HomeMy WebLinkAbout1995-191E:AWPDDCS\DRD\MARCUS.CTV
Note: Amended by Ordinance No. 99-094
ORDINANCE NO. 9:!5 =i9/
AN ORDINANCE AMENDING ORDINANCE NO. 88-189, WHICH GRANTED A FRAN-
CHISE TO SAMMONS COMMUNICATIONS, INC. TO RECONSTRUCT, OPERATE, AND
MAINTAIN A CABLE TELEVISION SYSTEM IN THE CITY OF DENTON, TEXAS;
CONSENTING TO THE ASSIGNMENT AND TRANSFER OF THAT FRANCHISE FROM
SAMMONS COMMUNICATIONS, INC. TO MARCUS CABLE ASSOCIATES, L.P. IN
ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS ORDINANCE;
APPROVING AN ACCEPTANCE AGREEMENT; PROVIDING FOR LIQUIDATED DAMAGES
NOT TO EXCEED $4, 000 FOR FAILURE TO MEET CUSTOMER SERVICE STAN-
DARDS; PROVIDING FOR A SAVINGS CLAUSE; PROVIDING FOR PUBLICATION;
PROVIDING FOR THE EFFECT OF THIS ORDINANCE UPON OTHER ORDINANCES
AND RESOLUTIONS; AND PROVIDING FOR AN EFFECTIVE DATE.
WHEREAS, Sammons Communications, Inc. ("Sammons") currently
holds a cable television franchise pursuant to Ordinance No. 88-
189, passed by the City Council on November 15, 1988 and duly
accepted by Sammons which incorporates the provisions of Chapter 8
"Cable Television" of the Code of Ordinances of the City of Denton
(collectively the "Franchise"); and
WHEREAS, Sammons, as seller, on April 5, 1995 entered into an
Asset Purchase Agreement to sell its assets and to assign and
transfer all its interest in the above -mentioned Franchise and its
cable system in the City to Marcus Cable Associates, L.P.
("Marcus"); and
WHEREAS, Marcus and Sammons submitted an Application for
Franchise Authority Consent on FCC form 394 providing certain
information with respect to the parties and the proposed transfer
and submitted additional information and documents relating to the
transaction and its effect on the provision of cable television
service within the City in response to requests of the City; and
WHEREAS, in accordance with Section 8-62 of the Code of
Ordinances, Sammons has notified the City of the proposed sale and
transfer of the Franchise to Marcus, and the City has joined with
a number of other cities in the Dallas/Fort Worth region served by
Sammons to hire the law firm of Varnum, Riddering, Schmidt &
Howlett, L.L.P. to examine and evaluate the transfer and to
represent the cities in negotiations with Marcus and Sammons
regarding the transfer, and to perform other duties with regard
thereto; and
WHEREAS, the City Council, relying on the consultant's
recommendation, in accordance with Section 8-62 of the Code of
Ordinances and applicable Federal Communication Commission ("FCC")
regulations, has examined Marcus' financial capability, legal
qualifications, general character qualifications, and its technical
ability to meet community needs for cable television services and
to comply with all the provisions of the Franchise, the current
Pole Lease and Cable Duct Use Agreements, the conditions imposed by
this ordinance, and with all applicable local, state, and federal
laws and regulations; and
WHEREAS, Marcus has agreed to certain amendments of the
existing Franchise and to cure various failures to perform certain
portions of the Franchise by Sammons and to alleviate any concerns
the City may have about Marcus' qualifications or its ability to
comply with all the obligations of the existing Franchise, the
cable television ordinance, and other applicable laws; and
WHEREAS, the City Council, upon recommendation of the City
Manager and after reviewing the evaluation of Marcus by the consul-
tant, feels that Marcus meets the technical ability, financial
capability and legal and general character qualification criteria
established by the FCC and the Denton City Council; and
WHEREAS, subject to Marcus' acceptance of the terms and
conditions set forth herein, the City Council believes that it is
in the best interest and consistent with the public necessity and
convenience of the City that the transfer and assignment of the
cable television Franchise from Sammons to Marcus be approved and
that Ordinance No. 88-189 be amended; NOW, THEREFORE,
THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS:
SECTION I. That the City Council hereby consents to and
approves the transfer and assignment of the Franchise which is
attached hereto and incorporated herein by reference as Exhibit "A"
from Sammons to Marcus for the remaining term of such Franchise,
subject to the following terms and conditions and the terms and
conditions of the Franchise:
A) Execution by Marcus of the Acceptance of the Terms and
Conditions to Transfer the Denton Cable Television System and
Franchise ("Acceptance Agreement"), including, without limitation,
the agreement to pay liquidated damages not to exceed $4,000 for
failure to comply with customer service standards in accordance
with Section D1(1) of the Acceptance Agreement, which is attached
as Exhibit "B" and incorporated by reference herein, including,
without limitation, the following conditions:
(1) Marcus will promptly, but no later than twelve months
from the effective date of this ordinance, provide the
capability for insertion of video programming and other
video, voice, and data messages into the cable system at
the points in the City in accordance with the terms
required under Section IV(b)(6) of the Franchise, and
will comply completely with the above section of the
franchise.
(2) Marcus will allocate one of the five access channels
provided under Section XXII(a) of the Franchise to the
Denton Independent School District when the District is
ready to use and access the channel.
PAGE 2
(3) Upon request of the City, Marcus will collect from
subscribers and pay to the City a monthly amount of no
more than fifty cents ($0.50) for each subscriber within
the City limits to assist in financing local access
activities. Such charge shall be set out as a separate
line item on all subscriber bills and shall not be deemed
a payment for basic service, but a pass -through of an
access and government programming fee. The charge will
not be part of gross revenue for purposes of calculating
the franchise fee.
(4) Marcus shall agree to comply with all the terms and
conditions of that certain CATV Pole Lease Agreement
between the City and Golden Triangle Communications
("Pole Lease Agreement") dated the 7th day of May, 1979,
and that certain Cable Duct Use Agreement Between the
City of Denton, Texas and Sammons Communications, Inc.
executed on or about April, 1988, which are attached to
this ordinance as Exhibits "C" and "D" and made a part
hereof for all purposes.
B) Execution by Marcus Cable Operating Company, L.P.; Marcus
Cable Company, L.P.; and Marcus Cable Property, L.P. of an Accep-
tance Agreement in the form attached as Exhibit "B" unconditionally
guaranteeing Marcus' performance of the obligations of the
Franchise and the Acceptance Agreement.
SECTION II. Marcus may, at any time and from time to time,
assign or grant or otherwise convey one or more liens or security
interests in its assets, including its rights, obligations and
benefits in and to the cable television system and Franchise, to
any lender providing financing to Marcus. Any assignment or
transfer by a lender or as a result of a foreclosure will require
the City's consent as provided in the Franchise.
SECTION III. That the City Council hereby consents to and
approves the transfer and assignment of all of Sammons' right,
title, and interest in and to those certain Pole Lease and Cable
Duct Use Agreements, attached hereto and incorporated herein as
Exhibits "C" and "D" to Marcus, for the remaining term of said
agreements, subject to Marcus agreeing to comply with all the terms
and conditions contained therein.
SECTION IV. That there is no waiver by the City of any
breach, default, or violation of the terms, covenants, or condi-
tions hereof to be performed, kept, and observed by Sammons or
Marcus. Nothing contained herein shall be construed to be or act
as a waiver of any subsequent default on any such terms, covenants,
and conditions of the Franchise, the attached Acceptance Agreement,
the attached Pole Lease and Cable Duct Use Agreements, or the terms
and conditions of this ordinance.
PAGE 3
SECTION V. That to the extent that this ordinance or the
attached Acceptance Agreement modifies any of the terms and
conditions of Ordinance No. 88-189, as amended, or Chapter 8 of the
Code of Ordinances, Ordinance No. 88-189 and Chapter 8 of the Code
of Ordinances are hereby amended. Save and except as amended
hereby, the remaining sections, sentences, and paragraphs of
Ordinance No. 88-189 and Chapter 8 of the Code of Ordinances shall
remain in full force and effect.
SECTION VI. That in accordance with Section 13.02 of the City
Charter, this ordinance shall become effective twenty-one days
after final approval, if, after that date, Marcus shall give its
written acceptance of this ordinance by signing as provided below;
and provided that, after final approval and before the expiration
of twenty-one days, the full text of this ordinance shall be
published once each week for two consecutive weeks in the official
newspaper of the City, the entire expense of which shall be borne
by Marcus. The City Secretary is hereby directed to publish the
full text of this ordinance in such official newspaper of the City
once each week for two consecutive weeks immediately following the
passage of this ordinance on second reading.
SECTION VII. That this ordinance shall be in full force and
effect at the time provided by law from and after its passage and
written acceptance by Marcus; provided however, that this ordinance
shall expire on March 31, 1996, and shall be of no further force
and effect if the transactions described in the Asset Purchase
Agreement between Sammons and Marcus have not been closed by that
date or if Marcus fails to accept this ordinance.
SECTION VIII. Marcus and Marcus Cable Operating Company,
L.P., Marcus Cable Company, L.P. and Marcus Cable Properties, L.P.
for themselves, their successors and assigns, hereby accepts this
ordinance including the attached exhibits and agrees to be bound by
all of its terms and conditions and will execute the paragraph
entitled "Acceptance" on page five of this ordinance.
P SED AND APPROVED at its first reading this the At 'day of
1995.
PA SED D APPROVED at its second reading this the � day
o��, 1995.
PAGE 4
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
BY: (IM j, j
APVED AS TO LEGAL FORM:
HEInERT L. PROUTY, Z
V
NEY
BY:
61
ACCEPTANCE: By the signature hereunder, Marcus Cable Company,
L.P., and Marcus Cable Properties, L.P., Marcus Cable Associates,
L.P. and Marcus Cable Operating Company, L.P., the transferee and
grantee, hereby represent that the officers signing below are fully
authorized to bind Marcus and Marcus Cable Properties, Inc., and
their signatures hereon constitutes an acceptance and Marcus' and
Marcus Cable Properties, Inc.'s agreement to fully comply and abide
by the terms and conditions of this ordinance, Ordinance No. 88-189
as amended hereby, the attached Acceptance Agreement and Pole Lease
Agreement, the provisions of Chapter 8 of the Code of Ordinances of
the City of Denton, Article XIII "Franchises" of the City Charter,
and all other applicable laws and regulations.
* Marcus Cable Properties,
Inc., the ultimate
general partner
MARCUS CABLE ASSOCIATES, L.P.
BY: � //%J
Thomas P. McMillin
Title: Vice President of
Date Of Execution: November 1 , 1995
MARCUS CABLE OPERATING COMPANY, L.P.
BY: —,Z/Aw A�//516� 2
Thomas P. McMil in
Title: Vice President of
Date Of Execution: NnvPmbpr ( , 1995
MARCUS CABLE COMPANY, L.P.
BY: le �
Thomas P. McMillin
Title: Vice President of
Date Of Execution: November
1995
PAGE 5
MARCUS CABLE PROPERTIES, L.P.
BY: Aft�lll2///G/
Thomas P. McMillin
Title: Vice President of
Date Of Execution: November I , 1995
* Marcus Cable Properties, Inc.,
the ultimate general partner
PAGE 6
364
EXHIBIT "A"
CABLE TELEVISION FRANCHISE AGREEMENT
BETWEEN
THE CITY OF DENTON, TEXAS
=1
SAMMONS COMMUNICATIONS, INC.
TABLE OF CONTENTS
SECTION
I.
TITLE...........................................2
SECTION
II.
PREAMBLE........................................2
SECTION
III.
DEFINITIONS.....................................2
SECTION
IV.
GRANT OF AUTHORITY ..............................2
SECTION
V.
POLICE POWER....................................3
SECTION
VI.
SYSTEM UPGRADE AND TIMETABLE....................3
SECTION
VII.
INDEMNIFICATION AND INSURANCE...................5
SECTION
VIII.
COMPLAINT PROCEDURE .............................6
SECTION
IX.
CONSTRUCTION AND MAINTENANCE ....................7
SECTION
X.
CONSTRUCTION AND EXTENSION ......................8
SECTION
XI.
CONSTRUCTION BOND REQUIRED......................9
SECTION
XII.
GOVERNING LAW..................................10
SECTION
XIII.
FRANCHISE TERM.................................10
SECTION
XIV.
RENEWAL PROCEDURE..............................10
SECTION
XV.
PERFORMANCE REVIEW .............................10
SECTION
XVI.
SECURITY FUND..................................11
SECTION
XVII.
LIQUIDATED DAMAGES .............................12
SECTION
XVIII.
FORFEITURE.....................................13
SECTION
XIX.
TRANSFERS......................................13
SECTION
XX.
FRANCHISE FEE..................................14
SECTION
XXI.
RATES..........................................14
SECTION
XXII.
ACCESS TO SERVICES AND
FACILITIES..............15
SECTION
XXIII.
EMERGENCY OVERRIDE .............................17
BFCTTON
XXIV.
PROGRAMMING MIX................................17
9
ebb
SECTION XXV.
SECTION XXVI.
SECTION XXVII.
SECTION XXVIII.
SECTION XXIX.
SECTION XXX.
SECTION XXXI.
SECTION XXXII.
SECTION XXXIII.
FORCE MAJEURE..................................17
NOTICES........................................18
SAVINGS CLAUSE.................................19
CONFLICTING ORDINANCES AND RESOLUTIONS ......... 19
FEES...........................................19
PAYMENT OF TAXES...............................19
NON-LIABILITY..................................20
WAIVERS........................................20
APPROVAL AND ACCEPTANCE ........................20
ii
2518L
NOTE: ORIGINAL EXHIBITS HAVE BEEN ATTACHED TO ORIGINAL ORDINANCE 88-189
367
ORDINANCE NO.IZ:yff
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF DENTON, TEXAS,
GRANTING A FRANCHISE TO SAMMONS COMMUNICATIONS, INC., TO CON-
STRUCT, RECONSTRUCT, OPERATE AND MAINTAIN A CABLE TELEVISION
SYSTEM IN THE CITY OF DENTON, TEXAS AND SETTING FORTH CONDITIONS
ACCOMPANYING THE GRANTING OF THIS FRANCHISE; PROVIDING FOR A
PENALTY FOR THE VIOLATION OF PORTIONS OF THIS ORDINANCE; PRO-
VIDING FOR A SAVINGS CLAUSE; PROVIDING FOR THE EFFECT OF THIS
ORDINANCE UPON OTHER ORDINANCES AND RESOLUTIONS; AND PROVIDING
AN EFFECTIVE DATE.
THE CITY COUNCIL OF THE CITY OF DENTON, TEXAS HEREBY ORDAINS:
WHEREAS, the City is authorized to grant, renew and deny
franchises for the installation, operation and maintenance of
cable television and other telecommunications systems, and
otherwise to regulate cable television within the City's
boundaries by virtue of (i) Federal and State statutes, (ii) the
City's police powers, (iii) the City's authority over its public
rights of way, and (iv) other City powers and authority; and
WHEREAS, the City has undertaken an extensive review of cable
television service in the City, including but not limited to a
review of Sammons Communications, Inc., its respective records of
service, its facilities, the cable television -related community
needs of the City and its citizens for both the present and
future, Sammons Communications, Inc.'s ability to carry out,each
of its commitments as set forth herein and in related documents,
the experience and character of Sammons Communications, Inc.
management teams and Sammons' financial, legal and technical
qualifications to maintain and operate a cable television system
franchise in the City in a manner which would serve the public
interest of the citizens of the City; and
WHEREAS, the City hereby finds that it would serve the public
interest of the citizens of the City to grant a cable television
franchise to Sammons Communications, Inc., subject to the terms
and conditions hereinafter set forth, and Sammons Communications,
Inc. voluntarily agrees to such terms and conditions;
NOW THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties hereby agree as follows:
SECTION I. TITLE.
This ordinance shall be known and may be cited as "Cable TV
Franchise Ordinance."
SECTION II. PREAMBLE.
This ordinance was passed after a full, open and public
hearing upon prior notice and opportunity of all interested
parties to be heard and upon careful consideration of SAMMONS
COMMUNICATIONS, INC.'S qualifications, including its legal,
financial and technical qualifications.
SECTION III. DEFINITIONS.
For the purpose of this ordinance, and when not inconsistent
with context, words used herein in the present tense include the
future, the word "shall" is always mandatory. The captions
supplied herein for each section are for convenience only. Said
captions have no force of law, are not part of the section, and
are not to be used in construing the language of the section.
The following terms and phrases, as used herein, shall be given
the meanings set forth below:
(1) "City" is the CITY OF DENTON, TEXAS, a municipal corpo-
ration under the laws of the State of Texas.
(2) "Grantee" is SAMMONS COMMUNICATIONS, INC., a corporation
organized and existing under the laws of the State of
Delaware, duly qualified and authorized to do business in
the State of Texas, and it is the grantee and franchisee
of rights under this franchise.
(3) "City Council" is the City Council of the CITY OF DENTON,
TEXAS, or its designated representatives.
As used in this document, a word shall have the meaning set
forth in Chapter 5 1/2 of the City's Municipal Code of Ordinances
(hereinafter, the "Cable Ordinance") at Article II, unless it is
apparent from the context that it has a different meaning, or
unless such word is specifically defined herein. The term
"Grantee" shall refer to Sammons Communications, Inc. or a
wholly -owned subsidiary of Sammons or a company under common
control with or controlling Sammons (provided that the liability
of Sammons and each affiliated entity acting as Grantee hereunder
shall be joint and several), and its successors hereunder.
SECTION IV. GRANT OF AUTHORITY.
There is hereby granted by the City to Grantee the right and
privilege to construct, reconstruct, erect, operate and maintain,
PAGE 2
369
in, upon, along, across, above, over or under the streets,
alleys, easements, public ways and public places now laid out or
dedicated and all extensions thereof and additions thereto in the
City, all poles, wires, cables, underground conduits, manholes
and other conductors and fixtures necessary for the maintenance
and operation in the City of a cable television system for the
transmission of television signals and other signals, either
separately or upon or in conjunction with any public utility
maintaining the same in the City, with all of the necessary and
desirable appliances and appurtenances pertaining thereto.
Without limiting the generality of the foregoing, this franchise
and grant shall and does hereby include the right in, over,
under, and upon streets, sidewalks, alleys, easements, and public
grounds and places in the City to install, erect, operate or in
any way acquire the use of, as by leasing or licensing, all lines
and equipment necessary to the Grantees cable system and the
right, to make connections to subscribers and the right to repair,
replace, enlarge and extend said lines, equipment and connections.
SECTION V. POLICE POWER.
Grantee shall, at all times during the term of this franchise,
be subject to all lawful exercise of the police power of the City.
The right is hereby reserved to the City to adopt, in addition to
the provisions herein contained and any other existing applicable
ordinances, such additional applicable ordinances as it shall find
necessary in the exercise of its police power; provided that such
additional ordinances shall be reasonable, shall not substantially
or materially conflict with or alter in any manner the rights
granted herein, and shall not conflict with the laws of the State
of Texas, the laws of the United States of America, or the rules
of the Federal Communications Commission. All terms, conditions
and provisions of the Cable Ordinance shall be deemed to be
embodied in this Agreement and Grantee does hereby agree to
comply with the terms of said Ordinance.
SECTION VI. SYSTEM UPGRADE AND TIMETABLE,
(a) Within the time period specified in (b) of this section,
the Grantee shall have completely upgraded and initiated a Cable
System which has the capability of delivering sixty (60) video
channels over 450 MRZ Cable bandwidth (the "Cable System Upgrade")
and the Grantee shall use its best efforts to maximize usage of
such capacity with non -duplicated video channels.
(b) The Grantee shall exercise its best good faith efforts to
expedite construction of the Cable System Upgrade as required in
subsection above in a sound and economical manner. Subject to
the provisions of Section XXV. (Force Majeure) hereof, Grantee
shall meet the following schedule:
PAGE 3
/U
(1) Submission of all applications for authorizations
necessary to begin initial construction of the
cable system upgrade on or before July 1, 1990.
(2) Securing all authorizations necessary to begin
initial construction of the Cable System Upgrade
on or before September 1, 1990.
(3) Completion of all of the construction of the
Cable System Upgrade on or before November 1,
1993.
(4) The Cable System Upgrade shall have the
capability to transmit video, voice and data
services in two directions simultaneously ("two
way services"). Two-way services shall be
instituted at such time as it is consistent with
federal and state laws and regulations and it is
economically and technically feasible; provided,
however, it shall be Grantee's burden to demon-
strate to the City's satisfaction, upon request
of the City at any time, that it is not econo-
mically or technically feasible to institute such
two-way services.
(5) Grantee shall have completed the installation of
alternative (standby) power sources at the
headend on or before May 1, 1989. Thereafter,
Grantee shall maintain such power sources so that
all Cable System and work lines and sub -stations
may be maintained at full power for at least two
(2) hours beyond the time when normal power
sources serving the Cable System have ceased.
6) Grantee shall provide the capability for inser-
tion of video programming and other video, voice
and data messages into the Cable System from the
following points in the City: Municipal Building,
215 E. McKinney, Central Fire Station, 217 W.
McKinney, Service Center, 901 Texas Street,
Police Station, 221 N. Elm, Library, 502 Oakland
and Civic Center, 321 E. McKinney.
Grantee shall complete construction of such cable
lines not later than November 13, 1993. In
addition to the above -designated points for•
insertion of video programming and other video,
voice and data messages into the Cable System
described above, Grantee shall provide a central
PAGE 4
insertion point for the Cable System within the
City, which shall be one of the points described
above and which shall include signal switching
and processing equipment as is reasonably
required to allow those utilizing the insertion
points listed above to transmit to the other
insertion points of the Cable System, or to
transmit to all subscribers, at the City's
option. Prior to designating the central
insertion point for the Cable System within the
City, Grantee shall obtain the prior written
consent of the City Manager to such designation.
(7) Grantee shall, not later than November 1, 1993,
provide and maintain two access channels
designated for the following uses:
(a) Local Government/Denton Independent School
District (a shared channel)
(b) Education Access
(c) The Grantee shall submit its drawings and specifications
for the Cable System Upgrade to the City not later than March 1,
1990, provided, however, that the City assumes no liability or
responsibility whatsoever for the design or construction of the
Cable System Upgrade by virtue of its receipt of such drawings
and specifications, it being understood that the City's approval
of such drawings and specifications shall not be required. At
the time the Grantee submits such drawings and specifications to
the City, the Grantee shall also submit a detailed plan of action
for the accomplishment of the Cable System Upgrade, including,
without limitation, performance criteria which will permit the
City to monitor the Grantee's progress toward completing the
Cable System Upgrade in a timely fashion.
SECTION VII. INDEMNIFICATION AND INSURANCE.
Grantee shall hold the City harmless from all loss sustained
by the City on account of any suit, judgment, execution, claim or
demand whatsoever against the City- resulting from any negligent
act or omission on the part of Grantee in the construction,
operation or maintenance of its Cable System in the City in
accordance with Section 5 1/2-76 of the Cable Ordinance. For
this purpose, Grantee shall carry property damage and personal
injury insurance with some responsible insurance company. or
companies qualified to do business in the State of Texas. The
amounts of such insurance to be carried for liability shall be
not less than those amounts set forth in the Cable Ordinance and
as set forth in Exhibit 1 to this Ordinance.
PAGE 5
/L
SECTION VIII. COMPLAINT PROCEDURE.
(a) Grantee shall maintain a business office in Denton for
the purpose of receiving inquiries and complaints from its
customers and the general public.
(b) Grantee shall establish procedures for receiving, acting
upon, and resolving subscriber complaints and complaints by the
City to the satisfaction of the City Manager and the proposed
initial procedures shall be submitted to the City Manager upon
Grantee's acceptance of this Agreement. Grantee shall provide
written notice of such procedures to subscribers at least once a
year.
(c) The Grantee shall respond to complaints made by the City
or subscribers of the Cable System promptly and, if possible,
shall resolve complaints made by the City or subscribers not more
than twenty-four (24) hours following receipt of the complaint by
Grantee. Grantee shall maintain complete, detailed records
relating to its maintenance and operation of the Cable System
which shall be available for inspection by representatives of the
City at any time during normal business hours of the City. Upon
the City's request, Grantee shall respond to City in writing
within twenty-four (24) hours following receipt of such request
by the Grantee regarding any complaint which takes longer than
one week to resolve.
(d) Grantee shall provide a local, toll -free telephone
service for subscriber complaints to be answered twenty-four (24)
hours each day in accordance with the schedule set forth in
Exhibit 2. Such telephone number shall be prominently displayed
on the first page of each customer bill and in the telephone
directory of the City of Denton.
(e) Grantee shall provide at least ten days (10) days written
notice prior to discontinuance of service to any subscriber of
the Cable System. If Grantee has improperly disconnected Cable
System service to any subscriber, it shall provide free recon-
nection to the Cable System to such subscriber.
(f) All personnel, agents and representatives of Grantee,
including subcontractors, shall wear photo -identification badges,
prominently displayed, when acting on behalf of the Grantee in
the City.
(g) Grantee shall provide advance notice in writing to .the
resident, of any private property within the City prior to entry
onto such property wherever the Grantee desires that any of its
personnel, agents or representatives should enter such property.
This requirement shall apply only when it is reasonable under the
PAGE 6
circumstances at the time and Grantee shall not be required to
provide such notice in emergencies.
(h) Grantee shall notify each subscriber of the Cable System
in advance of the expected time of any service visit to such
subscriber's premises. Such notification shall specify whether
the anticipated service visit will be before or after noon.
Grantee shall accommodate the subscriber with respect to the
subscriber's expressed preference for a morning or afternoon
service visit.
(1) Grantee shall, not less than once a year, provide
subscribers of the Cable System, and potential subscribers, with
a complete list of service offerings, options, prices, and credit
policies associated with the Cable System.
(j) Grantee shall establish and maintain sufficient telephone
lines and personnel so as to not delay unreasonably the answering
of all telephone calls. The City, upon receipt of documented
complaints from more than ten subscribers during a single business
day between the hours of 8:30 a.m. and 6:00 p.m. regarding their
inability to reach a live, personal representative of Grantee
during non -emergency, non -system outage periods, may seek
liquidated damages as provided in Section S 1/2-62 of the Cable
Ordinance.
SECTION IX. CONSTRUCTION AND MAINTENANCE.
(a) All structures, lines and equipment erected by Grantee
within the City shall be so located as to cause minimum inter-
ference with the proper use of streets, alleys, easements, and
other public ways and places and to cause minimum interference
with the rights or reasonable convenience of property owners, and
Grantee shall comply with all reasonable, proper and lawful
ordinances of the City now or hereafter in force. Existing
poles, posts, conduits, and other such structures of any electric
power system, telephone company, or other public utility located
in the City shall, when possible, be made available to Grantee
for leasing or licensing upon reasonable terms and rates and
shall be used to the extent practicable in order to minimize
interference with travel and avoid unnecessary duplication of
facilities. Poles owned by City shall be made available to
Grantee for its use under the terms, conditions and provisions of
a separate Pole Rental Agreement to be negotiated between the
parties.
(b) Grantee shall not open or disturb the surface of any
street, sidewalk, driveway or public place for any purpose
without first having obtained a permit to do so in accordance
with applicable ordinances, including, but not limited to,
PAGE 7
/4
Chapter 21 of the Code of Ordinances, except that Grantee shall
not be required to post a bond prior to commencing such
disturbance. Grantee specifically agrees to pay any fees in
connection herewith required by City Ordinances. In case of any
disturbance by the Grantee of pavements, .sidewalk, driveway, or
other surfacing, Grantee shall, at its own cost and expense and
in a manner approved by the City, replace and restore all paving,
sidewalk, driveway or surface so disturbed in as good condition
as before said work was commenced.
(c) In the event that at any time during the period of this
franchise the City shall elect to alter or change any street,
alley, easement, or other public way requiring the relocation of
Grantee's facilities, then in such event., Grantee, upon
reasonable notice from the City, shall remove, relay, and
relocate the same at its own expense.
(d) Grantee shall, on the request of any person holding a
building moving permit issued by the City, temporarily raise or
lower its lines to permit the moving of the building. The
expense of such temporary removal shall be paid by the person
requesting the same, and Grantee shall have the authority to
require such payment in advance.
(e) All poles, lines, structure or other facilities owned by
Grantee in, on, over and under the streets, sidewalks, alleys and
easements and public grounds or places of the City shall be kept
by Grantee at all times in a safe and substantial condition.
SECTION X. CONSTRUCTION AND EXTENSION.
(a) In conjunction with submittal of its proposal for
renewal, Grantee has submitted a construction plan, a copy of
which is hereby incorporated by reference and made a part of the
franchise agreement. The plan, attached hereto as Exhibit 2,
includes system design details, equipment, specifications and
design performance criteria, a map of the entire franchise area
and clearly delineates the following:
(1) The areas within the franchise area where the
cable system is currently available to subscribers,
including a schedule of construction for each year
that construction or reconstruction is proposed.
(2) The areas within the franchise area where the
cable system cannot reasonably be extended due to
lack of present or planned development or other
similar reasons, with the areas and the reasons
for not serving them clearly identified on the map.
PAGE 8
375
(b) Nothing in this section shall prevent the Grantee from
constructing or reconstructing the system earlier than planned.
However, any delay in the system construction beyond the times
specified in the plan report timetable must be submitted to and
approved by the City Council.
(c) Extension of the Cable System into any areas not
specifically addressed in the plan shall nonetheless be required
if the terms of any of the following conditions are met:
(1) Upon request of potential subscribers, a Grantee
shall extend the system to any contiguous area
not designated for initial service in the plan
when there exists a density of 35 homes per
street mile for aerial cable or 50 homes per
street mile for underground cable. Extension
shall be at Grantee's cost. If underground
installation is required by regulation, Grantee
must make installation at Grantee's expense.
Where aerial extension is allowed by regulation
but underground installation is requested by
benefited subscribers, the cost of undergrounding
that exceeds the estimated aerial extension cost
may be charged to such benefited subscribers.
(2) In areas not meeting the requirements for
mandatory extension of serviceGrantee shall
provide, upon the request of five (5) or more
potential subscribers desiring service, an
estimate of the costs required to extend service
to said subscribers. Grantee shall then extend
service upon request of said potential subscribers
according to the rate schedule. Grantee ma
require advance payment or assurance of paymeN
satisfactory to Grantee. The amount paid by sub-
scribers for early extension shall be nonrefund-
able, and in the event the area subsequently
reaches the density required for mandatory
extension, such payments shall be treated as
consideration for early extension.
(d) Grantee shall construct, install, operate and maintain
its system in a manner consistent with detailed construction
standards submitted by Grantee as a part of its application.
Grantee agrees to comply with the Codes, and any supplements or
amendments thereto, referenced in its proposal.
PAGE 9
76
SECTION XI. CONSTRUCTION BOND REQUIRED.
Pursuant to Section 5 1/2-63 of the Cable Ordinance, the
Grantee shall file with the City a construction bond in the amount
of $1,000,000 not later than August 1, 1990. The construction
bond shall be terminated only after the City Council finds that
the Grantee has satisfactorily completed reconstruction of the
cable system pursuant to the terms of the Cable Ordinance and
this franchise agreement.
SECTION XII. GOVERNING LAW.
This franchise is governed by and subject to all applicable
provisions of the Communications Act of 1934, as amended in 1984,
and regulations promulgated by the Federal Communications
Commission pursuant thereto as well as the laws of the State of
Texas. not inconsistent therewith.
SECTION XIII. FRANCHISE TERM.
This franchise shall take effect and be in full force from
and after acceptance by Grantee as provided in Section XXXIII.,
and the same shall continue in full force and effect for a term
of fifteen (15) years.
SECTION XIV. RENEWAL PROCEDURE.
This Franchise Agreement shall be subject to renewal in
accordance with the terms and conditions of Section 626 of the
Cable Communications Policy Act of 1984, 47 U.S.C. 546, as now in
force and effect or hereafter as amended.
SECTION XV. PERFORMANCE REVIEW.
The parties agree that the City shall have the right to con-
duct a performance evaluation with the Grantee and the citizens
of the City relating to this Franchise Agreement, commencing in
the seventh year subsequent to the date of Grantee's acceptance
of this franchise. The Grantee agrees to incur the costs of the
evaluation and the City's ascertainment of the current cable -
related needs and interests of the City's residents; provided,
however, that the total payment by the Grantee shall not exceed
Twenty -Five Thousand ($25,000.00) Dollars. This sum shall be
adjusted on the basis of the proportion that the then all Urban
Consumer Price Index (CPI-U) for the Dallas/Fort Worth Standard
Metropolitan Statistical Area bears to the February, 1988 index,
which was 114.0. The City shall provide Grantee with the names
of three nationally recognized independent cable television
consulting firms and the Grantee, together with the City, shall
PAGE 10
377
select one of the three consultants to perform the evaluation.
Grantee agrees that such costs are in addition to and not to be
deducted from the franchise fees due the City.
SECTION XVI. SECURITY FUND
(a) Within twenty (20) days after the effective date of a
franchise agreement, the Grantee shall deposit with the City's
Executive Director of Finance, and maintain on deposit through
the term of the franchise, the sum of Sixty -Five Thousand
($65,000) Dollars in monies, as security for the faithful perfor-
mance- by it of all the provisions of this franchise agreement,
and compliance with all orders, permits and directions of any
agency of the City having jurisdiction over its acts or defaults
under this contract, and the payment by the Grantee of any claims,
liena and taxes due the City which arise by reason of the con-
struction, reconstruction, operation or maintenance of the system
and the payment by the Grantee of any penalties or liquidated
damages due the City pursuant to this franchise agreement.
(b) The City Manager may draw upon the security fund in the
event of any of the occurrences set forth in this Section and in
Section 5 1/2-62 of the Cable Ordinance. Within ten (10) days
after notice to it that any amount has been withdrawn from the
security fund deposited pursuant to subdivision (a) of this
section in accordance with Section 5 1/2-62 (Liquidated Damages),
the Grantee shall pay to or deposit with the Executive Director
of Finance a sum of money sufficient to restore such securit
fund to the original amount of Sixty -Five Thousand ($65,000f
Dollars. Failure to restore said security fund to the original
amount shall constitute a material breach.
(c) Examples of a basis for drawing upon the security fund
include, but are not limited to the following:
(1) failure of the Grantee to pay to the City any taxes
after ten (10) days written notice of delinquency;
(2) failure of the Grantee to pay to the City after
ten (10) days written notice, any amounts due and
owing the City by reason f the indemnity provision
of Section 5 1/2-78 of the Cable Ordinance;
(3) failure by the Grantee to pay to the City, any
liquidated damages due and owing to the City pur-
suant to Section 5 1/2-62 of the Cable Ordinance;
(4) failure by the Grantee to pay to the City any
amounts due pursuant o Section 5 1/2-21(g) of the
Cable Ordinance;
PAGE 11
I
(5) failure by the Grantee to pay, upon ten (10) days
written notice, any amounts owing as franchise
fees pursuant to Section 5 1/2-69 of the Cable
Ordinance.
(d) The security fund deposited pursuant to this Section
shall become the property of the City in the event that this
contract is cancelled by reason of the default of the Grantee.
The Grantee, however, shall be entitled to the return of such
security fund, or portion thereof, as remains on deposit with the
Executive Director of Finance at the expiration of the term of
the franchise agreement, provided that there is then no
outstanding default on the part of the Grantee.
(e) The rights reserved to the City with respect to the
security fund are in addition to all other rights of the City
whether reserved by this contract or authorized by law, and no
action, proceeding or exercise of a right with respect to such
security fund shall affect any other right the City may have.
SECTION XVII. LIQUIDATED DAMAGES.
(a) The pparties agree to the liquidated damages specified in
Section 5 1/2-62 of the Cable Ordinance, as adopted on the 1st
day of November, 1988, but without prejudice to any other
remedies available to the parties hereto to the extent permitted
by law. The parties agree that the liquidated damages set forth
in the ordinance may be greater or less than the City's actual
damages and such damages represent the best estimate by the par-
ties hereto as the likely extent of such damages. The liquidated
damages are not intended to constitute a penalty, but rather, are
designed to save the parties from having to engage in costly liti-
gation with regard to the extent of such damages. In addition to
the amounts set forth in the Cable Ordinance, the following
liquidated damages shall apply:
For breach of any service standards adopted pursuant to
Section VIII., hereof:
- $200.00 per day
(b) If the City Manager determines that the Grantee is liable
for liquidated damages, he shall issue to the Grantee by certi-
fied mail a notice of intention to assess liquidated damages.
The notice shall set forth the basis for the assessment, and
shall inform the Grantee that liquidated damages will be assessed
from the date of the notice unless the assessment notice is
appealed for hearing before the City Council. If the Grantee
desires a hearing before the City Council, it shall send a
written notice of appeal by certified mail to the City Manager
within ten (10) days of the date on which the City sent the
PAGE 12
notice of intention to assess liquidated damages. In the event
the City Manager receives such a notice from the Grantee, the
hearing on the Grantee's appeal shall be held within thirty (30)
days of the date on which the City sent the notice of intention
to assess liquidated damages unless mutually extended by the City
and the Grantee. After such hearing, and based on the facts
before it, if the City Council finds (a) that an extension of
time or other relief should be granted, or (b) that there was
never a violation, then it shall waive the City Manager's
assessment of liquidated damages. If the City finds that the
facts warrant the assessment of liquidated damages, or any
portion thereof, the City may at any time thereafter draw the
amount of liquid damages from the security fund established
pursuant to Section 5 1/2-61 of the Cable Ordinance up to the
full amount of accrued liquidated damages to such date. In
considering whether or not to waive all or a portion of any
liquidated damages assessable against the Grantee hereunder, the
City shall consider, without limitation, the number, frequency
and magnitude of any prior breaches of this Agreement by the
Grantee and the speed with which the Grantee cured such breach or
breaches.
SECTION XVIII. FORFEITURE.
If Grantee should violate any of the terms, conditions or
provisions of this franchise or if Grantee should fail to comply
with any reasonable provisions of any ordinance of the City regu-
lating the use by Grantee of the streets, alleys, easements or
public ways of the City, and should Grantee further continue to
violate or fail to comply with the same for a period of thirty
(30) days after Grantee shall have been notified in writing by
the City to cease and desist from any such violation or failure
to comply so specified, then Grantee may be deemed to have for-
feited and annulled and shall thereby forfeit and annul all the
rights and privileges granted by this franchise; provided that
such forfeiture shall be declared only by written decision of the
City Council after following the procedures set forth in Section
5 1/2-23 of the Cable Ordinance and an appropriate public pro-
ceeding before the City Council affording Grantee due process and
full opportunity to be heard and to respond to any such notice of
violation or failure to comply; and provided further that the City
Council may, in its discretion and upon a finding of violation or
failure to comply, impose a lesser penalty than forfeiture of this
franchise or excuse the violation or failure to comply upon a
showing by Grantee of mitigating circumstances. Grantee shall
have the right to appeal any finding of violation or failure to
comply and any resultant penalty to or seek relief in any court of
competent jurisdiction. In the event of any determination by the
City to revoke this Franchise Agreement, such a determination
shall be stayed during the pendency of any judicial review
thereof.
PAGE 13
6U
SECTION XIX. TRANSFERS.
All of the rights and privileges and all of the obligations,
duties, and liabilities created by this franchise shall pass to
and be binding upon the successors of the City and the successors
and assigns of Grantee; and the same shall not be assigned or
transferred without the prior written approval of the City
Council, which ap roval shall be sought and obtained in accordance
with Section 5 M_26 of the Cable Television Ordinance. Grantee
specifically agrees to comply with the provisions of said Section
5 1/2-26.
SECTION XX. FRANCHISE FEE.
In consideration of the terms of this franchise for the first
ten years from the date of Grantee's acceptance of the terms of
the franchise, Grantee agrees to pay to the City a sum of money
equal to five percent (5%) of Grantee's gross subscriber revenues
per year pursuant to the provisions of Article I of the Cable
Ordinance. Thereafter, for the remainder of the term of the
agreement, Grantee shall pay to the City a sum of money equal to
seven percent (7%) of Grantee's gross subscriber revenues per
year. If the law does not allow the City to charge Grantee a
franchise fee in this amount, Grantee shall continue to pay five
percent (5%). The Grantee shall pay to the City in quarterly
installments within forty-five (45) days after March 30, June 30,
September 30 and December 31 of each year the franchise fee
attributable to gross receipts of the Grantee during the
preceding quarter.
SECTION XXI. RATES.
To the extent permitted by federal and state law, the 'City
may regulate the following rates, fees and charges:
(1) Rates for the provision of basic cable service to
subscribers whether residential or commercial,
including multiple tiers of basic cable service.
(2) Rates for the initial insrallation or the rental of
one set of the minimum equipment which is necessary
for the subscribers' receipt of basic cable service.
(3) Any other rates for any type of services delivered
by the Grantee that may become subject to local
regulation.
The Grantee may petition the Council for a change in rates
subject to regulation by filing a proposed rate schedule with the
City Clerk. The procedures outlined in Section 5 1/2-70 of the
Cable Ordinance shall then be followed.
PAGE 14
SECTION XXII.
ACCESS TO SERVICES AND FACILITIES.
Grantee shall provide the minimum range of services required
from time to time by the FCC as its regulations presently exist
or may hereafter be amended including, without limiting the
foregoing, public, educational and governmental use channels in
accordance with the following conditions:
(a) Grantee shall provide and maintain five channels for
public programming, educational programming and governmental
programming, three initially and, in the event that the conditions
of Section 5 1/2-91 of the Cable Ordinance are met, Grantee shall
provide additional access channels. In any event, Grantee shall
provide and maintain at least five channels not later than
November 1, 1993.
(b) The three initial channels, which are being maintained as
of the date of Grantee's acceptance of this Agreement, shall be
designated for the following use:
(1) University of North Texas
(2) Texas Woman's University
(3) Public Access/Local Organization
(c) The access channels described in subsection (a) above
shall be made available for non-commercial use to qualifying
applicants without charge when requested all in accordance with
the rules hereinafter mentioned.
(d) Rules shall be established by the cooperative effort of
City and the Grantee regarding access programming, priority of
use for the access channel, prohibition of lottery information,
obscene or indecent matter, and permitting public inspection of
the complete record of names and addresses of all persons or
groups requesting access time.
(e) Should a dispute arise between the user of an access
channel and the Grantee relative to the quality of the audio or
visual signal, at the request of either, the dispute will be
submitted to an independent engineer to be jointly selected by
City and Grantee. The party requesting that such testing be
performed shall be required to pay for the cost of testing and
analysis performed by the engineer, unless the engineer shall
find that there is a distortion of signal quality. If a
distortion is found, the party responsible for causing the
distortion shall pay the cost of testing.
(f) The Grantee shall provide "A/B switches" and "lock
boxes," or similar parental control devices, at a reasonable
price to any subscriber upon such subscriber's request.
PAGE 15
bL
(g) Subject to Section 5 1/2-40 of the Cable Ordinance, the
Grantee agrees to provide reasonable equipment to be used by
access cable casters with the aid of a technical and production
staff to be provided by the cable operator. Equipment that can
store programs for later showing shall be provided. In addition,
Grantee shall make available a centrally located studio to all
access users on a first -come, first -serve basis. Grantee shall
provide, at a minimum, the production equipment and facilities
designated in Exhibit 3. All equipment shall be maintained in
good working order by Grantee and shall be replaced as needed,
consistent with good operating practice.
(h) Grantee agrees to continue to maintain a local
programming studio containing the equipment specified in Exhibit
5, and shall provide adequate staffing for the local programming
studio and for training of the public in the use of production
equipment. Grantee shall keep a log of inquiries by citizens
requesting such training and shall conduct free training sessions
in use of cablecasting equipment and cablecasting techniques not
less than once each three months during the term hereof.
(i) Grantee also agrees to provide an instructor and the
facilities to train, without charge, once per year, potential
access users through sessions offered through the Denton
Independent School District.
(j) Grantee shall establish rules and rates if necessary, to
ensure that the studio is available in an equitable manner
provided that Grantee shall not, charge for use of the public and
educational access channels unless City has approved the charging
of the proposed fee.
(k) The parties hereby incorporate by reference' the
provisions of 47 U.S.C. 532, which provisions are hereby amended
to apply to the Grantee and the City, as appropriate. These
provisions are incorporated herein to assure that the widest
possible diversity of information sources are made available to
the residents of the City from the Cable System in a manner
consistent with the growth and development of the Cable System.
Grantee shall undertake any and all construction installation
necessary to keep current with the latest technological and
economically feasible developments in the state-of-the-art cable
television, whether with respect to increasing channel capacity,
developing new services, and instituting two-way service or •,any
other state-of-the-art technology. Further, Grantee specifically
agrees to comply with Section 5 1/2-93 of the Cable Ordinance.
PAGE 16
SECTION XXIII. EMERGENCY OVERRIDE.
Grantee shall provide and maintain the equipment necessary
for the City to maintain an emergency alert system to override,
by remote control, the audio and/or video signal to transmit a
message regarding a bona fide emergency over all cable video
channels simultaneously. Grantee shall designate a channel which
will be used for emergency broadcasts. Grantee shall provide a
remote data terminal, telephone lines, modems, cables and any
other items needed to adequately supply this service. Such
equipment shall be maintained at a location designated by City.
SECTION XXIV. PROGRAMMING MIX.
(a) Grantee agrees to provide programming that maintains the
mix of distinct and separate channels that is presently provided
and listed in Exhibit 4. In accordance with the Cable Act, the
Grantee shall, for the term of this Agreement, maintain the mix,
quality and level of programming set forth in Exhibit 4.
(b) In addition to the programming mix indicated above,
Grantee will use the upgraded system to provide a wide range and
assortment of optional programming services. Grantee shall
provide, at a minimum, the following additional services:
(1) Provision of an additional full channel space
for films and cultural entertainment programming
(2) Provision of an additional full channel space for
children's entertainment programming
(3) Addition of a full channel space for documentary,
public broadcasting programming
(4) Addition of a full channel space devoted to
weather information service
(5) Addition of a Pay -Per -View Channel
(c) Such services shall be provided not later than November
1, 1994. Grantee agrees to produce a minimum of 400 hours of
local origination programming annually. One hundred (100) hours
of such programming may be supplied from other Sammons' local
origination sources.
SECTION XXV. FORCE MAJEURE.
