1995-191·.. E:XWPD0¢SXO~\~S.C~ ~ % (r~, { /
Note: Amended by Ordinance No. 99-094
ORDINANCE NO. ~--/~/
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;
APPROVINGANACCEPTANCE 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 Di(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.
SED AND APPROVED at its first reading this the /~day of
, 1995.
/PA~SED~AND APPROVED at its second reading this the /~'/day
o~_~~, 1995.
BOB CASTLEBERRY,
PAGE 4
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
HERBERT L. PROUTY, ~TY ATTORNEY
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 ASSOCIATES, L.P.
T~6mas P. ~cMillin
Title: Vice President of *
Date Of Execution: November ; , 1995
MARCUS CABLE OPERATING COMPANY, L.P.
ThOmas Pi MC~i~-~n
Title: Vice President of *
Date Of Execution: November ~ ~ 1995
MARCUS CABLE COMPANY, L.P.
Marcus Cable Properties, T~$mas P. McMillin
Inc., the ultimate Title: Vice President of *
general partner
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 11995
* Marcus Cable Properties, Inc.,
the ultimate general partner
PAGE 6
364
~;
EXHIBIT "A"
CABLE TELEVISION FRANCHISE AGREEMENT
BETWEEN
THE CITY OF DENTON, TEXAS
AND
SAMMONS COMMUNICATIONS, INC.
365
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
SECTfON 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. TR~R~SFERS ...................................... 13
SECTION XX. FRANCHISE FEE .................................. 14
SECTION XXI. RATES .......................................... 14
SECTION XXII. ACCESS TO SERVICES AND FACILITIES .............. 15
SECTION XXIII. EMERGENCY OVERRIDE ............................. 17
SECTION XXIV. PROGR~ING MIX ................................ 17
SECTION XXVII. SAVINGS CLAUSE ................................. 19
SECTION XXVIII. CONFLICTING ORDINANCES AND RESOLUTIONS ......... 19
SECTION XXIX. FEES ........................................... 19
SECTIpN XXX. PAYMENT OF TAXES ............................... 19
SECTION XXXI. NON-LIABILITY .................................. 20
SECTION XXXII. WAIVERS ........................................ 20
SECTION XO(XIII. APPROVAL AND ACCEPTANCE ........................ 20
ii
NOTE: ORIGINAL EXHIBITS HAVE BEEN ATTACHED TO ORIGINAL ORDINANCE 88-189
ORDINANCE NO.~
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 ~ITY 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 S~mmons 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 S-mmons' 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 S~mmons Communications, Inc., subject to the terms
and conditions hereinafter set forth, and Smmmons 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 fro~ the context that it has a different meaning, or
unless such word is specifically defined herein. The term
"Grantee" shall refer to S~mmons Communications, Inc. or a
wholly-owned subsidiary of Sammons or a company under common
control with or controlling Smmmon8 (provided that the liability
of Sammons and each affiliated entity acting as Grantee hereunder
shall be joint and several), and its successor8 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 Grantee's 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. POLICg 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. Ail 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 UPGRADEAND TIMETABLE..
(a) Within the t~me 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 MHZ 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
(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 nocmal 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. McKtnney, 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 1, 1993. In
addttto~ 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
371
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 INSUKANCE.
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
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 s~bscribers 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 lon§er 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 ~he
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
373
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.
(i) 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 5 1/2-62 of the Cable
Ordinance.
SECTION IX. CONST~UCTIONAND MAINTENANCE.
(a) Ail 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 te~ms 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
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
reloqate 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) Ail 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 cops 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 service, Grantee 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
376
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,
lien~ 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 an~ 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 security
fund to the original amount of Sixty-Five Thousand ($65,000)
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
(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 parties 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
tn 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 mall 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 Gradtee
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
379
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
liqui-dated 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 al~ 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 se~ 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 courf 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
SECTION XIX. TRANSFERS.
Ail 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 approval shall be sought and obtained in accordance
with Section 5 1/2-26 of the Cable Television Ordinance. Grantee
specifically agrees to comply with the provisions of said Section
5 1/2~26.
SECTION XX. FRANCHISE FEE.
I~ 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,
fee
September 30 and December 31 of each year the franchise
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 installation 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
381
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 tnspectioh of
the complete record of n-mes 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
(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. Ail equipment shall be maintained in
good working order by Grantee and shall be replaced aa needed,
consi6tent with good operating practice.
(h) Grantee agrees to continue to maintain a local
programming studio containing the equipment specified in Exhibit
5, a~d 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 cablecasttng 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
383
SECTION XXIII. EMERGENCY OVERRIDE.
Grantee shall provide and maintain the equipment necessary
for the City to maintain an emerRency 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 perfoLm
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: Ssmmons 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 ANDRESOL~rIONS.
Ail 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 by
the Grantee. The sum of Sixty Thousand Dollars ($60,000)
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. Grkntee
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
386
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 Gramtee 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 berne
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
387
.L~PASSED AND APPROVED on first reading, this the /~ day of
/y~/~ ~ j , 1988.
PASSED AND APPROVED this the ~ day of ~, 1988.
ATTEST:
APPROVED AS TO LEGAL FORM:
DEBRA ADAMI DRAYOVITCH, CITY ATTORNEY
BY: ~
GRANTEE
SAMMONS COMMUNICATIONS, INC.
PAGE 21
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' perfom~ance
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 perfomx 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 infom~ation 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 abnomial operat'mg 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 tune
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 staffmg 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 infoimation as the City reasonably
requests relating to customer service matters.
E. Signal Quality. 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 Mamus' 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. Validi _ty 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.
1. 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 affmnative 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 roles 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 ~4)~
compames ......... , ~- '~-' ~- ' ~-" ~- ..... "
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 grant'mg 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 tei-iii "affiliate" means any individual, parmership, 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 deter~iiines 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 f'mancial 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
info.nation. 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.
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.
Marcus Cable Operating Comp/~..f, L.P.
Marcus Cable Company, L.P.
Dated: c~ ~ 17_.-~'-, ~ By:
Page 9
Marcus Cable Properties, /L.P.
Dated: By: ~ ~/-!/i lt~
sy ~ .. .-
E:\ W PDOCSVC\TRANSFER. CTV
Page 10
Federal Communications Comrhission Approved by OMB
Washington, D.C, 20554 3060-0573
FCC 394 Expires 08/31/96
APPLICATION FOR FRANCHISE AUTHORITY
CONSENT TO ASSIGNMENT OR TRANSFER OF CONTROL
OF CABLE TELEVISION FRANCHISE
FOR FRANCHISE AUTHORITY USE ONLY
SECTION I. GENERAL INFORMATION ~"'~I~,~_V"0.,C~ ~'~ ] S' /~..~"
I DATE APRIL 28, 1995 I 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 AUGUST 27, 1985
which service was provided to the first subscriber in the franchise area:
6. Proposed effective date of closing of the transaction assigning or transferring ownership of the NQVEMBER 1, 1995
system to transferee/assignee:
I
7. Attach as an Exhibit a schedule of any and all additional information or material filed with this Exhibit No. I
application that is identified in the franchise as required to be provided to the franchising
I
authority when requesting its approval of the type of transaction that is the subject to this
application.
PART I - TRANSFEROR/ASSIGNOR
1. Indicate the name, mailing address, and telephone number of the transferor/assignor.
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 ZiP Code I Telephone No. (include area code)
TEXAS 75234 I (214) 484-8888
2.(a) Attach as an Exhibit a copy of the contract or agreement that provides for the assignment or Exhibit No. /
transfer of control (including any exhibits or schedules thereto necessary in order to understand 1
J
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 [] Yes * [] No
between the transferor/assignor and the transferee/assignee?
If No, explain in an Exhibit. * SEE EXHIBIT 2 / Exhibit No.
L
FCC 394 (Page 1)
October 1993
PART II - TRANSFEREE/ASSIGNEE
1 .(a) Indicate the name, mailing address, and telephone number of the transferee/assignee.
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 IStateTEXAS ZIP C°de I Teleph°ne N°' (include area c°de)75219 (214) 521-7898
(b) Indicate the name, mailing address, and telephone number of person to contact, if other than transferee/assignee.
Name of contact person (list last name first) JOSEPH CAMICIA, Director of Corporate Government Relations
:irm or company name (if any) MARCUS CABLE
Mailing street address or P.O. Box 2911 TURTLE CREEK BLVD., SUITE 1300
City DALLAS I State ZIP Code I Telephone No. (include area code)
I
TEXAS 75219 I (214) 521-7898
(c) Attach as an Exhibit the name, mailing address, and telephone number of each additional person Exhibit No.
who should be contacted, if any.
(d) Indicate the address where the system's records will be maintained.
Street address2911 TURTLE CREEK BLVD., SUITE 1300
I
Cty DALLAS I 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 ~ Exhibit No.
and operations of the system as a consequence of the transaction for which approval is sought.
[
NONE
SECTION I. TRANSFEREE'S/ASSIGNEE'S LEGAL QUALIFICATIONS
1. Transferee/Assignee is:
a. Jurisdiction of incorporation: d. Name and address of registered agent in
] Corporation urisdiction:
b. Date of incorporation:
c. For profit or not-for-profit:
la. Jurisdiction in which formed: c. Name and address of registered agent in
[] Limited Partnership I DELAWARE jurisdictiOn:coRPORATioNTHEsYsTEM,PRENTICE-HALLiNc.
~ b. Date of formation: 32 LOOCKERMAN SQ., SUITE L-100
3/29/95 DOVER, DE 19904
[] General Partnership I a. Jurisdiction whose laws govern formation: I b. Date of formation:
[] Individual
~J Other. Describe in an Exhibit. I ExhibitN°' I
2. 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.i
(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 (e.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. MARCUS CABLE OPERATING CO., L.P. MARCUS CABLE COMPANY, L.P.
2911 TURTLE CREEK BLVD., STE 1300 2911 TURTLE CREEK BLVD., STE 1300 2911 TURTLE CREEK BLVD., STE 1300
DALLAS, TX 75219 DALLAS, TX 75219 DALLAS, TX 75219
(b) DELAWARE DELAWARE DELAWARE
(c) ASSIGNEE DIRECT PARENT PARENT OF MCOC, L.P.
l(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. 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. I Exhibit No. I
I
I
4. 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.
5. 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 matter(s) 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.
6. 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. I
4
I
7. 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: la) voting rights will remain with the applicant, even in
the event of default on the obligation; lb) 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 lb), 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. I Exhibit No. I
I
5
I
SECTION III - TRANSFEREE'S/ASSIGNEE'S FINANCIAL QUALIFICATIONS
1. 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 financiat 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 6
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 taw.
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. I
regarding cable television systems, including, but not limited to, summary information about appropriate management 7
I
personnel that will be involved in the system's management and operations. The transferee/assignee mav, but need not, list
a representative sample of cable systems currently or formerly owned or operated.
HOU03:166444.1
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.
;ignature~,,~"'~
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.
~ /
W ILLFULFALSESTATEMENTSMADEONTHISFORMARE Date
PUNISHABLE BY FINE AND/OR IMPRISONMENT. U.S. CODE, TITLE
18, SECTION 1001. Print full name i~.~ ~F~
Check appropriate classification:
[] Individual [] General Partner [] Corporate Officer [] Other. Ftxplain:
{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.
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.
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: MP, I~CU$ CABLE PROPERTIES, INC.
[] Individual [] General Partner [] Corporate Officer MARCUS ~t~]~L(EIEE01~t~t~S, INC.
(Indicate Title)
FCC 394 (Page 5)
October 1993
EXHIBIT # 1 CONFORMED COPY
ASSET PURCHASE AGREEMENT
Dated as of April 5, 1995
BY AND BETWEEN
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
DAL02:64246. I
ASSET PURCHASE AGREEMENT
'THIS AGREF_.3il*.NT, i:lated.a~0f APril 5,' 1'99~,. by and 'between ~Marcus Cable·
Associates, L.P., a Delaware limited partnership, .as ~buyer (?Buyer"), and Samm0ns
C0m~n,,nications, Inc., a Delaw~are...cori~ra..ti0.n, $ .a~.'m'°ns] .co. mmmiicatio,ns of ConnectiCut, Inc., a
Co,,eeticut corporation, Sammons Commu,icatio.ns.0f.~.W.~gton, lnc:, a..Delgwai;e,corporati0n,
Sammons Communications of Texas, Inc., a Texas corporation, Sammons Communications 'of
Illinois, Inc., a Delaware corporation, Sammons Communications of Vir~nla, Inc., a Delaware
corporation, Sarnmons 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 othenvise requires), and solely for purposes of
Section 18 hereof, Marcus Cable Company, L.P., a Delaware limited partatership ("MCC"), and
Sammons Enterprises, Inc., a Delaware corporation ("SEI").
