due presentment for registration of transfer, the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the Person in whose name any Note is registered in the Note Register as the owner of such Note for the purpose of receiving payment of principal of and (subject to Section 3.06) interest on such Note and for all other purposes whatsoever, whether or not such Note shall be overdue, and neither the Issuer, the Trustee nor any agent of the Issuer or the Trustee shall be affected by notice to the contrary. -31- Section 3.08. Cancellation. ------------ All Notes surrendered for payment, redemption, registration of transfer or exchange shall be delivered to the Trustee and, if not already cancelled, shall be promptly cancelled by it. The Issuer may at any time deliver to the Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Issuer may have acquired in any manner whatsoever, and all Notes so delivered shall be promptly cancelled by the Trustee. No Notes shall be authenticated in lieu of or in exchange for any Notes cancelled as provided in this Section 3.08, except as expressly permitted by this Indenture. All cancelled Notes held by the Trustee shall be destroyed in accordance with the applicable governmental record retention regulations and certification of their destruction shall be delivered to the Issuer unless by a Company Order the Issuer shall direct that the cancelled Notes be returned to it. The Trustee shall provide to the Issuer a list of all Notes that have been cancelled from time to time as requested by the Issuer. Section 3.09. Legal Holidays. -------------- Any action or payment required to be made under this Indenture or the Notes on a day which is not a Business Day, may (notwithstanding any other provision of this Indenture or of the Notes) be taken or made on the next succeeding Business Day with the same force and effect as if made on the day required. Section 3.10. CUSIP Number. ------------ The Issuer in issuing the Notes may use a "CUSIP" number (if then generally in use), and if so, the Trustee may use the CUSIP numbers in notices of redemption or exchange as a convenience to Holders, provided, that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Notes, and that reliance may be placed only on the other identification numbers printed on the Notes. All Notes shall bear identical CUSIP numbers. The Issuer shall promptly notify the Trustee in writing of any change in the CUSIP number of the Notes. -32 ARTICLE IV DEFEASANCE OR COVENANT DEFEASANCE Section 4.01. Issuer's Option to Effect Defeasance or Covenant Defeasance. ----------------------------------------------------------- The Issuer may, at its option, at any time terminate certain of the obligations of the Issuer with respect to the outstanding Notes, as set forth in this Article, and elect to have either Section 4.02 or Section 4.03 be applied to all of the Outstanding Notes (the "Defeased Notes"), upon compliance with the -------------- conditions set forth below in Section 4.04. Section 4.02. Defeasance and Discharge. ------------------------ Upon the Issuer's exercise under Section 4.01 of the option applicable to this Section 4.02, the Issuer shall be deemed to have been released and discharged from its obligations with respect to the Defeased Notes on the date the conditions set forth below are satisfied (hereinafter, "defeasance"). For ---------- this purpose, such defeasance means that the Issuer shall be deemed to have paid and discharged the entire indebtedness represented by the Defeased Notes, which shall thereafter be deemed to be "Outstanding" only for the purposes of Section 4.05 and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under such Notes and this Indenture insofar as such Notes are concerned (and the Trustee, at the expense of the Issuer, shall execute proper instruments acknowledging the same), except for the following, which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of Defeased Notes to receive, solely from the trust fund described in Section 4.04 and as more fully set forth in such Section, payments in respect of the principal of and interest on such Notes when such payments are due, (b) the Issuer's obligations with respect to such Defeased Notes under Sections 3.03, 3.04, 3.05, 7.01, 10.01, 10.02 and 10.03, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder, including, without limitation, the Trustee's rights under Section 6.07, and (d) this Article IV. Subject to compliance with this Article IV, the Issuer may exercise its option under this Section 4.02 notwithstanding the prior exercise of its option under Section 4.03 with respect to the Notes. -33- Section 4.03. Covenant Defeasance. ------------------- Upon the Issuer's exercise under Section 4.01 of the option applicable to this Section 4.03, the Issuer shall be released from its obligations under any covenant or provision contained in Sections 10.04 through 10.16 and the provisions of Article VIII shall not apply, with respect to the Defeased Notes on and after the date the conditions set forth below are satisfied (hereinafter, "covenant defeasance"), and the Notes shall thereafter be deemed not to be ------------------- "Outstanding" for the purposes of any direction, waiver, consent or declaration or Act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "Outstanding" for all other purposes hereunder. For this purpose, such covenant defeasance means that, with respect to the Outstanding Notes, the Issuer may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 5.01(e) but, except as specified above, the remainder of this Indenture and such Outstanding Notes shall be unaffected thereby. Section 4.04. Conditions to Defeasance or Covenant Defeasance. ----------------------------------------------- The following shall be the conditions to application of either Section 4.02 or Section 4.03 to the Outstanding Notes: (a) The Issuer shall have irrevocably (i) selected a date for the payment of principal of and accrued interest on the Defeased Notes (the "Payment Date") and (ii) deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 6.09 who shall agree to comply with the provisions of this Article IV applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Notes, (x) cash, in United States dollars, in an amount, or (y) U.S. Government Obligations maturing as to principal and interest in such amounts of money and at such times as are sufficient without consideration of any reinvestment of such interest, to pay principal of and interest on Defeased Notes not later than one day before -34- the Payment Date, or (z) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants or a nationally recognized investment banking firm expressed in a written certification thereof delivered to the Trustee, to pay and discharge and which shall be applied by the Trustee (or other qualifying trustee) to pay and discharge, the principal of and interest on the Defeased Notes on the Payment Date in accordance with the terms of this Indenture and the Notes, provided, that the Trustee (or other qualifying trustee) shall have received an irrevocable written order from the Issuer instructing the Trustee (or other qualifying trustee) to apply such cash or the proceeds of such U.S. Government Obligations to said payments with respect to the Notes; and provided further, that from and after the time of deposit, the -------- ------- cash or U.S. Government Obligations deposited shall not be subject to the rights of the holders of other Indebtedness of the Issuer; (b) No Default or Event of Default shall have occurred and be continuing on the date of such deposit or, insofar as Section 5.01(c) or (d) are concerned, at any time during the period ending on the ninety-first day after the date of such deposit; (c) Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a Default or Event of Default under, this Indenture or any other agreement or instrument to which the Issuer is a party or by which it is bound; (d) In the case of an election under Section 4.02, the Issuer shall have delivered to the Trustee an Opinion of Counsel in the United States stating that (i) the Issuer has received from, or there has been published by, the Internal Revenue Service a ruling or (ii) since the date hereof, there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of the Outstanding Notes will not recognize income, gain or loss for Federal income tax purposes as a result of such defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred; (e) In the case of an election under Section 4.03, the Issuer shall have delivered to the Trustee an Opinion -35- of Counsel in the United States to the effect that the Holders of the Outstanding Notes will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; (f) The Issuer shall have delivered to the Trustee an Opinion of Counsel in form and substance reasonably acceptable to the Trustee to the effect that (i) the trust funds established pursuant to this Article will not be subject to any rights of any other holders of Indebtedness of the Issuer, and (ii) after the 91st day following the deposit, the trust funds established pursuant to this Article will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; and (g) The Issuer shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that (i) all conditions precedent provided for relating to either the defeasance under Section 4.02 or the covenant defeasance under Section 4.03, as the case may be, have been complied with and (ii) if any other Indebtedness of the Issuer shall then be outstanding or committed, such defeasance or covenant defeasance will not violate the provisions of the agreements or instruments evidencing such Indebtedness. Opinions required to be delivered under this Section shall be in compliance with the requirements set forth in Section 1.04 and this Section 4.04. Section 4.05. Deposited Money and U.S. Government Obligations To Be Held ---------------------------------------------------------- in Trust; Other Miscellaneous Provisions. - ---------------------------------------- Subject to the provisions of the last paragraph of Section 10.03, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or such other Person that would qualify to act as successor trustee under Article VI, collectively for purposes of this Section 4.05, the "Trustee") ------- pursuant to Section 4.04 in respect of the Defeased Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (other than the Issuer or any -36- Affiliate of the Issuer) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal and interest, but such money need not be segregated from other funds except to the extent required by law. The Issuer shall pay and indemnify the Trustee and hold it harmless against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 4.04 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Defeased Notes. Anything in this Article IV to the contrary notwithstanding, the Trustee shall deliver or pay to the Issuer from time to time upon Company Request any money or U.S. Government Obligations held by it as provided in Section 4.04 which, in the opinion of a nationally recognized firm of independent' public accountants satisfactory to the Trustee expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent defeasance or covenant defeasance. Section 4.06. Reinstatement. ------------- If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 4.02 or 4.03, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the obligations of the Issuer under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 4.02 or 4.03, as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such money and U.S. Government Obligations in accordance with Section 4.02 or 4.03, as the case may be, provided, that if the Issuer -------- makes any payment of principal of or interest on any Note following the reinstatement of its obligations, the Issuer shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money and U.S. Government Obligations held by the Trustee or Paying Agent. -37- ARTICLE V REMEDIES Section 5.01. Events of Default. ----------------- An Event of Default shall mean the occurrence or existence of one or more of the following events or conditions (whatever the reason for such Event of Default and whether voluntary, involuntary or effected by operation of law): (a) the Issuer shall fail to pay, when due, principal of any Note; or (b) the Issuer shall fail to pay, when due, interest on any Note, or any other amount due under this Indenture or under any Note and such failure shall have continued for a period of three Business Days; or (c) a proceeding shall have been instituted in respect of the Issuer (and shall have remained undismissed for a period of 60 consecutive days if not instituted by the Issuer): (i) seeking a declaration or entailing a finding that the Issuer is insolvent or a similar declaration or finding, or seeking dissolution, reorganization, arrangement, adjustment, composition or other similar relief with respect to the Issuer, its assets or its debts under any law relating to bankruptcy, insolvency, relief of debtors or protection of creditors, forfeiture of charter, or any other similar law now or hereafter in effect, or (ii) seeking appointment of a receiver, trustee, custodian, liquidator, assignee, sequestrator or other similar official for the Issuer or for all or any substantial part of its property; or (d) the Issuer shall become insolvent, shall become generally unable to pay its debts as they become due or shall not generally pay its debts as they become due, shall make a general assignment for the benefit of creditors, shall institute a proceeding described in Section 5.01(c)(i) or shall consent to any such order for relief, declaration, finding or relief described therein, shall institute a proceeding described in Section 5.01(c)(ii) or shall consent to any such appointment or to the taking of possession by any such official of all -38- or any substantial part of its property whether or not any such proceeding is instituted, shall dissolve, wind-up or liquidate itself or any substantial part of its property, or shall take any action in furtherance of any of the foregoing; or (e) any default shall occur in the performance or observance of any covenant contained in Article X and shall have continued for a period of thirty Business Days after notice from any Holder to the Issuer; or (f) the Issuer (i) shall default (as principal or as guarantor or other surety), unless such default shall have been waived or cured, in any payment of principal of or interest on any Indebtedness for Money Borrowed (other than Indebtedness incurred under this Indenture and the Notes) in the aggregate amount of the lesser of $7,500,000 or the Senior Debt Threshold (as defined below) or, if such obligation or obligations is or are payable or repayable on demand, shall fail to pay or repay such obligation or obligations when demanded, in each case allowing any applicable grace period to lapse, or (ii) shall default (unless such default has been waived or cured) in the observance of any covenant, term or condition contained in any agreement or instrument by which such obligation or obligations are created, secured or evidenced if the effect of such default is to cause all or part of such obligation or obligations to become due before its or their otherwise stated maturity; or (g) one or more final judgments for the payment of money shall have been entered against the Issuer which judgment or judgments in the aggregate exceed the lesser of $7,500,000 or the Senior Debt Threshold (as defined below) in the aggregate and which remain undischarged for a period (during which execution shall not be effectively stayed) of 30 days. For purposes of Sections 5.01(f) and (g), the references to "Senior Debt Threshold" shall mean the amounts provided in the most nearly comparable provisions of the Senior Debt. Section 5.02. Consequences of an Event of Default. ----------------------------------- Subject, in all cases, to the terms of Article XIII, if an Event of Default specified in Section 5.01 shall occur and be continuing or shall exist, (i) any Holder, if an Event of Default occurs under Section 5.01(a) or 5.01(b) or (ii) the Holders of a majority in principal amount of the Notes if an -39- Event of Default occurs and is continuing other than under Section 5.01(a) or 5.01(b), may, at its or their option, by written notice to the Issuer and/or to the Trustee elect to declare the unpaid principal amount of the Notes which such Holders hold, interest accrued thereon and all other amounts owed by the Issuer under this Indenture or under the Notes which such Holders hold to be immediately due and payable; provided, that if the Issuer fails to pay all of -------- the outstanding principal on or prior to the Stated Maturity date or all of the accrued and unpaid interest on or prior to the third day following the Stated Maturity Date, there shall be imposed upon the unpaid principal amount of each Note (in addition to the 13% per annum interest rate set forth in Section 3.01 and, if applicable, the Default Rate of interest as set forth in Section 10.01) a penalty rate of interest as follows (which shall accrue through the date of repayment and be based on a year of 360 days of twelve 30-day months):
Year Ending December 31 Per Annum Penalty Rate ----------------------- ---------------------- 2000 5% 2001 7% 2002 9% 2003 11% 2004 and thereafter 13%
Section 5.03. Collection of Indebtedness and Suits for Enforcement by ------------------------------------------------------- Trustee. - ------- The Issuer covenants that if: (a) default is made in the payment of any interest on any Note when such interest becomes due and payable and such default continues for a period of 30 days or more, or (b) default is made in the payment of the principal of any Note when such principal becomes due and payable, the Issuer, subject in all cases, to Article XIII, will, upon demand of the Trustee, pay to the Trustee, for the benefit of the Holders of such Notes, the whole amount then due and payable on such Notes for principal and interest, with interest on the overdue principal at the rate then borne by the Notes; and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. -40- Subject, in all cases, to Article XIII, if the Issuer fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may, but is not obligated under this paragraph to, institute a judicial proceeding for the collection of the sums so due and unpaid and may, but is not obligated under this paragraph to, prosecute such proceeding to judgment or final decree, and may, but is not obligated under this paragraph to, enforce the same against the Issuer or any other obligor upon the Notes and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Issuer or any other obligor upon the Notes, wherever situated. Subject, in all cases, to Article XIII, if an Event of Default occurs and is continuing, the Trustee may in its discretion, but is not obligated under this paragraph to, (i) proceed to protect and enforce its rights and the rights of the Holders under this Indenture by such appropriate private or judicial proceedings as the Trustee shall deem most effective to protect and enforce such rights, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted herein, or (ii) proceed to protect and enforce any other proper remedy. No recovery of any such judgment upon any property of the Issuer shall affect or impair any rights, powers or remedies of the Trustee or the Holders. Section 5.04. Trustee May File Proofs of Claims. --------------------------------- Subject, in all cases, to Article XIII, in case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Issuer or any other obligor upon the Notes, or the property of the Issuer or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Issuer for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, but is not obligated under this paragraph (a) to file and prove a claim for the whole amount of principal and interest owing and unpaid in respect of the Notes and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the -41- Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and (b) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 6.07. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding; provided, however, that the -------- ------- Trustee may, on behalf of the Holders and subject, in all cases, to Article XIII, vote for the election of a trustee in bankruptcy or similar official and may be a member of the creditors' committee. Section 5.05. Trustee May Enforce Claims Without Possession of Notes. ------------------------------------------------------ All rights of action and claims under this Indenture or the Notes may be prosecuted and enforced by the Trustee without the possession of any of the Notes or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name and as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Notes in respect of which such judgment has been recovered. Section 5.06. Application of Money Collected. ------------------------------ Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal or interest, upon presentation of the Notes and the notation thereon of the -42- payment if only partially paid and upon surrender thereof if fully paid: First: to the Trustee for amounts due under Section 6.07; Second: to Holders for interest accrued on the Notes, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for interest; Third: to Holders for principal amounts owing under the Notes, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal; and Fourth: the balance, if any, to the Issuer. The Trustee, upon prior written notice to the Issuer, may fix a record date and payment date for any payment to Noteholders pursuant to this Section 5.06. Section 5.07. Limitation on Suits. ------------------- No Holder of any Notes shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless, and subject, in all cases, to Article XIII, (a) such Holder has previously given written notice to the Trustee of a continuing Event of Default; (b) the Holders of not less than a majority of the principal amount of the Outstanding Notes shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (c) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee for 15 days after its receipt of any notice or request referred to in subsection (a) or (b) above and an offer of indemnity referred to in subsection (c) above has failed to institute any such proceeding; and -43- (e) no direction inconsistent with such written request has been given to the Trustee during such 15-day period by the Holders of a majority in aggregate principal amount of the Outstanding Notes; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture or any Note to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture or any Note except in the manner provided in this Indenture and for the equal and ratable benefit of all the Holders. Section 5.08. Unconditional Right of Holders To Receive Principal and ------------------------------------------------------- Interest. - -------- Subject, in all cases, to Article XIII, notwithstanding any other provision in this Indenture, the Holder of any Note shall have the right, which is absolute and unconditional, to receive cash payment, in United States dollars, of the principal of and (subject to Section 3.06) interest on such Note when due and payable, and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. Section 5.09. Restoration of Rights and Remedies. ---------------------------------- If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture or any Note and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Issuer, the Trustee and the Holders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. Section 5.10. Rights and Remedies Cumulative. ------------------------------ Except as provided in Section 3.05, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment -44- of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. Section 5.11. Delay or Omission Not Waiver. ---------------------------- No delay or omission of the Trustee or of any Holder of any Note to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article V or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. Section 5.12. Control by Majority. ------------------- The Holders of not less than a majority in aggregate principal amount of the Outstanding Notes shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, provided, that: -------- (a) such direction shall not be in conflict with any rule of law or with this Indenture or any Note or expose the Trustee to liability; and (b) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. Section 5.13. Waiver of Past Defaults. ----------------------- The Holders of not less than a majority in aggregate principal amount of the Outstanding Notes may on behalf of the Holders of all the Notes waive any past Default hereunder and its consequences, except a Default: (a) in the payment of the principal of or interest on any Note; or (b) in respect of a covenant or provision under this Indenture which cannot be modified or amended without the consent of the Holder of each Outstanding Note affected. -45- Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. Section 5.14. Undertaking for Costs. --------------------- All parties to this Indenture agree, and each Holder of any Note by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Notes, or to any suit instituted by any Holder for the enforcement of the payment of the principal of or interest on any Note on or after the date when due and payable. ARTICLE VI THE TRUSTEE Section 6.01. Certain Duties and Responsibilities. ----------------------------------- (a) Except during the continuance of an Event of Default, (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or -46- opinions which by provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. (b) In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs. (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 6.01. Section 6.02. Notice of Defaults. ------------------ Within 30 days after the occurrence of any Default, the Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Note Register, notice of such Default hereunder known to the Trustee, provided, that, -------- except in the case of a Default in the payment of the principal of or interest on any Note, the Trustee shall be protected in withholding such notice if and so long as a trust committee of Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interest of the Holders. Section 6.03. Certain Rights of Trustee. ------------------------- Subject to Section 6.01 and the provisions of Section 315 of the TIA: -47- (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, approval, appraisal, bond, debenture, note, coupon, security, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Issuer mentioned herein shall be sufficiently evidenced by a Company Request or Company Order of the Issuer and any resolution of the Board of Directors of the Issuer may be sufficiently evidenced by a Board Resolution of the Issuer thereof; (c) before the Trustee acts or refrains from acting, the Trustee may consult, at the expense of the Issuer, with counsel and any written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon in accordance with such advice or Opinion of Counsel; (d) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity reasonable to it against the costs, expenses and liabilities which might be incurred by the Trustee in compliance with such request or direction; (e) the Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture other than any liabilities arising out of its own negligence; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, approval, appraisal, bond, debenture, note, coupon, security, other evidence of indebtedness or other paper or document unless requested in writing to do so by the Holders of not less than a majority in aggregate principal amount of the Notes then outstanding, provided, -------- -48- that, if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity against such expenses or liabilities as a condition to proceeding; the reasonable expenses of every such investigation shall be paid by the Issuer or, if paid by the Trustee or any predecessor Trustee, shall be repaid by the Issuer upon demand, provided, further, the Trustee in its discretion may make such further -------- ------- inquiry or investigation into such facts or matters as it may deem fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Issuer, personally or by agent or attorney during the reasonable business hours of the Issuer; (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (h) the permissive rights of the Trustee to do things enumerated in this Indenture shall not be construed as a duty; (i) except for a default under Sections 501(a) or 501(b) or any other event of which the Trustee has actual knowledge, the Trustee shall not be deemed to have notice of any default or Event of Default unless specifically notified in writing by the Issuer or the holders of not less than a majority in aggregate principal amount of the Notes outstanding; and (j) the Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder. As used herein, the term "actual knowledge" means the actual fact or statement of knowing, without any duty to make any investigation with regard thereto. -49- Section 6.04. Trustee Not Responsible for Recitals, Dispositions of Notes ----------------------------------------------------------- or Application of Proceeds Thereof. - ---------------------------------- The recitals contained herein and in the Notes, except the Trustee's certificates of authentication, shall be taken as the statements of the Issuer, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Notes, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Notes and perform its obligations hereunder and that the statements made by it in a Statement of Eligibility and Qualification on Form T-1 supplied to the Issuer in connection with the registration of any Notes issued hereunder are true and accurate subject to the qualifications set forth therein. The Trustee shall not be accountable for the use or application by the Issuer of Notes or the proceeds thereof. Section 6.05. Trustee and Agents May Hold Notes; Collections; etc. ---------------------------------------------------- The Trustee, any Paying Agent, the Registrar or any other agent of the Issuer, in its individual or any other capacity, may become the owner or pledgee of Notes, with the same rights it would have if it were not the Trustee, Paying Agent, the Registrar or such other agent and, subject to Sections 6.08 and 6.13 and Sections 310 and 311 of the TIA, may otherwise deal with the Issuer and receive, collect, hold and retain collections from the Issuer with the same rights it would have if it were not the Trustee, the Paying Agent, the Registrar or such other agent. Section 6.06. Money Held in Trust. ------------------- All moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required herein or by law. The Trustee shall not be under any liability for interest on any moneys received by it hereunder. Section 6.07. Compensation and Indemnification of Trustee and Its Prior --------------------------------------------------------- Claim. - ----- The Issuer covenants and agrees: (a) to pay to the Trustee from time to time, and the Trustee shall be entitled to, reasonable compensation for all services rendered by it hereunder (which shall not be limited by any provision of law -50- in regard to the compensation of a trustee of an express trust); (b) to reimburse the Trustee and each predecessor Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by or on behalf of it in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all agents and other Persons not regularly in its employ), except any such reasonable expense, disbursement or advance as may arise from its negligence or bad faith; and (c) to indemnify the Trustee and each predecessor Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this Indenture or the trusts hereunder and its duties hereunder, including enforcement of this Section 6.07. The obligations of the Issuer under this Section to compensate and indemnify the Trustee and each predecessor Trustee and to pay or reimburse the Trustee and each predecessor Trustee for expenses, disbursements and advances shall constitute an additional obligation hereunder and shall survive the satisfaction and discharge of this Indenture. To secure the obligations of the Issuer to the Trustee under this Section 6.07, the Trustee shall have a prior Lien upon all property and funds held or collected by the Trustee as such, except funds and property paid by the Issuer and held in trust for the benefit of the Holders of particular Notes under this Indenture. All such payments and reimbursements shall be made with interest at the base (Prime) rate charged at the time by the Trustee or an affiliate of the Trustee for loans to commercial customers. The Trustee shall be entitled to file a proof of claim in any bankruptcy proceeding as a secured creditor for its reasonable compensation, fees and expenses under this Section 6.07. When the Trustee incurs expenses under Section 5.01(c) or (d), the expenses (including reasonable fees and expenses of its counsel) and the compensation for the service in connection therewith are intended to constitute expense of administration under any applicable bankruptcy law. Section 6.08. Conflicting Interests. --------------------- The Trustee shall be subject to and comply with the provisions of Section 310(b) of the TIA. -51- Section 6.09. Corporate Trustee Required; Eligibility. --------------------------------------- There shall at all times be a Trustee hereunder which shall be eligible to act as Trustee under TIA Sections 310(a)(l) and 310(a)(5) and which shall have a combined capital, surplus and undivided profits of at least $50,000,000, and have an office or agency at which Notes may be presented for transfer and redemption and at which demands may be made in the City of New York. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of United States Federal, state, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, the Trustee shall resign immediately in the manner and with the effect hereinafter specified in this Article. Section 6.10. Resignation and Removal; Appointment of Successor Trustee. --------------------------------------------------------- (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 6.11. (b) The Trustee, or any trustee or trustees hereinafter appointed, may at any time resign by giving written notice thereof to the Issuer at least 20 Business Days prior to the date of such proposed resignation. Upon receiving such notice of resignation, the Issuer shall promptly appoint a successor trustee by written instrument, a copy of which shall be delivered to the resigning Trustee and a copy to the successor trustee. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 20 Business Days after the giving of such notice of resignation, the resigning Trustee may, or any Holder who has been a bona fide Holder of a Note for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper, appoint a successor trustee. -52- (c) The Trustee may be removed at any time by an Act of the Holders of a majority in principal amount of the Outstanding Notes, delivered to the Trustee and to the Issuer. (d) If at any time: (1) the Trustee shall fail to comply with the provisions of Section 310(b) of the TIA in accordance with Section 6.06 after written request therefor by the Issuer or by any Holder who has been a bona fide Holder of a Note for at least six months, or (2) the Trustee shall cease to be eligible under Section 6.09 and shall fail to resign after written request therefor by the Issuer or by any such Holder, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose or rehabilitation, conservation or liquidation, then, in any case, (i) the Issuer may remove the Trustee, or (ii) subject to Section 5.14, the Holder of any Note who has been a bona fide Holder of a Note for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor trustee. (e) If the Trustee shall be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Issuer shall promptly appoint a successor Trustee. If, within one year after such removal or incapability, or the occurrence of such vacancy, the Issuer shall fail to appoint a successor Trustee, a successor Trustee shall be appointed by Act of the Holders of not less than a majority in principal amount of the Outstanding Notes delivered to the Issuer and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Issuer. If no successor Trustee shall have been so appointed by the Issuer or the Holders of the Notes and accepted appointment in the manner hereinafter provided, the Holder of any Note who has been a bona fide Holder for at least six months may, -53- subject to Section 5.14, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Issuer shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by written notice (by means of facsimile transmission (which shall be deemed to have been duly given or made upon receipt), sent by U.S. mail (postage prepaid), or sent prepaid via a nationally recognized private courier service) of such event to the Holders of Notes as their names and addresses appear in the Note Register. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. Section 6.11. Acceptance of Appointment by Successor. -------------------------------------- Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Issuer and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee as if originally named as Trustee hereunder; but, nevertheless, on the written request of the Issuer or the successor Trustee, upon payment of amounts due it pursuant to Section 6.07, such retiring Trustee shall duly assign, transfer and deliver to the successor Trustee all moneys and property at the time held by it hereunder and shall execute and deliver an instrument transferring to such successor Trustee all the rights, powers, duties and obligations of the retiring Trustee. Upon request of any such successor Trustee, the Issuer shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights and powers. Any Trustee ceasing to act shall, nevertheless, retain a prior claim upon all property or funds held or collected by such Trustee to secure any amounts then due it pursuant to the provisions of Section 6.07. No successor Trustee with respect to the Notes shall accept appointment as provided in this Section 6.11 unless at the time of such acceptance such successor Trustee shall be eligible to act as Trustee under this Article. Upon acceptance of appointment by any successor Trustee as provided in this Section 6.11, the Issuer shall give notice thereof to the Holders of the Notes, by mailing such notice to -54- such Holders at their addresses as they shall appear on the Note Register. If the acceptance of appointment is substantially contemporaneous with the resignation, then the notice called for by the preceding sentence may be combined with the notice called for by Section 6.10(f). If the Issuer fails to give such notice within 10 days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be given at the expense of the Issuer. Section 6.12. Successor Trustee by Merger, etc. --------------------------------- Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion, or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided such corporation shall be eligible under this -------- Article to serve as Trustee hereunder. In case at the time such successor to the Trustee under this Section 6.12 shall succeed to the trusts created by this Indenture any of the Notes shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor Trustee and deliver such Notes so authenticated; and, in case at that time any of the Notes shall not have been authenticated, any successor to the Trustee under this Section 6.12 may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor Trustee; and in all such cases such certificate shall have the full force which it is anywhere in the Notes or in this Indenture provided that the certificate of the Trustee shall have. Section 6.13. Preferential Collection of Claims Against Issuer. ------------------------------------------------ The Trustee shall comply with Section 311(a) of the TIA, excluding any creditor relationship listed in Section 311(b) of that Act. If the present or any future Trustee shall resign or be removed, it shall be subject to Section 311(a) of the TIA to the extent provided therein. -55- ARTICLE VII HOLDERS' LISTS AND REPORTS BY TRUSTEE AND ISSUER Section 7.01. Preservation of Information; Issuer To Furnish Trustee Names ------------------------------------------------------------ and Addresses of Holders. - ------------------------ (a) The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders, provided, that if and for so long as the Trustee shall be the -------- Registrar, the Note Register shall satisfy the requirements relating to such list. Neither the Issuer nor the Trustee shall be under any responsibility with regard to the accuracy of such list. (b) The Issuer will furnish or cause to be furnished to the Trustee (i) semiannually, not more than 10 days after each Regular Record Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of such Regular Record Date; and (ii) at such other times as the Trustee may request in writing, within 30 days after receipt by the Issuer of any such request, a list in similar form and content as of a date not more than 15 days prior to the time such list is furnished; provided, that if and so long as the Trustee shall be the Registrar, no such list need be furnished pursuant to this Section 7.01(b). Section 7.02. Communications of Holders. ------------------------- Holders may communicate with other Holders with respect to their rights under this Indenture or under the Notes pursuant to Section 312(b) of the TIA. The Issuer and the Trustee and any and all other Persons benefited by this Indenture shall have the protection afforded by Section 312(c) of the TIA. Section 7.03. Reports by Trustee. ------------------ Within 60 days after each May 15, the Trustee shall mail to all Holders, as their names and addresses appear in the Note Register, a brief report dated as of such date that complies with Section 313(a) of the TIA, provided, that if no -56- such event as described in Section 313(a) of the TIA has occurred within such period then no such report need be transmitted. The Trustee shall also comply with Sections 313(b), 313(c) and 313(d) of the TIA. At the time of its mailing to Holders, a copy of each report shall be filed with the Issuer, the SEC and with each national securities exchange, if any, on which the Notes are listed. The Issuer shall notify the Trustee if the Notes become listed on any stock exchange and the Trustee shall comply with Section 313(d) of the TIA. Section 7.04. Reports by Issuer. ----------------- The Issuer shall file with the Trustee copies of the reports and of the information and documents which the Issuer is required to provide to any Person under Section 10.08. ARTICLE VIII SUCCESSOR ENTITY Section 8.01. Merger and Consolidation. ------------------------ Except as permitted under Section 10.16(a), the Issuer shall not merge or consolidate with, or permit any Restricted Subsidiary to merge or consolidate with, any entity (other than a merger between two Restricted Subsidiaries, a merger between the Issuer and a Restricted Subsidiary in which the Issuer is the surviving entity or a merger of a Restricted Subsidiary with another entity in which either such Restricted Subsidiary is the surviving entity or such other entity becomes a Restricted Subsidiary of the Issuer). Section 8.02. Successor Entity Substituted. ---------------------------- Upon any consolidation or merger in accordance with Section 8.01, the successor Person or Persons formed by such consolidation or into which such Issuer is merged shall succeed to, and be substituted for, and may exercise every right and power of, and shall assume all of the liabilities and obligations of, such Issuer under this Indenture and the Notes with the same effect as if such successor had been named as such Issuer in this Indenture and the Notes. When a successor assumes all the obligations of its predecessor under this Indenture and the Notes, the predecessor shall be released from those obligations. -57- ARTICLE IX AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 9.01. Without Consent of Holders. -------------------------- The Issuer and the Trustee may amend or supplement this Indenture or the Notes without notice to or consent of any Holder: (a) to cure any ambiguity, defect or inconsistency, provided, that -------- such amendment or supplement does not adversely affect the rights of any Holder in any material respect; (b) to comply with Article VIII; (c) to provide for uncertificated Notes in addition to or in place of certificated Notes; (d) to comply with any requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA; (e) to make any change that would provide any additional benefit or rights to the Holders or that does not adversely affect the rights of any Holder; (f) to provide for issuance of the Exchange Notes, which will have terms substantially identical in all material respects to the Initial Notes (except that the transfer restrictions contained in the Initial Notes will be eliminated, as appropriate), and which will be treated together with any outstanding Initial Notes, as a single issue of securities; or (g) to make any other change that does not, in the opinion of the Trustee, adversely affect in any material respect the rights of any Holders hereunder. The Issuer shall be required to deliver to the Trustee an Opinion of Counsel stating that any such change under this Section 9.01 does not adversely affect the rights of any Holder. Section 9.02. With Consent of Holders. ----------------------- Subject to Section 5.08, the Issuer and the Trustee may amend any of this Indenture, the Notes, the Guarantees -58- (including, without limitation, releasing any Guarantor from its obligations under its Guarantee) or the Subordination Agreement with the written consent of the Holders of not less than a majority in aggregate principal amount of the Outstanding Notes, and the Holders of not less than a majority in aggregate principal amount of the Outstanding Notes by written notice to the Trustee may waive future compliance by the Issuer with any provision of this Indenture or the Notes. Notwithstanding the provisions of this Section 9.02, without the consent of each Holder affected, an amendment or waiver, including a waiver pursuant to Section 5.13, may not: (i) change the Stated Maturity Date or the time at which the principal of, or interest on, any Note becomes due and payable, or reduce the principal amount thereof or the rate of interest thereon, or change the coin or currency in which the principal of any Note or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment when due and payable (or, in the case of redemption, on or after the redemption date); provided, however, that this clause (i) shall, -------- ------- in all cases, be subject to the provisions of Section 10.11(d) which, indirectly, could have the effect of changing the time at which principal of or interest on the Notes becomes due and payable with the consent of only the Holders of a majority in aggregate principal amount of the Notes; (ii) reduce the percentage in principal amount of outstanding Notes, the consent of whose holders is required to amend or supplement this Indenture or the consent of whose holders is required for any waiver of compliance with certain provisions of this Indenture or certain Defaults hereunder and their consequences provided for in this Indenture; (iii) modify any of the provisions relating to supplemental indentures requiring the consent of holders or relating to the waiver of past defaults or relating to the waiver of certain covenants, except to increase the percentage of outstanding Notes required for such actions or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the holder of each Note affected thereby; (iv) except as otherwise permitted under Article VIII, allow the assignment or transfer by the -59- Issuer of any of its rights and obligations under this Indenture; or (v) modify or in any other way affect the ranking of the Notes in a manner adverse to the Holders. It shall not be necessary for the consent of the Holders under this Section 9.02 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Issuer shall mail to the Holders of each Note affected thereby, with a copy to the Trustee, a notice briefly describing the amendment, supplement or waiver. Any failure of the Issuer to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any supplemental indenture. Section 9.03. Compliance with TIA. ------------------- Every amendment of or supplement to this Indenture or the Notes shall comply with the TIA as then in effect and as and to the extent applicable to this Indenture. Section 9.04. Revocation and Effect of Consents; Record Date for Consents. ----------------------------------------------------------- Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder is a continuing consent by such Holder and every subsequent Holder of that Note or portion of that Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. Subject to the following paragraph, any such Holder or subsequent Holder may revoke the consent as to his Note or portion of a Note prior to such amendment, supplement or waiver becoming effective. Such revocation shall be effective only if the Trustee receives the notice of revocation before the date the amendment, supplement or waiver becomes effective. Notwithstanding the above, nothing in this paragraph shall impair the right of any Holder under Section 316(b) of the TIA. The Issuer may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver. If a record date is fixed, then notwithstanding the second and third sentences of the immediately preceding paragraph, those persons who were Holders at such record date (or their duly -60- designated proxies), and only those persons, shall be entitled to consent to such amendment, supplement or waiver or to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. Such consent shall be effective only for actions taken within 90 days after such record date. After an amendment, supplement or waiver becomes effective, it shall bind every Holder, unless it makes a change described in any of clauses (i) through (v) of Section 9.02, in which case, the amendment, supplement or waiver shall bind every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note. Section 9.05. Notation on or Exchange of Notes. -------------------------------- If an amendment, supplement or waiver changes the terms of a Note, the Trustee shall (in accordance with the specific direction of the Issuer) request the Holder of the Note to deliver it to the Trustee. The Trustee shall (in accordance with the specific direction of the Issuer) place an appropriate notation on the Note about the changed terms and return it to the Holder. Alternatively, if the Issuer or the Trustee so determines, the Issuer in exchange for the Note shall issue and the Trustee shall authenticate a new Note that reflects the changed terms. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. Section 9.06. Trustee May Sign Amendments, etc. --------------------------------- The Trustee shall sign any amendment, supplement or waiver authorized pursuant to this Article IX if the amendment, supplement or waiver does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, but need not, sign it. In signing or refusing to sign such amendment, supplement or waiver, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of any amendment, supplement or waiver is authorized or permitted by this Indenture, that it is not inconsistent herewith and that it will be valid and binding upon the Issuer in accordance with its terms. -61- ARTICLE X COVENANTS Section 10.01. Payment of Principal and Interest. --------------------------------- The Issuer shall duly and punctually pay the principal of and interest on the Notes in accordance with the terms of the Notes and this Indenture. Subject to the terms of Article XIII, (i) if any of the Events of Default set forth in Sections 5.01(c), (d), (e), (f) and/or (g) shall occur and be continuing, or (ii) if, at such time as the provisions of Section 13.01 and the Subordination Agreement are no longer in effect, any of the Events of Default set forth in Section 5.01(a) and/or (b) shall occur and be continuing, all principal, interest or any other amounts due from the Issuer hereunder or under the Notes shall bear interest for each day until paid (before and after judgment), at a rate per annum then in effect according to the terms of Section 3.01 or 5.02 (as the case may be), plus a rate per annum (based on a year of 360 days of twelve ---- 30-day months) equal to 3% of the unpaid principal amount of the Notes (the "Default Rate"). - ------------- Section 10.02. Maintenance of Office or Agency. ------------------------------- The Issuer shall maintain in The City of New York, an office or agency where Notes may be presented or surrendered for payment, where Notes may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served. The office of the Trustee shall be such office or agency of the Issuer, unless the Issuer shall designate and maintain some other office or agency for one or more of such purposes, in which case, the Issuer shall give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Issuer shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office, and the Issuer hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Issuer may also from time to time designate one or more other offices or agencies (in or outside of The City of New York) where the Notes may be presented or surrendered for any or all such purposes, and may from time to time rescind such designation, provided, that no such designation or rescission shall in any manner relieve the Issuer of its -62- obligation to maintain an office or agency in the Borough of Manhattan in The City of New York for such purposes. The Issuer shall give prompt written notice to the Trustee of any such designation or rescission and any change in the location of any such other office or agency. Section 10.03. Money for Note Payments To Be Held in Trust. ------------------------------------------- If the Issuer shall at any time act as its own Paying Agent, the Issuer shall, on or before any due date of the principal of or interest on any of the Notes, segregate and hold in trust for the benefit of the Holders entitled thereto a sum sufficient to pay the principal or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and shall promptly notify the Trustee of its action or failure so to act. If the Issuer is not acting as Paying Agent, the Issuer shall, on or before the day preceding each due date of the principal of or interest on, any Notes, deposit with a Paying Agent a sum in same day funds sufficient to pay the principal or interest so becoming due, such sum to be held in trust for the benefit of the Holders entitled to such principal or interest, and (unless such Paying Agent is the Trustee) the Issuer shall promptly notify the Trustee of such action or any failure so to act. If the Issuer is not acting as Paying Agent, the Issuer shall cause any Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section 10.03, that such Paying Agent shall: (a) hold all sums held by it for the payment of the principal of or interest on Notes in trust for the benefit of the Holders entitled thereto until such sums shall be paid to such Holders or otherwise disposed of as herein provided; (b) give the Trustee notice of any Default by the Issuer (or any other obligor upon the Notes) in the making of any payment of principal of or interest on the Notes; (c) at any time during the continuance of any such Default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent; and -63- (d) acknowledge, accept and agree to comply in all respects with the provisions of this Indenture relating to the duties, rights and liabilities of such Paying Agent. The Issuer may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Issuer or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Issuer or such Paying Agent; and, upon such payment by the Issuer or any Paying Agent to the Trustee, the Issuer or such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Issuer, in trust for the payment of the principal of or interest on any Note and remaining unclaimed for two years after such principal or interest has become due and payable shall be paid to the Issuer upon receipt of a Company Request therefor, or (if then held by the Issuer) shall be discharged from such trust; and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Issuer for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Issuer as trustee thereof, shall thereupon cease, provided, that the -------- Trustee or such Paying Agent, before being required to make any such repayment, shall at the expense of the Issuer cause to be published once, in the New York Times and the Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining shall be repaid to the Issuer. Section 10.04. Corporate Existence. ------------------- Subject to Article VIII, the Issuer shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the corporate, partnership or other existence of each of the Restricted Subsidiaries, and the rights (charter and statutory), licenses and franchises of the Issuer and each of the Restricted Subsidiaries, provided, that the Issuer -------- shall not be required to preserve any such right, license or franchise if the Board of Directors of the Person holding such right, license or franchise shall determine that the preservation thereof is no -64- longer desirable in the conduct of the business of the Issuer and the Restricted Subsidiaries as a whole and that the loss thereof is not disadvantageous in any material respect to the Holders, provided, further, that the foregoing shall not -------- ------- prohibit a sale, transfer or conveyance of a Restricted Subsidiary or any of the Issuer's or a Restricted Subsidiary's assets or capital stock in compliance with the terms of this Indenture. Section 10.05. Change of Ownership. ------------------- Except with the approval of Holders of a majority of the principal amount of the Notes (such approval not to be unreasonably withheld), the Issuer shall not suffer, permit or allow to occur any voting arrangement, proxy, assignment, pledge or other transfer with respect to or of its shares so that one or more of KIAV and its Affiliates, the directors of Kelso & Companies, Inc. and Charter owns and votes directly or indirectly less than fifty-one percent of the voting shares (i.e., shares entitled to elect a majority of the directors) of the Issuer, provided that after the Issuer completes an initial public offering, -------- such percentage may be less than fifty-one percent so long as a majority of the Issuer's directors are nominees of one or more of KIAV and its Affiliates, the directors of Kelso & Companies, Inc. and Charter. Section 10.06. Management of Cable Properties. ------------------------------ The Issuer shall not suffer or permit any company or entity, other than Charter, not approved by the Holders of a majority in principal amount of the Notes (such approval not to be unreasonably withheld) to manage any of the cable television properties of CCE-I (for purposes of this Section 10.06, if one or more of Howard Wood, Jerald Kent or Barry Babcock (or any other person approved by the Holders of a majority in principal amount of the Notes) and their heirs at law collectively own and vote less than fifty-one percent of the voting shares of Charter, the Issuer will be deemed to have violated this Section 10.06). Section 10.07. Annualized Cash Flow. -------------------- The Issuer shall not permit the Adjusted Consolidated Annualized Operating Cash Flow of the Issuer, for the three months ending on the last day of each calendar quarter, to be less than 1.2 times its total Adjusted Consolidated Debt Service for the 12 months ending on such last day. -65- Section 10.08. Reporting and Information Requirements. -------------------------------------- So long as any of the Notes are then outstanding, the Issuer shall deliver to the Trustee and each Holder of $1,000,000 or more in unpaid principal amount of the Notes: (a) as soon as available but in any event within 45 days after the end of each quarterly accounting period (other than the fourth quarter) in each fiscal year, the unaudited consolidated statement of operations and statement of cash flows of the Issuer for such quarterly period and for the period from the beginning of the fiscal year to the end of such quarter, and the unaudited consolidated balance sheet of the Issuer as of the end of such quarterly period, and all such statements shall be prepared in accordance with GAAP, consistently applied; provided, that such statements shall not include footnotes and shall be -------- subject to normal year-end adjustments; (b) at the time delivered to the applicable creditor, a copy of any certificate, report or other correspondence relating to compliance with any Senior Debt or any other Indebtedness of the Issuer and any of its Restricted Subsidiaries; (c) within 90 days after the end of each fiscal year, the consolidated statements of operations, shareholders' investment and cash flows of the Issuer for such fiscal year, and the consolidated balance sheet of the Issuer as of the end of such fiscal year, all prepared in accordance with GAAP, consistently applied, and accompanied by (i) a certified audit report from the Issuer's auditors, which shall be a firm of recognized national standing, and (ii) a certificate from such accounting firm, addressed to the Issuer's board of directors, stating that in the course of its examination nothing came to its attention that caused it to believe that there was any default by the Issuer in the fulfillment of or compliance with Sections 10.07 and 10.11(a) of this Indenture or, if such accountants have reason to believe any such default by the Issuer exists, a certificate specifying the nature and period of existence thereof; (d) promptly (but in any event within ten (10) Business Days) after the discovery or receipt of notice of any default under any material agreement (including any default under the terms and provisions of the Notes and this Indenture) to which it or any of the Restricted Subsidiaries is a party or any other material adverse event or circumstance affecting the Issuer or any Restricted Subsidiary (including the filing of -66- any material litigation against the Issuer or any Restricted Subsidiary), an Officer's Certificate specifying the nature and period of existence thereof and what actions the Issuer and the Restricted Subsidiaries have taken and propose to take with respect thereto; (e) within 30 days after transmission thereof, copies of all financial statements, proxy statements, reports and any other general written communications which the Issuer sends to its stockholders (if it is a reporting company under the Exchange Act) and copies of all registration statements and all regular, special or periodic reports which it files, or any of its officers or directors file with respect to the Issuer, with the SEC or with any securities exchange on which any of its securities are then listed, and copies of all press releases and other statements made available generally by the Issuer to the public concerning material developments in the Issuer's business; it being understood that the delivery of such reports shall satisfy the requirements of paragraphs (a), (c) and (i) of this Section 10.08; (f) within five (5) Business Days after execution, copies of all documents and instruments governing any Senior Debt; (g) all written requests for amendments, consents and waivers relating to (i) the CCE-I Credit Agreement to be executed pursuant to the terms thereof and (ii) the CCE, L.P. Partnership Agreement to be executed pursuant to the terms thereof; and in each such case, copies of any such amendments, consents and waivers, contemporaneously with the delivery of such amendments, consents and waivers to the Persons indicated therein; provided, however, that in lieu of any -------- ------- such amendment, consent or waiver the Company may, at its option, provide a summary thereof; (h) within 45 days after the end of each quarterly accounting period in each fiscal year, a certificate as to compliance with Section 8.01 and Article X, including a calculation under the covenants of Sections 10.07 and 10.11(a); and (i) within 30 days after the date on which the Issuer would have been required to file a report on Form 8-K with the SEC had the Issuer been subject to such a requirement relating to (i) a change of control event, (ii) a significant asset disposition or acquisition directly by the Issuer or any of the Restricted Subsidiaries, (iii) the appointment of a receiver, fiscal agent or similar officer for the Issuer, or -67- (iv) any resignation or dismissal of the Issuer's principal independent accountants, a notice of the occurrence of any such event together with a general description with reasonable detail describing such event. Section 10.09. [Intentionally Omitted.] Section 10.10. Changes in CCE, L.P. Partnership Agreement. ------------------------------------------ The Issuer shall not permit any amendment, modification or other change to the CCE, L.P. Partnership Agreement other than amendments, modifications or other changes (a) which do not alter the priority, amount and timing of distributions (or remedies with respect thereto) to partners of CCE, L.P. to be made out of the proceeds of distributions received by CCE, L.P. from its Subsidiaries (including but not limited to CCE-I), except as permitted by subclause (b) of this Section 10.10 or (b) in connection with the creation of one or more new Subsidiaries of CCE, L.P. (each a "New CCE Subsidiary") (and the admission of additional partners resulting therefrom) or the contribution of assets to an existing subsidiary of CCE, L.P., provided that (x) no -------- distributions to CCE, L.P. from such New CCE Subsidiary or CCE-II may be distributed by CCE, L.P. to its partners other than to repay any outstanding CCE Purchase Money Indebtedness incurred in connection with acquiring assets or equity interests owned or to be owned, directly or indirectly, by the New CCE Subsidiary making the distribution or CCE-II, respectively, and, provided, that -------- any such distributions remaining after the payment in full of such CCE Purchase Money Indebtedness shall be used to repay on a pro rata basis, based on the aggregate amounts owed, any other CCE Purchase Money Indebtedness outstanding, and shall thereafter be used to make distributions to CCE, L.P.'s partners and (y) such amendment, modification or other change does not alter the priority, amount and timing of distributions (or remedies with respect thereto) to partners of CCE, L.P. to be made out of the proceeds of distributions received by CCE, L.P. from CCE-I; Section 10.11. Limitation on Indebtedness. -------------------------- The Issuer shall not: (a) permit the Adjusted Consolidated Indebtedness of the Issuer (other than any Indebtedness represented by the Notes) at the end of any calendar quarter after December 31, 1996 to exceed 6.75 times its Adjusted -68- Consolidated Annualized Operating Cash Flow for such quarter; (b) permit any Indebtedness of the Issuer and the Restricted Subsidiaries (other than that evidenced by the Notes) which is subordinated to the Senior Debt, whether as to right of payment of principal or interest or otherwise, to not be subordinated to the Indebtedness evidenced by the Notes to the same extent that the Indebtedness evidenced by the Notes is subordinated to the Senior Debt under Article XIII; (c) incur any Indebtedness which would be reasonably expected, in the circumstances at the time of incurrence, to cause the Issuer to violate the provisions of clause (a) above; (d) on or after the date when the ratio of the Adjusted Consolidated Indebtedness of the Issuer for Money Borrowed (other than any Indebtedness represented by the Notes) to its Adjusted Consolidated Annualized Operating Cash Flow is less than 5.0 to 1, permit the extension of any maturity date under the CCE-I Credit Facility beyond July 17, 2005 without the consent of the Holders of a majority in principal amount of the Notes; (e) permit CCE, L.P. to incur any Indebtedness (including, without limitation, the issuance of any guarantees) other than (A) the Guarantee of the Notes issued by CCE, L.P., and (B) Indebtedness to the Issuer or any of its Subsidiaries to the extent such Indebtedness is subordinate to CCE, L.P.'s Guarantee of the Notes. Section 10.12. Limitation on Restricted Payments. --------------------------------- The Issuer shall not: (a) directly or indirectly, declare or pay any dividend on, or make any distribution to the holders of any class of its Capital Stock in respect of such shares of Capital Stock (including pursuant to a merger or consolidation of the Issuer), other than dividends or distributions payable solely in Capital Stock of the Issuer. Neither the Issuer nor any of its Subsidiaries may purchase, redeem or otherwise acquire or retire for value any of the Capital Stock of the Issuer; -69- (b) except for distributions by CCE, L.P. in accordance with the CCE, L.P. Partnership Agreement, permit any of its Restricted Subsidiaries, directly or indirectly, to declare or pay any dividend or make any distribution other than (i) dividends or distributions to the Issuer or to another Restricted Subsidiary, which declares or pays or distributes the full amount of any such dividend or makes any such distribution, directly or indirectly, to the Issuer and the Issuer uses such dividend or distribution towards the repayment of the Notes, (ii) dividends or distributions by CCE-I to CCT Holdings Corp., as a limited partner of CCE- I, pursuant to the CCE-I Partnership Agreement, and (iii) dividends or distributions by any subsidiary of CCE-I (a "CCE-I Subsidiary") to CCE-I or another CCE-I Subsidiary that is a parent company of such CCE-I Subsidiary, provided that the proceeds of such dividends or distributions in the case -------- of this clause (iii) are (A) retained by CCE-I or such other CCE-I Subsidiary, (B) used to repay indebtedness of CCE-I or such other CCE-I Subsidiary or (C) otherwise used in a manner not violative of the terms of this Indenture; (c) permit any new investment in a Restricted Subsidiary by a non- Affiliate, unless such investment is structured in such a way that (x) there is no adverse impact on the ability of the Issuer to repay the Notes, (y) the Holders of the Notes have an interest as to distributions by such Restricted Subsidiary arising from the assets created or acquired as a direct or indirect result of such new investment which is subordinate only to the CCE-I Credit Facility and the obligations to repay Indebtedness or other forms of non-Affiliate financing related to such acquisition and (z) the Issuer continues to Control, directly or indirectly, CCE-I. The Issuer will not and will not permit any Restricted Subsidiary to dispose of any equity interest, whether direct or indirect, which it currently holds in CCE-I, other than to (i) the Issuer, (ii) another Restricted Subsidiary, or (iii) a third party, so long as such third party contributes cash and/or other assets to CCE-I and the equity interest received by such third party in distributions received from CCE-I shall be subordinated to the preferred equity interest of CCE, L.P. in distributions received from CCE-I; (d) permit any of CCE-I and any of the Restricted Subsidiaries to make any advance, loan, payment or cash distribution to Charter or KIAV or any of their -70- respective Affiliates (other than Restricted Subsidiaries) before all the Obligations in respect of the Notes are paid in full, other than as permitted by Section 10.13(a); or (e) invest or permit any Restricted Subsidiary to invest more than $20,000,000 in any Restricted Subsidiary thereof relating to the operation and ownership of licensed radio station(s) in the St. Louis, Missouri, area. Section 10.13. Limitation on Transaction with Affiliates. ----------------------------------------- (a) The Issuer shall not, except as permitted under Sections 8.01, 10.12(a), 10.12(b), 10.12(d) and 10.16(a), permit CCE-I to, at any time, engage in any transaction with an Affiliate, or make an assignment or other transfer of any of its properties or assets to an Affiliate on terms less advantageous to CCE-I than would be the case if such transactions had been effected on an arm's length basis with a non-Affiliate, other than any transaction (including the payment of fees and expenses) permitted under the CCE-I Credit Agreement from time to time or, after the CCE-I Credit Facility Termination Date, consistent with past practice. In addition, CCE-I shall receive the full benefit of any discounts, rebates or special payment terms available to Charter (in its capacity as manager of the cable systems owned by CCE-I) which Charter (in such capacity) is permitted to pass through to CCE-I. (b) The Issuer shall not permit any Restricted Subsidiary to incur Indebtedness to an Affiliate, other than Indebtedness to another Restricted Subsidiary or a direct or indirect Restricted Subsidiary of a Restricted Subsidiary, on terms less advantageous than would be the case if such loan had been effected on an arm's length basis with a non-Affiliate. Section 10.14. Disposition of Proceeds of Asset Sales. -------------------------------------- After the sale by CCE-I of any cable television property owned directly by it, the Issuer (A) shall cause the entire cash net proceeds of such sale to be used to pay down the Senior Debt and (B) thereafter shall maintain the Senior Debt at a level not in excess of the level to which such Senior Debt has been paid down plus $20,000,000 (the "New Senior Debt Level"); provided, that at any --------------------- -------- time during the 24 month period following any such sale, the Issuer may increase the level of Senior Debt beyond the New Senior Debt Level solely to the -71- extent such increase arises from acquisition borrowings to acquire cable television properties in any of the Issuer's and its Restricted Subsidiaries' Areas of Dominant Influence. Section 10.15. Change of Control. ----------------- Without the approval of the Holders of a majority in principal amount of the Notes (such approval not to be unreasonably withheld), the Issuer shall not suffer or permit Charter's principal executive or operating officers not to include at least one of Howard Wood, Barry Babcock or Jerald Kent. Section 10.16. Sale of Assets. -------------- (a) The Issuer shall not sell, lease or otherwise dispose of, or permit any of the Restricted Subsidiaries to sell, lease or otherwise dispose of, an aggregate (including all such dispositions by the Issuer and the Restricted Subsidiaries) of more than 10% of CCE-I's assets in any transaction or series of transactions (other than sales in the ordinary course of business) or sell, lease or otherwise dispose of any of CCE-I's cable television systems, provided that (A) the Issuer or any of the -------- Restricted Subsidiaries may exchange any and all of its cable television systems and related property for cable television systems and related property of unrelated third parties on terms that are commercially reasonable to CCE-I; (B) the Issuer and the Restricted Subsidiaries may make sales of assets but only to the extent they comply with Section 10.14; (C) the Issuer and the Restricted Subsidiaries may transfer assets to a "joint venture subsidiary" (as defined below) but only to the extent the Issuer complies with Section 10.16(b) below; and (D) the Issuer and the Restricted Subsidiaries may otherwise make sales if but only if the Issuer and the Restricted Subsidiaries have made arrangements reasonably satisfactory to the Holders of a majority in principal amount of the Notes to apply the entire after-tax proceeds of any such sale to payment of the outstanding principal of and accrued interest on the Notes, it being understood that the satisfaction and discharge of this Indenture in accordance with Article XI hereof shall be deemed an arrangement reasonably satisfactory to such Holders for the application of such proceeds pursuant to this clause (D); provided, further, that, in connection with any such -------- ------- sale, lease or other disposition of assets by the Issuer or one of the Restricted Subsidiaries to an Affiliate of such Person -72- (other than a sale, lease or other disposition the proceeds of which are promptly applied to repay in full in cash all amounts, including principal and accrued and unpaid interest owing on the Notes, whether or not then due and payable), such Person shall first obtain an opinion from an investment banking or brokerage firm which is nationally recognized for its expertise in the cable television industry to the effect that such transaction is fair to all Holders of Notes from a financial point of view. (b) Except as permitted under Section 8.01, the Issuer shall not permit the transfer of any or all of the cable television properties of the Issuer or the Restricted Subsidiaries to one or more Restricted Subsidiaries which is not wholly owned by the Issuer or such Restricted Subsidiary ("joint venture subsidiary(ies)"), unless (A) all Restricted ----------------------------- Subsidiaries of the Issuer which hold an interest in the joint venture subsidiary or subsidiaries provide a guarantee of, or an assumption agreement for, the Notes and (B) such transfer does not otherwise materially disadvantage the Holders of the Notes in connection with their rights, position and powers under the Notes. ARTICLE XI SATISFACTION AND DISCHARGE Section 11.01. Satisfaction and Discharge of Indenture. --------------------------------------- This Indenture shall cease to be of further effect (except as to surviving rights of registration of transfer or exchange of Notes herein expressly provided for, the Issuer's obligations under Section 6.07, and the Trustee's and Paying Agent's obligations under Section 4.06) and the Trustee, on written demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (a) either (i) all Notes theretofore authenticated and delivered (other than (A) Notes which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 3.05 and (B) Notes for whose payment in United States dollars has theretofore been irrevocably deposited in trust or segregated and held in -73- trust by the Issuer and thereafter repaid to the Issuer or discharged from such trust, as provided in Section 10.03) have been delivered to the Trustee for cancellation; or (ii) all such Notes not theretofore delivered to the Trustee for cancellation have become due and payable and the Issuer has irrevocably deposited or caused to be deposited with the Trustee in trust for the purpose an amount in United States dollars sufficient to pay and discharge the entire Indebtedness on such Notes not theretofore delivered to the Trustee for cancellation, for the principal of and interest on such Notes to the date of such deposit; (b) the Issuer has paid or caused to be paid all other sums payable hereunder by the Issuer; and (c) the Issuer has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Issuer to the Trustee under Section 6.07 and, if money shall have been deposited with the Trustee pursuant to subclause (a)(ii) of this Section 11.01, the obligations of the Trustee under Section 11.02 and the last paragraph of Section 10.03 shall survive. Section 11.02. Application of Trust Money. -------------------------- Subject to the provisions of the last paragraph of Section 10.03, all money deposited with the Trustee pursuant to Section 11.01 shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Issuer acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal of and interest on the Notes for whose payment such money has been deposited with the Trustee. -74- ARTICLE XII REGISTRATION Section 12.01. Cooperation in Registration. --------------------------- (a) Until such time as there are Exchange Notes outstanding, the Issuer shall use reasonable best efforts to cooperate with any Holder or the proposed transferee of one or more of the Initial Notes to facilitate a proposed transfer, provided that the Issuer will not be required to register the Initial Notes under the Securities Act or any state or other securities laws. To this end, the Issuer shall make available to any proposed transferee or Holder (i) all information reasonably requested by such Holder and required under Section 10.08, (ii) its appropriate executive officers to be interviewed, at reasonable times and intervals, by proposed transferees (acting in a coordinated fashion) about the affairs and status of the Issuer, and (iii) any other information reasonably required by a Holder in order to transfer any of the Notes in compliance with Rule 144A of the Securities Act. Any transfer taxes payable in connection with a Holder's transfer of its Note(s) shall be the responsibility of such Holder. (b) After March 31, 1997, if any Holder or Holders of $15,000,000 or more in unpaid principal amount of the Notes desire to register same under the Securities Act, the Issuer shall comply with such Holder's written request for same, and shall use its best efforts to effect such registration and the sale of such Notes in accordance with the intended method of disposition thereof, and pursuant thereto the Issuer shall as expeditiously as possible: (i) prepare and file with the SEC a registration statement with respect to such Notes and use its reasonable best efforts to cause such registration statement to become effective (provided that before filing a registration statement or prospectus or any amendments or supplements thereto, the Issuer shall furnish to the counsel selected by the Holders of a majority in principal amount of the Notes covered by such registration statement copies of all such documents proposed to be filed, which documents shall be subject to the review of such counsel); (ii) prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be -75- necessary to keep such registration statement effective for a period of not less than nine months and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such registration statement; (iii) furnish to each seller of such Notes such number of copies of such registration statement, each amendment and supplement thereto, the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as such seller may reasonably request in order to facilitate the disposition of the Notes owned by such seller; (iv) use its reasonable best efforts to register or qualify such Notes under such other securities or blue sky laws of such jurisdictions as any seller reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the Notes owned by such seller (provided that the Issuer shall not be required to (i) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph, (ii) subject itself to taxation in any such jurisdiction, or (iii) consent to service of process in any such jurisdiction); (v) notify each seller of such Notes at any time when a prospectus relating thereto is required to be delivered under the Securities Act after the happening of any event as a result of which the prospectus included in such registration statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and, at the request of any such seller, the Issuer shall prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Notes, such prospectus shall not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (vi) enter into such customary agreements (including underwriting agreements in customary form which contain customary indemnification provisions) and -76- take all such other actions as the Holders of a majority in aggregate principal amount of the Notes being sold or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Notes; (vii) make available for inspection by any seller of such Notes, any underwriter participating in any disposition pursuant to such registration statement, and any attorney, accountant or other agent retained by any such seller or underwriter, all financial and other records, pertinent corporate documents and properties of the Issuer, and cause the Issuer's officers, directors, employees and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement; (viii) obtain a cold comfort letter from the Issuer's independent public accountants in customary form and covering such matters of the type customarily covered by cold comfort letters as the sellers of a majority of the Notes being sold reasonably request; and (ix) enter into such agreements, trust indentures, and other documents (including a reformulation of the Notes and this Indenture into such form and with such additional provisions) and file such statements, registration documents and other material as are reasonably requested by the managing underwriter in order to comply with the Trust Indenture Act and to effect a sale under the Securities Act. (c) All expenses incident to the Issuer's performance of or compliance with Section 12.01(b), including without limitation all registration and filing fees, fees and expenses of compliance with securities or blue sky laws, printing expenses, messenger and delivery expenses, and fees and disbursements of counsel for the Issuer and all independent certified public accountants, underwriters (excluding discounts and commissions) and other persons retained by the Issuer (all such expenses being herein called "Registration Expenses"), shall be borne --------------------- by the sellers of the Notes except that the Issuer shall, in any event, pay its internal expenses (including, without limitation all salaries of its officers and employees performing legal or accounting duties) and the expense of any annual audit; provided, that the Issuer shall be required to pay the fees and -------- expenses of any indenture trustee appointed in connection with any such registration of the Notes. -77- Each Holder of Notes included in any registration described in Section 12.01(b) will pay those Registration Expenses allocable to the registration of such Holder's Notes so included, and any Registration Expenses not so allocable will be borne by all sellers of Notes included in such registration in proportion to the aggregate selling price of the Initial Notes of each such Holder to be so registered. (d) In connection with the registration of Notes described in Section 12.01(b), the Issuer agrees to indemnify, to the extent permitted by law, each Holder of such Notes, its officers and directors and each person who controls such Holder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses caused by any untrue or alleged untrue statement of material fact contained in any registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Issuer by such Holder expressly for use therein or by such Holder's failure to deliver a copy of any registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto after the Issuer has furnished such Holder with a sufficient number of copies of the same. In connection with an underwritten offering pursuant to the registration of Notes described in Section 12.01(b), the Issuer shall indemnify such underwriters, their officers and directors and each person who controls such underwriters (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the Holders of such Notes. In connection therewith, each Holder of such Notes agrees to indemnify, to the extent permitted by law, the Issuer, its officers and directors and each person who controls the Issuer (within the meaning of the Securities Act) from and against all losses, claims, damages, liabilities and expenses caused by or contained in any information furnished in writing to the Issuer by such Holder expressly for use in any registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or by such Holder's failure to deliver a copy of the registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto after the Issuer has furnished such Holder with a sufficient number of copies of the same. -78- (e) The Issuer's obligations under Section 12.01(b) shall not extend to more than one registration completed under the Securities Act. ARTICLE XIII SUBORDINATION Section 13.01. Special Provisions Relating to the CCE-I Credit Facility. -------------------------------------------------------- Notwithstanding anything which may be construed to the contrary in this Article or any other provision of this Indenture or otherwise, on and prior to the CCE-I Credit Facility Termination Date, all of the Holders' rights vis-a-vis --------- the Issuer and the CCE-I Bank Facility Lenders shall be subordinate to the CCE-I Credit Facility and governed by the terms of the Subordination Agreement (the terms and provisions of which are expressly incorporated by reference herein) and this Section 13.01. Without limiting the foregoing, the terms of Sections 13.02 through 13.07 shall be inapplicable to the Indebtedness arising under the CCE-I Credit Facility. On and prior to the earlier of (i) the CCE-I Credit Facility Termination Date and (ii) January 18, 2019, no Holder shall exercise any right or remedy against the Issuer or any of its Subsidiaries with respect to this Indenture or any Note, provided, that: -------- (a) Upon the election of Holders of a majority in principal amount of the Notes, the Holders may exercise the right to pursue a claim of specific performance or an injunction against the Issuer: (i) unless expressly permitted by the terms hereof, if the Issuer merges or consolidates with or permits any Restricted Subsidiary (other than CCE-I and any of its Subsidiaries) to merge or consolidate with, any entity and the Issuer or such Restricted Subsidiary is not the survivor of such merger or consolidation (other than a merger between two Restricted Subsidiaries, a merger between the Issuer and a Restricted Subsidiary in which the Issuer is the surviving entity or a merger of a Restricted Subsidiary with another entity in which either such Restricted Subsidiary is the surviving entity or such other entity becomes a Restricted Subsidiary of the Issuer); or -79- (ii) unless expressly permitted by the terms hereof, if the Issuer sells, leases or otherwise disposes of, or permits any of the Restricted Subsidiaries to sell, lease or otherwise dispose of assets (other than cable television assets sold in exchange for other cable television assets pursuant to an asset swap transaction or series thereof) which generate Adjusted Consolidated Annualized Operating Cash Flow (including all such dispositions by the Issuer and its Restricted Subsidiaries) representing more than 50% of CCE-I's Adjusted Consolidated Annualized Operating Cash Flow (as determined by reference to the most recent audited annual financial statements of the Issuer which are required to be delivered to the Holders prior to such sale, lease or other disposition) in any transaction or series of transactions (other than sales in the ordinary course of business); or (iii) if the Issuer incurs, or permits any Restricted Subsidiary to incur, Indebtedness for Money Borrowed which, when, consolidated with all Indebtedness for Money Borrowed of the Issuer on an Adjusted Consolidated basis (excluding the Indebtedness for Money Borrowed represented by or otherwise arising in respect of the Notes and this Indenture), causes the Adjusted Consolidated Indebtedness of the Issuer (other than the Indebtedness represented by the Notes) to exceed at the end of any calendar quarter period ending after December 31, 1996, 7.0 times its Adjusted Consolidated Annualized Operating Cash Flow for such quarter; or (iv) if the Issuer or its Restricted Subsidiaries (other than CCE-I and its Subsidiaries) incur Indebtedness for Money Borrowed (other than that evidenced by the Notes and this Indenture) which is senior in right of payment of principal or interest by its terms to the Notes but subordinated in right of payment of principal or interest by its terms to the CCE-I Credit Facility; or (v) if the Issuer breaches the terms of Section 10.12(a) or Section 10.16(b). (b) Upon the occurrence of an Event of Default, the Holders may exercise the right to cause interest to accrue on the unpaid principal amount of the Notes at the interest rate then in effect, including, if applicable, the Default Rate of interest described in Section 10.01 and the penalty rate of interest described in the proviso to Section 5.02; and -80- (c) The Holders may exercise such other rights and remedies against the Issuer as are expressly permitted to them under the Subordination Agreement. In connection with any such action by a Holder for specific performance or an injunction, the Issuer shall waive any requirement of a bond and acknowledges that the Holders would be irreparably damaged by any such violation. Notwithstanding any effect of this Section 13.01 or of the Subordination Agreement, the Issuer agrees that any statute of limitations with respect to any Event of Default shall be tolled so long as any debt is outstanding under the CCE-I Credit Facility. Section 13.02. Agreement to Subordinate; Authorization to Trustee to Take ---------------------------------------------------------- Action to Effectuate Subordination. - ---------------------------------- (a) The Issuer agrees, and each Holder by accepting a Note agrees, that the Indebtedness evidenced by the Notes and the payment of the principal of and interest on each of the Notes is subordinated in right of payment, to the extent and in the manner provided in this Article, to the prior payment in full of all amounts then due on all Senior Debt. This Article shall constitute a continuing offer to all persons who become holders of or who continue to hold, Senior Debt, and the provisions of this Article XIII are intended to be for the benefit of, and shall be enforceable directly by, the holders of Senior Debt. (b) Each Holder by accepting a Note authorizes and directs the Trustee for and on such Holders' behalf to take such action as may be necessary or appropriate to effectuate, as between the holders of Senior Debt and the Holders, the subordination provided in this Article XIII (including, without limitation, executing and delivering a Subordination Agreement, substantially in the form of Exhibit E, in the name and on behalf of such Holder) and appoints the Trustee his attorney-in-fact for any and all such purposes. Section 13.03. Definitions of Senior Debt. -------------------------- "Senior Debt" means all monetary obligations (whether fixed or contingent and whether outstanding on the date hereof or hereafter created, incurred or assumed), including, without limitation, obligations in respect of principal, interest (including post-petition interest in any proceeding under bankruptcy law), reimbursement obligations, indemnities, fees and expenses in respect of any Indebtedness for Money Borrowed of the Issuer and the Restricted Subsidiaries, whether -81- outstanding on an even date herewith or afterwards, unless any instrument creating or affecting such Indebtedness (a) provides that such Indebtedness is not superior in right of payment to the principal of and interest on any of the Notes or (b) provides that such Indebtedness is subordinate in right of payment to the payment of the principal of and interest on any other Indebtedness for Money Borrowed of the Issuer and its Subsidiaries. The fact that certain Indebtedness is not secured, or is junior in security to other Indebtedness, shall not be relevant to the issue of whether it is Senior Debt. Notwithstanding anything to the contrary in the foregoing, Senior Debt shall not include (a) indebtedness or amounts owed for compensation to employees, for goods or materials purchased in the ordinary course of business or for services, (b) indebtedness of the Issuer or any Restricted Subsidiary to any Restricted Subsidiary, or any shareholder, partner or officer of the Issuer or any Restricted Subsidiary, (c) obligations for television, program and syndicated series exhibition rights or (d) payments due under or in connection with a cable television franchise, including any management fees. Section 13.04. Liquidation; Dissolution; Bankruptcy. ------------------------------------ Upon any distribution to creditors upon dissolution, winding-up, liquidation or reorganization of the Issuer (whether voluntary or involuntary and whether in bankruptcy, insolvency or receivership proceedings or upon an assignment for the benefit of creditors or any other marshalling of the assets and liabilities of the Issuer or otherwise): (1) holders of Senior Debt shall receive payment in full in cash of the principal of and interest (including interest accruing after the commencement of any such proceeding) to the date of payment on the Senior Debt and all other amounts due in respect of the Senior Debt before Holders shall be entitled to receive any payment; and (2) until the Senior Debt is paid in full in cash, any distribution to which Holders would be entitled but for this Article shall be made to holders of Senior Debt as their interests may appear, except that pursuant to a plan of reorganization under applicable bankruptcy law, the Holders of Notes may receive securities containing provisions that are no more favorable to Holders of the Notes than those in the Notes, including, without limitation, provisions that subordinate such securities to Senior Debt to the same extent as the Notes, so long as the rights of the holders of Senior Debt are not altered by such reorganization. -82- For purposes of this Article XIII, a distribution may consist of cash, securities or other property, by set-off or otherwise. Section 13.05. Default on Senior Debt. ---------------------- Upon the final maturity of any Senior Debt by lapse of time, acceleration or otherwise, all such Senior Debt shall first be paid in full before any payment is made by the Issuer or any of its Restricted Subsidiaries or any Person acting on behalf of the Issuer or any of its Restricted Subsidiaries on account of the principal of or interest on the Notes or any payment is made to acquire any of the Notes. The Issuer may not nor may it permit any of its Restricted Subsidiaries or any Person acting on behalf of the Issuer or any of its Restricted Subsidiaries to, directly or indirectly, pay principal of or interest on the Notes or acquire any Notes, cash or property (other than Capital Stock of the Issuer or other securities of the Issuer that are subordinated to Senior Debt to at least the same extent as the Securities) if an event which constitutes, or which, with the giving of notice or the lapse of time or both or after giving effect to a payment on account of the Notes, would constitute, a default or event of default in respect of any Senior Debt, as defined in the instrument or agreement under which the same is outstanding, has occurred and is continuing that automatically accelerates or permits holders of such Senior Debt to accelerate the maturity of such Senior Debt (other than as described in the immediately preceding paragraph). The Issuer shall resume payments on the Notes and may acquire them if such default is cured or waived in writing. Section 13.06. Subrogation. ----------- At such time as all Senior Debt is paid in full and until the Notes are paid in full, Holders shall be subrogated to the rights of holders of Senior Debt to receive distributions applicable to Senior Debt to the extent that distributions otherwise payable to the Holders have been applied to the payment of Senior Debt. A distribution made under this Article to holders of Senior Debt which otherwise would have been made to Holders is not, as between the Issuer and Holders, a payment by the Issuer on Senior Debt. -83- Section 13.07. Relative Rights. --------------- This Article defines the relative rights of Holders and holders of Senior Debt. Nothing in this Article shall: (1) impair, as between the Issuer and Holders, the obligation of the Issuer, which is absolute and unconditional, to pay principal of and interest on the Notes in accordance with their terms; (2) affect the relative rights of Holders and creditors of the Issuer other than holders of Senior Debt except as provided in Section 13.06; or (3) prevent any Holder from exercising its available remedies upon an Event of Default, subject to the rights of holders of Senior Debt under this Article. If the Issuer fails because of this Article to pay principal of or interest on a Note when due under this Indenture, the failure is still an Event of Default. ARTICLE XIV GUARANTEE Section 14.01. Guarantee of Notes. ------------------ CCA Acquisition Corp., CCE, L.P. and Cencom Cable have each issued guarantees substantially in the forms attached hereto as Exhibits F-I, F-II and F-III, respectively (together with any New Restricted Subsidiary Guarantee (as defined below), the "Guarantees") which guarantee on a subordinated basis to the same extent as provided in Article XIII, to each Holder of a Note, but only to the extent set forth therein, payment and performance of the Notes. Section 14.02. Future Guarantees. ----------------- Upon and after the occurrence of the CCE-I Credit Facility Termination Date and upon acquisition or formation of each Restricted Subsidiary thereafter, the Issuer shall cause any Restricted Subsidiary that is not then party to a Guarantee to provide the Trustee with written evidence in the form attached hereto as Exhibit F-IV (a "New Restricted Subsidiary Guarantee") of its guarantee of the Notes under this Article XIV. -84- ARTICLE XV REDEMPTION OF NOTES Section 15.01. Applicability of Article. ------------------------ Redemption of Notes at the election of the Issuer or otherwise, as permitted or required by any provision of this Indenture, shall be made in accordance with such provision and this Article. Section 15.02. Optional Redemption. ------------------- The Notes will be redeemable at the option of the Issuer, in whole or in part, at any time at a price equal to 100% of the face amount thereof, plus accrued and unpaid interest to the Redemption Date. Section 15.03. Election to Redeem; Notice to Trustee. ------------------------------------- The election of the Issuer to redeem any Notes pursuant to Section 15.02 shall be evidenced by a Board Resolution of the Issuer and an Officers' Certificate. In case of any redemption at the election of the Issuer, the Issuer shall, at least 45 days prior to the Redemption Date fixed by the Issuer (unless a shorter notice period shall be satisfactory to the Trustee), notify the Trustee in writing of such Redemption Date and of the principal amount of Notes to be redeemed. Section 15.04. Selection by Trustee of Notes To Be Redeemed. -------------------------------------------- In the event that less than all of the Notes are to be redeemed at any time, selection of such Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not then listed on a national securities exchange, on a pro rata basis, by lot or by such method as --- ---- the Trustee shall deem fair and appropriate, provided that, at the election of -------- the Issuer, Notes the redemption of which would cause the unredeemed portion of the principal amount thereof to be $1,000,000 or less may be redeemed in whole. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in a principal amount equal to the unredeemed portion thereof will be issued in the name of the holder thereof upon cancellation of the original Note. On and after the Redemption Date, if the Issuer does not default in -85- the payment of the Redemption Price, interest will cease to accrue on Notes or portions thereof called for redemption. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to redemption of Notes shall relate, in the case of any Note redeemed or to be redeemed only in part, to the portion of the principal amount of such Note which has been or is to be redeemed. Section 15.05. Notice of Redemption. -------------------- Notice of redemption shall be mailed by first-class mail, postage prepaid, mailed at least 30 but not more than 60 days before the Redemption Date, to each Holder of Notes to be redeemed at its registered address. All notices of redemption shall state: (a) the Special Record Date; (b) the Redemption Date; (c) the Redemption Price; (d) if less than all outstanding Notes are to be redeemed, the identification of the particular Notes to be redeemed; (e) in the case of a Note to be redeemed in part, the principal amount of such Note to be redeemed and that after the Redemption Date upon surrender of such Note, a new Note or Notes in the aggregate principal amount equal to the unredeemed portion thereof will be issued; (f) that Notes called for redemption must be surrendered to the Paying Agent to collect the Redemption Price; (g) that on the Redemption Date the Redemption Price will become due and payable upon each such Note or portion thereof, and that (unless the Issuer shall default in payment of the Redemption Price) interest thereon shall cease to accrue on and after said date; (h) the place or places where such Notes are to be surrendered for payment of the Redemption Price; (i) the CUSIP number, if any, relating to such Notes; and -86- (j) the paragraph of the Notes pursuant to which the Notes are being redeemed. Notice of redemption of Notes to be redeemed shall be given by the Issuer or, at the Issuer's written request, by the Trustee in the name and at the expense of the Issuer. The notice, if mailed in the manner herein provided, shall be conclusively presumed to have been given, whether or not the Holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the Holder of any Note designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Note. Section 15.06. Deposit of Redemption Price. --------------------------- On or prior to the day preceding any Redemption Date, the Issuer shall deposit with the Trustee or with a Paying Agent (or, if the Issuer is acting as its own Paying Agent, segregate and hold in trust as provided in Section 10.03) an amount of money in same day funds sufficient to pay the Redemption Price of, and accrued interest on, all the Notes or portions thereof which are to be redeemed on that date. Section 15.07. Notes Payable on Redemption Date. -------------------------------- Notice of redemption having been given as aforesaid, the Notes to be redeemed shall, on the Redemption Date, become payable at the Redemption Price therein specified and from and after such date (unless the Issuer shall default in the payment of the Redemption Price) such Notes shall cease to bear interest. Upon surrender of any such Note for redemption in accordance with said notice, such Note shall be paid by the Issuer at the Redemption Price, plus accrued and unpaid interest. If any Note called for redemption shall not be so paid upon surrender thereof for redemption, the principal and premium, if any, shall, until paid, bear interest from the Redemption Date at the rate then borne by such Note. Section 15.08. Notes Redeemed in Part. ---------------------- Any Note which is to be redeemed only in part shall be surrendered to the Paying Agent at the office or agency maintained for such purpose pursuant to Section 10.02 (with, if the Issuer, the Registrar or the Trustee so requires, due endorsement by, or a written instrument of transfer in form -87- satisfactory to, the Issuer, the Registrar or the Trustee duly executed by the Holder thereof or such Holder's attorney duly authorized in writing), and the Issuer shall execute, and the Trustee shall authenticate and deliver to the Holder of such Note without service charge, a new Note or Notes, of any authorized denomination as requested by such Holder in aggregate principal amount equal to, and in exchange for, the portion of the principal of the Note so surrendered that is not redeemed. -88- IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. CCA HOLDINGS CORP. By: /s/ Kent Kalkwarf ----------------------------- Name: Kent Kalkwarf Title: Senior Vice President CENCOM CABLE ENTERTAINMENT, INC. By: /s/ Kent Kalkwarf ----------------------------- Name: Kent Kalkwarf Title: Senior Vice President (with respect to Article XIV hereof only) CCA ACQUISITION CORP. By: /s/ Kent Kalkwarf ----------------------------- Name: Kent Kalkwarf Title: Senior Vice President (with respect to Article XIV hereof only) CHARTER COMMUNICATIONS ENTERTAINMENT, L.P. By: CCA Acquisition Corp., a general partner By: /s/ Kent Kalkwarf ----------------------------- Name: Kent Kalkwarf Title: Senior Vice President (with respect to Article XIV hereof only) -89- HARRIS TRUST AND SAVINGS BANK, as Trustee By: /s/ J. Bartolini -------------------------------- Name: J. Bartolini Title:Vice President -90- EXHIBIT A CUSIP NO.: CCA HOLDINGS CORP. SERIES A SENIOR SUBORDINATED NOTE DUE 1999 No. $______________ CCA HOLDINGS CORP., a Delaware corporation (the "Issuer," which term ------ includes any successor entity), for value received promises to pay to or registered assigns, the principal sum of Dollars, plus accrued interest thereon, on December 31, 1999, subject to Article XIII of the within-mentioned Indenture. Interest shall accrue from January 18, 1995, at the rate of 13% per annum, until the principal hereof is paid or duly provided for. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which will for all purposes have the same effect as if set forth at this place. IN WITNESS WHEREOF, the Issuer has caused this Note to be signed manually or by facsimile by its duly authorized officers and a facsimile of its corporate seal to be affixed hereto or imprinted hereon. CCA HOLDINGS CORP. By:____________________________ Name: Title: Dated: February 13, 1997 By:____________________________ Name: Title: Certificate of Authentication This is one of the Series A Senior Subordinated Notes due 1999 referred to in the within-mentioned Indenture. Harris Trust and Savings Bank, as Trustee Dated: February 13, 1997 By:_______________________ Authorized Signatory A-1 A-2 (REVERSE OF NOTE) SERIES A SENIOR SUBORDINATED NOTE DUE 1999 1. Indenture. This Note is one of a duly authorized issue of Notes of the --------- Issuer designated as its Series A Senior Subordinated Notes due 1999 (the "Notes"), limited (except as otherwise provided in the Indenture referred to ----- below) in aggregate principal amount to $82,000,000, which may be issued under an indenture (the "Indenture") dated as of February 13, 1997, between the Issuer --------- and Harris Trust and Savings Bank, as trustee (the "Trustee," which term ------- includes any successor Trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties, obligations and immunities thereunder of the Issuer, the Trustee, and the Holders of the Notes, and of the terms upon which the Notes are, and are to be, authenticated and delivered. All capitalized terms used in this Note which are defined in the Indenture and not otherwise defined herein shall have the meanings assigned to them in the Indenture. No reference herein to the Indenture and no provisions of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place, and rate, and in the coin or currency, herein prescribed. 2. Redemption. ---------- (a) Optional Redemption. The Notes will be redeemable at the option of the ------------------- Issuer, in whole or in part, at any time at par value, plus accrued and unpaid interest to the Redemption Date. (b) Sinking Fund. The Issuer will not be required to make any mandatory ------------ sinking fund payments in respect of the Notes. (c) Interest Payments. In the case of any redemption of the Notes, ----------------- interest accrued but not paid on or prior to the Redemption Date will be payable to the Holders of such Notes, or one or more Predecessor Notes, of record at the close of business on the Special Record Date. Notes (or portions thereof) for whose redemption and payment provision is made in accordance with the Indenture shall cease to bear interest from and after the Redemption Date. A-2 (d) Partial Redemption. In the event of redemption of the Note in part ------------------ only, a new Note or Notes for the unredeemed portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof. 3. Defaults and Remedies. Subject to Article XIII of the Indenture, if --------------------- an Event of Default shall occur and be continuing, the principal of all of the outstanding Notes, plus all accrued and unpaid interest, if any, to the date the Notes become due and payable, may be declared due and payable in the manner and with the effect provided in the Indenture. 4. Defeasance. The Indenture contains provisions for defeasance at any ---------- time of (a) the entire indebtedness of the Issuer on this Note and (b) certain restrictive covenants and related Defaults and Events of Default, in each case upon compliance by the Issuer with certain conditions set forth therein. 5. Amendments and Waivers. The Issuer and the Trustee (if a party ---------------------- thereto) may, without the consent of the Holders of any Outstanding Notes, amend, waive or supplement the Indenture or the Notes for certain specified purposes, including, among other things, curing ambiguities, defects or inconsistencies, maintaining the qualification of the Indenture under the Trust Indenture Act of 1939, as amended, and making any change that does not adversely affect the rights of any Holder. Other amendments and modifications of the Indenture or the Notes may be made by the Issuer and the Trustee with the consent of the Holders of not less than a majority of the aggregate principal amount of the Outstanding Notes, subject to certain exceptions requiring the consent of the Holders of the particular Notes to be affected. Any such consent or waiver by or on behalf of the Holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this or such Note. 6. Denominations, Transfer and Exchange. The Notes are issuable only in ------------------------------------ registered form without coupons and, except in the case of Notes issued pursuant to Section 2(d) above, in denominations of $1,000,000 or more. As provided in the Indenture and subject to certain limitations therein set forth, the Notes are exchangeable for a like aggregate principal amount of Notes of a different authorized denomination, as requested by the Holder surrendering the same. A-3 The transfer of this Note is registrable on the Note Register of the Issuer, upon surrender of this Note for registration of transfer at the office or agency of the Issuer maintained for such purpose in the Borough of Manhattan in The City of New York or at such other office or agency of the Issuer as may be maintained for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Issuer and the Note Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Notes, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. 7. Persons Deemed Owners. Prior to and at the time of due presentment of --------------------- this Note for registration of transfer, the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the Person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note shall be overdue, and neither the Issuer, the Trustee nor any agent shall be affected by notice to the contrary. 8. Registration Rights. The Issuer will be obligated to use its best ------------------- efforts to consummate an exchange offer pursuant to which the Holder of this Note shall have the right to exchange this Note for the Issuer's Series B Senior Subordinated Notes due 1999 (the "Exchange Notes"), which will have been -------------- registered under the Securities Act, in like principal amount and having terms identical in all material respects as the Initial Notes. 9. No Recourse Against Others. No limited partner, officer or employee of -------------------------- the Issuer (or any direct or indirect investor therein, including Charter and KIAV), nor any director, officer, partner, affiliate, employee or stockholder of a general partner, shall have any liability for any obligations of the Issuer under the Notes or the Indenture. Each holder of Notes by accepting a Note waives and releases all such liability, and such waiver and release is part of the consideration for the issuance of the Notes. 10. Subordination. All of the Holders' rights vis-a-vis the Issuer and ------------- the CCE-I Bank Facility Lenders shall be subordinate to the CCE-I Credit Facility and other Senior Debt and shall be governed by and subject to the terms of the Subordination Agreement and Article XIII of the Indenture. 11. Guarantees. CCA Acquisition Corp., CCE, L.P. and Cencom Cable have ---------- each issued limited guarantees with respect to this Note in accordance with Article XIV of the Indenture. A-4 12. GOVERNING LAW. THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY, AND ------------- CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF). THE TRUSTEE, THE ISSUER, ANY OTHER OBLIGOR IN RESPECT OF THE NOTES AND THE HOLDERS AGREE TO SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE COURT LOCATED IN THE BOROUGH OF MANHATTAN, IN THE CITY OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE INDENTURE OR THIS NOTE. THE INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT IS SUBORDINATED TO THE PRIOR PAYMENT IN FULL OF THE OBLIGATIONS (AS DEFINED IN THE SUBORDINATION AGREEMENT HEREINAFTER REFERRED TO) PURSUANT TO, AND TO THE EXTENT PROVIDED IN, THE SECOND AMENDED AND RESTATED SUBORDINATION AGREEMENT DATED AS OF FEBRUARY 13, 1997 BY AND BETWEEN HARRIS TRUST AND SAVINGS BANK, AS TRUSTEE, AND CCA HOLDINGS CORP., A DELAWARE CORPORATION, IN FAVOR OF TORONTO DOMINION (TEXAS), INC., THE CHASE MANHATTAN BANK (FORMERLY CHEMICAL BANK), CIBC INC., CREDIT LYONNAIS CAYMAN ISLAND BRANCH, NATIONSBANK, N.A., BANQUE PARIBAS, UNION BANK OF CALIFORNIA, N.A. (FORMERLY UNION BANK), CORESTATES BANK, N.A., THE LONG-TERM CREDIT BANK OF JAPAN, LTD., MERCANTILE BANK OF ST. LOUIS NATIONAL ASSOCIATION, FLEET BANK, N.A., FIRST NATIONAL BANK OF MARYLAND, VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST, BANQUE FRANCAISE DU COMMERCE EXTERIEUR, PRIME INCOME TRUST, SENIOR DEBT PORTFOLIO, AERIES FINANCE LTD., ING CAPITAL ADVISORS, INC., ABN AMRO BANK N.V., SOCIETE GENERALE, THE FIRST NATIONAL BANK OF BOSTON, CAPTIVA FINANCE, LTD., BANQUE NATIONALE DE PARIS, THE SUMITOMO BANK, LIMITED, CHICAGO BRANCH, CHASE SECURITIES, INC. AND THE ING CAPITAL SENIOR SECURED HIGH INCOME FUND, L.P. (COLLECTIVELY, AND TOGETHER WITH THEIR RESPECTIVE SUCCESSORS AND ASSIGNS, THE "LENDERS"), TORONTO DOMINION (TEXAS), INC. AND THE CHASE MANHATTAN BANK (FORMERLY CHEMICAL BANK), AS DOCUMENTATION AGENTS, TORONTO DOMINION (TEXAS), INC., THE CHASE MANHATTAN BANK (FORMERLY CHEMICAL BANK), CIBC INC., CREDIT LYONNAIS CAYMAN ISLAND BRANCH, AND NATIONSBANK, N.A., AS MANAGING AGENTS, BANQUE PARIBAS, UNION BANK OF CALIFORNIA, N.A. (FORMERLY UNION BANK), CORESTATES BANK, N.A., FLEET BANK, N.A., ABN AMRO BANK N.V., SOCIETE GENERALE AND THE FIRST NATIONAL BANK OF BOSTON, AS CO-AGENTS, AND TORONTO DOMINION (TEXAS), INC., AS ADMINISTRATIVE AGENT, AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS. A-5 ASSIGNMENT FORM If you the holder want to assign this Note, fill in the form below and have your signature guaranteed: I or we assign and transfer this Note to ________________________________________________________________________________ (Insert assignee's social security or tax ID number) ___________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint ________________________________________________________________________________ agent to transfer this Note on the books of the Issuer. The agent may substitute another to act for such agent. Date:______________ Your signature:__________________________ (Sign exactly as your name appears on the other side of this Note) By:__________________________ NOTICE: To be executed by an executive officer. NOTICE: Signature(s) must be guaranteed by an institution which is a participant in the Securities Transfer Agent Medallion Program ("STAMP") or similar program. ----- In connection with any transfer of this Note occurring prior to the date which is the earlier of (i) the date of the declaration by the SEC of the effectiveness of a registration statement under the Securities Act of 1933, as amended (the "Securities Act") covering resales of this Note (which -------------- effectiveness shall not have been suspended or terminated at the date of the transfer) and (ii) February 13, 2000, the undersigned confirms that it has not utilized any general solicitation or general advertising in connection with the transfer: A-6 [Check One] (1) ___ to the Issuer or a subsidiary thereof; or (2) ___ pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended; or (3) __ to an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended) that has furnished to the Trustee a signed letter containing certain representations and agreements (the form of which letter can be obtained from the Trustee); or (4) __ outside the United States to a "foreign person" in compliance with Rule 904 of Regulation S under the Securities Act of 1933, as amended; or (5) -- pursuant to the exemption from registration provided by Rule 144 under the Securities Act of 1933, as amended; or (6) -- pursuant to an effective registration statement under the Securities Act of 1933, as amended; or (7) -- pursuant to another available exemption from the registration requirements of the Securities Act of 1933, as amended. If box (3), (4), (5) or (7) is checked, the Issuer or the Trustee may require, prior to registering any such transfer of Notes, in its sole discretion, such written legal opinions, certifications (including an investment letter in the case of box (3) or (4)) and other information as the Trustee or the Issuer have reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, as amended. A-7 If none of the foregoing boxes are checked, the Trustee or Registrar will refuse to register this Note in the name of any person other than the Registered Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 2.05 of the Indenture shall have been satisfied. Dated: ______________ Signed: __________________________________ (Sign exactly as name appears on the other side of this Security) Signature Guarantee: ____________________________________ TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, as amended and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Issuer as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Date:___________________ ________________________________ NOTICE: To be executed by an executive officer A-8 EXHIBIT B CUSIP NO.: FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, AND THE RULES AND REGULATIONS THEREUNDER, THIS SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT; FOR EACH $1,000,000 PRINCIPAL AMOUNT OF THIS SECURITY: (1) THE ISSUE PRICE IS $1,000,000; (2) THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS $865,680.76; (3) THE ISSUE DATE IS JANUARY 18, 1995; AND (4) THE YIELD TO MATURITY (COMPOUNDED SEMI-ANNUALLY) IS 13%. CCA HOLDINGS CORP. SERIES B SENIOR SUBORDINATED NOTE DUE 1999 No. $______________ CCA HOLDINGS CORP., a Delaware corporation (the "Issuer," which term ------ includes any successor entity), for value received promises to pay to or registered assigns, the principal sum of Dollars, plus accrued interest thereon, on December 31, 1999, subject to Article XIII of the within- mentioned Indenture. Interest shall accrue from January 18, 1995, at the rate of 13% per annum, until the principal hereof is paid or duly provided for. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which will for all purposes have the same effect as if set forth at this place. IN WITNESS WHEREOF, the Issuer has caused this Note to be signed manually or by facsimile by its duly authorized officers and a facsimile of its corporate seal to be affixed hereto or imprinted hereon. CCA HOLDINGS CORP. By:_____________________ Name: Title: Dated: February 13, 1997 By:_____________________ Name: Title: Certificate of Authentication This is one of the Series B Senior Subordinated Notes due 1999 referred to in the within-mentioned Indenture. Harris Trust and Savings Bank, as Trustee Dated: February 13, 1997 By:_______________________ Authorized Signatory B-1 A-2 (REVERSE OF NOTE) SERIES B SENIOR SUBORDINATED NOTE DUE 1999 1. Indenture. This Note is one of a duly authorized issue of Notes of the --------- Issuer designated as its Series B Senior Subordinated Notes due 1999 (the "Notes"), limited (except as otherwise provided in the Indenture referred to ----- below) in aggregate principal amount to $82,000,000, which may be issued under an indenture (the "Indenture") dated as of February 13, 1997, between the Issuer --------- and Harris Trust and Savings Bank, as trustee (the "Trustee," which term ------- includes any successor Trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties, obligations and immunities thereunder of the Issuer, the Trustee, and the Holders of the Notes, and of the terms upon which the Notes are, and are to be, authenticated and delivered. All capitalized terms used in this Note which are defined in the Indenture and not otherwise defined herein shall have the meanings assigned to them in the Indenture. No reference herein to the Indenture and no provisions of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place, and rate, and in the coin or currency, herein prescribed. 2. Redemption. ---------- (a) Optional Redemption. The Notes will be redeemable at the option of the ------------------- Issuer, in whole or in part, at any time at par value, plus accrued and unpaid interest to the Redemption Date. (b) Sinking Fund. The Issuer will not be required to make any mandatory ------------ sinking fund payments in respect of the Notes. (c) Interest Payments. In the case of any redemption of the Notes, ----------------- interest accrued but not paid on or prior to the Redemption Date will be payable to the Holders of such Notes, or one or more Predecessor Notes, of record at the close of business on the Special Record Date. Notes (or portions thereof) for whose redemption and payment provision is made in accordance with the Indenture shall cease to bear interest from and after the Redemption Date. B-2 (d) Partial Redemption. In the event of redemption of the Note in part ------------------ only, a new Note or Notes for the unredeemed portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof. 3. Defaults and Remedies. Subject to Article XIII of the Indenture, if an --------------------- Event of Default shall occur and be continuing, the principal of all of the outstanding Notes, plus all accrued and unpaid interest, if any, to the date the Notes become due and payable, may be declared due and payable in the manner and with the effect provided in the Indenture. 4. Defeasance. The Indenture contains provisions for defeasance at any ---------- time of (a) the entire indebtedness of the Issuer on this Note and (b) certain restrictive covenants and related Defaults and Events of Default, in each case upon compliance by the Issuer with certain conditions set forth therein. 5. Amendments and Waivers. The Issuer and the Trustee (if a party ---------------------- thereto) may, without the consent of the Holders of any Outstanding Notes, amend, waive or supplement the Indenture or the Notes for certain specified purposes, including, among other things, curing ambiguities, defects or inconsistencies, maintaining the qualification of the Indenture under the Trust Indenture Act of 1939, as amended, and making any change that does not adversely affect the rights of any Holder. Other amendments and modifications of the Indenture or the Notes may be made by the Issuer and the Trustee with the consent of the Holders of not less than a majority of the aggregate principal amount of the Outstanding Notes, subject to certain exceptions requiring the consent of the Holders of the particular Notes to be affected. Any such consent or waiver by or on behalf of the Holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this or such Note. 6. Denominations, Transfer and Exchange. The Notes are issuable only in ------------------------------------ registered form without coupons and, except in the case of Notes issued pursuant to Section 2(d) above, in denominations of $1,000,000 or more. As provided in the Indenture and subject to certain limitations therein set forth, the Notes are exchangeable for a like aggregate principal amount of Notes of a different authorized denomination, as requested by the Holder surrendering the same. B-3 The transfer of this Note is registrable on the Note Register of the Issuer, upon surrender of this Note for registration of transfer at the office or agency of the Issuer maintained for such purpose in the Borough of Manhattan in The City of New York or at such other office or agency of the Issuer as may be maintained for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Issuer and the Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Notes, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. 7. Persons Deemed Owners. Prior to and at the time of due presentment of --------------------- this Note for registration of transfer, the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the Person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note shall be overdue, and neither the Issuer, the Trustee nor any agent shall be affected by notice to the contrary. 8. No Recourse Against Others. No limited partner, officer or employee of -------------------------- the Issuer (or any direct or indirect investor therein, including Charter and KIAV), nor any director, officer, partner, affiliate, employee or stockholder of a general partner, shall have any liability for any obligations of the Issuer under the Notes or the Indenture. Each holder of Notes by accepting a Note waives and releases all such liability, and such waiver and release is part of the consideration for the issuance of the Notes. 9. Subordination. All of the Holders' rights vis-a-vis the Issuer and ------------- the CCE-I Bank Facility Lenders shall be subordinate to the CCE-I Credit Facility and other Senior Debt and shall be governed by and subject to the terms of the Subordination Agreement and Article XIII of the Indenture. 10. Guarantees. CCA Acquisition Corp., CCE, L.P. and Cencom Cable have ---------- each issued limited guarantees with respect to this Note in accordance with Article XIV of the Indenture. 11. GOVERNING LAW. THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY, AND ------------- CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF). THE TRUSTEE, THE ISSUER, ANY OTHER OBLIGOR IN RESPECT OF THE NOTES AND THE HOLDERS AGREE TO SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE COURT LOCATED IN THE BOROUGH OF MANHATTAN, IN THE CITY OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE INDENTURE OR THIS NOTE. B-4 THE INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT IS SUBORDINATED TO THE PRIOR PAYMENT IN FULL OF THE OBLIGATIONS (AS DEFINED IN THE SUBORDINATION AGREEMENT HEREINAFTER REFERRED TO) PURSUANT TO, AND TO THE EXTENT PROVIDED IN, THE SECOND AMENDED AND RESTATED SUBORDINATION AGREEMENT DATED AS OF FEBRUARY 13, 1997 BY AND BETWEEN HARRIS TRUST AND SAVINGS BANK, AS TRUSTEE, AND CCA HOLDINGS CORP., A DELAWARE CORPORATION, IN FAVOR OF TORONTO DOMINION (TEXAS), INC., THE CHASE MANHATTAN BANK (FORMERLY CHEMICAL BANK), CIBC INC., CREDIT LYONNAIS CAYMAN ISLAND BRANCH, NATIONSBANK, N.A., BANQUE PARIBAS, UNION BANK OF CALIFORNIA, N.A. (FORMERLY UNION BANK), CORESTATES BANK, N.A., THE LONG-TERM CREDIT BANK OF JAPAN, LTD., MERCANTILE BANK OF ST. LOUIS NATIONAL ASSOCIATION, FLEET BANK, N.A., FIRST NATIONAL BANK OF MARYLAND, VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST, BANQUE FRANCAISE DU COMMERCE EXTERIEUR, PRIME INCOME TRUST, SENIOR DEBT PORTFOLIO, AERIES FINANCE LTD., ING CAPITAL ADVISORS, INC., ABN AMRO BANK N.V., SOCIETE GENERALE, THE FIRST NATIONAL BANK OF BOSTON, CAPTIVA FINANCE, LTD., BANQUE NATIONALE DE PARIS, THE SUMITOMO BANK, LIMITED, CHICAGO BRANCH, CHASE SECURITIES, INC. AND THE ING CAPITAL SENIOR SECURED HIGH INCOME FUND, L.P. (COLLECTIVELY, AND TOGETHER WITH THEIR RESPECTIVE SUCCESSORS AND ASSIGNS, THE "LENDERS"), TORONTO DOMINION (TEXAS), INC. AND THE CHASE MANHATTAN BANK (FORMERLY CHEMICAL BANK), AS DOCUMENTATION AGENTS, TORONTO DOMINION (TEXAS), INC., THE CHASE MANHATTAN BANK (FORMERLY CHEMICAL BANK), CIBC INC., CREDIT LYONNAIS CAYMAN ISLAND BRANCH, AND NATIONSBANK, N.A., AS MANAGING AGENTS, BANQUE PARIBAS, UNION BANK OF CALIFORNIA, N.A. (FORMERLY UNION BANK), CORESTATES BANK, N.A., FLEET BANK, N.A., ABN AMRO BANK N.V., SOCIETE GENERALE AND THE FIRST NATIONAL BANK OF BOSTON, AS CO-AGENTS, AND TORONTO DOMINION (TEXAS), INC., AS ADMINISTRATIVE AGENT, AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS. B-5 ASSIGNMENT FORM If you the holder want to assign this Note, fill in the form below and have your signature guaranteed: I or we assign and transfer this Note to ________________________________________________________________________________ (Insert assignee's social security or tax ID number) ___________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint ________________________________________________________________________________ agent to transfer this Note on the books of the Issuer. The agent may substitute another to act for such agent. Date:______________________ Your signature:_____________________________ (Sign exactly as your name appears on the other side of this Note) By:____________________________ NOTICE: To be executed by an executive officer. NOTICE: Signature(s) must be guaranteed by an institution which is a participant in the Securities Transfer Agent Medallion Program ("STAMP") or similar program. ----- B-6 EXHIBIT C FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS TO NON-QIB ACCREDITED INVESTORS ----------------------------------------- _______________________ _______________________ _______________________ _______________________ Attention: Indenture Trust Division Re: CCA Holdings Corp.(the "Issuer") Series A Senior Subordinated Notes due 1999 (the "Notes") -------------------------------- Ladies and Gentlemen: In connection with our proposed purchase of $____________ aggregate principal amount of the Notes, we confirm that: 1. We have received a copy of the offering memorandum (the "Offering -------- Memorandum"), dated February 10, 1997, relating to the Notes and such other ---------- information as we deem necessary in order to make our investment decision. We acknowledge that we have read and agreed to the matters stated in the section entitled "Notice to Investors" of the Offering Memorandum. 2. We understand that any subsequent transfer of the Notes is subject to certain restrictions and conditions set forth in the Indenture dated as of February 13, 1997 relating to the Notes (the "Indenture") and the --------- undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the "Securities ---------- Act"). 3. We understand that the Notes have not been registered under the Securities Act, and that the Notes may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell any Notes within three years after the original issuance of the Notes, we will do so only (A) to the Issuer or any subsidiary thereof, (B) inside the United States in C-1 accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (C) inside the United States to an "institutional accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker- dealer) to you a signed letter substantially in the form of this letter, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the exemption from registration provided by Rule 144 under the Securities Act (if available), or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing any of the Notes from us a notice advising such purchaser that resales of the Notes are restricted as stated herein. 4. We understand that, on any proposed resale of any Notes, we will be required to furnish to you and the Issuer such certification, written legal opinions and other information as you and the Issuer may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. 5. We are an institutional "accredited investor" (as defined in Rule ------------------- 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) (an "institutional accredited investor") and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment, as the case may be. 6. We are acquiring the Notes purchased by us for our own account or for one or more accounts (each of which is an "institutional accredited ------------------------ investor") as to each of which we exercise sole investment discretion. -------- You, the Issuer and counsel for the Issuer are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or C-2 official inquiry with respect to the matters covered hereby. 7. We are not acquiring the Notes for distribution in any manner that would require registration or qualification under, or otherwise violate, applicable federal or state securities laws, without prejudice to our rights to dispose of such Notes or a portion thereof to a transferee or transferees, in accordance with such laws if at some future time we deem it advisable to do so. Very truly yours, [Name of Transferee] By:_________________ Authorized Signature C-3 EXHIBIT D FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S ------------------------ _____________________________ _____________________________ _____________________________ _____________________________ Attention: Indenture Trust Division Re: CCA Holdings Corp.(the "Issuer") ------ Series A Senior Subordinated Notes due 1999 (the "Notes") --------------------------------------------------------- Ladies and Gentlemen: In connection with our proposed sale of $ aggregate principal amount of the Notes, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent that: -------------- (1) the offer of the Notes was not made and the sale will not be made to a person in the United States or to or for the benefit of a U.S. person as defined in Regulation S; (2) either (a) at the time the buy offer was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States, or (b) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been pre-arranged with a buyer in the United States; (3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; (4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; and D-1 (5) we have advised the transferee of the transfer restrictions applicable to the Notes. You, the Issuer and counsel for the Issuer are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Transferor] By:_________________ Authorized Signature D-2 EXHIBIT F-1 SECOND AMENDED AND RESTATED GUARANTY Reference is made to (i) the Indenture dated as of February 13, 1997 (the "Indenture") between CCA Holdings Corp. ("CCA") and Harris Trust and Savings Bank, as trustee, and (ii) the Amended and Restated Guaranty dated November 15, 1996 (the "Predecessor Guaranty") issued by CCA Acquisition Corp., a Delaware corporation (the "Guarantor") for the benefit of HC Crown Corp. ("HC Crown") pursuant to the Amended and Restated HC Crown Loan Agreement between CCA and HC Crown dated as of November 15, 1996 (the "Loan Agreement"). Pursuant to Article XIV of the Indenture, for value received, the Guarantor for the benefit of the holders of the Notes hereby irrevocably guarantees the prompt and complete payment and performance when due, whether by acceleration or otherwise, of the Notes, but subject in all cases to the terms of Article XIII of the Indenture. Capitalized terms used and not defined herein shall have the meanings assigned to them in the Indenture. 1. The Guarantor's obligations under this Guaranty shall be unconditional, irrespective of the validity or enforceability of any other provision of the Notes, but subject in all cases to the terms of Article XIII of the Indenture and Sections 9 and 10 below. 2. This Guaranty is a guaranty of payment and shall remain in full force and effect until all amounts payable by CCA under the Notes have been validly, finally and irrevocably paid in full, and shall not be affected in any way by the absence of any action to obtain such amounts from CCA or by any variation, extension, waiver, compromise or release of any or all of the obligations of CCA under the Notes or of any security from time to time therefor. The Guarantor waives all requirements as to promptness, diligence, presentment, demand for payment, protest and notice of any kind with respect to the Notes. 3. This Guaranty shall not be affected by the occurrence of any Event of Default or by any present or future action of any governmental authority or court amending, varying, reducing or otherwise affecting, or purporting to amend, vary, reduce or otherwise affect, any of the obligations of CCA under the Notes or by any other circumstance (other than by complete, irrevocable payment) that might otherwise constitute a legal or equitable discharge or defense of a surety or a guarantor. If CCA merges or consolidates with or into another entity, loses its separate legal identity or ceases to exist, F-1 the Guarantor shall nonetheless continue to be liable for the payment of all amounts payable by CCA under the Notes, but subject in all cases to the terms of the Indenture. 4. This Guaranty shall remain in full force and effect or shall be reinstated (as the case may be) if at any time any payment of CCA, in whole or in part, is rescinded or must otherwise be returned by the Trustee upon the insolvency, bankruptcy or reorganization of CCA or otherwise, all as though such payment had not been made. 5. This Guaranty shall be binding on the Guarantor and its successors and assigns and shall inure to the benefit of the holders of the Notes and their respective successors and assigns, except that the Guarantor may not delegate any obligations hereunder without the prior written consent of the Trustee. 6. Any suit, action or proceeding against the Guarantor with respect to this Guaranty or on any judgment entered by any court in respect thereof may be brought in the Supreme Court of the State of New York, County of New York, or in the United States District Court for the Southern District of New York and the Guarantor submits to the nonexclusive jurisdiction of such courts for the purpose of any such suit, action or proceeding or judgment. 7. The Guarantor hereby waives any right the Guarantor may have to jury trial. 8. This Guaranty shall be governed by and interpreted and construed in accordance with the law of the State of New York, without giving effect to principles of conflicts of laws. 9. Notwithstanding anything contained herein which may be construed to the contrary, no right or remedy shall be exercised against the Guarantor or any of its successors or assigns hereunder on or prior to the CCE-I Credit Facility Termination Date. 10. Notwithstanding anything contained herein which may be construed to the contrary, any payments in respect of this Guaranty to be made by the Guarantor shall only be serviced by (i) the proceeds of dividends or distributions received, directly or indirectly, from any Restricted Subsidiary of the Guarantor and (ii) any income directly generated by the Guarantor (provided that for purposes of this clause (ii) only, "income directly generated by the Guarantor" shall not F-2 include any dividends or distributions received from a Subsidiary of the Guarantor). 11. Upon execution of this Guaranty and the Indenture, any and all guaranties issued by the Guarantor (including, without limitation, the Predecessor Guaranty) pursuant to the terms and conditions of the Loan Agreement shall be null and void and any and all obligations with respect thereto shall cease to be in effect. F-3 IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed by its duly authorized officer as of the 13th day of February, 1997. CCA ACQUISITION CORP. By:____________________________ Name: Kent Kalkwarf Title: Senior Vice President F-4 EXHIBIT F-11 SECOND AMENDED AND RESTATED GUARANTY Reference is made to (i) the Indenture dated as of February 13, 1997 (the "Indenture") between CCA Holdings Corp. ("CCA") and Harris Trust and Savings Bank, as trustee, and (ii) the Amended and Restated Guaranty dated November 15, 1996 (the "Predecessor Guaranty") issued by Charter Communications Entertainment, L.P., a Delaware partnership (the "Guarantor") for the benefit of HC Crown Corp. ("HC Crown") pursuant to the Amended and Restated HC Crown Loan Agreement between CCA and HC Crown dated as of November 15, 1996 (the "Loan Agreement"). Pursuant to Article XIV of the Indenture, for value received, the Guarantor for the benefit of the holders of the Notes hereby irrevocably guarantees the prompt and complete payment and performance when due, whether by acceleration or otherwise, of the Notes, but subject in all cases to the terms of Article XIII of the Indenture. Capitalized terms used and not defined herein shall have the meanings assigned to them in the Indenture. 1. The Guarantor's obligations under this Guaranty shall be unconditional, irrespective of the validity or enforceability of any other provision of the Notes, but subject in all cases to the terms of Article XIII of the Indenture and Sections 9 and 10 below. 2. This Guaranty is a guaranty of payment and shall remain in full force and effect until all amounts payable by CCA under the Notes have been validly, finally and irrevocably paid in full, and shall not be affected in any way by the absence of any action to obtain such amounts from CCA or by any variation, extension, waiver, compromise or release of any or all of the obligations of CCA under the Notes or of any security from time to time therefor. The Guarantor waives all requirements as to promptness, diligence, presentment, demand for payment, protest and notice of any kind with respect to the Notes. 3. This Guaranty shall not be affected by the occurrence of any Event of Default or by any present or future action of any governmental authority or court amending, varying, reducing or otherwise affecting, or purporting to amend, vary, reduce or otherwise affect, any of the obligations of CCA under the Notes or by any other circumstance (other than by complete, irrevocable payment) that might otherwise constitute a legal or equitable discharge or defense of a surety or a guarantor. If CCA merges or consolidates with or into another F-5 entity, loses its separate legal identity or ceases to exist, the Guarantor shall nonetheless continue to be liable for the payment of all amounts payable by CCA under the Notes, but subject in all cases to the terms of the Indenture. 4. This Guaranty shall remain in full force and effect or shall be reinstated (as the case may be) if at any time any payment of CCA, in whole or in part, is rescinded or must otherwise be returned by the Trustee upon the insolvency, bankruptcy or reorganization of CCA or otherwise, all as though such payment had not been made. 5. This Guaranty shall be binding on the Guarantor and its successors and assigns and shall inure to the benefit of the holders of the Notes and their respective successors and assigns, except that the Guarantor may not delegate any obligation s hereunder without the prior written consent of the Trustee. 6. Any suit, action or proceeding against the Guarantor with respect to this Guaranty or on any judgment entered by any court in respect thereof may be brought in the Supreme Court of the State of New York, County of New York, or in the United States District Court for the Southern District of New York and the Guarantor submits to the nonexclusive jurisdiction of such courts for the purpose of any such suit, action or proceeding or judgment. 7. The Guarantor hereby waives any right the Guarantor may have to jury trial. 8. This Guaranty shall be governed by and interpreted and construed in accordance with the law of the State of New York, without giving effect to principles of conflicts of laws. 9. Notwithstanding anything contained herein which may be construed to the contrary, no right or remedy shall be exercised against the Guarantor or any of its successors or assigns hereunder on or prior to the CCE-I Credit Facility Termination Date, on or prior to the Tranche B Maturity Date under a certain Credit Agreement dated as of September 29, 1995 among certain lenders and Charter Communications Entertainment II, L.P., a subsidiary of the Guarantor ("CCE-II"), as amended by the First Amendment thereto dated as of February 29, 1996, by such lenders and Charter Communications Entertainment II, L.P., on or prior to the indefeasible payment in full in cash and termination of any other senior indebtedness of CCE-II or any senior indebtedness of any New CCE Subsidiary (as defined in the Indenture) as each of the F-6 same may be amended, extended, renewed, restated, supplemented or otherwise modified from time to time. 10. Notwithstanding anything contained herein which may be construed to the contrary, any payments in respect of this Guaranty to be made by the Guarantor shall only be serviced by (i) the proceeds of dividends or distributions received, directly or indirectly, from any Restricted Subsidiary of the Guarantor and (ii) any income directly generated by the Guarantor (provided that for purposes of this clause (ii) only, "income directly generated by the Guarantor" shall not include any dividends or distributions received from a Subsidiary of the Guarantor, or payments of principal or interest by CCE-II to the Guarantor in connection with the $25 million intercompany loan from the Guarantor to CCE-II which is outstanding as of the date hereof). 11. Upon execution of this Guaranty and the Indenture, any and all guaranties issued by the Guarantor (including, without limitation, the Predecessor Guaranty) pursuant to the terms and conditions of the Loan Agreement shall be null and void and any and all obligations with respect thereto shall cease to be in effect. F-7 IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed by its duly authorized officer as of the 13th day of February, 1997. CHARTER COMMUNICATIONS ENTERTAINMENT, L.P. By: CCA Acquisition Corp., a general partner By:____________________________ Name: Kent Kalkwarf Title: Senior Vice President F-8 EXHIBIT F-111 SECOND AMENDED AND RESTATED GUARANTY Reference is made to (i) the Indenture dated as of February 13, 1997 (the "Indenture") between CCA Holdings Corp. ("CCA") and Harris Trust and Savings Bank, as trustee, and (ii) the Amended and Restated Guaranty dated November 15, 1996 (the "Predecessor Guaranty") issued by Cencom Cable Entertainment, Inc., a Delaware corporation (the "Guarantor") for the benefit of HC Crown Corp. ("HC Crown") pursuant to the Amended and Restated HC Crown Loan Agreement between CCA and HC Crown dated as of November 15, 1996 (the "Loan Agreement"). Pursuant to Article XIV of the Indenture, for value received, the Guarantor for the benefit of the holders of the Notes hereby irrevocably guarantees the prompt and complete payment and performance when due, whether by acceleration or otherwise, of the Notes, but subject in all cases to the terms of Article XIII of the Indenture. Capitalized terms used and not defined herein shall have the meanings assigned to them in the Indenture. 