In the event the Grantee's diligent performance of any of the
terms, conditions, obligations or requirements of this Agreement
is prevented or impaired due to any cause beyond its reasonable
PAGE 17
•
control which was not reasonably foreseeable to the parties
hereto, such inability to perform shall be deemed to be excused
for the period of such impairment, and no penalties or sanctions
shall be imposed. Before invoking this Section, the Grantee must
have exercised good faith in attempting to perform such terms,
conditions, obligations or requirements. Causes beyond the
Grantee's reasonable control and not reasonably foreseeable to
the parties hereto shall include, without limitation, labor
unrest and strikes. Upon its best good faith efforts to obtain
all authorizations on an expedited basis, the Grantee shall also
be excused for time delays in construction requirements in
Section VI which are caused by unreasonable delays on the part of
utility companies or the City in issuing licenses, permits or
authorizations for poles and conduits or other authorizations
necessary to continue construction. Where the Grantee cannot
obtain access to any individual's property, after due diligence
and a good faith effort by the Grantee to obtain access to such
property, compliance with the terms of this Agreement shall be
excused by the City as to that individual and the consequential
effects thereof only, and only for such period as the property is
inaccessible. Where the cause beyond the Grantee's control is
either an act of God or civil emergency, an inability to perform
during such period shall not be an independent ground for
termination of this Franchise Agreement.
SECTION XXVI. NOTICES.
All notices, statements, demands, requests, consents,
approvals, authorizations, offers, agreements, appointments or
designations hereunder by any party to another shall be in
writing and shall be sufficiently given and served upon the other
party, immediately if delivered personally or by telex or
telecopy (provided with respect to telex and telecopy that such
transmissions are received on a business day during normal
business hours), on the second business day.after dispatch if
sent by first class mail, registered or certified, return receipt
requested, postage prepaid and addressed as follows:
The City: City of Denton, Texas
215 E. McKinney Street
Denton, Texas 76201
Attention: City Manager
The Grantee: Sammons Communications, Inc.
500 South Ervay Street, Suite 200-A
Dallas, Texas 75201
Attention: General Counsel
PAGE 18
385
SECTION XXVII. SAVINGS CLAUSE.
If any section, subsection, sentence, clause, phrase or
portion of this ordinance is for any reason held invalid or
unconstitutional by a federal or state court or administrative or
governmental agency of competent jurisdiction, specifically
including the Federal Communications Commission, such portion
shall be deemed a separate, distinct and independent provision,
and such holding shall not affect the validity of the remaining
portions thereof.
SECTION XXVIII. CONFLICTING ORDINANCES AND RESOLUTIONS.
All ordinances or resolutions in conflict herewith are
expressly repealed to the extent of such conflict, except that in
the event of a conflict between the Cable Ordinance and the
franchise agreement, the ordinance shall prevail.
SECTION XXIX. FEES.
This franchise ordinance renews and extends that Ordinance
which has previously been granted for the operation of Cable
television services in the City of Denton, Texas. Grantee agrees
to pay to the City of Denton a lump sum fee of $91,027, $5,000 of
which was paid by Grantee on July 8, 1988, and the remainder of
which will be paid upon acceptance of this franchise agreement b
the Grantee. The sum of Sixty Thousand Dollars ($60,000T
represents a voluntary contribution by Grantee in lieu of capital
expenditures and Grantee agrees that such payment may not be
deducted from the franchise fees provided for herein. Grantee
specifically agrees, and to the extent permitted by law, waives
any rights to claim to the contrary. The City agrees to use such
funds for the operation of the Local Government Channel. Grantee
agrees to pay the sum of $31,027 to reimburse City for the costs
incurred in preparing, reviewing and awarding this franchise.
SECTION XXX. PAYMENT OF TAXES.
The Grantee covenants and agrees that it will pay and
discharge, or cause to be paid and discharged, in timely fashion
all payments in lieu of taxes, service charges, assessments,
utility fees, user fees and other governmental charges which may
lawfully be imposed upon the Grantee with respect to the Grantee
or the Cable System or any portion thereof or relating thereto,
or upon the revenues and income therefrom and will pay all lawful
claims for labor, material and supplies which, if unpaid, might
become a lien or charge upon any of said properties, revenues or
income or which might impair the security interest granted by
this Agreement or the value of the Cable System or the Grantee;
provided that nothing in this Section shall require the Grantee
PAGE 19
to make any such payment so long as the Grantee in good faith
shall contest the validity thereof.
SECTION XXXI. NON -LIABILITY.
The City shall not be liable to the Grantee or any other
person or entity for death or personal injury or for loss, damage
or destruction of property in, on or about the Cable System or
any part thereof by or from any cause whatsoever other than the
City s own negligence or willful misconduct, nor shall the City
be liable in any way or regard to the Grantee or to any of the
Grantee's affiliates, officers, directors, members, agents or
employees if any claim is asserted against the Grantee by any
taxing authority or other entity as the result of any election or
decision which the Grantee may make or may have made with respect
to the Cable System for purposes of filing federal or state income
or franchise tax returns or making any other type of filing what-
soever; and the Grantee shall indemnify and save harmless the City
and its officers, agents and employees from, and defend the same
against, any and all claims, liens, liabilities, expenses (includ-
ing attorneys' fees and disbursements), losses and judgments
arising from death or personal injury or from the loss, damage or
destruction of property of any person or entity resulting directly
or indirectly from any acts, omissions or negligence of the
Grantee, its officers, agents or employees with respect to the
use of, occupancy of, or operation in, on, of, or about the Cable
System or the Grantee.
SECTION XXXII. WAIVERS.
No waiver by City of any breach, default or violation of the
terms, covenants or conditions hereof to be performed, kept and
observed by Grantee shall be construed to be or act as a waiver
of any subsequent default of any of such terms, covenants and
conditions.
SECTION XXXIII. APPROVAL AND ACCEPTANCE.
In accordance with Section 13.02 of the City Charter, this
ordinance shall become effective twenty-one (21) days after final
approval, if, before that date, Grantee shall give its written
acceptance of this ordinance by signing as provided below; and
provided that, after final approval and before the expiration of
twenty-one (21) days, the full text of this ordinance shall be
published once each week for two (2) consecutive weeks in the
official newspaper of City, the expense of which shall be borne
by Grantee.
Grantee for itself, its successors and assigns hereby accepts
this ordinance and agrees to be bound by all of its terms and
provisions.
PAGE 20
PASSED AND APPROVED on first reading, this the day of
L(Aj , 1988.
PASSED AND APPROVED this the jL4Zb� day of , 1988.
RAY S Tr
ENS./MAYOR
ATTEST:
APPROVED AS TO LEGAL FORM:
DEBRA ADAMI DRAYOVITCH, CITY ATTORNEY
GRANTEE
SAMMONS COMMUNICATIONS, INC.
S12 lit � �rGS�d".'f"
PAGE 21
Fik 5
STATE OF TEXAS §
COUNTY OF DENTON §
ACCEPTANCE BY MARCUS OF TERMS AND CONDITIONS TO
TRANSFER OF THE CITY OF DENTON, TEXAS
CABLE TELEVISION SYSTEM AND FRANCHISE
("ACCEPTANCE AGREEMENT")
Marcus Cable Associates, L.P. ("Marcus") makes the following agreement for the
purpose of accepting Ordinance No. 95- ! 9/ of the City of Denton, Texas ("City")
consenting to the transfer of the franchise granted by Ordinance No. 8-189, as amended from
Sammons Communications, Inc./Sammons of Fort Worth to Marcus Cable Associates, L.P.
Marcus Cable Operating Company, L.P., Marcus Cable Company, L.P., and Marcus
Cable Properties, L.P. join this Agreement for the purpose of guaranteeing Marcus' performance
of the Franchise and this Agreement.
A. The promises, covenants, and conditions contained herein inure to the benefit of
the City and are binding on Marcus.
B. Marcus acknowledges that the transactions described in the Asset Purchase
Agreement dated as of April 5, 1995, between Marcus Cable Associates, L.P. as buyer and
Sammons Communications, Inc., Sammons of Fort Worth, and other entities as seller (col-
lectively "Sammons"), and the transfer of the franchise granted by Ordinance No. 88-189 (the
"Ordinance" or "Franchise") pursuant thereto are expressly subordinate to and will not affect
the binding nature of the Franchise and the obligations of the Grantee provided for therein, and
that the consent of the City to the transaction does not constitute a waiver or release of any
rights of the City. Marcus assumes and agrees to perform all of the obligations of the Franchise
including any obligations to make refunds for periods prior to the transfer.
C. Marcus acknowledges that the City has consented to the transaction in reliance
upon the representations, documents and information provided by Marcus and Sammons, all of
which are incorporated herein by reference.
D. Customer Service.
1. Marcus will comply with the customer service rules of the FCC as
presently in effect, 47 CFR § 76.309. Marcus's compliance shall be
measured and enforced as follows:
a. For the purpose of such rules "normal business hours" therein are
deemed to be 8:00 AM to 5:00 PM Monday through Friday, and
Saturday 9:00 AM to 1:00 PM.
b. Transfer to or answering by a voice mail system (or other
automated response system) does not constitute answering "by a
customer representative" under § 76.309(c)(ii) or analogous
provisions of such rules.
C. Within 20 business days of the close of each calendar quarter (or
monthly, if the City requests same), Marcus will provide the City
with a report in such form as the City and Marcus may reasonably
agree, setting forth on a consistent basis, fairly applied, Marcus's
performance as compared to such standards, including in particular
as compared to the standards for telephone answer time, busy
signals, standard installations, service interruptions, appointment
windows, refunds and credits.
d. Such reports shall show and use the telephone calls originating
from within the City if that information is readily available from
the system, and as to installations, service interruptions, appoint-
ment windows, refunds, credits and the like shall show and use
data only for subscribers in the City.
e. Such reports shall show Marcus's performance including and
excluding any periods of abnormal operating conditions, and if
Marcus contends that any such abnormal conditions occurred
during the reporting period in question, they shall also describe the
nature and extent of such conditions.
f. Marcus acknowledges that noncompliance with customer service
standards will harm subscribers and the City and that the extent of
harm will be difficult or impossible to measure. The City may
therefore assess liquidated damages against Marcus for non-
compliance with the preceding customer service standards as
follows: The FCC Rules currently state as to § 76.309(c)(1)(ii)
and (iv); and § 76.309(c)(2)(i), (ii), (iii) and (iv) (collectively
"quarterly customer service standards") that the standards set forth
therein "shall be met no less than ninety (90) percent of the time
under normal operating conditions measured on a quarterly basis. "
(i) Liquidated damages may be assessed if Marcus does not
meet the ninety (90) percent standard for a given subsection
(for example, §76.309 (c)(2)(ii)) of the quarterly customer
service standards in a given calendar quarter as follows.
First Second Third and subsequent
Noncompliance Noncompliance Noncompliance
Page 2
0 $ 2.000 $ 4,000
(ii) The City may collect liquidated damages from any bond,
letter of credit, or security fund furnished under the
Franchise.
2. In the event of a change in 47 CFR § 76.309 that makes any of the
Federal customer service standards therein less stringent than those in
effect in July, 1995, the City may adopt customer service regulations as
to the subject matter of the portion of the rule that is changed. City
agrees to meet with Marcus on any proposed changes prior to taking
action on them, and to provide Marcus with at least 60 days notice of such
action. Marcus agrees to comply with any such provisions that are no
more stringent than those contained in 47 CFR § 76.309 as in effect in
July, 1995 and to such extent agrees that it is not entitled to recover the
costs of such compliance through external cost treatment or otherwise.
3. Marcus acknowledges that under applicable law the City may unilaterally
establish and enforce reasonable customer service regulations that exceed
or are not addressed by the standards established by the FCC or the
standards currently established by the Franchise.
4. Marcus will provide at minimum the same quality of customer service that
Sammons is currently providing, but in all events no less than the quality
of service required by the Franchise, Chapter 8 "Cable Television" of the
Code of Ordinances of the City of Denton, and any other applicable City
ordinance and applicable FCC regulations. As evidence of and to assist
in compliance with such commitment, Sammons and Marcus agree as
follows:
a. On an annual basis Marcus will provide the City with historical
expenditure information and staffing levels on customer service
related matters; the customer service standards currently used; its
materials, if any, on same as used by its customer service
representatives; and its procedures and forms used to measure
compliance with applicable customer service standards.
b. Marcus will provide such other information as the City reasonably
requests relating to customer service matters.
E. Signal Ouality.. The following shall apply to Marcus' implementation of and
compliance with the rules and regulations relating to cable television technical standards for
Page 3
signal quality adopted by the FCC in MM Dockets 91-169 and 85-38 on February 13, 1992 and
subsequent amendments thereto:
1. All testing for compliance with the FCC technical standards shall be done
by a person with the necessary expertise and substantial experience in
cable television matters.
2. Upon request, Marcus shall provide the City with the written report of
such testing.
3. Marcus shall establish the following procedure for resolving complaints
from subscribers about the quality of the television signal delivered to
them: All complaints shall go initially to the manager of Marcus' local
office. All matters not resolved by the manager shall at Marcus' or the
subscriber's option be referred to City for attempted resolution. All
matters not resolved at that step shall be referred to the FCC for it to
resolve.
4. Marcus shall annually notify its subscribers of the preceding.
5. Upon request by the City, Marcus at its expense will test the system in
areas or at subscriber locations specified by City where there are apparent
problems and provide City with the written report of such testing. If the
test shows a non-compliance with such standards, Marcus will bring the
system into compliance with such standards within 180 days.
F. Prior Defaults. Marcus agrees on behalf of itself and its affiliates that it will not
contend directly or indirectly that any defaults or failures to comply with the franchise or other
matters set forth in 47 USC § 546(c)(1)(A) (Communications Act of 1934, Section 626(c)(1)(A))
(collectively "defaults") by Sammons occurring prior to the transfer to Marcus are waived,
including but not limited to the following:
1. The ability of the City to obtain redress for prior defaults, such as
recovery of any underpayment of franchise fees.
2. The ability of the City to enforce in the future any Franchise terms which
may not have been enforced in the past.
Marcus reserves the right to contend that the transfer and the City's approval thereof
preclude the City from considering defaults that occurred prior to the transfer in connection with
any renewal or non -renewal of the Franchise. The City reserves the right to oppose such
contention.
Page 4
The City confirms that it has informed Marcus of all defaults or other instances of
noncompliance with the Franchise of which the City Administrator primarily responsible for
cable television matters is aware as of the date hereof (without, however, having conducted any
financial or other audit of performance or compliance).
G. Validity of Franchise. Marcus accepts and agrees to be bound by the terms and
conditions of the City Charter, Chapter 8 "Cable Television" of the Code of Ordinances, the
Franchise and all other ordinances applicable to its operations after the transfer. Marcus does
not contend that any provision of the Franchise is unlawful or unenforceable, nor is it aware of
any other ordinance or any provision in the City Charter which it contends is unlawful or
unenforceable. The City acknowledges that the Franchise is in full force and effect.
H. Service and Equipment for Public Facilities.
Marcus will continue to provide the same installation and service without
charge to public facilities as Sammons is providing at the present time, but
in all events no less than is required by the Franchise, Chapter 8 "Cable
Television" of the Code of Ordinances, or any other applicable city
ordinance.
2. In addition, at the City's request Marcus will provide to the public
facilities identified in the Franchise or other applicable city ordinance the
highest level of installation and service without charge as it provides to
any other community in the Fort Worth area.
3. If any service or equipment for public facilities provided pursuant to
subsections (1) and (2) above exceeds the requirements of the Franchise,
Chapter 8 "Cable Television" of the Code of Ordinances, or other
applicable city ordinance, Marcus will not pass through the costs as so-
called "external costs" or as new franchise requirements, except that
Marcus may pass through the cost of such services under subsection (b)
above that exceeds the requirements of the franchise or other applicable
city ordinance to the extent that cost exceeds $5,000 per year in Fort
Worth, $2,500 per year in Denton or $500 per year in each other
community.
I. EEO Matters.
1. Marcus agrees to set goals for contracts to be entered with qualified
Denton minorities, women and other residents to provide goods,
equipment and services to Marcus.
2. Marcus agrees to set goals for jobs (including supervisory and midman-
agement positions) to be made available by Marcus to qualified Denton
Page 5
minorities, women and residents. To this end, Marcus agrees to faithfully
adhere to all applicable federal, state and city laws, rules and regulations
pertaining to non-discrimination, equal employment and affirmative action.
3. During the term hereof, Marcus agrees to share information developed in
paragraphs (1) and (2) above upon request of the City. Marcus will
furnish the City with the foregoing goals and its concept proposals for
meeting them within 120 days after the transfer.
Marcus agrees to faithfully adhere to all applicable federal, state and city laws, rules and
regulations relating to non-discrimination, equal employment and affirmative action.
J. Access to Records. The records and reports of the franchise grantee which are
to be submitted to the City or otherwise made available for the City (such as for inspection by
the City) pursuant to the Franchise or other ordinance or charter provisions of the City shall
include records maintained by Marcus Cable Operating Company, L.P., Marcus Cable
Company, L.P., Marcus Cable Properties, L.P., and their affiliates to the extent necessary for
the City to discharge its responsibilities under the Franchise, Chapter 8 "Cable Television" of
the Code of Ordinances, FCC rules or state or local law, or to insure compliance with the
Franchise or this Agreement.
K. Franchise Requirement.
1. Marcus will give the City 60 days notice in writing prior to allowing any
telecommunications entity other than Marcus to use or lease its facilities
(other than towers) in the City or capacity thereon or to amending any
agreement with such an entity. No such arrangements or uses are
presently in existence except as have been disclosed. "Telecommunica-
tions entity" means any entity subject to the jurisdiction of or regulated by
the Federal Communications Commission (such as under the Communica-
tions Act of 1934 as amended) or the Texas Public Utility Commission or
their successors, including telephone, alternative access and cable
companies. Marcus will provide the City with such documents relating
to the foregoing as the City may reasonably request, including copies of
the agreements.
2. Marcus will give the City 60 days notice in writing prior to providing
telecommunications services within the City or making its facilities (other
than towers) available to others for that purpose. "Telecommunications
services" means conventional telephone service, such as switched local
exchange service; and non -switched services, such as alternative access
service which connect user locations and connect users to long distance
companies. Provided, L_w,.ye maLd.-,. hereitt shall
..L_. a% or amen
Page 6
3. Nothing herein shall expand or modify any restrictions or limitations
under the Franchise or applicable law on use for telecommunication
purposes of the facilities being acquired by Marcus.
L. Transaction Transparent to Rates. Marcus acknowledges that the transfer, the
consent process, the City's action granting consent, and this Acceptance Agreement do not
provide any basis for increasing the amounts paid by subscribers through cost pass -through as
so-called "external costs" or as new franchise requirements and the consent process, action, and
this agreement do not provide any basis for increasing the amounts paid by subscribers in any
other manner, except as otherwise provided herein.
M. Other Matters.
1. In the event of any conflict between the terms of this Acceptance
Agreement and the Franchise, Chapter 8 of the Code of Ordinances, the
City Charter, or any City Ordinance, that provision which provides the
greatest benefit to the City, in the opinion of the City Council, shall
prevail.
2. Marcus will join the City in obtaining from the FCC any waivers from
time to time necessary to effectuate the provisions of this Acceptance
Agreement.
3. If the transfer of the Franchise to Marcus Cable Associates, L.P., is not
completed on or before March 31, 1996, then at the City's option prior
to the transfer occurring, this agreement and the City's consent to transfer
shall become null and void. Such option may be exercised prior to the
transfer occurring by the City giving written notice to Marcus and
Sammons at the addresses designated in the Asset Purchase Agreement
dated as of April 5, 1995.
4. Marcus will cause the City to be reimbursed, by Sammons or otherwise,
for its reasonable expenses in connection with the consent process
including publication costs and fees of consultants and attorneys, including
the City Attorney. Such reimbursement shall not exceed the aggregate
amount of $125,000 plus publication costs for the City and the other
municipalities which have acted with the City in connection with the
consent process.
Page 7
5. The term "affiliate" means any individual, partnership, association, joint
stock company, trust, corporation, or other person or entity who owns or
controls, or is owned or controlled by, or is under common ownership or
control with the entity in question.
6. Venue of any suit under or arising out of this Agreement shall be
exclusively in Denton County, Texas or in the United States District Court
for the Northern District of Texas. This Agreement shall be construed in
accordance with the laws of the State of Texas.
N. Section 8-62(i) of the Cable Television Ordinance, No. 188-182, provides that
"any negotiated sale value which the Council determines will cause a significant affect on
subscriber rates in order to finance the purchase may result in a denial of transfer." The City
will not deny approval of the transfer on the basis of this provision, but the parties agree that
the provision may be interpreted to permit the City to deny future rate increases that are based
upon sale price. Marcus reserves the right to contest the enforceability of the provision as so
interpreted.
O. Other Provisions.
a. Marcus will promptly, but no later than twelve months from the effective
date of the ordinance approving the transfer and assignment of the
Franchise to Marcus, provide the capability for insertion of video
programming and other video, voice and data messages into the cable
system at the points in the City required under Section VI (b)(6) of the
Franchise (this has been done only at the Municipal Building thus far) and
will comply in all respects with that section of the Franchise.
b. Marcus will allocate one of the five access channels provided under
Section XXII (a) of the Franchise to the Denton Independent School
District when the District is ready to use an access channel.
C. Upon request of the City Marcus will collect from subscribers and pay to
the City a monthly amount of no more than $.50 for each subscriber
within the City limits for the purpose of assisting in financing local access
activities. Such charge shall be set out as a separate line item on the
subscriber's bill and shall not be deemed a payment for basic service but
a pass -through of an access and government programming fee. The
charge will not be part of revenue for purposes of calculating the franchise
fee. Marcus will remit the money to the City monthly.
Page 8
d. Marcus accepts and agrees to perform the obligations of the CATV Pole
Lease Agreement of 1979 between the City and Golden Triangle
Communications and of the Cable Duct Use Agreement Between the City
and Sammons Communications, Inc. executed on or about April, 1988.
P. Marcus has informed the City's financial consultant, KFA Services, of the terms
of commitments it has received from equity investors and lenders for financing its acquisition
of the Sammons systems. KFA Services' report of August 4, 1995, is based in part on this
information. Marcus acknowledges that the City is relying on that report in acting on the
application for approval of the transfer. Marcus agrees to inform the City's financial consultant
of any material differences between its final financing arrangements and those disclosed in the
approval process. Marcus further agrees that the City may withdraw its approval and reconsider
the application if any such differences would have a material adverse effect on Marcus or the
subscribers.
Q. In accordance with the letter executed by Richard A. B. Gleimer and Peter
Armstrong dated August 16, 1995, a copy of which is attached hereto and incorporated herein,
by execution of this Acceptance Agreement, Marcus extends the 120 day period to October 1,
1995 and agrees to all the terms and conditions of the attached letter.
Marcus Cable Associates, L.P.
Dated:
Marcus Cable Operating Company, L.P., Marcus Cable Company, L.P., and Marcus
Cable Properties, L.P., hereby unconditionally guarantee performance of the obligations of the
Franchise and of this Acceptance Agreement by Marcus Cable Associates, L.P.
Dated:
Dated:
Marcus Cable Company, L.P.
By:
Page 9
Marcus Cable Properties, L.P.
Dated: By.
.. — _ — - -�—_. Fes_ w • ..e...: +�-�:!.Z__',. �_
E:\WPDOCS\K\TRANSFER.CTV
Page 10
Federal Communications Commission
Washington, D.C. 20554
FCC 394
APPLICATION FOR FRANCHISE AUTHORITY
CONSENT TO ASSIGNMENT OR TRANSFER OF CONTROL
OF CABLE TELEVISION FRANCHISE
SECTION I. GENERAL INFORMATION
Approved by OMB
3060-0573
Expires 08/31 /96
FOR FRANCHISE AUTHORITY USE ONLY
• �_ �C r' c � Q c� .
DATE APRIL 28, 1995 1. Community Unit Identification Number: TX0580
2. Application for: ® Assignment of Franchise ❑ Transfer of Control
3. Franchising authority: CITY OF DENTON
4. Identify community where the system/franchise that is the subject of the assignment or transfer of control is located: DENTON
5. Date system was acquired or (for system's constructed by the transferor/assignor) the date on
which service was provided to the first subscriber in the franchise area:
AUGUST 27, 1985
6. Proposed effective date of closing of the transaction assigning or transferring ownership of the
system to transferee/assignee:
NOVEMBER 1, 1995
7. Attach as an Exhibit a schedule of any and all additional information or material filed with this
application that is identified in the franchise as required to be provided to the franchising
authority when requesting its approval of the type of transaction that is the subject to this
application.
PART 1 - TRANSFEROR/ASSIGNOR
Inrlirate the name. mailing address. and telephone number of the transferor/assignor
Exhibit No.
Legal name of Transferor/Assignor (if individual, list last name first) SAMMONS COMMUNICATIONS, INC.
Assumed name used for doing business (if any) SAMMONS COMMUNICATIONS
Mailing street address or P.O. Box 3010 LBJ FREEWAY, SUITE 800
City DALLAS
State
TEXAS
ZIP Code
75234
Telephone No. (include area code)
(214) 484-8888
2. (a) Attach as an Exhibit a copy of the contract or agreement that provides for the assignment or
transfer of control (including any exhibits or schedules thereto necessary in order to understand
the terms thereof). If there is only an oral agreement, reduce the terms to writing and attach.
(Confidential trade, business, pricing or marketing information, or other information not
otherwise publicly available, may be redacted).
(b) Does the contract submitted in response to (a) above embody the full and complete agreement
between the transferor/assignor and the transferee/assignee?
If No, explain in an Exhibit.
Exhibit No.
1
® Yes * ❑ No
* SEE EXHIBIT 2 Exhibit No.
FCC 394 (Page 1)
October 1993
PART II - TRANSFEREE/ASSIGNEE
1 !al Ineiirata the namemailinn address. and telenhone number of the transferee/assianee.
Legal name of Transferee/Assignee (if individual, list last name first) MARCUS CABLE ASSOCIATES, L.P.
Assumed name used for doing business (if any) MARCUS CABLE
Mailing street address or P.O. Box 2911 TURTLE CREEK BLVD., SUITE 1300
City DALLAS
State
TEXAS
ZIP Code
75219
Telephone No. (include area code)
(214) 521-7898
dki she — A;— an,l talanhnne nnmhar of narenn to rnntart if nthar than tranefcraa/accinnea
Name of contact person (list last name first) JOSEPH CAMICIA, Director of Corporate Government Relations
Firm or company name (if any) MARCUS CABLE
Mailing street address or P.O. Box 2911 TURTLE CREEK BLVD., SUITE 1300
City DALLAS
State
TEXAS
ZIP Code
75219
Telephone No. (include area code)
(214) 521-7898
(c) Attach as an Exhibit the name, mailing address, and telephone number of each additional person
who should be contacted, if any.
Exhibit No.
(d) Indicate the address where the system's records will be maintained.
Street address2911 TURTLE CREEK BLVD., SUITE 1300
City DALLAS State TEXAS ZIP Code 75219
'LOCAL SYSTEM RECORDS WILL CONTINUE TO BE MAINTAINED AT LOCAL SYSTEM OFFICE.
2. Indicate on an attached exhibit any plans to change the current terms and conditions of service
and operations of the system as a consequence of the transaction for which approval is sought.
NONE
Exhibit No.
SECTION I. TRANSFEREE'S/ASSIGNEE'S LEGAL QUALIFICATIONS
1. Transferee/Assignee is:
❑ Corporation
® Limited Partnership
❑ General Partnership
❑ Individual
❑ Other. Describe in an Exhibit.
a. Jurisdiction of incorporation:
d. Name and address of registered agent in
jurisdiction:
b. Date of incorporation:
c. For profit or not -for -profit:
a. Jurisdiction in which formed:
c. Name and address of registered agent in
DELAWARE
jurisdiction: THE PRENTICE-HALL
CORPORATION SYSTEM, INC.
32 LOOCKERMAN SQ., SUITE L-100
b- Date of formation:
3129/95
DOVER, DE 19904
a. Jurisdiction whose laws govern formation: b. Date of formation:
Exhibit No.
List the transferee/assignee, and, if the transferee/assignee is not a natural person, each of its officers, directors, stockholders beneficially
holding more than 5% of the outstanding voting shares, general partners, and limited partners holding an equity interest of more than 5%.
Use only one column for each individual or entity. Attach additional pages if necessary. (Read carefully -- the lettered items below refer
to corresponding lines in the following table.)
(a) Name, residence, occupation or principal business, and principal place of business. (If other than an individual, also show name, address
and citizenship of natural person authorized to vote the voting securities of the applicant that it holds.) List the applicant first, officers, next,
then directors and, thereafter, remaining stockholders and/or partners.
(b) Citizenship.
(c) Relationship to the transferee/assignee le.g., officer, director, etc.)
(d) Number of shares or nature of partnership interest.
(e) Number of votes.
(f) Percentage of votes.
(a) MARCUS CABLE ASSOCIATES, L.P.
2911 TURTLE CREEK BLVD., STE 1300
DALLAS, TX 75219
MARCUS CABLE OPERATING CO., L.P.
2911 TURTLE CREEK BLVD., STE 1300
DALLAS, TX 75219
MARCUS CABLE COMPANY, L.P.
2911 TURTLE CREEK BLVD., STE 1300
DALLAS, TX 75219
(b) DELAWARE
DELAWARE
DELAWARE
(c) ASSIGNEE
DIRECT PARENT
PARENT OF MCOC, L.P.
(d) N/A
SOLE GENERAL PARTNER
SOLE GENERAL PARTNER
(e) N/A
99% EQUITY INTEREST
99% EQUITY INTEREST
(f) N/A
HOLDS 100% OF VOTING RIGHTS
HOLDS 100% OF VOTING RIGHTS
'FOR FURTHER EXPLANATION OF OWNERSHIP STRUCTURE AND VOTING CONTROL PLEASE SEE EXHIBIT 3.
FCC 394 (Page 3)
October 1993
3.
4.
If the applicant is a corporation or a limited partnership, is the transferee/assignee formed under the laws of, or duly ® Yes ❑ No
qualified to transact business in, the State or other jurisdiction in which the system operates?
If the answer is No, explain in an Exhibit. Exhibit No.
Has the transferee/assignee had any interest in or in connection with an application which has been dismissed or ❑ Yes ® No
denied by any franchise authority?
If the answer is Yes, describe circumstances in an Exhibit. Exhibit No.
Has an adverse finding been made or an adverse final action been taken by any court or administrative body with ❑ Yes ® No
respect to the transferee/assignee in a civil, criminal or administrative proceeding, brought under the provisions of
any law or regulation related to the following: any felony; revocation, suspension or involuntary transfer of any
authorization (including cable franchises) to provide video programming services; mass media related antitrust or
unfair competition; fraudulent statements to another governmental unit; or employment discrimination?
If the answer is Yes, attach as an Exhibit a full description of the persons and matters) involved, including an Exhibit No.
identification of any court or administrative body and any proceeding (by dates and file numbers, if applicable), and
the disposition of such proceeding.
Are there any documents, instruments, contracts or understandings relating to ownership or future ownership rights ® Yes ❑ No
with respect to any attributable interest as described in Question 2 (including, but not limited to, non -voting stock
interests, beneficial stock ownership interests, options, warrants, debentures)?
If Yes, provide particulars in an Exhibit. Exhibit No.
4
Do documents, instruments, agreements or understandings for the pledge of stock of the transferee/assignee, as ❑ Yes ® No
security for loans or contractual performance, provide that: (a) voting rights will remain with the applicant, even in
the event of default on the obligation; (b) in the event of default, there will be either a private or public sale of the
stock; and (c) prior to the exercise of any ownership rights by a purchaser at a sale described in (b), any prior
consent of the FCC and/or of the franchising authority, if required pursuant to federal, state or local law or pursuant
to the terms of the franchise agreement will be obtained?
If No, attach as an Exhibit a full explanation. Exhibit No.
5
SECTION III - TRANSFEREE'S/ASSIGNEE'S FINANCIAL QUALIFICATIONS
The transferee/assignee certifies that it has sufficient net liquid assets on hand or available from committed ®Yes ❑ No
resources to consummate the transaction and operate the facilities for three months.
2. Attach as an Exhibit the most recent financial statements, prepared in accordance with generally accepted Exhibit No.
accounting principles, including a balance sheet and income statement for at least one full year, for the 5
transferee/assignee or parent entity that has been prepared in the ordinary course of business, if any such financial
statements are routinely prepared. Such statements, if not otherwise publicly available, may be marked
CONFIDENTIAL and will be maintained as confidential by the franchise authority and its agents to the extent
permissible under local law.
SECTION IV - TRANSFEREE'S/ASSIGNEE'S TECHNICAL QUALIFICATIONS
Set forth in an Exhibit a narrative account of the transferee's/assignee's technical qualifications, experience and expertise Exhibit No.
regarding cable television systems, including, but not limited to, summary information about appropriate management 7
personnel that will be involved in the system's management and operations. The transferee/assignee may, but need not, list
a representative sample of cable systems currently or formerly owned or operated.
ML103aee444.1
SECTION V - CERTIFICATIONS
Part I - Transferor/Assignor
All the statements made in the application and attached exhibits are considered material representations, and all the Exhibits are a material part hereof
and are incorporated herein as if set out in full in the application.
Signature
I CERTIFY that the statements in this application are true, complete
and correct to the best of my knowledge and belief and are made in
%
good faith.
G
Date q
/ 1
WILLFUL FALSE STATEMENTS MADE ON THIS FORM ARE
PUNISHABLE BY FINE AND/OR IMPRISONMENT. U.S. CODE, TITLE
18, SECTION 1001.
Print full name ta�� WaER
Check appropriate classification:
i
❑ Individual ❑ General Partner ®Corporate Officer ❑Other. explain:
(Indicate Title)
Part II - Transferee/Assignee
All the statements made in the application and attached exhibits are considered material representations, and all the Exhibits are a material part hereof
and are incorporated herein as if set out in full in the application.
The transferee/assignee certifies that he/she:
(a) Has a current copy of the FCC's Rules governing cable television systems.
(b) Has a current copy of the franchise that is the subject of this application, and of any applicable state laws or local ordinances and related
regulations.
(c) Will use its best efforts to comply with the terms of the franchise and applicable state laws or local ordinances and related regulations, and to
effect changes, as promptly as practicable, in the operation of the system, if any changes are necessary to cure any violations thereof or defaults
thereunder presently in effect or ongoing.
I CERTIFY that the statements in this application are true, complete
and correct to the best of my knowledge and belief and are made in
good faith.
Date APRIL 28, 1995
WILLFUL FALSE STATEMENTS MADE ON THIS FORM ARE
PUNISHABLE BY FINE AND/OR IMPRISONMENT. U.S. CODE, TITLE
18, SECTION 1001. Print full name STEVEN P. BROCKETT
Vice President of Operations & Administration
Check appropriate classification: ---
Individual ❑ General Partner ® Corporate Officer MARCUS QI EI ROPE TILES, INC.
(Indicate Title)
FCC 394 (Page 5)
October1993
EXHIBIT # 1
ASSET PURCHASE AGREEMENT
Dated as of April 51 1995
BY AND BETWEEN
CONFORMED COPY
MARCUS CABLE ASSOCIATES, L.P.,
as Buyer
AND
SAMMONS COMMUNICATIONS, INC.,
SAMMONS COMMUNICATIONS OF CONNECTICUT, INC.,
SAMMONS COMMUNICATIONS OF WASHINGTON, INC.,
SAMMONS COMMUNICATIONS OF TEXAS, INC.,
SAMMONS COMMUNICATIONS OF ILLINOIS, INC.,
SAMMONS COMMUNICATIONS OF VIRGINIA, INC.,
SAMMONS COMMUNICATIONS OF MISSISSIPPI, INC.
SAMMONS OF INDIANA and
SAMMONS OF FORT WORTH,
as Seller
DAIA2:64246.1
ASSET PURCHASE AGREEMENT
THIS AGREEMENT, dated. as of April 5, 1995; by and between Marcus Cable
Associates, L.P., a Delaware limited partnership, as :buyer ("Buyer"), and Sammons
Communications, Inc, a Delaware, corporation, Sammons Communications of Connecticut, Inc., a
Connecticut corporation, Sammons Communications.of Washington, Inc., a Delpware corporation,
Sammons Communications of Texas, Inc., a Texas corporation, Sammons Communications of
Illinois, Inc., a Delaware corporation, Sammons Communications of Virginia, Inc., a Delaware
corporation, Sammons Communications of Mississippi, Inc., a Delaware corporation, Sammons of
Indiana, an Indiana general partnership, and Sammons of Fort Worth, a Texas general partnership,
as sellers (collectively, "Seller", unless the context otherwise requires), and solely for purposes of
Section 18 hereof, Marcus Cable Company, L.P., a Delaware limited partnership ("MCC'), and
Sammons Enterprises, Inc., a Delaware corporation ("SEI").
WITNESSETH:
WHEREAS, Seller is the owner and operator of the cable television systems
serving the groups of cable television franchises listed on Schedule 1 (each such group a
"System," collectively the "Systems") and the related business in respect thereof (the 'Business");
and
WHEREAS, Seller desires to sell, and Buyer desires to buy, on the terms and
subject to the conditions contained in this Agreement, the Systems, together with those franchises,
assets, contracts and rights used by Seller in connection with the Systems and the Business, free
and clear of all mortgages, security interests, liens, claims, pledges, restrictions, leases, title
exceptions, rights of others, charges or other encumbrances, except as hereinafter provided, all
in accordance with and subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the promises, mutual covenants and
agreements set forth herein, the parties hereto, intending to be legally bound, hereby agree as
follows:
DAIA2:64246.1
2. Assets Sold and Purchased: Purchase Price.
2.1 Systems Assets. Subject to the conditions hereinafter set forth,
Seller agrees to sell, assign, convey and deliver to the Buyer, and Buyer agrees to purchase,
acquire and accept from Seller, all right, title and interest in and to all of the assets used or useful
in connection with the Systems and the Business (the "Systems Assets"), including, but not
limited to:
(a) All Authorizations and CATV Instruments;
(b) All towers, fixtures, leaseholds and leasehold improvements,
licenses, easements, rights -of -way and other interests in real property owned or leased by Seller,
_ (collectively, the "Real Property");
(c) All tangible personal property owned or leased by Seller,
including, without limitation, all electronic devices, trunk and distribution cables, studio
DAL.02:64246.1 7
equipment, programming origination equipment, amplifiers, power supplies, conduits, bolts and
pedestals, grounding and pole hardware, _ installed subscribers' devices (including, without
limitation, drop .lines, converters, encoders;, transformers behind television sets and 'fittings),
headends (origination, transmission 'and distribution systems), hardware, 'toots; :inventory; ' spare
parts, motor vehicles, supplies, test equipment and closed circuit devices, microwave equipment,
advertising insett'equipmeht, billing equipment, computer -equipment and furniture, furnishings
and office equipment (including, without IWtation, - any such items located" at Seller's home
office) owned by Seller as of the date hereof and at the CIosiii> Date (collectively,' -the "Tangible
Personal Property");
(d) All contracts, leases, agreements, licenses, reuransmission
consent agreements, commitments and understandings,
and all contracts, leases, agreements, licenses, permits, retransmission consent
agreements, commitments and understandings entered into by Seller with respect to the Systems
after the execution of this Agreement which are made in the normal course of business and in
accordance with Section 6 hereof, but excluding any programming agreements, collecti.-!e
bargaining agreements and those contracts, leases, agreements, licenses, retransmission consent
agreements, commitments and understandings set forth on a list to be delivered by Buyer to Seller
pursuant to Section 6.6 as those contracts, leases, agreements, licenses, permits, commitments and
understandings not to be assigned to or assumed by Buyer (collectively, the "Business
Contracts");
(e) All subscriber agreements and orders for CATV service to
be provided by the Systems existing at the Closing Date;
(f) All schematics, blueprints, strand maps, working drawings,
engineering data, current and prior customer -lists, systems maps and other reports, lists, plans,
specifications, projections, statistics, promotional graphics, original art work, mats, plates,
negatives and other advertising, marketing or related materials, files and records and all other
technical and financial information concerning the Systems, including, without limitation, all
DA ,02:64246.1 8
operating data as are contained in any computer media (eg_, computer disks and computer tapes),
all of which shall be provided to Buyer at or prior to the Closing);
(g) All"accounts receivable of Seller (a -schedule of current
accounts receivable has been made available for review by Buyer);
(h) All deposits and prepaid expenses relating to the Systems (a
schedule of Seller's current deposits and prepaid expenses relating to the Systems has been made
available for review by the Buyer);
(i) All of Seller's right, title and interest in and to
manufacturers' warranties with respect to the Systems Assets;
0) All telephone numbers and listings related to the Business;
(k) All current assets paid for by Buyer in accordance with
Sections 2.5(d) and 2.6 hereof; and
(I) All other assets of whatever nature and wherever located
owned or leased by Seller and used in connection with the design, construction or operation of
the Systems or the Business, which assets shall include all of Seller's books and records (or
copies thereof) related to the Systems or the Business but shall not include assets described in
Section 2.2 hereof.
2.2 Excluded Assets. Notwithstanding anything in this Agreement to
the contrary, the assets sold to Buyer hereunder shall not include (and Seller shall retain):
worksheets;
(a) Originals of all corporate books and records, tax returns and
(b) Cash, cash equivalents and marketable securities;
(c) All trade marks, service marks, copyrights, trade names, ant,
all rights associated therewith owned or held by Seller; provided that for a period of up to 180
days after the Closing Date, Buyer shall have the right to use the "Sammons" name in connection
with the operation of the Systems; and
(d) Rights to any tax refunds for tax periods ending on or prior
to the Closing.
2.3 Assumed Liabilities. Subject to Sections 2.1(b) and 6.6 hereof,
Buyer will assume on the Closing Date and agrees to pay, perform and discharge when due all
Assumed Liabilities . Except as expressly set
forth in this Agreement, Buyer will not assume any other liabilities of Seller or related to the
DAL02:64246.1 - 9
Systems, the Systems Assets or the Business. It is expressly understood and agreed that Buyer
shall not be liable for, and will not assume, any obligations or liabilities of Seller of any kind
nature, whether accrued or unaccrued, asserted or unasserted, known or unknown, absolute or
contingent, or otherwise, other than *-such obligations. being acquired by. Buyer pursuant to this.
Agreement, and .which are. specifically -assumed by ,Buyer, and that _ in no event shall. Buyer
assume or .otherwise be bound by or responsible, or :liable for -any liability,- duty -or obligation
'incurred by Seller in violation of.the provisions of ibis Agreement, 'or'any liability, duty or -
obligation arising out of a breach, -violation or default by Seller,"prior to the Closing, under any
Business Contract, any law or judgment (including any event, fact or circumstance existing or
occurring as of or prior to Closing that, with'the passage of time or the giving of notice, or both,
may become such a breach, violation or default). Except as otherwise set forth herein or
provided in this Agreement, Buyer shall be under no obligation to assume any obligation, liability
or indebtedness of Seller. In the event that Buyer incurs any costs, fees or expenses of any kind
with respect to any liability or obligation of Seller not specifically assumed by Buyer, Buyer will
be entitled to indemnification pursuant to Section 13 hereof. Without limiting the foregoing,
Buyer shall assume no liability or obligation with respect to the payment of salary or severance
or provision of benefits, including but not limited to the benefits payable under any employee
benefit plan with respect to the employment by Seller of any employee or independent contractor
of Seller or of any former employee of Seller. Seller shall be responsible for compliance with
the notice and continuation coverage requirements of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, with respect to all employees (and their beneficiaries)
experiencing a qualifying event (as defined in Section 603 of ERISA) on account of the
transactions contemplated by this Agreement or occurring prior to the Closing. Finally, Seller
shall be responsible for, and Buyer assumes no liability for any fine, penalty or refund ordered
by the FCC, a Franchising Authority, the Copyright Royalty Tribunal or any other governmental
authority, relating to the operations of the Systems prior to the Closing.
2.4 Purchase Price. In addition to the assumption of the Assumed
Liabilities, and subject to adjustments described in Section 2.5 and the provisions of Section 12,
the aggregate purchase price (the "Purchase Price") to be paid by Buyer to Seller shall be
$ , payable by wire transfer of immediately available funds at the Closing to an
account designated by Seller at least five days prior to Closing. All state or local sales t-a!,
applicable to the transactions contemplated by this Agreement shall be borne by Seller, and all
transfer taxes or fees applicable to the transactions contemplated by this Agreement shall be borne
by Buyer.
DAL02:64246.1 10
3. Closing Date and Place. The closing. of the transactions contemplated by
this Agreement (the "Closing") will take place at 10-.00 a m.. on the latest of (a) October 1, 1995,
(b) the first day of a month in which such first "day is at least ten- business days after satisfaction
or waiver of the conditions set' forth in Sections-7 and - hereof or (c) at Seller's or Buyer's
unilaterafelection, the first day of the month (bi t-no later than January1,1996) ft which such
first day is at least ten days after the effectiveness of the 1995 Activity if the 1995 Activity was
not fully in effect for all Franchises as of the date determined under clause (a) -or (b) (the
"Closing Date"), at the offices of Baker & Botts, L.L.P., 2001 Ross Avenue, Dallas, Texas 75201,
or such other date or place as agreed to in writing by the parties hereto.
15
DAL02:64246-1
19. Miscellaneous.
19.1 Remedies Upon Default. (a) . Seller recognizes that the Systems
cannot be readily obtained in the open market and that Buyer will* be irreparably injured if this
Agreement is not specifically enforced. _ Therefore, Buyer shall be entitled in such event, .in
addition 'to bringing' suit at law or equity for money or other damages, to obtain specific
performance of the terms of'this Agreement. -'In any `action to 'enforce the provisions of this
Agreement, Seller shall waive the defense that "there is an adequate remedy at law or equity and
agree that Buyer shall have the right to obtain specific performance of the terms of this
Agreement.
(b) In the event of a default by Buyer, Seller shall be entitled to bring
suit at law or equity for money or other damages.
19.2 Indulgences. Etc. Neither the failure nor any delay on the part of
either party to exercise any right, remedy, power or privilege under this Agreement ("Right")
shall operate as a waiver thereof, nor shall any single or partial exercise of any Right preclude
any other or further exercise of the same or of any other Right, nor shall any waiver of any Right
with respect to any occurrence be construed as a waiver of such Right with -respect to any other
occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted
to have granted such waiver; provided that any waiver granted by Seller hereunder shall be
effective and binding against each Seller if contained in a writing signed by SCI.
19.3 Controlling Law. This Agreement and all questions relating to
its validity, interpretation, performance and enforcement (including, without limitation,
provisions concerning limitations of actions) shall be governed by and construed in accordance
with the laws of the State of Texas, and without the aid of any canon, custom or rule of law
requiring construction against the draftsman.
