-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, q2a3cLq2NkxhvspeEaVd5RuJDhw/cpfDTnN6oswj+au2BdEBzLy22vnLg6gkOwwm /x1PtDDwXvWyqnedKPoYlg== 0000950130-95-001814.txt : 19950908 0000950130-95-001814.hdr.sgml : 19950908 ACCESSION NUMBER: 0000950130-95-001814 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950906 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19950907 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: CABLEVISION SYSTEMS CORP CENTRAL INDEX KEY: 0000784681 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 112776686 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09046 FILM NUMBER: 95570958 BUSINESS ADDRESS: STREET 1: ONE MEDIA CROSSWAYS CITY: WOODBURY STATE: NY ZIP: 11797 BUSINESS PHONE: 5163648450 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________________ FORM 8-K ___________________________ CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): September 6, 1995 CABLEVISION SYSTEMS CORPORATION (Exact Name of Registrant as specified in its charter) Delaware (State of Incorporation) 1-9046 11-2776686 (Commission File Number) (IRS Employer Identification Number) One Media Crossways, Woodbury, New York 11797 (Address of principal executive offices) Registrant's telephone number, including area code: (516) 364-8450 Item 5. Other Events. PROPOSED V CABLE TRANSACTIONS Cablevision Systems Corporation (the "Company" or the "Registrant"), V Cable, Inc. ("V Cable") and VC Holding, Inc. ("VC Holding") have entered into a general, non-binding letter of intent with General Electric Capital Corporation ("GECC"), the principal creditor of V Cable. In the transactions proposed by the letter of intent, the Company would issue to GECC preferred stock having an initial aggregate liquidation preference of $500 million for an aggregate purchase price of $500 million. It is anticipated that such preferred stock would be redeemable at the option of the Company and would be convertible at the option of the holder at certain times and in certain circumstances in whole or in part into the Company's Class A common stock at a conversion rate based upon the trading value of the Company's Class A common stock at the time of such conversion. The Company would make an equity capital contribution to V Cable of the gross proceeds from such issuance and V Cable would apply such amounts as set forth below. As part of the proposed transactions contemplated by the letter of intent (together with the issuance of the preferred stock to GECC, the "Proposed V Cable Transactions"), the $500 million capital contribution received by V Cable would be applied as follows: (i) approximately $26 million to repay V Cable's outstanding indebtedness to GECC; (ii) approximately $93 million to repay to GECC a portion of debt U.S. Cable Television Group, L.P. ("U.S. Cable") payable by V Cable under certain circumstances; (iii) approximately $331 million to repay to GECC a portion of VC Holding's indebtedness; and (iv) $50 million would be used by VC Holding to make a preferred capital contribution to U.S. Cable as discussed below. The Company's $500 million capital contribution to V Cable requires the approval of a majority of the Company's banks under the Company's principal credit agreement (the "Credit Agreement"). The Proposed V Cable Transactions also contemplate that V Cable will enter into one or more agreements pursuant to which, following the receipt of any required franchise and regulatory approvals, V Cable or one or more of its subsidiaries (i) will purchase the 80% of U.S. Cable that V Cable does not already own for approximately $4 million, (ii) will make a preferred capital contribution to U.S. Cable of $50 million, and (iii) will assume approximately $165 million of U.S. Cable indebtedness payable to GECC. As part of the Proposed V Cable Transactions, GECC would also agree to provide two new credit facilities, a $325 million three year revolving credit facility for V Cable's Ohio subsidiary (approximately $210 million of which would be drawn upon entering into such agreement) and a $260 million two year revolving credit facility for V Cable's Long Island subsidiary (approximately $220 million of which would be drawn upon entering into such agreement). The initial amounts drawn under the respective revolving credit facilities will be used to repay all remaining VC Holding debt to GECC. Both the Ohio and Long Island credit facilities would be entered into upon completion of final documentation and the receipt of any required franchise or regulatory approvals. The letter of intent between the Company and GECC is a general, non-binding letter of intent. There can be no assurances that the Proposed V Cable Transactions will be consummated or will be consummated in the form described in the letter of intent. If the Proposed V Cable Transactions, or similar transactions with respect to V Cable, fail to occur, then V Cable believes that it is likely that it will be unable to meet certain of its financial covenants as of September 30, 1995. To remedy the anticipated covenant defaults, V Cable may request waivers and/or amendments to its credit agreement and/or seek equity contributions from the Company's restricted group of subsidiaries (the "Restricted Group"). During 1995, the Restricted Group has made equity contributions aggregating $1.9 million to enable V Cable to meet certain of its financial covenants. There can be no assurance as to V Cable's ability to accomplish either of these alternatives in the future or the terms or timing of such alternatives. Assuming any covenant defaults are waived or cured, V Cable anticipates that its cash flow from operations and amounts available under the VC Holding revolving credit line will be sufficient to service its debt, to fund its capital expenditures and to meet its working capital requirements through 1996. See Item 7(b) hereto (Pro Forma Financial Information) for the pro forma financial information with respect to the Proposed V Cable Transactions and the other transactions that would be required pursuant to Article 11 of Regulation S-X for the six months ended June 30, 1995. LIQUIDITY AND CAPITAL RESOURCES The discussion under "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources" in the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1995 (the "Form 10-Q") is amended as follows: The Company believes for the Restricted Group that, subject to the limitations described in the following paragraphs, internally generated funds together with funds available under the Credit Agreement will be sufficient through December 31, 1996 to (i) meet its debt service requirements, including its amortization requirements under the Credit Agreement, (ii) fund its ongoing capital expenditures, including those related to Cablevision of New York City and the required upgrades under the New York upgrade agreement, (iii) fund its anticipated investments in Cablevision of New York City and the $5.6 million annual payment to Charles F. Dolan in connection with the Cablevision of New York City acquisition, (iv) fund payments with respect to the proposed Cablevision of Boston Limited Partnership ("Cablevision of Boston") acquisition and (v) fund any anticipated equity requirements in A-R Cable Services, Inc. ("A-R Cable") and/or V Cable. -1- The Company intends to incur additional expenditures to sufficiently upgrade its plant to facilitate the startup of such adjunct businesses as information services; video on demand and near video on demand; and residential telephony. To successfully implement these plans, the Company will require additional capital from the sale of equity in the capital markets or to a strategic investor. Absent the receipt of proceeds from the issuance of additional equity or an amendment to the financial covenants contained in the Credit Agreement, the Company would have to implement internal expense reductions and delay its capital upgrade plan and/or sell assets in order to remain in compliance with its Credit Agreement during 1996. There can be no assurance that any of such alternatives will be accomplished. RISK FACTORS Purchase of the Company's securities involves various risks, including the following principal factors, which, together with the