1. The Guarantor's obligations under this Guaranty shall be unconditional, irrespective of the validity or enforceability of any other provision of the Notes, but subject in all cases to the terms of Article XIII of the Indenture and Sections 9 and 10 below. 2. This Guaranty is a guaranty of payment and shall remain in full force and effect until all amounts payable by CCA under the Notes have been validly, finally and irrevocably paid in full, and shall not be affected in any way by the absence of any action to obtain such amounts from CCA or by any variation, extension, waiver, compromise or release of any or all of the obligations of CCA under the Notes or of any security from time to time therefor. The Guarantor waives all requirements as to promptness, diligence, presentment, demand for payment, protest and notice of any kind with respect to the Notes. 3. This Guaranty shall not be affected by the occurrence of any Event of Default or by any present or future action of any governmental authority or court amending, varying, reducing or otherwise affecting, or purporting to amend, vary, reduce or otherwise affect, any of the obligations of CCA under the Notes or by any other circumstance (other than by complete, irrevocable payment) that might otherwise constitute a legal or equitable discharge or defense of a surety or a guarantor. If CCA merges or consolidates with or into another F-9 entity, loses its separate legal identity or ceases to exist, the Guarantor shall nonetheless continue to be liable for the payment of all amounts payable by CCA under the Notes, but subject in all cases to the terms of the Indenture. 4. This Guaranty shall remain in full force and effect or shall be reinstated (as the case may be) if at any time any payment of CCA, in whole or in part, is rescinded or must otherwise be returned by the Trustee upon the insolvency, bankruptcy or reorganization of CCA or otherwise, all as though such payment had not been made. 5. This Guaranty shall be binding on the Guarantor and its successors and assigns and shall inure to the benefit of the holders of the Notes and their respective successors and assigns, except that the Guarantor may not delegate any obligations hereunder without the prior written consent of the Trustee. 6. Any suit, action or proceeding against the Guarantor with respect to this Guaranty or on any judgment entered by any court in respect thereof may be brought in the Supreme Court of the State of New York, County of New York, or in the United States District Court for the Southern District of New York and the Guarantor submits to the nonexclusive jurisdiction of such courts for the purpose of any such suit, action or proceeding or judgment. 7. The Guarantor hereby waives any right the Guarantor may have to jury trial. 8. This Guaranty shall be governed by and interpreted and construed in accordance with the law of the State of New York, without giving effect to principles of conflicts of laws. 9. Notwithstanding anything contained herein which may be construed to the contrary, no right or remedy shall be exercised against the Guarantor or any of its successors or assigns hereunder on or prior to the CCE-I Credit Facility Termination Date. 10. Notwithstanding anything contained herein which may be construed to the contrary, any payments in respect of this Guaranty to be made by the Guarantor shall only be serviced by (i) the proceeds of dividends or distributions received, directly or indirectly, from any Restricted Subsidiary of the Guarantor and (ii) any income directly generated by the Guarantor (provided that for purposes of this clause (ii) only, "income directly generated by the Guarantor" shall not F-10 include any dividends or distributions received from a Subsidiary of the Guarantor). 11. Upon execution of this Guaranty and the Indenture, any and all guaranties issued by the Guarantor (including, without limitation, the Predecessor Guaranty) pursuant to the terms and conditions of the Loan Agreement shall be null and void and any and all obligations with respect thereto shall cease to be in effect. F-11 IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed by its duly authorized officer as of the 13th day of February, 1997. CENCOM CABLE ENTERTAINMENT, INC. By:_____________________________ Name: Kent Kalkwarf Title: Senior Vice President F-12 EXHIBIT F-IV FORM OF NEW RESTRICTED SUBSIDIARY GUARANTY Reference is made to the Indenture dated as of February 13, 1997 (the "Indenture") between CCA Holdings Corp. ("CCA") and Harris Trust and Savings Bank (the "Trustee"), as trustee for the holders of the Notes (as defined in the Indenture). Pursuant to Article XIV of the Indenture, for value received, ____________ (the "Guarantor") for the benefit of the holders of the Notes hereby irrevocably guarantees the prompt and complete payment and performance when due, whether by acceleration or otherwise, of the Notes, but subject in all cases to the terms of Article XIII of the Indenture. Except as otherwise provided in this Guaranty, capitalized terms defined in the Indenture shall have the same respective meanings in this Guaranty. 1. The Guarantor's obligations under this Guaranty shall be unconditional, irrespective of the validity or enforceability of any other provision of the Notes, but subject in all cases to the terms of Article XIII of Indenture and Section 9. 2. This Guaranty is a guaranty of payment and shall remain in full force and effect until all amounts payable by CCA under the Notes have been validly, finally and irrevocably paid in full, and shall not be affected in any way by the absence of any action to obtain such amounts from CCA or by any variation, extension, waiver, compromise or release of any or all of the obligations of CCA under the Notes or of any security from time to time therefor. The Guarantor waives all requirements as to promptness, diligence, presentment, demand for payment, protest and notice of any kind with respect to the Notes. 3. This Guaranty shall not be affected by the occurrence of any Event of Default or by any present or future action of any governmental authority or court amending, varying, reducing or otherwise affecting, or purporting to amend, vary, reduce or otherwise affect, any of the obligations of CCA under the Notes or by any other circumstance (other than by complete, irrevocable payment) that might otherwise constitute a legal or equitable discharge or defense of a surety or a guarantor. If CCA merges or consolidates with or into another entity, loses its separate legal identity or ceases to exist, the Guarantor shall nonetheless continue to be liable for the payment of all amounts payable by CCA under the Notes, but F-13 subject in all cases to the terms of Article XIII of the Indenture. 4. This Guaranty shall remain in full force and effect or shall be reinstated (as the case may be) if at any time any payment of CCA, in whole or in part, is rescinded or must otherwise be returned by the Trustee upon the insolvency, bankruptcy or reorganization of CCA or otherwise, all as though such payment had not been made. 5. This Guaranty shall be binding on the Guarantor and its successors and assigns and shall inure to the benefit of the holders of the Notes and their respective successors and assigns, except that the Guarantor may not delegate any obligations hereunder without the prior written consent of the Trustee. 6. Any suit, action or proceeding against the Guarantor with respect to this Guaranty or on any judgment entered by any court in respect thereof may be brought in the Supreme Court of the State of New York, County of New York, or in the United States District Court for the Southern District of New York and the Guarantor submits to the nonexclusive jurisdiction of such courts for the purpose of any such suit, action or proceeding or judgment. 7. The Guarantor hereby waives any right the Guarantor may have to jury trial. 8. This Guaranty shall be governed by and interpreted and construed in accordance with the law of the State of New York, without giving effect to principles of conflicts of laws. 9. Notwithstanding anything contained herein which may be construed to the contrary, any payments in respect of this Guaranty to be made by the Guarantor shall be limited to funds that are (i) the proceeds of dividends or distributions received, directly or indirectly, from any Restricted Subsidiary of the Guarantor and (ii) income directly generated by the Guarantor (provided that for purposes of this clause (ii) only, "income directly generated by the Guarantor" shall not include any dividends or distributions received from a Subsidiary of the Guarantor). F-14 IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed by its duly authorized officer as of the ____ day of ________, ____. ____________________________ By:__________________________ Name: Title: F-15 EX-4.2 13 2ND AMEND & RESTATED GTY DTD 2/13/97 CCA ACQUISIT EXHIBIT 4.2 SECOND AMENDED AND RESTATED GUARANTY Reference is made to (i) the Indenture dated as of February 13, 1997 (the "Indenture") between CCA Holdings Corp. ("CCA") and Harris Trust and Savings Bank, as trustee, and (ii) the Amended and Restated Guaranty dated November 15, 1996 (the "Predecessor Guaranty") issued by CCA Acquisition Corp., a Delaware corporation (the "Guarantor") for the benefit of HC Crown Corp. ("HC Crown") pursuant to the Amended and Restated HC Crown Loan Agreement between CCA and HC Crown dated as of November 15, 1996 (the "Loan Agreement"). Pursuant to Article XIV of the Indenture, for value received, the Guarantor for the benefit of the holders of the Notes hereby irrevocably guarantees the prompt and complete payment and performance when due, whether by acceleration or otherwise, of the Notes, but subject in all cases to the terms of Article XIII of the Indenture. Capitalized terms used and not defined herein shall have the meanings assigned to them in the Indenture. 1. The Guarantor's obligations under this Guaranty shall be unconditional, irrespective of the validity or enforceability of any other provision of the Notes, but subject in all cases to the terms of Article XIII of the Indenture and Sections 9 and 10 below. 2. This Guaranty is a guaranty of payment and shall remain in full force and effect until all amounts payable by CCA under the Notes have been validly, finally and irrevocably paid in full, and shall not be affected in any way by the absence of any action to obtain such amounts from CCA or by any variation, extension, waiver, compromise or release of any or all of the obligations of CCA under the Notes or of any security from time to time therefor. The Guarantor waives all requirements as to promptness, diligence, presentment, demand for payment, protest and notice of any kind with respect to the Notes. 3. This Guaranty shall not be affected by the occurrence of any Event of Default or by any present or future action of any governmental authority or court amending, varying, reducing or otherwise affecting, or purporting to amend, vary, reduce or otherwise affect, any of the obligations of CCA under the Notes or by any other circumstance (other than by complete, irrevocable payment) that might otherwise constitute a legal or equitable discharge or defense of a surety or a guarantor. If CCA merges or consolidates with or into another entity, loses its separate legal identity or ceases to exist, the Guarantor shall nonetheless continue to be liable for the F-1 payment of all amounts payable by CCA under the Notes, but subject in all cases to the terms of the Indenture. 4. This Guaranty shall remain in full force and effect or shall be reinstated (as the case may be) if at any time any payment of CCA, in whole or in part, is rescinded or must otherwise be returned by the Trustee upon the insolvency, bankruptcy or reorganization of CCA or otherwise, all as though such payment had not been made. 5. This Guaranty shall be binding on the Guarantor and its successors and assigns and shall inure to the benefit of the holders of the Notes and their respective successors and assigns, except that the Guarantor may not delegate any obligations hereunder without the prior written consent of the Trustee. 6. Any suit, action or proceeding against the Guarantor with respect to this Guaranty or on any judgment entered by any court in respect thereof may be brought in the Supreme Court of the State of New York, County of New York, or in the United States District Court for the Southern District of New York and the Guarantor submits to the nonexclusive jurisdiction of such courts for the purpose of any such suit, action or proceeding or judgment. 7. The Guarantor hereby waives any right the Guarantor may have to jury trial. 8. This Guaranty shall be governed by and interpreted and construed in accordance with the law of the State of New York, without giving effect to principles of conflicts of laws. 9. Notwithstanding anything contained herein which may be construed to the contrary, no right or remedy shall be exercised against the Guarantor or any of its successors or assigns hereunder on or prior to the CCE-I Credit Facility Termination Date. 10. Notwithstanding anything contained herein which may be construed to the contrary, any payments in respect of this Guaranty to be made by the Guarantor shall only be serviced by (i) the proceeds of dividends or distributions received, directly or indirectly, from any Restricted Subsidiary of the Guarantor and (ii) any income directly generated by the Guarantor (provided that for purposes of this clause (ii) only, "income directly generated by the Guarantor" shall not include any dividends or distributions received from a Subsidiary of the Guarantor). F-2 11. Upon execution of this Guaranty and the Indenture, any and all guaranties issued by the Guarantor (including, without limitation, the Predecessor Guaranty) pursuant to the terms and conditions of the Loan Agreement shall be null and void and any and all obligations with respect thereto shall cease to be in effect. F-3 IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed by its duly authorized officer as of the 13th day of February, 1997. CCA ACQUISITION CORP. By: /s/ Kent Kalkwarf ---------------------------- Name: Kent Kalkwarf Title: Senior Vice President F-4 EX-4.3 14 2ND AMEND & RESTATED GTY DTD 2/13/97 CENCOM CABLE EXHIBIT 4.3 SECOND AMENDED AND RESTATED GUARANTY Reference is made to (i) the Indenture dated as of February 13, 1997 (the "Indenture") between CCA Holdings Corp. ("CCA") and Harris Trust and Savings Bank, as trustee, and (ii) the Amended and Restated Guaranty dated November 15, 1996 (the "Predecessor Guaranty") issued by Charter Communications Entertainment, L.P., a Delaware partnership (the "Guarantor") for the benefit of HC Crown Corp. ("HC Crown") pursuant to the Amended and Restated HC Crown Loan Agreement between CCA and HC Crown dated as of November 15, 1996 (the "Loan Agreement"). Pursuant to Article XIV of the Indenture, for value received, the Guarantor for the benefit of the holders of the Notes hereby irrevocably guarantees the prompt and complete payment and performance when due, whether by acceleration or otherwise, of the Notes, but subject in all cases to the terms of Article XIII of the Indenture. Capitalized terms used and not defined herein shall have the meanings assigned to them in the Indenture. 1. The Guarantor's obligations under this Guaranty shall be unconditional, irrespective of the validity or enforceability of any other provision of the Notes, but subject in all cases to the terms of Article XIII of the Indenture and Sections 9 and 10 below. 2. This Guaranty is a guaranty of payment and shall remain in full force and effect until all amounts payable by CCA under the Notes have been validly, finally and irrevocably paid in full, and shall not be affected in any way by the absence of any action to obtain such amounts from CCA or by any variation, extension, waiver, compromise or release of any or all of the obligations of CCA under the Notes or of any security from time to time therefor. The Guarantor waives all requirements as to promptness, diligence, presentment, demand for payment, protest and notice of any kind with respect to the Notes. 3. This Guaranty shall not be affected by the occurrence of any Event of Default or by any present or future action of any governmental authority or court amending, varying, reducing or otherwise affecting, or purporting to amend, vary, reduce or otherwise affect, any of the obligations of CCA under the Notes or by any other circumstance (other than by complete, irrevocable payment) that might otherwise constitute a legal or equitable discharge or defense of a surety or a guarantor. If CCA merges or consolidates with or into another entity, loses its separate legal identity or ceases to exist, the Guarantor shall nonetheless continue to be liable for the F-5 payment of all amounts payable by CCA under the Notes, but subject in all cases to the terms of the Indenture. 4. This Guaranty shall remain in full force and effect or shall be reinstated (as the case may be) if at any time any payment of CCA, in whole or in part, is rescinded or must otherwise be returned by the Trustee upon the insolvency, bankruptcy or reorganization of CCA or otherwise, all as though such payment had not been made. 5. This Guaranty shall be binding on the Guarantor and its successors and assigns and shall inure to the benefit of the holders of the Notes and their respective successors and assigns, except that the Guarantor may not delegate any obligations hereunder without the prior written consent of the Trustee. 6. Any suit, action or proceeding against the Guarantor with respect to this Guaranty or on any judgment entered by any court in respect thereof may be brought in the Supreme Court of the State of New York, County of New York, or in the United States District Court for the Southern District of New York and the Guarantor submits to the nonexclusive jurisdiction of such courts for the purpose of any such suit, action or proceeding or judgment. 7. The Guarantor hereby waives any right the Guarantor may have to jury trial. 8. This Guaranty shall be governed by and interpreted and construed in accordance with the law of the State of New York, without giving effect to principles of conflicts of laws. 9. Notwithstanding anything contained herein which may be construed to the contrary, no right or remedy shall be exercised against the Guarantor or any of its successors or assigns hereunder on or prior to the CCE-I Credit Facility Termination Date, on or prior to the Tranche B Maturity Date under a certain Credit Agreement dated as of September 29, 1995 among certain lenders and Charter Communications Entertainment II, L.P., a subsidiary of the Guarantor ("CCE-II"), as amended by the First Amendment thereto dated as of February 29, 1996, by such lenders and Charter Communications Entertainment II, L.P., on or prior to the indefeasible payment in full in cash and termination of any other senior indebtedness of CCE-II or any senior indebtedness of any New CCE Subsidiary (as defined in the Indenture) as each of the same may be amended, extended, renewed, restated, supplemented or otherwise modified from time to time. F-6 10. Notwithstanding anything contained herein which may be construed to the contrary, any payments in respect of this Guaranty to be made by the Guarantor shall only be serviced by (i) the proceeds of dividends or distributions received, directly or indirectly, from any Restricted Subsidiary of the Guarantor and (ii) any income directly generated by the Guarantor (provided that for purposes of this clause (ii) only, "income directly generated by the Guarantor" shall not include any dividends or distributions received from a Subsidiary of the Guarantor, or payments of principal or interest by CCE-II to the Guarantor in connection with the $25 million intercompany loan from the Guarantor to CCE-II which is outstanding as of the date hereof). 11. Upon execution of this Guaranty and the Indenture, any and all guaranties issued by the Guarantor (including, without limitation, the Predecessor Guaranty) pursuant to the terms and conditions of the Loan Agreement shall be null and void and any and all obligations with respect thereto shall cease to be in effect. F-7 IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed by its duly authorized officer as of the 13th day of February, 1997. CHARTER COMMUNICATIONS ENTERTAINMENT, L.P. By: CCA Acquisition Corp., a general partner By: /s/ Kent Kalkwarf ---------------------------- Name: Kent Kalkwarf Title: Senior Vice President F-8 EX-4.4 15 2ND AMEND & RESTATED GTY DTD 2/13/97 CHARTER COMM EXHIBIT 4.4 SECOND AMENDED AND RESTATED GUARANTY Reference is made to (i) the Indenture dated as of February 13, 1997 (the "Indenture") between CCA Holdings Corp. ("CCA") and Harris Trust and Savings Bank, as trustee, and (ii) the Amended and Restated Guaranty dated November 15, 1996 (the "Predecessor Guaranty") issued by Cencom Cable Entertainment, Inc., a Delaware corporation (the "Guarantor") for the benefit of HC Crown Corp. ("HC Crown") pursuant to the Amended and Restated HC Crown Loan Agreement between CCA and HC Crown dated as of November 15, 1996 (the "Loan Agreement"). Pursuant to Article XIV of the Indenture, for value received, the Guarantor for the benefit of the holders of the Notes hereby irrevocably guarantees the prompt and complete payment and performance when due, whether by acceleration or otherwise, of the Notes, but subject in all cases to the terms of Article XIII of the Indenture. Capitalized terms used and not defined herein shall have the meanings assigned to them in the Indenture. 1. The Guarantor's obligations under this Guaranty shall be unconditional, irrespective of the validity or enforceability of any other provision of the Notes, but subject in all cases to the terms of Article XIII of the Indenture and Sections 9 and 10 below. 2. This Guaranty is a guaranty of payment and shall remain in full force and effect until all amounts payable by CCA under the Notes have been validly, finally and irrevocably paid in full, and shall not be affected in any way by the absence of any action to obtain such amounts from CCA or by any variation, extension, waiver, compromise or release of any or all of the obligations of CCA under the Notes or of any security from time to time therefor. The Guarantor waives all requirements as to promptness, diligence, presentment, demand for payment, protest and notice of any kind with respect to the Notes. 3. This Guaranty shall not be affected by the occurrence of any Event of Default or by any present or future action of any governmental authority or court amending, varying, reducing or otherwise affecting, or purporting to amend, vary, reduce or otherwise affect, any of the obligations of CCA under the Notes or by any other circumstance (other than by complete, irrevocable payment) that might otherwise constitute a legal or equitable discharge or defense of a surety or a guarantor. If CCA merges or consolidates with or into another entity, loses its separate legal identity or ceases to exist, the Guarantor shall nonetheless continue to be liable for the F-9 payment of all amounts payable by CCA under the Notes, but subject in all cases to the terms of the Indenture. 4. This Guaranty shall remain in full force and effect or shall be reinstated (as the case may be) if at any time any payment of CCA, in whole or in part, is rescinded or must otherwise be returned by the Trustee upon the insolvency, bankruptcy or reorganization of CCA or otherwise, all as though such payment had not been made. 5. This Guaranty shall be binding on the Guarantor and its successors and assigns and shall inure to the benefit of the holders of the Notes and their respective successors and assigns, except that the Guarantor may not delegate any obligations hereunder without the prior written consent of the Trustee. 6. Any suit, action or proceeding against the Guarantor with respect to this Guaranty or on any judgment entered by any court in respect thereof may be brought in the Supreme Court of the State of New York, County of New York, or in the United States District Court for the Southern District of New York and the Guarantor submits to the nonexclusive jurisdiction of such courts for the purpose of any such suit, action or proceeding or judgment. 7. The Guarantor hereby waives any right the Guarantor may have to jury trial. 8. This Guaranty shall be governed by and interpreted and construed in accordance with the law of the State of New York, without giving effect to principles of conflicts of laws. 9. Notwithstanding anything contained herein which may be construed to the contrary, no right or remedy shall be exercised against the Guarantor or any of its successors or assigns hereunder on or prior to the CCE-I Credit Facility Termination Date. 10. Notwithstanding anything contained herein which may be construed to the contrary, any payments in respect of this Guaranty to be made by the Guarantor shall only be serviced by (i) the proceeds of dividends or distributions received, directly or indirectly, from any Restricted Subsidiary of the Guarantor and (ii) any income directly generated by the Guarantor (provided that for purposes of this clause (ii) only, "income directly generated by the Guarantor" shall not include any dividends or distributions received from a Subsidiary of the Guarantor). F-10 11. Upon execution of this Guaranty and the Indenture, any and all guaranties issued by the Guarantor (including, without limitation, the Predecessor Guaranty) pursuant to the terms and conditions of the Loan Agreement shall be null and void and any and all obligations with respect thereto shall cease to be in effect. F-11 IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed by its duly authorized officer as of the 13th day of February, 1997. CENCOM CABLE ENTERTAINMENT, INC. By: /s/ Kent Kalwarf --------------------------- Name: Kent Kalkwarf Title: Senior Vice President F-12 EX-4.5 16 2ND AMEND & RESTATD SUB AGMNT HARRIS TR & CCA HOL EXHIBIT 4.5 SECOND AMENDED AND RESTATED SUBORDINATION AGREEMENT SECOND AMENDED AND RESTATED SUBORDINATION AGREEMENT, dated as of February 13, 1997 (this "Agreement"), made by Harris Trust and Savings Bank (the "Trustee"), in its capacity as trustee for, and on behalf of, the Subordinated Bondholders (as herein defined), and CCA Holdings Corp., a Delaware corporation (the "Parent Company Borrower"), in favor of Toronto Dominion (Texas), Inc., The Chase Manhattan Bank (formerly Chemical Bank), CIBC Inc., Credit Lyonnais Cayman Island Branch, NationsBank, N.A., Banque Paribas, Union Bank of California, N.A. (formerly Union Bank), Corestates Bank, N.A., The Long-Term Credit Bank of Japan, Ltd., Mercantile Bank of St. Louis National Association, Fleet Bank, N.A., First National Bank of Maryland, Van Kampen American Capital Prime Rate Income Trust, Banque Francaise du Commerce Exterieur, Prime Income Trust, Senior Debt Portfolio, Aeries Finance Ltd., ING Capital Advisors, Inc., ABN AMRO Bank N.V., Societe Generale, The First National Bank of Boston, Captiva Finance Ltd., Banque Nationale de Paris, The Sumitomo Bank, Limited, Chicago Branch, Chase Securities, Inc., and The ING Capital Senior Secured High Income Fund, L.P. (together with any financial institution which subsequently becomes a "Bank" under the Credit Agreement, as such term is defined therein, the "Lenders"), Toronto Dominion (Texas), Inc. and The Chase Manhattan Bank (formerly Chemical Bank), as Documentation Agents (the "Documentation Agents"), Toronto Dominion (Texas), Inc., The Chase Manhattan Bank (formerly Chemical Bank), CIBC Inc., Credit Lyonnais Cayman Island Branch, and NationsBank, N.A., as Managing Agents (the "Managing Agents"), Banque Paribas, Union Bank of California, N.A. (formerly Union Bank), ABN AMRO Bank N.V., Societe Generale, Fleet Bank, N.A., CoreStates Bank, N.A., and The First National Bank of Boston, as Co-Agents (the "Co-Agents"), and Toronto Dominion (Texas), Inc., as Administrative Agent for the Documentation Agents, the Managing Agents, the Co-Agents and the Lenders (the "Administrative Agent" and, collectively with the Documentation Agents, the Managing Agents and the Co-Agents, the "Agents"). References to the "Trustee" herein are to the Trustee in its capacity as trustee for the Subordinated Bondholders; provided, however, the Trustee shall have no responsibility for, nor liability with respect to, any breach of the provisions of this Agreement by any Subordinated Bondholders. RECITALS -------- (1) The Agents and the Lenders have entered into a Loan Agreement dated as of January 18, 1995 and such Loan Agreement was amended and restated by the Agents and the Lenders as of September 29, 1995 (as such amended and restated Loan Agreement may hereafter be amended, extended, renewed, restated, supplemented or otherwise modified from time to time, the "Credit Agreement") with Charter Communications Entertainment I, L.P., a Delaware limited partnership (the "Subsidiary Borrower"), an indirect Subsidiary of the Parent Company Borrower. Capitalized terms used herein which are defined in the Credit Agreement and not otherwise defined or limited herein are used herein as therein defined. (2) The Parent Company Borrower was indebted to H C Crown Corp., a Delaware corporation (the "Predecessor Subordinated Creditor") in an aggregate principal amount of approximately $82,000,000, as evidenced by that certain Senior Subordinated Loan Agreement dated as of January 18, 1995 (the "Original Crown Loan Agreement"), as such Senior Subordinated Loan Agreement was amended and restated by the parties thereto as of November 15, 1996 (as such Senior Subordinated Loan Agreement was so amended and restated, the "Predecessor Loan Agreement") between the Parent Company Borrower and the Predecessor Subordinated Creditor, and all Senior Subordinated Notes or other promissory notes issued pursuant thereto. CCA Acquisition Corp. ("CAC"), Cencom Cable Entertainment, Inc. ("Cencom") and Charter Communications Entertainment, L.P. ("CCE") guaranteed the obligations of the Parent Company Borrower under the Original Crown Loan Agreement pursuant to guarantees dated as of January 18, 1995, as amended and restated by the parties thereto as of November 15, 1996 (the "Predecessor Guarantees"). All indebtedness and other obligations of the Parent Company Borrower or any of its Subsidiaries to the Predecessor Subordinated Creditor then or thereafter existing and arising in respect of the Subordinated Debt Documents (as such term was defined in the Predecessor Loan Agreement) (whether created directly or acquired by assignment or otherwise), and interest, fees, premiums, if any, thereon and other amounts payable in respect thereof or in connection therewith are hereinafter referred to as the "Predecessor Subordinated Debt". (3) As a restatement of the Predecessor Subordinated Debt, at the demand of the Predecessor Subordinated Creditor, the Parent Company Borrower is to duly authorize the creation of an issue of Series A 13% Senior Subordinated Notes due 1999 (the "Initial Subordinated Notes") and Series B 13% Senior Subordinated Notes due 1999 (the "Exchange Subordinated Notes" and -2- together with the Initial Subordinated Notes, the "Subordinated Notes") as of the date hereof. Upon the issuance of the Subordinated Notes, the Predecessor Subordinated Creditor shall sell all or a portion thereof to Furman Selz LLC as placement agent who will, in turn, sell such Notes to individual institutional investors (as holders of the Subordinated Notes, the Predecessor Subordinated Creditor, such institutional investors and their respective successors and assigns are referred to herein collectively as the "Subordinated Bondholders"), and the Parent Company Borrower is to enter into an indenture dated as of February 13, 1997 with the Trustee, as trustee for the Subordinated Bondholders (as amended, extended, renewed, restated, supplemented or otherwise modified from time to time, the "Indenture" and the Indenture and the Subordinated Notes are collectively referred to herein as the "Subordinated Debt Documents"). Further, in connection therewith the Predecessor Guarantees are being amended and restated as of the date hereof in the forms of Exhibits F-I, F-II and F-III attached to the Indenture. All indebtedness and other obligations of the Parent Company Borrower or any of its Subsidiaries to the Subordinated Bondholders now or hereafter existing and arising in respect of the Subordinated Debt Documents (whether created directly or acquired by assignment or otherwise), and interest, fees and premiums, if any, thereon and other amounts payable in respect thereof or in connection therewith, are hereinafter referred to as the "Subordinated Debt". (4) The Predecessor Subordinated Debt was subject to the terms of that certain Subordination Agreement dated as of January 18, 1995, as such Subordination Agreement was amended and restated as of November 15, 1996 (as such Subordination Agreement was so amended and restated, the "Predecessor Subordination Agreement"). Concurrently with the amending and restating of the Predecessor Loan Agreement, and in conjunction with the execution of the Indenture and the issuance of the Subordinated Notes, the Predecessor Subordination Agreement is being amended and restated by the terms hereof to document the continued subordination of the Subordinated Debt. (5) The Trustee is entering into this Agreement pursuant to Section 13.02(b) of the Indenture and at the direction of the Subordinated Bondholders. (6) The Administrative Agent is entering into this Agreement pursuant to Section 2(b) of the Sixth -3- Amendment to Loan Agreement dated as of February 7, 1997 and at the direction of the Lenders. NOW, THEREFORE, in consideration of the premises and in order to induce the Lenders to make Advances under the Credit Agreement, the Trustee and the Parent Company Borrower each hereby agrees as follows: SECTION 1. Agreement to Subordinate. The Trustee acknowledges that ------------------------ the Indenture provides, and the Parent Company Borrower agrees, that the Subordinated Debt is and shall be subordinate, to the extent and in the manner hereinafter set forth, to the prior payment in full of all obligations of the Subsidiary Borrower now or hereafter existing under the Credit Agreement, the Notes and the other Loan Documents, whether for principal, interest (including, without limitation, interest accruing after the filing of a petition initiating any Bankruptcy Proceeding, as such term is defined in Section 3(a) hereof, whether or not such interest accrues after the filing of such petition for purposes of the Federal Bankruptcy Code or is an allowed claim in such proceeding), fees, expenses or otherwise (collectively, the "Obligations"). For the purposes of this Agreement, the Obligations shall not be deemed to have been paid in full until all Commitments under the Credit Agreement shall have been terminated and the Agents and the Lenders shall have received indefeasible payment of the Obligations in full in cash. SECTION 2. No Payment on the Subordinated Debt. ----------------------------------- (a) No payment (including any payment that may be payable by reason of any other indebtedness of the Parent Company Borrower or any of its Subsidiaries being subordinated to payment of the Subordinated Debt) shall be made by or for the account of the Parent Company Borrower or any of its Subsidiaries for or on account of any Subordinated Debt, unless and until the Trustee shall have received written notice from the Parent Company Borrower, acknowledged by the Administrative Agent, that the Obligations have been paid in full; provided, however, that prior to the receipt of any such written notice, the Trustee, subject to the terms of this Section 2, shall be entitled in all respects to assume that no such facts exist. (b) The Trustee shall not take or receive from or for the account of the Parent Company Borrower or any of its Subsidiaries, directly or indirectly, in cash or other property or by set-off or in any other manner, including, -4- without limitation, from or by way of collateral, payment of all or any of the Subordinated Debt, unless and until the Trustee shall have received written notice from the Parent Company Borrower, acknowledged by the Administrative Agent, that the Obligations have been paid in full; provided, however, that prior to the receipt of any such written notice, the Trustee, subject to the terms of this Section 2, shall be entitled in all respects to assume that no such facts exist. (c) The Trustee shall be entitled to rely on the delivery to it of written notice(s) to the Trustee by a senior officer of the Parent Company Borrower acknowledged by a senior officer of the Administrative Agent. SECTION 3. In Furtherance of Subordination. The Trustee agrees as ------------------------------- follows: (a) In the event of any dissolution, winding up, liquidation, arrangement, reorganization, adjustment, protection, relief or composition of the Parent Company Borrower or any of its Subsidiaries or its respective debts, whether voluntary or involuntary, in any bankruptcy, insolvency, arrangement, reorganization, receivership, relief or other similar case or proceeding under any Federal or state bankruptcy or similar law or upon an assignment for the benefit of creditors or any other marshalling of the assets and liabilities of the Parent Company Borrower or any such Subsidiary (each, a "Bankruptcy Proceeding") or otherwise: (i) The Administrative Agent is hereby irrevocably authorized and empowered (in its own name or in the name of the Trustee or otherwise), but shall have no obligation, (A) to demand, sue for, collect and receive every payment or distribution of any kind (whether in cash, property or securities) that otherwise would be payable or deliverable upon or with respect to the Subordinated Debt in any such case, proceeding, assignment, marshalling or otherwise (including any payment that may be payable by reason of any other indebtedness of the Parent Company Borrower or any such Subsidiary being subordinated to payment of the Subordinated Debt) and give acquittance therefor and (B) to file claims and proofs of claim and take such other action (including, without limitation, voting the Subordinated Debt or enforcing any security -5- interest or other lien securing payment of the Subordinated Debt) as it may deem necessary or advisable for the exercise or enforcement of any of the rights or interests of the Agents and the Lenders hereunder, and the Administrative Agent is hereby irrevocably appointed as the Trustee's attorney-in-fact with full power of substitution for such purposes, so long as such Bankruptcy Proceeding is related to or affiliated with, in any manner whatsoever, any Subsidiary of the Parent Company Borrower or any Bankruptcy Proceeding involving any Subsidiary of the Parent Company Borrower. Notwithstanding the foregoing, the Trustee shall be entitled to itself file claims and proofs of claim with respect to the Subordinated Debt and to vote the Subordinated Debt in the event of any Bankruptcy Proceeding with respect to the Parent Company Borrower only, so long as such Bankruptcy Proceeding is in no way related to or affiliated with any Bankruptcy Proceeding with respect to any Subsidiary of the Parent Company Borrower. (ii) The Trustee shall duly and promptly take such action as the Administrative Agent may request (A) to collect the Subordinated Debt for the account of the Agents and the Lenders and, to the extent any Bankruptcy Proceeding is related to or affiliated with, in any manner whatsoever, a Bankruptcy Proceeding with respect to any Subsidiary of the Parent Company Borrower, to file appropriate claims or proofs of claim in respect of the Subordinated Debt, (B) to execute and deliver to the Administrative Agent such powers of attorney, assignments, or other instruments as the Administrative Agent may request in order to enforce any and all claims with respect to, and any security interests and other liens securing payment of, the Subordinated Debt, and (C) to collect and receive any and all payments or distributions which may be payable or deliverable upon or with respect to the Subordinated Debt. (b) All payments or distributions upon or with respect to the Subordinated Debt which are received by the Trustee contrary to the provisions of this Agreement shall be received in trust for the benefit of the Agents and the Lenders, shall be segregated from other funds and property held by the Trustee and shall be forthwith paid over to the -6- Administrative Agent in the same form as so received (with any necessary endorsement or assignment necessary to effect a transfer) to be applied (in the case of cash) to, or held as collateral (in the case of non-cash property or securities) for, the payment or prepayment of the Obligations in accordance with the terms of the Credit Agreement. (c) The Trustee acknowledges that the Indenture provides that the Subordinated Debt at all times shall be unsecured and shall not be supported by any guaranty by any Subsidiary of the Parent Company Borrower, and, further, that if at any time the Trustee is in possession of any assets of the Parent Company Borrower or any of its Subsidiaries or any assets constituting collateral for the Obligations prior to the payment in full of the Obligations, the Trustee shall hold such assets in trust for the benefit of the Agents and the Lenders, segregated from other property held by the Trustee, and shall deliver such assets to the Administrative Agent upon written request. (d) The Administrative Agent is hereby authorized to demand specific performance of this Agreement, whether or not the Parent Company Borrower shall have complied with any of the provisions hereof applicable to it, at any time when the Trustee shall have failed to comply with any of the provisions of this Agreement applicable to it. The Trustee hereby irrevocably waives any defense based on the adequacy of a remedy at law, which might be asserted as a bar to such remedy of specific performance. SECTION 4. No Commencement of Any Proceeding. The Trustee agrees --------------------------------- that, until the earlier of (i) the Obligations having been paid in full or (ii) January 18, 2019, the Trustee will not: (a) accelerate the maturity of all or any of the Subordinated Debt and will not take, sue for, ask or demand from the Parent Company Borrower or any of its Subsidiaries payment of all or any of the Subordinated Debt; (b) exercise any rights or remedies against the Parent Company Borrower or any of its Subsidiaries arising under or in connection with the Subordinated Debt Documents or otherwise in respect of the Subordinated Debt, other than as expressly set forth in Article XIII of the Indenture; or (c) commence, or join with any creditor other than the Agents and the Lenders in commencing, directly or indirectly cause the Parent Company Borrower or any such Subsidiary to commence, or assist the Parent Company Borrower or any such Subsidiary in commencing, any Bankruptcy Proceeding; provided, however, -7- that in the event a Bankruptcy Proceeding is already in effect with respect to the Subsidiary Borrower, the Trustee may commence or assist the Parent Company Borrower in commencing a Bankruptcy Proceeding with respect to the Parent Company Borrower as well. SECTION 5. Rights of Subrogation. The Trustee agrees that no payment --------------------- or distribution to any Agent or any Lender pursuant to the provisions of this Agreement shall entitle the Trustee to exercise any right of subrogation in respect thereof until the Obligations shall have been paid in full. The Trustee agrees that the subordination provisions contained herein shall not be affected by any action or failure to act by any Agent or any Lender which results, or may result, in affecting, impairing or extinguishing any right of reimbursement or subrogation or other right or remedy of the Trustee. SECTION 6. Subordination Legend; Further Assurances. The Trustee ---------------------------------------- acknowledges that the Indenture provides and the Parent Company Borrower agrees that it will cause each instrument evidencing Subordinated Debt to be endorsed with the following legend: "The indebtedness evidenced by this instrument is subordinated to the prior payment in full of the Obligations (as defined in the Subordination Agreement hereinafter referred to) pursuant to, and to the extent provided in, the Second Amended and Restated the Subordination Agreement dated as of February 13, 1997 by and between Harris Trust and Savings Bank, as trustee, and CCA Holdings Corp., a Delaware corporation, in favor of Toronto Dominion (Texas), Inc., The Chase Manhattan Bank (formerly Chemical Bank), CIBC Inc., Credit Lyonnais Cayman Island Branch, NationsBank, N.A., Banque Paribas, Union Bank of California, N.A. (formerly Union Bank), CoreStates Bank, N.A., The Long-Term Credit Bank of Japan, Ltd., Mercantile Bank of St. Louis National Association, Fleet Bank, N.A., First National Bank of Maryland, Van Kampen American Capital Prime Rate Income Trust, Banque Francaise du Commerce Exterieur, Prime Income Trust, Senior Debt Portfolio, Aeries Finance Ltd., ING Capital Advisors, Inc., ABN AMRO Bank N.V., Societe Generale, The First National Bank of Boston, Captiva Finance, Ltd., Banque Nationale de Paris, The Sumitomo Bank, Limited, Chicago Branch, Chase Securities, Inc. and The ING Capital Senior Secured High Income Fund, L.P. (collectively, and together with their respective -8- successors and assigns, the "Lenders"), Toronto Dominion (Texas), Inc. and The Chase Manhattan Bank (formerly Chemical Bank), as Documentation Agents, Toronto Dominion (Texas), Inc., The Chase Manhattan Bank (formerly Chemical Bank), CIBC Inc., Credit Lyonnais Cayman Island Branch, and NationsBank, N.A., as Managing Agents, Banque Paribas, Union Bank of California, N.A. (formerly Union Bank), CoreStates Bank, N.A., Fleet Bank, N.A., ABN AMRO Bank N.V., Societe Generale and The First National Bank of Boston, as Co- Agents, and Toronto Dominion (Texas), Inc., as Administrative Agent, and their respective successors and assigns." The Parent Company Borrower will further mark, and cause each of its Subsidiaries to mark, its books of account in such a manner as shall be effective to give proper notice of the effect of this Agreement and will, in the case of any Subordinated Debt which is not evidenced by any instrument, upon the Administrative Agent's request, cause such Subordinated Debt to be evidenced by an appropriate instrument or instruments endorsed with the above legend. The Trustee and the Parent Company Borrower each will, at its expense and at any time and from time to time, promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that the Administrative Agent may request, in order to protect any right or interest granted or purported to be granted hereby or to enable the Administrative Agent to exercise and enforce its rights and remedies hereunder. SECTION 7. Agreements in Respect of Subordinated Debt. ------------------------------------------ (a) The Trustee will not: (i) Cancel or otherwise discharge any of the Subordinated Debt (except upon payment in full thereof paid to the Administrative Agent as contemplated by Section 3(b) hereof), convert or exchange any of the Subordinated Debt into or for any other indebtedness or equity interest or subordinate any of the Subordinated Debt to any indebtedness of the Parent Company Borrower or any of its Subsidiaries other than the Obligations; (ii) Permit the sale, assignment, pledge, encumbrance or other disposition of any of the Subordinated Debt unless such sale, -9- assignment, pledge, encumbrance or disposition (x) is to a Person or entity other than the Parent Company Borrower or any of its Subsidiaries or Affiliates, which Person or entity executes and delivers to the Administrative Agent, immediately upon any such sale, assignment, pledge, encumbrance or disposition, a Subordination Agreement substantially in the form of this Agreement; and (y) any such assignment or sale or other disposition is made with respect to a principal amount of the Subordinated Debt of not less than $1,000,000; or (iii) Permit the terms of any of the Subordinated Debt or any document relating thereto, including, without limitation, the Subordinated Debt Documents, to be amended, modified or changed in any respect without the prior written consent of all of the Lenders which consent may be withheld in the sole discretion of any such Person; provided, however, that the Trustee and the Parent Company Borrower -------- ------- may amend, modify or change the terms of the Subordinated Debt or any document relating thereto so long as such amendments, modifications or changes are purely of an administrative nature or (1) extend the maturity of principal due thereunder, (2) decrease the rate of interest payable by the Parent Company Borrower thereunder, (3) modify any reporting requirement or notice provisions contained therein, (4) loosen any covenant of the Parent Company Borrower thereunder, or (5) forgive any Indebtedness of the Parent Company Borrower arising thereunder. (b) The Trustee shall promptly notify the Administrative Agent in writing of the occurrence of each and every default, event of default, or the occurrence of any event which with the giving of notice or passage of time would constitute a default or an event of default of which the Trustee has actual knowledge in accordance with Section 6.03(i) of the Indenture (including, in any event, a default under Section 5.01(a) or 5.01(b) of the Indenture) (hereinafter, a "Default"). SECTION 8. Agreement by the Parent Company Borrower. The Parent ---------------------------------------- Company Borrower agrees that it will not make, and will not permit any of its Subsidiaries to make, any payment of any of the Subordinated Debt, or take, -10- or permit any of its Subsidiaries to take, any other action, in contravention of the provisions of this Agreement. SECTION 9. Obligations Hereunder Not Affected. All rights and ---------------------------------- interests of the Agents and the Lenders hereunder, and all agreements and obligations of the Trustee and the Parent Company Borrower under this Agreement, shall remain in full force and effect irrespective of: (i) any lack of validity or enforceability of the Credit Agreement, the Notes, the Loan Documents or any other agreement or instrument relating thereto; (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, the Notes or any other Loan Document, including, without limitation, any increase in the Obligations resulting from the extension of additional credit to the Subsidiary Borrower or any of its Subsidiaries or otherwise; (iii) any taking, exchange, release or non-perfection of any other collateral, or any taking, release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Obligations; (iv) any manner of application of collateral, or proceeds thereof, to all or any of the Obligations, or any manner of sale or other disposition of any collateral for all or any of the Obligations or any other assets of the Subsidiary Borrower or any of its Subsidiaries; (v) any change, restructuring or termination of the corporate or partnership structure or existence of the Parent Company Borrower or any of its Subsidiaries; (vi) any reduction, limitation, impairment or termination of any Obligations for any reason, including any claim of waiver, release, surrender, alteration or compromise; or (vii) any other circumstance which might otherwise constitute a defense available to, or a -11- discharge of, the Parent Company Borrower, the Subsidiary Borrower or the Trustee; and shall not be subject to (and the Parent Company Borrower, for itself and on behalf of its Subsidiaries, hereby waives any right to or claim of) any defense or set-off, counterclaim, recoupment or termination whatsoever by reason of any invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, any of the Obligations. This Agreement shall continue to be effective or shall be reinstated, as the case may be, if at any time any payment of any of the Obligations is rescinded or must otherwise be returned by any Agent or Lender upon the insolvency, bankruptcy or reorganization of, or in connection with any other Bankruptcy Proceeding involving, the Parent Company Borrower or any of its Subsidiaries, including, without limitation, the Subsidiary Borrower and its Subsidiaries, or otherwise, all as though such payment had not been made. SECTION 10. Waiver. The Trustee and the Parent Company Borrower (for ------ itself and on behalf of its Subsidiaries) each hereby waives promptness, diligence, notice of acceptance, notice of the existence, creation or non- payment of all or any of the Obligations, and any other notice with respect to any of the Obligations and this Agreement and any requirement that any Agent or Lender protect, secure, perfect or insure any security interest or lien or any property subject thereto or exhaust any right or remedy or take any action against the Parent Company Borrower, any of its Subsidiaries or any other person or entity or any collateral; provided, however, that this Section 10 shall not constitute a waiver by the Trustee of any notice expressly required to be delivered to the Trustee under any other provision of this Agreement. SECTION 11. Representations and Warranties. The Parent Company ------------------------------ Borrower hereby represents and warrants to the Agents and the Lenders as follows: (a) True and complete copies of all instruments evidencing the Subordinated Debt as of the date hereof, including, without limitation, the Subordinated Debt Documents, have been furnished to the Agents and the Lenders. There exists no Default in respect of any such Subordinated Debt. (b) The Subordinated Bondholders are and at all times will be the legal and beneficial owner of the -12- Subordinated Debt, free and clear of any lien, security interest, option or other charge or encumbrance, except to the extent of any sale, assignment or other disposition of Subordinated Debt made in accordance with Section 7(a)(ii) above. (c) There are no conditions precedent to the effectiveness of this Agreement that have not been satisfied or waived. The Parent Company Borrower further represents and warrants to the Agents and the Lenders that the Subordinated Debt now outstanding has been duly authorized and issued by the Parent Company Borrower, and constitutes the legal, valid and binding obligation of the Parent Company Borrower, enforceable against the Parent Company Borrower, in accordance with its terms. SECTION 12. Amendments, Etc. No amendment or waiver of any provision --------------- of this Agreement, and no consent to any departure by the Trustee or the Parent Company Borrower herefrom, shall in any event be effective unless the same shall be in writing and signed by the Administrative Agent (with consent of the Lenders in accordance with Section 7 hereof), the Trustee and the Parent Company Borrower, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 13. Expenses. The Parent Company Borrower agrees upon demand -------- to pay to the Agents and the Lenders the amount of any and all expenses, including the reasonable fees and expenses of its counsel and of any experts or agents, which the Agents and the Lenders may incur in connection with (i) the administration of this Agreement, (ii) the exercise or enforcement of any of the rights of any Agent or Lender hereunder or (iii) the failure by the Trustee or the Parent Company Borrower to perform or observe any of the provisions hereof. SECTION 14. Addresses for Notices. All notices and other --------------------- communications provided for hereunder shall be in writing and mailed (registered or certified mail, return receipt requested), telecopied or delivered by hand, if to the Trustee, to it at 311 West Monroe Street, 12th Fl., Chicago, IL 60606, Attention: Indenture Trust Division, Facsimile No. (312) 461-3525, if to the Parent Company Borrower, to it c/o Charter Communications, Inc., 12444 Powerscourt Drive, Suite 400, St. Louis, Missouri 63131, -13- Attention: Jerald L. Kent, Facsimile No. (314) 965-8793, with a copy to the General Counsel, if to the Administrative Agent, to it at 909 Fanin Street, Suite 1700, Houston, Texas 77010, Attention: Manager, Agency Division, Facsimile No. (713) 951-9921, or if to any other Agent or any Lender, to it at its address specified in the Credit Agreement, or as to each party, at such other address as shall be designated by such party in a written notice to each other party complying as to delivery with the terms of this Section. All such notice and other communications shall be effective, upon the earlier of actual receipt or three days after deposit in the mail, one day after being entrusted to a reputable commercial overnight delivery service or when sent by telecopy, each in the manner provided above. SECTION 15. No Waiver; Remedies. No failure on the part of any Agent ------------------- or Lender to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof or give rise to an estoppel, nor be construed as an agreement to modify the terms of this Agreement; nor shall any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy. The remedies herein provided are cumulative and not exclusive of any remedies provided by law or in equity. SECTION 16. Continuing Agreement; Assignments Under the Credit -------------------------------------------------- Agreement. This Agreement is a continuing agreement and shall (i) remain in - --------- full force and effect until the payment in full of the Obligations, (ii) be binding upon the Trustee, the Parent Company Borrower and their respective successors and assigns, and (iii) inure to the benefit of, and be enforceable by, the Agents and the Lenders and their respective successors, transferees and assigns. Without limiting the generality of the foregoing clause (iii), each of the Agents and the Lenders may assign or otherwise transfer all or any portion of its rights and obligations under the Credit Agreement (including, without limitation, all or any portion of its Commitments, the Advances and any Note to be held by it) to any other person or entity, and such other person or entity shall thereupon become vested with all the rights in respect thereof granted to such Agent or such Lender, as applicable, herein or otherwise. SECTION 17. Priorities. The priorities herein specified are ---------- applicable irrespective of the time of creation of any indebtedness of the Parent Company Borrower or any of its Subsidiaries. -14- SECTION 18. Severability. Any provision of this Agreement which is ------------ prohibited or unenforceable in any jurisdiction shall be ineffective to the extent of such prohibition or unenforceability in that jurisdiction without invalidating the remaining provisions hereof in that jurisdiction or affecting the validity or unenforceability of such provision in any other jurisdiction. SECTION 19. Counterparts. This Agreement may be executed in any ------------ number of counterparts, each of which shall be deemed to be an original, but all such separate counterparts shall together constitute but one and the same instrument. SECTION 20. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND ------------- CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK, WITHOUT REGARD TO ITS CONFLICTS OF LAW PRINCIPLES. SECTION 21. Further Assurances. The Parent Company Borrower and the ------------------ Trustee shall execute and deliver to the Agents and the Lenders such further documents and instruments and shall take such further action as the Administrative Agent may at any time or from time to time reasonably request in order to carry out the provisions and intent of this Agreement. SECTION 22. Financial Reports. The Administrative Agent hereby ----------------- agrees that, to the extent it has received such items from the Parent Company Borrower or the Subsidiary Borrower, it will, upon the reasonable written request of the Trustee, provide the Trustee with financial information of the types described in Sections 10.08(a) and (c) of the Indenture in the event such information has not already been provided to the Trustee. Any such request by the Trustee shall not be made more often than once during any fiscal quarter of the Parent Company Borrower. SECTION 23. Extension of Senior Debt Maturity. The Agents and the --------------------------------- Lenders agree that in the event that, subsequent to the initial funding of the Term Loan under the Credit Agreement, the ratio of Total Debt of the Subsidiary Borrower and its Subsidiaries on a consolidated basis (excluding the Subordinated Debt) to Annualized Operating Cash Flow of the Subsidiary Borrower and its Subsidiaries on a consolidated basis is less than 5.0:1 at any time, the consent of holders of a majority in principal amount of the -15- Subordinated Debt shall be required in order to extend the Maturity Date after July 17, 2005. SECTION 24. Representation of Harris Trust and Savings Bank. Harris ----------------------------------------------- Trust and Savings Bank ("Harris"), solely in its role as the Trustee hereby represents and warrants that the waivers and agreements solely on its part set forth herein constitute binding obligations of Harris, as the Trustee, enforceable against Harris, as the Trustee, in accordance with their terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting the enforcement of creditors' rights generally and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). -16- IN WITNESS WHEREOF, the Trustee and the Parent Company Borrower each has caused this Agreement to be duly executed and delivered by its officers thereunto duly authorized as of the date first above written. HARRIS TRUST AND SAVINGS BANK, not in its individual capacity, but solely in its capacity as Trustee. By: /s/ J. Bartolini --------------------------------- Name: J. Bartolini --------------------------- Title: Vice President -------------------------- Attest: /s/ C. Potter ----------------------------- Name: C. POTTER ---------------------- Title: ASSISTANT SECRETARY --------------------- CCA HOLDINGS CORP., a Delaware corporation By: _________________________________ Name: Kent Kalkwarf Title: Senior Vice President Attest: _____________________________ Name: Marcy Lifton Title: Vice President and Assistant Secretary Acknowledged and Agreed as of the 13th day of February, 1997. TORONTO DOMINION (TEXAS), INC., as Administrative Agent, for itself and the other Agents and Lenders By: ______________________________________ Its: ________________________________ IN WITNESS WHEREOF, the Trustee and the Parent Company Borrower each has caused this Agreement to be duly executed and delivered by its officers thereunto duly authorized as of the date first above written. HARRIS TRUST AND SAVINGS BANK, not in its individual capacity, but solely in its capacity as Trustee. By: _________________________________ Name: ___________________________ Title: __________________________ Attest: ____________________________ Name:_______________________ Title:______________________ CCA HOLDINGS CORP., a Delaware corporation By: /s/ Kent Kalkwarf --------------------------------- Name: Kent Kalkwarf Title: Senior Vice President Attest: /s/ Marcy Lifton ----------------------------- Name: Marcy Lifton Title: Vice President and Assistant Secretary Acknowledged and Agreed as of the 13th day of February, 1997. TORONTO DOMINION (TEXAS), INC., as Administrative Agent, for itself and the other Agents and Lenders By: ______________________________________ Its: ________________________________ IN WITNESS WHEREOF, the Trustee and the Parent Company Borrower each has caused this Agreement to be duly executed and delivered by its officers thereunto duly authorized as of the date first above written. HARRIS TRUST AND SAVINGS BANK, not in its individual capacity, but solely in its capacity as Trustee. By: _________________________________ Title:___________________________ Attest: ____________________________ Title:______________________ CCA HOLDINGS CORP., a Delaware corporation By: _________________________________ Title: __________________________ Attest: _____________________________ Title: _____________________ Acknowledged and Agreed as of the 13th day of February, 1997. TORONTO DOMINION (TEXAS), INC., as Administrative Agent, for itself and the other Agents and Lenders By: /s/ Diane Baley -------------------------------------- Its: VP -------------------------------- EX-4.6 17 LTR AGMNT DATED 11/15/96 CCA HOLDINGS & HC CROWN EXHIBIT 4.6 CCA Holdings Corp. c/o Charter Communications, Inc. 12444 Powerscourt Drive, Suite 400 St. Louis, Missouri 63131 November 15, 1996 HC Crown Corp. c/o Hallmark Cards, Incorporated 2501 McGee Trafficway Kansas City, Missouri 64108 Attention: General Counsel Ladies and Gentlemen: Reference is made to that certain Amended and Restated Senior Subordinated Loan Agreement between CCA Holdings Corp., a Delaware corporation ("CCA"), and HC Crown Corp., a Delaware corporation ("HC Crown"), originally dated as of January 18, 1995 (the "Original Agreement"), and amended and restated as of November 15, 1996 (the "Agreement"). This letter hereby further describes the rights and duties of the parties to the Agreement as set forth below. All capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Agreement. CCA has prepared, at the request and with the cooperation of HC Crown, a private placement offering memorandum (the "Offering Memorandum"), dated November 18, 1996, pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), for the sale of the Notes held by HC Crown. Pursuant to Section 4.02(b) of the Original Agreement, HC Crown was entitled to two demand registrations of the Notes. The registration described below will fulfill one such demand registration obligation, with the remaining demand registration being that described in Section 4.02(b) of the Agreement. The demand registration right described below is in addition to the demand registration right described in Section 4.02(b) of the Agreement. The parties hereby agree as follows: 1. At HC Crown's request, CCA shall (a) comply with HC Crown's request to file a registration statement (the "Exchange Offer Registration Statement") under the Securities Act with respect to an offer to exchange the Notes sold pursuant to the Offering Memorandum (the "Exchange Offer") for senior subordinated notes of CCA, with substantially 1 identical terms to the Notes (the "Exchange Notes") (except that the Exchange Notes will not contain terms with respect to transfer restrictions under applicable securities laws), (b) use its best efforts to effect the registration of the Exchange Notes in connection with the Exchange Offer pursuant to the Securities Act and (c) otherwise take all such further actions related to the Exchange Offer described in the Section of the draft preliminary Offering Memorandum, a copy of which is attached hereto as Exhibit A (the "Preliminary Offering Memorandum"), entitled "Exchange Offer; Registration Rights" to be taken by it; 2. In the event that applicable interpretations of the staff of the Securities and Exchange Commission do not permit CCA to effect such an Exchange Offer, then, if HC Crown requests, CCA shall, subject to the provisions of paragraph 4 hereof, file a shelf registration statement covering resales of the Notes (a "Shelf Registration Statement"), use reasonable best efforts to cause such Shelf Registration Statement to be declared effective under the Securities Act and use reasonable best efforts to keep effective such Shelf Registration Statement for nine (9) months; 3. The Exchange Offer Registration Statement, or Shelf Registration Statement which is filed because CCA is not permitted to effect the Exchange Offer (as described in Section 2 of this letter), shall fulfill one demand registration right under the Original Agreement and shall be in addition to the demand registration right provided for by Section 4.02(b) of the Agreement and by the Indenture (as defined in the Preliminary Offering Memorandum); and 4. All expenses incident to CCA's performance of or compliance with the registration provisions of this letter agreement, including, without limitation, all registration and filing fees, fees and expenses of compliance with securities or blue sky laws, printing expenses, messenger and delivery expenses, and fees and 2 disbursements of counsel for CCA and all independent certified public accountants, underwriters (excluding discounts and commissions) and other persons retained by CCA (all such expenses being herein called "Registration Expenses"), are to be borne by HC Crown in connection with the Exchange Offer, except that CCA will, in any event, pay its internal expenses, including, without limitation all salaries of its officers and employees performing legal or accounting duties) and the expenses of any annual audit; provided that CCA will be required to pay the fees and expenses of any trustee appointed in connection with the registration of the Notes. If the foregoing reflects your understanding of the matters set forth herein, please indicate your acceptance by signing below. Very truly yours, CCA HOLDINGS CORP. By: /s/ Kent Kalkwarf ------------------------ Name: Kent Kalkwarf Title: Senior Vice President Accepted and agreed as of the date first above written HC CROWN CORP. By: /s/ Dwight Arn ------------------------ Name: Dwight Arn Title: Vice President 3 EX-10.1 18 AMENDED/RESTATED LOAN AGMNT-9/29/95 THIS PAGE MUST BE KEPT WITH THE DOCUMENT. AMENDED AND RESTATED LOAN AGREEMENT 04/25/97 12:58 pm Exhibit 10.1 AMENDED AND RESTATED LOAN AGREEMENT AMONG CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P., AS BORROWER, TORONTO DOMINION (TEXAS), INC. AND CHEMICAL BANK, AS DOCUMENTATION AGENTS, TORONTO DOMINION (TEXAS), INC., CHEMICAL BANK, CIBC INC., CREDIT LYONNAIS CAYMAN ISLAND BRANCH AND NATIONSBANK, N.A. (CAROLINAS), AS MANAGING AGENTS, BANQUE PARIBAS AND UNION BANK, AS CO-AGENTS, THE SIGNATORY BANKS HERETO AND TORONTO DOMINION (TEXAS), INC., AS ADMINISTRATIVE AGENT As of September 29, 1995 INDEX -----
Page ---- RECITALS ................................................ 1 ARTICLE 1 Definitions..................................... 3 ARTICLE 2 Loans........................................... 24 2.1 The Loans....................................... 24 2.2 Manner of Borrowing and Disbursement............ 25 2.3 Interest........................................ 28 2.4 Commitment Fee.................................. 30 2.5 Revolving Loan Commitment Reductions............ 31 2.6 Prepayment...................................... 32 2.7 Repayment....................................... 32 2.8 Notes; Loan Accounts............................ 35 2.9 Manner of Payment............................... 35 2.10 Reimbursement................................... 37 2.11 Pro Rata Treatment.............................. 38 2.12 Capital Adequacy................................ 39
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Page ---- ARTICLE 3 Conditions Precedent............................ 40 3.1 Conditions Precedent to Initial Advance and Closing......................................... 40 3.2 Conditions Precedent to Each Advance............ 43 ARTICLE 4 Representations and Warranties.................. 44 4.1 Representations and Warranties.................. 44 4.2 Survival of Representations and Warranties, etc............................................. 52 ARTICLE 5 General Covenants............................... 52 5.1 Preservation of Existence and Similar Matters... 53 5.2 Business; Compliance with Applicable Law........ 53 5.3 Maintenance of Properties....................... 53 5.4 Accounting Methods and Financial Records........ 53 5.5 Insurance....................................... 54 5.6 Payment of Taxes and Claims..................... 54 5.7 Visits and Inspections.......................... 55 5.8 Payment of Indebtedness; Loans.................. 55 5.9 Use of Proceeds................................. 55 5.10 Management Services............................. 55 5.11 Indemnity....................................... 55 5.12 Interest Rate Hedging........................... 56 5.13 Covenants Regarding Formation of Subsidiaries... 56 5.14 Payment of Wages................................ 57 ARTICLE 6 Information Covenants........................... 58 6.1 Quarterly Financial Statements and Information.. 58 6.2 Annual Financial Statements and Information; Certificate of No Default....................... 58 6.3 Monthly Operating Reports....................... 59 6.4 Performance Certificates........................ 59 6.5 Copies of Other Reports......................... 60 6.6 Notice of Litigation and Other Matters.......... 62 ARTICLE 7 Negative Covenants.............................. 63 7.1 Indebtedness of the Borrower.................... 63 7.2 Limitation on Liens............................. 64 7.3 Amendment and Waiver............................ 64 7.4 Liquidation, Change in Ownership, Disposition or Acquisition of Assets........................ 65 7.5 Limitation on Guaranties........................ 66 7.6 Investments..................................... 67
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Page ---- 7.7 Restricted Payments and Purchases............... 67 7.8 Leverage Ratio.................................. 69 7.9 Annualized Operating Cash Flow to Fixed Charges Ratio........................................... 69 7.10 Annualized Operating Cash Flow to Pro Forma Debt Service.................................... 70 7.11 Affiliate Transactions.......................... 70 7.12 Real Estate..................................... 70 7.13 Limitation on Leases............................ 70 7.14 ERISA Liabilities............................... 71 7.15 Capital Expenditures............................ 71 7.16 No Limitation on Upstream Dividends by Subsidiaries.................................... 71 ARTICLE 8 Default......................................... 72 8.1 Events of Default............................... 72 8.2 Remedies........................................ 78 ARTICLE 9 The Agents...................................... 79 9.1 Appointment and Authorization................... 79 9.2 Interest Holders................................ 80 9.3 Consultation with Counsel....................... 80 9.4 Documents....................................... 80 9.5 Agents and Affiliates........................... 80 9.6 Responsibilities of the......................... 80 9.7 Collateral...................................... 81 9.8 Action by the Administrative Agent.............. 81 9.9 Notice of Default or Event of Default........... 81 9.10 Responsibility Disclaimed....................... 82 9.11 Indemnification................................. 82 9.12 Credit Decision................................. 83 9.13 Successor Administrative Agent and Documentation Agents............................ 83 9.14 Managing Agents................................. 84 9.15 Co-Agents....................................... 84 ARTICLE 10 Change in Circumstances Affecting Fixed Rate Advances........................................ 84 10.1 Fixed Rate Basis Determination Inadequate or Unfair.......................................... 84 10.2 Illegality...................................... 84 10.3 Increased Costs................................. 85 10.4 Effects on Other Advances....................... 86 10.5 Claims for Increased Costs and Taxes............ 87
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Page ---- ARTICLE 11 Miscellaneous................................... 87 11.1 Notices......................................... 87 11.2 Expenses........................................ 90 11.3 Waivers......................................... 91 11.4 Set-Off......................................... 92 11.5 Assignment...................................... 92 11.6 Accounting Principles; Calculations............. 94 11.7 Counterparts.................................... 95 11.8 Governing Law................................... 95 11.9 Severability.................................... 95 11.10 Interest........................................ 95 11.11 Headings........................................ 96 11.12 Amendment and Waiver............................ 96 11.13 Entire Agreement................................ 97 11.14 Other Relationships............................. 97 11.15 Agreement to Transfer and Consent............... 97 ARTICLE 12 Waiver of Jury Trial............................ 98 12.1 Waiver of Jury Trial............................ 98
EXHIBITS Exhibit A - Form of Assignment of Rights by General Partner Exhibit B - Form of Assignment of Rights by Limited Partner Exhibit C - Form of Certificate of Financial Condition Exhibit D - Form of Request for Advance Exhibit E - Form of Revolving Loan Notes Exhibit F - Form of Security Agreement Exhibit G - Form of Subordination Agreement Exhibit H - Form of Subordination of Management and Financial Advisory Fees Agreement Exhibit I - Form of Term Loan Notes Exhibit J - Form of General Partner Loan Certificate Exhibit K - Form of Limited Partners Loan Certificate Exhibit L - Form of Manager Loan Certificate Exhibit M - Form of Monthly Operating Report Exhibit N - Form of Assignment and Assumption Agreement -iv- SCHEDULES Schedule 1 - Licenses Schedule 2 - Pole Agreements Schedule 3 - Subsidiaries Schedule 4 - Overbuilding Schedule 5 - Lien Search Results Schedule 6 - Real Property Schedule 7 - Litigation Schedule 8 - Agreements with Affiliates -v- AMENDED AND RESTATED LOAN AGREEMENT BY AND AMONG CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. (THE "BORROWER"), TORONTO DOMINION (TEXAS), INC. AND CHEMICAL BANK, AS DOCUMENTATION AGENTS, (THE "DOCUMENTATION AGENTS"), TORONTO DOMINION (TEXAS), INC., CHEMICAL BANK, CIBC INC., CREDIT LYONNAIS CAYMAN ISLAND BRANCH AND NATIONSBANK, N.A. (CAROLINAS), AS MANAGING AGENTS (THE "MANAGING AGENTS"), BANQUE PARIBAS AND UNION BANK, as CO-AGENTS (THE "CO-AGENTS"), THE SIGNATORY BANKS HERETO (THE "BANKS") AND TORONTO DOMINION (TEXAS), INC., AS ADMINISTRATIVE AGENT (THE "ADMINISTRATIVE AGENT"), RECITALS WHEREAS, CCA Acquisition Corp., a Delaware corporation (the "General Partner"), the Documentation Agents, the Managing Agents, the Co-Agents, the Administrative Agent and the Banks are all parties to that certain Loan Agreement dated as of January 18, 1995 (the "Prior Loan Agreement"); and WHEREAS, pursuant to this Agreement, the Documentation Agents, the Managing Agents, the Co-Agents, the Administrative Agent and the Banks have consented to the transfer on the Agreement Date (as defined herein) of substantially all of the assets and all of the liabilities of the General Partner, other than the General Partner's ownership of the stock of Cencom (as defined herein), including, without limitation, the General Partner's liabilities under the Prior Loan Agreement, to CCELP (as defined herein) and to the transfer on the Agreement Date of the remainder of the General Partner's assets (other than the General Partner's ownership of the stock of Cencom) to CCT (as defined herein), all of which assets and liabilities shall be transferred by CCELP and CCT, respectively, to the Borrower on the Agreement Date; and WHEREAS, pursuant to this Agreement, the Documentation Agents, the Managing Agents, the Co-Agents, the Administrative Agent and the Banks have consented to the transfer on the Agreement Date of all assets and liabilities of Cencom to CCELP, which assets and liabilities shall be transferred on the Agreement Date to the Borrower; and WHEREAS, immediately upon the transfer to CCELP and CCT of all of the assets and liabilities of the General Partner and Cencom, as described above, CCELP and CCT shall transfer all such assets and liabilities to the Borrower; and WHEREAS, pursuant to this Agreement, the Borrower has agreed, effective upon completion of the transfer of all assets and liabilities from the General Partner and Cencom to CCELP and CCT and the subsequent transfer of all such assets and liabilities to the Borrower, to assume the Obligations (as defined in the Prior Loan Agreement) of the General Partner and to be bound by all of the terms and conditions set forth in the Prior Loan Agreement; and WHEREAS, the Documentation Agents, the Managing Agents, the Co-Agents, the Administrative Agent and the Banks have agreed to amend and restate the Prior Loan Agreement in its entirety as set forth herein; and WHEREAS, the Borrower acknowledges and agrees that the Security Interest (as defined in the Prior Loan Agreement) granted to the Banks pursuant to the Prior Loan Agreement, shall remain outstanding and in full force and effect in accordance with the Prior Loan Agreement and shall continue to secure the Obligations (as defined herein); and WHEREAS, the Borrower acknowledges and agrees that (i) the Obligations (as defined herein) represent, among other things, the amendment, restatement, renewal, extension, consolidation and modification of the Obligations (as defined in the Prior Loan Agreement) arising in connection with the Prior Loan Agreement and the other Loan Documents (as defined in the Prior Loan Agreement) executed in connection therewith; (ii) the parties hereto intend that the Prior Loan Agreement and the other Loan Documents (as defined in the Prior Loan Agreement) executed in connection therewith and the collateral pledged thereunder shall secure, without interruption or impairment of any kind, all existing Indebtedness under the Prior Loan Agreement and the other Loan Documents (as defined in the Prior Loan Agreement) executed in connection therewith as so amended, restated, renewed, extended, consolidated and modified hereunder, together with all other Obligations hereunder; (iii) all Liens evidenced by the Prior Loan Agreement and the other Loan Documents (as defined in the Prior Loan Agreement) executed in connection therewith are hereby ratified, confirmed and continued; and (iv) the Loan Documents (as defined herein) are intended to restate, renew, extend, consolidate, amend and modify the Prior Loan Agreement and the other Loan Documents (as defined in the Prior Loan Agreement) executed in connection therewith; and -2- WHEREAS, the parties hereto intend that (i) the provisions of the Prior Loan Agreement and the other Loan Documents (as defined in the Prior Loan Agreement) executed in connection therewith, to the extent restated, renewed, extended, consolidated, amended and modified hereby, are hereby superseded and replaced by the provisions hereof and of the Loan Documents (as defined herein); and (ii) the Notes (as hereinafter defined) amend, renew, extend, modify, replace, are substituted for and supersede in their entirety, but do not extinguish the indebtedness arising under, the promissory notes issued pursuant to the Prior Loan Agreement; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each of the parties hereto, the parties hereby amend and restate the Prior Loan Agreement as follows: ARTICLE 1 Definitions ----------- For the purposes of this Agreement: "Administrative Agent" shall mean Toronto Dominion (Texas), Inc., a -------------------- Delaware corporation, acting as administrative agent for the other Agents and the Banks. "Administrative Agent's Office" shall mean the office of the Administrative ----------------------------- Agent located at Toronto Dominion (Texas), Inc., 909 Fannin, Suite 1700, Houston, Texas 77010, or such other office as may be designated pursuant to the provisions of Section 11.1 of this Agreement. "Advance" or "Advances" shall mean amounts advanced by the Banks to the ------- -------- Borrower pursuant to Article 2 hereof on the occasion of any borrowing. "Affiliate" shall mean any Person directly or indirectly controlling, --------- controlled by, or under common control with, the Borrower. For purposes of this definition, "control" when used with respect to any Person includes, without limitation, the direct or indirect beneficial ownership of more than five percent (5%) of the voting securities or voting equity of such Person or the power to direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. "Agents" shall mean, collectively, the Documentation Agents, the Managing ------ Agents, the Co-Agents and the Administrative Agent. -3- "Agreement" shall mean this Amended and Restated Loan Agreement. --------- "Agreement Date" shall mean the date as of which this Agreement is dated. -------------- "Annual Excess Cash Flow" shall mean, for any fiscal year of the Borrower ----------------------- and its Subsidiaries on a consolidated basis, as determined based upon the audited annual financial statements for such year required to be provided under Section 6.2 hereof, the remainder of (a) the Operating Cash Flow for such year, but without giving effect to the last sentence of the definition of "Operating Cash Flow," less (b) the sum, without duplication, of the following items for such year: (i) Capital Expenditures made; (ii) management fees and expenses paid in cash to the Manager pursuant to the Financial Advisory Agreement; (iii) financial advisory fees and expenses paid in cash to Kelso pursuant to the Financial Advisory Agreement; (iv) cash Interest Expense paid; (v) scheduled repayments of principal on Indebtedness for Money Borrowed to the extent actually paid, which shall mean, with respect to the Loans, principal payments required pursuant to Sections 2.5(a) and 2.7(a) hereof; (vi) scheduled payments under Capitalized Lease Obligations to the extent actually paid; (vii) voluntary prepayments of the Term Loan under Section 2.6 hereof; (viii) voluntary prepayments of the Revolving Loans under Section 2.6 hereof, provided that there is a corresponding reduction of the Revolving Loan Commitment; and (ix) Tax Distributions made with respect to such fiscal year. "Annualized Operating Cash Flow" shall mean an amount equal to Operating ------------------------------ Cash Flow for the calendar quarter specified, multiplied by four (4). "Applicable Law" shall mean, in respect of any Person, all provisions of -------------- constitutions, statutes, rules, regulations and orders of governmental bodies or regulatory agencies applicable to such Person, including, without limiting the foregoing, the Licenses, the Federal Communications Act of 1934 and Title 47 of the United States Code, and all orders and decrees of all courts and arbitrators in proceedings or actions to which the Person in question is a party or by which it is bound. "Applicable Margin" shall mean the interest rate margin applicable to Base ----------------- Rate Advances, LIBOR Advances and CD Rate Advances, as the case may be, in each case determined in accordance with Section 2.3(g) hereof. "Assessment Rate" shall mean, for any Interest Period for a CD Rate --------------- Advance, the highest current annual assessment rate (rounded upward, if necessary, to the nearest hundredth (1/100th) -4- of one percent) payable by any Bank which is a bank to the Federal Deposit Insurance Corporation (or any successor) for insuring time deposits made in dollars at offices of such Bank in the United States as determined by the Administrative Agent on the first day of such Interest Period. "Asset Sales" shall have the meaning ascribed to such term in Section ----------- 2.7(b) hereof. "Assignment of Rights by General Partner" shall mean that certain --------------------------------------- Assignment of Rights by General Partner between CCA Holdings Corp., a Delaware corporation, which is the sole general partner of the Borrower, on the one hand, and the Administrative Agent, on the other hand, substantially in the form of Exhibit A attached hereto. - --------- "Assignment of Rights by Limited Partner" shall mean, collectively, the --------------------------------------- Assignment of Rights by Limited Partner between CCT, which is a limited partner of the Borrower, on the one hand, and the Administrative Agent, on the other hand, and the Assignment of Rights by Limited Partner between CCELP, which is a limited partner of the Borrower, on the one hand, and the Administrative Agent, on the other hand, each one substantially in the form of Exhibit B attached --------- hereto. "Authorized Officer" shall mean any officer of the Borrower holding the ------------------ office of Vice President or above. "Authorized Signatory" shall mean such senior officer of the General -------------------- Partner as may be duly authorized and designated in writing by the General Partner to execute documents, agreements and instruments on behalf of the Borrower or any of its Subsidiaries, as applicable. "Banks" shall mean those financial institutions whose names are set forth ----- on the signature pages hereof as "Banks" and any assignees thereof pursuant to and in accordance with Section 11.5 hereof; and "Bank" shall mean any one of the ---- foregoing Banks. "Base Rate" shall mean, at any time, the greater of (a) the rate of --------- interest adopted by The Toronto-Dominion Bank as its reference rate for the determination of interest rates for loans of varying maturities in United States dollars to United States residents of varying degrees of creditworthiness and being quoted at such time by The Toronto-Dominion Bank as its "prime rate," and (b) the sum of (i) the Federal Funds Rate and (ii) five-eighths of one percent (5/8%). The Base Rate is not necessarily the lowest rate of interest charged to borrowers of The Toronto-Dominion Bank. -5- "Base Rate Advance" shall mean an Advance which the Borrower requests to be ----------------- made as a Base Rate Advance or is reborrowed as a Base Rate Advance in accordance with the provisions of Section 2.2 hereof, and which shall be in a principal amount of at least $1,000,000 and in an integral multiple of $100,000, except for a Base Rate Advance which is in an amount equal to the unused amount of the Term Loan Commitment or the Revolving Loan Commitment, which Advance may be in such amount, as applicable. "Base Rate Basis" shall mean a simple interest rate equal to the sum of (a) --------------- the Base Rate and (b) the Applicable Margin. The Base Rate Basis shall be adjusted automatically as of the opening of business on the effective date of each change in the Base Rate and the Applicable Margin to account for such changes. "Basic Subscriber" shall mean a dwelling unit, including an apartment which ---------------- is separately billed for cable television services within an apartment building, in respect of which the Borrower or any of its Subsidiaries has in effect an agreement to provide one or more of the basic cable television subscription services offered by the Borrower or such Subsidiary and for which the Borrower or any of its Subsidiaries or, during the period prior to the Agreement Date, the General Partner, has received at least one full month's payment at the rate customarily charged by such Person within the applicable franchise area, except for those dwelling units for which payment is more than sixty (60) days past due, or for which notices of termination of service have been sent by the Borrower, any such Subsidiary, the General Partner or the customer. As to bulk subscribers, such as hotels, motels, and apartments, billed on a bulk basis, the number of Basic Subscribers for the Borrower and its Subsidiaries shall be computed by dividing the monthly basic cable revenues received by the Borrower and its Subsidiaries from any such bulk subscribers by the average monthly subscription price received by the Borrower and its Subsidiaries from other Basic Subscribers within the portion of the System serving such bulk subscriber. "Borrower" shall mean Charter Communications Entertainment I, L.P., a -------- Delaware limited partnership, having the General Partner as its sole general partner and the Limited Partners as its sole limited partners. "Business Day" shall mean a day on which banks and foreign exchange markets ------------ are open for the transaction of business required for this Agreement in London, England, St. Louis, Missouri, Houston, Texas and New York, New York, as relevant to the determination to be made or the action to be taken. "Capital Expenditures" shall mean, in respect of any Person, expenditures -------------------- for the purchase or construction of fixed assets, -6- plant and equipment which are capitalized in accordance with GAAP. "Capitalized Lease Obligation" shall mean that portion of any obligation of ---------------------------- a Person as lessee under a lease which at the time would be required to be capitalized on the balance sheet of such lessee in accordance with GAAP. "CCELP" shall mean Charter Communications Entertainment, L.P., a Delaware ----- limited partnership. "CCT" shall mean CCT Holdings Corp., a Delaware corporation. --- "CD Rate" shall mean, for any Interest Period, the interest rate per annum ------- determined by the Administrative Agent to be the average of the prevailing rates bid at 10:00 a.m. (New York time) or as soon thereafter as practicable, on the Business Day on which the relevant Interest Period commences, by two or more New York certificate of deposit dealers of recognized standing for the purchase at face value from each of the Reference Banks of its certificates of deposit having a maturity comparable to the duration of the Interest Period and in the amount of the CD Rate Advance requested by the Borrower. "CD Rate Advance" shall mean an Advance which the Borrower requests to be --------------- made as a CD Rate Advance or which is reborrowed as a CD Rate Advance, in accordance with the provisions of Section 2.2 hereof, and which shall be in a principal amount of at least $1,000,000.00 and in an integral multiple of $100,000.00. "CD Rate Basis" shall mean a simple per annum interest rate (rounded ------------- upward, if necessary, to the nearest one-hundredth (1/100th) of one percent) equal to the sum of (a) the quotient of (i) the CD Rate divided by (ii) one minus the Domestic Reserve Percentage, stated as a decimal, plus (b) the Assessment Rate, plus (c) the Applicable Margin. The CD Rate Basis shall apply to Interest Periods of thirty (30), sixty (60), ninety (90), one hundred eighty (180), two hundred seventy (270) and, subject to availability as determined by the Administrative Agent, three hundred sixty (360) days and, once determined, shall remain unchanged during the applicable Interest Period, except for changes to reflect adjustments in the Domestic Reserve Percentage, the Applicable Margin, and the Assessment Rate. "Cencom" shall mean Cencom Cable Entertainment, Inc., a Delaware ------ corporation. "Certificate of Financial Condition" shall mean a certificate of financial ---------------------------------- condition of the Borrower and its -7- Subsidiaries on a consolidated basis, substantially in the form of Exhibit C --------- attached hereto, and signed by an Authorized Signatory of the Borrower. "Charter Communications Group" shall mean Charter Communications Group, a ---------------------------- Missouri general partnership. "Co-Agents" shall mean Banque Paribas and Union Bank, and "Co-Agent" shall --------- -------- mean any one of the foregoing Co-Agents. "Code" shall mean the Internal Revenue Code of 1986, as amended from time ---- to time. "Collateral" shall mean any property of any kind constituting collateral ---------- for the Obligations under this Agreement or any of the Security Documents. "Commission" shall mean the Federal Communications Commission or any ---------- successor thereto. "Commitment Ratios" shall mean the percentages in which the Banks are ----------------- severally bound to make Advances to the Borrower under the Revolving Loan Commitment and in which the Banks made the Term Loan, as set forth below (together with dollar amounts) as of the Agreement Date:
Portion of Revolving Term Loan Revolving Loan Term Loan Loan Total Dollar Commitment Commitment Banks Commitment Commitment Commitment Ratio Ratio - ----------------------------- -------------- ------------- ------------ ------------- --------------- Toronto Dominion (Texas), $ 9,856,000.01 $ 703,999.99 $ 10,560,000 3.520000001% 3.519999983% Inc. Chemical Bank 13,189,333.33 2,370,666.67 15,560,000 4.710476190% 11.853333333% CIBC Inc. 33,189,333.33 2,370,666.67 35,560,000 11.853333333% 11.853333333% Credit Lyonnais Cayman 33,189,333.33 2,370,666.67 35,560,000 11.853333333% 11.853333333% Island Branch NationsBank, N.A. 33,189,333.33 2,370,666.67 35,560,000 11.853333333% 11.853333333% (Carolinas) Banque Paribas 19,026,666.67 2,073,333.33 21,100,000 6.795238095% 10.366666667% Union Bank 29,026,666.67 2,073,333.33 31,100,000 10.366666667% 10.366666667% CoreStates Bank, N.A. 14,000,000.00 1,000,000.00 15,000,000 5.000000000% 5.000000000% The Long-Term Credit 14,000,000.00 1,000,000.00 15,000,000 5.000000000% 5.000000000% Bank of Japan, Ltd. Mercantile Bank of St. 14,000,000.00 1,000,000.00 15,000,000 5.000000000% 5.000000000% Louis National Association
-8-
Portion of Revolving Term Loan Revolving Loan Term Loan Loan Total Dollar Commitment Commitment Banks Commitment Commitment Commitment Ratio Ratio - ----------------------------- -------------- ------------- ------------ ------------- --------------- NatWest Bank N.A. 14,000,000.00 1,000,000.00 15,000,000 5.000000000% 5.000000000% First National Bank of 14,000,000.00 1,000,000.00 15,000,000 5.000000000% 5.000000000% Maryland Van Kampen Merritt Prime 30,000,000.00 0.00 30,000,000 10.714285714% 0.000000000% Rate Income Trust Banque Francaise du 9,333,333.33 666,666.67 10,000,000 3.333333332% 3.333333350% Commerce Exterieur =========================================================================== Total $ 280,000,000 $ 20,000,000 $300,000,000 100% 100%
"Commitments" shall mean, collectively, the Term Loan Commitment and the ----------- Revolving Loan Commitment. "Default" shall mean any Event of Default, and any of the events specified ------- in Section 8.1 hereof regardless of whether there shall have occurred any passage of time or giving of notice or both that would be necessary for such event to be an Event of Default. "Default Rate" shall mean a simple per annum interest rate equal to the sum ------------ of (a) the Base Rate Basis (calculated using the highest Applicable Margin for the Base Rate Basis set forth in Section 2.3(g) hereof, without giving effect to the Leverage Ratio then in effect) plus (b) two percent (2%). "Documentation Agents" shall mean Toronto Dominion (Texas), Inc. and -------------------- Chemical Bank, and "Documentation Agent" shall mean either one of the foregoing ------------------- Documentation Agents. "Domestic Reserve Percentage" shall mean, for any day, the percentage which --------------------------- is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor thereto) for determining the maximum reserve requirement (including, without limitation, any basic, supplemental, emergency or marginal reserves) for a member bank of the Federal Reserve System with deposits exceeding $5 billion in respect of new non-personal time deposits in dollars in the United States having a maturity comparable to the duration of the Interest Period and in an amount of $250,000.00 or more. The CD Rate Basis for any CD Rate Advance shall be adjusted automatically on and as of the effective date of any change in the Domestic Reserve Percentage. -9- "Environmental Laws" shall mean all environmental, health and safety laws, ------------------ regulations, resolutions, and ordinances applicable to the Borrower or any of its Subsidiaries, or any of their respective assets or properties, including, without limitation, all laws, regulations, resolutions, ordinances and decrees relating to the release of any toxic or hazardous waste or other chemical substance, pollutant or contaminant into the environment or the generation, treatment, storage or disposal of any toxic or Hazardous Substances. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as ----- in effect on the Agreement Date and as amended thereafter from time to time. "Event of Default" shall mean any of the events specified in Section 8.1 ---------------- hereof, provided that any requirement for notice or lapse of time has been satisfied. "Federal Funds Rate" shall mean, as of any date, the weighted average of ------------------ the rates on overnight federal funds transactions with the members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three (3) federal funds brokers of recognized standing selected by the Administrative Agent. "Financial Advisory Agreement" shall mean that certain Financial Advisory ---------------------------- Agreement dated as of the Agreement Date between Kelso and the Borrower, whereby Kelso agrees to provide financial advisory services to the Borrower and its Subsidiaries. "Fixed Charges" shall mean with respect to the Borrower and its ------------- Subsidiaries on a consolidated basis, for any period, without duplication, the sum of (a) cash Interest Expense paid during such period, (b) Capital Expenditures made during such period, (c) scheduled payments of principal made on its Indebtedness for Money Borrowed during such period to the extent actually paid, which shall mean, with respect to the Loans, principal required to be paid pursuant to Sections 2.5(a) and 2.7(a) hereof and, with respect to the Revolving Loans in particular, the principal amount required to be paid with respect thereto during any such period shall be deemed to be the difference, if positive, between (i) the aggregate principal amount of the Revolving Loans outstanding on the first day of such period, and (ii) the amount of the Revolving Loan Commitment on the last day of such period, (d) Tax Distributions made during such period, (e) management -10- fees and expenses paid in cash to the Manager during such period, (f) financial advisory fees and expenses paid in cash to Kelso during such period, and (g) the portion of scheduled payments with respect to Capitalized Lease Obligations which constitutes imputed principal for such period to the extent actually paid. "Fixed Rate Advances" shall mean LIBOR Advances and CD Rate Advances. ------------------- "GAAP" shall mean, as in effect from time to time, generally accepted ---- accounting principles in the United States, consistently applied. "General Partner" shall mean CCA Acquisition Corp., a Delaware corporation. --------------- "Guaranty" or "Guaranteed," as applied to an obligation, shall mean and -------- ---------- include (a) a guaranty, direct or indirect, in any manner, of any part or all of such obligation or (b) any other agreement, direct or indirect, contingent or otherwise, the practical effect of which is to assure in any way the payment or performance (or payment of damages in the event of non-performance) of any part or all of such obligation, including, without limiting the foregoing, any reimbursement obligations as to amounts drawn down by beneficiaries of outstanding letters of credit. "Hallmark Subordinated Debt" shall have the meaning ascribed to the term -------------------------- "Subordinated Debt" in the Subordination Agreement. "Hazardous Substance" shall mean any hazardous substance, hazardous or ------------------- toxic waste, hazardous material, pollutant or contaminant, as those or similar terms are used in the Environmental Laws and shall include, without limitation, asbestos and asbestos-related products, chlorofluorocarbons, oils or petroleum- derived compounds, polychlorinated biphenyls, pesticides and radon. "Holdings" shall mean CCA Holdings Corp., a Delaware corporation. -------- "Indebtedness" shall mean, with respect to any Person, without duplication, ------------ the sum of (a) all items, which, in accordance with GAAP, would be included in determining total liabilities as shown on the liability side of a balance sheet of such Person, except (i) accounts payable which by their terms are less than sixty (60) days past due or which are being contested in good faith and as to which adequate reserves shall have been set aside in accordance with GAAP, if any such reserves are so required to be set aside in accordance with GAAP, (ii) items of -11- stockholders' equity or capital stock or surplus, or (iii) items of general contingency or deferred tax reserves, (b) all direct or indirect obligations secured by any Lien to which any property or asset owned by such Person is subject (but if the obligation secured thereby shall not have been assumed, then only to the extent of the higher of the fair market value or the book value of the property or asset subject to such Lien), (c) all Capitalized Lease Obligations of such Person and all obligations of such Person with respect to leases constituting part of a sale and lease-back arrangement, (d) all reimbursement obligations with respect to outstanding letters of credit, and (e) all obligations of such Person under Interest Rate Hedge Agreements. "Indebtedness for Money Borrowed" shall mean, with respect to any Person, ------------------------------- money borrowed and Indebtedness represented by notes payable and drafts accepted representing extensions of credit, all obligations evidenced by bonds, debentures, notes or other similar instruments, all Indebtedness upon which interest charges are customarily paid, and all Indebtedness issued or assumed as full or partial payment for property or services, whether or not any such notes, drafts, obligations or Indebtedness represent Indebtedness for money borrowed. For purposes of this definition, interest which is accrued but not paid on the original due date for such interest shall be deemed Indebtedness for Money Borrowed. Where obligations are evidenced by bonds, debentures, notes or other similar instruments whose face amount exceeds the amount received by such Person with respect thereto, only the amount received plus debt discount amortized as of the calculation date need be taken into account as Indebtedness for Money Borrowed. "Interest Expense" shall mean, for any period, the aggregate amount of all ---------------- interest paid or accrued, as well as fees payable to the Agents and the Banks hereunder, in respect of Indebtedness for Money Borrowed and the portion of payments under Capitalized Lease Obligations which constitutes imputed interest, in each case, of the Borrower and its Subsidiaries on a consolidated basis during such period as determined in accordance with GAAP. "Interest Period" shall mean, (a) in connection with any Base Rate Advance, --------------- the period beginning on the date of such Advance is made and ending on the last day of the quarter (based upon quarters ending December 31, March 31, June 30, and September 30) in which such Advance is made, provided, however, that if a Base Rate Advance is made on the last day of any such quarter, it shall have an Interest Period ending on, and its Payment Date shall be, the last day of the following such quarter (based upon quarters ending December 31, March 31, June 30, and September 30); and (b) in connection with any Fixed Advance, the term of such Advance selected by the Borrower or otherwise -12- determined in accordance with this Agreement. Notwithstanding the foregoing, however, (i) any applicable Interest Period which would otherwise end on a day which is not a Business Day shall be extended to the next succeeding Business Day unless, with respect to LIBOR Advances only, such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day, (ii) any applicable Interest Period, with respect to LIBOR Advances only, which begins on a day for which there is no numerically corresponding day in the calendar month during which such Interest Period is to end shall (subject to clause (i) above) end on the last day of such calendar month, and (iii) no Interest Period shall extend beyond the Maturity Date or such earlier date as would cause the Borrower to incur reimbursement obligations under Section 2.10 hereof in light of the Borrower's scheduled repayment obligations under Sections 2.5 and 2.7 hereof. Interest shall be due and payable with respect to any Advance as provided in Section 2.3 hereof. "Interest Rate Basis" shall mean the Base Rate Basis, the LIBOR Basis, or ------------------- the CD Rate Basis, as appropriate. "Interest Rate Hedge Agreement" shall mean the obligations of any Person ----------------------------- pursuant to any arrangement with any other Person whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such other Person calculated by applying a fixed or a floating rate of interest on the same notional amount and shall also include, without limitation, interest rate swaps, caps, swaptions, captions, floors, collars and similar agreements. "ISDA" shall mean the International Swap Dealers Association. ---- "Kelso" shall mean Kelso & Company, L.P., a Delaware limited partnership. ----- "Leverage Ratio" shall mean the ratio of Total Debt as of a specified date -------------- to Annualized Operating Cash Flow for the most recent fiscal quarter for which financial statements are required to have been delivered pursuant to Section 6.1 hereof. "LIBOR" shall mean, for any Interest Period, the average (rounded upward to ----- the nearest one-sixteenth (1/16th) of one percent) of the interest rates per annum at which deposits in United States dollars for such Interest Period are offered to the Reference Banks, in the London interbank borrowing market at approximately 11:00 a.m. (London time), two (2) Business Days -13- before the first day of such Interest Period, in an amount approximately equal to the principal amount of, and for a length of time approximately equal to the Interest Period for, the LIBOR Advance sought by the Borrower. "LIBOR Advance" shall mean an Advance which the Borrower requests to be ------------- made as a LIBOR Advance or which is reborrowed as a LIBOR Advance, in accordance with the provisions of Section 2.2 hereof, and which shall be in a principal amount of at least $1,000,000 and in an integral multiple of $100,000. "LIBOR Basis" shall mean a simple per annum interest rate equal to the sum ----------- of (a) the quotient of (i) LIBOR divided by (ii) one minus the LIBOR Reserve Percentage, stated as a decimal, plus (b) the Applicable Margin. The LIBOR Basis shall apply to Interest Periods of one (1), two (2), three (3), six (6), nine (9) and, subject to availability as determined by the Administrative Agent, twelve (12) months and, once determined, shall remain unchanged during the applicable Interest Period, except for changes to reflect adjustments in the LIBOR Reserve Percentage and the Applicable Margin. "LIBOR Reserve Percentage" shall mean the percentage which is in effect ------------------------ from time to time under Regulation D of the Board of Governors of the Federal Reserve System, as such regulation may be amended from time to time, as the maximum reserve requirement applicable with respect to Eurocurrency Liabilities (as that term is defined in Regulation D), whether or not any Bank has any Eurocurrency Liabilities subject to such reserve requirement at that time. The LIBOR Basis for any LIBOR Advance shall be adjusted as of the effective date of any change in the LIBOR Reserve Percentage. "Licenses" shall mean any rights, whether based upon any agreement, -------- statute, ordinance or otherwise, granted by any governmental authority to the Borrower or any of its Subsidiaries to own and operate cable television systems, described as of the Agreement Date on Schedule 1 attached hereto, and any other ---------- such rights subsequently obtained by the Borrower or any of its Subsidiaries, together with any amendment, modification or replacement with respect thereto. "Lien" shall mean, with respect to any property, any mortgage, lien, ---- pledge, assignment, charge, security interest, title retention agreement, levy, execution, seizure, attachment, garnishment or other encumbrance of any kind in respect of such property, whether or not choate, vested or perfected. "Limited Partners" shall mean, collectively, CCT and CCELP. ---------------- -14- "Loan Documents" shall mean, without limitation, this Agreement, the Notes, -------------- the Security Documents, the Subordination of Management and Financial Advisory Fees Agreement, the Subordination Agreement, all Requests for Advances, all Interest Rate Hedge Agreements between the Borrower, on the one hand, and the Banks and the Agents, or any of them, on the other hand, and all other documents and agreements executed and delivered in connection with the making of the Loans. "Loans" shall mean, collectively, the Term Loan and the Revolving Loans. ----- "Majority Banks" shall mean, at any time, (a) if there are no Loans -------------- outstanding, Banks the total of whose Commitment Ratios equals or exceeds sixty- six and two-thirds percent (66-2/3%), or (b) if there are Loans outstanding, Banks the total of whose Loans outstanding equals or exceeds sixty-six and two- thirds percent (66-2/3%) of the total principal amount of the Loans outstanding hereunder. "Management Agreement" shall mean any management agreement between the -------------------- Manager and the Borrower or any of its Subsidiaries, whereby the Manager agrees to provide management services to the Borrower or any of its Subsidiaries regarding the daily operation of the System, including programming, development of advertising, marketing and sales programs, supervision of construction, preparation of financial reports, budgets, forecasts and reports to governmental and regulatory agencies, and liaison with federal, state and local governmental officials. "Manager" shall mean Charter Communications, Inc., a Delaware corporation, ------- or any assignee, successor or transferee manager of the System agreed to in writing by the Majority Banks. "Managing Agents" shall mean, collectively, Toronto Dominion (Texas), Inc., --------------- Chemical Bank, CIBC Inc., Credit Lyonnais Cayman Island Branch and NationsBank, N.A. (Carolinas); and "Managing Agent" shall mean any one of the foregoing -------------- Managing Agents. "Materially Adverse Effect" shall mean any materially adverse effect upon ------------------------- the business, assets, liabilities, financial condition, results of operations or business prospects of the Borrower and its Subsidiaries on a consolidated basis, taken as a whole, or upon the ability of the Borrower and its Subsidiaries to construct, operate and maintain the System, taken as a whole, or to ensure performance under the Licenses (taken as a whole), this Agreement or any other Loan Document by the Borrower and its Subsidiaries, resulting from any act, omission, situation, status, event or undertaking, either singly or taken together. -15- "Maturity Date" shall mean December 31, 2003, or such earlier date as ------------- payment of the Loans shall be due (whether by acceleration or otherwise). "Mortgage" shall mean that certain Open-End Mortgage and Security Agreement -------- of even date herewith given by the Borrower in favor of the Administrative Agent, for itself and for the benefit of the Banks and the other Agents. "Multiemployer Plan" shall have the meaning set forth in Section 4001(a)(3) ------------------ of ERISA. "Necessary Authorizations" shall mean all material approvals and licenses ------------------------ from, and all material filings and registrations with, any governmental or other regulatory authority, including, without limiting the foregoing, the Licenses and all material approvals, licenses, filings and registrations under the Federal Communications Act of 1934, necessary in order to enable the Borrower and its Subsidiaries to acquire, construct, maintain and operate the System. "Net Income" shall mean, as applied to any Person for any fiscal period, ---------- the aggregate amount of net income (or net loss) of such Person, after taxes, for such period as determined in accordance with GAAP. "Net Proceeds" shall mean, with respect to any sale, lease, transfer, or ------------ other disposition of the assets of the Borrower or any of its Subsidiaries permitted hereunder, the gross cash sales price for the assets being sold, leased, transferred or otherwise disposed of (including, without limitation, any payments received for non-competition covenants), net of (a) amounts reserved, if any, for Tax Distributions payable with respect to the sale after the application of any available losses, credits, or other offsets, (b) reasonable and customary transaction costs payable by the Borrower or any of its Subsidiaries, (c) contingencies with respect to such sale, lease, transfer or other disposition appropriately reserved for by the Borrower or any of its Subsidiaries, and (d) until actually received by the Borrower or any of its Subsidiaries, any portion of the sales price held in escrow or paid in installments. "Notes" shall mean, collectively, the Term Loan Notes and the Revolving ----- Loan Notes. "Obligations" shall mean (a) all payment and performance obligations of the ----------- Borrower and its Subsidiaries to the Banks, and the Agents under this Agreement and the other Loan Documents, as they may be amended from time to time, or as a result of making the Loans, (b) all payment and performance obligations of -16- all obligors (other than the Borrower and its Subsidiaries) to the Banks and the Agents under the Loan Documents, as they may be amended from time to time, and (c) the obligation to pay an amount equal to the amount of any and all damage which the Banks and the Agents, or any of them, may suffer by reason of a breach by the Borrower, any of its Subsidiaries, or any other obligor of any obligation, covenant or undertaking with respect to this Agreement or any other Loan Document. "Operating Cash Flow" shall mean, for the Borrower and its Subsidiaries on ------------------- a consolidated basis in respect of any quarterly or annual period, as applicable, without duplication, the remainder of (a) the sum of Net Income, plus, to the extent deducted in calculating Net Income, (i) Interest Expense, (ii) depreciation, (iii) amortization, (iv) management fees and expenses paid in cash to the Manager pursuant to the Management Agreement, (v) financial advisory fees and expenses paid in cash to Kelso pursuant to the Financial Advisory Agreement, (vi) income tax expense and (vii) other non-cash items, less (b) extraordinary income, all as determined in accordance with GAAP. If the Borrower or any of its Subsidiaries acquires (or disposes of) cable television systems during a fiscal period, Operating Cash Flow for that period shall be determined as if the systems so acquired (or disposed of) had been acquired (or disposed of) on the first day of such fiscal period, and the operating results of any acquired system for that portion of any fiscal period in which it was not owned by the Borrower or any of its Subsidiaries shall be determined by reference to financial information prepared by the prior owners thereof, subject to such adjustments as the Managing Agents may reasonably require. "Partners" shall mean, collectively, the General Partner and the Limited -------- Partners, the only partners of the Borrower. "Payment Date" shall mean the last day of any Interest Period. ------------ "Permitted Asset Swap" shall mean the exchange (whether effected pursuant -------------------- to a sale of stock or assets or otherwise) by the Borrower and its Subsidiaries of (a) that portion of the System located in the State of Connecticut in return for (b) cable television assets located in, or in geographical areas contiguous to, St. Louis, Missouri (other than those then owned by the Borrower or any of its Subsidiaries) or all or any substantial part of the ownership interests of any Person or Persons owning such St. Louis, Missouri cable television assets, pursuant to terms which are reasonably satisfactory to the Managing Agents. "Permitted Liens" shall mean, as applied to any Person: --------------- -17- (a) any Lien in favor of the Administrative Agent or any Bank or other Agent given to secure the Obligations; (b) (i) Liens on real estate for real estate taxes not yet delinquent and (ii) Liens for taxes, assessments, judgments, governmental charges or levies or claims the non-payment of which is being diligently contested in good faith by appropriate proceedings and for which adequate reserves have been set aside on such Person's books, but only so long as no foreclosure, distraint, sale or similar proceedings have been commenced with respect thereto and remain unstayed for a period of thirty (30) days after their commencement; (c) Liens of carriers, warehousemen, mechanics, laborers and materialmen incurred in the ordinary course of business for sums not yet due or being diligently contested in good faith, if such reserve or appropriate provision, if any, as shall be required by GAAP shall have been made therefor; (d) Liens incurred in the ordinary course of business in connection with worker's compensation and unemployment insurance; (e) Restrictions on the transfer of assets imposed by any of the Licenses as presently in effect or by the Federal Communications Act of 1934 and any regulations thereunder; (f) Liens created under Pole Agreements on cables and other property affixed to transmission poles; (g) Easements, rights-of-way, restrictions and other similar encumbrances on the use of real property which do not materially interfere with the ordinary conduct of the business of such person, or Liens incidental to the conduct of the business of such Person or to the ownership of its properties which were not incurred in connection with Indebtedness or other extensions of credit and which do not in the aggregate materially detract from the value of such properties or materially impair their use in the operation of the business of such Person; and (h) Liens securing Indebtedness permitted under Section 7.1(e) hereof to the extent incurred in connection with the acquisition of any property or assets by the Borrower or any of its Subsidiaries permitted hereunder, and Liens securing Capitalized Lease Obligations permitted under Section 7.1(c) hereof; provided, that - -------- (1) such Lien shall attach only to the property or asset acquired in such transaction and shall not extend -19- to or cover any other assets or properties of the Borrower or any of its Subsidiaries; and (2) the Indebtedness secured or covered by such Lien shall not exceed the cost of the asset or property acquired and shall not be renewed or extended by the Borrower or any of its Subsidiaries. "Person" shall mean an individual, corporation, partnership, limited ------ liability company, trust or unincorporated organization, or a government or any agency or political subdivision thereof. "Plan" shall mean an employee benefit plan within the meaning of Section ---- 3(3) of ERISA maintained for employees of any Person or any affiliate of such Person. "Pole Agreements" shall mean the agreements between the Borrower or any of --------------- its Subsidiaries and the parties referred to in Schedule 2 to this Agreement, as ---------- more particularly described therein, and any other agreement entered into by the Borrower or any of its Subsidiaries permitting the Borrower or any of its Subsidiaries to make use of the transmission poles or conduits of such parties in distributing its cable television signals. Schedule 2 attached hereto sets ---------- forth a description of all Pole Agreements in effect on the Agreement Date as to which payments scheduled to be made by the Borrower or any of its Subsidiaries during the term of this Agreement exceed $50,000 in the aggregate. "Prior Loan Agreement" shall have the meaning ascribed thereto in the -------------------- recitals to this Agreement. "Pro Forma Debt Service" shall mean, with respect to the Borrower and its ---------------------- Subsidiaries on a consolidated basis for the next succeeding four (4) calendar quarters following the calculation date, the sum, without duplication, of (a) cash Interest Expense for such period, (b) scheduled payments of principal during such period in respect of the Loans required to be paid pursuant to Sections 2.5(a) and 2.7(a) hereof or in respect of any other Indebtedness for Money Borrowed and the principal component of payments for such period in respect of Capitalized Lease Obligations, (c) management fees and expenses anticipated to be paid in cash to the Manager during such period pursuant to the Management Agreement, (d) financial advisory fees and expenses anticipated to be paid in cash to Kelso during such period pursuant to the Financial Advisory Agreement, and (e) fees payable during such period in respect of Indebtedness for Money Borrowed. For purposes of calculating Pro Forma Debt Service hereunder, when interest payments for the four-quarter period immediately succeeding the calculation date are not fixed by way -19- of Interest Rate Hedge Agreements, Fixed Rate Advances, or otherwise for the entire period, interest shall be calculated on such Indebtedness for Money Borrowed for periods for which interest payments are not so fixed at the LIBOR Basis (based on the then current adjustment under Section 2.3(g) hereof) for a LIBOR Advance having an Interest Period of three (3) months as determined on the date of calculation; provided, however, that if such LIBOR Basis cannot be -------- ------- determined in the reasonable opinion of the Administrative Agent, such interest shall be calculated using the Base Rate Basis as then in effect. "Purchase Agreement" shall mean that certain Stock Purchase Agreement dated ------------------ as of July 1, 1994, as amended, among HC Crown Corp., a Delaware corporation, CM Acquisition Corp., a Delaware corporation, Marcus Cable Partners, L.P., a Delaware limited partnership, Charter Communications, Inc., a Delaware corporation, the General Partner, and Charter Communications II, L.P., a Delaware limited partnership, together with every exhibit, appendix and schedule thereto. "Reference Banks" shall mean The Toronto-Dominion Bank, Credit Lyonnais --------------- Cayman Island Branch, and Chemical Bank. "Reportable Event" shall have the meaning set forth in Title IV of ERISA. ---------------- "Request for Advance" shall mean any certificate signed by an Authorized ------------------- Signatory of the Borrower requesting an Advance hereunder, which certificate shall be denominated a "Request for Advance," and shall be in substantially the form of Exhibit D attached hereto. Each Request for Advance shall, among other --------- things, (a) specify the date of the Advance, which shall be a Business Day, the amount of the Advance, the type of Advance and, with respect to Fixed Rate Advances, the Interest Period selected by the Borrower, (b) specify the Commitment under which the Advance is to be made, (c) state that there shall not exist, on the date of the requested Advance and after giving effect thereto, a Default, and (d) specify the use of the proceeds of the Loans being requested. "Restricted Payment" shall mean (a) any direct or indirect distribution, ------------------ dividend or other payment to any Person on account of any capital stock, general or limited partnership interest, or other ownership interest (whether common or preferred) in, or other equity securities of, the Borrower or any of its Subsidiaries or in connection with any tax sharing agreement, including, without limitation, Tax Distributions; and (b) any management, consulting, advisory, search, acquisition or other similar fees or payments, or any interest thereon, payable by the Borrower or any of its Subsidiaries to any Affiliate or to any -20- other Person, including but not limited to payments to the Manager under the Management Agreement and payments to Kelso under the Financial Advisory Agreement. "Restricted Purchase" shall mean any payment on account of the purchase, ------------------- redemption or other acquisition or retirement of any capital stock, general or limited partnership interest, or other ownership interest in, or other securities of, the Borrower or any of its Subsidiaries. "Revolving Loan Commitment" shall mean the several obligations of the Banks ------------------------- issuing a Revolving Loan Commitment to advance the sum of up to $20,000,000 at any one time outstanding, in accordance with their respective Commitment Ratios, to the Borrower pursuant to the terms hereof, as such obligations may be reduced from time to time pursuant to the terms hereof. "Revolving Loan Notes" shall mean those certain amended and restated -------------------- revolving promissory notes in the aggregate principal amount of $20,000,000, one such note issued to each of the Banks having a Revolving Loan Commitment hereunder by the Borrower, each one substantially in the form of Exhibit E --------- attached hereto, and any extensions, renewals, amendments or substitutions to any of the foregoing. "Revolving Loans" shall mean, collectively, the amounts advanced by the --------------- Banks issuing a Revolving Loan Commitment to the Borrower under the Revolving Loan Commitment, not to exceed the amount of the Revolving Loan Commitment, and evidenced by the Revolving Loan Notes. "Security Agreement" shall mean that certain Security Agreement of even ------------------ date by and between the Borrower and the Administrative Agent, for itself and on behalf of the Banks and the other Agents, in substantially the form of Exhibit F --------- attached hereto. "Security Documents" shall mean the Security Agreement, the Assignment of ------------------ Rights by General Partner, the Assignment of Rights by Limited Partner, the Mortgage, any other agreement or instrument providing collateral for the Obligations whether now or hereafter in existence, and any filings, instruments, agreements, and documents related thereto or to this Agreement, and providing collateral for the Obligations. "Security Interest" shall mean all Liens in favor of the Administrative ----------------- Agent for itself and on behalf of the Banks and the other Agents created under this Agreement or any of the Security Documents to secure the Obligations. -21- "Subordination Agreement" shall mean that certain Subordination Agreement ----------------------- dated as of January 18, 1995, by and among the Agents, the Banks, Holdings and HC Crown Corp., a Delaware corporation, in the form of Exhibit G attached --------- hereto. "Subordination of Management and Financial Advisory Fees Agreement" shall ----------------------------------------------------------------- mean that certain Subordination of Management and Financial Advisory Fees Agreement of even date herewith by and among the Manager, Kelso and the Administrative Agent, for itself and on behalf of the Banks and the other Agents, substantially in the form attached hereto as Exhibit H. --------- "Subsidiary" shall mean, as applied to any Person, (a) any corporation of ---------- which fifty percent (50%) or more of the outstanding stock (other than directors' qualifying shares) having ordinary voting power to elect a majority of its board of directors, regardless of the existence at the time of a right of the holders of any class or classes of securities of such corporation to exercise such voting power by reason of the happening of any contingency, or any partnership of which fifty percent (50%) or more of the outstanding partnership interests, is at the time owned by such Person, or by one or more Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person, and (b) any other entity which is controlled or susceptible to being controlled by such Person, or by one or more Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person. Unless the context otherwise requires, "Subsidiaries" as used herein shall mean the Subsidiaries of the ------------ Borrower. The Subsidiaries of the Borrower as of the Agreement Date are set forth on Schedule 3 attached hereto. ---------- "System" shall mean, collectively, those certain cable systems and other ------ assets described as the "Missouri/Connecticut System" under the Purchase Agreement, together with any other cable television systems acquired by the General Partner or Cencom on or prior to the Agreement Date or hereafter acquired by the Borrower or any of its Subsidiaries in accordance with the terms and conditions of this Agreement. "Tax Distributions" shall mean all amounts distributed in cash by the ----------------- Borrower to the Partners to pay the Federal and state income tax liability of the Partners (or their indirect or direct partners or shareholders who are ultimately liable for such taxes) on the earnings of the Borrower and its Subsidiaries, and any state franchise taxes with respect to the Borrower or any of its Subsidiaries, after giving effect to all available losses, offsets, credits, or other tax benefits; provided, however, the amount of such -------- ------- distributions shall not exceed the actual aggregate tax liability (including estimated taxes) of such -22- Persons generated as a result of the Borrower's and its Subsidiaries' earnings or the aggregate amount of such franchise taxes, as applicable, and shall be distributed to the Partners no later than thirty (30) days after such taxes have been paid by any such Persons. "Taxes" shall have the meaning ascribed to such term in Section 2.9(b) ----- hereof. "Term Loan" shall mean, collectively, the amounts advanced by the Banks --------- issuing a Term Loan Commitment to the General Partner on January 18, 1995 under the Term Loan Commitment in an aggregate principal amount equal to the Term Loan Commitment, which "Term Loan" is hereby assumed by the Borrower as of the Agreement Date and which is evidenced by the Term Loan Notes. "Term Loan Commitment" shall mean the several obligations of the Banks -------------------- issuing a Term Loan Commitment to advance the sum of $280,000,000 to the General Partner on January 18, 1995, in accordance with their respective Commitment Ratios pursuant to the terms of the Prior Loan Agreement. "Term Loan Notes" shall mean those certain amended and restated term --------------- promissory notes in the aggregate principal amount of $280,000,000, one such note issued to each of the Banks having a Term Loan Commitment by the Borrower, each one substantially in the form of Exhibit I attached hereto, and any --------- extensions, renewals, amendments or substitutions to any of the foregoing. "Total Debt" shall mean, for the Borrower and its Subsidiaries on a ---------- consolidated basis as of any date, the sum of (a) Indebtedness for Money Borrowed, plus (b) Capitalized Lease Obligations, plus (c) all reimbursement obligations with respect to outstanding letters of credit, plus (d) all obligations under Guaranties in respect of Indebtedness for Money Borrowed and Capitalized Lease Obligations of any other Person. "Upstream Dividends" shall have the meaning ascribed to such term in ------------------ Section 7.16 hereof. Each definition of an agreement in this Article 1 shall include such agreement as amended from time to time (with, to the extent required hereunder, the prior written consent of the Banks or the Majority Banks, as provided in Section 11.12 hereof). -23- ARTICLE 2 Loans ----- Section 2.1 The Loans. --------- (a) Term Loans. The Banks who issued a Term Loan Commitment agreed ---------- to lend to the General Partner, on January 18, 1995, an amount not to exceed, in the aggregate, the amount of the Term Loan Commitment. The Borrower hereby assumes all of the "Obligations" of the General Partner which were previously assumed by CCELP, as such term is defined under the Prior Loan Agreement, including, without limitation, all obligations of the General Partner with respect to "Advances" outstanding under the "Term Loan" (as such terms are defined in the Prior Loan Agreement). For all purposes hereafter, all such "Advances" under the "Term Loan" under the Prior Loan Agreement shall be deemed to have been made to the Borrower as Advances of the Term Loan hereunder and shall constitute a portion of the Obligations. Advances under the Term Loan Commitment may be repaid and reborrowed as provided in Section 2.2(b), Section 2.2(c) and Section 2.2(d) hereof in order to effect changes in the Interest Rate Bases applicable to the Advances thereunder, provided, however, that there shall be no net increase in the aggregate principal amount outstanding under the Term Loan Commitment. (b) Revolving Loans. The Banks who have issued a Revolving Loan --------------- Commitment agree, severally in accordance with their respective Commitment Ratios relating to the Revolving Loan Commitment and not jointly, upon the terms and subject to the conditions of this Agreement, to lend and relend to the Borrower from time to time amounts which do not exceed in the aggregate at any one time outstanding the amount of the Revolving Loan Commitment as in effect from time to time. The Borrower hereby assumes all "Obligations" of the General Partner which were previously assumed by CCELP in respect of "Advances" outstanding under the "Revolving Loan Commitment" (as such terms are defined in the Prior Loan Agreement). For all purposes hereafter, all such outstanding "Advances" shall be deemed to have been made to the Borrower as Advances under the Revolving Loan Commitment hereunder and shall constitute a portion of the Obligations. Advances under the Revolving Loan Commitment may be repaid and then reborrowed as provided in Section 2.2(b), Section 2.2(c) and Section 2.2(d). -24- Section 2.2 Manner of Borrowing and Disbursement. ------------------------------------ (a) Choice of Interest Rate, Etc. Any Advance shall, at the option ---------------------------- of the Borrower as provided in Section 2.2 hereof, be made as a Base Rate Advance, a LIBOR Advance or a CD Rate Advance; provided, however, that the -------- ------- Borrower may not receive a Fixed Rate Advance after the occurrence and during the continuance of a Default hereunder. Fixed Rate Advances shall in all cases be subject to Section 2.3(f) and Article 10 hereof. Any notice given to the Administrative Agent in connection with a requested Advance hereunder shall be given to the Administrative Agent prior to 11:00 a.m. (Houston, Texas time) in order for such Business Day to count toward the minimum number of Business Days required. (b) Base Rate Advances. ------------------ (i) Advances. The Borrower shall give the Administrative Agent -------- in the case of Base Rate Advances at least one (1) Business Day's irrevocable written notice in the form of a Request for Advance, or telecopied notice followed immediately by an original Request for Advance; provided, however, that the Borrower's failure to confirm any telecopied -------- ------- notice with an original Request for Advance shall not invalidate any notice so given. (ii) Repayments and Reborrowings. Subject to the provisions of --------------------------- Section 2.3(f) hereof, the Borrower may repay or prepay a Base Rate Advance without regard to its Payment Date and (i) upon at least one (1) Business Day's irrevocable prior written notice to the Administrative Agent, reborrow all or a portion of the principal amount thereof as one or more Base Rate Advances, (ii) upon at least three (3) Business Days' irrevocable prior written notice to the Administrative Agent, reborrow all or a portion of the principal thereof as one or more Fixed Rate Advances, or (iii) not reborrow all or any portion of such Base Rate Advance. On the date indicated by the Borrower, such Base Rate Advance shall be so repaid and, as applicable, reborrowed. (c) LIBOR Advances. -------------- (i) Advances. Upon request, the Administrative Agent, whose -------- determination shall be conclusive, shall determine the available LIBOR Bases and shall notify the Borrower of such LIBOR Bases. The Borrower shall give the Administrative Agent in the case of LIBOR Advances at least three (3) Business Days' irrevocable written notice in the form of a Request for Advance, or telecopied notice followed -25- immediately by an original Request for Advance; provided, however, that the -------- ------- Borrower's failure to confirm any telecopied notice with an original Request for Advance shall not invalidate any notice so given. Upon receipt of such notice from the Borrower, the Administrative Agent shall promptly notify each Bank by telephone or telecopy of the contents thereof. (ii) Repayments and Reborrowings. At least three (3) Business --------------------------- Days prior to each Payment Date for a LIBOR Advance, the Borrower shall give the Administrative Agent written notice specifying whether all or a portion of any LIBOR Advance outstanding on the Payment Date (i) is to be repaid and then reborrowed in whole or in part as a LIBOR Advance, (ii) is to be repaid and then reborrowed in whole or in part as a CD Rate Advance, (iii) is to be repaid and then reborrowed in whole or in part as one or more Base Rate Advances, or (iv) is to be repaid and not reborrowed. Upon such Payment Date such LIBOR Advance will, subject to the provisions hereof, be so repaid and, as applicable, reborrowed. (d) CD Rate Advances. ---------------- (i) Advances. Upon request, the Administrative Agent, whose -------- determination shall be conclusive, shall determine the available CD Rate Bases and shall notify the Borrower of such CD Rate Bases. The Borrower shall give the Administrative Agent in the case of CD Rate Advances at least three (3) Business Days' irrevocable written notice in the form of a Request for Advance, or telecopied notice followed immediately by an original Request for Advance; provided, however, that the Borrower's -------- ------- failure to confirm any telecopied notice with an original Request for Advance shall not invalidate any notice so given. Upon receipt of such notice from the Borrower, the Administrative Agent shall promptly notify each Bank by telephone or telecopy of the contents thereof. (ii) Repayments and Reborrowings. At least three (3) Business --------------------------- Days prior to each Payment Date for a CD Rate Advance, the Borrower shall give the Administrative Agent written notice specifying whether all or a portion of any CD Rate Advance outstanding on the Payment Date (i) is to be repaid and then reborrowed in whole or in part as a CD Rate Advance, (ii) is to be repaid and then reborrowed in whole or in part as a LIBOR Advance, (iii) is to be repaid and then reborrowed in whole or in part as one or more Base Rate Advances, or (iv) is to be repaid and not reborrowed. Upon such Payment Date such CD Rate Advance will, subject to the -26- provisions hereof, be so repaid and, as applicable, reborrowed. (e) Notification of Banks. Upon receipt of a Request for Advance, or --------------------- a notice from the Borrower with respect to any outstanding Advance prior to the Payment Date for such Advance, the Administrative Agent shall notify each Bank by telephone or telecopy of the contents thereof and the amount of such Bank's portion of the Advance on the same day such Request for Advance or notice is received by the Administrative Agent, provided that such Request for Advance or notice is received by the Administrative Agent prior to 11:00 a.m. (Houston, Texas time). Each Bank shall, not later than 12:00 noon (Houston, Texas time) on the date specified in such notice, make available to the Administrative Agent at the Administrative Agent's Office, or at such account as the Administrative Agent shall designate, the amount of its portion of the Advance in immediately available funds. (f) Disbursement. Prior to 1:00 p.m. (Houston, Texas time) on the ------------ date of an Advance hereunder, the Administrative Agent shall, subject to the satisfaction of the conditions set forth in Article 3, disburse the amounts made available to the Administrative Agent by the Banks (or as otherwise provided below) in like funds by (i) transferring the amounts so made available (or as otherwise provided below) by wire transfer pursuant to the Borrower's instructions, or (ii) in the absence of such instructions, crediting the amounts so made available (or as otherwise provided below) to the account of the Borrower maintained with the Administrative Agent. Unless the Administrative Agent shall have received notice from a Bank prior to the date of any borrowing that such Bank will not make available to the Administrative Agent such Bank's ratable portion of such borrowing, the Administrative Agent may assume that such Bank has made such portion available to the Administrative Agent on the date of such borrowing and the Administrative Agent may, in its sole discretion and in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent such Bank shall not have so made such ratable portion available to the Administrative Agent, such Bank agrees to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at the Federal Funds Rate for three (3) Business Days and thereafter at the Base Rate. If such Bank shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Bank's Loan as part of such borrowing for purposes of this Agreement. If such Bank does not repay such corresponding amount immediately -27- upon the Administrative Agent's demand therefor, the Administrative Agent shall notify the Borrower and the Borrower shall immediately pay such corresponding amount to the Administrative Agent. The failure of any Bank to make the Loan to be made by it as part of any borrowing shall not relieve any other Bank of its obligation, if any, hereunder to make its Loan on the date of such borrowing, but no Bank shall be responsible for any such failure of any other Bank. In the event that, at any time when the Borrower is not in Default and the conditions to borrowing set forth in Sections 3.1 and 3.2 hereof, as applicable, have been satisfied, a Bank for any reason fails or refuses to fund its portion of an Advance, then, until such time as such Bank has funded its portion of such Advance (which late funding shall not absolve such Bank from any liability it may have to the Borrower), or all other Banks have received payment in full from the Borrower (whether by repayment or prepayment) or otherwise of the principal and interest due in respect of such Advance, such non-funding Bank shall not have the right (A) to vote regarding any issue on which voting is required or advisable under this Agreement or any other Loan Document, and the amount of the Loans of such Bank shall not be counted as outstanding for purposes of determining "Majority Banks" hereunder, and (B) to receive payments of principal, interest or fees from the Borrower, the Administrative Agent or the other Banks in respect of its Loans. Section 2.3 Interest. -------- (a) On Base Rate Advances. Interest on each Base Rate Advance shall --------------------- be computed on the basis of a year of 365/366 days for the actual number of days elapsed and shall be payable at the Base Rate Basis for such Advance on the applicable Payment Date. Interest on Base Rate Advances then outstanding shall also be due and payable on the Maturity Date. (b) On LIBOR Advances. Interest on each LIBOR Advance shall be ----------------- computed on the basis of a 360-day year for the actual number of days elapsed and shall be payable at the LIBOR Basis for such Advance in arrears on the applicable Payment Date, and, in addition, if the Interest Period for a LIBOR Advance exceeds three (3) months, interest on such LIBOR Advance shall also be due and payable in arrears on each three-month anniversary of the date of such LIBOR Advance during such Interest Period. Interest on LIBOR Advances then outstanding shall also be due and payable on the Maturity Date. (c) On CD Rate Advances. Interest on each CD Rate Advance shall be ------------------- computed on the basis of a 360-day year for the actual number of days elapsed and shall be payable at the CD Rate Basis for such Advance in arrears on the applicable Payment Date, -28- and, in addition, if the Interest Period for a CD Rate Advance exceeds ninety (90) days, interest on such CD Rate Advance shall also be due and payable in arrears on every ninetieth day anniversary of the date of such CD Rate Advance during such Interest Period. Interest on CD Rate Advances then outstanding shall also be due and payable on the Maturity Date. (d) Interest if no Notice of Selection of Interest Rate Basis. If the --------------------------------------------------------- Borrower fails to give the Administrative Agent timely notice of its selection of a LIBOR Basis or a CD Rate Basis, or if for any reason a determination of a LIBOR Basis or a CD Rate Basis for any Advance is not timely concluded and the Administrative Agent has used reasonable efforts to make such determination, the Base Rate Basis shall apply to such Advance. (e) Interest Upon Default. Immediately upon the occurrence and during --------------------- the continuance of an Event of Default, interest on the outstanding principal balance of the Loans shall accrue at the Default Rate from the date of such Event of Default. Such interest shall be payable on the earlier of demand or the Maturity Date and shall accrue until the earlier of (i) waiver or cure (to the satisfaction of the Majority Banks) of the applicable Event of Default, (ii) agreement by the Majority Banks to rescind the charging of interest at the Default Rate, or (iii) payment in full of the Obligations. The Banks shall not be required to (1) accelerate the maturity of the Loans, (2) exercise any other rights or remedies under the Loan Documents, or (3) give notice to the Borrower of the decision to charge interest on the Loans at the Default Rate in accordance herewith, prior to or in conjunction with the effective date of the commencement of any accrual of interest at the Default Rate. (f) Fixed Rate Contracts. At no time may the sum of the number of -------------------- outstanding Fixed Rate Advances exceed eight (8). (g) Applicable Margin. With respect to any Advance under the Term ----------------- Loan Commitment or the Revolving Loan Commitment, the Applicable Margin shall be as set forth in the table set forth below based upon the Leverage Ratio as of the end of the most recently completed calendar quarter. Changes to the Applicable Margin shall be effective as of the second (2nd) Business Day after the day on which the financial statements are required to be delivered to the Administrative Agent and the Banks pursuant to Section 6.1 hereof; provided, -------- that, if such financial statements are not delivered to the Administrative Agent - ---- and the Banks within five (5) days after the date specified in such Section, the Leverage Ratio shall be deemed to be greater than 6.00:1, and the Applicable Margin shall be deemed to be the highest Applicable Margin set forth in the table set forth below, until the second (2nd) Business Day after the date on which such -29- financial statements are actually delivered to the Administrative Agent and the Banks. Upon its receipt of such delinquent financial statements, the Administrative Agent shall recalculate the Leverage Ratio and the Applicable Margin by reference to such financial statements, and any change in the Applicable Margin shall be effective as of the second (2nd) Business Day after the Administrative Agent's receipt thereof.