19.4 Notices. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be deemed to have been
duly given, made and received only when delivered (personally, by courier service such as
Federal Express or by other messenger) or five days after deposit in the United States mails,
registered or certified mail, postage prepaid, return receipt requested, addressed as set forth
below:
(a) If to Seller or SEL
Sammons Communications, Inc.
300 Crescent Court, Suite 700
Dallas, TX 75201
Attn: James N. Whitson, Chairman
DAL02:64246.1 52
With a copy, given in the manner prescribed above, to:
Sammons Enterprises, Inc.
300 Crescent Court, Suite 700
Dallas, TX 75201
Attn: John H. Washburn
Senior Vice President and General Counsel
(b) If to Buyer or MCC:
Marcus Cable Associates, L.P.
2911 Turtle Creek Blvd., Suite 1300
Dallas, TX 75219
Attn: Jeffrey A. Marcus
With copies, given in the manner prescribed above, to:
Marcus Cable Associates, L.P.
2911 Turtle Creek Blvd., Suite 1300
Dallas, TX 75219
Attn: Richard A.B. Gleiner
Baker & Botts, L.L.P.
2001 Ross Avenue
Dallas, TX 75201
Attn: Michael A. Saslaw
Any party may alter the address to which communications or copies are to
be sent by giving notice of such change of address in conformity with the provisions of this
paragraph for the giving of notice.
19.5 Exhibits and Schedules. All Exhibits and Schedules attached
hereto are hereby incorporated by reference into, and made a part of, this Agreement. All
Schedules to be provided by Seller hereunder shall reflect information on a consolidating
(System -by -System) and a consolidated (all Systems as a whole) basis. Nothing contained in the
Schedules with respect to any Franchise, or any agreement, ordinance, statute, rule or regulation
related thereto, shall be deemed to imply an obligation of Buyer under the same or an admission
by Buyer that any term of any such Franchise, or of any agreement, ordinance, statute, rule or
regulation related thereto, is valid or binding.
19.6 Binding Nature of Agreement; Assignment. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their respective successors and
assigns. No party may assign or transfer its rights or obligations under this Agreement without
the prior written consent of the other party hereto. Notwithstanding the foregoing, Seller
DAL02:64246.1 53
acknowledges that Buyer may assign the right to acquire certain Systems to third parties, provided
that Buyer remains liable for any failure of Buyer's assignee to purchase any such Systems.
19.7 Execution in Counterparts: This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be an original as against any party
whose signature appears thereon. and all of which shall together -constitute one and the same
instrument. This Agreement shall become binding when one or more counterparts hereof,
individually or 'taken together, shall bear the signatures of all of the parties reflected hereon as
the signatories.
19.8 Severability. If any provision of this Agreement is held illegal,
invalid or unenforceable, such illegal, invalid or unenforceable provision shall not affect any other
ion and the
er of this Agreement
, in such
provision cees be deemed modifich eed to the extent necessary to render nforceable the remaining
circumstances,
provisions hereof.
19.9 Entire Agreement. This Agreement, including the Schedules and
Exhibits hereto and other instruments and documents referred to herein or delivered pursuant
hereto represent the entire understanding among the parties hereto with respect to the subject
matter hereof, and supersede all prior and contemporaneous agreements and understandings,
inducements or conditions, express or implied, oral or written, except as herein contained. This
Agreement may not be modified or amended other than by an agreement in writing signed by
each of the parties hereto.
19.10 Section Headings. The section headings in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its interpretation.
19.11 No Third -Party Rights. Nothing in this Agreement, express or
implied, shall be construed to confer upon any person, other than the parties hereto, their
successors and permitted assigns, any legal or equitable rights, remedies, claims, obligations or
liabilities under or by reason of this Agreement.
19.12 Expenses. Except as otherwise expressly provided herein, each
party hereto shall pay its own expenses incident to this Agreement and the transactions
contemplated hereunder, including all legal and accounting fees and disbursements, and costs of
obtaining all necessary respective consents.
19.13 Further Assurances. The parties hereto will use their reasonable
best efforts to comply with all legal requirements imposed on them with respect to the
transactions contemplated by this Agreement. Each party agrees to execute .and deliver any and
all further agreements, documents or instruments necessary to effectuate this Agreement and the
transactions referred to herein, contemplated hereby or reasonably requested by the other party
to perfect or evidence its rights hereunder. Each of Seller and Buyer will use its reasonable best
efforts to complete the transactions contemplated by this Agreement as promptly as practicable
54
DAL02:64246 l
and will promptly notify the other party of any information delivered to or obtained by such party
concerning an event that would prevent the consummation of the transactions contemplated by
this Agreement.
DAL02:64246.1 55
IN WITNESS VaMREOF, the parties have executed and delivered this Agreement
as of the date first above written.
SELLER:
SAMMONS COMMUNICATIONS, INC.
SAMMONS COMMUNICATIONS OF CONNECTICUT, INC.
SAMMONS COMMUNICATIONS OF WASHINGTON, INC.
SAMMONS COMMUNICATIONS OF TEXAS, INC.
SAMMONS COMMUNICATIONS OF ILLINOIS, INC.
SAMMONS COMMUNICATIONS OF VIRGINIA, INC.
SAMMONS COMMUNICATIONS OF MISSISSIPPI, INC.
SAMMONS OF INDIANA
By: Sammons Cardinal, Inc., a general partner
By: Sammons Communications of Indiana, Inc.,
a general partner
SAMMONS OF FORT WORTH
By: Metroplex Cable Television, Inc., a general partner
By: Sammons Communications, Inc., a general partner
By: /s/ James N. Whitson
James N. Whitson
Chairman of the Board
DAL02.64246.1 56
MARCUS CABLE ASSOCIATES, L.P.
By: Marcus Cable Operating Company, L.P., its general partner
By: Marcus Cable Company, L.P., its general partner
By: Marcus Cable Properties, L.P., its general partner
By: Marcus Cable Properties, Inc., its general partner
By: /s/ Jeffre A. Marcus
Jeffrey A. Marcus
President
SAMMONS ENTERPRISES, INC.
By: /s/ James N. Whitson
James N. Whitson
Executive Vice President
MARCUS CABLE COMPANY, L.P.
By: Marcus Cable Properties, L.P., its general partner
By: Marcus Cable Properties, Inc., its general partner
By: /s/ Jeffrey A. Marcus
Jeffrey A. Marcus
President
57
DAL02:64246. I
EXHIBIT # 1
ASSET PURCHASE AGREEMENT
Dated as of April 5, 1995
BY AND BETWEEN
CONFORMED COPY
MARCUS CABLE ASSOCIATES, L.P., as Buyer
AND
SAMMONS COMMUNICATIONS, INC.,
SAMMONS COMMUNICATIONS OF CONNECTICUT, INC.,
SAMMONS COMMUNICATIONS OF WASHINGTON, INC.,
SAMMONS COMMUNICATIONS OF TEXAS, INC.,
SAMMONS COMMUNICATIONS OF ILLINOIS, INC.,
SAMMONS COMMUNICATIONS OF VIRGINIA, INC.,
SAMMONS COMMUNICATIONS OF NUSSISSIPPI9 INC.
SAMMONS OF INDIANA and
SAMMONS OF FORT WORTH,
as Seller
DAL02:64246.1
ASSET PURCHASE AGREEMENT
TEI IS AGREEMENT, dated. ds" of April 5, -1995, by and between Marcus . Cable
Associates, L.P., a Delaware limited partnership, as :buyer ("Buyer"), and Sammons
Communications, Inc.,.a Delaware. corporation, ,Sammons Communications of Connecticut, Inc., a
Connecticut corporation, Sammons Communications of Washington, inc., a Delaware corporation,
Sammons Communications of Texas, Inc., a Texas corporation, Sammons Communications of
Illinois, Inc., a Delaware corporation, Sammons Communications of Virginia, Inc., a Delaware
corporation, Sammons Communications of Mississippi, Inc., a Delaware corporation, Sammons of
Indiana, an Indiana general partnership, and Sammons of Fort Worth, a Texas general partnership,
as sellers (collectively, "Seller", unless the context otherwise requires), and solely for purposes of
Section 18 hereof, Marcus Cable Company, L.P., a Delaware limited partnership ("MCC'), and
Sammons Enterprises, Inc., a Delaware corporation ("SEI").
WITNESSETH:
WHEREAS, Seller is the owner and operator of the cable television systems
serving the groups of cable television franchises listed on Schedule I (each such group a
"System," collectively the "Systems") and the related business in respect thereof (the 'Business");
and
WHEREAS, Seller desires to sell, and Buyer desires to buy, on the terms and
subject to the conditions contained in this Agreement, the Systems, together with those franchises,
assets, contracts and rights used by Seller in connection with the Systems and the Business, free
and clear of all mortgages, security interests, liens, claims, pledges, restrictions, leases, title
exceptions, rights of others, charges or other encumbrances, except as hereinafter provided, all
in accordance with and subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the promises, mutual covenants and
agreements set forth herein, the parties hereto, intending to be legally bound, hereby agree as
follows:
DALA2:64246.1
2. Assets Sold and Purchased; Purchase Price.
2.1 Systems Assets. Subject to the conditions hereinafter set forth,
Seller agrees to sell, assign, convey and deliver to the Buyer, and Buyer agrees to purchase,
acquire and accept from Seller, all right, title and interest in and to all of the assets used or useful
in connection with the Systems and the Business (the "Systems Assets"), including, but not
limited to:
(a) All Authorizations and CATV Instruments;
(b) All towers, fixtures, leaseholds and leasehold improvements,
licenses, easements, rights -of -way and other interests in real property owned or leased by Seller,
_ (collectively, the "Real Property");
(c) All tangible personal property owned or leased by Seller,
including, without limitation, all electronic devices, trunk and distribution cables, studio
DAL02:64246.1 7
equipment, programming origination equipment, amplifiers, power supplies, conduits, bolts and
pedestals, grounding and pole hardware, installed subscribers' devices (including, without
limitation, drop. lines, converters, encoders;_ transformers behind television sets and fittings),
headends (origination, transmission and distribution systems), hardware, tools, `inventory, spate
parts, motor vehicles, supplies, test equipment and closed circuit devices, .microwave equipment,
advertising insert equipment, billing'equipment, computer -equipment and furniture, furnishings
and office equipment (including, without limitation,'any such items located at Seller's home
office) owned by Seller as of the date hereof and of the Closing -Date (collectively,`the "Tangible
Personal Property");
(d) All contracts, leases, agreements, licenses, retransrmssion
consent agreements, commitments and understandings,
and all contracts, leases, agreements, licenses, permits, retransmission consent
agreements, commitments and understandings entered into by Seller with respect to the Systems
after the execution of this Agreement which are made in the normal course of business and in
accordance with Section 6 hereof, but excluding any programming agreements, collective
bargaining agreements and those contracts, leases, agreements, licenses, retransmission consent
agreements, commitments and understandings set forth on a list to be delivered by Buyer to Seller
pursuant to Section 6.6 as those contracts, leases, agreements, licenses, permits, commitments and
understandings not to be assigned to or assumed by Buyer (collectively, the "Business
Contracts");
(e) All subscriber agreements and orders for CATV service to
be provided by the Systems existing at the Closing Date;
(f) All schematics, blueprints, strand maps, working drawings,
engineering data, current and prior customer -lists, systems maps and other reports, lists, plans,
specifications, projections, statistics, promotional graphics, original art work, mats, plates,
negatives and other advertising, marketing or related materials, files and records and all other
technical and financial information concerning the Systems, including, without limitation, all
8
DAl02:64246.1
operating data as are contained in any computer media (ef� computer disks and computer tapes),
all of which shall be provided to Buyer at or prior to the Closing);
(g) All 'accounts receivable of Seller (a schedule of current
accounts receivable has been made available for review by Buyer);
(h) All deposits and prepaid expenses relating to the Systems (a
schedule of Seller's current deposits and prepaid expenses relating to the Systems has been made
available for review by the Buyer);
(i) All of Seller's right, title and interest in and to
manufacturers' warranties with respect to the Systems Assets;
0) All telephone numbers and listings related to the Business;
(k) All current assets paid for by Buyer. in accordance with
Sections 2.5(d) and 2.6 hereof, and
(1) All other assets of whatever nature and wherever located
owned or leased by Seller and used in connection with the design, construction or operation of
the Systems or the Business, which assets shall include all of Seller's books and records (or
copies thereof) related to the Systems or the Business but shall not include assets described in
Section 2.2 hereof.
2.2 Excluded Assets. Notwithstanding anything in this Agreement to
the contrary, the assets sold to Buyer hereunder shall not include (and Seller shall retain):
worksheets;
(a) Originals of all corporate books and records, tax returns and
(b) Cash, cash equivalents and marketable securities;
(c) All trade marks, service marks, copyrights, trade names, aiai
all rights associated therewith owned or held by Seller; provided that for a period of up to 180
days after the Closing Date, Buyer shall have the right to use the "Sammons" name in connection
with the operation of the Systems; and
(d) Rights to any tax refunds for tax periods ending on or prior
to the Closing.
2.3 Assumed Liabilities. Subject to Sections 2.1(b) and 6.6 hereof,
Buyer will assume on the Closing Date and agrees to pay, perform and discharge when due all
Assumed Liabilities . Except as expressly set
forth in this Agreement, Buyer will not assume any other liabilities of Seller or related to the
DAL02:64246 1 - 9
Systems, the Systems Assets or the Business. It is expressly understood and agreed that Buyer
shall not be liable for, and will not assume, any obligations or liabilities of Seller of any kind
nature, whether accrued or unaccrued, asserted. or unasserted,' known or unknown, absolute or
contingent, or otherwise, other -than -such obligations.' being .acquufed by_ Buyer pursuant to this.
Agreement, and which are. specifically assumed by Buyer, and that _ in no event shall. Buyer
assume or. otherwise be bourid by or responsible or lable for - any liability," duty -or obligation
incurred by Seller in. violation of.the provisions of this 'Agreement, 'or'any liability, duty or -
obligation arising out of a breach, violation or default by S6116t,"prior
to the Closing, under any
Business Contract, any law or judgment (including any event, fact or circumstance existing or
occurring as of or prior to Closing that, with the passage of time or the giving of notice, or both,
may become such a breach, violation or default). Except as otherwise set forth herein or
provided in this Agreement, Buyer shall be under no obligation to assume any obligation, liability
or indebtedness of Seller. In the event that Buyer incurs any costs, fees or expenses of any kind
with respect to any liability or obligation of Seller not specifically assumed by Buyer, Buyer will
be entitled to indemnification pursuant to Section 13 hereof. Without limiting the foregoing,
Buyer shall assume no liability or obligation with respect to the payment of salary or severance
or provision of benefits, including but not limited to the benefits payable under any employee
benefit plan with respect to the employment by Seller of any employee or independent contractor
of Seller or of any former employee of Seller. Seller shall be responsible for compliance with
the notice and continuation coverage requirements of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, with respect to all employees (and their beneficiaries)
experiencing a qualifying event (as defined in Section 603 of ERISA) on account of the
transactions contemplated by this Agreement or occurring prior to the Closing. Finally, Seller
shall be responsible for, and Buyer assumes no liability for any fine, penalty or refund ordered
by the FCC, a Franchising Authority, the Copyright Royalty Tribunal or any other governmental
authority, relating to the operations of the Systems prior to the Closing.
2.4 Purchase Price. In addition to the assumption of the Assumed
Liabilities, and subject to adjustments described in Section 2.5 and the provisions of Section 12,
the aggregate purchase price (the "Purchase Price") to be paid by Buyer to Seller shall be
$ payable by wire transfer of immediately available funds at the Closing to an
account designated by Seller at least five days prior to Closing. All state or local sales t_a7 ---
applicable to the transactions contemplated by this Agreement shall be borne by Seller, and all
transfer taxes or fees applicable to the transactions contemplated by this Agreement shall be home
by Buyer.
10
DAI02:64246.1
I Closing Date and Place. The closing. of the transactions contemplated by
this Agreement (the "Closing") will take place at 10.00 am.. on the latest of (a) October 1, 1995,
(b) the first day of a month in which such- first -day is- at least ten- business days after : satisfaction
or waiver of the conditions set' forth in Sections7 and -8 hereof or (c) at Seller's or Buyer's
unilateral election, the first day of themonth (bitt no later than 7anuary1, 1996) in which such
first day is at least ten days after the effectiveness of the 1995 Activity if the 1995 Activity was
not fully in effect for all Franchises as of the date determined under clause (a) or (b) (the
"Closing Date"), at the offices of Baker & Botts, L.L.P., 2001 Ross Avenue, Dallas, Texas 75201,
or such other date or place as agreed to in writing by the parties hereto.
15
DAL02:64246. t
19. Miscellaneous.
19.1 Remedies Upon Default. (a) . Seller recognizes that the Systems
cannot be readily obtained in the open market and that Buyer _will be irreparably injured if this
Agreement is not specifically enforced.. Therefore, Buyer shall be entitled in such event, in
addition 'to bringing suit at law or equity for money -or other damages, to obtain specific
performance of the terms of this Agreement. " In any `action to enforce the provisions of this
Agreement, Seller shall waive the defense that -there is an adequate remedy at law or equity and
agree that Buyer shall have the right to obtain specific performance of the terms of this
Agreement.
(b) In the event of a default by Buyer, ,Seller shall be entitled to bring
suit at law or equity for money or other damages.
19.2 Indulgences, Etc. Neither the failure nor any delay on the part of
either party to exercise any right, remedy, power or privilege under this Agreement ("Right")
shall operate as a waiver thereof, nor shall any single or partial exercise of any Right preclude
any other or further exercise of the same or of any other Right, nor shall any waiver of any Right
with respect to any occurrence be construed as a waiver of such Right with -respect to any other
occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted
to have granted such waiver; provided that any waiver granted by Seller hereunder shall be
effective and binding against each Seller if contained in a writing signed by SCI.
19.3 Controlling Law. This Agreement and all questions relating to
its validity, interpretation, performance and enforcement (including, without limitation,
provisions concerning limitations of actions) shall be governed by and construed in accordance
with the laws of the State of Texas, and without the aid of any canon, custom or rule of law
requiring construction against the draftsman.
19.4 Notices. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be deemed to have been
duly given, .made and received only when delivered (personally, by courier service such as
Federal Express or by other messenger) or five days after deposit in the United States mails,
registered or certified mail, postage prepaid, return receipt requested, addressed as set forth
below:
(a) If to Seller or SEI:
Sammons Communications, Inc.
300 Crescent Court, Suite 700
Dallas, TX 75201
Attn: James N. Whitson, Chairman
DAL02:64246.1 .52
With a copy, given in the manner prescribed above, to:
Sammons Enterprises, Inc.
300 Crescent Court, Suite .700
Dallas, TX 75201
Attn: John H. Washburn
Senior Vice President and General Counsel
(b) If to Buyer or MCC:
Marcus Cable Associates, L.P.
2911 Turtle Creek Blvd., Suite 1300
Dallas, TX 75219
Attn: Jeffrey A. Marcus
With copies, given in the manner prescribed above, to:
Marcus Cable Associates, L.P.
2911 Turtle Creek Blvd., Suite 1300
Dallas, TX 75219
Attn: Richard A.B. Gleiner
Baker & Botts, L.L.P.
2001 Ross Avenue
Dallas, TX 75201
Attn: Michael A. Saslaw
Any party may alter the address to which communications or copies are to
be sent by giving notice of such change of address in conformity with the provisions of this
paragraph for the giving of notice.
19.5 Exhibits and Schedules. All Exhibits and Schedules attached
hereto are hereby incorporated by reference into, and made a part of, this Agreement. All
Schedules to be provided by Seller hereunder shall reflect information on a consolidating
(System -by -System) and a consolidated (all Systems as a whole) basis. Nothing contained in the
Schedules with respect to any Franchise, or any agreement, ordinance, statute, rule or regulation
related thereto, shall be deemed to imply an obligation of Buyer under the same or an admission
by Buyer that any term of any such Franchise, or of any agreement, ordinance, statute, rule or
regulation related thereto, is valid or binding.
19.6 Binding Nature of Agreement; Assignment. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their respective successors and
assigns. No party may assign or transfer its rights or obligations under this Agreement without
the prior written consent of the other party hereto. Notwithstanding the foregoing, Seller
DAL02:64246. ( 53
acknowledges that Buyer may assign the right to acquire certain Systems to third parties, provided
that Buyer remains liable for any failure of Buyer's assignee to purchase any such Systems.
19.7 Execution in Counteraarts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be an original as against any party
whose signature appears thereon and all of which shall together -constitute one and the same
instrument. This Agreement shall become binding when one or more counterparts hereof,
individually or taken together, shall bear the signatures of all of the parties reflected hereon as
the signatories.
19.8 Severability. If any provision of this Agreement is held illegal,
invalid or unenforceable, such illegal, invalid or unenforceable provision shall not affect any other
provision hereof. Such provision and the remainder of this Agreement shall, in such
circumstances, be deemed modified to the extent necessary to render enforceable the remaining
provisions hereof.
19.9 Entire Agreement. This Agreement, including the Schedules and
Exhibits hereto and other instruments and documents referred to herein or delivered pursuant
hereto represent the entire understanding among the parties hereto with respect to the subject
matter hereof, and supersede all prior and contemporaneous agreements and understandings,
inducements or conditions, express or implied, oral or written, except as herein contained. This
Agreement may not be modified or amended other than by an agreement in writing signed by
each of the parties hereto.
19.10 Section Headings. The section headings in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its interpretation.
19.11 No Third -Party Rights. Nothing in this Agreement, express or
implied, shall be construed to confer upon any person, other than the parties hereto, their
successors and permitted assigns, any legal or equitable rights, remedies, claims, obligations or
liabilities under or by reason of this Agreement.
19.12 Expenses. Except as otherwise expressly provided herein, each
party hereto shall pay its own expenses incident to this Agreement and the transactions
contemplated hereunder, including all legal and accounting fees and disbursements, and costs of
obtaining all necessary respective consents.
19.13 Further Assurances. The parties hereto will use their reasonable
best efforts to comply with all legal requirements imposed on them with respect to the
transactions contemplated by this Agreement. Each party agrees to execute and deliver any and
all further agreements, documents or instruments necessary to effectuate this Agreement and the
transactions referred to herein, contemplated hereby or reasonably requested by the other party
to perfect or evidence its rights hereunder. Each of Seller and Buyer will use its reasonable best
efforts to complete the transactions. contemplated by this Agreement as promptly as practicable
54
DAL02:64246 1
and will promptly notify the other party of any information delivered to or obtained by such party
concerning an event that would prevent the consummation of the transactions contemplated by
this Agreement.
DAL02:64246.1 55
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
SELLER:
SAMMONS COMMUNICATIONS, INC.
SAMMONS COMMUNICATIONS OF CONNECTICUT, INC.
SAMMONS COMMUNICATIONS OF WASHINGTON, INC.
SAMMONS COMMUNICATIONS OF TEXAS, INC.
SAMMONS COMMUNICATIONS OF ILLINOIS, INC.
SAMMONS COMMUNICATIONS OF VIRGINIA, INC.
SAMMONS COMMUNICATIONS OF MISSISSIPPI, INC.
SAMMONS OF INDIANA
By: Sammons Cardinal, Inc., a general partner
By: Sammons Communications of Indiana, Inc.,
a general partner
SAMMONS OF FORT WORTH
By: Metroplex Cable Television, Inc., a general partner
By: Sammons Communications, Inc., a general partner
By: /s/ James N. Whitson
James N. Whitson
Chairman of the Board
DAL02:64246.1 56
MARCUS CABLE ASSOCIATES, L.P.
By: Marcus Cable Operating Company, L.P., its general partner
By: Marcus Cable Company, L.P., its general partner
By: Marcus Cable Properties, L.P., its general partner
By: Marcus Cable Properties, Inc., its general partner
By: /s/ Jeffrey A Marcus
Jeffrey A. Marcus
President
SAMMONS ENTERPRISES, INC.
By: /s/ James N. Whitson
James N. Whitson
Executive Vice President
MARCUS CABLE COMPANY, L.P.
By: Marcus Cable Properties, L.P., its general partner
By: Marcus Cable Properties, Inc., its general partner
By: /s/ Jeffrey A Marcus
Jeffrey A. Marcus
President
DAL02:64246.1 57
Exhibit 2
The Asset Purchase Agreement has been redacted as permitted by this form, and certain exhibits
to the Asset Purchase Agreement and related agreements and schedules thereto have not been
included because such information (i) is not needed to understand the terms of the Asset
Purchase Agreement that are applicable to the assignment of the system franchise or (ii) contains
confidential trade, business, pricing or marketing information, or other information not otherwise
publicly available. Such materials are available for review upon request, subject to being
redacted as permitted by this form, and subject to the establishment of proper procedures for
confidentiality. If you desire to review such materials, please contact Richard A. B. Gleiner,
Marcus Cable Company, L.P., Legal Department, at (214) 521-7898 or Heather Kreager,
Sammons Communications, Inc., Legal Department, at (214) 484-8888.
Exhibit 3
The proposed Assignee is Marcus Cable Associates, L.P., ninety-nine percent of which is owned
by Marcus Cable Operating Company, L.P. ("MCOC"). MCOC is the general partner of the
Assignee, as well as of several other companies operating cable television. This structure is
described in greater detail under Exhibit 7. MCOC is ninety-nine percent owned by Marcus
Cable Company, L.P. ("MCC"). In turn, MCC is eighty-six percent owned by a number of
private investors as detailed further in this Exhibit. MCC's sole general partner and fourteen
percent owner is Marcus Cable Properties, L.P. ("MCP"), whose sole general partner is Marcus
Cable Properties, Inc. ("MCPI"), owned by Jeffrey and Nancy Marcus. Over thirty-five percent
of MCP is owned by a number of employees of MCOC.
Through a voting trust agreement between Jeffrey and Nancy Marcus, Jeffrey Marcus has sole
voting authority over MCPI, which serves as the ultimate general partner and sole controlling
entity of each of the partnerships referred to above.
An ownership diagram is attached to this Exhibit for purposes of ease of understanding this
structure.
MCC has commitments to issue more of its Class B Units to its current investors and to affiliates
of Hicks, Muse, Tate & Furst, Incorporated, as well as to a number of MCOC's employees.
Exhibit 3
PRINCIPAL SECURITY HOLDERS
Security Ownership of Certain Beneficial Owners
The following table sets forth, as of January 18, 1995, (i) the units of general partnership interests,
limited partnership interests and preferred partnership interests of MCC constituting a class of voting
security and which are owned by the directors and executive officers of MCPI and each person who is
known to MCC to own beneficially more than 5.0% of any class of MCC's partnership interests and (ii)
the units of the equity securities of MCPI and the General Partner owned by each directoi or executive
officer of MCPI named in the Summary Compensation Table and by all executive officers of MCPI as a
group. MCC owns all 1,000 shares of outstanding common stock of Capital.
# of Units/ % of
Name and Address of Beneficial Owners
Type of Interest
Shares Class
Marcus Cable Properties, L.P. (1)
Class B General Partner Units
6,434.53 100.00%
2911 Turtle Creek Boulevard, Suite 1300
of MCC
Dallas, Texas 75219
Marcus Cable Properties, L.P. (1)
DCA Class B Units
7,470.00 100.00%
2911 Turtle Creek Boulevard, Suite 1300
of MCC
Dallas, Texas 75219
Marcus Cable Properties, L.P. (1)
General Partner Profit
4,943.66 100.00%
2911 Turtle Creek Boulevard, Suite 1300
Interest of MCC
Dallas, Texas 75219
Goldman, Sachs & Co. Affiliates (2)
Class B Limited Partnership
96,366.24 65.84%
85 Broad Street
Units of MCC
New York, New York 10004
Freeman Spogli & Co., Inc. Affiliates (3)
Class B Limited Partnership
25,000.00 17.08%
599 Lexington Avenue, 18th Floor
Units of MCC
New York, NY 10022
Greenwich Street Capital Partners, Inc.
Class B Limited Partnership
15,625.00 10.67%
Affiliates (4)
Units of MCC
388 Greenwich Street
New York, NY 10013
Weiss, Peck & Greer Affiliates (5)
Class B Limited Partnership
9,375.00 6.41 %
One New York Plaza, 30th Floor
Units of MCC
New York, NY 10004
Jeffrey A. Marcus (1)
Common Stock of MCPI
1,000.00 100.00%
2911 Turtle Creek Boulevard, Suite 1300
Dallas, Texas 75219
Louis A. Borrelli, Jr. (1)
2911 Turtle Creek Boulevard, Suite 1300
CIass A Limited Partnership
Units of the General Partner
13.75 52.88%
Dallas, Texas 75219
Cynthia J. Mannes (1)
2911 Turtle Creek Boulevard, Suite 1300
Class A Limited Partnership
Units of the General Partner
7.50 28.84%
Dallas, Texas 75219
David L. Hanson (1)
3300 Birch Street
Class C Limited Partnership
5.00 74.10%
Suite 2B
Units of the General Partner
Eau Claire, WI *54703
—1—
Exhibit 3
(1) The General Partner, the sole general partner of MCC, owns an 11.41 % equity interest in MCC. MCPI is the sole general
partner of the General Partner. A majority of the limited partners of the General Partner are members of the Company's
management team In total, the limited parmas own approximately 34.75 % of the partnership interest: of the General Parma.
Jeffrey A. Marcus and his wife, Nancy C. Marcus, own all the issued and outstanding stock of MCPI, which stock is subject
to a voting tout agreement which gives Mr. Marcus the right to vote all of such stock. See 'Certain Transactions -Ownership
of Equity Interests in MCC and the Operating Partnerships.'
(2) The following affiliates of Goldman Sachs & Co. own the outstanding Class B Limited Partnership Units of MCC: Broad
Street Investment Fund I. L.P. (75,047.693 units); Broad Street Acquisition Corporation (5,028.885 units); the Goldner.
Sachs Group, L.P. (8,155.847 units); Stone Street Fund 1992, L.P. (1,416.686 units); Bridge Street Fund 1992, L.P.
(831.163 units); Broad Street Exploration Corporation (405.405 units); Stone Sara Fund 1990, L.P. (462.834 units); Stone
Sum Fund 1991. L.P. (257.670 units); Bridge Sara Fund 1990, L.P. (308.272 units); Broad Strew Empire Corporation
(121.616 units) and Broad Street Income Corporation (1,456.490 units), Broad Street Yield Corporation (a66.083 units),
Stone Street Fund 1994, L.P. (941.974 units), Broad Strew Value Corporation (79.497 units) and Bridge Street Fund 1994,
L.P. (986.220 units).
(3) The following affiliates of Freeman Spogli own the outstanding Class B Limited Partnership Units of MCC: FS Equity
Partners III, L.P. (24,129.00 units) and MCC International Holdings, Ltd. (871.00).
(4) The following affiliates of Greenwich Street Capital Partners own the outstanding Class B Limited Partnership Units of
MCC: Greenwich Street Capital Partners. L.P. (9,371.378 units), GSCP Offshore Holdings, Inc. (511.992 units), TRV
Employees Fund, L.P. (4,899.650 units), The Travelers Insurance Company (564.127 units), and The Travelers Life and
Annuity Company (277.853 units).
(5) The following affiliates of Weiss, Peck & Grew own the outstanding Class B Limited Partnership Units of MCC: WPG
Corporate Development Associates IV, L.P. (7,553.00 units) and WPG M Holding, Inc. (1,822.00 units).
—2—
Exhibit 4
MCC's partnership arrangements, both present and contemplated, provide for certain rights of
first refusal whereby units must first be offered to existing partners before their sale to third
parties, as well as certain conversion provisions of General Partner and Convertible Preferred
Units. These are all intra-partner arrangements and there are no rights for non -partners to obtain
any interests in MCC or any of its subsidiaries.
Exhibit 5
MCOC's existing credit facility provides that voting rights may be exercised by its lenders upon
an event of default. It is expected that any future credit facility would contain a similar
provision. In any case, voting rights will not be exercisable unless and until any prior consent of
the FCC and/or the franchising authority, if required pursuant to federal, state or local law or
pursuant to the terms of the franchise agreement has been obtained.
Exhibit 6
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1993 and 1994
(in thousands)
Assets
1223
1224
Current assets:
Cash and cash equivalents
Accounts receivable:
S 8,837
S 5,328
Customers, net of allowance of S 142 in 1993 and
S240 in 1994
Other
1,033
1,899
Prepaid expenses
190
�63
1,971
Total current assets
10,523
68
--�3
9,883
Property and equipment (note 2):
Cable systems
Land and buildings
65,791
104 357
Vehicles and other
1,160
2-338
,,357
3-421
Less accumulated depreciation
69,289
(22-673)
110,026
Net property and equipment
(369)46,666 76,657
Other assets, net (note 3)
137-95
229,677
S 195.148
S 315 17
Liabilities and -Partners, Deficit
Current liabilities:
Current maturities of long-term debt (note 4)
S 2,850
$
Accotmts payable and other accrued liabtiitiea
2,882
6,519
Accrued interest
3.148
Total current liabilities
8,880
2.970
9,489
Long-term debt, less corneal maturities (note 4)
192,150
327,264
Subsidiary limped ptrtner mtmm (note 5)
5,789
(246)
Partners' deficit - redeemable parmer interests (note 6)
(11,670)
(21,290)
Commitments sad contingencies (notes 2, 4, 5 and 9)
S 195.148
17
SLUE
See accompanying notes to consolidated financial statements.
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31, 1992, 1993 and 1994
(in thousands)
122Z
1223
1224
Revenues:
Basic service
S 29,894
S 40,532
S 47,792
Premium service
5,705
7,917
10,397
Installation and other
2,711
3,858
5,440
Management fees
_
_
L I M
Total revenues
38.310
52.307
64.747
Operating expenses:
Programming costs
7,501
10,516
14,127
Selling, service and system management
4,112
5,448
7,533
General and administrative
4,491
5,885
9,793
Management fees and expenses (note 7)
2,224
3,617
2,165
Depreciation and amortization
26,652
28.633
37.412
Operating loss
44.980
54,099
Q7
71.030
Other (income) expense:
Interest expense
11,114
13,443
28,105
Interest income and other, net
(133)
251
(511
Loss before subsidiary limited painter
10.981
13.694
2R-054
interests and extraordinary item
(17,651)
(15,486)
(34,337)
Subsidiary limited partner interests (note 6)
(3,6721
8.919
6.034
Loss before extraordinary item
(21,323)
(6,567)
(28,303)
Extraordinary item - loss on early retirement of debt
—
(3,0761
Net loss
SQL323J
$ (9,643)
-(2-30
S(30,61 0)
See accompanying notes to consolidated 5nmcial statements.
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Consolidated Statements of Partners' Capital (Deficit)
Years ended December 31, 1992, 1993 and 1994
(in thousands)
Balance at December 31, 1991
Capital contribution
Net loss
Balance at December 31, 1992
Distribution of preference
returns on Class A traits
redeemed
Redemption of Class A units
Reallocation of losses on
redemption of subsidiary
limited partner interests
(note 6)
Capital contribution
Net loss
Balance at December 31, 1993
Distribution of preference
returns on Class A units
redeemed
Redemption of Class A units
Conversion of Class A units
Capital contribution
Net loss
Balance at December 31, 1994
Redeemable P mer Tnterests
Class B
General Limited Class A
Partners Partners Partner
S (2,500)
(213)
(2,713)
(187)
(63)
(4,302)
1961
(7,361)
(7)
(25)
(3,844)
(10,053
S i 90
S —
32,501
( LIM
11,391
(1,717)
(6,030)
3,510
(7.154)
(721)
(2,519)
(166)
22,990
S —
See Accompanying notes to consolidated financial statements.
$(3,687)
(3,687)
1,771
( _3931
(4,309)
1,272
4,010
(9731
S
�]
S (6,187)
32,501
(21.=
4,991
(1,904)
(4,322)
(4,302)
3,510
(9,643)
(11,670)
(728)
(1,272)
22,990
(30.6101
S 21 90
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1992, 1993 and 1994
(in thousands)
Cash flows from operating activities:
1M
IM
122A
Net loss
S (21,323)
S (9,643)
S (30,610
Adjustments to reconcile net loss to net cash
provided by operating activities:
Extraordinary item - loss on early retirement
of debt
-
3,076
2,307
Loss on retirement of fixed assets
-
400
-
Loss on redemption of subsidiary limited partner
units
-
4,302
-
Depreciation and amortization
26,652
28,633
37,412
Accretion of discount on notes
-
-
12,264
Subsidiary limited partner interests
3,672
(13,221)
(6,034
Changes in assets and liabilities, net of
effects of acquisitions:
Accounts receivable
(930)
229
(1,876
Prepaid expenses
(85)
(152)
(222
Other asses
(217)
457
(40
Accounts payable and accrued liabilities
1 _R99
1.48R
2.688
Net cash provided by operating activities
9-668
15369
15,889
Cash flows from investing activities:
Escrow deposit on acquisition of cable systems
-
(2,980)
(5,000
Acquisition of cable systems and franchises, net of
cash acquired
(95,669)
-
(139,130
Additions to property and equipment
(53551
(31
(6.592
Net cash used in investing activities
(101,024)
(6,9491
(150,722
Cash flows from financing activities:
Proceeds from long-term debt
66,500
195,000
215,000
Repayment of long-term debt
(7,000)
(162,500)
(95,000
Contributions by limited partners
32,501
3,510
22,990
Contributions by subsidiary limited parmer
1,000
-
-
Purchase of subsidiary limited partner units
-
(351)
-
Payment of debt issrance costs
(2,129)
(6,589)
(9,666'
Redemption of Claaa A partner units
_
(4,322)
(2,000
Redemption of subsidiary limited partner units
-
(16,946)
-
Prefer+eace returns distnbumd
-
(8- 10)
-
Net cash provided by (used in)
imsncing activities
90-972
(1.009
131-324
Net increase (demuw) in cash and cash equivalents
(494)
7,612
(3,509
Cash and cash equivalents at beginning of year
t _709
1.225
8.837
Cash sad cash equivdents at end of year
S
S 8,837
S 5,328
Supplemental disclosure of cash flow information -
interest paid
$ 10.409
S 11.510
S 15.868
See accompanying notes to consolidated financial statements.
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1993 and 1994
(a) General
Marcus Cable Company, L.P. ("MCC"), a Delaware limited partnership, and subsidiaries
(collectively, the "Company") was formed on January 17, 1990 for the purpose of acquiring,
operating and developing cable television systems. In July 1994 the Company created a new
subsidiary, Marcus Cable Operating Company, L.P. ("Operating"). Operating acts as a
holding company and general partner for the three subsidiary partnerships discussed below.
In addition, Operating has a subsidiary, Marcus Cable of Alabama, Inc., which has a general
partner interest in a partnership with cable systems in Alabama (see note 2).
The Company's operations are conducted through three subsidiary partnerships which are
organized by geographic region. MCC, through Operating, serves as the general partner of
all three partnerships. The three subsidiary partnerships include: Marcus Cable Partners,
L.P., which operates cable systems primarily in Wisconsin and Minnesota, Marcus Cable of
San Angelo, L.P., which operates cable systems in Texas, and Marcus Cable of Delaware and
Maryland, L.P., which operates cable systems in Delaware and Maryland. MCC also has two
subsidiaries, Marcus Cable Capital Corporation ("Capital") and Marcus Cable Capital
Corporation II ("Capital II"), which were created in August 1993 and July 1994, respectively,
for the purpose of acting as co -issuers on public debt offerings. Capital and Capital II have
no operations.
In September 1994, the Company also began managing certain cable systems in Maryland
and Alabama
The consolidated financial statements include the accounts of the Company, Operating,
Capital, Capital II and their subsidiary partnerships. All significant intercompany accounts
and transactions have been eliminated in consolidation. Certain reclassifications have been
made to prior years' consolidated balances to conform to the current year presentation.
For purposes of the statement of cash flows, the Company considers all highly liquid
investments with original maturities of three months or less at inception to be cash
equivalents. At December 31, 1"3 and 1994, the Company had cash equivalents of
S4,291,000 and S 1,900,000, respectively, consisting of certificates of deposit.
(Continued)
MARCUS CABLE COMPANY, L.P.AND SUBSIDLARIES
Notes to Consolidated Financial Statements
Property and equipment are recorded at cost, including all direct costs and certain indirect
costs associated with the construction of cable television t systems, and the cost of new customer installations. Maintransmission and distribution
enance and
expense as incurred and equipment replacements and betterments are repairs an charged to
capitalized.
Property and equipment are depreciated using the straight-line method based on estimated
useful lives as follows: buildings, 15 years; cable systems, 3 to 10 years; and vehicles and
other, 3 to 10 years,
(e) QWM,& S
Franchise rights and going concern value of acquired cable systems are amortized on a
straight-line basis over ten years. The cost straight-line method over the periods of thof noncompetition agreements is amortized by the
costs are amortized e respective agreements. Deferred debt issuance
debt. to interest expense using the interest method over the term of the related
The Company assesses the recoverability amortization lives by determining whethC1 theof intangible assets as well as the related
recovered over the remaining lives throw �g value of the intangible assets can be
extent that such 8h projected undiacounted future cash flows. To the
be adequate to recover the carrying that undiscouated futon cash flows are not expected to
amounts are adjusted for ' �Ymg amounts of the related intangible assets, such carrying
analysis of the underlying n sets. ent to a level commensurate with a discounted cash flow
yang assets.
Revenues from basic and premium service are recognized when the service is provided.
Installation revenues are recognized to the extent of direct selling costs incurred. The
remainder, if any, n deferred and amortized to Customersare income over the estimated average period that
to remain corrected to
the cable television system.
(g) IIIGgg
The Company has not provided for federal income taxes since such taxes are the
taxra � 1> noof >am � � f Capital and Gpital II are subject to federal income
tax since their inception
inception
Limited partner interests of subsidiary partnerships which are d by the
not directly held Cotnpany are accounted for in a manner similar to minority interests. Net income el loss and
preference returns related to the limited partner interests of subsidiary partnerships are
re"e � in
aceomPanymg statements of operations as "subsidiary limited partner
w
(Continued)
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Acquisition
On July 29, 1994, the Company acquired cable television systems in Wisconsin and Minnesota
from Star Cablevision Group ("Star"), an unaffiliated third party, through a subsidiary partnership
for cash of S139,152,000 (including direct acquisition costs of $2,152,000).
On September 1, 1994, the Company acquired from Crown Media, Inc. ("Crown"), an unaffiliated
third party, a noncontrolling general partner interest in Cencom of Alabama, L.P. ("CALP"), the
management contract pursuant to which the Company will provide management services to CALP,
investment in CALP is accounted for using the equity method.
and accrued and unpaid management fees, for total cash consideration of S2,878,000. The
The acquisitions of Star and CALP were accounted for as purchases and, accordingly, the purchase
prices were allocated to tangible and intangible assets based on estirnated fair market values at the
dates of acquisition. Fair market values were determined using independent appraisers. In
connection with the acquisitions, the Company also assumed responsibility for settling outstanding
receivables and payables of the cable television systems acquired. Net assets acquired as a result of
these acquisitions are summarized as follows (in thousands):
Property and equipment S 34,147
Franchise rights
Going concern value ] 94,437 ,4
Noncompetition agreement 412
Other assets 100
Net cash paid, including S2,980 3.014
from escrow paid in 1993 $142110 ,
Unaudited pro forma financial information for the years ended December 31, 1993 and 1994 as
though the Star and CALP acquisitions had occurred at January 1, 1993 follows (in thousands):
�.ENEWEAM
Revenues $81,077 S 82,202
Operating income Ooss) 2,357 (2,781)
Net loss (42,146) (45,831)
On July 1, 19949 the Catttltany, duough Operating, entered into an agreement to acquire cable
television sysoema in Wises and Minnesota fiom Crown for approximately $337 million. This
acquisition was completed on January 18, 1995 and was funded with proceeds from an amended
credit Serlity (note 4) and additional equity investments in the Company. At December 31, 1994,
the Company had incurred direct acquisition costs relating to this acquisition of approximately
S 136,000, all of which have bees deferred
(Continued)
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
(3) Other Assets
(4)
Notes to Consolidated Financial Statements
Other assets consist of the following at December 31, 1993 and 1994 (in thousands):
Im
1224
Franchise rights
S 146,052
S 240,489
Going concern value of acquired cable systems
3,169
13,365
Noncompetition agreements
36,600
36,700
Debt issuance costs
6,606
13,773
Escrow deposits for acquisitions
2,980
5,000
Management fees receivable from CALP
—
3,410
Other
197
584
195,604
313,321
Accumulated amordntion
57.645
94.644
Long-term Debt
S 137,959
$2282677
The Company has outstanding borrowings on long-term debt arrangements at December 31, 1993
and 1994 as follows (in thousands):
13-1/2% Senior Subordinated Discount Notes S — $227,264
11 7/9% Senior Debentures 100,000 100,000
Credit facility 95,000 _
195,000 327,264
Less current portion 2_950 —
$192,150 S 3271264
On July 29, 1994, Operating and Capital II issued S413,461,000 of 13 1/2% Senior Subordinated
Discount Notes (the "Notes") through a public offering for net proceeds of approximately
S215,000,000. The Notes we unsaxtred, are guaranteed by the Company on a senior basis, and are
redeemable, at the option of Operating, at amounts decreasing from 1050A to 100% of par beginning
on August 1, 2001. No interest is payable on the Notes until February 1, 2001. Thereafter, interest
'is payable semiannually on February 1 and August 1 until maturity on August 1, 2004. The
discount on the Notes a being accreted using the interest method at an interest rate of 13 12% from
the date of issuance to August 1, 1999. The unsmortized discount was $196,197,000 at December
31, 1994. Proceeds from the Notes were used to retire outstanding borrowings under the
Company's existing credit facility and to fund the 1994 acquisitions.
On October 13,1993, the Company and Capital issued S100,000,000 of 11 7/84/o Senior Debentures
(the "Debentures") though a public offering. The Debentures are unsecured and are redeemable at
the option of the Company on or after October 1,1998 at amounts decreasing from 105.90/a to 100%
of par at October 1, 2002, plus accrued interest to the date of redemption. Interest on the
Debentures is payable semiannually beginning April 1, 1"4 until maturity on October 1, 2005.
Proceeds from the Debentures, together with borrowings under the Company's credit facility, were
(Continued)
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5)
used to repay indebtedness of subsidiary partnerships and to redeem certain partnership preference
units.