other matters set forth herein or incorporated by reference herein, which as revised as set forth below should be considered by holders and purchasers of the Company's securities: Substantial Indebtedness and High Degree of Leverage. The Company has incurred substantial indebtedness, primarily to finance acquisitions and expansion of its operations and, to a lesser extent, for investments in and advances to affiliates. The Company's consolidated debt and Series E Redeemable Convertible Exchangeable Preferred Stock (the "Series E Preferred Stock") aggregated approximately $3.4 billion at June 30, 1995 ($3.2 billion on a pro forma basis after giving effect to the proposed acquisition of Cablevision of Boston and the Proposed V Cable Transactions) with varying maturities to 2023, including an aggregate of approximately $711.1 million maturing on or prior to December 31, 1999. See Note 4 of Notes to the Consolidated Financial Statements and notes thereto (the "Consolidated Financial Statements") incorporated by reference from the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 (the "Form 10-K"). In addition, the Company's consolidated subsidiary, Rainbow Programming Holding Inc. ("Rainbow Programming"), incurred approximately $94.0 million of indebtedness in July 1995 in connection with the exercise of its option (the "NBC Option") to purchase the interest of National Broadcasting Company, Inc. ("NBC") in SportsChannel (New York) Associates and Rainbow News 12 Company. Net Losses and Stockholders' Deficit. The Company reported net losses for the six months ended June 30, 1995 and 1994 of $195.4 million and $111.9 million, respectively, and for the years ended December 31, 1994, 1993 and 1992 of $315.2 million, $246.8 million and $250.5 million, respectively. At June 30, 1995, the Company had a stockholders' deficit of $2.0 billion. The losses primarily reflect high levels of interest expense and depreciation and amortization charges relating to the depreciation of assets obtained through, and debt incurred to finance, acquisitions. Interest expense and depreciation and amortization charges remained at a high level throughout 1992, 1993 and 1994 and will continue at high levels in the future as a result of previously completed, pending and future acquisitions, expected capital expenditures and additional investments in the Company's programming operations, including the approximately $95.5 million payment made in connection with the exercise of the NBC Option. The Company expects to continue incurring substantial losses for at least the next several years. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources" in the Form 10-K and Form 10-Q. Need for Additional Financing. The Company's business requires substantial investment on a continuing basis to finance capital expenditures and related expenses for, among other things, upgrade of the Company's cable plant (including the need to make cable system upgrades mandated by franchise authorities), the offering of new services and the servicing, repayment or refinancing of its indebtedness and preferred stock. The Company will require significant additional financing, through debt or equity issuances, to meet its capital expenditure plans and to pay its debt and preferred stock obligations. There can be no assurance -2- that the Company will be able to issue additional debt or obtain additional equity capital on satisfactory terms, or at all, to meet its future financing needs. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources" in the Form 10-K and the Form 10-Q. Future Capital Expenditures and Programming Commitments. The Company's cable systems have commitments for capital expenditures, including major system upgrades, which will involve substantial expenditures over the next several years. In addition, the Company, through Rainbow Programming, has entered into numerous contracts relating to cable television programming, including rights agreements with professional and other sports teams. These contracts typically require substantial payments over extended periods of time. See Note 8 of Notes to Consolidated Financial Statements for a discussion of commitments and contingencies. The Company also has a commitment to fund annual payments to Mr. Dolan related to Cablevision of New York City. See "Business--Consolidated Cable Affiliates--Cablevision of New York City" and "Business--Programming Operations" in the Form 10-K and "Management's Discussion and Analysis of Financial Condition and Results of Operation--Liquidity and Capital Resources" in the Form 10-K and the Form 10-Q. Intangible Assets. The Company had total assets at June 30, 1995 of approximately $2.3 billion, of which approximately $0.9 billion were intangible assets, principally subscriber lists, franchises, excess cost over fair value of net assets acquired, deferred financing, acquisition and other costs and deferred interest expense. It is possible that no cash would be recoverable from the voluntary or involuntary sale of these intangible assets. Losses on Investments in and Advances to Certain Affiliates. The Company has made investments in and advances to certain affiliates of which Charles F. Dolan is the managing general partner or in which Mr. Dolan has substantial ownership interests. At June 30, 1995, investments in and advances (less applicable reserves) to such affiliates aggregated approximately $33.7 million (consisting of $17.6 million for Cablevision of Boston, $12.5 million for Cablevision of Chicago (which has subsequently been repaid, as explained below), and $3.6 million for Atlantic Cable Television Publishing Corporation ("Atlantic Publishing")). Because Mr. Dolan is the managing general partner or has a substantial interest in such affiliates, an inherent conflict of interest exists with respect to such investments and advances. There can be no assurances that such investments and advances and any amounts accrued with respect thereto will be fully recovered or that conflicts of interest will not arise with respect to the recovery of such amounts. The Company wrote off for accounting purposes its entire investment in and advances to one such affiliate, Cablevision of Boston, of $34.5 million at September 30, 1985. Between September 1985 and May 1988, the Company made additional subordinated advances to Cablevision of Boston which amounted to approximately $17.6 million at June 30, 1995. Management currently anticipates that no further funds will be advanced by the Company to Cablevision of Boston to support operations. See "Business--Other Cable Affiliates--Cablevision of Boston" in the Form 10-K. In June 1994, the Company and Cablevision of Boston entered into an agreement which is designed to give the Company full ownership of Cablevision of Boston. The agreement provides for the acquisition by the Company of the interests of Cablevision of Boston which it does not already own in a series of transactions. See "Condensed Pro Forma Consolidated Financial Information" under Item 7(b) hereto. Consummation of the transactions would result in the limited partners in Cablevision of Boston receiving Class A common stock of the Company (the "Class A Common Stock") with an expected aggregate market value of approximately $40 million. All outstanding subordinated advances made by the Company to Cablevision of Boston will become intercompany indebtedness if the acquisition of Cablevision of Boston is consummated. On August 4, 1995, Cablevision of Chicago sold its cable television systems to Continental Cablevision, Inc. and the loans from the Company to Cablevision of Chicago, together with accrued interest reserved by the Company, were repaid in full. Accordingly, in connection therewith, the Company will recognize a gain in the third quarter of 1995 of approximately $15.6 million. Atlantic Publishing holds a minority equity interest in a company that publishes cable television guides which are offered to the Company's subscribers and to other unaffiliated cable television operators. As of June 30, 1995, the Company had advanced an aggregate of $17.9 million to Atlantic Publishing, of which -3- approximately $0.7 million was advanced during 1992, approximately $0.5 million was repaid