WlTNESSETH:
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 System~ together with those franchises,
a~ets, contracts and fights 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:
DAL02:64246.1 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 l~om 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 ln.qtruments;
Co) 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, tnmk 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 ..1~,. C0{iverters, encoders;, transf6rmerS behind television 'sets and 'fittings),
headends (origination, tmn-qmi.~sion:'and dl.qtribffiion.~em.q),'hardware, to~ll~ ~in. vent0rY;'.sp .at.. e
pans, motor vehicles, suPPli~ te~ equipment and closed circuit devices, microwave equipment,
advertising in-qeit'equipm~'nt, bi!!ihg'equipment, .,c,omPuter.equipmcnt' and furniture, ~shlngs
and office equipmeht' (inci{idifig, WithOut 'limitation,' any' SUch items'locate' at 'Seller s home
office) OWned by 8eiier'gs 0f tl~ dath he,of aiid"at the' CIo'shi~-Date (eollectively,'the "Tangible
Personal Property");
(d) All contracts, leases, agreements, licenses, re~ransrmssmn
consent agreements, commitments and underaandings,
and ali contracts, leases, agreements, licenses, permits, retransmission consent
a~m~ements, commitments and understandings entered into by Seller with respect to the Systems
after the execution of this Agreement which are made in the notuual course of business and in
accordance with Section 6 hereof, but excluding any programming agreement,s, collective
bargaining agreements and those contracts, leases, agreements, licenses, retran.qmission consent
agreements, commitments and undea'standings 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, th6 "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
DAL02:64246.1 8
operating data as are contained in any computer media (e.g., 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 0.f. current
accoUnts receivable has been made available for review-by Buyer);
.... (h)' All deposits ired prepaid expenses relating to the Systemq (a
schedule of Seller's current deposits and prepaid expenses relating to-the-Systerhs has-been made
available for review by the Buyer);
(i) All of Seller's right, title and interest in and to
manufacturers' warranties ,Mth respect to the Systems Assets;
(j) 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):
(a) Originals of all corporate books and records, tax returns and
worksheets;
(b) Cash, cash equivalents and marketable securities;
(e) All trade marks, service marks, copyrights, trade names, a~d
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 am_qume 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 miaccmec~ ~ .aJSer~edI Or unasserted,' known or unknown, absolute or
Contingent, Or 6thenvise; 'other.ttimi:'SUCh' Obligations/being aequi_/ed bY. Buyer pummat to-thi~
Agreement, and.which are.speoifieally.assumed by..Buyer, and that.ia no event shall. Buyer
assnme 'or"0thei~rise b/~ botfiid by-or i' .rgsl~nsible:or :liable'for'anY liability,-duty-or obligation
i~Curred i~y' ".Seller' in ~i61'atioh '0f./he' p¥0viSio/i~ 6f'fltiS 'Agreemefit' '6r ".any. 'liability, duty-Or'
obligation'arising out 0f'i br~ch~ '~01ati6n'iSr d6t~ault by: Sillit,'~rior to the' C16slng, under any
Business Contract, any law or judgment (including any event' fact or-circumstance existing or
occunSng as Of or prior to Closing that, with'the pa~_~age of time or the giving of notice, or botk,
may become such a bieach, violation or default). Except as otherwise set forth herein or
provided in this Agreement, Buyer shall be under no obligation to a~mae 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 pur~m~t 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 qua![fying 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 ass~mption of the Assumed
Liabilities, and subject to adjustments described in Section 2.5 and the provisions of Section 12,
the a~gregate 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.~ ....
applicable to the nansaetions contemplated by this Agreement shall be borne by Seller, anct all
transfer taxes or fees applicable to the transactions contemplated by this Agreement shall be borne
by Buyer.
3. ,, Closing Date and Pla~.'.. The closing Of the transactions 9ontemplated.by
this Agreement (the (21o,~ng") will take place at 10:00 a.m..on the latest of(a) October 1, 19!)5,
05) the first day'of a month in which'such'first'day is. at least ten-bUSiness days after.satisfaction
or waiver of the C°nditions set'forth'in 8~eti0ns'7 and'$' 'hereof'or(e) at Seller's or Buyer's
unilhieml'electi0n, the' first day of the'month' (b~'no'later than January. 1 ~ '1996) in, mhich' 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 i~ this
Agreement is not specifically enfomed. ~ Therefore, Buyer shall be entitled in such cygnt, .in
~ddition 'to 'bringing' suit'at law or equity for money'or other-.damages, 'to-'obtain specific
perfo~n~nce' Of 'the 'tei'~n.n' ~f'this Agreement'" In any :action' tO 'enforce'the .provisions of thia
Agreement, seller shall wai~/e th~ '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 te~ms of this
Agreement.
Co) 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 thi.q 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 .qhall any waiver of any Right
with respect to any occurrence be cor~i~-aed 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 nde 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:
Summons Communicatious, 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
Atto:' 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
Atto: Richard A.B. Gleiner
Baker & Botts, L.L.P.
2001 Ross Avenue
Dallas, TX 75201
Atto: 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 System as a whole) basis. Nothing contained in the
Schedules with respect to any Franchise, or any agreement, ordinance, statute, role or regulation
related thereto, shall be deemed to imply an obligation of Buyer under the same or an admission
by Buyer that any temt 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
a~iEnn. No party may assign or transfer its rights or obligations under this Agreement without
the prior written consent of the other party hereto. Notwith.qtandlng the foregoing, Seller
DAL02:64246. l 5 3
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
instrtunent. This' Agreement shall become binding When one or more counterparts hereof~
individually or ~l~en together, shall bear the signatures of all' 'of the-parties-iefleeted hereon as
the signatories.
19:8 Severabili~. If any provision of this Agreement is held illegal,
invalid or unenforceable, such illegal, invalid or unenforceable provision sb_a!! 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 ~. This Agreement, including the Schedules and
Exhibits hereto and other ir~ttuments 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 I
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 S S
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.
SAMMON8 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 pmmer
By: /s/James N. Whitson
James N. Whitson
Chairman of the Board
DAL02.64246.1 56
BUYER:
MARCUS CABLE ASSOCIATES, L.P. By: Marcus Cable Operating Company, L.P., its general parmer
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 parmer
By: Marcus Cable Properties, Inc., its general partner
By: /s/Jeffrey A. Marcus
Jeffrey A. Marcus
President
57
DAL02:64246.1
EXHIBIT # 1 CONFORMED COPY
ASSET PURCHASE AGREEMENT
Dated as of April 5, 1995
BY AND BETWEEN
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.,
SA1VIMONS COMMUNICATIONS OF VIRGINIA, INC.,
SAMMONS COMMUNICATIONS OF MISSISSIPPI, INC.
SAMMONS OF INDIANA and
SAMMONS OF FORT WORTH,
as Seller
DAL02:64246.1
ASSET PURCHASE AGREEMENT
TtqlS AGREEaX~.NT, dated.~' 6f April'5,' 1'995, by and 'between'Marcus'Cable-
Associates, L.P., a Delaware limited pa~mership, as ..buyer (,"Buyer"), and Sammons
Connecticut corporation, Sarnmons Communicatio,..ns..o,f.W~:ngton, mc., a o.e[aware.corpomuon,
Summons Conununications of Texas,' Inc., aTexas corporation, sammoia~ C0mm~irildati0ns bf
Illinois, Inc., a Delaware corporation, Sammous Communications of Virginia, Inc., a Delaware
corporation, Sarnmons Communications of Mississippi, Inc., a Delaware corporation, Sammons of
Indiana, an Indiana general partnership, and Sarnmons 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,
a~ets, 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, re~ixlctions, 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:
1
DAL02:64246.1
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 fight, 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 ln.utmments;
Co) 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");
(e) All tangible personal property owned or leased by Seller,
including, without limitation, all electronic devices, trunk and distribution cables, studio
DAL02:64246. I
equipment, progranuning origination equipment, amplifiers, power supplies, conduits, bolts and
pedestals, grounding and pole hardware, installed subscribers' devices (including, without
limitation, drop. lines, converters, encoder~, tran.qf6rmers behind television 'sets and 'fittings),
headends (originafi0iz,' ~on:'and clislxib'tition':~tstems),'ha~rdware'''t°61s' :~Vent0ry'" sP~e
parts, motor vehicles, supplies, test equipment and close~! circuit devices, . microwave equipment,
advertisin~ insert'equipment, billing'equiPment, comPuter.equipment' and furniture,'faml-qhi~gs
and '0ffi~-~ "'ui m~n~'(inclb'difig, Wiltx6ut 'lim'itafion,'any' such items'located'at'Seller's home
eq p · -
office) oWned by s~iier'~s 0i? tt~ date'hei~f aild'a~' the' Cldsi/i~'Date' (eoll~ctivelY,'the "Tangible
Personal Property");
(d) All contracts, leases, agreements, llCenses, retransrmss~on
consent agreements, commitments and understandings,
and all contracts, leases, agreements, licenses, permits, retran.qmission consent
aoreements, 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, l~.s~, agreements, licenses, permits, commihaxents and
understandings not to be assigned to or assumed by Buyer (collectively, th~ "Business
Conixacts");
(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 (e.g., 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 bad prepaid expenses relating to the 8ystem.q (a
schedule of Seller's current depositS and ptq~mid expenses relating to the Systeths 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;
(j) 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 ~ssets 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):
(a) Originals of all corporate books and records, tax returns and
worksheets;
(b) Cash, cash equivalents and marketable securities;
(c) All trade marks, setwice marks, copyrights, trade names, and
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 I 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
na~e, ..wh~ther a~,,,ed o~ ~,,~.~.. ~i °r ~,' ~,.o.~ ~r2,.-~o~ ~,~!u!~.o.r
' fin~il "0 ~-Wise} Other thari.-such Obligations being acquired by l~uyer pttm t m.uus,
con ~ t, or th · . -
Agreement, and which are.sp~ifieally.assUmed by.Buyer, and that.'.m no event shall. Buyer
'-'s,m'e 'or"0the~ be 'bou~a by or.'m~o~ib]~.' or :UaUe-for'any .U~*,-d..uE.'.o..~ obh.'gaa0n
in=~ed ~Y'geUer ~.,~0],~..o.n Of.the ?~..o~.0t~5....m~..m'.~_~. o~j~[2U~,u~, ? or.
oblig~iio~:afi~ktg"out 0f'd' breach,'violation or aefault by' ~eu~r,'pn0r to me ctosmg, unuer any
Business Contract, any law or judgment (including any event, fact or 'circumstance existing or
occtmSng 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 othevadse set forth herein or
provided in this Agreement, Buyer shall be under no obligation to asa,me 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 _a~qumed by Buyer, Buyer will
be entitled to indemnification pursuant to Section 13 hereof. Without l~mifing the foregoing,
Buyer sbatl 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 mended, with respect to all employees (and their beneficiaries)
experiencing a qua![lying event (as deemed 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 t'me, 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 adjuslments described in Section 2.5 and the provisions of Section 12,
the a~re~ate 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~_', ....
applicable to the transactions contemplated by this Agreement shall be borne by Se{ler, aaa all
transfer taxes or fees applicable to the transactions contemplated by this Agreement shall be borne
by Buyer.
10
DAL02:64246.1
3, Clo.~in~ Date and Pla~e. The cl0sing. 0f the tran~cti0ns contemplated.~y
this Agreement (the "Closing") will take pla~ at 10:00 a.m.. on the latest of (a) October 1, 19!)5,
(~) the first daY'of a month in which' suck first 'day is-at least ten~ bUSiness days after:satisfaction
or waiver of the C°ndifi6ns set' forth'in S6Cfions"7 and'8 'hereof or(c) at Seller's or Buyer's
~milateral"electi0n, the'first day of'the 'mOnth (bt~t'no .later tb~n ~Iant, ary"l, '1996) in, ~vhich- 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 deteimined 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 System~
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 e..v. ent, in
addition 'tO 'bringing' suit'at law or equity for money 'or other .damages,. to.-'obtain specific
perfmmance' 0f'the 'terms 6f'thi.~ Agi~ment.''' Iii any ;action tO enforce'the provisions of this
Agreement, Seller shall Wak;e th6 '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 fight, 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 consmted 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, remm receipt requested, addressed as set forth
below:
(a) If to Seller or SEI:
Sammons Communications, Inc.
300 Crescent Court, Suite 700
Dallas, TX 75201
Atto: James N. Whitson, Chaixman
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:-W~shbum - '~
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
At'tn: 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, role 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, nde or
regulation related thereto, is valid or binding.
19.6 Binding Nature of A!~treement; Assignment. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their respective successors and
a.~si~'gns. 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
~^~o2:~4246. t 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 hereof½
indi~id-ally or 'taken tog6ther, shall bear the Signatures of all of the.parties'iefleeted 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 ~eement. 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 fights 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, 1NC.