On November 15, 1994, Operating amended its existing credit facility to provide for borrowings of
up to $15,000,000 in the form of a reducing revolving loan and $235,000,000 in the forth of two
term loans. Amounts outstanding under the credit facility bear interest at either the (i) base rate or
(ii) London Interbank Offered Rate ("LiBOR'), in each case plus a margin of 0.75% to 3% subject
to certain adjustments based on the ratio of the Company's total debt to annualized operating -ash
flow, as defined. The credit facility is secured by first liens on all tangible and intangible assets of
the subsidiary partnerships and a pledge of all partnership interests in the subsidiary partnerships.
Operating pays a commitment fee of .5% on the unused commitment under the reducing revolving
loan. Commitment fees on the unused portion of the credit facility amounted to $223,000 and
$225,000 for the years ended December 31, 1993 and 1994, respectively. Operating borrowed
S235,000,000 on the term loans on January18, 1995 to acquire certain cable systems from Crown
(see note 2).
The Notes, Debentures and credit facility all require the Company and/or its subsidiaries to comply
with various financial and other covenants, including the maintenance of certain operating and
financial ratios. These debt instruments also contain substantial limitations on, or prohibitions of,
distributions, additional indebtedness, liens, asset sales and certain other items.
Subsidiary limited partner interests represent limited partner units of the subsidiary partnerships
held by entities affiliated with, but not a part of, the Company. These limited partner units have
voting rights and share in the profit or loss of the respective partnerships. Certain of the subsidiary
limited partner interests receive preference returns on their capital contributions. A summary of
transactions in subsidiary limited partner interests during the years ended December 31, 199 99
and 1994 follows (in thousands):
1.2�
1243 12�4
Balance at beginning of year $29,936
$34,608 S 5,788
Contributions 1,000
- -
Accrued preference returns (through July 29,
1994) 3,787
3,373 764
Redemption of subsidiary limited partner units -
(19,550) -
Purchase of subsidiary limited partner units
Companyby the
Net lass (115)
(12-2 (6,728
Balance at end of year S 334 608
S S 789 S (246)
Certain subsidiary limited partner interests are allocated losses in excess of their contributed capital
to the extent that the fin value of assets contributed by the subsidiary
limited partners exceeded the
book value at the date of contribution. As of December 31, 1994, preference returns are no longer
accrued on subsidiary limited partner interests.
(Continued)
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
�1/ yY• ••I 1 1 - �11
Marcus Cable Properties, LP. ("Properties") is the General Partner of the Company and was
also the Class A partner through July 29, 1994. On that date, the Company redeemed
1,272.126 Class A partnership units with a face value of $1,000 per unit and cumulative
unpaid preference returns of S727,875 for cash of S2,000,000. Also on that date, the
remaining 3,405.944 Class A units with a face value of S 1,000 per unit and cumulative
unpaid preference returns of S 1,971,474 were converted into 3,934.53 general partner units
and 201.95 Class B limited partner units of MCC, each with a face value of S 1,300 per trait.
In the event that the holders of 75% or more of the Class B limited partner units vote to
dissolve the Company (and the General Partner does not consent to such dissolution), such
holders have the right to require the Company to redeem all of the Class B limited partner
units held by the exercising Class B limited partners for a price equal to the fair market value
of the units on the date of redemption. The fair market value of the Class B limited partner
units is to be determined and agreed to by the Class B limited partners and the General
Partner. If a fair market value cannot be agreed upon, then an independent appraiser is to be
used to determine the fair market value.
In connection with a disabling event (as defined in the partnership agreement), the general
Parma units held by the General Partner immediately convert into an equivalent number of
Class B limited partner units. Upon conversion of these general Parma units into Class B
limited partner units, the holders of the converted units have the right to cause the Company
to redeem all partnership units owned by such holders at a price equal to the fair market value
of the units.
.� 1 41 • 1 • 11 .4 . Jn • • .yll yw
Income is allocated to the partners first to eliminate any negative capital account balance (as
defined in the partnership agreement) until no partner has a negative capital account balance
and then to the Class A partner (through July 29, 1994), Class B limited partners and the
General Partner as specified m the partnership agreement.
Losses are allocated as follows:
First, to the Class B limited partners and the General Partner until each holder's capital
account balance does not exceed zero. If the capital account is less than zero prior to this
allocation step, then no loss is allocated;
• Next, to the Chas A partner (through July 29, 1994) until its capital account balance does
not exceed zero; and
Next, to the Class B limited partners and the General Parmer.
The General Partner is allocated a minimum of 1 % of income or loss at all times.
(Continued)
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The amount of distributions is at the discretion of the General Partner, subject to the
restrictions in the Company's credit facilities (see note 4). The manner of distribution is as
follows:
• First, to each partner in an amount sufficient to pay income taxes on net taxable income
allocated to each partner,
Next, to the Class A partner (through July 29, 1994) equal to any cumulative unpaid
preference returns and any unrecovered capital, as defined; and
• Next, to the Class B limited partners and the General Partner.
On July 29, 1994, the Class B limited partners made a cash capital contribution of
$22,990,000. The proceeds of this contribution were used to partially fund the purchase of
cable television systems from Star (see note 2).
Through July 29, 1994, each subsidiary partnership had a management agreement with Marcus
Cable Management, Inc. ("MMI"), an affiliated entity, whereby MMI provided various general,
administrative and operating services to the partnerships. The management fee paid by each
subsidiary for these services was 5.5% of revenues. The Company and its subsidiary partnerships
recorded management fees and expenses of $2,224,000, S3,617,000 and $2,165,000 for the years
ended December3l, 1992, 1993 and 1994, respectively, pursuant to this agreement. The
management fees were discontinued on July 29, 1994, and the employees and related expenses u.
MMI become a part of the Company.
In connection with the Star acquisition in 1994, a fee of S1,500,000 was paid to Marcus Cable
Properties, Inc., an affiliated entity, for services directly related to the acquisition. The fee was
capitalized as part of the cost of acquiring the cable television systems.
During the period of September 1, 1994 through December 31, 1994, the Company earned
management fees of $532,000 from CALP (see note 2). Payment of management fees by CALP is
deferred under provisions of CALP's credit and partnership agreements MW such time as certain
conditions are met. At December 31, 19%, management fees receivable from CALP were
approximately S3,410,000, which have been included in noncurrent other assets in the
accompanying 1994 consolidated balance shad.
(Continued)
MARCUS CABLE COMPANY, L.P. AND SUBSIDLARIES
Notes to Consolidated Financial Statements
rP • 1 .. / • • . 1
The Company sponsors a 401(k) plan for its employees whereby employees that qualify for
Participation under the plan can contribute up to 15% of their salary, on a before tax basis, subject
to a maximum contribution limit as determined by the Internal Revenue Service. The Company
matches participant contributions up to a maximum of 2% of a participant's salary. For the years
ended December 31, 1992, 1993 and 1994, the Company made contributions to the plan of
approximately $29,000, $50,000 and S83,000, respectively.
1 11 11 111 yl 1 1 1 1 �11 .11 .n
The Company rents pole space from various companies tinder agreements which are generally
cancelable on short notice and leases office space for system and corporate offices. Lease and
rental costs charged to expense for the years ended December 31, 1992, 1993 and 1994 were
approximately S543,000, S391,000 and S461,000, respectively.
In October 1992, Congress enacted the Cable Television Consumer Protection and Competition du
of 1992 (the "1992 Cable Act"). During May 1993, pursuant to authority granted to it under the
1992 Cable Act, the Federal Communications Commission ("FCC") issued its rate regulation rules
which became effective September 1, 1993. These rate regulation rules required certain cable
systems in franchise areas which receive certification and are 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
of -service were September 1, 1993, regulated cable systems not electing cost -
required to reduce rates to the higher of the prescribed benchmarks or rates that
were ] 00/a 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 170/a, which became effective
on May 15, 1994 or if certain conditions were met, on July 14, 1994. Regulated cable systems were
required to reduce rates to the higher of the new FCC prescribed benchmarks or rates that were 17%
below those in effect on September 1, 1992.
The Company believes that it has complied with all provisions of the 1992 Cable Act, including the
rate setting provisions promulgated by the FCC. However, in jurisdictions which have chosen not
to certify, refunds covering a one-year period of basic service may be ordered upon certification if
the Company is unable to justify its rates tht+ough a cost -of -service filing. The amount of refimd
liability, if any, to which the Company could be subject in the event that these systems' rates are
succesdWly dullenged by f whisittg authorities is not currently estimable.
During the year ended December 31, 1994, the Company paid rate refunds of approximately
$944,000 to its cable customers as a result of rate orders issued by certain franchise authorities.
(Continued)
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following methods and assumptions were used to estimate the fair value of each class of
financial instrument for which it is practicable to estimate that value:
Cash and cash equivalents, other receivables, accounts payable and accrued liabilities - The
carrying amounts of these accounts approximates their fair values because of the short maturity of
these instruments.
Long-term debt - The fair value of the Notes and Debentures is based upon market quotations
obtained from dealers. As amounts outstanding under the Company's credit agreement bear interest
at current market rates, their carrying amounts approximate fair value. The carrying and fair values
of the Company's long-term debt are $327,264,000 and $307,067,000, respectively, at
December3l, 1994. The carrying value of long-term debt approximated fair value at
December3l, 1993.
On March 10, 1995, the Company agreed to acquire certain cable systems from Sammons
Enterprises, Inc. for approximately $1 billion, subject to closing adjustments. The systems to be
acquired conduct operations in 15 states. Consummation of the acquisition, which is anticipated to
occur in the fourth quarter of 1995, is subject to approval of the FCC and local regulatory
authorities. Funding for the purchase will be comprised of a combination of equity and debt
issuances.
On March 24, 1995, the Company agreed to sell Marcus Cable of San Angelo, L.P. to Teleservicc
Corporation of America for approximately $65.5 million, subject to closing adjustments.
Consummation of the sale, which is anticipated to occur in the third quarter of 1995, is subject to
approval of the FCC and local regulatory authorities.
!
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Exhibit 7
Technical Qualifications
Of Transferee/Assignee
Through it's operating partnerships, MCC owns and manages cable systems serving a
total of approximately 590,000 cable customers located in seven states. MCC is one of
the twenty largest multiple system operators in the nation, owning or operating
approximately 450 cable systems. Upon closing this acquisition, MCC through affiliated
partnerships, will serve a total of approximately 1.5 million customers.
Via a network of approximately 17,500 miles of coaxial and fiber optic cable, MCC
customers generally receive an average of 45 or more channels of video programming.
Included are distant broadcast signals such as WTBS, ESPN and CNN which are
advertiser supported video services, premium programming services like HBO. In some
systems MCC also offers information services, digital audio, and other entertainment
services.
MCC has one of the lowest monthly service call percentages in the industry (averaging
approximately 2%) and one of the highest levels of customer satisfaction. MCC has an
extensive technical staff of corporate and regional engineers who constantly review the
system operating and technical needs of each system to improve system reliability while
expanding the system bandwidth capabilities to add additional services.
MCC is most proud of it's leadership role in developing fiber optic educational service
networks. The MCC technical staff has and will continue to work with state and
instructional television authorities to respond to RFPs and develop these networks. This
level of commitment demands that the MCC technical staff be fully cognizant of new and
developing technologies which would enable us to expand our service capabilities and
improve network reliability. This commitment to the future ultimately benefits each of
our customers.
EXHIBIT # 7
Jeffrey A. Marcus, the President and Chief Executive Officer of MCPI and its sole director, is
a cable television industry executive with over twenty-seven years of experience in system operations
and ownership, who founded the Company in 1990. Mr. Marcus had previously founded Marcus
Communications, Inc. in 1982, a cable television company that ultimately served and managed over
160,000 customers by the time of its 1988 merger into publicly held Western Tele-Communications,
Inc. The combined companies were renamed WestMarc Communications, Inc. ("WestMarc"), and
grew to serve over 550,000 customers during the period when Mr. Marcus served as WestMarc's
Chairman and Chief Executive Officer. Mr. Marcus exchanged his interest in WestMarc at the end of
1988 for cable television systems in Wisconsin which were operated from 1989 until August 1990 by
Marcus Communications, Inc. These Systems were subsequently contributed to the Company as part
of the acquisition of the Wisconsin Systems. Prior to forming the original Marcus Communications,
Inc. in 1982, Mr. Marcus co-founded Communications Equity Associates ("CEA") in 1975. From its
inception until 1982, when Mr. Marcus sold his interest in the company, CEA grew to become the
second-largest brokerage firm in the cable television industry. Mr. Marcus also served as Director of
Sales for Teleprompter Corporation from 1973 to 1975, as Vice President of Marketing for Sammons
Communications, Inc. from 1971 to 1973 and as the owner of Markit Communications, Inc., a cable
marketing and installation company, from 1969 to 1971.
Long active in state and national cable television industry matters and community affairs, Mr.
Marcus has served as Executive Director of the Minnesota and Wisconsin Cable Television
Associations and has served in a number of capacities for the National Cable Television Association.
He also has served as a Director of Daniels & Associates, one of the cable television industry's largest
brokerage and investment services companies, and TCI Northeast, Inc., a subsidiary of
TeleCommunications, Inc.
Louis A. Borrelli, Jr. has served as Executive Vice President and Chief Operating Officer of
MCPI since March 1994, with responsibility for the Company's general operations as well as strategic
planning. From October 1989, to March 1994, Mr. Borrelli served as Senior Vice President of MCPI.
Mr. Borrelli has had an extensive seventeen-year career in the cable television industry, with specific
expertise in the marketing, programming and operations areas. Mr. Borrelli joined Marcus
Communications, Inc. in 1986 as Director of Operations. In connection with the 1988 WestMarc
merger, he was appointed as a Vice President - Operations for WestMarc, with responsibility for a
division of cable systems serving 200,000 customers. In October 1989, Mr. Borrelli returned to
Marcus Communications, Inc. as Senior Vice President.
From 1978 to 1986, Mr. Borrelli served in various capacities for the predecessor company to
United Artists Cable Systems Corp., including service as the Director of Programming/Marketing from
1984 to 1986, overseeing all programming and marketing activities and the development of new
revenue opportunities such as advertising sales and pay -per -view. Long active in the cable television
industry, Mr. Borrelli is a member of the Cable Television Administration and Marketing Society
("CTAM"), and has served as President of CTAM's South Central region and as Chairman of the
Planning and Development Committee of the Metro Cable Marketing Co -Op, representing over 3
million cable customers in the New York tri-state area.
Thomas P. McMillin has served as Chief Financial Officer of MCPI since February 1995. He
joined the Company in September 1994, as Vice President of Finance and Development. Prior to
joining the Company, Mr. McMillin served for three years as Vice President - Cable Development for
Crown Media, Inc., a subsidiary of Hallmark Cards. Prior to his position with Crown, Mr. McMillin
served five years in various positions for Cencom Cable Associates, Inc., most recently as Vice
President - Finance and Acquisitions. Prior to joining Cencom in 1987, Mr. McMillin served four
years with Arthur Andersen & Co., certified public accountants. Mr. McMillin received his Bachelor
of Science Degree in Accountancy from the University of Missouri - Columbia.
EXHIBIT # 7
Richard A. B. Gleiner is the Secretary and General Counsel of MCPI, with responsibility for
overseeing all of the legal affairs of the Company. Prior to joining the Company in 1994, Mr. Gleiner
had been of counsel to Dow, Lohnes & Albertson, New York, New York from 1988 until 1991, where
he was the primary outside counsel to the Company and its predecessors. From 1991 until joining
Marcus Cable, Mr. Gleiner was in private practice in Northampton, Massachusetts. Mr. Gleiner
received his A.B. Degree from Vassar College in 1974, and his J.D. Degree from Boston University in
1977.
David L. Hanson is a Senior Vice President of Wisconsin Operations of MCPI, with
responsibility for the daily operations of the Wisconsin Systems. Mr. Hanson is a native of Wisconsin
and has spent more than twenty years in the state's cable television industry designing, building and
managing systems. Mr. Hanson held a number of technical and management positions with Badger
CATV in Wisconsin from 1973 through 1982, when Badger CATV was acquired by Marcus
Communications, Inc., after which Mr. Hanson was named Wisconsin Regional Manager of MCI.
After the 1988 WestMarc merger, Mr. Hanson was named a Vice President/Regional Manager of
WestMarc, and he became a Vice President of Marcus Communications, Inc. in 1989 when Mr.
Marcus exchanged his ownership position in WestMarc for the Wisconsin Systems previously owned
by Badger CATV. Mr. Hanson is a long-time board member and past President of both the North
Central Cable Television Association (serving Minnesota, Wisconsin, Michigan, Iowa, North Dakota
and South Dakota) and the Wisconsin Cable Communications Association. He also has served as a
regional Vice -Director on the national board of the Community Antenna Television Association.
Cynthia J. Manes is Vice President of MCPI, with responsibility for human resources,
employee benefits, general administration and insurance matters. Ms. Marines began her cable
television career in 1984 as a receptionist with Marcus Communications, Inc., expanding her role with
the Company in later years by becoming Assistant to the President, with responsibility for corporate
administration. Upon the merger of Marcus Communications, Inc. with WestMarc in 1988, Ms.
Marines was named Assistant to the Chairman. At the end of 1988, Ms. Manes left WestMarc to
become Vice President of Corporate Affairs at Marcus Communications, Inc., with responsibility for
day-to-day operations and administration. Ms. Mannes is an active member of the Cable Television
Administration Marketing Society, Women in Cable, Dallas Human Resource Management
Association, and the Cable Television Human Resource Association. Ms. Manes is also a charter
fellow of The Betsy Magness Leadership Institute.
John C. Pietri is Vice President of Engineering and Technology of MCPI. He is responsible
for the technical operations and standards of the Company's cable television Systems including new
construction and rebuild projects, routine maintenance and installation practices and regulatory
compliance and reporting. Mr. Pietri has spent the past seventeen years in the cable television industry
in a variety of technical management positions. Prior to joining the Company, Mr. Pietri was Regional
Plant Manager for WestMarc, managing all technical operations, budgeting and purchasing for twenty-
five cable systems serving 120,000 customers in four states. Mr. Pietri also held positions as
Operations Manager of Minnesota Utility Contracting, General Manager of Double "A" Enterprises
and President of the Milwaukee Division of Mullen Communications Construction Company. He has
had extensive experience in cable system design, construction installation and maintenance, having
constructed over 5,000 miles of cable plant.
John P. Klingstedt, Jr. is the Vice President and Controller of MCPI, with responsibility for
the accounting and financial reporting of the Company. Mr. Klingstedt joined Marcus
Communications, Inc. in 1987 and became Controller in 1989, with the election to Vice President
following in 1994. Mr. Klingstedt holds a Bachelors of Science Degree in Accountancy from
Oklahoma State University.
EXHIBIT # 7
Susan C. Holliday is the Vice President of Regulatory Compliance of MCPI, with
responsibility for all FCC rate regulatory compliance and procedures. Prior to joining the Company in
1993, Ms. Holliday had been an audit manager with KPMG Peat Marwick. Ms. Holliday holds a
Bachelors Degree in Business Administration with concentration in Accounting, and is a Certified
Public Accountant (CPA).
David M. Intrator joined MCPI in October 1994 as a Vice President of Marketing and
Programming, with responsibility for the Company's programming, marketing, advertising sales and
ancillary revenue business. Mr. Intrator has had a diverse fifteen year career in the cable television
industry, managing systems for Acton, Capital Cities, Post -Newsweek and Centel, and working in
cable programming with Home Shopping Network, where he was Director, Affiliate Relations from
1986 to 1990 and with Viewer's Choice Pay -Per -View where he was Vice President, Affiliate Relations
from 1990 to 1994. Mr. Intrator is a member of the Cable Television Administration and Marketing
Society ("CTAM") and is a Board member of the CTAM Texas chapter. Mr. Intrator is a graduate of
the University of Connecticut and holds a Masters Degree in Public Administration from the Maxwell
School of Public Administration of Syracuse University.
Steven P. Brockett joined the Company in February of 1995 as the Vice President of
Operations/Administration of MCPI with responsibility for the Company's management of cable
operations in the states of Alabama, Delaware, Maryland and Texas. Additional responsibilities
include Corporate Government relation, Information Services Group, and the Operations Audit
function. Prior to joining the Company, Mr. Brockett worked for two. years as Vice President -
Administration and one year as Vice President - Controller for Crown Media, Inc., a subsidiary of
Hallmark Cards. Mr. Brockett began his cable career in 1978 with Heritage Communications, Inc.,
where he gained experience in both Accounting (Cable Division Controller) and Operations (Director
of System Training). Mr. Brockett has held various positions at the cable system operating level
including System Controller in New Castle County, Delaware (125,000 customers). Mr. Brockett is an
active member of the Cable Television Administration Marketing Society (National and Texas).
Other Key Employees
J. Christian Fenger is the Regional Group Manager for the Delaware/Maryland Systems and
has over fifteen years of experience in the cable television business. Prior to joining the Company, he
had served since 1986 as Regional Manager for Simmons Cable TV for its Systems throughout
Maryland and Delaware (including the Systems that now comprise the Delaware/Maryland Systems).
Previously, he served from 1985 to 1986 as a General Manager for Warner Amex Cable in Nashua,
New Hampshire, where he was responsible for various aspects of system operations, and from 1980 to
1985 he was Marketing Manager for Rogers Cablesystems in Syracuse, New York. Mr. Fenger holds
a Masters Degree in Communications Management and is President and member of the Board of
Directors of Easton Community Television. He also holds various committee positions with the
DE/MD/DC Cable Association.
UNTIED STATES
TES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[� ANNUAL REPORT PURSUANT TO SECTION 13 OR 13(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
[) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED)
Far the transition period from to
Commission File Numbers: 3341390. 33410N. 334ION41.
33-673390-01. and 334100M
MARCUS CABLE COMPANY9 L.P.
MARCUS CABLE OPERATING COMPANY, L.P.
MARCUS CABLE CAPITAL CORPORATION
MARCUS CABLE CAPITAL ORPORATION II
(Exact names of registrmrts as specified in dreir droners)
Delaware 75-2337471
Delaware 75-2546077
Delaware Delaware 7S-2495706 (State or odor jurisdiction of 7S-2SWI3
(I.R.S. F.nploya incorporation or organization)
Identification No.)
2911 Turtle Creek Boulevard, Suite 1300
Dallas, Teas 521
(Address of prineipa! executive offices) 75219 Code)
(214) S21-7898
(Registrmu's telephone number, including area code)
Seatrides Regatered Pursuant to Section 12(b) of the Act: Neste
Sgmkiu Registered Pursuant to Section 12W of the Act: Nerve
the Seaaitiea by duck mark whether the regiments (1) have filed all reports re*dred to be filed by Section 13 or 15(d) of
o file urti repo beect of 1934 n the preceding 12 mootha (or for such shorter period that the regisrama were required
mbpaa to touch filing its for the past 90 days.
Yes _6 No _
Indicate by c beck mark if d Wb=ne of ddim* mt filers putstant to Item 405 of Regulation S-x is not III her
contained hein,
and will not be ombined, to the beat of the registraon lmowledge, in definitive Proxy of iof notion statements in by
tefercum in Part of this Form 10-x or any ammdmew to this Form 10-x. lC
As of the date of this report, there were 1,000 sharra of common sack of Martats Cable Capin) Corporation otgsandng
all of whim are owned by Marcus Cable Company. L.P.. and 1,000 shares of common sock of Marais Cable Capital Corporation
U outstanding. all of which were owned by Marys Cable Operating Company. L.P.
Documents incorporated by reference: None
MARCUS CABLE COMPANY, L.P.
MARCUS CABLE OPERATING COMPANY, L.P.
MARCUS CABLE CAPITAL CORPORATION
MARCUS CABLE CAPITAL CORPORATION II
1994 ANNUAL REPORT ON FORM 10-K
Table of Contents
Part I EW
Item I. Description of Business ........................................ 3
Item 2. Properties ................................................ 24
Item 3. Legal Proceedings .......................................... 25
Item 4. Submission of Matters to a Vote of Security Holders .................... 25
Part 11
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters .................................. 25
Item 6. Selected Financial Data ....................................... 25
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation .............................. 26
Item 8. Financial Statements and Supplementary Data ........................ 33
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure ............................. 33
Part M
Item 10. Directors and Executive Officers of the Registrants ......................33
Item 11. Executive Compensation ...................................... 37
Item 12. Security Owned of Certain Beneficial Owners
Management ................................... 39
Item 13. Certain Relationships and Related Transactions ........................ 40
E7rZIFE7
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K....................................... 42
7
ITEM 1. DESCRIPTION OF BUSINESS
a) fstneml Development of Busueeas
Owned Systems
Through Marcus ale Company, L.P. ("MCC") owns, operates and develops cable television systems.
P (the 'Operating Partnerships"), MCC and the Operating Partnerships
(collectively, the "Company"), own cable television systems (the "Systems"), which are organized into
operating regions-'OVtsconsm, Texas and Delaware/Maryland. The Operating Partnerships currentl
consist of (i) Marcus Cable Partners, L.P., in conjunction with its whollyowned rM us Cable
Inc. (collectively, the Wisconsin Partnership*), which owns and operates systems in Wisconsin,
Minnesota and Minis, (ii) Marcus Cable of San Angelo, L.P. (the "San Angelo Partnership"), which owns
and operates systems in San Angelo, Texas, and (iii) Marcus Cable of Delaware and Maryland, L.P. (the
"Delaware/Maryland Partnership"), which owns and operates systems in Delaware and Maryland. Marcus
Cable Operating Company. L.P., a Delaware limited partnership ("Ope "), is the sole general partner
Of each of the three Operating partnerships and owns substantially alI of t partnership interests therein,
holding 99.55 %, 99. 5 %, and 99.999% of the parmeln�interests in the Wisconsin Partnership, the
San Angelo Partnership and the Delaware/Marylam
L.P. the "General Palmer'),whose sole general • Marcus
blely. Marcus Inc.Cab("Propemes,
( 8 partner is Marcus Cable
Delaware corporation owned by Jeffrey A. Marais, is the sole general Properties, Inc. (MCPI ), a
partner in each of the three g partner of MCC and the sole limited
December 31, 1994, the S�m� Partnerships. MCC is the sole general partner of Operating. At
Y� P� 322,842 homes and served 222,735 basic customers who
subscribed to 156,656 premium service units.
MCC was organized as a Delaware limited
("Capital"), a wholly -owned subsidiary of MCC,, was m 1990. Marcus Cable Capital Corporation
d�Y organized as a Delaware corporation in August
.1993, for the sole purpose of serving as a co -issuer of the 1 P/�% Senior Debentures due October 1, 2005
(the "117/6% Debentures"). In June 1994, the Company created two new subsidiaries, Operating, a
Delaware limited partnership, and Marcus Cable Capital Corporation lI ("Capital II"), a Delaware
corporation. Capital II was organized for the purpose of serving as co -issuer of the 13%% Senior
Subordinated Guaranteed Discount Notes due August 1, 2004 (the "13'k % Notes"). Capital and Capital
11 have nominal assets.
The President and Chief Executive Officer of MCC is Jeffrey A. Marcus. Mr. Marcus has
successfully built and managed cable television systems since 1979. Mr. Marcus founded the Company
with the goal of developing it into one of the leading multiple cable system operators through internal
growth and acquisitions. The Company first acquired cable television systems in 1990 in the Wisconsin
area, purchased systems in San Angelo, Texas and the Delaware/Maryland area in 1992, and acquired
systems in the Wisconsin and Minnesota area in 1994. The Company has continued to expand through
additional acquisitions in 1995. (See "Recent Developments" section on page 4.)
Managed Systems
Maryland Cable Partners, L.P. ("Maryland Cable"), which is controlled by an affiliate of
Goldman, Sachs & Co., entered into a management agreement (the "Maryland Cable Agreement") with
Operating beginning r 30, 1994, whereby Operating manages the cable systems owned by
Maryland Cable, (the eland Cable Systems") which serve customers in and around Prince Georges
seryCounty,0,56 basic customers who holand. At December 31subscribed' the to 78 55668 premium sbind Cable ervice units.stems passed 143,881 homes and
Under the Maryland Cable Agreement, Operating earns a management fee, payable monthly, equal
to 4.7% of the revenues of Maryland Cable. Of such fee, $1,100,000 per year is payable in cash and any
additional amounts are payable to Operating only in the event that no material default (as defined in the
Credit Agreement between Maryland Cable Partners, L.P. and Citibank, N.A.) has occurred and the
leverage ratio (debt to cash flow) of Maryland Cable is less than 5:1. However, an affiliate of Goldman,
Sachs & Co. contributed cash of $2,000,000 to Maryland Cable in February 1995, sufficient to enable
Maryland Cable to pay Operating the $248,000 of accrued management fees outstanding as of December
31, 1994. Such affiliate has also agreed that thereafter it will guarantee the payment of any accrued fees
due to Operating and will perform under such guarantee upon termination of the Maryland Cable
Agreement. While there can be no assurance, Operating expects to earn approximately $2,175,000 (based
on 1995 budgeted revenues) each year under the Maryland Cable Agreement. Under the Maryland Cable
Agreement, Operating was also granted rights to a bonus if the systems are sold above certain threshold
amounts, which may allow Operating to participate in any profits upon the sale of the Maryland Cable
Systems.
The Maryland Cable Agreement is cancelable by either patty at any time. In the event the contract
is canceled by Maryland Cable prior to the sale of the Maryland Cable Systems, Maryland Cable will pay
Operating a termination fee.
Operating also provides management services to Cencom of Alabama, L.P., a Delaware limited
partnership ("CALP") under a separate management contract. (See "Recent Developments - Crown
Acquisition" section below for a more detailed discussion.)
At December 31, 1994, the managed systems in Maryland and Alabama passed 264,116 homes
and served 163,279 basic service customers who subscribed to 113,289 premium service units.
Recent Developments
Star Acquisition
On July 29, 1994, the Wisconsin Partnership consummated the purchase from Star Cablevision
Group and Star Mid America Limited Partnership (collectively, "Star") of certain cable television systems
(the "Star Systems") owned by Star in Wisconsin and Minnesota for $139,152,000 in cash (the "Star
Acquisition"). At December 31, 1994, the Star Systems passed 111,793 homes and served 75,446 basic
customers who subscribed to 54,281 premium service units. The Star Systems serve the areas in and
around Fond du Lac, Sheboygan and West Bend in Wisconsin and Apple Valley, Lakeville, Rosemount,
Red Wing and Northfield in Minnesota. The areas served by the Star Systems are adjacent to the existing
operating region of the Wisconsin Partnership in Wisconsin.
Crown Acquisition
On January 18, 1995, the Wisconsin Partnership consummated the acquisition of the Wisconsin
and Minnesota cable television systems ("the Crown Systems") of Crown Media, Inc. ("Crown"), which
immediately prior to the closing was an indirect subsidiary of Hallmark Cards, Inc., for an aggregate
purchase price of $333,900,000 in cash excluding direct acquisition costs of $2,495,000 and working
capital adjustments. The Crown Systems serve customers in and around the cities of Janesville, Wausau,
Stevens Point, Wisconsin Rapids, Onalaska, Depere and Door County in northern Wisconsin and in the
suburbs of Madison and Milwaukee, Wisconsin, including the city of West Allis, and in the communities
of Altura, Rollingstone, Lewiston and Hidden Valley, Minnesota. The area served by the Crown Systems
are adjacent to the Wisconsin Partnership's existing operations. At December 31, 1994, the Crown
Systems passed 289,132 homes and served 193,325 basic customers who subscribed to 100,218 premium
service units. The Crown Systems, together with MCC's Wisconsin Systems, provide service to more than
350,000 basic customers, which the Company believes represents the largest concentration of systems in
the area.
In addition to the purchase of the Crown Systems on such date, Operating consummated the
acquisition of Class A and Class C Limited Palmer Units (the "CALP Units") of CALF, from an affiliate
of Crown, representing approximately 2.6% of the Limited Partner Units of CALP, for further
consideration of $1,020,000. CALP owns and operates cable systems in areas surrounding Birmingham,
Alabama. AS of December 31, 1994, CALp's systems (the "CALL
passed
served 82,716 basic service customers who subscribed to 34 721 ) 120,235 homes and
premium service units.
On September 1. 1994, Operating purchased from Crown (a) all of the partner of CALF. Cencom of Alabama Inc., which has since been renamed Cap
Cable of Alabama,
tIo CALP and ("Alabama"),
(b) the management contract pursuant to which Operating provides
() accrued and unpaid management fees due Alabama, all for aa�ge� services
52,878,000. Under such management contract, Operating earns a fee, payable 88Te8� price of
%
of the revenues of CALF. CALF revenues for the year ended December quarterly' e9� to 5.0 .
Such fees are subordinated in of y r 31, 1994 were $30,089,000.
that such fees will be � Payer to CALP's bank indebtedness. Operating does not anticipate
paid until the bank indebtedness is refinanced or the CALF Systems are sold (see
"CALF Ac9WSlhon" below).
Furthermore, the Wisconsin partnership, upon the ,,,,,,„„al of all of the limited
ass its right to purchase certain Special Emoted Parmeir nits of CALP rep Partners of MCC,
14.N of the Special Limited Partner Units, to Jeffrey A. Marcus and The Goldman S22 sq3 up��p
The aggregate purchase price for such units was $8,102,000.
Sammons Acquisition
On March 10, 1995, MCC announced that it had reached agreement
Communications, Inc. to acquire certain cable television systems (the "Sammo a+s* ��Om
Sammons in a transaction valued at $%2,500,000. The Sammons Systems roxims) owned by
customers located in Texas - 170,000 basic customers (143,000 of which are itxatered th�ly650,000
ofWorthm are inoism the Los 00 basic aastomets, California-122,000 basic customers (96.000
45,000 basic customers, Miss' i eles -42,orth Carolina - ama/G basic customers, Connecticut -
Virginia - 15,000 basic customers and W customers' Aiabatna/Georgia - 23,000 basic customers,
ashington - 12,000 basic customers.
San Angelo Divestiture
On March 24, 1995, MCC announced that it had entered into an San Angelo, Texas cable agreement to sell the assets of its
of Tyler, Texas, for '' roxtmately 32.8W customers, to TCA Cable TV, Inc.
Party approvals. is expected 5'�m �. The sale, which is subject to customary third
apected to close in the third quarter of 1995.
CALF Acquisition
On March
CALPtoacquire 24, 1995, MCC announced thu it is having discussions with certain limited
of
Marcus Cable of Alabama Inmc. CALF which MCC does not currently own. MCC, through its subsidiary
Sachs & Co. own a substantial equity currently serves as the general partner of CALF. Affiliates of Goldman,
by MCC. The equity stake in MCC and the interest in CALP which would be acquired
certain classes of f partners f pis sub
�� �to die� OdAfm of a definitive agreement and the approval of
$150,000.000, in a combination of cub anWIited ti partners of MCC, would be for approximately
quarter of 1995. eta' securities• Closing is expected to occur in the third
pars, toff i d aans or 'go; � CALP from the San Angelo sale, along with �v equity from its lirn
for CALP will be f with debt. wire' It is anticipated that the remainder of the purchase price
Upon completion of the Sammons Acquisition, the San Angelo Divestiture and the CALp
ari ery n- the Company's owned and Managed systems will Pass approximately 1,800,000 homes and
service aPprurt Furthermore,
1.2ver 00 customers who will subscribe to approximately 700,000 premium
clusters, averaging over 155,000 basic (customers per Will
Managed Systems will be within seven regional
b) Financial Information About InduaM Serments
The Company operates solely in the cable television industry, and all revenues are derived from
that source.
e) lyarradve Descruman
The Coble Tekvision Industry
A cable television system receives television, radio and data signals that are transmitted to the
system's headend site by means of off -air antennas, microwave relay sratems and satellite earth stations.
These signals are then modulated, amplified and distributed, Primarily through coaxial and, in some
instances. fiber optic cable, to customers who pay a fee for this service. Cable systems may also originate
their own television programming a� other information services for distribution through the system.
Cable ulevisioa systems generally are constructed and operated pursuant to non-exch�sive franchises or
similar licenses granted by local governmental authorities for a specified term of years.
The cable television industry developed in the United States in the late 1940's and early 1950's in
response to the needs of residents in predominantly rural and mountainous areas of the country where the
qua—Ary of off -air television reception was inadequate due to factors such as topography and remoteness
television broadcast towers. In the 1960's, cable systems also developed m small and medium-sized
cities and stuburban areas that had a limited availability of clear off -air television station signals. In more
recent years, cable television systems have been constructed in large urban cities and nearby suburban
areas, where good off -air receptim from multiple television stations usually is already available, in order
to offer the numerous, livered channels typically carried by cable systems which are not
otherwise available via broadcast television reception. The cable television industry is changing idly
due to new technology and new alliances between cable television and telephone companies. Prodding
traditional cable television programming is only one aspect of the industry, as providing telephone services
and expanded educational and entertainment services on an interactive basis have become potential
opportunities.
Cable television systems offer customers various levels (or "tiers") of basic cable services
consisting of off -air television signals of local network, independent and educational stations, a limited
number of television signals from so-called superstations originating from distant cities (such as VIM,
WGN, and WWOR), various satellite -delivered, non -broadcast channels (such as Cable News Network
("CNN"), MTV: Music Television, the USA Network ("USA"), 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) and informational
displays featuring news, weamer, stock market and financial reports and public service announcements.
For an extra monthly charge, cable systems also typically offer premium television services to their
customers. These services (such as Home Box Office (OHIBO"), Showtime, The Disney Channel and
regional sports networks) are satellite -delivered channels consisting principally of feature films, live sports
events, concerts and other special entertainment features, usually presented without commercial
interruption.
A customer generally pays an initial installation charge and fixed monthly fees for basic and
premium television services and for other services (such as the rental of converters and remote control
devices). Such monthly service fees constitute the pnmary source of revenues for cable television systems.
In addition to customer revenues from these servio s, cable systems generate revenues from additional fees
paid by customers for pay -per -view programming of movies and swill events aid from the sale of
available advertising spots on advertiaer�-supported prog
iramming. Cable systems also offer home shopping
services to their customers, a service which pays the systems a share of revenues from sales of products
in the systems' service areas.
Business Strategy
Acquisitions and Regional Clustering. Jeffrey A. Marcus, a cable television industry executive
with over twenty-seven years of experience in cable system operations and ownership, founded the
Company in 1990 with the goal of developing it into one of the leading multiple cable system operators.
The Company acquired cable television systems in 1990 in the Wisconsin area, in 1992 in Texas and the
Delaware/Maryland area, and in 1994. added to its systems in the Wisconsin area through the acquisition
Of the Star Systems in Wisconsin and Minnesota. The acquisition of the Crown Systems in January 1995,
further strengthened the Company's position in Wisconsin and Minnesota. Each of these acquisitions
involved selected groups of cable television systems with the potential for increased basic and premium
customer penetration and for growth in operating cash flow and operating margins.
The Company has focused its acquisition efforts on cable television systems located in close
graphic proximity to its Ong systems or of sufficient size to serve as cones for new operating regions
or as extensions of existing regions. As evidenced by the Company's recent announcement to purchase
certain of Sammons Communications' cable television systems, the Company will strategically review
oppottuaities to acquire systems in areas where the Company does not c urreatiy operate in order to create
additional clusteriopportunities. The Sammons systems include four regional clusters which serve
greater than 90,000 customers and certain other of the Sammons Systems provide regional clustering
opportunities with existing cable systems owned or managed by the Company.
The.Company intends to continue to concentrate on specific gwpVhical areas in order to achieve
the economioes of scale and operating efficiencies associated with regional clusters of systems, such as
centralized man ement, billing,
"hogthat clusteringcan reduce technical
these functio administrative cefunctions.p �y believes
tures
in cases where cable service can be delivered to a number off c� headend n facility systems within a single region through a
rebuilding its cable Company currently intends to initiate a program of systematically
ding systems so that within the next five years substantially all existing systems should have
bandwidth of between 550MHz and 750MHz. This program should enable the Company to deliver
technological innovations to its customers as such services become commercially viable.
Upon acquiring a system, the Company's approach has been to implement extensive management,
operational and organizational changes designed to enhance operating cash flow and operating margins,
while promoting superior customer service and strong community relations After first selectively
upgrading the cable plant to increase channel capacity and expanding the number and variety of services
available to its customers, the Company has sought to add customers and increase revenue per customer
by aggressively marketing innovative basic, tier aid premium cable service packages and by developing
ancillary sources of revenue through local spot advertising sales and pay -per -view programming. The
Company has been particularly successful in increasing revenues through the introduction of multiple
Premium service packages that emphasize customer value and enable the Company to take advantage of
Programming agreements offering cost incentives based on premium service unit growth. The Company's
customer and equipment)other re enuwth, incombination wide the economies of scale (such as volume discounts for
operating efficiencies associated with regional clusters of systems, as well as
substantial system -level expense redxtiow. has enabled the Company to increase operating cash flow and
operating margins in the.
The Company intends to Conti= its acquisition strategy on an oppommistic basis, has
the development of regional clusters of cable television systems. Future acquisitions may be fi�nanced�
part, by the sale of additional equity interests in the Company and by the incurrence of additional
indebtedness by MCC, Operating or certain other entities that may be formed by the Company. In addition
c opportunities to purchase aystems, the Company may Pursue Opportunities to exchange systems for other
cable television properties to further its regional clustering strategy.
Decentralized Management. The Systems are currently organized into three operating regions -
Wnconsm, Texas and Delaware/Maryland. The Company manages the systems in these regions on a
deceiunlized basis, delegating day -today operating decisions to the local system managers, who are closest
7
to the Company's customers. The Wisconsin Systems have district managers who report to the Senior Vice
President of Wisconsin Operations. The district managers within the San Angelo and Maryland/Delaware
Systems report to the Vice President of Operations. The Company believes that its decentralized
management strIMIT increases its sensitivity to the needs of its customers, enhances the effectiveness of
its customer service efforts and assists in the maintenance of good relations with local fovernmental
authorities. IAmW system managers are rewarded for attaining operating goals through incentive and bonus
plans based on predefined measures of performance.
Mar*edng• The items typically offer two tiers of basic cable television programming service;
a broadcast basic pro tier (consisting generally of network and public television signals available
over in the community and "superstation signals) and a satellite pp tier
(consisting primarily of satellite -delivered programming such as CNN, USA, ESPN��TNT).
Approximately 96 % of the Systems' customers subscribed to both tiers of basic service as of December
31, 1994.
The Company also offers premium programming services, both on an a' la cane basis and as part
of premium service packages designed to enhance customer value and to enable the Company to take
advantage of ProBrammu►8� agreements offering cost incentives based on premium service unit growth.
The Company has succe fullyy promoted innovative premium service packages -such as its Maximum
Value Package ("MVP") - throughout all of the Systems. Overall premium service penetration has
increased significantly in systems where such packages have been introduced by the Company.
The Company actively markets its services through direct mail, advertising, telemarketing and
door-to-door selling campaigns. The also seeks to add customers by extending its cable plant
to new housing developments once potential for significant numbers of additional customers is exhibited.
Custonw Service and Community Relations. The Company is dedicated to providing superior
customer service and fostering strong community relations in the towns and cities served b the Systems.
As part of this effort, the Company places a special emphasis on the personal and professional growth of
its employees, which includes a strong commitment to training. All of the Company's employees receive
extensive training in customer service, sales and customer retention skills on a regular basis from outside
professionals and from qualified mangement personnel. Technical employees are encouraged to enroll
in courses available from the National Cable Technical Institute and attend regularly scheduled on -site
seminars co>diicted by equipment manufacturers to keep pace with the latest technological developments
in the cable television industry. The Company believes that all of these training programs improve the
overall quality of employee worimianship in the field and results in fewer service calls from customers,
improved cable television picture and product quality and greater system reliability.
The Company is also involved in charitable activities and other community affairs in the towns and
cities served by the Systems. In addition to the Company's commitment to training its own employees, the
Company Places a special emphasis on education in the communities it serves and regularly awards
scholarships to customers who intend to Pursue courses of study related to the communications field. The
Cody also supports numerous local charities and cometniry causes through marketing promotions to
raise money and supplies for persons in need. Recent charityu afiyliations have included campaigns for Toys
for Tots, local food banks, and volunteer fire and ambulance corps.
MCC's Cabk Systems
MCC's Systems are currently or into three
Delaware/Maryland. The gg � regions - Wisconsin, Texas and
Systems in a= region are directly Owned and operated by one of the three
corresponding Operating Partnerships; (i) the Wisconsin Partnership, (ii) the San Angelo Partnership, and
(iii) the Delaware/Maryland partnership. operating is the sole general Partner of each of the three
Operating Partnerships and MCC is the sole general partner of Operating.
H
The following table indicates the growth of the Systems by summarizing (i) certain operating data
as of December 31, 1992, 1993, and 1994, and (ii) certain financial data for each of the fiscal quarters
during which the respective regional groups of Systems have been owned by the Company.
OPERATING DATA (6)
1222
As of December 31.
1m
129
Homes paced (1)
Wisconsin Systems
124,131
125,080
237,864
San Angelo Systems
47,043
45,679
45,766
DelaR'are/Marylwd Systems
38.805
38,790
39,212
Total
�9
�
S49
3�i
Basic service customer: (2)
Wisconsin Systems
84,578
96,960
165,204
San Angelo Systems
30,772
30,938
32,667
Delawareft"Iam Systems
22,924
23,425
24,864
Total
13�— 8i274�
1��q5
Basic penetration (3)
Wisconsin Systems
69.1 %
69.5 %
69.5 %
San Angelo Systems
65.4%
67.7%
71.4%
Delaware/Maryland Systems
59.1 %
60.4%
63.4%
Taal
�-9
�
�s
Premium service units (4)
Wisconsin Systems
57.508
63,193
114,771
San Selo Systems
13,475
19,751
22,418
Delaware/Maryland Systems
10,274
15,000
19,467
Taal
8�257
��
1� 56� 656
Premium penetration (S)
Wisconsin Systems
69.0%
72.7%
69.5%
San Angelo Systems
43.8%
63.8%
68.6%
Delaware/Maryland Systems
44.8 %
64.0%
79.3 %
Taal
�
r'.