the the the Applicable Applicable Applicable Margin for Margin for Margin for If the Base Rate LIBOR CD Rate Leverage Advances Advances Advances Ratio is: then shall be and shall be and shall be -------- ---------- ---------- ---------- Greater than 6.00:1 1.375% 2.375% 2.500% Greater than 5.50:1, but less than or equal to 6.00:1 1.125% 2.125% 2.250% Greater than 5.00:1, but less than or equal to 5.50:1 0.875% 1.875% 2.000% Greater than 4.50:1, but less than or equal to 5.00:1 0.625% 1.625% 1.750% Greater than 4.00:1, but less than or equal to 4.50:1 0.375% 1.375% 1.500% Less than or equal to 4.00:1 0% 1.125% 1.250%
(h) Interest on Advances Outstanding under Prior Loan Agreement. ----------------------------------------------------------- Interest on "Advances" outstanding under the Prior Loan Agreement shall be payable to the Banks by the Borrower in accordance with the terms and conditions of the Prior Loan Agreement. Section 2.4 Commitment Fee. The Borrower agrees to pay to the Banks, in -------------- accordance with their respective Commitment Ratios, a commitment fee on the aggregate unborrowed balance of the Revolving Loan Commitment at a rate of three-eighths of one percent (3/8%) per annum for each day from the Agreement Date until the Maturity Date. Such commitment fee shall be computed on the basis of a year of 365/366 days for the actual number of days elapsed, shall be payable quarterly in arrears on each March 31, June 30, September 30 and December 31, commencing on September 29, 1995 and on the Maturity Date, and shall be fully earned when due and non-refundable when paid. The commitment fee payable under the Prior Loan Agreement shall be paid to the Banks -30- by the Borrower in accordance with the terms and conditions of the Prior Loan Agreement. Section 2.5 Revolving Loan Commitment Reductions. ------------------------------------ (a) Mandatory. Commencing March 31, 1997 and at the end of each --------- calendar quarter thereafter, the Revolving Loan Commitment as in effect on March 30, 1997 shall be automatically reduced by the percentages set forth below: Quarterly Percentage Reduction of Revolving Loan Commitment as in Dates of Reduction Effect on March 30, 1997 ------------------ ------------------------ March 31, 1997, June 30, 1997, September 30, 1997 and December 31, 1997 0.9500% March 31, 1998, June 30, 1998, September 30, 1998 and December 31, 1998 1.8000% March 31, 1999, June 30, 1999, September 30, 1999 and December 31, 1999 2.7750% March 31, 2000, June 30, 2000, September 30, 2000 and December 31, 2000 3.5750% March 31, 2001, June 30, 2001, September 30, 2001 and December 31, 2001 4.4750% March 31, 2002, June 30, 2002, September 30, 2002 and December 31, 2002 5.5250% March 31, 2003, June 30, 2003, September 30, 2003 and December 31, 2003 5.9000% The Borrower shall make a repayment of the Revolving Loans outstanding, together with accrued interest thereon, on or before the effective date of each reduction in the Revolving Loan Commitment under this Section 2.5(a), such that the aggregate principal amount of the Revolving Loans outstanding at no time exceeds the Revolving Loan Commitment as so reduced. In -31- addition, any remaining unpaid principal and interest under the Revolving Loan Commitment shall be due and payable in full on the Maturity Date. (b) Optional. The Borrower may without penalty at any time terminate -------- or permanently reduce the Revolving Loan Commitment by giving the Administrative Agent and the Banks at least ten (10) Business Days' notice thereof; provided, -------- however, that any reduction shall reduce the Revolving Loan Commitment in a - ------- principal amount of at least $1,000,000 and an integral multiple of $1,000,000. The Borrower shall make a repayment of the Loans outstanding under the Revolving Loan Commitment plus accrued interest on such outstanding Revolving Loans, together with any costs incurred on account of such repayment under Section 2.10, on or before the effective date of the reduction of the Revolving Loan Commitment, such that the principal amount of the Revolving Loans outstanding after such repayment does not exceed the Revolving Loan Commitment as so reduced. The Borrower shall not have any right to rescind any termination or reduction pursuant to this Section 2.5. Section 2.6 Prepayment. The principal amount of any Base Rate Advance ---------- may be prepaid in full or in part at any time, without penalty and without regard to the Payment Date for such Advance, upon three (3) Business Days' prior written notice to the Administrative Agent of such prepayment. Fixed Rate Advances may be prepaid prior to the applicable Payment Date, upon three (3) Business Days' prior written notice to the Administrative Agent, provided that -------- ---- the Borrower shall reimburse the Banks on the earlier of demand or the Maturity Date, for any loss or out-of-pocket expense incurred by the Banks in connection with such prepayment, as set forth in Section 2.10. Any notice of prepayment shall be irrevocable and all amounts prepaid on the Loans pursuant to Sections 2.5(b) or 2.6 hereof shall be applied to principal, in inverse order of maturity. Partial prepayments shall be in a principal amount of at least $500,000 and integral multiples of $100,000. All prepayments shall be accompanied by a payment of all accrued but unpaid interest on the principal amounts so prepaid. Upon receipt of any notice of prepayment, the Administrative Agent shall promptly notify each Bank of the contents thereof by telephone or telecopy and of such Bank's portion of the prepayment. Section 2.7 Repayment. --------- (a) Scheduled Repayments. Commencing March 31, 1997, the principal -------------------- balance of the Term Loan shall be amortized in consecutive quarterly installments on March 31, June 30, September 30, and December 31 of each year until paid in full, in such amounts as follows: -32- Percent of Principal Due on Last Day Payment Dates of Each Quarter ------------- --------------- March 31, 1997, June 30, 1997, September 30, 1997 and December 31, 1997 0.9500% March 31, 1998, June 30, 1998, September 30, 1998 and December 31, 1998 1.8000% March 31, 1999, June 30, 1999, September 30, 1999 and December 31, 1999 2.7750% March 31, 2000, June 30, 2000, September 30, 2000 and December 31, 2000 3.5750% March 31, 2001, June 30, 2001, September 30, 2001 and December 31, 2001 4.4750% March 31, 2002, June 30, 2002, September 30, 2002 and December 31, 2002 5.5250% March 31, 2003, June 30, 2003, September 30, 2003 and December 31, 2003 5.9000% A final payment of all principal amounts and other Obligations then outstanding shall be due and payable on the Maturity Date. (b) Repayments Upon Sales of Assets and Asset Swaps. Except as ----------------------------------------------- provided below with respect to Permitted Asset Swaps, in the event of any sale, lease, transfer or other disposition of assets permitted hereunder, excluding any such sale, lease, transfer or other disposition of assets by the Borrower or any of its Subsidiaries in the ordinary course of business (collectively, "Asset Sales"), to the extent that the Net Proceeds with respect thereto (when taken together with the Net Proceeds of all other Asset Sales made subsequent to the Agreement Date) are in excess of $5,000,000 in the aggregate for all Asset Sales made during the period from the Agreement Date to the Maturity Date, the Borrower shall, on the date of such sale, lease, transfer or other disposition, make a repayment of the principal of the Term Loan then outstanding in an amount equal to -33- the Net Proceeds in excess of the first $5,000,000 of all such Asset Sales. Any such Net Proceeds which constitute a portion of the sales price which was previously held in escrow or paid in installments shall be paid to the extent required by the terms hereof to the Banks as a repayment of principal at such time as such Net Proceeds are received by the Borrower. In the event the Borrower elects to enter into a Permitted Asset Swap, the Borrower shall, on the date it sells, leases, transfers or otherwise disposes of all or substantially all of its interests in the cable television system owned by the Borrower or any of its Subsidiaries in the State of Connecticut, deposit in an escrow account with the Administrative Agent an amount equal to the Net Proceeds of such sale, lease, transfer or other disposition. The amount deposited in such escrow account shall be held in such escrow account until the earlier to occur of the consummation of the Permitted Asset Swap or the first anniversary of the sale, lease, transfer or other disposition of such Connecticut assets or interests relating thereto. Amounts held in such escrow account may be invested as permitted under Section 7.6(i), (ii) and (iii) hereof, or as otherwise agreed to by the Borrower and the Administrative Agent. Net Proceeds held in escrow by the Administrative Agent may be used by the Borrower at any time prior to the first anniversary of such sale, lease, transfer or other disposition of Connecticut assets or interests to consummate a Permitted Asset Swap or to repay the principal amount of the Term Loan. All Net Proceeds remaining in escrow with the Administrative Agent pursuant to this Section 2.7(b) on such first anniversary date shall be immediately applied to repay the principal amount of the Term Loan. All amounts paid by the Borrower pursuant to this subsection shall be applied to principal of the Term Loan pro rata over the scheduled repayment schedule set forth in Section 2.7(a) above. (c) Annual Excess Cash Flow Recapture. In addition to the foregoing, --------------------------------- the Borrower agrees that on April 30, 1998 and on each April 30th thereafter during the term of this Agreement, the Borrower shall make a repayment of the principal of the Term Loan then outstanding in an amount equal to (i) seventy- five percent (75%) of Annual Excess Cash Flow for the Borrower's preceding fiscal year if the Leverage Ratio as of the end of such preceding fiscal year (but before giving effect to such repayment) is greater than or equal to 5.5:1, or (ii) fifty percent (50%) of Annual Excess Cash Flow for the Borrower's preceding fiscal year if the Leverage Ratio at the time of such payment (but before giving effect to such repayment) is less than 5.5:1, together, in any case, with accrued interest on the portion of the Term Loan so repaid. All amounts paid by the Borrower pursuant to this subsection in respect of the principal of the Term Loan shall be applied to such principal in inverse order of maturity. -34- (d) Reimbursement. In addition to any principal repayment required to ------------- be made under Section 2.5 or Sections 2.7(a), (b) or (c) hereof, the Borrower shall reimburse the Banks pursuant to Section 2.10 hereof for any loss or out- of-pocket expense incurred by the Banks in connection with such repayment. Section 2.8 Notes; Loan Accounts. -------------------- (a) The Loans shall be repayable in accordance with the terms and provisions set forth herein, and shall be evidenced by the Notes. One Term Loan Note and one Revolving Loan Note shall be payable to the order of each Bank for such Commitment, in accordance with the respective Commitment Ratio of such Bank for the applicable Commitment. The Notes shall be issued by the Borrower to each Bank and each Note shall be duly executed and delivered by the Authorized Signatories. (b) Each Bank may open and maintain on its books in the name of the Borrower one or more loan accounts with respect to the Loans and interest thereon. Each Bank which opens such loan accounts shall debit such loan accounts for the principal amount of each Advance made by it and accrued interest thereon, and shall credit such loan accounts for each payment on account of principal of or interest on its Loans. The records of a Bank with respect to the loan account maintained by it shall be prima facie evidence of ----- ----- the Loans and accrued interest thereon. Section 2.9 Manner of Payment. ----------------- (a) Each payment (including any prepayment) by the Borrower on account of the principal of or interest on the Loans, commitment fees, and any other amount owed to the Banks or the Agents under this Agreement or the other Loan Documents shall be made not later than 1:00 p.m. (Houston, Texas time) on the date specified for payment under this Agreement to the Administrative Agent at the Administrative Agent's Office, for the account of the Banks and the Agents, or any of them, as the case may be, in lawful money of the United States of America in immediately available funds. If any payment is stated to be due hereunder on the last day of any calendar or fiscal quarter and such day is not a Business Day, the due date for such payment shall be, instead, the immediately preceding Business Day in such quarter. Any payment received by the Administrative Agent after 1:00 p.m. (Houston, Texas time) shall be deemed received on the next Business Day. Receipt by the Administrative Agent of any payment intended for any Bank or any Agent hereunder prior to 1:00 p.m. (Houston, Texas time) on any Business Day shall be deemed to constitute receipt by such Bank or such Agent (as appropriate) on such Business Day. In the case of a payment for the account of a Bank or an Agent, the Administrative Agent will promptly -35- thereafter distribute the amount so received in like funds to such Bank or such Agent, as the case may be. If the Administrative Agent shall not have received any payment from the Borrower as and when due, the Administrative Agent will promptly notify the Banks accordingly. (b) The Borrower agrees to pay principal, interest, fees and all other amounts due hereunder or under the Notes or the other Loan Documents without set-off or counterclaim or any deduction whatsoever, including withholding taxes, excluding, (i) in the case of each Bank and each Agent, taxes measured by its net income, and franchise taxes imposed on it by the jurisdiction under the laws of which it is organized or any political subdivision thereof, (ii) in the case of each Bank, taxes (including, but not limited to, the Branch Profits Tax under Section 884 of the Code) measured by its net income, and franchise taxes imposed on it, by the jurisdiction of such Bank's applicable lending office or any political subdivision thereof and (iii) in the case of any Bank organized under the laws of a jurisdiction outside the United States, United States federal withholding tax payable with respect to payments by the Borrower which would not have been imposed had such Bank, to the extent then required thereunder, delivered to the Borrower and the Administrative Agent the forms prescribed by Section 2.9(d) hereof (all such non-excluded taxes being hereinafter referred to as "Taxes"). (c) Prior to the acceleration of the Loans under Section 8.2 hereof, if some but less than all amounts due from the Borrower are received by the Administrative Agent, the Administrative Agent shall distribute such amounts in the following order of priority, all in accordance where applicable with the respective Commitment Ratios of the Banks for the applicable Commitment: (i) to the costs and expenses, if any, incurred by the Administrative Agent in the collection of such amounts under this Agreement or any of the other Loan Documents; (ii) to the payment of all fees then due and payable hereunder; (iii) to the payment of interest then due and payable on the Loans; (iv) to the payment of all other amounts not otherwise referred to in this Section 2.9(c) then due and payable hereunder or under the Notes or the other Loan Documents; and (v) to the payment of principal then due on the Term Loan and then due on the Revolving Loans, which payments shall be applied against outstanding Advances in the following order of priority: (A) Advances, the Interest Period for which is expiring concurrently with such payment, (B) Base Rate Advances, (C) CD Rate Advances, and (D) LIBOR Advances. Subsequent to any acceleration of the Loans under Section 8.2 hereof, all amounts received from any source whatsoever by the Administrative Agent or any of the Banks with respect to the Borrower shall be paid to -36- and distributed by the Administrative Agent in the manner provided in Section 2.11(c) hereof. (d) Prior to the date on which any Person becomes a Bank hereunder, and from time to time thereafter if either required by law due to a change in circumstances or reasonably requested by the Borrower or the Administrative Agent (unless such Bank is unable to do so by reasons of change in law), each Bank organized under the laws of a jurisdiction outside the United States shall provide the Administrative Agent and the Borrower with an IRS Form 4224 or Form 1001 or other applicable form, certificate or document prescribed by the IRS certifying as to such Bank's entitlement to full exemption from United States withholding tax with respect to all payments to be made to such Bank hereunder and under any Note. Unless the Borrower and the Administrative Agent have received forms or other documents satisfactory to them indicating that payments hereunder or under any Note are not subject to United States withholding tax (or there is a change in law preventing delivery thereof), the Borrower or the Administrative Agent shall, in the case of payments to or for any Bank organized under the law of a jurisdiction outside the United States, (i) withhold taxes from such payments at the applicable statutory rate, or at a rate reduced by an applicable tax treaty (provided that the Borrower and the Administrative Agent have received forms or other documents satisfactory to them indicating that such reduced rate applies) and (ii) pay such Bank such payment net of any taxes withheld. To the extent that the Borrower is obligated hereunder, the Borrower shall provide evidence that such taxes of any nature whatsoever in respect of this Agreement, any Loan or any Note shall have been paid to the appropriate taxing authorities by delivery to the Bank on whose account such payment was made of the official tax receipts or notarized copies of such receipts within thirty (30) days after payment of such tax. If the Borrower fails to make any such payment when due, the Borrower shall indemnify the Banks for any incremental taxes, interest or penalties that may become payable by any Bank as a result of any such failure. Section 2.10 Reimbursement. ------------- (a) Whenever any Bank shall sustain or incur any losses or out-of- pocket expenses in connection with (i) failure by the Borrower to borrow any Fixed Rate Advance after having given notice of its intention to borrow in accordance with Section 2.2 hereof (whether by reason of the Borrower's election not to proceed or the non-fulfillment of any of the conditions set forth in Article 3 hereof), or (ii) prepayment or repayment of any Fixed Rate Advance in whole or in part (including a prepayment pursuant to Sections 10.2 and 10.3(b) hereof) prior to -37- its Payment Date, the Borrower agrees to pay to such Bank, upon the earlier of such Bank's demand or the Maturity Date, an amount sufficient to compensate such Bank for all such losses and out-of-pocket expenses. Such Bank's good faith determination of the amount of such losses or out-of-pocket expenses, absent manifest error, shall be binding and conclusive. (b) Loss subject to reimbursement hereunder shall be any loss incurred by any Bank in connection with the re-employment of funds prepaid, repaid, not borrowed, or paid, as the case may be, and the amount of such loss shall be the excess, if any, of (i) interest or other costs to such Bank of the deposit or other sources of funding used to make any such Fixed Rate Advance for the remainder of its Interest Period over (ii) the interest earned (or to be earned) by such Bank upon the re-lending or other redeployment of the amount of such Fixed Rate Advance for the remainder of its putative Interest Period. Section 2.11 Pro Rata Treatment. ------------------ (a) Advances. Each Advance from the Banks under the Revolving Loan -------- Commitment or the Term Loan Commitment shall be made pro rata on the basis of the respective Commitment Ratios of the Banks applicable to the particular Commitment. (b) Payments Prior to Declaration of Event of Default. Prior to the ------------------------------------------------- acceleration of the Loans under Section 8.2 hereof, each payment and prepayment of the Loans, and, except as provided in Article 10 hereof, each payment of interest on the Loans, shall be made to the Banks pro rata on the basis of their respective unpaid principal amounts outstanding under the applicable Commitment immediately prior to such payment or prepayment. If any Bank shall obtain any payment (whether involuntary, through the exercise of any right of set-off, or otherwise) on account of the Loans made by it in excess of its ratable share of the Loans under its Commitment Ratio for the applicable Commitment, such Bank shall forthwith purchase from the other Banks having Commitment Ratios with respect to the applicable Commitment such participations in the Loans made by them as shall be necessary to cause such purchasing Bank to share the excess payment ratably with each of them; provided, however, that if all or any portion -------- ------- of such excess payment is thereafter recovered from such purchasing Bank, such purchase from each Bank shall be rescinded and such Bank shall repay to the purchasing Bank the purchase price to the extent of such recovery. The Borrower agrees that any Bank so purchasing a participation from another Bank pursuant to this Section may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully -38- as if such Bank were the direct creditor of the Borrower in the amount of such participation. (c) Payments Subsequent to Declaration of Event of Default. ------------------------------------------------------ Subsequent to the acceleration of the Loans under Section 8.2 hereof, payments and prepayments made to the Administrative Agent, the other Agents or the Banks or otherwise received by any of them (from realization on Collateral for the Obligations or otherwise) shall be distributed as follows: first, to the ----- Administrative Agent's reasonable costs and expenses, if any, incurred in connection with the collection of such payment or prepayment, including, without limitation, any reasonable costs incurred in connection with the sale or disposition of any Collateral for the Obligations; second, to the payment of ------ fees then due and payable to the Banks and any costs and expenses, if any, incurred by any of the Banks under Section 11.2(c) hereof, pro rata on the basis of the amount of such Obligations; third, to any unpaid interest which may have ----- accrued on the Obligations, pro rata on the basis of the amount of such Obligations; fourth, to any unpaid principal of the Obligations, pro rata on the ------ basis of the amount of such Obligations; fifth, to damages incurred by the ----- Administrative Agent or any Bank by reason of any breach hereof or of any other Loan Document, pro rata on the basis of the amount of such Obligations; and sixth, upon satisfaction in full of all Obligations, to the Borrower or as - ----- otherwise required by law. Section 2.12 Capital Adequacy. If any Bank shall determine that the ---------------- adoption, after the date hereof, of any Applicable Law regarding the capital adequacy of banks or bank holding companies, or any change therein or in any Applicable Law existing as of the date hereof, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by such Bank with any request or directive regarding capital adequacy (whether or not having the force of law) of any such governmental authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Bank's capital as a consequence of its commitment of its obligations to fund or maintain Advances hereunder to a level below that which it could have achieved but for such adoption, change or compliance (taking into consideration such Bank's policies with respect to capital adequacy immediately before such adoption, change or compliance and assuming that such Bank's capital was fully utilized prior to such adoption, change or compliance) by an amount deemed by such Bank in good faith to be material, then, upon the earlier of demand by such Bank or the Maturity Date, the Borrower shall immediately pay to such Bank, such additional amounts as shall be sufficient to compensate such Bank for such reduced return, -39- together with interest on such amount from the fourth (4th) day after the date of demand or the Maturity Date, as applicable, until payment in full thereof at the Default Rate. Any Bank claiming compensation under this Section 2.12 shall notify the Borrower of any event occurring after the date of this Agreement entitling such Bank to such compensation as promptly as practicable, but in any event within forty-five (45) days, after such Bank obtains actual knowledge thereof; provided that if such Bank fails to give such notice within forty-five -------- (45) days after it obtains actual knowledge of such an event, such Bank shall, with respect to such compensation in respect of any costs resulting from such event, only be entitled to payment under the Section 2.12 for costs incurred from and after the date forty-five (45) days prior to the date that such Bank does give such notice. A certificate of such Bank setting forth the amount to be paid to such Bank by the Borrower as a result of any event referred to in this paragraph shall, absent manifest error, be conclusive, and, at the Borrower's request, such Bank shall set forth the basis for such determination. ARTICLE 3 Conditions Precedent -------------------- Section 3.1 Conditions Precedent to Initial Advance and Closing. The --------------------------------------------------- obligation of the Banks to undertake the Commitments, to permit the General Partner's assignment to CCELP, with a subsequent assignment to the Borrower of, and the Borrower's assumption of, the General Partner's "Obligations" under the Prior Loan Agreement, and to make the initial Advances hereunder is subject to the prior fulfillment of each of the following conditions: (a) The Administrative Agent or the Banks, as appropriate, shall have received each of the following, in form and substance satisfactory to the Administrative Agent and the Banks: (i) duly executed Notes; (ii) duly executed Subordination of Management and Financial Advisory Fees Agreement; iii) duly executed Security Agreement, together with appropriate UCC-1 financing statements; (iv) duly executed Mortgage, together with appropriate title insurance and related documentation; -40- (v) duly executed Assignment of Rights by General Partner, together with appropriate UCC-1 financing statements; (vi) duly executed Assignment of Rights by Limited Partner from each of the Limited Partners, together with appropriate UCC-1 financing statements; (vii) opinions or comfort letters of general counsel, FCC counsel and in-house counsel to the Borrower and its Subsidiaries, addressed to the Banks and the Administrative Agent and satisfactory to the Administrative Agent and its special counsel, dated the Agreement Date; (viii) the loan certificate of the General Partner dated as of the Agreement Date, in substantially the form attached hereto as Exhibit J, --------- including a certificate of incumbency with respect to each Authorized Signatory of the General Partner, together with appropriate attachments which shall include, without limitation, the following items: (A) a copy of the Certificate of Incorporation of the General Partner, certified to be true, complete and correct by the Delaware Secretary of State, (B) a true, complete and correct copy of the By-Laws of the General Partner, as in effect on the date hereof, (C) a true, complete and correct copy of the resolutions of the General Partner authorizing it to execute, deliver and perform this Agreement and the other Loan Documents on behalf of the Borrower, (D) certificates of good standing from appropriate jurisdictions for the General Partner, (E) true, complete and correct copies of all shareholders agreements or voting trust agreements among the shareholders of the General Partner, (F) a true, complete and correct copy of the Partnership Agreement of the Borrower as in effect on the Agreement Date, and (G) certificates of good standing for the Borrower issued by the Secretary of State or similar state official for each state in which the Borrower is required to qualify to do business; (ix) the loan certificate of the Limited Partners dated as of the Agreement Date, in substantially the form attached hereto as Exhibit K, --------- including a certificate of incumbency with respect to each authorized signatory of the CCT, together with appropriate attachments which shall include, without limitation, the following items: (A) a copy of the Certificate of Incorporation of CCT, certified to be true, complete and correct by the Delaware Secretary of State, (B) a true, complete and correct copy of the By-Laws of CCT, as in effect on the date hereof, (C) a true, complete and correct copy of the resolutions of CCT -41- authorizing it to execute, deliver and perform the Loan Documents to which the Limited Partners are party, for itself and on behalf of CCELP, (D) certificates of good standing from appropriate jurisdictions for the CCT, (E) a true, complete and correct copy of the Partnership Agreement of CCELP as in effect on the Agreement Date, and (F) certificates of good standing for CCELP issued by the Secretary of State or similar state official for each state in which the Borrower is required to qualify to do business; (x) the loan certificate of the Manager dated as of the Agreement Date, in substantially the form attached hereto as Exhibit L, --------- including a certificate of incumbency with respect to each authorized signatory of the Manager, together with appropriate attachments which shall include, without limitation, the following items: (A) a copy of the Certificate of Incorporation of the Manager, certified to be true, complete and correct by the Delaware Secretary of State, (B) a true, complete and correct copy of the By-Laws of the Manager, as in effect on the date hereof, (C) a true, complete and correct copy of the resolutions of the Manager authorizing it to execute, deliver and perform the Loan Documents to which it is party, and (D) certificates of good standing from appropriate jurisdictions for the Manager; (xi) true, complete and correct copies of the Management Agreement and the Financial Advisory Agreement; (xii) copies of all approvals or consents regarding the transfer of all franchises and contracts to the Borrower; (xiii) a duly executed Certificate of Financial Condition; (xiv) copies of insurance binders or certificates covering the assets of the Borrower and its Subsidiaries, and otherwise meeting the requirements of Section 5.5 hereof; (xv) copies of all documents related to the transfer of all assets and liabilities of the General Partner and Cencom to CCELP and the subsequent transfer of such assets and liabilities to the Borrower; (xvi) a copy of the notice to HC Crown Corp., a Delaware corporation, regarding the transactions contemplated hereby, together with all related documentation, including, without limitation, copies of all guaranties and other agreements provided or to be provided -42- to HC Crown Corp. in connection therewith and all correspondence relating thereto; (xvii) duly executed Request for Advance for any Advance of the Loans on the Agreement Date; (xviii) pro forma balance sheet with respect to the Borrower and its Subsidiaries on a consolidated basis, after giving effect to the transactions contemplated hereby, including, without limitation, the assumption by the Borrower of all obligations of the General Partner under the Prior Loan Agreement and the making of any new Advances hereunder on the Agreement Date; and (xix) all such other documents as the Administrative Agent or any Bank may reasonably request, certified by an appropriate governmental official or an Authorized Signatory if so reasonably requested. (b) The Licenses shall be in form and substance satisfactory to the Administrative Agent and the Banks, and the Administrative Agent and the Banks shall have received evidence reasonably satisfactory to them that all Necessary Authorizations, including all necessary consents to the closing of this Agreement and the transactions contemplated hereby, from the grantors of the Licenses have been obtained or made, are in full force and effect and are not subject to any pending or threatened reversal or cancellation, and the Administrative Agent and the Banks shall have received a certificate of an Authorized Signatory so stating. Section 3.2 Conditions Precedent to Each Advance. The obligation of the ------------------------------------ Banks to make each Advance, including the initial Advances under Section 3.1, is subject to the fulfillment of each of the following conditions immediately prior to or contemporaneously with such Advance: (a) All of the representations and warranties of the Borrower under this Agreement (including, without limitation, all representations and warranties with respect to the Borrower's Subsidiaries), which, pursuant to Section 4.2 hereof, are made at and as of the time of such Advance, shall be true and correct at such time in all material respects, both before and after giving effect to the making of the Advance and application of the proceeds of the Advance; (b) The incumbency of the Authorized Signatories shall be as stated in the certificate of incumbency contained in the General Partner's loan certificate delivered pursuant to Section 3.1(a) hereof or as subsequently modified and reflected -43- in a certificate of incumbency delivered to the Administrative Agent and the Banks; (c) With respect to Advances which, if funded, would increase the aggregate amount of Loans outstanding hereunder, the Administrative Agent and the Banks shall have received a duly executed Request for Advance; and (d) There shall not exist, on the date of the making of the Advance and after giving effect thereto, a Default hereunder, and, with respect to Advances which increase the outstanding principal amount of the Loans hereunder, there shall not have occurred any event which could have or which has had a Materially Adverse Effect. ARTICLE 4 Representations and Warranties ------------------------------ Section 4.1 Representations and Warranties. The Borrower hereby agrees, ------------------------------ represents and warrants to the Agents and the Banks that: (a) Organization; Ownership; Power; Qualification; Capitalization. ------------------------------------------------------------- The Borrower is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware. The Borrower has the partnership power and authority to own its properties and to carry on its business as now being and hereafter proposed to be conducted. Each Subsidiary of the Borrower is a corporation or partnership duly organized, validly existing and in good standing under the laws of the state of its incorporation or formation and has the corporate or partnership power and authority to own its properties and to carry on its business as now being and hereafter proposed to be conducted. The Borrower and each of its Subsidiaries are duly qualified, in good standing and authorized to do business in each jurisdiction in which the character of their respective properties or the nature of their respective businesses requires such qualification or authorization. The General Partner is the sole general partner of the Borrower and the Limited Partners are the sole limited partners of the Borrower. (b) Authorization; Enforceability. The Borrower has the partnership ----------------------------- power and has taken all necessary partnership action to authorize it to borrow hereunder, to execute, deliver and perform this Agreement and each of the other Loan Documents to which it is a party in accordance with their respective terms, and to consummate the transactions contemplated hereby and -44- thereby. This Agreement has been duly executed and delivered by the Borrower and is, and each of the other Loan Documents to which the Borrower is party is, a legal, valid and binding obligation of the Borrower enforceable in accordance with its terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors' rights and (b) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). (c) Subsidiaries: Authorization; Enforceability. The Borrower's -------------------------------------------- Subsidiaries and its direct and indirect ownership thereof are as set forth as of the Agreement Date on Schedule 3 attached hereto, and to the extent such ---------- Subsidiaries are corporations, the Borrower has the unrestricted right to vote the issued and outstanding shares of the Subsidiaries shown thereon; such shares of such Subsidiaries have been duly authorized and issued and are fully paid and nonassessable. Each Subsidiary of the Borrower has the corporate or partnership power and has taken all necessary corporate or partnership action to authorize it to execute, deliver and perform each of the Loan Documents to which it is a party in accordance with their respective terms and to consummate the transactions contemplated by this Agreement and by such Loan Documents. Each of the Loan Documents to which any Subsidiary of the Borrower is party is a legal, valid and binding obligation of such Subsidiary enforceable against such Subsidiary in accordance with its terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors' rights, and (b) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). (d) Compliance with Other Loan Documents and Contemplated ----------------------------------------------------- Transactions. The execution, delivery and performance, in accordance with their respective terms, by the Borrower of this Agreement, and by the Borrower and its Subsidiaries of each of the other Loan Documents to which they are respectively party, and the consummation of the transactions contemplated hereby and thereby, do not and will not (i) require any consent or approval not already obtained, (ii) violate any material Applicable Law respecting the Borrower or any Subsidiary of the Borrower, (iii) conflict with, result in a breach of, or constitute a default under the certificate or articles of incorporation, by- laws, certificate of limited partnership or partnership agreements, as the case may be, as amended, of the Borrower or of any Subsidiary of the Borrower, under the Licenses, the Management Agreement or the Financial Advisory -45- Agreement, or, in any material respect, under any material indenture, agreement, or other instrument to which the Borrower or any Subsidiary of the Borrower is a party or by which any of them or any of their respective properties may be bound, including, without limitation, the Pole Agreements, or (iv) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by the Borrower or any Subsidiary of the Borrower except Permitted Liens. (e) Business. The Borrower and its Subsidiaries are engaged primarily -------- in the business of acquiring, constructing, operating and maintaining the cable television systems owned, leased or managed by them, respectively, and of investing in other cable television systems and engaging in other activities relating to the cable television industry. (f) Licenses, etc. The Licenses have been duly authorized by the -------------- grantors thereof and are in full force and effect. The Borrower and its Subsidiaries are in compliance in all material respects with all of the provisions thereof. The Borrower and its Subsidiaries have secured all Necessary Authorizations and all such Necessary Authorizations are in full force and effect. Neither any License nor any Necessary Authorization is the subject of any pending or, to the best of the Borrower's knowledge, threatened attack or revocation. Except as described on Schedule 4 attached hereto, and except for ---------- services operating on a national or regional basis and affecting the cable television industry generally (for example, the DirecTV DBS service), there is no Person currently overbuilding any territory within the System. (g) Compliance with Law. The Borrower and its Subsidiaries are in ------------------- compliance with all Applicable Laws, non-compliance with which could have a Materially Adverse Effect. (h) Title to Assets. Except as set forth on Schedule 5 attached --------------- ---------- hereto, the Borrower has good, legal and marketable title to, or a valid leasehold interest in, all of its assets. Each of the Borrower's Subsidiaries has good, legal and marketable title to, or a valid leasehold interest in, all of its assets. To the best of the Borrower's knowledge and as disclosed on the lien searches described in Schedule 5 hereto, none of such properties or assets ---------- is subject to any Liens, except for Permitted Liens. To the best of the Borrower's knowledge and as disclosed on the lien searches described in Schedule -------- 5 hereto, no financing statement under the Uniform Commercial Code as in effect - - in any jurisdiction and no other filing which names the Borrower or any of its Subsidiaries as debtor or which covers or purports to cover any of the assets of the Borrower or any of its -46- Subsidiaries is on file in any state or other jurisdiction, and neither the Borrower nor any of its Subsidiaries has signed any such financing statement or filing or any security agreement authorizing any secured party thereunder to file any such financing statement or filing. Neither the Borrower nor any of its Subsidiaries owns any parcel of real estate with a fair market value in excess of $750,000, except as set forth on Schedule 6 attached hereto. ---------- (i) Litigation. Except as described on Schedule 7 attached hereto, ---------- ---------- there is no action, suit, proceeding or investigation pending against, or, to the best of the Borrower's knowledge, threatened against or in any other manner relating adversely to, the Borrower or any of its Subsidiaries or any of their respective properties, including, without limitation, the Licenses, in any court or before any arbitrator of any kind or before or by any governmental body, and no such action, suit, proceeding or investigation (i) calls into question the validity of this Agreement or any other Loan Document, or (ii) could, if determined adversely to the Borrower or any of its Subsidiaries, have a Materially Adverse Effect. (j) Taxes. All federal, state and other tax returns of the Borrower ----- and each of its Subsidiaries required by law to be filed have been duly filed and all federal, state and other taxes, including, without limitation, withholding taxes, assessments and other governmental charges or levies required to be paid by the Borrower or any of its Subsidiaries or imposed upon the Borrower or any of its Subsidiaries or any of their respective properties, income, profits or assets, which are due and payable, have been paid, except any such (x) the payment of which the Borrower or any of its Subsidiaries is diligently contesting in good faith by appropriate proceedings, (y) for which adequate reserves have been provided on the books of the Borrower or the Subsidiary of the Borrower involved, and (z) as to which no Lien other than a Permitted Lien has attached and no foreclosure, distraint, sale or similar proceedings have been commenced. The charges, accruals and reserves on the books of the Borrower and each of its Subsidiaries in respect of taxes are, in the judgment of the Borrower, adequate. All pro forma financial information provided to the Agents and the Banks in connection with this Agreement has been based upon reasonable assumptions and prepared in good faith. (k) Financial Statements. The pro forma financial statements of the -------------------- Borrower, with respect to the System, furnished to the Agents and the Banks by the Borrower on or prior to the Agreement Date are, to the best of the Borrower's knowledge, complete and correct in all material respects and present fairly, in accordance with GAAP, the financial position of the Borrower -47- and its Subsidiaries on a consolidated basis, with respect to the System, on and as at the date thereof, and the results of operations for the period then ended. The pro forma financial statements of the General Partner, with respect to the System, furnished to the Agents and the Banks by the General Partner on or prior to the Agreement Date are, to the best of the Borrower's knowledge, complete and correct in all material respects and present fairly, in accordance with GAAP, the financial position of the General Partner and its Subsidiaries on a consolidated basis, with respect to the System, on and as at the date thereof, and the results of operations for the period then ended. When furnished to the Administrative Agent and the Banks in accordance with Sections 6.1 and 6.2 hereof, all copies of the balance sheets and statements of income for the Borrower and its Subsidiaries on a consolidated basis shall be complete and correct in all material respects and shall present fairly, in accordance with GAAP, the financial position of the Borrower and its Subsidiaries on a consolidated basis on and as at the date thereof and the results of operations for the periods then ended. Neither the Borrower nor any of its Subsidiaries shall have material liabilities, contingent or otherwise, other than as disclosed in the financial statements referred to in the preceding sentence for the most recently ended fiscal year or quarter, as appropriate, and there shall be no material unrealized losses of the Borrower or any of its Subsidiaries and no material anticipated losses of the Borrower or any of its Subsidiaries other than those which have been previously disclosed in writing to the Administrative Agent and the Banks and identified to the Administrative Agent and the Banks as such. (l) ERISA. The Borrower and each Subsidiary of the Borrower and each ----- of their respective Plans are in material compliance with ERISA and the Code and neither the Borrower nor any of its Subsidiaries has incurred any accumulated funding deficiency with respect to any such Plan within the meaning of ERISA or the Code. The Borrower, each of its Subsidiaries and each other Person which is affiliated with the Borrower within the meaning of Section 414 of the Code have materially complied with all requirements of ERISA Sections 601 through 608 and Code Section 4980B. Neither the Borrower nor any of its Subsidiaries has made any promises of retirement or other benefits to employees, except as set forth in any Plan. Neither the Borrower nor any of its Subsidiaries has incurred any material liability to the Pension Benefit Guaranty Corporation in connection with any such Plan. The assets of each such Plan which is subject to Title IV of ERISA, if any, are sufficient to provide the benefits under such Plan payment of which the Pension Benefit Guaranty Corporation would guarantee if such Plan were terminated, and such assets are also sufficient to provide all other "benefit liabilities" (as defined in ERISA Section 4001(a)(1b)) due under -48- the Plan upon termination. No Reportable Event has occurred and is continuing with respect to any such Plan. No such Plan or trust created thereunder, or party in interest (as defined in Section 3(14) of ERISA), or any fiduciary (as defined in Section 3(21) of ERISA), has engaged in a "prohibited transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of the Code) which would subject such Plan or any other Plan of the Borrower or any of its Subsidiaries, any trust created thereunder, or any such party in interest or fiduciary, or any party dealing with any such Plan or any such trust to the penalty or tax on "prohibited transactions" imposed by Section 502 of ERISA or Section 4975 of the Code. Neither the Borrower nor any of its Subsidiaries is a participant in, and is not obligated to make any payment to, any Multiemployer Plan. (m) Compliance with Regulations G, T, U and X. Neither the Borrower ----------------------------------------- nor any of its Subsidiaries is engaged principally in, or has as one of its important activities, the business of extending credit for the purpose of purchasing or carrying, and neither the Borrower nor any of its Subsidiaries owns or presently intends to acquire, any "margin security" or "margin stock" as defined in Regulations G, T, U, and X (12 C.F.R. Parts 221 and 224) of the Board of Governors of the Federal Reserve System (herein called "margin stock"). None of the proceeds of the Loans will be used, directly or indirectly, for the purpose of purchasing or carrying any margin stock or for the purpose of reducing or retiring any Indebtedness which was originally incurred to purchase or carry margin stock or for any other purpose which might constitute this transaction a "purpose credit" within the meaning of said Regulations G, T, U, and X. Neither the Borrower, its Subsidiary, nor any bank acting on their behalf has taken or will take any action which might cause this Agreement or the Notes to violate Regulation G, T, U, or X or any other regulation of the Board of Governors of the Federal Reserve System or to violate the applicable provisions of the Securities Exchange Act of 1934, in each case as now in effect or as the same may hereafter be in effect. If so requested by any Bank, the Borrower and its Subsidiaries will furnish such Bank with (i) a statement or statements in conformity with the requirements of Federal Reserve Forms G-3 and/or U-1 referred to in Regulations G and U of said Board of Governors and (ii) other documents evidencing its compliance with the margin regulations, including without limitation an opinion of counsel in form and substance satisfactory to such Bank. Neither the making of the Loans nor the use of proceeds thereof will violate, or be inconsistent with, the provisions of Regulation G, T, U, or X of said Board of Governors. (n) Investment Company Act. Neither the Borrower nor any of its ---------------------- Subsidiaries is required to register under the -49- provisions of the Investment Company Act of 1940, as amended, and neither the entering into or performance by the Borrower and its Subsidiaries of this Agreement and the other Loan Documents nor the issuance of the Notes violates any provision of such Act or requires any consent, approval or authorization of, or registration with, the Securities and Exchange Commission or any other governmental or public body or authority pursuant to any provisions of such Act. (o) Government Regulation. Neither the Borrower nor any of its --------------------- Subsidiaries is required to obtain any consent, approval, authorization, permit or license which has not already been obtained from, or effect any filing or registration which has not already been effected with, any federal, state or local regulatory authority in connection with the execution and delivery of this Agreement or any other Loan Document. Neither the Borrower nor any of its Subsidiaries is required to obtain any consent, approval, authorization, permit or license which has not already been obtained from, or effect any filing or registration which has not already been effected with, any federal, state or local regulatory authorization in connection with the performance, in accordance with their respective terms, of this Agreement or any other Loan Document, or the borrowing hereunder, other than the filing of Uniform Commercial Code continuation statements, filings and consents relating to the renewal of Licenses and ongoing filings and consents relating to the Commission. (p) Absence of Default. The Borrower and its Subsidiaries are in ------------------ compliance in all material respects with all of the provisions of their respective partnership agreements or certificates or articles of incorporation and by-laws, as the case may be, and no event has occurred or failed to occur (including without limitation any matter which could create an Event of Default hereunder by cross-default) which has not been remedied or waived, the occurrence or non-occurrence of which constitutes, or with the passage of time or giving of notice or both would constitute, (i) an Event of Default or (ii) a default by the Borrower or any of its Subsidiaries under any material indenture, agreement or other instrument, including without limiting the foregoing the Licenses, the Management Agreement, the Financial Advisory Agreement, and material Pole Agreements, or any judgment, decree or order to which the Borrower or any of its Subsidiaries is a party or by which the Borrower or any of its Subsidiaries or any of their respective properties may be bound or affected. (q) Accuracy and Completeness of Information. All information, ---------------------------------------- reports, prospectuses and other papers and data relating to the Borrower or any of its Subsidiaries and furnished -50- by or on behalf of the Borrower or any of its Subsidiaries to the Agents and the Banks, or any of them, were, at the time furnished, complete and correct in all material respects to the extent necessary to give the recipients true and accurate knowledge of the subject matter thereof. Notwithstanding the foregoing, with respect to projections of the future performance of the Borrower and its Subsidiaries, such representations and warranties are made in good faith and to the best of the Borrower's knowledge. No fact or situation is currently known to the Borrower which has had or which could reasonably be foreseen to have a Materially Adverse Effect. (r) Agreements with Affiliates and Management Agreement. Except for --------------------------------------------------- the Management Agreement, the Financial Advisory Agreement and as set forth on Schedule 8 attached hereto, neither the Borrower nor any of its Subsidiaries has - ---------- (i) any agreements or binding arrangements of any kind with any Affiliates or (ii) any management or consulting agreements of any kind with any third party (including Affiliates). (s) Payment of Wages. The Borrower and each of its Subsidiaries are ---------------- in compliance with the Fair Labor Standards Act, as amended, and the Borrower and each of its Subsidiaries have paid all minimum and overtime wages required by law to be paid to their respective employees. (t) Priority. The Security Interest is a valid and, upon the due -------- filing of appropriate UCC-1 financing statements, perfected security interest in the Collateral securing, in accordance with the terms of the Security Documents, the Obligations, and the Security Interest is subject to no Liens that are prior to, on a parity with or junior to the Security Interest other than Permitted Liens, and the Security Documents are enforceable as security for the Obligations in accordance with their terms with respect to the Collateral against the Borrower and its Subsidiaries and all other third parties other than holders of the Permitted Liens, except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors' rights and (b) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) (insofar as any such law relates to the bankruptcy, insolvency or similar event of the Borrower or any of its Subsidiaries, as the case may be, or any other Person pledging Collateral to secure the Obligations). (u) No Adverse Change. Since December 31, 1994, there has occurred no ----------------- event which has had or which could have a Materially Adverse Effect. -51- (v) Environmental Laws. Except as consistent with applicable ------------------ Environmental Laws, no Hazardous Substances are present on or below the surface of the real property or, to the Borrower's knowledge, leased premises which could give rise to any event or condition which could have a Materially Adverse Effect. None of the soil, ground water, or surface water of such real property, or, to the best of the Borrower's knowledge, such leased premises, is contaminated in any material respect by any Hazardous Substance which could have a Materially Adverse Effect. To the best of the Borrower's knowledge, there are no incinerators, septic tanks, or cesspools located on such real property or on such leased premises; all sewage is discharged into a public sanitary sewer system; and no Hazardous Substances are emitted, discharged or released in any material respect from such real property or leased premises, directly or indirectly, into the atmosphere or any body of water. To the best of the Borrower's knowledge, neither the Borrower nor any of its Subsidiaries nor any present or former owner or operator of such real property (including, without limitation, the Borrower) or such leased premises, has been identified as a potentially responsible party for cleanup liability with respect to the emission, discharge, or release of any Hazardous Substance. As of the date hereof, no permits, licenses, or other authorizations issued pursuant to the Environmental Laws are required for Borrower's ownership of the Collateral, present use or occupancy of the real property or leased premises included in the Collateral, or the present operation of the Systems the absence of which would have a Materially Adverse Effect. Section 4.2 Survival of Representations and Warranties, etc. All ----------------------------------------------- representations and warranties made under this Agreement shall be deemed to be made, and shall be true and correct, at and as of the Agreement Date, and shall be true and correct in all material respects on the date of each Advance, except to the extent any such representation or warranty relates solely, by its terms, to an earlier date or time period. All representations and warranties made under this Agreement shall survive, and not be waived by, the execution hereof by the Agents and the Banks, any investigation or inquiry by any of the Agents and the Banks, or the making of any Advance. ARTICLE 5 General Covenants ----------------- So long as any of the Obligations is outstanding and unpaid or the Borrower shall have the right to borrow hereunder (whether or not the conditions to borrowing have been or can be -52- fulfilled), and unless the Majority Banks shall otherwise consent in writing: Section 5.1 Preservation of Existence and Similar Matters. The Borrower --------------------------------------------- will, and will cause each of its Subsidiaries to: (a) preserve and maintain its existence in the state of its formation, its material rights, franchises, licenses and privileges, including, without limiting the foregoing, the Licenses (to the extent required to prevent the occurrence of a Default under Section 8.1(o) hereof), all material Pole Agreements, and all other Necessary Authorizations, and (b) qualify and remain qualified and authorized to do business in each jurisdiction in which the character of its properties or the nature of its businesses requires such qualification or authorization. Section 5.2 Business; Compliance with Applicable Law. The Borrower ---------------------------------------- will, and will cause each of its Subsidiaries to, (a) engage solely in the business of constructing, maintaining and operating the System and of investing in other cable television systems and engaging in other activities relating to the cable television industry, and (b) comply in all material respects with the requirements of Applicable Law. Section 5.3 Maintenance of Properties. The Borrower will, and will ------------------------- cause each of its Subsidiaries to, maintain or cause to be maintained in the ordinary course of business in good repair, working order and condition (reasonable wear and tear excepted) all properties used in their respective businesses (whether owned or held under lease), and from time to time make or cause to be made all needed and appropriate repairs, renewals, replacements, additions, betterments and improvements thereto. The Borrower will, and will cause each of its Subsidiaries to, operate all property owned or leased by it such that no material obligation, including a cleanup obligation, shall arise under any Environmental Law and Regulation, which obligation would constitute a Lien (other than a Permitted Lien) or charge (prior to that in favor of the Administrative Agent under the Security Documents) on any property of the Borrower or any of its Subsidiaries. Section 5.4 Accounting Methods and Financial Records. The Borrower ---------------------------------------- will, and will cause each of its Subsidiaries on a consolidated basis with the Borrower to, maintain a system of accounting established and administered in accordance with GAAP, keep adequate records and books of account in which complete entries will be made in accordance with such accounting -53- principles consistently applied and reflecting all transactions required to be reflected by such accounting principles, and keep accurate and complete records of their respective properties and assets. The Borrower and its Subsidiaries will maintain a fiscal year ending on December 31. Section 5.5 Insurance. The Borrower will, and will cause each of its --------- Subsidiaries to: (a) Maintain insurance including, but not limited to, public liability coverage insurance from responsible companies in such amounts and against such risks to the Borrower and each of its Subsidiaries as shall be standard in the cable television industry for cable television companies similar in size and location to the Borrower and its Subsidiaries. (b) Keep their respective assets insured by insurers on terms and in a manner acceptable to the Majority Banks against loss or damage by fire, theft, burglary, loss in transit, explosions and hazards insured against by extended coverage, in amounts which are standard in the cable television industry for cable television companies similar in size and location to the Borrower and its Subsidiaries, all premiums thereon to be paid by the Borrower and its Subsidiaries. (c) Require that each insurance policy provide for at least thirty (30) days' prior written notice to the Administrative Agent of any termination of or proposed cancellation or nonrenewal of such policy, and that each insurance policy insuring assets pledged to the Administrative Agent as Collateral for the Obligations name the Administrative Agent as additional named loss payee and additional insured to the extent of the Obligations secured by such assets. All such amounts paid in respect of any such policy directly to the Administrative Agent shall, provided no Default then exists, be applied to the prepayment of the Obligations or the rebuilding or repairing of the portion of the System giving rise to the payment of insurance benefits, as the Borrower may elect; if a Default then exists, such amounts shall be applied by the Administrative Agent, (i) prior to the acceleration of the Loans, as provided in Section 2.9(c) hereof or, if the Majority Banks so elect, to the prepayment of the Obligations or to the rebuilding or repairing of the portion of the System giving rise to the payment of insurance benefits, and any balance thereof remaining after payment in full of the Obligations shall be paid to the Borrower or as otherwise required by law, and (ii) after the acceleration of the Loans, as provided under Section 2.11(c) hereof. Section 5.6 Payment of Taxes and Claims. The Borrower will, and will --------------------------- cause each of its Subsidiaries to, pay and -54- discharge all taxes, including, without limitation, withholding taxes, assessments and governmental charges or levies required to be paid by them or imposed upon them or their income or profits or upon any properties belonging to them prior to the date on which penalties attach thereto, and all lawful claims for labor, materials and supplies which, if unpaid, might become a Lien or charge upon any of their properties; except that no such tax, assessment, charge, levy or claim need be paid which is being diligently contested in good faith by appropriate proceedings and for which adequate reserves shall have been set aside on the appropriate books, but only so long as such tax, assessment, charge, levy or claim does not become a Lien or charge other than a Permitted Lien and no foreclosure, distraint, sale or similar proceedings shall have been commenced. The Borrower and each of its Subsidiaries shall timely file all information returns required by federal, state or local tax authorities. Section 5.7 Visits and Inspections. The Borrower will, and will cause ---------------------- each of its Subsidiaries to, permit representatives of the Administrative Agent and the Banks upon two (2) days' prior notice, to (a) visit and inspect the properties of the Borrower or any of its Subsidiaries at all reasonable times, (b) inspect and make extracts from and copies of its books and records, and (c) discuss with the principal officers of the Partners and the Manager, their respective businesses, assets, liabilities, financial positions, results of operations and business prospects. Section 5.8 Payment of Indebtedness; Loans. Subject to any provisions ------------------------------ regarding subordination herein or in any other Loan Document, the Borrower will, and will cause each of its Subsidiaries to, pay any and all of its Indebtedness when and as it becomes due, other than amounts diligently disputed in good faith. Section 5.9 Use of Proceeds. The Borrower will use the aggregate --------------- proceeds of the Loans (as set forth in the Requests for Advances issued from time to time hereunder) to assume the liabilities of the General Partner under the Prior Loan Agreement, which liabilities were previously assumed by CCELP, to finance Capital Expenditures, for working capital and for other general partnership needs as permitted under this Agreement. Section 5.10 Management Services. The Borrower will obtain management ------------------- services for the operation of the System from the Manager under the terms of the Management Agreement. Section 5.11 Indemnity. The Borrower, for itself and on behalf of each --------- of its Subsidiaries, jointly and severally, will indemnify and hold harmless each Bank, each Agent, and each of -55- their respective employees, representatives, officers and directors from and against any and all claims, liabilities, losses, damages, actions, attorneys' fees and demands by any party against the Banks and Agents, or any of them, (a) resulting from any breach or alleged breach by the Borrower or any Subsidiary of the Borrower of any representation or warranty made hereunder, or (b) arising out of (i) the making or administration of the Loans, (ii) allegations of any participation by the Banks and the Agents, or any of them, in the affairs of the Borrower or any Subsidiary of the Borrower, or allegations that the Banks, and the Agents, or any of them, has any joint liability with the Borrower or any Subsidiary of the Borrower for any reason, or (iii) any claims against the Banks and the Agents, or any of them, by any investor in or lender to the Borrower or any Subsidiary of the Borrower, for any reason whatsoever; unless, in any case referred to above, the Person seeking indemnification hereunder is determined to have acted or failed to act with gross negligence or willful misconduct by a non-appealable judicial order of a court of competent jurisdiction. Section 5.12 Interest Rate Hedging. As of the Agreement Date, the --------------------- Borrower shall have entered into (and shall at all times thereafter maintain) one or more Interest Rate Hedge Agreements with respect to the Borrower's interest obligations hereunder or under the Notes in an aggregate principal amount of not less than fifty percent (50%) of the Obligations outstanding from time to time. Such Interest Rate Hedge Agreements shall provide such interest rate protection in conformity with the standards promulgated under the most recent edition of ISDA's Code of Standard Wording, Assumptions and Provisions for Swaps and for a weighted average period of not less than eighteen (18) months from the date of such Interest Rate Hedge Agreement or, if earlier, until the Maturity Date on terms reasonably acceptable to the Administrative Agent, such terms to include consideration of the creditworthiness of the other party to such Interest Rate Hedge Agreements. Any such Interest Rate Hedge Agreement shall provide that the Borrower's obligations to pay interest in respect of the notional amount thereunder shall not exceed, during the term of such Agreement, two percent (2%) per annum in excess of the United States Treasury rate currently in effect for an instrument of similar duration to the Interest Rate Hedge Agreement in question, as such Treasury rate is in effect on the date of such Agreement. All obligations of the Borrower to any of the Agents or the Banks pursuant to any Interest Rate Hedge Agreement shall rank pari passu with ---- ----- the other Obligations. Section 5.13 Covenants Regarding Formation of Subsidiaries. At the time --------------------------------------------- of (i) any acquisition permitted hereunder, (ii) any Permitted Asset Swap hereunder, (iii) the purchase by the Borrower or any of its Subsidiaries of all -56- minority (or remaining) interests in any Subsidiary of the Borrower, or (iv) the formation of any new Subsidiary of the Borrower or any of its Subsidiaries which is permitted under this Agreement, the Borrower will, and will cause its Subsidiaries, as appropriate, to (a) provide to the Administrative Agent an executed Subsidiary Security Agreement for such new Subsidiary, in substantially the form attached to the Prior Loan Agreement as Exhibit J, together with appropriate UCC-1 financing statements, as well as an executed Subsidiary Guaranty for such new Subsidiary, in substantially the form attached to the Prior Loan Agreement as Exhibit I, which shall constitute both Security Documents and Loan Documents for purposes of this Agreement, as well as a loan certificate for such new Subsidiary, in substantially the form attached to the Prior Loan Agreement as Exhibit P, together with appropriate attachments; (b) pledge to the Administrative Agent all of the stock or partnership interests (or other instruments or securities evidencing ownership) of such Subsidiary or Person which is acquired or formed, beneficially owned by the Borrower or any of the Borrower's Subsidiaries, as the case may be, as additional Collateral for the Obligations to be held by the Administrative Agent in accordance with the terms of a pledge agreement in form and substance satisfactory to the Managing Agents, and execute and deliver to the Administrative Agent all such documentation for such pledge as, in the reasonable opinion of the Managing Agents, is appropriate; and (c) with respect to any acquisition permitted hereunder, any Permitted Asset Swap hereunder, or the formation of any new Subsidiary which Subsidiary has assets or liabilities, or both, provide revised financial projections for the remainder of the fiscal year and for each subsequent year until the Maturity Date which reflect the effects of such transaction, certified by the chief financial officer of the Borrower, together with a statement by such Person that no Default exists or would be caused by such acquisition or formation, and all other documentation, including one or more opinions of counsel, reasonably satisfactory to the Managing Agents which in their reasonable opinion is appropriate with respect to such transaction. Any document, agreement or instrument executed or issued pursuant to this Section 5.13 shall be a "Loan Document" for purposes of this Agreement. Section 5.14 Payment of Wages. The Borrower and each of its Subsidiaries ---------------- shall at all times comply in all material respects with the requirements of the Fair Labor Standards Act, as amended, including, without limitation, the provisions of such Act relating to the payment of minimum and overtime wages as the same may become due from time to time. -57- ARTICLE 6 Information Covenants --------------------- So long as any of the Obligations is outstanding and unpaid or the Borrower has a right to borrow hereunder (whether or not the conditions to borrowing have been or can be fulfilled) and unless the Majority Banks shall otherwise consent in writing, the Borrower will furnish or cause to be furnished to each Bank and each Agent at their respective offices: Section 6.1 Quarterly Financial Statements and Information. Within ---------------------------------------------- forty-five (45) days after the last day of each quarter in each fiscal year, the balance sheet of the Borrower and its Subsidiaries on a consolidated basis as at the end of such quarter and the related statement of income and statements of cash flows of the Borrower and its Subsidiaries on a consolidated basis for such quarter and for the elapsed portion of the year ended with the last day of such quarter, which shall be certified by the chief financial officer of the Borrower, to be, in his or her opinion, complete and correct in all material respects and to present fairly, in accordance with GAAP, the financial position of the Borrower and its Subsidiaries on a consolidated basis as at the end of such period and the results of operations for such period, and for the elapsed portion of the year ended with the last day of such period, subject only to normal year-end adjustments. With respect to periods prior to the Agreement Date, financial information of the General Partner and its Subsidiaries shall be substituted for the financial information of the Borrower and its Subsidiaries as if such financial information were that of the Borrower and its Subsidiaries. Section 6.2 Annual Financial Statements and Information; Certificate of ----------------------------------------------------------- No Default. Within one hundred twenty (120) days after the end of each fiscal - ---------- year of the Borrower, (i) the audited consolidated balance sheet of the Borrower and its Subsidiaries at the end of such fiscal year and the related statement of income and retained earnings and related statement of cash flows of the Borrower and its Subsidiaries for such fiscal year, which financial statements, shall set forth in comparative form such figures as at the end of and for the previous fiscal year, as applicable, and shall be accompanied by an opinion of independent certified public accountants of recognized standing reasonably satisfactory to the Majority Banks, together with a statement of such accountants (A) to the effect that their audit examination has included a review of Sections 7.7, 7.8, 7.9, 7.10 and 7.15 of the terms of this Agreement and the Notes as they relate to accounting matters, (B) as to whether, in connection with their audit examination, -58- any Default has come to their attention and if such a Default has come to their attention, specifying the nature and period of existence thereof, and (C) that such accountants have authorized the Borrower to deliver such financial statements and opinion thereon to the Agents and the Banks pursuant to this Agreement; and (ii) the statement of income of the Borrower and its Subsidiaries for each grouping of the System then utilized by the Borrower and its Subsidiaries (it being understood that the Borrower's current groupings are (1) Western Connecticut, (2) Northeast Connecticut, and (3) St. Louis, Missouri) as at the end of each fiscal year of the Borrower and its Subsidiaries, which shall be certified by the chief financial officer of the Borrower, to be, in his or her opinion, complete and correct in all material respects and to present fairly, in accordance with GAAP, the financial position of such grouping as at the end of such period and the results of operations for such period. With respect to periods prior to the Agreement Date, the financial information of the General Partner and its Subsidiaries shall be substituted for the financial information of the Borrower and its Subsidiaries as if such financial information were that of the Borrower and its Subsidiaries. Section 6.3 Monthly Operating Reports. To the extent that the Leverage ------------------------- Ratio for the most recently reported fiscal quarter exceeded 5.5:1, within forty-five (45) days from the last day of each month, a monthly operating report of the Borrower and its Subsidiaries on a consolidated basis, in substantially the form attached hereto as Exhibit M. With respect to periods prior to the --------- Agreement Date, the financial information of the General Partner and its Subsidiaries shall be substituted for the financial information of the Borrower and its Subsidiaries as if such financial information were that of the Borrower and its Subsidiaries. Section 6.4 Performance Certificates. At the time the financial ------------------------ statements are furnished pursuant to Sections 6.1 and 6.2, a certificate of an Authorized Officer in form and substance satisfactory to the Majority Banks: (a) setting forth as at the end of such quarterly period or fiscal year, as the case may be, the arithmetical calculations required to establish (i) the Leverage Ratio, Fixed Charges and Pro Forma Debt Service and (ii) whether or not the Borrower was in compliance with the requirements of Sections 7.7, 7.8, 7.9, 7.10, and 7.15 hereof; and (b) stating that, to the best of his or her knowledge, no Default or Event of Default has occurred as at the end of such quarterly period or year, as the case may be, or, if a Default or an Event of Default has occurred, disclosing each such Default or -59- Event of Default and its nature, when it occurred, whether it is continuing and the steps being taken by the Borrower with respect to such Default or Event of Default. With respect to periods prior to the Agreement Date, the financial information of the General Partner and its Subsidiaries shall be substituted for the financial information of the Borrower and its Subsidiaries as if such financial information were that of the Borrower and its Subsidiaries. Section 6.5 Copies of Other Reports. ----------------------- (a) Promptly upon receipt thereof, copies of all reports, if any, submitted to the Borrower in connection with an audit of the Borrower by the Borrower's independent public accountants, including, without limitation, any management report prepared in connection with the annual audit referred to in Section 6.2. (b) No later than January 31 of each year, a copy of the annual budget for the Borrower and its Subsidiaries on a consolidated basis for such calendar year, including the budget for Capital Expenditures. (c) Promptly upon receipt thereof by an Authorized Officer, copies of any material notice or report regarding any License from the grantor of such License or regarding the System or any License from the Commission with respect to (i) the suspension, revocation or modification of any License, (ii) a denial of a request for a rate change, (iii) disciplinary proceedings involving the Borrower or any of its Subsidiaries, (iv) notice of default or other non- compliance by the Borrower or any of its Subsidiaries under any License, or (v) any similar event or occurrence. (d) Promptly upon receipt thereof by an Authorized Officer, copies of any material correspondence from HC Crown Corp., a Delaware corporation, or any of its Affiliates with respect to the Hallmark Subordinated Debt. (e) From time to time and promptly upon each request, such data, certificates, reports, statements, opinions of counsel, documents or further information regarding the business, assets, liabilities, financial position, projections, results of operations or business prospects of the Borrower or any of its Subsidiaries, as the Administrative Agent or any Bank reasonably may request. (f) As soon as possible, and in any event within fifteen (15) days after the Borrower knows that any of the events -60- or conditions set forth below have occurred or exist, a statement signed by an Authorized Officer setting forth details respecting such event or condition and the action which the Borrower (or the applicable Subsidiary) proposes to take with respect thereto (and a copy of any notices or other communications received or given by the Borrower or the applicable Subsidiary, with respect thereto): (i) any judgment, action, proceeding or investigation pending before any court or governmental authority, bureau or agency, including, without limitation, any environmental regulatory body, with respect to or threatened against or affecting the Borrower or any of its Subsidiaries or relating to the assets or liabilities of any of them (including, without limitation, in respect of any "facility" owned, leased or operated by any of them under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or under any state, local or municipal statute, ordinance or regulation in respect thereof, in connection with any release of any toxic or hazardous waste or chemical substance, pollutant or contaminant into the environment, or with the generation, storage or disposal of any toxic or hazardous wastes or other chemical substances), which could have a Materially Adverse Effect or materially impair the value of the Collateral; (ii) any liability or threatened liability of the Borrower or any of its Subsidiaries (a) under any Applicable Law for any release of a hazardous substance caused by the seeping, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing of hazardous wastes or other chemical substances, pollutants or contaminants into the environment, or (b) for the costs of any cleanup or other remedial action including, without limitation, costs arising out of security fencing, alternative water supplies, temporary evacuation and housing and other emergency assistance undertaken by any environmental regulatory body having jurisdiction over the Borrower or any of its Subsidiaries to prevent or minimize any actual or threatened release by the Borrower or any of its Subsidiaries, of any hazardous wastes or other chemical substances, pollutants and contaminants into the environment which would endanger the public health or the environment which could in either case have a Materially Adverse Effect; and (iii) any change or proposed change in any law, rule, regulation or order (including without limitation, Environmental Laws) of any governmental body or regulatory -61- authority, other than proposed changes of general applicability, which could have a Materially Adverse Effect. Section 6.6 Notice of Litigation and Other Matters. Prompt notice of -------------------------------------- the following events after an Authorized Officer has received notice or otherwise become aware thereof: (a) the commencement of all proceedings and investigations by or before any governmental body and all actions and proceedings in any court or before any arbitrator against or to the extent known to the Borrower or any of its Subsidiaries in any other way relating materially adversely and directly to the Borrower or any Subsidiary of the Borrower, CCELP, the General Partner or the Manager, or any of their respective properties, assets or businesses or any License; (b) any material adverse change with respect to the business, assets, liabilities, financial position, results of operations or business prospects of the Borrower or any Subsidiary of the Borrower, the Manager, CCELP or the General Partner, other than changes in the ordinary course of business which have not had and are not likely to have a Materially Adverse Effect; (c) any material amendment or change to any budget submitted under Section 6.5(b) hereof for the operation of the System; (d) any Default or the occurrence or non-occurrence of any event (i) which constitutes, or which with the passage of time or giving of notice or both would constitute a default by the Borrower or any Subsidiary of the Borrower, CCELP or the General Partner under any material agreement other than this Agreement to which the Borrower, or any Subsidiary of the Borrower, CCELP or the General Partner is party or by which any of its respective properties may be bound, or (ii) which could have a Materially Adverse Effect, giving in each case the details thereof and specifying the action proposed to be taken with respect thereto; (e) the occurrence of any Reportable Event or a "prohibited transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of the Code) with respect to any Plan of the Borrower or any Subsidiary of the Borrower or the institution or threatened institution by the Pension Benefit Guaranty Corporation of proceedings under ERISA to terminate or to partially terminate any such Plan or the commencement or threatened commencement of any litigation regarding any such Plan or naming it or the trustee of any such Plan with respect to such Plan; and -62- (f) the occurrence of any event subsequent to the Agreement Date which, if such event had occurred prior to the Agreement Date, would have constituted an exception to the representation and warranty in Section 4.1(l) of this Agreement. ARTICLE 7 Negative Covenants ------------------ So long as any of the Obligations is outstanding and unpaid or the Borrower has a right to borrow hereunder (whether or not the conditions to borrowing have been or can be fulfilled) and unless the Majority Banks shall otherwise give their prior consent in writing: Section 7.1 Indebtedness of the Borrower. The Borrower shall not, and ---------------------------- shall not permit any of its Subsidiaries to, create, assume, incur or otherwise become or remain obligated in respect of, or permit to be outstanding, any Indebtedness except: (a) Indebtedness arising under this Agreement, the Notes and the other Loan Documents; (b) Accounts payable, subscriber deposits, accrued expenses and customer advance payments incurred in the ordinary course of business, which are (1) current or (2) being contested in good faith by appropriate proceedings and for which the Borrower or any of its Subsidiaries, as the case may be, has established adequate reserves on its respective books; (c) Capitalized Lease Obligations in an amount not in excess of $3,000,000 in the aggregate; (d) Accrued but unpaid management fees and financial advisory fees and any interest thereon due pursuant to the Management Agreement and the Financial Advisory Agreement, respectively, subject to the terms of the Subordination of Management and Financial Advisory Fees Agreement; (e) Any other Indebtedness (including, without limitation, Indebtedness secured by Permitted Liens) in an aggregate outstanding principal amount at any time not to exceed $5,000,000; (f) Obligations under Interest Rate Hedge Agreements; and (g) Indebtedness arising under payment and performance bonds and letters of credit issued for the Borrower's account, or -63- the account of a Subsidiary of the Borrower, in the ordinary course of the Borrower's or such Subsidiary's business in favor of the grantors of the Licenses and the Pole Agreements, in an aggregate amount not to exceed $3,000,000. Section 7.2 Limitation on Liens. The Borrower shall not, and shall not ------------------- permit any of its Subsidiaries to, create, assume, incur or permit to exist or to be created, assumed, incurred or permitted to exist, directly or indirectly, any Lien on any of its properties or assets, whether now owned or hereafter acquired, except for Permitted Liens, and the Borrower shall not, and shall not permit any of its Subsidiaries to, undertake, covenant or agree with any third party that it will not create, assume, incur or permit to exist or to be created, assumed, incurred or permitted to exist any Lien on any of its assets or properties (other than property subject to a Permitted Lien referred to in clause (e) or (h) of the definition of Permitted Liens). Section 7.3 Amendment and Waiver. The Borrower shall not, and shall not -------------------- permit any of its Subsidiaries to, enter into any amendment of, or agree to or accept or consent to any waiver of any of the provisions of (a) its certificate or articles of incorporation, by-laws or partnership agreement, as the case may be, (b) the Management Agreement which materially alters the duties and obligations of the Manager thereunder, (c) the Financial Advisory Agreement which materially alters the duties and obligations of Kelso thereunder, (d) any Loan Document, or (e) any License (other than amendments and waivers in connection with the renewal thereof). The foregoing notwithstanding, (A) any such certificate or articles of incorporation, by-laws or partnership agreement may be amended or modified without the prior written consent of any of the Banks provided (i) no such amendment or modification adversely affects the rights of the Agents or the Banks under the Loan Documents, and (ii) copies of all documents evidencing or related to such amendment or modification are furnished to the Agents and the Banks within five (5) days prior to its effective date, and (B) any Licenses may be amended or modified without the prior written consent of any of the Banks in connection with renewals thereof in any case, and otherwise, provided such Licenses account for less than (i) five percent (5%) of -------- the Basic Subscribers of the Borrower and its Subsidiaries in the aggregate during any calendar year and (ii) twenty percent (20%) of the Basic Subscribers of the Borrower and its Subsidiaries in the aggregate during the term of this Agreement. -64- Section 7.4 Liquidation, Change in Ownership, Disposition or Acquisition ------------------------------------------------------------ of Assets. - --------- (a) The Borrower shall not, and shall not permit any of its Subsidiaries to, at any time (i) liquidate, dissolve or terminate itself (or suffer any liquidation, dissolution or termination) or otherwise wind up, provided that the Borrower may dissolve such of its Subsidiaries as have no assets and no liabilities, (ii) enter into any merger, other than, so long as no Default then exists or would be caused thereby, a merger or consolidation among the Borrower and one or more of its Subsidiaries, provided that the Borrower is the surviving entity, or a merger or consolidation among two (2) or more Subsidiaries of the Borrower, (iii) create any Subsidiary, unless no Default then exists or would be caused by the creation of any such Subsidiary and unless the Borrower first complies with the terms of Section 5.13 hereof, or (iv) except pursuant to a Permitted Asset Swap, sell, lease, abandon, transfer or otherwise dispose of any of its assets, property or business to the extent that the fair market value of such assets exceeds $5,000,000 in the aggregate during the term hereof (excluding such sales, leases, transfers or other dispositions in the ordinary course of the Borrower's or any of its Subsidiaries' business). All Net Proceeds received by the Borrower or any of its Subsidiaries from any sale, lease, transfer or other disposition of assets permitted hereunder (excluding such sales, leases, transfers or other dispositions in the ordinary course of the Borrower's or any of its Subsidiaries' business) shall be used to repay or prepay on the closing date of such sale an identical amount of the outstanding principal amount of the Loans to the extent required under Section 2.7 hereof. In the event the Borrower or any of its Subsidiaries sells or otherwise disposes of any assets in accordance with this Section, the Agents and the Banks will, upon receipt of the Net Proceeds of such sale or other disposition in repayment of the Loans to the extent required under Section 2.7 hereof, release their Liens on the assets so sold, leased, transferred or otherwise disposed. (b) The Borrower shall not, and shall not permit any of its Subsidiaries to, at any time acquire any assets, property or business of any other Person, or acquire stock, partnership or other ownership interests in any other Person, other than (i) the acquisition of the assets of the General Partner and Cencom from CCELP on the Agreement Date, (ii) in the ordinary course of business of the Borrower or its Subsidiaries, (iii) as permitted by the limitations on Capital Expenditures set forth in Section 7.15 hereof, (iv) so long as no Default hereunder then exists or would be caused thereby, acquisitions of cable television systems for a purchase price not to exceed $5,000,000 in the aggregate in any fiscal year and $10,000,000 in the aggregate during the term -65- hereof, plus the aggregate amount of any Excess Cash Flow which, in accordance with Section 7.7(c) hereof, would be permitted to be distributed to the Partners and which are not so distributed, (v) pursuant to a Permitted Asset Swap, (vi) as permitted pursuant to Section 7.7(c) hereof, (vii) to acquire assets with insurance proceeds as permitted by Section 5.5(c) hereof, and (viii) with respect to the transfer of assets between and among the Borrower or any of its Subsidiaries, subject to the provisions of Section 5.13 hereof. (c) So long as no Default then exists or would be caused thereby, the Borrower or one or more of its Subsidiaries may enter into a Permitted Asset Swap, so long as (i) not less than thirty (30) days prior to the execution of contracts or agreements (other than substantially non-binding letters of intent) relating to any such Permitted Asset Swap, the Borrower provides the Agents and the Banks with written notice of its intent to enter into such a transaction, together with copies of all material documents and any other information which may be reasonably requested by the Administrative Agent or any Bank with respect thereto, (ii) not less than ten (10) days prior to the execution of contracts or agreements (other than substantially non-binding letters of intent) relating to any such transaction, the Borrower provides the Agents and the Banks with a certificate of its chief financial officer stating that no Default then exists or would be caused by the consummation of the Permitted Asset Swap and setting forth calculations specifically demonstrating the Borrower's pro forma compliance with Sections 7.8, 7.9 and 7.10 hereof through the remaining term of this Agreement, after giving effect to the consummation of such transaction, and (iii) the Net Proceeds of any sale, lease, transfer or other disposition of any assets constituting a part of such Permitted Asset Swap are delivered to the Administrative Agent and distributed in the manner set forth in Section 2.7(b) hereof. Upon any acquisition by the Borrower and its Subsidiaries, the Borrower shall immediately cause all assets and other properties, of whatever nature, to be pledged to the Administrative Agent as Collateral for the Obligations pursuant to Section 5.13 hereof to the extent that the existing Security Documents do not already so provide. Section 7.5 Limitation on Guaranties. The Borrower shall not, and shall ------------------------ not permit any of its Subsidiaries to, at any time Guaranty, assume, be obligated with respect to, or permit to be outstanding any Guaranty of, any obligation of any other Person other than (a) Guaranties by endorsement of negotiable instruments for collection in the ordinary course of business, (b) obligations under agreements of the Borrower or any of its -66- Subsidiaries entered into in connection with the acquisition of services, supplies and equipment in the ordinary course of business of the Borrower or any of its Subsidiaries, and (c) Guaranties described in Section 7.1(g) hereof. Section 7.6 Investments. The Borrower shall not, and shall not permit ----------- any of its Subsidiaries to, make any loan or advance, or otherwise acquire for a consideration evidences of Indebtedness, capital stock or other securities of or equity interests in any Person, except that so long as no Event of Default then exists or would be caused thereby, the Borrower or any of its Subsidiaries may (i) purchase marketable, direct obligations of the United States of America maturing within three hundred sixty-five (365) days of the date of purchase, (ii) purchase commercial paper issued by corporations, each of which conducts a substantial part of its business in the United States of America, maturing within one hundred and eighty (180) days from the date of the original issue thereof, and rated "P-1" or better by Moody's Investors Service, (iii) purchase repurchase agreements and certificates of deposit maturing within three hundred sixty-five (365) days of the date of purchase which are issued by any Bank or by a United States national or state bank having capital, surplus and undivided profits totaling more than $250 million and rated "A" or better by Moody's Investors Service, (iv) make acquisitions as permitted pursuant to Section 7.4 hereof, (v) make loans and advances to officers and employees (other than officers and employees, if any, who are shareholders of Kelso or the Manager), in an aggregate outstanding amount not to exceed $750,000, in the ordinary course of the Borrower's business, and (vi) make loans or advances to, and other investments in, the Borrower or any wholly-owned Subsidiaries of the Borrower. Section 7.7 Restricted Payments and Purchases. The Borrower shall not, --------------------------------- and shall not permit any of its Subsidiaries to, directly or indirectly declare or make any Restricted Payment or Restricted Purchase, except that Subsidiaries of the Borrower may make Restricted Payments to the Borrower and to other wholly-owned Subsidiaries of the Borrower, and except further that the Borrower may: (a) accrue management fees under the Management Agreement and accrue financial advisory fees under the Financial Advisory Agreement, subject to the provisions of the Subordination of Management and Financial Advisory Fees Agreement and this Agreement; (b) so long as no Default hereunder then exists or would be caused thereby, during the period from January 18, 1995 through and including December 31, 1998, pay management fees and -67- expenses and financial advisory fees and expenses in an aggregate amount for any fiscal year not to exceed $3,650,000, except that with respect to the fiscal year ending December 31, 1995, such amount shall not exceed the difference between (i) $3,650,000 minus (ii) management fees and expenses and financial ----- advisory fees and expenses paid by the General Partner for the period from and after January 18, 1995 through and including the Agreement Date, as the same may become due and payable under the Management Agreement and the Financial Advisory Agreement, or, in the case of the General Partner, the predecessors to such Agreements; (c) subject to the provisions of Section 2.7(c) hereof, so long as no Default hereunder then exists or would be caused thereby, and so long as the Leverage Ratio is less than 5.5:1, on or after April 30, 1998 and on or after each April 30th thereafter, use up to fifty percent (50%) of Annual Excess Cash Flow for the most recently ended fiscal year of the Borrower to (i) make distributions to the Partners, or (ii) make acquisitions otherwise permitted under Section 7.4(b) hereof; (d) not less than five (5) days prior to the making of any such payment described in Section 7.7(b) or (c) above, the Borrower shall notify the Agents and the Banks in writing of its intent to make such a payment (making reference to this Section 7.7) and the proposed amount and nature of such payment, and shall provide the Agents and the Banks with calculations specifically demonstrating the Borrower's compliance with Sections 7.8, 7.9 and 7.10 hereof, both before and after giving effect to such payment; (e) so long as no Default hereunder then exists or would be caused thereby, make Tax Distributions to the Partners; (f) so long as no Default hereunder then exists or would be caused thereby, distribute to the General Partner the amount of any accounting fees and any fees of other professionals with respect to the preparation of financial statements and tax returns of the General Partner solely with respect to matters involving the Borrower and its Subsidiaries and related matters arising in the ordinary course of business of the General Partner with respect to the Borrower and its Subsidiaries; and (g) so long as no Default hereunder then exists or would be caused thereby, pay fees of technical and other consultants in the ordinary course of the Borrower's and its Subsidiaries' business, so long as such consultants are not Affiliates. -68- Section 7.8 Leverage Ratio. (a) As of the end of any calendar quarter, -------------- and (b) at the time of any Advance which increases the outstanding principal amount of the Loans (after giving effect to such Advance), the Borrower shall not permit the Leverage Ratio for the calendar quarter end being tested in the case of Section 7.8(a) above, or the most recent quarter end for which financial statements are required to have been provided to the Agents and the Banks pursuant to Section 6.1 hereof in the case of Section 7.8(b) above and after giving effect to the Advance as of such date, to exceed the ratios set forth below for calculation dates using financial statements for periods ending during the periods shown below:
Leverage Period Ratio ------ ----- From January 18, 1995 through December 31, 1995 6.50:1 From January 1, 1996 through June 30, 1996 6.25:1 From July 1, 1996 through December 31, 1996 6.00:1 From January 1, 1997 through June 30, 1997 5.75:1 From July 1, 1997 through December 31, 1997 5.50:1 From January 1, 1998 through December 31, 1998 5.00:1 From January 1, 1999 through December 31, 1999 4.50:1 From January 1, 2000 and thereafter 4.00:1
Section 7.9 Annualized Operating Cash Flow to Fixed Charges Ratio. As ----------------------------------------------------- of March 31, 1997 and as of the end of each calendar quarter thereafter, the Borrower shall not permit the ratio of Annualized Operating Cash Flow for the calendar quarter end being tested to Fixed Charges for the four (4) calendar quarters immediately preceding the calculation date to be less than 1.0 to 1.0. -69- Section 7.10 Annualized Operating Cash Flow to Pro Forma Debt Service. -------------------------------------------------------- (a) As of the end of any calendar quarter, and (b) at the time of any Advance which increases the outstanding principal amount of the Loans (after giving effect to such Advance), the Borrower shall not permit the ratio of Annualized Operating Cash Flow for the calendar quarter end being tested in the case of Section 7.10(a) above, or the most recent quarter end for which financial statements are required to be delivered to the Agents and the Banks pursuant to Section 6.1 hereof in the case of Section 7.10(b) above, to Pro Forma Debt Service for the immediately succeeding four (4) calendar quarters, to be less than the ratio set forth below for calculation dates using financial statements for quarters ending during the periods set forth below:
Period Ratio ------ ----- From January 18, 1995 through December 31, 1997 1.20:1 From January 1, 1998 and thereafter 1.10:1
Section 7.11 Affiliate Transactions. Except as specifically provided in ---------------------- Section 7.7 hereof and otherwise specifically provided herein, the Borrower shall not, and shall not permit any of its Subsidiaries to, at any time engage in any transaction with an Affiliate, nor make an assignment or other transfer of any of its properties or assets to any Affiliate on terms less advantageous to the Borrower or such Subsidiary than would be the case if such transactions had been effected on an arm's length basis with a non-Affiliate. In addition, the Borrower and any of its Subsidiaries shall receive the full benefit of any discounts, rebates or special payment terms for pay television programming available to the Manager which the Manager is permitted to pass through to the Borrower or such Subsidiary, but which are not available to the Borrower or such Subsidiary from a non-Affiliate. Section 7.12 Real Estate. The Borrower shall not, and shall not permit ----------- any of its Subsidiaries to, purchase or become obligated to purchase real estate (other than easements, rights-of-way, restrictions and other similar encumbrances on the use of real property), other than purchases, with a value of less than $500,000 for any single purchase, and less than $1,000,000 in the aggregate for all purchases after the Agreement Date. Section 7.13 Limitation on Leases. The Borrower shall not make or be or -------------------- become obligated to make, or permit any of its -70- Subsidiaries to make or be or become obligated to make, any payment in respect of any obligations as lessee under a lease, except for (x) payments under leases to be used in connection with the operation of its business which, when aggregated with all other payments under such leases by the Borrower and its Subsidiaries would not exceed in the aggregate during any one fiscal year of the Borrower, $1,500,000, and during the term of this Agreement, $10,000,000, and (y) payments relating to Capitalized Lease Obligations permitted hereby. Section 7.14 ERISA Liabilities. The Borrower shall not, and shall not ----------------- permit any of its Subsidiaries to, allow any of their respective Plans to have an accumulated funding deficiency as defined in Code Section 4971(c)(ii) and measured at the end of any Plan year. The Borrower shall not, and shall not permit any of its Subsidiaries to become a participant in any Multiemployer Plan. Section 7.15 Capital Expenditures. The Borrower shall not permit the -------------------- aggregate amount of Capital Expenditures made by the Borrower and its Subsidiaries (and, prior to the Agreement Date, by the General Partner and its Subsidiaries), on a consolidated basis, in any period set forth below to exceed as of the end of such period the sum of (a) the limit for such period, as set forth below, plus (b) any unexpended portion of the Capital Expenditures limit set forth below for the preceding period.