during 1993, $0.6 million was repaid during 1994 and approximately $0.2 million was advanced during 1995. The Company has written off all advances to Atlantic Publishing other than approximately $3.6 million. Atlantic Publishing is owned by a trust for certain family members of Mr. Dolan; however, the Company has the option to purchase Atlantic Publishing for an amount equal to the owner's net investment therein plus interest. The current owner has only a nominal investment in Atlantic Publishing. See "Business-- Other Affiliates--Atlantic Publishing" in the Form 10-K. See "Business--Consolidated Cable Affiliates--Cablevision of New York City" in the Form 10-K for a discussion of the Company's acquisition of substantially all of Mr. Dolan's interest in Cablevision of New York City, which was consummated as described therein in July 1992. Voting Control by Majority Stockholder; Disparate Voting Rights. Charles F. Dolan beneficially owned, as of July 31, 1995, 340,200 shares or 2.8% of the Company's outstanding Class A Common Stock and 2,347,494 shares or 20.1% of the Company's outstanding Class B common stock (the "Class B Common Stock" and, collectively with the Class A Common Stock, the "Common Stock"). On a combined basis, these shares represented 11.3% of the total number of shares of both classes of Common Stock and 20.9% of the total voting power of the classes. Trusts established by Mr. Dolan for the benefit of certain Dolan family members, and as to which Mr. Dolan disclaims beneficial ownership, owned, as of July 31, 1995, an additional 500,000 shares of Class A Common Stock or 4.1% of the Class A Common Stock and 9,326,928 shares of the Class B Common Stock, or 76.3% of the Class B Common Stock and 72.8% of the total voting power of all classes of the Common Stock. As a result of this stock ownership, Dolan family members have the power to elect all 12 directors subject to election by holders of the Class B Common Stock, which directors constitute 75% of the entire 16- member Board of Directors of the Company. Moreover, because holders of Class B Common Stock are entitled to ten votes per share while holders of Class A Common Stock are entitled to one vote per share, Dolan family members may control stockholder decisions on matters in which holders of Class A and Class B Common Stock vote together as a class. These matters include the amendment of certain provisions of the Company's restated certificate of incorporation (the "Certificate of Incorporation") and the approval of fundamental corporate transactions, including mergers. In addition, because the affirmative vote or consent of the holders of at least 66 2/3% of the outstanding shares of the Class B Common Stock, voting separately as a class, is required to approve (i) the authorization or issuance of any additional shares of Class B Common Stock and (ii) any amendment, alteration or repeal of any of the provisions of the Certificate of Incorporation of the Company which adversely affects the powers, preferences or rights of the Class B Common Stock, Dolan family members also have the power to prevent such issuance or amendment. The voting rights of the Class B Common Stock beneficially owned by Mr. Dolan will not be modified as a result of any transfer of legal or beneficial ownership thereof. Restrictive Covenants. The Credit Agreement and certain of the Company's other debt instruments contain various financial and operating covenants which, among other things, require the maintenance of certain financial ratios and restrict the Company's ability to borrow funds from other sources and to utilize funds for various purposes, including investments in certain subsidiaries. Violation of the covenants in the Credit Agreement could result in a default under the Credit Agreement which would permit the bank lenders thereunder to restrict the Company's ability to borrow undrawn funds under the Credit Agreement and to accelerate the maturity of borrowings thereunder. In addition, certain of the Company's debt instruments restrict the Company's ability to pay dividends on capital stock. The Company currently is not in violation of any covenant under the Credit Agreement or such other debt instruments. Absent the receipt of proceeds from the issuance of additional equity or an amendment to the financial covenants contained in the Credit Agreement, the Company would have to implement internal expense reductions and delay its capital upgrade program and/or sell assets in order to remain in compliance with its Credit Agreement during 1996. Failure to meet its financial covenants could have a material adverse effect on the Company. There can be no assurance that any of such alternatives will be accomplished. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources" in the Form 10-K and the Form 10-Q. -4- Conflicts of Interest. Mr. Dolan and trusts for Dolan family interests have varying economic interests in the Company's affiliates. Mr. Dolan and other officers and directors of the Company are also officers and directors of affiliated companies. Such officers and directors of the Company devote such time to the business of the Company as is reasonably required; however, they have other responsibilities which require various amounts of their time and which would conflict with their duties to the Company. Risks Related to Regulation. The Company's cable television operations may be adversely affected by government regulation, the impact of competitive forces and technological changes. In 1992, Congress enacted the 1992 Cable Act, which represented a significant change in the regulatory framework under which cable television systems operate. In April 1993 and February 1994, the FCC ordered reductions in cable television rates. Telecommunications legislation pending in Congress would relax the cable rate regulation required by the 1992 Cable Act and would also open the local telephone business to competition from cable television companies and other providers and preempt state and local barriers to entry into that market. While both the U.S. Senate and the House of Representatives have passed telecommunications bills, the Company cannot predict whether the legislation ultimately will be enacted into law or what form any final legislation will take. See "Business--Cable Television Operations--Competition" and "Business--Cable Television Operations-- Regulation" in the Form 10-K and "Recent Developments--Impact of Pending Telecommunications Legislation on FCC Cable Rate Regulation". Risk of Competition. Cable operators compete with a variety of distribution systems, including broadcast television stations, multichannel multipoint distribution services ("MMDS"), satellite master antenna systems ("SMATV"), direct broadcast satellite systems ("DBS"), and private home dish earth stations. For example, CAI Wireless Systems, Inc., an MMDS operator, has received investments from Bell Atlantic Corporation and NYNEX Corporation and owns operating systems or spectrum rights in a significant portion of the Company's systems. In addition, three DBS systems are now operational in the United States. The 1992 Cable Act prohibits a cable programmer that is owned by or affiliated with a cable operator (such as Rainbow Programming) from unreasonably discriminating among or between cable operators and other multichannel video distribution systems with respect to the price, terms and conditions of sale or distribution of the programmer's service and from unreasonably refusing to sell service to any multichannel video programming distributor. Cable systems also compete with the entities that make videotaped movies and programs available for home rental. The 1992 Cable Act regulates the ownership by cable operators of MMDS and SMATV. In July 1992, the FCC voted to authorize additional competition to cable television by video programmers using broadband common carrier facilities constructed by telephone companies. The FCC allowed telephone companies to take ownership interests of up to 5% in such programmers. The FCC also reaffirmed an earlier holding, upheld on appeal by a Federal appeals court, that programmers using such a telephone company- provided "video dialtone" system would not