FINANCIAL DATA (6)
(in thousands, except revenue per calstomer amounts)
1992 1993 1994
system Ca>g 2nd data lg Zad }2t !14 ]8 70
m Row 3m 4i4
Refuse Larsen rn
wisoomin Systems $3.797 53.778 53,804 $4,050 $4.138 54.250 $4.144 34JM 53.90 $4.331 $6.514 $8.105
San Angdo system N/A %7 1.396 1.339 r306 1.729 LAC 1.660 1.615 919 1.490 1320
Ddaw•ardstatytard Systems N/A NIA N/A LAC 957 1.059 1.049 1.067 933 977 1.183 1.154
Tent $3.797 $4.745 $S.200 16.451 $6.601 $7.038 >S6.87S 56:� $6.517 16.227 $93V 510.879
Avenge Monthly Revenue
per buic savtoe customer (8)
Wisoomin systems S28.34 528.91 =M =939 529A9 530.49 52931 530.09 52936 530.45 529.60 529.10
San Angdo systems NIA 30.09 29.72 3034 32.90 3534 34.99 34.52 33.91 26.V 32.17 32M
DeimBdMatylsad System N/A NIA WA 29.11 2933 31.30 30.80 30.79 30.17 30AI 32.22 32.40
Weigffied Avenge S2834 $29.23 529.09 529.72 53038 $31.74 530.79 531.18 $30.49 529.66 530.37 529.93
(1) Homes passed refers to estimates by tie Company of the appMimM number of dwelling units in a particular community
that can be connected to the Company's able television distribution system without any further extension of principal
transmission lines. The number of homes passed within die Crown systems at December 31, 1994 was 289,132. These
homes are not included in the table above as such systems were not acquired until January 18, 1995.
(2) A home with one or more television sets connected to a able system is counted as one basic customer. Bulls accounts am
included on a 'basic customer equivaka" basis in which the total monthly bill for the account is divided by the basic monthly
charge for a single outlet in the area. The number of basic customers saved by the Crown systems at December 31. 1994
was 193X5. These customers are not included in the table shave as the >tya = were not acquired until January 18, 1995.
(3) Basic service customers as a percentage of homes passed.
(4) Premium service units include only single channel services offered for a monthly fee per channel and do not include tiers
of chanrids offered as a paclauge for a single monthly fee. The number of premium Service units to which customers in the
Crown systems subscribed at December 31, 1994 was 100,219. Thew premium service units are not included in the table
above as such systems were mot acquired until January 19. 1995.
(5) premium service units as a percentage of basic service customers. A customer may purchase more thaw one premium
service. each of which is counted as a separate premium service unit. This ratio may be greater than 100% if the average
customer subscribes to from than one premium service.
(6) Both die ficanclal data and the operating data M60a the "Owing acquisitions by the Company from the date of acquisition
01 the May 1.1992, acquisiion of the San Angdo Systems: M me October 1. 1992. acquisition of the Ddawam/Marylamd
Systems: and C1ii) the July 29, 19%, ao4uit3dan of the Star Systems. Neither table reflects the acquisition of the Crown
Systems an January 18, 095.
(7) System cash flow, before intact, is defined erg Venting loss plus depreciation and amord=d m. System ash flow for the
first, second, third and fourth gmarters of 1994 for tie Crown Systems purchased In January of 1995. was $6,924. $7,002.
$7.790 and $8.054. respectively (in thousands). the relevant quarter
(8) Average monthly revenue per basic service customer equator revenue of die reVemn Systems during
divided by the number of basic service customers of such Systems as of the end of the same quarter. Weighted average
monthly revenue per basic service customer equals total revenue of the Company for the relevant quarter divided by the
number of basic service customers of the Company as of the end of the same quarter. For the third quarter of 1994, a
weighted average was calculated on a monthly basis for the Wisconsin Systems to allow for the addition of the Star Systems
during the middle of drat quarter. Average monthly revenue per basic service eusmmer for du Seat, second, third and fourth
quarters of 1994 for the Crown systems, which were acquired in January of 1995. was $27.39. $27.72. $27.43 and $28.32.
respectively.
10
The Wisconsin Systems. The Wisconsin Systems, excluding the Star Systems and the Crown
Wisconsin Systems, were the first systems acquired by the Company after its orgganization in 1990. The
number of basic service customers in the Wisconsin Systems has grown from 78,938 as of the Company's
acquisition of these systems on August 1, 1990, to 89,758 at December 31, 1994. During that same
period, premium service units subscribed to in these s)+stems have increased from 35,555 to 60,490.
Average revenue per basic service customer for the Wisconsin Systems increased from $25.79 for the
fourth quarter of 1990 (the first full quarter after acquisition of the Wisconsin Systems) to $30.49 for the
quarter ended December 31, 1994.
On July 29, 1994, the Wisconsin Partnership purchased the Star Systems for $139,152,000
(including acquisition costs of $2,152,000). At December 31, 1994, the Star Systems passod 111,793
homes and served approximately 75,446 basic customers who subscribed to approximately ,281 premium
service units. The areas served by the Star Systems were adjacent to the existing operating region of the
Wisconsin Partnership in Wisconsin; consequently, the Star Systems were integrated into the Wisconsin
operating region.
The mama features of the combined Wisconsin and Star Systems are the high penetration rates and
a stable customer base. The combined Wisconsin and Star Systems have an average channel Ca�acity of
50, with approximately 43 % of the customers being served by systems with 60 channel capacity. The
Company Plans to gradually upgrade all of the Wisconsin and Star Systems to a minimum of 60 channel
capacuy m future years. While only the Rosemount, Mbinesom system uses addressable converter
technology, the Company intends to begin deploying this technology in its larger systems beginning in
1995.
As part of its clustering strategy of shared re ' management, marketing, customer service and
technical support operations, the Company of the Wisconsin and Star Systems in
an effort to maximize operating ef%iencies reduce costs. The�o>ripany presently utilizes 23 offices
to serve the combined systems, each of which reports to the main ��nnaall office in Eau Claire, Wisconsin.
The combined Wisconsin and Star Systems are served by 58 headends and have approximately 3,480 miles
of cable plant. Through technical upgrades, the Company Plans to consolidate the majority of the Star
Systems using fiber optic technology to interconnect headends thus reducing the number of headends
utilized from nuke to two. The Star Systems located in Minnesota will be served from a single headend
in Rosemount, Minnesota and the Star Systems serving Fond du Lac, Sheboygan, and West Bend,
Wisconsin will be served from a headend located in Fond du Lac, Wisconsin. These consolidations should
Provide increased operating, technical and marketing efficiencies. These efficiencies will include e
of advertising sales opportunities and wider distribution, of addressable converter technolo to expansion
customer base having access to gy � the
�n8 special event and movie ppaay-per-view services. The Company plans to
develop similar revenue streams in other systems in the Wisconsin operating region by consolidation and
through economies of scale afforded by the Star and Crown Systems.
The Company has applied more sophisticated marketing .techniques used in large single headend
systems to its smaller, multiple headend rural systems in Wisconsin. This strategy resulted in increasing
basic and premium service penetration in a number of Wisconsin Systems in which the prior owners had
not effectively markaed cable television services. The of the
increased premium service units and marketing Company'S MVP program has
Pm� curers with a very competitive, price effective service.
Customers receive basic service including the satellite showcase tier, a choice of three 'premium services
and additional outlets in a sage, at once low monthly rate. The Company has achieved substantial
growth in revenues from its iswnsin Systems through this premium service package. The Company
expects less significant growth in pay -snits in the Star Systems since the previous owner marketed similar
packaging of premium services.
The amm Wisconsin Systems. The Crown Wisconsin Systems feature high basic penetrations and
growing communities. The Systems are organized into five operating districts that will be merged into the
existing ten Wisconsin operating districts. Through further consolidation of management and technical
activities, the Company plans to eliminate duplicate overhead and reduce costs. The systems are served
by 33 headends with approximately 4,480 miles of cable plant. The Company has begun planning the
11
consolidation of certain of the Crown Wisconsin Systems into current existing systems. The goal of these
consolidations is to create five major regional networks to enhance operating, technical, and marketing
efficiencies within the Wisconsin opt ' region. These large area networks will create new revenue
opportunities in advertising, pay -per -view, education, and communications. The Company expects
to make capital expenditures in the Crown Wisconsin Systems of approximately $32,600,000 over the next
three years for erode projects, new plant extension projects and system headend consolidations
via the deployment of ber optic diatnbtttion lines. (See Item 7, "Liquidity and Capital Resources" for
funding of capital expenditures.)
YU San Angelo Symms. The San Angelo Systems consist of five cable television systems in west
central Texas which the Company acquu�d from Scott Cable Communications, Inc., a subsidiary of
Simmons Communications Company, ):.P., for a purchase price of $57,500,000. The member of basic
service customers to the San Angelo Systems increased from 31,390 as of the Company's acquisition of
these Systems on May 1, 1992 to 32,667 at December 31, 1994. During that same period, premium
service units subscribed to in these Systems have increased from 15,136 to 22,418. Average revenue r
customer basic service for the San Angelo Systems increased from $29.72 for the third quarter of 1992 (the
fast full quarter after acquisition of the San Angelo Systems) to $32.23 for the quarter ended December
31, 1994- See Item 1, "Recent Developments - San Angelo Dives =- regarding the planned divestiture
of the San Angelo Systems.
The five San Angelo Systems serve the City of San Angelo and the communities of Andrews,
Ballinger, Winters and Miles, Texas. The San Angelo Systems have strong basic penetration. The City
of San Angelo system is the largest of the five representing 80% of the aggregate customers to the San
Angelo Systems. The San Angelo Systems have approximately 575 miles of cable plant, with the City of
San Angelo system being served by a single headend and four other headends serving the remaining San
Angelo System. In 1993, the Company completed a fiber -to -the -node upgrade of the plant between
headends.
The Company upgraded the City of San Angelo system to 60-chaamel capacity and hooduced new
programming services and premium service packages to improve premium service penetration. The
Andrews system, which is the second largest of the San Angelo Systems, has 42-channel capacity. The
other San Angelo systems have 35-channel capacity.
The City of San Angelo and the Andrews systems are addressable systems, with technology that
permits the Company to activate, by remote control from the headend site, cable television services
delivered to each customer having an addressable converter. Addresssbility has enabled the Compa>i to
introduce pay -per -view programming of movies and other special events to its 8,000 customers served by
these San Angelo Systems with addressable converters. Pay -per -view programming and premium service
packages have performed especially well in these Systems due to the limited availability of alternative
entertainment in the San Angelo area.
The San Angelo area features a large rental population residing in apartment buildings,
condominiums, hotels and other multiple dwelling units ("MDUs"), which typically have long -team
contracts for cable television services. Of the 45,766 homes passed by the San Angelo Systems at
December 31, 1994, approximately 4,200 of those residences are located within MDUs billed under bulk
contracts (i.e., contracts involving a fiat amount per month paid by the hotel or apartment complex,
regardless of occupancy). Prior to the Company's acquisition of the San Angelo System, expi lei basic
and premservice penetration for MDU accounts was below 10%, which is unusually low. In single
famiium ly residences served by the San Angelo Systems, basic service penetration was 71.4% and premium
service penetration was 68.6% at December 31, 1994. As part of an overall redering of its MDU services,
the Company developed a premium service marketing plan specifically targeted to MDUs, which has
resulted in 100 % growth in MDU expanded basic and premium service units since the Company's
acquisition.
The Delawaremary&M Systems. The Delaware/Maryland Systems were acquired by the
Company from Simmons Communications Company, L.P. for a purchase price of approximately
12
$37,500,000. The cumber of basic customers in the Delaware/Maryland Systems has grown from 22,505
as of the Company's acquisition of these Systems on October 1, 1992- to 24,864 at December 31, 1994.
During that same Period, premium service units subscribed to in these Systems have increased from 10,258
to 19,467. Average revenue per basic service customer for the Delaware/Maryland Systems increased
from $29.11 for the fourth quarter of 1992 (the first frill quarter after acquisition of the Delaware/Mazy System) to $32.40 for the quarter ended December 31, 1994.E
The Delaware/Maryland Systems are comprised of two groups of systems located in the middle
of the
end in Delmarva
peninsula. The larger of these two clusters, the Mrdshore systems, utilizes a coma!
facilities, aadserves n' Delaware, which is connected W nine hub sites with microwave distribution
communities in middle Delaware and adjacent portions of eastern Maryland. The
l�� system cluster, the Cambridge sthe Cystems, utilizes a headend m Cambridge,
ke Bay. In combination, the DelaM�'�. which ;s
area �$�8
from the suburbs of Dover, Delaware on�r cover a large geographic
Mu7'� on the southeast and west to Chesapeake gay at the Cambridge, with uWft of Georgetown,
cable plant throughout this region. g aPProatehy 1,100 miles of
1992, thereby Ile Company
completed an upgrade of the MWShore systems' microwave distribution plant in
vmg signal reliability and reducing operating costs, sad it expanded channel capacity
to 60 channels throughout the Midshore systems (except for one Small area served by a hub site with a
channel capacity of 42). The Company plans to progressively upgrade the Cambridge system to 78-channel
capacity over the next five years at a cost of approximately $1,750,000. (See
fun
Capital Resources" for ding of capital expenditures,) Currently, none Item 7, areyland
and
Systems are addressable systems. of the Delaw
Compeddon
Cable television systems face competition from alternative methods of receiving and
television osignals and h om other sources of news, information a� � distributing
ors, movie theaters, the emertainment such as off -air television
and home vi 8 sPo�B events, interactive computer programs
aeo prouuctS, mcludiog videotape came recorders. The extent to which cable service is
competitive depends, in part, upon the cable system's ability to provide a greater variety of programming
at a reasonable price to consumers than that available off -air or through other alternative div
See "k latuon and Regulation in the Cable Television Industry. elery sources.
Recent FCC and judicial decisions, if upheld by appellate courts, will enable local telephone
companies to provide a wide variety of video services competitive with services proves by cable systems
and to provide cable services directly to customers. See �vI.egislation and Regulation in the Cable
Television Industry." Various local telephone companies lave
initiation of video programming services. Cable systems could be pla $motor' approval for the
cable ff the delivery
are Of programming by local telephone companies bccoe disadvantage
variety Y ns to obtain local franchises to provide cable service and �rlydsince
with as
est of obligations under such franchises. Ism ues of cross-subsidizstion by local telephone companies
Pose strategic disadvamages for cable operators seeking to compete with local telephone companies who
provide video services. The Company cannot predict at this time the likelihood of success of any video
programming ventures by local telees.phone companies or the impact on the Company of such competitive
Cable systems generally operate pursuant to fimichises granted on a non-exclusive basis. The 1992
Cable Act gives local mg authorities control over basic cable service rates, prohibits franchising
authorities from unreasonably denying -Legislation
for additional franchises, and It is possible
to operate cabfranchising Legislation and Regulation in the Cable Permits Television Industry."
It is ssible that a MY in'& g= a second franchise to conuming terms and conditions more favorable than those afforded theanother cable company
businesses from outside the cable industry (such as the public utilities which owns Company. le on Well -financed
le
is attached) may become competitors for franchises or providers of competing services. 1,her costch s
13
operating a cable system where a competing cable service exists (referred to in the cable industry as an
"overbuild") will be substantially greater than if there were no competition present. Although the potential
for overbuild exists, there are presently only two overbuilds in the Delaware/Maryland operating region,
which represent an aggregate of approximately 250 of the homes in the Company's franchise arras. The
Company is not aware of any other company that is actively seeking local governmental franchises for
areas presently served by the Company.
Cable operators face additional competition from private satellite master antenna television
("SMATV") systems that serve condominiums, apartment complexes, and other private residential
developments. The operators of these SMATV systems often enter into exclusive agreements with
apartment building owners or homeowners' associations. Due to the widespread availability of reasonably
priced earth stations, SMATV systems now offer both improved reception of local television stations and
many of the same satellite4elivered program services offered by franchised cable systems. Various states
have enacted laws to assure franchised cable systems access to private residential complexes. These laws
have been challenged in the courts with varying results. Additionally, the 1994 Cable Act gives a
� le operator the right to use existing companble easements within its franchise area; however,
conflicting judicial decisions imerpretmg the scope of this right, particularly with respect
to easements located entirely on pprivate property. The ability of the Company to compete for customers
in communities served by SMA9 operators is uncertain.
The availability of reasonably -priced home satellite dish earth stations ("HSD") may enable
individual households to receive many of the sateWte-delivered program services formerly available only
to cable customers. Furthermore, the 1992 Cable Act contains provisions, which the FCC has
implemented with regulations, to enhance the ability of HSD owners and other cable competitors to
purchase certain satellite -delivered cable programming at competitive costs. The Company is unable to
estimate the extent to which private HSD's represent competition in its franchise areas
In recent years, the FCC has adopted policies providing for a more favorable operating
environment for new and existing technologies that provide, or have the potential to provide, substantial
competition to cable systems. These technologies include, among others, the direct broadcast satellite
("DBS") service whereby signals are transmitted by satellite to receiving facilities located on customer
pr u* 1'roBrammtng is ctureffily available to the owners of HSDs through conventional, medium and
powered satellites. One coffiortium comprised of cable operators and a satellite company, commenced
operation in 1990 on a medium -power DBS satellite system am currently provides service consisting of
F7e-�
roximate,gsgnasand pay -per -view services. Two
panies began offering DBS servrce1994 pyxensvmarketing efforts. Several other
anies are preparing to have hih-ower DBS later this decade. DBS stems are
ted to use video compression technology to increase the channel capacity of their systems to provide
movies' broadcast stations, and other program services comparable to those of cable systems. The extent
to which DBS systems are able to compete with the service provided by cable systems depends, among
other things, on the availability of reception equipment at reasonable prices and on the ability of DBS
operators to provide competitive programming.
Cable television systems also compete with wireless program distribution services such as
multichannel, multipomt distribution service ("MMDS") which use low power microwave frequencies to
transmit video programming over -the -air to customers. Although there are MMDS operators who are
authorized to provide or am providing broadcast and satellite programming to customers in areas served
by thenew
Company's cable systems, such on is not yet significant. Additionally, the FCC recently
a multichannel rulemaking proceeding e in tproposedo S :�o� dies in the 28 Ghz band for
t whether
wireless video distribution services, such as DBS and MMDS, will Company
aymaterialis leimpto art non its future
operations.
Other new technologies may become competitive with non -entertainment services that cable
television systems can offer. The FCC has authorized television broadcast stations to transmit textual and
graphic information useful both to consumers and to businesses. The FCC also permits commercial and
14
non-commercial FM stations to use their subcarrier frequencies to provide non -broadcast services including
data transmissions. The FCC established an over -the -air Interactive Video and Data Service that will
permit two-way interaction with commercial and educational programming along with informational and
data services. The expansion of fiber optic systems by telephone companies and other common carriers
will provide facilities for the transmission and distribution of video programming, data and other non -video
services. The FCC is currently conducting spectrum auctions for licenses to provide personal
communications services ("PCS"). PCS could enable license holders, including cable operators, to provide
voice and data services as well as video programming.
Advances in communications technology as well as changes in the marketplace and the re
and legislative environment are constantly occurring. Thus, it is not possible to predict the effect that
ongoing or future developments might have on the cable industry.
Legislation and Regulation in the Cable Television Indusdy
The cable television industry currently is regulated by the FCC, some state governments and most
local govern. In addition, legislative and regulatory proposals under consideration by the Congress
and federal agencies may materially affect the cable television industry. 7be following is a summary of
federal laws and regulations serially affecting the growth and operation of the cable television industry
and a description of certain state and local laws.
The 1984 Cable Act and the 1992 Cable Act (collectively the "Cable Acts"), both of which
amended the Communications Act of 1934 (the "Communications Act"), establish a national policy
guide the development and regulation of cable television systems. Principal' ihty for 1
the policies of the Cable Acts is allocated between the FCC and state or local franchising authorities.
Rate Regulation. Prior to ril 1, 1993, virtually all of the Company's cable systems were free
to adjust cable service rates withoutobta". local governmental approval. The 1992 Cable Act authorizes
rate regulation for certain cable communications services and �u�me� in communities that are not subject
to "effective competition" as defined in the 1992 Cable Act. Virtually all cable television systems are now
�j� to rate regulation for basic cable service and equipment by local officials under the oversight of the
FCC, which has prescribed detailed guidelines for such rate regulation. The 1992 Cable Act also requires
the FCC to resolve complaints about rates for nonbasic cable programming services (other than
programming offered on a per channel or per program basis) and to reduce any such rates found to be
unreasonable. The 1992 Cable Act limits the ability of cable systems to raise rates for basic and certain
nonbasic cable programming services (collectively the "Regulated Services") and eliminates the 5 % annual
basic service rate increase permitted by the 1954 Cable Act without local approval. Cable services offered
on a per charnel (a la carte) or per program (pay per vies,) basis are not subject to rate regulation by either
franchising authorities or the FCC.
On April 1, 1993, the FCC adopted regulations pursuant to the 1992 Cable Act governing the rates
aged to customers for Regulated Services and ordered an interim freeze on these rates effective on April
5, 1993. The FCC's rate regulations became effective on September 1, 1993 and the FCC's rate freeze
was extended until the earlier of May 15, 1994 or the date on which a cable system's basic service rate was
regulated by a franchising authority.
In implementing the 1992 Cable Act, the FCC adopted a benchmark methodology as the principal
method of regulating rates for Regulated Services. Cable operators with rates above the allowable level
under the FCC's benchrnarlc methodology may justify, such rates using a cost -of -service methodology. As
of September 1, 1993, cable operators whose then current rates were above FCC benchmark levels were
wed• absent a successfuri-°f"sezvice sh°wing, to reduce those rates to the benchmark level or by
up to 10 % of the rates in effect on September 30, 1992, whichever reduction was less, adjusted for
costs and for inflation sad channel modifications occurring subsequent to September 30, 1992.
May 15, 1994, the FCC modified its benchmark methodology to require reductions of up to 17 %
of the rates for Regulated Services in effect on September 30, 1992, adjusted for inflation, channel
modifications, equipment costs am increases in certain operating costs. The FCC's modified benchmark
15
regulations were designed to cause an additional 7% reduction in the rates for Regulated Services on top
of any rate reductions implemented under the FCC's initial benchmark regulations.
The FCC's initial "going -forward" regulations limited rate increases for Regulated Services to an
inflation -indexed amount phis increases for channel additions and certain external costs beyond the cable
operator's control, such as franchise fees, taxes and increased programming costs. Under these
regulations, cable operators are entitled to take a 7.5 % mark-up on certain programming cost increases.
On November 10, 1994, the FCC modified these regulations and instituted a three-year flu fee mark-up
for changes relating to new channels added to the cable programming service tier. As of January 1, 1995,
cable operators may charge customers for channels added to the cable programming service tier after May
14. 1994 u a monthly rate of up to 20 teats per added channel, but may not make adjustments to monthly
rates totaling more than $1.20 phis an additional 30 cents for programming licxme fees per customer over
the first two years of the three-year period. Cable operators may charge an additional 20 cents plus the
cost of the programming in the third year (1997) for one additional channel added in that year. Operators
must make a ote_time election to use either the 20 cent per channel ad' or the 7.5 % mark-up on
programming cost increases for all channels added after December 13 , 1994. The FCC is currently
considering whether to modify or eliminate the regulation allowing operators to receive the 7.5 % mark-up
on increases in existing programming license fees.
On November 10, 1994, the FCC adopted regulations permitting cable operators to create new
product tiers ("NPT") that will not be subject to rate regulation if certain conditions are met. The FCC
also revised its previously adopted policy and concluded that packages of a la cane services are b
to rate regulation by the FCC as cable pro�rammiog service tiers. Because of the services nity c ea
the FCC's prior a la cane package guidelines, the FCC will allow cable operators, under certain
circumstances, to treat previously offered a la cane packages as NPTs.
Franchising authorities are empowered to regulate the rates charged for additional outlets and for
the installation, lease and sale of equipment used by customers to receive the basic service tier, such as
converter boxes and remote control emus. The FCC's rules require authorities to regulate these
rates on the basis of actual cast phis a reasonable profit as defined by the FC . Cable operators required
to reduce rates may also be required to refund overcharges with interest.
Rate reductions will not be required where a cable operator can demonstrate that rates for
Regulated Services are justified and reasonable using cost -of -service guidelines. On November 24, 1993,
the FCC ruled that operators choosing to justify above -benchmark rates through a cast -of -service
submission must do so for all Regulated Services. On Feb 22, 1994. the FCC adopted interim cost -
of -service regulations establshing, among other things. an i ustr' wide 11.25 % after tax rate of return
on an operators allowable rate base aurd a rebuttait Ce presumption that acquisition costs above original
historic book value of tangible assets should be excluded from the allowable rue base. Petitions for
reconsideration have been filed with the FCC requesting modification of the interim gre ulations, and the
FCC is conducting a further rulemaldng to determine whether these interim standards and regulations
should be made permanent.
The Company believes that it has materially complied with prrn isi ms of the Act, including its rate
setting provisoes promulgated by the FCC on April 1, 1993. However, in jurisdictions which have chosen
not to certify, refunds covering a one-year period on basic service may be ordered upon certification if the
Company is unable to justify its rates dimgb a cost -of -service filing. The amount of refunds, if any,
which may be payable by the Company in the event that these systems' rates are auccesaMy challenged
by franchising authorities is tot currently estimable. During the year ended December 31, 1994, the
Company paid total cumulative rate refunds of approximately $944,000 for 1993 and 1994 to its cable
customers as a result of rate orders issued by certain franchise authorities.
Appeals have been filed in federal appellate court challenging, among other things, the lawfulness
of the FCC's benchmark methodology. Additionally, legislation has been proposed in Congress that, if
enacted into law, may reduce the regulation of cable service rates. The Company cannot predict at this
16
time the final outcome of the FCC rulemakings, the litigation described herein or the impact of any adverse
judicial or administrative decisions on the Company's Systems or business.
'Anti -Buy Through' Provisions. The 1992 Cable Act also requires cable systems to permit
customers to purchase video programming offered by the operator on a per channel or a per program basis
without the necessity of subscribing to any der of service, other than the basic service tier, unless the
system's lack of addressable converter boxes or other technological limitations does not permit it to do so.
The statutory exemption for cable systems that do not have the technological capability to offer
programming in the manner required bv the statute is available until a system obtains such capability, but
not later than December, 2002. The FCC may waive such time ppeenods if deemed necessary. Mt of
the Company's cable systems do not have the technological capability to offer pro�rammmg is the manner
required by the statute and currently are exempt from complying with the requirement. The Company
m cannot predict the extent to which this provision of the 1992 Cable Act and the corresponding FCC's rulers
Y �e c unomers to discontinue optional nonbasic service tiers in favor of the less expensive basic cable
service.
Must Carry/Retronsntission Consent. The 1992 Cable Act contains broadcast signal carriage
requirements that allow local commercial television broadcast stations to elect once every three years to
require a cable system to carry the station, subject to certain exceptions, or to negotiate for "retransmission
consent" to carry the station. A cable system generWly is required to devote hip to one-third of its activated
channel capacity for the mandatory carriage o local commercial television stations. 1 oral non-commercial
television stations are also given mandatory carriage rights; however, such stations are not given the option
negotiate retransmission consent for the carriage of their signals by cable systems. Additionally, cable
systems are required to obtain retransmission consent for all "distant" commercial television stations
(except for commercial satellite4eelivered 'independent "
stations and certain low dower television ssupetatations" such as WTBS), commercial radio
tations carried by such systems after October 6, 1993. On April
of the 3, a ial three -judge federal district court issued a decision upholding the constitutional validity
rY signal carriage requirements. In June 1994, the United States Supreme Court vacated
this decision and remanded it to the district court to determine, among other matters, whether the statutory
carriage requirements are necessary to preserve the economic viability of the broadcast industry. The
mandatory broadcast signal carriage requirements will remain in effect pending the outcome of the further
proceedings in the district court.
As a result of the mandatory carriage rules, some of the Company's Systems have been required
to carry television broadcast stations that otherwise would not have been carried and have caused
displacement of possibly more attractive programming. The retransmission consent Hiles have resulted in
the deletion of certain local and distant television broadcast stations which various Company Systems were
carrying. To the extent retransmission consent fees must be paid for the continued carriage of certain
television stations, the Company's cost of doing business will increase with no assurance that such fees can
be recovered through rate increases.
Designated Channels. The 1984 Cable Act permits franchising authorities to require cable
operators to set aside certain channels for public, educational and governmental access programming. The
1984 Cable Act also requires a cable system with 36 or more channels to designate a portion of its channel
capacity for commercial leased access by third parties to provide pro that may compete with
a�o
services offered by the cable operator. The FCC haspt rules r ' : (i) the maximum reasonable
rate a cable operator may charge for commercial use of the designated channel capacity; (il) the terms and
conditions for commercial use of such channels; and OR) the procedures for the expedited resolution of
disputes concerning rates or commercial use of the designated channel capacity.
Franchise Procedures. The 1984 Cable Act affirms the right of franchising authorities (state or
local, depending on the practice in individual states) to award one or more franchises within their
jurisdictions and prohibits non cable systems from operating without a franchise in such
jurisdictions. The 1992 Cable Act encourages competition with existing cable systems by (i) allowing
ipalities to operate their own cable systems without franchises: (ii) preventing franchising authorities
from granting exclusive franchises or from unreasonably refusing to award additional franchises covering
17
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. The 1994 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. Ong the more significant provisions of the 1984 Cable Act is a limitation on the payment
of franchise fees to 5 % of cable system revenues and the opportunity for the cable operator to obtain
modification of franchise requirements by the franchise authority or judicial action if warranted by changed
circumstances. The 's franchises typically provide for payment of fees to franchising authorities
in the range of 3 % to S of "revenues" (as defined by each franchise agreement).
The 1984 Cable Act contains renewal procedures designed to protect mcaumbent franchisees against
arbitrary denials of renewal. The 1992 Cable Act makes several changes to the renewal process which
could make it easier for a franchising authority to deny renewal. Moreover, even if the franchise is
renewed, the franchising authority may seek to impose new and more onerous requirements such as
significant upgrades in facilities and services or increased franchise fees as a condition of renewal.
Similarly, if a franchising authority's consent is required for the purchase or sale of a cable system or
franchise, such authority may attempt to bmmc more burdensome or onerous franchise require in
connection with a request for such sorically, franchises have been renewed for Icab e c editors
that have provided satisfactory services and have complied with the terms of their franchises. The
Company believes that it has generally met the terms of its franchises and has provided quality levels of
service, and it anticipates that its future franchise renewal prospects generally will be favorable.
Various courts have considered whether franchising authorities have the legal right to limit
franchise awards to a single cable operator andto 'impose certain substantive franchise requuemeats (i.e.,
access channels, universal service and other technical requirements). These decisions bave been somewhat
inconsistent and, until the United States Supreme Court rules definitively on the scope of cable operators'
First Amendment protections, the legality of the franchising process, generally, and of various specific
franchise requirements is likely to be in a state of flux.
Ownership Limitations. The 1994 Cable Act and the FCC's regulations prohibit the common
ownership, operation, control or interest in a cable system and a local television broadcast station whose
Predicted grade B contour (a measurre of signal strength as defied by the FCC's rules) covers any portion
of the community served by the cable system. In Jtme 1992, the C revised its cross -ownership rules
to permit natleaal television networks to own cable systems under certain circumstances. As a part of the
same action, the FCC also voted to recommend to Congress that the broadcast/cable cross -ownership
restrictions contained in the 1984 Cable Act be repealed. The 1992 Cable Act permits state or local
franchising authorities to adopt certain tes<rictions on the ownership of cable systems. Pursuant to the 1992
Cable Act, the FCC adopted rules prescnbirrg national customer limits and limits on the number of
channels that can be occupied on a cable system by a video programmer in which the cable operator has
an attributable interest. The effectiveness of these FCC horizontal ownership
because a federal district court found the statutory limitation to be limits has been stayed unconstitutional.
Telephone Company Ownership of Cabk TekWsionn Sysom. The 1984 regulations, and the 19882 federal court consent decree (the "MFFJ") that settled the 19741eantitruist suit
against AT&T regulate the provision of video programming and other information services by telephone
companies. The 1984 Cable Act codified FCC cross -ownership regulations that, in , prohibit local
video a �lA � cam, inclttdittg the aevea Bell Operatittg Companies ("B s*), tfrom providing
Programming directly to customers within their local exchange service areas, except in rural areas
or by specific waiver of FCC rules. The statutory provision and corresponding FCC regulations are of
particular compe" importance because telephone es already own much of the plant necessary
or cable communications operations, such as poles,=rgroumd conduit and associated rights -of -way.
Many of the BOCs have initiated federal court actions challenging the statutory "telco-cable" cross-
OOwnerestriction, and various federal district courts and two federal appellate courts have concluded
cross -ownership restriction violates local telephone companies constitutional rights. Further
judicial review of these decisions can be anticipated.
18
In 1992, the FCC modified its regulations to enable local telephone companies to provide a "video
dialtone" service that would provide consumers access to a wide variety of services now provided by cable
systems, as well as new services that may develop.. The FCC determined that local telephone companies
must provide consumers access to video dialtone services of others on a common carver basis and may
provide their own non -video dialtone and non -video services directly to their telephone customers, subject
to certain cross -subsidization safeguards. The FCC also decided to recommend to Congress that the
statutory telco-cable cross -ownership restriction should be repealed and that local telephone companies
should be permitted to provide video directly to customers subject to appropriate safeguards.
Various parties have appealed the F C.
In its video diahone proceeding, the FCC also determined that the 1984 Cable Act and the FCC's
regulatory cross-ownersbip restrictions do not prohibit interexcltange carriers (i.e., distaax hone
companies) from entering into joint verW res with cable operators or from acquiring cable el ion
systems in areas where such interexchange carriers provide long distance telephone services. The FCC also concluded that local telephone companies offering broadband common carrier services to distribute
video programming to customers and the third party programmers usigg such common carrier services are
not required by federal law to obtain franchises from local frrachisigg authorities in order to provide such
video PrOVIIIIIIIIJig services to the public.
decThe ultimate outcome of the FCC's video dialtone proceeding, the BOC litigation, the FCC
isions on the video dialtone proposals of various BOCs and other local telephone companies or the
appeals of the FCC's decisions desccribed above, or the ultimate impact on the
these judicial and administrative proceedings carrot be determined this Company or its business of
In July 1991, the U.S. District Court responsible for the MFJ issued an opinion lifting the MEN
on the provision of information servuxs by the BOCs. This decision was upheld on and
enables the BOCs to acquire or construct cable television systems outside of their own service areas.
Independent telephone companies currently may provide cable television service outside of their service areas under the 1994 Cable Act.
The telephone industry continues to ley Congress for legislation
companies to provide video programming directly to consumerthat will permit local telephone
Congress that would permit local tek�hone S, to legislation has been emceuced in
certain conditions. The outcome of these F' among other, to provide such services under
effect of such outcome on cable gWative or judicial proceedings and proposals or the
system operations cannot be predicted.
cations le Attachment. The Communications Act requires the FCC to regulate the rates, terms and
®Posed by public utilities for cable systems use of utility pole and conduit space unless state
authorities can diemonstrate that they adequately regulate pole attachment rates. In the absence of state
regulation, the FCC adiministen pole attachment rates through the use of a formula that it has devised. In
some cases, utility sole attachment fees for cable systems that have installed fiber optic cables an'd that are rising ouch cables for the�'�r��,,....=..,ram •�—T��� _ —. —�
on the type of service provided over the
Other Statutory Provimw. The 1992 Cable Act also precludes video programmers affiliated with
cable companies from favoring cable operators over competitors and such
to sell
their programming to other multic amiel video distributors. This provision limits programmers cable
program �PQliers affiliates with cable companies to offer exclusive programming arrangements to cable
der• "1C Communkations Act also includes provisions, among others, concerning horizontal and
vertical ownership of cable systems, customer service, customer pprnacy, commercial leased access
channels, marketing practices, equal employment oppoMuut�r, franchise renewal and transfer, award of
franchises, obscene or indecent programming and regulation of technical standards and equipment
compatibility. The FCC has adopted regulation implementing many of these new atadrto ry provisions and
19
it has received numerous petitions requesting reconsideration of various aspects of its rulemaking
proceedings.
Other FCC Regulations. In addition to the FCC regulations noted above, there are other FCC
regulations covering such areas as equal employment opportunity, syndicated program exclusivity, network
program non -duplication, registration of cable systems, maintenance of various records and public
inspection files, microwave usage, lockbox availability, origination cabl and sponsorship
identification, antenna structure marking and lighting; carriage of local programming,
application of the fairness doctrine and rules governing political broadcasts, limitations on advertising
contained in non -broadcast children programming, consumer protection and customer service, leased
commercial access, ownership of home wiring, indecent programming, programmer access to cable
systems. programming agreear, technical standards, consumer electronics equipent mCompatibility, and
DBS implementation. T''hh FCC has the 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.
The 1992 Cable Act and the FCC's rules implementing it generally have increased the
administrative and operational expenses of cable television systems and have resulted in additional
regulatory oversight by the FCC and local franchise authorities. The Company is currently 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 re ens
Implementing the 1992 Cable Act. Mie Company intends to continue to assess the impact of the CC rate
regulations and to develop strategies to nummize the adverse impact of such regulations and the other
provisions of the 1992 Cable Act on the Company's business. However, no assurances can be given that
the Company will be able to develop and successfully implement such strategies to minimithe adverse
impact of the FCC's rate regulations or the 1992 Cable Act on the Company's business.
Other bills and administration proposals pertaining to cable television have previously been
introduced in Congress or considered by other governme Wd 6odiea over the past several years on matters
such as rate regulation, customer service standards, sports programming, franchising, copyright and
telephone company provision of cable services. It is probable that further attempts will be made by
Congress and other governmental bodies relating to the delivery of communications services.
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
payments for broadcast signal carriage cannot be predicted at this time. The possible simplification,
modification or elimination of the compulsory license is the sub'e:ct of continuing legislative
review. The elimination or substantial modificatin of cable compulsory could adversely affect
the Company's ability to obtain suitable programming and could substantially increase the coat of
programming that remained available for distribution to the Company's customers. The Company cannot
predict the outcome of this legislative activity.
Cable operators may produce Iocal programming and advertising that use music controlled by the
two major music performing rights organizations, A AP and BhU. In October 1989, the special rate
court of the United States District Court for the Southern District of New York imposed interim rates on
the cable industry's use of ASCAP-controlled music. The same federal district court recently established
a special rate court for BW. Cable industry representatives are negotiating with ASCAP and BINT for
licenses and corresponding rates for past and future use of ASCAP/B controlled music by cable
operators in programming and advertising produced and distributed by operators on cable systems.
Although the Company cannot predict the ultimate outcome of these industy negotiations or the amount
Of any license fees it may be required to pay for past and future use of ASCA� and BINI controlled music,
it does not believe such license fees will be material to the Company's operations.
20
State and Local Regulation
Cable systems are subject to state and local regulation, typically imposed through the franchising
process because a cable television system uses local streets and rights -of -way. Regulatory responsibility
for essentially local aspects of the cable business such as franchisee selection, billing practices, system
design and construction, and safety and consumer protection remains with either state or local officials and,
in some jurisdictions, with both.
Cable television systems generally are operated pursuant to nonexclusive franchises, permits or
licenses pranced by a municipality or other state or local government entity. Franchises generally are
granted of r fixed terms and in many cases are terminable of the franchisee fails to comply with material
provisions. The terms and conditions of franchises vary materially from jurisdiction to jurisdiction. Each
franchise guy contains provisions governing cable service rates, franchise fees, franchise term, system
construction and maintenance obligations systemchannel capacity, design and technical performance,
customer service standards, franchise renewal, sle or transfer of the franchise, territory of the franchisee,
indemnification of the fianchising authority. use and occupancy of public streets and types of cable services
provided. A number of states subject cable television systems to the ,*urisdwuon 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 sy�am contiouigg and can be expected to increase.
To date, Delaware is the only state in which the CC y operates which has enacted such state level
regulation. The Company cannot predict whether any of the states in which it currently operates will
engage in such regulation in the future. State and local franchising jurisdiction is not , however,
and must be exercised consistently with federal law. The 1992 Mie Aix ivamtmizes firaochising authorities
from monetary damage awards arising from regulation of cable 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 requ nts, are currently the subject of
1 � Proceedings, legislative hearings aadministrative and legislative proposals which could change,
in varying degrees, the manner m wWchnd cable television systems operate. Neither the outcome of these
proceedings nor the impact on the cable communications industry or the Company can be predicted at this
time.
Technological Developments
As part of its commitment to superior customer service, the Company emphasizes the highest
technical standards in the Systems and piudewly applies new tedmology on the basis of cost effectiveness,
enhancement of product quality and service delivery, and industry -wide acceptance. Upon acquiring new
Systems, the Company selectively upthe technical quality of the Systems' cable plant to increase
channel capacity for the delivery of ammonal programming and new services.
Most of the Systems are not addressable systems. Addressable technology enables a cable
television system operator to activate, by remote control from the headend site or another central location,
the cable television services delivered to each customer having an addressable converter. Over 20% of
the Company's customers are served by systems with addressable capable technology (i.e., systems ha
capacity to offer addressable services if addressable converters were installed in customer homes), and
6 % of the Company's customers (the majority of which are located in the San Angelo Systems) have
addressable converters. With this addressable converter technology, the Company can upgrade or
downgrade services to a customer immediately, without the delay or expense assocated with duspatchurug
a technician to the home. Addressable technology also allows the Company to offer pay -per -view services,
reduces premium service theft, and, through the ability to deactivate service automatically, to disconnect
delinquent customer accounts. in certain of its systems (particularly in the Wisconsin and San Angelo
regions), the Company has taken active steps to remove from service older addressable converter
equipment, which was costly to maintain. hsstead of using these outdated converters in such systems, the
Company has installed negative trap technology, which enables customers to use cable -ready television sets
21
without the need for converters and facilitates the delivery of premium service channels to the customer.
T4h,
gh this replacement, the Company has enhanced customer convenience and simultaneously
aed significantreductions in service and inventory costs and revenue growth through increased
pm service orders. In contrast, the cable plant of the Star Systems, are technically capable of, and
officient site that, instituting addressable technology, including pay -per -view services, is economically
desirable. The Crown Wisconsin Systems presently have addressable technology available to 45 % of the
austomers with 15 % of these customers having addressable converters. The Company expects to continue
to expand this addressable base.
The Company continually monitors and evaluates new technological developments on the basis of
its ability to make optimal use of its existing assets and to anticipate the introduction of new services and
Program delivery capabilities. The use of fiber optic cable as an enhancement to coaxial cable is playing
a major role in expanding channel capacity and improving the performance of cable television systems.
Fiber optic cable is capable of carrying hundreds of video, data and voice channels. To date, the Company
has sought to implement fiber optic techaolo$y in its systems during the system upgrade process. The
Company has migrated to a fiber-to-the-servutg-area architecture that uses multiple nodes to limit the
number of customers served from any specific node. At the present time, node size is being limited to a
maximum of 500 home getup' g This architecture enhances the reliability of the system while at the sane
time expands the system bandwidth allowing the delivery of more programming services. The Star
Systems have some fiber optic technology in place and the Company plans to continue its placement. In
addition to implementing�analog fiber optic technology for the distribution of services to customers, the
Company Plans to use fif r optics to interconnect system headends to form regional networks. These
regional networks will enhance the placement of addressability and advertising insertion.
New technological advances that are anticipated to be commercially viable in the next few years
include digital compression and expanded bandwidth amplifiers, which offer cable operators the potential
for a dramatic expansion of channel capacity, along with alternative communications delivery system
sse.
As this new technology and related services become available, the Company intends to carefully ass the
economic return and market demand for such technology and services in order for the Company to
prudently implement additional services in the most cost-effective manner.
Nogramming
The Company has various contracts to obtain basic and premium programming for the Systems
from program suppliers whose compensation is typically based on a fix fee per_ customer. The
Company's programming contracts are generally for a fixed period of time and are subject to negotiated
renewal. Some program suppliers provide volume discount pricing structures or offer marketing support
to the Company. In particular, the Company has negotiated programming agreements with premium
service suppliers that offer cost incentives to the Company under which premruun service unit prices decline
as certain premium service growth thresholds are met. The Company s suuccessful marketing of multiple
premium service packages emphasizing customer value has enabled the Company to take advantage of such
cost incentives.
The Company's cable programmin# costs have increased in recent years and are expected to
continue to increase due to system acquisitions, additional programming being provided to customers,
increased cost to produce or purchase cable programming, inflationary increases and other factors.
Program suppliers may continue to increase rates. However, under the new FCC rules, the cable operator
may have the ability to mark up these increases by 7.5% and pass the increase on to customers. Although
there can be no assurances, the Company believes it will continue to have access to cable programming
services at reasonable price levels.
Franchises
Cable television systems are generally constructed and operated under non-exclusive franchises
granted by local governmental authorities. These franchises typically contain many conditions, such as
tune limitations on commencement and completion of construction; conditions of service, including number
22
of channels, types of programming and the provision of free service to schools and certain other public
institutions; and the maintenance of insurance and indemnity bonds. The provisions of local franchises are
subject to federal regulation under the 1984_ Cable Act and the 1992 Cable Act.
As of December 31, 1994, the Company operated pursuant to 264 franchises. Additional
ftheiR h�acquiredawith the Crown Systems total 195 franchises. These non-exclusive franchises provide
payment of fees to the issuing authority. Annual franchise fees ion the Systems range up
to 5 % of grass revenues generated by a system. In substantially all of the ,such franchise fees are
passed through ers to the customdirectly as an addition to the rates for cable television service. The 1984
Cable Act prohibits franchising authorities fmm imposing fianchise fees in excess of 5% of gross revenues
and also permits the cable system operator to seek renegotiation and modification of fiaachiarequirements
e
if warranted by changed circumstances.
The table below illustrates the grouping of the franchises of the Systems by date of expiration and
presents the approximate number and percentage of basic service customers for each group of franchises
as of December 31, 1994.
Year
Franchise
Number of
Number of
Percentage
of Total
Expiration
Communities
Customers
Customers
Prior to 1996.......................... ......... :........
43
43,251
19.4 %
1996-2000...............................................
98
121,096
54.4%
2001 and after ...........................................
86
51,267
23.0%
Other(1).................................................
37
7,121
3.2%
Total ......................................................
264
222,735
100.0%
(1) 1'he Company qMM a etmber of systems thsr nave tmldpk comtmmides and, in acme inim x, patios of wch
extend into Jwndm= for which the Campatty believes
no hancli is wounry.
The table below illustrates the grouping of the franchises of the Crown Systems by date of
expiration and presents the approximate number and percentage of basic service customers for each group
of franchises as of December 31, 1994.
Year of
Franchise
Expiration
Priorto 1996............................................
1996-2000...............................................
2001 and after ...........................................
Other(1).................................................
Total......................................................