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 parmer
SAMMONS OF FORT WORTH
By: Metroplex Cable Television, Inc., a general parmer
By: Sammons Communications, Inc., a general partner
By: /s/James N. Whitson
James N. Whitson
Chairman of the Board
BUYER:
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 parhxer
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: /si Jeffrey A. Marcus
Jeffrey A. Marcus
President
DAt02:642~6.~ 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 mm, MCC is eighty-six percem 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 agreemem between Jeffrey and Nancy Marcus, Jeffrey Marcus has sole
voting authority over MCPI, which serves as the ultimate general panner 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 parmership interests,
limited parmership 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 umts of the extuity securities of MCPI and the General Partner owned by each directo~ 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 _Tyne of Interest Shares Class
Marcus Cable Properties, L.P. (1) Class B General Partner Units 6,434.53 100.00%
2911 Turde 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, Saclm & Co. Affi![ates (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 & Greet 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) Class A Limited Partnership 13.75 52.88%
2911 Turtle Creek Boulevard, Suite 1300 Units of the General Parmer
Dallas, Texas 75219
Cynthia J. Mannes (i) Class A Limited Parmership 7.50 28.84%
2911 Turtle Creek Boulevard, Suite 1300 Units of the General Panner
Dallas, Texas 75219
David L. Hanzon (1) Class C Limited Partnership 5.00 74.10%
3300 Birch Street Units of the General Partner
Suim 2B
Eau Claire, WI '54703
-1-
Exhibit 3
(1) The ~ Pzr'm~r. ~ sole ~em~ral parmar of MCC. owns ~m 11.41
p~er of ~e ~ P~. A ~jofi~ of ~e 1~ ~e~ of ~e Ge~ P~er ~e mem~rs of ~e Colby's
..~,ag~ ~ ~ ~, ~e 1~ ~ o~ ~w~y ~.75
Je~ A. ~ ~ ~ ~fe, N~ C. ~, o~ ~1 ~e ~ ~ ~ ~k of M~I, ~ ~ h subj~
m a v~ ~ ~ ~ giv~ ~. ~ ~ fi~t w v~ ~ of ~ ~. ~ '~ T~i~p
of~ ~ m MCC ~ me ~ ~.'
~ fo~o~ ~1~,~ dGol~ ~ & Co. o~ ~e ~ ~ B ~ P~ U~ of MCC: Br~d
~ hv~ ~ I, L.P. ~5,~7.693 ~); B~ S~ A~ifion Co~on (5,~.8~ ~); ~e Gol~
S~ G~, L.P. (8,155.~7 ~m); S~ S~ ~ l~, L.P. (1,416.~ ~); Bridge S~ F~ l~, L.P.
~1.1~ ~); B~ ~ ~l~ ~ (~.~5 ~);
~ ~ l~l, L.P. ~.670 ~); Bridge ~ ~ 1~, L.P. ~8.2~ mm); Br~ S~ ~ ~on
(~1.616 ~) ~ B~ S~ ~ ~ (1,456.4~ ~m), Br~ S~ ~eld ~on (S~.083 ~),
O) ~e fo~ow~ ~ of F~ S~li o~ ~e ~ing C~ B ~ P~p U~ of MCC:
~ ~ LP. a4,~.~ "~i'9 ~ MCC ~o~ HoIaings, ~. (~I.~).
(4) ~ follow~g ~!~*~ of Gr~ S~ c~p~ ~ o~ ~e ~ C~ B ~ ~p U~ of
MCC: G~ S~ ~i~ P~. L.P. (9,371.378 ~), GSCP O~o~ Hol~s, ~. (511.~ ~), ~V
N~l~ F~, L.P. (4,8~.650 ~), ~e Tmv~ ~ ~y (5~.127 ~m), ~d
~ ~y ~.~3 ~).
~ fo~o~ ~fil!a~e~ of We~, P~ & Gr~ o~ ~e o~ing Cla~ B IJmi~
~ ~vel~ ~i~ ~, L.P. ~553.~ ~) ~ ~ M Hol~, ~. (I,~.~ ~).
-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 parmers before their sale to third
parties, as well as certain conversion provisions of General Partner and Convertible Preferred
Units. These are all intra-parmer 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
NLARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1993 and 1994
(m thousancts)
~4
Curr~t
Cash and ~'-q~b equivalents $ 8,837 $ 5,328
Accounts receivable:
Customers, net of allowance of $142 in 1993 and
$240 in 1994
Other 1,033 1,899
l~id expenses 190 1,9'/1
463
Total cmTent assets 10,523 9,883
Prope~ and equ~nent (note 2):
Cable systems
Land and buildings 65,791 104,357
Vehicles and other 1,160 2,248
69,289 110,026
Less ~ted dep~eci~on .f22.f~)
Net prupert~ and equipment 46,666 ?6,65?
Other assets, net (note 3) 137.959 ~.~
LiAbilities sr.:l Pnrmers' Defiei~
Cun~t maturities oflo~-t~m ci~bt (not~ 4) $ 2,8~0 $ -
Accounts payable and other ac~ued liabilities 2,882 6,519
Accrued interest
Tot~ current liabilities 8,880 9,489
Long-term debt, less current matmitim (note 4) 192,1~0 327,264
Subsiai..T ~i~it..a pruner intetea~ (note 5) 5.'/88 (246)
Parmer~' den~ - redeemabe parma- interests (note 6) (11,670) (2L290)
Commitments and ee~ ' _m,gen~ (nora 2, 4, S and 9)
S ms,las s
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Consolidated Statement~ of Operations
Years endexl December 3 l, 1992, 1993 and 1994
(in thousands)
1992 1993 1994
Revenues:
Basic service $ 29,894 $ 40,5~2 $ 47,792
Pre. urn service 5.705 7,917 10,397
Installation and other 2,711 3,858 5,440
Manage~-~t fce~ - - IA 1
Total r~ventms 38.310 52307 64.747
Programmiag costs 7,501 10,516 14,127
Selling, s~xvice and syatem management 4.112 5,448 7,533
Cs~n-al and a.~,,~ni~rativ¢ 4,491 5,885 9,793
Manag~a~nt fe~ and ~nljens~ (note 7) 2.224 3,617 2,165
I~'In~iaaon and amorti-~tion 26.652 28.633
44.980 54.0~
Other (income) expense:
Interest expense 11,114 13,443 28,105
Inter~t income and otber, net (133) 251 (51)
10.981 13.694 28.054
interests and extrn~tdinary item (17,651) (15,486) (34,337)
Subsidiary limited partner interests (note 6) (3.672~ 8.919 6.034
L~___~ before extmontinary item (21,323) (6,567) (28,3O3)
Exlraordina~ item - loss cn early ~-ment of debt - /3.076~ (2307~
Net loss $(21v323) $ (9,643) $(30,610)
MARCUS CABLE COMPANY, L.P. AND SUBSIDIAKIES
Consolidated Statements of Parmcrs' Capital (Deficit)
Years ended December 31, 1992, 1993 and 1994
(in tho,,~nds)
Redeemable Partner Interests
C1~ B
General Limited Class A
Balanceat December31, 1991 $ (2,500) $ - $(3,687) $ (6,187)
Capital contribution - 32,501 - 32,501
Net loss ~ ~ _ (~
Balance ar December 31, 1992 (2,713) 11,391 (3,687) 4,991
Distribution of preference
redeemed (187) (1,717) - (1,904)
Redemption of Class A onits (63) (6,030) 1,771 (4,322)
Reallocadon of losses on
redemption of subsJdi,~
limited partner int~-sts
(note 6) (4,302) - ' - (4,302)
Capital contribution - 3,510 - 3,510
Net l~s ¢96/ (%154) (2,,2u~ (9.643)
Balance at D,x-___~nher 31, 1993 (7,361) - (4 ,309) ( 11,670)
Distribution of preference
redeemed (7) (721) - (728)
Redemption of Class ^ .~its (28) (2,519) 1,272 (1,272)
Convemion of Class A tmi~s (3,844) (166) 4,010 -
Capital contribution - 22,990 - 22,990
Net lo~.s (10.053) ~ (973) (30.619)
B~e~tDeeemlnr31, 1994 S(21~.90) S - S - S(21,290)
notes m con~lidg~ financial ~ta~c'ments.
M. ARCUS CABLE COIv[PANY, L.P. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 3 I, 1992, 1993 and 1994
(m thott~nds)
1992 1993 1994
Cash flows ftum operating activities:
Netlo~s $ (21,323) $ 0,643) $ 00,610
Adjustments t~ r~coneil¢ net loss to net
p~u~ded by operating activities:
Extmordim~ item - loss on early t~tix~mem
old, bt - 3,076 2,307
L~ on retir~m~t of fixed a~ets - 400 -
Loss on redemption of subsidiary limited pa.rmer
units - 4,302 -
Dopteeiafion and anaorti~ion 26,652 28,633 37,412
Accretion of discount on notes - - 12,264
Subsidiary limited partner interests 3,672 (13,221) (6,034
Cbange~ in asset~ and liabilities, net of
effects of acqum'tions:
Accounts t~eeivable (930) 229 (1,876
Prepaid e~pe~ses (85) (152) (222
Othe~ a.sa~s (217) 457 (40
Accounts payable and aeeru~ linhiljfies 1.fl~)9 1.4R~
Net cash provided by operating activities 9.668 15.$~;~ 15.889
Cash flows from investing activities:
Esc,-,,w deposit un acquisition of cable systems - (2,980) (5,000
Acquisition of cable systems and franchise, net of
cash acquin~d (95,669) - (139,130
Ad~ion~ to property atat ~lUilm~m ~ ¢3.9~9)
Net cash used in mv~i~g activities ~ ¢6.949) (150.522
Cash flows frum fiua~L.g activiti~:
Proe~ from lung-turin d~bt 66,500 195,000
Repaym~t uf I~mg-m'm d~bt (7,000) (162,500) (95,000
Con~ by limi~_e~ ~ 32,501 3,510 22,990
Camtribufium by aubaidiavy ~mi~! lmrumr 1,000 - -
Pu~eha~ uf au~idia~ limit! ~ u~ita - 051) -
Payment of debt isauanee costs (2,129) (6,589) 0,666'
Redemption ofCt~ss A partner units - (4,322) (2,OOO
Redempt~n of subsidiary limlt~ partner units - (16,846) -
P~-ferenee nsturns dism'bumd - ~g.910) -
~et oash provided by (used in)
Net inemm (deet~a~) in oash and cash equiv~ents (484) ?,6~ C3,.s09
Cash and cash equivalents at _beg~,~g of year 1.709 1225 8.g37
Cash and ctsh oquivnlents at end of year $ lt225 $ 8,837 $ 5,328
Supplemental diselo~ve of cash flow info,~atiea -
mterestpaid $ 10,409 $ 11,510 $ 15,868
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Notes to ConsoLidated Financml Statements
December 31, 1993 and 1994
~ ~ble C~p~y, L.P. ~MCC'), a ~law~ l~i~d p~p, ~d subsidi~
(co~vely, ~e *Comp~y~ w~ fo~ on J~ 17, 1~0 for ~e p~ose of ~g,
~g ~d d~elop~g ~ble ~l~sion ~. ~ J~y 1994 ~e ~y ~d a n~
subsi~, ~c~ ~ble ~g Comply, L.P. ("O~t~g"). ~tmg ac~ ~ a
holding ~m~y ~d g~l ~ for ~e ~e ~bsid~ ~ps ~sed below.
~ ad~fi~, ~g ~ a ~si~, M~ ~le of ~a~ ~c., w~ch ~ a g~l
~ m~ m a ~~ ~ ~le ~s~ ~ ~a~ (~e no~ 2).
~e Cm~s ~fio~ ~ con~ ~u~ ~ ~si~ ~h~s which ~
or~d by gm~c ~. MCC, ~u~ ~g, s~es ~ ~e g~ ~ of
all ~ p~m~. ~e ~ s~si~ ~~ incl~e: ~ ~le P~,
L.P., w~ch o~ ~le ~ ~ ~ W~ ~d M~ ~ ~ble of
S~ ~1o, L~., ~ ~ ~le ~ ~ T~, ~d ~ ~[e of De~ ~d
~ L~., w~ch ~ ~ble ~ ~ ~h~ ~d ~d. MCC ~o h~, ~o
~~ H ("~i~ H"), ~ ~ ~ ~ A~t 1~3 ~ J~y 1~, ~vely,
for ~e p~ of ~ ~ c~ ~ p~c ~t o~. ~i~ ~d ~pi~ H ~ve
no
In S~ 1~, ~ ~y ~o ~ ~ c~ ~ble ~ ~ ~d
~d ~
~e ~moli~ ~ m~ ~l~e ~e ~ of ~e ~m~, ~mfi~,
~d ~o~ ~ve ~ e~ ~ ~~ ~ ~fi~ ~ve ~
For ~ of ~ ~t of ~ fl~, ~e ~y ~id~ ~1 ~y liq~d
~v~u ~ m~ m~fi~ of ~e ~n~ ~ 1~ at ~fion m ~ ~h
~U. At ~~ 31, 1~3 ~d 1~, ~e ~y ~ ~h ~v~U of
~91,~ ~ $1,~,~, ~fively, ~g of~
(Coudnued)
MARCUS CABLE COM~, L.P, AND SUBSE3LA~FI~$
Notes to Color.ted F~na~cml S~men~
(d) ~op~ and Eauinm~;
~ ~d ~i~t ~e ~ a~ cos~ ~clud~g ~1 d~t cos~ ~d ~ m~ct
~ ~s~ia~d ~ ~e C~cfion of ~ble ~l~ion ~sion
~s~, ~ ~e c~st ofn~ ~mm~ ~hfiom ~ ........ ~d ~s~bu~
~p~c ~ ~a ~d ~,i~t .... '.. ~c ~a ~ ~ c~
~l liv~ ~ ~o~o~: b~, l~ ~; ~lc ~, 3 m lO ~; ~d vc~cl~
o~, 3 to lO ~.