Capital Period Expenditures Limit ------ ------------------ From January 18, 1995 through December 31, 1995 $ 23,500,000 From January 1, 1996 through December 31, 1996 $ 18,500,000
There shall be no dollar limitation on Capital Expenditures after December 31, 1996. Section 7.16 No Limitation on Upstream Dividends by Subsidiaries. The --------------------------------------------------- Borrower shall not permit any of its Subsidiaries to enter into or agree, or otherwise become subject, to any agreement, contract or other arrangement with any Person pursuant to the terms of which (a) such Subsidiary is or would be prohibited from declaring or paying any cash dividends or distributions on any class of its stock or any partnership interests owned directly or indirectly by the Borrower or from making any other distribution on account of any class of any such -71- stock or any such partnership interests (herein referred to as "Upstream Dividends") or (b) the declaration or payment of Upstream Dividends by a Subsidiary of the Borrower to the Borrower or to another Subsidiary of the Borrower, on an annual or cumulative basis, is or would be otherwise limited or restricted. ARTICLE 8 Default ------- Section 8.1 Events of Default. Each of the following shall constitute ----------------- an Event of Default, whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment or order of any court or any order, rule or regulation of any governmental or non-governmental body: (a) Any representation or warranty made under this Agreement shall prove incorrect or misleading in any material respect when made or deemed to be made pursuant to Section 4.2 hereof; (b) The Borrower shall default in the payment of (i) any interest under the Notes, or any of them, or fees or other amounts payable hereunder or under any other Loan Document (other than as provided in Section 8.1(b)(ii) hereof), when due, which Default is not cured within three (3) days from the date such payment shall become due, or (ii) any principal under the Notes, or any of them, when due; (c) The Borrower shall default (i) in the performance or observance of any agreement or covenant contained in Article 7 hereof, (ii) in the performance or observance of any negative covenant contained in any of the Loan Documents, or (iii) in providing any financial statement or report under Article 6 hereof which would permit the Agents and the Banks to determine whether the Borrower was in Default under Article 7 hereof; (d) The Borrower shall default in the performance or observance of any other agreement or covenant contained in this Agreement not specifically referred to elsewhere in this Section 8.1, and such default shall not be cured to the Majority Banks' satisfaction within a period of thirty (30) days from the date on which any Authorized Officer becomes aware of or receives notice of the occurrence of such default; (e) There shall occur any default in the performance or observance of any agreement or covenant or material breach of -72- any representation or warranty contained in any of the Loan Documents (other than this Agreement or as otherwise provided in Section 8.1 of this Agreement), which shall not be cured to the Majority Banks' satisfaction within a period of thirty (30) days from the date on which any Authorized Officer becomes aware or receives notice of the occurrence of such default; (f) There shall be entered a decree or order for relief in respect of the Manager, CCELP, the General Partner, the Borrower or any of the Borrower's Subsidiaries under Title 11 of the United States Code, as now constituted or hereafter amended, or any other applicable Federal or state bankruptcy law or other similar law, or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or similar official of the Manager, CCELP, the General Partner, the Borrower or any of the Borrower's Subsidiaries or of any substantial part of its respective properties, or ordering the winding-up or liquidation of the affairs of the Manager, CCELP, the General Partner, the Borrower or any of the Borrower's Subsidiaries or an involuntary petition shall be filed against the Manager, CCELP, the General Partner, the Borrower or any of the Borrower's Subsidiaries, and (i) such petition shall not be diligently contested, or (ii) any such petition shall continue undismissed for a period of sixty (60) consecutive days; (g) The Borrower, the Manager, CCELP, the General Partner, or any of the Borrower's Subsidiaries shall file a petition, answer or consent seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other applicable Federal or state bankruptcy law or other similar law, or the Manager, CCELP, the General Partner, the Borrower or any of the Borrower's Subsidiaries shall consent to the institution of proceedings thereunder or to the filing of any such petition or to the appointment or taking of possession of a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Manager, CCELP, the General Partner, the Borrower or any of the Borrower's Subsidiaries or of any substantial part of its respective properties, or the Manager, CCELP, the General Partner, the Borrower or any of the Borrower's Subsidiaries shall fail generally to pay its debts as they become due (other than to the extent required with respect to the General Partner, under the Subordination Agreement and the terms of the Hallmark Subordinated Debt), or the Manager, CCELP, the General Partner, the Borrower or any of the Borrower's Subsidiaries shall take any action in furtherance of any such action; (h) A final judgment shall be entered by any court against the Borrower or any of the Borrower's Subsidiaries for the payment of money which exceeds any insurance coverage which -73- is uncontested by the insurance carrier by $3,000,000 or more, or a warrant of attachment or execution or similar process shall be issued or levied against property of the Borrower or any of the Borrower's Subsidiaries which, together with all other such property of the Borrower or any of the Borrower's Subsidiaries subject to other such process, exceeds in value any insurance coverage which is uncontested by the insurance carrier by $3,000,000 or more in the aggregate, and if, within thirty (30) days after the entry, issue or levy thereof, such judgment, warrant or process shall not have been paid or discharged or stayed pending appeal, or if, after the expiration of any such stay, such judgment, warrant or process shall not have been paid or discharged; (i) There shall be at any time any "accumulated funding deficiency," as defined in ERISA or in Section 412 of the Code, with respect to any Plan maintained by the Borrower or any of its Subsidiaries, or to which the Borrower or any of its Subsidiaries has any liabilities, or any trust created thereunder; or a trustee shall be appointed by a United States District Court to administer any such Plan; or the Pension Benefit Guaranty Corporation shall institute proceedings to terminate any such Plan; or the Borrower or any of its Subsidiaries shall incur any liability to the Pension Benefit Guaranty Corporation in connection with the termination of any such Plan; or any Plan or trust created under any Plan of the Borrower or any of its Subsidiaries shall engage in a "prohibited transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of the Code) which would subject any such Plan, any trust created thereunder, any trustee or administrator thereof, or any party dealing with any such Plan or trust to the tax or penalty on "prohibited transactions" imposed by Section 502 of ERISA or Section 4975 of the Code; or the Borrower or any of its Subsidiaries shall enter into or become obligated to contribute to a Multiemployer Plan; (j) Any Materially Adverse Effect shall occur, or any event shall occur which has a materially adverse effect upon the business, assets, liabilities, financial condition, results of operations or business prospects of CCELP or the General Partner; (k) There shall occur any failure by the Borrower or any of the Borrower's Subsidiaries to pay any Indebtedness when due (after any applicable cure period) or there shall occur any default which entitles the holders to accelerate the maturity thereof under, in either case, any agreement or instrument evidencing Indebtedness of the Borrower or any of the Borrower's Subsidiaries in an aggregate principal amount exceeding $3,000,000; or there shall occur any material default under any -74- Interest Rate Hedge Agreement having a notional principal amount of $3,000,000 or more; (1) There shall occur any default which entitles the holders to accelerate the maturity thereof under any agreement or instrument evidencing Indebtedness for Money Borrowed of Holdings, CCELP or the General Partner, in an aggregate principal amount exceeding $3,000,000; (m) The Borrower shall at any time fail to obtain management services pursuant to the Management Agreement, for itself and its Subsidiaries, from the Manager or any permitted transferee, successor or assignee Manager agreed to in writing by the Majority Banks for a period of thirty (30) consecutive days, or there shall occur any event which could have a materially adverse effect upon the ability of the Manager or any permitted transferee, successor or assignee Manager agreed to in writing by the Majority Banks to fulfill its obligations under the Management Agreement and the possibility that such event could have such a materially adverse effect shall continue to exist on the thirty-first (31st) day after the occurrence of such event; (n) Any one or more of the following shall occur with respect to Licenses which account for five percent (5%) or more of the Basic Subscribers: (i) any License shall be revoked and such revocation shall not be waived or stayed, or there shall occur a material default by the Borrower or any of its Subsidiaries under any License which shall not have been waived within thirty (30) days of the occurrence thereof, or any proceedings shall in any way be brought to challenge (and shall continue uncontested for a period of thirty (30) days) the validity or enforceability of any License, or (ii) a proceeding for the renewal of any License shall not be commenced at least one year prior to its expiration, or (iii) any License shall expire due to termination, nonrenewal or for any other reason, which, together with any other such Licenses described in this Section 8.1(n), account for five percent (5%) or more of the Basic Subscribers; (o) Any material provision of any Loan Document shall at any time and for any reason be declared to be null and void, or a proceeding shall be commenced by the Borrower or any of its Subsidiaries, or by any governmental authority (other than the grantor of any License in a proceeding pertaining to such -75- License) having jurisdiction over the Borrower or any of its Subsidiaries, seeking to establish the invalidity or unenforceability thereof (exclusive of questions of interpretation of any provision thereof), or the Borrower or any of its Subsidiaries shall deny that it has any liability or obligation for the payment of principal or interest purported to be created under any Loan Document; (p) Any Security Document shall for any reason (other than failure to file UCC continuation statements), fail or cease (except by reason of lapse of time) to create a valid and perfected and, except to the extent permitted by the terms hereof or thereof, first priority lien on or security interest in any material portion of the Collateral purported to be covered thereby; (q) Kelso shall for any reason fail to own, directly or indirectly, beneficially and of record, (i) prior to an initial public offering of its capital stock by the General Partner, at least fifty-one percent (51%), and (ii) after an initial public offering of its capital stock by the General Partner, at least thirty-five percent (35%) of all economic ownership interests in, and voting rights with respect to the capital stock of, the General Partner; or Kelso shall for any reason fail to have the power to elect a majority of the board of directors of the General Partner; or Kelso shall for any reason fail to be the shareholder which owns, legally and beneficially, the largest percentage of all classes of the issued and outstanding capital stock of the General Partner; (r) Kelso shall for any reason fail to own, directly or indirectly, beneficially and of record, at least fifty-one percent (51%) of all economic ownership interests in, and voting rights with respect to CCELP; or Kelso shall for any reason fail to have, directly or indirectly, the largest share of voting rights with respect to CCELP; or Kelso shall for any reason fail to be the entity which owns, directly or indirectly, legally and beneficially, the largest percentage of all partnership interests in CCELP; (s) The General Partner shall cease to be the managing general partner of the Borrower or the sole general partner of the Borrower; or CCELP shall cease to own, directly or indirectly, beneficially and of record, at least seventy-five percent (75%) of all economic ownership interests in, and voting rights with respect to the Borrower; (t) Unless the Majority Banks have otherwise agreed in writing: (i) (1) each of Jerald L. Kent, Howard L. Wood and Barry L. Babcock (or any substitute general partner which is not -76- rejected by the Majority Banks, as provided below) shall cease for any reason to be a general partner of Charter Communications Group, or (2) Charter Communications Group shall for any reason fail to be controlled, directly or indirectly, by at least one of such individuals, or (3) a majority of the voting equity of and economic interests in Charter Communications Group shall for any reason fail to be owned by at least one of such individuals; provided, however, that if any of the events described in clause (1), (2) or (3) above occurs solely as a result of the death, disability or legal incapacity of any such individual (or any substitute general partner which is not rejected by the Majority Banks, as provided below), such event shall not constitute an Event of Default unless (w) thirty (30) days after the occurrence of such event, the Borrower shall have failed to provide the Agents and the Banks with a written proposal as to the identity of one or more willing substitute general partners of Charter Communications Group, together with a list of the names of the Charter Communications Group, or (x) the Majority Banks shall have rejected, in writing, any such proposal given (within such thirty (30) day period) by the Borrower or (y) any such substitute general partner shall fail to become a general partner of Charter Communications Group within a reasonable time thereafter or (z) the senior management proposed by the Borrower as set forth in clause (w) above, or any combination thereof, shall for any reason fail to engage in senior management of Charter Communications Group; or (ii) Charter Communications Group shall for any reason fail to control Charter Communications, Inc., a Delaware corporation, at any time it is the Manager, directly or indirectly, or Charter Communications Group shall for any reason fail to own a majority of the voting equity of Charter Communications, Inc., a Delaware corporation, at any time it is the Manager; provided that for purposes of this Section 8.1(t), "control" shall mean the possession of the power to direct or cause the direction of management and policies of the Person in question, whether through the ownership of voting securities, by contract or otherwise; (u) The Borrower shall fail to have provided to the Administrative Agent and the Banks, by December 15, 1995: (i) evidence satisfactory to the Administrative Agent that all necessary consents to the Commission to the transfer to the borrower of all Commission Licenses held by the General Partner and Cencom, or either of them, on or prior to the Agreement Date have been received, together with an opinion of Commission counsel which is substantially similar to the opinion of Commission counsel previously delivered in connection with the Prior Loan Agreement; or (ii) evidence satisfactory to the Administrative Agent that all necessary consents to the transfer or assignment to the Borrower of all Pole Agreements set forth on -77- Schedule 2 hereto and all "material" contracts and agreements (as such term is - ---------- defined in the Security Agreement) held by the General Partner and Cencom, or either of them, have been received; or (iii) evidence satisfactory to the Administrative Agent that the Borrower has used its best efforts to obtain all necessary consents to the collateral assignment of such contracts and agreements to the Administrative Agent, for itself and on behalf of the Banks, in accordance with the terms of the Security Agreement; or (v) Any demand for payment shall be made under the Guaranty issued by CCELP in favor of HC Crown Corp. in respect of the Hallmark Subordinated Debt. Section 8.2 Remedies. If an Event of Default shall have occurred and -------- shall be continuing: (a) With the exception of an Event of Default specified in Section 8.1(f) or (g), the Administrative Agent, at the direction of the Majority Banks, shall (i) terminate the Commitments, and (ii) declare the principal of and interest on the Loans and the Notes and all other amounts owed under this Agreement, the Notes and the other Loan Documents to be forthwith due and payable without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, anything in this Agreement, the Notes, or the other Loan Documents to the contrary notwithstanding. (b) Upon the occurrence and continuance of an Event of Default specified in Section 8.1(f) or Section 8.1(g), such principal, interest and other amounts shall thereupon and concurrently therewith become due and payable and the Commitments shall forthwith terminate, all without any action by any of the Administrative Agent and the Banks or the Majority Banks or the holders of the Notes and without presentment, demand, protest or other notice of any kind, all of which are expressly waived, anything in this Agreement, the Notes or the other Loan Documents to the contrary notwithstanding. (c) The Administrative Agent, with the concurrence of the Majority Banks, shall exercise all of the post-default rights granted to it and to them under the Loan Documents or under Applicable Law. (d) The Administrative Agent shall have the right (but not the obligation) to operate the System in accordance with the terms of the Licenses and subject to any limitations contained in the Security Documents and, within guidelines established by the Majority Banks, to make any and all payments and expenditures necessary or desirable in connection therewith, including, -78- without limitation, payment of wages as required under the Fair Labor Standards Act, as amended, and of any necessary withholding taxes to state or federal authorities. In the event the Majority Banks fail to agree upon the guidelines referred to in the preceding sentence within six (6) Business Days' after the Administrative Agent has begun to operate the System, the Administrative Agent may, after giving notice to the Banks of its intention to do so, make such payments and expenditures as it deems reasonable and advisable in its sole discretion to maintain the normal day-to-day operation of the System. Such payments and expenditures in excess of receipts shall constitute Advances under this Agreement, notwithstanding any limitation that might otherwise be imposed on Advances by the amount of the Commitments. Advances made pursuant to this Section 8.2(d) shall bear interest as provided in Section 2.3(e) and shall be payable on the earlier of demand or the Maturity Date. The making of one or more Advances under this Section 8.2(d) shall not create any obligation on the part of the Banks to make any additional Advances hereunder. No exercise by the Administrative Agent of the rights granted to it under this Section 8.2(d) shall constitute a waiver of any other rights and remedies granted to the Administrative Agent and the Banks, or any of them, under this Agreement or at law. The Borrower hereby irrevocably appoints the Administrative Agent, the true and lawful attorney of the Borrower, in its name and stead and on its behalf, to execute, receipt for or otherwise act in connection with any and all contracts, instruments or other documents in connection with the completion and operation of the System in the exercise of the Administrative Agent's and the Banks' rights under this Section 8.2(d). (e) The rights and remedies of the Administrative Agent and the Banks hereunder shall be cumulative, and not exclusive. ARTICLE 9 The Agents ---------- Section 9.1 Appointment and Authorization. Each Bank hereby irrevocably ----------------------------- appoints and authorizes, and hereby agrees that it will require any transferee of any of its interest in its Loans and in its Note irrevocably to appoint and authorize, the Administrative Agent and the Documentation Agents to take such actions as its agents on its behalf and to exercise such powers hereunder as are delegated by the terms hereof, together with such powers as are reasonably incidental thereto. Neither the Administrative Agent nor the Documentation Agents, nor any of their respective directors, officers, employees or agents shall -79- be liable for any action taken or omitted to be taken by it or them hereunder or in connection herewith, except for its or their own gross negligence or willful misconduct as determined by a final order of a court of competent jurisdiction. Section 9.2 Interest Holders. The Agents may treat each Bank, or the ---------------- Person designated in the last notice filed with the Administrative Agent under this Section, as the holder of all of the interests of such Bank in its Loans and in its Note until written notice of transfer, signed by such Bank (or the Person designated in the last notice filed with the Administrative Agent) and by the Person designated in such written notice of transfer, in form and substance satisfactory to the Administrative Agent, shall have been filed with the Administrative Agent. Section 9.3 Consultation with Counsel. The Agents may consult with such ------------------------- legal counsel selected by them and shall not be liable for any action taken or suffered by them in good faith. Section 9.4 Documents. The Agents shall be under no duty to examine, --------- inquire into, or pass upon the validity, effectiveness or genuineness of this Agreement, any Note or any instrument, document or communication furnished pursuant hereto or in connection herewith, and the Agents shall be entitled to assume that they are valid, effective and genuine, have been signed or sent by the proper parties and are what they purport to be. Section 9.5 Agents and Affiliates. With respect to the Commitments and --------------------- the Loans, the affiliates of the Agents which are Banks shall have the same rights and powers hereunder as any other Bank, and the Agents and their respective affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower, any of its Subsidiaries, any Affiliates of, or Persons doing business with, the Borrower, as if it were not affiliated with the Agents and without any obligation to account therefor. The Banks acknowledge that the Agents and their respective affiliates have other lending and investment relationships with the Borrower, its Subsidiaries, and its Affiliates and in the future may enter into additional such relationships. Section 9.6 Responsibilities of the Agents. The duties and obligations ------------------------------ of the Agents under this Agreement are only those expressly set forth in this Agreement. Each of the Agents shall be entitled to assume that no Default or Event of Default has occurred and is continuing unless it has actual knowledge, or has been notified by the Borrower, of such fact, or has been notified by a Bank that such Bank considers that a Default or an Event of -80- Default has occurred and is continuing, and such Bank shall specify in detail the nature thereof in writing. None of the Agents shall be liable hereunder for any action taken or omitted to be taken except for its own gross negligence or willful misconduct as determined by a final order of a court of competent jurisdiction. The Administrative Agent shall provide each Bank with copies of such documents received from the Borrower as such Bank may reasonably request. Section 9.7 Collateral. The Administrative Agent is hereby authorized ---------- to act on behalf of the Banks, in its own capacity and through other agents and sub-agents appointed by it, under the Security Documents, provided that the Administrative Agent shall not agree to the release of any Collateral, or any property encumbered by any mortgage, pledge or security interest except in compliance with Section 11.12 hereof. Section 9.8 Action by the Administrative Agent and the Documentation -------------------------------------------------------- Agents. - ------ (a) The Administrative Agent and the Documentation Agents shall be entitled to use their discretion with respect to exercising or refraining from exercising any rights which may be vested in them by, and with respect to taking or refraining from taking any action or actions which they may be able to take under, or in respect of, this Agreement, unless the Administrative Agent or either Documentation Agent shall have been instructed by the Majority Banks to exercise or refrain from exercising such rights or to take or refrain from taking such action; provided that the Administrative Agent shall not exercise any rights under Section 8.2(a) or 8.2(c) of this Agreement without the request of the Majority Banks. Each Administrative Agent and each Documentation Agent shall not incur any liability under, or in respect of, this Agreement with respect to anything which it may do or refrain from doing in the reasonable exercise of its judgment or which may seem to it to be necessary or desirable in the circumstances, except for its gross negligence or willful misconduct as determined by a final order of a court of competent jurisdiction. (b) Neither the Administrative Agent nor any Documentation Agent shall be liable to the Banks or to any Bank in acting or refraining from acting under this Agreement in accordance with the instructions of the Majority Banks, and any action taken or failure to act pursuant to such instructions shall be binding on all Banks. Section 9.9 Notice of Default or Event of Default. In the event that ------------------------------------- any of the Agents or any Bank shall acquire actual knowledge, or shall have been notified, of any Default or Event -81- of Default, such Agent or such Bank shall promptly notify the Banks and the other Agents, and the Administrative Agent shall take such action and assert such rights under this Agreement as the Majority Banks shall request in writing, and the Administrative Agent shall not be subject to any liability by reason of its action pursuant to any such request. If the Majority Banks shall fail to request the Administrative Agent to take action or to assert rights under this Agreement in respect of any Default or Event of Default within ten (10) days after their receipt of the notice of any Default or Event of Default from the Administrative Agent, or shall request inconsistent action with respect to such Default or Event of Default, the Administrative Agent may, but shall not be required to, take such action and assert such rights (other than rights under Article 8 hereof) as it deems in its discretion to be advisable for the protection of the Banks, except that, if the Majority Banks have instructed the Administrative Agent not to take such action or assert such right, in no event shall the Administrative Agent act contrary to such instructions. Section 9.10 Responsibility Disclaimed. The Agents shall be under no ------------------------- liability or responsibility whatsoever as Agents: (a) To the Borrower or any other Person as a consequence of any failure or delay in performance by or any breach by, any Bank of any of its or their obligations under this Agreement; (b) To any Bank, as a consequence of any failure or delay in performance by, or any breach by, (i) the Borrower of any of its obligations under this Agreement or the Notes or any other Loan Document, or (ii) any Subsidiary of the Borrower or any other obligor under any other Loan Document; or (c) To any Bank, for any statements, representations or warranties in this Agreement, or any other document contemplated by this Agreement, or any information provided pursuant to this Agreement, any other Loan Document, or any other document contemplated by this Agreement, or for the validity, effectiveness, enforceability or sufficiency of this Agreement, the Notes, any other Loan Document, or any other document contemplated by this Agreement. Section 9.11 Indemnification. The Banks agree to indemnify the Agents --------------- (to the extent not reimbursed by the Borrower) pro rata according to their respective Commitment Ratios, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including fees and expenses of experts, agents, consultants and counsel), or disbursements of any kind or nature -82- whatsoever which may be imposed on, incurred by or asserted against the Agents in any way relating to or arising out of this Agreement, any other Loan Document, or any other document contemplated by this Agreement or any action taken or omitted by such Agent under this Agreement, any other Loan Document, or any other document contemplated by this Agreement, except that no Bank shall be liable to any Agent for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, or disbursements resulting from the gross negligence or willful misconduct of such Agent as determined by a final order of a court of competent jurisdiction. Section 9.12 Credit Decision. Each Bank represents and warrants to each --------------- other and to the Agents that: (a) In making its decision to enter into this Agreement and to make its Advances it has independently taken whatever steps it considers necessary to evaluate the financial condition and affairs of the Borrower and the Borrower's Subsidiaries and that it has made an independent credit judgment, and that it has not relied upon information provided by any of the Agents; and (b) So long as any portion of the Loans remains outstanding, it will continue to make its own independent evaluation of the financial condition and affairs of the Borrower and the Borrower's Subsidiaries. Section 9.13 Successor Administrative Agent and Documentation Agents. ------------------------------------------------------- The Administrative Agent and either of the Documentation Agents may resign at any time by giving written notice thereof to the Banks and the Borrower, and may be removed at any time for cause by the Majority Banks. Upon any such resignation or removal, the Majority Banks shall have the right to appoint a successor Administrative Agent or Documentation Agent. If no successor Administrative Agent or Documentation Agent shall have been so appointed by the Majority Banks and shall have accepted such appointment within ten (10) days after the retiring Administrative Agent's or Documentation Agent's giving of notice of resignation or the Majority Banks' removal of the retiring Administrative Agent or Documentation Agent, then the retiring Administrative Agent or Documentation Agent may, on behalf of the Banks, appoint a successor Administrative Agent or Documentation Agent, as the case may be, which shall be any Bank or a commercial bank organized under the laws of the United States of America or any political subdivision thereof which has combined capital and reserves in excess of $500,000,000. Such successor Administrative Agent or Documentation Agent shall thereupon succeed to and become vested with all the rights, powers, privileges, duties and obligations of the retiring -83- Administrative Agent or Documentation Agent, and the retiring Administrative Agent or Documentation Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent's or Documentation Agent's resignation or removal hereunder as Administrative Agent or Documentation Agent, the provisions of this Article shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent or Documentation Agent. Section 9.14 Managing Agents. The Managing Agents shall have no duties --------------- or obligations under this Agreement or the other Loan Documents in their capacities as Managing Agents. Section 9.15 Co-Agents. The Co-Agents shall have no duties or --------- obligations under this Agreement or the other Loan Documents in their capacities as Co-Agents. ARTICLE 10 Change in Circumstances Affecting Fixed Rate Advances ----------------------------- Section 10.1 Fixed Rate Basis Determination Inadequate or Unfair. If --------------------------------------------------- with respect to any proposed Fixed Rate Advance for any Interest Period, the Administrative Agent determines that deposits in dollars (in the applicable amount) are not being offered in the relevant market for such Interest Period, or if the Majority Banks determine that the rate quoted by the Administrative Agent does not reflect the Banks' actual cost of funding such Advance, the applicable Banks shall forthwith give notice thereof to the Administrative Agent, the Borrower and the other Banks, whereupon until the Administrative Agent notifies the Borrower that the circumstances giving rise to such situation no longer exist, the obligations of such Bank or all of the Banks, as applicable, to make such type of Fixed Rate Advances shall be suspended. Section 10.2 Illegality. If any applicable law, rule or regulation, or ---------- any change therein, or any interpretation or change in interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency, shall make it unlawful or impossible for any Bank to make, maintain or fund its Fixed Rate Advances (whether LIBOR Advances, CD Rate Advances, or both), such Bank shall notify the Administrative Agent, and the Administrative Agent -84- shall forthwith give notice thereof to the Banks and the Borrower. Before giving any notice to the Administrative Agent pursuant to this Section, such Bank shall designate a different lending office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. Upon receipt of such notice, notwithstanding anything contained in Article 2 hereof, the Borrower shall repay in full the then outstanding principal amount of each affected Fixed Rate Advance of such Bank so affected, together with accrued interest thereon, either (a) on the last day of the then current Interest Period applicable to such affected Fixed Rate Advances if such Bank may lawfully continue to maintain and fund such Fixed Rate Advance to such day or (b) immediately if such Bank may not lawfully continue to fund and maintain such affected Fixed Rate Advances to such day. Concurrently with repaying each affected Fixed Rate Advance of such Bank so affected, notwithstanding anything contained in Article 2 hereof, the Borrower shall borrow a Base Rate Advance (or the other type of Fixed Rate Advance, if available) from such Bank, and such Bank shall make such Advance in an amount such that the outstanding principal amount of the Note held by such Bank shall equal the outstanding principal amount of such Note immediately prior to such repayment. Section 10.3 Increased Costs. --------------- (a) If any applicable law, rule or regulation adopted or promulgated after the Agreement Date, or any change therein or in any law, rule or regulation existing as of the Agreement Date, or any interpretation or change in interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof or compliance by any Bank with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency: (1) shall subject any Bank to any tax, duty or other charge with respect to its obligation to make Fixed Rate Advances, or shall change the basis of taxation of payments to any Bank of the principal of or interest on its Fixed Rate Advances or in respect of any other amounts due under this Agreement, in respect of its Fixed Rate Advances, or its obligation to make Fixed Rate Advances (except for Taxes excluded under Section 2.9(b) hereof); or (2) shall impose, modify or deem applicable any reserve (including, without limitation, any imposed by the Board of Governors of the Federal Reserve System, but excluding any included in an applicable LIBOR Reserve Percentage or Domestic Reserve Percentage), special deposit, -85- capital adequacy, assessment or other requirement or condition against assets of, deposits with or for the account of, or commitments or credit extended by, any Bank or shall impose on any Bank or the London Interbank Borrowing Market any other condition affecting its obligation to make such Fixed Rate Advances or its Fixed Rate Advances; and the result of any of the foregoing is to increase the cost to such Bank of making or maintaining any such Fixed Rate Advances, or to reduce the amount of any sum received or receivable by the Bank under this Agreement or under any of its Notes with respect thereto, then, on the earlier of a date within fifteen (15) days after demand by such Bank or the Maturity Date, the Borrower agrees to pay to such Bank such additional amount or amounts as will compensate such Bank for such increased costs. Each Bank will promptly notify the Borrower and the Administrative Agent of any event of which its has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section 10.3 and will designate a different lending office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the sole judgment of such Bank made in good faith, be otherwise disadvantageous to such Bank. (b) A certificate of any Bank claiming compensation under this Section 10.3 and setting forth the additional amount or amounts to be paid to it hereunder and calculations therefor shall be presumptively correct in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods. If any Bank demands compensation under this Section 10.3, the Borrower may at any time, upon at least five (5) Business Days' prior notice to such Bank, prepay in full the then outstanding affected Fixed Rate Advances of such Bank, together with accrued interest thereon to the date of prepayment, along with any reimbursement required under Section 2.10 hereof. Concurrently with prepaying such Fixed Rate Advances the Borrower shall borrow a Base Rate Advance or a Fixed Rate Advance not so affected, from such Bank, and such Bank shall make such Advance in an amount such that the outstanding principal amount of the affected Note or Notes held by such Bank shall equal the outstanding principal amount of such Note or Notes immediately prior to such prepayment. Section 10.4 Effects on Other Advances. If notice has been given ------------------------- pursuant to Sections 10.1, 10.2 or 10.3 suspending the obligation of any Bank to make any type of Fixed Rate Advance, or requiring Fixed Rate Advances of any Bank to be repaid or prepaid, then, unless and until such Bank notifies the Borrower that the circumstances giving rise to such repayment no longer -86- apply, all Advances which would otherwise be made by such Bank as the type of Fixed Rate Advances affected shall be made instead as Base Rate Advances, or, if available, the other type of Fixed Rate Advance. Section 10.5 Claims for Increased Costs and Taxes. In the event that any ------------------------------------ Bank shall decline to make any type of Fixed Rate Advances pursuant to Section 10.1 or 10.2 hereof or shall have notified the Borrower that it is entitled to claim compensation pursuant to Section 2.12 or 10.3 hereof (each such Bank being an "Affected Bank"), the Borrower may designate a replacement bank (a "Replacement Bank") to assume the Commitments and the obligations of any such Affected Bank hereunder, and to purchase the outstanding Note or Notes of such Affected Bank and such Affected Bank's rights hereunder and with respect thereto, without recourse upon, or warranty by, or expense to, such Affected Bank, for a purchase price equal to the outstanding principal amount of the Loans of such Affected Bank plus all interest accrued and unpaid thereon and all other amounts owing to such Affected Bank hereunder, including without limitation, any amount which would be payable to such Affected Bank pursuant to Section 2.10, and upon such assumption and purchase by the Replacement Bank, such Replacement Bank shall be deemed to be a "Bank" for purposes of this Agreement and such Affected Bank shall cease to be a "Bank" for purposes of this Agreement and shall no longer have any obligations or rights hereunder (other than any obligations or rights which according to this Agreement shall survive the termination of this Agreement). ARTICLE 11 Miscellaneous ------------- Section 11.1 Notices. ------- (a) All notices and other communications under this Agreement shall be in writing and shall be deemed to have been given three (3) days after deposit in the mail, designated as certified mail, return receipt requested, post- prepaid, or one (1) day after being entrusted to a reputable commercial overnight delivery service, or when delivered to the telegraph office or sent out by telex or telecopy addressed to the party to which such notice is directed at its address determined as provided in this Section 11.1. All notices and other communications under this Agreement shall be given to the parties hereto at the following addresses: -87- (i) If to the Borrower, to it at: Charter Communications Entertainment I, L.P. 12444 Powerscourt Drive Suite 400 St. Louis, Missouri 63131 Attn: Jeffrey Sanders with a copy to: Paul, Hastings, Janofsky & Walker 600 Peachtree Street, N.E. Suite 2400 Atlanta, Georgia 30308 Attn: Kevin Conboy, Esq. (ii) If to the Administrative Agent, to it at: Toronto Dominion (Texas), Inc. 909 Fannin, Suite 1700 Houston, Texas 77010 Attn: Manager, Agency with a copy to: The Toronto-Dominion Bank 31 West 52nd Street New York, New York 10019 Attn: Melissa Glass and with a copy to: Powell, Goldstein, Frazer & Murphy Sixteenth Floor 191 Peachtree Street, N.E. Atlanta, Georgia 30303 Attn: Mary W. Bondurant, Esq. -88- (iii) If to the Banks, to them at: Toronto Dominion (Texas), Inc. 909 Fannin, Suite 1700 Houston, Texas 77010 Attn: Manager, Agency with a copy to: The Toronto-Dominion Bank 31 West 52nd Street New York, New York 10019 Attn: Melissa Glass Chemical Bank 270 Park Avenue New York, New York 10017 Attn: Joseph Coneeny CIBC Inc. 425 Lexington Avenue, 6th Floor New York, New York 10017 Attn: Tefta Ghilaga Credit Lyonnais Cayman Island Branch 1301 Avenue of the Americas New York, New York 10019 Attn: Bruce Yeager NationsBank, N.A. (Carolinas) 901 Main Street, 64th Floor Dallas, Texas 75202 Attn: Hutch McClendon Banque Paribas 2029 Century Park East, Suite 3900 Los Angeles, California 90067 Attn: Steve Healey CoreStates Bank, N.A. FC 1-8-10-73 1339 Chestnut Street Philadelphia, Pennsylvania 19101 Attn: Anthony B. Parisi The Long-Term Credit Bank of Japan, Ltd. 190 South Lasalle Street, Suite 800 Chicago, Illinois 60603 Attn: Ken Loveless -89- Mercantile Bank of St. Louis National Association 721 Locust Street St. Louis, Missouri 63102 Attn: Eloise Engman NatWest Bank N.A. 175 Water Street New York, New York 10038 Attn: Michael Cerullo Union Bank 445 South Figueroa Street Los Angeles, California 90071 Attn: Kevin Sampson Van Kampen Merritt Prime Rate Income Trust c/o Van Kampen American Capital One Parkview Plaza Oakbrook Terrace, Illinois 60181 Attn: Jeffrey Maillet First National Bank of Maryland 25 South Charles Street Baltimore, Maryland 21201 Attn: John Bruch Banque Francaise du Commerce Exterieur 645 Fifth Avenue New York, New York 10022 Attn: Rick Kammler Copies shall be provided to persons other than parties hereto only in the case of notices under Article 8 hereof. (b) Any party hereto may change the address to which notices shall be directed under this Section 11.1 by giving ten (10) days' written notice of such change to other parties. Section 11.2 Expenses. The Borrower will promptly pay: -------- (a) all reasonable out-of-pocket expenses of the Documentation Agents and the Administrative Agent in connection with the preparation, negotiation, execution and delivery of this Agreement and other Loan Documents, and the transactions contemplated hereunder and thereunder and the making of the initial Advance hereunder whether or not such Advance is made, including, but not limited to, the reasonable fees and -90- disbursements of Powell, Goldstein, Frazer & Murphy, special counsel for the Administrative Agent; (b) all reasonable out-of-pocket expenses of the Administrative Agent in connection with the administration of the transactions contemplated in this Agreement or the other Loan Documents (other than routine overhead expenses) and the preparation, negotiation, execution and delivery of any waiver, amendment or consent by the Banks relating to this Agreement or the other Loan Documents, including, but not limited to, the reasonable fees and disbursements of any experts, agents or consultants and of counsel for the Administrative Agent; and (c) all reasonable out-of-pocket costs and expenses of the Agents and the Banks in obtaining performance under this Agreement or the other Loan Documents and in connection with any restructuring, refinancing or "work out" of the transactions contemplated hereby and thereby, and all reasonable out-of- pocket costs and expenses of collection if default is made in the payment of the Notes, which in each case shall include reasonable fees and out-of-pocket expenses of any experts, agents, consultants and counsel for the Administrative Agent and reasonable fees and out-of-pocket expenses of counsel for the other Banks, collectively (which counsel for the Banks shall be selected by the Majority Banks). Section 11.3 Waivers. The rights and remedies of the Agents and the ------- Banks under this Agreement and the other Loan Documents shall be cumulative and not exclusive of any rights or remedies which they would otherwise have. No failure or delay by the Agents, the Majority Banks or the Banks, or any of them, in exercising any right shall operate as a waiver of such right. The Agents and the Banks expressly reserve the right to require strict compliance with the terms of this Agreement in connection with any funding of a request for an Advance. In the event the Banks decide to fund a request for an Advance at a time when the Borrower is not in strict compliance with the terms of this Agreement, such decision by the Banks shall not be deemed to constitute an undertaking by the Banks to fund any further requests for Advances or preclude the Banks from exercising any rights available to the Banks under the Loan Documents or at law or equity. Any waiver or indulgence granted by the Banks or by the Majority Banks shall not constitute a modification of this Agreement, except to the extent expressly provided in such waiver or indulgence, or constitute a course of dealing by the Banks at variance with the terms of the Agreement such as to require further notice by the Banks of the Banks' intent to require strict adherence to the terms of the Agreement in the future. Any such actions shall not in any way affect the ability of the Agents and the Banks, in their discretion, to exercise any rights -91- available to them under this Agreement or under any other agreement, whether or not the Agents and the Banks are party, relating to the Borrower. Section 11.4 Set-Off. In addition to any rights now or hereafter granted ------- under Applicable Law and not by way of limitation of any such rights, upon the occurrence of an Event of Default and during the continuation thereof, the Banks and any subsequent holder or holders of the Notes are hereby authorized by the Borrower at any time or from time to time, without notice to the Borrower or to any other Person, any such notice being hereby expressly waived, to set-off, appropriate and apply any and all deposits (general or special, time or demand, including, but not limited to, Indebtedness evidenced by certificates of deposit, in each case whether matured or unmatured) and any other Indebtedness at any time held or owing by the Banks or such holder to or for the credit or the account of the Borrower, against and on account of the obligations and liabilities of the Borrower, to the Banks or such holder under this Agreement, the Notes and any other Loan Document, including, but not limited to, all claims of any nature or description arising out of or connected with this Agreement, the Notes or any other Loan Document, irrespective of whether (a) the Banks or the holder of the Notes shall have made any demand hereunder or (b) the Banks shall have declared the principal of and interest on the Loans and Notes and other amounts due hereunder to be due and payable as permitted by Section 8.2 and although such obligations and liabilities, or any of them, shall be contingent or unmatured. Any sums obtained by any Bank or by any subsequent holder of the Notes shall be subject to the pro rata treatment provisions of Section 2.11 hereof. Upon direction by the Administrative Agent with the consent of the Majority Banks, each Bank holding deposits of the Borrower shall exercise its set-off rights as so directed. The Administrative Agent will notify the Borrower after the exercise of set-off rights under this Section. Section 11.5 Assignment. ---------- (a) The Borrower may not assign or transfer any of its rights or obligations hereunder, under the Notes or under any other Loan Document without the prior written consent of each Bank. (b) Each Bank may sell assignments of up to one hundred percent (100%) of its interest hereunder to (A) one or more affiliates of such Bank or to any other Bank, or (B) any Federal Reserve Bank as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve -92- Bank, so long as such assignment does not relieve such Bank from its obligations hereunder. (c) Each of the Banks may at any time enter into assignment agreements (but not participations) with one or more other banks or other Persons pursuant to which each Bank may assign its interest under this Agreement and the other Loan Documents, including, its interest in any particular Advance or portion thereof, provided, that (1) all assignments (other than assignments described in -------- clause (b) hereof) shall be in minimum aggregate principal amounts of $7,500,000 with respect to both Commitments or either Commitment, as applicable (unless after giving effect to all contemporaneous assignments to such Person, such Person has a minimum aggregate commitment under the Commitments of $7,500,000), (2) without the prior consent of the Borrower, no Bank may assign more than forty-nine percent (49%) of its interest hereunder on the Agreement Date, unless such Bank is selling one hundred percent (100%) of its interest, and (3) all assignments (other than assignments described in clause (b) hereof) shall be subject to the following additional terms and conditions: (i) No assignment (except assignments permitted in Section 11.5(b) hereof) shall be sold without the prior consent of the Administrative Agent and, prior to the occurrence and continuation of an Event of Default, the consent of the Borrower, which consents shall not be unreasonably withheld and, with respect to any assignment to any Person in an aggregate principal amount of less than $10,000,000, the Borrower shall have received not less than ten (10) Business Days' prior notice; (ii) Any Person purchasing an assignment of the Loans from any Bank shall be required to represent and warrant that its purchase shall not constitute a "prohibited transaction" (as defined in Section 4.1(l) hereof); (iii) The Borrower, the Agents and the Banks agree that assignments permitted hereunder may be made with all voting rights, and shall be made pursuant to an Assignment and Assumption Agreement substantially in the form of Exhibit N attached hereto. An administrative --------- fee of $2,500 shall be payable to the Administrative Agent by the assigning Bank at the time of any assignment hereunder other than with respect to an assignment to an Affiliate of such Bank; (iv) Each Bank agrees to provide the Administrative Agent and the Borrower with prompt written -93- notice of the making of any assignments of its interests hereunder; (v) No assignment of any rights hereunder or under the Notes shall be effected that would result in any interest requiring registration under the Securities Act of 1933, as amended, or qualification under any state securities law; (vi) No such assignment may be made to any bank or other financial institution (A) that does not have a minimum capital and surplus of $500,000,000, (B) with respect to which a receiver or conservator (including, without limitation, the Federal Deposit Insurance Corporation, the Resolution Trust Company or the Office of Thrift Supervision) has been appointed and (C) that is not "adequately capitalized" (as such term is defined in Section 131(b)(1)(B) of the Federal Deposit Insurance Corporation Improvement Act as in effect on the Agreement Date); and (vii) If applicable, each Bank shall cause each of its assignees to provide to the Administrative Agent on or prior to the effective date of any assignment an appropriate Internal Revenue Service form as required by Applicable Law supporting such Bank's position that no withholding by the Borrower or the Administrative Agent for U.S. income tax payable by such Bank in respect of amounts received by it hereunder is required. For purposes of this Agreement, an appropriate Internal Revenue Service form shall mean Form 1001 (Ownership Exemption or Reduced Rate Certificate of the U.S. Department of Treasury), or Form 4224 (Exemption from Withholding of Tax on Income Effectively Connected with the Conduct of a Trade or Business in the United States), or any successor or related forms adopted by the relevant U.S. taxing authorities. (d) Nothing in this Agreement or the Notes, expressed or implied, is intended to or shall confer on any Person other than the respective parties hereto and thereto and their successors and assignees permitted hereunder and thereunder any benefit or any legal or equitable right, remedy or other claim under this Agreement or the Notes. (e) The provisions of this Section 11.5 shall not apply to any purchase of participations among the Banks pursuant to Section 2.11 hereof. Section 11.6 Accounting Principles; Calculations. All references in this ----------------------------------- Agreement to generally accepted accounting principles shall be to such principles as in effect from time to -94- time. All accounting terms used herein without definition shall be used as defined under GAAP. All calculations required to be made hereunder with respect to the Borrower and its Subsidiaries shall be made for the Borrower and its Subsidiaries on a consolidated basis. All calculations for the Borrower and its Subsidiaries relating to time periods prior to the Agreement Date shall be deemed to include calculations for the General Partner and its Subsidiaries as well as the Borrower and its Subsidiaries on a consolidated basis. All calculations required to be made hereunder with respect to compliance by the Borrower hereunder, including, without limitation, compliance under Sections 2.7(b), 7.3, 7.4(a), 7.4(b), 7.12, 7.13 and 7.15 hereof, shall be deemed to include calculations for all activities engaged in, all transactions consummated by and all events which occurred with respect to the General Partner and its Subsidiaries for the period from and including January 18, 1995 through the Agreement Date. For all purposes herein, the phrase "during the term of this Agreement" or similar phrases used herein shall be deemed to refer to the period from and including January 18, 1995 through the applicable calculation date. Section 11.7 Counterparts. This Agreement may be executed in any number ------------ of counterparts, each of which shall be deemed to be an original, but all such separate counterparts shall together constitute but one and the same instrument. Section 11.8 Governing Law. This Agreement and the other Loan Documents ------------- shall be construed in accordance with and governed by the law of the State of New York. Section 11.9 Severability. Any provision of this Agreement which is ------------ prohibited or unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof in that jurisdiction or affecting the validity or enforceability of such provision in any other jurisdiction. Section 11.10 Interest. -------- (a) In no event shall the amount of interest due or payable hereunder or under the Notes exceed the maximum rate of interest allowed by Applicable Law, and in the event any such payment is inadvertently made by the Borrower or inadvertently received by any Bank, then such excess sum shall be credited as a payment of principal, unless the Borrower shall notify such Bank in writing that it elects to have such excess sum returned forthwith. It is the express intent hereof that the Borrower not pay and the Banks not receive, directly or indirectly in any manner whatsoever, interest in excess of that which may legally be paid by the Borrower under Applicable Law. -95- (b) Notwithstanding the use by the Banks of the Base Rate, CD Rate, LIBOR and the Federal Funds Rate as reference rates for the determination of interest on the Loans, the Banks shall be under no obligation to obtain funds from any particular source in order to charge interest to the Borrower at interest rates tied to such reference rates. Section 11.11 Headings. Headings used in this Agreement are for -------- convenience only and shall not be used in connection with the interpretation of any provision hereof. Section 11.12 Amendment and Waiver. Neither this Agreement nor any term -------------------- hereof may be amended orally, nor may any provision hereof be waived orally but only by an instrument in writing signed by the Majority Banks and, in the case of an amendment, by the Borrower, except that in the event of (a) any increase in the amount of either Commitment, (b) reduction of any repayment of the Loans provided in Section 2.5 or 2.7 hereof, (c) reduction of any required reduction in the Revolving Loan Commitment provided in Section 2.5 hereof, (d) any reduction of any principal, interest or fees due hereunder, (e) any postponement of the timing of payments of principal, interest and fees due hereunder, (f) any release (other than a release required under Section 7.4 hereof) or impairment of the value of any Collateral for the Loans, (g) any waiver of any Default due to the Borrower's failure to pay any sum due hereunder, (h) any amendments or modifications to the Hallmark Subordinated Debt other than amendments or modifications which are purely of an administrative nature or which (1) extend the maturity of principal due thereunder, (2) decrease the rate of interest payable by Holdings thereunder, (3) modify any reporting requirements or notice provisions, (4) loosen any covenant of Holdings thereunder, or (5) forgive any Indebtedness of Holdings arising thereunder, or (i) any amendment of this Section 11.12 or of the definition of Majority Banks, any amendment or waiver may be made only by an instrument in writing signed by each of the Banks and, in the case of an amendment, also by the Borrower. In addition, no Bank's portion of any Commitment hereunder may be increased without the written consent of such Bank. Any amendment to any provision hereunder governing the rights, obligations, or liabilities of any Agent in its capacity as such, may be made only by an instrument in writing signed by such affected Person and by each of the Banks. No term or provision of any Security Document may be amended or waived orally, but only by an instrument in writing signed by the Administrative Agent with the direction of the Majority Banks and, in the case of an amendment, by such of the Borrower and its Subsidiaries as are party thereto; provided, that the written consent of all of the Banks shall be required with respect to any amendment to or waiver of the provisions of any Security Document which would have the -96- effect of (i) releasing any portion of the Collateral for the Loans, other than in connection with any permitted asset sale (which shall require no further approval by the Banks) or (ii) releasing any Guaranty of all or any portion of the Obligations, except in connection with a merger, sale or other disposition otherwise permitted hereunder (in either such case as described in clauses (i) and (ii) of this sentence, such release shall require no further approval by the Banks). The Agents and the Banks hereby instruct and authorize the Administrative Agent to enter into the Security Documents (and all other Loan Documents) referred to in Section 3.1 hereof as of the Agreement Date and any other Security Documents required to be entered into by the Borrower or any of its Subsidiaries hereunder after the Agreement Date. Section 11.13 Entire Agreement. Except as otherwise expressly provided ---------------- herein, this Agreement and the other documents described or contemplated herein embody the entire agreement and understanding among the parties hereto and thereto and supersede all prior agreements and understandings relating to the subject matter hereof and thereof. Section 11.14 Other Relationships. No relationship created hereunder or ------------------- under any other Loan Document shall in any way affect the ability of the Agents and the Banks to enter into or maintain business relationships with the Borrower or any of its Subsidiaries, the General Partner, either of the Limited Partners, the Manager, or any of their Affiliates beyond the relationships specifically contemplated by this Agreement and the other Loan Documents. Section 11.15 Agreement to Transfer and Consent. By its execution of this --------------------------------- Agreement, (a) the General Partner agrees (i) to transfer to CCELP on the Agreement Date substantially all of the General Partner's assets (other than its ownership of the stock of Cencom) and all of the its liabilities, including, without limitation, the General Partner's liabilities under the Prior Loan Agreement, and (ii) to transfer to CCT on the Agreement Date the portion of the General Partner's assets not transferred to CCELP; (b) CCELP consents to the transfer to CCELP on the Agreement Date of substantially all of the assets of the General Partner and all of the assets of Cencom (other than the General Partner's ownership of the stock of Cencom) and all of the liabilities of the General Partner and Cencom, including, without limitation, the General Partner's liabilities under the Prior Loan Agreement; (c) CCT consents to the transfer to CCT on the Agreement Date of the portion of the assets of the General Partner not transferred to CCELP; (d) CCELP agrees to transfer to the Borrower on the Agreement Date all of the assets and liabilities of the General Partner and Cencom which are -97- transferred to CCELP by the General Partner and Cencom; and (e) CCT agrees to transfer to the Borrower on the Agreement Date all of the assets of the General Partner which are transferred to CCT by the General Partner. By their execution of this Agreement, the parties signatory hereto consent to the transactions contemplated hereby, including, without limitation, (i) the transfer to CCELP on the Agreement Date of substantially all of the assets (other than the General Partner's ownership of the stock of Cencom) and all of liabilities of the General Partner, including, without limitation, the General Partner's liabilities under the Prior Loan Agreement; (ii) the transfer to CCT on the Agreement Date of the portion of the assets of the General Partner not transferred to CCELP; (iii) the transfer by CCELP and CCT to the Borrower on the Agreement Date of all assets and liabilities of the General Partner previously transferred to CCELP and CCT, respectively; (iv) the transfer to CCELP on the Agreement Date of all assets and liabilities of Cencom and the subsequent transfer on the Agreement Date of such assets and liabilities to the Borrower; and (v) effective upon completion of the transfer of all assets from the General Partner and Cencom to CCELP and CCT, respectively, and the transfer of all liabilities from the General Partner and Cencom to CCELP and the subsequent transfer to the Borrower by CCELP and CCT, the agreement of the Borrower to assume all of the Obligations (as defined in the Prior Loan Agreement) of the General Partner and to be bound by all of the terms and conditions set forth in the Prior Loan Agreement, as amended and restated hereby. ARTICLE 12 Waiver of Jury Trial -------------------- Section 12.1 Waiver of Jury Trial. THE BORROWER, EACH AGENT AND EACH -------------------- BANK HEREBY AGREE TO WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY COURT AND IN ANY ACTION OR PROCEEDING OF ANY TYPE IN WHICH THE BORROWER, ANY OF THE BORROWER' SUBSIDIARIES, THE GENERAL PARTNER, EITHER OF THE LIMITED PARTNERS, THE MANAGER, AND ANY OF THE AGENTS OR THE BANKS, OR ANY OF THEIR RESPECTIVE SUCCESSORS OR ASSIGNS IS A PARTY, AS TO ALL MATTERS AND THINGS ARISING DIRECTLY OR INDIRECTLY OUT OF THIS AGREEMENT, ANY OF THE NOTES OR THE OTHER LOAN DOCUMENTS AND THE RELATIONS AMONG THE PARTIES LISTED IN THIS SECTION 12.1. -98- IN WITNESS WHEREOF, the parties hereto have executed this Agreement or caused it to be executed under seal by their duly authorized officers, all as of the day and year first above written. BORROWER: CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P., a Delaware limited partnership By: Its General Partner CCA ACQUISITION CORP., a Delaware corporation /s/ Jeffrey Sanders By:______________________________________________ Its: Executive Vice President ADMINISTRATIVE AGENT: TORONTO DOMINION (TEXAS), INC., as Administrative Agent /s/ Melissa B. Nigro By:______________________________________________ Its: Vice President DOCUMENTATION AGENTS: TORONTO DOMINION (TEXAS), INC., as a Documentation Agent /s/ Melissa B. Nigro By:______________________________________________ Its: Vice President CHEMICAL BANK, as a Documentation Agent /s/ Mary E. Cameron By:______________________________________________ Its: Vice President CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. AMENDED AND RESTATED LOAN AGREEMENT SIGNATURE PAGE 1 MANAGING AGENTS: TORONTO DOMINION (TEXAS), INC., as a Managing Agent /s/ Melissa B. Nigro By:______________________________________________ Its: Vice President CHEMICAL BANK, as a Managing Agent /s/ Mary E. Cameron By:______________________________________________ Its: Vice President CIBC INC., as a Managing Agent /s/ Matthew B. Jones By:______________________________________________ Its: Vice President CREDIT LYONNAIS CAYMAN ISLAND BRANCH, as a Managing Agent /s/ Bruce M. Yeager By:______________________________________________ Its: Authorized Signatory NATIONSBANK, N.A. (CAROLINAS), as a Managing Agent /s/ Jennifer Zydney By:______________________________________________ Its: Vice President CO-AGENTS: BANQUE PARIBAS, as a Co-Agent /s/ Stephen Healey By:______________________________________________ Its: Vice President /s/ John Cate By:______________________________________________ Its: Vice President UNION BANK, as a Co-Agent CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. AMENDED AND RESTATED LOAN AGREEMENT SIGNATURE PAGE 2 /s/ Michael K. McShane By:______________________________________________ Its: Vice President BANKS: TORONTO DOMINION (TEXAS), INC., as a Bank /s/ Melissa B. Nigro By:______________________________________________ Its: Vice President CHEMICAL BANK, as a Bank /s/ Mary E. Cameron By:______________________________________________ Its: Vice President CIBC INC., as a Bank /s/ Matthew B. Jones By:______________________________________________ Its: Vice President CREDIT LYONNAIS CAYMAN ISLAND BRANCH, as a Bank /s/ Bruce M. Yeager By:______________________________________________ Its: Authorized Signtory NATIONSBANK, N.A. (CAROLINAS), as a Bank /s/ Jennifer Zydney By:______________________________________________ Its: Vice President BANQUE PARIBAS, as a Bank /s/ Stephen Healey By:_____________________________________________ Its: Vice President /s/ John Cate By:______________________________________________ Its: Vice President CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. AMENDED AND RESTATED LOAN AGREEMENT SIGNATURE PAGE 3 UNION BANK, as a Bank /s/ Michael K. McShane By:______________________________________________ Its: Vice President CORESTATES BANK, N.A., as a Bank /s/ Anthony B. Parisi By:______________________________________________ Its: Assistant Vice President THE LONG-TERM CREDIT BANK OF JAPAN, LTD., as a Bank /s/ Armund Schoen, Jr. By:______________________________________________ Its: Vice President MERCANTILE BANK OF ST. LOUIS NATIONAL ASSOCIATION, as a Bank /s/ Gregory D. Knudsen By:______________________________________________ Its: Vice President NATWEST BANK N.A., as a Bank /s/ Michael Cerullo By:______________________________________________ Its: Vice President FIRST NATIONAL BANK OF MARYLAND, as a Bank /s/ John L. Bruch By:______________________________________________ Its: Vice President CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. AMENDED AND RESTATED LOAN AGREEMENT SIGNATURE PAGE 4 VAN KAMPEN MERRITT PRIME RATE INCOME TRUST as a Bank /s/ Kathleen A. Zarn By:______________________________________________ Its: Vice President BANQUE FRANCAISE DU COMMERCE EXTERIEUR, as a Bank /s/ Frederick K. Kammler By:______________________________________________ Its: Vice President ACKNOWLEDGED AND, WITH RESPECT TO SECTION 11.5 HEREOF, AGREED TO: CCA ACQUISITION CORP., a Delaware corporation /s/ Jeffrey Sanders By:_________________________________________ Its: Executive Vice President CHARTER COMMUNICATIONS ENTERTAINMENT, L.P., a Delaware limited partnership By: Its General Partner CCT HOLDINGS CORP., a Delaware corporation /s/ Jeffrey Sanders By:_____________________________________ Its: Executive Vice President CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. AMENDED AND RESTATED LOAN AGREEMENT SIGNATURE PAGE 5 CCT HOLDINGS CORP., a Delaware corporation /s/ Jeffrey Sanders By:__________________________________________ Its: Executive Vice President CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. AMENDED AND RESTATED LOAN AGREEMENT SIGNATURE PAGE 6 EX-10.2 19 FIRST AMENDMENT TO LOAN AGMNT - 10/31/95 THIS PAGE MUST BE KEPT WITH THE DOCUMENT. FIRST AMENDMENT TO LOAN AGREEMENT 04/25/97 1:23 PM Exhibit 10.2 FIRST AMENDMENT TO LOAN AGREEMENT THIS FIRST AMENDMENT TO LOAN AGREEMENT (this "Amendment"), dated as of the 31st day of October, 1995 (the "Amendment Date"), by and among CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P., a Delaware limited partnership (the "Borrower"), TORONTO DOMINION (TEXAS), INC., CHEMICAL BANK, CIBC INC., CREDIT LYONNAIS CAYMAN ISLAND BRANCH, NATIONSBANK, N.A. (CAROLINAS), BANQUE PARIBAS, UNION BANK, CORESTATES BANK, N.A., THE LONG-TERM CREDIT BANK OF JAPAN, LTD., MERCANTILE BANK OF ST. LOUIS NATIONAL ASSOCIATION, NATWEST BANK N.A., FIRST NATIONAL BANK OF MARYLAND, VAN KEMPEN MERRITT PRIME RATE INCOME TRUST and BANQUE FRANCAISE DU COMMERCE EXTERIEUR (together with any financial institution which subsequently becomes a `Bank' under the Loan Agreement, as such term is defined therein, the "Banks"), TORONTO DOMINION (TEXAS), INC. and CHEMICAL BANK, as Documentation Agents (in such capacity, the "Documentation Agents"), TORONTO DOMINION (TEXAS), INC., CHEMICAL BANK, CIBC INC., CREDIT LYONNAIS CAYMAN ISLAND BRANCH, and NATIONSBANK, N.A. (CAROLINAS), as Managing Agents (collectively in such capacity, the "Managing Agents"), BANQUE PARIBAS and UNION BANK, as Co- Agents (collectively in such capacity, the "Co-Agents") and TORONTO DOMINION (TEXAS), INC., as Administrative Agent for the Documentation Agents, the Managing Agents, the Co-Agents and the Banks (the "Administrative Agent," and together with the Documentation Agents, the Managing Agents and the Co-Agents, the "Agents"), W I T N E S S E T H: ------------------- WHEREAS, the Agents, the Borrower, and the Banks are parties to that certain Amended and Restated Loan Agreement dated as of September 29, 1995, (as amended, modified and supplemented from time to time, the "Loan Agreement"); and WHEREAS, the Borrower has requested the Agents and the Banks to agree to amend certain provisions of the Loan Agreement to provide for the creation of a third credit facility to be provided thereunder which shall be in a principal amount not to exceed $85,000,000 in the aggregate, the proceeds of which shall be used by the Borrower to acquire certain cable properties from United Video Cablevision, Inc. and Omega Communications, Inc.; and WHEREAS, the Agents and the Banks are willing to consent to such amendments and such other matters as set forth herein on the terms and conditions contained herein in return, in part, for the payment of the Amendment Fee (as defined herein); NOW, THEREFORE, in consideration of the premises set forth above, the covenants and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that all capitalized terms used herein shall have the meanings ascribed thereto in the Loan Agreement, and further agree as follows: 1. Amendments to Article 1. ----------------------- (a) Article 1 of the Loan Agreement, Definitions, is hereby amended by ----------- deleting the existing definitions of "Base Rate Advance," "Commitment Ratios," ----------------- ----------------- "Commitments," "Default Rate," "Loans," "Maturity Date" and "Notes" in their - ------------ ------------ ----- ------------- ----- entireties and by substituting the following therefor: "`Base Rate Advance' shall mean an Advance which the Borrower requests ------------------ to be made as a Base Rate Advance or is reborrowed as a Base Rate Advance in accordance with the provisions of Section 2.2 hereof, and which shall be in a principal amount of at least $1,000,000 and in an integral multiple of $100,000, except for a Base Rate Advance which is in an amount equal to the unused amount of the Commitment applicable thereto, which Advance may be in such amount." "`Commitment Ratios' shall mean the percentages in which the Banks are ----------------- severally bound to make Advances to the Borrower under the respective Commitments, as set forth below (together with dollar amounts) as of the date of the First Amendment to this Agreement:
Portion of Portion of Revolving Portion of Term Loan Revolving Loan Fund Loan Term Loan Loan Fund Loan Total Dollar Commitment Commitment Commitment Banks Commitment Commitment Commitment Commitment Ratio Ratio Ratios - ----------------- -------------- ------------- -------------- ------------ ------------- --------------- ------------- Toronto $ 9,856,000.01 $ 703,999.99 $42,500,000.00 $ 53,060,000 3.520000001% 3.519999983% 50.000000000% Dominion (Texas), Inc. Chemical Bank 13,189,333.33 2,370,666.67 $42,500,000.00 58,060,000 4.710476190% 11.853333333% 50.000000000% CIBC Inc. 33,189,333.33 2,370,666.67 0.00 35,560,000 11.853333333% 11.853333333% 0.000000000% Credit Lyonnais 33,189,333.33 2,370,666.67 0.00 35,560,000 11.853333333% 11.853333333% 0.000000000% Cayman Island Branch NationsBank, 33,189,333.33 2,370,666.67 0.00 35,560,000 11.853333333% 11.853333333% 0.000000000% N.A. (Carolinas) Banque Paribas 19,026,666.67 2,073,333.33 0.00 21,100,000 6.795238095% 10.366666667% 0.000000000% Union Bank 29,026,666.67 2,073,333.33 0.00 31,100,000 10.366666667% 10.366666667% 0.000000000% CoreStates 14,000,000.00 1,000,000.00 0.00 15,000,000 5.000000000% 5.000000000% 0.000000000% Bank, N.A.
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Portion of Portion of Revolving Portion of Term Loan Revolving Loan Fund Loan Term Loan Loan Fund Loan Total Dollar Commitment Commitment Commitment Banks Commitment Commitment Commitment Commitment Ratio Ratio Ratios - ----------------- -------------- ------------- -------------- ------------ ------------- --------------- ------------- The Long-Term 14,000,000.00 1,000,000.00 0.00 15,000,000 5.000000000% 5.000000000% 0.000000000% Credit Bank of Japan, Ltd. Mercantile Bank 14,000,000.00 1,000,000.00 0.00 15,000,000 5.000000000% 5.000000000% 0.000000000% of St. Louis National Association NatWest Bank 14,000,000.00 1,000,000.00 0.00 15,000,000 5.000000000% 5.000000000% 0.000000000% N.A. First National 14,000,000.00 1,000,000.00 0.00 15,000,000 5.000000000% 5.000000000% 0.000000000% Bank of Maryland Van Kampen 30,000,000.00 0.00 0.00 30,000,000 10.714285714% 0.000000000% 0.000000000% Merritt Prime Rate Income Trust Banque 9,333,333.33 666,666.67 0.00 10,000,000 3.333333332% 3.333333350% 0.000000000% Francaise du Commerce Exterieur =========================================================================================================== Total $ 280,000,000 $ 20,000,000 $85,000,000.00 $385,000,000 100% 100% 100%"
"`Commitments' shall mean, collectively, the Term Loan Commitment, the ----------- Revolving Loan Commitment and the Fund Loan Commitment." "`Default Rate' shall mean a simple per annum interest rate equal to ------------ the sum of (a) the Base Rate Basis (calculated using the highest Applicable Margin for Base Rate Advances under the applicable Commitment as set forth in Section 2.3(g) hereof, without giving effect to the Leverage Ratio then in effect) plus (b) two percent (2%)." "`Loans' shall mean, collectively, the Term Loan, the Revolving Loans ----- and the Fund Loans." "`Maturity Date' shall mean December 31, 2003, or such earlier date as ------------- payment of the Loans under the Revolving Loan Commitment or the Term Loan Commitment shall be due (whether by acceleration or otherwise)." "`Notes' shall mean, collectively, the Term Loan Notes, the Revolving ----- Loan Notes and the Fund Loan Notes." -3- THIS PAGE MUST BE KEPT WITH THE DOCUMENT. FIRST AMENDMENT TO LOAN AGREEMENT 04/25/97 1:23 pm FIRST AMENDMENT TO LOAN AGREEMENT THIS FIRST AMENDMENT TO LOAN AGREEMENT (this "Amendment"), dated as of the 31st day of October, 1995 (the "Amendment Date"), by and among CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P., a Delaware limited partnership (the "Borrower"), TORONTO DOMINION (TEXAS), INC., CHEMICAL BANK, CIBC INC., CREDIT LYONNAIS CAYMAN ISLAND BRANCH, NATIONSBANK, N.A. (CAROLINAS), BANQUE PARIBAS, UNION BANK, CORESTATES BANK, N.A., THE LONG-TERM CREDIT BANK OF JAPAN, LTD., MERCANTILE BANK OF ST. LOUIS NATIONAL ASSOCIATION, NATWEST BANK N.A., FIRST NATIONAL BANK OF MARYLAND, VAN KEMPEN MERRITT PRIME RATE INCOME TRUST and BANQUE FRANCAISE DU COMMERCE EXTERIEUR (together with any financial institution which subsequently becomes a `Bank' under the Loan Agreement, as such term is defined therein, the "Banks"), TORONTO DOMINION (TEXAS), INC. and CHEMICAL BANK, as Documentation Agents (in such capacity, the "Documentation Agents"), TORONTO DOMINION (TEXAS), INC., CHEMICAL BANK, CIBC INC., CREDIT LYONNAIS CAYMAN ISLAND BRANCH, and NATIONSBANK, N.A. (CAROLINAS), as Managing Agents (collectively in such capacity, the "Managing Agents"), BANQUE PARIBAS and UNION BANK, as Co- Agents (collectively in such capacity, the "Co-Agents") and TORONTO DOMINION (TEXAS), INC., as Administrative Agent for the Documentation Agents, the Managing Agents, the Co-Agents and the Banks (the "Administrative Agent," and together with the Documentation Agents, the Managing Agents and the Co-Agents, the "Agents"), W I T N E S S E T H: ------------------- WHEREAS, the Agents, the Borrower, and the Banks are parties to that certain Amended and Restated Loan Agreement dated as of September 29, 1995, (as amended, modified and supplemented from time to time, the "Loan Agreement"); and WHEREAS, the Borrower has requested the Agents and the Banks to agree to amend certain provisions of the Loan Agreement to provide for the creation of a third credit facility to be provided thereunder which shall be in a principal amount not to exceed $85,000,000 in the aggregate, the proceeds of which shall be used by the Borrower to acquire certain cable properties from United Video Cablevision, Inc. and Omega Communications, Inc.; and WHEREAS, the Agents and the Banks are willing to consent to such amendments and such other matters as set forth herein on the terms and conditions contained herein in return, in part, for the payment of the Amendment Fee (as defined herein); NOW, THEREFORE, in consideration of the premises set forth above, the covenants and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that all capitalized terms used herein shall have the meanings ascribed thereto in the Loan Agreement, and further agree as follows: 1. Amendments to Article 1. ----------------------- (a) Article 1 of the Loan Agreement, Definitions, is hereby amended by ----------- deleting the existing definitions of "Base Rate Advance," "Commitment Ratios," ----------------- ----------------- "Commitments," "Default Rate," "Loans," "Maturity Date" and "Notes" in their - ------------ ------------ ----- ------------- ----- entireties and by substituting the following therefor: "`Base Rate Advance' shall mean an Advance which the Borrower requests ------------------ to be made as a Base Rate Advance or is reborrowed as a Base Rate Advance in accordance with the provisions of Section 2.2 hereof, and which shall be in a principal amount of at least $1,000,000 and in an integral multiple of $100,000, except for a Base Rate Advance which is in an amount equal to the unused amount of the Commitment applicable thereto, which Advance may be in such amount." "`Commitment Ratios' shall mean the percentages in which the Banks are ----------------- severally bound to make Advances to the Borrower under the respective Commitments, as set forth below (together with dollar amounts) as of the date of the First Amendment to this Agreement:
Portion of Portion of Revolving Portion of Term Loan Revolving Loan Fund Loan Term Loan Loan Fund Loan Total Dollar Commitment Commitment Commitment Banks Commitment Commitment Commitment Commitment Ratio Ratio Ratios - ----------------- -------------- ------------- -------------- ------------ ------------- --------------- ------------- Toronto $ 9,856,000.01 $ 703,999.99 $42,500,000.00 $ 53,060,000 3.520000001% 3.519999983% 50.000000000% Dominion (Texas), Inc. Chemical Bank 13,189,333.33 2,370,666.67 $42,500,000.00 58,060,000 4.710476190% 11.853333333% 50.000000000% CIBC Inc. 33,189,333.33 2,370,666.67 0.00 35,560,000 11.853333333% 11.853333333% 0.000000000% Credit Lyonnais 33,189,333.33 2,370,666.67 0.00 35,560,000 11.853333333% 11.853333333% 0.000000000% Cayman Island Branch NationsBank, 33,189,333.33 2,370,666.67 0.00 35,560,000 11.853333333% 11.853333333% 0.000000000% N.A. (Carolinas) Banque Paribas 19,026,666.67 2,073,333.33 0.00 21,100,000 6.795238095% 10.366666667% 0.000000000% Union Bank 29,026,666.67 2,073,333.33 0.00 31,100,000 10.366666667% 10.366666667% 0.000000000% CoreStates 14,000,000.00 1,000,000.00 0.00 15,000,000 5.000000000% 5.000000000% 0.000000000% Bank, N.A.
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Portion of Portion of Revolving Portion of Term Loan Revolving Loan Fund Loan Term Loan Loan Fund Loan Total Dollar Commitment Commitment Commitment Banks Commitment Commitment Commitment Commitment Ratio Ratio Ratios - ----------------- -------------- ------------- -------------- ------------ ------------- --------------- ------------- The Long-Term 14,000,000.00 1,000,000.00 0.00 15,000,000 5.000000000% 5.000000000% 0.000000000% Credit Bank of Japan, Ltd. Mercantile Bank 14,000,000.00 1,000,000.00 0.00 15,000,000 5.000000000% 5.000000000% 0.000000000% of St. Louis National Association NatWest Bank 14,000,000.00 1,000,000.00 0.00 15,000,000 5.000000000% 5.000000000% 0.000000000% N.A. First National 14,000,000.00 1,000,000.00 0.00 15,000,000 5.000000000% 5.000000000% 0.000000000% Bank of Maryland Van Kampen 30,000,000.00 0.00 0.00 30,000,000 10.714285714% 0.000000000% 0.000000000% Merritt Prime Rate Income Trust Banque 9,333,333.33 666,666.67 0.00 10,000,000 3.333333332% 3.333333350% 0.000000000% Francaise du Commerce Exterieur =========================================================================================================== Total $ 280,000,000 $ 20,000,000 $85,000,000.00 $385,000,000 100% 100% 100%"
"`Commitments' shall mean, collectively, the Term Loan Commitment, the ----------- Revolving Loan Commitment and the Fund Loan Commitment." "`Default Rate' shall mean a simple per annum interest rate equal to ------------ the sum of (a) the Base Rate Basis (calculated using the highest Applicable Margin for Base Rate Advances under the applicable Commitment as set forth in Section 2.3(g) hereof, without giving effect to the Leverage Ratio then in effect) plus (b) two percent (2%)." "`Loans' shall mean, collectively, the Term Loan, the Revolving Loans ----- and the Fund Loans." "`Maturity Date' shall mean December 31, 2003, or such earlier date as ------------- payment of the Loans under the Revolving Loan Commitment or the Term Loan Commitment shall be due (whether by acceleration or otherwise)." "`Notes' shall mean, collectively, the Term Loan Notes, the Revolving ----- Loan Notes and the Fund Loan Notes." -3- (b) Article 1 of the Loan Agreement, Definitions, is hereby further amended ----------- by deleting clause (b)(vii) of the existing definition of "Annual Excess Cash ------------------ Flow" in its entirety and by substituting the following therefor: - ---- "(vii) voluntary prepayments of the Term Loan or the Fund Loans under Section 2.6 hereof;" (c) Article 1 of the Loan Agreement, Definitions, is hereby further amended ----------- by adding the following definitions in the appropriate alphabetical order: "A `Change in Control' shall be deemed to have occurred if (a)(i) ----------------- prior to any IPO, Kelso shall for any reason cease to be the beneficial owner, directly or indirectly, of at least a majority of the voting rights or other rights to participate in the Control of the Borrower, or (ii) following any IPO, any Person or group (within the meaning of Rule 13d-5 of the Securities and Exchange Commission as in effect on the date hereof) other than Kelso and Persons Controlled by Kelso is or becomes the beneficial owner, directly or indirectly, of more than 35% of the voting rights or other rights to participate in the Control of the Borrower; provided, however, that Kelso does not beneficially own, directly or -------- ------- indirectly, in the aggregate a greater percentage of the voting rights or other rights to participate in the Control of the Borrower than such other Person and does not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the board of directors or comparable body of the Borrower; or (b) following any IPO, any Person or group other than Kelso and Persons Controlled by Kelso shall own, directly or indirectly, more than 50% of the voting rights or other rights to participate in the Control of the Borrower; or (c) following any IPO, individuals who at the beginning of any period of two consecutive years constituted the board of directors or other governing body of the Borrower or any Person Controlling the Borrower (together with any new members of such board of directors or other governing body appointed or nominated by Kelso or a majority of the members then still in office who were either members at the beginning of such period or who were previously so appointed or nominated) shall cease for any reason to constitute a majority of such board of directors or other governing body then in office; or (d) at any time when the Manager shall manage the Borrower, (i) the Manager shall cease beneficially to own, directly or indirectly, (A) prior to any IPO, at least 10% of the equity interests in the Borrower, or (B) following any IPO, at least 5% of such equity interests, or shall sell or otherwise transfer for consideration to any other Person, directly or indirectly, -4- any equity interest in the Borrower, or (ii) there shall occur a Charter Communications Management Event." "`Charter Communications Management Event' shall mean, unless the --------------------------------------- Majority Banks shall have otherwise agreed in writing the happening of any of the following events: (a)(i) Charter Communications Group shall for any reason fail to be Controlled directly or indirectly by at least one of Jerald L. Kent, Howard L. Wood and Barry L. Babcock or (ii) a majority of the voting equity of and economic interests in Charter Communications Group shall for any reason fail to be owned by at least one of such individuals or (b) Charter Communications Group shall for any reason fail to Control the Manager at any time it is the manager, directly or indirectly, of the Borrower, or Charter Communications Group shall for any reason fail to own a majority of the voting equity of the Manager at any time it is the manager of the Borrower; provided that if any of the events described in -------- clause (a)(i) or (a)(ii) above occurs solely as a result of the death of any such individual, such event shall not constitute a Charter Communications Management Event unless (x) 90 days after the occurrence of such event (i) the Borrower shall have failed to provide the Administrative Agent and the Banks with a written proposal as to the Control of Charter Communications Group thereafter or (ii) the Majority Banks (or the Administrative Agent on their behalf) shall not have consented (and consent shall not be withheld unreasonably), in writing, to any such proposal given by the Borrower in accordance with the preceding clause or (y) if such written proposal is not rejected, such proposal shall not be implemented within 180 days after such event." "`Control' shall mean the possession, directly or indirectly, of the ------- power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and "Controlling" and "Controlled" shall have meanings ----------- ---------- correlative thereto." "`Final Maturity Date' shall mean December 31, 2004, or such earlier ------------------- date as payment of the Fund Loans shall be due (whether by acceleration or otherwise)." "`Fund Loans' shall mean, collectively, the amounts advanced by the ---------- Banks issuing a Fund Loan Commitment to the Borrower under the Fund Loan Commitment and which are evidenced by the Fund Loan Notes." "`Fund Loan Commitment' shall mean the several obligations of the -------------------- Banks issuing a Fund Loan Commitment to -5- advance the sum of $85,000,000 to the Borrower in accordance with their respective Commitment Ratios and the terms and conditions hereof." "`Fund Loan Notes' shall mean those certain term promissory notes in --------------- the aggregate principal amount of $85,000,000, one such note issued to each of the Banks having a Fund Loan Commitment by the Borrower, each one substantially in the form of Exhibit A to the First Amendment to this --------- Agreement, and any extensions, renewals, amendments or substitutions to any of the foregoing." "`Fund Loans' shall mean, collectively, the amounts advanced by the ---------- Banks issuing a Fund Loan Commitment to the Borrower under the Fund Loan Commitment and which are evidenced by the Fund Loan Notes." "`IPO' shall mean a completed initial public offering and sale by any --- Person directly or indirectly Controlling the Borrower of common stock or partnership interests representing at least 10% of the equity of such Person." "`Omega Acquisition Agreement' shall mean that certain purchase and --------------------------- sale agreement or similar agreement to be entered into by the Borrower and Omega Communications, Inc. with respect to the acquisition by the Borrower of certain cable television assets of Omega Communications, Inc., as such agreement may be amended, modified or supplemented from time to time, together with all exhibits, schedules and appendices thereto, all of which shall be in form and substance satisfactory to the Administrative Agent." "`Omega Acquisition Date' shall mean the date on which the Borrower ---------------------- acquires the Omega Assets pursuant to the Omega Acquisition Agreement." "`Omega Assets' shall mean those cable television assets of Omega ------------ Communications, Inc. to be acquired by the Borrower pursuant to the Omega Acquisition Agreement." "`United Video Acquisition Agreement' shall mean that certain Asset ---------------------------------- Purchase and Sale Agreement between United Video Cablevision, Inc. and the Borrower dated as of July 13, 1995, as amended, modified or supplemented from time to time, together with all exhibits, schedules and appendices thereto." "`United Video Assets' shall mean those assets of United Video ------------------- Cablevision, Inc. to be acquired by the Borrower pursuant to the United Video Acquisition Agreement." -6- 2. Amendments to Article 2. Article 2 of the Loan Agreement, Loans, is ----------------------- ----- hereby amended as follows: (a) Section 2.1 of the Loan Agreement, The Loans, is hereby amended by --------- adding the following new subsection (c) thereto at the end of such Section: "(c) Fund Loans. The Banks who have issued a Fund Loan Commitment ---------- agree, severally in accordance with their respective Commitment Ratios relating to the Fund Loan Commitment, and not jointly, upon the terms and subject to the conditions of this Agreement, to lend to the Borrower: (i) an aggregate amount not to exceed $75,000,000 under the Fund Loan Commitment on the date of the First Amendment to this Agreement; and (ii) provided that, not less than fifteen (15) days prior to the Omega Acquisition Date, the Borrower shall have provided the Administrative Agent with copies of the Omega Acquisition Agreement and all other documents related to the transfer of the Omega Assets to the Borrower, including, without limitation, lien search results from appropriate jurisdictions with respect to the Omega Assets, all of which shall be certified by an Authorized Signatory to be true, complete and correct, and all of which shall be in form and substance satisfactory to the Administrative Agent, an aggregate amount not to exceed $10,000,000 under the Fund Loan Commitment on the Omega Acquisition Date. Advances under the Fund Loan Commitment may be repaid and reborrowed as provided in Section 2.2(b) and 2.2(c) hereof, as applicable, in order to effect changes in the Interest Rate Bases applicable to Advances thereunder, provided, however, that there shall be -------- ------- no net increase in the aggregate principal amount outstanding under the Fund Loan Commitment on any date other than the date of the First Amendment to this Agreement or the Omega Acquisition Date." (b) Section 2.3(a) of the Loan Agreement, Interest, On Base Rate Advances, -------- --------------------- is hereby amended by deleting the last sentence thereof in its entirety and by substituting the following therefor: "Interest on Base Rate Advances then outstanding shall also be due and payable on the Maturity Date or the Final Maturity Date, as applicable to the Commitment under which such Advance was made." (c) Section 2.3(b) of the Loan Agreement, Interest, On LIBOR Advances, is -------- ----------------- hereby amended by deleting the last sentence thereof in its entirety and by substituting the following therefor: -7- "Interest on LIBOR Advances then outstanding shall also be due and payable on the Maturity Date or the Final Maturity Date, as applicable to the Commitment under which such Advance was made." (d) Section 2.3(c) of the Loan Agreement, Interest, On CD Rate Advances, -------- ------------------- is hereby amended by deleting the last sentence thereof in its entirety and by substituting the following therefor: "Interest on CD Rate Advances then outstanding shall also be due and payable on the Maturity Date or the Final Maturity Date, as applicable to the Commitment under which such Advance was made." (e) Section 2.3(e) of the Loan Agreement, Interest Upon Default, is hereby --------------------- amended by adding the word "Final" immediately before the phrase "Maturity Date" appearing in the second sentence thereof. (f) Section 2.3(g) of the Loan Agreement, Applicable Margin, is hereby ----------------- amended by designating the existing language in such Section as a paragraph (i), entitled "For Revolving Loans and the Term Loan," and adding the following at ------------------------------------- the end of such Section as a new paragraph (ii) thereof: "(ii) For Fund Loans. With respect to any Base Rate Advance under the -------------- Fund Loan Commitment, the Applicable Margin shall be one and three-quarters percent (1-3/4%); with respect to any LIBOR Advance under the Fund Loan Commitment, the Applicable Margin shall be two and three-quarters percent (2-3/4%); and with respect to any CD Rate Advance under the Fund Loan Commitment, the Applicable Margin shall be two and seven-eighths percent (2-7/8%)." (g) Section 2.4 of the Loan Agreement, Commitment Fee, is hereby amended by -------------- deleting such Section in its entirety and by substituting the following therefor: "Section 2.4 Commitment Fee. The Borrower agrees to pay to the -------------- Banks, in accordance with their respective Commitment Ratios for the applicable Commitment, a commitment fee on the aggregate unborrowed balance of the Revolving Loan Commitment and the Fund Loan Commitment at a rate of three-eighths of one percent (3/8%) per annum for each day from the Agreement Date until the Maturity Date or the Final Maturity Date, as applicable to the respective Commitment. Such commitment fee shall be computed on the basis of a year of 365/366 days for the actual number of days elapsed, shall be payable quarterly in arrears on each March 31, June 30, September 30 and December 31, commencing -8- on September 29, 1995 and on the Maturity Date or the Final Maturity Date, as applicable, and shall be fully earned when due and non-refundable when paid. The commitment fee payable under the Prior Loan Agreement shall be paid to the Banks by the Borrower in accordance with the terms and conditions of the Prior Loan Agreement." (h) Section 2.6 of the Loan Agreement, Prepayment, is hereby amended by ---------- (i) adding the word "Final" immediately before the phrase "Maturity Date" appearing in the second sentence thereof, and (ii) deleting the third sentence thereof in its entirety and substituting the following therefor: "Any notice of prepayment shall be irrevocable and all amounts prepaid on the Loans shall be applied to principal outstanding, first, under the Term Loan and the Fund Loans in inverse order of maturity and on a weighted pro rata basis between the Term Loan and the Fund Loans, and then to the Revolving Loans." (i) Section 2.7(a) of the Loan Agreement, Scheduled Repayments, is hereby -------------------- amended by (A) designating the existing language in such Section as a paragraph (i), entitled "For the Term Loan," (B) deleting the last sentence of such new ----------------- paragraph (i) in its entirety, and (C) adding the following at the end of such Section as a new paragraph (ii) thereof: "(ii) For the Fund Loans. Commencing March 31, 1998, the principal ------------------ balance of the Fund Loans shall be amortized in consecutive quarterly installments on March 31, June 30, September 30 and December 31 of each year until paid in full, in such amounts as follows:
Percent of Principal Due on Last Day Payment Dates of Each Quarter ------------- --------------- March 31, 1998, June 30, 1998, September 30, 1998 and December 31, 1998 0.125% March 31, 1999, June 30, 1999, September 30, 1999 and December 31, 1999 0.125% March 31, 2000, June 30, 2000, September 30, 2000 and December 31, 2000 0.250%
-9- March 31, 2001, June 30, 2001, September 30, 2001 and December 31, 2001 0.250% March 31, 2002, June 30, 2002, September 30, 2002 and December 31, 2002 0.250% March 31, 2003, June 30, 2003, September 30, 2003 and December 31, 2003 4.350% March 31, 2004, June 30, 2004, September 30, 2004 and December 31, 2004 19.650%
A final payment of all principal amounts and other Obligations then outstanding shall be due and payable on the Final Maturity Date." (j) Section 2.7(b) of the Loan Agreement, Repayments Upon Sales of Assets ------------------------------- and Asset Swaps, is hereby amended by deleting the existing Section 2.7(b) in - --------------- its entirety and by substituting the following therefor: "(b) Repayments Upon Sales of Assets and Asset Swaps. Except as ----------------------------------------------- provided below with respect to Permitted Asset Swaps, in the event of any sale, lease, transfer or other disposition of assets permitted hereunder, excluding any such sale, lease, transfer or other disposition of assets by the Borrower or any of its Subsidiaries in the ordinary course of business (collectively, "Asset Sales"), to the extent that the Net Proceeds with respect thereto (when taken together with the Net Proceeds of all other Asset Sales made subsequent to the Agreement Date) are in excess of $5,000,000 in the aggregate for all Asset Sales made during the period from the Agreement Date to the Final Maturity Date, the Borrower shall, on the date of such sale, lease, transfer or other disposition, make a repayment of the principal of the Term Loan and the Fund Loans then outstanding (on a weighted pro rata basis between such Loans) in an amount equal to the Net Proceeds in excess of the first $5,000,000 of all such Asset Sales. Any such Net Proceeds which constitute a portion of the sales price which was previously held in escrow or paid in installments shall be paid to the extent required by the terms hereof to the Banks as a repayment of principal at such time as such Net Proceeds are received by the Borrower. In the event the Borrower elects to enter into a Permitted Asset Swap, the Borrower shall, on the date it sells, leases, transfers or otherwise disposes of all or substantially all of its -10- interests in the cable television system owned by the Borrower or any of its Subsidiaries in the State of Connecticut, deposit in an escrow account with the Administrative Agent an amount equal to the Net Proceeds of such sale, lease, transfer or other disposition. The amount deposited in such escrow account shall be held in such escrow account until the earlier to occur of the consummation of the Permitted Asset Swap or the first anniversary of the sale, lease, transfer or other disposition of such Connecticut assets or interests relating thereto. Amounts held in such escrow account may be invested as permitted under Section 7.6(i), (ii) and (iii) hereof, or as otherwise agreed to by the Borrower and the Administrative Agent. Net Proceeds held in escrow by the Administrative Agent may be used by the Borrower at any time prior to the first anniversary of such sale, lease, transfer or other disposition of Connecticut assets or interests to consummate a Permitted Asset Swap or to repay the principal amount of the Term Loan and the Fund Loans (on a weighted pro rata basis between such Loans). All Net Proceeds remaining in escrow with the Administrative Agent pursuant to this Section 2.7(b) on such first anniversary date shall be immediately applied to repay the principal amount of the Term Loan and the Fund Loans (on a weighted pro rata basis between such Loans). All amounts paid by the Borrower pursuant to this subsection shall be applied to principal of the Term Loan and the Fund Loans, respectively, pro rata over the applicable repayment schedule set forth in Section 2.7(a) above." (k) Section 2.7(c) of the Loan Agreement, Annual Excess Cash Flow ----------------------- Recapture, is hereby amended by deleting the existing Section 2.7(c) in its - --------- entirety and by substituting the following therefor: "(c) Annual Excess Cash Flow Recapture. In addition to the foregoing, --------------------------------- the Borrower agrees that on April 30, 1998 and on each April 30th thereafter during the term of this Agreement, the Borrower shall make a repayment of the principal of the Term Loan and the Fund Loans then outstanding (on a weighted pro rata basis between such Loans) in an amount equal to (i) seventy-five percent (75%) of Annual Excess Cash Flow for the Borrower's preceding fiscal year if the Leverage Ratio as of the end of such preceding fiscal year (but before giving effect to such repayment) is greater than or equal to 5.5:1, or (ii) fifty percent (50%) of Annual Excess Cash Flow for the Borrower's preceding fiscal year if the Leverage Ratio at the time of such payment (but before giving effect to such repayment) is less than 5.5:1, together, in any case, with accrued interest on the portion of the Term Loan and the Fund Loans -11- so repaid. All amounts paid by the Borrower pursuant to this subsection in respect of the principal of the Term Loan and the Fund Loans shall be applied to such principal in inverse order of maturity." (l) Section 2.8 of the Loan Agreement, Notes; Loan Accounts, is hereby -------------------- amended by deleting the second sentence of existing Section 2.8 in its entirety and by substituting the following therefor: "One Term Loan Note, one Revolving Loan Note and one Fund Loan Note shall be payable to the order of each Bank for such Commitment, in accordance with the respective Commitment Ratio of such Bank for the applicable Commitment." (m) Section 2.9 of the Loan Agreement, Manner of Payment, is hereby ----------------- amended by deleting clause (v) of subsection (c) thereof in its entirety and substituting the following therefor: "(v) to the payment of principal then due on the Term Loan and the Fund Loans (on a weighted pro rata basis between such Loans) and then due on the Revolving Loans, which payments shall be applied against outstanding Advances in the following order of priority: (A) Advances, the Interest Period for which is expiring concurrently with such payment, (B) Base Rate Advances, (C) CD Rate Advances, and (D) LIBOR Advances." (n) Section 2.10 of the Loan Agreement, Reimbursement, is hereby amended ------------- by adding the word "Final" immediately before the phrase "Maturity Date" appearing in the first sentence of subsection (a) thereof. (o) Section 2.11 of the Loan Agreement, Pro Rata Treatment, is hereby ------------------ amended by deleting subsection (a) thereof in its entirety and substituting the following therefor: "(a) Advances. Each Advance from the Banks under any Commitment -------- shall be made pro rata on the basis of the respective Commitment Ratios of the Banks applicable to the particular Commitment." (p) Section 2.12 of the Loan Agreement, Capital Adequacy, is hereby ---------------- amended by adding the word "Final" immediately before the phrase "Maturity Date" each time it appears therein. 3. Amendments to Article 5. ----------------------- -12- (a) Section 5.9 of the Loan Agreement, Use of Proceeds, is hereby amended --------------- by deleting existing Section 5.9 in its entirety and by substituting the following therefor: "Section 5.9 Use of Proceeds. The Borrower will use the aggregate --------------- proceeds of the Term Loan and the Revolving Loans (as set forth in the Requests for Advances issued from time to time hereunder) to assume the liabilities of the General Partner under the Prior Loan Agreement, which liabilities were previously assumed by CCELP, to finance Capital Expenditures, for working capital and for other general partnership needs as permitted under this Agreement. The Borrower will use proceeds of the Fund Loans (a) in an aggregate amount not to exceed $75,000,000 to finance the acquisition of the United Video Assets pursuant to the United Video Acquisition Agreement and related transaction costs, and (b) in an aggregate amount not to exceed $10,000,000 to finance the acquisition of the Omega Assets pursuant to the Omega Acquisition Agreement and related transaction costs." (b) Section 5.12 of the Loan Agreement, Interest Rate Hedging, is hereby --------------------- amended by inserting the word "Final" immediately before the phrase "Maturity Date" appearing in the second sentence thereof. (c) Section 5.13 of the Loan Agreement, Covenants Regarding Formation of -------------------------------- Subsidiaries, is hereby amended by inserting the word "Final" immediately before - ------------ the phrase "Maturity Date" appearing in clause (c) thereof. 4. Amendments to Article 7. ----------------------- (a) Section 7.4 of the Loan Agreement, Liquidation, Change in Ownership, --------------------------------- Disposition or Acquisition of Assets, is hereby amended by deleting the word - ------------------------------------ "and" appearing immediately before existing subsection (b)(viii) and adding the following at the end of existing subsection (b) thereof, before the period: "and (ix) the United Video Acquisition and the Omega Acquisition, subject to the terms and conditions of this Agreement." (b) Section 7.7 of the Loan Agreement, Restricted Payments and Purchases, --------------------------------- is hereby amended by deleting existing subsection (b) thereof in its entirety and by substituting the following therefor: "(b) so long as no Default hereunder then exists or would be caused thereby, during the period from January 1, 1995 through and including December 31, 1999, (i) pay -13- management fees and financial advisory fees in an aggregate amount for any fiscal year not to exceed $4,450,000, except that with respect to the fiscal year ending December 31, 1995, such amount shall not exceed $3,750,000, and (ii) reimburse Kelso for all reasonable out of pocket expenses incurred by it in connection with its services under the Financial Advisory Agreement, all as the same may become due and payable under the Management Agreement and the Financial Advisory Agreement, or, in the case of the General Partner, the predecessors to such Agreements;" (c) Section 7.7 of the Loan Agreement, Restricted Payments and Purchases, --------------------------------- is hereby further amended by (i) deleting the word "and" from the end of subsection (f) thereof, (ii) deleting the period at the end of subsection (g) thereof and inserting a semi-colon and the word "and" in lieu thereof, and (iii) inserting the following new subsection (h) after existing subsection (g) thereof: "(h) (i) pay to Kelso or the Manager a search and acquisition fee (A) in an aggregate amount not to exceed $1,900,000 on the date of the First Amendment to this Agreement, and (B) in an aggregate amount not to exceed $200,000 on the Omega Acquisition Date, and (ii) reimburse Kelso for all reasonable out of pocket expenses incurred by Kelso in connection with its providing search and acquisition services to the Borrower with respect to the Borrower's acquisition of the United Video Assets and the Omega Assets." (d) Section 7.8 of the Loan Agreement, Leverage Ratio, is hereby amended -------------- by deleting the existing table contained in existing Section 7.8 in its entirety and by substituting the following therefor:
Leverage "Period Ratio ------ -------- From January 18, 1995 6.50:1 through June 30, 1996 From July 1, 1996 6.25:1 through December 31, 1996 From January 1, 1997 6.00:1 through June 30, 1997 From July 1, 1997 5.50:1 through December 31, 1997 From January 1, 1998 5.00:1 through December 31, 1998
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Leverage "Period Ratio ------ -------- From January 1, 1999 4.50:1 through December 31, 1999 From January 1, 2000 and 4.00:1" thereafter
(e) Section 7.15 of the Loan Agreement, Capital Expenditures, is hereby -------------------- amended by deleting the existing table contained in existing Section 7.15 in its entirety and by substituting the following therefor:
Capital "Period Expenditures Limit ------ ------------------ From January 18, 1995 $23,500,000 through December 31, 1995 From January 1, 1996 $25,500,000 through December 31, 1996
5. Amendments to Article 8. ----------------------- (a) Section 8.1 of the Loan Agreement, Events of Default, is hereby ----------------- amended by deleting existing subsections 8.1(q), (r), (s) and (t) thereof in their respective entireties and by substituting the following, in the appropriate alphabetical order, therefor: "(q) There shall have occurred a Change in Control; (r) [INTENTIONALLY OMITTED]; (s) [INTENTIONALLY OMITTED]; (t) [INTENTIONALLY OMITTED];" (b) Section 8.1 of the Loan Agreement, Events of Default, is hereby ----------------- further amended by (i) deleting the period appearing at the end of existing subsection (v) thereof and inserting a semi-colon and the word "or" in lieu thereof, and (ii) adding the following as a new subsection (w) thereof: "(w) CCELP shall incur, create, assume or permit to exist any Indebtedness for Money Borrowed, Capitalized Lease Obligations or obligations under Guaranties in respect of Indebtedness for Money Borrowed in an aggregate amount in -15- excess of $20,000,000, only $10,000,000 of which may be used for purposes other than acquisitions." (c) Section 8.2 of the Loan Agreement, Remedies, is hereby amended by -------- inserting the word "Final" immediately before the phrase "Maturity Date" appearing in the fourth sentence of subsection (d) thereof. 6. Amendment to Section 10.3. Section 10.3 of the Loan Agreement, ------------------------- Increased Costs, is hereby amended by inserting the word "Final" immediately - --------------- before the phrase "Maturity Date" appearing in subsection (a) thereof. 7. Amendments to Article 11. ------------------------ (a) Section 11.5 of the Loan Agreement, Assignment, is hereby amended by ---------- deleting the introductory paragraph to existing subsection (c) thereof in its entirety and by substituting the following therefor: "(c) Each of the Banks may at any time enter into assignment agreements (but not participations) with one or more other banks or other Persons pursuant to which each Bank may assign its interests under this Agreement and the other Loan Documents, including, without limitation, its interest in any particular Advance or portion thereof, provided, that (1) -------- all assignments (other than assignments described in clause (b) hereof and assignments by Toronto Dominion (Texas), Inc. and Chemical Bank of their respective interests under the Fund Loan Commitment and Advances thereunder) shall be in minimum aggregate principal amounts of $7,500,000 with respect to each applicable Commitment (unless, after giving effect to all contemporaneous assignments to the applicable assignee, such assignee has a minimum aggregate commitment under the Commitments of $7,500,000), (2) without the prior consent of the Borrower, no Bank (other than Toronto Dominion (Texas), Inc. and Chemical Bank with respect to their respective interests under the Fund Loan Commitment and Advances thereunder) may assign more than forty-nine percent (49%) of its interests hereunder on the Agreement Date, unless such Bank is selling one hundred percent (100%) of its interests, and (3) all assignments (other than assignments described in clause (b) hereof) shall be subject to the following additional terms and conditions:" (b) Section 11.12 of the Loan Agreement, Amendment and Waiver, is hereby -------------------- amended by deleting subsection (a) thereof in its entirety and by substituting the following therefor: "(a) any increase in the amount of any Commitment," -16- 8. Counterparts. This Amendment may be executed in any number of ------------ counterparts, each of which shall be deemed to be an original, but all such separate counterparts shall together constitute but one and the same instrument. 9. Governing Law. This Amendment shall be construed in accordance with ------------- and governed by the laws of the State of New York. 10. Severability. Any provision of this Amendment which is prohibited or ------------ unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof in that jurisdiction or affecting the validity or enforceability of such provision in any other jurisdiction. 11. No Other Amendment or Waiver. Except for the amendments set forth ---------------------------- above, the text of the Loan Agreement and all other Loan Documents shall remain unchanged and in full force and effect. No waiver by the Administrative Agent, the other Agents or the Banks under the Loan Agreement or any other Loan Document is granted or intended except as expressly set forth herein, and the Administrative Agent, the other Agents and the Banks expressly reserve the right to require strict compliance in all other respects (whether or not in connection with any Requests for Advance). Except as set forth herein, the amendments agreed to herein shall not constitute a modification of the Loan Agreement or any of the other Loan Documents, or a course of dealing with the Administrative Agent, the other Agents and the Banks, or any of them, at variance with the Loan Agreement or any of the other Loan Documents, such as to require further notice by the Administrative Agent, the other Agents, the Banks, the Majority Banks, or any of them, to require strict compliance with the terms of the Loan Agreement and the other Loan Documents in the future. 12. Representations and Warranties. The Borrower hereby represents and ------------------------------ warrants in favor of the Agents and the Banks as follows: (a) The Borrower has the partnership power and authority (i) to enter into this Amendment and to consummate the acquisition of the United Video Assets as contemplated hereby and (ii) to do all other acts and things as are required or contemplated hereunder to be done, observed and performed by it; (b) This Amendment has been duly authorized, validly executed and delivered by one or more Authorized Signatories of the Borrower and constitutes the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, subject, as to enforcement of -17- remedies, to the following qualifications: (i) an order of specific performance and an injunction are discretionary remedies and, in particular, may not be available where damages are considered an adequate remedy at law, and (ii) enforcement may be limited by bankruptcy, insolvency, liquidation, reorganization, reconstruction and other similar laws affecting enforcement of creditors' rights generally (insofar as any such law relates to the bankruptcy, insolvency or similar event of the Borrower); and (c) The execution and delivery of this Amendment, the performance by the Borrower under the Loan Agreement and the other Loan Documents to which it is a party, as amended hereby, and the consummation by the Borrower of the acquisition of the United Video Assets as contemplated hereby do not and will not require the consent or approval of any regulatory authority or governmental authority or agency having jurisdiction over the Borrower which has not already been obtained, nor is in contravention of or in conflict with the partnership agreement or other similar agreement of the Borrower, or the provision of any statute, judgment, order, indenture, instrument, agreement, or undertaking, to which the Borrower is a party or by which any of its assets or properties are or may become bound. 13. Conditions Precedent. The effectiveness of this Amendment is subject -------------------- to the prior fulfillment of each of the following conditions: (a) Toronto Dominion (Texas), Inc. and Chemical Bank shall each have received a duly executed Fund Loan Note in substantially the form attached hereto as Exhibit A, which promissory notes shall be deemed to be "Notes" under --------- the Loan Agreement and the other Loan Documents for all purposes hereafter; (b) The Administrative Agent or the Banks, as appropriate, shall have received each of the following, in form and substance satisfactory to the Administrative Agent and the Banks: (i) A certificate, signed by an Authorized Signatory of the Borrower, certifying on the date hereof that there exists no Default under the Loan Agreement, after giving effect to this Amendment, and demonstrating the Borrower's compliance with Sections 7.8, 7.9, 7.10 and 7.15 of the Loan Agreement, after giving effect to this Amendment and the consummation of the Borrower's acquisition of the United Video Assets; (ii) All documentation required under Section 5.13 of the Loan Agreement with respect to the Borrower's acquisition of the United Video Assets; -18- (iii) Copies of the United Video Acquisition Agreement and all other documents related to the transfer of the United Video Assets to the Borrower, including, without limitation, lien search results from appropriate jurisdictions with respect to the United Video Assets, all of which shall be certified by an Authorized Signatory to be true, complete and correct as of the date hereof, together with duly executed UCC-1 financing statements and other collateral documentation deemed reasonably necessary by the Administrative Agent to reflect or perfect the Security Interest of the Administrative Agent (for itself and on behalf of the Banks) in such assets; (iv) Opinions of general counsel and in-house counsel to the Borrower and its Subsidiaries, addressed to the Banks and the Administrative Agent and satisfactory to the Administrative Agent and its special counsel, dated as of the date hereof; (v) Reliance letters regarding a opinions of counsel to United Video Cablevision, Inc., in form and substance satisfactory to the Administrative Agent and its special counsel, dated as of the date hereof; (vi) Evidence satisfactory to the Administrative Agent and its special counsel that the Borrower has acquired the United Video Assets pursuant to the United Video Acquisition Agreement; (vii) Evidence satisfactory to the Agents and the Banks that CCELP has invested not less than $22,000,000 in additional cash equity in the Borrower; (viii) Duly executed Certificate of Financial Condition dated as of the date hereof; (ix) Copies of all approvals or consents regarding the transfer to the Borrower of all franchises and contracts constituting a part of the United Video Assets; (x) Pro forma balance sheet with respect to the Borrower, after giving effect to the transactions contemplated hereby; and (xi) All such other documents as the Administrative Agent or any Bank may reasonably request, certified by an appropriate governmental official or an Authorized Signatory if so reasonably requested. (c) The Licenses constituting a part of the United Video Assets shall be in form and substance satisfactory to the -19- Administrative Agent, and the Administrative Agent shall have received evidence reasonably satisfactory to it that all Necessary Authorizations, including all necessary consents to the consummation of the Borrower's acquisition of the United Video Assets and the other transactions contemplated hereby, from the grantors of the Licenses have been obtained or made, are in full force and effect and are not subject to any pending or threatened reversal or cancellation, and the Administrative Agent and the Banks shall have received a certificate of an Authorized Signatory so stating. (d) The Administrative Agent for each of the Banks shall have received from the Borrower for the account of the Banks an amendment fee (the "Amendment Fee") by wire transfer of immediately available funds equal to the product of (i) each Bank's pro rata portion of the Revolving Loan Commitment and the Term Loan Commitment as of the effective date of this Amendment, multiplied by (ii) 0.125%, and all other fees payable to the Administrative Agent or any Bank in connection herewith. 14. Effective Date. Upon satisfaction of the conditions precedent referred -------------- to in Section 13 above, this Amendment shall be effective as of October 31, 1995. 15. Loan Documents. This document shall be deemed to be a Loan Document -------------- for all purposes. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] -20- IN WITNESS WHEREOF, the parties hereto have executed this Amendment or caused it to be executed under seal by their duly authorized officers, all as of the day and year first above written. BORROWER: CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P., a Delaware limited partnership By: Its General Partner CCA ACQUISITION CORP., a Delaware corporation By: /s/ Jeffrey Sanders ------------------------------------------- Its: Executive Vice President ADMINISTRATIVE AGENT: TORONTO DOMINION (TEXAS), INC., as Administrative Agent By: /s/ Martha L. Gariepy ------------------------------------------- Its: Vice President DOCUMENTATION AGENTS: TORONTO DOMINION (TEXAS), INC., as a Documentation Agent By: /s/ Martha L. Gariepy ------------------------------------------- Its: Vice President CHEMICAL BANK, as a Documentation Agent By: /s/ Edward Devine ------------------------------------------- Its: Managing Director CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. FIRST AMENDMENT TO LOAN AGREEMENT SIGNATURE PAGE 1 MANAGING AGENTS: TORONTO DOMINION (TEXAS), INC., as a Managing Agent By: /s/ Martha L. Gariepy ------------------------------------------- Its: Vice President CHEMICAL BANK, as a Managing Agent By: /s/ Edward Devine ------------------------------------------- Its: Managing Director CIBC INC., as a Managing Agent By: /s/ Deborah Strek ------------------------------------------- Its: Vice President CREDIT LYONNAIS CAYMAN ISLAND BRANCH, as a Managing Agent By: /s/ Bruce M. Yeager ------------------------------------------- Its: Authorized Signatory NATIONSBANK, N.A. (CAROLINAS), as a Managing Agent By: /s/ W.H. McClendon ------------------------------------------- Its: Senior Vice President CO-AGENTS: BANQUE PARIBAS, as a Co-Agent By: /s/ Stephen J. Healey ------------------------------------------- Its: Vice President By: /s/ John Cate ------------------------------------------- Its: Group Vice President UNION BANK, as a Co-Agent CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. FIRST AMENDMENT TO LOAN AGREEMENT SIGNATURE PAGE 2 By: /s/ Michael K. McShane ------------------------------------------- Its: Vice President BANKS: TORONTO DOMINION (TEXAS), INC., as a Bank By: /s/ Martha L. Gariepy ------------------------------------------- Its: Vice President CHEMICAL BANK, as a Bank By: /s/ Edward Devine ------------------------------------------- Its: Managing Director CIBC INC., as a Bank By: /s/ Deborah Strek ------------------------------------------- Its: Vice President CREDIT LYONNAIS CAYMAN ISLAND BRANCH, as a Bank By: /s/ Bruce M. Yeager ------------------------------------------- Its: Authorized Signatory NATIONSBANK, N.A. (CAROLINAS), as a Bank By: /s/ W.H. McClendon ------------------------------------------- Its: Senior Vice President BANQUE PARIBAS, as a Bank By: /s/ Stephen J. Healey ------------------------------------------- Its: Vice President By: /s/ John Cate ------------------------------------------- Its: Group Vice President CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. FIRST AMENDMENT TO LOAN AGREEMENT SIGNATURE PAGE 3 UNION BANK, as a Bank By: /s/ Michael K. McShane ----------------------------------------------- Its: Vice President CORESTATES BANK, N.A., as a Bank By: /s/ Anthony G. Parisi ----------------------------------------------- Its: Assistant Vice President THE LONG-TERM CREDIT BANK OF JAPAN, LTD., as a Bank By: /s/ Armund Schoen Jr. ----------------------------------------------- Its: Vice President & Deputy General Manager MERCANTILE BANK OF ST. LOUIS NATIONAL ASSOCIATION, as a Bank By: /s/ Gregory D. Knudsen ----------------------------------------------- Its: Vice President NATWEST BANK N.A., as a Bank By: /s/ Michael Cerullo ----------------------------------------------- Its: Vice President FIRST NATIONAL BANK OF MARYLAND, as a Bank By: /s/ Mark L. Cook ----------------------------------------------- Its: Vice President VAN KAMPEN MERRITT PRIME RATE INCOME TRUST as a Bank By: /s/ Jeffrey W. Maillet ----------------------------------------------- Its: Senior Vice President--Portfolio Manager CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. FIRST AMENDMENT TO LOAN AGREEMENT SIGNATURE PAGE 4 BANQUE FRANCAISE DU COMMERCE EXTERIEUR, as a Bank By: /s/ Frederick K. Kammler ------------------------------------------- Its: Vice President By: /s/ William C. Maier ------------------------------------------- Its: Vice President--Group Manager CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. FIRST AMENDMENT TO LOAN AGREEMENT SIGNATURE PAGE 5 EX-10.3 20 SECOND AMENDMENT TO LOAN AGMNT - 1/16/96 THIS PAGE MUST BE KEPT WITH THE DOCUMENT. SECOND AMENDMENT TO LOAN AGREEMENT 04/25/97 12:13 pm Exhibit 10.3 SECOND AMENDMENT TO LOAN AGREEMENT THIS SECOND AMENDMENT TO LOAN AGREEMENT (this "Amendment"), dated as of the 16th day of January, 1996 (the "Amendment Date"), by and among CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P., a Delaware limited partnership (the "Borrower"), TORONTO DOMINION (TEXAS), INC., CHEMICAL BANK, CIBC INC., CREDIT LYONNAIS CAYMAN ISLAND BRANCH, NATIONSBANK, N.A. (F/K/A NATIONSBANK, N.A. (CAROLINAS)), BANQUE PARIBAS, UNION BANK, CORESTATES BANK, N.A., THE LONG-TERM CREDIT BANK OF JAPAN, LTD., MERCANTILE BANK OF ST. LOUIS NATIONAL ASSOCIATION, NATWEST BANK N.A., FIRST NATIONAL BANK OF MARYLAND, VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST (F/K/A VAN KAMPEN MERRITT PRIME RATE INCOME TRUST), BANQUE FRANCAISE DU COMMERCE EXTERIEUR, PRIME INCOME TRUST, SENIOR DEBT PORTFOLIO AND MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. (together with any financial institution which subsequently becomes a `Bank' under the Loan Agreement, as such term is defined therein, the "Banks"), TORONTO DOMINION (TEXAS), INC. and CHEMICAL BANK, as Documentation Agents (in such capacity, the "Documentation Agents"), TORONTO DOMINION (TEXAS), INC., CHEMICAL BANK, CIBC INC., CREDIT LYONNAIS CAYMAN ISLAND BRANCH, and NATIONSBANK, N.A. (F/K/A NATIONSBANK, N.A. (CAROLINAS)), as Managing Agents (collectively in such capacity, the "Managing Agents"), BANQUE PARIBAS and UNION BANK, as Co-Agents (collectively in such capacity, the "Co-Agents") and TORONTO DOMINION (TEXAS), INC., as Administrative Agent for the Documentation Agents, the Managing Agents, the Co-Agents and the Banks (the "Administrative Agent," and together with the Documentation Agents, the Managing Agents and the Co-Agents, the "Agents"), W I T N E S S E T H: ------------------- WHEREAS, the Agents, the Borrower, and certain of the Banks are parties to that certain Amended and Restated Loan Agreement dated as of September 29, 1995, as amended by that certain First Amendment to Loan Agreement dated as of October 31, 1995 (as further amended, modified and supplemented from time to time, the "Loan Agreement"); and WHEREAS, Prime Income Trust, Senior Debt Portfolio and Merrill Lynch Senior Floating Rate Fund, Inc. (collectively, the "New Banks") desire to become "Banks" under the Loan Agreement by purchasing pro rata assignments of portions of the Fund Loan Commitment and outstanding Fund Loans currently held by Toronto Dominion (Texas), Inc. and Chemical Bank, as more fully set forth in that certain Master Assignment and Assumption Agreement of even date by and among each of the New Banks, Toronto Dominion (Texas), Inc. and Chemical Bank with respect to the Loan Agreement; and WHEREAS, the parties to the Loan Agreement, including, without limitation, the New Banks, desire to amend the Loan Agreement as more fully set forth herein; NOW, THEREFORE, in consideration of the premises set forth above, the covenants and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that all capitalized terms used herein shall have the meanings ascribed thereto in the Loan Agreement, and further agree as follows: 1. Amendments to Article 1. ----------------------- (a) Article 1 of the Loan Agreement, Definitions, is hereby amended ----------- by deleting the existing definitions of "Commitment Ratios," "Fund Loan ----------------- --------- Notes," "Notes," "Revolving Loan Notes" and "Term Loan Notes" in their ----- ----- -------------------- --------------- entireties and by substituting the following therefor: "`Commitment Ratios' shall mean the percentages in which the ----------------- Banks are severally bound to make Advances to the Borrower under the respective Commitments, as set forth below (together with dollar amounts) as of the date of the Second Amendment to this Agreement:
Portion of Portion of Revolving Portion of Term Loan Revolving Loan Fund Loan Term Loan Loan Fund Loan Total Dollar Commitment Commitment Commitment Banks Commitment Commitment Commitment Commitment Ratio Ratio Ratio - ------------------- -------------- ------------- -------------- ------------ -------------- --------------- ------------- Toronto $ 9,856,000.01 $ 703,999.99 $25,750,000.00 $ 36,310,000 3.520000001% 3.519999983% 30.294117647% Dominion (Texas), Inc. Chemical Bank 13,189,333.33 2,370,666.67 $25,750,000.00 41,310,000 4.710476190% 11.853333333% 30.294117647% CIBC Inc. 33,189,333.33 2,370,666.67 0.00 35,560,000 11.853333333% 11.853333333% 0.000000000% Credit Lyonnais 33,189,333.33 2,370,666.67 0.00 35,560,000 11.853333333% 11.853333333% 0.000000000% Cayman Island Branch NationsBank, 33,189,333.33 2,370,666.67 0.00 35,560,000 11.853333333% 11.853333333% 0.000000000% N.A. (f/k/a NationsBank, N.A. (Carolinas)) Banque Paribas 19,026,666.67 2,073,333.33 0.00 21,100,000 6.795238095% 10.366666667% 0.000000000% Union Bank 29,026,666.67 2,073,333.33 0.00 31,100,000 10.366666667% 10.366666667% 0.000000000% CoreStates 14,000,000.00 1,000,000.00 5,000,000.00 20,000,000 5.000000000% 5.000000000% 5.882352941% Bank, N.A.