Number of
Communities
22
56
94
Number of
Customers
59,192
61,443
68,523
Percentage
of Total
Customers
30.6 %
31.8%
35.4 %
13 4,167 2.2%
185 193,325 100.0%
(D Crown opanes a amber of $yam= that sore
into Jwudltx = far which the mddpb oomm�m dw nod, in some imnou, PmIkW of arh syssems exbmd
Caapany believes no hsuch= u neceu ry.
23
The 1984 Cable Act provides, among other thins, for an orderly franchise renewal process where
franchise renewal will not be unreasonably withheld or, if renewal is withheld, the franchise authority an,
pay the operator the "fair market value" for the system covered by such franchise. In addition, the 1994
Cable Act establishes comprehensive renewal procedures that require that an incumbent franchisee's
renewal application be assessed on its own merit and not as part of a comparative process with competing
applications.
The Company believes that it generally has very good relationships with its franchising
communities. Neither the Company nor its predecessor entities controlled by Jeffrey A. Marcus (who has
owned and operated cable television systems since 1979) has ever had a franchise revoked or failed to have
a franchise renewed. In addition, all of the franchises of the Company and such predecessors eligible for
renewal have been renewed or extended at or prior to their gated expirations, and no material franchise
community has refused to consent to a franchise transfer to the Company or any such predecessor.
Employees
At December 31, 1994, the Company had 347 full-time employees, none of which belonged to a
collective bargaining unit, and 27 part-time employees. The Company considers its relations with its
employees to be excellent.
At December 31, 1994, the Crown Wisconsin Systems had 279 full-time employees, of which 34
belonged to a collective barpining unit, and 27 part-time employees in the Wisconsin area. The collective
bargaining agreement is with The Communication Workers of America, Local 4642 operating under a
contract scheduled to terminate on June 15, 1995.
(d)
MCC has neither foreign operations nor export sales.
ITEM 2. PROPERTIES
The Company operates the Systems in three geographic areas: Wisconsin, Texas, and
Delaware/Maryland. In connection with its operation of the ,the Company owns or leases parcels
of real property for signal reception sites (antenna towers andsheadends), microwave facilities and business
offices, a� owns most of its service vehicles. The Company believes that its properties, both owned and
leased, are in good condition and are suitable and adequate for the Company's business operations.
The Systems generally consist of four principal operating components. The first component,
known as the headend facility, receives television and radio signals and other programming and information
by means of special antennae, microwave relays and satellite earth stations. The second component. the
distribution network, which originates at the headend and extends throughout the system's service area,
typically consists of coaxial or fiber optic cables placed on utility poles or buried underground, and
associated electronic equipment. The third component of the system is a drop cable, which extends from
the distribution network into each customer's home and connects the distribution system to the customer's
television set. The fourth component, a converter, is the home terminal device that expands channel
capacity to permit reception of more than 12 channels of programming.Some of the Systems utilize
converters that can be addressed by sending coded signals fromhe headend over the cable network.
The Company's cables generally are attached to utility poles under pole rental agreements with
local public utilities, although in some areas the distribution cable is buried in underground ducts or
trenches. The physical components of the Systems require maintenance and periodic upgrading to keep
pace with technological advances.
24
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which MCC or any of its subsidiaries is a party
or to which any of their respective properties are subject.
TEEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM S. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED
STOCKHOLDERS MATTERS
There is no established public trading market for any of the registrants' equity.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below are derived from the audited historical financial
statements of the Company. The 's acquisitions of cable television during the periods
for which the selected data are below materially affect the comparab.. of such data from one
Period to another. Recent federal legislation and related existing and pending FCC regulation applicable
to cable television companies could have a muerial adverse impact on the Company's business in the
future. The data presented below should be
statements and the related notes thereto. read in conjunction with the Company's historical financial
Stateum at Operations Data: (2)
Reve ies
Costs and expenses
MaoaBemet fees and egmses (3)
Depredation and amortization
Operating IOU
Net lass
Other Data:
EBITDA (4)
Balance Sheet Data:
Total assets
Total debt (inclttdie8 turret msnuum)
Subsidiary limited partner interests
Partnm' capital (deficit)
FINANCIAL DATA
(in thousands, except ratios)
1!ffi(12
3l31
243�
14Et
14P4
$12,980
$26,517
$38,310
$52,307
$64.747
5.673
11.141
16,104
21,849
31,453
1,093
1.581
2,224
3.617
2,165
22M
12.E
2b.d32
ZS.M
31412
(3.012)
(3,901)
(6.670)
(1.792)
(6,283)
6,341
9,848
11,114
13,443
28.105
(10.923)
(19,377)
(21,323)
(9.643)
(30.610)
6,224
13.795
19,982
As of December
26,841
at
31.129
13Y4ii1
1231
1>!�
1l4�
14�4
$146,104
$129.391
M,641
$195,148
$315.217
95,000
103.000
162.500
195.000
327,264
36.718
29.936
34.608
5.798
046)
11,790
(6,187)
4.991
(11,670)
(21.290)
25
(1) Data for the period from Jantay 1. 1990 to July 31, 1990 relae to certain systems in Wisconsin dw were previously owned
by Marcus Commmicatieos. Inc. ('MCI'), a Delawm corporation, previously owned by Jeffrey A. Maras, wbich systems
were contributed to the Company on August 1. 1990.
(2) All statement of operations data reflect the following ao*nshiom by the Company from the data of acquisition: (i) the May
1. 1992. acquisition of the San Angelo Systems; (d) the October 1. I992, acquisition of the DelawamfMaryland Systems;
aW (di) the July 29. 1994, w*dsWm of the Star Systems.
(3) Each of the operating Partnerships entered mto various management service agrameou (the *Management Agreement').
pursuant to wbich each Operating Partnership paid Marcus Cable Management, Inc. (the 'Management Company) a
specified percentage of die revenues from the Systems owned and operated by orb Operating Partnership, plus amain
reimburs" '!bore agroetnents terminated July 29. 1994. in aaoection with the acquisition and financing of the
Star Systems.
(4) EBITDA is equal to operating loss phis depreciation and s mortiadon. 'Ibe Company believes that E UMA is a mmnmgfui
measure of performance because it is commonly used m die able television iodutay to am = and compsm able Wevum
companies on the basis of operating performance. leverage and liquidity. In additim the iudenaue for the Il?A%
Debentures. the 13%%Senior SuboMusted Gnaraomed Disoamt Notes and the Company's e:ifaing bank credit agreement
dated October 13, 1993, and amended an November 15, 1994 (the 'Credit Agterment•), contain eatam covmens mastered
by compuntiaos substantially similar to dwse used in determining EBrMA. However, EBrMA is not intended to be a
Performance measure that should be regalled as an alternative eitber to operating mcome, or tier income, as an indicator of
operaing performance or to ash flows as a maste of liquidity, as determined m accordance with generally accepted
accounting priocipla-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
Results of Operations
In each of the past three years, the ComPany has generated substantially all of its revenues from
monthly customer fees for basic, premium and other services (such as the rental of converters and remote
control devices) and from installation income. Additional revenues were generated from pay -per -view
programming, the sale of advertising and home shopping networks. Beginning in September of 1994,
revenues were also generated from management fees earned in conjunction with the Managed Systems.
The Company has experienced increases in revenues and EBITDA in each of the past three fiscal
years. This growth was accomplished primarily through acquisitions and through internal customer
growth. Total selling, service and system management expo =, and general and administrative expenses
have also increased significantly due to acqutst .ons, expenses relating to rate regulation, and changes in
the Company's financial reporting structure. Until July 29, 1994, certain general and administrative
services were performed on behalf of the Company by the Management Company, for which the Operating
Partnerships paid a management fee of 5.5 % of gross revenues. After that date, the employees and related
expenses of the Management Company became a part of Operating, and Operating now records all
overhead expenses relating to the Dallas home office and the Wisconsin regional office within selling,
service and system management and general and administrative expenses, instead of management fees.
three Programming expenses have increased both in dollars and as a percentage of revenue for the past
Y system acquisitions, additional programming being provided to mummers and increased
costs to produce or purchase cable programming. However, the increase in the Company's size will permit
more leverage in renegotiating contracts and gaining volume discounts in the future. Furthermore, the
FCC's cable rate regulations will permit the Company to increase its rates for cable services to recover
increases in the costs of programming to the extent such increases exceed the general rate of inflation. The
significant increase in charges for depreciation and amortization are due to acquisitions and capital
expenditures related to continued construction and upgrading of the Systems. Depreciation and
amortization expense and interest costs on debt issuance have tar ely contributed to net losses in the
financial statements of the Company. However, net cash flows from operations have been positive. This
type of financial performance is considered normal for the cable television industry.
26
The following table sets forth for the periods indicated, certain income statement items as a percentage of
total revenues.
Revenues
Programming costs
SeWng, service and system management
General and administrative
Maasggem(2) fees and expenses
EBITDA (2)
Depreciation and amortization
Interestrating loss
Other (income) expense
Subsidiary limited partner interests (3)
Net loss before extraordinary items
Percentage of Revenue for
Periods Ended (1)
1000.0%
10000.00%
10000..00%
19.6
20.1
21.8
10.7
10.4
11.6
11.7
11.3
15.1
5.8
6.9
3.3
52.2
51.3
48.1
69.6
54.7
57.8
(17.4)
(3.4)
(9.7)
29.0
25.7
43.4
(0.4)
0.4
0.0
41
(55 S %
(1s17
(4 I)
(1) Reflects mules of operadom; of the foilow'ms aequwdons by the Company fmm the date of acquisition: (i) the May 1, 1992,
acquisition of the San Angelo Systems: 01) the October 1, 1992, acquisition of date DelammftAoryland Systems; and (iii)
the July 29, 1994, acquistion of the Star Systems.
(2) EUMA is equal to operating loss plus depreciation and amordution. The Company believes that EBrMA is a meaningful
masure of perfarmeoa because it is commonly used in die able television industry to aalyze and compare Cable television
companies an the basis of opentiog performance. leverage and liquidity. In addition, the iodamm for the ilrA%
Debeamm, the 13%%Senior Mordimad Guaranteed Discotmt Notes and the Company's existing bank credit agreement
dated October 13, 1993. and amended on November 15, 1994, (die 'Credt Agreement') contain certain covema= masmed
by cOMIMMMOnt wbwodally similar to time used in detertniomg EBrMA. However. EBrMA is not intended to be a
performance manse (hat should be regarded as an ah rmsam either to operating income, or net income, as an bKucuw of
oPmtwg Performance or to Cash flows as a measure of liquidity, a determined m scowdsoce wdh generally accepted
+ems pry The Company bas substantial am -cash dorges to earnings from depracia m and amortintion,
maoagemeat fen and ioraat.
(3) Represents preferred nouns and allocated net income or lets to parUlm who arc affiliated with, but not a part of, the
Company. Subsequmt to July 29, 1994, retoaupmg subsidiary limited partner intents are not eraitled to preferred returns.
Fucal 1994 Compared to Fuel 1993
Revenues of $64,747,000 for the year ended December 31, 1994, increased $12,440,000 (or
23.8%) over the year ended December 31, 1993, of which $10,783,000 related to revenue generated by
the acquisition of the Star Systems and $1,118,000 related to management fee income derived from the
Managed Systems. The revenues generated from internal growth account for 4.3 % of the total revenue
growth. EBITDA increased 16.0% to $31,129,000 for the year ended December 31, 1994, as compared
to the year ended December 31, 1993, primarily as a result of the acquisition of the Star systems. Monthly
revenue per basic customer decreased from $31.18 as of December 31, 1993, to $29.93 as of December
31, 1994. The $1.25 decrease reflected primarily (i) a decrease of $1.64 in basic revenues, due to basic
service rate regulation, (ii) an increase of $0.38 in installation and other revenues, and (iii) an increase of
$0.01 in premium subscription revenues, the latter of which was due to the increase in pay -to -basic
percentage from 69.3 % to 70.3 %. The systems acquired from Star have lower revenues, thus resulting
in a $0.56 overall reduction in revenue per basic customer. The greatest impact due to the Star acquisition
is in pay revenue. Tie Company's basic customers increased 57.6% from 141,323 at December 31, 1993,
to 222,735 at December 31, 1994. The acquisition of the Star Systems accounted for 75,446 of the
increase in customers, or 92.7% of the growth. The remaining increase in customers resulted from internal
marketing ca�ai�s The total number of premium units increased 60.0% from 97,944 units at December
31, 1993, to 15 ,656 units at December 31, 1994. The acquisition of the Star Systems account for 54,281
27
of the increase in premium units, or 92.5 % of the growth. The remaining units were developed through
marketing promotions and contimied implementation of premium packaging.
Programming costs for the year ended December 31, 1994, increased 34.3 % over the year ended
December 31, 1993, to 514,127,000. The increase in programming expense is two -fold. First , the
acquisition of the Star Systems added $2,472,000, representing five months of expense. The r
S1,139,000 resulted from increases in customer growth, increases in programming rates by certain vendors
and additional costs associates) with new chanmels offered to customers.
SeUmS, service and system management expenses increased 38.3 % to $7,533,000, of which
$1,248,000 o the increase related to the ition of the Star Systems and the remainder resulted
� Primarily from Company growth and a hi r level of concentration in effective) mar
Company's services and c and de el Y Meting the
�8 oiling more ad sales ventures. General and administrative
expenses increased 66.4% to $9,793,000, of which the acquisition of the Star Systems accounted for
$1,209,000 of the increase. The inclusion of the former employees and related expenses of the
the incinsrease, whichanagement Company whetffset,however, theCompany's financial reporting structure accounted for $2,499,000 of
he ea The by a decrease in mand management fees aof approximately
remaining $200,000 increase resulted from internal Company growth. Management fees
decreased for the year ended December 31, 1994, because of the termination of the Management
Agreements with the Operating Partnerships on July 29, 1994. These Management Agreements were
terminated and the Company's structure was reorganized in order to comply with the note terms in
connection with the acquisition of the Star Systems.
Depreciation and amortization expense increased 30.7% to $37,412,000, principally due to the
inclusion of the Star Systems for the last five months of 1994. Interest expense increased 109.1 % to
$28,105,000 at December 31, 1994. Ibis increase represents a full year of interest expense on the 117/*%
Debentures and the inclusion of five months of the interest on the 13%% Notes (replacing the prior Credit
Agreement amended at the issuance of the 13%% Notes). Borrowings increased from $195,000,000 at
December 31, 1993, to $327,264,000 at December 31, 1994, as a result of financing for the Star System
acquisition. The weightedaverage interest rate for the twelve months ended December 31, 1993, was
7.85%, and the weighted average interest rate for the twelve months ended December 31, 1994, was
11.0%. Subsidiary limited partner interests decreased from $8,919,000 at the end of 1993 to $6,034,000
at the end of 1994. This decrease resulted from net losses allocated to the limited partners. The loss
before extraordinary items at December 31, 1994, was $28,303,000, which is $21,736,000 higher than
1993 results. The factors effecting this increase are discussed above.
The Company incurred extraordinary losses of $3,076,000 and $2,307,000 in 1993 and 1994.
Both of these amounts represent the write-off of debt issuance costs due to the early extinguishment of debt.
The Company does not expect extraordinary losses to occur on a frequent basis unless there are future
financing advantages to early debt retirement.
Fiscal 1993 Compared so Fiscal 1992
Revenues for the year ended December 31, 1993, increased 36.5 % to $52,307,000 and EBTPDA
rease inc Revenues
34.3% to $26,841,000, cOmPucd with the year ended December 31, 1992. The increase in
revenues resulted primarily from the 'inclusion of twelve months of revenues from the San Angelo Systems
and the Delaware/Maryland Systems in 1993 of $21,249,000 as compared to $9,443,000 for the twelve
months ended December 31, 1992, which contains only eight months of revenue for the San Angelo
Systems and three months of revenues for the Delaware/Maryland Systems. Monthly revenue per basic
customer increased from $29.72 as of December 31, 1992, to $31.18 as of December 31, 1993. The $1.46
increase reflectei�� pprimarily 0) an increase of $0.84 due to basic customer growth and rate increases, (ii)
an increase of 50.31 in installation and other reveres, and (iii) an increase of $0.31 in premium
subscription revenues, which was due to the increase in pay -to -basic percentage from 58.8 % to 69.3 % .
The Company's basic customers increased 2.2% from 138,274 at December 31, 1992, to 141,323 at
December 31, 1993. The total number of premium units increased 20.5% from 81,257 at December 31,
1992, to 97,944 at December 31, 1993.
28
Programming costs for the year ended December 31, 1993, increased 40.2% over the twelve
months ended December 31, 1992, to $10,516,000. The increase in programming costs resulted primarily
from the inclusion of twelve months of programming costs from the San Angelo Systems and the
Dela�2wareMaryland S� $4,091,000, as compared to $1,672,000 for the year ended December 31,
Programming grew due to rate increases by certain programming vendors, as well as
additional costs associated with new channels offered to customers.
Selling, service and systezzi management expenses increased 32.5% to $5,448,000, while general
and administrative expenses increased 31.0% to ,985,000, due also to the inclusion of twelve months
of expenses for the San Angelo Systems and the Delaware/Maryland Systems. Management fees increased
for the twelve months ended December 31, 1993, by 62.6% to $3,617,000, but the contractual
management fee rate remained constant. The increase was due mainly to the inclusion of a full twelve
months of revenues for the San Angelo Systems and the Delaware/Maryland Systems.
Depreciation and amortisation expenses increased 7.4 % to $28,633,000, principally due to the
inclusion of the twelve months of depreciation and amortization relating to the San Angelo Systems and
the I elaware/Maryland Systems acquired in 1992. Interest expense increased 21.0% to $13,443,000.
This increase was due in large part to the inclusion of twelve months of interest expense related to the
acquisition of the San Angelo Systems and the Delaware/Maryland Systems, Borrowing increased from
$162,500,000 at December 31, 1992, to $195,000,000 at December 31, 1993. The weighted average
interest rate for the twelve months ended December 31, 1992, was 8.34%, and the weighted average
interest rate for the twelve months ended December 31, 1993, was 7.85%. Subsidiary limited partner
interests increased to $8,919,000 in 1993 from $(3,672,000) in 1992, due to additional losses being
allocated to the subsidiary limited partner interests in 1993 in accordance with the partnership agreement.
The loss before extraordinary items as of December 31, 1993, was $6,567,000, which represents a 69.2%
decrease, due primarily to the factors discussed above. Extraordinary losses of $3,076,000 occurred
during 1993. These losses occurred due to the refinancing of company's debt, thus resulting in an early
extinguishment of debt.
Liquidity and Capitol Resources
The cable television business requires substantial expenditures for system acquisitions and for
construction, expansion and maintena±ce of plant and equipment. The Company has traditionally relied
on three sources for the necessary funding. These sources are: (i) contributions from equity investors,
(ii) borrowings under various debt instruments, and (iii) positive cash flows from operations. As of
December 31, 1994, unreturned capital contributions from Goldman, Sachs 8t Co. and other equity
investors totaled approximately $103,997,000. The Company has an aggregate of S327,264,000
indebtedness outstanding in the form of the IITA% Debentures and the 131A% Notes. The Company
generated cash flows from operating activities of $9,668,000, $15,569,000, and $15,989,000 for the years
ended December 31, 1992, 1993, and 1994, respectively. These three resources have been sufficient to
meet the Company's debt service, working capital and capital expenditure requirements, including the
purchase costs incurred in connection with the Star Acquisition.
Although the Company has not generated earnings, as defined, sufficient to cover fixed charges,
the Company has gge�rated cash and obtainiai financing sufficient to meet its debt service, working capital
and capital expenditure requirements. Although there can be no assurances, the Company expects that it
will continue to generate funds sad obtain financing sufficient to meet its obligations in the foreseeable
future.
On October 13, 1993, the Company and Capital consummated the public offering of S100,000,000
Of the 117i4% Debentures, and entered into a Credit Agreement borrowing $95,000,000 thereunder. The
3proceeds from these borrowings were used to repay witstanding senior bank indebtedness of approximately
160,800,000 and to redeem certain partnership ppreference units. Subsequently, on July 29, 1994, MCC
through its subsidiaries, Operraauuaagg and Capital II, issued 5413,461,000 of the 13'h % Notes due August
1, 2004 (approximately $215,000,000 gross proceeds). The proceeds were used to fund the acquisition of
the Star Systems and to repay outstanding borrowings under the Credit Agreement. The existing Credit
29
Agreement was amended as of November 15, 1994, to substitute Operating for the Operating Partnerships
as the obligor. The original discount of $198,461,000 is being amortized to interest expense using the
interest method. The 13%% Notes are guaranteed on a senior basis by the Company and contain certain
Optional and mandatory redemption provisions. Interest on the 13 cA % Notes accrues semi-annually until
August 1, 1999. Commencing February 1, 2000, interest will be paid semi-annually until maturity at
August 1, 2004.
The acquisitions of the Crown Systems and the CALP Units were financed through a) additional
limited partner investments in MCC totaling $110,000,000 and b) $235,000,000 in borrowings under the
$250,000,000 Amended and Restated Credit Agreement among Operating, NationsBank of Texas, N.A.,
as Managing Agent and as a Lender, Union Bank, as Agent and as a Lender, The First National Bank of
Boston and November Banque
S. 1994 (the
and Lenders and certain other Lenders referred to therein dated
as ( Credit Agreement").
The Credit Agreement provides for two term loan facilities, one of which is in the principal amount
of $120,000,000 and matures June 30, 1999 and the other which is in the prmcipal amount of
ues
$115,000,000 and mattJune 30, 2003. The Credit Agreement provides for scheduled amortization of
the two term loan facilities. The Credit Agreement also provers for a $15,000,000 revolving credit loan
(the "Revolver") with a final maturity date of June 30, 2003. The terms of the Revolver provide for an
increase to 545,000,000 to accommodate additio»al cable system tu�uisitions, subject to lender approval.
The full principal amount of the two term loan facilities is as of the ling of this report, and
c advance has been made under the Revolver. As of March 23, 1 5, the average interest rate being
charged with respect to all borrowings under the Credit Agreement was 8.99% per anaum.
The obligations under the Credit Agreement are secured by (a) a first lien on all of Operating's
interest in the Operating partnerships (including the Wisconsin Parmend ), (b) subject to certain
exceptions, a first lien on all 'ble and intangible assets of Operating and tie Operating Partnerships
(including the Wisconsin partne , but excluding Alabama), (c) a pledge by Operates of intercompany
notes under which it is the payee, () a guaranty of MCC and (e) an assignment or proceeds received under
certain management contracts to which Operating or an operating partnetsWp ua a party. The Credit
Agreement contains numerous restrictive $naacial and other covenants, including (a) restrictions on the
incurrence of indebtedness, liens, sale/leaseback transactions and guarantees. (b) restrictions on mergers,
dispositions of assets, acquisitions, investments, transactions with affiliates, change in fiscal year and
change in business conducted, (c) prohibitions on certain acquisitions by Operating, (d) restrictions on
distributions and (e) certain maintenance financial tests.
Working sae 1Ctaotmpany has financed system acquisitions through equity contributions and borrowings.
requirements and funds for capital expendinures for property and equipment have been
generated internally through net cash from operations. During the periods presented, the Company
committed substantial Capital resources for (a) construction and expansion of ext'sung Systems. (b) routine
replacement of cable television plant, (c) an increase in the channel capacity of certain systems, (d)
construction of new systems, (e) acquisitions of systems, and (f) cent action of fiber optic plant. During
the fourth quarter of 1994, the Hill Fos capital expenditures were $2,795,000. Capital expenditures,
excluding acquisitions, totaled S5, 55,000, $3,969,000, and $6,592,000, in 1992, 1993 and 1994,
respectively. Expenditures for acquisitions totaled $95,669,000 and $139,152,000 in 1992 surd 1994,
respectively. The Company has bud4eted approximately $34,000,000 for capital expenditures for the
Systems (including the Crown Wisconsin Systems) during 1995 for the costs of upgrading, rebuilding and
expanding channel capacity, for line extensions and customer connection, and for routine replacement of
equipment. Corny plans to BAY upgrade all of the Wisconsin Systems to a minimum of 60-
channel capacity over the next five years. The Cot�uaay's decision to upgrade these Systems will be based
on the economic return of the upgrade, including the impact of rate regulation on the particular System,
and its technical feasibility.
and MCC is a holding company which has no significant assets other than its investment in Operating
Dperating's investments in the Operating Partnerships. Capital, which is wholly owned by MCC, is
a corporation initially formed solely for the purpose of serving as co -issuer of the 117/s% Debentures, and
Capital has no operations or assets from which it will be able to repay the I I?/*% Debentures. MCC
derives all of its cash flow from the operating Partnerships. Accordingly, MCC must rely entirely upon
distributions from the Operating Partnerships to supply the funds necessary to meet its obligations,
principal and interest on the 11�/i% Debentures. The Credit Agreement prohibits
including the payment of �n
the Operating Partnerships from distributing cash to MCC, including, but not limited to, dividends,
management fees or interest and principal on intercompany loans, as provided therein. The Credit
Agreement provides that the Operating Partnerships may make buttons of cash to MCC for semi-
annual interest payments with respect to the llrifi Debentures (in the form of interest payments with
respectto intercompany loans) so long as (a) there exists no default under the Credit Agreement before or
after giving effect to such payment, and (b) the operating panne
Credit A Partnerships deliver to the lenders, under the
$fO�m, compliance certificates demonstrating that, following such payments, the Operating
Partnerships will be m compliance with their various covenants and financial tests. In the event and during
the occurrence of a default under the Credit Agreement, MCC would not receive from the Operating
Partnerships In addition relit he funds necessary to meet its interest payment obligations with respect to the 117A%
Agreement prohibits the Operating partnerships from making any
distributions to the Company for the repayment of principal with to the ll?A% Debentures,
including any redemption thereof, prior to the expiration of the Credit , which, by its terms,
expires m 2003. If an event of default occurs with respect to the 117i6% prior to the expiration
of the Credit Agreement, the will not be able to receive finds from the Operating Panne
to meet its principal repayment ob� on the l lri4% Debentures. The Company currently intends
arrange for any necessary financing to enable it to make principal payments on the 117i6% Debentures
when due, although there can be no assurance that it will be able to do so.
Recent Accounting Aronowwenenar
No recent accounting pronouncements have been issued which the Company has not adopted and
which are expected to have a material effect on the Company's consolidated financial statements and related
disclosures.
Impact of the IM Cable Act and Anticipated FCC Rate Regulations
In October 1992, Congress passed the 1992 Cable Act, which, among odor things, authorizes the
FCC to set standards for goveninxmal authorities to regulate the rates for certain cable television services
and equipment and gives local broadcast stations the option to elect mandatory carriage or require
retransmission consent.
The FCC promulgated rate regulations in April 1993, that established the initial permitted rates for
cable television services (other than programming offered on a per -channel or per -program basis) based
upon a benchmark methodology. Rates were also established for cable equipment. On February 22, 1994,
the FCC adopted further rate regulations resulting in parallel and overlapping benchmark formulas for rates
in effect before and after May 15, 1994. Operators may also justify rates through utility -type -cost -of -
service showings. The FCC adopted interim cost -of -service standards that took effect May 15, 1994, under
which cable operators may depart from the new benchmarks, with a permissible return on investment of
11.25 %. Under the interim cost of service standards, the rate base is the original cost of plant (original
purchase price, minus depreciation, plus improvements), with some allowances for intangibles; expenses
are those reasonably incurred in the course of providing cable services. A rulemaking is pending to make
the interim coat -of -service Hiles final. The regulations require rates for e�urpment to be cost -based. The
rates will be subject to rollbacks and, in some cases, refunds and/or forfeitures to the extent that a cable
television system's rates are found to exceed the reasonable rate determined by the methodolselected
ogy
by the cable television operator. The FCC has announced its intention to invegate systems whose rates
are substantially above permitted benchmark levels, unless such rates are justified under cost -of -service
standards that have yet to be established by the FCC. The timing and amount of such rollbacks and refunds
for any system will depend on a number of factors, inshudmg the method of rate determination selected by
the cable television operator, further clarification of and refinements to the benchmark methodology, the
final form of the cost -of -service standard to be adopted by the FCC, the capacity of the FCC to efficiently
process cost -of --service showings submitted by cable television operators, and the ultimate outcome of
31
petitions for reconsideration filed with the FCC challenging various asps of the FCC's regulations and
judicial proceedings in which challenges to the 1992 Cable Act and the FCC's regulations will be resolved.
While the overall impact of these regulations and other provisions of the 1992 Cable Act cannot
be determined at this time, the Company's business could be materially and adversely affected if the
Company were required to reduce its rates. The Company's ability to implement rate increases consistent
with its past practices has been limited materially by the FCC's regulations.
The Company believes that it has complied with all provisions of the 1992 Cable Act, including
the rate setting provisions promulgated by the FCC. Refunds may be ordered by a regulatory body on
basic service covering a one-year period. A certifying franchise authority has the right to order refunds
of the Company is unable to justify its rates through a cost -of -service filing. The amount of refund liability,
if any, to which the Company could be subject in the event that these systems' rates are successfully
challenged by franchising authorities is not currently estimable.
During the year ended December 31, 1994, the Company paid rate total cumulative rate refunds
of approximately $944,000 for 1993 and 1994 to its cable customers as a result of rate orders issued by
certain franchise authorities.
The Company has reviewed the majority of filings submitted by Crown for certified franchise
areas. Based on this review, the Company does not believe there are any outstanding rate orders which
would result in material refunds to customers.
The timing and amount of any reduction in rates from franchises successfully certifying is
uncertain. The Company does not anticipate at this point in time that it will need to take measures to
maintain compliance with the financial covenants included in the Credit Agreement. However, if
reductions in revenues from certifying franchises is significant, additional measures may need to be taken.
The Company intends to continue to assess the impact of the FCC's rate regulations and to develop
strategies to minimize the adverse impact of such regulations and the odor provisions of the 1992 Cable
Act on the Company's business. However, no assurances can be given that the Company will be able to
develop and successfully implement such strategies to minimize the potentially adverse impact of the FCC's
rate regulations on the Company's business.
Injiadon
Based on the FCC's current rate regulation standards, an inflation factor is included in the
benchmark formula in establishing the initial permitted rate. Subsequent to establishing the initial rate, an
annual rate increase based on the year-end inflation factor is permitted. In addition to anal rate
increases, certain costs over the prescribed inflation factors, defined by the FCC as "external costs", may
be passed through to customers.
Certain of the Company's expenses, such as those for wages and benefits, for equipment repair and
replacement, and for bruin; am marketing. generally increw with inflation. However, the Company does
not believe that its financial results have been adversely affected by inflation. Periods of high inflation
could have an adverse effect to the extent that increased borrowing costs for floating rate debt may not be
offset by increases in revenues. As of December 31, 1994, none of the Company's consolidated long-term
debt is subject to floating interest rates. However, as of January 19, 1995, the Company has $235,000,000
of outstanding borrowings cinder its Credit Agreement which are subject to floating interest rates. The
rates are based on LIBOR or the prime rate plus applicable margins based on certain financial ratios.
32
ITEM S. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company required under Regulation S-X are set forth
herein commencing on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 10. DIRECTORS AND E MCLTIVE OFFICERS OF THE REGISTRANTS
Director mid Executive Officers of Manus Cabk Properties, Inc.
The sole director and executive offic m of MCPI, which as the sole general partner of the General
Partner is responsible for the overall management of the business and operations of the Company, are:
NJeffre�
-
Position
Y A. Marcus
48
Director, President, Chief Executive
Officer and Treasurer
Louis A. Borrelli, Jr.
39
Executive Vice President and Chief
Operating Officer
Thomas P. McMillin
33
Vice President and Chief Financial
Officer
Richard A. B. Gleiner
42
Secretary and General Counsel
David L. Hanson
46
Senior Vice President of Wisconsin
Operations
Cynthia J. Manes
36
Vice President of Human Resources
and Administration
John C. Pietri
45
Vice President of Engineering and
Technology
John P. Klingstedt, Jr.
32
Vice President and Controller
Susan C. Holliday
29
Vice President of Regulatory
Compliance
David M. Intrator
39
Vice President of Marketing and
Programming
Steven P. Brockett
44
Vice President of Operations
The following sets forth certain biographical information with respect to the director and executive
officers of MCPI:
33
Jeffrey A. Marcus, the President and Chief Executive Officer of MCPI and its sole director, is
a cable television industry executive with over twenty-seven years of experience in system operations and
ownership, who founded the Company in 1990. Mr. Marcus had previously founded Marcus
Communications, Inc. in 1982, a cable television company that ultimately served and managed over
160,000 customers by the time of its 1988 merger into publicly held Western Tele-Communications, Inc.
The combined companies were renamed WestMarc Communications, Inc. ("WestMarc"), and grew to
serve over 550,000 customers during the period when Mr. Marcus served as WestMarc's Chairman and
Chief Executive Officer. Mr. Marcus exchanged his interest in WestMarc at the end of 1988 for cable
television systems in Wisconsin which were operated from 1989 until August 1990 by Marcus
Communications, Inc. These Systems were subsequently contributed to the Company as part of the
acquisition of the Wisconsin Systems. Prior to forming the original Marcus Communiciltiong, Inc. in 1982,
Mr. Marcus co-founded Communications Equity Associates ("CEA") in 1975. From its inception until
1982, when Mr. Marcus sold his interest in the company, CEA grew to become the second-largest
brokerage firm in the cable television industry.
Teleprompter Co Mr. Marcus also served as Director of Sales for
rporation fret 1973 to 1975, as Vice President of Marketing for Sammons
Communications, Inc. from 1971 to 1973 and as the owner of Marldt Communications, Inc., a cable
marketing and installation company, from 1969 to 1971.
Long active in state and national cable television industry matters and community affairs, Mr.
Marcus has served as Executive Director of the Minnesota and Wisconsin Cable Television Associations
and has served in a number of capacities for the National Cable Television Association. He also has served
as a Director of Daniels & Associates, one of the cable television industry's largest brokerage and
investment services companies, and TCI Northeast, Inc., a subsidiary of TeleCommunications, Inc.
Louis A. Borrelli, Jr. has served as Executive Vice President and Chief Operating Officer of
MCPI since March 1994, with responsibility for the Company's general operations as well as strategic
planning. From October 1989, to March 1994, Mr. Borrelli served as Senior Vice President of MCPI.
Mr. Borrelli has had an extensive seventeen-year career in the cable television
expertise in the mar industry, with specific
��8 programming and operations areas. Mr. Borrelli joined Marcus
Communications, Inc. in 1986 as Director of Operations. In connection with the 1988 WestMarc merger,
he was appointed as a Vice president - Operations for WestMarc, with responsibility for a division of cable
systems serving 200,000 customers. In October 1989, Mr. Borrelli returned to Marcus Communications,
Inc. as Senior Vice President.
From 1978 to 1986, Mr. Borrelli served in various capacities for the predecessor company to
United Artists Cable Systems Corp., including service as the Director of Programming/Marketing from
1984 to 1986, overseeing all programming and marketing activities and the development of new revenue
opportunities such as advertising sales and pay -per -view. Long active in the cable television industry, Mr.
Borrelli is a member of the Cable Television Administration and Marketing Society ("CTAM"), and has
served as President of CTAM's South Central region and as Chairman of the Planning and Development
Committee of the Metro Cable Marketing Co -Op, representing over 3 million cable customers in the New
York tri-state area.
Thomas P. McMMIn has served as Chief Financial Officer of MCPI since February 1995. He
joined the Company in September 1994, as Vice President of Finance and Development. Prior to joining
the Company, Mr. McMillin served for three years as Vice President - Cable Development for Crown
Media, Inc., a subsidiary of Hallmark Cards. Prior to his position with Crown, Mr. McMillin served five
years in various positions for Cencom Cable Associates, Inc., most recently as Vice President - Finance
and Acquisitions. Prior to joining Cencom in 1987, Mr. McMillin served four years with Arthur Andersen
& Co., certified public accountants. Mr. McMillin received his Bachelor of Science Degree in
Accountancy from the University of Missouri - Columbia.
Richard A. B. Gleiner is the Secretary and General Counsel of MCPI, with responsibility for
overseeing all of the legal affairs of the Company. Prior to joining the Company in 1994, Mr. Gleiner had
been of counsel to Dow, Lohnes & Albertson, New York, New York from 1988 until 1991, where he was
the primary outside counsel to the Company and its predecessors. From 1991 until joining Marcus Cable,
V:!
Mr. Gleiner was in private ppractice in Northampton, Massachusetts. Mr. Gleiner received his A.B. Degree
from Vassar College in 1974. and his J.D. Degree from Boston University in 1977.
David L. Hamm is a Senior Vice President of Wisconsin Operations of MCPI, with responsibility
for the daily operations of the Wisconsin Systems. Mr. Hanson is a native of Wisconsin and has spent
more than twenty years in the state's cable television industry designing, budding and managing systems.
Mr. Hanson held a number of technical and management positions with Badger CATV in Wisconsin from
1973 through 1982, when Badger CATV was acquired by Manus Comnumuations, Inc., after which Mr.
Hanson was named Wisconsin Regional Manager of MCI. After the 1988 WestMarc merger, Mr. Hanson
was named a Vice Press Manager of Wes"arc, and he became a Vice President of Marcus
Communications, Inc. in 1989 when Mr. Manus exchanged his ownership position in WestMarc for the
Wisconsin Systems previously owned by Badger CATV. Mr. Hanson is a of ng-time board member and
ppast President of both the North Central Cable Television Association (serving Minnesota, Wisconsin,
Ii4ichigan, Iowa, North Dakota and South Dakota) and the Wisconsin Cable Communications Association.
a also has served as a regional Vice -Director on the national board of the Community Antemna Television
He
Association.
Cynthia J. Mann[s is Vice President of MCPI, with responsibility for human resources, employee
benefits, general administration and insurance matters. Ms. Manes began her cable television career in
1984 as a receptionist with Marcus Communications, Inc., a her role with the Company in later
years by becoming Assistant to the President, with reap %* - ' for corporate administration. Upon the
merger of Marcus Communications, Inc. with WestMar�c in 19 , Ms. Marries was named Assistant to the
Chairman. At the end of 1988, Ms. Maumes left WestMarc to become Vice President of Corporate Affairs
at Marcus Communications, Inc., with responsibility for day-to-day operations and administration. Ms.
Mannes is an active member of the Cable Television Adtministradon Marketing Society, Women in Cable,
Dallas Human Resource Management Association, and the Cable Television Human Resource Association.
Ms. Manes is also a charter fellow of The Betsy Magness Leadership Institute.
John C. Pietri is Vice President Of Engineering and Technology of MCPI. He is responsible for
the technical operations and standards of the Company's cable television Systems including new
construction and rebuild projects, routine maintenance and installation practices and regulatory compliance
and reporting. Mr. Pietri has spent o technical therio �� , ,e�an in the cable television industry in a variety
for WestMarc, managing technical gXrtuatioi>s dg budgeting And Mr. Pietri was Regional Plant Manager
, btidgexiug and purchasing for twenty-five cable systems
serving 120,000 customers in four states. Mr. Pietri also held positions as Operations Manager of
Minnesota Utility Contracting, General ManaSer of Double "A" Enterprises and President of the
Milwaukee Division of Mullen Communications Construction Company. He has had extensive experience
in cable system design, construction installation and maintenance, having constructed over 5,000 miles of
cable plant.
John P. Klmgstedt, Jr. is the Vice President and Controller of MCPI, with responsibility for the
accounting and finanial repotting of the Company. Mr. Klingstedt joined Marcus Communications, Inc.
in 1987 and became Controller in 1989, with the election to Vice President following in 1994. Mr.
Klingstedt holds a Bachelors of Science Degree in Accountancy from Oklahoma Stan University.
Susan C. HoDlday is the Vice President of Regulatory Compliance of MCPI, with responsibility
for all FCC rate regulatory compliance and procedures Prior to joining the Company in 1993, Ms.
Holliday had been an audit manager with KPMG Peat Marwick. Ms. Holliday holds a Bachelors Degree
in Business Administration with concentration in Accounting, aid is a Certified Public Accountant (CPA).
David M. Intrator joined MCPI in October 1994 as a Vice President of Marketing and
Programming, with responsibility for the Company's programming, marketing. advertising sales and
ancillary revenue business. Mr. hmator has had a diverse fifteen year career in the cable television
industry, managing systems for Acton, Ca
ital Cities, Post -Newsweek and Centel, and working in cable
programming with Home Shopping Networ , where he was Director, Affiliate Relations from 1986 to 1990
and with Viewer's Choice Pay -Per -View where he was Vice President, Affiliate Relations from 1990 to
35
1994. Mr. Intrator is a member of the Cable Television Administration and Marketing Society ("CTAM")
and is a Board member of the CTAM Texas chapter. Mr. Intrator is a graduate of the University of
Connecticut and holds a Masters Degree in Public Administration from the Maxwell School of Public
Administration of Syracuse University.
Steven P. Brockett joined the Company in February of 1995 as the Vice President of
Operations/Administration of MCPI with responsibility for the Company's management of cable operations
in the states of Alabama, Delaware, Maryland and Texas. Additional responsibilities include Corporate
Government relation, information Services Group, and the Operations Audit function. Prior to joining the
Company, Mr. Brockett worked for two years as Vice President - Administration and one year as Vice
President - Controller for Crown Media, Inc., a subsidiary of Hallmark Cards. Mr. Brockett began his
cable career in 1978 with Heritage Communications, Inc., where he
(Cable Division Controller) andOperations (Director of S� experience tt both Accounting
Positions at the cable System Training). Mr. Brockett has held various
system operating level including System Controller in New Castle County, Delaware
(125,000 customers). Mr. Bmclodt is an active member of the Cable Television Administration Marketing
Society (National and Texas).
Other Key Employees
J. Christian Fenger is the Regional Group Manager for the Delaware/Maryland
over fifteen years of experience in the cable television business. Prior to joining the ompan , he hystem and ad
served since 1986 as Regional Manager for Simmons Cable TV for its Systems throughout Maryland and
Delaware (including the Systems that now comprise the Delaware/Maryland Systems). Previously, he
served from 1985 to 1986 as a General Manager for Warner Amex Cable in Nashua, New
where he was responsible for various aspects of system operations, and from 1980 to 1985 he was
Marketing Manager for Rogers Cablesystems in Syracuse, New York. Mr. Fenger holds a Masters Degree
in Communications Management and is President and member of the Board of Directors of Easton
Community Television. He also holds various committee positions with the DE/MD/DC Cable
Association.
Jerry Cranford is the Regional Group Manager for the San Angelo, Texas Systems with the
responsibility for the daily operations of this group. Mr. Cranford began his cable television career in San
Angelo and has over twenty-one years of experience in the cable television business. He held a variety
of positions during this period such as General Manager, Division Manager, Vice President, and Regional
Manager for the Southwest Division of United Artists Cable. His responsibilities varied but always
included working with system managers, their staff and mrmicipal authorities. In addition to his experience
in the cable industry, Mr. Cranford has held directorships in the Texas Cable Association from 198o-87,
including the presidency in 1985-96. Mr. Cranford holds a Bachelor of Science Degree of Business
Administration and is a past recipient of the "John Manidn Award" from the Texas Cable TV Association.
36
ITEM 11. EXECUTIVE COMPENSATION
MCPI presently does not pay any compensation to its director or officers. The executives of MCPI
are compensated in their capacity as officers of Operating. The following table summarizes the
compensation paid by Operating to its Chief Executive Officer and to each of its four other most highly
executive officers recem'ng compensation in excess of $100,000 for services rendered during
thyea
e rs ended December 31, 1992, 1993, and 1994.
SUMMARY COMPENSATION TABLE (1)
Annual
Compensation
All Other
Name and Princigg] PoMon
YM
SAIM
Jeffrey A. Marcus
President, Chief Executive Officer
1992
1993
-
-
$429,677 (3)
and Treasurer
1994
-
$163,949
$200.000
$917,764 (3)
$575,765 (3)
Louis A. Borrelli, Jr.
Executive Vice President,
1992
1993
$104,000
$107,120
$109,393
$218,761
$2,225 (4)
$4,497 (4)
Chief Operating Officer
1994
$176.275
$263,942
$4,620 (4)
David L. Hanson
1992
_
Senior Vice President of Wisconsin
Operations
1993
$67,670
$41,533
$1,984 (4)
1994
$96,034
$93,380
$2,368 (4)
Cynthia J. Manes
Vice President of Human Resources
1992
1993
$47,810
$56,400
$64,343
$125,671
$2,221 (4)
$2,784 (4)
and Administration
1994
$95,700
$135,757
$4,620 (4)
Thomas P. McMillin (5)
1992
-
Vice President and
1993
-
_
Chief Financial Officer
1994
$36,050
$69,567
_
Mark A. Biersmith (5)
1992
-
Former Chief Financial Officer
1993
$100,000
$92,951
_
1994
$138,248
$64,621
$4,620 (4)
(1) Does nut imclude limited partnership mrorrau in the General Parma which vested in part in foal years 1992, 1993. and
1994. Shown below we (i) the total number of limited partnership nab of the General Partner held by executive officers
named in the Summary Compensation Table, as of December 31, 1994, and (d) the vesting schedule, as of December 31,
1994, fa each of the executive ot5oeta named in the Summary Compensation Table:
Number and
Cb m of
limited
Pitrituarship
�
P�
inballs
oVatfng
1�4
Louis A. Borrslli, Jr.
13.75 Class A
100%
20%
Cynthia J. Mannes
7.5 Class A
100%
20%
David L. Hamson
5.0 Class C
100%
20%
The Company believes that the lamed partnership units have ono current market value. See 'lnoemive Performance Plans.
Ilmaed Partnership Interests in Genial Partner- and -Security Ownership of Certain Beneficial Owners and Management_
37
Principal Security Holders.'
(2) Includes $250.000 in the aggregate paid as bonuses by the General Partner from available finds to employees of the
Management Compny (other than Jeffrey A. Maraca) m connecum with the oompleum of the previous Credit AVwmeat
financing and the offering of the 11%% Demitttres in October 1993.
(3) Represents disttilastim to Jeffrey A. Marcus and Nancy C. Marcus as the taocbwidea of the Management Company.
MCPI, which is owned by Jeffrey A. Masts and his wife, Nancy C. Maras. has coouund with the Company to provide
services relating to the pluming and negotiation of acquisitions in the merger of bW into MCPI in De ember 1993.
(4) Reprnmu the employer maochmg contribution under the Company's 401(k) mulched savings plan for each of the executive
officers named in the Summary Compensation Table. See 'Mao-Pemsion and Profit Sharing Plans.'