(c)
F~ch~e ~gh~ ~d going conc~, value of acq~ cabte s~ ~ ~o~zed oa a
d~t.
~e Comply ~s~a~s ~e r~cov~b~i~ of i~ 'ble
~ ~ m ~v~ ~e ~-~ ........ ~ ~-~ ~ zl~ ~ not
~m or~ ~u~l~ ~. "~ ~m a ~ ~h flow
~ ~ ~c ~ ~ ~ ~ ~i~ ~ ~e ~ ~ pro~d~.
~ ~ ~ m ~ ~ -- ~ ~'~ .~ ~ av~ge ~ ~t
(Commu d)
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Notes to Consoliclated Financial Statements
(2) aralai.~inm
On July 29, 1994, thc Company acquired cable t~levision systems in Wisconsin and M/n~esota
from Sm' Cablevision Group ("Star"), an u~t~aliar~d third pan'y, through a subsidiary parmcnkip
for cash of $139,152,000 (including direr acquisition costs o f $2,152,000).
On Sept~.6~r 1, 1994, the Company acquired from Crown Merlin. Inc. ("Crow~"), an unafHliated
~ party, a noncontmlling general parmor interest in Cencom of Alabama, L.P. ("CALP"), the
management conu'act 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 acqu/sition~ of Star and CALP were accounted for as purchases and, accordingly, the purchase
prices were allocated W tang/hie and intangible assets based on estimated fair m~rket values at the
dates of acquisition. Fa/r market values were determ/ned using independent appra/sers. In
connection with the ac. qu/s/tinns, the Company also assumed responsibility for settling outstanding
rece/vables and payables of the cable television system~ at.mt/red. Net assets acquired as a result of
these acqu/sit/ons are ~ as follows (in thousands):
Franchise rights $ 34,147
Going concern value 94,437
Noncompetition agreement 10,412
Net cash paid, including $2,980 3.014
from ea~,u~V i~I in 1993 $ .!42,110
Unaudited pro lo,ma financial information for the years ended December 31, 1993 and 1994 ns
though the Star and C,~!-la acquisitions had occmved at January 1, 1993 follows (in thousands):
Revenues $ 81,077 $ 82,202
Operating income 0oss) 2,357 (2,781)
~et lo= (42,146) (4s,s30
On July 1, 1~94, th~ ...Comlink., through Opentin~, entered into an agreement to ae. qui~ cable
television symmna in Wisaonsin and Minnesota from Crown for appmxima~ly $337 ~ This
ae, quisi~ion was ~:~npleusd on Janumy 18, 1995 and was funded with proceeds from an amended
(Continued)
MARCUS CABLE COMPANY, L.P. AND SUBSIDIAR_IES
Notes to Consolidated Financial Statements
(3) ~
Other as~ts comist of the following at Dccemb~ 31, 1993 and 1994 (m thousands):
1993 1994
Franchise rights $146,05.2 $ 240,489
Going concern value of acquired cable systems 3,169 13,365
Noncompetition ag~-'eme~ts 36,600 36,700
Debt i~tumce costs 6,606 13,773
Eac~uw d~osits for acqu~itions 2,980 5,000
lVlanagemamt fc~ receivable from CALP - 3,410
Other 197 584
195,604 313,321
Accum-lnted amo~6on 57.645 84.6,M
$137~959 $ 228~677
(4) ~
The Com~r~any h~_~ outstanding borrowings on long-t~,,~ debt ~cme~ts at Dccgmbc~ 31, 1993
and 1994 as follows (in thousands):
1993 ~4
13-1/2% Sc~or Subordinated Discount Notes $ - $ 227,264
11 7/8% Senior Debentures 100,000 100,000
Credit facility 95.000 -
195,000 327,264
$192~150 $ 327,264
On July 29, 1994, Operating and Capital II issued $413,461,000 of 13 1/2% Senior Subordinated
Discount Notes (the "Notes') through a public offering for net proceeds of approximately
$215,000,000. The Notes ate umeeured, ate gmtanteed by the Company on a soniot basis, and a~e
redeemable, at the olnion of Opetat~_~; at amounts deanasing .'.,,a, 10~ to 100% of par be~_'nn~g
on August 1, 2001. No interest is payable on the Notes until February 1, 2001. Theteaftm, interest
/is payable ~-miannmlly mi Febnm'y I and A~gmt 1 until maturity on August 1, 2004. The
disem~ an the No~ is being a~d using the intotest method at sa inte~st tare of 13 1/2% fxom
31, 1994. Proceeds from the Note~ were used to tet~e outstanding borrowings under the
Compm~ existing ~t fa~tity and to fund the 1994 acquisitions.
On Oembet 13, 1993, tine Company and Capital issued $100,000,000 of 11 7/8% Senior Debentures
(the 'Debentures") throu~ a public offerin& The Debentures ate unsecured and a~e rexieemable at
the option of the Cmnpony on or a/ret October 1, 1998 at amonnts de~xeasing farm 105.9% to 100%
of pat at October 1, 2002, plus ae,~rued intet~t to the date of redemption. Interest on the
Debentures is payable semiannually beg~-i~g ~ 1, 1994 until mattmty on October 1, 2005.
(Coutmu~l)
IVIARCUS CABLE COMPANY, L.P. AND SUBSIDI. ARI~S
Notes to Consolidated Fi.n~cml Statements
used to repay i~debtedness of subsidiary parmerships a~d to redeem certain parmership preference
O~ 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 form of two
term loa~. Amounts outstanding under the credit facili~ bear interest at either the (i) base rate or
(ii) London Interb~ni~ Offered Rate ('LIBOR"), in each case plus a margin of 0:75% to 3% subject
to cermi~ 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 parmerships and a pledge of all partnership interests in the subsidi.ry partnerships.
Operating pays a commil:lllent 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 loa~s on Januaryl 8, 1995 to acquir~ cerlain cable systems from Crown
(see note 2).
The Notes, Debentu~s and cr~iit f~cility all requ~ the Company and/or its subsidiaries to comply
with various fimmcial and other covenants, mchiding the mamt6m~-ce of certain operating and
fimmcial ratios. These debt inslruments also contain substantial iimi~atiolls oR, or prohibitions of,
distributions, additional indebtedness, liens, asset sales and certain other items.
Subsidiary Limited Partner
Subsidhu~ limited partn~ interests lmpr~ent limited partner traits of the subsidiary partnerships
held by entities affiliated with, but not a part of, the Com~r~ny. These limited pm'ruer units have
volfin~ rights and share in the profit or loss of the r~ctive parmersh'.ms. Certain of the subsidiary
limit~ partner interns receive prefer~ce returns on their capital cunuibutioos. A sumrn*ry of
transactions in subsidiary limited partner inter, ts during the years ended D~ 31, 199%~ 99~
and 1994 follows (in thousands):
1992 1993 1994
B.I.-~ at beghming ofy~r $ 29,936 $ 34,608 $ 5,788
Conlributiuns 1,000 - _
1994) $,?8? 3.~'/3 764
Redemptiun of subsidimy limited ~ units - (19,550) -
Purchase of mbsidi~y ii~i~a pmla~r mls
by Co- ay - (351) -
Net lg~ ~ ~ f6.798]
Ralmu:e ~t end of year S~,608 S $,78___~88 $ (246)
co the extent that the ~ value of ~ en~trilx~ted by the subsidiary limitecl parm~s exceeded the
book value at the cLa~ of co~ributin~. A~ of December 31, 1994, preference r~cun~ are ao
(Con,hued)
lvlA~CUS CABLE COM~PANY, L.P. AND SUBSIDIAKIES
Notes to Consolidated F~n-ncial Stat~mems
(6) Parmers' Canital (Deficifl - Redeemable Partner Interes~
(a) General Partner and Class A Partner
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 $727,875 for cash of $2,000,000. Als6 on that date, the
remaining 3,405.944 Class A units with a face value of $1,000 per unit and cumulative
unpaid preference returas of $1,971,474 were converted into 3,934.53 general partner units
and 201.95 Class B limit~l psrlller tlllits of MCC, ~h with a fae~ value of $1,300 per umt.
(1,)
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 do~s not consent to such dissolution), such
holders have the right to require the Company to mdaem all of the Class B limited partner
units held by the ~xa~ising Class B limited parm~ for a price equal to the fair m~ket value
of the units on the date of mdamptiom The fair market value of the Class B limited partner
units is to be datermined and agr~d to by the Class B limited parmers and the General
Pm'trier. If a fair market value cannot be agr~! upon, ~ an independent appraiser is to be
used to det~...ine the fair market value.
In eonnee[i.'on with a disabling event (as dermal in the parme~ip ~reement), the general
,. 2- y, ~-~ ~ .umts. op~ eonve,,,on or ~ general parmer units into Class B
(c) Allocation of Incom~ and ! ~s to Partner~.
Income is ~llocat~l to tl~ lmrtnt~ firat to eliminate any negafiv~ capital =_¢eount b~mc~ (as
defined in the part~ agreement) until no partner has a negative capital account bnlnnce
~d.n then to the Class A partner (through July 29, 1994), Class B limited partners and the
· Fimt, to tlae Class Il limited partners and the General Partner until each holder's capital
..a~e°tm.t balance d°es not ~ ze~o. if tile capital a~az:nt is leas than zero prior to tim
· Next, to the Ciasa A lin'mcr (tJnmugh July 29, 1~94) until its capital account balance does
· Next, to thc Class B limi*,.d painters and the General Partner.
The General Partner is allocated a mini,~,m~ of 1% of income or loss at all times.
(contmu~)
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(d) ~
The mount of distributions is at the discretion of the General Partner, subject to the
restr/cfions in the Company's credit facilities (see note 4). The manner of distribut/on/s as
follows:
· F/rst, to each panner 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 limi~xl partners and thc General Panner.
On July 29, 1994, the Class B limited parmers made a cash capital con~bution of
$22,990,000. The proceeds of this contribution were used to partially fund the purchase of
cable television system, from SUtr (see note 2).
(7) Related Party Tranna~tion~
Through July 29, 1994, each subsidiary partnmship had a management agreement with Marcus
Cable Management, Inc. ("MMIC), ma afftliated entity, whm~by MMI p, uvided various general,
administrative and operating sexvices to the parmexshlps. The menag~.naont fee paid by each
subsidiary for these services was $.5% of revenues. The Company and its subsidiary partnerships
w. corded managmnont fees and expenses of $2,224,000, $3,617,000 and $2,165,000 for the years
ended Docember31, 1992, 1993 and 1994, respectively, pursuant to this agrecnnent. The
management fees ~ discontinued on July 29, 1994, and the ~mployees and rdated expenses v.
MMI become a part of the Company.
la connection with the Sm' acquis/fion ia 1994, a fee of $1,500,000 was paid to Marcus Cable
Properties, lac., an dliated ~atity, for s~'vices di~ctly relami lo the a~luisition, The fee was
capitalized as pan of tl~ cost of acquiri~$ the cable I~levision
Ihring the l~'iod of Sq)tmk, r 1, 1994 through I)~camber 31, 1994, the Company earned
managenmat fees of $532,000 ~om C, ALP (~ note 2). lhymmt of~t fees by CALP is
deferred under pmvisiom of CAL~s cre~t and [m'tn~ Ml~'ments until such time as certain
conditions a~ met. At December 31, 1994, mana~-ment fees receivable from CALP were
approxinmt~ly $3,410,000, which have been includ~l in noncun~-nt other nssets in the
(continued)
MA_RCUS CABLE COMPA_Nry, L.P. AND SUBSIDLNKiES
Not~ to Consolidated Financial Statements
(8) Profit ghurinv Plan
The Company sponsor~ a 4010c) plan for its employees whereby employees that qualify for
participation under the plan can contribute up to 15% of their aala~, on a before tax basis, subject
to a maximum contribution limit as detcrmi~ed by the Internal Revenue Service. The Company
matches participant conm~utions up to a maximnm 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
appruxlm~ely $29,000, $$0,000 and $83,000, respectively.