need to obtain a state or municipal franchise. Several telephone companies have sought approval from the FCC to build such "video dialtone" systems. Such a system has been proposed in several communities in which the Company currently holds a cable franchise and several of such systems have been approved by the FCC. Additional competition to cable systems is possible if the FCC authorizes the licensing of local multipoint distribution services ("LMDS"). The FCC has proposed to license this type of service to providers. Competition from Telephone Companies. The 1984 Cable Act bars co-ownership of telephone companies and cable television systems operating in the same service areas ("cable-telco cross-ownership prohibition"). Numerous Federal district courts have held this prohibition to be unconstitutional. Several of these decisions have been upheld on appeal and a number of other decisions are pending on appeal in various Federal appellate courts. The United States Supreme Court is expected to consider the constitutionality of the prohibition during the 1995-96 term. Neither the 1984 Cable Act nor the 1992 Cable Act bars a telephone company from acquiring cable systems outside its telephone service area, and several Regional Bell operating companies have purchased or made investments in cable systems. Legislation to repeal the cable-telco cross- ownership prohibition, subject to certain regulatory requirements, has passed both the U.S. Senate and the House of Representatives; repeal has also been endorsed by the Clinton Administration. These bills also -5- would permit a telephone company to acquire an in-region cable operator in certain small markets under certain circumstances. The Company cannot predict whether the legislation ultimately will be enacted into law or what form any final legislation would take. See "Business--Cable Television Operations-- Regulation" in the Form 10-K. Risk of Non-Exclusive Franchises and Franchise Renewals. The Company's cable television systems are operated primarily under nonexclusive franchise agreements with local government franchising authorities, in some cases with the approval of state cable television authorities. The Company's business is dependent on its ability to obtain and renew its franchises. Although the Company has never lost a franchise as a result of a failure to obtain a renewal, its franchises are subject to non-renewal or termination under certain circumstances. In certain cases, franchises have not been renewed at expiration and the Company operates under temporary licenses while negotiating renewal terms with the franchising authorities. See "Business--Cable Television Operations--Franchises" in the Form 10-K. -6- Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (b) Pro Forma Financial Information The Company files herewith the pro forma financial information that would be required pursuant to Article 11 of Regulation S-X for the six months ended June 30, 1995. CONDENSED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION The following condensed pro forma consolidated balance sheet as of June 30, 1995 presents the Company's financial position as adjusted to give effect to the proposed acquisition of Cablevision of Boston and the Proposed V Cable Transactions, as if they had occurred as of that date. The following condensed pro forma consolidated statement of operations for the year ended December 31, 1994 presents the Company's consolidated results of operations as adjusted to give effect to (i) the acquisition (the "AMCC Acquisition") of partnership interests in American Movie Classics Company ("AMCC"), (ii) the acquisition of substantially all of the assets of Monmouth Cable, Riverview Cable and Framingham Cable, (iii) the proposed acquisition of Cablevision of Boston, and (iv) the Proposed V Cable Transactions as if the acquisition of interests in AMCC, the acquisition of Monmouth Cablevision Associates ("Monmouth Cable"), Riverview Cablevision Associates, L.P. ("Riverview Cable") and Framingham Cablevision Associates Limited Partnership ("Framingham Cable") the acquisition of Cablevision of Boston and the Proposed V Cable Transactions had occurred at the beginning of the period presented. The following condensed pro forma consolidated statement of operations for the six months ended June 30, 1995 presents the Company's consolidated results of operations as adjusted to give effect to the proposed acquisition of Cablevision of Boston and the Proposed V Cable Transactions as if the proposed acquisition of Cablevision of Boston and the Proposed V Cable Transactions had occurred at the beginning of the period presented. The condensed pro forma consolidated financial statements should be read in conjunction with the notes thereto and the historical consolidated financial statements and notes thereto incorporated herein by reference. The pro forma financial information is not necessarily indicative of what the actual financial position or results of operations of the Company would have been had the transactions occurred on the dates indicated nor does it purport to indicate the future results of operations or the future financial condition of the Company. CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET JUNE 30, 1995 (DOLLARS IN THOUSANDS)
PRO FORMA ADJUSTMENTS* ---------------------------- PROPOSED CABLEVISION OF V CABLE HISTORICAL BOSTON TRANSACTIONS PRO FORMA ----------- -------------- ------------ ----------- ASSETS Cash and cash equivalents............ $ 23,487 $ 5,967 (1) $ 236 (4) $ 22,690 (3,000)(2) (4,000)(5) Accounts receivable, trade.................. 71,406 2,165 (1) 331 (4) 73,902 Notes and other receivables............ 17,872 601 (1) 502 (4) 18,975 Prepaid expenses and other current assets... 13,256 470 (1) 464 (4) 14,190 Property, plant and equipment, net......... 916,312 35,863 (1) 103,604 (4) 1,055,779 Investments in and advances to affiliates. 182,080 (17,462)(1) 324 (4) 164,942 Feature film inventory.. 151,113 151,113 Intangible assets, net.. 795,631 114,188 (2) 133,610 (6) 1,042,204 (1,225)(3) Deferred financing, interest expense and other costs, net....... 83,711 1,000 (2) (33,617)(5) 51,094 ----------- -------- --------- ----------- $ 2,254,868 $138,567 $ 201,454 $ 2,594,889 =========== ======== ========= =========== LIABILITIES AND STOCKHOLDERS' DEFICIENCY Accounts payable........ $ 117,203 $ 9,286 (1) $ 9,381 (4) $ 135,870 Accrued expenses........ 213,562 9,186 (1) 10,690 (4) 233,438 Accounts payable to affiliates............. 27,577 665 (1) 28,242 Feature film rights payable................ 131,026 131,026 Bank debt............... 1,499,762 80,773 (2) 1,580,535 Senior debt............. 880,888 215,000 (4) 595,888 (500,000)(5) Subordinated debentures. 623,571 623,571 Subordinated notes payable................ 141,268 141,268 Obligation to related party.................. 190,212 190,212 Capital lease obligations and other debt................... 10,241 2,048 (1) 12,289 ----------- -------- --------- ----------- 3,835,310 101,958 (264,929) 3,672,339 ----------- -------- --------- ----------- Deficit investment in affiliates............. 436,321 436,321 ----------- ----------- Stockholders' deficiency: Preferred stock........ 2 5 (5) 7 Common stock........... 238 6 (2) 244 Par value in excess of capital contributed... (71,888) 37,828 (2) 499,995 (5) 464,710 (1,225)(3) Accumulated deficit.... (1,941,878) (33,617)(5) (1,975,495) ----------- -------- --------- ----------- (2,013,526) 36,609 466,383 (1,510,534) Less, treasury stock, at cost (50,000 shares)... (3,237) (3,237) ----------- -------- --------- ----------- (2,016,763) 36,609 466,383 (1,513,771) ----------- -------- --------- ----------- $ 2,254,868 $138,567 $ 201,454 $ 2,594,889 =========== ======== ========= ===========