(5) Mark A. Bk=ith left the Company on October 28, 1994. Thomas P. McMillin joined the Company an September 12,
1994.
Incentive Performance Plans
Deferred Profit Agreement. The General Partner has entered into a Deferred Profit Agreement
with J. Christian Fenger. Mr. Fenger is the Regional Manager of the Delaware/Maryland Systems. The
Deferred Profit Agreement was entered into in connection with the Company's acquisition of the
Delaware/Maryland Systems. The Deferred Profit Agreement provides that the General Partner shall pay
an amount equal to five percent
of the pre-tax net profit received by the General Partner from the sale of
the Delaware/Maryland Systems during the term of the respective Deferred Profit Agreement. The
Deferred Profit Agreement provides that the executive's itlterest under the Deferred Profit Agreement shall
vest twenty percent upon execution thereof and twenty percent on the first, second, third and fourth
anniversaries thereof, if Mich executive is still an employee of the Company. Mr. Fenger entered into their
Deferred Profit Agreement with the General Partner on October 1, 1992.
Limited Partnership Interests in General Painter. The General Partner has issued certain limited
partnership interests to key employees of the Company without requiring such employees to make capital
contributions to the General Partner. Each of the limited partnership interests issued is subject to the
applicable vesting schedule set forth in the Partnership Agreement of the General Partner. Most of the
outstanding interests issued were fully vested in 1994, and the remaining outstanding interests will be fully
vested by 1997.
Among the executive officers of MCPI named in the Summary Compensation Table, Louis A.
Borrelli, Jr., has been granted 13.75 Class A Limited Partnership units, which became fully vested as of
August 1, 1994, and Cynthia J. Manes has been ranted 7.5 Class A Limited Partnership Units, which
became fully vested as of August 1, 1994. David L. Hanson has been granted five Class C Limited
Partnership Units which became fully vested as of August 1, 1994. One unit equals 1% of the total
partnership interests of the General Partner.
The limited partners of the General Partner are entitled to receive distributions in accordance with
their respective percentage interests in the General Partner, as set forth in the Partnership Agreement,
except for the Class C Limited Partners who are entitled only to receive distributions of amounts directly
attributable to the Wisconsin Systems.
Pension and Profit Sharing Plans
The Company sponsors a 401(k) plan for its employees that are age 21 or older and have been
employed by the Company for at least one year. Employees of the Company can contribute up to fifteen
percent of their salary, on a before -tax basis, with a maximum 1994 contribution of $9,240 (as set bq the
Internal Revenue Service). The Company matches participant contributions up to a maximum of two
percent of a panic�t's salary. All employee -participant contributions and earnings are fully vested upon
contribution and Company contributions and earnings vest twenty percent per year of employment with
the Company for five years. See "Summary Compensation Table."
38
Compensation of Directors
Beginning on July 29, 1994, the sole director of MCPI, Jeffrey A. Marcus, received an annual
salary of $400,000 from Operating for his role as President and Chief Executive Officer. Mr. Marcus'
salary will increase to S500,000 in 1995.
Compensation Committee Interlocks and Insider Participation
Mr. Jeffrey A. Marcus, as the president of MCPI, the ultimate general partner, sets the
compensation of the executive officers of MCPI in their executive positions with Operating.
ITEM 12• SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
PRINCIPAL SECURITY HOLDERS
Security Ownership of Certain Beneficial Owners
The following table sets forth, as of January 18, 1995, (i) the units of general partnership interests,
limited pier interests and preferred partnership interests of MCC constituting a class of votings
security and whichare owned by the directors and executive officers of MCPI and each person who i known to MCC to own beneficially more than 5.0% of any class of MCC's partnership interests and (iithe units of the equity securities of MCPI and the General Partner owned by each director or executive
officer of MCPI named in the S�a�y Compensation Table and by all executive officers of MCPI as a
group. MCC owns all 1,000 shares o{outstanding common stock of Capital.
N of Units/ % of
sum Luz
Marcus Cable Properties, L.P. (1)
2911 Turtle Creek Boulevard, Suite 1300
Class B General Partner Units
of MCC
6,434.53 100.00%
Dallas, Texas 75219
Marcus Cable Properties, L.P. (1)
2911 Turtle Creek Boulevard, Suite 1300
DCA Class B Units
of MCC
7,470.00 100.00%
Dallas, Texas 75219
Marcus Cable Properties, L.P. (1)
2911 Turtle Creek Boulevard, Suite 1300
General Partner Profit
Interest of MCC
4,943.66 100.00%
Dallas, Texas 75219
Goldman, Sachs & Co. Affiliates (2)
85 Broad Street
Class B Limited Partnership
96,366.24 65.84%
New York, New York 10004
Units of MCC
Freeman Spogh & Co., Inc. Affiliates (3)
599 Lexington Avenue, 18th Floor
Class B Limited Partnership
Units MCC
25,000.00 17.08%
New York, NY 10022
of
Greenwich Street Capital Partners, Inc.
Affiliates (4)
Class B Limited Parmership
15,625.00 10.67 %
388 Greenwich Street
Units of MCC
New York, NY 10013
Weiss, Peck & Greer Affiliates (5)
One New York Plaza, 30th Floor
Class B Limited Partnership
Units MCC
9,375.00 6.41 %
New York, NY 10004
of
Jeffrey A. Marcus (1)
2911 Turtle Creek Boulevard, Suite 1300
Common Stock of MCPI
1,000.00 100.00%
Dallas, Texas 75219
39
# of Units/ % of
Name and Address of Beneficial Owners Type of Interest Shares Q S
Louis A. Borrelli, Jr. (1) Class A Limited Partnership 13.75 52.88 %
2911 Turtle Creek Boulevard, Suite 1300 Units of the General Partner
Dallas, Texas 75219
Cynthia J. Mannes (1) Class A Limited Partnership 7.50 28.84%
2911 Turtle Creek Boulevard, Suite 1300 Units of the General Partner
Dallas, Texas 75219
David L. Hanson (1) Class C Limited Partnership 5.00 74.10%
3300 Birch Street Units of the General Partner
Suite 2B
Eau Claire, WI '54703
(1) The General Partner, the sole general partner of MCC, owns an 11.41 % equity bum in MCC. MCPI is the sole general
partner of the General Partner. A majority of the limited partners of the General Partner are members of the Company's
management team In trial, the limited partners own approximately 34.75 % of the Wmerahip interest of the General Partner.
Jeffrey A. Manaus and his wife, Nancy C. Maras, own all the issued and outstanding stock of MCPI, which stock is subject
to a voting trust agreement which gives Mr. Maraca the right to vote all of such stock. See -Certain Transactions -Ownership
Of Equity Interests in MCC and the Operating Partnerships.•
(2) The following affiliates of Goldman Sachs & Co. own the outstanding Class B Limited Partnership Units of MCC: Broad
Street Investment Fund 1. L.P. (75,047.693 units); Brad Street Acquisition Corporation (5,028.885 units); the Goldman
Sachs Group, L.P. (8,155.847 units); Stone Strew Fund 1992, L.P. (1.416.686 units); Bridge Strew Fund 1992, L.P.
(831.163 units); Broad Street Exploration Corporation (405.405 units); Stone Suva Fund 1990, L.P. (462.834 units); Stone
Stew Fund 1991, L.P. (257.670 units); Bridge Street Fund 1990, L.P. (308.272 units); Broad Street Empire Corporation
(121.616 units) and Broad Street Income Corporation (1,456.490 units), Broad Street Yield Corporation (SM.083 units),
Stone Street Fund 1994, L.P. (941.974 units). Broad Strew Value Corporation (79.497 units) and Bridge Strew Fund 1994,
L.P. (996.220 units).
(3) The following affiliates of Freeman Spogli own the outstanding Class B Limited Partnership Units of MCC: FS Equity
Partners M. L.P. (24,129.00 units) and MCC International Holdings. Ltd. (871.00).
(4) The following affiliates of Greenwich Street Capital Partners own the outstanding Class B Limited Partnership Units of
MCC: Greenwich Street Capital Partners. L.P. (9,371.378 units), GSCP Offshore Holdings, Inc. (511.992 units), TRV
&nployees Fund, L.P. (4,899.650 units), The Travelers Insurance Company (564.127 twits), and The Travelers Life and
Annuity Commpany (277.853 units).
(5) The following affiliates of Weiss, Peck & Greer own the outstanding Class B Limited Partnership Units of MCC: WPG
Corporate Development Associates IV, L.P. (7,553.00 units) and WPG M Holding, Inc. (1,822.00 units).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Management Company
Prior to July 29, 1994, each Operating Partnership had entered into various Management
Agreements with the Management Company, whereby the Management Company performed various
general, administrative and operating services to the Operating Partnerships. The Management
Agreements with the Operating Partnerships provided that the Management Company was to manage all
aspects of each of the partnerships' business in consideration for a management fee payable monthly, equal
to 5.5 % of the total revenues of the Systems from all sources (other than extraordinary gains or losses
derived from sales or dispositions of all or part of the System). The total amounts paid for management
fees by the Operating Partnerships for the years ended December 31, 1992, 1993, and 1994 were
approximately $1,693,000, $3,193,000 and $1,683,000, respectively. These Management Agreements
were terminated July 29, 1994, in conjunction with the acquisition of the Star Systems and the issuance of
the 131h % Notes. All management functions previously performed by the Management Company were
transferred to Operating.
40
Transaction Fees
Transaction fees for services relating to the planning and negotiation of acquisitions have been paid
to MCPI by the Company upon closing of certain transactions. In 1994, MCPI received a transaction fee
of $1,500,000 in connection with the acquisitions of the Star Systems and in January 1995, MCPI received
a transaction fee of $1.250,000 in connection with the acquisition of the Crown Systems.
Investment Banking Agreement
MCC, the General Partner, MCPI, Jeffrey A. Marcus and Goldman Sachs have entered into an
agreement (the "Investment Banking Aggrr "), pursuant to which the parties have agreed that, for so
long as Goldman Sachs holds at least 30% oaf the total outstanding interest of MCC, no person
or entity other than Goldman Sachs or its affiliates are to provide investment banking, financial advisory,
or underwriting or placement agent services on behalf of the Company.
Recent Developments in the Ownership of Equity Interests in MCC and the Operating Partnerships
In July 1994, the Company utilized a portion of the net proceeds received by the Company from
the sale of the 13 rA % Notes to pay down the current Credit Agreement and to convert the remaining
8,854.16 Class II MCP Units held by Goldman Sachs Investors to additional Class B linked Pannier Units
in MCC and to partial redeem and convert the remaining 4,678.07 Class A Units held by the General
Partner to additional General Palmer Units.
The Company redeemed 1,272.126 Class A Units with a face value of $1,000 per unit and
cumulative ut,paid preference returns of $727,875 for cash of $2,000,000. Also on that date, the remaining
3,405.944 Class A Units with a face value of $1,000 per unit and cumulative unpaid preference returns
of $1,971,474 were converted into 3,934.53 GP Units and 201.95 Class B Limited Partnership Units, each
with a face value of $1,300 per unit.
As of December 31, 1994, the General Partner owned 19.5390% of the equity interests in MCC,
and a 2 % limited partnership interest in Operating. After the Crown acquisition. the General Partner's
non -preferred equity interests in MCC is 11.4083 %.
Agency Agreements
The Issuers have entered into two agreements (the "Agency Agreements") whereby the Issuers have
agreed that Capital is acting as an agent of MCC in serving as co -issuer of the l lrii% Debentures and that
Capital II is acting as an agent of Operating in serving as co -issuer of the 13'A Notes.
41
ITEM 14. KMBITS, FINANCIAL STATEMENT
S-K
(a) (1) F, ncial Statements
Included in this Report:
Independent Auditors' Report
Consolidated Balance Sheets
December 31, 1993 aW 1994
Consolidated Statements of Operations
Years ended December 31, 1992, 1993, and 1994
Consolidated Statements of Partners' Capital (Deficit)
Years ended December 31, 1992, 1993, and 1994
Consolidated Statements of Cash Flows
Years ended December 31, 1992, 1993, and 1994
Notes to Consolidated Financial Statements
AND REPORTS ON FORM
EW
F-1
F-2
F-3
F-4
F-5
F6
Separate financial statements of Marcus Cable Operating Company, L.P. as issuers of the 131h %
Senior Subordinated Guaranteed Discount Notes have not been presented, as the aggregate net
assets, earnings and partners' capital (deficit) of Marcus Cable Operating Company, L.P. are
substantially equivalent to the net assets, eatums and partners' capital (deficit) of the Company
and its subsidiaries on a consolidated basis. Additionally, separate financial statements of Marcus
Cable Capital Corporation and Marcus Cable Capiuta�) Corporation 11 have not been presented
because these entities have no operations and substantially no assets or partners' capital.
Financial statement schedules have been omitted because they are either inapplicable or the
requested information is shown in the financial statements or noted therein.
(2) Exhibits
Included in this Report:
Exhibit:
'3.1 Amended and Restated Agreement of Limited Partnership of MCC, dated
as of August 1, 1990. (Exhibit 3.1)
•3.2 Certificate of Limited Partnership of MCC. (Exhibit 3.2)
'3.3 Agreement of Limited Partnership of the General Partner, datad as of May
14, 1990 (the "General Partner Partnership Agreement"). (Exhibit 3.3)
'3.4 Amendment Number One, dated as of August 1, 1990, to the General
Partner Partnership Agreement. (Exhibit 3.4)
•3.5 Amendment Number Two, dated as of December 15, 1990. to the General
Partner Partnership Agreement. (Exhibit 3.5)
42
*3.6
Amendment Number Three, dated as of March 15, 1993, to the General
Partner Partnership Agreement. (Exhibit 3.6)
*3.7
Amendment Number Four, dated as of August 1, 1993, to the General
Partner Partnership Agreement. (Exhibit 3.18)
*3.8
Certificate of Limited Partnership of the General Partner. (Exhibit 3.7)
*3.9
Amended and Restated Agreement of Limited Partnership of the
Wisconsin Partnership, dated August 1, 1990. (Exhibit 3.8)
*3.10
Certificate of Limited Partnership of the Wisconsin Partnership. (Exhibit
3.9)
*3.11
Amended and Restated Agreement of Limited Partnership of the San
Angelo Partnership, dated as of April 30, 1992. (Exhibit 3.10)
*3.12
Certificate of Limited Partnership of the San Angelo (Exhibit
3.11)
*3.13
Amended and Restated Agreement of Limited Partnership of the
Delaware/Maryland Partnership, dated as of October 1, 1992. (Exhibit
3.12)
*3.14
Certificate of Limited Partnership of the Delaware/Maryland partnership.
(Exhibit 3.13)
*3.15
Certificate of Incorporation of MCPI. (Exhibit 3.14)
*3.16
Bylaws of MCPI. (Exhibit 3.15)
*3.17
Certificate of Incorporation of Capital. (Exhibit 3.16)
*3.18
Bylaws of Capital. (Exhibit 3.17)
**3.19
Second Amended and Restated Agreement of Limited Partnership of
MCC, dated as of October 13, 1993. (Exhibit 3.15)
**3.20
Second Amended and Restated Agreement of Limited Partnership of the
Wisconsin Partnership, dated as of October 13, 1993. (Exhibit 3.16)
**3.21
Second Amended and Restated Agreement of Limited Partnership of the
San Angelo Partnership, dated as of October 13, 1993. (Exhibit 3.17)
**3.22
Second Amended and Restated A� of Limited Partnership of the
�ware/Maryland Paimerahip, as of October 13, 1993. (Exhibit
**3.23
Certificate of Limited Partnership of Operating. (Exhibit 3.20)
**3.24
Agreement it 1) Limited Partnership of Operating, dated June 23, 1994.
**3.25
Certificate of Incorporation of Capita111. (Exhibit 3.13)
**3.26
Bylaws of Capital U. (Exhibit 3.14)
43
***3.27
Form of Third Amended and Restated Agreement of Limited Partnership
of MCC. (Exhibit 3.16)
*****3.28
Fourth Amended and Restated Agreement of Limited Partnership of
Marcus Cable Company, L.P. ("MCC") (Exhibit 4.1)
*4.1
Form of Indenture byy and among the Registrants and U.S. Trust Company
of Texas, N.A., Trustee,
as related to the I ITA 6 Debentures.
(Exhibit 4.1)
****4.2
Indentre by and among the Registrants and the U.S. Trust Company of
Texas, N.A., as Trustee, relating to the 13%% Notes. (Exhibit 4.1)
*9.1
Voting Trust Agreement between Jeffrey A. Marcus and Nancy C.
Marcus as stockholders and Jeffrey A. Marcus as trustee. (Exhibit 9.1)
* 10.1
Agreement, as of January 17, 1990, by and between
Pagem
MCPmenu Company (the "Wisconsin Management
Agreement"). (Exhibithe
*10.2
First Amendment to the Wisconsin Management Agreement, dated as of
July 31, 1990. (Exhibit 10.2)
*10.3
Letter Agreement, dated as of August 1, 1990, from MCC to the
Management Company. (Exhibit 10.3)
*10.4
Management Agreement, dated February 10, 1992, by and between the
San Angelo Partnership and the Management Company. (Exhibit 10.4)
*10.5
Management Agreement, dated October 1, 1992, by and between the
Partnership and the Management Company. (Exhibit
11�ware/Maryland
* 10.6
Compensation Agreement, dated as of January 17, 1990, by and between
the Wisconsin Partnership and Marcus Management, Inc. (the
Compensation Agreement). (Exhibit 10.6)
*10.7
First Amendment to the Compensation Agreement, dated as of August 1,
1990. (Exhibit 10.7)
*10.8
Investment Banking Agreement, dated as of January 17, 1990, by and
among MCC, MCPI, Jeffrey A. Marcus and Goldman Sachs & Co. (the
"Investment
Banking Agreement"). (Exhibit 10.8)
*10.9
Amendment to the h estment Banking Agreement, dated as of August 1,
1990. (Exhibit 10.9)
*10.10
Credit Agreement, dated as of August 1, 1990, by and among the
Wiaconsia Partnership, the Banks listed therein and The
aank0; f Chicago, asAgent(the "Wisconsin Credit Agreement-). (Exhibit
*10.11
First Amendment, dated as of September 21, 1990, to the Wisconsin
Credit Agreement. (Exhibit 10.11)
44
*10.12
Second Agreement, dated as of June 10, 1991, to the Wisconsin Credit
Agreement. (Exhibit 10.12)
*10.13
Third Agreement, dated as of April 22, 1992, to the Wisconsin Credit
Agreement. (Exhibit 10.13)
* 10.14
Credit Agreement, dated as of February 10, 1992, by and among the San
Angelo Partnership, the lenders named therein and NationsBank of Texas,
N.A., individually and as administrative lender, as amended as of October
1, 1992 ("San Angelo Credit Agreement"). (Exhibit 10.14)
10.15
Credit Agreement, dated as of September 11, 1992, by and among the
DelawarNMaryland Partnership,
the lenders named therein and
NationsBank of Texas, N.A., individuaUv and as administrative lender
"Delaware/Maryland
(the Agreement"). ibit 10.15)
' 10.16
San Angelo Cable Television Franchise Ordinance, dated as of February
2, 1977. as amended. (Exhibit 10.16)
**10.17
Credit Agreement, dated October 13, 1993, among the Operating
Partnership and NationsBank of Texas, N.A., individually
and as
Administrative Lender, and the other lenders parties thereto. (Exhibit
10.11)
**10.18
First Amendment to Credit Agreement, dated as of November 23, 1993,
among the Operating Partnerships and NationsBank of Texas, N.A.,
individually and as Administrative Lender, and the other lenders
parties
thereto. (Exhibit 10.12)
»»10.19
Letter Agreement, dated October 1, 1993 from the Goldman Sachs & Co.
Investors to MCPI. (Exhibit 10.16)
**10.20
Purchase Agreement, dated as of November 12, 1993 between Star and
the Wisconsin Partnership. (Exhibit 10.17)
**10.21
Escrow ) ►gre dated November 12, 1993 between Star, the
WisconsinParmrship
and Waller Capital Corporation. (Exhibit 10.18)
*»» 10.22
Amendment Number One to Purchase Agreement dated as of May 31,
1994 between Star and the Wisconsin Partnership. (Exhibit 10.16)
****10.23
Amendment Number Two to Purchase July 29,
1994, between Sellers and the Wisconsin, dated as
Partnership. (Exhibit 2.3)
it
****10.24
Assignment and Assumption Agreement
Sellers and the WPa�, dated July 29, 1994, between
rship. (Exhibit 99.1)
»»»» 10.25
Indemnification Escrow 'dated July 1994, by and among
the Sellers, the Wisconsin
(Exhibit 99.3) hip and Walllerer Capital Corporation.
»»»**10.26
Form of tion Agreement for the Purchase and Sale of Class B LP
Units datedS�as of J
January 11, 1995, among MCC, Marcus Cable
Properties, L.P. and a new investor. (Exhibit 4.2)
45
****10.27 Purchase Agreement, dated as of July 1, 1994 between the Sellers, the
Wisconsin Partnership and the Other Crown Buyers (Exhibit 10.18).
*****10.28 Funding and Adjustment Agreement dated as of January 18, 1995 among
CMA, MCP, CCI, CCA and CCII. (Exhibit 99.2)
*****10.29 $250,000,000 Amended and Restated Credit Agreement among Marcus
Cable Operating Company, L.P., NationsBank of Texas, N.A., as
Managing Agent and as a Lender, Union Bank, as Agent and as a Lender,
The First National Bank of Boston and Banque Paribas, as Co -Agents and
Leaders, ad certain other Lenders named therein dated as of November
15, 1994. (Exhibit 99.3)
10.30 Amendment to Stock Purchase Agreement, dated November 18, 1994.
10.31 Asset Purchase Agreement, dated March 24, 1995, among the San Angelo
Partnership and TCA.
10.32 Pre -Closing Escrow Agreement, dated March 24, 1995, among the San
Angelo Partnership and TCA.
12.1 Computation of Ratio of Earnings to Fixed Charges.
***21.1 Subsidiaries of Operating. (Exhibit 21.1)
***21.2 Subsidiaries of MCC. (Exhibit 21.2)
****99.1 Covenant Not to Compete, dated July 29, 1994, by and amonngg the Sellers,
Donald G. Jones and the Wisconsin Partnership. (Exhibit 99.2)
* Incorporated by reference to the exhibit shown in parenthesis contained in the Registrants'
Registration Statement on Form S-1 (File Nos. 33-67390 and 33-67390-01).
** Incorporated by reference to the exhibit shown in parentheses contained in the Registrants'
Registration Statement on Form S-I (File Nos. 33-74104 and 33-74104-01).
*•' Incorporated by reference to the exhibit shown in contained in the Registrants'
Registration Statement on Form S-1 (File Nos. 33-81008, 008-01 and 33-81008-02).
"** Incorporated by reference to the exhibit shown in
29, BKA. parentheses contained in Form 8-K dated July
*'**' Incorporated by reference to the exhibit shown in
18, 1995. P contained in Form 8-K dated January
(b) Reports on Form 8-K:
On January 18, 1995, Marcus Cable Company, L.P. and Marcus Cable Operating
Company, L.P. filed a report on Form 8-K relating to the acquisition of certain cable
systems serving the areas in Janesville, Wausau, Stevens Point, Wisconsin Rapids,
Onalaslm, Depere and Door County in Northern Wisconsin and in the suburbs of Madison
and Milwaukee, Wisconsin, including West Allis, and in Altura, Rollingstone, Lewiston
and Bidden Valley, Minnesota.
On March 10, 1995, Marcus Cable Company, L.P. and Marcus Cable Operating
Company, L.P. filed a report on Form 8-K relating to the announcement to acquire certain
cable television systems from Sammons Communications, Inc.
On March 24, 1995, Marcus Cable Company, L.P. and Marcus Cable Operating
Company L.P. filed a report on Form 8-K relating to the announcement of the divestiture
of certain cable systems in.San Angelo, Texas and the discussions relating to the
acquisition of CALP.
47
Nl�t� wlP zitu lI lit
The Partners
Marcus Cable Company, L.P.:
We have audited the consolidated financial statements of Marcus Cable Company, L.P. and subsidiaries
as listed in the index in Item 14(a). These consolidated financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above present fairly, in all material
respects, the financial position of Marcus Cable Company, L.P. and subsidiaries as of December 31, 1993
and 1994, and the results of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1994, in conformity with generally accepted accounting principles.
Dallas, Texas
February 17, 1995, except for note 11,
which is as of March 24,1995
KPMG Peat Marwick LLP
F-1
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1993 and 1994
(in thousands)
Assets IM IM
Current assets:
Cash and cash equivalents S 8,937 S 5,328
Accounts receivable:
Customers, net of allowance of 5142 in 1993 and
$240 in 1994 1,033 1,899
Other 190 1,971
Prepaid expenses 463 685
Total current assets 10,523 9,883
Property and equipment (note 2):
Cable systems 65,791 104,357
Land and buildings 1,160 2,248
Vehicles and other 2=338 3_421
Less accumulated de69,289 110,026
depreciation -(2?,b?�1 -( 69)
Net property and equipment 46,666 76,657
Other assets, net (note 3) 137137.959 228.677
$195,148 $ 315 17
Liabilities anA Partners'Deficit
Current liabilities:
Current maturities of long-term debt (note 4)
S 2,850
$ —
Accounts payable and other accreted liabilities
2,882
6,519
Accreted interest
3.148
2.970
Total current liabilities
8,880
9,489
Long-term debt, less current nu rities (note 4)
192,150
327,264
Subsidiary limited partner interests (note 5)
5,788
(246)
Parmers' deficit - redeemable partner interests (note 6)
(11,670)
(21,290)
Commitments and contingencies (notes 2, 4, 5 and 9)
S 195.148
S 111al7
See accompanying notes to consolidated financial statements.
F-2
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31, 1992, 1993 and 1994
(in thousands)
1252
1223
1224
Revenues:
Basic service
$29,994
$40,532
$47,792
Premium service
5,705
7,917
10,397
Installation and other
2,711
3,858
5,440
Management fees
—
1.11 g
Total revenues
38.310
52307
64,747
Operating expenses:
Programming costs
7,501
10,516
14,127
Selling, service and system management
4,112
5,448
7,533
General and administrative
4,491
5,885
9,793
Management fees and expenses (note 7)
2,224
3,617
2,165
Depreciation and amortization
26,652
?, m
37.412
Operating loss
44.990
(6.6701
5�
.(1,792J
71,030
l6-293a
Other (income) expense:
Interest expense
11,114
13,443
28,105
Interest income and other, net
(1331
251
(51
Loss before subsidiary limited partner
10.991
13-694
28-054
interests and extraordinary item
(17,651)
(15,486)
(34,337)
Subsidiary limited partner interests (note 6)
(3,6721
9-919
6,034
Loss before extraordinary item
(21,323)
(6,567)
(28,303)
Extraordinary item - loss on early retirement of debt
—
(3-0761
(2.3071
Net loss
21 23
$ (9.643)
S(30,61
See accompanying notes to consolidated financial statements.
F-3
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Consolidated Statements of Partners' Capital (Deficit)
Years ended December 31, 1992, 1993 and 1994
(in thousands)
Balance at December 31, 1991
Capital contribution
Net loss
Balance at December 31, 1992
Distribution of preference
returns on Class A units
redeemed
Redemption of Class A units
Reallocation of losses on
redemption of subsidiary
limited partner interests
(note 6)
Capital contribution
Net loss
Balance at December 31, 1993
Distribution of preference
returns on Class A units
redeemed
Redemption of Class A units
Conversion of Class A units
Capital contribution
Net loss
Balance at December 31, 1994
Redeemable Partner Interest%
Class B
General Limited Class A
Partners Partners Partner
S (2,500)
(213�
(2,713)
(I"
(63)
(4,302)
(961
(7,361)
(7)
(25)
(3,844)
(10,0531
S(21.2
90
S —
32,501
(1-110)
11,391
(1,717)
(6,030)
(721)
(2,519)
(166)
22,990
S - —
See accompanying notes to consolidated financial statements.
F-4
S(3,687)
(3,687)
1,771
(2,39
(4,309)
1,272
4,010
(9731
S —
S (6,187)
32,501
(2t
-323
4,991
(1,904)
(4,322)
(4,302)
3,510
(9,643)
(11,670)
(728)
(1,272)
22,990
(30AW
S 21 90
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1992, 1993 and 1994
(in thousands)
1=
im
1224
Cash flows from operating activities:
Net loss
S (21,323)
S (9,643)
S (30,610
Adjustments to reconcile net loss to net cash
provided by operating activities:
Extraordinary item - loss on early retirement
of debt
-
3,076
2,307
Loss on retirement of fixed assets
_
400
_
Loss on redemption of subsidiary limited partner
units
-
4,302
-
Depreciation and amortization
26,652
29,633
37,412
Accretion of discount on notes
-
-
12,264
Subsidiary limited partner interests
3,672
(13,221)
(6,034
Changes in assets and liabilities, net of
effects of acquisitions:
Accounts receivable
(930)
229
(1,876
Prepaid expenses
(85)
(152)
(222
Other assets
(217)
457
(40
Accounts payable and accrued liabilities
1 A99
1.49R
2.688
Net cash provided by operating activities
9.668
15.569
15•989
Cash flows from investing activities:
Escrow deposit on acquisition of cable systems
-
(2,990)
(5,000
Acquisition of cable systems and franchises, net of
cash acquired
(95,669)
-
(139,130
Additions to property and equipment
(5,3551
(3-9691
(6,592
Net cash used in investing activities
(10I.0241
(6-9491
(150,722
Cash flows from financing activities:
Proceeds from long-term debt
66,500
195,000
215,000
Repayment of long-term debt
(7,000)
(162,500)
(95,000
Contributions by limited partners
32,501
3,510
22,990
Contributions by subsidiary limited partner
1,000
-
-
Purchase of subsidiary limited partner units
-
(351)
-
Payment of debt issuance costs
(2,129)
(6,589)
(9,666
Redemption of Class A partner units
-
(4,322)
(2,000
Redemption of subsidiary limited partner units
-
(16,846)
-
Preference returns distributed
-
(8,910
_
Net cash provided by (used in)
financing activities
90.872
(1.0081
131.324
Net increase (decrease) in cash and cash equivalents
(494)
7,612
(3,509
Cash and cash equivalents at beginning of year
1-709
1.225
8.837
Cash and cash equivalents at end of year
S 1,225
S 8,837
S 5,328
Supplemental disclosure of cash flow information -
interest paid
S 10,409
S 11,510
S 15.868
See accompanying notes to consolidated financial statements.
F-5
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1993 and 1994
(a) Qmcni
Marcus Cable Company, L.P. ("MCC"), a Delaware limited partnership, and subsidiaries
(collectively, the "Company") was formed on January 17, 1990 for the purpose of acquiring,
operating and developing cable television systems. In July 1994 the Company created a new
subsidiary, Marcus Cable Operating Company, L.P. ("Operating"). Operating acts as a
holding company and general partner for the three subsidiary partnerships discussed below.
In addition, Operating has a subsidiary, Marcus Cable of Alabama, Inc., which has a general
Partner interest in a partnership with cable systems in Alabama (see note 2).
The Company's operations are conducted through three subsidiary partnerships which are
organized by geographic region. MCC, through Operating, serves as the general partner of
all three partnerships. The three subsidiary partnerships include: Marcus Cable Partners,
L.P., which operates cable systems primarily in Wisconsin and Minnesota, Marcus Cable of
San Angelo, L.P., which operates cable systems in Texas, and Marcus Cable of Delaware and
Maryland, L.P., which operates cable systems in Delaware and Maryland. MCC also has two
subsidiaries, Marcus Cable Capital Corporation ("Capital") and Marcus Cable Capital
Corporation II ("Capital II"), which were created in August 1993 and July 1994, respectively,
for the purpose of acting as co -issuers on public debt offerings. Capital and Capital II have
no operations.
In September 1994, the Company also began managing certain cable systems in Maryland
and Alabama.
The consolidated financial statements include the accounts of the Company, Operating,
Capital, Capital II and their subsidiary partnerships. All significant intercompany accounts
and transactions have been eliminated in consolidation. Certain reclassifications have been
made to prior years' consolidated balances to conform to the current year presentation.
(c) Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid
investments with original maturities of three months or less at inception to be cash
equivalents. At December 31, 1993 and 1994, the Company had cash equivalents of
54,291,000 and $1,900,000, respectively, consisting of certificates of deposit.
F-6 (Continued)
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
I r 1 Iyyt� / 1 ,I' I/11 yl
Property and equipment are recorded at cost, including all direct costs and certain indirect
costs associated with the construction of cable television transmission and distribution
systems, and the cost of new customer installations. Maintenance and repairs are charged to
expense as incurred and equipment replacements and betterments are capitalized.
Property and equipment are depreciated using the straight-line method based on estimated
useful lives as follows: buildings, 15 years; cable systems, 3 to 10 years; and vehicles and
other, 3 to 10 years.
(e) Other Assets
Franchise rights and going concern value of acquired cable systems are amortized on a
straight-line basis over ten years. The cost of noncompetition agreements is amortized by the
straight-line method over the periods of the respective agreements. Deferred debt issuance
costs are amortized to interest expense using the interest method over the term of the related
debt.
The Company assesses the recoverability of intangible assets as well as the related
amortization lives by determining whether the carrying value of the intangible assets can be
recovered over the remaining lives through projected undiscounted future cash flows. To the
extent that such projections indicate that undiscounted future cash flows are not expected to
be adequate to recover the carrying amounts of the related intangible assets, such carrying
amounts are adjusted for impairment to a level commensurate with a discounted cash flow
analysis of the underlying assets.
Revenues from basic and premium service are recognized when the service is 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 estimated average period that
customers are expected to remain connected to the cable television system.
(g) Income Taxes
The Company has not provided for federal income taxes since such taxes are the
responsibility of the individual partners. Capital and Capital 11 are subject to federal income
tax but have no operations and, therefore, no tax since their inception.
Limited partner interests of subsidiary partnerships which are not directly held by the
Company are accounted for in a manner similar to minority interests. Net income or loss and
preference returns related to the limited partner interests of subsidiary partnerships are
reflected in the accompanying statements of operations as "subsidiary limited partner
interests."
F-7 (Continued)
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) A
On July 29, 1994, the Company acquired cable television systems in Wisconsin and Minnesota
from Star Cablevision Group ("Star"), an unaffiliated third party, through a subsidiary partnership
for cash of S 139,152,000 (including direct acquisition costs of $2,152,000).
On September 1, 1994, the Company acquired from Crown Media, Inc. ("Crown"), an unaffiliated
third party, a noncontrolling general partner interest in Cencom of Alabama, L.P. ("CALP"), the
management contract pursuant to which the Company will provide management services to CALP,
and accrued and unpaid management fees, for total cash consideration of $2,878,000. The
investment in CALP is accounted for using the equity method.
The acquisitions of Star and CALP were accounted for as purchases and, accordingly, the purchase
prices were allocated to tangible and intangible assets based on estimated fair market values at the
dates of acquisition. Fair market values were determined using independent appraisers. In
connection with the acquisitions, the Company also assumed responsibility for settling outstanding
receivables and payables of the cable television systems acquired. Net assets acquired as a result of
these acquisitions are summarized as follows (in thousands):
Property and equipment S 34,147
Franchise rights 94,437
Going concern value 10,412
Noncompetition agreement 100
Other assets 3.014
Net cash paid, including $2,980
from escrow paid in 1993 $142,110
Unaudited pro forma financial information for the years ended December 31, 1993 and 1994 as
though the Star and CALP acquisitions had occurred at January 1, 1993 follows (in thousands):
Im
1224
Revenues $81,077
$82,202
Operating income (lam) 2,357
(2,781)
Net loss (42,146)
(45,831)
On July 1, 1994, the Company, through Operating, entered into an agreement to acquire cable
television systems in Wisconsin and Minnesota from Crown for approximately $337 million. This
acquisition was completed on January 18, 1995 and was funded with proceeds from an amended
credit facility (note 4) and additional equity investments in the Company. At December 31, 1994,
the Company had incurred direct acquisition costs relating to this acquisition of approximately
S 136,000, all of which have been deferred.
F-8 (Continued)
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
(3)
(4)
Notes to Consolidated Financial Statements
Other assets consist of the following at December 31, 1993 and 1994 (in thousands):
Im
Im
Franchise rights
$146,052
S 240,489
Going concern value of acquired cable systems
3,169
13,365
Noncompetition agreements
36,600
36,700
Debt issuance costs
6,606
13,773
Escrow deposits for acquisitions
2,980
5,000
Management fees receivable from CALP
—
3,410
Other
197
195,604
�594
313,321
Accumulated amortization
57.645
94,644
Lon&1GIDl.Debt
S 137,959
$228,677
The Company has outstanding borrowings on long-term debt arrangements at December 31, 1993
and 1994 as follows (in thousands):
fL':7� ❖:
13-1/2% Senior Subordinated Discount Notes S — $227,264
11 7/8% Senior Debentures 100,000 100,000
Credit facility 95,000 _
195,000 327,264
Less current portion 2.850 _
S 192. j 50 S IZZ,.264
On July 29, 1994, Operating and Capital II issued S413,461,000 of 13 1/2% Senior Subordinated
Discount Notes (the "Notes") through a public offering for net proceeds of approximately
$215,000,000. The Notes we unsecured, are guaranteed by the Company on a senior basis, and are
redeemable, at the option of Operating, at amounts decreasing from 105% to 100% of par beginning
on August 1, 2001. No interest is payable on the Notes until February 1, 2001. Thereafter, interest
is payable semiannually on February 1 and August 1 until maturity on August 1, 2004. The
discount on the Notes is being accreted using the interest method at an interest rate of 13 V2% from
the date of issuance to August 1, 1999. The unamortized discount was $186,197,000 at December
31, 1994. Proceeds from the Notes were used to retire outstanding borrowings under the
Company's existing credit facility and to fund the 1"4 acquisitions.
On October 13,1993, the Company and Capital issued S 100,000,000 of 11 7/8% Senior Debentures
(the "Debentures") through a public offering. The Debentures are unsecured and are redeemable at
the option of the Company on or after October 1, 1998 at amounts decreasing from 105.9% to 100%
of par at October 1, 2002, plus accrued interest to the date of redemption. Interest on the
Debentures is payable semiannually beginning April 1, 1994 until maturity on October 1, 2005.
Proceeds from the Debentures, together with borrowings under the Company's credit facility, were
F-9 (Continued)
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
(5)
Notes to Consolidated Financial Statements
used to repay indebtedness of subsidiary partnerships and to redeem certain partnership preference
units.
On November 15, 1994, Operating amended its existing credit facility to provide for borrowings of
up to $15,000,000 in the form of a reducing revolving loan and S235,000,000 in the form of two
term loans. Amounts outstanding under the credit facility bear interest at either the (i) base rate or
(ii) London Interbank Offered Rate ("LIBOR'), in each case plus a margin of 0.75% to 3% subject
to certain adjustments based on the ratio of the Company's total debt to annualized operating cash
flow, as defined. The credit facility is secured by first liens on all tangible and intangible assets of
the subsidiary partnerships and a pledge of all partnership interests in the subsidiary partnerships.
Operating pays a commitment fee of .5% on the unused commitment under the reducing revolving
loan. Commitment fees on the unused portion of the credit facility amounted to $223,000 and
$225,000 for the years ended December 31, 1993 and 1994, respectively. Operating borrowed
$235,000,000 on the term loans on January18, 1995 to acquire certain cable systems from Crown
(see note 2).
The Notes, Debentures and credit facility all require the Company and/or its subsidiaries to comply
with various financial and other covenants, including the maintenance of certain operating and
financial ratios. These debt instruments also contain substantial limitations on, or prohibitions of,
distributions, additional indebtedness, liens, asset sales and certain other items.
Subsidiary limited partner interests represent limited partner units of the subsidiary partnerships
held by entities affiliated with, but not a part of, the Company. These limited partner units have
voting rights and share in the profit or loss of the respective partnerships. Certain of the subsidiary
limited partner interests receive preference returns on their capital contributions. A summary of
transactions in subsidiary limited partner interests during the years ended December 31, 1992, 1993
and 1994 follows (in thousands):
I=
1223 1224
Balance at beginning of year $29,936
$34,608 S 5,788
Contributions 1,000
— —
Accrued preference returns (through July 29,
1994) 3,787
3,373 764
Redemption of subsidiary limited partner units —
(19,550) —
Purchase of subsidiary limited partner units
by the Company —
(351)
Net loss (1151
(12-29 f 6" M
Balance at end of year S 34,608
$ 5,788 S (246)
Certain subsidiary limited partner interests are allocated losses in excess of their contributed capital
to the extent that the fair value of assets contributed by the subsidiary
limited partners exceeded the
book value at the date of contribution. As of December 31, 1994, preference returns are no longer
accrued on subsidiary limited pannier interests.
F-10 (Continued)
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
• PI Hf• 1 /a 1 N 1 '11 d11 1 I p1 y 1 -1lT
I,
I III -1 Y• :rt4 1 • pl
Marcus Cable Properties, L.P. ("Properties") is the General Partner of the Company and was
also the Class A partner through July 29, 1994. On that date, the Company redeemed
1,272.126 Class A partnership units with a face value of $1,000 per unit and cumulative
unpaid preference returns of S727,875 for cash of $2,000,000. Also on that date, the
remaining 3,405.944 Class A units with a face value of S1,000 per unit and cumulative
unpaid preference returns of $1,971,474 were converted into 3,934.53 general partner units
and 201.95 Class B limited partner units of MCC, each with a face value of S1,300 per unit.
In the event that the holders of 75% or more of the Class B limited partner units vote to
dissolve the Company (and the General Partner does not consent to such dissolution), such
holders have the right to require the Company to redeem all of the Class B limited partner
units held by the exercising Class B limited partners for a price equal to the fair market value
of the units on the date of redemption. The fair market value of the Class B limited partner
units is to be determined and agreed to by the Class B limited partners and the General
Partner. If a fair market value cannot be agreed upon, then an independent appraiser is to be
used to determine the fair market value.
In connection with a disabling event (as defined in the partnership agreement), the general
partner units held by the General Partner immediately convert into an equivalent number of
Class B limited partner units. Upon conversion of these general partner units into Class B
limited partner units, the holders of the converted units have the right to cause the Company
to redeem all partnership units owned by such holders at a price equal to the fair market value
of the units.
1 .• 11 1 - .I ' I f•1 -J f.
Income is allocated to the partners first to eliminate any negative capital account balance (as
defined in the partnership agreement) until no partner has a negative capital account balance
and then to the Class A partner (through July 29, 1994), Class B limited partners and the
General Partner as specified in the partnership agreement.
Losses are allocated as follows:
First, to the Class B limited partners and the General Partner until each holder's capital
account balance does not exceed zero. If the capital account is less than zero prior to this
allocation step, then no loss is allocated;
Next, to the Class A partner (through July 29, 1994) until its capital account balance does
not exceed zero; and
Next, to the Class B limited partners and the General Partner.
The General Partner is allocated a minimum of 1 % of income or loss at all times.
F-11 (Continued)
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(d) Distributions
The amount of distributions is at the discretion of the General Partner, subject to the
restrictions in the Company's credit facilities (see note 4). The manner of distribution is as
follows:
First, to each partner in an amount sufficient to pay income taxes on net taxable income
allocated to each partner,
Next, to the Class A partner (through July 29, 1994) equal to any cumulative unpaid
preference returns and any unrecovered capital, as defined;- and
• Next, to the Class B limited partners and the General Partner.
(e) Capital Contribution
On July 29, 1994, the Class B limited partners made a cash capital contribution of
S22,990,000. The proceeds of this contribution were used to partially fund the purchase of
cable television systems from Star (see note 2).
Through July 29, 1994, each subsidiary partnership had a management agreement with Marcus
Cable Management, Inc. ("MMI"), an affiliated entity, whereby MMI provided various general,
administrative and operating services to the partnerships. The management fee paid by each
subsidiary for these services was 5.5% of revenues. The Company and its subsidiary partnerships
recorded management fees and expenses of S2,224,000, $3,617,000 and 52,165,000 for the years
ended December3l, 1992, 1"3 and 1994, respectively, pursuant to this agreement. The
management fees were discontinued on July 29, 1994, and the employees and related expenses of
MMI become a part of the Company.
In connection with the Star acquisition in 1994, a fee of $1,500,000 was paid to Marcus Cable
Properties, Inc., an affiliated entity, for services directly related to the acquisition. The fee was
capitalized as part of the cost of acquiring the cable television systems.
During the period of September 1, 1994 through December 31, 1994, the Company earned
management fees of $532,000 from CALP (see note 2). Payment of management fees by CALP is
deferred under provisions of CALP's credit and partnership agreements until such time as certain
conditions are met. At December 31, 1994, management fees receivable from CALP were
approximately $3,410,000, which have been included in noncurrent other assets in the
accompanying 1994 consolidated balance sheet.
F-12 (Continued)
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(8) ProfitSharing Plan
The Company sponsors a 401(k) plan for its employees whereby employees that qualify for
participation under the plan can contribute up to 15% of their salary, on a before tax basis, subject
to a maximum contribution limit as determined by the Internal Revenue Service. The Company
matches participant contributions up to a maximum of 2% of a participant's salary. For the yeas
ended December 31, 1992, 1993 and 1994, the Company made contributions to the plan of
approximately S29,000, S50,000 and $83,000, respectively.
1 / 11 11 " A I W. T1 1 I
The Company rents pole space from various companies under agreements which are generally
cancelable on short notice and leases office space for system and corporate offices. Lease and
rental costs charged to expense for the years ended December 31, 1992, 1993 and 1994 were
approximately $543,000, S391,000 and $461,000, 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 ("FCC") issued its rate regulation rules
which became effective September 1, 1993. These rate regulation rules required certain cable
systems in franchise areas which receive certification and are 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, regulated cable systems not electing cost -
of -service were required to reduce rates to the higher of the prescribed benchmarks or rates that
were 101/6 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
on May 15, 1994 or if certain conditions were met, on July 14, 1994. Regulated cable systems were
required to reduce rates to the higher of the new FCC prescribed benchmarks or rates that were 17%
below those in effect on September 1, 1992.
The Company believes that it has complied with all provisions of the 1992 Cable Act, including the
rate setting provisions promulgated by the FCC. However, in jurisdictions which have chosen not
to certify, refimds covering a one-year period of basic service may be ordered upon certification if
the Company is unable to justify its rates through a cost -of -service filing. The amount of refund
liability, if any, to which the Company could be subject in the event that these systems' rates are
successfully challenged by franchising authorities is not currently estimable.