(9) Commitment~ and Contim, encies
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, $391,000 and :r~51,000, respectively.
In October 1992, Congr~ enacted the Cable Television Consumer Protection and Competin'on dct
of 1992 (the '1992 Cable Act"). During May 1993, pursuant to authority g~anted to it under the
1992 Cable Act, the Federal Communications Commlnsion ("FCC") issued its rate regulation rules
which became effective September 1, 1993. These rate regutation rules required certain cable
systems in franchise areas which r~ceive certification and are not subject to effective competition,
o~-n~ were mueo on an average I{PA coml~-titive differential betwee~
~nve ~m~. Eff~'tive ~-pteml~r 1, 1 ~3, regul~ed ~ble ~y~tems not electing cost-
of-~.-,rvice ~ ~ to reduce mt~ to tl~ higher of the pr~m'il~..6 I~mchnm'ks or rates
w~ 10% ~l~v ~ in effect on Septeml~,r 1, 19~2.
In Feimu~ 1 ~)4, the FCC annmmc~l flutist ¢l~mge~ in its r~e rt'gutation rules and mnotmced its
~. ......... ,,?asea. on a ~ competitive differentml of 17%, which became effective
un .~ay.l=, t.~ or ucertam conamons were met, on July 14, 1994. Relzui~ted cable svstem~ were.
? ~o .~o'_'~ ra~ to the ~i.~-r of the new FCC m~'ibed benc~,~,4cs or--~ ~,;~,~- ~"~
The Company believes that ithas eomplled with all provisions of the 1992 Cable Act, including the
~t_¢ setting p~ovisions In. indented by the FCC. However, in jumdictions which have chosen not
to ceftin, refunds oov~ring · one-year period of basic service may be ordered upon eer~fi~on if
the Co~,any is unable m justi'"'"T~ its rat~s through a cost-of-service filthE, The amount of refund
mceessfully e~llenged by fmghising authorities h not ~n, mtly estimable.
During the year ended December 31, 1994, the Company paid rate refunds of appruxim~ely
$944,000 to its cable custom,rs as · result of rate or~rs issued by certain franchise authorities.
(Continued)
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(10) Financial lrl~truments
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, respect,vely, at
December31, 1994. The carrying value of long-term debt approximated fair value at
December31, 1993.
(11)
On March 10, 1995, the Company agreed to acquire certain cable systems from Sammons
Enterprises, Inc. for approximately $I billion, subject to closing adjustments. The systems to be
acquired conduct operations in 15 states. Consummation of the ac.quisition, 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 Teleservice
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.
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. McMillln 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. Mannes is Vice President of MCPI, with responsibility for human resources,
employee benefits, general administration and insurance matters. Ms. Mannes 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.
Mannes was named Assistant to the Chairman. At the end of 1988, Ms. Mannes 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. Mannes 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. Itolliday 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.
Corporate Structure Pro FDrma for the Sammons Acuuisitiql~
Limited Partners
Other
--~ Operating
Subsidiaries
UNITED STATES
SECUR1TIF~ AND EXCHANGE COMM~ION
WAb~nNGTON, D.C. 20~49
FORM IO~K
[~,e] ANNUAL REPORT PURSUANT TO SF. t2TION 13 OR l~d) OF TH~ SP. CURIT~ EXCHANGE ACT
OF ~ [~
For d~ fi~tl y~r ~ded Dec~mber 31, 1994
OR
[ ] TRANSITION RI~PORT PURSUANT TO SF. CTION 13 OR l~(d) OF TI~ SF. t2URIT~_~ EXCHANGE
ACT OF 1934 [NO ~ R~UIRaD]
MARCUS CABLE COMPANY, L.P.
MARCUS CABLE OPERATING COMPANY, L~P.
MARCUS CABLE CAPITAL CORPORATION
MARCUS CABLE CAPITAL CORPORATION ii
Delaware 7~-23~7471
Delaware 7~'2-e~077
Delawar~ 7~-249~706
(.~ate or ot~er j~a~flction of
incorporation or organi~x~on)
~ca~on ~Vo. ~
2911 Turtle Creek Boulevard, S~ 1300
l~ll~, Tez~ 7S219
~4ddre~ of pr~nc~al ~cutive oJ~c~) ~ Code)
MARCUS CABI.F. COMPANY, L.P.
MARCUS CABLE OPERAT~G COMPANY, L.P.
MARCUS CABLe. CAPri'AL CORPORATION
MARCUS CABLE CAPITAL CORPORATION ti
1994 ANNUAL REPORT ON FORM 10-K
Table of Contents
l rtI
Item 1. Description of Business ........................................ 3
Item 2. Properties ................................................ 24
Item 3. Legal Proceedings .......................................... 25
Item 4. Submission of Matters to a Vo~ of Security Holders .................... 25
PanIl
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters .................................. 25
Item 6. Selected Financial D~ ....................................... 25
Item 7. lVl~~'S Oiscu~ion and Analysis of Financial
· 'on and Results of Operation .............................. 26
Item 8. Financial $~_,~aems and Supplememary Data ........................ 33
I~em 9. Change~ in and Disagreemen~ With Accounmms on
Accounting and Financial Disclosure ............................. 33
Partm
Item 10. Directors and Executive Officers of the Regi~.~mis ...................... 33
Item 11. Executive ~n ...................................... 37
Item 12. Security Ownership of Certain Beneficial Owners
and Manag~ .......................................... 39
I~em 13. Certain Relationships and Related Transactions ........................ 40
I~em 14. Exhibits, Fimmcial Statement Schedules, and
Reports on Form 8-K ....................................... 42
ITEM 1. DF~CRIFFION OF BUSINEKS
a) General Development of
Owned Systems
.T.~..Marc~ Cable ComPan. ~, L..P..('__MCC') o_wm, ope~ and develops cable television systems
ougn its affiliated lnm~mut~ (the Operatin~ l'armershins ), MCC and the ' · '
· . . . . .~ ~ Operating Parmerships
~! llecuvely, the Company ), own cable ~levmou svm, m, (the 'Svsm~,'~ ,,~,.~,., ......
consm oto) Marcus Cable Pat~n'a. L P in coniunction ~ a,.. ~.'.~.2,,.. __'__., ~ :.;---:-;-.r-
:.:-.. ~,~,u~uv~y, u~ w~scomm Panneranip'), which owns and omrs,,,~ ~, {. un
~ and Illin~i~ li{'~ I~.,,,,,,~ r',,k~., .r e.- -a___,_ , ,., ..,_ _ ,,. - .-r--:- .... ; ....
.a~a~_.operat~..~. ~ m San .~elo, Teru, and (iii) Mar~ Cable of Delawm and ~an,~,,.~ ·
A .cio and the · ·
L ~ .k. -r.~__, .._~_ ,, .... Panmr~, rezpac~ y. Marcus Cable Prooenles,
· -. ~,,,~ ,.~u~r,, farmer j, wnose SOle general Mam~ (
raung . CC ~s the sole an~ral
December 31- 1994 the evstems ..... a ,~A ,_ __ g. _ partner of Operating. At
· , -,,-,~..- ~ o/..~,~ez homes ann served 222,735 basic customers who
subscribed to 156,656 premium service units.
· ~ m ~. was organized ~ a Demware corporation in August
.1993, for the ~le __.l~.__.of serving as a co-issuer of the llV.~ ,Senior Debentures ,due ,October 1, 2005
(the "11~ De.~m~.es ). In June 1994, the
Delaw- - ': ........... C _ompany creat~ two new subsidiaries, Operating, a
.~? umu~ , s.~ Marcus Cable Ca ~ Co rati ' · ,, --
co ration. Ca · P ~ on 1I .( C~i~l li ), a Delaware
fpo pP~~Pw~ organized for the purpose of serving ~ co-tuner of the 13~i~ Senior
Subordir~.,~ Guarnmeed Discou~ No~ due Augusi 1, 2004 (the '13~i~ No~"). C. apital and Capit~l
II have nominnl as~s.
wi~ the .... ..- ....... ~,~. m~;u:i zoun~a me L;ompan
goal of develop lC into one of the I~ad,n mul' le · Y
o .... g tip cable system rators through internal
· . y first acquired cable telev~smn systems m 1990 m the W~,scousm
area, pm'.¢ .,h~d_ ..systen~. m San Angelo, Texas and the Delaware/Maryland area in 1992 and ....
sys~.m, tn ~ .w...~con!.m and M?~ta._ area in 1994. The Co ~av'i~ continued to e' -"~'"'"'
additional acqmsmom m 1995. (See -~__-c_-_m Developments" ~:aom~n on page 4 ) xpand through
Managed Systtm~
Go" Maryland Cable Partners, L P ('Maryland Cable"X, which is co-'---"--' '- .........
lin'nan . ' ' ,, ,, ,.u~uu~u oy an ~ O!
Coumy, Maryland. At~w. el~r 31 1~¢ ~?'w'-m-ca-'--se~rv'''e-''cus' to~m?.rs in and around Prince Georges
..ed 80,563 basic customers who ~i~ri~;d~ 78,~r~n~ ~Y~~ 1n,,881 homes and
to 4 7, Uofnd~ ~mw_mM~?~~l~dt ~-C~--~-e-~--'- ,~ ..e~s._a_ __n_n_n_n_n_n_m~_ gement fee, payable monthly, equal
additional arno ...... =L-~_'.._=m~,_Y._~au~ ~.am.e. cn ~ .tee, ~l,lU?,O00 per year m payable in cash and any
ua~ ~ payam¢ to ~pernnng omy tn me event taat no material default (as defined in the
Credit Agreement between Maryland Cable Panners, 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 afffiiate 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 fights 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 party 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 Ahb~ma, L.P., a Delaware limited
partnership (``CP, LP'') under a separate management contract. (See 'R~_nt 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 Partllership (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 S~ar Systems serve the areas in and
around Food 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 Parmership in Wisconsin.
Crown Acquisition
On January 18, 1995, the Wisconsin Partaership 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, Del)ere and Door County in northern Wisconsin and in the
suburbs of Madison and Milwaukee, Wisconsin, including the city of West AIIis, and in the communities
of Altura, Rollin..ostolle, Lewiston ~ Hidden Valley, ]VIinn~ota. The areas served by the Crown System.s
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 Systent% provide service to more than
350,000 basic cuswmers, which the Corn?any 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 Parmer Units (the ``CALP Units'') of CAI.P, from an affiliate
of Crown, representing approximately 2.6% of the Limited Panner Units of CALP, for further
consideration of $1,020,000. CALP owns and operates cable systems in areas surrounding Birmingham,
Alabama. As of Dec~_~-mher 31, 1994, CALP's system, (the 'CALP Systems') passed 120,235 homes ami
served 82,716 basic service customers who subscribed to 34,721 premium service units.
of the reve~le$ of C~P.""~AL~ --------- ; ~pcraun$ elms, tee, yaole quL'Mrly, to S 0
ou~ ~cca are: in t ~ ,~o~,~uu~ a:, ~-~ were $30,089,000.
..... ,- ACquisition 0elow). ---- ...... oysmma are sold (see
.Furthermore, ~he Wir. om~ ~, upon the Worov~l .......
aa$~ ~ ' to .... oz all or me ~ rs of M
,4' · · · . ofc, ·
.,~.._. __ the Spec'.ml Limited _/Mrt~r Umt$, to Jeffrey A Marcus ...a -~_ ~r~p~. ~o~ro~_ly
,u~ aggregate purclm~ prir~ for me.h mlit$ was ~0~,~}~. ,~ ,~ oo~mnall ~ oroup, L.P.
Sammom Acquisition
in a tr~,~_~on v~ued ~t ~ e, nn n,~ ~._ ~ oy~.~u~ ~mom aymms") owned bv
customers I . - $96_,...~,v~,. -a~ ~munom ~ ~rve '
... _ oca. t~d m Texas - 170,000 basle oistouler~ tiaa ~ -~ . ~apr?xlmat~ly ~50,000
worm memmlex Inai,,~tm~,~. ~n ~ ~__. -- ,.-~,.~o~,.. oz wmca are lOCatea in the
of v~ · oa~c cmtomers, C,~ligorma - 122 ·
v~rgm~ - 15,000 bazic cu~tom~rs ami Wz~Mnom- ,~ ~ ~ .-..y=~,~orSu~ - ~.a,ooo o~ic cuatomers.
San Ang¢lo Divestiture
u~ m qua~r of 1995.