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Portion of Portion of Revolving Portion of Term Loan Revolving Loan Fund Loan Term Loan Loan Fund Loan Total Dollar Commitment Commitment Commitment Banks Commitment Commitment Commitment Commitment Ratio Ratio Ratio - ------------------- -------------- ------------- -------------- ------------ -------------- --------------- ------------- The Long-Term 14,000,000.00 1,000,000.00 0.00 15,000,000 5.000000000% 5.000000000% 0.000000000% Credit Bank of Japan, Ltd. Mercantile Bank 14,000,000.00 1,000,000.00 0.00 15,000,000 5.000000000% 5.000000000% 0.000000000% of St. Louis National Association NatWest Bank 14,000,000.00 1,000,000.00 0.00 15,000,000 5.000000000% 5.000000000% 0.000000000% N.A. First National 14,000,000.00 1,000,000.00 0.00 15,000,000 5.000000000% 5.000000000% 0.000000000% Bank of Maryland Van Kampen 30,000,000.00 0.00 8,500,000.00 38,500,000 10.714285714% 0.000000000% 10.000000000% American Capital Prime Rate Income Trust (f/k/a Van Kampen Merritt Prime Rate Income Trust) Banque 9,333,333.33 666,666.67 0.00 10,000,000 3.333333332% 3.333333350% 0.000000000% Francaise du Commerce Exterieur Prime Income 0.00 0.00 10,000,000.00 10,000,000 0.000000000% 0.000000000% 11.764705882% Trust Merrill Lynch 0.00 0.00 5,000,000.00 5,000,000 0.000000000% 0.000000000% 5.882352941% Senior Floating Rate Fund, Inc. Senior Debt 0.00 0.00 5,000,000.00 5,000,000 0.000000000% 0.000000000% 5.882352941% Portfolio Total $ 280,000,000 $ 20,000,000 $85,000,000.00 $385,000,000 100% 100% 100%"
"`Fund Loan Notes' shall mean those certain term promissory notes --------------- (including Registered Notes) in the aggregate principal amount of $85,000,000, one such note issued to each of the Banks having a Fund Loan Commitment by the Borrower, each one substantially in the form of Exhibit A --------- to the Second Amendment to this Agreement, and any extensions, renewals, amendments or substitutions to any of the foregoing." -3- "'Revolving Loan Notes' shall mean those certain amended and restated -------------------- revolving promissory notes (including Registered Notes) in the aggregate principal amount of $20,000,000, one such note issued to each of the Banks having a Revolving Loan Commitment hereunder by the Borrower, each one substantially in the form of Exhibit E attached hereto, and any extensions, --------- renewals, amendments or substitutions to any of the foregoing." "'Term Loan Notes' shall mean those certain amended and restated term --------------- promissory notes (including Registered Notes) in the aggregate principal amount of $280,000,000, one such note issued to each of the Banks having a Term Loan Commitment by the Borrower, each one substantially in the form of Exhibit I attached hereto, and any extensions, renewals, amendments or --------- substitutions to any of the foregoing." (b) Article 1 of the Loan Agreement, Definitions, is hereby further ----------- amended by adding the following definitions in the appropriate alphabetical order: "'Non-U.S. Bank' shall have the meaning ascribed to such term in ------------- Section 2.8(a) hereof." "'Register' shall have the meaning ascribed to such term in Section -------- 11.5(f) hereof." "'Registered Noteholder' shall mean each Non-U.S.Bank that requests or --------------------- holds a Registered Note pursuant to Section 2.8(a) hereof or registers its Loans pursuant to Section 11.5(f) hereof." "'Registered Notes' shall mean those certain Notes that have been ---------------- issued in registered form in accordance with Sections 2.8(a) and 11.5(f) hereof and each of which bears the following legend: 'This is a Registered Note, and this Registered Note and the Loans evidenced hereby may be assigned or otherwise transferred in whole or in part only by registration of such assignment or transfer on the Register and in compliance with all other requirements provided for in the Loan Agreement.'" "'U.S. Person' shall mean a citizen or resident of the United States ----------- of America, a corporation, partnership or other entity created or organized in or under any laws of the United States of America, or any estate or trust that is subject to Federal income taxation regardless of the source of its income." -4- (2) Amendments to Article 2. ----------------------- (a) Section 2.1 of the Loan Agreement, The Loans, is hereby amended by --------- deleting existing subsection (c) thereto in its entirety and by substituting the following in lieu thereof: "(c) Fund Loans. The Banks who have issued a Fund Loan Commitment ---------- agree, severally in accordance with their respective Commitment Ratios relating to the Fund Loan Commitment, and not jointly, upon the terms and subject to the conditions of this Agreement, to lend to the Borrower: (i) an aggregate amount not to exceed $75,000,000 under the Fund Loan Commitment on the date of the First Amendment to this Agreement; and (ii) provided that the Omega Acquisition Date occurs on or before March 31, 1996, and provided further that not less than fifteen (15) days prior to the Omega Acquisition Date, the Borrower shall have provided the Administrative Agent with copies of the Omega Acquisition Agreement and all other documents related to the transfer of the Omega Assets to the Borrower, including, without limitation, lien search results from appropriate jurisdictions with respect to the Omega Assets, all of which shall be certified by an Authorized Signatory to be true, complete and correct, and all of which shall be in form and substance satisfactory to the Administrative Agent, an aggregate amount not to exceed $10,000,000 under the Fund Loan Commitment on the Omega Acquisition Date. Advances under the Fund Loan Commitment may be repaid and reborrowed as provided in Section 2.2(b) and 2.2(c) hereof, as applicable, in order to effect changes in the Interest Rate Bases applicable to Advances thereunder, provided, -------- however, that there shall be no net increase in the aggregate principal ------- amount outstanding under the Fund Loan Commitment on any date other than the date of the First Amendment to this Agreement or the Omega Acquisition Date. In any event, the Fund Loan Commitment shall terminate upon the earlier to occur of the close of business on the Omega Acquisition Date or March 31, 1996." (b) Section 2.8 of the Loan Agreement, Notes; Loan Accounts, is hereby -------------------- amended by adding the following at the end of existing Section 2.8(a): "Any Bank (i) which is not a U.S. Person (a "Non-U.S. Bank") and (ii) which ------------- could become completely exempt from withholding of United States Federal income taxes in respect of payment of any obligations due to such Bank hereunder relating to any of its Loans if such Loans were in registered form for United States Federal income tax purposes may request the Borrower (through the Administrative Agent), and the Borrower agrees thereupon, to -5- register such Loans as provided in Section 11.5(f) hereof and to issue to such Bank Notes evidencing such Loans as Registered Notes or to exchange Notes evidencing such Loans for new Registered Notes, as applicable. Registered Notes may not be exchanged for Notes that are not in registered form." (c) Section 2.9 of the Loan Agreement, Manner of Payment, is hereby ----------------- amended by adding to Section 2.9(d) the phrase ", Form W-8" immediately after the phrase "Form 4224" appearing in the first sentence thereof. (d) Section 2.9 of the Loan Agreement, Manner of Payment, is hereby ----------------- further amended by adding the following after the first sentence of existing Section 2.9(d): "Each Registered Noteholder (or, if such Registered Noteholder is not the beneficial owner thereof, such beneficial owner) shall deliver to the Borrower (with a copy to the Administrative Agent) prior to or at the time it becomes a Registered Noteholder, the applicable form described in the first sentence of this Section 2.9(d) (or such successor and related forms as may from time to time be adopted by the relevant taxing authorities of the United States of America), together with an annual certificate stating that such Registered Noteholder or beneficial owner, as the case may be, is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and is not otherwise described in Section 881(c)(3) of the Code. Each Registered Noteholder or beneficial owner, as the case may be, shall promptly notify the Borrower (with a copy to the Administrative Agent) if at any time, such Registered Noteholder or beneficial owner, as the case may be, determines that it is no longer in a position to make the certification made in such certificate to the Borrower (or any other form of certification adopted by the relevant taxing authorities of the United States of America for such purposes)." 3. Amendments to Article 11. ------------------------ (a) Section 11.1 of the Loan Agreement, Notices, is hereby amended by ------- adding the following to Section 11.1(a)(iii) immediately before the last sentence thereof: "Prime Income Trust c/o Dean Witter InterCapital, Inc. Two World Trade Center New York, New York 10048 Attn: Rafael Scolari -6- Merrill Lynch Senior Floating Rate Fund, Inc. c/o Merrill Lynch Asset Management 800 Scudders Mill Road Plainsboro, New Jersey 08536 Attn: Anthony Clemente Senior Debt Portfolio c/o Eaton Vance 24 Federal Street Boston, Massachusetts 02110 Attn: Jeffrey Garner" (b) Section 11.5 of the Loan Agreement, Assignment, is hereby amended by ---------- deleting the introductory paragraph to existing subsection (c) thereof and subparagraph (i) thereof in their respective entireties and by substituting the following therefor: "(c) Each of the Banks may at any time enter into assignment agreements (but not participations) with one or more other banks or other Persons pursuant to which each Bank may assign its interests under this Agreement and the other Loan Documents, including, without limitation, its interest in any particular Advance or portion thereof, provided, that (1) -------- all assignments with respect to the Term Loan Commitment or Advances thereunder (other than assignments described in clause (b) hereof) shall be in minimum aggregate principal amounts of $10,000,000 (unless, after giving effect to all contemporaneous assignments to the applicable assignee, such assignee has a minimum commitment under the Term Loan Commitment of $10,000,000), (2) all assignments with respect to the Revolving Loan Commitment and Advances thereunder (other than assignments described in clause (b) hereof) shall be in minimum aggregate principal amounts of $10,000,000 (unless, after giving effect to all contemporaneous assignments to the applicable assignee, such assignee has a minimum commitment under the Revolving Loan Commitment of $10,000,000), (3) all assignments with respect to the Fund Loan Commitment and Advances thereunder (other than assignments described in clause (b) hereof and assignments by Toronto Dominion (Texas), Inc. and Chemical Bank of their respective interests under the Fund Loan Commitment and Advances thereunder) shall be in minimum aggregate principal amounts of $5,000,000 (unless, after giving effect to all contemporaneous assignments to the applicable assignee, such assignee has a minimum commitment under the Fund Loan Commitment of $5,000,000), (4) without the prior consent of the Borrower, no Bank (other than Toronto Dominion (Texas), Inc. and Chemical Bank with respect to their respective interests under the Fund Loan Commitment and Advances thereunder) may assign more than forty-nine percent (49%) of -7- its interests hereunder, unless such Bank is selling one hundred percent (100%) of its interests hereunder, and (5) all assignments (other than assignments described in clause (b) hereof) shall be subject to the following additional terms and conditions: "(i) No assignment (except assignments permitted in Section 11.5(b) hereof) shall be sold without the prior consent of the Administrative Agent and, prior to the occurrence and continuation of an Event of Default, the consent of the Borrower, which consents shall not be unreasonably withheld;". (c) Section 11.5 of the Loan Agreement, Assignment, is hereby further ---------- amended by adding the following as new subsections (f) and (g) thereof: "(f) The Administrative Agent, acting, for this purpose only, as agent of the Borrower shall maintain, at no extra charge to the Borrower, a register (the "Register") at the address to which notices to the -------- Administrative Agent are to be sent under Section 11.1 hereof) on which Register the Administrative Agent shall enter the name, address and taxpayer identification number (if provided) of the registered owner of the Loans evidenced by a Registered Note or, upon the request of the registered owner, for which a Registered Note has been requested. A Registered Note and the Loans evidenced thereby may be assigned or otherwise transferred in whole or in part only by registration of such assignment or transfer of such Registered Note and the Loans evidenced thereby on the Register. Any assignment or transfer of all or part of such Loans and the Registered Note evidencing the same shall be registered on the Register only upon compliance with the other provisions of this Section 11.5 and surrender for registration of assignment or transfer of the Registered Note evidencing such Loans, duly endorsed by (or accompanied by a written instrument of assignment or transfer duly executed by) the Registered Noteholder thereof, and thereupon one or more new Registered Notes in the same aggregate principal amount shall be issued to the designated assignee(s) or transferee(s) and, if less than the aggregate principal amount of such Registered Notes is thereby transferred, the assignor or transferor. Prior to the due presentment for registration of transfer of any Registered Note, the Borrower and the Administrative Agent shall treat the Person in whose name such Loans and the Registered Note evidencing the same is registered as the owner thereof for the purpose of receiving all payments thereon and for all other purposes, notwithstanding any notice to the contrary. -8- "(g) The Register shall be available for inspection by the Borrower and any Bank at any reasonable time during the Administrative Agent's regular business hours upon reasonable prior notice." 4. Counterparts. This Amendment may be executed in any number of ------------ counterparts, each of which shall be deemed to be an original, but all such separate counterparts shall together constitute but one and the same instrument. 5. Governing Law. This Amendment shall be construed in accordance with ------------- and governed by the laws of the State of New York. 6. Severability. Any provision of this Amendment which is prohibited or ------------ unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof in that jurisdiction or affecting the validity or enforceability of such provision in any other jurisdiction. 7. No Other Amendment or Waiver. Except for the amendments set forth ---------------------------- above, the text of the Loan Agreement and all other Loan Documents shall remain unchanged and in full force and effect. No waiver by the Administrative Agent, the other Agents or the Banks under the Loan Agreement or any other Loan Document is granted or intended except as expressly set forth herein, and the Administrative Agent, the other Agents and the Banks expressly reserve the right to require strict compliance in all other respects (whether or not in connection with any Requests for Advance). Except as set forth herein, the amendments agreed to herein shall not constitute a modification of the Loan Agreement or any of the other Loan Documents, or a course of dealing with the Administrative Agent, the other Agents and the Banks, or any of them, at variance with the Loan Agreement or any of the other Loan Documents, such as to require further notice by the Administrative Agent, the other Agents, the Banks, the Majority Banks, or any of them, to require strict compliance with the terms of the Loan Agreement and the other Loan Documents in the future. 8. Representations and Warranties. The Borrower hereby represents and ------------------------------ warrants in favor of the Agents and the Banks as follows: (a) The Borrower has the partnership power and authority (i) to enter into this Amendment and (ii) to do all other acts and things as are required or contemplated hereunder to be done, observed and performed by it; -9- (b) This Amendment has been duly authorized, validly executed and delivered by one or more Authorized Signatories of the Borrower and constitutes the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, subject, as to enforcement of remedies, to the following qualifications: (i) an order of specific performance and an injunction are discretionary remedies and, in particular, may not be available where damages are considered an adequate remedy at law, and (ii) enforcement may be limited by bankruptcy, insolvency, liquidation, reorganization, reconstruction and other similar laws affecting enforcement of creditors' rights generally (insofar as any such law relates to the bankruptcy, insolvency or similar event of the Borrower); and (c) The execution and delivery of this Amendment, the performance by the Borrower under the Loan Agreement and the other Loan Documents to which it is a party, as amended hereby, do not and will not require the consent or approval of any regulatory authority or governmental authority or agency having jurisdiction over the Borrower which has not already been obtained, nor is in contravention of or in conflict with the partnership agreement or other similar agreement of the Borrower, or the provision of any statute, judgment, order, indenture, instrument, agreement, or undertaking, to which the Borrower is a party or by which any of its assets or properties are or may become bound. 9. Conditions Precedent. The effectiveness of this Amendment is subject -------------------- to the prior fulfillment of each of the following conditions: (a) Toronto Dominion (Texas), Inc., Chemical Bank and the New Banks shall each have received a duly executed Fund Loan Note in substantially the form attached hereto as Exhibit A, which promissory notes shall be deemed to be --------- "Notes" under the Loan Agreement and the other Loan Documents for all purposes hereafter; (b) The Administrative Agent or the Banks, as appropriate, shall have received all such other documents as the Administrative Agent or any Bank may reasonably request, certified by an appropriate governmental official or an Authorized Signatory if so reasonably requested. 10. Effective Date. Upon satisfaction of the conditions precedent referred -------------- to in Section 9 above, this Amendment shall be effective as of January 16, 1996. 11. Loan Documents. This document shall be deemed to be a Loan Document -------------- for all purposes. -10- [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] -11- IN WITNESS WHEREOF, the parties hereto have executed this Amendment or caused it to be executed under seal by their duly authorized officers, all as of the day and year first above written. BORROWER: CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P., a Delaware limited partnership By: Its General Partner CCA ACQUISITION CORP., a Delaware corporation By: /s/ Jeffrey Sanders ------------------------------------------- Its: Executive Vice President ADMINISTRATIVE AGENT: TORONTO DOMINION (TEXAS), INC., as Administrative Agent By: /s/ Melissa B. Nigro ------------------------------------------- Its: Vice President DOCUMENTATION AGENTS: TORONTO DOMINION (TEXAS), INC., as a Documentation Agent By: /s/ Melissa B. Nigro ------------------------------------------- Its: Vice President CHEMICAL BANK, as a Documentation Agent By: /s/ John C. Huber III ------------------------------------------- Its: Managing Director SECOND AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 1 MANAGING AGENTS: TORONTO DOMINION (TEXAS), INC., as a Managing Agent /s/ Melissa B. Nigro By: __________________________________________ Its: Vice President CHEMICAL BANK, as a Managing Agent /s/ John J. Huber III By: __________________________________________ Its: Managing Director CIBC INC., as a Managing Agent /s/ Matthew B. Jones By: __________________________________________ Its: Vice President CREDIT LYONNAIS CAYMAN ISLAND BRANCH, as a Managing Agent /s/ James E. Morris By: __________________________________________ Its: Vice President NATIONSBANK, N.A. (f/k/a NationsBank, N.A. (Carolinas)), as a Managing Agent /s/ Jennifer Zydney By: __________________________________________ Its: Vice President CO-AGENTS: BANQUE PARIBAS, as a Co-Agent /s/ John G. Acker By: __________________________________________ Its: Vice President /s/ Thomas Brandt By: __________________________________________ Its: Vice President SECOND AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 2 UNION BANK, as a Co-Agent /s/ Gabe Renga By: __________________________________________ Its: Senior Vice President BANKS: TORONTO DOMINION (TEXAS), INC., as a Bank /s/ Melissa B. Nigro By: __________________________________________ Its: Vice President CHEMICAL BANK, as a Bank /s/ John J. Huber III By: __________________________________________ Its: Managing Director CIBC INC., as a Bank /s/ Matthew B. Jones By: __________________________________________ Its: Vice President CREDIT LYONNAIS CAYMAN ISLAND BRANCH, as a Bank /s/ James E. Morris By: __________________________________________ Its: Vice President NATIONSBANK, N.A. (f/k/a NationsBank, N.A. (Carolinas)), as a Bank /s/ Jennifer Zydney By: __________________________________________ Its: Vice President BANQUE PARIBAS, as a Bank /s/ John G. Acker By: __________________________________________ Its: Vice President /s/ Thomas Brandt By: __________________________________________ Its: Vice President SECOND AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 3 UNION BANK, as a Bank /s/ Gabe Renga By: __________________________________________ Its: Senior Vice President CORESTATES BANK, N.A., as a Bank /s/ Anthony B. Parisi By: __________________________________________ Its: Assistant Vice President THE LONG-TERM CREDIT BANK OF JAPAN, LTD., as a Bank /s/ Armund Schoen, Jr By: __________________________________________ Its: Vice President MERCANTILE BANK OF ST. LOUIS NATIONAL ASSOCIATION, as a Bank /s/ Gregory D. Knudsen By: __________________________________________ Its: Vice President NATWEST BANK N.A., as a Bank /s/ Adam Bester By: __________________________________________ Its: Vice President FIRST NATIONAL BANK OF MARYLAND, as a Bank /s/ Mark L. Cook By: __________________________________________ Its: Vice President SECOND AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 4 VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST (f/k/a Van Kampen Merritt Prime Rate Income Trust), as a Bank /s/ Jeffrey W. Maillet By: __________________________________________ Its: Senior Vice President BANQUE FRANCAISE DU COMMERCE EXTERIEUR, as a Bank /s/ Frederick K. Kammler By: __________________________________________ Its: Vice President /s/ William C. Maier By: __________________________________________ Its: Vice President PRIME INCOME TRUST, as a Bank /s/ Rafael Scolari By: __________________________________________ Its: Vice President - Portfolio Manager SENIOR DEBT PORTFOLIO, as a Bank By: Boston Management and Research, as Investment Advisor /s/ Barbara Campbell By: __________________________________________ Its: Assistant Treasurer MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., as a Bank /s/ Anthony R. Clemente By: __________________________________________ Its: Authorized Signatory SECOND AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 5 EX-10.4 21 THIRD AMENDMENT TO LOAN AGMNT - 3/29/96 THIS PAGE MUST BE KEPT WITH THE DOCUMENT. THIRD AMENDMENT TO LOAN AGREEMENT 04/25/97 12:24 pm Exhibit 10.4 THIRD AMENDMENT TO LOAN AGREEMENT THIS THIRD AMENDMENT TO LOAN AGREEMENT (this "Amendment"), dated as of the 29th day of March, 1996 (the "Amendment Date"), by and among CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P., a Delaware limited partnership (the "Borrower"), TORONTO DOMINION (TEXAS), INC., CHEMICAL BANK, CIBC INC., CREDIT LYONNAIS CAYMAN ISLAND BRANCH, NATIONSBANK, N.A., BANQUE PARIBAS, UNION BANK, CORESTATES BANK, N.A., THE LONG-TERM CREDIT BANK OF JAPAN, LTD., MERCANTILE BANK OF ST. LOUIS NATIONAL ASSOCIATION, NATWEST BANK N.A., FIRST NATIONAL BANK OF MARYLAND, VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST, BANQUE FRANCAISE DU COMMERCE EXTERIEUR, PRIME INCOME TRUST, SENIOR DEBT PORTFOLIO, MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., AERIES FINANCE LTD. AND MERRILL LYNCH PRIME RATE PORTFOLIO (together with any financial institution which subsequently becomes a `Bank' under the Loan Agreement, as such term is defined therein, the "Banks"), TORONTO DOMINION (TEXAS), INC. and CHEMICAL BANK, as Documentation Agents (in such capacity, the "Documentation Agents"), TORONTO DOMINION (TEXAS), INC., CHEMICAL BANK, CIBC INC., CREDIT LYONNAIS CAYMAN ISLAND BRANCH, and NATIONSBANK, N.A., as Managing Agents (collectively in such capacity, the "Managing Agents"), BANQUE PARIBAS and UNION BANK, as Co-Agents (collectively in such capacity, the "Co-Agents") and TORONTO DOMINION (TEXAS), INC., as Administrative Agent for the Documentation Agents, the Managing Agents, the Co- Agents and the Banks (the "Administrative Agent," and together with the Documentation Agents, the Managing Agents and the Co-Agents, the "Agents"), W I T N E S S E T H: ------------------- WHEREAS, the Agents, the Borrower, and the Banks are parties to that certain Amended and Restated Loan Agreement dated as of September 29, 1995, as amended by that certain First Amendment to Loan Agreement dated as of October 31, 1995, as amended by that certain Second Amendment to Loan Agreement dated as of January 16, 1996 (as further amended, modified and supplemented from time to time, the "Loan Agreement"); and WHEREAS, the Borrower has requested that the Agents and the Banks agree to amend certain provisions of the Loan Agreement to provide for an $80,000,000 increase of the Revolving Loan Commitment (as defined in the Loan Agreement) to a principal amount not to exceed $100,000,000 in the aggregate, the proceeds of which increase shall be used by the Borrower to acquire certain cable properties from Cencom Cable Income Partners, L.P. and an office building from AEtna Life Insurance Company; and WHEREAS, the Agents and the Banks are willing to consent to such amendments and such other matters as set forth herein on the terms and conditions contained herein in return, in part, for the payment of the Amendment Fee (as defined herein); NOW, THEREFORE, in consideration of the premises set forth above, the covenants and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that all capitalized terms used herein shall have the meanings ascribed thereto in the Loan Agreement, and further agree as follows: 1. Amendments to Article 1. ----------------------- (a) Article 1 of the Loan Agreement, Definitions, is hereby amended by ----------- deleting the existing definitions of "Commitment Ratios," "Loan Documents," ----------------- -------------- "Revolving Loan Commitment" and "Revolving Loan Notes" in their respective - -------------------------- -------------------- entireties and by substituting the following therefor: "`Commitment Ratios' shall mean the percentages in which the Banks are ----------------- severally bound to make Advances to the Borrower under the respective Commitments, as set forth below (together with dollar amounts) as of the date of the Third Amendment to this Agreement:
Portion of Portion of Revolving Portion of Term Loan Revolving Fund Loan Term Loan Loan Fund Loan Total Dollar Commitment Loan Commitment Banks Commitment Commitment Commitment Commitment Ratio Commitment Ratio - ----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Toronto $ 9,856,000.01 $14,703,999.99 $18,250,000.00 $42,810,000.00 3.520000001% 14.703999999% 21.470588235% Dominion (Texas), Inc. Chemical Bank 13,189,333.33 16,370,666.67 $18,250,000.00 47,810,000.00 4.710476190% 16.370666667% 21.470588235% CIBC Inc. 33,189,333.33 16,370,666.67 0.00 49,560,000.00 11.853333333% 16.370666667% 0.000000000% Credit 33,189,333.33 16,370,666.67 0.00 49,560,000.00 11.853333333% 16.370666667% 0.000000000% Lyonnais Cayman Island Branch NationsBank, N.A. 33,189,333.33 16,370,666.67 0.00 49,560,000.00 11.853333333% 16.370666667% 0.000000000% Banque Paribas 19,026,666.67 2,073,333.33 0.00 21,100,000.00 6.795238095% 2.073333333% 0.000000000% Union Bank 29,026,666.67 2,073,333.33 0.00 31,100,000.00 10.366666667% 2.073333333% 0.000000000% CoreStates 14,000,000.00 11,000,000.00 5,000,000.00 30,000,000.00 5.000000000% 11.000000000% 5.882352941% Bank, N.A.
-2-
Portion of Portion of Revolving Portion of Term Loan Revolving Fund Loan Term Loan Loan Fund Loan Total Dollar Commitment Loan Commitment Banks Commitment Commitment Commitment Commitment Ratio Commitment Ratio - ----------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- The Long- 14,000,000.00 1,000,000.00 0.00 15,000,000.00 5.000000000% 1.000000000% 0.000000000% Term Credit Bank of Japan, Ltd. Mercantile 14,000,000.00 1,000,000.00 0.00 15,000,000.00 5.000000000% 1.000000000% 0.000000000% Bank of St. Louis National Association NatWest Bank N.A. 14,000,000.00 1,000,000.00 0.00 15,000,000.00 5.000000000% 1.000000000% 0.000000000% First National 14,000,000.00 1,000,000.00 0.00 15,000,000.00 5.000000000% 1.000000000% 0.000000000% Bank of Maryland Van Kampen 30,000,000.00 0.00 8,500,000.00 38,500,000.00 10.714285714% 0.000000000% 10.000000000% American Capital Prime Rate Income Trust Banque Francaise du 9,333,333.33 666,666.67 0.00 10,000,000.00 3.333333332% 0.666666667% 0.000000000% Commerce Exterieur Prime Income Trust 0.00 0.00 10,000,000.00 10,000,000.00 0.000000000% 0.000000000% 11.764705882% Merrill Lynch 0.00 0.00 5,000,000.00 5,000,000.00 0.000000000% 0.000000000% 5.882352941% Senior Floating Rate Fund, Inc. Senior Debt 0.00 0.00 5,000,000.00 5,000,000.00 0.000000000% 0.000000000% 5.882352941% Portfolio Aeries 0.00 0.00 10,000,000.00 10,000,000.00 0.000000000% 0.000000000% 11.764705882% Finance Ltd. Merrill Lynch 0.00 0.00 5,000,000.00 5,000,000.00 0.000000000% 0.000000000% 5.882352941% Prime Rate Portfolio Total $280,000,000.00 $100,000,000.00 $85,000,000.00 $465,000,000.00 100% 100% 100%"
"'Loan Documents' shall mean, without limitation, this Agreement, the -------------- Notes, the Security Documents, the Subordination of Management and Financial Advisory Fees Agreement, the Subordination Agreement, all Requests for Advances, all Interest Rate Hedge Agreements and reimbursement agreements with respect to letters of credit -3- permitted under Sections 7.1(e) and (g) hereof, in each case, between the Borrower, on the one hand, and the Banks and the Agents, or any of them, on the other hand, and all other documents and agreements executed and delivered in connection with the making of the Loans." "'Revolving Loan Commitment' shall mean the several obligations of the ------------------------- Banks issuing a Revolving Loan Commitment as indicated in the definition of "Commitment Ratios" to advance the sum of up to $100,000,000 at any one time outstanding, in accordance with their respective Revolving Loan Commitment Ratios set forth in the definition of "Commitment Ratios," to the Borrower pursuant to the terms hereof, as such obligations may be reduced from time to time pursuant to the terms hereof." "'Revolving Loan Notes' shall mean those certain amended and restated -------------------- revolving promissory notes (including Registered Notes) in the aggregate principal amount of $100,000,000, one such note issued to each of the Banks having a Revolving Loan Commitment hereunder by the Borrower, each one substantially in the form of Exhibit A to the Third Amendment to this --------- Agreement, and any extensions, renewals, amendments or substitutions to any of the foregoing." (b) Article 1 of the Loan Agreement, Definitions, is hereby further ----------- amended by adding the following definitions in the appropriate alphabetical order: "`CCIP Acquisition Agreement' shall mean that certain Asset Purchase -------------------------- Agreement dated as of July 1, 1995 among Cencom Cable Income Partners, L.P., the Borrower, Charter Communications Properties, Inc. and Charter Communications Entertainment I, L.P. with respect to the acquisition by the Borrower of certain cable television assets of Cencom Cable Income Partners, L.P., as such agreement may be amended, modified or supplemented from time to time, together with all exhibits, schedules and appendices thereto, all of which shall be in form and substance satisfactory to the Administrative Agent." "`CCIP Assets' shall mean those cable television assets of Cencom ----------- Cable Income Partners, L.P. to be acquired by the Borrower pursuant to the CCIP Acquisition Agreement." "`Office Building Acquisition Agreement' shall mean that certain ------------------------------------- Purchase and Sale Agreement dated February 16, 1996 between AEtna Life Insurance Company and Charter Communications, Inc., as assigned to the Borrower by -4- Assignment dated March 29, 1996, with respect to the acquisition by the Borrower for a purchase price not to exceed $3,650,000 of a three building office complex located in Town and Country, Missouri, as such agreement may be amended, modified or supplemented from time to time, together with all exhibits, schedules and appendices thereto, all of which shall be in form and substance reasonably satisfactory to the Administrative Agent." "`Office Building Acquisition Date' shall mean the date on which the -------------------------------- Borrower acquires the Office Building Assets pursuant to the Office Building Acquisition Agreement." "`Office Building Assets' shall mean the three building office complex ---------------------- located in Town and Country, St. Louis County, Missouri to be acquired by the Borrower pursuant to the Office Building Acquisition Agreement." 2. Amendments to Article 2. ----------------------- (a) Section 2.5 of the Loan Agreement, Revolving Loan Commitment ------------------------- Reductions, is hereby amended by deleting existing subsection (a) thereto in its - ---------- entirety and by substituting the following therefor: "(a) Mandatory. Commencing September 30, 1997 and at the end of each --------- calendar quarter thereafter, the Revolving Loan Commitment as in effect on September 29, 1997 shall be automatically reduced by the percentages set forth below: Quarterly Percentage Reduction of Revolving Loan Commitment as in Effect Dates of Reduction on September 29, 1997 ------------------ --------------------- September 30, 1997 and December 31, 1997 1.0500% March 31, 1998, June 30, 1998, September 30, 1998 and December 31, 1998 2.2500% March 31, 1999, June 30, 1999, September 30, 1999 and December 31, 1999 3.3250% March 31, 2000, June 30, 2000, September 30, 2000 and December 31, 2000 3.3250%
-5- Quarterly Percentage Reduction of Revolving Loan Commitment as in Effect Dates of Reduction on September 29, 1997 ------------------ --------------------- March 31, 2001, June 30, 2001, September 30, 2001 and December 31, 2001 4.4500% March 31, 2002, June 30, 2002, September 30, 2002 and December 31, 2002 5.4500% March 31, 2003, June 30, 2003, September 30, 2003 and December 31, 2003 5.6750%
The Borrower shall make a repayment of the Revolving Loans outstanding, together with accrued interest thereon, on or before the effective date of each reduction in the Revolving Loan Commitment under this Section 2.5(a), such that the aggregate principal amount of the Revolving Loans outstanding at no time exceeds the Revolving Loan Commitment as so reduced. In addition, any remaining unpaid principal and interest under the Revolving Loan Commitment shall be due and payable in full on the Maturity Date." (b) Section 2.7 of the Loan Agreement, Scheduled Repayments, is hereby -------------------- amended by deleting existing subsection (a)(i) thereto in its entirety and by substituting the following therefor: "(i) For the Term Loan. Commencing September 30, 1997, the principal ----------------- balance of the Term Loan shall be amortized in consecutive quarterly installments on September 30, December 31, March 31 and June 30 of each year until paid in full, in such amounts as follows: -6-
Percent of Principal Due on Last Day Payment Dates of Each Quarter ------------- --------------- September 30, 1997 and December 31, 1997 1.0500% March 31, 1998, June 30, 1998, September 30, 1998 and December 31, 1998 2.2500% March 31, 1999, June 30, 1999, September 30, 1999 and December 31, 1999 3.3250% March 31, 2000, June 30, 2000, September 30, 2000 and December 31, 2000 3.3250% March 31, 2001, June 30, 2001, September 30, 2001 and December 31, 2001 4.4500% March 31, 2002, June 30, 2002, September 30, 2002 and December 31, 2002 5.4500% March 31, 2003, June 30, 2003, September 30, 2003 and December 31, 2003 5.6750%"
(c) Section 2.7(b) of the Loan Agreement, Repayments Upon Sales of Assets ------------------------------- and Asset Swaps, is hereby amended by deleting the existing Section 2.7(b) in - --------------- its entirety and by substituting the following therefor: "(b) Repayments Upon Sales of Assets and Asset Swaps. Except as ----------------------------------------------- provided below with respect to Permitted Asset Swaps, in the event of any sale, lease, transfer or other disposition of assets permitted hereunder, excluding any such sale, lease, transfer or other disposition of assets by the Borrower or any of its Subsidiaries in the ordinary course of business (collectively, "Asset Sales"), to the extent that the Net Proceeds with respect thereto (when taken together with the Net Proceeds of all other Asset Sales made subsequent to the Agreement Date) are in excess of $7,500,000 in the aggregate for all Asset Sales made during the period from the Agreement Date to the Final Maturity Date, the Borrower shall, on the date of such sale, lease, transfer or other disposition, make a repayment of -7- the principal of the Term Loan and the Fund Loans then outstanding (on a weighted pro rata basis between such Loans) in an amount equal to the Net Proceeds in excess of the first $7,500,000 of all such Asset Sales. Any such Net Proceeds which constitute a portion of the sales price which was previously held in escrow or paid in installments shall be paid to the extent required by the terms hereof to the Banks as a repayment of principal at such time as such Net Proceeds are received by the Borrower. In the event the Borrower elects to enter into a Permitted Asset Swap, the Borrower shall, on the date it sells, leases, transfers or otherwise disposes of all or substantially all of its interests in the cable television system owned by the Borrower or any of its Subsidiaries in the State of Connecticut, deposit in an escrow account with the Administrative Agent an amount equal to the Net Proceeds of such sale, lease, transfer or other disposition. The amount deposited in such escrow account shall be held in such escrow account until the earlier to occur of the consummation of the Permitted Asset Swap or the first anniversary of the sale, lease, transfer or other disposition of such Connecticut assets or interests relating thereto. Amounts held in such escrow account may be invested as permitted under Section 7.6(i), (ii) and (iii) hereof, or as otherwise agreed to by the Borrower and the Administrative Agent. Net Proceeds held in escrow by the Administrative Agent may be used by the Borrower at any time prior to the first anniversary of such sale, lease, transfer or other disposition of Connecticut assets or interests to consummate a Permitted Asset Swap or to repay the principal amount of the Term Loan and the Fund Loans (on a weighted pro rata basis between such Loans). All Net Proceeds remaining in escrow with the Administrative Agent pursuant to this Section 2.7(b) on such first anniversary date shall be immediately applied to repay the principal amount of the Term Loan and the Fund Loans (on a weighted pro rata basis between such Loans). All amounts paid by the Borrower pursuant to this subsection shall be applied to principal of the Term Loan and the Fund Loans, respectively, pro rata over the applicable repayment schedule set forth in Section 2.7(a) above." 3. Amendments to Article 5. ----------------------- (a) Section 5.9 of the Loan Agreement, Use of Proceeds, is hereby amended --------------- by deleting existing Section 5.9 in its entirety and by substituting the following therefor: "Section 5.9 Use of Proceeds. On and after the effective date of the --------------- Third Amendment to this Agreement, the -8- Borrower will use the aggregate proceeds of the Revolving Loans (as set forth in the Requests for Advances issued from time to time hereunder) to finance Capital Expenditures; to finance the acquisition of the CCIP Assets pursuant to the CCIP Acquisition Agreement and related transaction costs; subject to compliance with Section 7.12 hereof, to finance the acquisition of the Office Building Assets pursuant to the Office Building Acquisition Agreement and related transaction costs; for working capital and for other general partnership needs as permitted under this Agreement." 4. Amendments to Article 7. ----------------------- (a) Section 7.1 of the Loan Agreement, Indebtedness of the Borrower, ---------------------------- is hereby amended by deleting existing subsections (c), (e) and (g) in their respective entireties and by substituting the following therefor: "(c) Capitalized Lease Obligations in an amount not in excess of $4,500,000 in the aggregate;" "(e) Any other Indebtedness (including, without limitation, Indebtedness secured by Permitted Liens) in an aggregate outstanding principal amount at any time not to exceed $7,500,000 of which not more than $4,500,000 in an aggregate outstanding principal amount at any time may be used for Indebtedness with respect to performance bonds, letters of credit and similar instruments securing the contractual obligations of the Borrower;" "(g) Indebtedness arising under payment and performance bonds and letters of credit issued for the Borrower's account, or the account of a Subsidiary of the Borrower, in the ordinary course of the Borrower's or such Subsidiary's business in favor of the grantors of the Licenses and the Pole Agreements, in an aggregate amount not to exceed $4,500,000." (b) Section 7.4 of the Loan Agreement, Liquidation, Change in ---------------------- Ownership, Disposition or Acquisition of Assets, is hereby amended by deleting - ----------------------------------------------- existing subsection (a)(iv) in its entirety and by substituting the following therefor: "(iv) except pursuant to a Permitted Asset Swap, sell, lease, abandon, transfer or otherwise dispose of any of its assets, property or business to the extent that the fair market value of such assets exceeds $7,500,000 in the aggregate during the term hereof (excluding such sales, leases, transfers or other dispositions in the ordinary -9- course of the Borrower's or any of its Subsidiaries' business)." (c) Section 7.4 of the Loan Agreement, Liquidation, Change in ---------------------- Ownership, Disposition or Acquisition of Assets, is hereby further amended by - ----------------------------------------------- deleting existing subsections (b)(iv) and (ix) in their respective entireties and by substituting the following therefor: "(iv) so long as no Default hereunder then exists or would be caused thereby, acquisitions of cable television systems for a purchase price not to exceed $7,500,000 in the aggregate in any fiscal year and $15,000,000 in the aggregate during the term hereof, plus the aggregate amount of any Excess Cash Flow which, in accordance with Section 7.7(c) hereof, would be permitted to be distributed to the Partners and which are not so distributed," "(ix) the CCIP Acquisition and the Office Building Acquisition, subject to the terms and conditions of this Agreement." (d) Section 7.7 of the Loan Agreement, Restricted Payments and ----------------------- Purchases, is hereby amended by deleting existing subsections (b), (c) and (h) - --------- thereof in their respective entireties and by substituting the following therefor: "(b) so long as no Default hereunder then exists or would be caused thereby, during the period from January 1, 1995 through and including December 31, 2000, (i) pay management fees and financial advisory fees in an aggregate amount for any fiscal year not to exceed $5,250,000, except that with respect to the fiscal year ending December 31, 1995, such amount shall not exceed $3,750,000, and (ii) reimburse Kelso for all reasonable out of pocket expenses incurred by it in connection with its services under the Financial Advisory Agreement, all as the same may become due and payable under the Management Agreement and the Financial Advisory Agreement, or, in the case of the General Partner, the predecessors to such Agreements;" "(c) subject to the provisions of Section 2.7(c) hereof, so long as no Default hereunder then exists or would be caused thereby, and so long as the Leverage Ratio is less than 4.5:1, on or after April 30, 1999 and on or after each April 30th thereafter, use up to fifty percent (50%) of Annual Excess Cash Flow for the most recently ended fiscal year of the Borrower to (i) make distributions to the Partners, or (ii) make acquisitions otherwise permitted under Section 7.4(b) hereof;" -10- "(h) (i) pay to Kelso and/or the Manager a search and acquisition fee in an aggregate amount not to exceed $1,600,000 on the CCIP Acquisition Date, and (ii) reimburse Kelso for all reasonable out of pocket expenses incurred by Kelso in connection with its providing search and acquisition services to the Borrower with respect to the Borrower's acquisition of the United Video Assets and the Omega Assets." (e) Section 7.8 of the Loan Agreement, Leverage Ratio, is hereby -------------- amended by deleting the existing table contained in existing Section 7.8 in its entirety and by substituting the following therefor: Leverage "Period Ratio ------ ----- From January 18, 1995 6.50:1 through June 30, 1996 From July 1, 1996 6.25:1 through December 31, 1996 From January 1, 1997 6.00:1 through September 30, 1997 From October 1, 1997 through June 5.50:1 30, 1998 From July 1, 1998 5.00:1 through December 31, 1998 From January 1, 1999 4.50:1 through December 31, 1999 From January 1, 2000 and 4.00:1" thereafter
(f) Section 7.9 of the Loan Agreement, Annualized Operating Cash Flow ------------------------------ to Fixed Charges Ratio, is hereby amended by deleting the date "March 31, 1997" - ---------------------- appearing in the first line thereof and replacing it with the date "September 30, 1997." (g) Section 7.12 of the Loan Agreement, Real Estate, is hereby ----------- amended by deleting existing Section 7.12 thereof in its entirety and by substituting the following therefor: "Section 7.12 Real Estate. The Borrower shall not, and shall ----------- not permit any of its Subsidiaries to, purchase or become obligated to purchase real estate (other than easements, rights-of-way, restrictions and other similar encumbrances on the use of real property), other than -11- purchases, with a value of less than $500,000 for any single purchase, and less than $1,000,000 in the aggregate for all purchases after the Agreement Date. Notwithstanding the foregoing, the Borrower may purchase the Office Building Assets pursuant to the Office Building Acquisition Agreement provided that (i) the Borrower grants a mortgage securing the Obligations to the Administrative Agent and delivers to the Administrative Agent all other documentation, including, without limitation, opinions of counsel, policies of title insurance, and a Phase I environmental audit which in the reasonable opinion of the Administrative Agent are appropriate with respect to such grant, including any documentation requested by the Banks (collectively, the "Mortgage Documents") and (ii) not less than five (5) days prior to the Office Building Acquisition Date, the Borrower shall have provided the Administrative Agent with copies of the Office Building Acquisition Agreement, the Mortgage Documents and all other documents related to the transfer of the Office Building Assets to the Borrower, including, without limitation, lien search results from appropriate jurisdictions with respect to the Office Building Assets, all of which shall be certified by an Authorized Signatory to be true, complete and correct, and all of which shall be in form and substance satisfactory to the Administrative Agent." (h) Section 7.13 of the Loan Agreement, Limitation on Leases, is hereby -------------------- amended by deleting the existing subsection (x) in its entirety and by substituting the following therefor: "(x) payments under leases to be used in connection with the operation of its business which, when aggregated with all other payments under such leases by the Borrower and its Subsidiaries would not exceed in the aggregate during any one fiscal year of the Borrower, $2,500,000, and during the term of this Agreement, $15,000,000, and" (i) Section 7.15 of the Loan Agreement, Capital Expenditures, is hereby -------------------- amended by deleting the existing table and the last sentence contained in existing Section 7.15 in its entirety and by substituting the following therefor: Capital "Period Expenditures Limit ------ ------------------ From January 18, 1995 $23,500,000 through December 31, 1995 From January 1, 1996 $36,650,000 through December 31, 1996
-12- Capital "Period Expenditures Limit ------- ------------------ From January 1, 1997 $16,300,000 through June 30, 1997 There shall be no dollar limitation on Capital Expenditures after June 30, 1997. Notwithstanding the foregoing, the Borrower may, during the 1996 calendar year, expend an additional $3,650,000 for the purchase of the Office Building Assets subject to compliance with Section 7.12 hereof." (j) Section 8.1 of the Loan Agreement, Events of Default, is hereby ----------------- amended by deleting the existing subsections (h), (k) and (l) in their respective entireties and by substituting the following therefor: "(h) A final judgment shall be entered by any court against the Borrower or any of the Borrower's Subsidiaries for the payment of money which exceeds any insurance coverage which is uncontested by the insurance carrier by $4,500,000 or more, or a warrant of attachment or execution or similar process shall be issued or levied against property of the Borrower or any of the Borrower's Subsidiaries which, together with all other such property of the Borrower or any of the Borrower's Subsidiaries subject to other such process, exceeds in value any insurance coverage which is uncontested by the insurance carrier by $4,500,000 or more in the aggregate, and if, within thirty (30) days after the entry, issue or levy thereof, such judgment, warrant or process shall not have been paid or discharged or stayed pending appeal, or if, after the expiration of any such stay, such judgment, warrant or process shall not have been paid or discharged;" "(k) There shall occur any failure by the Borrower or any of the Borrower's Subsidiaries to pay any Indebtedness when due (after any applicable cure period) or there shall occur any default which entitles the holders to accelerate the maturity thereof under, in either case, any agreement or instrument evidencing Indebtedness of the Borrower or any of the Borrower's Subsidiaries in an aggregate principal amount exceeding $4,500,000; or there shall occur any material default under any Interest Rate Hedge Agreement having a notional principal amount of $4,500,000 or more;" "(l) There shall occur any default which entitles the holders to accelerate the maturity thereof under any agreement or instrument evidencing Indebtedness for Money -13- Borrowed of Holdings, CCELP or the General Partner, in an aggregate principal amount exceeding $4,500,000;" 5. Counterparts. This Amendment may be executed in any number of ------------ counterparts, each of which shall be deemed to be an original, but all such separate counterparts shall together constitute but one and the same instrument. 6. Governing Law. This Amendment shall be construed in accordance with ------------- and governed by the laws of the State of New York. 7. Severability. Any provision of this Amendment which is prohibited or ------------ unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof in that jurisdiction or affecting the validity or enforceability of such provision in any other jurisdiction. 8. No Other Amendment or Waiver. Except for the amendments set ---------------------------- forth above, the text of the Loan Agreement and all other Loan Documents shall remain unchanged and in full force and effect. No waiver by the Administrative Agent, the other Agents or the Banks under the Loan Agreement or any other Loan Document is granted or intended except as expressly set forth herein, and the Administrative Agent, the other Agents and the Banks expressly reserve the right to require strict compliance in all other respects (whether or not in connection with any Requests for Advance). Except as set forth herein, the amendments agreed to herein shall not constitute a modification of the Loan Agreement or any of the other Loan Documents, or a course of dealing with the Administrative Agent, the other Agents and the Banks, or any of them, at variance with the Loan Agreement or any of the other Loan Documents, such as to require further notice by the Administrative Agent, the other Agents, the Banks, the Majority Banks, or any of them, to require strict compliance with the terms of the Loan Agreement and the other Loan Documents in the future. 9. Representations and Warranties. The Borrower hereby represents and ------------------------------ warrants in favor of the Agents and the Banks as follows: (a) The Borrower has the partnership power and authority (i) to enter into this Amendment and to consummate the acquisition of the CCIP Assets and the Office Building Assets as contemplated hereby and (ii) to do all other acts and things as are required or contemplated hereunder to be done, observed and performed by it; -14- (b) This Amendment has been duly authorized, validly executed and delivered by one or more Authorized Signatories of the Borrower and constitutes the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, subject, as to enforcement of remedies, to the following qualifications: (i) an order of specific performance and an injunction are discretionary remedies and, in particular, may not be available where damages are considered an adequate remedy at law, and (ii) enforcement may be limited by bankruptcy, insolvency, liquidation, reorganization, reconstruction and other similar laws affecting enforcement of creditors' rights generally (insofar as any such law relates to the bankruptcy, insolvency or similar event of the Borrower); and (c) The execution and delivery of this Amendment, the performance by the Borrower under the Loan Agreement and the other Loan Documents to which it is a party, as amended hereby, and the consummation by the Borrower of the acquisition of the CCIP Assets and the Office Building Assets as contemplated hereby do not and will not require the consent or approval of any regulatory authority or governmental authority or agency having jurisdiction over the Borrower which has not already been obtained, nor contravene or be in conflict with the partnership agreement or other similar agreement of the Borrower, or the provision of any statute, judgment, order, indenture, instrument, agreement, or undertaking, to which the Borrower is a party or by which any of its assets or properties are or may become bound. 10. Conditions Precedent. The effectiveness of this Amendment is subject -------------------- to the prior fulfillment of each of the following conditions: (a) Each of the Banks shall have received a duly executed Revolving Loan Note in substantially the form attached hereto as Exhibit A, which promissory --------- notes shall be deemed to be "Notes" under the Loan Agreement and the other Loan Documents for all purposes hereafter; (b) The Administrative Agent or the Banks, as appropriate, shall have received each of the following, in form and substance satisfactory to the Administrative Agent and the Banks: (i) A certificate, signed by an Authorized Signatory of the Borrower, certifying on the date hereof that there exists no Default under the Loan Agreement, after giving effect to this Amendment, and demonstrating the Borrower's compliance with Sections 7.8, 7.9, 7.10 and 7.15 of the Loan Agreement, after giving effect to this Amendment and the consummation of the Borrower's acquisition of the CCIP Assets and the Office Building Assets; -15- (ii) All documentation required under Section 5.13 of the Loan Agreement with respect to the Borrower's acquisition of the CCIP Assets and the Office Building Assets; (iii) Copies of the CCIP Acquisition Agreement and the Office Building Acquisition Agreement and all other documents related to the transfer of the CCIP Assets and the Office Building Assets to the Borrower, including, without limitation, lien search results from appropriate jurisdictions with respect to the CCIP Assets and the Office Building Assets, all of which shall be certified by an Authorized Signatory to be true, complete and correct as of the date hereof, together with duly executed UCC-1 financing statements and other collateral documentation deemed reasonably necessary by the Administrative Agent to reflect or perfect the Security Interest of the Administrative Agent (for itself and on behalf of the Banks) in such assets; (iv) Opinions of general counsel and in-house counsel to the Borrower and its Subsidiaries, addressed to the Banks and the Administrative Agent and satisfactory to the Administrative Agent and its special counsel, dated as of the date hereof; (v) Opinions or comfort letters regarding the CCIP Assets and the Office Building Assets and the CCIP Acquisition Agreement and the Office Building Acquisition Agreement given by FCC counsel to the Borrower, addressed to the Banks and the Administrative Agent and satisfactory to the Administrative Agent and its special counsel, dated as of the date hereof; (v) Reliance letters regarding opinions of counsel to Cencom Cable Income Partners, L.P. and AEtna Life Insurance Company, in form and substance satisfactory to the Administrative Agent and its special counsel, dated as of the date hereof; (vi) Evidence satisfactory to the Administrative Agent and its special counsel that the Borrower has acquired the CCIP Assets pursuant to the CCIP Acquisition Agreement and the Office Building Assets pursuant to the Office Building Acquisition Agreement; (viii) Duly executed Certificate of Financial Condition dated as of the date hereof; (ix) Copies of all approvals or consents regarding the transfer to the Borrower of all franchises and contracts -16- constituting a part of the CCIP Assets and the Office Building Assets; (x) Pro forma balance sheet with respect to the Borrower, after giving effect to the transactions contemplated hereby; and (xi) All such other documents as the Administrative Agent or any Bank may reasonably request, certified by an appropriate governmental official or an Authorized Signatory if so reasonably requested. (c) The Licenses constituting a part of the CCIP Assets and the Office Building Assets shall be in form and substance satisfactory to the Administrative Agent, and the Administrative Agent shall have received evidence reasonably satisfactory to it that all Necessary Authorizations, including all necessary consents to the consummation of the Borrower's acquisition of the CCIP Assets and the Office Building Assets and the other transactions contemplated hereby, from the grantors of the Licenses have been obtained or made, are in full force and effect and are not subject to any pending or threatened reversal or cancellation, and the Administrative Agent and the Banks shall have received a certificate of an Authorized Signatory so stating. (d) The Administrative Agent for each of the Banks shall have received from the Borrower for the account of the Banks an amendment fee (the "Amendment Fee") by wire transfer of immediately available funds equal to the product of (i) each Bank's pro rata portion of the Revolving Loan Commitment, the Term Loan Commitment and the Fund Loan Commitment as of the day immediately prior to the effective date of this Amendment, multiplied by (ii) 0.10%, and all other fees payable to the Administrative Agent or any Bank in connection herewith. 11. Loan Documents. This document shall be deemed to be a Loan Document -------------- for all purpose. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] -17- IN WITNESS WHEREOF, the parties hereto have executed this Amendment or caused it to be executed under seal by their duly authorized officers, all as of the day and year first above written. BORROWER: CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P., a Delaware limited partnership By: Its General Partner CCA ACQUISITION CORP., a Delaware corporation /s/ Jeffrey Sanders By: ___________________________________ Its: Executive Vice President ADMINISTRATIVE AGENT: TORONTO DOMINION (TEXAS), INC., as Administrative Agent /s/ Melissa B. Nigro By: ___________________________________ Its: Vice President DOCUMENTATION AGENTS: TORONTO DOMINION (TEXAS), INC., as a Documentation Agent /s/ Melissa B. Nigro By: ___________________________________ Its: Vice President CHEMICAL BANK, as a Documentation Agent /s/ Ann B. Kern By: ___________________________________ Its: Vice President THIRD AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 1 MANAGING AGENTS: TORONTO DOMINION (TEXAS), INC., as a Managing Agent /s/ Melissa B. Nigro By: ___________________________________ Its: Vice President CHEMICAL BANK, as a Managing Agent /s/ Ann B. Kern By: ___________________________________ Its: Vice President CIBC INC., as a Managing Agent /s/ Matthew B. Jones By: ___________________________________ Its: Director CREDIT LYONNAIS CAYMAN ISLAND BRANCH, as a Managing Agent /s/ Mark D. Thorsheim By: ___________________________________ Its: Authorized Signatory NATIONSBANK, N.A., as a Managing Agent /s/ Jennifer Zydney By: ___________________________________ Its: Vice President CO-AGENTS: BANQUE PARIBAS, as a Co-Agent /s/ Stephen J. Healey By: ___________________________________ Its: Vice President /s/ John Cate By: ___________________________________ Its: Vice President UNION BANK, as a Co-Agent THIRD AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 2 22910426 .W51 By: /s/ Michael K. McShane ------------------------------------------- Its: Vice President BANKS: TORONTO DOMINION (TEXAS), INC., as a Banks By: /s/ Melissa B. Nigro ------------------------------------------- Its: Vice President CHEMICAL BANK, as a Bank By: /s/ Ann B. Kern ------------------------------------------- Its: Vice President CIBC INC., as a Bank By: /s/ Matthew B. Jones ------------------------------------------- Its: Director CREDIT LYONNAIS CAYMAN ISLAND BRANCH, as a Bank By: /s/ Mark D. Thorsheim ------------------------------------------- Its: Authorized Signatory NATIONSBANK, N.A., as a Bank By: /s/ Jennifer Zydney ------------------------------------------- Its: Vice President BANQUE PARIBAS, as a Bank By: /s/ Stephen J. Healey ------------------------------------------- Its: Vice President By: /s/ John Cate ------------------------------------------- Its: Group Vice President THIRD AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 3 22910426 .W51 UNION BANK, as a Bank By: /s/ Michael K. McShane ------------------------------------------- Its: Vice President CORESTATES BANK, N.A., as a Bank By: /s/ Anthony B. Parisi ------------------------------------------- Its: Assistant Vice President THE LONG-TERM CREDIT BANK OF JAPAN, LTD., as a Bank By: /s/ Armund Schoen Jr. ------------------------------------------- Its: Vice President MERCANTILE BANK OF ST. LOUIS NATIONAL ASSOCIATION, as a Bank By: /s/ Gregory D. Knudsen ------------------------------------------- Its: Vice President NATWEST BANK N.A., as a Bank By: /s/ Adam Bester ------------------------------------------- Its: Vice President FIRST NATIONAL BANK OF MARYLAND, as a Bank By: /s/ Mark L. Cook ------------------------------------------- Its: Senior Vice President VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST, as a Bank By: /s/ Jeffrey W. Maillet ------------------------------------------- Its: Senior Vice President THIRD AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 4 22910426. W51 BANQUE FRANCAISE DU COMMERCE EXTERIEUR, as a Bank By: /s/ Timothy Daileader ------------------------------------------- Its: Assistant Vice President By: /s/ Frederick K. Kammler ------------------------------------------- Its: Vice President PRIME INCOME TRUST, as a Bank By: /s/ Rafael Scolari ------------------------------------------- Its: Vice President--Portfolio Manager SENIOR DEBT PORTFOLIO, as a Bank By: Boston Management and Research, as Investment Advisor By: /s/ Barbara Campbell ------------------------------------------- Its: Assistant Treasurer MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., as a Bank By: /s/ Anthony R. Clemente ------------------------------------------- Its: Authorized Signatory AERIES FINANCE LTD., as Registered Noteholder By: /s/ Andrew Wignall ------------------------------------------- Its: Director MERRILL LYNCH PRIME RATE PORTFOLIO, as a Bank By: /s/ Anthony R. Clemente ------------------------------------------- Its: Authorized Signatory THIRD AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 5 22910426. W51 EX-10.5 22 FOURTH AMENDMENT TO LOAN AGMNT - 10/24/96 THIS PAGE MUST BE KEPT WITH THE DOCUMENT FOURTH AMENDMENT TO LOAN AGREEMENT 04/25/97 1:36 pm Exhibit 10.5 FOURTH AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT THIS FOURTH AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT (this "Amendment"), dated as of the 24th day of May, 1996 (the "Amendment Date"), by and among CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P., a Delaware limited partnership (the "Borrower"), TORONTO DOMINION (TEXAS), INC., CHEMICAL BANK, CIBC INC., CREDIT LYONNAIS CAYMAN ISLAND BRANCH, NATIONSBANK, N.A., BANQUE PARIBAS, UNION BANK, CORESTATES BANK, N.A., THE LONG-TERM CREDIT BANK OF JAPAN, LTD., MERCANTILE BANK OF ST. LOUIS NATIONAL ASSOCIATION, FLEET BANK, N.A., F/K/A NATWEST BANK N.A., FIRST NATIONAL BANK OF MARYLAND, VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST, BANQUE FRANCAISE DU COMMERCE EXTERIEUR, PRIME INCOME TRUST, SENIOR DEBT PORTFOLIO, AERIES FINANCE LTD. AND ING CAPITAL ADVISORS (together with any financial institution which subsequently becomes a `Bank' under the Loan Agreement, as such term is defined therein, the "Banks"), TORONTO DOMINION (TEXAS), INC. and CHEMICAL BANK, as documentation Agents (collectively, in such capacity, the "Documentation Agents"), TORONTO DOMINION (TEXAS), INC., CHEMICAL BANK, CIBC INC., CREDIT LYONNAIS CAYMAN ISLAND BRANCH, and NATIONSBANK, N.A., as managing agents (collectively, in such capacity, the "Managing Agents"), BANQUE PARIBAS and UNION BANK, as co-agents (collectively, in such capacity, the "Co-Agents"), and TORONTO DOMINION (TEXAS), INC., as administrative agent for the Documentation Agents, the Managing Agents, the Co- Agents and the Banks (the "Administrative Agent," and together with the Documentation Agents, the Managing Agents and the Co-Agents, the "Agents"), W I T N E S S E T H: ------------------- WHEREAS, the Agents, the Borrower, and the Banks are parties to that certain Amended and Restated Loan Agreement dated as of September 29, 1995, as amended by that certain First Amendment to Loan Agreement dated as of October 31, 1995, as amended by that certain Second Amendment to Loan Agreement dated as of January 16, 1996, and as amended by that certain Third Amendment to Loan Agreement dated as of March 29, 1996 (as further amended, modified and supplemented from time to time, the "Loan Agreement"); and WHEREAS, the Borrower has requested that the Agents and the Banks agree to amend certain provisions of the Loan Agreement to permit the formation of an unrestricted subsidiary and its acquisition of an AM radio station from Belleville Broadcasting Co. and Metro Broadcasting, Inc.; and WHEREAS, the Agents and the Banks are willing to consent to such amendments and such other matters as set forth herein on the terms and conditions contained herein; NOW, THEREFORE, in consideration of the premises set forth above, the covenants and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that all capitalized terms used herein shall have the meanings ascribed thereto in the Loan Agreement, and further agree as follows: 1. Amendments to Article 1. ----------------------- (a) Article 1 of the Loan Agreement, Definitions, is hereby further ----------- amended by adding the following sentence at the end of the existing definition of "Subsidiary": ---------- "For all purposes under this Agreement (except as otherwise set forth herein, with respect to the Borrower, "Subsidiary" or "Subsidiaries" shall ---------- ------------ not include the Unrestricted Subsidiary." (b) Article 1 of the Loan Agreement, Definitions, is hereby further ----------- amended by adding the following definitions in the appropriate alphabetical order: "'Unrestricted Subsidiary' shall mean Charter Communications Radio St. ----------------------- Louis, LLC, a Delaware limited liability company. The financial condition and operations of the Unrestricted Subsidiary shall not be consolidated with those of the Borrower and its Subsidiaries for financial reporting and financial covenant purposes herein." "`WIBV Acquisition Agreement' shall mean that certain Asset Purchase -------------------------- Agreement dated as of March 16, 1996 among Charter Communications Radio St. Louis, LLC, Belleville Broadcasting Co. and Metro Broadcasting, Inc. with respect to the acquisition by Charter Communications Radio St. Louis, LLC of certain radio station assets of Belleville Broadcasting Co. and Metro Broadcasting, Inc., as such agreement may be amended, modified or supplemented from time to time, together with all exhibits, schedules and appendices thereto, all of which shall be in form and substance satisfactory to the Administrative Agent." "`WIBV Assets' shall mean those radio station assets of Belleville ----------- Broadcasting Co. and Metro Broadcasting, Inc. to be acquired by an Unrestricted Subsidiary of the Borrower pursuant to the WIBV Acquisition Agreement." -2- 2. Amendments to Article 4. ----------------------- (a) Section 4.1(e) of the Loan Agreement, Business, is hereby amended by -------- adding the following at the end of existing Section 4.1(e): "The Unrestricted Subsidiary is engaged solely in the business of owning and operating an AM radio station." (b) Section 4.1(g) of the Loan Agreement, Compliance with Law, is hereby ------------------- amended by deleting the phrase "The Borrower and its Subsidiaries" and replacing it with the phrase "The Borrower, its Subsidiaries and the Unrestricted Subsidiary". (c) Section 4.1(i) of the Loan Agreement, Litigation, is hereby amended by ---------- adding the phrase "and the Unrestricted Subsidiary" immediately following the word "Subsidiaries" in the fifth line thereof. (d) Section 4.1(j) of the Loan Agreement, Taxes, is hereby amended by ----- deleting existing Section 4.1(j) in its entirety and by substituting the following therefor: "(j) Taxes. All federal, state and other tax returns of the ----- Borrower, each of its Subsidiaries and the Unrestricted Subsidiary required by law to be filed have been duly filed and all federal, state and other taxes, including, without limitation, withholding taxes, assessments and other governmental charges or levies required to be paid by the Borrower or any of its Subsidiaries or the Unrestricted Subsidiary or imposed upon the Borrower or any of its Subsidiaries or the Unrestricted Subsidiary or any of their respective properties, income, profits or assets, which are due and payable, have been paid, except any such (x) the payment of which the Borrower or any of its Subsidiaries or the Unrestricted Subsidiary is diligently contesting in good faith by appropriate proceedings, (y) for which adequate reserves have been provided on the books of the Borrower, the Unrestricted Subsidiary or the Subsidiary of the Borrower involved, and (z) as to which no Lien other than a Permitted Lien has attached and no foreclosure, distraint, sale or similar proceedings have been commenced. The charges, accruals and reserves on the books of the Borrower and each of its Subsidiaries and the Unrestricted Subsidiary in respect of taxes are, in the judgment of the Borrower, adequate. All pro forma financial information provided to the Agents and the Banks in connection with this Agreement has been based upon reasonable assumptions and prepared in good faith." -3- (e) Section 4.1(l) of the Loan Agreement, ERISA, is hereby amended by ----- adding the following at the end of existing Section 4.1(l): "For purposes of this Section 4.1(l), the term `Subsidiaries' shall include the Unrestricted Subsidiary." (f) Section 4.1(m) of the Loan Agreement, Compliance with Regulations G, T, --------------------------------- U and X, is hereby amended by adding the following at the end of existing - ------- Section 4.1(m): "For purposes of this Section 4.1(m), the term `Subsidiaries' shall include the Unrestricted Subsidiary." (g) Section 4.1(q) of the Loan Agreement, Accuracy and Completeness of ---------------------------- Information, is hereby amended by (i) adding the phrase "or the Unrestricted - ----------- Subsidiary" immediately following the word "Subsidiaries" in the third and fourth lines thereof and (ii) adding the phrase "and the Unrestricted Subsidiary" immediately following the word "Subsidiaries" in the tenth line thereof. 3. Amendments to Article 5. ----------------------- (a) Section 5.2 of the Loan Agreement, Business; Compliance with Law, is ----------------------------- hereby amended by adding the following at the end of existing Section 5.2: "The Borrower will cause the Unrestricted Subsidiary to (a) engage solely in the business of owning and operating an AM radio station, and (b) comply in all material respects with the requirements of all Applicable Law." (b) Section 5.5 of the Loan Agreement, Insurance, is hereby amended by --------- adding the phrase "and the Unrestricted Subsidiary" immediately following the word "Subsidiaries" each time it appears therein. (c) Section 5.6 of the Loan Agreement, Payment of Taxes and Claims, is --------------------------- hereby amended by adding the phrase "and the Unrestricted Subsidiary" immediately following the word "Subsidiaries" in the second and seventeenth lines thereof. (d) Section 5.11 of the Loan Agreement, Indemnity, is hereby amended by --------- adding the phrase "or the Unrestricted Subsidiary" immediately following the phrase "of the Borrower" in the thirteenth and fifteenth lines thereof. -4- 4. Amendments to Article 6. ----------------------- (a) Section 6.5(e) of the Loan Agreement, Copies of Other Reports, is ----------------------- hereby amended by adding the phrase "or the Unrestricted Subsidiary" immediately following the word "Subsidiaries" in the sixth line thereof. (b) Section 6.6(a) of the Loan Agreement, Notice of Litigation and Other ------------------------------ Matters, is hereby amended by (i) adding the phrase "or the Unrestricted - ------- Subsidiary" immediately following the word "Subsidiaries" in the fourth line thereof and (ii) deleting the phrase "or any Subsidiary of the Borrower" in the sixth line and replacing it with "or its Subsidiaries or the Unrestricted Subsidiary". (c) Section 6.6(b) of the Loan Agreement, Notice of Litigation and Other ------------------------------ Matters, is hereby amended by deleting the phrase "or any Subsidiary of the - ------- Borrower" beginning in the third line and replacing it with "or its Subsidiaries or the Unrestricted Subsidiary". 5. Amendments to Article 7. ----------------------- (a) Section 7.4 of the Loan Agreement, Liquidation, Change in Ownership, --------------------------------- Disposition or Acquisition of Assets, is hereby amended by deleting subsection - ------------------------------------ 7.4(b)(iv) in its entirety and by substituting the following therefor: "(iv) so long as no Default hereunder then exists or would be caused thereby, loans, advances or investments permitted pursuant to Section 7.6(vii) hereof and acquisitions of cable television systems for a purchase price not to exceed $7,500,000 in the aggregate in any fiscal year and $15,000,000 in the aggregate during the term hereof, plus the aggregate amount of any Excess Cash Flow which, in accordance with Section 7.7(c) hereof, would be permitted to be distributed to the Partners and which are not so distributed," (b) Section 7.6 of the Loan Agreement, Investments, is hereby amended by ----------- (i) deleting the word "and" immediately before the "(vi)" in the twenty-fifth line thereof and (ii) by adding the following at the end thereof immediately before the period: "and (vii) loans or advances to, and other investments in, the Unrestricted Subsidiary, in an aggregate outstanding amount not to exceed $4,000,000 including, without limitation, the acquisition by the Unrestricted Subsidiary of the WBIV Assets pursuant to the WBIV Acquisition Agreement." -5- 6. Counterparts. This Amendment may be executed in any number of ------------ counterparts, each of which shall be deemed to be an original, but all such separate counterparts shall together constitute but one and the same instrument. 7. Governing Law. This Amendment shall be construed in accordance with ------------- and governed by the laws of the State of New York. 8. Severability. Any provision of this Amendment which is prohibited or ------------ unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof in that jurisdiction or affecting the validity or enforceability of such provision in any other jurisdiction. 9. No Other Amendment or Waiver. Except for the amendments set forth ---------------------------- above, the text of the Loan Agreement and all other Loan Documents shall remain unchanged and in full force and effect. No waiver by the Administrative Agent, the other Agents or the Banks under the Loan Agreement or any other Loan Document is granted or intended except as expressly set forth herein, and the Administrative Agent, the other Agents and the Banks expressly reserve the right to require strict compliance in all other respects (whether or not in connection with any Requests for Advance). Except as set forth herein, the amendments agreed to herein shall not constitute a modification of the Loan Agreement or any of the other Loan Documents, or a course of dealing with the Administrative Agent, the other Agents and the Banks, or any of them, at variance with the Loan Agreement or any of the other Loan Documents, such as to require further notice by the Administrative Agent, the other Agents, the Banks, the Majority Banks, or any of them, to require strict compliance with the terms of the Loan Agreement and the other Loan Documents in the future. 10. Representations and Warranties. The Borrower hereby represents and ------------------------------ warrants in favor of the Agents and the Banks as follows: (a) The Borrower has the partnership power and authority (i) to enter into this Amendment and (ii) to do all other acts and things as are required or contemplated hereunder to be done, observed and performed by it; (b) This Amendment has been duly authorized, validly executed and delivered by one or more Authorized Signatories of the Borrower and constitutes the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, subject, as to enforcement of remedies, to the following qualifications: (i) an order of -6- specific performance and an injunction are discretionary remedies and, in particular, may not be available where damages are considered an adequate remedy at law, and (ii) enforcement may be limited by bankruptcy, insolvency, liquidation, reorganization, reconstruction and other similar laws affecting enforcement of creditors' rights generally (insofar as any such law relates to the bankruptcy, insolvency or similar event of the Borrower); and (c) The execution and delivery of this Amendment, the performance by the Borrower under the Loan Agreement and the other Loan Documents to which it is a party, as amended hereby, do not and will not require the consent or approval of any regulatory authority or governmental authority or agency having jurisdiction over the Borrower which has not already been obtained, nor contravene or be in conflict with the partnership agreement or other similar agreement of the Borrower, or the provision of any statute, judgment, order, indenture, instrument, agreement, or undertaking, to which the Borrower is a party or by which any of its assets or properties are or may become bound. 11. Conditions Precedent. The effectiveness of this Amendment is subject -------------------- to receipt by the Administrative Agent or the Banks, as appropriate, of each of the following, in form and substance satisfactory to the Administrative Agent and the Banks: (a) A certificate, signed by an Authorized Signatory of the Borrower, certifying on the date hereof that there exists no Default under the Loan Agreement, after giving effect to this Amendment, and demonstrating the Borrower's compliance with Sections 7.8, 7.9, 7.10 and 7.15 of the Loan Agreement, after giving effect to this Amendment and the transactions contemplated hereby; and (b) All such other documents as the Administrative Agent or any Bank may reasonably request, certified by an appropriate governmental official or an Authorized Signatory if so reasonably requested. 12. Loan Documents. This document shall be deemed to be a Loan Document -------------- for all purposes. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] -7- IN WITNESS WHEREOF, the parties hereto have executed this Amendment or caused it to be executed under seal by their duly authorized officers, all as of the day and year first above written. BORROWER: CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P., a Delaware limited partnership By: Its General Partner CCA ACQUISITION CORP., a Delaware corporation By: /s/ Barry L. Babcock ------------------------------------------- Its: Secretary ADMINISTRATIVE AGENT: TORONTO DOMINION (TEXAS), INC., as Administrative Agent By: /s/ Diane Bailey ------------------------------------------- Its: Vice President DOCUMENTATION AGENTS: TORONTO DOMINION (TEXAS), INC., as a Documentation Agent By: /s/ Diane Bailey ------------------------------------------- Its: Vice President CHEMICAL BANK, as a Documentation Agent By: /s/ John Huber, III ------------------------------------------- Its: Managing Director FOURTH AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 1 MANAGING AGENTS: TORONTO DOMINION (TEXAS), INC., as a Managing Agent By: /s/ Diane Bailey ------------------------------------------- Its: Vice President CHEMICAL BANK, as a Managing Agent By: /s/ John J. Huber, III ------------------------------------------- Its: Managing Director CIBC INC., as a Managing Agent By: /s/ Matthew B. Jones ------------------------------------------- Its: Vice President CREDIT LYONNAIS CAYMAN ISLAND BRANCH, as a Managing Agent By: /s/ Mark Thorsheim --------------------------------------------- Its: Authorized Signatory NATIONSBANK, N.A., as a Managing Agent By: /s/ Jennifer Zydney -------------------------------------------- Its: Vice President CO-AGENTS: BANQUE PARIBAS, as a Co-Agent By: /s/ Thomas Brandt ---------------------------------------------- Its: Vice President By: /s/ John J. Acker ---------------------------------------------- Its: Vice President UNION BANK, as a Co-Agent FOURTH AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 2 /s/ Michael K. McShane By:______________________________________________ Its: Vice President BANKS: TORONTO DOMINION (TEXAS), INC., as a Bank /s/ Diane Bailey By:______________________________________________ Its: Vice President CHEMICAL BANK, as a Bank /s/ John J. Huber, III By:______________________________________________ Its: Managing Director CIBC INC., as a Bank /s/ Matthew B. Jones By:______________________________________________ Its: Vice President CREDIT LYONNAIS CAYMAN ISLAND BRANCH, as a Bank /s/ Mark Thorsheim By:______________________________________________ Its: Authorized Signatory NATIONSBANK, N.A., as a Bank /s/ Jennifer Zydney By:______________________________________________ Its: Vice President BANQUE PARIBAS, as a Bank /s/ Thomas Brandt By:______________________________________________ Its: Vice President /s/ John J. Acker By:______________________________________________ Its: Vice President FOURTH AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 3 UNION BANK, as a Bank /s/ Matthew K. McShane By:______________________________________________ Its: Vice President CORESTATES BANK, N.A., as a Bank Anthony B. Parisi By:______________________________________________ Its: Vice President THE LONG-TERM CREDIT BANK OF JAPAN, LTD., as a Bank /s/ Armund Schoen, Jr. By:______________________________________________ Its: Vice President and Deputy General Manager MERCANTILE BANK OF ST. LOUIS NATIONAL ASSOCIATION, as a Bank /s/ Gregory D. Knudsen By:______________________________________________ Its: Vice President FLEET BANK, N.A., f/k/a NatWest Bank N.A., as a Bank /a/ Adam Bester By:______________________________________________ Its: Vice President FIRST NATIONAL BANK OF MARYLAND, as a Bank /s/ Mark D. Jones By:______________________________________________ Its: Senior Vice President VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST, as a Bank /s/ Jeffrey Maillet By:______________________________________________ Its: Senior Vice President FOURTH AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 4 BANQUE FRANCAISE DU COMMERCE EXTERIEUR, as a Bank /s/ Brian J. Cumberland By:______________________________________________ Its: Assistant Treasurer /s/ Frederick K. Kammler By:______________________________________________ Its: Vice President PRIME INCOME TRUST, as a Bank /s/ Rafael Scolari By:______________________________________________ Its: Vice President - Portfolio Manager SENIOR DEBT PORTFOLIO, as a Bank By: Boston Management and Research, as Investment Advisor [blank] By:______________________________________________ Its: [blank] AERIES FINANCE LTD., as a Registered Noteholder /s/ Ian D. Moore By:______________________________________________ Its: Director FOURTH AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 5 ING CAPITAL ADVISORS, as a Bank /s/ Kathleen A. Lenarcic By:______________________________________________ Its: Vice President FOURTH AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 6 EX-10.6 23 FIFTH AMENDMENT TO LOAN AGMNT - 11/29/96 THIS PAGE MUST BE KEPT WITH THE DOCUMENT. FIFTH AMENDMENT TO LOAN AGREEMENT 04/25/97 12:50 pm Exhibit 10.6 FIFTH AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT THIS FIFTH AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT (this "Amendment"), dated as of the 29th day of November, 1996, by and among CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P., a Delaware limited partnership (the "Borrower"), TORONTO DOMINION (TEXAS), INC., THE CHASE MANHATTAN BANK (FORMERLY, CHEMICAL BANK), CIBC INC., CREDIT LYONNAIS CAYMAN ISLAND BRANCH, NATIONSBANK, N.A., BANQUE PARIBAS, UNION BANK OF CALIFORNIA, N.A. (FORMERLY, UNION BANK), CORESTATES BANK, N.A., THE LONG-TERM CREDIT BANK OF JAPAN, LTD., MERCANTILE BANK OF ST. LOUIS NATIONAL ASSOCIATION, FLEET BANK, N.A., FIRST NATIONAL BANK OF MARYLAND, VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST, BANQUE FRANCAISE DU COMMERCE EXTERIEUR, PRIME INCOME TRUST, SENIOR DEBT PORTFOLIO, AERIES FINANCE LTD., ING CAPITAL ADVISORS, INC., ABN AMRO BANK N.V., SOCIETE GENERALE, THE FIRST NATIONAL BANK OF BOSTON, CAPTIVA FINANCE LTD., BANQUE NATIONALE DE PARIS, THE SUMITOMO BANK, LIMITED, CHICAGO BRANCH AND CHASE SECURITIES INC. (together with any financial institution which subsequently becomes a `Bank' under the Loan Agreement, as such term is defined therein, the "Banks"), TORONTO DOMINION (TEXAS), INC. and THE CHASE MANHATTAN BANK (FORMERLY, CHEMICAL BANK), as documentation agents (collectively, in such capacity, the "Documentation Agents"), TORONTO DOMINION (TEXAS), INC., THE CHASE MANHATTAN BANK (FORMERLY, CHEMICAL BANK), CIBC INC., CREDIT LYONNAIS CAYMAN ISLAND BRANCH, and NATIONSBANK, N.A., as managing agents (collectively, in such capacity, the "Managing Agents"), BANQUE PARIBAS, UNION BANK OF CALIFORNIA, N.A. (FORMERLY, UNION BANK), ABN AMRO BANK N.V., SOCIETE GENERALE, FLEET BANK, N.A., CORESTATES BANK, N.A. AND THE FIRST NATIONAL BANK OF BOSTON, as co-agents (collectively, in such capacity, the "Co-Agents"), and TORONTO DOMINION (TEXAS), INC., as administrative agent for the Documentation Agents, the Managing Agents, the Co- Agents and the Banks (the "Administrative Agent," and together with the Documentation Agents, the Managing Agents and the Co-Agents, the "Agents"), W I T N E S S E T H: ------------------- WHEREAS, the Agents, the Borrower, and the Banks are parties to that certain Amended and Restated Loan Agreement dated as of September 29, 1995, as amended by that certain First Amendment to Loan Agreement dated as of October 31, 1995, that certain Second Amendment to Loan Agreement dated as of January 16, 1996, that certain Third Amendment to Loan Agreement dated as of March 29, 1996 and that certain Fourth Amendment to Loan Agreement dated as of May 24, 1996 (as further amended, modified and supplemented from time to time, the "Loan Agreement"); and WHEREAS, the Borrower has requested that the Agents and the Banks agree to amend certain provisions of the Loan Agreement to permit the Borrower to acquire cable television systems located in Jefferson County, Missouri from Masada Cable Partners, L.P. and to finance additional capital expenditures, acquisitions, working capital, fees and other general corporate needs; and WHEREAS, the Agents and the Banks are willing to consent to such amendments and such other matters as set forth herein on the terms and conditions contained herein; NOW, THEREFORE, in consideration of the premises set forth above, the covenants and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that all capitalized terms used herein shall have the meanings ascribed thereto in the Loan Agreement, and further agree as follows: 1. Amendments to Article 1. ----------------------- (a) Article 1 of the Loan Agreement, Definitions, is hereby amended by ----------- deleting the existing definitions of "Commitment Ratios," "Maturity Date," ----------------- ------------- "Revolving Loan Commitment" and "Revolving Loan Notes" in their entireties and ------------------------- -------------------- by substituting the following therefor: "`Commitment Ratios' shall mean the percentages in which the Banks are ----------------- severally bound to make Advances to the Borrower under the respective Commitments, as set forth below (together with dollar amounts) as of the date of the Fifth Amendment to this Agreement:
Portion of Portion of Revolving Portion of Term Loan Revolving Loan Fund Loan Term Loan Loan Fund Loan Total Dollar Commitment Commitment Commitment Banks Commitment Commitment Commitment Commitment Ratio Ratio Ratio - ----------------- --------------- --------------- --------------- --------------- ------------- --------------- ------------- Toronto $ 6,211,985.62 $ 10,118,014.38 $18,250,000.00 $ 34,580,000.00 2.218566293% 7.227153129% 21.470588235% Dominion (Texas), Inc. The Chase 5,820,912.28 13,009,087.72 5,750,000.00 24,580,000.00 2.078897243% 9.292205514% 6.764705882% Manhattan Bank (formerly, Chemical Bank) CIBC Inc. 17,202,370.00 17,377,630.00 0.00 34,580,000.00 6.143703571% 12.412592857% 0.000000000% Credit 17,202,370.00 17,377,630.00 0.00 34,580,000.00 6.143703571% 12.412592857% 0.000000000% Lyonnais Cayman Island Branch
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Portion of Portion of Revolving Portion of Term Loan Revolving Loan Fund Loan Term Loan Loan Fund Loan Total Dollar Commitment Commitment Commitment Banks Commitment Commitment Commitment Commitment Ratio Ratio Ratio - ----------------- --------------- --------------- --------------- --------------- ------------- --------------- ------------- NationsBank, 17,202,370.00 17,377,630.00 0.00 34,580,000.00 6.143703571% 12.412592857% 0.000000000% N.A. Banque 19,026,666.67 2,073,333.33 0.00 21,100,000.00 6.795238096% 1.480952379% 0.000000000% Paribas Union Bank of 23,000,000.00 2,000,000.00 0.00 25,000,000.00 8.214285714% 1.428571429% 0.000000000% California, N.A. (formerly, Union Bank) CoreStates 14,000,000.00 11,000,000.00 5,000,000.00 30,000,000.00 5.000000000% 7.857142857% 5.882352941% Bank, N.A. The Long- 14,000,000.00 6,000,000.00 0.00 20,000,000.00 5.000000000% 4.285714286% 0.000000000% Term Credit Bank of Japan, Ltd. Mercantile 9,000,000.00 1,000,000.00 0.00 10,000,000.00 3.214285714% 0.714285714% 0.000000000% Bank of St. Louis National Association Fleet Bank, 14,000,000.00 11,000,000.00 0.00 25,000,000.00 5.000000000% 7.857142857% 0.000000000% N.A. First National 14,000,000.00 1,000,000.00 0.00 15,000,000.00 5.000000000% 0.714285714% 0.000000000% Bank of Maryland Van Kampen 30,000,000.00 0.00 8,500,000.00 38,500,000.00 10.714285714% 0.000000000% 10.000000000% American Capital Prime Rate Income Trust Banque 9,333,333.33 5,666,666.67 0.00 15,000,000.00 3.333333332% 4.047619050% 0.000000000% Francaise du Commerce Exterieur Prime Income 0.00 0.00 10,000,000.00 10,000,000.00 0.000000000% 0.000000000% 11.764705882% Trust Senior Debt 0.00 0.00 5,000,000.00 5,000,000.00 0.000000000% 0.000000000% 5.882352941% Portfolio Aeries 0.00 0.00 5,000,000.00 5,000,000.00 0.000000000% 0.000000000% 5.882352941% Finance Ltd. ING Capital 0.00 0.00 12,500,000.00 12,500,000.00 0.000000000% 0.000000000% 14.705882353% Advisors ABN AMRO 18,421,050.00 6,578,950.00 0.00 25,000,000.00 6.578946429% 4.699250000% 0.000000000% Bank N.V.