- ------- * See Note A of Notes to Condensed Pro Forma Consolidated Financial Statements. -7- CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1994 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA ADJUSTMENTS* ----------------------------------------------------------- MONMOUTH CABLE, RIVERVIEW CABLE AMERICAN AND CABLEVISION PROPOSED MOVIE FRAMINGHAM OF V CABLE HISTORICAL CLASSICS CABLE BOSTON TRANSACTIONS PRO FORMA ---------- -------- --------------- ----------- ------------ ---------- Net Revenues............ $ 837,169 $50,951 (7) $ 47,286 (13) $59,239 (19) $ 71,960 (22) $1,066,605 --------- ------- -------- ------- -------- ---------- Operating expenses: Technical............. 302,885 16,262 (7) 15,127 (13) 26,749 (19) 29,674 (22) 390,697 Selling, general and administrative....... 195,942 16,105 (7) 9,199 (13) 17,119 (19) 20,776 (22) 254,162 (859)(11) (2,028)(16) (2,092)(20) Restructuring charge.. 4,306 4,306 Depreciation and amortization......... 271,343 142 (7) 12,488 (13) 8,428 (19) 41,861 (22) 379,478 10,827 (12) 27,273 (14) 11,038 (20) (3,922)(26) --------- ------- -------- ------- -------- ---------- 774,476 42,477 62,059 61,242 88,389 1,028,643 --------- ------- -------- ------- -------- ---------- Operating profit (loss).............. 62,693 8,474 (14,773) (2,003) (16,429) 37,962 --------- ------- -------- ------- -------- ---------- Other income (expense) Interest expense...... (263,299) (1,510)(7) (4,657)(13) (8,955)(19) (24,195)(22) (266,443) (7,615)(9) (11,093)(15) 1,552 (21) 47,323 (23) 6,006 (25) Interest income......... 1,518 305 (7) 59 (13) 216 (19) 236 (22) 2,334 Share of affiliates' net loss............. (82,864) (4,304)(10) (521)(17) 8,594 (22) (79,367) (272)(18) Write off of deferred financing costs...... (9,884) (9,884) Loss on redemption of debt................. (7,088) (40,457)(23) (47,545) Provision for preferential payment to related party................ (5,600) (5,600) Minority interest..... (3,429) (4,321)(8) (7,750) Miscellaneous, net.... (7,198) (23)(7) (131)(13) (307)(19) (1,280)(22) (8,939) --------- ------- -------- ------- -------- ---------- Net loss................ (315,151) (8,994) (31,388) (9,497) (20,202) (385,232) Preferred stock dividend requirement............ (6,385) (43,403)(24) (49,788) --------- ------- -------- ------- -------- ---------- Net loss applicable to common shareholders.......... $(321,536) $(8,994) $(31,388) $(9,497) $(63,605) $ (435,020) ========= ======= ======== ======= ======== ========== Net loss per common share................. $ (13.72) $ (18.10) ========= ========== Average number of common shares outstanding (in thousands)............ 23,444 593(19) 24,037 ========= ======= ==========
- -------- * See Note B of Notes to Condensed Pro Forma Consolidated Financial Statements. -8- CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1995 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA ADJUSTMENTS* ----------------------------- PROPOSED CABLEVISION OF V CABLE HISTORICAL BOSTON TRANSACTIONS PRO FORMA ---------- -------------- ------------ --------- Net Revenues............. $ 509,135 $30,671 (27) $ 37,892 (30) $ 577,698 --------- ------- -------- --------- Operating expenses: Technical................ 193,243 14,334 (27) 16,596 (30) 224,173 Selling, general and administrative........... 131,611 9,510 (27) 11,004 (30) 151,035 (1,090)(28) Depreciation and amortization............. 159,537 4,421 (27) 19,560 (30) 187,419 5,519 (28) (1,618)(34) --------- ------- -------- --------- 484,391 32,694 45,542 562,627 --------- ------- -------- --------- Operating profit (loss).. 24,744 (2,023) (7,650) 15,071 --------- ------- -------- --------- Other income (expense) Interest expense......... (155,318) (5,397)(27) (12,642)(30) (144,371) 1,753 (29) 23,672 (31) 3,561 (33) Interest income.......... 790 162 (27) 38 (30) 990 Share of affiliates' net loss..................... (52,692) 2,840 (30) (49,852) Write off of deferred financing costs.......... (2,888) (2,888) Loss on redemption of debt..................... -- (33,652)(31) (33,652) Provision for preferential payment to related party............ (2,800) (2,800) Minority interest........ (4,276) (4,276) Miscellaneous, net....... (2,999) (89)(27) (237)(30) (3,325) --------- ------- -------- --------- Net loss................. (195,439) (5,594) (24,070) (225,103) Preferred stock dividend (4,918) (21,075)(32) (25,993) requirement.............. --------- ------- -------- --------- Net loss applicable to $(200,357) $(5,594) $(45,145) $(251,096) common shareholders...... ========= ======= ======== ========= Net loss per common $ (8.45) $ (10.33) share.................... ========= ========= Average number of common shares outstanding 23,710 593(27) 24,303 (in thousands).......... ========= ======= =========
- -------- * See Note C of Notes to Condensed Pro Forma Consolidated Financial Statements. Note A--Notes to Condensed Pro Forma Balance Sheet as of June 30, 1995 CABLEVISION OF BOSTON ACQUISITION (1) As a result of the acquisition of Cablevision of Boston, the assets and liabilities purchased will be combined with the Company's consolidated balance sheet amounts. The adjustments referenced by this Note (1) reflect the consolidation of such amounts as of the balance sheet date. (2) Represents (a) the total cost of interests in Cablevision of Boston not owned by the Company to be paid by the issuance of Class A Common Stock of the Company valued at $37,834,000, (b) estimated transaction costs of $2,000,000 and financing costs of $1,000,000, (c) bank borrowings of $80,773,000 to be used to refinance Cablevision of Boston's bank debt and accrued interest thereon of $61,106,000 and repay amounts owed to Mr. Dolan aggregating $19,667,000 for management fees, loans, accrued interest thereon and preferred equity and (d) the excess ($114,188,000) of the purchase price over the value of the net liabilities acquired. -9- (3) Represents the amount paid to Mr. Dolan for his general partnership interest and the assumption of his share of the excess liabilities over net assets of Cablevision of Boston ($1,225,000) (such amount to be charged to par value in excess of capital contributed). Interests in the Dolan-owned assets and liabilities are recorded in the pro forma balance sheet at Cablevision of Boston's historical cost. PROPOSED V CABLE TRANSACTIONS (4) As a result of the proposed acquisition of 80% of the partnership interests in U.S. Cable not already owned by V Cable to be effected in connection with the Proposed V Cable Transactions, the assets and liabilities of U.S. Cable will be combined with the Company's consolidated balance sheet amounts. The adjustments referenced by this Note (4) reflect the consolidation of such amounts as of the balance sheet date. (5) In connection with the Proposed V Cable Transactions, the Company will redeem the outstanding preferred stock on the books of U.S. Cable for $4,000,000 and will issue $500,000,000 of its preferred stock to GECC. The proceeds from this issuance will be used to repay $450,000,000 of V Cable and/or VC Holding debt to GECC and provide V Cable with $50,000,000 to make a preferred capital contribution to U.S. Cable, which will repay an equivalent amount of its debt to GECC. Deferred interest expense and financing costs of $33,617,000 related to V Cable's assumption of U.S. Cable's debt in the 1992 V Cable Reorganization will be written off in connection with the repayment of such debt. (6) Represents the excess ($133,610,000) of the purchase price of U.S. Cable over the value of the net liabilities acquired. Note B--Notes to Condensed Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 1994 AMERICAN MOVIE CLASSICS COMPANY ACQUISITION (7) As a result of the AMCC Acquisition, which was consummated on July 11, 1994, the results of operations of AMCC are combined with the Company's consolidated results of operations. The adjustments referenced by this Note (7) reflect the consolidation of such amounts for the period January 1, 1994 through July 10, 1994. (8) Represents the 25.1% minority partnership interest in the results of operations of AMCC owned by NBC and Liberty Media Corporation. (9) Represents interest expense, at 8.0% per annum, on the $181,903,000 of debt incurred by the Company to fund the purchase of the additional approximate 50% interest in AMCC. NBC will not share in this expense. (10) Represents the income of AMCC previously recorded by the Company using the equity method of accounting. (11) Represents the elimination of management fees paid to the former partner by AMCC. In connection with the purchase of the approximate 50% interest in AMCC, the Company also purchased the right to receive