CALP Acquisition
Cable of Alabama, Inc., enrr~, ~,ea ~$ ~,~. '__u~____,c~re~. y ow~_. MCC, ~ _t~.. gh ira ~ul~idiary,
quarter of 199:5. ~---~ -~,~. ,..wsm$ :s expects! to occur in the third
MCC plam to utilize the proceeds fix~ the San ~"~*oszle *lon~
r CALP will be fmamc~ with debt. "-~' '~ m~ me ~ of the purclmse price
...Upon completion of the S~mnons Acquisition the n~ · ·
will serve aooroxnnamlv ~ 9tiff nt~ _."__'~_~ Y .. ~ ~ appmxunatelv 1800 ~flrr~_=
· . ; , *~miOl]l~rs WhO WIll Siibscri · -.
clusters, averaging over 155,000 basic customers l~e~clu~te'~.°'''' oystems Vnll oe wmun seven regional
b) Financ'ial In_formd~n About Industry Se?ment~
The Company operates solely in the cable mlevision iadt~/~y, ired all revenues are derived from
¢) Narrate De~c '_m,tion ~[
The Cab~ Tel~sion Induslry
A cable televisian system wceives television, radio and ~ signals tim are u'ansmimd to the
s~zm's head~! si~ by ~ of off-air antennu, microwsve rehy ~ and u~lii~ ear~
~;.~,e',~, fiber..o~ cable, to customer~ wi~ pay a fee for this ~%,ice. Cable sys~ms my aiso origix~e
~r ow~. televmon programming and other information seduces for diseibufion through the system.
.Cab. lc te.levision sysmm generally are consmu:~i and ~ punua~ to non-exchsive franchises or
s~rn~l~r licenses gr=nt~ by local govemmon~al authorities for a spadfi~l m-m of years.
response ~o me n~ens ox rer~n~s m pre~ommanny rural and mountainous ase~ of the counn-y where the
.~. '~y.of.o.ff-~r.' television reception was ~ due to factors such u .t?pol~.hy and remotene~
crees ~d suburban areas that had a In~,,~ availability of clear off-air television station signals. In more
recent years, cable television ~stmm have been constnu:ted ia hrge urhaa cities ~d nearby suburban
~ueas, wnere good off-a/r r~:ep~ioa from multiple television stations us~lly is ~-eady av~/hble, ia order
satellite.~iivered
to offer the numerous, . channeis vTpically catri~ by cable systmm wkich ~re not
otherwise available via broadcast television reception. The cable televi/ion iadnstry is ~ r~idly
due.to new tec, hnolo~y ~d new ~llhnces between cable television s~d telephone compames.
· ~ovidi~
~onal ?b.le ~le~.ion pro~'amm/~.is only one .aspaa of the industry, as providia~ telephone services
expanae~ eaucauonal ~nd entertainment services on an interactive basis have become potential
Cable television systems offer ~uston~rs v~ious leveis (or 'tiers') of basic cable services
consisti~ of off-air television si~nais of local network, independent m~d ~ducation~l stations,
television as
GN, and WWOR), various satell/te-delivered, non-broade~ channels (such as Cable News Network
('CNN'), MTV: Music Television, the USA Network ('USA'), ~.ntertaiament and Sports Pro~vammi~
Network ('ESPN'), ~nd Turner Network Television ('TNT')), ~i ~ pro~tmmni~ o 'r~ia~ted locally
b.y the cable ~stem (such as public, govemnm~al ~d ~lucatioml -_cce~_ pro,'ams) and informational
_disphys f~-,~ ~ws, wether, stock m~rim ~n/fin~nc~ reports ~d public service announcement.
~or an extra~montl~y .charge, cable systems also typically offer premium television services to their
customers, lnese servw, es (such as Home Box Office ('HIK)'), Showfin~, The Disney Channel ~d
regional sports networks) are satellite-del~e~d dmmeh comistia~ principally of feature film% live sports
events, c, oncens and other sp~ial entenaiamont features, usually pr~m~! without commercial
interruption.
· A c.ust?.mer gen~., r&lly pays an ~ installation ch~ge and fixed monthly f~es for basic and
premmm televmon serw-.es ~nd for other services .(such as the rental of c, onverters ~nd remote corm-el
~).. Such monthly service f~s c. ots~/~te ~ pmmry source of rev~,~ for cable television systems.
pai.d, by .eugene..rs for pay-pct.-view, pro~n~ of moves and spaci~l events and from the me of
av '.ail?ble.adv. e .msu~ spots on ~ive.mser..-~l~poned ~ro~'mmm~. Cable sysmm ~ offer home shoppin~
services to me~r custom~rs, a service wn~n pays me systems a share of revenues from sales of products
Business Strategy
Acquisitions and Regional C/nst.e~g. Jeffrey A. Marcus, a cable television industry executive
with over twenty-seven years '
C ......... of.e.~.n .el~ .In. cable system operations and owner~h'?, founded the
ware~marymnn a~a, mm m ~. aaaea to us system~ tn the Wisconsin area through the acquisition
· ~-~.usU~..n~ uw ~ s. p~..men m wlsc~.mm and Minnesota. Each of ~ acqui~ifiom
~or, r~o ~rox -y to ns emstmg sysum~ or or suma~nt raze to serve as cores for new operating regiom
or as extempore of existl.~ regiom. As evidenced by the Conmanv's recent .~-~-.-
rmtu o.f. Sanunons Comnmnicatlom cable telev~on systems, the Commnv will strateaieallv review
-- 7--~-~--
~m.~ with ezann~ uble aymna own~ or managed by ti~ ~y.P
_ _ .u~ ui e~mc mm opcrm:ulg enlcteigle~ a~sogiated with re onnl C~
~ ....... ~..,: ................. gl_ rs of systen~, such as
central hand,~4 ~..,..~ ~.,.a... ~ r,- ...-~; o...yr~az?~..wm~ a s~n~qe region mrougn a
oanow~ , sumtanu~y _ . .____ ouL _v_
. . .°tg. o.~.oetwe~n. ~o .MHz and 7501VlHz. This program should enable the Con.any to deliver
tecl~nologlcal mnnvatlons tO ItS customers a~ such servic~ become commercially viable.~--' ......
vt,-.. --- ~ ~,~ ~z~ ~ ~l~[l~O [0 ennnm'-" Op~ ~ flOW and ol~l'at~q~ mnroine
W~11¢ rome flor ' -- . - . -,--------o ~o~,
.___.,~_ .,. ................. ty · first selectwely
~f...,~t~. u~. oamc p~ant to increase ~l capacity and ~ the nmnber and vnri~rv ,~+'
,,v -.~,.___..~.a7 su~tn, r~,....~ ,U~iJ~Va.V¢ D*ISIC, tiff nn~ lDr~ilBn] ~DI~ ~lq/ico I~h~'e~ nnd hv
_ancillary sourc~ of revenu~ through local s~ot advdrtisinn and nav-~=:,,~- -- -' ""
oCfm-.e~nYse~i~.~l~m .para_ .c~_!y ~ m mcmum8 revemm~ through the introduction of multiple
t' , uj, u~ ~u~ ui mmuzu~aJ ~ mMre~j m ~ ~mmam, an~ hv th~ iu~f~,.,,
illdok.,,~_~_ t,.. ~,-,,~ '"----tine-' ; "--- .. - - ,--., -- -; ~ --------,,--,~
_ -~.oy.,a~.~.,.~w, .or _c~m!n~ otnerentm, that may be forn~d by tl~ Company Inaddition
~__ab eO~ePe ~ zo ~puff~e~sys~, ~ ~ may~..l~SU~__._o~_.mmities to exchange systems for other
prope funh~ as regxonal ¢luste,,,~
~m..m, !.e.x~. ~ t,,e,nware/Marytann. 'l'ne y manages me v/stems in ~'~ re,inns
~,-_~-~i,,,,, msis clei ' . .' .c;xm~n. y __ __ --o ......
, egmng day-to-day operanng dectsmns to the local system managers, who are closest
The following table indicat~ the growth of the ~ by summarizing (i) certain operating d~
as of December 31. 1992, 1993, and 1994, and (ii) certain financial data for each of the fiscal quarters
during which the reapective regional groups of Systems have been owned by the Company.
OFF, RATING DATA (6)
~992 1993
ttonm pined (1)
Wisconsin Systmm 124,131 125,0~0 ~7.~
~ ~elo ~ 47,~3 45,679 45.7~
~~~ ~ 38,~ ~,~ 39,212
T~ ~.~ ~.~9
W~ ~ ~,~8 ~,~ 1~,~
~ ~1o ~ ~,~ ~,~8 32,~7
W~ ~ ~.1% ~.5~ ~.5%
~ ~o S~ ~.4% 67.7% 71.4%
~~~ ~ 59.~ % ~.4~ ~.4~
w~ S~ ~,~ ~,1~ 114,~I
~ ~o ~ 13,475 19,751 ~,418
~w~~ ~ 10,~4 15,~ 19.~7
T~ ~ 156~656
~~(~
W~ ~ ~.0% ~.7~ ~.5~
~ ~o Sy~ 43.8~ ~.8% ~.6~
~~ ~ ~.8 % ~.0~ 78.3
T~ 5a.8~ 69.3~ 70.3~
FINANCIAL DATA (6)
(in thousands, except revenue per customer ,mounts)
1992 1993 1994
W'.~tn .S~'~ ,".~ $3,79? $3.7'Y8 $3.b34 $4.0~0 $4.1.38 $4.2~0 S4.144 $4.-~-~ $3,969 $4..32,1 $6.~14 $~,1~
San Aogcio Sym~,~ N/A 9~7 1,396 1,359 1..~6 1.T29 1,682 1.660 1.61~ 919 1,490 1.5'7.0
Ddawur~ Sy~*-''~t N/A N/A N/A 1,0~2 957 1,0~9 1,049 1,05'7 933 977 1,183 1.2.54
Tor~t $3,797 S4,745 ~,200 ~6,4.51 ~6,601 S7.038 S6.g7S S6,78S S6,,S17 S6.2~7 ~9,187 $10,879
A,,~cragc MomMy
D~ 51'~M N/A bYA iq/A 29.11 29.53 $130 30J0 ~0.~9 ~0.17 30.41 _~ "~ 32.40
W~igf~zd Averq¢ 112834 $29.23 $29.09 $29.72 $30.38 $31.74 $30.79 $31.18 $30.49 1~19.66 ~0.37 $39.93
H~ll~ ,~ l~fO.r~ to -P~t°~ bY ~ C~ of ~i~ ~P
6~at can b~ oomzcied to ~hz C.~mpa~'s cable ~ dLstr~mi~ p~stem without any ~Xber ~'~ of principal"
homes are not in~*_~ in the table above as ~h sy~,*~( we~ not acquired until January 18, 1995.
(2) A hm~t~: with c~ or more tclevisioo sets c(xmm:tmi to a cable sY~em is counted as °fl~ basic crammer' Bulk accouras are
charge for ash~eoutle~inthearea. Themmb~ ofbasiccmtom~ m~wiby ~h~ C~°~n systems at --Deck-er 31' 1994
(:~) Basic serv~ ~ as a peromage of ~ ~-
(4) Premium ~rvice ~ iac~,~ ~,4,' ooly ,~no~ chanad r, etvic~ offered for a mommy fee per channel and do not i~u~ tiers
of channels offered as a pack~e f~ a ~ mm~MY fee- The mmbex of premium w-vice units to which c~stome~ in 8re
Crown systems ~ at December $1, 1994 ~a~ 100.218. The~ premium ~rvice units ar~ not inc~u~ in the table
above a~ such sy~tem~ wer~ not acquired umilJammy 18. 1995.
(5) Premium service ~ as a perceatag¢ of ba.~c ~ custom~s. A customer may purpose more than one premium
service, each of which i~ co~n~d as a _ _~ _r.am premium ~.rvice unit. This ratio may be gr_~_!e~ than 100% if the average
(6) Bo~h e,~ ~- .... ~:~ data mi ~e operal~ dm rd~t ~e ~ilo~ a~lui.~io~ bY d~ Company fr°m tt~ 4~*~ °f ~iti°~
SystmmmJanuarylS, 199~. ',' --mnv~,fi';,,-,~-, ~N~temca, sh flow for tM
(8) XwF~ge m~ulhly re'~ l~n' bific ~e~'"dce custom equ~ln reve~ °f th~ ~e:q'"~c~ve 5y'~t- ''m~* ~ Ihe relcwnt quarter
momhly revent~ pe~' I~ic Im~,~ cmtotller equals ~d t~nu~ of lh~ C -?any f°~ the relevant quat~4' di~-'~- - by ~
number of basic service cu~,mn~ of lhe ~ as of th~ end of ~he san~ quar~' For the 1hird quarter of 1994,
welgh~l avenge was ca?,,~.~-a on a nx~t~y ~ fo~ ~e W'~in Sy~_ ,~ to ~ fo~ the addition of the $~ar
&uing the middle of that qua~. Average monthly rev~me per _~*~ service customer fo~ ~he fu~t, ~ third and
qum-u~ of 1994 for Ihe Crovm ~stems, w~h wet'e acquired ht ~anuaty of 1995, ~a~ ~?.39, ~0.7.72, $27.43 and 5'28.32,
respectively.