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Portion of Portion of Revolving Portion of Term Loan Revolving Loan Fund Loan Term Loan Loan Fund Loan Total Dollar Commitment Commitment Commitment Banks Commitment Commitment Commitment Commitment Ratio Ratio Ratio - ----------------- --------------- --------------- --------------- --------------- ------------- --------------- ------------- Societe 18,421,050.00 6,578,950.00 0.00 25,000,000.00 6.578946429% 4.699250000% 0.000000000% Generale The First 18,421,050.00 6,578,950.00 0.00 25,000,000.00 6.578946429% 4.699250000% 0.000000000% National Bank of Boston Banque 7,368,421.05 2,631,578.95 0.00 10,000,000.00 2.631578946% 1.879699250% 0.000000000% Nationale de Paris The Sumitomo 7,368,421.05 2,631,578.95 0.00 10,000,000.00 2.631578946% 1.879699250% 0.000000000% Bank, Limited, Chicago Branch Captiva 0.00 0.00 5,000,000.00 5,000,000.00 0.000000000% 0.000000000% 5.882352941% Finance Ltd. Chase 0.00 0.00 10,000,000.00 10,000,000.00 0.000000000% 0.000000000% 11.764705882% Securities, Inc. Total $280,000,000.00 $140,000,000.00 $85,000,000.00 $505,000,000.00 100.00% 100.00% 100.00%
"'Maturity Date' shall mean June 30, 2004 or such earlier date as ------------- payment of the Loans under the Revolving Loan Commitment or the Term Loan Commitment shall be due (whether by acceleration or otherwise)." "'Revolving Loan Commitment' shall mean the several obligations of the ------------------------- Banks issuing a Revolving Loan Commitment as indicated in the definition of "Commitment Ratios" to advance the sum of up to $140,000,000 at any one time outstanding, in accordance with their respective Revolving Loan Commitment Ratios set forth in the definition of "Commitment Ratios," to the Borrower pursuant to the terms hereof, as such obligations may be reduced from time to time pursuant to the terms hereof." "'Revolving Loan Notes' shall mean those certain second amended and -------------------- restated revolving promissory notes (including Registered Notes) in the aggregate principal amount of $140,000,000, one such note issued to each of the Banks having a Revolving Loan Commitment hereunder by the Borrower, each one substantially in the form of Exhibit A to the Fifth Amendment to --------- this Agreement, and any extensions, renewals, amendments or substitutions to any of the foregoing." -4- (b) Article 1 of the Loan Agreement, Definitions, is hereby further amended by adding the following definitions in the appropriate alphabetical order: "'Masada' shall mean Masada Cable Partners, L.P., a Delaware limited ------ partnership." "'Masada Acquisition Agreement' shall mean that certain CATV Asset ---------------------------- Purchase Agreement dated as of May 28, 1996 among Masada Cable Partners, L.P. and CM Acquisition Corp. as assigned pursuant to that certain Amended and Restated Assignment of Purchase Rights dated as of November 1, 1996 among CM Acquisition Corp and the Borrower, Charter Communications Properties, Inc. and Charter Communications, L.P., as such agreement may be amended, modified or supplemented from time to time, together with all exhibits, schedules and appendices thereto, all of which shall be in form and substance satisfactory to the Administrative Agent." "'Masada Acquisition Date' shall mean the date on which the Borrower ----------------------- acquires the Masada Assets pursuant to the Masada Acquisition Agreement." "'Masada Assets' shall mean those cable television assets of Masada ------------- located in Franklin County, Jefferson County and St. Francois County, Missouri to be acquired by the Borrower pursuant to the Masada Acquisition Agreement." 2. Amendments to Article 2. ----------------------- (a) Section 2.5 of the Loan Agreement, Revolving Loan Commitment ------------------------- Reductions, is hereby amended by deleting the existing subsection (a) in its - ---------- entirety and by substituting the following in lieu thereof: "(a) Mandatory. Commencing September 30, 1997 and at the end of --------- each calendar quarter thereafter, the Revolving Loan Commitment as in effect on September 29, 1997 shall be automatically reduced by the percentages set forth below:
Quarterly Percentage Reduction of Revolving Loan Commitment as in Effect Dates of Reduction on September 29, 1997 ------------------ --------------------- September 30, 1997 and December 31, 1997 1.0500%
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Quarterly Percentage Reduction of Revolving Loan Commitment as in Effect Dates of Reduction on September 29, 1997 ------------------ --------------------- March 31, 1998, June 30, 1998, September 30, 1998 and December 31, 1998 2.2500% March 31, 1999, June 30, 1999, September 30, 1999 and December 31, 1999 3.0000% March 31, 2000, June 30, 2000, September 30, 2000 and December 31, 2000 3.0625% March 31, 2001, June 30, 2001, September 30, 2001 and December 31, 2001 4.1250% March 31, 2002, June 30, 2002, September 30, 2002 and December 31, 2002 5.0625% March 31, 2003, June 30, 2003, September 30, 2003 and December 31, 2003 5.3125% March 31, 2004 and June 30, 2004 3.3250%
The Borrower shall make a repayment of the Revolving Loans outstanding, together with accrued interest thereon, on or before the effective date of each reduction in the Revolving Loan Commitment under this Section 2.5(a), such that the aggregate principal amount of the Revolving Loans outstanding at no time exceeds the Revolving Loan Commitment as so reduced. In addition, any remaining unpaid principal and interest under the Revolving Loan Commitment shall be due and payable in full on the Maturity Date." (b) Section 2.7 of the Loan Agreement, Repayments, is hereby amended ---------- by deleting the existing subsection (a)(i) thereto in its entirety and by substituting the following in lieu thereof: "(i) For the Term Loan. Commencing September 30, 1997, the ----------------- principal balance of the Term Loan shall be amortized in consecutive quarterly installments on September -6- 30, December 31, March 31 and June 30 of each year until paid in full, in such amounts as follows:
Percent of Principal Due on Last Day Payment Dates of Each Quarter ------------- --------------- September 30, 1997 and December 31, 1997 1.0500% March 31, 1998, June 30, 1998, September 30, 1998 and December 31, 1998 2.2500% March 31, 1999, June 30, 1999, September 30, 1999 and December 31, 1999 3.0000% March 31, 2000, June 30, 2000, September 30, 2000 and December 31, 2000 3.0625% March 31, 2001, June 30, 2001, September 30, 2001 and December 31, 2001 4.1250% March 31, 2002, June 30, 2002, September 30, 2002 and December 31, 2002 5.0625% March 31, 2003, June 30, 2003, September 30, 2003 and December 31, 2003 5.3125% March 31, 2004 and June 30, 2004 3.3250%"
(c) Section 2.7 of the Loan Agreement, Repayment, is hereby further --------- amended by deleting the existing subsection 2.7(b) thereto in its entirety and by substituting the following in lieu thereof: "(b) Repayments Upon Sales of Assets and Asset Swaps. Except as ----------------------------------------------- provided below with respect to Permitted Asset Swaps, in the event of any sale, lease, transfer or other disposition of assets permitted hereunder, excluding any such sale, lease, transfer or other disposition of assets by the Borrower or any of its Subsidiaries in the ordinary course of business (collectively, "Asset Sales"), to the extent that the Net Proceeds with respect thereto (when -7- taken together with the Net Proceeds of all other Asset Sales made subsequent to the Agreement Date) are in excess of $7,500,000 in the aggregate for all Asset Sales made during the period from the Agreement Date to the Final Maturity Date, the Borrower shall, on the date of such sale, lease, transfer or other disposition, make a repayment of the principal of the Term Loan and the Fund Loans then outstanding, and the Revolving Loan Commitment shall be permanently and automatically reduced, such that the outstanding principal amount of the Term Loan, the outstanding principal amount of the Fund Loans and the amount of the Revolving Loan Commitment are reduced, on a weighted pro rata basis among the outstanding principal amount of the Term Loan and the Fund Loans and the amount of the Revolving Loan Commitment, in an aggregate amount equal to the Net Proceeds in excess of the first $7,500,000 of all such Asset Sales. Any such Net Proceeds which constitute a portion of the sales price which was previously held in escrow or paid in installments shall be paid to the Banks as a repayment of principal, and the Revolving Loan Commitment shall be permanently and automatically reduced, all to the extent required by the terms hereof, at such time as such Net Proceeds are received by the Borrower. In the event the Borrower elects to enter into a Permitted Asset Swap, the Borrower shall, on the date it sells, leases, transfers or otherwise disposes of all or substantially all of its interests in the cable television system owned by the Borrower or any of its Subsidiaries in the State of Connecticut, deposit in an escrow account with the Administrative Agent an amount equal to the Net Proceeds of such sale, lease, transfer or other disposition. The amount deposited in such escrow account shall be held in such escrow account until the earlier to occur of the consummation of the Permitted Asset Swap or the first anniversary of the sale, lease, transfer or other disposition of such Connecticut assets or interests relating thereto. Amounts held in such escrow account may be invested as permitted under Section 7.6(i), (ii) and (iii) hereof, or as otherwise agreed to by the Borrower and the Administrative Agent. Net Proceeds held in escrow by the Administrative Agent may be used by the Borrower at any time prior to the first anniversary of such sale, lease, transfer or other disposition of Connecticut assets or interests to consummate a Permitted Asset Swap or the Borrower may direct the Administrative Agent to repay the principal amount of the Term Loan and the Fund Loans and to permanently and automatically reduce the Revolving Loan Commitment (on a weighted pro rata basis among the outstanding principal amount of the Term Loan and the Fund Loans and the amount of the Revolving Loan Commitment) in a like amount. On such first anniversary date, the outstanding principal amount of -8- the Term Loan and the Fund Loans shall be automatically repaid and the amount of the Revolving Loan Commitment shall be permanently and automatically reduced (on a weighted pro rata basis among the outstanding principal amount of the Term Loan and the Fund Loans and the amount of the Revolving Loan Commitment) in an aggregate amount equal to the amount of all Net Proceeds then remaining in escrow with the Administrative Agent pursuant to this Section 2.7(b). All amounts paid pursuant to this subsection shall be applied to principal of the Term Loan and the Fund Loans, respectively, pro rata over the applicable repayment schedule set forth in Section 2.7(a) above." (d) Section 2.7 of the Loan Agreement, Repayment, is hereby further --------- amended by deleting the date "April 30, 1998" appearing in the first sentence of subsection (c), "Annual Excess Cash Flow Recapture," and substituting the date --------------------------------- "April 30, 1999" in lieu thereof. 3. Amendments to Article 5. ----------------------- (a) Section 5.9 of the Loan Agreement, Use of Proceeds, is hereby --------------- amended by deleting the existing Section 5.9 in its entirety and by substituting the following in lieu thereof: "Section 5.9 Use of Proceeds. On and after the effective date --------------- of the Fifth Amendment to this Agreement, the Borrower will use the aggregate proceeds of the Revolving Loans (as set forth in the Requests for Advances issued from time to time hereunder) to finance Capital Expenditures, to finance the acquisition of the Masada Assets pursuant to the Masada Acquisition Agreement and related transaction costs, for working capital and for other partnership needs as permitted under this Agreement." (b) Section 5.12 of the Loan Agreement, Interest Rate Hedging, is --------------------- hereby amended by adding the following proviso at the end of the first sentence of such Section immediately before the period: "; provided, however, that, prior to February 27, 1997, no Default shall be deemed to have arisen under this Section solely as a result of the Borrower's failure to comply with the foregoing requirement with respect to Advances made under the Revolving Loan Commitment which cause the aggregate principal amount of Advances outstanding thereunder to exceed $100,000,000." -9- 4. Amendments to Article 7. ----------------------- (a) Section 7.7 of the Loan Agreement, Restricted Payments and ----------------------- Purchases, is hereby amended by deleting the existing subsection (b) thereof in - --------- its entirety and by substituting the following in lieu thereof: "(b) so long as no Default hereunder then exists or would be caused thereby, during the period from January 1, 1995 through and including December 31, 2000, (i) pay management fees and financial advisory fees in an aggregate amount for any fiscal year not to exceed $5,450,000, provided, that, in the event the Leverage Ratio for each of the two (2) most recently completed fiscal quarters for which financial statements of the Borrower are required to have been provided to the Banks pursuant to Section 6.1 hereof is less than 5.50 to 1.0, the Borrower may pay management fees and financial advisory fees for the fiscal year during which the second such fiscal quarter falls up to the greater of $5,450,000 or an aggregate amount not to exceed three percent (3%) of gross revenues of the Borrower and its Restricted Subsidiaries on a consolidated basis for such year, as determined in accordance with GAAP, and (ii) reimburse Kelso for all reasonable out of pocket expenses incurred by it in connection with its services under the Financial Advisory Agreement, all as the same may become due and payable under the Management Agreement and the Financial Advisory Agreement, or, in the case of the General Partner, the predecessors to such Agreements;" (b) Section 7.7 of the Loan Agreement, Restricted Payments and ----------------------- Purchases, is hereby further amended by deleting the period at the end of - --------- existing subsection (h) thereof and substituting a semi-colon therefor, and adding the following as a new subsection (i) thereof: "(i) so long as no Default hereunder then exists or would be caused thereby, pay Kelso and/or the Manager a search and acquisition fee in an aggregate amount not to exceed $480,000 on the Masada Acquisition Date." (c) Section 7.8 of the Loan Agreement, Leverage Ratio, is hereby -------------- amended by deleting the existing Section in its entirety and by substituting the following in lieu thereof: "Section 7.8 Leverage Ratio. (a) As of the end of any calendar -------------- quarter, and (b) at the time of any Advance which increases the outstanding principal amount of the Loans (after giving effect to such Advance), the Borrower shall not permit the Leverage Ratio for the calendar quarter end being tested in the case of Section 7.8(a) above, or the -10- most recent quarter end for which financial statements are required to have been provided to the Agents and the Banks pursuant to Section 6.1 hereof in the case of Section 7.8(b) above and after giving effect to the Advance as of such date, to exceed the ratios set forth below for calculation dates using financial statements for periods ending during the periods shown below:
Leverage Period Ratio ------ ----- January 18, 1995 6.50:1 through March 31, 1997 From April 1, 1997 6.25:1 through September 30, 1997 From October 1, 1997 6.00:1 through March 31, 1998 From April 1, 1998 5.50:1 through December 31, 1998 From January 1, 1999 5.00:1 through June 30, 1999 From July 1, 1999 4.50:1 through December 31, 1999 From January 1, 2000 and 4.00:1" thereafter
(d) Section 7.9 of the Loan Agreement, Annualized Operating Cash Flow ------------------------------ to Fixed Charges, is hereby amended by deleting the existing Section in its - ---------------- entirety and by substituting the following in lieu thereof: "Section 7.9 Annualized Operating Cash Flow to Fixed Charges Ratio. ----------------------------------------------------- As of September 30, 1998 and as of the end of each calendar quarter thereafter, the Borrower shall not permit the ratio of Annualized Operating Cash Flow for the calendar quarter end being tested to Fixed Charges for the four (4) calendar quarters immediately preceding the calculation date to be less than 1.0 to 1.0." (e) Section 7.15 of the Loan Agreement, Capital Expenditures, is -------------------- hereby amended by deleting the existing Section in its entirety and by substituting the following in lieu thereof: Section 7.15 Capital Expenditures. The Borrower shall not permit the -------------------- aggregate amount of Capital Expenditures made by the Borrower and its Subsidiaries (and, -11- prior to the Agreement Date, by the General Partner and its Subsidiaries), on a consolidated basis, in any period set forth below to exceed as of the end of such period the sum of (a) the limit for such period, as set forth below, plus (b) any unexpended portion of the Capital Expenditures limit set forth below for the preceding period.
Capital Period Expenditures Limit ------ ------------------ From January 18, 1995 $23,500,000 through December 31, 1995 From January 1, 1996 $40,300,000 through December 31, 1996 From January 1, 1997 $42,500,000 through December 31, 1997 From January 1, 1998 $18,500,000 through September 30, 1998
There shall be no dollar limitation on Capital Expenditures after September 30, 1998." 5. Amendment to Article 8. ---------------------- (a) Section 8.1 of the Loan Agreement, Events of Default, is hereby ----------------- amended by adding the following at the end of existing subsection (w) thereof immediately before the period: ", other than that certain Guaranty dated as of September 29, 1995 issued by CCELP for the benefit of H C Crown Corp., as the same may be amended, restated or otherwise modified from time to time with the prior written consent of the Majority Banks." 6. Counterparts. This Amendment may be executed in any number of ------------ counterparts, each of which shall be deemed to be an original, but all such separate counterparts shall together constitute but one and the same instrument. 7. Governing Law. This Amendment shall be construed in accordance with ------------- and governed by the laws of the State of New York. 8. Severability. Any provision of this Amendment which is prohibited or ------------ unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof in that jurisdiction or affecting the validity or enforceability of such provision in any other jurisdiction. -12- 9. No Other Amendment or Waiver. Except for the amendments set forth ---------------------------- above, the text of the Loan Agreement and all other Loan Documents shall remain unchanged and in full force and effect. No waiver by the Administrative Agent, the other Agents or the Banks under the Loan Agreement or any other Loan Document is granted or intended except as expressly set forth herein, and the Administrative Agent, the other Agents and the Banks expressly reserve the right to require strict compliance in all other respects (whether or not in connection with any Requests for Advance). Except as set forth herein, the amendments agreed to herein shall not constitute a modification of the Loan Agreement or any of the other Loan Documents, or a course of dealing with the Administrative Agent, the other Agents and the Banks, or any of them, at variance with the Loan Agreement or any of the other Loan Documents, such as to require further notice by the Administrative Agent, the other Agents, the Banks, the Majority Banks, or any of them, to require strict compliance with the terms of the Loan Agreement and the other Loan Documents in the future. 10. Representations and Warranties. The Borrower hereby represents and ------------------------------ warrants in favor of the Agents and the Banks as follows: (a) The Borrower has the partnership power and authority (i) to enter into this Amendment and (ii) to do all other acts and things as are required or contemplated hereunder to be done, observed and performed by it; (b) This Amendment has been duly authorized, validly executed and delivered by one or more Authorized Signatories of the Borrower and constitutes the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, subject, as to enforcement of remedies, to the following qualifications: (i) an order of specific performance and an injunction are discretionary remedies and, in particular, may not be available where damages are considered an adequate remedy at law, and (ii) enforcement may be limited by bankruptcy, insolvency, liquidation, reorganization, reconstruction and other similar laws affecting enforcement of creditors' rights generally (insofar as any such law relates to the bankruptcy, insolvency or similar event of the Borrower); and (c) The execution and delivery of this Amendment, the performance by the Borrower under the Loan Agreement and the other Loan Documents to which it is a party, as amended hereby, and the consummation of the transactions contemplated hereby do not and will not require the consent or approval of any regulatory authority or governmental authority or agency having jurisdiction over the Borrower which has not already been obtained, nor contravene or be in conflict with the partnership -13- agreement or other similar agreement of the Borrower, or the provision of any statute, judgment, order, indenture, instrument, agreement, or undertaking, to which the Borrower is a party or by which any of its assets or properties are or may become bound. 11. Conditions Precedent. The effectiveness of this Amendment is subject -------------------- to receipt by the Administrative Agent or the Banks, as appropriate, of each of the following, in form and substance satisfactory to the Administrative Agent and the Banks: (a) Each of the Banks having a portion of the Revolving Loan Commitment shall have received a duly executed Revolving Loan Note in substantially the form attached hereto as Exhibit A, which promissory notes --------- shall be deemed to be "Notes" under the Loan Agreement and the other Loan Documents for all purposes hereafter; (b) The Administrative Agent or the Banks, as appropriate, shall have received each of the following, in form and substance satisfactory to the Administrative Agent and the Banks: (i) A certificate, signed by an Authorized Signatory of the Borrower, certifying on the date hereof that there exists no Default under the Loan Agreement, after giving effect to this Amendment and to the consummation of the Borrower's acquisition of the Masada Assets, and demonstrating the Borrower's compliance with Sections 7.8, 7.9, 7.10 and 7.15 of the Loan Agreement, after giving effect to this Amendment and the consummation of the Borrower's acquisition of the Masada Assets; (ii) All documentation required under Section 5.13 of the Loan Agreement with respect to the Borrower's acquisition of the Masada Assets; (iii) Copies of the Masada Acquisition Agreement and all other documents related to the transfer of the Masada Assets to the Borrower, including, without limitation, lien search results from appropriate jurisdictions with respect to the Masada Assets, all of which shall be certified by an Authorized Signatory to be true, complete and correct as of the date hereof, together with duly executed UCC-1 financing statements and other collateral documentation deemed reasonably necessary by the Administrative Agent to reflect or perfect the Security Interest of the Administrative Agent (for itself and on behalf of the Banks) in such assets; (iv) Opinions of general counsel, local counsel and in-house counsel to the Borrower and its Subsidiaries, addressed to the Banks and the Administrative Agent and -14- satisfactory to the Administrative Agent and its special counsel, dated as of the date hereof; (v) Opinions or comfort letters regarding the Masada Assets and the Masada Acquisition Agreement given by FCC counsel to the Borrower, addressed to the Banks and the Administrative Agent and satisfactory to the Administrative Agent and its special counsel, dated as of the date hereof; (v) Reliance letters regarding opinions of counsel to Masada, in form and substance satisfactory to the Administrative Agent and its special counsel, dated as of the date hereof; (vi) Evidence satisfactory to the Administrative Agent and its special counsel that the Borrower has acquired the Masada Assets pursuant to the Masada Acquisition Agreement; (viii) Duly executed Certificate of Financial Condition dated as of the date hereof; (ix) Copies of all approvals or consents regarding the transfer to the Borrower of all franchises and contracts constituting a part of the Masada Assets; (x) Pro forma balance sheet with respect to the Borrower, after giving effect to the transactions contemplated hereby; and (xi) All such other documents as the Administrative Agent or any Bank may reasonably request, certified by an appropriate governmental official or an Authorized Signatory if so reasonably requested; (c) The Licenses constituting a part of the Masada Assets shall be in form and substance satisfactory to the Administrative Agent, and the Administrative Agent shall have received evidence reasonably satisfactory to it that all Necessary Authorizations, including all necessary consents to the consummation of the Borrower's acquisition of the Masada Assets and the other transactions contemplated hereby, from the grantors of the Licenses have been obtained or made, are in full force and effect and are not subject to any pending or threatened reversal or cancellation, and the Administrative Agent and the Banks shall have received a certificate of an Authorized Signatory so stating; (d) The Administrative Agent for each of the Banks shall have received from the Borrower for the account of the Banks an amendment fee (the "Amendment Fee") by wire transfer of immediately available funds equal to the product of (i) each -15- Bank's pro rata portion of the Revolving Loan Commitment, the Term Loan Commitment and the Fund Loan Commitment as of the day immediately prior to the effective date of this Amendment, multiplied by (ii) 0.125%, and all other fees payable to the Administrative Agent or any Bank in connection herewith; and (e) All such other documents as the Administrative Agent or any Bank may reasonably request, certified by an appropriate governmental official or an Authorized Signatory if so reasonably requested. 12. Loan Documents. This document shall be deemed to be a Loan Document -------------- for all purposes. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] -16- IN WITNESS WHEREOF, the parties hereto have executed this Amendment or caused it to be executed under seal by their duly authorized officers, all as of the day and year first above written. BORROWER: CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P., a Delaware limited partnership By: Its General Partner CCA ACQUISITION CORP., a Delaware corporation /s/ Jerald L. Kent By: ________________________________________________ Its: President ADMINISTRATIVE AGENT: TORONTO DOMINION (TEXAS), INC., as Administrative Agent /s/ Diane Bailey By: ________________________________________________ Its: Vice President DOCUMENTATION AGENTS: TORONTO DOMINION (TEXAS), INC., as a Documentation Agent /s/ Diane Bailey By: ________________________________________________ Its: Vice President THE CHASE MANHATTAN BANK (formerly, Chemical Bank), as a Documentation Agent /s/ John J. Huber, III By: ________________________________________________ Its: Managing Director MANAGING AGENTS: TORONTO DOMINION (TEXAS), INC., as a Managing Agent /s/ Diane Bailey By: ________________________________________________ Its: Vice President FIFTH AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 1 MANAGING AGENTS: THE CHASE MANHATTAN BANK (formerly, (continued) Chemical Bank), as a Managing Agent /s/ John J. Huber, III By: ________________________________________________ Its: Managing Director CIBC INC., as a Managing Agent /s/ Matthew B. Jones By: ________________________________________________ Its: Vice President CREDIT LYONNAIS CAYMAN ISLAND BRANCH, as a Managing Agent /s/ Mark D. Thorsheim By: ________________________________________________ Its: Authorized Signatory NATIONSBANK, N.A., as a Managing Agent /s/ Jennifer Zydney By: ________________________________________________ Its: Vice President CO-AGENTS: BANQUE PARIBAS, as a Co-Agent /s/ Bryan G. Petermann By: ________________________________________________ Its: Vice President /s/ John G. Acker By: ________________________________________________ Its: Group Vice President UNION BANK OF CALIFORNIA, N.A. (formerly, Union Bank), as a Co-Agent /s/ B. Adam Trout By: ________________________________________________ Its: Assistant Vice President FIFTH AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 2 CO-AGENTS CORESTATES BANK, N.A., as a Co-Agent (continued) /s/ Anthony B. Parisi By: ________________________________________________ Its: Vice President FLEET BANK, N.A., as a Co-Agent /s/ M.A. Cerullo By: ________________________________________________ Its: Vice President ABN AMRO BANK N.V., as a Co-Agent /s/ James J. Johnson By: ________________________________________________ Its: Vice President /s/ Mary L. Honda By: ________________________________________________ Its: Vice President SOCIETE GENERALE, as a Co-Agent /s/ John Sadik-Khan By: ________________________________________________ Its: Vice President THE FIRST NATIONAL BANK OF BOSTON, as a Co-Agent /s/ Cindy C. Chen By: ________________________________________________ Its: Director BANKS: TORONTO DOMINION (TEXAS), INC., as a Bank /s/ Diane Bailey By: ________________________________________________ Its: Vice President FIFTH AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 2B BANKS THE CHASE MANHATTAN BANK (formerly, (continued) Chemical Bank), as a Bank /s/ John J. Huber, III By: ________________________________________________ Its: Managing Director CIBC INC., as a Bank /s/ Matthew B. Jones By: ________________________________________________ Its: Vice President CREDIT LYONNAIS CAYMAN ISLAND BRANCH, as a Bank /s/ Mark D. Thorsheim By: ________________________________________________ Its: Authorized Signatory NATIONSBANK, N.A., as a Bank /s/ Jennifer Zydney By: ________________________________________________ Its: Vice President BANQUE PARIBAS, as a Bank /s/ Bryan G. Petermann By: ________________________________________________ Its: Vice President /s/ John G. Acker By: ________________________________________________ Its: Group Vice President UNION BANK OF CALIFORNIA, N.A. (formerly Union Bank), as a Bank /s/ B. Adam Trout By: ________________________________________________ Its: Assistant Vice President BANKS CORESTATES BANK, N.A., as a Bank FIFTH AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 3B (continued) /s/ Anthony B. Parisi By: ________________________________________________ Its: Vice President THE LONG-TERM CREDIT BANK OF JAPAN, LTD., as a Bank /s/ Armund Schoen, Jr. By: ________________________________________________ Its: Vice President MERCANTILE BANK OF ST. LOUIS NATIONAL ASSOCIATION, as a Bank /s/ Gregory D. Knudsen By: ________________________________________________ Its: Vice President FLEET BANK, N.A., as a Bank /s/ M.A. Cerullo By: ________________________________________________ Its: Vice President FIRST NATIONAL BANK OF MARYLAND, as a Bank /s/ Mark L. Cook By: ________________________________________________ Its: Senior Vice President VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST, as a Bank /s/ Brian W. Good By: ________________________________________________ Its: Vice President FIFTH AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 4B BANKS BANQUE FRANCAISE DU COMMERCE (continued) EXTERIEUR, as a Bank /s/ Brian J. Cumberland By: ________________________________________________ Its: Assistant Treasurer /s/ Frederick K. Kammler By: ________________________________________________ Its: Vice President PRIME INCOME TRUST, as a Bank /s/ Rafael Scolari By: ________________________________________________ Its: Authorized Signatory SENIOR DEBT PORTFOLIO, as a Bank By: Boston Management and Research, as Investment Advisor /s/ Scott Page By: ________________________________________________ Its: Vice President and Portfolio Manager AERIES FINANCE LTD., as a Registered Noteholder /s/ Andrew Wignall By: ________________________________________________ Its: Director ING CAPITAL ADVISORS, INC., as agent for Bank syndication account /s/ Kathleen A. Lenarcic By: ________________________________________________ Its: Vice President & Portfolio Manager FIFTH AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 5B BANKS ABN AMRO BANK N.V., as a Bank (continued) /s/ James J. Johnson By: ________________________________________________ Its: Vice President /s/ Mary L. Honda By: ________________________________________________ Its: Vice President SOCIETE GENERALE, as a Bank /s/ John Sadik-Khan By: ________________________________________________ Its: Vice President THE FIRST NATIONAL BANK OF BOSTON, as a Bank /s/ Cindy C. Chen By: ________________________________________________ Its: Director BANQUE NATIONALE DE PARIS, as a Bank /s/ Mark Whitson By: ________________________________________________ Its: Vice President /s/ Pamela Lucash By: ________________________________________________ Its: Assistant Treasurer FIFTH AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 6B BANKS THE SUMITOMO BANK, LIMITED, CHICAGO (continued) BRANCH, as a Bank /s/ Hiroyuki Iwami By: ________________________________________________ Its: Joint General Manager CAPTIVA FINANCE LTD., as a Registered Noteholder /s/ Darrin Riley By: ________________________________________________ Its: Director CHASE SECURITIES INC., as agent for The Chase Manhattan Bank, as a Bank /s/ Matthew B. Leahey By: ________________________________________________ Its: Vice President FIFTH AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 7B EX-10.7 24 SIXTH AMENDMENT TO LOAN AGMNT - 2/7/97 THIS PAGE MUST BE KEPT WITH THE DOCUMENT. SIXTH AMENDMENT TO LOAN AGREEMENT 04/25/97 12:35 pm Exhibit 10.7 SIXTH AMENDMENT TO LOAN AGREEMENT THIS SIXTH AMENDMENT TO LOAN AGREEMENT (this "Amendment"), dated as of the 7th day of February, 1997 (the "Amendment Date"), by and among CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P., a Delaware limited partnership (the "Borrower"), TORONTO DOMINION (TEXAS), INC., THE CHASE MANHATTAN BANK (FORMERLY, CHEMICAL BANK), CIBC INC., CREDIT LYONNAIS CAYMAN ISLAND BRANCH, NATIONSBANK, N.A., BANQUE PARIBAS, UNION BANK OF CALIFORNIA, N.A. (FORMERLY, UNION BANK), CORESTATES BANK, N.A., THE LONG-TERM CREDIT BANK OF JAPAN, LTD., MERCANTILE BANK OF ST. LOUIS NATIONAL ASSOCIATION, FLEET BANK, N.A., FIRST NATIONAL BANK OF MARYLAND, VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST, BANQUE FRANCAISE DU COMMERCE EXTERIEUR, PRIME INCOME TRUST, SENIOR DEBT PORTFOLIO, AERIES FINANCE LTD., ING CAPITAL ADVISORS, INC., ABN AMRO BANK N.V., SOCIETE GENERALE, THE FIRST NATIONAL BANK OF BOSTON, CAPTIVA FINANCE LTD., BANQUE NATIONALE DE PARIS, THE SUMITOMO BANK, LIMITED, CHICAGO BRANCH, CHASE SECURITIES INC. AND THE ING CAPITAL SENIOR SECURED HIGH INCOME FUND, L.P. (together with any financial institution which subsequently becomes a `Bank' under the Loan Agreement, as such term is defined therein, the "Banks"), TORONTO DOMINION (TEXAS), INC. and THE CHASE MANHATTAN BANK (FORMERLY, CHEMICAL BANK), as Documentation Agents (in such capacity, the "Documentation Agents"), TORONTO DOMINION (TEXAS), INC., THE CHASE MANHATTAN BANK (FORMERLY, CHEMICAL BANK), CIBC INC., CREDIT LYONNAIS CAYMAN ISLAND BRANCH, and NATIONSBANK, N.A., as Managing Agents (collectively in such capacity, the "Managing Agents"), BANQUE PARIBAS, UNION BANK OF CALIFORNIA, N.A. (FORMERLY, UNION BANK), ABN AMRO BANK N.V., SOCIETE GENERALE, FLEET BANK, N.A., CORESTATES BANK, N.A. AND THE FIRST NATIONAL BANK OF BOSTON, as Co-Agents (collectively in such capacity, the "Co-Agents") and TORONTO DOMINION (TEXAS), INC., as Administrative Agent for the Documentation Agents, the Managing Agents, the Co-Agents and the Banks (the "Administrative Agent," and together with the Documentation Agents, the Managing Agents and the Co-Agents, the "Agents"), W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Agents, the Borrower, and the Banks are parties to that certain Amended and Restated Loan Agreement dated as of September 29, 1995, as amended by that certain First Amendment to Loan Agreement dated as of October 31, 1995, that certain Second Amendment to Loan Agreement dated as of January 16, 1996, that certain Third Amendment to Loan Agreement dated as of March 29, 1996, that certain Fourth Amendment to Loan Agreement dated as of May 24, 1996 and that certain Fifth Amendment to Loan Agreement dated as of November 29, 1996 (as further amended, modified and supplemented from time to time, the "Loan Agreement"); and WHEREAS, the Borrower has requested that the Agents and the Banks agree to amend certain provisions of the Loan Agreement to provide for an increase in the amount of Indebtedness with respect to performance bonds, letters of credit and similar instruments permitted under the Loan Agreement and to waive any Default which may currently exist as a result of the incurrence of such types of Indebtedness prior to the date of this Amendment; and WHEREAS, the Borrower has requested that the Agents and the Banks agree to certain amendments to the documentation relating to the Hallmark Subordinated Debt; and WHEREAS, the Agents and the Banks are willing to consent to such amendments and such other matters as set forth herein on the terms and conditions contained herein; NOW, THEREFORE, in consideration of the premises set forth above, the covenants and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that all capitalized terms used herein shall have the meanings ascribed thereto in the Loan Agreement, and further agree as follows: 1. Amendment to Article 7. Section 7.1 of the Loan Agreement, ---------------------- Indebtedness of the Borrower, is hereby amended by deleting existing subsections - ---------------------------- (e) and (g) in their respective entireties and by substituting the following therefor: "(e) Any other Indebtedness (including, without limitation, Indebtedness secured by Permitted Liens) in an aggregate outstanding principal amount at any time not to exceed $7,500,000 of which not more than $6,000,000 in an aggregate outstanding principal amount at any time may be used for Indebtedness with respect to performance bonds, letters of credit and similar instruments securing the contractual obligations of the Borrower;" "(g) Indebtedness arising under payment and performance bonds and letters of credit issued for the Borrower's account, or the account of a Subsidiary of the Borrower, in the ordinary course of the Borrower's or such Subsidiary's business in favor of the grantors of the Licenses and the Pole Agreements, in an aggregate amount not to exceed $6,000,000." -2- 2. Consents. -------- (a) Pursuant to Section 7(a)(iii) of the Subordination Agreement and Section 8.1(w) of the Loan Agreement, the Agents and the Banks hereby consent to the amendment and restatement of that certain Senior Subordinated Loan Agreement dated as January 18, 1995 and that certain Guaranty by CCELP dated September 30, 1995 as set forth in the Amended and Restated Senior Subordinated Loan Agreement dated as of November 15, 1996 attached hereto as Exhibit A (the "Amended --------- Agreement") and the Amended and Restated Guaranty of CCELP dated as of November 15, 1996 attached hereto as Exhibit B (the "Amended Guaranty"), respectively. --------- The Agents and the Banks hereby further agree that the Subordination Agreement shall be amended and restated by that certain Amended and Restated Subordination Agreement dated as of November 15, 1996 (the "Amended Subordination Agreement") to be executed by the Agents and the Banks in the form attached hereto as Exhibit C as of the effective date of this Amendment. The Agents and the Banks - --------- hereby further consent to the amendment and restatement of that certain Senior Subordinated Note dated January 18, 1995 (the "Original Subordinated Note") as set forth in an Amended and Restated Subordinated Note (the "Amended Subordinated Note") which shall be on substantially the same terms as the Original Subordinated Note and which shall be in form and substance satisfactory to the Administrative Agent. The Agents and the Banks hereby authorize the Administrative Agent to enter into or obtain from the Borrower and its Subsidiaries such conforming modifications to the Loan Documents as the Administrative Agent may deem necessary or appropriate to reflect the Amended Agreement, the Amended Subordinated Note, the Amended Guaranty and the Amended Subordination Agreement. (b) In the event the Amended Subordinated Note is required to be registered in accordance with the Amended Agreement, the Agents and the Banks hereby authorize the Administrative Agent to approve and execute an indenture and related documents (the "Indenture Documents") to replace the Amended Agreement, Amended Guaranty, Amended Subordination Agreement and related agreements; provided, however, that (i) the Indenture Documents shall be in form -------- ------- and substance the same terms as the Amended Agreement, the Amended Guaranty and the Amended Subordinated Note with such changes as are necessary to reflect that the Amended Subordinated Note will be issued in one or more notes under an indenture rather than a loan agreement and such other changes required to comply with Applicable Law, all of which changes and modifications shall be in form and substance satisfactory to the Administrative Agent; (ii) a replacement subordination agreement in form and substance of the Amended Subordination Agreement shall be executed by the trustee under the Indenture Documents on behalf of the holders of the replacement subordinated notes in favor of the Agents and the -3- Banks, which agreement shall be in form and substance satisfactory to the Administrative Agent; (iii) the Borrower shall provide to the Administrative Agent a certificate, signed by an Authorized Signatory of the Borrower, certifying that there exists no Default under the Loan Agreement, both before and after giving effect to the Indenture Documents, and demonstrating the Borrower's compliance with Sections 7.8, 7.9, 7.10 and 7.15 of the Loan Agreement, after giving effect to the Indenture Documents; and (iv) the Borrower shall provide to the Administrative Agent opinions of general counsel and in- house counsel to the Borrower and its Subsidiaries, addressed to the Banks and the Administrative Agent and satisfactory to the Administrative Agent and its special counsel, dated as of the effective date of the Indenture Documents. 3. Waiver. The Agents and the Banks hereby waive, effective through the ------ date hereof, any Default or Event of Default which may have arisen under Sections 7.1(e) or 7.1(g) of the Loan Agreement resulting from the incurrence by the Borrower and its Subsidiaries of Indebtedness with respect to performance bonds, letters of credit and similar instruments in an aggregate outstanding principal amount in excess of $9,000,000. 4. Counterparts. This Amendment may be executed in any number of ------------ counterparts, each of which shall be deemed to be an original, but all such separate counterparts shall together constitute but one and the same instrument. 5. Governing Law. This Amendment shall be construed in accordance with ------------- and governed by the laws of the State of New York. 6. Severability. Any provision of this Amendment which is prohibited or ------------ unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof in that jurisdiction or affecting the validity or enforceability of such provision in any other jurisdiction. 7. No Other Amendment, Consent or Waiver. Except for the amendments, ------------------------------------- consents and waiver set forth above, the text of the Loan Agreement and all other Loan Documents shall remain unchanged and in full force and effect. No waiver by the Administrative Agent, the other Agents or the Banks under the Loan Agreement or any other Loan Document is granted or intended except as expressly set forth herein, and the Administrative Agent, the other Agents and the Banks expressly reserve the right to require strict compliance in all other respects (whether or not in connection with any Requests for Advance). Except as set forth herein, the amendments, consents and waiver agreed to herein shall not constitute a modification of the Loan Agreement -4- or any of the other Loan Documents, or a course of dealing with the Administrative Agent, the other Agents and the Banks, or any of them, at variance with the Loan Agreement or any of the other Loan Documents, such as to require further notice by the Administrative Agent, the other Agents, the Banks, the Majority Banks, or any of them, to require strict compliance with the terms of the Loan Agreement and the other Loan Documents in the future. 8. Representations and Warranties. The Borrower hereby represents and ------------------------------ warrants in favor of the Agents and the Banks as follows: (a) The Borrower has the partnership power and authority (i) to enter into this Amendment and (ii) to do all other acts and things as are required or contemplated hereunder to be done, observed and performed by it; (b) This Amendment has been duly authorized, validly executed and delivered by one or more Authorized Signatories of the Borrower and constitutes the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, subject, as to enforcement of remedies, to the following qualifications: (i) an order of specific performance and an injunction are discretionary remedies and, in particular, may not be available where damages are considered an adequate remedy at law, and (ii) enforcement may be limited by bankruptcy, insolvency, liquidation, reorganization, reconstruction and other similar laws affecting enforcement of creditors' rights generally (insofar as any such law relates to the bankruptcy, insolvency or similar event of the Borrower); and (c) The execution and delivery of this Amendment, the performance by the Borrower under the Loan Agreement and the other Loan Documents to which it is a party, as amended hereby, and the consummation of the transactions contemplated hereby do not and will not require the consent or approval of any regulatory authority or governmental authority or agency having jurisdiction over the Borrower which has not already been obtained, nor contravene or be in conflict with the partnership agreement or other similar agreement of the Borrower, or the provision of any statute, judgment, order, indenture, instrument, agreement, or undertaking, to which the Borrower is a party or by which any of its assets or properties are or may become bound. 9. Conditions Precedent. The effectiveness of this Amendment is subject -------------------- to receipt by the Administrative Agent or the Banks, as appropriate, of each of the following, in form and substance satisfactory to the Administrative Agent and the Banks: -5- (a) The Administrative Agent or the Banks, as appropriate, shall have received each of the following, in form and substance satisfactory to the Administrative Agent and the Banks: (i) A certificate, signed by an Authorized Signatory of the Borrower, certifying on the date hereof that, except with respect to the requirements of Subsections 7.1(e) and (g) of the Loan Agreement waived hereby, there exists no Default under the Loan Agreement, both before and after giving effect to this Amendment, and demonstrating the Borrower's compliance with Sections 7.8, 7.9, 7.10 and 7.15 of the Loan Agreement, after giving effect to this Amendment; and (ii) Opinions of general counsel and in-house counsel to the Borrower and its Subsidiaries, addressed to the Banks and the Administrative Agent and satisfactory to the Administrative Agent and its special counsel, dated as of the date hereof. (b) All such other documents as the Administrative Agent or any Bank may reasonably request, certified by an appropriate governmental official or an Authorized Signatory if so reasonably requested. 10. Loan Documents. This document shall be deemed to be a Loan Document -------------- for all purposes. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] -6- IN WITNESS WHEREOF, the parties hereto have executed this Amendment, or caused it to be executed under seal by their duly authorized officers, all as of the day and year first above written. BORROWER: CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P., a Delaware limited partnership By: Its General Partner CCA ACQUISITION CORP., a Delaware corporation /s/ Kent D. Kalkwarf By: _________________________________________________ Its: Senior Vice President ADMINISTRATIVE AGENT: TORONTO DOMINION (TEXAS), INC., as Administrative Agent /s/ Diane Bailey By: ___________________________________________________ Its: Vice President DOCUMENTATION AGENTS: TORONTO DOMINION (TEXAS), INC., as a Documentation Agent /s/ Diane Bailey By: ___________________________________________________ Its: Vice President THE CHASE MANHATTAN BANK (formerly, Chemical Bank), as a Documentation Agent /s/ Mitchell J. Gervis By: ___________________________________________________ Its: Vice President MANAGING AGENTS: TORONTO DOMINION (TEXAS), INC., as a Managing Agent /s/ Diane Bailey By: ___________________________________________________ Its: Vice President SIXTH AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 1 MANAGING AGENTS: THE CHASE MANHATTAN BANK (formerly, (continued) Chemical Bank), as a Managing Agent /s/ Mitchell J. Gervis By:__________________________________________ Its: Vice President CIBC INC., as a Managing Agent /s/ Matthew B. Jones By:__________________________________________ Its: Authorized Signatory CREDIT LYONNAIS CAYMAN ISLAND BRANCH, as a Managing Agent /s/ Mark D. Thorsheim By:__________________________________________ Its: Vice President NATIONSBANK, N.A., as a Managing Agent /s/ Jennifer Zydney By:__________________________________________ Its: Vice President CO-AGENTS: BANQUE PARIBAS, as a Co-Agent /s/ Bryan Petermann By:__________________________________________ Its: Vice President /s/ John G. Acker By:__________________________________________ Its: Vice President UNION BANK OF CALIFORNIA, N.A. (formerly, Union Bank), as a Co-Agent /s/ B. Adam Trout By:__________________________________________ Its: Assistant Vice President SIXTH AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 2 CO-AGENTS: CORESTATES BANK, N.A., as a Co-Agent (continued) /s/ Anthony B. Parisi By:__________________________________________ Its: Vice President FLEET BANK, N.A., as a Co-Agent /s/ Adam Bester By:__________________________________________ Its: Senior Vice President ABN AMRO BANK N.V., as a Co-Agent /s/ James J. Johnston By:__________________________________________ Its: Vice President /s/ Mary L. Honda By:__________________________________________ Its: Vice President SOCIETE GENERALE, as a Co-Agent /s/ William A. Sinsigalli By:__________________________________________ Its: First Vice President & Group Manager THE FIRST NATIONAL BANK OF BOSTON, as a Co-Agent /s/ Cindy Chen By:__________________________________________ Its: Director BANKS: TORONTO DOMINION (TEXAS), INC., as a Bank /s/ Diane Bailey By:__________________________________________ Its: Vice President SIXTH AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 3 BANKS: THE CHASE MANHATTAN BANK (formerly, (continued) Chemical Bank), as a Bank /s/ Mitchell J. Gervis By:__________________________________________ Its: Vice President CIBC INC., as a Bank /s/ Matthew B. Jones By:__________________________________________ Its: Authorized Signatory CREDIT LYONNAIS CAYMAN ISLAND BRANCH, as a Bank /s/ Mark D. Thorsheim By:__________________________________________ Its: Vice President NATIONSBANK, N.A., as a Bank /s/ Jennifer Zydney By:__________________________________________ Its: Vice President BANQUE PARIBAS, as a Bank /s/ Bryan Petermann By:__________________________________________ Its: Vice President /s/ John G. Acker By:__________________________________________ Its: Vice President UNION BANK OF CALIFORNIA, N.A. (formerly Union Bank), as a Bank /s/ Adam Trout By:__________________________________________ Its: Assistant Vice President SIXTH AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 4 BANKS: CORESTATES BANK, N.A., as a Bank (continued) /s/ Anthony B. Parisi By:__________________________________________ Its: Vice President THE LONG-TERM CREDIT BANK OF JAPAN, LTD., as a Bank /s/ Armund Schoen, Jr. By:__________________________________________ Its: Vice President & Deputy General Manager MERCANTILE BANK OF ST. LOUIS NATIONAL ASSOCIATION, as a Bank /s/ Gregory D. Knudsen By:__________________________________________ Its: Vice President FLEET BANK, N.A., as a Bank /s/ Adam Bester By:__________________________________________ Its: Senior Vice President FIRST NATIONAL BANK OF MARYLAND, as a Bank /s/ William Blake Hampson By:__________________________________________ Its: Vice President VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST, as a Bank /s/ Jeffrey W. Maillet By:__________________________________________ Its: Senior Vice President SIXTH AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 5 BANKS: BANQUE FRANCAISE DU COMMERCE (continued) EXTERIEUR, as a Bank /s/ Evan Kraus By:__________________________________________ Its: Assistant Treasurer /s/ Frederick K. Kammler By:__________________________________________ Its: Vice President PRIME INCOME TRUST, as a Bank /s/ Rafael Scolari By:__________________________________________ Its: Vice President & Portfolio Manager SENIOR DEBT PORTFOLIO, as a Bank By: Boston Management and Research, as Investment Advisor /s/ Scott H. Page By:__________________________________________ Its: Vice President AERIES FINANCE LTD., as a Registered Noteholder /s/ Andrew Wignall By:__________________________________________ Its: Director ING CAPITAL ADVISORS, INC., as agent for Bank syndication account /s/ Kahleen A. Lenarcic By:__________________________________________ Its: Vice President & Portfolio Manager SIXTH AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 6 BANKS: ABN AMRO BANK N.V., as a Bank (continued) /s/ James J. Johnston By:__________________________________________ Its: Vice President /s/ Mary I. Honda By:__________________________________________ Its: Vice President SOCIETE GENERALE, as a Bank /s/ William A. Sinsigalli By:__________________________________________ Its: First Vice President & Group Manager THE FIRST NATIONAL BANK OF BOSTON, as a Bank /s/ Cindy Chen By:__________________________________________ Its: Director BANQUE NATIONALE DE PARIS, as a Bank /s/ Mark Whitson By:__________________________________________ Its: Vice President /s/ Pamela Lucash By:__________________________________________ Its: Assistant Treasurer SIXTH AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 7 BANKS: THE SUMITOMO BANK, LIMITED, CHICAGO (continued) BRANCH, as a Bank /s/ Hiroyuki Iwami By:__________________________________________ Its: Joint General Manager CAPTIVA FINANCE LTD., as a Registered Noteholder /s/ Derrie Boggess By:__________________________________________ Its: Director CHASE SECURITIES INC., as agent for The Chase Manhattan Bank, as a Bank /s/ Matthew B. Leahey By:__________________________________________ Its: Vice President THE ING CAPITAL SENIOR SECURED HIGH INCOME FUND, L.P., as agent for Bank syndication account /s/ Kathleen A. Lenarcic By:__________________________________________ Its: Vice President & Portfolio Manager SIXTH AMENDMENT TO LOAN AGREEMENT CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Signature Page 8 EX-10.8 25 AMENDED & RESTATED SHAREHOLDER AGREEMENT 1/18/95 EXHIBIT 10.8 AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT This Amended and Restated Agreement is made as of this 15th day of November, 1996 by and among Kelso & Company, L.P. ("Kelso"), Charter Communications, Inc. ("Charter") and HC Crown Corp. ("Seller"). WHEREAS, Charter and Crown are parties to a certain Stock Purchase Agreement dated July 1, 1994 as amended November 18, 1994 (the "Agreement"); WHEREAS, in order to secure financing for the transac tion described in the Agreement, Seller entered into the Subordination Agreement dated January 18, 1995 (the "Origi nal Subordination Agreement") among Seller, CCA Holdings Corp. ("Holdings") and the other parties set forth therein; WHEREAS, the Original Subordination Agreement is being amended and restated as of the date hereof (as so amended and restated, and as the same may be amended, extended, renewed, restated, supplemented or otherwise modified from time to time, the "Amended and Restated Subordination Agree ment"); WHEREAS, Charter and certain designees and affiliates of Kelso are the sole stockholders of Holdings; and NOW, THEREFORE, the parties hereto agree as follows: 1. Kelso and Charter represent that Charter and certain designees and affiliates of Kelso are the owners of all of the outstanding shares of stock of Holdings, and that Charter is the manager of the cable systems owned and to be acquired by Holdings and its subsidiaries. 2. In consideration of the execution by Seller of the Amended and Restated Subordination Agreement, Kelso and Charter severally agree as follows: A. They will cause Holdings to comply with the re quirements of Section 4.01(a) of the Amended and Restated Loan Agreement dated as of the date hereof (the "Loan Agree ment") by and between Seller and Holdings; B. They will give Seller at least 10 business days' prior written notice of any proposed transfer or disposition by Holdings or its subsidiaries of more than 10% of Charter Communications Entertainment I, L.P.'s assets in any trans action or series of transactions. C. They will take no action inconsistent with the following provisions of the Loan Agreement: Section 4.01(b)(i), (iii), (iv), (v), (xii), (xiv) and (xvi). D. The following legend has been or will be placed on all stock certificates of Holdings owned by them: "These shares are subject to an Amended and Re stated Shareholders' Agreement dated as of November 15, 1996 on file in the office of the company." Any new shares of Holdings issued to transferees of such designees or affiliates of Kelso or Charter shall include the same legend. Such legends may be removed and will not be required at such time as the Notes (as defined in the Loan Agreement) have been paid in full or otherwise cancel led or discharged. 3. Seller shall enter into the Amended and Restated Subordination Agreement. 4. Notices to Seller and Charter pursuant hereto shall be given in accordance with the Agreement. Notices to Kelso shall be sent to: 320 Park Avenue New York, NY 10022 Attn: James J. Connors, II, Esq. 5. This agreement shall be binding upon the assigns, transferees and successors of the parties hereto. 6. Capitalized terms used herein without definition shall have the meanings ascribed to such terms in the Agree ment. -2- 7. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. -3- IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the day and year first written above. Kelso & Company, L.P. By /s/ James J. Connors II ______________________________________ Title Vice President and General Counsel ___________________________________ Charter Communications, Inc. By______________________________________ Title___________________________________ HC Crown Corp. By_______________________________________ Title____________________________________ -4- IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the day and year first written above. Kelso & Company, L.P. By__________________________ Title_______________________ Charter Communications, Inc. By /s/ Kent Kalkwarf __________________________ Title Vice President _______________________ HC Crown Corp. By__________________________ Title_______________________ -5- IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the day and year first written above. Kelso & Company, L.P. By__________________________ Title_______________________ Charter Communications, Inc. By__________________________ Title_______________________ HC Crown Corp. /s/ Dwight Arn By__________________________ Vice President Title_______________________ -6- EX-10.9 26 AMENDED & RESTATED MANAGEMENT AGREEMENT 9/29/95 EXHIBIT 10.9 ================================================================================ AMENDED AND RESTATED MANAGEMENT AGREEMENT between CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. and CHARTER COMMUNICATIONS, INC. Dated as of September 29, 1995 ================================================================================ TABLE OF CONTENTS - ----------------- Page ---- RECITALS............................................................. 1 ARTICLE I Definitions............................................... 2 1.1 Defined Terms.............................................. 2 ARTICLE II Retention of the Manager................................. 4 2.1 Agreement to Manage........................................ 4 2.2 Standards of Performance................................... 5 2.3 Availability of Discounts, etc............................. 5 2.4 Conflicts of Interest...................................... 6 2.5 Annual Business Plan....................................... 6 2.6 Tax Returns, Financial Statements, Books, etc.............. 6 (a) Tax Returns........................................... 6 (b) Financial Statements.................................. 7 (c) Preparation of Documents under Financing Arrangements. 7 (d) Books and Records..................................... 7 (e) Appraisal............................................. 7 ARTICLE III Restricted Activities of the Manager.................... 8 3.1 Restricted Activities of the Manager....................... 8 4.1 Base Management Fee........................................ 10 (a) General............................................... 10 (b) Expenses.............................................. 10 (c) Employees............................................. 10 4.2 Cash Bonus............................................ 11 (a) Determination of Cash Bonus........................... 11 (b) Procedures for Payment of Cash Bonus.................. 11 4.3 Payment of Fee and Cash Bonus.............................. 11 4.4 Pro Rated Fee and Cash Bonus............................... 11 ARTICLE V Representations and Warranties............................ 12 5.1 Representations and Warranties of the Company.............. 12 (a) Due Organization; Power and Authority, etc............ 12 (b) Authorization; Enforceability......................... 12 (c) Executing Parties..................................... 12 5.2 Representations and Warranties of the Manager.............. 12 (a) Due Organization; Power and Page ---- Authority, etc..................................... 12 (b) Authorization; Enforceability...................... 13 (c) Executing Parties.................................. 13 (d) Authorizations..................................... 13 5.3 Survival of Representations and Warranties......... 13 ARTICLE VI Insurance and Indemnity............................... 13 6.1 Insurance............................................... 13 6.2 Indemnification of the Manager.......................... 13 6.3 Indemnification by the Manager.......................... 14 6.4 Persons Indemnified..................................... 14 ARTICLE VII Termination.......................................... 15 7.1 Default by the Manager.................................. 15 7.2 Effect of Termination................................... 15 ARTICLE VIII Miscellaneous....................................... 15 8.1 Prohibited Transfers and Assignments.................... 15 8.2 Waiver.................................................. 16 8.3 Amendment and Modification.............................. 16 8.4 Governing Law........................................... 16 8.5 Invalidity of Provision................................. 16 8.6 Notices................................................. 17 8.7 Headings; Execution in Counterparts..................... 18 8.8 Successors.............................................. 18 8.9 Entire Agreement........................................ 18 SCHEDULES Schedule 1 List of Cable Systems Schedule 2 Projected OCF AMENDED AND RESTATED MANAGEMENT AGREEMENT AMENDED AND RESTATED MANAGEMENT AGREEMENT (the "Agreement"), dated as of September 29, 1995, between Charter Communications, Inc., a Delaware corporation (the "Manager"), and Charter Communications Entertainment I, L.P., a Delaware limited partnership (the "Company"). RECITALS -------- WHEREAS, the Manager and CCA Acquisition Corp., a Delaware corporation ("CCA Acquisition"), are party to a Management Agreement, dated as of January 18, 1995 (the "Original Management Agreement"); WHEREAS, CCA Acquisition is transferring all of its assets and liabilities to the Company; WHEREAS, the parties hereto desire to amend and restate the Original Management Agreement, to provide, among other things, for the replacement of CCA Acquisition by the Company as a party to this Agreement; WHEREAS, upon the completion of such transfer, the Company and its subsidiaries will own and operate the cable television systems listed on Schedule 1; WHEREAS, the Company desires to retain the Manager to manage and operate the Cable Systems (as defined below) on its behalf, and the Manager has agreed to manage and operate the Cable Systems, all upon the terms and subject to the conditions hereinafter set forth; NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE I Definitions ----------- 1.1 Defined Terms. When used in this Agreement, the following terms ------------- shall have the meanings ascribed to them in this Section 1.1: "Affiliate" shall mean a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person specified. "Cable Systems" shall mean the cable television systems listed on Schedule 1 and any cable television systems subsequently acquired by the Company or any of its subsidiaries during the Term. "Cash Bonus" shall mean the annual cash bonus payable to the Manager with respect to a given Fiscal Year, which shall equal 30% of the excess, if any, of OCF for such Fiscal Year over Projected OCF for such Fiscal Year. "CCA Holdings" shall mean CCA Holdings Corp., a Delaware corporation. "Closing Date" shall mean the date of the closing under the Asset Purchase Agreement, dated as of March 30, 1995, as the same shall be amended from time to time, among Cencom Cable Television, Inc., Lenoir T.V. Cable, Inc., CCT Holdings Corp. and CCA Holdings. "Equity Agreements" shall mean the Stockholders' Agreement, the Registration Rights Agreement and the Subscription Agreements. "Financial Advisory Agreement" shall mean the Amended and Restated Financial Advisory Agreement, dated as of the Closing Date, between Kelso & Company, L.P. and the Company. "Fiscal Year" shall mean a year beginning on January 1 of one calendar year and ending on December 31 of the same calendar year, or such other fiscal year as the Company and the Manager may hereafter agree, provided, however, that -------- ------- the term "Fiscal Year" shall mean with respect to the Company's first period of operations the period commencing on the Closing Date and ending on December 31 of the same calendar year. "General Partner" shall mean CCA Acquisition, together with any other entities which, in accordance with the terms of the Partnership Agreement, may be admitted after the date hereof as a general partner of the Company. "H C Crown" shall mean H C Crown Corp., a Delaware corporation. "Kelso" shall mean Kelso Investment Associates V, L.P., a Delaware limited partnership. "Loan Agreement" shall mean the Amended and Restated Loan Agreement, dated as of September 29, 1995, among the Company, Toronto Dominion (Texas), Inc., as Documentation Agent and Managing Agent, and the other banks signatory thereto, including any amendment, renewal, extension, substitution, refinancing, replacement or other modification thereof. "Partnership Agreement" shall mean the Agreement of Limited Partnership of the Company, dated as of September 29, 1995, as the same shall be amended from time to time, among the General Partner and the limited partners party thereto. "OCF" for any period means the sum of (a) consolidated net income before nonrecurring gains or losses for such period and (b) all amounts deducted in the determination of such consolidated net income in respect of (i) depreciation - and amortization, (ii) interest charges, (iii) federal, state and local income -- --- taxes, (iv) franchise and similar taxes and fees and (v) fees paid to Kelso & -- - Company, L.P. pursuant to the Financial Advisory Agreement. OCF shall be derived from the audited consolidated financial statements of the Company and its subsidiaries delivered to the Company by the Manager pursuant to Section 2.6. "Person" shall mean an individual, corporation, partnership, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Principals" shall mean Howard L. Wood, Barry L. Babcock and Jerald L. Kent or appropriate replacements, reasonably satisfactory to and approved by Kelso. "Projected OCF" shall mean the projected OCF for a given Fiscal Year for the Company and its subsidiaries set forth on Schedule 2. Schedule 2 shall be amended by the Company, with the consent of Kelso and the Manager, each acting reasonably and in good faith, prior to any acquisition or disposition of assets outside the ordinary course of business to reflect such acquisition or disposition. "Registration Rights Agreement" shall mean the Registration Rights Agreement, dated as of January 18, 1995, as the same shall be amended from time to time, among CCA Holdings, Kelso, Kelso Equity Partners V, L.P. and the Manager. "Stock Purchase Agreement" shall mean the Stock Purchase Agreement, dated July 1, 1994, as amended, among H C Crown, CM Acquisition Corp., Marcus Cable Partners, L.P., the Manager, the Company and Charter Communications II, L.P. "Stockholders' Agreement" shall mean the Amended and Restated Stockholders' Agreement, dated as of the date hereof, as the same shall be amended from time to time, among CCA Holdings, Kelso, Kelso Equity Partners V, L.P. and the Manager. "Subscription Agreements" shall mean the Subscription Agreements, each dated as of January 18, 1995, between CCA Holdings and each of the Manager, Kelso and Kelso Equity Partners V, L.P. "Subordinated Loan Agreement" shall mean the Senior Subordinated Loan Agreement, dated as of January 18, 1995, as the same shall be amended from time to time, between H C Crown and CCA Holdings. "Term" shall mean the term of this Agreement which shall commence on the Closing Date and end upon the tenth anniversary thereof, unless sooner terminated pursuant to the terms hereof. ARTICLE II Retention of the Manager ------------------------ 2.1 Agreement to Manage. (a) Subject to the terms and conditions ------------------- hereinafter set forth, the Company hereby retains the Manager, and the Manager hereby accepts such retention, as the manager of the Cable Systems, with full power and authority during the Term to carry out all responsibilities of the Manager under this Agreement. (b) The Manager shall, subject to Section 3.1 and in accordance with all applicable laws, administrative enactments and franchise agreements and licenses, be responsible for the management and operation of the Cable Systems, including, but not limited to, (i) determination of policy, (ii) preparation and - -- filing of all materials with appropriate federal, state and local regulatory agencies or departments (including but not limited to the Federal Communications Commission, Equal Employment Opportunity Commission and state agencies having similar jurisdiction), (iii) hiring, supervision and dismissal of all --- personnel, (iv) day-to-day system operations and (v) payment of all financial -- - obligations and operating expenses relating to the Cable Systems. All such responsibilities shall be undertaken under the Company's continuing oversight, review, supervision and control. Notwithstanding the foregoing, the Company shall retain unfettered use of all facilities and equipment of the Cable Systems and all cash or other assets received by the Manager in connection with the management and operation of the Cable Systems shall be the property of the Company, other than the Manager's compensation pursuant to Section 4. 2.2 Standards of Performance. The Manager covenants with the Company to ------------------------ manage and operate the Cable Systems in substantially the same manner as cable television systems managed or owned by the Manager are managed and operated, and to perform its duties and obligations under this Agreement in accordance with all applicable laws, the terms and conditions of all applicable franchise agreements and licenses and standard industry practices with respect to the management of similar cable television systems. The Company acknowledges that the Manager manages and owns other cable television systems. Nevertheless, the Manager agrees that at any given time at least two of the Principals will be devoting a substantial amount of their respective time to the management and operation of the Cable Systems. 2.3 Availability of Discounts, etc. To the extent that the Manager is ------------------------------- able to negotiate discounts or other favorable terms with suppliers of programming and other goods and services with respect to cable systems owned or managed by it, which discounts or other favorable terms are based on the buying power of the Manager or otherwise, the Manager shall use its commercially reasonable efforts to make the benefit of such discounts or other favorable terms available to the Cable Systems on the same terms. In no event shall the Cable Systems receive goods and services from the Manager on terms less favorable than what the Cable Systems would receive from an unaffiliated third party. 2.4 Conflicts of Interest. The Manager shall not cause the Company, any --------------------- of its subsidiaries or any Cable System to engage in any transaction or enter into any agreement with the Manager or any Affiliate or employee thereof unless (a) such transaction or agreement is in the ordinary course of business and upon - terms and conditions substantially similar to those granted to or imposed by the Manager on all other cable television systems owned or managed by the Manager or (b) the General Partner shall have consented thereto (which consent may be - granted or withheld in the sole discretion of the General Partner). 2.5 Annual Business Plan. On or before the Closing Date (but, in any -------------------- event, not later than the date upon which the Company is required to deliver the following budgets to the lenders under the Loan Agreement or to H C Crown under the Subordinated Loan Agreement), the Manager shall prepare and submit to the General Partner for its approval proposed capital and operating budgets for the Company and its subsidiaries for the remaining portion of the 1995 Fiscal Year. Commencing with the budget for the 1996 Fiscal Year, the Manager shall prepare and submit to the General Partner for its approval at least 30 days prior to the first day of each Fiscal Year (and, in any event, at least 30 days prior to any required delivery of such budgets to the lenders under the Loan Agreement or to H C Crown under the Subordinated Loan Agreement) proposed capital and operating budgets for the Company and its subsidiaries for the forthcoming Fiscal Year. As revised and approved by the General Partner, such proposed capital and operating budgets shall become the "Annual Business Plan" for the Company and its subsidiaries. 2.6 Tax Returns, Financial Statements, Books, etc. Without limiting the ---------------------------------------------- generality of the Manager's responsibilities set forth in Section 2.1(b), the Manager shall: (a) Tax Returns. Prepare or cause to be prepared and file all tax ----------- returns and statements, if any, that must be filed on behalf of the Company or any of its subsidiaries with any taxing authority. The Manager will provide copies of any such filings to Kelso or any of its Affiliates or any of their respective representatives upon request. (b) Financial Statements. Render to the Company (i) within 120 days -------------------- - following the end of each Fiscal Year, audited financial statements for each prior Fiscal Year, (ii) within 45 days following the end of each fiscal quarter, -- unaudited financial statements for each prior fiscal quarter, (iii) within 45 days following the end of each month, monthly financial statements and (iv) -- such other information or reports as the General Partner may reasonably request. All financial statements shall be for the Company and its subsidiaries on a consolidated basis and shall be prepared in accordance with generally accepted accounting principles, consistently applied. The Manager will provide copies of any such financial statements, information or reports to Kelso or any of its Affiliates or any of their respective representatives upon the reasonable request of such parties. (c) Preparation of Documents under Financing Arrangements. Prepare or ----------------------------------------------------- cause to be prepared all documents, certificates, reports and other information required to be delivered to the lenders under the Loan Agreement or H C Crown under the Subordinated Loan Agreement and otherwise cause the Company and its subsidiaries to comply with the terms thereof. The Manager will provide copies of any such documents, certificates, reports and other information to Kelso or any of its Affiliates or any of their respective representatives upon request. (d) Books and Records. Maintain complete and accurate records and ----------------- accounts pertaining to the business of the Company and its subsidiaries in accordance with generally accepted accounting principles. Kelso, its Affiliates and their respective representatives shall be entitled to inspect and audit the books, records and accounts of the Company and its subsidiaries. (e) Appraisal. Engage, from time to time, but not less often than once --------- with respect to every Fiscal Year, commencing with the Fiscal Year ending on Decem ber 31, 1995, and not later than 90 days after the end of each Fiscal Year, an independent valuation consultant or appraiser of recognized national standing reasonably satisfactory to Kelso to appraise the fair market value of the Company and its subsidiaries on a consolidated basis as of the last day of the Fiscal Year then most recently ended or, at the request of the Company or Kelso, as of any more recent date and to prepare and deliver a report to the Company and Kelso describing the results of such appraisal. ARTICLE III Restricted Activities of the Manager ------------------------------------ 3.1 Restricted Activities of the Manager. Without the prior written ------------------------------------ consent of the General Partner, which consent may be granted or withheld in its sole discretion, the Manager shall not do, or cause or permit to be done, the following for or on behalf of the Company or any of its subsidiaries: (a) Modify, amend or waive any material right under any agreement between the Company or any of its subsidiaries, on the one hand, and the Manager or any Affiliate or employee thereof, on the other hand, including, without limitation, this Agreement and the Equity Agreements. (b) Approve any additional payment by the Company or any of its subsidiaries to the Manager or any Affiliate or employee thereof other than as provided in subsection (k)(ii) below. (c) Commence or settle any suit, action or other legal or administrative proceeding, except for any suit, action or other proceeding brought or defended in the ordinary course of business where the Manager has no reasonable expectation that potential damages will exceed $1,000,000. (d) Select or replace the Company's independent public accountants. (e) Materially change the accounting practices of the Company or any of its subsidiaries . (f) Materially change any of the tax reporting positions or elections of the Company or any of its subsidiaries. (g) Assert any of the Company's rights under the Stock Purchase Agreement, provided, however, that the failure of the Company to timely assert -------- ------- such rights in accordance therewith shall not constitute a breach by the Manager hereunder. (h) Operate any business or enter into any agreement not related to the Cable Systems. (i) Approve the Annual Business Plan, including the annual capital and operating expense budget, or change any such approved budgets by more than 10% in the aggregate. (j) Incur or guarantee any indebtedness, except (i) indebtedness for - borrowed money not in excess of $1,000,000, (ii) indebtedness pursuant to the -- Loan Agreement, (iii) indebtedness in connection with a programming contract --- or a cable television basic service supply contract entered into in the ordinary course of business which requires aggregate payments of less than $3,000,000 over the value assigned to such contract in the Company's most recent operating expense budget, (iv) guarantees of any obligations under franchise -- agreements of any of the Company's subsidiaries and (v) indebtedness in - connection with those cable television programming services commonly known in the cable television industry as "Pay-TV" or "premium services" entered into in the ordinary course of business. (k) Make any loans or advances to or investments in any Person other than a subsidiary of the Company, except (i) extensions of trade credit in the - ordinary course of business and (ii) loans and advances to employees of the -- Company or any of its subsidiaries for reasonable travel, relocation and related expenses in the ordinary course of business not to exceed $1 million in the aggregate outstanding at any one time. (l) Sell, pledge, encumber, donate, abandon, transfer or otherwise dispose of any portion of the Company's or any of its subsidiaries' assets having a fair market value in excess of $3,000,000. (m) Unless included in the capital budget approved under subsection (i) above, purchase, lease or acquire on behalf of the Company or any of its subsidiaries any interest in any real property or other assets having a fair market value in excess of $3,000,000. (n) Unless included in the capital or operating budgets approved under subsection (i) above or permit- ted under subsection (j) above, enter into, or materially modify or waive any of the Company's or any of its subsidiaries' material rights under, any agreement or related set of agreements involving aggregate payments to or by the Company or any of its subsidiaries in excess of $1,000,000 during the term of such agreement or agreements. ARTICLE IV Compensation ------------ 4.1 Base Management Fee. (a) General. As compensation to the Manager for the ------------------- ------- management and operation of the Cable Systems, the Company shall pay to the Manager an aggregate fee (the "Base Management Fee") equal to $3,250,000 per Fiscal Year, payable quarterly in arrears. In the event the Company acquires Cable Systems after the Closing Date, the Company and the Manager shall negotiate in good faith to effect a mutually acceptable increase to the Base Management Fee to reflect such acquisitions. (b) Expenses. The Base Management Fee shall cover all expenses related to the -------- management and operation of the Cable Systems, provided, however, the Base -------- ------- Management Fee will not cover, and the Company or its subsidiaries will pay or reimburse the Manager for, (i) in any given year, the kinds and amount of - operating and capital expenses of the Cable Systems set forth in the Annual Business Plan for such year and (ii) the reasonable out-of-pocket travel -- expenses (and lodging and entertainment expenses incurred by the Manager in connection therewith) incurred by the Manager in connection with the performance of its duties hereunder. Notwithstanding the provisions of clause (i) above, in the event that the amount of any actual operating and capital expense of the Cable Systems in any given year exceeds the amount of such expense set forth in the Annual Business Plan for such year, then the Company or its subsidiaries shall pay or reimburse the Manager for such excess up to an amount equal to 10% of such operating and capital expense set forth in the Annual Business Plan for such year. (c) Employees. It is understood by the parties that the Company and its --------- subsidiaries shall have the benefit of the headquarters, facilities, officers and employees of the Manager. The Manager shall be responsible for providing all benefits to such employees and shall indemnify the Company and its subsidiaries for any claim in connection therewith. 4.2 Cash Bonus. (a) Determination of Cash Bonus. Following the end of each ---------- --------------------------- Fiscal Year (beginning with the 1995 Fiscal Year) during the Term of this Agreement, if OCF for such Fiscal Year exceeds Projected OCF for such Fiscal Year, the Company shall pay to the Manager the Cash Bonus for such Fiscal Year. (b) Procedures for Payment of Cash Bonus. Together with delivery of the ------------------------------------ Company's audited financial statements for each Fiscal Year, the Manager shall cause the Company's auditors to deliver a schedule that sets forth, for such Fiscal Year: (i) OCF, including the calculations made to determine OCF, (ii) - -- Projected OCF and (iii) calculations showing the amount, if any, of the Cash --- Bonus, as determined in accordance with this Section 4.2 and the definition of Cash Bonus. Such schedule will be presented to the General Partner for its approval (which approval shall not be unreasonably withheld or delayed). If a Cash Bonus is payable for any Fiscal Year, it will become due and payable to the Manager within five days after delivery of such schedule to the General Partner for its approval described in the preceding sentence. 4.3 Payment of Fee and Cash Bonus. Notwithstanding anything to the contrary ----------------------------- herein, the Company shall not be permitted or obligated to pay the Base Management Fee or any Cash Bonus to the extent the Company is restricted from paying such Base Management Fee or Cash Bonus by any of the Loan Agreement or the Subordinated Loan Agreement. In the event the Company is unable to pay the full amount of any Base Management Fee or Cash Bonus due to any such restriction, the Company shall pay such deferred amounts together with 8% annual interest thereon, as soon as such payment is permissible under the Loan Agreement, if ever, and the Subordinated Loan Agreement. 4.4 Pro Rated Fee and Cash Bonus. If this Agreement is terminated at any ---------------------------- time during the Term other than the end of a Fiscal Year, the Base Management Fee and any Cash Bonus to which the Manager might be entitled pursuant to Section 4.2 shall be determined on a pro rata basis for the Fiscal Year during which the termination occurs. ARTICLE V Representations and Warranties ------------------------------ 5.1 Representations and Warranties of the Company. As a material inducement --------------------------------------------- to the Manager to enter into this Agreement, the Company represents and warrants that: (a) Due Organization; Power and Authority, etc. It is a limited partnership ------------------------------------------- duly organized, validly existing and in good standing under the laws of the State of Delaware, with all necessary partnership power and authority to enter into this Agreement and to carry out the transactions contemplated herein. The execution and delivery hereof and the performance by the Company of its obligations hereunder will not violate or constitute a default under the terms and provisions of its certificate of limited partnership or agreement of limited partnership or of any agreement, law or court order to which the Company is a party or by which the Company is bound. (b) Authorization; Enforceability. All actions required to be taken by or on ----------------------------- behalf of the Company to authorize it to execute, deliver and perform its obligations under this Agreement have been taken, and this Agreement is a valid and binding obligation of the Company, enforceable in accordance with its terms, except as the same may be affected by bankruptcy, insolvency, moratorium or similar laws, or by legal or equitable principles relating to or limiting the rights of contracting parties generally. (c) Executing Parties. The Person executing this Agreement on behalf of the ----------------- Company has full power and authority to bind the Company to the terms hereof. 5.2 Representations and Warranties of the Manager. As a material inducement --------------------------------------------- to the Company to enter into this Agreement, the Manager represents and warrants that: (a) Due Organization; Power and Authority, etc. It is a corporation duly ------------------------------------------- organized, validly existing and in good standing under the laws of the State of Delaware, with all necessary corporate power and authority to enter into this Agreement and to carry out the transactions contemplated herein. The execution and delivery hereof and the performance by the Manager of its obligations hereunder will not violate or consti- tute a default under the terms and provisions of its certificate of incorporation or by-laws or of any agreement, law or court order to which the Manager is a party or by which the Manager is bound. (b) Authorization; Enforceability. All actions required to be taken by or on ----------------------------- behalf of the Manager to authorize it to execute, deliver and perform its obligations under this Agreement have been taken, and this Agreement is a valid and binding obligation of the Manager, enforceable in accordance with its terms, except as the same may be affected by bankruptcy, insolvency, moratorium or similar laws, or by legal or equitable principles relating to or limiting the rights of contracting parties generally. (c) Executing Parties. The Person executing this Agreement on behalf of the ----------------- Manager has full power and authority to bind the Manager to the terms hereof. (d) Authorizations. The Manager has all necessary permits, licenses, -------------- franchises, authorizations and entitlements necessary to perform its obligations under this Agreement. 5.3 Survival of Representations and Warranties. All representations, ------------------------------------------ warranties and indemnities of the Company and the Manager in this Agreement shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. ARTICLE VI Insurance and Indemnity ----------------------- 6.1 Insurance. The Manager shall take out, or cause to be taken out, in each --------- case at the expense of the Company, and maintain in force, such insurance policies, bonds, or other sureties as are required by federal, state or local law or by requirements of any franchise agreement or as are customary in the normal course of business in the cable television industry. 6.2 Indemnification of the Manager. The Company hereby agrees to defend ------------------------------ (with counsel approved by the Manager, which approval shall not be unreasonably withheld), indemnify and hold the Manager harmless from and against and reimburse the Manager for any loss, liability, claim, liti- gation, damage, penalty, action, demand and expense arising out of, connected with or incidental to: (a) the performance by the Manager of its duties under - this Agreement or any matter arising out of the relationship created hereby, except to the extent that the Manager shall have acted with gross negligence, dishonesty, willful malfeasance or gross misconduct or (b) any breach of any - representation by the Company in this Agreement. This obligation to indemnify shall include reasonable attorneys' fees and investigation costs and all other reasonable costs, expenses and liabilities incurred by the Manager or its counsel in connection with any such claim. Such fees, costs and expenses shall be paid by the Company in advance of the final disposition of such claim upon receipt of an undertaking by or on behalf of the Manager to repay such amount if it shall ultimately be determined that the Manager is not entitled to be indemnified by the Company. 6.3 Indemnification by the Manager. The Manager hereby agrees to defend ------------------------------ (with counsel approved by the Company, which approval shall not be unreasonably withheld), indemnify and hold the Company and its subsidiaries harmless from and against and reimburse the Company and its subsidi aries for any loss, liability, claim, litigation, damage, penalty, action, demand and expense arising out of, connected with or incidental to: (a) any gross - negligence, dishonesty, willful malfeasance or gross misconduct by the Manager in connection with the performance by the Manager of its obligations contained in this Agreement or (b) any breach of any representation made by the Manager in - this Agreement. This obligation to indemnify shall include reasonable attorneys' fees and investigation costs and all other reasonable costs, expenses and liabilities incurred by the Company, its subsidiaries or its counsel in connection with any such claim. 6.4 Persons Indemnified. The foregoing agreements by the Manager or the ------------------- Company to indemnify and hold the other harmless shall inure to the benefit not only of the respective indemnitee but also to that of its respective Affiliates, and the directors, officers, employees, partners, agents and control persons (as such term is defined in the Securities Act of 1933, as amended, and the rules and regulations thereunder) of such indemnitee and its Affiliates. For purposes of this Section 6.4, neither the Manager nor any of its officers, directors, employees or stockholders shall be deemed to be an Affiliate of the Company. ARTICLE VII Termination ----------- 7.1 Default by the Manager. (a) If the Manager materially breaches this ---------------------- - Agreement or the Stockholders' Agreement and the Manager fails to cure such breach within 10 days after receipt of written notice from the Company advising the Manager of the action allegedly resulting in such breach (or, if such breach is not susceptible of cure within such period, fails to cure such breach as promptly as possible, but in any event, within 90 days after receipt of written notice from the Company), provided that the foregoing 90 day cure period will -------- not apply to any willful breach of either such agreement by the Manager or (b) - if the Manager, or any employee or consultant thereof, engages in any act of gross negligence, dishonesty, willful malfeasance or gross misconduct that is materially injurious to the Company and its subsidiaries taken as a whole, then the Company may elect, by written notice to the Manager, to terminate this Agreement or (c) if the Manager defaults under any material agreement to which - it is a party and the Company reasonably believes that the Manager will be unable to pay its debts as such debts become due (whether upon maturity, acceleration or otherwise). Any such termination shall be effective as of the date specified in the notice of termination. Without limiting the generality of subsection (a) above, any breach of Section 8.1 hereof shall be deemed to be a material breach of this Agreement entitling the Company to terminate this Agreement. Kelso shall be entitled to exercise all of the Company's rights under this Section 7.1. Effect of Termination. If this Agreement is terminated pursuant to Section --------------------- 7.1, such termination will be without liability of any party and such party's Affiliates to any other party and such other party's Affiliates, except for liabilities resulting from any breach or default occurring prior to such termination. The provisions of Article VI shall survive any termination of this Agreement. ARTICLE VIII Miscellaneous ------------- 8.1 Prohibited Transfers and Assignments. The Manager shall not sell, convey, ------------------------------------ assign, transfer, hypothecate, pledge, or otherwise dispose of all or any part of its interests in or obligations under this Agreement or agree to do any of the foregoing, except that (i) with the prior written consent of - Kelso, the Manager may assign its rights and obligations hereunder to an Affiliate of the Manager and (ii) with prior notice to the Company, the Manager -- may assign to any commercial bank (a "Charter Lender") any of its rights hereunder, including its rights to receive compensation hereunder, as collateral for any loan made by such Charter Lender to the Manager. So long as this Agreement shall remain in full force and effect, the Principals shall own, in the aggregate, directly or indirectly, at least 51% of the voting interests and 35% of the economic interests of the Manager on a fully diluted basis, taking into account agreements or understandings (other than a pledge agreement entered into in accordance with the terms of the Stockholders' Agreement) in effect entitling any other Person (other than a Charter Lender) to the economic benefit of such securities, provided, however, that the Principals shall be permitted to -------- ------- transfer their shares of common stock of the Manager to their respective spouses or children, or to trusts established for the benefit of such spouses or children. Notwithstanding the foregoing provisions of this Section 8.1, the Manager shall not take any action and shall not permit any Principal to take any action, that would cause a breach of the Loan Agreement or the Subordinated Loan Agreement. 8.2 Waiver. The waiver by the Company or the Manager of any breach of any ------ term, covenant or condition contained in this Agreement shall not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant or condition contained herein. No covenant, term or condition of this Agreement shall be deemed to have been waived by the Company or the Manager, unless such waiver is in writing and is signed by the party against whom such waiver is asserted. 8.3 Amendment and Modification. This Agreement may be amended, modified or -------------------------- supplemented only by written agreement of the Company and the Manager. 8.4 Governing Law. This Agreement and the rights and obligations of the ------------- parties hereunder and the persons subject hereto shall be governed by, and construed and interpreted in accordance with, the law of the State of New York, without giving effect to the choice of law principles thereof. 8.5 Invalidity of Provision. The invalidity or unenforceability of any ----------------------- provision of this Agreement in any jurisdiction shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of this Agreement, including that provision, in any other jurisdiction. 8.6 Notices. All notices, requests, demands, letters, waivers and other ------- communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if (a) delivered - personally, (b) mailed, certified or registered mail with postage prepaid, (c) - - sent by next-day or overnight mail or delivery or (d) sent by fax, as follows: - (i) If to the Company, to it at: Charter Communications Entertainment I, L.P. 12444 Powerscourt Drive 400 St. Louis, Missouri 63131 Attention: Jerald L. Kent (ii) If to the Manager, to it at: Charter Communications, Inc. 12444 Powerscourt Drive Suite 400 St. Louis, Missouri 63131 Attention: Jerald L. Kent With a copy of any such notice to the Company or the Manager also being sent to: Kelso Investment Associates V, L.P. c/o Kelso & Company 350 Park Avenue, 21st Floor New York, New York 10022 Attention: James J. Connors, II, Esq. or to such other person or address as any party shall specify by notice in writing to the Company. All such notices, requests, demands, letters, waivers and other communications shall be deemed to have been received (w) if by - personal delivery on the day after such delivery, (x) if by certified or - registered mail, on the fifth business day after the mailing thereof, (y) if by - next-day or overnight mail or delivery, on the day delivered or (z) if by fax, - on the next day following the day on which such fax was sent, provided that a copy is also sent by certified or registered mail. 8.7 Headings; Execution in Counterparts. The headings and captions contained ----------------------------------- herein are for convenience and shall not control or affect the meaning or construction of any provision hereof. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and which together shall constitute one and the same instrument. 8.8 Successors. Except as herein otherwise provided, the terms hereof ---------- shall be binding upon and shall inure to the benefit of the successors and assigns, respectively, of the Company and the Manager. 8.9 Entire Agreement. This Agreement embodies the entire agreement and ---------------- understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, representations, warranties, covenants or undertakings relating to the subject matter contained herein, other than those expressly set forth or referred to herein. This Agreement supersedes all prior agreements and understandings among the parties with respect to such subject matter. IN WITNESS WHEREOF, the Company and the Manager have executed this Agreement as of the date first above written. CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. By: CCA Acquisition Corp., as general partner By:/s/ Theodore W. Browne, II ---------------------------- Theodore W. Browne Executive Vice President CHARTER COMMUNICATIONS, INC. By:/s/ Theodore W. Browne, II ---------------------------- Theodore W. Browne Executive Vice President Schedule 1 ---------- List of Cable Systems --------------------- Connecticut Systems ------------------- 1. Department of Public Utility Control (Northeast Connecticut) of the State of Connecticut for Ashford, Brooklyn-Danielson, Canterbury, Chaplin, Columbia, Coventry and Eastford (New London, Tolland and Windham Counties) [Willimantic System]. 2. Department of Public Utility Control (West Connecticut) of the State of Connecticut for Bethlehem, Bridgewater, Brookfield, Kent, Monroe, New Fairfield, New Milford, Newtown, Roxbury, Sherman, Southbury, Trumbult, Washington and Woodbury (Fairfield, Litchfield and New Haven Counties) [Housatonic, Mid-Connecticut, New Milford and Newtown Systems]. Missouri Systems ----------------
1. Ballwin 30. Oakland 2. Bella Villa 31. Olivette 3. Black Jack 32. Pike County 4. Bowling Green 33. Richmond Heights 5. Bridgeton 34. Rock Hill 6. Charlack 35. Shrewsbury 7. Country Life Acres 36. St. George 8. Crestwood 37. St. John 9. Creve Coeur 38. St. Louis County Area A 10. Crystal Lake Park 39. St. Louis County Area D/E 11. Des Peres 40. Sunset Hills 12. Ellisville 41. Sycamore Hills 13. Eureka 42. Town & Country 14. Fenton 43. Troy 15. Florissant 44. Truesdale 16. Frontenac 45. Twin Oaks 17. Glendale 46. Unknown Area 18. Grantwood Village 47. Valley Park 19. Hanley Hills 48. Vinita Park 20. Huntleigh 49. Warren County 21. Kirkwood 50. Warrenton 22. Ladue 51. Warson Woods 23. Lakeshire 52. Webster Groves 24. Lakeview Estates 53. Westwood 25. Lincoln County 54. Wilbur Park 26. Mackenzie 55. Winchester 27. Manchester 56. Woodson Terrace 28. Marlborough 57. Wright City 29. Moscow Mills
Schedule 2 ---------- Projected OCF -------------
Final year Projected Ended December 31 OCF - --------------------------- ----------- 1995 $43,111,178 1996 $47,531,358 1997 $52,566,181 1998 $58,243,378 1999 $64,198,510 2000 $70,572,412 2001 $77,352,348 2002 $84,651,332 2003 $92,483,668
EX-10.10 27 AMD #1 TO AMD & RESTATED MGMT AGREEMENT 10/31/95 EXHIBIT 10.10 AMENDMENT NUMBER ONE TO AMENDED AND RESTATED MANAGEMENT AGREEMENT AMENDMENT NUMBER ONE, dated as of October 31, 1995, to the Amended and Restated Management Agreement, dated as of September 29, 1995 (the "Management Agreement"), between Charter Communications Entertainment I, L.P., a Delaware limited partnership, and Charter Communications, Inc., a Delaware corporation. NOW, THEREFORE, for good and valuable considera tion, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Section 4.1(a) of the Management Agreement is hereby replaced in its entirety with the following: "(a) General. As compensation to the Manager for the management and ------- operation of the Cable Systems, the Company shall pay to the Manager an aggregate fee (the "Base Management Fee") equal to $3,925,000 per Fiscal Year, payable quarterly in arrears. In the event the Company acquires Cable Systems after the Closing Date, the Company and the Manager shall negotiate in good faith to effect a mutually acceptable increase to the Base Management Fee to reflect such acquisitions." 2. Schedule 1 to the Management Agreement is hereby replaced in its entirety with Schedule 1 attached hereto. 3. Schedule 2 to the Management Agreement is hereby replaced in its entirety with Schedule 2 attached hereto. 4. Except as specifically amended hereby, the Management Agreement remains in full force and effect. 5. This Amendment Number One may be executed in any number of counterparts, each of which shall be deemed to be an original and which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned have executed this Amendment Number One as of the date first above written. CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. By: CCA Acquisition Corp., as general partner By:/s/ Jeffrey C. Sanders ------------------------------- Jeffrey C. Sanders Executive Vice President CHARTER COMMUNICATIONS, INC. By:/s/ Jeffrey C. Sanders ------------------------------- Jeffrey C. Sanders Executive Vice President 2 Schedule 1 ---------- List of Cable Systems --------------------- Connecticut Systems ------------------- 1. Department of Public Utility Control (Northeast Connecticut) of the State of Connecticut for Ashford, Brooklyn-Danielson, Canterbury, Chaplin, Columbia, Coventry and Eastford (New London, Tolland and Windham Counties) [Willimantic System]. 2. Department of Public Utility Control (West Connecticut) of the State of Connecticut for Bethlehem, Bridgewater, Brookfield, Kent, Monroe, New Fairfield, New Milford, Newtown, Roxbury, Sherman, Southbury, Trumbull, Washington and Woodbury (Fairfield, Litchfield and New Haven Counties) [Housatonic, Mid-Connecticut, New Milford and Newtown Systems]. Massachusetts Systems --------------------- 1. Pepperell 2. Rutland 3. Uxbridge 4. Wales 5. Westport Missouri Systems ---------------- 1. Ballwin 31. Oakland 2. Bela Villa 32. Olivette 3. Black Jack 33. Pike County 4. Bowling Green 34. Richmond Heights 5. Bridgeton 35. Rock Hill 6. Charlack 36. Shrewsbury 7. Chesterfield 37. St. George 8. Country Life Acres 38. St. John 9. Crestwood 39. St. Louis County Area A 10. Creve Coeur 40. St. Louis County Area D/E 11. Crystal Lake Park 41. Sunset Hills 12. Des Peres 42. Sycamore Hills 13. Ellisville 43. Town & Country 14. Eureka 44. Troy 15. Fenton 45. Truesdale 16. Florissant 46. Twin Oaks 17. Frontenac 47. Unknown Area 18. Glendale 48. Valley Park 19. Grantwood Village 49. Vinita Park 20. Hanley Hills 50. Warren County 21. Huntleigh 51. Warrenton 22. Kirkwood 52. Warson Woods 23. Ladue 53. Webster Groves 24. Lakeshire 54. Westwood 25. Lakeview Estates 55. Wilbur Park 26. Lincoln County 56. Winchester 27. Mackenzie 57. Woodson Terrace 28. Manchester 58. Wright City 29. Marlborough 30. Moscow Mills 2 EX-10.11 28 AMD #2 TO AMD & RESTATED MGMT AGREEMENT 3/29/96 EXHIBIT 10.11 AMENDMENT NUMBER TWO TO AMENDED AND RESTATED MANAGEMENT AGREEMENT AMENDMENT NUMBER TWO, dated as of March 29, 1996, to the Amended and Restated Management Agreement, dated as of September 29, 1995 and as amended as of October 31, 1995 (the "Management Agreement"), between Charter Communications Entertainment I, L.P., a Delaware limited partnership, and Charter Communications, Inc., a Delaware corporation. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Section 4.1(a) of the Management Agreement is hereby replaced in its entirety with the following: "(a) General. As compensation to the Manager for the management and ------- operation of the Cable Systems, the Company shall pay to the Manager an aggregate fee (the "Base Management Fee") equal to $4,665,000 per Fiscal Year, payable quarterly in arrears. In the event the Company acquires Cable Systems after the Closing Date, the Company and the Manager shall negotiate in good faith to effect a mutually acceptable increase to the Base Management Fee to reflect such acquisitions." 2. Schedule 1 to the Management Agreement is hereby replaced in its entirety with Schedule 1 attached hereto. 3. Schedule 2 to the Management Agreement is hereby replaced in its entirety with Schedule 2 attached hereto. 4. Except as specifically amended hereby, the Management Agreement remains in full force and effect. 5. This Amendment Number Two may be executed in two counterparts, both of which shall be deemed to be an original and which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned have executed this Amendment Number Two as of the date first above written. CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. By: CCA Acquisition Corp., its general partner By: /s/ Jerald L. Kent ______________________________________________ Name: Title: CHARTER COMMUNICATIONS, INC. By: /s/ Jerald L. Kent ______________________________________________ Name: Title: Schedule 2 ---------- Projected OCF ------------- Final year Projected Ended December 31 OCF --------------------------- ------------ 1996 $ 65,111,589 1997 $ 74,620,519 1998 $ 82,842,070 1999 $ 91,523,401 2000 $100,506,900 2001 $109,937,267 2002 $120,092,309 2003 $131,000,409 CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. City/County Legal Entity CONNECTICUT (2) Northeast Connecticut CCE I Western Connecticut CCE I ILLINOIS (25) Alhambra CCE I Caseyville CCE I Collinsville CCE I Columbia CCE I Dupo CCE I Edwardsville CCE I Glen Carbon CCE I Granite City CCE I Hamel CCE I Highland CCE I Madison CCE I Madison County CCE I Marine CCE I Maryville CCE I Millstadt CCE I Monroe County CCE I New Douglas CCE I Pontoon Beach CCE I Sorento CCE I St. Clair County CCE I St. Jacob CCE I Troy CCE I Venice CCE I Waterloo CCE I Worden CCE I MASSACHUSETTS (16) Barre CCE I Berlin CCE I Brimfield CCE I Douglas CCE I Dunstable CCE I Groton CCE I Harvard CCE I Hubbardston CCE I Millville CCE I Oakham CCE I Page 1 Pepperell CCE I Rutland CCE I Sutton CCE I Uxbridge CCE I Wales CCE I Westport CCE I NEW HAMPSHIRE (2) Brookline CCE I Hollis CCE I MISSOURI (73) Ballwin CCE I Ballwin (UVC) CCE I Bella Villa CCE I Black Jack CCE I Bonne Terre CCE I Bowling Green CCE I Bridgeton CCE I Charlack CCE I Chesterfield CCE I Clarkson Valley CCE I Country Life Acres CCE I Crestwood CCE I Creve Coeur I CCE I Creve Coeur II CCE I Crystal Lake Park CCE I Des Peres CCE I Desloge CCE I Ellisville CCE I Eureka CCE I Fenton CCE I Florissant CCE I Frontenac CCE I Glendale CCE I Grantwood Village CCE I Green Park CCE I Hanley Hills CCE I Hazelwood CCE I Huntleigh CCE I Kirkwood CCE I Ladue CCE I Lakeshire CCE I Leadington CCE I Leadwood CCE I Lincoln County CCE I Mackenzie CCE I Page 2 Manchester I CCE I Manchester II CCE I Marlborough CCE I Moscow Mills CCE I Oakland CCE I Olivette CCE I Park Hills CCE I Peerless Park CCE I Pike County CCE I Richmond Heights CCE I Rock Hill CCE I Shrewsbury CCE I St. George CCE I St. John CCE I St. Louis County-Area A CCE I St. Louis County-Area D CCE I St. Louis County-Area E CCE I St. Louis County (UVC) CCE I Sunset Hills CCE I Sycamore Hills CCE I Town & Country CCE I Town & Country (UVC) CCE I Troy CCE I Truesdale CCE I Twin Oaks CCE I Valley Park CCE I Vinita Park CCE I Warren County CCE I Warrenton CCE I Warson Woods CCE I Webster Groves CCE I Westwood CCE I Wilbur Park CCE I Wildwood CCE I Wildwood (UVC) CCE I Winchester CCE I Woodson Terrace CCE I Wright City CCE I Page 3 EX-10.12 29 AMD #3 TO AMD & RESTATED MGMT AGREEMENT 11/29/96 EXHIBIT 10.12 AMENDMENT NUMBER THREE TO AMENDED AND RESTATED MANAGEMENT AGREEMENT AMENDMENT NUMBER THREE, dated as of November 29, 1996, to the Amended and Restated Management Agreement, dated as of September 29, 1995, as amended as of October 31, 1995 and as further amended as of March 29, 1996 (the "Management Agreement"), between Charter Communications Entertainment I, L.P., a Delaware limited partnership, and Charter Communications, Inc., a Delaware corporation. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Section 4.1(a) of the Management Agreement is hereby replaced in its entirety with the following: "(a) General. As compensation to the Manager for the management and ------- operation of the Cable Systems, the Company shall pay to the Manager an aggregate fee (the "Base Management Fee") equal to $4,845,000 per Fiscal Year, payable quarterly in arrears. In the event the Company acquires Cable Systems after the Closing Date, the Company and the Manager shall negotiate in good faith to effect a mutually acceptable increase to the Base Management Fee to reflect such acquisitions." 2. Schedule 1 to the Management Agreement is hereby replaced in its entirety with Schedule 1 attached hereto. 3. Schedule 2 to the Management Agreement is hereby replaced in its entirety with Schedule 2 attached hereto. 4. Except as specifically amended hereby, the Management Agreement remains in full force and effect. 5. This Amendment Number Three may be executed in two counterparts, both of which shall be deemed to be an original and which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned have executed this Amendment Number Three as of the date first above written. CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. By: CCA Acquisition Corp., its general partner By: /s/ Jerald L. Kent __________________________ Name: Title: CHARTER COMMUNICATIONS, INC. By: /s/ Jerald L. Kent __________________________ Name: Title: 2 Schedule 2 ---------- Projected OCF -------------