During the year ended December 31, 1994, the Company paid rate refunds of approximately
$944,000 to its cable customers as a result of rate orders issued by certain franchise authorities.
F-13 (Continued)
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(10) Financial Instruments
The following methods and assumptions were used to estimate the fair value of each class of
financial instrument for which it is practicable to estimate that value:
Cash and cash equivalents, other receivables, accounts payable and accrued liabilities - The
carrying amounts of these accounts approximates their fair values because of the short maturity of
these instruments.
Long-term debt - The fair value of the Notes and Debentures is based upon market quotations
obtained from dealers. As amounts outstanding under the Company's credit agreement bear interest
at current market rates, their carrying amounts approximate fair value. The carrying and fair values
of the Company's long-term debt are $327,264,000 and $307,067,000, respectively, at
December3l, 1994. The carrying value of long-term debt approximated fair value at
December3l, 1993.
(11) SubseQuent Events
On March 10, 1995, the Company agreed to acquire certain cable systems from Sammons
Enterprises, Inc. for approximately $1 billion, subject to closing adjustments. The systems to be
acquired conduct operations in 15 states. Consummation of the acquisition, which is anticipated to
occur in the fourth quarter of 1995, is subject to approval of the FCC and local regulatory
authorities. Funding for the purchase will be comprised of a combination of equity and debt
issuances.
On March 24, 1995, the Company agreed to sell Marcus Cable of San Angelo, L.P. to Teleservicc
Corporation of America for approximately $65.5 million, subject to closing adjustments.
Consummation of the sale, which is anticipated to occur in the third quarter of 1995, is subject to
approval of the FCC and local regulatory authorities.
F-14
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SIGNATURES
Pursuant to the requirements of the Securities Fach}ange Act of 1934, each of the
registrants have duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
MARCUS CABLE COMPANY, L.P.
(Resimaot)
By: Marcus Cable Properties, L.P., its general partner,
By: Marcus Cable Properties, Inc., its geaetai Porter,
March 30, 1995 By: Jeffrey A. Marcus
Jetfray A. Maraca
Its: Chairman. President and Chief Executive Officer
By: Thomas P. McMillin
Thomas P. McMillin
Its: Vice President and Chief Financial Officer
MARCUS CABLE OPERATING COMPANY, L.P.
(Resistrant)
By: Marcus Cable Company, L.P., its general partner,
By: Marcus Cable Properties, L.P., its geeral porter,
By: Marcus Cable Properties, Inc., its general partner,
March30, 1995 By: _Jeffrey A. Marcus
Jeffrey A. Marcus
Its: Chairman, President and Chief Executive officer
By: Thomas P. McMillin
Thomas P. McMillin
Its: Vine President and Chief Financial Offcxr
MARCUS CABLE CAPITAL CORPORATION
(Registram)
March30, 1995 By: Jeffrev A. Marcus
Jeffrey A. Marcus
Its: Chairman, President and Chief Executive Officer
By: Thomas P. McMillin
Thomas P. McMillin
Its: Vice President and Chief Financial Officer
MARCUS CABLE CAPITAL CORPORATION II
(Registrant)
March30, 1995 By: Jeffrev A. Marcus
Jeffrey A. Marcus
Its: Chairman, President and Chief Executive Officer
By: Thomas P. McMillin
Thomas P. McMillin
Its: Vice President aW Chief Financial officer
Exhibit 12.1
COMPUTATION OF RATIO OF EARNINGS TO F17ED CHARGES
(in thousands)
Earnings:
Net loss
Add:
Fixed charges per (b)
below
Earnings for computation
purposes (a)
Fixed Charges:
Interest Costs
Amortization of de-
ferred financing
costs
Preference Returns
IM
Year
IM
Ender! December
31.
IM
IM
1292
$ (10,923)
$ (18,377)
$ (21,323)
$(9,643)
S (30,610)
7,591
13,598
14,939
16,847
29,346
$ 6,224 $ 9,566 $ 10,687 $ 12,912 $ 27,699
117 282 427 531 406
1,250 3,750 3,825 3,404 1,241
Total Fixed Charges (b)
Ratio of earnings to
fixed charges (a)/(b)
Deficiency of earnings
to cover fixed charges t10 1 S ll21"3�231 (9 64 1 S (30.6101
EXHIBIT "C"
CATV POLE LEASE AGREEMENT
BETWEEN
CITY OF DENTON, TEXAS
AND
GOLDEN TRIANGLE COMMUNICATIONS
CATV Pole Lease Agreement
Index
page
Application for Permission to Attach, Article III
3
Cost.of Pole Replacements, Article VI
10
Definitions, Article I
2
Existing Contracts, Article XIV
19
General, Article XII
17
Indemnity and Insurance, Article X
14
Installation and Maintenance of Attachments and Poles, Article V
6
Notice, Article XV
19
Payment of Bills, Article XIII
18
Protection Against Claims for Libel and Slander, Copyright and
Patent Infringement, Article XI
17
Rentals, Article VIII
12
Rights -of -Way, Legal Authority and Default, Article VII
11
Scope of Agreement, Article II
2
Specifications, Article IV
5
Term and Termination of Agreement, Article IX
13
0
CATV POLE LEASE AGREEMENT
THIS AGREEMENT made as of the �a day of May, 1979, between the City
of Denton, Texas, a Home Rule Municipal Corporation, hereinafter called
Licensor, and Golden Triangle Communications, a partnership of the State of
Texas, having its principal office at Atlanta, Georgia, hereinafter called
Licensee,
W I T N E S S E T H:
WHEREAS, Licensee proposes to furnish a CATV service (as hereinafter
defined) to residents of Denton, Texas, intends to erect and maintain an
antenna tower(s) located at Denton, Texas and proposes to install coaxial
television cables, amplifiers and drop wires, wires and appliances together
with associated cable messengers, anchors and other appurtenances (herein-
after sometimes collectively called "equipment") throughout the area to be
served and desires to attach such equipment to poles of Licensor and/or to
poles used jointly by Licensor and other companies; and
WHEREAS, Licensor is willing to permit, to the extent it may lawfully
do so, the attachment of said equipment `to its poles where, in its judgment,
such use will not interfere with its own service requirements or, as it may
be advised, the service requirements of other joint users, including conside-
rations of economy and safety.
a
NOW, TIMREFORE, in consideration of the mutual covenants, terms and
conditions herein contained, the parties hereto do mutually covenant and agree
as follows:
ARTICLE I
DEFINITIONS
1. All references herein to "Licensor's poles" or "its poles" shall
mean poles solely owned by the Licensor, jointly owned by Licensor or the pole
space rented or obtained by other arrangements by Licensor from another owner.
2. All references herein to "joint user" shall mean (1) a company or
municipality which together with Licensor has a percentage ownership in a pole,
(2) a public utility company or municipality which has attachment privileges on
Licensor's poles, or (3) a public utility company which owns poles on which
Licensor has attachment privileges.
3. All references herein to "CATV service" shall mean the trans-
mission to subscribers of off -the -air pickup of broadcast signals or the
transmission without separate charge of locally originated closed circuit
television to the subscribers -of off -the -air service.
ARTICLE II
SCOPE OF AGREEMENT
1. Licensor hereby agrees to license and permit Licensee to attach
its equipment, for the primary purpose of furnishing CATV service within the
area outlined in red on the map attached hereto as Exhibit A. to such of its
-2-
poles as are, in the judgment of the Licensor, suitable and available for such
attachments, subject to the conditions and limitations contained herein.
2. Licensee agrees that its equipment to be attached to Licensor's
poles shall be installed for the purpose of providing CATV service and shall be
used primarily for furnishing CATV service. Any residual channel capacity,
however, may be used by Licensee for any lawful purpose.
3. Licensee agrees to secure from the proper franchising authority,
a franchise to erect and maintain its equipment within public streets, highways
and other thoroughfares provided such franchising authority exists, and shall
secure any and all consents, permits or licenses that may be legally required
for its operations hereunder. Prior to the execution of the Agreement, Licensee
shall deliver to Licensor documentation satisfactory to Licensor evidencing
that all such franchises, consents, permits or licenses have been obtained.
4. Licensee agrees to assist in, and bear the expense of, securing
any consents, permits or licenses that may be required by Licensor by reason of
this Agreement.
ARTICLE III
APPLICATION FOR PEMISSION TO ATTACH
I. At least thirty (30) days prior to the time Licensee desires to
attach its equipment to any of Licensor's poles, it shall make written appli-
cation on the form marked Exhibit B attached hereto and made a part hereof, in -
the number of copies from time to time prescribed by Licensor. Upon approval of
-3-
said application, Licensor shall return one copy of Exhibit B to the Licensee
bearing the endorsement of its permission.
2. Upon receiving such endorsed copy of said application, but not
sooner, Licensee shill have the right, subject to Article IV herein, to install,
maintain and use its equipment described in said application upon the poles
identified therein, provided that Licensee shall complete each installation
within one (1) year from date of said approved application; provided, however,
that before commencing any such installation, Licensee shall notify Licensor of
the time when it proposes to do such work and that within thirty (30) days of
completion of such work, Licensee shall notify Licensor and, in the event
Licensor elects to have its representative present, Licensee shall reimburse
Licensor for the cost and expense thereof.
3. Where costs are involved. in the rearrangement of Licensor's or
other facilities to accommodate Licensee's equipment, two signed copies of said
application shall be returned to Licensee detailing the costs in the space
provided thereon for that purpose. Approval of said application by Licensor is
subject to receiving authorization from Licensee, on said application in the
space provided thereon for that purpose, to make changes and rearrangements, at
Licensee's sole risk and expense, detailed by Licensor with said copies of said
application. _
4. Licensee shall not have the right to place, nor shall it place,
any additional equipment upon any pole used by it hereunder without first making•
application therefor and receiving Licensor's permission to do so, all as
-4-
prescribed in paragraph 1 of this Article; nor shall Licensee change the
position of any equipment attached to any such pole without Licensor's prior
written approval. The provisions of this Article shall not restrict the
attachment of television drops to television crossarms or television cable
messenger. It is agreed that a charge equal to one and one half (1-1/2) times
the pole rental amount, as specified in Article VIII, per attachment shall be
levied against and paid by Licensee to Licensor for any unauthorized attachment
made by Licensee to Licensor"s poles or facilities. This charge will be in
addition to rental charges from the time.of said unauthorized attachment,
rearrangement costs, or other appropriate charges. In the event that the time
of the unauthorized attachment cannot be determined, it shall be deemed to have
occurred on the date succeeding the day on which the last joint survey was made
in accordance with Paragraph I of Article V.
5. It is agreed and Ifnderstood that in the case of jointly -used
poles, permission to attach thereto shall. be subject to Licensor's obtaining
approval from such joint users and/or owners whenever necessary.
ARTICLE IV
SPECIFICATIONS
1. Licensee, at its own cost and expense, shall construct, maintain
and replace its attachments on Licensor's poles in accordance with (i) such
requirements and specifications as Licensor shall from time to time prescribe,
(ii) in compliance with any rules or orders now in effect or that hereafter may
be issued by any regulatory Commission or other authority having jurisdiction,
—5—
and (iii) the requirements and specifications of the National Electrical Safety
Code, 1977 Edition, and any amendments or revisions of said specifications or
code. In addition, all attachments shall be made by Licensee in accordance with
this Agreement and Exhibits 1-10 attached hereto and made a part hereof.
Licensee agrees to comply, at its sole risk and expense, with the specifications
of all Exhibits attached hereto, as revised from time to time by Licensor in
accordance with the provisions of this Article IV.
ARTICLE V
INSTALLATION ARID MAINTENANCE of ATTACMIENTS AND POLES
1. The exact location of Licensee's attachments on poles shall be
determined from a joint survey to be made, at such times as shall be mutually
agreed upon, by representatives of Licensor, Licensee and, if desired by a joint
user. Licensor may inspect each new installation of Licensee on its poles and
in the vicinity of its lines or appliances and may make periodic inspections of
the entire plant of Licensee as plant conditions may warrant; and- Licensee
shall, on demand, reimburse Licensor for the cost of such surveys .and
inspections. Such inspections shall not operate to relieve Licensee of any
responsibility, obligation ur liability assumed under this Agreement.
2. Where Licensee's attachments can be accommodated on poles of
Licensor by rearranging or changing the facilities of Licensor or other joint
users, Licensee agrees to pay Licensor in advance the cost of making such
rearrangements or changes. Strengthening of poles (guying) required to accom-
modate the attachments of Licensee and the bonding of Licensee's strand to that
-6-
of Licensor shall be performed by Licensee at its sole risk and expense. Such
work, however, may be performed by Licensor at its option, and in such event
Licensee shall pay to Licensor in advance the cost of all such work.
3. Upon written notice from Licensor, Licensee shall relocate or
replace its equipment attached to Licensor's poles, or transfer the same to
substituted poles, or perform any other work in connection with said equipment
that may be requested _by Licensor, at Licensee's sole risk and expense;
provided, however, that in cases of emergency Licensor may, at Licensee's sole
risk and expense, arrange to relocate or replace the facilities attached to said
poles by Licensee, transfer them to substituted poles or perform any other work
in connection with said facilities that may be required in the maintenance, re-
placement, removal or relocation of said poles, the facilities thereon or the
equipment which may be placed thereon, or for the service needs of Licensor.
4. Licensee shall notify Licensor in advanced of the time when it
proposes to replace any of its equipment' attached to Licensor's poles.
S. All tree trimming required on account of Licensee's equipment
shall be done by Licensee at its sole risk and expense and in a manner satis-
factory to Licensor and any other joint users.
6. Licensee shall, at its sole risk and expense, maintain all of its
attachments on Licensor's poles in safe condition and in thorough repair.
-7-
7. Licensor reserves to itself, its successors and assigns the
right to maintain its poles and to operate its facilities thereon in such manner
as will best enable it to fulfill its public service requirements. Licensor or
other joint users shall not be liable to Licensee for any interruption to the
service of Licensee or for interference with the operation of the equipment of
Licensee, unless the service interruption was created solely by acts of
Licensor.
S. Nothing herein contained shall give to the Licensee the right to
place a crossarm on any pole. If a crossarm is required to accommodate the
facilities of the Licensee, then Licensee shall so state the reasons therefore
in its application for attachment.
9. Licensee shall not at any time make any additions to, or changes
in, the location of its attachments on the poles covered by this Agreement
without the prior written consent of Licensor except, in cases of emergency,
when oral permission shall have been obtained from Licensoe's authorized
representative at Denton, Texas
and subsequently confirmed in writing.
10. If Licensee should require the location of its equipment upon any
public thoroughfare or other public or private property in the conduct of its
business in the territory covered by this Agreement and Licensor shall not have
pole facilities so located to fulfill Licensee's requirements, Licensee shall so
notify Licensor, and the parties shall thereupon determine who shall place such
-8-
pole facilities in such location. The pole facilities shall be erected in such
locations adequate to meet the service requirements of both Licensee and
Licensor, and if placed by the Licensor, the Licensee shall thereupon make
application for permission to place its equipment thereon as provided in this
Agreement. If the pole facilities are placed by Licensee, attachment privileges
shall be made available to Licensor at a rental not to exceed the rental being
charged Licensee hereunder.
11. Nothing in this Agreement shall be construed to obligate
Licensor to grant Licensee permission to use any particular pole and Licensor at
its discretion may revoke permission theretofore granted to Licensee with
respect to any particular pole. If such permission is refused, Licensee is free
to make any other arrangement not prohibited under the terms of this Agreement,
it•may wish to provide for its equipment at*the location in question.
12. Whenever, pursuant to the provisions of this Agreement, Licensee
shall be required to remove its attachments from any pole, such removal shall be
made, except as otherwise specifically provided, within thirty (30) days
following the giving of notice to Licensee by Licensor to so remove. Upon
failure of Licensee to remove suchattachments within such thirty (30) days or
as otherwise• required, Licensor may remove them and charge all costs associated .
with such removal to Licensee.
13. Licensee agrees that it shall not interset poles where
Licensor's facilities are located nor shall it locate poles, guys, or other
facilities where in either case they will interfere with access to Licensor's
poles or violate any provision of the National Electric Safety Code.
-9-
ARTICLE VI
COST OF POLE P.EPLACEHEh'TS
1. Whenever Licensee applies for permission to attach to a pole that
is considered by Licensor to be insufficient in height or strength for
accommodation of Licensee's attachments, or in the event that Licensor or a
joint user of the pole shall require the space occupied by Licensee's existing
attachments, Licensor shall notify Licensee of such fact and of the estimated
cost to Licensee of replacing such pole with a pole which will accommodate the
attachments of Licensee, Licensor and any such joint user. Within thirty (30)
days of such notification, Licensee shall either notify Licensor (i) of its
approval of such replacement or (ii) of its cancellation of the application with
respect to such pole or (iii) in the case of existing attachments, of its
election to remove its attachments from the pole.
2. In the event of Licensee's approval of such replacement,
Licensor shall replace the pole and Licensee shall pay to Licensor in advance
the charges therefore computed as follows:
The total cost of the new pole, the removal of the old pole, the
transferring of Licensor's and any such joint user's attachments from the old. to
the new pole and such other costs, if any, necessitated by Licensee's
requirements, less the total of the following: accrued depreciation on the old
pole, salvage, if any, and the cost of such portion of the new pole, if any,
which represents space reserved for the use of Licensor or any such joint user
greater than that provided for them on the old pole, less appropriate
contribution by any other licensee, if any.
.10-
ARTICLE VII
RIGHTS -OF -WAY, LEGAL AUTHORITY ARID DEFAULT
1. Upon execution of this Agreement, Licensee shall submit evidence
satisfactory to licensor of its authority to erect and maintain its equipment
within public streets, highways and other thoroughfares and shall secure any
necessary license, permit or consent from Federal, state or municipal
authorities and from the owneres of property now or hereafter required to
construct and maintain such equipment at the locations of poles of Licensor to
which it desires to attach. In the event any such franchise, license, permit or
consent is revoked or is thereafter denied to Licensee for any reason,
permission to attach to licensor's poles shall immediately terminate, Licensee
shall within reasonable time remove its equipment from Licensor's poles and
Licensor at its option may forthwith terminate this Agreement.
2. • Upon notice from Licensor to Licensee that the cessation of the
use of any pole or poles has been requested or directed by Federal, -state or
municipal authorities, or property owners, permission to attach to such pole or
poles shall .immediately terminate and Licensee shall forthwith remove its
equipment therefrom.
3. If Licensee shall fail to comply with any of the provisions of
this Agreement, including the specifications hereinbefore referred to, or
defaults in any of its obligations under this Agreement, and shall fail within.
thirty (30) days after written notice from Licensor to correct such default or•
=11-
noncompliance, Licensor may, at its option forthwith terminate this
Agreement in its entirety or, at its election, revoke the permit
covering the pole or poles involved in such default or noncompliance,
or at Licensor's option, obtain service of an attorney to institute
suit or other judicial proceeding to remedy and default by Licensee
in its performance of the covenants, terms and conditions of this
Agreement and Licensee expressly agrees that the defeated party shall
pay reasonable attorney's fees and expenses of such legal counsel.
ARTICLE VIII
RENTALS
1. For the privilege of placing and maintaining attachments on
Licensor's poles, Licensee shall pay an annual rental rate of five
dollars ($5.00) per contract.
2. Rentals shall be payable annually in advance to the Licensor
on the first daY of January each year during which this Agreement re-
mains in effect.
3. At anytime after two (2) years from the date of this Agreement
and at intervals of not less than two (2) years thereafter, the rentals
shall be subject to adjustment by Licensor upon written notice.
4. Rental payment shall be made within sixty (60) days of the
receipt of statement. Any late payment shall bear an interest rate of
ten percent (10%) per annum.
-12-
S. The Licensee and Licensor shall together maintain a perpetual
inventory of total Licensee contacts through the use of Exhibit B, "Appli-
cation of Permit," and Exhibit C, "Notice of Removal," and all future
rental fees shall be based on such perpetual inventory. The Licensor may
at its option use a physical inventory in lieu of perpetual inventory.
The cost of such physical inventory shall be shared proportionally among
the participating companies.
6. In the event Licensee makes an attachment to the Licenser's
pole at anytime after commencement of this Agreement and fails to comply
to Article III, Paragraph 1 hereof, then Article III, Paragraph 4, shall apply.
7.. In the event that Licensor files a tariff with the appropriate
regulatory authority during the term of this Agreement covering attachments
made to its poles, Licensor reserves the right to substitute the rates and
charges covered by such tariff in place of the rentals set forth in this
Article.
8. The Licensee shall reimburse the Licensor in advance for all
net capital costs incurred by Licensor as a result of replacing poles and
equipment as required by Licensee for the initial installation of Licensee's
attachments. Licensor shall credit such advance reimbursement by Licensee
to initial and subsequent rental lease fees. Licensor shall notify Licensee
of the estimated net costs of such replacements on the application forms.
Licensee shall make payments of such estimated costs and final adjustments
in payments or credits shall be made at the completion of the work and shall
be based on actual costs incurred.
-13-
ARTICLE IX
TERM AND TERMINATION OF AGREEMENT
1. This Agreene•nt, if not previously terminated in accordance
with the provisions hereof, shall continue in effect for a term of five
(5) years and thereafter until terminated as provided herein. The Agree-
ment may be terminated at the end of said time or at any time thereafter
by either party giving to the other party at least ninety (90) days written
notice. Upon termination of the Agreement In accordance with any of its
terms, Licensee shall remove its said equipment from all poles of Licensor
within thirty (30) days thereafter.
—13a—
2. Licensee may at any time remove its equipment attached to any
pole or poles of Licensor, but shall immediately give Licensor written notice of
such removal in the form of Exhibit C attached hereto and made a part hereof.
No credit or refund of any rental shall be allowed Licensee on account of such
removal.
3. This Agreement shall be subject to termination by Licensor
without notice, or, where circumstances permit, upon five (5) days' written
notice to Licensee, upon objection being made by or on behalf of any
governmental authority asserting proper jurisdiction thereon.
ARTICLE X
INDEMNITY AND INSURANCE
1. Licensee shall indemnify, protect and hold harmless Licensor and
other joint users of said poles from and against any and all loss, costs,
claims, demands, damage and/or expense arising out of any demand, claim, suit or
judgment for damages to property and injury to or death of persons, including
the officers, agents and employees of either party hereto and other joint users
of said poles, including payment made under any Workmen's Compensation Law and
under any plan for employees' disability and death benefits, which may arise out
of or be caused by the erection, maintenance, presence, use or removal of said
equipment or by the proximity of the ,respective cables, wires, apparatus and
appliances of the parties hereto or other joint users of said poles, or arising
out of any act or omission or alleged act or omission of Licensee, including any
claims and demands of customers of Licensee.
.14-
2. Licensee shall carry insurance, at its sole cost and expense, to
protect the parties hereto and other joint users of said poles from and
against any and all such claims and demands and from and against any and
all actions, judgments, costs, expenses and liabilities of every name and
nature which may arise or result, directly or indirectly, from or by rea-
son of the acts or omissions of Licensee hereunder and irrespective of any
fault, failure, negligence or alleged negligence on the part of Licensor
or of any other joint user of said poles. The amounts of such insurance
are set out in Section 27-58 of Ordinance No. 78-21 of the City of Denton
ordinances, and the Licensee will.comply with -the provisions of that section.
Licensee shall promptly advise an authorized representative of Licensor of
all claims relating to damage to property or injury to or death of persons,
arising or alleged to have arisen in any manner by, or directly or indirectly
associated with, the erection, maintenance, presence, use or removal of
Licensee's equipment.
2. Licensee has furnished $30,000 in security as required by Section
27-43 of Ordinance No. 78-21 (Cable Television Franchise Ordinance) and such
sum shall also guarantee the performance of all the covenants, terms and
conditions of this agreement. '
3. Licensee shall exercise special precautions to avoid damage to
facilities of Licensor and of other joint users on said poles and hereby
assumes all responsibility for any and all loss for such damage. Licensee
shall make an immediate report to Licensor of the occurrence of any such
damage and hereby agrees to reimburse Licensor for the expense incurred in
making repairs necessitated thereby.
-15-
ARTICLE XI
PROTECTION AGAINST CLAIMS FOR LIBEL AND
SLANDER, COPYRIGHT AND PATENT INFRINGEM NT
1.: Licensee shall indemnify, protect and hold harmless Licensor
from and against any and all claims for libel and slander, copyright and/or
patent infringement arising by reason of attachment by Licensee of its equipment
to Licensor's poles pursuant to this Agreement.
ARTICLE XII
• GENERAL
1. Licensee shall not assign, transfer or sublet this Agreement, or
any of the privileges hereby granted to it, without the prior written consent of
Licensor. Provided,.however., that Licensor's consent shall not be required to
place mortgage or lien upon the facilities of Licensee for the purpose of
financing the installation, improvement, maintenance or extension of its
system.
2. No use, however extended, of Licensor's poles under this Agree-
ment shall create or vest in Licensee any ownership or property right. in said
poles, but Licensee's rights therein shall be and remain a mere license.
Nothing herein contained shall be construed to compel Licensor to maintain any
of its poles for a period longer than that demanded by its own service require-
ments.
-16-
3. Nothing herein contained shall be construed as affecting the
rights or privileges previously conferred by Licensor to others, by contract or
otherwise, to use any poles covered by this Agreement, and Licensor shall have
the right to continue to extend such rights or privileges; the attachment
privileges granted hereunder shall at all times be subject to such contracts and
arrangements and nothing contained herein shall be construed as affecting the
right of Licensor to grant attachment privileges to such other parties as it may
desire to do so.
4. Failure to enforce or insist. upon compliance with any of the
terms or conditions of this Agreement shall not constitute a general waiver or
relinquishment of any such terms or conditions, but the same shall be and remain
at all times in full force and effect.
S. Subject to the provisions of paragraph I of this Article, this
Agreement shall extend to and bind the successors and assigns of the parties
hereto.
6. Nothing contained herein shall be construed as affecting the
rights conferred or exercised by the parties und_r present or future
governmental authority or regulation.
ARTICLE XIII
PAYMENT OF BILLS
1. All amounts payable by Licensee to Licensor under the provisions .
of this Agreement shall, unless otherwise specified, be payable within thirty
(30) days after presentation of bills.therefor. Nonpayment of any such amounts
when due shall constitute a default under this Agreement.
-17-
ARTICLE XIV
EXISTING CONTRACTS
I. All existing Agreements between the parties hereto for the joint
use of facilities are by mutual consent hereby abrogated and superseded
by this Agreement.
Nothing in the foregoing shall preclude the parties to this
Agreement from preparing such supplemental operating routines or working
practices as they mutually agree to be necessary or desirable to effectively
administer the provisions of this Agreement.
ARTICLE XV
NOTICE
1. Any notice provided in this Agreement to be given by either party
hereto to the other shall be deemed to have been duly given when made in
wirting and deposited in the United States Mail, postage prepaid, addressed
as follows:
TO LICENSEE:
Golden Triangle Communications
53 Perimeter Center East
Suite 300
Atlanta, Georgia 30346
TO LICENSOR:
City of Denton
215 East McKinney
Denton, Texas 76201
Attn: Director of Utilities
-18-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
ATTEST:;
T SECRETARY
ATTEST:
2;_it _ -,-
Pr--SbT. 3ECRETARY
Gcu CA LA-- OF 1TtrJK� cc.
(?RUMHLN)
CITY OF DENTON, TEXAS, LICENSOR
BY:
0
GOLDEN TRIANGLE COMMUNICATIONS, LICENSEE
BY: ,mow, l(
VicF- NGSjDS!,
Cox Cp150-c or- Ts�Ps
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-19-
EXHIBIT "D"
CABLE DUCT USE AGREEMENT
BETWEEN THE CITY OF DENTON, TEXAS
AND SAMMONS COMMUNICATIONS, INC.
2095L
TABLE OF CONTENTS
Article
I. Definitions
II. Scope of Agreement
III. Application for Permission to Install Cable
IV. Specifications
V. Installation and Maintenance of Cable and Duct
VI. Rights -Of -Way, Legal Authority and Default
VII. Fee
VIII. Term and Termination of Agreement
IX. Force Majeure
X. Indemnity and Insurance
XI. Limitation on Assignment and Transfer
XII. Supplemental Operating Routines or Working Practices
XIII. Notice
Attachment
Exhibit A: Drawing No.
P.U.E.D.
132
Revision Level 0, Dated
June 24,
1985
Attachment
Exhibit B: Drawing No.
P.U.E.D.
133
Revision Level 0, Dated
June 24,
1985
Attachment
Exhibit C: Drawing No.
P.U.E.D.
134
Revision Level 0, Dated
June 26,
1985
Attachment
Exhibit D: Drawing No.
P.U.E.D.
135
Revision Level 0, Dated
July 5,
1985
Page
1
2
3
4
4
5
6
6
7
7
8
9
9
- i -
2095L
CABLE DUCT USE AGREEMENT
This Cable Duct Use Agreement made and entered into effec-
tive and operative as of the day of , 1988
by and between the City of Denton, Texas, a Home Rule Municipal
Corporation, hereinafter referred to as "Licensor," and Sammons
Communications, Inc., a Texas Corporation, hereinafter referred
to as "Licensee,"
WITNESSETH:
WHEREAS, Licensee is franchised to furnish CATV Service (as
hereinafter defined) to residents of Denton, Texas and is the
assignee of and bound by a certain "CATV POLE LEASE AGREEMENT"
dated the 7th day of May, 1979, between the Licensor and Golden
Triangle Communications, which permits the Licensee to attach
equipment necessary to the provision of CATV Service to
Licensor's electric utility poles; and
WHEREAS, Licensor has caused poles to be removed and
underground cable duct to be installed for the purpose of
distribution of electricity in the area commonly known as "The
Square" and further defined in Exhibit A, Drawing No. P.U.E.D.
##132, Revision Level 0, Dated June 24, 1985; Exhibit B, Drawing
No. P.U.E.D. ##133, Revision Level 0, Dated June 24, 1985;
Exhibit C, Drawing No. P.U.E.D. ##134, Revision Level 0, Dated
June 26, 1985; Exhibit D, Drawing No. P.U.E.D. ##135, Revision
Level 0, Dated July 5, 1985; and
WHEREAS, Licensor has dedicated a duct within Licensor's
System of Ducts to be used for CATV Service to subscribers in
said area and is willing to permit, to the extent it may
lawfully do so, the use of said duct by Licensee where, in
Licensor's judgment, such use will not interfere with its own
service requirements or, as it may be advised, the service
requirements of the Joint Users, present or future, including
consideration of economy and safety.
NOW, THEREFORE, in consideration of
terms and conditions herein contained,
mutually covenant and agree as follows:
ARTICLE I.
DEFINITIONS
the, mutual covenants,
the parties hereto do
1. All references herein to "Licensor's Duct" or "Licensor's
System of Ducts" or "Licensor's Duct System" shall mean duct
and related appurtenances consisting of vaults, manholes,
junction boxes, and pull boxes solely owned by the Licensor,
jointly owned by Licensor, or duct rented or obtained through
other arrangements by Licensor from another owner.
2. All references herein to "Joint User" shall mean (1) a
company or municipality which together with Licensor has a
percentage ownership in a duct or system of ducts, (2) a public
utility company or municipality which has use privileges for
Licensor's duct, or (3) a public utility company which owns
duct for which Licensor has use privileges.
3. All references herein to "CATV Service" shall mean all
services provided by Sammons Communications as defined in its
franchise agreement with the City of Denton.
4. All references herein to "Licensee's Cable" shall mean
the coaxial cable or Cables and associated joining fittings
used as the transmission media for CATV Service.
5. All reference herein to "Licensee's Equipment" shall
refer to amplifiers, power supplies and other similar support
equipment that is not suitable for inclusion- in duct system
manholes, vaults, junction boxes and pull boxes.
ARTICLE II.
SCOPE OF AGREEMENT
1. Licensor hereby agrees to license and permit Licensee to
route Licensee's Cable, for the primary purpose of furnishing
CATV Service in accordance with its franchise, within the area
commonly known as "The Square," and further defined by Exhibits
A, B, C and D; to such of Licensor's Duct System of as are, in
the judgment of the Licensor, suitable and available for such
cable, subject to conditions and limitations contained herein.
2. Licensee agrees that only cable shall be routed through
Licensor's Duct and related manholes, vaults, pull boxes and
junction boxes and that Licensee shall install Licensee's
Equipment in above ground locations sited to prevent
interference with Licensor's access to said manholes, vaults,
pull boxes and junction boxes.
3. Licensee agrees that this Agreement extends only to the
use of the Licensor's Duct System as defined on Exhibits A, B,
C, and D; and that Licensee agrees to secure and maintain from
the proper franchising authority, a franchise to erect and
maintain its equipment within public streets, highways and
other thoroughfares provided such franchising authority exists,
PAGE 2
and shall secure any and all consents, permits or licenses that
may be required by law for its operations.
4. Licensee agrees to assist in and bear the expense of
securing any consents, permits or licenses that may be required
by Licensor by reason of this Agreement.
ARTICLE III.
APPLICATION FOR PERMISSION TO INSTALL CABLE
I. At least thirty (30) days prior to the time Licensee
desires to install cable in Licensor's Duct System, it shall
make written application to Licensor. Licensor shall review
Licensee's application and upon approval, shall supply Licensee
written approval to proceed with installation.
2. Upon receiving such written approval but not sooner,
Licensee shall have the right, subject to Article IV herein, to
install, maintain and use Licensee's Cable described in said
application in ducts identified therein, provided that Licensee
shall complete each installation within one (1) year from date
of said approved application; provided however, that before
commencing any such installation, Licensee shall notify
Licensor at least five days in advance of the time when it
proposes to do such work and, in the event Licensor elects to
have its representative present, Licensee shall reimburse
Licensor for the cost and expense thereof.
3. Where costs are involved in the rearrangement of
Licensor's Duct or other facilities to accommodate Licensee's
Cable, the Licensor shall notify Licensee of these estimated
costs and Licensee shall notify the Licensor in writing that
actual costs will be paid by Licensee to effect such rearrange-
ment. Licensor shall then make said changes and rearrangements,
at Licensee's sole risk and expense, and upon completion shall
notify the Licensee that installation of cable may proceed.
4. Licensee shall not have the right to place, nor shall it
place, any of Licensee's Equipment in Licensor's System of
Ducts and its associated manholes, vaults, pull boxes, and
junction boxes; and shall install only the Licensee's Cable and
fitting required for its termination and assembly or connection
within the duct system. Licensee's Equipment necessary for the
full operation of and delivery of CATV Service shall be
constructed, housed, or mounted external to Licensor's System
of Ducts.
5. Licensee shall not change the position of any cable
routed through Licensor's Duct System without Licensor's prior
PAGE 3
written approval. The provisions of this Article shall not
restrict the attachment of service drops from Licensee's Cable
installed in the Licensor's System of ducts.
ARTICLE IV.
SPECIFICATIONS
1. Licensee, at its own cost and expense, shall construct,
maintain and replace Licensee's Cable in accordance with (i)
such requirements and specifications as Licensor shall from
time to time prescribe, (ii) in compliance with any rules or
orders now in effect or that hereafter may be issued by a
regulatory Commission or other authority having jurisdiction,
and (iii) the requirements and specifications of the National
Electrical Safety Code, 1987 Edition, and any subsequent
amendments or revisions of said specifications or code.
ARTICLE V.
INSTALLATION AND MAINTENANCE OF CABLE AND DUCT
1. Upon written notice from Licensor, Licensee shall, within
thirty (30) days of receipt of such notice, relocate or replace
Licensee's Cable or transfer the same to a substitute duct
system or perform any other work in connection with said Cable
that may be requested by Licensor, at Licensee's sole risk and
expense; provided, however, that in cases of emergency, Licensor
may, at Licensee's sole risk and expense, arrange to relocate
or replace the Licensee's Cable, transfer said Cable to a sub-
stitute duct system or perform any other work in connection
with said Cable that may be required in the maintenance,
replacement, removal or relocation of said duct system, for the
service needs of Licensor.
2. No additions to, or change of locations of Licensee's
Cable in Licensor's Duct System shall be undertaken without the
prior written consent of Licensor, except in cases of emergency,
when Licensee must obtain oral permission from Licensor's
authorized representative, presently designated as the City of
Denton, Director of Utilities and subsequently confirmed in
writing.
3. Licensee shall, at its sole risk and expense, maintain
all of Licensee's Cable in Licensor's Duct System in safe
condition and thorough repair. Licensor or its agents shall be
sole judge of suitability of such condition and repair.
4. Licensor reserves to itself, its successors and assigns
the right to maintain Licensor's Duct System and to operate its
facilities therein in such manner as will best enable it to
PAGE 4
fulfill its public service requirements. Licensor or the Joint
Users will make every reasonable effort to prevent interruption
to the service of the Licensee but shall not be liable to
Licensee for any interruption to the service of Licensee or for
interference with the operation of the Licensee's Equipment.
5. Nothing in this Agreement shall be construed to obligate
Licensor to grant Licensee permission to use any particular duct
and Licensor at its discretion may revoke permission therefore
granted to Licensee with respect to any particular duct if
Licensor can make a substitute duct system available. If such
permission is refused, Licensee is free to make any other
arrangement not prohibited under the terms of this Agreement it
may wish to provide for Licensee's Cable at the location in
question.
6. Whenever, pursuant to the provisions of this Agreement,
Licensee shall be required to remove Licensee's Cable from any
duct, such removal shall be made, except as otherwise specifi-
cally provided, within thirty (30) days following the giving of
notice to Licensee to so remove. Upon failure of Licensee to
remove Licensee's Cable within such thirty (30) days or as
otherwise required, Licensor may remove Licensee's Cable and
charge all costs associated with said removal to Licensee.
ARTICLE VI.
RIGHTS -OF WAY, LEGAL AUTHORITY AND DEFAULT
1. In the event any such franchise, license, permit or
consent necessary for the lawful provision of CATV Service is
revoked or is hereafter denied to Licensee for any reason,
permission to route Licensee's Cable through Licensor's Duct
System shall immediately terminate, Licensee shall, within a
reasonable time, remove Licensee's Cable from Licensor's Duct
system and Licensor, at its option, may forthwith terminate
this Agreement.
2. Upon notice from Licensor to Licensee that the cessation
of the use of any duct system has been requested or directed by
Federal, state or municipal authorities, permission to route
Cable through such duct system shall immediately terminate and
Licensee shall forthwith remove Licensee's Cable therefrom.
3. If Licensee shall fail to comply with any of the
provisions of this Agreement, including the specification
heretofore referred to, or defaults in any of its obligations
under this Agreement, and shall fail within thirty (30) days
after written notice from Licensor to correct such default or
noncompliance, Licensor may, at its option:
PAGE 5
a) forthwith terminate this Agreement in its entirety;
or,
b) at its election, revoke the permit covering the duct
or ducts involved in such default or noncompliance;
or,
c) at Licensor's option, obtain service of an attorney
to institute suit of other judicial proceeding to
remedy any default by Licensee in its performance of
the covenants, terms and conditions of this Agreement.
Licensee expressly agrees that it shall pay reasonable
attorney's fees and expenses of such legal counsel.
ARTICLE VII.
FEES
1. For the privilege of placing and maintaining Licensee's
Cable in Licensor's Duct System as shown on Exhibits A. B, C
and D, Licensee shall pay an initial fee of $18,000, and the
sum of $20.00 per year for the next fourteen (14) years, due
and payable on October 1, of each year.
2. No additional fees will be paid by Licensee during the
term of this Agreement except as provided elsewhere herein.
3. Payment of the $18,000 fee shall be made within thirty
(30) days of the execution of this agreement. Failure to pay
such amount when due shall constitute a default under this
Agreement.
ARTICLE VIII.
TERM AND TERMINATION OF AGREEMENT
1. This agreement, if not previously terminated in accord-
ance with the provisions hereof, shall continue in effect for a
term of fifteen (15) years and thereafter until terminated as
provided herein. The Agreement may be terminated at the end of
said term or at any time thereafter by either party giving to
the other party at least (90) days written notice. Upon
termination of the agreement, Licensee shall remove Licensee's
Cable for the Licensor's Duct System within thirty (30) days of
the effective termination date.
2. Licensee may at any time remove Licensee's Cable from
Licensor's Duct System but shall immediately give Licensor
written notice of intent of such removal and Licensee's intent
PAGE 6
to terminate this Agreement. No credit or refund of any fee
shall be allowed Licensee on account of such removal.
3. This Agreement shall be subject to termination by
Licensor without notice, or, where circumstances permit, upon
five (5) days written notice to Licensee, upon objection being
made by or on behalf of any governmental authority asserting
prior jurisdictions thereof.
ARTICLE IX.
FORCE MAJEURE
If either party is rendered unable, wholly or in part, by
force majeure or other causes herein specified, to carry out its
obligations under this Agreement, other than the obligation to
make payment of amounts due hereunder, it is agreed that on such
party s giving notice and reasonable full particulars of such
force majeure in writing to the other party within a reasonable
time after the occurrence of the cause relied on, then the
obligations of the party giving such notice, so far as they are
affected by such force majeure or the causes herein specified,
shall be suspended during the continuance of any inability so
caused, but for no longer period, and such cause shall so far
as possible be remedied with all reasonable dispatch.
For purposes of this Article, force majeure means any cause
or event not reasonably within the control of either party;
including without limitation the following: acts of God;
strikes; lockouts; orders of any kind of the government of the
United States or of the State of Texas or of any of their
departments, agencies or officials, or civil or military auth-
orities; insurrections; civil disturbances; epidermis; land-
slides; lightning; earthquakes; fires; hurricanes; tornadoes;
storms; typhoons; cyclones; waterspouts; floods; washouts;
arrests; restraints of government and people; explosions;
breakage or accident to machinery and transmission lines or
poles.
ARTICLE X.
INDEMNITY AND INSURANCE
I. Licensee shall indemnify, protect and hold harmless
Licensor and other Joint Users of said duct system from and
against any and all loss, costs, claims, demands, damage and/or
expense arising out of any demand, claim, suit or judgment for
damages to property and injury to or death of persons, including
the officers, agents and employees of either party hereto and
other Joint Users of said duct system, including payment made
PAGE 7
under any Workers' Compensation law and under any plan for
employees' disability and death benefits, which may arise out
of or be caused by the erection, maintenance, presence, use or
removal of Licensee's Cables or by the proximity of the respec-
tive cables, wires, apparatus and appliances of the parties
hereto or other Joint Users of said duct system, or arising out
of an act or omission of alleged act or omission of Licensee,
including any claims and demands of customers of Licensee.
2. Licensee shall carry insurance, at its sole cost and
expense, to protect the parties hereto and other Joint Users of
said duct system from and against any and all such claims and
demands and from and against any and all actions, judgments,
costs, expenses and liability of every name and nature which
may arise or result, directly or indirectly, from or by reason
of the acts or omissions of Licensee hereunder and irrespective
of any fault, failure, negligence or alleged negligence in the
part of Licensor or of any or the joint users of said duct
system. The minimum amounts of such insurance are set out in
Section 27-58 of Ordinance No. 78-21 of the City of Denton
Ordinances, and the Licensee will comply with the provisions of
that section, and as the same may be amended. Licensee shall
promptly advise the authorized representative or Licensor of
all claims relating to damage to property or injury to or death
of persons, arising or alleged to have arisen in any manner by,
or directly or indirectly associated with, the erection,
maintenance, presence, use or removal of Licensee's property.
3. Licensee shall exercise special precautions to avoid
damage to facilities of Licensor and or the Joint Users in said
ducts and hereby assumes all responsibility for any and all
loss for such damage, Licensee shall make an immediate report
to Licensor of the occurrence of any such damage and hereby
agrees to reimburse Licensor for the expense incurred in making
repairs necessitated thereby.
ARTICLE XI.
LIMITATION ON ASSIGNMENT AND TRANSFER
1. Licensee shall not assign, transfer or sublet this
Agreement, or any of the privileges hereby granted to it,
without the prior written consent of Licensor. Provided,
however, that Licensor's consent shall not be required to place
a mortgage or lien upon the facilities of Licensee for the
purpose of financing the installation, improvement, maintenance
or extension of its system.
2. No use, however extended, of Licensor's Duct System under
this Agreement shall create or vest in Licensee any ownership of
PAGE 8
property right in Licensor's Duct System, but Licensee's rights
therein shall be and remain nothing more than a License.
Nothing herein contained shall be construed to compel Licensor
to maintain any of its duct system for a period longer than
that demanded by its own service requirements.
3. Nothing herein contained shall be construed as affecting
the rights or privileges previously conferred by Licensor to
others, by contract or otherwise, to use any ducts covered by
this Agreement, and Licensor shall have the right to continue
to extend such rights or privileges; the use privileges granted
hereunder shall at all times be subject to such contracts and
arrangements and nothing contained herein shall be construed as
affecting the right of Licensor to grant use privileges to such
other parties as it may desire to do so.
4. Failure to enforce or insist upon compliance with any of
the terms or conditions of this Agreement shall not constitute
a general waiver or relinquishment of any such terms or
conditions, but the same shall be and remain at all times in
full force and effect.
5. Subject to the provisions
this Agreement shall extend to
assigns of the parties hereto.
of paragraph 1 of this Article,
and bind the successors and
6. Nothing contained herein shall be construed as affecting
the rights conferred or exercised by the parties under present
or future governmental authority or regulation.
ARTICLE XII.
SUPPLEMENTAL OPERATING ROUTINES OR WORKING PRACTICES
1. Nothing in the foregoing shall preclude the parties to
this Agreement from preparing such supplemental operating
routines or working practices as they may mutually agree to in
writing to be necessary or desirable to effectively administer
the provisions of this Agreement.
ARTICLE XIII.
NOTICE
1. Any notice provided in this Agreement to be given by
either party hereto to the other shall be deemed to have been
duly given when made in writing and deposited in the United
States Mail, postage prepaid, addressed as follows:
PAGE 9
TO LICENSEE:
Sammons Communications, Inc.
205 Industrial
Denton, Texas 76201
TO LICENSOR:
City of Denton
Attn: Director of Utilities
215 East McKinney
Denton, Texas 76201
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first
above written.
CITY OF DENTON, TEXAS, LICENSOR
BY: Aea�Z411--
,, O,
ATTEST:
—Ojisor
JF5FIFERTERS, CI'Y SECRETARY
APPROVED AS TO LEGAL FORM:
DEBRA ADAMI DRAYOVITCH, CITY ATTORNEY
BY:
ATTEST:
SAMMONS
LICFNQFF
BY:
COMMUNICATIONS, INC.,
PAGE 10