10
~mm ~ys~, were ~ ~ ~= ~ ey ~e C~y ~r ~ org~on ~ 1~ ~e
~.of ~ ~ ~ ~ ~ w~ ~ ~ ~ ~ 7~,~ ~ of ~e ~y's
~n oL~_~ ? A~ ~ ~,p sg,~ss ~ ~r ~, l~. ~ ~t ~,
~_~.Sc ~v~.~[ ~.~ ~.mr ~ ~mm $~ ~ ~m ~.79 for ~=
~~ ~%~ ~r ~r ~mon of ~ W~ S~) w $~.49 for ~e
~ ~mon ~ o~ ~1~, At ~r 31, l~, ~ S~ ~~ Ill,793
~ll~_~L~ ~ %~m ~y.~ ~ ~ ~e~ Mj~ M ~ ~ ~ ~sion of ~
~ting ~on. Y __ ~-~
~le ~ ~ ~ of ~ ~ W~h ~ ~ ~ ~ ~ hivh ~on ~ ~
~C~OlO~, ~ ~,,q~y ~ ~ ~ · I ' ' ... _____ __
1~5. ~ ~ ~ ~ ~1o~ m m ~er ~ ~g~ m
~' . ~ ~ of ~ c~ng ~ of ~ ~ ~, ~, ~r ~ ~
n.,~ ~n ~o~, ~ ~' ~ ' of ~' ·
~e~ .... ~_~ ..... ~~~ ~W~mm~S~Sy~m
of ~ble p~.
W~ · ~ · ~ ~' ~ ': ~' ~,
c~lomer D~ ~n~ a~ W ~ eve o~ ~ ..~ ~..~..~___ ~_ ~ -- -'~ ---
~el ~ ~v ' · · ~ ~. · ~y p~ w
.... r'~ ~!'~ ~~ m · ~,~r oz w~mm ~ ~ w~ ~ ~r o~ ha
· · · . 7. · . ~7~v~~
-, . . - r ..... ~y~ -- -- o~ o~ S~ ~ p~v~ o~r ~ similar
pac~gmo o~ pr~ ~ ........
~, ~ ~ ............. ~~ ~
~ ~ ~ w~ ~m~ly ~,~ ~ m ~le p~. ~ ~ ~ ~ p~ ~e
11
consolidation of certain of the Crown Wisconsin Systems into current existing system,. The goal of these
consolidations is to create five major regional networks to enhance operstin~, technical, and mnrketin~
efficiencies within the Wisconsin ~
...... op?ati~, region. These large area networks will create new revenue
._ot:~_ ..rummy. m aove~**m~, .pay**per.:v~, _..o~mce. _~h~on, mi co~-~-~,-~ms. The Company
y m~ ~.,p:~ ~-'.m a...cu~ w~..~ ~ of .approximmiy S32,e~o,00o over .,,,
~ y.e~ .mr ~ Ipro~.ec~*** ~w p.umt extension projec~.an~l..syn, headend consolidations
~v~..me o~m ..y~? m n~r optic a~n0uUon ih~. (See Item 7, 'Liquidity and Capi~ Resources*' for
ruxmmg m capmu expenamu*~.)
x ~e,~u wm~ ..me '_c:oppany acquired from ~ Cable Comnmnir~om, Inc., a sul~idiary of
.mons ~oxnmumcan~ Con?~., L.P., for a purchase price of $S?,~0,000. The number of basic
~ ~n ~ ~S~n.__,&n~eLo_s._yn~. *_mcr~d. from 3X,:~0 -* og ~ ~'s acqui~i~on
..- ,'om,o =.4XS. rev,,,,, r
~t .......... ~
3' ,~x~.._qv~_ ..{?x~.r ..aC,~l~__mo_n oz .me :,an z~_eso syntoms~ to $32.~ for the qumer ended
_x, x:~,.~. ~ mun x, Kecent X~ve~opments - ,~n ~1o Diveslure re ' ~ lanned ' '
o~ the San ,~elo Systems. Aug ~ p divemture
The fiv~
W' '; ~ . .A~***elo ~ serve the ~it~ of San Angelo and the co.minnies of Andrews,
Ballinger, mmr~ am n,m~, 'lex~. The San An~elo Sysun~ have m*ong basic peneu*ation. The City
~,~.,.__o_y,_- ~.~._ ~?n ,,mge.~ ~'ym~s..m. ve .app.roxunmly ~75 miles of cable plant, with the City of
A~ e~o~',° .sysco. u~_¥~__m _rv~l_oy a sm~,e neaoem and four other headends serving the remaining San
8 ~ysrmu. in IMM3, lhe ~.:ompany completed a ~b~r-u~nede upgrade of the plaut ba~veeu
headeuds.
-_~**, .,~_ __,~.,_.~__~_y_ m .acuX. m, oy ..mmo~. cOmml ~*mn ~ neaaena sm, cable 21evision servic~
· ~.~,~ ~ ~mcu cu,smmer nnvm.o nn ~ldr--~nble converter. A.ddre~iliw I~s enabled ~h~ t'"*.nmnnnv tn
.,um*oa~.? .I.l~Y**l~. r*..view prog~..mml-2 Of movies and o~er special evems to ~ 8,1~0~-~-se~ b~
u~e. ~an .z,mgeio ~ysunns ~ addmssable converters. Pay*per*view pro~mmin2 and .mmium servic~
_p_a?_r,~g.es nave. ??.rfo.rmed. esp~c, iatly well in these Sysum~ due to the l~nited av~ilabih'ty of alternative
cnmx~ammgnr In ~De ~ ,dn~lO
CO . . ~ ..vuau~ i ,~, wmcn lC~lly nnVe lOX~,*~l*m
,,,~. ox, x::,,*~, appx'oxmmm0, q,z~ olu~o~e resi~ences are lOCal~ ~ MDUs billed ul~der
contracts (i.e., conlracts ' '
re-'''~'-' _, _ . i~o_l_.v~_ .., ~ ~ per .m.o. nth .p~d. by the hotel or ap~'huent complex,
~u.~ ............. 0%, which is Imilsually low. In single
~~.se.2.eg=obY~F..~__Ang. e_l_o?.~ .s~s~., .o?~c se .~,?,e pemm~i.. 'o- was 71.4S and premium
.,'_'~T_ _~'"~'." ."' .oo.o~ = ~ or, x .~q.. AS p~ 0=~ overau ~ierln2 of ils MDU services
~,,,ma m xoo~o grow~ m w'u,zu expaxme~ basic aha prennum service umts since l/xe Copy's
acqui.sition.
~rh~ De/awar~/Mary/a~ 2yaem~. The Delaware/Maryland Syslem~ were acquired by the
Company from ~immonn Commuq|cations Company, L.P. for a pux'cha~ price of approximately
12
~ ......... ~ 'uM l~ ~r ~r ~0~
Y~) ~ $32.~ for ~ ~r ~ ~r 31, 1~.
. ~ ~. ~ ~er oI ~ ~o Cl · ---~. ~e
... ~n, ~, w~ ~ ~ m
f~, ~ ~ ~ ~ . . ~_ s~ ~ ~mwave ~b~on
~ of ~ver, ~w~
~1 ' of 4 -~ x~ w~ o~ ~ ~ ~ D a ~b si~ w'
. ~ 2). ~ ~ . Y ~& a
over ~ · ~ ~ · m 7
~_ ~ five ~ v a
~n ,.~ o ....... . ~__ ~_~. . ~t. of ~~ly $1,7~,~ (~ l~,, 7 "~ ;~,;a~.._~
~ ~ ~le ~. Y, of
' ' U~~' ~g ~, ~e '
home v~ · · ___ ..~ ~, ~ve ~ .r
~{e p~ m ~m ~ · . ~ ~ of pm '
. · . . ~ arkie off-~ or · ·
~on ~ ~on ~ ~ ~le Telev2ion ~~ ~r ~ve ~ve~ ~.
provide ~ble ~ ~ ~ ~~IC
..... --. ' l~ ~a~p~~ '
me ~ or ~ · ' · ~ ~ a ~e ~v
~ pm . ~ge
. ~ ~ by 1~ minim · .
of ' ' ~~~pm~e~le~~ ·
~ ob~ omar __ . ~~1 ~a
· ~ ~ ~. ~ o~ c~ .... Y .
~gic ~v~ ~ for ~ ~ · ~on by
~le ~ g~v ~ ~ W ~--u:
~ble Act giv~ 1~ ~.~ .,~-- --~~
· . ~~~lovet~l~ ' ' · · ·
au~onu~ ~ ~~lv ~- .... ~ ..........
· . ~ ~ ~.~ wt ~uo~ ~, ~ it~ '.
~le ~ a ~s~oa ~ ~on m ~ ~ie Tel~ion ~.~
a~) ~y ~ w~tom for ~ or prov~em of ~fing ~i~. ~e ~ of
13
operatillg a clible ~yst~m where a C,0mpetin_,o cable service exists (refen. ed to in the cable indu~y as
· ~ .,, ~,_~ _,~_~_ u,,m~, u~ ~r~ pt~.~uy .omy .t~vo_o.v_em. tmas m me ~elawar land o re ion.
which .
· ,__ rep ~ an aggregate of.approyamate~y ?~.o! the home~ .m. the Co .ml~ny s franchise areas. The
~..omp~ny ,* no~ aw~e ot~uy omer co.~y ~t ~s scuvely seeldni local governmental franchises for
areas presently served by the Company.
d' .... ~C~,.!e operato~ face ~dditio.ml coml~ition from private satellite mr~ter amenna television
.... _-,¥_.~,~..... ,u~ op~nuo.~ os m~e al~iAl v systems onen enter i~o exclusive agreeme~s with
· erected laws to zs~re fllur, hised c~ble svs~m, ~ to pnva2 '~:-~---:-' ~' ......
· . --' ."7---' !' . . ~,~,u~u wu~olr,,v~, llleSe laws
?..v.e.u:.b~_~ __~,_ ~_~[_ff~.~fl~.? wifll .v..~yl~ r~ul?.. Addifiooall},: th~ 1984 Cable Act give~
._ _ u~v~ ~ . .c,o~u.u~:u~...lua~m.~cmom lmerpreti~ ~ w. ope of this ri~h~, particularly with resvect
? _r,~m~em~..locat~ ~mire{y onpnv~e property. The ability of the ~ to ctmm~ far
m commun~ ~erv~d by SMATV oper~ots ~s uncertain. ' ~--' --'-'"
to ,'o~,~' ~.,-"~--~--~ ~--~L~--~-v~---~--Y .o._t_tn?~ ~11~.~?. m/erea pro,yarn servaces fo,~rly av.i!nhle only
· .~.,. ,.,~,~v~. r~rmo~, me 1~ ~l)le ACt collial~ provisions, which the FCC has
r .~,,-~ ~,~,,,~-u~uv~r~ came pro at ' 'ye ·
· . . , grammmg compe~ costs. The ~s unable
es'umate me extent to which pnvale HSD s represent competition in its franchise ~tn. y to
· In recent years, Ihe FCC has ndopted policies providing for a more favorable rating
(v'r~ ~~ s?~ar~~thebYoSat~llite to receiving facili~es located on customer
[~_-U-~-__;)ered .......... ..~ ~.uu~uy .... wn~rs of HSDs through conventional, medium and
company, _
rollr ~.v o,~ ~ Ol , ' Ol'Oi~t ' ' ·
.... ~-- beun-" ' - ~'2~~--mcluamg · s.~na~, ann pay-per-view serwces. Two
· .,,,,s,~-_._~. ~ ou~.u~ ~,t~ service m i~ accmnpanied by extensive marketing efforts. Several other
~ '~'""~°."°mP -~a~xm~w'nnm°gyton~--setnecnan~l oftheir W to'
to ~ab~--~st~- -n~-'- _a~,,_ .?r_ program` ~ comparable .to those of cable systems. The extent
omer ' , on the avaihb" ~ · - -': .....' .... ~""--"
o,,,~,~t~,~ ......a.~. ~v_.~b~.lht~._o_f_~ equipment ~t r~somlble prices and on the ~bili~y of D~
l-'~--'~`~ ~,~ Fa~,va~a~ b4.,,,,;,c~.lv~ ~.
trni~i~',i~u~u,,,,~u~,,,~~s~. ~ ( MMD$ ) w.~.'.c.h u~. low power microwave frequencies to
· -,,,,.,, r, .,i~. aumu~ ov~__-me-alr to customers. AltnOU~ t~ere are MMDS o~erato who are
authorized to provme or are providing broadcut and satellite ' to customers in ~.a~
w -. · · .~Y . . p hether
o;~oons~.deo di/~ibulion serv!c~, sucll as DBS and MMDS, will have a material .m~l~ct on its future
Other new technologies may become ~.~ve with non-entertainment service~ that cable
television systmm can offer. The FCC ires authorized television broadcast stations to transmit texmn~ and
graphic information useful both to consumers and to businesses. The FCC also permits commercial and
14
data trnnsmi*=iolls. The FCC established an over-me-air Interactive Video and Data Service that will
· ----:-~. -,~ ~paasion m n~r opuc systems oy telephone compames a~a omer common
will provide fa~,~,t,~_ for the transmismon and distrii~on of video programming, data and other non-video
o Th~ ..F_C~_.is,.~c~l?.,ntJy,,,.,c(?d~ .~ .ao.~.'oils for ..Ucellses to p,ovide personal
vomce and ,tn_~ services as well as video programming, mmng operators, p vide
____,..?_, __ ~?_en .v~'o .ll~le~ .~ ~,~y occ~rm., e:' l.nU~., it iS not po~iole to predict tile ~ffect that
ou~ou~ or furore ~-veiopmeala ~ l~ave on Ille Ca~le m~lustry.