such fees in the future. (12) Represents the amortization, based on an average 10-year life, of the excess cost over fair value of assets acquired resulting from the purchase of the additional approximate 50% interest in AMCC. NBC will not share in this expense. MONMOUTH CABLE, RIVERVIEW CABLE AND FRAMINGHAM CABLE ACQUISITION (13) As a result of the acquisition of Monmouth Cable and Riverview Cable, which was consummated on August 8, 1994, the results of operations of Monmouth Cable and Riverview Cable are combined with the Company's consolidated results of operations. The adjustments referenced by this Note (13) reflect the consolidation of such amounts for the period January 1, 1994 through August 7, 1994. -10- (14) Represents the depreciation and amortization, based on an average 10-year life, of the step-up in property, plant and equipment, franchise costs and the excess cost over fair value of assets acquired of $39,761,000 for the period, offset by the elimination of pre-acquisition depreciation and amortization of $12,488,000. (15) Represents interest expense of $15,750,000 attributable to $237,800,000 of bank borrowings (interest expense of $10,444,000 at a 7.32% interest rate); $132,158,000 of 6% senior subordinated notes (interest expense of $4,758,000); $9,110,000 of a 6% indemnification note (interest expense of $328,000); and amortization of deferred finance costs of $220,000 offset by pre-acquisition interest expense of $4,657,000 incurred by Monmouth Cable and Riverview Cable. (16) Represents the elimination of management fees of $2,378,000 paid to a former general partner by Monmouth Cable and Riverview Cable and the elimination of an adjustment ($350,000) made in the first half of 1994 to reduce prior period overaccruals of franchise fees. (17) As a result of the acquisition of Framingham Cable, which was consummated on August 8, 1994, by the Company and Warburg Pincus, a 30% Pre-Payout Interest in the results of Framingham Cable will be combined with the Company's consolidated results of operations. The adjustment referenced by this Note (17) reflects the 30% Pre-Payout Interest for the period January 1, 1994 through August 7, 1994. (18) Represents the Company's 30% share of reduced costs for Framingham Cable management fees of $56,000, offset by additional expenses relating to the Framingham Cable acquisition for depreciation and amortization of $249,000 and interest of $79,000. CABLEVISION OF BOSTON ACQUISITION (19) As a result of the acquisition of Cablevision of Boston (and related issuance of approximately 593,000 shares of the Company's Class A Common Stock), the results of operations of Cablevision of Boston will be combined with the Company's consolidated results of operations. The adjustments referenced by this Note (19) reflect the consolidation of such amounts for the year ended December 31, 1994. (20) Represents the amortization, based on an average 10-year life, of the excess cost over fair value of assets acquired of $11,296,000 for the period, offset by the elimination of amortization of previous intangibles of $258,000 and the elimination from selling, general and administrative expenses of management fees payable by Cablevision of Boston to Cablevision Systems Services Corporation ($2,092,000). (21) Represents interest expense of $7,188,000 attributable to $80,773,000 of bank debt (8.9% interest rate) reduced by pre-acquisition interest expense of $8,740,000 incurred by Cablevision of Boston on its bank debt and debt owed to Mr. Dolan and the Company. PROPOSED V CABLE TRANSACTIONS (22) As a result of the proposed acquisition of 80% of the partnership interests in U.S. Cable not already owned by V Cable to be effected in connection with the Proposed V Cable Transactions, the results of operations of U.S. Cable will be combined with the Company's consolidated results of operations. The adjustments referenced by this Note (22) reflect the consolidation of such amounts for the year ended December 31, 1994 and the elimination of the Company's share of losses in U.S. Cable previously recorded on the equity basis. (23) Represents the reduction in interest expense, at an average interest rate of 10.5%, resulting from the net repayment of $450,000,000 of V Cable and/or VC Holding debt from the proceeds of the issuance of the preferred stock in the Proposed V Cable Transactions. In addition, the Company will write off deferred interest and financing costs of $40,457,000 in connection with the repayment of U.S. Cable debt assumed by V Cable in the 1992 V Cable Reorganization. (24) Represents the dividends payable to GECC on the preferred stock to be issued in the Proposed V Cable Transactions. This amount does not take into account any gross up required to be paid to a holder of preferred stock failing to obtain a dividends received deduction. -11- (25) Represents the reduction in interest expense, at an average interest rate of 12.0%, resulting from the repayment of $50,000,000 of U.S. Cable debt from the proceeds of the issuance of preferred stock and certain reductions in U.S. Cable's debt resulting from the Proposed V Cable Transactions. (26) Represents the depreciation and amortization, based on an average 10-year life, of the step-up in property, plant and equipment, franchise costs and the excess cost over fair value of assets acquired of $37,939,000 for the period, offset by the elimination of pre-acquisition depreciation and amortization of $41,861,000. Note C--Notes to Condensed Pro Forma Consolidated Statement of Operations for the Six Months Ended June 30, 1995 CABLEVISION OF BOSTON ACQUISITION (27) As a result of the acquisition of Cablevision of Boston (and related issuance of approximately 593,000 shares of the Company's Class A Common Stock), the results of operations of Cablevision of Boston will be combined with the Company's consolidated results of operations. The adjustments referenced by this Note (27) reflect the consolidation of such amounts for the six months ended June 30, 1995. (28) Represents the amortization, based on an average 10-year life, of the excess cost over fair value of assets acquired of $5,648,000 for the period, offset by the elimination of amortization of previous intangibles of $129,000 and the elimination from selling, general and administrative expenses of management fees payable by Cablevision of Boston to Cablevision Systems Services Corporation ($1,090,000). (29) Represents interest expense of $3,565,000 attributable to $80,773,000 of bank debt (8.9% interest rate) reduced by pre-acquisition interest expense of $5,318,000 incurred by Cablevision of Boston on its bank debt and debt owed to Mr. Dolan and the Company. PROPOSED V CABLE TRANSACTIONS (30) As a result of the proposed acquisition of 80% of the partnership interests in U.S. Cable not already owned by V Cable to be effected in connection with the Proposed V Cable Transactions, the results of operations of U.S. Cable will be combined with the Company's consolidated results of operations. The adjustments referenced by this Note (30) reflect the consolidation of such amounts for the six months ended June 30, 1995 and the elimination of the Company's share of losses in U.S. Cable previously recorded on the equity basis. (31) Represents the reduction in interest expense, at an average interest rate of 10.6%, resulting from the net repayment of $450,000,000 of V Cable and/or VC Holding debt from the proceeds of the issuance of the preferred stock in the Proposed V Cable Transactions. In addition, the Company will write off deferred interest and financing costs of $33,652,000 in connection with the repayment of U.S. Cable debt assumed by V Cable in the 1992 V Cable Reorganization. (32) Represents the dividends payable to GECC on the preferred stock to be issued in the Proposed V Cable Transactions. This amount does not take into account any gross up required to be paid to a holder of preferred stock failing to obtain a dividends received deduction. (33) Represents the reduction in interest expense, at an average interest rate of 11.6%, resulting from the repayment of $50,000,000 of U.S. Cable debt from the proceeds of the issuance of preferred stock and certain reductions in U.S. Cable's debt resulting from the Proposed V Cable Transactions. (34) Represents the depreciation and amortization, based on an average 10-year life, of the step-up in property, plant and equipment, franchise costs and the excess cost over fair value of assets acquired of $17,942,000 for the period, offset by the elimination of pre-acquisition depreciation and amortization of $19,560,000. (c) Exhibits 1. Letter, dated September 6, 1995, between the Company, V Cable and VC Holding and GECC. -12- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CABLEVISION SYSTEMS CORPORATION By: -------------------------------- Barry J. O'Leary Senior Vice President, Finance and Treasurer Dated: September 7, 1995 -13- EX-99.