Final year Projected Ended December 31 OCF - --------------------------- ------------ 1996 $ 65,288,897 1997 $ 77,242,502 1998 $ 85,920,610 1999 $ 95,090,670 2000 $104,513,390 2001 $114,444,874 2002 $124,987,559 2003 $136,312,259
3 CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. City/County Legal Entity CONNECTICUT (2) Northeast Connecticut CCE I Western Connecticut CCE I ILLINOIS (25) Millstadt CCE I St. Clair County CCE I Glen Carbon CCE I Edwardsville CCE I Dupo CCE I Troy CCE I Madison County CCE I Waterloo CCE I Highland CCE I Granite City CCE I Pontoon Beach CCE I Maryville CCE I Caseyville CCE I Collinsville CCE I Sorento CCE I Alhambra CCE I New Douglas CCE I Worden CCE I St. Jacob CCE I Hamel CCE I Monroe County CCE I Marine CCE I Venice CCE I Madison CCE I Columbia CCE I MASSACHUSETTS (16) Pepperell CCE I Uxbridge CCE I Westport CCE I Millville CCE I Sutton CCE I Groton CCE I Douglas CCE I Rutland CCE I Barre CCE I Berlin CCE I Page 1 Hubbardston CCE I Harvard CCE I Brimfield CCE I Wales CCE I Dunstable CCE I Oakham CCE I NEW HAMPSHIRE (2) Brookline CCE I Hollis CCE I MISSOURI (78) Green Park CCE I Huntleigh CCE I Hazelwood CCE I St. Louis County--Area A CCE I St. Louis County--Area D CCE I St. Louis County--Area E CCE I St. Louis County (UVC) CCE I Warrenton CCE I Bella Villa CCE I Lincoln County CCE I Clarkson Valley CCE I Troy CCE I Wildwood CCE I Town & Country (UVC) CCE I Webster Groves CCE I Ballwin (UVC) CCE I Sycamore Hills CCE I Manchester I CCE I Fenton CCE I Des Peres CCE I Ellisville CCE I Crystal Lake Park CCE I Creve Coeur I CCE I Sunset Hills CCE I Olivette CCE I Eureka CCE I Frontenac CCE I Kirkwood CCE I Warson Woods CCE I Richmond Heights CCE I Rock Hill CCE I Crestwood CCE I Town & Country CCE I Ballwin CCE I Ladue CCE I Page 2 Twin Oaks CCE I Oakland CCE I Creve Coeur II CCE I Manchester II CCE I Westwood CCE I Country Life Acres CCE I Vinita Park CCE I Charlack CCE I Bonne Terre CCE I St. George CCE I St. John CCE I Wilbur Park CCE I Moscow Mills CCE I Desloge CCE I Leadington CCE I Bowling Green CCE I Florissant CCE I Bridgeton CCE I Pike County CCE I Wright City CCE I Truesdale CCE I Franklin County CCE I Park Hills CCE I Chesterfield CCE I Winchester CCE I Valley Park CCE I Leadwood CCE I Mackenzie CCE I Jefferson County CCE I Byrnes Mill CCE I Olympian Village CCE I Woodson Terrace CCE I Shrewsbury CCE I Glendale CCE I Marlborough CCE I Cedar Hill Lakes CCE I Lakeshire CCE I Warren County CCE I Kimmswick CCE I Grantwood Village CCE I Peerless Park CCE I Hanley Hills CCE I Black Jack CCE I Page 3 EX-10.13 30 CERTIFICATE OF LIMITED PARTNERSHIP OF CHARTER COMM EXHIBIT 10.13 PAGE 1 STATE OF DELAWARE OFFICE OF THE SECRETARY OF STATE ________________________________ I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF LIMITED PARTNERSHIP OF "CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P.", FILED IN THIS OFFICE ON THE TWENTIETH DAY OF APRIL, A.D. 1995, AT 1:30 O'CLOCK P.M. /s/ Edward J. Freel (SEAL) ---------------------------------- Edward J. Freel Secretary of State 2500922 8100 AUTHENTICATION: 7481708 950087614 DATE: 04-24-95 CERTIFICATE OF LIMITED PARTNERSHIP OF CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. This Certificate of Limited Partnership of Charter Communications Entertainment I, L.P. (the "Partnership"), dated as of April 19, 1995, is being duly executed and filed by CCA Holdings Corp., a Delaware corporation, as general partner, to form a limited partnership pursuant to the Delaware Revised Uniform Limited Partnership Act, Title 6 Delaware Code, Chapter 17. 1. The name of the limited partnership is Charter Communications Entertainment I, L.P. 2. The address of the Partnership's registered office in the State of Delaware is the Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. The name of the Partnership's registered agent for service of process at such address is The Corporation Trust Company. 3. The name and business address of the sole general partner of the Partnership is: CCA Holdings Corp. c/o Charter Communications, Inc. 12444 Powerscourt Drive St. Louis, Missouri 63131 IN WITNESS WHEREOF, the undersigned has executed this Certificate of Limited Partnership of Charter Communications Entertainment I, L.P. as of the date first above written. CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. By: CCA Holdings Corp., general partner By: /s/ Neil A. Torpey ----------------------------- Name: Neil A. Torpey Title: Assistant Secretary EX-10.14 31 AMD TO CERT OF LTD PARTNERSHIP WITH CHARTER COMM EXHIBIT 10.14 AMENDMENT TO THE CERTIFICATE OF LIMITED PARTNERSHIP OF CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. The undersigned, desiring to amend the Certificate of Limited Partnership of Charter Communications Entertainment I, L.P. pursuant to the provisions of Section 17-202 of the Revised Uniform Limited Partnership Act of the State of Delaware, does hereby certify as follows: FIRST: The name of the Limited Partnership is Charter Communications Entertainment I, L.P. SECOND: Article 3 of the Certificate of Limited Partnership shall be amended to read in its entirety as follows: "3. The name and business address of the sole general partner of the Partnership is: CCA Acquisition Corp. c/o Charter Communications, Inc. 12444 Powerscourt Drive St. Louis, Missouri 63131" IN WITNESS WHEREOF, the undersigned executed this Amendment to the Certificate of Limited Partnership of this 29th day of September, 1995. CHARTER COMMUNICATIONS ENTERTAINMENT I. L.P. By: CCA Acquisition Corp., general partner By:/s/ Jeffrey Sanders _______________________ Name: Jeffrey Sanders Title: Executive Vice President, CFO and Treasurer EX-10.15 32 AGREEMENT OF LIMITED PARTNERSHIP CHARTER COMM EXHIBIT 10.15 ================================================================================ AGREEMENT OF LIMITED PARTNERSHIP OF CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. Dated as of September 29, 1995 ================================================================================ 2 Initial Preferred Capital Account - ------- Table of Contents -----------------
Page Article I Formation of the Partnership................................... 1 1.1. Formation................................................ 1 1.2. Partnership Name......................................... 1 1.3. Purpose.................................................. 1 1.4. Place of Business........................................ 1 1.5. Registered Office and Registered Agent................... 2 1.6. Term..................................................... 2 1.7. Partnership Powers....................................... 2 Article II Capital........................................................ 3 2.1. Capital Contributions.................................... 3 2.2. Additional Capital....................................... 3 2.3. Liability, etc........................................... 4 2.4. Withdrawal of Capital.................................... 4 2.5. Priority................................................. 4 2.6. Capital Accounts......................................... 4 2.7. Adjustments.............................................. 4
i Article III Accounting, Distributions and Taxes............................ 5 3.1. Allocations of Net Profits and Net Losses................ 5 3.2. Qualified Income Offsets, Restorative Allocations.............................................. 5 3.3. Partnership Minimum Gain................................. 6 3.4. Minimum Gain Attributable to Partner Nonrecourse Debt......................................... 6 3.5. Nonrecourse Deductions................................... 7 3.6. Partner Nonrecourse Deductions........................... 7 3.7. Section 754 Adjustments.................................. 7 3.8. Tax Allocations; Section 704(c).......................... 7 3.9. Distributions............................................ 8 3.10. Accounting Method........................................ 8 3.11. Certain Federal Income Tax Matters....................... 8 3.12. Election under Section 754............................... 9 3.13. Tax Withholdings......................................... 9 Article IV General Partner................................................ 9 4.1. Management............................................... 9 4.2. Reliance on Authority of General Partner................. 10 4.3. Interested Party Contracts............................... 10 4.4. Expenditures By General Partner.......................... 10 4.5. Other Relationships...................................... 10 4.6. Proscriptions............................................ 10 4.7. Bank Accounts............................................ 11 Article V Restrictions Regarding Transfer, Substitution, etc............. 11 5.1. Transfer of Interests by General Partner................. 11 5.2. Additional General Partner............................... 11 5.3. Transfer of Interests by Limited Partners................ 11 5.4. Additional Limited Partners.............................. 11
ii Article VI Indemnification................................................ 12 6.1. Exculpatory Provisions................................... 12 6.2. Indemnification of General Partner....................... 12 6.3. Advance of Expenses...................................... 13 6.4. Non-Exclusivity.......................................... 13 6.5. Satisfaction from Partnership Assets..................... 13 6.6. Notices of Claims, etc................................... 13 6.7. Exculpation and Indemnification of Manager............... 13 Article VII Dissolution and Liquidation.................................... 14 7.1. Events of Dissolution; Accounting........................ 14 7.2. Liquidating Trustee...................................... 14 7.3. Distribution in Liquidation.............................. 14 Article VIII Power of Attorney.............................................. 15 Article IX Construction................................................... 16 9.1. Headings................................................. 16 9.2. Notices.................................................. 16 9.3. Governing Law............................................ 17 9.4. Entire Understanding and Amendment....................... 17 9.5. Miscellaneous............................................ 18 Article X Definitions.................................................... 18
SCHEDULE A -- Partners, Capital Contributions and Capital Accounts iii AGREEMENT OF LIMITED PARTNERSHIP OF CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P. AGREEMENT OF LIMITED PARTNERSHIP, dated as of September 29, 1995, among CCA Acquisition, a Delaware corporation, as general partner (the "General Partner"), and the entities identified as limited partners in Schedule A hereto, as limited partners (which entities, together with any other entities who, in accordance with the terms hereof, may be admitted hereafter as limited partners, are herein collectively referred to as the "Limited Partners"). Capitalized terms used herein without definition are defined in Article X. Article I ---------- Formation of the Partnership ---------------------------- 1.1 Formation. The parties to this Agreement hereby form a limited --------- partnership (the "Partnership") pursuant to and in accordance with the provisions of the Delaware Revised Uniform Limited Partnership Act (as amended from time to time, the "Act"). The Certificate of Limited Partnership of the Partnership was filed with the Secretary of State of the State of Delaware on April 20, 1995. 1.2 Partnership Name. The name of the Partnership shall be Charter ---------------- Communications Entertainment I, L.P. 1.3 Purpose. The purpose of the Partnership is, directly or ------- indirectly, to acquire, finance, franchise, construct, develop, own, alter, repair, maintain, promote, program, operate, manage, lease, sell, exchange or otherwise dispose of cable television systems and to engage in such activities as the General Partner, subject to the terms set forth herein, deems necessary, advisable or incidental to the foregoing. 1.4 Place of Business. The principal place of business of the ----------------- Partnership shall be c/o Charter Communications, Inc., 12444 Powerscourt Drive, Suite 400, St. Louis, Missouri 63131, or such other place or places as may be designated at any time and from time to time by the General Partner. The General Partner will inform the Limited Partners of any change in the principal office of the Partnership. 1.5 Registered Office and Registered Agent. The registered office of -------------------------------------- the Partnership in the State of Delaware shall be c/o The Corporation Trust Company, Corporation Trust Company Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801, and the registered agent for service of process on the Partnership in the State of Delaware at such address is The Corporation Trust Company. 1.6 Term. Unless sooner terminated by the General Partner, the ---- Partnership shall continue until the earliest to occur of: (a) The assignment for the benefit of creditors by the General Partner, appointment of a receiver for or adjudication of bankruptcy of the General Partner which appointment or order remains unstayed for more than 90 days, or seizure by a judgment creditor of the General Partner's interest in the Partnership; (b) The sale, exchange or involuntary conversion of all, or substantially all, of the assets of the Partnership; 2 (c) The resignation or withdrawal of any Partner or the assignment or transfer by any Partner of any of such Partner's interest in the Partnership; or (d) December 31, 2055. 1.7 Partnership Powers. In furtherance of the Partnership's purpose ------------------ specified in Section 1.3, the Partnership shall have all of the powers available to it as a limited partnership under the laws of the State of Delaware, including, without limitation, the power to engage in all activities and transactions necessary or advisable to carry out the Partnership's purpose. The General Partner is authorized to exercise all such powers in the name and on behalf of the Partnership, including, without limitation, the authority: (a) to invest in any other entity and to sell, transfer, assign, convey, exchange or otherwise dispose of any or all of the properties or assets of the Partnership or its Subsidiaries for cash, stock, securities or any combination thereof on such terms and conditions as may, at any time and from time to time, be determined by the General Partner; (b) (i) to enter into any instruments or agreements constituting - Indebtedness; (ii) to apply the proceeds of any borrowings under any -- instruments or agreements evidencing or creating any Indebtedness in such manner and for such purposes as the General Partner shall determine; (iii) --- to grant security interests in assets of the Partnership or its Subsidiaries to secure the obligations of the Partnership or its Subsidiaries or any of their respective affiliates with respect to any Indebtedness; and (iv) to guarantee the obligations of the Partnership or -- its Subsidiaries or any of their respective affiliates with respect to any Indebtedness; 3 (c) to enter into, deliver, perform and carry out contracts and agreements of every kind necessary or incidental to the Partnership's purpose; (d) to open, maintain, and close bank accounts and draw checks or other orders for the payment of money; and (e) to take or perform such acts and to execute such agreements, certificates, documents and instruments necessary or advisable to carry out the Partnership's purpose. Article II ---------- Capital ------- 2.1 Capital Contributions. As of the date of this Agreement, each --------------------- Partner shall have contributed or caused to be contributed to the capital of the Partnership property having an agreed upon value equal to the amount set forth opposite such Partner's name on Schedule A hereto. 2.2 Additional Capital. No additional capital contributions or ------------------ assessments therefor beyond the amounts provided for in Section 2.1 shall be required from any Partner. No additional capital contribution will be accepted from any person (including the Partners) except for capital contributions approved by the General Partner. Upon the making of any additional capital contribution by any Partner, the General Partner shall amend Schedule A to reflect the capital contribution of such Partner. 2.3 Liability, etc. The Limited Partners shall not have any personal -------------- liability with respect to the liabilities or the obligations of the Partnership. The Partners shall not be required to lend funds to the Partnership for any purpose. The Limited Partners, in their capacity as such, shall not (a) take - part in the management of the 4 business of the Partnership, except to the extent provided herein and as permitted under the Act, (b) transact any business for the Partnership or (c) - - have the power to sign for or to bind the Partnership. 2.4 Withdrawal of Capital. No Partner shall be entitled to the --------------------- return of such Partner's capital contribution except by reason of the distribution to such Partner of cash or other property pursuant to Section 3.9 or 7.3 or upon the consent of the General Partner. No Partner shall have the right to receive a distribution of property other than cash from the Partnership. 2.5 Priority. Except as expressly otherwise provided herein, there -------- shall be no priority of one or more of the Partners over the other Partners as to return of contributions, withdrawals or distributions of cash or other property. 2.6 Capital Accounts. There shall be established and maintained for ---------------- each Partner on the books of the Partnership a capital account (each, a "Capital Account"), which shall be comprised of two subaccounts, an Ordinary Capital Account and a Preferred Capital Account. The opening balance in each Partner's Capital Account shall be as shown in Schedule A hereto. Whenever this Agreement refers to the balance in a Partner's Capital Account, such reference shall mean the sum of the balances of such Partner's Ordinary Capital Account and Preferred Capital Account. 2.7 Adjustments. (a) As of each Adjustment Date, the balance of ----------- each Ordinary Capital Account shall be adjusted by (i) increasing such balance - ---------- by such Partner's (x) allocable share of Net Profits (allocated in accordance - with Section 3.1) and (y) the amount of money or the fair market value of any - property contributed to the Partnership by such Partner (net of any liabilities secured by such contributed property that the Partnership is considered to assume or take subject to under Section 752 of the Code) and (ii) decreasing such balance by (x) the amount of cash or the fair market value -- ---------- - of property distributed or deemed distributed to such Partner pursuant to Sections 3.9(a), 3.9(b)(ii) and 7.3 (net of any liabilities secured by such distributed property that the distributee Partner is considered to assume or take subject to under Section 752 of the Code) and (y) such Partner's allocable - share of Net Losses (allocated in accordance with Section 3.1). Each Partner's Ordinary Capital Account shall be further adjusted with respect to any special allocations pursuant to Sections 3.2 through 3.7. (b) As of each Adjustment Date, the balance of each Preferred Capital Account shall be adjusted by (i) increasing such balance by any Preferred Return - ---------- during the relevant Fiscal Period and (ii) decreasing such balance by any -- ---------- payments made pursuant to Section 3.9(b)(i) during the relevant Fiscal Period. Such increase and any related payment pursuant to Section 3.9(b)(i) shall be treated for all purposes of this Agreement as a payment described in Section 707(c) of the Code. (c) Any question with respect to a Partner's Capital Account shall be resolved by the General Partner in good faith and in its reasonably exercised discretion, applying principles consistent with this Agreement. The provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations Section 1.704-1(b) and shall be interpreted and applied in a manner consistent with such Treasury Regulations. Article III ----------- Accounting, Distributions and Taxes ----------------------------------- 3.1 Allocations of Net Profits and Net Losses. Except as provided in ----------------------------------------- Sections 3.2 through 3.8, the Net Profits or Net Losses of the Partnership for any Fiscal 6 Period shall be allocated among the Partners in accordance with their Percentage Interests. 3.2 Qualified Income Offsets, Restorative Allocations. (a) If (i) -------------------------------------------------- - any Partner unexpectedly receives any adjustment, allocation or distribution described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) and (ii) such adjustment, allocation or distribution causes or increases a -- deficit in such Partner's Adjusted Capital Account as of the end of the Fiscal Period to which such adjustment, allocation or distribution relates (a "Deficit"), then items of gross income for such Fiscal Period and each subsequent Fiscal Period shall be specifically allocated to each such Partner pro rata in proportion to its Deficits in an amount and manner sufficient to - --- ---- eliminate, to the extent required by the Treasury Regulations, such Deficit as quickly as possible, provided that an allocation pursuant to this Section 3.2 -------- shall be made only if and to the extent that such Partner would have a Deficit after all other allocations provided for in this Article III have been tentatively made as if this Section 3.2 were not in this Agreement. (b) Any special allocations of items of income or gain pursuant to this Section 3.2 shall be taken into account in computing subsequent allocations pursuant to this Agreement, so that the net amount for any item so allocated and all other items allocated to each Partner pursuant to this Agreement shall be equal, to the extent possible, to the net amount that would have been allocated to each Partner pursuant to the provisions of this Agreement if such special allocations had not occurred. 3.3 Partnership Minimum Gain. Except as otherwise provided in ------------------------ Treasury Regulations Section 1.704-2(f), if there is a net decrease in Partnership Minimum Gain during any Partnership Fiscal Year, each Partner shall be specially allocated items of Partnership income and gain for such period (and, if necessary, subsequent periods) in proportion to, and to the extent of, an amount equal to the 7 portion of such Partner's share of the net decrease in Partnership Minimum Gain, determined in accordance with Treasury Regulations Section 1.704-2(g). This Section 3.3 is intended to comply with the chargeback of items of income and gain requirement in Treasury Regulations Section 1.704-2(f) and shall be interpreted consistently therewith. 3.4 Minimum Gain Attributable to Partner Nonrecourse Debt. Except as ----------------------------------------------------- otherwise provided in Treasury Regulations Section 1.704-2(i), if there is a net decrease in Minimum Gain Attributable to Partner Nonrecourse Debt during any Partnership Fiscal Year, each Partner with a share of Minimum Gain Attributable to Partner Nonrecourse Debt shall be specially allocated items of Partnership income and gain for such period (and, if necessary, subsequent periods) in proportion to, and to the extent of, an amount equal to the portion of such Partner's share of the net decrease in the Minimum Gain Attributable to Partner Nonrecourse Debt, determined in accordance with Treasury Regulations Section 1.704-2(i)(4). This Section 3.4 is intended to comply with the chargeback of items of income and gain requirement in Treasury Regulations Section 1.704- 2(i)(4) and shall be interpreted consistently therewith. 3.5 Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal ---------------------- Year shall be allocated to the Partners in the same ratios that Net Profits are allocated for the Fiscal Year in accordance with Treasury Regulations Section 1.704-2(b)(1). 3.6 Partner Nonrecourse Deductions. Partner Nonrecourse Deductions ------------------------------ for any Fiscal Year shall be allocated 100% to the Partner that bears the economic risk of loss (as defined in Treasury Regulations Section 1.704-2(b)) with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable in accordance with Treasury Regulations Section 1.704-2(i). If more than one Partner bears the economic risk of loss with respect to a Partner Nonrecourse Debt, such Partner Nonrecourse Deductions attributable thereto shall be 8 allocated between or among such Partners in accordance with the ratios in which they share such economic risk of loss. 3.7 Section 754 Adjustments. To the extent an adjustment to the ----------------------- adjusted basis of any Partnership asset pursuant to Section 734(b) of the Code or Section 743(c) of the Code is required, pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Partners in a manner consistent with the manner in which their Adjusted Capital Accounts are required to be adjusted pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m). 3.8 Tax Allocations; Section 704(c). (a) Except as provided in ------------------------------- subsection (b) below, the income, gains, losses, credits and deductions recognized by the Partnership shall be allocated among the Partners, for U.S. federal, state and local income tax purposes, to the extent permitted under the Code and the Treasury Regulations, in the same manner that each such item affects the balances in the Partners' Capital Accounts. (b) In accordance with Section 704(c) of the Code and the Treasury Regulations thereunder, income, gain, loss and deduction with respect to any property contributed to the capital of the Partnership shall, solely for tax purposes, be allocated among the Partners so as to take account of any variation between the adjusted basis of such property to the Partnership for federal income tax purposes and its fair market value as determined by the General Partner. 3.9 Distributions. The General Partner may from time to time declare ------------- distributions of cash or other Partnership property. Such distributions shall be made or applied as follows: 9 (a) First, all distributions received for Permitted Expenses shall be distributed in a manner designed to permit payment of such expenses. (b) Following the Partnership's distribution of amounts pursuant to Section 3.9(a) above, the Partnership shall make all other distributions to the Partners in accordance with the following order of priority: (i) first, to each Partner whose Preferred Capital Account balance shall be greater than zero to the extent of such positive balance in the ratio that its respective Preferred Capital Account balance bears to all such positive Preferred Capital Account balances; and (ii) thereafter, to the Partners in accordance with their Percentage Interests. 3.10 Accounting Method. The books of account of the Partnership shall ----------------- be kept pursuant to the accrual method of accounting. Except to the extent required by law, the Partnership shall not change its accounting principles in a manner adverse to any Partner without the consent of such Partner. 3.11 Certain Federal Income Tax Matters. The Partners understand and ---------------------------------- intend that under the Code the Partnership constitutes a "limited partnership." The General Partner shall be the "tax matters partner" of the Partnership pursuant to Section 6231(a)(7) of the Code. Each Partner hereby consents to such designation and agrees that upon the request of the General Partner it will execute, certify, acknowledge, deliver, swear to, file and record at the appropriate public offices such documents as may be necessary or appropriate to evidence such consent. 3.12 Election under Section 754. The General Partner, on behalf of -------------------------- the Partnership, may in its sole 10 discretion file an election under Section 754 of the Code in accordance with the procedures set forth in the applicable Treasury Regulations. 3.13 Tax Withholdings. The Partnership shall at all times be entitled ---------------- to make payments with respect to any Partner in amounts required to discharge any legal obligation of the Partnership pursuant to any provision of the Code or any other tax provision or any provision enacted in the future imposing a similar obligation on the Partnership to withhold or make payments to any governmental authority with respect to any U.S. federal, state and local tax liability of such Partner arising as a result of such Partner's interest in the Partnership. Each such payment shall be deemed to be a loan by the Partnership to such Partner and shall not be deemed to be a distribution. The amount of such payments made with respect to any Partner, plus interest at an annual rate equal to the interest rate publicly announced by The Toronto-Dominion Bank, New York Branch from time to time as its base rate on each such amount from the date of each such payment until such amount is repaid to the Partnership, shall be repaid to the Partnership by (i) deduction from the current or next succeeding - distribution or distributions otherwise payable to such Partner pursuant to this Agreement or (ii) earlier payment of such amounts and interest by the Partner to -- the Partnership. Article IV ---------- General Partner --------------- 4.1 Management. The management and control of and the determination ---------- of policy with respect to the Partnership and its affairs shall be vested exclusively in the General Partner and in connection therewith the General Partner may exercise all of the powers and authority set forth in Section 1.7. Notwithstanding the foregoing, the General Partner may retain the Manager to manage the 11 Partnership and its Subsidiaries and may delegate such powers and authority to the Manager and assign such duties to the Manager as the General Partner in its reasonable discretion deems necessary or advisable, such powers, authority and duties to be set forth, and limited in the manner set forth, in the Management Agreement. 4.2 Reliance on Authority of General Partner. Nothing herein ---------------------------------------- contained shall impose any obligation on any person or firm doing business with the Partnership to inquire as to whether or not the General Partner has exceeded its authority in executing or causing to be executed any contract, lease, deed or other instrument on behalf of the Partnership, and any such third person shall be fully protected in relying upon such authority. 4.3 Interested Party Contracts. The General Partner may cause the -------------------------- Partnership to enter into contracts and transactions with the General Partner or any of its affiliates, provided that the terms of any such contract or -------- transaction are entered into in good faith, and are fair and reasonable to the Partnership. 4.4 Expenditures By General Partner. The General Partner shall be ------------------------------- entitled to reimbursement by the Partnership for any reasonable expenditures incurred by the General Partner on behalf of the Partnership which are paid by or on behalf of the General Partner other than out of the funds of the Partnership. The General Partner shall not be compensated for its services as a General Partner of the Partnership. 4.5 Other Relationships. The General Partner shall devote so much of ------------------- its time to the business of the Partnership as in the judgment of the General Partner the conduct of the Partnership's business shall reasonably require. The General Partner may engage in other business ventures of any nature and description independently or with others, and neither the Partnership nor any of the other Partners shall have any rights in and to such independent 12 ventures or the income or profits derived therefrom. Except as otherwise specifically provided herein, nothing contained in this Agreement shall, or shall be deemed to, prohibit, restrict or limit in any manner any business or investment activities of the General Partner or any of its affiliates, including, without limitation, rendering any business, management or consulting advice to the Partnership or its Subsidiaries. 4.6 Proscriptions. Without the written consent of or ratification by ------------- 90% or more of the Percentage Interests of the Limited Partners, the General Partner shall have no authority to do any act in contravention of this Agreement or of the Act. 4.7 Bank Accounts. All funds of the Partnership shall be deposited ------------- in the Partnership name in such bank account or accounts and in such bank or banks as shall be designated from time to time by the General Partner. All withdrawals therefrom shall be made upon the signature of the General Partner or of such other person or persons as the General Partner may from time to time designate. The Partnership's funds shall not be commingled with funds not belonging to the Partnership and shall be used only for the affairs or business of the Partnership as herein provided. Article V --------- Restrictions Regarding Transfer, Substitution, etc. --------------------------------------------------- 5.1 Transfer of Interests by General Partner. The General Partner may ---------------------------------------- not (a) sell, transfer, assign, convey, or otherwise dispose of, all or a - portion of its general partner interest in the Partnership or (b) resign or - withdraw from the Partnership. 5.2 Additional General Partner. Without the prior written consent of -------------------------- a Majority in Interest, no party shall become an additional General Partner hereof unless and 13 until it has executed such certificates and other documents and performed such acts as may be necessary to constitute such party as a general partner, and to preserve the status of the Partnership as a limited partnership. 5.3 Transfer of Interests by Limited Partners. No Limited Partner may ----------------------------------------- sell, transfer, assign, convey, or otherwise dispose of, all or a portion of its limited partner interest in the Partnership. 5.4 Additional Limited Partners. No party shall become an additional --------------------------- Limited Partner hereof without the consent of the General Partner and unless and until it has executed such certificates and other documents and performed such acts as may be necessary to constitute such party as a limited partner, and to preserve the status of the Partnership as a limited partnership. Article VI ---------- Indemnification --------------- 6.1 Exculpatory Provisions. None of the General Partner or any of ---------------------- its affiliates, or the partners, officers, directors, employees or control persons (as such term is defined in the Securities Act of 1933, as amended, and the rules and regulations thereunder) of the General Partner or affiliate (collectively, the "Indemnified Persons") shall be liable, directly or indirectly, to the Partnership or any Partner for any act or omission (in relation to the Partnership or this Agreement) taken or omitted by such Indemnified Person in good faith, provided that such act or omission did not -------- constitute gross negligence, fraud, willful violation of the law, willful violation of this Agreement or reckless disregard of the duties of such Indemnified Person. 6.2 Indemnification of General Partner. The Partnership shall, to ---------------------------------- the fullest extent permitted by applicable law, indemnify and hold harmless each Indemnified 14 Person against all claims, liabilities and expenses of whatever nature ("Claims") relating to activities undertaken in connection with the Partnership, including but not limited to amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and counsel, accountants' and experts' and other fees, costs and expenses reasonably incurred in connection with the investigation, defense or disposition (including by settlement) of any action, suit or other proceeding, whether civil or criminal, before any court or administrative body in which such Indemnified Person may be or may have been involved, as a party or otherwise, or with which such Indemnified Person may be or may have been threatened, while acting as such Indemnified Person, provided -------- that no indemnity shall be payable hereunder against any liability incurred by such Indemnified Person by reason of gross negligence, fraud, willful violation of the law, willful violation of this Agreement, reckless disregard of the duties of such Indemnified Person or with respect to any matter as to which such Indemnified Person shall have been adjudicated not to have acted in good faith, and provided further that as to any action, suit or other proceeding disposed of -------- by settlement or a compromise payment, pursuant to a consent decree or otherwise, no indemnification (whether for such payment or for any other Claim) shall be provided unless there has been a determination that such compromise is in or not opposed to the best interests of the Partnership and that such Indemnified Person has acted in good faith and did not involve gross negligence, fraud, willful violation of the law, willful violation of this Agreement or reckless disregard of the duties of such Indemnified Person. 6.3 Advance of Expenses. Expenses incurred by an Indemnified Person ------------------- in defense or settlement of any Claim that may be subject to a right of indemnification hereunder may be advanced by the Partnership prior to the final disposition thereof upon receipt of an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall ultimately be determined that the Indemnified Person is not entitled to be indemnified by the Partnership. 15 6.4 Non-Exclusivity. The right of any Indemnified Person to the --------------- indemnification provided herein shall be cumulative of, and in addition to, any and all rights to which such Indemnified Person may otherwise be entitled by contract or as a matter of law or equity and shall extend to such Indemnified Person's successors, assigns and legal representatives. 6.5 Satisfaction from Partnership Assets. All judgments against the ------------------------------------ Partnership or an Indemnified Person, in respect of which such Indemnified Person is entitled to indemnification, shall first be satisfied from Partnership assets before the Indemnified Person is responsible therefor. 6.6 Notices of Claims, etc. Promptly after receipt by an Indemnified ----------------------- Person of notice of the commencement of any action or proceeding or threatened action or proceeding involving a Claim referred to in this Article VI, such Indemnified Person will, if a claim for indemnification in respect thereof is to be made against the Partnership, give written notice to the Partnership of the commencement of such action, provided that the failure of any Indemnified Person -------- to give notice as provided herein shall not relieve the Partnership of its obligations under this Article VI, except to the extent that the Partnership is actually prejudiced by such failure to give notice. Each such Indemnified Person shall keep the General Partner apprised of the progress of any such proceeding. 6.7 Exculpation and Indemnification of Manager. Notwithstanding the ------------------------------------------ foregoing provisions of this Article VI, the liability of the Manager to the Partnership and the Partnership's obligation to indemnify the Manager acting solely in its capacity as Manager with respect to any action or inaction in connection with the performance of the services and duties contemplated by the Management Agreement shall be governed by the provisions of the Management Agreement. For purposes of this Section 6.7, the Manager 16 shall include its officers, directors, employees and affiliates. Article VII ------------ Dissolution and Liquidation --------------------------- 7.1 Events of Dissolution; Accounting. (a) The Partnership shall --------------------------------- dissolve upon the earliest to occur of the events described in Section 1.6. (b) In the event of the dissolution and liquidation of the Partnership, a proper accounting shall be made of the Capital Account of each Partner and of the Net Profits or Net Losses of the Partnership from the date of the last previous accounting to the date of dissolution. Financial statements presenting such accounting shall be audited and shall include a report of a nationally recognized accounting firm. 7.2 Liquidating Trustee. Upon the dissolution and liquidation of the ------------------- Partnership's business for any reason, the General Partner shall act as liquidating trustees, or, if there shall then be no General Partner, the Limited Partners may elect a liquidating trustee. The liquidating trustee(s) shall have full power to sell, assign and encumber Partnership assets. 7.3 Distribution in Liquidation. In the event of the termination of --------------------------- the Partnership pursuant to this Article VII or for any other reason, the Partnership assets shall be liquidated. The proceeds of such liquidation shall be distributed as follows: (a) first, to the payment of the expenses of the liquidation; (b) second, to the (i) payment of creditors of the Partnership and - (ii) establishment of reserves to -- 17 provide for contingent liabilities, if any, in the order of priority as provided by law; (c) third, to each Partner whose Preferred Capital Account balance shall be greater than zero (determined after all adjustments for the Fiscal Period in which such dissolution occurs) to the extent of such positive balance in the ratio that its respective Preferred Capital Account balance bears to all such positive Preferred Capital Account balances; (d) fourth, to each Partner whose Ordinary Capital Account balance shall be greater than zero (determined after all adjustments for the Fiscal Period in which such dissolution occurs) to the extent of such positive balance in the ratio which its respective Ordinary Capital Account balance bears to all such positive Ordinary Capital Account balances; and (e) thereafter, to the Partners in accordance with their Percentage Interests at the time of liquidation. Payments to Partners described in subsections (a) through (e) above may be made in cash or in kind if so determined by the General Partner or a liquidating trustee appointed pursuant to Section 7.2. Any distributions to Partners upon liquidation shall be made by the end of the taxable year in which the liquidation of the Partnership occurs (or, if later, within 90 days after the date of such liquidation). Article VII ----------- Power of Attorney ----------------- Concurrently with the execution of this Agreement, each Limited Partner hereby appoints the General Partner as its true and lawful attorneys coupled with an interest, in 18 its name, place and stead to sign, execute, acknowledge, swear to and file any and all documents which in the reasonable discretion of such attorney are required to be signed, executed, acknowledged, sworn to or filed by each Limited Partner to discharge the purposes of the Partnership as hereinabove stated. Without limitation, among the documents which the General Partner may execute on behalf of each Limited Partner shall be a Certificate of Limited Partnership and all amendments thereto required by applicable law or by the provisions of this Agreement. Article IX ---------- Construction ------------ 9.1 Headings. The headings, titles and subtitles herein are -------- inserted for convenience of reference only and shall not control or affect the meaning or construction of any of the provisions hereof. 9.2 Notices. All notices, requests, demands, letters, waivers and ------- other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if (a) delivered - personally, (b) mailed, by certified or registered mail with postage prepaid, - (c) sent by next-day or overnight mail or delivery or (d) transmitted by - - telecopy or telegram, as follows: (i) If to the General Partner: c/o Charter Communications, Inc. 12444 Powerscourt Drive Suite 400 St. Louis, Missouri 63131 Attention: Jerald L. Kent with a copy to: 19 Kelso & Company 350 Park Avenue, 21st Floor New York, New York 10022 Attention: James J. Connors, II, Esq. Paul, Hastings, Janofsky & Walker 399 Park Avenue New York, New York 10022 Attention: Neil A. Torpey, Esq. Debevoise & Plimpton 875 Third Avenue New York, New York 10022 Attention: Richard D. Bohm, Esq. (ii) If to the Limited Partners, to each of them: c/o Charter Communications, Inc. 12444 Powerscourt Drive Suite 400 St. Louis, Missouri 63131 Attention: Jerald L. Kent with a copy to: Kelso & Company 350 Park Avenue, 21st Floor New York, New York 10022 Attention: James J. Connors, II, Esq. Paul, Hastings, Janofsky & Walker 399 Park Avenue New York, New York 10022 Attention: Neil A. Torpey, Esq. Debevoise & Plimpton 875 Third Avenue New York, New York 10022 Attention: Richard D. Bohm, Esq. 20 or to such other person or address as any party shall specify by notice in writing to the other Partners. All such notices, requests, demands, letters, waivers and other communications shall be deemed to have been received (w) if by - personal delivery on the day after such delivery, (x) if by certified or - registered mail, on the fifth business day after the mailing thereof, (y) if by - next-day or overnight mail or delivery, on the day delivered or (z) if by - telecopy or telegram, on the next day following the day on which such telecopy or telegram was sent, provided that a copy is also sent by certified or registered mail. 9.3 Governing Law. This Agreement, and its validity, construction ------------- and performance, shall be governed by the laws of the State of Delaware, without regard to the conflict of laws rules thereof. 9.4 Entire Understanding and Amendment. This Agreement embodies the ---------------------------------- entire agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, representations, warranties, covenants or undertakings among the parties hereto relating to the subject matter contained herein, other than those expressly set forth or referred to herein. This Agreement supersedes all prior agreements and understandings among the parties with respect to such subject matter. This Agreement may be amended or modified with the written consent of the General Partner. Notwithstanding the foregoing, this Agreement may not be amended or modified without the prior written consent of the General Partner and, if in the judgment of the General Partner such amendment or modification would materially and adversely affect the rights of a Limited Partner, a Majority in Interest. 9.5 Miscellaneous. Except as provided in Article V, this Agreement ------------- may not be assigned or transferred by operation of law or otherwise. This Agreement is not intended to confer upon any other person except the parties hereto any rights or remedies hereunder. If any provision 21 of this Agreement or the application thereof to any person or circumstance shall be prohibited by or invalid under applicable law, the remainder of this Agreement or the application of such provision to other persons or circumstances shall not be affected thereby. This Agreement may be executed in one or more counterparts, all of which shall constitute one and the same instrument. Each counterpart may consist of a number of copies each signed by less than all, but together signed by all, the parties hereto. Article X --------- Definitions ----------- As used in this Agreement and the Schedules hereto, the following terms shall have the following meanings: Act: as defined in Section 1.1 of this Agreement. --- Adjusted Capital Account: means, with respect to any Partner, as of ------------------------ the end of any Fiscal Year, such Partner's Capital Account balance (whether positive or negative) as of the end of such Fiscal Year, (i) increased by the - --------- sum of (A) such Partner's share of Partnership Minimum Gain and (B) any amount - - for which such Partner is personally liable with respect to liabilities of the Partnership as of the end of such Fiscal Year (except to the extent that such amount would duplicate the amount of any increase under clause (A) above) and (ii) decreased by such Partner's share of the reasonably expected net - --- --------- allocations and distributions described in Treasury Regulations Sections 1.704- 1(b)(2)(ii)(d)(4), (5) and (6). Adjustment Date: means (a) the close of business on the last day of --------------- - each Fiscal Year of the Partnership, (b) the day before the effective date of - the admission of any additional Partner to the Partnership, (c) the day be- - 22 fore any distribution is made by the Partnership or (d) any other date selected - by the General Partner, in its reasonable discretion, for an interim closing of the Partnership books. For purposes of this definition, the day before the date of this Agreement shall be considered an Adjustment Date. Capital Account: as defined in Section 2.6 of this Agreement. --------------- Claims: as defined in Section 6.2 of this Agreement. ------ Code: means the Internal Revenue Code of 1986, as amended. ---- Deficit: as defined in Section 3.2 of this Agreement. ------- Fiscal Period: means a period beginning on the day following any ------------- Adjustment Date and ending on the next succeeding Adjustment Date. Fiscal Year: means a year beginning on January 1 of one calendar year ----------- and ending on December 31 of the same calendar year, provided, however, that the -------- ------- term "Fiscal Year" shall mean with respect to the Partnership's first period of operations the period commencing on the date hereof and ending on December 31 of the same calendar year. General Partner: as defined in the first paragraph of this Agreement. --------------- Hallmark Loan Agreement: means the Senior Subordinated Loan ----------------------- Agreement, dated as of January 18, 1995, between the General Partner and HC Crown Corp., including any amendment, renewal, extension, substitution, refinancing, replacement or other modification thereof. 23 Indebtedness: means any indebtedness, whether or not for money ------------ borrowed, including any amendment, renewal, extension, substitution, refinancing, replacement or other modification thereof, directly or indirectly created, incurred or assumed by any entity, including, without limitation, indebtedness arising under or pursuant to the TD Loan Agreement and the Hallmark Loan Agreement. Indemnified Party: as defined in Section 6.1 of this Agreement. ----------------- Limited Partners: as defined in the first paragraph of this ---------------- Agreement. Majority in Interest: means a majority in interest of the Limited -------------------- Partners, based on their Percentage Interests. Management Agreement: means the Amended and Restated Management -------------------- Agreement, dated as of September 29, 1995, as the same shall be amended from time to time, between the Partnership and the Manager. Manager: means Charter Communications, Inc., a Delaware corporation, ------- or any successor manager approved by the General Partner. Minimum Gain Attributable to Partner Nonrecourse Debt: means that ----------------------------------------------------- amount determined in accordance with the principles of Treasury Regulations Section 1.704-2(i)(3), (4) and (5). Net Profits and Losses: means, for any Fiscal Period, (a) the ---------------------- - Partnership's share of the net income and net loss for such Fiscal Period of each Subsidiary that is a partnership for federal income tax purposes, as determined in accordance with the operating agreement for such Subsidiary, and (b) in the case of any other item, the net income or net loss of the Partnership - -- for such Fiscal Period, including any items that are separately stated for 24 purposes of Section 702(a) of the Code, as determined in accordance with federal income tax accounting principles with the following adjustments: (i) any income of the Partnership that is exempt from federal income tax shall be included as income; (ii) any expenditures of the Partnership described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(1) shall be treated as current expenses; (iii) no effect shall be given to any adjustments made pursuant to Section 734 or Section 743 of the Code; (iv) the basis of property contributed to the Partnership shall initially be treated as equal to the agreed upon valuation of such property as reflected on Schedule A hereto and all gain, loss, depreciation and amortization on such property shall be determined based on such agreed upon value in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(g); (v) if the Partnership distributes any property in kind, the Partnership shall be deemed to have sold such property for its fair market value immediately before such distribution and the proceeds of such deemed sale shall be deemed to have been distributed to the Partners for all purposes of this Agreement; and (vi) notwithstanding any other provisions of this definition, any items which are specially allocated pursuant to Sections 3.2 through 3.8 shall not be taken into account. Nonrecourse Deductions: has the meaning set forth in Treasury ---------------------- Regulations Section 1.704-2(b)(1). 25 Nonrecourse Liability: has the meaning set forth in Treasury --------------------- Regulations Section 1.704-2(b)(3). Ordinary Capital Account: as described in Section 2.6 of this ------------------------ Agreement. Partner Nonrecourse Debt: means debt of the Partnership within the ------------------------ meaning of Treasury Regulations Section 1.704-2(b)(4). Partner Nonrecourse Deductions: has the meaning set forth in Treasury ------------------------------ Regulations Sections 1.704-2(i)(1) and 1.704-2(i)(2). Partners: means the General Partner and the Limited Partners. -------- Partnership: as defined in Section 1.1 of this Agreement. ----------- Partnership Minimum Gain: has the meaning set forth in Sections ------------------------ 1.704-2(b)(2) and 1.704-2(d) of the Treasury Regulations. Percentage Interest: means each Partner's proportionate share of the ------------------- Net Profits or Net Losses of the Partnership, as set forth in Schedule A hereto. Permitted Expenses: means, to the extent permitted pursuant to any ------------------ instrument or agreement constituting Indebtedness, general and administrative expenses, all U.S. federal and state income taxes, state franchise taxes, accounting fees, fees and expenses of technical and other consultants, and fees and expenses of other professionals of the Partnership or its affiliates or any direct or indirect partner in the Partnership. Preferred Capital Account: as defined in Section 2.6 of this ------------------------- Agreement. 26 Preferred Return: means, for any Fiscal Period, in the case of ---------------- Charter Communications Entertainment, L.P., the aggregate of the "Preferred Returns" accruing in respect of the "Preferred Capital Accounts" of the General Partner and Cencom Cable Entertainment, Inc., a Delaware corporation, as such terms are defined in, and pursuant to, the Agreement of Limited Partnership of Charter Communications Entertainment, L.P., as amended from time to time. Subsidiaries: means any corporation, partnership, limited liability ------------ company or other entity of which the Partnership owns, directly or indirectly, more than 50% of the equity. TD Loan Agreement: means the Amended and Restated Loan Agreement, ----------------- dated as of September 29, 1995, among the Partnership, Toronto Dominion (Texas), Inc. as documentation agent and managing agent and the other banks signatory thereto, including any amendment, renewal, extension, substitution, refinancing, replacement or other modification thereof. Treasury Regulations: means the Regulations of the Treasury -------------------- Department of the United States issued pursuant to the Code. 27 IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the day and year first above written. GENERAL PARTNER: LIMITED PARTNERS: CCA ACQUISITION CORP. CCT HOLDINGS CORP. By /s Theodore W. Browne, II By /s/ Theodore W. Browne, II ------------------------- -------------------------- Executive Vice President Executive Vice President CHARTER COMMUNICATIONS ENTERTAINMENT, L.P. By /s/ Theodore W. Browne, II -------------------------- Executive Vice President 28 SCHEDULE A General Partner: --------------- Initial Initial Ordinary Preferred Percentage Initial Capital Capital Capital Partner Interest Contribution Account Account - ------- -------- ------------ ------- ------- CCA 1.22% Acquisition Corp. Limited Partners: ---------------- Initial Ordinary Percentage Initial Capital Capital Partner Interest Contribution Account - ------- -------- ------------ ------- CCT Holdings Corp. 1.00% Corp. Charter Communications 97.78% Entertainment, L.P. EX-10.16 33 CERTIFICATE OF LIMITED PARTNERSHIP CHARTER COMM EXHIBIT 10.16 PAGE 1 STATE OF DELAWARE OFFICE OF THE SECRETARY OF STATE _____________________________ I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF LIMITED PARTNERSHIP OF "CHARTER COMMUNICATIONS ENTERTAINMENT II, L.P.", FILED IN THIS OFFICE ON THE TWENTIETH DAY OF APRIL, A.D. 1995, AT 1:30 O'CLOCK P.M. (SEAL) /s/ Edward J. Freel ----------------------------------- Edward J. Freel, Secretary of State 2500493 8100 AUTHENTICATION: 7656303 950221976 DATE: 09-27-95 CERTIFICATE OF LIMITED PARTNERSHIP OF CHARTER COMMUNICATIONS ENTERTAINMENT II, L.P. This Certificate of Limited Partnership of Charter Communications Entertainment II, L.P. (the "Partnership"), dated as of April 19, 1995, is being duly executed and filed by CCT Holdings Corp., a Delaware corporation, as general partner, to form a limited partnership pursuant to the Delaware Revised Uniform Limited Partnership Act, Title 6 Delaware Code, Chapter 17. 1. The name of the limited partnership is Charter Communications Entertainment II, L.P. 2. The address of the Partnership's registered office in the State of Delaware is the Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. The name of the Partnership's registered agent for service of process at such address is The Corporation Trust Company. 3. The name and business address of the sole general partner of the Partnership is: CCT Holdings Corp. c/o Charter Communications, Inc. 12444 Powerscourt Drive St. Louis, Missouri 63131 IN WITNESS WHEREOF, the undersigned has executed this Certificate of Limited Partnership of Charter Communications Entertainment II, L.P. as of the date first above written. CHARTER COMMUNICATIONS ENTERTAINMENT II, L.P. By: CCT Holdings Corp., general partner By: /s/ Neil A. Torpey --------------------------------- Name: Neil A. Torpey Title: Assistant Secretary EX-10.17 34 AGREEMENT OF LIMITED PARTNERSHIP CHARTER COMM EXHIBIT 10.17 ================================================================================ AGREEMENT OF LIMITED PARTNERSHIP OF CHARTER COMMUNICATIONS ENTERTAINMENT II, L.P. Dated as of September 29, 1995 ================================================================================ Table of Contents
Page Article I Formation of the Partnership.................................... 1 1.1 Formation.................................................. 1 1.2 Partnership Name........................................... 1 1.3 Purpose.................................................... 1 1.4 Place of Business.......................................... 1 1.5 Registered Office and Registered Agent..................... 2 1.6 Term....................................................... 2 1.7 Partnership Powers......................................... 2 Article II Capital......................................................... 3 2.1 Capital Contributions...................................... 3 2.2 Additional Capital......................................... 3 2.3 Liability, etc............................................. 4 2.4 Withdrawal of Capital...................................... 4 2.5 Priority................................................... 4 2.6 Capital Accounts........................................... 4 2.7 Adjustments................................................ 4
Article III Accounting, Distributions and Taxes................................... 5 3.1 Allocations of Net Profits and Net Losses........................ 5 3.2 Qualified Income Offsets, Restorative Allocations...................................................... 5 3.3 Partnership Minimum Gain......................................... 6 3.4 Minimum Gain Attributable to Partner Nonrecourse Debt................................................. 6 3.5 Nonrecourse Deductions........................................... 7 3.6 Partner Nonrecourse Deductions................................... 7 3.7 Section 754 Adjustments.......................................... 7 3.8 Tax Allocations; Section 704(c).................................. 7 3.9 Distributions.................................................... 8 3.10 Accounting Method............................................... 8 3.11 Certain Federal Income Tax Matters.............................. 8 3.12 Election under Section 754...................................... 9 3.13 Tax Withholdings................................................ 9 Article IV General Partner....................................................... 9 4.1 Management....................................................... 9 4.2 Reliance on Authority of General Partner......................... 10 4.3 Interested Party Contracts....................................... 10 4.4 Expenditures By General Partner.................................. 10 4.5 Other Relationships.............................................. 10 4.6 Proscriptions.................................................... 11 4.7 Bank Accounts.................................................... 11 Article V Restrictions Regarding Transfer, Substitution, etc.................... 11 5.1 Transfer of Interests by General Partner......................... 11 5.2 Additional General Partner....................................... 11 5.3 Transfer of Interests by Limited Partners........................ 12 5.4 Additional Limited Partners...................................... 12
ii Article VI Indemnification........................................................ 12 6.1 Exculpatory Provisions............................................ 12 6.2 Indemnification of General Partner................................ 12 6.3 Advance of Expenses............................................... 13 6.4 Non-Exclusivity................................................... 13 6.5 Satisfaction from Partnership Assets.............................. 13 6.6 Notices of Claims, etc............................................ 13 6.7 Exculpation and Indemnification of Manager........................ 14 Article VII Dissolution and Liquidation............................................ 14 7.1 Events of Dissolution; Accounting................................. 14 7.2 Liquidating Trustee............................................... 14 7.3 Distribution in Liquidation....................................... 15 Article VIII Power of Attorney...................................................... 16 Article IX Construction........................................................... 16 9.1 Headings.......................................................... 16 9.2 Notices........................................................... 16 9.3 Governing Law..................................................... 18 9.4 Entire Understanding and Amendment................................ 18 9.5 Miscellaneous..................................................... 18 Article X Definitions............................................................ 19
SCHEDULE A -- Partners, Capital Contributions and Capital Accounts iii AGREEMENT OF LIMITED PARTNERSHIP OF CHARTER COMMUNICATIONS ENTERTAINMENT II, L.P. AGREEMENT OF LIMITED PARTNERSHIP, dated as of September 29, 1995, among CCT Holdings Corp., a Delaware corporation, as general partner (the "General Partner"), and the entities identified as limited partners in Schedule A hereto, as limited partners (which entities, together with any other entities who, in accordance with the terms hereof, may be admitted hereafter as limited partners, are herein collectively referred to as the "Limited Partners"). Capitalized terms used herein without definition are defined in Article X. Article I ---------- Formation of the Partnership ---------------------------- 1.1 Formation. The parties to this Agreement hereby form a limited --------- partnership (the "Partnership") pursuant to and in accordance with the provisions of the Delaware Revised Uniform Limited Partnership Act (as amended from time to time, the "Act"). The Certificate of Limited Partnership of the Partnership was filed with the Secretary of State of the State of Delaware on April 20, 1995. 1.2 Partnership Name. The name of the Partner ship shall be Charter ---------------- Communications Entertainment II, L.P. 1.3 Purpose. The purpose of the Partnership is, directly or ------- indirectly, to acquire, finance, franchise, construct, develop, own, alter, repair, maintain, promote, program, operate, manage, lease, sell, exchange or otherwise dispose of cable television systems and to engage in such activities as the General Partner, subject to the terms set forth herein, deems necessary, advisable or incidental to the foregoing. 1.4 Place of Business. The principal place of business of the ----------------- Partnership shall be c/o Charter Communications, Inc., 12444 Powerscourt Drive, Suite 400, St. Louis, Missouri 63131, or such other place or places as may be designated at any time and from time to time by the General Partner. The General Partner will inform the Limited Partners of any change in the principal office of the Partnership. 1.5 Registered Office and Registered Agent. The registered office of -------------------------------------- the Partnership in the State of Delaware shall be c/o The Corporation Trust Company, Corporation Trust Company Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801, and the registered agent for service of process on the Partnership in the State of Delaware at such address is The Corporation Trust Company. 1.6 Term. Unless sooner terminated by the General Partner, the ---- Partnership shall continue until the earliest to occur of: (a) The assignment for the benefit of creditors by the General Partner, appointment of a receiver for or adjudication of bankruptcy of the General Partner which appointment or order remains unstayed for more than 90 days, or seizure by a judgment creditor of the General Partner's interest in the Partnership; (b) The sale, exchange or involuntary conversion of all, or substantially all, of the assets of the Partnership; (c) The resignation or withdrawal of any Partner or the assignment or transfer by any Partner of any of such Partner's interest in the Partnership; or 2 (d) December 31, 2055. 1.7 Partnership Powers. In furtherance of the Partnership's purpose ------------------ specified in Section 1.3, the Partnership shall have all of the powers available to it as a limited partnership under the laws of the State of Delaware, including, without limitation, the power to engage in all activities and transactions necessary or advisable to carry out the Partnership's purpose. The General Partner is authorized to exercise all such powers in the name and on behalf of the Partnership, including, without limitation, the authority: (a) to invest in any other entity and to sell, transfer, assign, convey, exchange or otherwise dispose of any or all of the properties or assets of the Partnership or its Subsidiaries for cash, stock, securities or any combination thereof on such terms and conditions as may, at any time and from time to time, be determined by the General Partner; (b) (i) to enter into any instruments or agreements constituting - Indebtedness; (ii) to apply the proceeds of any borrowings under any -- instruments or agreements evidencing or creating any Indebtedness in such manner and for such purposes as the General Partner shall determine; (iii) --- to grant security interests in assets of the Partnership or its Subsidiaries to secure the obligations of the Partnership or its Subsidiaries or any of their respective affiliates with respect to any Indebtedness; and (iv) to guarantee the obligations of the Partnership or -- its Subsidiaries or any of their respective affiliates with respect to any Indebtedness; (c) to enter into, deliver, perform and carry out contracts and agreements of every kind necessary or incidental to the Partnership's purpose; 3 (d) to open, maintain, and close bank accounts and draw checks or other orders for the payment of money; and (e) to take or perform such acts and to execute such agreements, certificates, documents and instruments necessary or advisable to carry out the Partnership's purpose. Article II ---------- Capital ------- 2.1 Capital Contributions. As of the date of this Agreement, each --------------------- Partner shall have contributed or caused to be contributed to the capital of the Partnership property having an agreed upon value equal to the amount set forth opposite such Partner's name on Schedule A hereto. 2.2 Additional Capital. No additional capital contributions or ------------------ assessments therefor beyond the amounts provided for in Section 2.1 shall be required from any Partner. No additional capital contribution will be accepted from any person (including the Partners) except for capital contributions approved by the General Partner. Upon the making of any additional capital contribution by any Partner, the General Partner shall amend Schedule A to reflect the capital contribution of such Partner. 2.3 Liability, etc. The Limited Partners shall not have any personal -------------- liability with respect to the liabilities or the obligations of the Partnership. The Partners shall not be required to lend funds to the Partnership for any purpose. The Limited Partners, in their capacity as such, shall not (a) take part in the management of the business of the Partnership, - except to the extent provided herein and as permitted under the Act, (b) - transact any business for the Partnership or (c) have the power to sign for or - to bind the Partnership. 4 2.4 Withdrawal of Capital. No Partner shall be entitled to the --------------------- return of such Partner's capital contribution except by reason of the distribution to such Partner of cash or other property pursuant to Section 3.9 or 7.3 or upon the consent of the General Partner. No Partner shall have the right to receive a distribution of property other than cash from the Partnership. 2.5 Priority. Except as expressly otherwise provided herein, there -------- shall be no priority of one or more of the Partners over the other Partners as to return of contributions, withdrawals or distributions of cash or other property. 2.6 Capital Accounts. There shall be established and maintained for ---------------- each Partner on the books of the Partnership a capital account (each, a "Capital Account"), which shall be comprised of two subaccounts, an Ordinary Capital Account and a Preferred Capital Account. The opening balance in each Partner's Capital Account shall be as shown in Schedule A hereto. Whenever this Agreement refers to the balance in a Partner's Capital Account, such reference shall mean the sum of the balances of such Partner's Ordinary Capital Account and Preferred Capital Account. 2.7 Adjustments. (a) As of each Adjustment Date, the balance of ----------- each Ordinary Capital Account shall be adjusted by (i) increasing such balance - ---------- by such Partner's (x) allocable share of Net Profits (allocated in accordance - with Section 3.1) and (y) the amount of money or the fair market value of any - property contributed to the Partnership by such Partner (net of any liabilities secured by such contributed property that the Partnership is considered to assume or take subject to under Section 752 of the Code) and (ii) decreasing -- ---------- such balance by (x) the amount of cash or the fair market value of property - distributed or deemed distributed to such Partner pursuant to Sections 3.9(a), 3.9(b)(ii) and 7.3 (net of any liabilities secured by such distributed property that the distributee Partner is 5 considered to assume or take subject to under Section 752 of the Code) and (y) - such Partner's allocable share of Net Losses (allocated in accordance with Section 3.1). Each Partner's Ordinary Capital Account shall be further adjusted with respect to any special allocations pursuant to Sections 3.2 through 3.7. (b) As of each Adjustment Date, the balance of each Preferred Capital Account shall be adjusted by (i) increasing such balance by any Preferred Return - ---------- during the relevant Fiscal Period and (ii) decreasing such balance by any -- ---------- payments made pursuant to Section 3.9(b)(i) during the relevant Fiscal Period. Such increase and any related payment pursuant to Section 3.9(b)(i) shall be treated for all purposes of this Agreement as a payment described in Section 707(c) of the Code. (c) Any question with respect to a Partner's Capital Account shall be resolved by the General Partner in good faith and in its reasonably exercised discretion, applying principles consistent with this Agreement. The provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations Section 1.704-1(b) and shall be interpreted and applied in a manner consistent with such Treasury Regulations. Article III ----------- Accounting, Distributions and Taxes ----------------------------------- 3.1 Allocations of Net Profits and Net Losses. Except as provided in ----------------------------------------- Sections 3.2 through 3.8, the Net Profits or Net Losses of the Partnership for any Fiscal Period shall be allocated among the Partners in accordance with their Percentage Interests. 3.2 Qualified Income Offsets, Restorative Allocations. (a) If (i) ------------------------------------------------- - any Partner unexpectedly receives any 6 adjustment, allocation or distribution described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) and (ii) such adjustment, allocation or -- distribution causes or increases a deficit in such Partner's Adjusted Capital Account as of the end of the Fiscal Period to which such adjustment, allocation or distribution relates (a "Deficit"), then items of gross income for such Fiscal Period and each subsequent Fiscal Period shall be specifically allocated to each such Partner pro rata in proportion to its Deficits in an amount and --- ---- manner sufficient to eliminate, to the extent required by the Treasury Regulations, such Deficit as quickly as possible, provided that an allocation -------- pursuant to this Section 3.2 shall be made only if and to the extent that such Partner would have a Deficit after all other allocations provided for in this Article III have been tentatively made as if this Section 3.2 were not in this Agreement. (b) Any special allocations of items of income or gain pursuant to this Section 3.2 shall be taken into account in computing subsequent allocations pursuant to this Agreement, so that the net amount for any item so allocated and all other items allocated to each Partner pursuant to this Agreement shall be equal, to the extent possible, to the net amount that would have been allocated to each Partner pursuant to the provisions of this Agreement if such special allocations had not occurred. 3.3 Partnership Minimum Gain. Except as otherwise provided in ------------------------ Treasury Regulations Section 1.704-2(f), if there is a net decrease in Partnership Minimum Gain during any Partnership Fiscal Year, each Partner shall be specially allocated items of Partnership income and gain for such period (and, if necessary, subsequent periods) in proportion to, and to the extent of, an amount equal to the portion of such Partner's share of the net decrease in Partnership Minimum Gain, determined in accordance with Treasury Regulations Section 1.704-2(g). This Section 3.3 is intended to comply with the chargeback of items of income 7 and gain requirement in Treasury Regulations Section 1.704-2(f) and shall be interpreted consistently therewith. 3.4 Minimum Gain Attributable to Partner Nonrecourse Debt. Except as ----------------------------------------------------- otherwise provided in Treasury Regulations Section 1.704-2(i), if there is a net decrease in Minimum Gain Attributable to Partner Nonrecourse Debt during any Partnership Fiscal Year, each Partner with a share of Minimum Gain Attributable to Partner Nonrecourse Debt shall be specially allocated items of Partnership income and gain for such period (and, if necessary, subsequent periods) in proportion to, and to the extent of, an amount equal to the portion of such Partner's share of the net decrease in the Minimum Gain Attributable to Partner Nonrecourse Debt, determined in accordance with Treasury Regulations Section 1.704-2(i)(4). This Section 3.4 is intended to comply with the chargeback of items of income and gain requirement in Treasury Regulations Section 1.704- 2(i)(4) and shall be interpreted consistently therewith. 3.5 Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal ---------------------- Year shall be allocated to the Partners in the same ratios that Net Profits are allocated for the Fiscal Year in accordance with Treasury Regulations Section 1.704-2(b)(1). 3.6 Partner Nonrecourse Deductions. Partner Nonrecourse Deductions ------------------------------ for any Fiscal Year shall be allocated 100% to the Partner that bears the economic risk of loss (as defined in Treasury Regulations Section 1.704-2(b)) with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable in accordance with Treasury Regulations Section 1.704-2(i). If more than one Partner bears the economic risk of loss with respect to a Partner Nonrecourse Debt, such Partner Nonrecourse Deductions attributable thereto shall be allocated between or among such Partners in accordance with the ratios in which they share such economic risk of loss. 8 3.7 Section 754 Adjustments. To the extent an adjustment to the ----------------------- adjusted basis of any Partnership asset pursuant to Section 734(b) of the Code or Section 743(c) of the Code is required, pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Partners in a manner consistent with the manner in which their Adjusted Capital Accounts are required to be adjusted pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m). 3.8 Tax Allocations; Section 704(c). (a) Except as provided in ------------------------------- subsection (b) below, the income, gains, losses, credits and deductions recognized by the Partnership shall be allocated among the Partners, for U.S. federal, state and local income tax purposes, to the extent permitted under the Code and the Treasury Regulations, in the same manner that each such item affects the balances in the Partners' Capital Accounts. (b) In accordance with Section 704(c) of the Code and the Treasury Regulations thereunder, income, gain, loss and deduction with respect to any property contributed to the capital of the Partnership shall, solely for tax purposes, be allocated among the Partners so as to take account of any variation between the adjusted basis of such property to the Partnership for federal income tax purposes and its fair market value as determined by the General Partner. 3.9 Distributions. The General Partner may from time to time declare ------------- distributions of cash or other Partnership property. Such distributions shall be made or applied as follows: 9 (a) First, all distributions for Permitted Expenses shall be distributed in a manner designed to permit payment of such expenses. (b) Following the Partnership's distribution of amounts pursuant to Section 3.9(a) above, the Partnership shall make all other distributions to the Partners in accordance with the following order of priority: (i) first, to each Partner whose Preferred Capital Account balance shall be greater than zero to the extent of such positive balance in the ratio that its respective Preferred Capital Account balance bears to all such positive Preferred Capital Account balances; and (ii) thereafter, to the Partners in accordance with their Percentage Interests. 3.10 Accounting Method. The books of account of the Partnership shall ----------------- be kept pursuant to the accrual method of accounting. Except to the extent required by law, the Partnership shall not change its accounting principles in a manner adverse to any Partner without the consent of such Partner. 3.11 Certain Federal Income Tax Matters. The Partners understand and ---------------------------------- intend that under the Code the Partnership constitutes a "limited partnership." The General Partner shall be the "tax matters partner" of the Partnership pursuant to Section 6231(a)(7) of the Code. Each Partner hereby consents to such designation and agrees that upon the request of the General Partner it will execute, certify, acknowledge, deliver, swear to, file and record at the appropriate public offices such documents as may be necessary or appropriate to evidence such consent. 3.12 Election under Section 754. The General Partner, on behalf of -------------------------- the Partnership, may in its sole 10 discretion file an election under Section 754 of the Code in accordance with the procedures set forth in the applicable Treasury Regulations. 3.13 Tax Withholdings. The Partnership shall at all times be entitled ---------------- to make payments with respect to any Partner in amounts required to discharge any legal obliga tion of the Partnership pursuant to any provision of the Code or any other tax provision or any provision enacted in the future imposing a similar obligation on the Partnership to withhold or make payments to any governmental authority with respect to any U.S. federal, state and local tax liability of such Partner arising as a result of such Partner's interest in the Partnership. Each such payment shall be deemed to be a loan by the Partnership to such Partner and shall not be deemed to be a distribution. The amount of such payments made with respect to any Partner, plus interest at an annual rate equal to the interest rate publicly announced by Chemical Bank from time to time as its base rate on each such amount from the date of each such payment until such amount is repaid to the Partnership, shall be repaid to the Partnership by (i) deduction from the current or next succeeding distribution or distributions - otherwise payable to such Partner pursuant to this Agreement or (ii) earlier -- payment of such amounts and interest by the Partner to the Partnership. Article IV ----------- General Partner --------------- 4.1 Management. The management and control of and the determination ---------- of policy with respect to the Partnership and its affairs shall be vested exclusively in the General Partner and in connection therewith the General Partner may exercise all of the powers and authority set forth in Section 1.7. Notwithstanding the foregoing, the General Partner may retain the Manager to manage the Partnership and its Subsidiaries and may delegate such 11 powers and authority to the Manager and assign such duties to the Manager as the General Partner in its reasonable discretion deems necessary or advisable, such powers, authority and duties to be set forth, and limited in the manner set forth, in the Management Agreement. The Management Agreement may not be amended or modified without the prior written consent of the General Partner, which consent may be granted or withheld in its sole discretion. 4.2 Reliance on Authority of General Partner. Nothing herein ---------------------------------------- contained shall impose any obligation on any person or firm doing business with the Partnership to inquire as to whether or not the General Partner has exceeded its authority in executing or causing to be executed any contract, lease, deed or other instrument on behalf of the Partnership, and any such third person shall be fully protected in relying upon such authority. 4.3 Interested Party Contracts. The General Partner may cause the -------------------------- Partnership to enter into contracts and transactions with the General Partner or any of its affiliates, provided that the terms of any such contract or -------- transaction are entered into in good faith, and are fair and reasonable to the Partnership. 4.4 Expenditures By General Partner. The General Partner shall be ------------------------------- entitled to reimbursement by the Partnership for any reasonable expenditures incurred by the General Partner on behalf of the Partnership which are paid by or on behalf of the General Partner other than out of the funds of the Partnership. The General Partner shall not be compensated for its services as a General Partner of the Partnership. 4.5 Other Relationships. The General Partner shall devote so much of ------------------- its time to the business of the Partnership as in the judgment of the General Partner the conduct of the Partnership's business shall reasonably require. The General Partner may engage in other business ventures of any nature and description independently or with 12 others, and neither the Partnership nor any of the other Partners shall have any rights in and to such independent ventures or the income or profits derived therefrom. Except as otherwise specifically provided herein, nothing contained in this Agreement shall, or shall be deemed to, prohibit, restrict or limit in any manner any business or investment activities of the General Partner or any of its affiliates, including, without limitation, rendering any business, management or consulting advice to the Partnership or its Subsidiaries. 4.6 Proscriptions. Without the written consent of or ratification by ------------- 90% or more of the Percentage Interests of the Limited Partners, the General Partner shall have no authority to do any act in contravention of this Agreement or of the Act. 4.7 Bank Accounts. All funds of the Partnership shall be deposited ------------- in the Partnership name in such bank account or accounts and in such bank or banks as shall be designated from time to time by the General Partner. All withdrawals therefrom shall be made upon the signature of the General Partner or of such other person or persons as the General Partner may from time to time designate. The Partnership's funds shall not be commingled with funds not belonging to the Partnership and shall be used only for the affairs or business of the Partnership as herein provided. Article V ---------- Restrictions Regarding Transfer, Substitution, etc. --------------------------------------------------- 5.1 Transfer of Interests by General Partner. The General Partner may ---------------------------------------- not (a) sell, transfer, assign, convey, or otherwise dispose of, all or a - portion of its general partner interest in the Partnership or (b) resign or - withdraw from the Partnership, provided, however, that nothing herein shall -------- ------- prohibit any General Partner from assigning its rights to receive cash distributions pursuant 13 to Section 3.9 or 7.3 in connection with the pledge of any partnership interest to any creditor of the Partnership. 5.2 Additional General Partner. Without the prior written consent of -------------------------- the General Partner and a Majority in Interest, no party shall become an additional General Partner hereof unless and until it has executed such certificates and other documents and performed such acts as may be necessary to constitute such party as a general partner, and to preserve the status of the Partnership as a limited partnership. In the event that any additional General Partner(s) shall be admitted to the Partnership in accordance with this Section 5.2, any provision of this Agreement pursuant to which the consent of the General Partner is required shall be deemed also to require the consent of any such additional General Partner(s). 5.3 Transfer of Interests by Limited Partners. No Limited Partner may ----------------------------------------- sell, transfer, assign, convey, or otherwise dispose of, partner interest in the Partnership, provided, however, that nothing herein shall prohibit any Limited -------- ------- Partner from assigning its rights to receive cash distributions pursuant to Section 3.9 or 7.3 in connection with the pledge of any partnership interest to any creditor of the Partnership. 5.4 Additional Limited Partners. No party shall become an additional --------------------------- Limited Partner hereof without the consent of the General Partner and unless and until it has executed such certificates and other documents and performed such acts as may be necessary to constitute such party as a limited partner, and to preserve the status of the Partnership as a limited partnership. 14 Article VI ----------- Indemnification --------------- 6.1 Exculpatory Provisions. None of the General Partner or any of ---------------------- its affiliates, or the partners, officers, directors, employees or control persons (as such term is defined in the Securities Act of 1933, as amended, and the rules and regulations thereunder) of the General Partner or affiliate (collectively, the "Indemnified Persons") shall be liable, directly or indirectly, to the Partnership or any Partner for any act or omission (in relation to the Partnership or this Agreement) taken or omitted by such Indemnified Person in good faith, provided that such act or omission did not -------- constitute gross negligence, fraud, willful violation of the law, willful violation of this Agreement or reckless disregard of the duties of such Indemnified Person. 6.2 Indemnification of General Partner. The Partnership shall, to ---------------------------------- the fullest extent permitted by applicable law, indemnify and hold harmless each Indemnified Person against all claims, liabilities and expenses of whatever nature ("Claims") relating to activities undertaken in connection with the Partnership, including but not limited to amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and counsel, accountants' and experts' and other fees, costs and expenses reasonably incurred in connection with the investigation, defense or disposition (including by settlement) of any action, suit or other proceeding, whether civil or criminal, before any court or administrative body in which such Indemnified Person may be or may have been involved, as a party or otherwise, or with which such Indemnified Person may be or may have been threatened, while acting as such Indemnified Person, provided that no indemnity shall be payable hereunder -------- against any liability incurred by such Indemnified Person by reason of gross negligence, fraud, willful violation of the law, willful violation of this Agreement, reckless disregard of the duties of such Indemnified Person or with respect to any matter as to which such 15 Indemnified Person shall have been adjudicated not to have acted in good faith, and provided further that as to any action, suit or other proceeding disposed of -------- by settlement or a compromise payment, pursuant to a consent decree or otherwise, no indemnification (whether for such payment or for any other Claim) shall be provided unless there has been a determination that such compromise is in or not opposed to the best interests of the Partnership and that such Indemnified Person has acted in good faith and did not involve gross negligence, fraud, willful violation of the law, willful violation of this Agreement or reckless disregard of the duties of such Indemnified Person. 6.3 Advance of Expenses. Expenses incurred by an Indemnified Person ------------------- in defense or settlement of any Claim that may be subject to a right of indemnification hereunder may be advanced by the Partnership prior to the final disposition thereof upon receipt of an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall ultimately be determined that the Indemnified Person is not entitled to be indemnified by the Partnership. 6.4 Non-Exclusivity. The right of any Indemnified Person to the --------------- indemnification provided herein shall be cumulative of, and in addition to, any and all rights to which such Indemnified Person may otherwise be entitled by contract or as a matter of law or equity and shall extend to such Indemnified Person's successors, assigns and legal representatives. 6.5 Satisfaction from Partnership Assets. All judgments against the ------------------------------------ Partnership or an Indemnified Person, in respect of which such Indemnified Person is entitled to indemnification, shall first be satisfied from Partnership assets before the Indemnified Person is responsible therefor. 6.6 Notices of Claims, etc. Promptly after receipt by an Indemnified ----------------------- Person of notice of the 16 commencement of any action or proceeding or threatened action or proceeding involving a Claim referred to in this Article VI, such Indemnified Person will, if a claim for indemnification in respect thereof is to be made against the Partnership, give written notice to the Partnership of the commencement of such action, provided that the failure of any Indemnified Person to give notice as -------- provided herein shall not relieve the Partnership of its obligations under this Article VI, except to the extent that the Partnership is actually prejudiced by such failure to give notice. Each such Indemnified Person shall keep the General Partner apprised of the progress of any such proceeding. 6.7 Exculpation and Indemnification of Manager. Notwithstanding the ------------------------------------------ foregoing provisions of this Article VI, the liability of the Manager to the Partnership and the Partnership's obligation to indemnify the Manager acting solely in its capacity as Manager with respect to any action or inaction in connection with the performance of the services and duties contemplated by the Management Agreement shall be governed by the provisions of the Management Agreement. For purposes of this Section 6.7, the Manager shall include its officers, directors, employees and affiliates. Article VII ------------ Dissolution and Liquidation --------------------------- 7.1 Events of Dissolution; Accounting. (a) The Partnership shall --------------------------------- dissolve upon the earliest to occur of the events described in Section 1.6. (b) In the event of the dissolution and liquidation of the Partnership, a proper accounting shall be made of the Capital Account of each Partner and of the Net Profits or Net Losses of the Partnership from the date of the last previous accounting to the date of dissolution. Financial statements presenting such accounting shall be audited 17 and shall include a report of a nationally recognized ac counting firm. 7.2 Liquidating Trustee. Upon the dissolution and liquidation of the ------------------- Partnership's business for any reason, the General Partner shall act as liquidating trustees, or, if there shall then be no General Partner, the Limited Partners may elect a liquidating trustee. The liquidating trustee(s) shall have full power to sell, assign and encumber Partnership assets. 7.3 Distribution in Liquidation. In the event of the termination of --------------------------- the Partnership pursuant to this Article VII or for any other reason, the Partnership assets shall be liquidated. The proceeds of such liquidation shall be distributed as follows: (a) first, to the payment of the expenses of the liquidation; (b) second, to the (i) payment of creditors of the Partnership and - (ii) establishment of reserves to provide for contingent liabilities, if --- any, in the order of priority as provided by law; (c) third, to each Partner whose Preferred Capital Account balance shall be greater than zero (determined after all adjustments for the Fiscal Period in which such dissolution occurs) to the extent of such positive balance in the ratio that its respective Preferred Capital Account balance bears to all such positive Preferred Capital Account balances; (d) fourth, to each Partner whose Ordinary Capital Account balance shall be greater than zero (determined after all adjustments for the Fiscal Period in which such dissolution occurs) to the extent of such positive balance in the ratio which its respective Ordinary Capital Account balance bears to all such positive Ordinary Capital Account balances; and 18 (e) thereafter, to the Partners in accordance with their Percentage Interests at the time of liquidation. Payments to Partners described in subsections (a) through (e) above may be made in cash or in kind if so determined by the General Partner or a liquidating trustee appointed pursuant to Section 7.2. Any distributions to Partners upon liquidation shall be made by the end of the taxable year in which the liquidation of the Partnership occurs (or, if later, within 90 days after the date of such liquidation). Article VII ------------ Power of Attorney ----------------- Concurrently with the execution of this Agreement, each Limited Partner hereby appoints the General Partner as its true and lawful attorneys coupled with an interest, in its name, place and stead to sign, execute, acknowledge, swear to and file any and all documents which in the reasonable discretion of such attorney are required to be signed, executed, acknowledged, sworn to or filed by each Limited Partner to discharge the purposes of the Partnership as hereinabove stated. Without limitation, among the documents which the General Partner may execute on behalf of each Limited Partner shall be a Certificate of Limited Partnership and all amendments thereto required by applicable law or by the provisions of this Agreement. Article IX ---------- Construction ------------ 9.1 Headings. The headings, titles and subtitles herein are inserted -------- for convenience of reference only and 19 shall not control or affect the meaning or construction of any of the provisions hereof. 9.2 Notices. All notices, requests, demands, letters, waivers and ------- other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if (a) delivered - personally, (b) mailed, by certified or registered mail with postage prepaid, - (c) sent by next-day or overnight mail or delivery or (d) transmitted by - - telecopy or telegram, as follows: (i) If to the General Partner: c/o Charter Communications, Inc. 12444 Powerscourt Drive Suite 400 St. Louis, Missouri 63131 Attention: Jerald L. Kent with a copy to: Kelso & Company 350 Park Avenue, 21st Floor New York, New York 10022 Attention: James J. Connors, II, Esq. Paul, Hastings, Janofsky & Walker 399 Park Avenue New York, New York 10022 Attention: Neil A. Torpey, Esq. Debevoise & Plimpton 875 Third Avenue New York, New York 10022 Attention: Richard D. Bohm, Esq. (ii) If to the Limited Partners, to each of them: 20 c/o Charter Communications, Inc. 12444 Powerscourt Drive Suite 400 St. Louis, Missouri 63131 Attention: Jerald L. Kent with a copy to: Kelso & Company 350 Park Avenue, 21st Floor New York, New York 10022 Attention: James J. Connors, II, Esq. Paul, Hastings, Janofsky & Walker 399 Park Avenue New York, New York 10022 Attention: Neil A. Torpey, Esq. Debevoise & Plimpton 875 Third Avenue New York, New York 10022 Attention: Richard D. Bohm, Esq. or to such other person or address as any party shall specify by notice in writing to the other Partners. All such notices, requests, demands, letters, waivers and other communications shall be deemed to have been received (w) if by - personal delivery on the day after such delivery, (x) if by certified or - registered mail, on the fifth business day after the mailing thereof, (y) if by - next-day or overnight mail or delivery, on the day delivered or (z) if by - telecopy or telegram, on the next day following the day on which such telecopy or telegram was sent, provided that a copy is also sent by certified or registered mail. 9.3 Governing Law. This Agreement, and its validity, construction ------------- and performance, shall be governed by the laws of the State of Delaware, without regard to the conflict of laws rules thereof. 21 9.4 Entire Understanding and Amendment. This Agreement embodies the ---------------------------------- entire agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, representations, warranties, covenants or undertakings among the parties hereto relating to the subject matter contained herein, other than those expressly set forth or referred to herein. This Agreement supersedes all prior agreements and understandings among the parties with respect to such subject matter. This Agreement may be amended or modified with the written consent of the General Partner. Notwithstanding the foregoing, this Agreement may not be amended or modified without the prior written consent of the General Partner and, if in the judgment of the General Partner such amendment or modification would materially and adversely affect the rights of a Limited Partner, a Majority in Interest. 9.5 Miscellaneous. Except as provided in Article V, this Agreement ------------- may not be assigned or transferred by operation of law or otherwise. This Agreement is not intended to confer upon any other person except the parties hereto any rights or remedies hereunder. If any provision of this Agreement or the application thereof to any person or circumstance shall be prohibited by or invalid under applicable law, the remainder of this Agreement or the application of such provision to other persons or circumstances shall not be affected thereby. This Agreement may be executed in one or more counterparts, all of which shall constitute one and the same instrument. Each counterpart may consist of a number of copies each signed by less than all, but together signed by all, the parties hereto. Notwithstanding anything to the contrary in this Agreement, nothing in this Agreement shall be interpreted to prohibit, or to cause a dissolution on account of, the pledge of any partnership interest to any creditor of the Partnership. 22 Article X --------- Definitions ----------- As used in this Agreement and the Schedules hereto, the following terms shall have the following meanings: Act: as defined in Section 1.1 of this Agreement. --- Adjusted Capital Account: means, with respect to any Partner, as of ------------------------ the end of any Fiscal Year, such Partner's Capital Account balance (whether positive or negative) as of the end of such Fiscal Year, (i) increased by the - --------- sum of (A) such Partner's share of Partnership Minimum Gain and (B) any amount - - for which such Partner is personally liable with respect to liabilities of the Partnership as of the end of such Fiscal Year (except to the extent that such amount would duplicate the amount of any increase under clause (A) above) and (ii) decreased by such Partner's share of the reasonably expected net - --- --------- allocations and distributions described in Treasury Regulations Sections 1.704- 1(b)(2)(ii)(d)(4), (5) and (6). Adjustment Date: means (a) the close of business on the last day of --------------- - each Fiscal Year of the Partnership, (b) the day before the effective date of - the admission of any additional Partner to the Partnership, (c) the day before - any distribution is made by the Partnership or (d) any other date selected by - the General Partner, in its reasonable discretion, for an interim closing of the Partner ship books. For purposes of this definition, the day before the date of this Agreement shall be considered an Adjustment Date. Capital Account: as defined in Section 2.6 of this Agreement. --------------- Cencom Loan Agreement: means the Senior Subordinated Loan Agreement, --------------------- dated as of September 29, 1995, 23 between the General Partner and Cencom Cable Television, Inc., including any amendment, renewal, extension, substitution, refinancing, replacement or other modification thereof. Claims: as defined in Section 6.2 of this Agreement. ------ Code: means the Internal Revenue Code of 1986, as amended. ---- Deficit: as defined in Section 3.2 of this Agreement. ------- Fiscal Period: means a period beginning on the day following any ------------- Adjustment Date and ending on the next succeeding Adjustment Date. Fiscal Year: means a year beginning on January 1 of one calendar year ----------- and ending on December 31 of the same calendar year, provided, however, that the -------- ------- term "Fiscal Year" shall mean with respect to the Partnership's first period of operations the period commencing on the date hereof and ending on December 31 of the same calendar year. General Partner: as defined in the first paragraph of this Agreement. --------------- Indebtedness: means any indebtedness, whether or not for money ------------ borrowed, including any amendment, renewal, extension, substitution, refinancing, replacement or other modification thereof, directly or indirectly created, incurred or assumed by any entity, including, without limitation, indebtedness arising under or pursuant to the Loan Agreement and the Cencom Loan Agreement. Indemnified Party: as defined in Section 6.1 of this Agreement. ----------------- 24 Limited Partners: as defined in the first paragraph of this ---------------- Agreement. Loan Agreement: means the Loan Agreement, dated as of September 29, -------------- 1995, among the Partnership, Chemical Bank as Documentation Agent, Nationsbank of Texas, N.A. as Administrative Agent, and the lenders named therein, including any amendment, renewal, extension, substitution, refinancing, replacement or other modification thereof. Majority in Interest: means a majority in interest of the Limited -------------------- Partners, based on their Percentage Interests. Management Agreement: means the Management Agreement, dated as of -------------------- September 29, 1995, as the same shall be amended from time to time in accordance with the terms hereof, between the Partnership and the Manager. Manager: means Charter Communications, Inc., a Delaware corporation, ------- or any successor manager approved by the General Partner. Minimum Gain Attributable to Partner Nonrecourse Debt: means that ----------------------------------------------------- amount determined in accordance with the principles of Treasury Regulations Section 1.704-2(i)(3), (4) and (5). Net Profits and Losses: means, for any Fiscal Period, the net income ---------------------- or net loss of the Partnership for such Fiscal Period, including any items that are separately stated for purposes of Section 702(a) of the Code, as determined in accordance with federal income tax accounting principles with the following adjustments: (i) any income of the Partnership that is exempt from federal income tax shall be included as income; (ii) any expenditures of the Partnership described in Code Section 705(a)(2)(B) or treated as Code Sec- 25 tion 705(a)(2)(B) expenditures pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(1) shall be treated as current expenses; (iii) no effect shall be given to any adjustments made pursuant to Section 734 or Section 743 of the Code; (iv) the basis of property contributed to the Partnership shall initially be treated as equal to the agreed upon valuation of such property as reflected on Schedule A hereto and all gain, loss, depreciation and amortization on such property shall be determined based on such agreed upon value in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(g); (v) if the Partnership distributes any property in kind, the Partnership shall be deemed to have sold such property for its fair market value immediately before such distribution and the proceeds of such deemed sale shall be deemed to have been distributed to the Partners for all purposes of this Agreement; and (vi) notwithstanding any other provisions of this definition, any items that are specially allocated pursuant to Sections 3.2 through 3.8 shall not be taken into account. Nonrecourse Deductions: has the meaning set forth in Treasury ---------------------- Regulations Section 1.704-2(b)(1). Nonrecourse Liability: has the meaning set forth in Treasury --------------------- Regulations Section 1.704-2(b)(3). Ordinary Capital Account: as described in Section 2.6 of this ------------------------ Agreement. Partner Nonrecourse Debt: means debt of the Partnership within the ------------------------ meaning of Treasury Regulations Section 1.704-2(b)(4). 26 Partner Nonrecourse Deductions: has the meaning set forth in Treasury ------------------------------ Regulations Sections 1.704-2(i)(1) and 1.704-2(i)(2). Partners: means the General Partner and the Limited Partners. -------- Partnership: as defined in Section 1.1 of this Agreement. ----------- Partnership Minimum Gain: has the meaning set forth in Sections ------------------------ 1.704-2(b)(2) and 1.704-2(d) of the Treasury Regulations. Percentage Interest: means each Partner's proportionate share of the ------------------- Net Profits or Net Losses of the Partnership, as set forth in Schedule A hereto. Permitted Expenses: means, to the extent permitted pursuant to any ------------------ instrument or agreement constituting Indebtedness, general and administrative expenses, all U.S. federal and state income taxes, state franchise taxes, accounting fees, fees and expenses of technical and other consultants, and fees and expenses of other professionals of the Partnership or its affiliates or any direct or indirect partner in the Partnership. Preferred Capital Account: as defined in Section 2.6 of this ------------------------- Agreement. Preferred Return: means, for any Fiscal Period, in the case of ---------------- Charter Communications Entertainment, L.P., the sum of (a) the "Preferred - Return" accruing in respect of the "Preferred Capital Account" of CCT Holdings Corp., a Delaware corporation, as such terms are defined in, and pursuant to, the Agreement of Limited Partnership of Charter Communications Entertainment, L.P., as amended from time to time and (b) the Ratable Portion of the Excess - Amount. For purposes of this definition, (i) the "Excess Amount" shall equal - the excess of (w) the initial Preferred Capital - 27 Account balance of CCT Holdings Corp. in respect of its partnership interest in Charter Communications Entertainment, L.P. over (x) the initial Preferred - Capital Account balance of Charter Communications Entertainment, L.P. in the Partnership and (ii) the "Ratable Portion" shall mean the ratable portion for -- such Fiscal Period of the Excess Amount amortized (on a straight-line basis) over the term of the "Cencom Loan Agreement" (as defined in the Agreement of Limited Partnership of Charter Communications Entertainment, L.P.). Subsidiaries: means any corporation, partnership, limited liability ------------ company or other entity of which the Partnership owns, directly or indirectly, more than 50% of the equity. Treasury Regulations: means the Regulations of the Treasury -------------------- Department of the United States issued pursuant to the Code. 28 IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the day and year first above written. GENERAL PARTNER: LIMITED PARTNERS: CCT HOLDINGS CORP. CCA HOLDINGS CORP. By /s/ Theodore W. Browne, II By /s/ Theodore W. Browne, II -------------------------- -------------------------- Executive Vice President Executive Vice President CHARTER COMMUNICATIONS ENTERTAINMENT, L.P. By /s/Theodore W. Browne, II ------------------------- Executive Vice President 29 SCHEDULE A General Partner: ---------------
Initial Initial Ordinary Preferred Percentage Initial Capital Capital Capital Partner Interset Contribution Account Account - ------- -------- ------------ ------- ------- CCT Holdings 1% Corp.
Limited Partners: ----------------
Initial Initial Ordinary Preferred Percentage Initial Capital Capital Capital Partner Interset Contribution Account Account - ------- -------- ------------ ------- ------- CCA Holdings 1.22% Corp. Charter 97.78% Communications Entertainment, L.P.