(A) 2 EXHIBIT 1 EXHIBIT A Cablevision Systems Corporation V Cable, Inc. VC Holding, Inc. One Media Crossways Woodbury, New York 11797-2013 Attention: Barry J. O'Leary, Senior Vice President and Treasurer Gentlemen: General Electric Capital Corporation ("GE Capital" or "Lender") has been advised by Cablevision Systems Corporation, a Delaware corporation ("CSC"), of a proposal for CSC, its wholly-owned subsidiary V Cable, Inc., a Delaware corporation ("V Cable"), V Cable's subsidiaries, and U.S. Cable Television Group, L.P., a Delaware limited partnership ("USC"), to enter into the following series of transactions set forth in clauses (a) through (d) below (the "Transactions"): (a) CSC would issue 500,000 shares of Series G Preferred Stock having the terms, rights and preferences summarized in the Preferred Stock Term Sheet attached hereto as Exhibit A (the "Preferred Stock") to GE Capital for an aggregate purchase price of $500 million; (b) Immediately upon the issuance and sale of the Preferred Stock to GE Capital: i) CSC would make an equity capital contribution to V Cable of $500 million; ii) V Cable would apply such funds: (A) to the repayment of all principal, interest and other amounts owing to GE Capital under the Loan Agreement dated December 31, 1992 between V Cable and GE Capital (i.e., approximately $26 million as of the date hereof); (B) to make a capital contribution to USC in an amount equal to the aggregate amount on such date of (x) the Allocable Term Loan Amount and (y) the Accreted Value of the Zero Coupon Term Loan, each as defined in the Senior Loan Agreement dated as of December 31, 1992 between USC and GE Capital (the "USC Senior Loan Agreement") (i.e., approximately $93 million as of the date hereof); and (C) to make an equity capital contribution to VC Holding, Inc. ("VC Holding") in an amount equal to 81% (i.e., approximately $309 million as of the date hereof) of the remaining funds, after the uses specified in clauses (b)(ii) (A) and (B) above, and to make an equity capital contribution to USC in an amount equal to 19% (i.e., approximately $72.4 million as of the date hereof) of such remaining funds; iii) USC would apply (A) the funds received from V Cable referred to in clause (b)(ii)(B) above to the prepayment of the Allocable Term Loan and the Accreted Value of the Zero Coupon Term Loan under the USC Senior Loan Agreement, and (B) the funds received from V Cable referred to in clause (b)(ii)(C) above to make an equity capital contribution to VC Holding in a corresponding amount; iv) VC Holding would apply the funds received from V Cable referred to in clause (b)(ii)(C) above and the funds received from USC referred to in clause (b)(iii)(B) above (A) to make a senior preferred capital contribution to USC in an amount equal to the greater of (x) $50 million or (y) the amount necessary to cause the ratio of indebtedness to annualized system cash flow (each as defined in a manner satisfactory to GE Capital and CSC) of USC and its subsidiaries, after giving effect to the Transactions on a pro forma basis, to be not greater than 2 6.0:1.0/1/ and (B) the balance of such funds to the prepayment in full of the outstanding principal amount of the Series B Term Loan under the Loan Agreement dated as of December 31, 1992 between VC Holding and GE Capital (the "VC Holding Loan Agreement") and, with the remaining amount of such funds, to the prepayment of a corresponding amount of the outstanding principal amount of the Series A Term Loan under the VC Holding Loan Agreement; and v) USC would apply the funds received from VC Holding referred to in clause (b) (iv) (A) above to the prepayment of a corresponding amount of the outstanding principal of the Series B Term Loan under the USC Senior Loan Agreement; (c) Concurrently with the execution of a definitive Preferred Stock Purchase Agreement with respect to the Preferred Stock: i) CSC, V Cable, VC Holding, USC and GE Capital would enter into a definitive Master Investment Agreement, on terms and conditions mutually acceptable to GE Capital and CSC, providing for the transactions described in clauses (b) (i) through (iv) above and clauses (d) (i) through (vi) below; ii) a subsidiary of V Cable would enter into an agreement with the non-V Cable partners of USC to acquire or cause the redemption by USC of (as mutually agreed by GE Capital and CSC) the partnership interests of such partners for aggregate consideration of $4,000,000 (allocated as mutually agreed) and otherwise on terms and conditions satisfactory to GE Capital and CSC, including a requirement that all outstanding principal, interest and other - ---------- 1. Alternately, the senior preferred capital contribution would be made to USC by V Cable and the contributions by V Cable referred to in clause (b) (ii) (c) would be proportionately reduced. The party making the senior preferred capital contribution shall be mutually agreed between CSC and GE Capital. 3 amounts owing under the USC Senior loan Agreement shall be repaid upon the closing of such acquisition or redemption; iii) the partners of USC would enter into an amendment to the Amended and Restated Limited Partnership Agreement of USC dated December 31, 1992, in form and substance mutually satisfactory to GE Capital and CSC, which would become effective upon the closing of the purchase by GE Capital of the Preferred Stock and would provide, inter alia, that: ----- ---- (A) in exchange for the capital contribution to be made by VC Holding or V Cable (as mutually agreed) to USC referred to in clause (b)(iv)(A) above, VC Holding or V Cable (as applicable) would receive a preferred partnership interest in USC that would have priority over all other partnership interests in USC, would accrue a preferred return not to exceed a rate per annum to be agreed and could not receive distributions until at least one year and one day following the repayment in full of the obligations of USC under the USC Senior Loan Agreement; (B) the outstanding principal and interest owing by USC to GE Capital under the Junior Loan Agreement dated December 31, 1992 between USC and GE Capital would be distributed by GE Capital to USC in exchange for a preferred partnership interest in USC that would have priority over all other partnership interests in USC other than the senior preferred partnership interest of VC Holding or V Cable (as mutually agreed) referred to in clause (c)(iii)(A) above; and (C) such other amendments to the allocation, distribution and other provisions thereof as shall be mutually satisfactory to GE Capital and CSC; and 4 (d) In addition to the transactions described above, upon the closing of the purchase of the Preferred Stock by GE Capital: i) GE Capital and VC Holding would amend the terms of the VC Holding Loan Agreement and GE Capital and USC would amend the terms of the USC Senior Loan Agreement, in each case on terms and conditions satisfactory to GE Capital and CSC and agreed upon prior to the execution of the definitive Preferred Stock Purchase Agreement; ii) GE Capital would issue, and the V Cable Ohio and V Cable Long Island entities would accept and pay a mutually satisfactory commitment fee in connection with, a commitment by GE Capital on terms mutually acceptable to the parties to refinance the obligations under the VC Holding Loan Agreement by providing credit facilities to V Cable Ohio (approximately $325 million) and V Cable Long Island (approximately $260 million); iii) the Management Performance Adjustment and Interborrower Agreement dated as of December 31, 1992 among V Cable, each of its subsidiaries party thereto, USC and GE Capital would be terminated; iv) USC would distribute to V Cable, without representations, warranties or recourse, but subject to existing liens securing indebtedness owed to GE Capital by USC and VC Holding, the common stock of VC Holding held by USC representing 19% of VC Holding's issued and outstanding common stock; v) the Exchange Agreement dated as of December 31, 1992 among V Cable, V Cable GP, Inc., USC and GE Capital would be amended on terms and conditions satisfactory to GE Capital and CSC; and vi) the Management Agreement dated as of December 31, 1992 among CSC, USC and each of the subsidiaries of USC party thereto would be amended on terms and conditions satisfactory to GE Capital. 5 This letter confirms the mutual intent of GS Capital to purchase, and CSC to issue and sell to GE Capital, the Preferred Stock, and of GE Capital and CSC, V Cable and VC Holding (collectively, the "CSC Entities") to enter into and consummate each of the Transactions to which they are a party. This letter constitutes a general, non-binding expression of interest on the part of the parties hereto and is not intended to create a legally binding commitment or obligation on the part of party, except as provided below in this paragraph. The creation of such a legally binding obligation is subject, among other things, to the negotiation, execution and delivery of definitive agreements containing such covenants, representations, warranties, indemnities, and other provisions as the parties shall mutually agree upon. It is understood that no party shall be legally bound by reason of this letter, nor shall any rights, liabilities or obligations arise as a result of this letter, other than the obligations set forth in paragraph 1 below with respect to confidentiality, paragraph 2 below solely with respect to indemnification in certain circumstances and the penultimate paragraph hereof with respect to the parties' waiver of trial by jury, each of which shall be binding upon the execution and delivery hereof by the parties hereto. The mutual obligations of the parties to effect the Transactions as described in the preceding paragraph shall be further conditioned on the satisfaction or waiver of certain conditions precedent as may be mutually agreed upon, including that all documentation necessary to effect the Transactions and such other documentation as shall be deemed appropriate by GE Capital or CSC to give effect to the Transactions shall be mutually acceptable and duly executed by all parties thereto, including all third parties, and shall be satisfactory to GE Capital and CSC, and all of the Transactions shall be consummated substantially concurrently on terms satisfactory to GE Capital and CSC and in compliance with applicable law. * * * 1. This letter is also delivered to the CSC Entities with the understanding that neither this letter nor its substance shall be disclosed publicly by GE Capital or the CSC Entities except as agreed to by the other parties or as may be required by law (in which event the party intending to make such disclosure shall furnish to the other parties to the extent reasonably practicable an opportunity to 6 review and comment upon the form and content of the proposed disclosure). If the terms of this letter are acceptable to you, we ask that you return to us an executed copy of this letter. This letter shall expire at the close of business on the date hereof unless accepted by you on or prior to such date. Once accepted by you, this letter shall terminate at 11:59 P.M. on November 30, 1995, unless all of the Transactions shall have theretofore been consummated, provided that notwithstanding the expiration or termination of this letter, the obligations set forth herein of the CSC entities with respect to the payment of fees and expenses, confidentiality and indemnification shall survive such expiration or termination. 2. Subject to the closing of the purchase of the Preferred Stock by GE Capital, V Cable agrees to pay or cause to be paid all reasonable costs and expenses of GE Capital (including all fees and expenses of its counsel) in excess of $50,000 in the aggregate incurred or sustained in the preparation of this letter and all documentation for the Transactions (including all diligence, duplication, audit, search, filing and recording fees). In the event that for any reason the closing of the purchase of the Preferred Stock by GE Capital does not occur, V Cable shall not have any obligation to reimburse GE Capital for, or pay directly, any costs and expenses of GE Capital incurred or sustained in the preparation of this letter and all documentation for the Transactions (including all diligence, duplication, audit, search, filing, and recording fees). By executing this letter, each of the CSC Entities agrees to indemnify and hold harmless GE Capital and its affiliates, and their respective officers, directors, employees, agents, consultants, attorneys and advisers (each, an "Indemnified Party"), from and against any and all losses, claims, damages, liabilities, costs and expenses including environmental liabilities, costs and expenses and all reasonable fees, expenses and disbursements of counsel, which may be incurred by or asserted or awarded against any such Indemnified Party in connection with or arising out of, or by reason of the preparation of the defense of, any investigation, litigation or proceeding arising out of, related to or in connection with this letter, any of the Transactions or the documentation therefor (including those arising from disputes among the parties hereto), whether or not such Indemnified Party is a party to such investigation, litigation or proceeding and whether or not any of the Transactions are consummated, except to the extent such 7 claim, damage, loss, liability or expense is found in a final judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. No Indemnified Party shall be responsible or liable to any other party hereto or to any other party to the definitive documentation for the Transactions, any successor, assignee or third party beneficiary of such person or any other person asserting claims derivatively through such party, for indirect, punitive, exemplary or consequential damages related to the Transactions. In the event the parties execute and deliver definitive documentation for any of the Transactions that contains indemnification by the CSC Entities with respect to the Transactions expressly governed thereby, the provisions of such indemnification shall supersede the provisions of this paragraph to the extent of any actual conflict between such provisions. The terms of this letter may not be changed except pursuant to a written instrument signed by GE Capital and the CSC Entities. This letter shall be governed by the laws of the State of New York, without regard to principles thereof relating to conflict of laws. This letter may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument. Neither this letter nor the rights or obligations of the parties hereunder may be assigned by any party without the prior written consent of the others. This letter and the Exhibits hereto hereof constitute the complete agreement between the parties hereto with respect to the subject matter hereof. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO, THIS LETTER. We look forward to working with you to bring the proposed transactions to completion. 8 Very truly yours, GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ Michael Cummings -------------------------------- Name: Michael Cummings Title: Managing Director 9 Agreed this 6th day of --- September, 1995: CABLEVISION SYSTEMS CORPORATION By: /s/ Barry J. O'Leary -------------------------------------- Name: Barry J. O'Leary Title: Senior Vice President, Finance and Treasurer V CABLE, INC. By: /s/ Barry J. O'Leary -------------------------------------- Name: Barry J. O'Leary Title: Senior Vice President, Finance and Treasurer VC HOLDING, INC. By: /s/ Barry J. O'Leary -------------------------------------- Name: Barry J. O'Leary Title: Senior Vice President, Finance and Treasurer 10 -----END PRIVACY-ENHANCED MESSAGE-----