EX-10.18 35 CONTINGENT PAYMENT AGREEMENT EXHIBIT 10.18 CONTINGENT PAYMENT AGREEMENT ---------------------------- CONTINGENT PAYMENT AGREEMENT, dated as of September 29, 1995, among Charter Communications Entertainment, L.P., a Delaware limited partnership ("CCE"), CCT Holdings Corp., a Delaware corporation ("CCT"), and Cencom Cable Television, Inc., a Delaware corporation ("Cencom"). WHEREAS, Kelso Investment Associates V, L.P., a Delaware limited partnership, Kelso Equity Partners V, L.P., a Delaware limited partnership, and certain individual investors (collectively, "Kelso") and Charter Communications, Inc., a Delaware corporation ("Charter"), own all of the outstanding shares of capital stock of CCT and CCA Holdings Corp., a Delaware corporation ("CCA"); WHEREAS, Cencom and Lenoir T.V. Cable, Inc., a North Carolina corporation (together, the "Sellers"), CCT and CCA have entered into a Asset Purchase Agreement (the "Asset Purchase Agreement"), dated as of March 30, 1995, providing for the sale of certain assets (the "Assets") by the Sellers to CCT on the date hereof; WHEREAS, immediately after the closing under the Asset Purchase Agreement CCT will contribute a majority of the Assets to CCE in exchange for general and limited partnership interests in CCE and CCA will cause a majority of the assets of its direct and indirect subsidiaries to be contributed to CCE in exchange for general and limited partnership interests in CCE; WHEREAS, in connection with the foregoing arrangements CCE has agreed that Cencom will be entitled to receive payments from CCE if certain conditions are met; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Distributions to CCT by the Partnerships. ---------------------------------------- (a) Basic Formula. If, at any time after the date hereof, CCT -------------- receives a distribution from CCE, Charter Communications 1 Entertainment II, L.P. ("CCE II'") or Charter Communications Entertainment I, L.P. ("CCE I") (collectively, the "Partnerships") that is not used entirely to pay either outstanding principal of or accrued interest on the Senior Subordinated Note, in the principal amount of $165,687,890, issued to Cencom by CCT on the date hereof, as such note may be amended from time to time (the "Cencom Note"), or Permitted Expenses (as defined in the Limited Partnership Agreement of CCE, dated as of the date hereof, attached as Exhibit A hereto, as the same shall be amended from time to time in accordance with Section 5 hereof (the "Partnership Agreement")) (the gross amount of such distribution, a "Partnership Distribution"), then CCE will pay to Cencom an amount equal to the product of 15% and the amount, if any, of (i) the aggregate amount of cash (or - the cash equivalent value of other property) distributed to CCT and CCA in connection with such Partnership Distribution over (ii) the sum of (A) Equity -- - Value (as defined below) immediately prior to such Partnership Distribution; (B) - the amount of such Partnership Distribution applied to the payment of outstanding principal of and accrued interest on the Cencom Note; and (C) the - amount of such Partnership Distribution applied to the payment of accrued but unpaid Permitted Expenses of CCT. "Equity Value" shall initially mean $450 million and shall be subject to adjustment as provided in Sections 1(c), 2(c) and 3(b) below. Prior to making any Partnership Distribution, CCE and CCT shall calculate the amount, if any, to be paid to Cencom pursuant to this Section 1(a) and CCE shall withhold such amount from the amounts to be distributed to CCT. (b) Adjustments to Basic Formula Upon Contributions of Additional ------------------------------------------------------------- Capital. If, at any time after the date hereof, any additional capital is - ------- contributed to CCE by either CCT or CCA, then the 15% factor in the formula set forth in Sections 1(a) above and 3(a) below will be reduced by multiplying it by a fraction, the numerator of which will be $450 million and the denominator of which will be $450 million plus the aggregate amount of capital contributed to CCE by CCT and CCA after the date hereof. In no event shall any adjustment under this Section 1(b) affect any calculations hereunder other than those made under Section 1(a) above or Section 3(a) below. (c) Adjustments to Equity Value Upon Partial Distributions. The ------------------------------------------------------ amount, if any, of the aggregate amount of cash (or the cash equivalent value of other property) 2 distributed to CCT and CCA in connection with any Partnership Distribution over the sum of (i) the amount of such Partnership Distribution applied to the - payment of the outstanding principal and accrued interest on the Cencom Note and (ii) the amount of such Partnership Distribution applied to the payment of -- accrued but unpaid Permitted Expenses of CCT, will reduce Equity Value for purposes of any subsequent calculations of Equity Value hereunder, provided that -------- in no event will Equity Value be reduced below zero. 2. Sale of Equity Securities of CCT or CCA. (a) Basic Formula. if at --------------------------------------- ------------- any time after the date of this Agreement, either Kelso or Charter sells any equity securities of CCT or CCA (an "Equity Sale''), then CCE will be required to make a payment to Cencom equal to the product of 15% and the amount, if any, of (i) the sum of (x) the aggregate amount of cash (or the cash equivalent value - - of other property) received by the stockholders of CCT and CCA in connection with such Equity Sale, after payment of such stockholders' expenses relating to such Equity Sale, and (y) if equity securities of CCA were sold by Kelso or - Charter in connection with such Equity Sale, a pro rata amount (based on the percentage of the outstanding equity securities of CCA sold in connection with such Equity Sale) of the outstanding amount of principal of and accrued interest on the Senior Subordinated Note issued to HC Crown Corp. by CCA on January 18, 1995 immediately prior to such Equity Sale over (ii) Equity Value immediately -- prior to such Equity Sale. (b) Adjustments to Basic Formula Upon the Issuance of Additional ------------------------------------------------------------ Equity. If at any time after the date of this Agreement, any additional equity - ------ is contributed to or issued by either CCT or CCA, the proceeds of which are contributed to CCE, then the 15% factor in the formula set forth in Section 2(a) above will be reduced by multiplying it by a fraction, the numerator of which will be $450 million and the denominator of which will be $450 million plus the aggregate amount of equity contributed to or equity proceeds received by CCT and CCA and contributed to CCE after the date hereof. In no event shall any adjustment under this Section 2(b) affect any calculations hereunder other than those made under Section 2(a) above. (c) Adjustments to Equity Value Upon Partial Sales. The aggregate ---------------------------------------------- amount of cash (or the cash equivalent 3 value of other property) received by the stockholders of CCT and CCA in connection with any Equity Sale, after payment of such stockholders' expenses relating to such Equity Sale, will reduce Equity Value for purposes of any subsequent calculations of Equity Value hereunder, provided that in no event -------- will Equity Value be reduced below zero. In addition, following any Equity Sale of less than 100% of Kelso's and Charter's equity interests in CCT and CCA, any subsequent calculations under Sections 1, 2 and 3 shall be adjusted as necessary to reflect the reduction in Kelso's and Charter's indirect equity interests in the Partnerships as a result of such Equity Sale. 3. Sale of Assets by CCT or CCA. (a) Basic Formula. If at any time ---------------------------- ------------- after the date of this Agreement, either CCT or CCA sells any assets, including without limitation, their respective partnership interests in the Partnerships (an "Assets Sale"), then CCE will be required to make a payment to Cencom equal to the product of 15% and the amount, if any, of (i) the aggregate amount of - cash (or cash equivalent value of other property) received by CCT and CCA in connection with such Asset Sale, after paying CCT's and CCA's expenses in connection with such Asset Sale, over (ii) the sum of (A) Equity Value -- - immediately prior to such Asset Sale; (B) the amount from such Asset Sale - applied to the payment of outstanding principal of and accrued interest on the Cencom Note and (C) the amount from such Asset Sale applied to the payment of - accrued but unpaid Permitted Expenses of CCT. (b) Adjustments to Equity Value Upon Partial Asset Sales. The amount, ---------------------------------------------------- if any, of the aggregate amount of cash (or cash equivalent value of other property) received by CCT and CCA in connection with any Asset Sale, after paying CCT's and CCA's expenses in connection with such Asset Sale, over the sum of (i) the amount from such Asset Sale applied to the payment of outstanding - principal of and accrued interest on the Cencom Note and (ii) the amount from -- such Asset Sale applied to the payment of accrued but unpaid Permitted Expenses of CCT, will reduce Equity Value for purposes of any subsequent calculations of Equity Value hereunder, provided, that in no event will Equity Value be reduced -------- below zero. 4. Initial Public Offering. (a) Upon an initial public offering of ----------------------- CCT, CCA, CCE or any successor in interest to CCT, CCA, or CCE, CCE's obligations to Cencom set 4 forth in Sections 1-3 will terminate and CCT and CCE will be obligated to cause to be issued to Cencom equity securities of the entity which is making such initial public offering of the same type which are being offered to the public and having an aggregate fair market value equal to the amount which would be payable to Cencom pursuant to Section 1 if as of the date of such initial public offering the Partnerships sold 100% of their assets for fair market value for cash and distributed the net proceeds to their partners. For purposes of this Section 4, "fair market value" will be determined with reference to the initial public offering price of the equity securities being offered to the public by such entity making an initial public offering. (b) Notwithstanding the provisions of Section 4(a), in the event that an issuance of equity securities to Cencom pursuant to Section 4(a) would cause Cencom or any of its affiliates to have an attributable interest in a cable operator for purposes of 47 C.F.R. (section section)76.1000 - 76.1003 and as a result any of Gaylord's Entertainment Company's cable networks would be prohibited from offering programming on an exclusive basis to cable delivery systems, then, at Cencom's option, CCT and CCE will cause such number of equity securities to be issued to Cencom as, in the opinion of Cencom's counsel, will not result in Cencom or its affiliates having such an attributable interest and CCT and CCE will have the option either (i) to pay or to cause to be paid to - Cencom in cash the fair market value of the balance of such equity securities otherwise issuable pursuant to Section 4(a) up to the amount of the net proceeds from the initial public offering received by the entity making such initial public offering, with the balance, if any, payable in a subordinated note of such entity, convertible into equity securities with appropriate registration rights, or (ii) to cause the balance of such equity securities otherwise -- issuable pursuant to Section 4(a) to be sold on behalf of Cencom in such initial public offering. In any event, Cencom will be entitled to have such number of its securities registered and sold in such initial public offering in the same proportion as the number of securities owned by Kelso and Charter bears to the number of securities to be registered and sold by Kelso and Charter in such initial public offering. 5. Amendments to Partnership Agreements. CCE and CCT will not permit any ------------------------------------ amendment to the Partnership Agreement or the CCE II or CCE I Agreements of Limited 5 Partnership, dated as of the date hereof, attached hereto as Exhibit B and C, respectively, that would adversely affect the rights of CCT to receive allocations and distributions thereunder; provided, that such partnership -------- agreements may be amended at any time to reflect normal dilution to CCT as a result of the admission of new partners into any of the Partnerships. 6. Affiliate Transactions. CCE will not enter, and will not permit or ---------------------- cause any of its subsidiaries to enter, into any transaction with any of their respective affiliates on terms less favorable than those that would be obtained in an arm's-length transaction with an unaffiliated third party; provided, that -------- (1) CCE II and its respective subsidiaries may enter into arrangements with - Charter or any replacement manager upon the terms of the Management Agreement, dated as of the date hereof, between CCE II and Charter; (2) CCE I and its - respective subsidiaries may enter into arrangements with Charter or any replacement manager upon the terms of the Amended and Restated Management Agreement, dated as of the date hereof, between CCE I and Charter; (3) CCE II - may enter into financial advisory arrangements with Kelso & Company, L.P. ("Kelso & Co.") upon the terms of the Financial Advisory Agreement, dated as of the date hereof, between Kelso & Co. and CCE II; (4) CCE I may enter into - financial advisory arrangements with Kelso & Co. upon the terms of the Amended and Restricted Financial Advisory Agreement, dated as of the date hereof, between Kelso & Co. and CCE I and (5) the foregoing arrangements may be amended - to reflect subsequent acquisitions by CCE, CCE II, CCE I and their respective subsidiaries and Kelso & Co. may enter into financial advisory arrangements with future subsidiaries of CCE, CCE II and CCE I, provided that any such amendments -------- or any such new arrangements provide for management or financial advisory fees, as the case may be, which are consistent with current arrangements taking into account the value of the assets, number of subscribers and equity value of the entities acquired. 7. Miscellaneous ------------- (a) Amendments, etc. The terms of this Agreement may be waived, --------------- amended or supplemented only with the written consent of all the parties hereto. (b) Assignment. This Agreement may not be assigned by any party ---------- without the prior written consent of the 6 other parties hereto; provided that Cencom may assign its rights hereunder to any of its affiliates without the prior consent of CCE and CCT. (c) Headings. The headings in this Agreement are solely for convenience -------- of reference and shall not affect its interpretation. (d) Counterparts. This Agreement may be executed in more than one ------------ counterpart which, taken together, shall constitute one agreement. (e) Completeness. This Agreement, together with the Limited Partnership ------------ Agreement of CCE, sets forth the entire understanding of the parties hereto with respect to the subject matter hereof. (f) Termination. This Agreement shall terminate upon the earlier of ----------- (a) the issuance of shares to Cencom pursuant to Section 4; (b) Kelso and - - Charter ceasing to own any shares of capital stock of either CCT or CCA; (c) CCE - selling, transferring or otherwise disposing of all of substantially all of its assets; and (d) CCT and CCA selling, transferring or otherwise disposing of all - or substantially all of their assets provided that all amounts due to Cencom -------- hereunder have been fully paid. (g) Disclaimer of Relationship. This Agreement is not intended to -------------------------- create a partnership or joint venture relationship among the parties hereto. (h) Governing Law. This Agreement shall be construed in accordance with ------------- and governed by the laws of the State of New York. (i) Attorneys' Fees and Expenses of Enforcement. CCE agrees to pay up to ------------------------------------------- $100,000 of costs and expenses (including reasonable attorneys' fees) incurred by Cencom in any action or proceeding to enforce its rights hereunder that results in a payment to Cencom hereunder. 7 IN WITNESS WHEREOF, the parties hereto have caused this Contingent Payment Agreement to be executed as of the day and year first above written. CHARTER COMMUNICATIONS ENTERTAINMENT, L.P. By: CCT HOLDINGS CORP., a general partner By: /s/ Theodore W. Browne, II ------------------------------- Title: Executive Vice President CCT HOLDINGS CORP. By: /s/ Theodore W. Browne, II ------------------------------- Title: Executive Vice President CENCOM CABLE TELEVISION, INC. By: /s/ Jerry E. Finder ------------------------------- Title: Chief Financial Officer 8 EX-10.19 36 AMENDED & RESTATED STOCKHOLDERS AGREEMENT EXHIBIT 10.19 ================================================================================ AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT among CCA HOLDINGS CORP. and KELSO INVESTMENT ASSOCIATES V, L.P. and KELSO EQUITY PARTNERS V, L.P. and CHARTER COMMUNICATIONS, INC. Dated as of September 29, 1995 ================================================================================ TABLE OF CONTENTS
Page ---- 1. Restrictions on Transfer of Common Stock.......................... 1 1.1. Restrictions on Transfers by Charter.................... 1 1.2. Restrictions on Transfers by Kelso...................... 2 2. Sales by Charter to Third Parties................................. 2 2.1. General................................................. 2 2.2. Right of First Refusal.................................. 3 3. Sales by Kelso to Third Parties................................... 4 3.1. General................................................. 4 3.2. Right of First Negotiation.............................. 4 3.3. Tag-Along Rights........................................ 6 3.4. Drag-Along Rights....................................... 6 4. Pledges by Charter and Involuntary Transfers...................... 6 4.1. Pledges by Charter...................................... 6 4.2. Involuntary Transfers................................... 7 5. Right of Charter to Sell to the Company Shares of Common Stock ("Put Rights") 5.1 Common Stock ("Put Rights")............................. 7 5.1. Right to Sell........................................... 7 5.2. Notice.................................................. 7 5.3. Payment................................................. 8 6. Right of the Company to Purchase from Charter Shares of Common Stock ("Call Rights") 6.1. Right to Purchase....................................... 8 6.2. Notice.................................................. 8 6.3. Payment................................................. 8 7. Prohibited Purchases.............................................. 9 8. Exit Payments..................................................... 9 9. Election of Directors............................................. 11 9.1. Board Make-up........................................... 11 9.2. Irrevocable Proxy....................................... 21 10. Stock Certificate Legends......................................... 21 11. Absence of Other Arrangements..................................... 31
12. Parties............................................................ 13 12.1. Assignment by the Company................................ 13 12.2. Assignment Generally..................................... 14 12.3. Termination.............................................. 14 12.4. Agreements to Be Bound................................... 14 13. Defined Terms...................................................... 15 14. Miscellaneous...................................................... 17 14.1. Sales Incentive Fee...................................... 14.2. Recapitalizations, Exchanges, etc........................ 17 Affecting the Common Stock............................... 17 14.3. Actions Requiring Approval of Stockholders............................................. 17 14.4. No Third Party Beneficiaries............................. 17 14.5. Mechanics of Payment..................................... 17 14.6. Further Assurances....................................... 18 14.7. Amendment and Modification............................... 18 14.8. Governing Law............................................ 18 14.9. Invalidity of Provision.................................. 18 14.10. Notices.................................................. 18 14.11. Headings; Execution in Counterparts...................... 20 14.12. Injunctive Relief........................................ 20 14.13. Entire Agreement......................................... 20
-ii- AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT, dated as of September 29, 1995, among CCA Holdings Corp., a Delaware corporation (the "Company"), Kelso Investment Associates V, L.P., a Delaware limited partnership ("KIA V"), Kelso Equity Partners V, L.P., a Delaware limited partnership ("KEP V", together with KIA V, "Kelso"), and Charter Communications, Inc., a Delaware corporation ("Charter"). Kelso and Charter are hereinafter referred to collectively as the "Stockholders". Capitalized terms used herein without definition are defined in Section 13. WHEREAS, the Company and the Stockholders are party to a Stockholders' Agreement, dated as of January 18, 1995 (the "Original Agreement"); WHEREAS, pursuant to the Original Agreement, the Company has sold 65,100 shares of Class A Common Stock to KIA V, 2,715 shares of Class A Common Stock to KEP V, 7,700 shares of Class A Common Stock to Charter and 4,300 shares of Class B Common Stock to Charter; and WHEREAS, the parties hereto desire to amend and restate the Original Agreement; NOW, THEREFORE, in consideration of the mutual covenants and obligations set forth in this Agreement, the parties hereto agree as follows: 1. Restrictions on Transfer of Common Stock. 1.1. Restrictions on ---------------------------------------- --------------- Transfers by Charter. Prior to the earlier of (a) the closing of a public - -------------------- - offering pursuant to an effective registration statement (a "Registration") under the Securities Act of 1933, as amended, and the rules and regulations thereunder (the "Act"), that covers (together with any prior effective Registrations) (i) 50% or more of the aggregate number of shares of Common Stock - then outstanding or (ii) shares of Common Stock that, after the closing of such -- public offering, will be traded on the New York Stock Exchange, the American Stock Exchange or the National Association of Securities Dealers Automated Quotation System (any such Registration, an "IPO") and (b) the tenth anniversary - of the Closing, no shares of Common Stock or any interest therein now or hereafter owned by Charter may be Transferred, except for any (1) sale to a - third party or the Company after the fifth anniversary of the Closing in compliance with Section 2.2 ("Right of First Refusal"), (2) sale to a third party pursuant to Section 3.3 ("Tag-Along Rights") or - Section 3.4 ("Drag-Along Rights"), (3) involuntary Transfer to a third party - permitted under Section 4.2, (4) sale to the Company pursuant to Section 5 ("Put - Rights") or Section 6 ("Call Rights"), (5) Transfer, authorized by the prior - written approval (not to be un reasonably withheld) of the disinterested members of the Board of Directors of the Company (the "Board"), to an Affiliate of Charter that agrees to be bound by the terms of this Agreement pursuant to Section 12.4 or Transfer to any entity of which Charter owns a majority of the voting and economic rights that agrees to be bound by the terms of this Agreement pursuant to Section 12.4, (6) sale pursuant to a Registration in - accordance with the Registration Rights Agreement or (7) pledges of shares of - Common Stock in accordance with Section 4.1. Notwithstanding the foregoing or any other provision of this Agreement, Charter may not Transfer (a) more than - 50% of the shares of Common Stock held by it on the Closing as long as the Management Agreement is in full force and effect; (b) any shares of Common Stock - if such Transfer would breach or cause a default under any provision of the Financing Documents (as defined in Section 7) and (c) any shares of Class B - Common Stock unless such transferee is also the permitted assignee of all of Charter's rights and obligations under Section 14.1 hereof. 1.2. Restrictions on Transfers by Kelso. Prior to the earlier of (a) ---------------------------------- - an IPO and (b) the tenth anniversary of the Closing, no shares of Common Stock - or any interest therein now or hereafter owned by Kelso may be Transferred, except for any (i) Transfer to a third party or to Charter after the third - anniversary of the Closing in compliance with Section 3.2 ("Right of First Negotiation") and Section 3.3 ("Tag-Along Rights"), (ii) involuntary Transfer -- to a third party permitted under Section 4.2, (iii) Transfer to a Permitted --- Assignee that agrees to be bound by the terms of this Agreement pursuant to Section 12.4 or (iv) sale pursuant to a Registration in accordance with the -- Registration Rights Agreement. Notwithstanding the foregoing or any other provision of this Agreement, Kelso may not Transfer any shares of Common Stock if such Transfer would breach or cause a default under any provision of the Financing Documents. 2. Sales by Charter to Third Parties. 2.1. General. At any time --------------------------------- ------- after the fifth anniversary of the Closing, Charter may sell any of the shares of Common Stock held by it to a third party or parties, provided that such sale -------- -2- is made in compliance with the provisions of Section 2.2 ("Right of First Refusal"). For purposes of this Section 2, a sale to a third party shall not include a sale by Charter pursuant to a Registration in accordance with the Registration Rights Agreement, or pursuant to Section 3.3 ("Tag-Along Rights"), Section 3.4 ("Drag-Along Rights"), Section 4.2 ("Involuntary Transfers"), Section 5 ("Put Rights") or Section 6 ("Call Rights"). 2.2. Right of First Refusal. (a) Procedure. If at any time after ---------------------- --------- the fifth anniversary of the Closing, Charter shall have received a bona fide ---- ---- offer or offers from a third party or parties to purchase any shares of Common Stock, then prior to selling such shares of Common Stock to such third party or parties Charter shall deliver to the Company and KIA V a letter signed by it setting forth: (i) the name(s) of such third party or parties; (ii) the purchase price per share of Common Stock offered by such third party or parties; (iii) all material terms and conditions contained in the offer of the third party or parties; (iv) Charter's offer (irrevocable by its terms for 30 days following receipt) to sell to the Company all (but not less than all) of the shares of Common Stock covered by the offer of the third party or parties, for a purchase price per share and on other terms and conditions not less favorable to the Company than those contained in the offer of the third party or parties (the "Offer"); and (v) closing arrangements and a closing date not less than 60 nor more than 90 days following the delivery of such letter (or such later date as is necessary to obtain all requisite governmental and regulatory approvals and consents, provided Charter covenants to use commercially reasonable -------- efforts to obtain such approvals and consents) for any purchase and sale that may be effected by the Company. (b) Effecting Sales. If, upon the expiration of 30 days following --------------- receipt by the Company of the letter described in Section 2.2(a), the Company shall not have accepted the Offer, Charter shall have the right, to sell to such third party or parties all (but not less than all) of the shares of Common Stock covered by the Offer, for a -3- purchase price and on other terms and conditions no less favorable to Charter than those contained in the Offer. If Charter has not signed a binding purchase agreement (subject to customary closing conditions) with such third party or parties within 45 days of the expiration of such 30 day period or if such sale has not been completed within 180 days from the expiration of such 30 day period, the shares of Common Stock covered by such Offer may not thereafter be sold by Charter unless the procedures set forth in this Section 2.2 shall have again been complied with. If the Company shall have accepted the Offer, the closing of the purchase and sale pursuant to such acceptance shall take place as set forth in Charter's letter to the Company. 3. Sales by Kelso to Third Parties. 3.1. General. At any time ------------------------------- ------- after the third anniversary of the Closing, Kelso may sell any of the shares of Common Stock held by it to a third party or parties, provided that such sale is -------- made in compliance with the provisions of Sections 3.2 and 3.3. For purposes of this Section 3, a sale to a third party shall not include a sale by Kelso to any Permitted Assignee or a sale pursuant to a Registration in accordance with the Registration Rights Agreement. 3.2. Right of First Negotiation. (a) Procedure. If at any time -------------------------- --------- after the third anniversary of the Closing, Kelso desires to sell any of the shares of Common Stock held by it, then prior to selling such shares of Common Stock to any third party or parties, Kelso shall deliver to Charter a letter signed by it setting forth the number of shares of Common Stock Kelso desires to sell (the "Sale Notice"). Within 60 days of receipt of the Sale Notice, Charter may make an offer to purchase such shares of Common Stock offered by Kelso by delivering written notice to Kelso setting forth: (i) the prospective purchase price per share of Common Stock; (ii) any other material terms and conditions to such purchase; (iii) evidence of binding commitments reasonably satisfactory to Kelso for the financing of such purchase; and (iv) closing arrangements and a closing date not less than 60 nor more than 90 days following the delivery of such notice (or such later date as is -4- necessary to obtain all requisite governmental and regulatory approvals and consents, provided Charter covenants to use commercially reasonable efforts to obtain such approvals and consents). (b) Effecting Sales. If, upon the expiration of 60 days following --------------- receipt by Charter of the Sale Notice, Charter shall not have made an offer to purchase the shares of Common Stock covered by the Sale Notice, Kelso may sell to a third party or parties any of the shares of Common Stock covered by the Sale Notice for whatever price and upon whatever other terms and conditions Kelso may agree to, provided that Kelso and the third party execute a binding -------- purchase agreement (subject to customary closing conditions) within 45 days of any written offer and in any event within 180 days after the expiration of such 60 day period and consummate the closing thereunder within 30 days after the receipt of all requisite governmental and regulatory approvals and consents. Kelso will provide a copy of any such written offer to Charter promptly upon receipt thereof. If Charter shall have made an offer to purchase the shares of Common Stock covered by the Sale Notice, then Kelso may either (1) accept - Charter's offer and the sale of such shares of Common Stock shall be consummated as soon as practicable after the delivery of a notice of acceptance by Kelso, but in any event within 90 days of the delivery of the Sale Notice (or such later date as is necessary to obtain all requisite governmental and regulatory approvals and consents), or (2) reject Charter's offer, by written notice - delivered to Charter within 20 days of the delivery to Kelso of such offer, in which case Kelso shall have the right to sell to a third party or parties all (but not less than all) of the shares of Common Stock covered by the Sale Notice, for a purchase price and on other terms and conditions no less favorable to Kelso than those contained in Charter's offer, provided that Kelso and the -------- third party purchaser execute a binding purchase agreement (subject to customary closing conditions) within 45 days of any written offer and in any event within 180 days of Charter's offer and consummate the closing thereunder within 30 days of receipt of all requisite governmental and regulatory approvals and consents. If Kelso and a third party purchaser do not execute such a purchase agreement or close such transaction within the time periods set forth in the proviso of the preceding sentence, then the shares of Common Stock covered by such Sale Notice may not thereafter be sold by Kelso unless the procedures set forth in this Section 3.2 shall have again been complied with. Any offer by Charter pursuant to this Section 3.2(b) shall not preclude Charter -5- from making additional offers for such shares or participating in any auction relating to the sale of any such shares. 3.3. Tag-Along Rights. If at any time after the third anniversary of ---------------- the Closing Kelso desires to sell any shares of Common Stock to one or more third parties and such shares, together with all shares of Common Stock previously sold by Kelso, would represent more than 10% of the aggregate number of shares of Common Stock held by Kelso immediately after the Closing, Kelso must offer Charter a pro rata right to participate in such sale with respect to --- ---- Charter's shares of Class A Common Stock, for a purchase price per share of Class A Common Stock equal to the purchase price per share of Class A Common Stock being paid for Kelso's shares and on other terms and conditions not less favorable to Charter than those applicable to Kelso. 3.4. Drag-Along Rights. If at any time after the third anniversary ----------------- of the Closing and subject to the termination or waiver by Charter of its rights under Section 3.2, Kelso proposes to sell to one or more third parties all of the shares of Common Stock then owned by it, then, if requested by Kelso, Charter shall be required to join Kelso in such sale on a pro rata basis for a --- ---- purchase price per share of Common Stock and on other terms and conditions not less favorable to Charter than those applicable to Kelso, provided, that any shares of Class B Common Stock subject to such sale will be sold for a price of $1,000 per share. 4. Pledges by Charter and Involuntary Transfers. 4.1. Pledges by -------------------------------------------- ---------- Charter. Charter may pledge its shares of Common Stock to a commercial bank - ------- (the "Charter Lender") pursuant to the terms of a pledge agreement, in form and substance reasonably satisfactory to Kelso. Upon any foreclosure, the Charter Lender will be required (a) to offer and sell the shares of Common Stock so - foreclosed upon to the Company as provided in Section 4.2 and (b) to agree to - become a party hereunder, subject to all the rights and obligations of Charter, except as provided below. During the 60 day period referred to in Section 4.2, the Charter Lender shall not have any rights hereunder. If, after the expiration of the 60 day period referred to in Section 4.2, the Company has not purchased such shares, then the Charter Lender shall be deemed to be Charter for all purposes hereunder, except that Section 3.2 and Section 14.3 and Charter's rights under Section 9.1 hereof will be of no further force and effect. -6- 4.2. Involuntary Transfers. Any transfer of title or beneficial --------------------- ownership of shares of Common Stock upon default, foreclosure, forfeit, court order, or otherwise than by a voluntary decision on the part of a Stockholder, including, without limitation, pursuant to Section 4.1, (an "Involuntary Transfer") shall be void unless such Stockholder complies with this Section 4.2 and enables the Company to exercise in full its rights hereunder. Upon any Involuntary Transfer, the Company shall have the right to purchase such shares of Common Stock pursuant to this Section 4.2 and the Person to whom such shares have been transferred (the "Involuntary Transferee") shall have the obligation to sell such shares in accordance with this Section 4.2. Upon the Involuntary Transfer of any shares of Common Stock, such Stockholder shall promptly (but in no event later than three business days after such Involuntary Transfer) furnish written notice to the Company and the other Stockholders indicating that the Involuntary Transfer has occurred, specifying the name of the Involuntary Transferee, giving a detailed description of the circumstances giving rise to, and stating the legal basis for, the Involuntary Transfer. Upon the receipt of such notice, and for 60 days thereafter, the Company shall have the right to purchase, and the Involuntary Transferee shall have the obligation to sell, all (but not less than all) of the shares of Common Stock acquired by the Involuntary Transferee for a purchase price equal to the Carrying Value of such shares of Common Stock. 5. Right of Charter to Sell to the Company Shares of Common Stock -------------------------------------------------------------- ("Put Rights"). 5.1. Right to Sell. Subject to all subsections of this ------------- Section 5 and Section 7, Charter shall have the right to sell to the Company, and the Company shall have the obligation to purchase from Charter, all, but not less than all, of Charter's shares of Common Stock at their Carrying Value if the Management Agreement is terminated pursuant to Article VII thereof or at the end of the term of the Management Agreement unless such agreement shall have been renewed or replaced by mutual agreement of the parties thereto. 5.2. Notice. If Charter desires to sell shares of Common Stock ------ pursuant to Section 5.1, Charter shall notify the Company and KIA V not more than 30 days after the occurrence of the event giving rise to Charter's right to sell its shares of Common Stock and shall specify the number of shares of Common Stock Charter owns. -7- 5.3. Payment. Subject to Section 7, payment for shares of Common ------- Stock sold by Charter pursuant to Section 5.1 shall be made on the date that is 60 days (or the first business day thereafter if the 60th day is not a business day, or such later date as is necessary to obtain all requisite governmental and regulatory approvals and consents) following the date of the receipt by the Company of such notice. Any payments required to be made by the Company under this Section 5.3 shall accrue simple interest at a rate per annum of 8% from the date of termination of the Management Agreement to the date the Company has paid in full for all of the shares of Common Stock. All payments of interest accrued hereunder shall be paid only at the date of payment by the Company for the shares of Common Stock being purchased. 6. Right of the Company to Purchase from Charter Shares of Common -------------------------------------------------------------- Stock ("Call Rights"). 6.1. Right to Purchase. Subject to all subsections of - ----- ----------------- this Section 6 and Section 7, the Company shall have the right to purchase from Charter, and Charter shall have the obligation to sell to the Company, all, but not less than all, of Charter's shares of Common Stock at the Carrying Value of the shares of Common Stock to be purchased if the Management Agreement is terminated pursuant to Article VII thereof or at the end of the term of the Management Agreement unless such agreement shall have been renewed or replaced by mutual agreement of the parties thereto. 6.2. Notice. If the Company desires to purchase shares of Common ------ Stock from Charter pursuant to Section 6.1, it shall notify Charter not more than 30 days after the occurrence of the event giving rise to the Company's right to acquire Charter's shares of Common Stock. 6.3. Payment. Subject to Section 7, payment for shares of Common ------- Stock purchased by the Company pursuant to Section 6.1 shall be made on the date 60 days (or the first business day thereafter if the 60th day is not a business day, or such later date as is necessary to obtain all requisite governmental and regulatory approvals and consents) following the date of the receipt by Charter of the Company's notice pursuant to Section 6.2. Any payments required to be made by the Company under this Section 6.3 shall accrue simple interest at a rate per annum of 8% on the amounts not paid from the date -8- of termination of the Management Agreement to the date the Company makes such payments. All payments of interest accrued hereunder shall be paid only at the date or dates of payment by the Company for the shares of Common Stock being purchased. 7. Prohibited Purchases. Notwithstanding anything to the contrary -------------------- herein, the Company shall not be permitted or obligated to purchase any shares of Common Stock hereunder to the extent (a) the Company is prohibited from - purchasing such shares by applicable law or by any debt instruments or agreements, including any amendment, renewal, extension, substitution, refinancing, replacement or other modification thereof (the "Financing Documents") entered into by the Company, CCE, CCE I or Cencom Cable Entertainment, Inc., a wholly-owned subsidiary of the Company, (b) a default has - occurred under any Financing Document and is continuing or (c) the purchase of - such shares of Common Stock would, or in the reasonable opinion of the Board might, result in the occurrence of an event of default under any Financing Document or create a condition which would or might, with notice or lapse of time or both, result in such an event of default. If shares of Common Stock that the Company has the right or obligation to purchase on any date exceed the total amount permitted to be purchased on such date pursuant to the preceding sentence (the "Maximum Amount"), the Company shall purchase on such date only that number of shares of Common Stock up to the Maximum Amount (and shall not be required to purchase more than the Maximum Amount). Notwithstanding anything to the contrary contained in this Agreement, if the Company is unable to make any payment when due under this Agreement by reason of this Section 7, the Company shall make such payment at the earliest practicable date permitted under this Section 7 and any such payment shall accrue simple interest (or if such payment is accruing interest at such time, shall continue to accrue interest) at a rate per annum of 8% from the date such payment is due and owing to the date such payment is made. All payments of interest accrued hereunder shall be paid only at the date of payment by the Company for the shares of Common Stock being purchased. 8. Exit Payments. (a) General Allocation. Except as otherwise ------------- ------------------ provided in Sections 8(b) and (e) below, in the event Kelso and Charter become entitled to cash payments in respect of any shares of Class A Common Stock, whether in connection with a sale of such shares, a distribution by the Company or otherwise (any such payment being referred to herein as an "Exit Payment"), the Exit -9- Payment will be allocated between Kelso and Charter as follows: (i) Kelso and Charter will receive 85% and 15%, respectively, of the Exit Payment until Kelso and Charter shall each have received from the aggregate amount of Exit Payments allocated to them, an amount equal to their respective capital investments in the Company. (ii) After the allocation pursuant to Section 8(a)(i), the remainder, if any, of the Exit Payment shall be allocated 85% and 15%, respectively, to Kelso and Charter until each of Kelso and Charter has received from the aggregate amount of Exit Payments allocated to it an internal rate of return equal to 15% per annum, compounded annually, on the aggregate amount of capital invested in the Company by it. (iii) After the allocations pursuant to Sections 8(a)(i) and 8(a)(ii), the remainder, if any, of the Exit Payment shall be allocated 75% and 25%, respectively, to Kelso and Charter until each of Kelso and Charter has received from the aggregate amount of Exit Payments allocated to it an internal rate of return equal to 32% per annum, compounded annually, on the aggregate amount of capital invested in the Company by it. (iv) After the allocations pursuant to Sections 8(a)(i), 8(a)(ii) and 8(a)(iii), the remainder, if any, of the Exit Payment shall be allocated 50% to Kelso and 50% to Charter. For purposes of this Section 8(a), internal rates of return shall be calculated by taking into account the date or dates of the investments of capital by each of Kelso and Charter in the Company, the date or dates of any Exit Payments and the amounts of such investments and Exit Payments. (b) Limitation. The provisions set forth in Section 8(a) above shall ---------- apply only to a sale by Kelso and Charter of all of the shares of Class A Common Stock owned by both Kelso and Charter to a third party or parties or a sale of all or substantially all of the Company's and its subsidiaries' assets (either of such transactions, a "Sale of 100% of the Company"). In the event either Kelso or Charter become entitled to a cash payment in respect of any shares of Class A Common Stock, but in connection with a -10- transaction constituting less than a Sale of 100% of the Company, then Kelso and Charter shall negotiate in good faith an equitable allocation of such cash payments which reflects the economic objectives set forth in Section 8(a). (c) Procedures for Payment. Kelso and Charter shall use reasonable ---------------------- efforts to arrange for any amounts allocated to Kelso and Charter pursuant to Section 8(a) or the last sentence of Section 8(b) to be paid directly to Kelso and Charter by the relevant third party purchaser(s) or the Company, as the case may be. In the event that Kelso or Charter is unable to make such arrangements (including, without limitation, because of any restrictions contained in the Company's Amended and Restated Certificate of Incorporation), Kelso or Charter, as the case may be, shall pay any amounts allocated to such party pursuant to Section 8(a) or the last sentence of Section 8(b) promptly following such party's receipt of such amounts. (d) Permitted Assignees. All references to Kelso in this Section 8 ------------------- shall include any Permitted Assignees of Kelso. (e) Cencom Contingent Payment Agreement. Notwithstanding the ----------------------------------- foregoing, the Cencom Contingent Payment Agreement provides for payments to Cencom under certain circumstances which may also involve the payment to Kelso and Charter of Exit Payments hereunder. Accordingly, Kelso and Charter each acknowledge that any Exit Payment will be calculated assuming such payment to Cencom has been made and in the event either Kelso or Charter receives any Exit Payment that includes any amount due to Cencom under the Cencom Contingent Payment Agreement, then upon the request of the Company, such party shall promptly remit such amount to Cencom. 9. Election of Directors. 9.1. Board Make-up. Until the earlier of --------------------- ------------- (a) the tenth anniversary of the Closing, (b) the closing of an IPO or (c) the - - - termination of the Management Agreement, each Stockholder agrees that it will nominate and elect and will vote all of the shares of Common Stock owned or held of record by it to elect and, thereafter, for such period, to continue in office a Board consisting of five members, three of whom will be designated for nomination and election by KIA V, and two of whom will be designated for nomination and election by Charter. The individuals designated for nomination and election by KIA V or Charter, as the case may be, pursuant to this Section 9 -11- may be changed from time to time by KIA V or Charter, as the case may be. Prior to or at the first meeting of the Board after the date of this Agreement, Charter shall propose to the Board for its approval one or more officers of the Company who will have the authority to execute and deliver such documents, instruments and agreements on behalf of the Company as is necessary for Charter to fulfill its obligations under the Management Agreement. Charter shall have the right at any time to propose to the Board for its approval additional or different officers to have such authority. The By-laws of the Company shall provide that the Board may, by resolution, authorize one or more such officers to take such actions on behalf of the Company. 9.2. Irrevocable Proxy. In order to effectuate Section 9.1 and, in ----------------- addition to and not in lieu of Section 9.1, each Stockholder hereby grants to the Secretary of the Company an irrevocable proxy solely for the purpose of voting all of the shares of Common Stock of the Company owned by the grantor of the proxy for the election of directors nominated in accordance with Section 9.1. 10. Stock Certificate Legends. A copy of this Agreement shall be ------------------------- filed with the Secretary of the Company and kept with the records of the Company. Each certificate representing shares of Common Stock issued after the date hereof shall bear upon its face the following legends, as appropriate: (a) "THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS AND UNTIL REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS, IN THE OPINION OF COUNSEL TO THE STOCKHOLDER, WHICH COUNSEL MUST BE, AND THE FORM AND SUBSTANCE OF WHICH OPINION ARE, SATISFACTORY TO THE ISSUER, SUCH OFFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION, TRANSFER OR OTHER DISPOSITION IS EXEMPT FROM REGISTRATION OR IS OTHERWISE IN COMPLIANCE WITH THE ACT, SUCH LAWS AND THE AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT OF THE ISSUER, DATED AS OF SEPTEMBER 29, 1995 (THE "STOCKHOLDERS' AGREEMENT")." -12- (b) "THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND OTHER CONDITIONS, AS SPECIFIED IN THE STOCKHOLDERS' AGREEMENT, COPIES OF WHICH ARE ON FILE AT THE OFFICE OF THE ISSUER AND WILL BE FURNISHED WITHOUT CHARGE TO THE HOLDER OF SUCH SHARES UPON WRITTEN REQUEST." In addition, certificates representing shares of Common Stock owned by any permitted transferees who are residents of certain states shall bear any legends required by the laws of such states. Each Stockholder shall be bound by the requirements of such legends. Upon a Registration of any shares of Common Stock, the certificate representing the registered shares shall be replaced, at the expense of the Company, with certificates not bearing the legends required by Sections 10(a) and 10(b). 11. Absence of Other Arrangements. Each Stockholder hereby ----------------------------- represents and warrants to each other Stockholder that it has not entered into or agreed to be bound by any other arrangements or agreements of any kind with any other party with respect to the shares of Common Stock, including, but not limited to, arrangements or agreements with respect to the acquisition, disposition or voting of shares of Common Stock or any interest therein (whether or not such arrangements or agreements are with the Company, Kelso, Charter or holders of Common Stock that are not parties to this Agreement), except for the letter agreements, dated as of the date of the Closing, between Kelso and certain of the KIA V Designees, a copy of which is attached hereto as Exhibit A, the Subscription Agreements, the Registration Rights Agreement, the Management Agreement and any pledge agreements between Charter and the Charter Lenders entered into in compliance with Section 4.1. 12. Parties. 12.1. Assignment by the Company. The Company shall ------- ------------------------- have the right to assign to one or more Permitted Assignees, and/or the right to cause one or more Permitted Assignees to assume, all or any portion of its rights and obligations under Section 2.2 ("Right of First Refusal"), Section 4.2 ("Involuntary Transfers"), Section 5 ("Put Rights") and Section 6 ("Call Rights"), provided that any such assignment or assumption is accepted by the -------- proposed assignee or assignees. If the Company has not exercised its right to purchase shares of Common Stock pursuant to any such Section within 20 days of receipt by the Company -13- of the letter or notice giving rise to such right (or, in the case of Section 6, the giving of notice by the Company), then Kelso shall have the right to require the Company to assign such right to one or more Permitted Assignees. If such right to purchase is assigned to a Permitted Assignee or Permitted Assignees pursuant to this Section 12.1, such Permitted Assignee or Permitted Assignees shall be deemed to be the Company for purposes of any such purchases and the seller shall be obligated to sell to such Permitted Assignee or Permitted Assignees. 12.2. Assignment Generally. The provisions of this Agreement shall -------------------- be binding upon and inure to the benefit of the parties hereto and their respective heirs, legal representatives, successors and assigns, provided that -------- Charter shall not be permitted to assign any of its rights or cause a third party to assume any of its obligations under this Agreement, unless such assignment or assumption is in connection with a Transfer explicitly permitted by this Agreement and, prior to such assignment or assumption, such assignee complies with the requirements of Section 12.4. 12.3. Termination. Any party to, or person who is subject to, this ----------- Agreement which ceases to own any shares of Common Stock or any interest therein shall cease to be a party to, or person who is subject to, this Agreement and thereafter shall have no rights or obligations hereunder; provided, however, -------- ------- that a Transfer of shares of Common Stock not explicitly permitted under this Agreement shall not relieve any Stockholder of any of its obligations hereunder. Notwithstanding the foregoing, in connection with a Transfer to an Affiliate explicitly permitted by this Agreement, including, without limitation, pursuant to subsection 5 of Section 1.1, prior to any such Person ceasing to be an Affiliate of the Stockholder from whom such Person acquired its shares of Common Stock, such Person shall be obligated to transfer such shares of Common Stock back to such original Stockholder and such original Stockholder shall thereupon be subject to this Agreement again. 12.4. Agreements to Be Bound. Notwithstanding anything to the ---------------------- contrary contained in this Agreement, any Transfer of shares by Kelso to a Permitted Assignee or by Charter (other than pursuant to a Registration) shall be permitted under the terms of this Agreement only if the transferee of such shares of Common Stock shall agree in writing to be bound by the terms and conditions of this Agreement pursuant to an instrument of assignment and assumption reasonably satisfactory in substance and form, in -14- the case of a Transfer by Kelso, to Charter and, in the case of a Transfer by Charter, to KIA V. Upon the execution of the instrument of assignment and assumption by such transferee, such transferee shall be deemed to be Kelso or Charter, as the case may be, for all purposes of this Agreement, provided, -------- however, that Section 3.3 ("Tag-Along Rights"), Section 5 ("Put Rights"), - ------- Section 8 ("Exit Payments") and Section 14.2 ("Sales Incentive Fee") shall not apply to any transferee of Charter (other than a transferee permitted under subsection 5 of Section 1.1 (an "Affiliate Transferee"), or a third party transferee which has acquired Charter's shares of Common Stock in accordance with Section 2.2 and which Kelso has approved, such approval not to be unreasonably withheld). Notwithstanding anything herein to the contrary, Charter shall exercise all rights hereunder on behalf of any such Affiliate Transferee and the Company and Kelso shall be entitled to deal exclusively with Charter and rely on the consent, waiver or any other action by Charter as the consent, waiver or other action, as the case may be, of any such Affiliate Transferee. 13. Defined Terms. As used in this Agreement, the following terms ------------- shall have the meanings ascribed to them below: "Affiliate": A Person that directly, or indirectly through one or --------- more intermediaries, controls, or is controlled by, or is under common control with, the Person specified. "Carrying Value": The price paid by a Stockholder for any share of -------------- Common Stock together with simple interest at a rate of 6% per annum from the date of the purchase of such share by such Stockholder through the date of the purchase by the Company less any distributions made to such Stockholder in respect of any such share. "CCE": Charter Communications Entertainment, L.P., a Delaware limited --- partnership. "CCE I": Charter Communications Entertainment I, L.P., a Delaware ----- limited partnership. "Cencom": Cencom Cable Television, Inc., a Delaware corporation. ------ "Cencom Contingent Payment Agreement": The Contingent Payment ----------------------------------- Agreement, dated as of September 29, -15- 1995, as the same shall be amended from time to time, among CCE, CCT Holdings Corp. and Cencom. "Class A Common Stock": the Company's Class A common stock, par value -------------------- $.01 per share. "Class B Common Stock": the Company's Class B common stock, par value -------------------- $.01 per share. "Closing": January 18, 1995. ------- "Common Stock": The Company's Class A Common Stock and Class B Common ------------ Stock. "KIA V Designee": Any of the following individuals or entities: -------------- Richard Cyert, Steven P. Dolberg, Louis and Patricia Kelso Trust, William A. Marquard, John F. McGillicuddy, Frank T. Nickell IRA, David M. Roderick, John Rutledge, George L. Shinn and Dieter Spethmann. "Management Agreement": The Amended and Restated Management -------------------- Agreement, dated as of the date hereof, as the same shall be amended from time to time between CCE I and Charter. "Permitted Assignee": Kelso, any Affiliate of Kelso, any KIA V ------------------ Designee and any Affiliate of a KIA V Designee. "Person": An individual, corporation, partnership, association, ------ trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Registration Rights Agreement": The Registration Rights Agreement, ----------------------------- dated as of the Closing, as the same shall be amended from time to time, among the Company, KIA V, KEP V and Charter. "Subscription Agreements": The Subscription Agreements, each dated as ----------------------- of the Closing, between the Company and each of Charter, KIA V and KEP V. "Transfer (or any variation thereof used herein)": Any direct or ----------------------------------------------- indirect sale, assignment, mortgage, transfer, pledge, hypothecation or other disposal or any arrangement or agreement with respect to any of the foregoing. -16- 14. Miscellaneous. 14.1. Sales Incentive Fee. In consideration of ------------- ------------------- Charter's marketing and sales efforts in selling the Company, the Company agrees that after the distribution provided in Section 8(a)(i), if required, it will redeem all of Charter's shares of Class B Common Stock for $1,000 per share. Such redemption shall occur upon the earliest of (i) the disposition by Kelso, - together with any Permitted Assignees, of all or substantially all of their shares of Common Stock, (ii) a Sale of 100% of the Company and (iii) the closing -- --- of an IPO. 14.2. Recapitalizations, Exchanges, etc. Affecting the Common Stock. ------------------------------------------------------------- Except as otherwise provided herein, the provisions of this Agreement shall apply to the full extent set forth herein with respect to (a) the shares of - Common Stock and (b) any and all shares of capital stock of the Company or any - successor or assign of the Company (whether by merger, consolidation, sale of assets or otherwise) which may be issued in respect of, in exchange for, or in substitution for the shares of Common Stock, by reason of any stock dividend, split, reverse split, combination, recapitalization, reclassification, merger, consolidation or otherwise. 14.3. Actions Requiring Approval of Stockholders. Without the prior ------------------------------------------ written approval of each of the Stockholders, the Company shall not (a) incur, - guarantee or assume any indebtedness for borrowed money or (b) reserve for - issuance, authorize the issuance of, agree to issue or issue (i) any additional - shares of capital stock (presently or hereafter authorized and whether authorized and unissued shares or treasury shares), (ii) any security (debt or -- equity) convertible into or exchangeable for shares of capital stock of the Company or (iii) any options, warrants or rights to acquire shares of capital --- stock of the Company. 14.4. No Third Party Beneficiaries. Except as otherwise provided ---------------------------- herein, this Agreement is not intended to confer upon any person, except for the parties hereto, any rights or remedies hereunder. 14.5. Mechanics of Payment. If at any time the Company purchases any -------------------- shares of Common Stock pursuant to this Agreement, the Company may pay the purchase price determined under this Agreement for the shares of Common Stock it purchases by wire transfer of funds or company check in the amount of the purchase price, and upon receipt of payment of such purchase price or, pursuant to Section 7, any portion thereof, the seller shall deliver the certificates -17- representing the number of shares of Common Stock being purchased in a form suitable for transfer, duly endorsed in blank, and free and clear of any lien, claim or encumbrance. Notwithstanding anything in this Agreement to the contrary, the Company shall not be required to make any payment for shares of Common Stock purchased hereunder until delivery to it of the certificates representing such shares or evidence or an affidavit, in either case in form and substance reasonably satisfactory to the Company of loss, theft or destruction of such certificates. If the Company is purchasing less than all the shares of Common Stock represented by a single certificate, the Company shall deliver to the seller a certificate for any unpurchased shares of Common Stock. 14.6. Further Assurances. Each party hereto or person subject hereto ------------------ shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments and documents as any other party hereto or person subject hereto may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. 14.7. Amendment and Modification. This Agreement may be amended, -------------------------- modified or supplemented only by the written agreement of all the parties hereto. 14.8. Governing Law. This Agreement and the rights and obligations ------------- of the parties hereunder and the persons subject hereto shall be governed by, and construed and interpreted in accordance with, the law of the State of Delaware, without giving effect to the choice of law principles thereof. 14.9. Invalidity of Provision. The invalidity or unenforceability of ----------------------- any provision of this Agreement in any jurisdiction shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of this Agreement, including that provision, in any other jurisdiction. 14.10. Notices. All notices, requests, demands, letters, waivers and ------- other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if (a) delivered - personally, (b) mailed, certified or registered mail with - -18- postage prepaid, (c) sent by next-day or overnight mail or delivery or (d) sent - - by fax, as follows: (i) If to the Company, to it at: CCA Holdings Corp. 12444 Powerscourt Drive Suite 400 St. Louis, Missouri 63131 Attention: Jerald L. Kent with a copy to: Kelso & Company 350 Park Avenue, 21st Floor New York, New York 10022 Attention: James J. Connors, II, Esq. (ii) If to Charter, to it at: Charter Communications, Inc. 12444 Powerscourt Drive Suite 400 St. Louis, Missouri 63131 Attention: Jerald L. Kent with a copy to: Paul, Hastings, Janofsky & Walker 399 Park Avenue New York, New York 10022 Attention: Daniel G. Bergstein, Esq. (iii) If to KIA V, to it at: Kelso Investment Associates V, L.P. c/o Kelso & Company 350 Park Avenue, 21st Floor New York, New York 10022 Attention: James J. Connors, II, Esq. (iv) If to KEP V, to it at: Kelso Equity Partners V, L.P. c/o Kelso & Company 350 Park Avenue, 21st Floor New York, New York 10022 Attention: James J. Connors, II, Esq. -19- or to such other person or address as any party shall specify by notice in writing to the Company and the other Stockholder(s). All such notices, requests, demands, letters, waivers and other communications shall be deemed to have been received (w) if by personal delivery on the day after such delivery, (x) if by - - certified or registered mail, on the fifth business day after the mailing thereof, (y) if by next-day or overnight mail or delivery, on the day delivered - or (z) if by fax, on the next day following the day on which such fax was sent, - provided that a copy is also sent by certified or registered mail. 14.11. Headings; Execution in Counterparts. The headings and ----------------------------------- captions contained herein are for convenience and shall not control or affect the meaning or construction of any provision hereof. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and which together shall constitute one and the same instrument. 14.12. Injunctive Relief. The shares of Common Stock cannot readily ----------------- be purchased or sold in the open market, and for that reason, among others, the parties hereto would be irreparably damaged in the event this Agreement is not specifically enforced. Each of the parties therefore agrees that in the event of a breach of any provision of this Agreement, the aggrieved party may elect to institute and prosecute proceedings in any court of competent jurisdiction to enforce specific performance or to enjoin the continuing breach of this Agreement. Such reme dies shall, however, be cumulative and not exclusive, and shall be in addition to any other remedy which any such party may have. 14.13. Entire Agreement. This Agreement, together with the ---------------- Subscription Agreements and the Registration Rights Agreement, embodies the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, representations, warranties, covenants or under takings relating to the shares of Common Stock, other than those expressly set forth or referred to herein or as set forth in the Subscription Agreements and the Registration Rights Agreement. This Agreement supersedes all prior agreements and understandings among the parties with respect to such subject matter. -20- IN WITNESS WHEREOF, this Agreement has been signed by each of the parties hereto, effective as of the date first above written. CCA HOLDINGS CORP. By: /s/ Theodore W. Browne, II _______________________________ Name: Theodore W. Browne, II Title: Executive Vice President KELSO INVESTMENT ASSOCIATES V, L.P. By: Kelso Partners V, L.P. as General Partner By: /s/ George E. Matelich _______________________________ as General Partner KELSO EQUITY PARTNERS V, L.P. By: /s/ George E. Matelich _______________________________ as General Partner CHARTER COMMUNICATIONS, INC. By: /s/ Theodore W. Browne, II _______________________________ Name: Theodore W. Browne, II Title: Executive Vice President -21- EX-10.20 37 REGISTRATION RIGHTS AGREEMENT 1/18/95 EXHIBIT 10.20 ================================================================================ REGISTRATION RIGHTS AGREEMENT among CCA HOLDINGS CORP. and KELSO INVESTMENT ASSOCIATES V, L.P. and KELSO EQUITY PARTNERS V, L.P. and CHARTER COMMUNICATIONS, INC. Dated as of January 18, 1995 ================================================================================ TABLE OF CONTENTS ----------------- Page ---- 1. Registrations Upon Request.................. 1 1.1. Requests.............................. 1 1.2. Registration Statement Form........... 3 1.3. Expenses.............................. 3 1.4. Priority in Demand Registrations...... 3 1.5. No Company Initiated Registration..... 3 2. Incidental Registrations.................... 4 3. Registration Procedures..................... 5 4. Underwritten Offerings...................... 10 4.1. Underwriting Agreement................ 10 4.2. Selection of Underwriters............. 11 5. Holdback Agreements......................... 11 6. Preparation; Reasonable Investigation....... 12 7. No Grant of Future Registration Rights...... 12 8. Kelso Designees and Permitted Transferees... 12 9. Indemnification............................. 13 9.1. Indemnification by the Company........ 13 9.2. Indemnification by the Sellers........ 13 9.3. Notices of Claims, etc................ 14 9.4. Other Indemnification................. 15 9.5. Indemnification Payments.............. 15 9.6. Other Remedies........................ 15 10. Definitions................................. 16 11. Miscellaneous............................... 18 11.1. Rule 144 etc......................... 18 11.2. Successors, Assigns and Transferees.. 19 11.3. Stock Splits, etc.................... 19 11.4. Amendment and Modification........... 19 11.5. Governing Law........................ 19 11.6. Invalidity of Provision.............. 20 11.7. Notices.............................. 20 11.8. Headings; Execution in Counterparts.. 21 11.9. Injunctive Relief.................... 21 11.10 Entire Agreement..................... 21 11.11. Term................................. 22 REGISTRATION RIGHTS AGREEMENT ----------------------------- REGISTRATION RIGHTS AGREEMENT, dated as of January 18, 1995, among CCA Holdings Corp., a Delaware corporation (the "Company"), Kelso Investment Associates V, L.P., a Delaware limited partnership ("KIA V"), Kelso Equity Partners V, L.P., a Delaware limited partnership ("KEP V", together with KIA V, "Kelso"), and Charter Communications, Inc., a Delaware corporation ("Charter"). Capitalized terms used herein without definition are defined in Section 10. 1. Registrations Upon Request. -------------------------- 1.1. Requests. At any time after the first anniversary hereof, the -------- Majority Stockholder shall have the right to make up to four requests and at any time after an IPO, Charter shall have the right to make up to two requests that the Company effect the registration under the Securities Act of any of the Registrable Securities of the Majority Stockholder or Charter, as the case may be, each such request to specify the intended method or methods of disposition thereof, provided, that the Company shall not be required to effect a -------- registration pursuant to this Section 1.1 upon the request of any Requesting Stockholder until a period of 180 days shall have elapsed from the effective date of the most recent registration previously effected pursuant to this Section 1.1 upon the request of such Requesting Stockholder and, provided, -------- further, that (a) if the Requesting Stockholder determines in its good faith - ------- - judgment to withdraw the proposed registration of any Registrable Securities requested to be registered pursuant to this Section 1.1 due to marketing or regulatory reasons or (b) the registration statement relating to any such - request is not declared effective within 90 days of the date such registration statement is first filed with the Commission or (c) if, within 180 days after - the registration relating to any such request has become effective, such registration is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason and the Company fails to have such stop order, injunction or other order or requirement removed, withdrawn or resolved to such Requesting Stockholder's reasonable satisfaction within 30 days or (d) the conditions to closing - specified in the purchase agreement or indemnity agreement entered into in connection with the registration relating to any such request are not satisfied (other than conditions to be satisfied by such Requesting Stockholder), then such request, shall not be counted for purposes of such Requesting Shareholder's request limitations set forth above. Upon any request by a Requesting Stockholder pursuant to this Section 1.1, the Company will promptly, but in any event within 15 days, give written notice of such request to the other Requesting Stockholder and thereupon the Company will use its best efforts to effect the registration under the Securities Act of: (i) the Registrable Securities which the Company has been so requested to register by the Requesting Stockholder, and (ii) all other Registrable Securities which the Company has been requested to register by the other Requesting Stockholder by written request given to the Company within 20 days after the giving of such written notice by the Company, all to the extent required to permit the disposition (in accordance with the Requesting Stockholder's intended method or methods of disposition) of the Registrable Securities so to be registered. Notwithstanding the foregoing, but subject to the rights of holders of Registrable Securities under Section 2, (a) - if the Board determines in its good faith judgment, after consultation with a firm of nationally recognized underwriters, that there will be an adverse effect on a then contemplated initial public offering of the Company's equity securities, the Company may defer the filing (but not the preparation) of the registration statement which is required to effect any registration pursuant to this Section 1.1, during the period starting with the thirtieth day immediately preceding the date of anticipated filing by the Company of, and ending on a date 60 days following the effective date of, the registration statement relating to such initial public offering, provided that at all times the Company is in good -------- faith using all reasonable efforts to cause such registration statement to become effective and provided, further, that such period shall end on such -------- ------- earlier date as may be permitted by the underwriters of such underwritten public offering and (b) if the Company shall at any time furnish to the Requesting - Stockholder a certificate signed by the President of the Company stating that the Company has pending or in process a material transaction, the disclosure of which would, in the good faith judgment of the Board, materially and adversely affect the Company, the Company may defer the filing (but not the preparation) of a registration statement for up to 60 days (but the Company shall use its best efforts to -2- resolve the transaction and file the registration statement as soon as possible). 1.2. Registration Statement Form. Each registration requested --------------------------- pursuant to Section 1.1 shall be effected by the filing of a registration statement on a form agreed to by the Requesting Stockholder. 1.3. Expenses. The Company will pay all Registration Expenses in -------- connection with any registrations requested under Section 1.1; provided that any -------- seller thereunder shall pay all Registration Expenses to the extent required to be paid by such seller under applicable law. 1.4. Priority in Demand Registrations. If a registration pursuant to -------------------------------- this Section 1 involves an underwritten offering, and the managing underwriter (or, in the case of an offering which is not underwritten, an investment banker) shall advise the Company in writing (with a copy to each Person requesting registration of Registrable Securities) that, in its opinion, the number of securities requested and otherwise proposed to be included in such registration exceeds the number which can be sold in such offering, the Company will include in such registration to the extent of the number which the Company is so advised can be sold in such offering, first, the Registrable Securities of the ----- Requesting Stockholder requested to be included in such registration and the Registrable Securities of the other Requesting Stockholder requested to be included in such registration, pro rata, among such holders, on the basis of the --- ---- number of Registrable Securities requested to be included by such holders, and second, the securities, if any, being sold by the Company. Notwithstanding the - ------ foregoing, Charter (or any successor manager of the Company and its subsidiaries) will not be entitled to participate in any such registration requested by the Majority Stockholder if the managing underwriter (or, in the case of an offering that is not underwritten, an investment banker) shall determine in good faith that the participation of management would adversely affect the marketability of the securities being sold by the Majority Stockholder in such registration. 1.5. No Company Initiated Registration. After receipt of notice of a --------------------------------- requested registration pursuant to Section 1.1, the Company shall not initiate a registration of any of its securities for its own account until 90 days after such registration has been effected or such registration has been terminated. -3- 2. Incidental Registrations. If the Company at any time proposes to ------------------------ register any of its equity securities under the Securities Act (other than pursuant to Section 1 or a registration on Form S-4 or S-8 or any successor form), and the registration form to be used may be used for the registration of Registrable Securities, it will give prompt written notice to all holders of Registrable Securities of its intention to do so. Upon the written request of any such holder made within 30 days after the receipt of any such notice (which request shall specify the number of Registrable Securities intended to be disposed of by such holder and the intended method or methods of disposition thereof), the Company will use its best efforts to effect the registration under the Securities Act of all such Registrable Securities in accordance with such intended method or methods of disposition, provided that: -------- (a) if such registration shall be in connection with an initial public offering by the Company, the Company shall not include any Registrable Securities in such proposed registration if the Board shall have determined, after consultation with the managing underwriter for such offering, that it is not in the best interests of the Company to include any Registrable Securities in such registration; (b) if, at any time after giving written notice of its intention to register any equity securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register such equity securities, the Company may, at its election, give written notice of such determination to each holder of Registrable Securities and, thereupon, shall not be obligated to register any Registrable Securities in connection with such registration (but shall nevertheless pay the Registration Expenses in connection therewith), without prejudice, however, to the rights of the Majority Stockholder to request that a registration be effected under Section 1; and (c) if a registration pursuant to this Section 2 involves an underwritten offering, and the managing underwriter (or, in the case of an offering that is not underwritten, an investment banker) shall advise the Company in writing (with a copy to each holder of Registrable Securities requesting registration thereof) that, in its opinion, the number of securities requested and otherwise proposed to be included in such -4- registration exceeds the number which can be sold in such offering, the Company will include in such registration to the extent of the number which the Company is so advised can be sold in such offering, first, the ----- securities if any, being sold by the Company, and second, the Registrable ------ Securities of each holder requesting registration thereof, pro rata, among --- ---- such holders, on the basis of the number of Registrable Securities requested to be included by such holders. Notwithstanding the foregoing, Charter will not be entitled to participate in any such registration if the managing underwriter (or, in the case of an offering that is not underwritten, an investment banker) shall determine in good faith that the participation of management would adversely affect the marketability of the securities being sold by the Company in such registration. The Company will pay all Registration Expenses in connection with each registration of Registrable Securities requested pursuant to this Section 2, provided that each seller of Registrable Securities shall pay all Registration - -------- Expenses to the extent required to be paid by such seller under applicable law. No registration effected under this Section 2 shall relieve the Company from its obligation to effect registrations under Section 1. 3. Registration Procedures. If and whenever the Company is required ----------------------- to use its best efforts to effect the registration of any Registrable Securities under the Securities Act as provided in Sections 1 and 2, the Company will promptly: (a) prepare, and within 60 days thereafter file with the Commission, a registration statement with respect to such Registrable Securities, make all required filings with the NASD and use best efforts to cause such registration statement to become effective; (b) prepare and promptly file with the Commission such amendments and post-effective amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for so long as is required to comply with the provisions of the Securities Act and to complete the disposition of all securities covered by such registration statement in accordance with the intended method or methods of disposition thereof, but in no -5- event for a period of more than six months after such registration statement becomes effective; (c) furnish to counsel selected by the Majority Stockholder and each seller of Registrable Securities copies of all documents proposed to be filed with the Commission in connection with such registration, which documents will be subject to the review of such counsel and each seller and the Company shall not file any amendment and post-effective amendments or supplement to such registration statement or the prospectus used in connection therewith which any such seller shall have reasonably objected in writing on the grounds that such amendment or supplement does not comply (explaining why) in all material respects with the requirements of the Securities Act or of the rules or regulations thereunder; (d) furnish to each seller of Registrable Securities, without charge, such number of conformed copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits and documents filed therewith) and such number of copies of the prospectus included in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents, as such seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such seller in accordance with the intended method or methods of disposition thereof; (e) use its best efforts to register or qualify such Registrable Securities covered by such registration statement under the securities or blue sky laws of such jurisdictions as each seller shall reasonably request, and do any and all other acts and things which may be necessary or advisable to enable such seller to consummate the disposition of such Registrable Securities in such jurisdictions in accordance with the intended method or methods of disposition thereof, provided that the -------- Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it is not so qualified, subject itself to taxation in any jurisdiction wherein it is not so subject, or take any action which would subject it to general service of -6- process in any jurisdiction wherein it is not so subject; (f) use its best efforts to cause all Registrable Securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the seller or sellers thereof to consummate the disposition of such Registrable Securities in accordance with the intended method or methods of disposition thereof; (g) furnish to each seller of Registrable Securities a signed counterpart, addressed to the sellers, of (i) an opinion of counsel for the Company experienced in securities law matters, dated the effective date of the registration statement (and, if such registration includes an underwritten public offering, the date of the closing under the underwriting agreement), and (ii) a "comfort" letter (unless the registration is pursuant to Section 2 and such a letter is not otherwise being furnished to the Company), dated the effective date of such registration statement (and if such registration includes an underwritten public offering, dated the date of the closing under the underwriting agreement), signed by the independent public accountants who have issued an audit report on the Company's financial statements included in the registration statement, covering such matters as are customarily covered in opinions of issuer's counsel and in accountants' letters delivered to the underwriters in underwritten public offerings of securities and such other matters as the Majority Stockholder may reasonably request; (h) notify each seller of any Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event or existence of any fact as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a -7- material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and, as promptly as is practicable, prepare and furnish to such seller a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; (i) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement of the Company (in form complying with the provisions of Rule 158 under the Securities Act) covering the period of at least 12 months, but not more than 18 months, beginning with the first month after the effective date of the registration statement; (j) notify each seller of any Registrable Securities covered by such registration statement (i) when the prospectus or any prospectus - supplement or post-effective amendment has been filed, and, with respect to such registration statement or any post-effective amendment, when the same has become effective, (ii) of any request by the Commission for amendments -- or supplements to such registration statement or to amend or to supplement such prospectus or for additional information, (iii) of the issuance by the --- Commission of any stop order suspending the effectiveness of such registration statement or the initiation of any proceedings for that purpose and (iv) of the suspension of the qualification of such securities -- for offering or sale in any jurisdiction, or of the institution of any proceedings for any of such purposes; (k) use every reasonable effort to obtain the lifting of any stop order that might be issued suspending the effectiveness of such registration statement at the earliest possible moment; (l) use its best efforts (i) (A) to list such Registrable Securities - - on any securities exchange on -8- which the equity securities of the Company are then listed or, if no such equity securities are then listed, on an exchange selected by the Company, if such listing is then permitted under the rules of such exchange, or (B) - if such listing is not practicable, to secure designation of such securities as a NASDAQ "national market system security" within the meaning of Rule 11Aa2-1 under the Exchange Act or, failing that, to secure NASDAQ authorization for such Registrable Securities, and, without limiting the foregoing, to arrange for at least two market makers to register as such with respect to such Registrable Securities with the NASD, and (ii) to -- provide a transfer agent and registrar for such Registrable Securities not later than the effective date of such registration statement; (m) enter into such agreements and take such other actions as the sellers of Registrable Securities or the underwriters reasonably request in order to expedite or facilitate the disposition of such Registrable Securities, including, without limitation, preparing for, and participating in, such number of "road shows" and all such other customary selling efforts as the underwriters reasonably request in order to expedite or facilitate such disposition; and (n) use its reasonable best efforts to take all other steps necessary to effect the registration of such Registrable Securities contemplated hereby. The Company may require each seller of any Registrable Securities as to which any registration is being effected to furnish to the Company such information regarding such seller, its ownership of Registrable Securities and the disposition of such Registrable Securities as the Company may from time to time reasonably request in writing and as shall be required by law in connection therewith. Each such holder agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such holder not materially misleading. The Company agrees not to file or make any amendment to any registration statement with respect to any Registrable Securities, or any amendment of or supplement to the prospectus used in connection therewith, which refers to any seller of any Registrable Securities covered thereby by name, or otherwise identifies such seller as the holder of any Registrable Securities, without the consent of such -9- seller, such consent not to be unreasonably withheld, unless such disclosure is required by law. By acquisition of Registrable Securities, each holder of such Registrable Securities shall be deemed to have agreed that upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(h), such holder will promptly discontinue such holder's disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such holder's receipt of the copies of the supplemented or amended prospectus contemplated by Section 3(h). If so directed by the Company, each holder of Registrable Securities will deliver to the Company (at the Company's expense) all copies, other than permanent file copies, in such holder's possession of the prospectus covering such Registrable Securities at the time of receipt of such notice. In the event that the Company shall give any such notice, the period mentioned in Section 3(b) shall be extended by the number of days during the period from and including the date of the giving of such notice to and including the date when each seller of any Registrable Securities covered by such registration statement shall have received the copies of the supplemented or amended prospectus contemplated by Section 3(h). 4. Underwritten Offerings. ---------------------- 4.1. Underwriting Agreement. If requested by the underwriters for ---------------------- any underwritten offering by holders of Registrable Securities pursuant to a registration requested under Section 1 or Section 2, the Company shall enter into an underwriting agreement with the underwriters for such offering, such agreement to be reasonably satisfactory in substance and form to the Majority Stockholder and to the underwriters and to contain such representations and warranties by the Company and such other terms and provisions as are customarily contained in agreements of this type, including, without limitation, indemnities to the effect and to the extent provided in Section 9. The holders of Registrable Securities to be distributed by such underwriters shall be parties to such underwriting agreement and may, at their option, require that any or all of the representations and warranties by, and the agreements on the part of, the Company to and for the benefit of such underwriters be made to and for the benefit of such holders of Registrable Securities and that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement shall also be conditions precedent to -10- the obligations of such holders of Registrable Securities. No underwriting agreement (or other agreement in connection with such offering) shall require any holder of Registrable Securities to make any representations or warranties to or agreements with the Company or the underwriters other than representations, warranties or agreements regarding such holder, the ownership of such holder's Registrable Securities and such holder's intended method or methods of disposition and any other representation required by law or to furnish any indemnity to any Person which is broader than the indemnity furnished by such holder in Section 9.2. 4.2. Selection of Underwriters. If the Company at any time proposes ------------------------- to register any of its securities under the Securities Act for sale for its own account pursuant to an underwritten offering, the Company will have the right to select the managing underwriter (which shall be of nationally recognized standing) to administer the offering, but only with the approval of the Majority Stockholder, such approval not to be unreasonably withheld, provided that -------- whenever a registration requested pursuant to Section 1 is for an underwritten offering, the Majority Stockholder will have the right to select the managing underwriter (which shall be of nationally recognized standing) to administer the offering, but only with the approval of the Company, such approval not to be unreasonably withheld. 5. Holdback Agreements. (a) If and whenever the Company proposes to ------------------- register any of its equity securities under the Securities Act for its own account (other than on Form S-4 or S-8 or any successor form) or is required to use its best efforts to effect the registration of any Registrable Securities under the Securities Act pursuant to Section 1 or 2, each holder of Registrable Securities agrees by acquisition of such Registrable Securities not to effect any public sale or distribution, including any sale pursuant to Rule 144 under the Securities Act, of any Registrable Securities within seven days prior to and 90 days (unless advised in writing by the managing underwriter that a longer period, not to exceed 180 days, is required) after the effective date of the registration statement relating to such registration, except as part of such registration. (b) The Company agrees not to effect any public sale or distribution of its equity securities or securities convertible into or exchangeable or exercisable for any of such securities within seven days prior to and 90 days (unless advised in writing by the managing underwriter that a longer period, not to exceed 180 days, is required) after -11- the effective date of such registration statement (except as part of such registration or pursuant to a registration on Form S-4 or S-8 or any successor form). In addition, the Company shall cause each holder of its equity securities or any securities convertible into or exchangeable or exercisable for any of such securities, whether outstanding on the date of this Agreement or issued at any time after the date of this Agreement (other than any such securities acquired in a public offering), to agree not to effect any such public sale or distribution of such securities during such period, except as part of any such registration if permitted, and to cause each such holder to enter into a similar agreement to such effect with the Company. 6. Preparation; Reasonable Investigation. In connection with the ------------------------------------- preparation and filing of each regis tration statement registering Registrable Securities under the Securities Act, the Company will give the holders of such Registrable Securities so to be registered and their underwriters, if any, and their respective counsel and accountants the opportunity to participate in the preparation of such registration statement, each prospectus included therein or filed with the Commission, and each amendment thereof or supplement thereto, and will give each of them such access to the financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries and such opportunities to discuss the business of the Company with its officers and the independent public accountants who have issued audit reports on its financial statements as shall be reasonably requested by such holders in connection with such registration statement. 7. No Grant of Future Registration Rights. The Company shall not -------------------------------------- grant any other demand or incidental registration rights to any other Person without the prior written consent of the Majority Stockholder. 8. Kelso Designees and Permitted Transferees. The Majority ----------------------------------------- Stockholder shall have the right to have included in any registration pursuant to Section 1 or Section 2 any shares of Common Stock owned by any of the Kelso Designees as though such shares were Registrable Securities owned by the Majority Stockholder. Charter shall have the right to have included in any registration pursuant to Section 1 or Section 2 any shares of Common Stock owned by any permitted transferees of Charter under the Stockholders' Agreement as those such shares were Registrable Securities owned by Charter. -12- 9. Indemnification. --------------- 9.1. Indemnification by the Company. In the event of any ------------------------------ registration of any Registrable Securities pursuant to this Agreement, the Company will indemnify and hold harmless (a) the seller of such Registrable - Securities, (b) the directors, officers, partners, employees, agents and - Affiliates of such seller, (c) each Person who participates as an underwriter in - the offering or sale of such securities and (d) each person, if any, who - controls (with the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) any such seller, partner or underwriter against any and all losses, claims, damages or liabilities (or actions or proceedings in respect thereof), joint or several, directly or indirectly based upon or arising out of (i) any untrue statement or alleged untrue statement of a fact contained in any - registration statement under which such Registrable Securities were registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained therein or used in connection with the offering of securities covered thereby, or any amendment or supplement thereto, or (ii) any -- omission or alleged omission to state a fact required to be stated therein or necessary to make the statements therein not misleading; and the Company will reimburse each such indemnified party for any legal or any other expenses reasonably incurred by them in connection with investigating, preparing, pursuing or defending any such loss, claim, damage, liability, action or proceeding, except insofar as any such loss, claim, damage, liability, action, proceeding or expense arises out of or is based upon an untrue statement or omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company by such seller expressly for use in the preparation thereof. Such indemnity shall remain in full force and effect, regardless of any investigation made by such indemnified party and shall survive the transfer of such Registrable Securities by such seller. The indemnity agreement contained in this Section 9.1 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, action or proceeding if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld). 9.2. Indemnification by the Sellers. The Company may require, as a ------------------------------ condition to including any Registrable Securities in any registration statement filed pursuant to -13- Section 1 or 2 that the Company shall have received an undertaking satisfactory to it from each of the prospective sellers of such Registrable Securities to indemnify and hold harmless, severally, not jointly, in the same manner and to the same extent as set forth in Section 9.1, the Company, its directors and officers and each person, if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) the Company with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such seller expressly for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling Person and shall survive the transfer of such Registrable Securities by such seller. The indemnity agreement contained in this Section 9.2 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, action or proceeding if such settlement is effected without the consent of such seller (which consent shall not be unreasonably withheld). The indemnity provided by each seller of Registrable Securities under this Section 9.2 shall be limited in amount to the net amount of proceeds actually received by such seller from the sale of Registrable Securities pursuant to such registration statement. 9.3. Notices of Claims, etc. Promptly after receipt by an ---------------------- indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding paragraphs of this Section 9, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action or proceeding, provided that the failure of any indemnified party to -------- give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding paragraphs of this Section 9, except to the extent that the indemnifying party is materially prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, the indemnifying party will be entitled to participate therein and to assume the defense thereof, -14- jointly with any other indemnifying party similarly notified, to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof except for the reasonable fees and expenses of any counsel retained by such indemnified party to monitor such action or proceeding. Notwithstanding the foregoing, if such indemnified party and the indemnifying party reasonably determine, based upon advice of their respective independent counsel, that a conflict of interest may exist between the indemnified party and the indemnifying party with respect to such action and that it is advisable for such indemnified party to be represented by separate counsel, such indemnified party may retain other counsel, reasonably satisfactory to the indemnifying party, to represent such indemnified party, and the indemnifying party shall pay all reasonable fees and expenses of such counsel. No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of such indemnified party, which consent shall not be unreasonably withheld, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation. 9.4. Other Indemnification. Indemnification similar to that --------------------- specified in the preceding paragraphs of this Section 9 (with appropriate modifications) shall be given by the Company and each seller of Registrable Securities with respect to any required registration (other than under the Securities Act) or other qualification of such Registrable Securities under any federal or state law or regulation of any governmental authority. 9.5. Indemnification Payments. Any indemnification required to be ------------------------ made by an indemnifying party pursuant to this Section 9 shall be made by periodic payments to the indemnified party during the course of the action or proceeding, as and when bills are received by such indemnifying party with respect to an indemnifiable loss, claim, damage, liability or expense incurred by such indemnified party. 9.6. Other Remedies. If for any reason the foregoing indemnity is -------------- unavailable, or is insufficient to hold -15- harmless an indemnified party, other than by reason of the exceptions provided therein, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such losses, claims, damages, liabilities, actions, proceedings or expenses in such proportion as is appropriate to reflect the relative benefits to and faults of the indemnifying party on the one hand and the indemnified party on the other in connection with the offering of Registrable Securities (taking into account the portion of the proceeds of the offering realized by each such party) and the statements or omissions or alleged statements or omissions which resulted in such loss, claim, damage, liability, action, proceeding or expense, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statements or omissions. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. No party shall be liable for contribution under this Section 9.6 except to the extent and under such circumstances as such party would have been liable to indemnify under this Section 9 if such indemnification were enforceable under applicable law. 10. Definitions. For purposes of this Agreement, the following terms ----------- shall have the following respective meanings: "Affiliate": A Person that directly, or indirectly through one or --------- more intermediaries, controls, or is controlled by, or is under common control with, the Person specified. "Board": The Board of Directors of the Company. ----- "Commission": The Securities and Exchange Commission. ---------- "Common Stock": The Company's Class A Common Stock, par value $.01 ------------ per share. -16- "Exchange Act": The Securities Exchange Act of 1934, as amended, or ------------ any successor federal statute, and the rules and regulations thereunder which shall be in effect at the time. "IPO": as defined in the Stockholders' Agreement. --- "Kelso Designees": Any of the following individuals or entities: --------------- Richard Cyert, Steven P. Dolberg, Louis and Patricia Kelso Trust, William A. Marquard, John F. McGillicuddy, Frank T. Nickell IRA, David M. Roderick, John Rutledge, George L. Shinn and Dieter Spethmann and any of their permitted assigns under the Stockholders' Agreement. "Majority Stockholder": Any holder or holders of at least 50% of the -------------------- Registrable Securities then outstanding. "NASD": National Association of Securities Dealers, Inc. ---- "NASDAQ": The Nasdaq National Market. ------ "Person": An individual, corporation, partnership, joint venture, ------ association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Registrable Securities": The shares of Common Stock beneficially ---------------------- owned (within the meaning of Section 13d-3 of the Exchange Act) by Kelso, Charter or any other Person made a party hereto pursuant to Section 11.2. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (i) a registration statement with respect to the - sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (ii) they shall have been sold to the public pursuant to Rule 144 -- under the Securities Act, (iii) they shall have been otherwise transferred and --- subsequent disposition of them shall not require registration or qualification of them under the Securities Act of or any similar state law then in force or (iv) they shall have ceased to be outstanding. - --- "Registration Expenses": All expenses incident to the Company's --------------------- performance of or compliance with Section 1 and Section 2, including, without limitation, (i) registration, filing and NASD fees, (ii) fees and expenses of - -- complying with securities or blue sky laws, (iii) fees and --- -17- expenses associated with listing securities on an exchange or NASDAQ, (iv) word -- processing, duplicating and printing expenses, (v) messenger and delivery - expenses, (vi) fees and disbursements of counsel for the Company and of its -- independent public accountants, including the expenses of any special audits or "cold comfort" letters, (vii) reasonable fees and disbursements of any one --- counsel retained by the sellers of Registrable Securities, which counsel shall be designated by the Majority Stockholder, and (viii) any fees and disbursements ---- of underwriters customarily paid by issuers or sellers of securities, but excluding underwriting discounts and commissions and transfer taxes, if any. "Requesting Stockholder": shall mean any stockholder which is ---------------------- exercising its rights to request that the Company effect a registration pursuant to Section 1.1. "Securities Act": The Securities Act of 1933, as amended, or any -------------- successor federal statute, and the rules and regulations thereunder which shall be in effect at the time. "Stockholders' Agreement": The Stockholders' Agreement, dated as of ----------------------- the date hereof, as the same shall be amended from time to time, among the Company, KIA V, KEP V and Charter. 11. Miscellaneous. ------------- 11.1. Rule 144 etc. If the Company shall have filed a registration ------------ statement pursuant to the requirements of Section 12 of the Exchange Act or a registration statement pursuant to the requirements of the Securities Act relating to any class of equity securities, the Company will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the Commission thereunder, and will take such further action as any holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, - as such rule may be amended from time to time, or (b) any successor rule or - regulation hereafter the commission. Upon the request of any holder of Registrable Securities, the Company will deliver to such holder a written statement as to whether it has complied with such requirements. -18- 11.2. Successors, Assigns and Transferees. This Agreement shall be ----------------------------------- binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. In addition, and provided that an express assignment shall have been made, and a copy of which shall have been delivered to the Company, the provisions of this Agreement which are for the benefit of a holder of Registrable Securities shall be for the benefit of and enforceable by any subsequent holder of any Registrable Securities, provided -------- that Charter may only assign its rights hereunder to one or more of its Affiliates which have acquired Registrable Securities in accordance with the terms of the Stockholders' Agreement or any third party transferee which has acquired Charter's Registrable Securities in accordance with Section 2.2 of the Stockholders' Agreement and which the Majority Stockholder has approved, such approval not to be unreasonably withheld. Notwithstanding anything herein to the contrary, Charter shall exercise all rights hereunder on behalf of any such Affiliates and the Company and Kelso shall be entitled to deal exclusively with Charter and rely on the consent, waiver or any other action by Charter as the consent, waiver or other action, as the case may be, of any such Affiliates. 11.3. Stock Splits, etc. Each holder of Registrable Securities ----------------- agrees that it will vote to effect a stock split or combination with respect to any Registrable Securities in connection with any registration of such Registrable Securities hereunder, or otherwise, if the managing underwriter shall advise the Company in writing (or, in connection with an offering that is not underwritten, if an investment banker shall advise the Company in writing) that in its opinion such a stock split or combination would facilitate or increase the likelihood of success of the offering. 11.4. Amendment and Modification. This Agreement may be amended, -------------------------- modified or supplemented by the Company with the written consent of the Majority Stockholder and a majority (by number of shares) of any other holder of Registrable Securities whose interests would be adversely affected by such amendment. 11.5. Governing Law. This Agreement and the rights and obligations ------------- of the parties hereunder and the persons subject hereto shall be governed by, and construed and interpreted in accordance with, the law of the State of Delaware, without giving effect to the choice of law princples thereof. -19- 11.6. Invalidity of Provision. The invalidity or unenforceability of ----------------------- any provision of this Agreement in any jurisdiction shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of this Agreement, including that provision, in any other jurisdiction. 11.7. Notices. All notices, requests, demands, letters, waivers and ------- other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if (a) delivered - personally, (b) mailed, certified or registered mail with postage prepaid, (c) - - sent by next-day or overnight mail or delivery or (d) sent by telecopy or - telegram, as follows: (i) If to the Company, to it at: CCA Holdings Corp. 12444 Powerscourt Drive Suite 550 St. Louis, Missouri 63131 Attention: Jerald L. Kent with a copy to: Kelso & Company 350 Park Avenue, 21st Floor New York, New York 10022 Attention: James J. Connors, II, Esq. (ii) If to Charter, to it at: Charter Communications, Inc. 12444 Powerscourt Drive Suite 550 St. Louis, Missouri 63131 Attention: Jerald L. Kent with a copy to: Paul, Hastings, Janofsky & Walker 399 Park Avenue New York, NY 10022 Attention: Daniel G. Bergstein, Esq. -20- (iii) If to Kelso, to it at: KIA Investment Associates V, L.P. Kelso Equity Partners V, L.P. c/o Kelso & Company 350 Park Avenue, 21st Floor New York, New York 10022 Attention: James J. Connors, II, Esq. (iv) If to any other holder of Registrable Securities, to the address of such holder as set forth in the books and records of the Company or to such other person or address as any party shall specify by notice in writing to the Company. All such notices, requests, demands, letters, waivers and other communications shall be deemed to have been received (w) if by - personal delivery on the day after such delivery, (x) if by certified or - registered mail, on the fifth business day after the mailing thereof, (y) if by - next-day or overnight mail or delivery, on the day delivered or (z) if by - telecopy or telegram, on the next day following the day on which such telecopy or telegram was sent, provided that a copy is also sent by certified or registered mail. 11.8. Headings; Execution in Counterparts. The headings and captions ----------------------------------- contained herein are for convenience and shall not control or affect the meaning or construction of any provision hereof. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and which together shall constitute one and the same instrument. 11.9. Injunctive Relief. Each of the parties recognizes and agrees ----------------- that money damages may be insufficient and, therefore, in the event of a breach of any provision of this Agreement the aggrieved party may elect to institute and prosecute proceedings in any court of competent jurisdiction to enforce specific performance or to enjoin the continuing breach of this Agreement. Such remedies shall, however, be cumulative and not exclusive, and shall be in addition to any other remedy which such party may have. 11.10. Entire Agreement. This Agreement, together with the ---------------- Stockholders' Agreement, is intended by the parties hereto as a final expression of their agreement and intended to be a complete and exclusive statement of their agreement and understanding in respect of the subject -21- matter contained herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 11.11. Term. This Agreement shall be effective as of the date hereof ---- and shall continue in effect thereafter until the earlier of (a) its - termination by the consent of the parties hereto or their respective successors in interest and (b) the date on which no Registrable Securities remain - outstanding. IN WITNESS WHEREOF, this Agreement has been signed by each of the parties hereto, effective as of the date first written above. CCA HOLDINGS CORP. By: /s/ Jerald L. Kent ----------------------------------- Name: Jerald L. Kent Title: Executive Vice President KELSO INVESTMENT ASSOCIATES V, L.P. By: Kelso Partners V, L.P. General Partner By: /s/ George E. Matelich ---------------------------------- General Partner KELSO EQUITY PARTNERS V, L.P. By: /s/ George E. Matelich ---------------------------------- General Partner CHARTER COMMUNICATIONS, INC. By: /s/ Jerald L. Kent ----------------------------------- Name: Jerald L. Kent Title: Executive Vice President -22- EX-10.21 38 AMENDMENT #1 TO REGISTRATION RIGHTS AGREEMENT EXHIBIT 10.21 AMENDMENT NUMBER ONE TO REGISTRATION RIGHTS AGREEMENT AMENDMENT NUMBER ONE, dated as of September 29, 1995, to the Registration Rights Agreement, dated as of January 18, 1995 (the "Registration Rights Agreement"), among CCA Holdings Corp., a Delaware corporation, Kelso Investment Associates V, L.P., a Delaware limited partnership, Kelso Equity Partners V, L.P., a Delaware limited partnership, and Charter Communications, Inc., a Delaware corporation. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. The definition of "Requesting Stockholder" is hereby replaced in its entirety with the following: " 'Requesting Stockholder': shall mean any stockholder which may ---------------------- exercise its rights to request that the Company effect a registration pursuant to Section 1.1." 2. Except as specifically amended hereby, the Registration Rights Agreement remains in full force and effect. 3. This Amendment Number One may be executed in any number of counterparts, each of which shall be deemed to be an original and which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned have executed this Amendment Number One as of the date first above written. CCA HOLDINGS CORP. /s/ Theodore W. Browne, II By: _________________________________ Name: Theodore W. Browne, II Title: Executive Vice President KELSO INVESTMENT ASSOCIATES V, L.P. By: Kelso Partners V, L.P. General Partner /s/ George E. Matelich By: ________________________________ General Partner KELSO EQUITY PARTNERS V, L.P. /s/ George E. Matelich By: ________________________________ General Partner CHARTER COMMUNICATIONS, INC. /s/ Theodore W. Browne, II By: _________________________________ Name: Theodore W. Browne, II Title: Executive Vice President 2 EX-12.1 39 CROWN SYSTEMS, RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12.1 CROWN SYSTEMS RATIO OF EARNINGS TO FIXED CHARGES CALCULATION (IN THOUSANDS, EXCEPT RATIO AMOUNTS)
1992 1993 1994 ---- ---- ---- Earnings - -------- Loss before income taxes $(29,539) $(27,213) $(28,183) Fixed charges 19,547 12,051 15,053 ---------- ---------- ---------- Earnings $(9,992) $(15,162) $(13,130) ========== ========== ========== Fixed charges - ------------- Interest expense 19,547 12,051 15,053 ----------- ---------- ---------- Total fixed charges $ 19,547 $12,051 $15,053 =========== ========== ========== Ratio of earnings to fixed charges(1) - - -
(1) Earnings for the years ended December 31, 1992, 1993 and 1994 were insufficient to cover the fixed charges by $29,539, $27,213 and $28,183, respectively. As a result of such deficiencies, the ratios are not presented above. EX-12.2 40 CCA HOLDINGS CORP & SUBSIDIARIES EXHIBIT 12.2 CCA HOLDINGS CORP. AND SUBSIDIARIES RATIO OF EARNINGS TO FIXED CHARGES CALCULATION (IN THOUSANDS, EXCEPT RATIO AMOUNTS)
1995 1996 ---- ---- Earnings - -------- Loss before income taxes $(41,761) $(38,634) Fixed charges 36,274 47,854 -------- -------- Earnings $ (5,487) $ 9,220 ======== ======== Fixed charges - ------------- Interest expense 35,461 46,654 Interest element of rentals 165 192 Amortization of debt costs 648 1,008 -------- -------- Total fixed charges $36,274 $ 47,854 ======== ======== Ratio of earnings to fixed charges(1) -- --
(1) Earnings for the years ended December 31, 1995 and 1996 were insufficient to cover the fixed charges by $41,761 and $38,634, respectively. As a result of such deficiencies, the ratios are not presented above. EX-21.1 41 LIST OF SUBSIDIARIES OF REGISTRANTS Exhibit 21.1 List of Subsidiaries of the Registrants CCA Holdings Corp.: - ----------------- CCA Acquisition Corp. (Delaware) Cencom Cable Entertainment, Inc. (Delaware) Charter Communications Entertainment, L.P. (Delaware) Charter Communications Entertainment I, L.P. (Delaware) Charter Communications Entertainment II, L.P. (Delaware) Charter Communications Radio St. Louis, LLC (Delaware) Cable Advertising of St. Louis, L.P. ("CASTL") (Missouri) CCA Acquisition Corp.: - --------------------- Cencom Cable Entertainment, Inc. (Delaware) Charter Communications Entertainment, L.P. (Delaware) Charter Communications Entertainment I, L.P. (Delaware) Charter Communications Entertainment II, L.P. (Delaware) Charter Communications Radio St. Louis, LLC (Delaware) Cable Advertising of St. Louis, L.P. ("CASTL") (Missouri) Cencom Cable Entertainment, Inc.: - -------------------------------- Charter Communications Entertainment, L.P. (Delaware) Charter Communications Entertainment I, L.P. (Delaware) Charter Communications Entertainment II, L.P. (Delaware) Charter Communications Radio St. Louis, LLC (Delaware) Cable Advertising of St. Louis, L.P. ("CASTL") (Missouri) Charter Communications Entertainment, L.P.: - ------------------------------------------ Charter Communications Entertainment I, L.P. (Delaware) Charter Communications Entertainment II, L.P. (Delaware) Charter Communications Radio St. Louis, LLC (Delaware) EX-23.1 42 CONSENT OF ARTHUR ANDERSEN LLP EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report dated February 21, 1997, relating to the consolidated financial statements of CCA Holdings Corp. and subsidiaries as of and for the years ended December 31, 1996 and 1995, (and to all references to our Firm) included in or made a part of this Registration Statement for the $82,000,000 Series B Senior Subordinated Notes due 1999 of CCA Holdings Corp. ARTHUR ANDERSEN LLP St. Louis, Missouri, April 30, 1997 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report dated February 21, 1997, relating to the consolidated financial statements of CCA Acquisition Corp. and subsidiaries as of and for the years ended December 31, 1996 and 1995, (and to all references to our Firm) included in or made a part of this Registration Statement for the $82,000,000 Series B Senior Subordinated Notes due 1999 of CCA Holdings Corp. ARTHUR ANDERSEN LLP St. Louis, Missouri, April 30, 1997 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report dated February 21, 1997, relating to the financial statements of Cencom Cable Entertainment, Inc. as of and for the years ended December 31, 1996 and 1995, (and to all references to our Firm) included in or made a part of this Registration Statement for the $82,000,000 Series B Senior Subordinated Notes due 1999 of CCA Holdings Corp. ARTHUR ANDERSEN LLP St. Louis, Missouri, April 30, 1997 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report dated February 21, 1997, relating to the financial statements of Charter Communications Entertainment, L.P. as of and for the years ended December 31, 1996 and 1995, (and to all references to our Firm) included in or made a part of this Registration Statement for the $82,000,000 Series B Senior Subordinated Notes due 1999 of CCA Holdings Corp. ARTHUR ANDERSEN LLP St. Louis, Missouri, April 30, 1997 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report dated February 21, 1997, relating to the financial statements of Charter Communications Entertainment I, L.P. as of and for the years ended December 31, 1996 and 1995, (and to all references to our Firm) included in or made a part of this Registration Statement for the $82,000,000 Series B Senior Subordinated Notes due 1999 of CCA Holdings Corp. ARTHUR ANDERSEN LLP St. Louis, Missouri, April 30, 1997 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report dated February 21, 1997, relating to the financial statements of Charter Communications Entertainment II, L.P. as of December 31, 1996 and 1995 and for the year ended December 31, 1996 and for the period from inception (April 20, 1995) to December 31, 1995, (and to all references to our Firm) included in or made a part of this Registration Statement for the $82,000,000 Series B Senior Subordinated Notes due 1999 of CCA Holdings Corp. ARTHUR ANDERSEN LLP St. Louis, Missouri, April 30, 1997 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report dated July 31, 1996, relating to the financial statements of Cencom Cable Entertainment, Inc.--Missouri System as of and for the year ended December 31, 1994, (and to all references to our Firm) included in or made a part of this Registration Statement for the $82,000,000 Series B Senior Subordinated Notes due 1999 of CCA Holdings Corp. ARTHUR ANDERSEN LLP St. Louis, Missouri, April 30, 1997 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report dated July 31, 1996, relating to the financial statements of Cencom Cable Income Partners, L.P.--Illinois System as of and for the years ended December 31, 1995 and 1994, (and to all references to our Firm) included in or made a part of this Registration Statement for the $82,000,000 Series B Senior Subordinated Notes due 1999 of CCA Holdings Corp. ARTHUR ANDERSEN LLP St. Louis, Missouri, April 30, 1997 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report dated November 22, 1995, relating to the financial statements of Cencom Cable Television, Inc.--Los Angeles and Riverside Systems as of September 29, 1995 and December 31, 1994, and for the nine months ended September 29, 1995 and the years ended December 31, 1994 and 1993, (and to all references to our Firm) included in or made a part of this Registration Statement for the $82,000,000 Series B Senior Subordinated Notes due 1999 of CCA Holdings Corp. ARTHUR ANDERSEN LLP Dallas, Texas, April 30, 1997 EX-23.2 43 CONSENT OF ERNST & YOUNG LLP EXHIBIT 23.2 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Independent Certified Public Accountants" and to the use of our report dated February 17, 1997, with respect to the Missouri Cable Television System to be sold by Masada Cable Partners, L.P. to Charter Communications Entertainment I, L.P., in this Registration Statement for the $82,000,000 Series B Senior Subordinated Notes due 1999 of CCA Holdings Corp. ERNST & YOUNG LLP Birmingham, Alabama May 1, 1997 EX-23.3 44 CONSENT OF KPMG PEAT MARWICK LLP Exhibit 23.3 INDEPENDENT AUDITORS' CONSENT We consent to the use of our reports included herein and to the reference to our firm under the headings "Independent Certified Public Accountants" and "Unaudited Selected Historical and Unaudited Pro Forma Financial Data" in the registration statement. KPMG Peat Marwick LLP Dallas, Texas April 30, 1997 EX-23.4 45 CONSENT OF PIAKER & LYONS, P.C. EXHIBIT 23.4 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report dated July 25, 1996, on the financial statements of United Video Cablevision, Inc. Massachusetts and Missouri Divisions included in or made part of CCA Holdings Corp.'s Form S-4 registration statement. Piaker & Lyons, P.C. Vestal, New York April 30, 1997 EX-25.1 46 STATE OF ELIGIBILITY, ON FORM T-1 EXHIBIT 25.1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM T-1 Statement of Eligibility Under the Trust Indenture Act of 1939 of a Corporation Designated to Act as Trustee Check if an Application to Determine Eligibility of a Trustee Pursuant to Section 305(b)(2) _______________ HARRIS TRUST AND SAVINGS BANK (Name of Trustee) Illinois 36-1194448 (I.R.S. Employer (State of Incorporation) Identification No.) 111 West Monroe Street, Chicago, Illinois 60603 (Address of principal executive offices) Daniel G. Donovan, Harris Trust and Savings Bank, 111 West Monroe Street, Chicago, Illinois, 60603 312-461-2908 (Name, address and telephone number for agent for service) CCA HOLDINGS CORP. (Name of Obligor) Delaware 43-1720013 (I.R.S. Employer (State of Incorporation) Identification No.) 12444 Powerscourt Drive Suite 400 St. Louis, Missouri 63131 (Address of principal executive offices) Senior Subordinated Notes (Title of indenture securities) 1. GENERAL INFORMATION. Furnish the following information as to the Trustee: (a) Name and address of each examining or supervising authority to which it is subject. Commissioner of Banks and Trust Companies, State of Illinois, Springfield, Illinois; Chicago Clearing House Association, 164 West Jackson Boulevard, Chicago, Illinois; Federal Deposit Insurance Corporation, Washington, D.C.; The Board of Governors of the Federal Reserve System,Washington, D.C. (b) Whether it is authorized to exercise corporate trust powers. Harris Trust and Savings Bank is authorized to exercise corporate trust powers. 2. AFFILIATIONS WITH OBLIGOR. If the Obligor is an affiliate of the Trustee, describe each such affiliation. The Obligor is not an affiliate of the Trustee. 3. thru 15. NO RESPONSE NECESSARY 16. LIST OF EXHIBITS. 1. A copy of the articles of association of the Trustee as now in effect which includes the authority of the trustee to commence business and to exercise corporate trust powers. A copy of the Certificate of Merger dated April 1, 1972 between Harris Trust and Savings Bank, HTS Bank and Harris Bankcorp, Inc. which constitutes the articles of association of the Trustee as now in effect and includes the authority of the Trustee to commence business and to exercise corporate trust powers was filed in connection with the Registration Statement of Louisville Gas and Electric Company, File No. 2-44295, and is incorporated herein by reference. 2. A copy of the existing by-laws of the Trustee. A copy of the existing by-laws of the Trustee was filed in connection with the Registration Statement of Commercial Federal Corporation, File No. 333-20711, and is incorporated herein by reference. 3. The consents of the Trustee required by Section 321(b) of the Act. (included as Exhibit A on page 2 of this statement) 4. A copy of the latest report of condition of the Trustee published pursuant to law or the requirements of its supervising or examining authority. (included as Exhibit B on page 3 of this statement) SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee, HARRIS TRUST AND SAVINGS BANK, a corporation organized and existing under the laws of the State of Illinois, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Chicago, and State of Illinois, on the 6th day of May, 1997. Harris Trust and Savings Bank By: /s/ DGDonovan ------------- D. G. Donovan Assistant Vice President EXHIBIT A The consents of the Trustee required by Section 321(b) of the Act. Harris Trust and Savings Bank, as the Trustee herein named, hereby consents that reports of examinations of said trustee by Federal and State authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor. Harris Trust and Savings Bank By: /s/ DGDonovan -------------- D.G. Donovan Assistant Vice President 2 EXHIBIT B Attached is a true and correct copy of the statement of condition of Harris Trust and Savings Bank as of December 31, 1996, as published in accordance with a call made by the State Banking Authority and by the Federal Reserve Bank of the Seventh Reserve District. [LOGO OF HARRIS BANK] HARRIS BANK Harris Trust and Savings Bank 111 West Monroe Street Chicago, Illinois 60603 of Chicago, Illinois, And Foreign and Domestic Subsidiaries, at the close of business on December 31, 1996, a state banking institution organized and operating under the banking laws of this State and a member of the Federal Reserve System. Published in accordance with a call made by the Commissioner of Banks and Trust Companies of the State of Illinois and by the Federal Reserve Bank of this District. Bank's Transit Number 71000288 THOUSANDS ASSETS OF DOLLARS Cash and balances due from depository institutions: Non-interest bearing balances $ 1,157,832 and currency and coin........... Interest bearing balances........ $ 658,287 Securities:............................. a. Held-to-maturity securities $ 0 b. Available-for-sale securities $ 2,759,331 Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBF's: Federal funds sold............... $ 316,275 Securities purchased under agreements to resell............ $ 0 Loans and lease financing receivables: Loans and leases, net of unearned income................. $ 8,199,096 LESS: Allowance for loan and lease losses.................... $ 108,408 ------------- Loans and leases, net of unearned income, allowance, and reserve (item 4.a minus 4.b)............. $ 8,090,688 Assets held in trading accounts......... $ 185,153 Premises and fixed assets (including capitalized leases).................... $ 180,043 Other real estate owned................. $ 582 Investments in unconsolidated subsidiaries and associated companies.. $ 82 Customer's liability to this bank on acceptances outstanding................ $ 78,983 Intangible assets....................... $ 294,420 Other assets............................ $ 542,257 ----------- TOTAL ASSETS $14,263,933 =========== 3
LIABILITIES Deposits: In domestic offices................... $ 7,898,588 Non-interest bearing............. $ 3,135,907 Interest bearing................. $ 4,762,681 In foreign offices, Edge and Agreement subsidiaries, and IBF's.... $ 1,839,922 Non-interest bearing............. $ 35,116 Interest bearing................. $ 1,804,806 Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBF's: Federal funds purchased............... $ 1,615,797 Securities sold under agreements to repurchase........................... $ 376,270 Trading Liabilities Other borrowed money:................... $ 74,165 a. With remaining maturity of one year or less $ 697,591 b. With remaining maturity of more than one year $ 9,265 Bank's liability on acceptances executed and outstanding............... $ 78,983 Subordinated notes and debentures....... $ 310,000 Other liabilities....................... $ 170,785 ------------------------------ TOTAL LIABILITIES $13,071,366 ============================== EQUITY CAPITAL Common stock............................ $ 100,000 Surplus................................. $ 600,377 a. Undivided profits and capital reserves............................... $ 506,301 b. Net unrealized holding gains (losses) on available-for-sale securities ($14,111) ------------------------------ TOTAL EQUITY CAPITAL $ 1,192,567 ============================== Total liabilities, limited-life preferred stock, and equity capital.... $14,263,933 ==============================
I, Steve Neudecker, Vice President of the above-named bank, do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. STEVE NEUDECKER 1/29/97 We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and, to the best of our knowledge and belief, has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and the Commissioner of Banks and Trust Companies of the State of Illinois and is true and correct. EDWARD W. LYMAN, ALAN G. McNALLY, MARIBETH S. RAHE Directors. 4 EX-27.1 47 FINANCIAL DATA SCHEDULE--CCA HOLDINGS CORP.
5 0001038334 CCA HOLDINGS CORP. YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 2,934,939 0 5,836,916 (371,166) 0 8,999,959 249,145,896 (42,794,517) 744,080,870 29,276,003 566,963,402 0 0 800 (396,025) 744,080,870 143,023,261 143,023,261 0 142,289,623 893,795 0 46,654,019 (53,117,116) (53,117,116) (53,117,116) (1,515,558) 0 0 (38,634,050) 0 0
EX-27.2 48 FINANCIAL DATA SCHEDULE--CCA ACQUISITION CORP.
5 0001038332 CCA ACQUISITION CORP. YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 2,934,939 0 5,836,916 (371,166) 0 8,999,959 249,145,896 (42,794,517) 744,080,870 28,903,475 566,963,402 0 0 1 (22,698) 744,080,870 143,023,261 143,023,261 0 141,917,095 893,795 0 46,654,019 (52,744,638) (52,744,638) (52,744,638) (1,515,558) 0 0 (38,261,522) 0 0
EX-27.3 49 FINANCIAL DATA SCHEDULE--CENCOM CABLE ENTRTAINMNT
5 0001038336 CENCOM CABLE ENTERTAINMENT, INC. YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 0 0 0 0 0 0 0 0 122,582,298 0 104,843,403 0 0 245,973 (38,007,078) 122,582,298 0 0 0 0 0 0 12,404,598 (26,941,399) (26,941,399) (26,941,399) 0 0 0 (26,941,399) 0 0
EX-27.4 50 FINANCIAL DATA SCHEDULE--CHARTER COMMUNICATIONS
5 0001038335 CHARTER COMMUNICATIONS ENTERTAINMENT, L.P. YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 0 0 27,418,000 0 0 0 0 0 307,272,790 0 104,843,403 0 0 0 202,429,387 307,272,790 0 0 0 0 0 0 12,404,598 (76,947,787) (76,947,787) (76,947,787) 0 0 0 (76,947,787) 0 0
EX-99.1 51 LETTER OF TRANSMITTAL EXHIBIT 99.1 LETTER OF TRANSMITTAL TO TENDER SERIES A SENIOR SUBORDINATED NOTES DUE 1999 OF CCA HOLDINGS CORP. PURSUANT TO THE PROSPECTUS DATED , 1997 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1997 UNLESS EXTENDED (AS SO EXTENDED, THE "EXPIRATION DATE"). EXCEPT AS PROVIDED UNDER APPLICABLE SECURITIES LAWS, TENDERS OF OLD NOTES (AS DEFINED HEREIN) MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE UNLESS SUCH OLD NOTES HAVE BEEN ACCEPTED FOR EXCHANGE BY CCA HOLDINGS CORP. PRIOR THERETO. To: HARRIS TRUST AND SAVINGS BANK, EXCHANGE AGENT BY MAIL, BY HAND OR OVERNIGHT BY FACSIMILE: DELIVERY: Harris Trust and Savings Bank (212) 701-7636 c/o Harris Trust Company of New York 77 Water Street, 4th Floor New York, NY 10005 CONFIRMATION AND INFORMATION: Attn: Reorganization Department (212) 701-7649 Delivery of this Letter of Transmittal to an address other than as set forth above or transmission of instructions via a facsimile number other than the one listed above will not constitute valid delivery. The undersigned acknowledges receipt and review of the prospectus dated May , 1997 (the "Prospectus") of CCA Holdings Corp., a Delaware corporation ("Issuer") and this Letter of Transmittal relating to the Issuer's Series A Senior Subordinated Notes due 1999 ("Old Notes"), which constitutes the Issuer's offer ("Exchange Offer") to exchange Old Notes for Series B Subordinated Notes due 1999 ("New Notes") in accordance with the terms and conditions described in the Prospectus. Capitalized terms used but not defined herein shall have the meanings given to them in the Prospectus. This Letter of Transmittal must be used if (i) Old Notes are to be physically delivered herewith, (ii) delivery of Old Notes is to be made by book-entry transfer to the Exchange Agent's account at The Depository Trust Company ("Book-Entry Transfer Facility") pursuant to the procedures set forth in "The Exchange Offer--Procedures for Tendering" in the Prospectus, or (iii) the guaranteed delivery procedures described in the Prospectus under "The Exchange Offer--Guaranteed Delivery Procedures" are to be utilized. Delivery of documents to a Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent. A holder who wishes to tender Old Notes must, at a minimum, complete columns (1) and (3) in the box below, captioned "Description of Old Notes," and sign in the box below captioned "Sign Here." If only columns (1) and (3) are completed, the holder will be deemed to have tendered all Old Notes listed in column (3) of the box captioned "Description of Old Notes." If a holder wishes to tender less than all of such Old Notes, column (4) must be completed in full, and such holder should refer to Instruction 4 of the instructions hereto ("Instructions") regarding completion of this Letter of Transmittal. Holders who desire to tender their Old Notes and (i) whose Old Notes are not immediately available, (ii) who cannot deliver their Old Notes, this Letter of Transmittal and all other documents required hereby to the Exchange Agent prior to the Expiration Date, or (iii) who cannot complete the procedure for book-entry transfer on a timely basis, must tender their Old Notes pursuant to the guaranteed delivery procedure set forth in the Prospectus under the caption "The Exchange Offer-- Guaranteed Delivery Procedures." See Instruction 2. If the undersigned is not the person in whose name the Old Notes tendered are registered on the books of the Issuer, a properly completed bond power must be obtained from the registered holder of such Old Notes and submitted with this Letter of Transmittal in order to tender them pursuant to this Letter of Transmittal. See Instructions 1 and 5. PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING ANY INFORMATION BELOW. Ladies and Gentlemen: Pursuant to the offer by the Issuer to exchange up to $82,000,000 principal amount of Old Notes for up to $82,000,000 principal amount of New Notes, upon the terms and subject to the conditions set forth in the Prospectus and this Letter of Transmittal, the undersigned hereby tenders to the Issuer the Old Notes indicated below. Accrued interest on Old Notes accepted for exchange will not be paid, but will instead continue to accrue. Subject to and effective upon acceptance for exchange of the Old Notes tendered herewith, the undersigned hereby exchanges, assigns and transfers to or upon the order of the Issuer all right, title and interest in and to all the Old Notes that are being tendered hereby, and irrevocably constitutes and appoints the Exchange Agent the true and lawful agent and attorney-in-fact of the undersigned (with full knowledge that the Exchange Agent also acts as the agent of the Issuer) with respect to such Old Notes, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest) to (a) present such Old Notes and all evidences of transfer and authenticity to, or upon the order of, the Issuer for registration in the name of the undersigned on the books of the Issuer if the undersigned is not currently the registered holder thereof, (b) deliver certificates for such Old Notes, or transfer ownership of such Old Notes on the account books maintained by the Book-Entry Transfer Facility, together, in any such case, with all accompanying evidences of transfer and authenticity, to or upon the order of the Issuer upon receipt by the Exchange Agent as the undersigned's agent, of the New Notes to be issued in exchange therefor, (c) present such Old Notes for cancellation and transfer on the books of the Issuer and (d) receive all benefits and otherwise exercise all rights of beneficial ownership of such Old Notes, all in accordance with the terms of the Exchange Offer. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, exchange, assign and transfer the Old Notes tendered hereby, and that when the same are accepted for exchange and exchanged by the Issuer, the Issuer will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claims. The undersigned will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or the Issuer to be necessary or desirable to complete the exchange, assignment and transfer of the Old Notes tendered hereby. The undersigned further represents and warrants that (i) this Exchange Offer is being made in reliance on an interpretation by the staff of the Securities and Exchange Commission that the New Notes may be offered for resale, resold and otherwise transferred by the holders thereof without compliance with the registration and prospectus delivery provisions of the Securities Act of 1933, as amended (the "Securities Act"), (ii) the New Notes are being obtained in the ordinary course of business of the person receiving such New Notes, whether or not such person is the holder of the Old Notes, (iii) no such person has any arrangement with any person to participate in the distribution of such New Notes and (iv) no such person is an "affiliate" of the Issuer or any of the Guarantors within the meaning of Rule 405 under the Securities Act. If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of the New Notes. If the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, it agrees that it will deliver a prospectus in connection with any resale of such New Notes; however, by so agreeing and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Listed below are the Old Notes tendered by the undersigned upon the terms and conditions set forth in the Prospectus and this Letter of Transmittal. The undersigned understands that the minimum permitted tender is $1 million principal amount of Old Notes and that all other tenders must be in integral multiples of $1 million. DESCRIPTION OF OLD NOTES - ------------------------------------------------------------------------------- NAME(S) AND ADDRESS(ES) OF REGISTERED PRINCIPAL AMOUNT HOLDER(S) CERTIFICATE AGGREGATE TENDERED (MUST BE (PLEASE NUMBER(S)* PRINCIPAL AN FILL IN, IF (ATTACH SEPARATE AMOUNT OF INTEGRAL MULTIPLE BLANK) LIST IF NECESSARY) OLD NOTES OF $1 MILLION)** - ----------------------------------------------------------- ------------------ ------------------ ------------------ ------------------ ------------------ - ----------------------------------------------------------- *Need not be completed by holders tendering by book-entry transfer. ** Need not be completed by holders who wish to tender all Old Notes listed. Unless otherwise indicated in column (4), the holder(s) will be deemed to have tendered the entire aggregate principal amount represented by the Old Notes listed in column (3). NOTE: SIGNATURES MUST BE PROVIDED IN THE BOX BELOW CAPTIONED "SIGN HERE." PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. [_]CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE EXCHANGE AGENT'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE FOLLOWING: Name of Tendering Institution: _____________________________________________ Account Number: ____________________________________________________________ at The Depository Trust Company. Transaction Code Number: ___________________________________________________ [_]CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s): ___________________________________________ Date of Execution of Notice of Guaranteed Delivery: ________________________ Name of Eligible Institution that Guaranteed Delivery: _____________________ If Delivery is by Book-Entry Transfer, provide Account Number: _____________ at The Depository Trust Company. [_]CHECK HERE IF OLD NOTES ARE BEING DELIVERED HEREWITH TO BE COMPLETED BY ALL TENDERING HOLDERS OF OLD NOTES PAYER'S NAME: HARRIS TRUST AND SAVINGS BANK - ------------------------------------------------------------------------------- PART I--PLEASE PROVIDE SUBSTITUTE YOUR TIN IN THE BOX AT TIN: _____________________ FORM W-9 RIGHT AND CERTIFY BY Social Security Number or SIGNING AND DATING BELOW. Emplyer Identification Number DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE ---------------------------------------------------------- PART II--For Payees Exempt From Backup Withholding PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER (TIN) AND CERTIFICATION (See Instructions) 1. The number shown on this form is my correct Tax- payer Identification Number (or I am waiting for a number to be issued to me), and ---------------------------------------------------------- CERTIFICATION--UNDER PENALTIES OF PERJURY, I CERTIFY THAT: 2. I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service ("IRS") that I am subject to backup with- holding as a result of a failure to report all interest or dividends, or (c) the IRS has noti- fied me that I am no longer subject to backup withholding. Signature: __________________________ Dated: ________ Instructions for Parts 1 and 2. Individuals (including sole proprietors) are not exempt from backup withholding. Corporations are exempt from backup withholding for certain payments, such as interest and dividends. For a complete list of exempt payees, please consult your tax advisor. If you are exempt from backup withholding, you should still complete this form to avoid possible erroneous backup withholding. Enter your correct Taxpayer Identification Number ("TIN") in Part 1, write "Exempt" in Part 2, and sign and date the form. If you are a nonresident alien or a foreign entity not subject to backup withholding, you must provide to the Issuer a completed Form W-8, Certificate of Foreign Status. INSTRUCTIONS FOR CERTIFICATION. YOU MUST CROSS OUT ITEM (2) IN THE BOX MARKED "CERTIFICATION" IN THE SUBSTITUTE FORM W-9 ABOVE IF YOU HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE CURRENTLY SUBJECT TO BACKUP WITHHOLDING BECAUSE OF UNDERREPORTING INTEREST OR DIVIDENDS ON YOUR TAX RETURN. NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU AS A RESULT OF THE EXCHANGE OFFER OR ON ACCOUNT OF THE NEW NOTES. * * * Upon satisfaction or waiver of the conditions to the Exchange Offer, the Issuer will accept promptly after the Expiration Date all properly tendered Old Notes and will deliver the New Notes in exchange therefor promptly after acceptance of such Old Notes. Interest on Old Notes accepted for exchange in the Exchange Offer will accrue to the Expiration Date, will be added to the New Notes as if accrued on the New Notes, and will continue to accrue without interruption on the Expiration Date. For purposes of the Exchange Offer, the Issuer will be deemed to have accepted for exchange tendered Old Notes if, as and when the Issuer gives oral or written notice to the Exchange Agent of their acceptance for exchange of the tenders of such Old Notes. New Notes will be delivered by deposit of the same with the Exchange Agent, which will act as agent for tendering holders for the purpose of receiving New Notes from the Issuer and transmitting the same to such holders. All authority conferred or agreed to be conferred by this Letter of Transmittal shall survive the death or incapacity of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the heirs, executors, administrators, trustees in bankruptcy, legal representatives, successors and assigns of the undersigned. EXCEPT AS PROVIDED UNDER APPLICABLE SECURITIES LAWS, TENDERS OF OLD NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE UNLESS SUCH OLD NOTES HAVE BEEN ACCEPTED FOR EXCHANGE BY THE ISSUER PRIOR THERETO. The Issuer may, in its sole discretion, extend the period of time for which the Exchange Offer is open, in which event the term "Expiration Date" shall mean the latest time and date to which the Exchange Offer has been extended. The Issuer shall make a public announcement of any such extension of the Exchange Offer no later than 9:00 a.m. New York City time, on the next business day after the previously scheduled Expiration Date. In the event the Issuer should modify the consideration offered for Old Notes in the Exchange Offer, such modified consideration would be paid to all holders of Old Notes accepted in the Exchange Offer, including those holders who tendered before the announcement of such modification. If the consideration is modified, the Exchange Offer will remain open at least ten business days from the date the Issuer gives notice, by public announcement or otherwise, of such modification, as required by applicable law. The undersigned understands that tenders of Old Notes pursuant to any one of the procedures described in the Prospectus under the caption "The Exchange Offer--Procedures for Tendering" and in the Instructions hereto will constitute a binding agreement between the undersigned and the Issuer upon the terms and subject to the conditions of the Exchange Offer. Unless otherwise indicated under "Special Issuance Instructions" below, please (i) issue the New Notes and (ii) return any Old Notes not tendered or not exchanged, in the Name(s) of the undersigned (and, in the case of Old Notes tendered by book-entry transfer, by credit to the account at the Book- Entry Transfer Facility designated above). Similarly, unless otherwise indicated under "Special Delivery Instructions" below, please mail (i) the New Notes and (ii) any certificates for Old Notes not tendered or not exchanged (and accompanying documents, as appropriate), to the undersigned at the address shown in the box captioned "Description of Old Notes" above. In the event that both "Special Issuance Instructions" and "Special Delivery Instructions" are completed, please issue the New Notes, return any Old Notes not tendered or not exchanged and mail any check and any certificates to the person(s) and address(es) so indicated. The undersigned recognizes that the Issuer has no obligation pursuant to the "Special Issuance Instructions" and "Special Delivery Instructions" to transfer any Old Notes from the name(s) of the registered holder(s) thereof if the Issuer does not accept for exchange any of the Old Notes so tendered. The undersigned has completed, executed and delivered this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. By completing the box entitled "Description of Old Notes" and signing this Letter of Transmittal, the undersigned will be deemed to have tendered the Old Notes indicated in such box, and will receive New Notes in exchange for such Old Notes. SPECIAL ISSUANCE INSTRUCTIONS(SEE SPECIAL DELIVERY INSTRUCTIONS(SEE INSTRUCTION 7) INSTRUCTION 7) To be completed ONLY if (i) the To be completed ONLY if (i) the New Notes and/or (ii) the Old New Notes and/or (ii) the Old Notes (if any) not tendered or Notes (if any) not tendered or not exchanged are to be issued in not exchanged are to be mailed to the name of someone other than someone other than the under- the undersigned, or if Old Notes signed or to the undersigned at delivered by book-entry transfer an address other than that shown that are not tendered or not ex- in the box captioned "Description changed are to be returned by of Old Notes" above. credit to an account maintained at a Book-Entry Transfer Facility other than as designated above. (Check appropriate boxes) [_] New Notes [_] Old Notes __________________________________ (Check appropriate boxes) NAME (PLEASE PRINT) [_] New Notes [_] Old Notes __________________________________ (ADDRESS) __________________________________ __________________________________ NAME (PLEASE PRINT) (INCLUDE ZIP CODE) __________________________________ (ADDRESS) __________________________________ (INCLUDE ZIP CODE) __________________________________ (TAXPAYER ID OR SOCIAL SECURITY NUMBER) SIGN HERE TO BE COMPLETED BY ALL TENDERING HOLDERS (INCLUDING THOSE COMPLETING THE NOTICE OF GUARANTEED DELIVERY) X __________________________________________________________________________ (SIGNATURE OF OWNER) X __________________________________________________________________________ SIGNATURE OF OWNER (IF MORE THAN ONE) Dated: , 1997 Area Code and Telephone Number: (Must be signed by registered holder(s) exactly as name(s) appear(s) on Old Notes or on a security position listing or by person(s) authorized to become registered holder(s) by Old Notes and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation, agent or other person acting in a fiduciary or representative capacity, please provide the following information and see Instruction 5.) ____________________________________________________________________________ NAME(S) (PLEASE PRINT) ____________________________________________________________________________ ____________________________________________________________________________ CAPACITY (FULL TITLE) ____________________________________________________________________________ (ADDRESS) ____________________________________________________________________________ (INCLUDE ZIP CODE) __________________________________ __________________________________ (AREA CODE AND TELEPHONE NUMBER) (TAXPAYER ID OR SOCIAL SECURITY NUMBER(S)) GUARANTEE OF SIGNATURE(S) (IF REQUIRED--SEE INSTRUCTIONS 1 AND 5) X __________________________________________________________________________ (AUTHORIZED SIGNATURE) ____________________________________________________________________________ (PRINT NAME) __________________________________ __________________________________ (TITLE) (NAME OF FIRM) ____________________________________________________________________________ (ADDRESS AND TELEPHONE NUMBER OF FIRM) Dated: _____________________, 1997 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all signatures on this Letter of Transmittal must be guaranteed by a firm which is a member of a registered national securities exchange or of the National Association of Securities Dealers, Inc., or by a commercial bank or trust company having an office or correspondent in the United States (an "Eligible Institution"). Signatures on this Letter of Transmittal need not be guaranteed if (a) this Letter of Transmittal is signed by the registered holder(s) of the Old Notes tendered herewith (which term, for purposes of this Letter of Transmittal, shall include any participant in one of the Book-Entry Transfer Facilities whose name appears on a security position listing as the owner of the Old Notes tendered herewith) and such holder(s) have not completed either the box captioned "Special Issuance Instructions" or the box captioned "Special Delivery Instructions" on this Letter of Transmittal or (b) such Old Notes are tendered for the account of an Eligible Institution. See Instruction 5. 2. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD NOTES. This Letter of Transmittal is to be used if (i) Old Notes are to be forwarded to the Exchange Agent herewith, (ii) delivery of Old Notes is to be made by book-entry transfer to the Exchange Agent's account at one of the Book-Entry Transfer Facilities pursuant to the procedures set forth in the Prospectus under the caption "The Exchange Offer--Procedures for Tendering" or (iii) the guaranteed delivery procedures described under the same caption and under "--Guaranteed Delivery Procedures" in the Prospectus are to be utilized. All physically delivered Old Notes, or a confirmation of a book-entry transfer into the Exchange Agent's account at one of the Book-Entry Transfer Facilities of all Old Notes tendered herewith, as well as a properly completed and duly executed Letter of Transmittal (or facsimile thereof) and all other documents required by this Letter of Transmittal, must be received by the Exchange Agent at its address set forth on the front page of this Letter of Transmittal prior to the Expiration Date. Holders who wish to tender their Old Notes and (i) whose Old Notes are not immediately available, (ii) who cannot deliver their Old Notes, this Letter of Transmittal and all other documents required hereby to the Exchange Agent prior to the Expiration Date, or (iii) who cannot complete the procedure for book-entry transfer on a timely basis, must tender their Old Notes pursuant to the guaranteed delivery procedures set forth in the Prospectus. Pursuant to such procedures: (a) such tender must be made by or through an Eligible Institution, (b) a properly completed and duly executed Notice of Guaranteed Delivery setting forth the name and address of the holder of Old Notes, the certificate number(s) of such Old Notes and the principal amount of Old Notes to be delivered, stating that tender is being made thereby and guaranteeing that the certificate(s) representing the Old Notes, the Letter of Transmittal and all other documents required thereby will be deposited by the Eligible Institution with the Exchange Agent within three business days after the Expiration Date and (c) all physically delivered Old Notes in proper form for transfer (or a confirmation of a book-entry transfer into the Exchange Agent's account at one of the Book-Entry Transfer Facilities of all Old Notes so delivered), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof) and all other documents required by this Letter of Transmittal, must be received by the Exchange Agent within three business days after the Expiration Date, all as provided in the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery Procedures". THE METHOD OF DELIVERY OF OLD NOTES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING HOLDER. IF OLD NOTES ARE SENT BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED, AND ENOUGH TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted. By executing this Letter of Transmittal (or a facsimile hereof), the tendering holder waives any right to receive any notice of the acceptance for exchange of the Old Notes. 3. INADEQUATE SPACE. If the space provided is inadequate, the aggregate principal amount of the Old Notes being tendered and the certificate numbers (if available) must be listed on a separate schedule signed by the tendering holder and attached hereto. 4. PARTIAL TENDERS. Tenders of the Old Notes will be accepted only in integral multiples of $1 million. If tenders are to be made with respect to less than the entire principal amount of any Old Notes, the holder must fill in the principal amount of Old Notes which are tendered in column (4) of the box captioned "Description of Old Notes." The entire principal amount of Old Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated in Column (4). In the case of partial tenders, Old Notes in fully registered form for the principal amount of Old Notes not tendered will be sent to the person(s) signing this Letter of Transmittal, unless otherwise indicated in the appropriate box on this Letter of Transmittal, promptly after the Expiration Date. 5. SIGNATURES ON LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS. The signature(s) of the registered holder(s) on this Letter of Transmittal must correspond with the name(s) as written on the face of the Old Notes, without alteration, enlargement or any change whatsoever. If any of the Old Notes are held of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any of the Old Notes are registered in different names, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal as there are names in which Old Notes are held. If this Letter of Transmittal is signed by the registered holder(s) of the Old Notes, no endorsements of Old Notes or separate bond powers are required. If, however, the Interest Payments are to be made, the New Notes are to be issued, or Old Notes not tendered or not exchanged are to be issued or returned in the name(s) of any person(s) or address(es) other than those of the registered holder(s), then endorsements of certificates transmitted hereby and separate bond powers are required, and signatures on any such Old Notes or bond powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Old Notes, such Old Notes must be endorsed or accompanied by appropriate bond powers, in either case signed exactly as the name(s) of the registered holder(s) on such Old Notes. Signature(s) on any such Old Notes or bond powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal or any Old Notes or bond powers are signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation, agent or other person acting in a fiduciary or representative capacity, such person must so indicate when signing and proper evidence, satisfactory to the Issuer, of the authority of such person to so act must be submitted with this Letter of Transmittal (unless waived by the Issuer). 6. TRANSFER TAXES. The Issuer will pay or cause to be paid security transfer taxes, if any, with respect to the exchange and transfer of Old Notes pursuant to the Exchange Offer. If, however, New Notes are to be issued to, or Old Notes not tendered or not exchanged are to be delivered to or are to be issued or registered in the name of, any person other than the registered holder(s), or if tendered Old Notes are to be registered in the name of any person other than the transferor of Old Notes to the Issuer or its order pursuant to the Exchange Offer, then the amount of any such security transfer taxes (whether imposed on the registered holder(s), such other person or otherwise) will be payable by the tendering holder. If satisfactory evidence of the payment of such tax, or exemption therefrom, is not submitted with this Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Old Notes listed in this Letter of Transmittal. 7. SPECIAL ISSUANCE AND DELIVERY INSTRUCTION. If any of (i) the New Notes or (ii) any Old Notes not tendered or not exchanged are to be issued or returned to or in the name of a person other than the person(s) signing this Letter of Transmittal, or if any of (i) the New Notes or (ii) any Old Notes not tendered or not exchanged, are to be mailed to a person other than the person(s) signing this Letter of Transmittal at an address other than that shown above, the applicable box(es) on this Letter of Transmittal should be completed. Holders tendering Old Notes by book-entry transfer may request that the Old Notes not tendered or not exchanged be credited to an account maintained at one of the Book-Entry Transfer Facilities. If no instructions are given, such Old Notes not tendered will be returned to the name and address of the person signing this Letter of Transmittal, or, at the Issuer's option, by crediting the account of the Book-Entry Transfer Facility so designated. 8. SUBSTITUTE FORM W-9. Federal income tax law generally requires that a tendering holder whose Old Notes are accepted for payment provide the Exchange Agent (as payor) with his correct TIN, which, in the case of a holder who is an individual, is his social security number. If the Exchange Agent is not provided with the correct TIN or an adequate basis for an exemption, such holder may be subject to a penalty imposed by the Internal Revenue Service. In addition, backup withholding at the rate of 31% may be imposed upon any payments resulting from the Exchange Offer or made on account of the New Notes. If withholding results in an overpayment of taxes, a holder may be eligible for a refund. In order to avoid such backup withholding, each tendering holder must provide the Exchange Agent with such holder's correct TIN by completing the Substitute Form W-9 (the "Form") set forth in this Letter of Transmittal. Certain holders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. To prevent possible erroneous backup withholding, an exempt holder must enter its correct TIN in Part 1 of the Form, write "Exempt" in Part 2 of such Form, and sign and date the Form. In order for a nonresident alien or foreign entity to qualify as exempt, such person must submit a completed Form W-8, entitled "Certificate of Foreign Status." Such Forms W-8 may be obtained from the Exchange Agent. If a holder does not have a TIN, such holder should write "Applied For" in the space for the TIN; if notice of the TIN assigned to such holder is not received by the Exchange Agent within 60 days, backup withholding will begin and continue until the Exchange Agent is in receipt of notice of such TIN. Note: Writing "Applied For" on the Form means that a holder has already applied for a TIN or that a holder intends to apply for a TIN. Failure to complete the Substitute Form W-9 will not, by itself, cause Old Notes to be deemed invalidly tendered, but may require withholding at the rate of 31% to be imposed on the amount of any payments made to the tendering holder as a result of the Exchange Offer or on account of the New Notes. Backup withholding is not an additional federal income tax. Rather, the federal income tax liability of a person subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained. 9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance or additional copies of the Prospectus and this Letter of Transmittal may be directed to the Exchange Agent at the address or telephone number set forth in this Letter of Transmittal. 10. SATISFACTION AND WAIVER OF CONDITIONS. All questions as to the validity, form, eligibility (including time of receipt), acceptance for exchange or withdrawal of any tender of Old Notes pursuant to any of the procedures described herein or in the Prospectus will be determined by the Issuer in its sole discretion, which determination shall be final and binding on all parties. The Issuer reserves the absolute right to reject any and all Old Notes not properly tendered or any Old Notes the Issuer's acceptance for exchange of which may, in the opinion of the Issuer or its counsel, be unlawful. The Issuer also reserves the absolute right to amend, waive or modify any of the conditions of the Exchange Offer as set forth in the Prospectus under the caption "The Exchange Offer--Conditions," or to waive any defect or irregularity in any tender with respect to any particular Old Notes or any particular holder. The interpretation of the terms and conditions of the Exchange Offer (including this Letter of Transmittal and the Instructions hereto) by the Issuer shall be final and binding on all parties. Unless waived by the Issuer, any defects or irregularities in connection with the tender of Old Notes must be cured within such time as the Issuer shall determine. Neither the Issuer, the Exchange Agent nor any other person will be under any duty to give notification of any defects or irregularities with respect to tenders of Old Notes, nor shall any of them incur any liability for failure to give any such modification. 11. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any tendering holder whose Old Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at its address set forth on the front page of this Letter of Transmittal for further instructions. 12. WITHDRAWAL. Except as otherwise provided below, tenders of Old Notes pursuant to the Exchange Offer are irrevocable and no withdrawal rights are being afforded to holders of Old Notes. EXCEPT AS PROVIDED UNDER APPLICABLE SECURITIES LAWS, TENDERS OF OLD NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE UNLESS SUCH OLD NOTES HAVE BEEN ACCEPTED FOR EXCHANGE PRIOR THERETO. To be effective with respect to the tender of Old Notes, a notice of withdrawal must (i) be given in writing or by facsimile transmission and be timely received by the Exchange Agent at its address set forth on the front page of this Letter of Transmittal before acceptance by the of the Old Notes relating to such withdrawal, (ii) specify the name(s) of the person(s) who tendered the Old Notes and the principal amount of Old Notes to be withdrawn, (iii) where Old Notes have been delivered or otherwise identified to the Exchange Agent, specify the name(s) in which such Old Notes are registered (if different from the person(s) tendering the Old Notes) and the certificate numbers of the particular Old Notes to be withdrawn, (iv) if Old Notes have been tendered pursuant to the procedure for book-entry transfer, specify the name, account number and Book-Entry Transfer Facility to be credited with the withdrawn Old Notes, and (v) be signed by the holder of Old Notes in the same manner as the original signature on this Letter of Transmittal (including any required signature guarantees) or be accompanied by evidence satisfactory to the Exchange Agent that the person withdrawing the tender has succeeded to beneficial ownership of the Old Notes prior to the physical release of Old Notes to be withdrawn. Withdrawals of tenders of Old Notes may not be rescinded, and any Old Notes withdrawn will thereafter be deemed not validly tendered for purposes of the Exchange Offer; provided, however, that withdrawn Old Notes may be tendered by following one of the procedures described in the Prospectus under the caption "The Exchange Offer-- Procedures for Tendering" at any time prior to the Expiration Date. The Exchange Agent for the Exchange Offer is: HARRIS TRUST AND SAVINGS BANK By Mail, By Hand or Overnight By Facsimile: Delivery: (212) 701-7636 Harris Trust and Savings Bank c/o Harris Trust Company of New Confirmation and Information: York 77 Water Street, 4th Floor (212) 701-7649 New York, NY 10005 Attention: Reorganization Department -----END PRIVACY-ENHANCED MESSAGE-----