Le~v~ffon and Re~m~a~m/n the ~ Te_/_o/s/oa Indus~
~ .~; . : -. .._.on, ~e aha regulatory p~ under consideration bv the nore~.~
~_a~__x~,eral ag .e~c~e~ .n~..y materi~, y atilt ~ cable television industry. The foliowi~o i~a ~
[0 "effuSive .. ,, . m _~...---"~--~-.. ....
· ,,~,i~., ,^ v_e.~ ~?_ ,de .filled.re. the 1792 C~.le AcL V"lll~y~al~ cable ~elevlsion ~ ~ now
]:CF' ,,,~,;,-~- t, .....-t._., .,~_. ........ -.~,-~,,-.~ ,? ~ ,~t~uua mio~r me OVet'sl~ O! the
the ~'" ........... ? . .r~te regmauon, l~e 1992 Cable Act also features
nonbasic cabl~ -ro-- : .... ,, . _ m.e .~ .u~ty o,~cao!~ ~ _s~ms. to ~ ~ for basic and certain
on a r . . local .a~roval. Cabl~ services off~red
o,_n__a_.l~_.r_.__ch~n~_ ..1 (~..1o co~..) or__pe_r progr~n (pa}, per view) barns are not subject to rate regulation by either
~ra~;msm~ au~onu~ or me
On April 1, 1993, the FCC adopted regulations ~ to the 19~2 Cable Act ~ov~rnin~ the rates
was exten~l tmtll the ~,~,4~. ,,~f.,, ~ ~ __ ~. .... _on_ 7_~, ._:..~_. ~: ,..., m~. ? r~..~, s rate n'eeze
regulated by a franchising authority. -- ..... , ....... ,,~ was
may jusi~ such ~_~ usi~ ~ co~-of-s~dce methodolosy.
of~~_r 1, _1 _9~__, __c~_~,opex~Io. ? whose .then curr~nt rates wer~ above FCC benchmark levels were
· ~ ;--- . . o.a ~r 30, 1992, whichevor reduc~on was l~ss. adius~ or
· ,,,' xor mnmon -,~ ca,~mei modifr..a~ occurrms sul~qu~n~ ~o ' 199i.
~ . . m ~o Sepmnber 30,
_ .ec~ve May. 15,..l!~.. ~l~ FCC modify! ~s Imr..hmark az~x~lolo~ ~o roauir~ r~lucdo~s of,,, ,,,
· .. gulated ~ in effect on _her 30, 1"9~2. ad usted ' '
moditcatio ..... ' ......... ~_ . _ tj for inflation, channel
,o, ~q~ ~ aha mcreas~ m certain operaUng costs. The FCC's modified benchmark
15
regulaliom were designed to cause an additional 7% reduct/on in the ~!e~_ for Regulated Services on top
of any rate reductions impiememed under the FCC's initial benchmark regulations.
.... ~ FC.C's ~ :goi~-for~," .t~,u~i.o~.
mr,~non-maex~ amo~pms incre, a~s ~or cmnnel additions and certain external ~ beyond the cable
operator's ~o~hol, as franahise f~es, taxes and ' .
regulations, cable op~!ors ~ ~itl~l ~o take a ?.~ ~ imm~on p~.gramming com. Under these
· ~ ,mark-up o~ programm~ cost imre~s~.
m.r,~mng~s r~mmg~mw ~sac~l~ouz~abl~programmina~e~r. As of Jamary 1,199~,
r-,,~ ,~,-".,~ mor~ ~ $1 20-lin ............. Y' " . ~/uamms to monthly
~ mar, e.a one-u~e., eimion, to use emir me zo c~nt I~r ~mm~l ~djmlmm or Ihe 7.5~ mark-up on
p ogrammmg cost mcreas~ mr all cbanmls added after I)~..c,m~ ~1, 1994. Ti~ FCC is currently
co~ideri~.~ whe~r to modify or elimim~ ~he r~ion ~ ~ ~o m:~iv~ ~ 7.~ mark-up
on increases in exiaing pro, mini%- ~ fro.
th,,~c~~_ .~_ ~? u ~,e proF~=~ma.~-~A?__t~.~. ~ or ~= un=r~y crm~ by
~ .... .~...r?.l~.~ ~.ri~. ~ =~pow~r~d ~o r,g~ ~ ~:~ c~rs~d for ~tditio~a o~ ~ for
xe~ ~ remote c~lrOl urals. TI~ r-,CC s ~
011 ........ ' -' ...... ~' --
reco- ~-'~-? ~u= o.~ ~..m.e ~ morea ~ excn~tl n, om t~ ~uow~ble r~ base. Pefio_'om for
..~.,?.,~.K~.on nsYe ~ Ill~:[ WI~ ~ FCC l'~[~il~ lllodi~ion of
L,~.,,."~ g .L?mu~,,m~? oy m~ r~ on ~ ~., 1.~. l~.owever, in jurisdictiom which have chos~
~o)~_'~__~..~?_.~ __.a!~_, _mm_ ?..not .curm~. y ~te. ~ me y~r ended December 31, 1994, the
~us~om=rs aS a re,AK OI ra~ o1'o~1~ ~ Dy cel~al/l
~,~" ¥~. a. v=u~m~ar~c m~loaoIogy. A/laltlOl~all. y, le~' 'on ~ ~ propos~ in Collgr .~. that, if'
enact___ mW law, may reduce the regulation of cable serv~c~ rates. The Company cannot predict at this
16
judJc~ or admini~'~ive decisions on ~ Syscem~ or busine~.
without ~'"'""~' ~,,u..tp.a,,au~ u.~.__m~_~ t~.op~t~r on a I~..r .ct~u~. 1 or a p~r program basis
the necessity of subscribing to any Uer of service, other than the ~asic service tier. unlt~$ the
~,~o. ,y. c..an~.p~uon mr cg. ole symem, tim ao aot rove me technological cambilitv to offer
--- .~,,,~-. ~.., ~,u,= ~y~m~ .o .o~ nave me _mch~nto~cal ca. oilily to offer moemnmine in the
r__e~lu~?a t~.y. ~ statute and curtmaly are e t from conmlvin~ with r~am~-m---~-~vh,
cannot "redict "- ............... .xgmP ......... the ___~ .......... :
___ _ ~, ~,,~ c..u~ .? w ..mca uas prolcon o! t~e 1992 Cable Act and the corres~mding FCC's mle~
umy cal~ custol~ ~0 discong~ ...... .~ .-
service, op~mal nonbasic sc'~w.e uers m favor of the less expenmve basic cable
a .... eve.., ~ y~'s to
consem ......... -: ......... .e.v:c_,_,_,_,.~. ~_ negomte for reummass~on
-,~-,,-,.. ~ m~ mo gnvm mmmamry camde ~ ; however, sur~ s~iom ~x mmerc~
· . . ~eri~J~; aremx · ~e ' n
sy are requ~ea to oblmn reu'anma~mn consem for all 'clis~m' ....
(exccmt for · ,.t.,;,._a.s;.----~ :.~_~__. ,_ _ . . .Com_merci~l ~evlslon
s~ OhS and cemm low rower mevision smio~ ~,,i,~ ~,,~ ,,,~ ~.,__..,_,.,__,r~__)v .~.~- ~ml .radi.o.
,199~ a · · ---,'~
· · · . - . . · -- .y.., mc ul]ll~2 ~Ialf, S l~'upl'~m~ ~ot~
r . . . ~.e~. __,~..._.~- ,~-,,cu~ma wm remain m enec~ pendin~ me omcome of the fimher
p oceedi~gs m the dim%, ~oun.
~P~ of --~, ~u~es um omerw~se woma no~ uave ~ carried and bare caused
...... posm.~!y more...at~ive .p . _rol~anmung. The retransmission consem ml~ h.,,, ,,~,,,.~
reco ered through me
1984 Cable Aa also reqmres a cable sv~ with ~ or ....-- .s.._., ......... P .~. .
services offered bv the cable ,~.,,,'.mr ~"~-~Y- ",",'. -~- -~- l~j p. rov. ide pro~.th,~ may co~.m w~th
ra~ a cable mor . . ~,aml~: (i) ! r~aso~ble
co~liuom for comme ' ... upac,y, ( ) ~ mrms ~d
loc~, d~e~e o'~eed~r~%l .gm~.v~C~b~lie ~e~_.l~__~ri~__ of ~ a..u~horki,.(s~,~, or
..... ,, u~ ~wm-u ouc or Illore frsl]chis~ within meir
jurisdicuo~-~c~'proht-o,s non-~randfa~ered cable ~ from operating wi~om a franchise in such
~, ~ Vl.~t. et,~ su~u Uwa G,~OIC ~ wi[hou~ ~'~.J3i~; Iii) Dl~Vefltina frant,hlelna
n'om granting exclusrve franchis~ or from unreasonably r~fusm~ to award addiuonal franchi~ covering
17
an exis...l~ng ,cab. l? sys~n'$ ~rvi.ce area; and (iii) prohibJlin,,o (witch limi~d exceplions) the common
ovmersmp ot caole sysmns, mm co-iocaIed MMDS or SMATV ~. 'Fac 1984 Cable Aa also provides
that in
fac,~~ o.r __r~_. ,va~__. __. ~f~his~:.loc~ authori~.'es may..esiabli~? ~ for cable-rela~ed
_, ~_o_n_,~.._ ,~mo .l~ ,me_mo? .s~nmcanI provisions of lhe 1984 Cable Ac~ is a limi~ion on the paymem
~ l~s~ ot ....c~le ~ ~re?[nu~, .and ~.e .oppo .mm~... for ~ cable opera~or ~o olxain
L"~:~ ~,~-~.~ ~-~p~y, s ~ v/p.w~_ y p.rov~?.r pa..y~mz of fees to franchising a~hori~ies
co- "'"~ ..... . u~ ~..~ w-,:. l,~. z~,~z ~.~lmle Ac~ ma~s several ~ to Ibc r~ewaJ, process which
-- · ~,~v~ yzuva~u ~auaraclory scl'vices
_..~, .,,,,. an,~q,a~ mat ns nnm, e tranc~se renew, prospects Beneraily will be favorable.
....... ,,,,,,-.~- ,-,,,,~ a.u omer tecnmcal mquU~ae~). T'nese decw~ns have been smnewhat
"~,~,~ l~luh-~u~ma !~ likely [O ~e m a s~a~e o! Htl~.
· -=-'w, "~ uu, ~, .,~m or ~ m a caoie an~ a local ~elevisi ·
-redictmd ......... system on broadcast s~aaon who~e
1~_ . ~? commit ia measure o! signal
,~' Forms nanonai temvisam networts to own cable systems under c~rtain circmnstanoes. As a pan of the
~.uo-- c,o..nut, co. m tn~ l~a4 Cable Act be ed The 1 ·
~--,,,-~-~----nmh,~-'-'~ ........... ~ ' .. 992 Cable Act permits state or local
~.~e~['..~__ .".'-_k __~ .o~? nu. l..re~.noms_nauo~., c,stomer limits and ~1,~, on ~ n, mber of
use a federal diet,ct court found the statutory limitation to be ~onal.
re .... Telep~o.n~.. ~_ ~ o~' C.4b~ Te~,v/,~ioa ,~y.~-ms. The 1984 Cable Act, FCC
gmauons, an~ the 1~82 f~leral court consent decree (the 'MFJ") that settled th~ 1974 antitrust suit
Of ' '.
oy specmc wmver of FCC rides. The statutory provmon and corresponding FCC regulations are of
'_'_'_'"!_~L _,~__~ ..~.~a nave __mi.nat~. t.e~e.r~..co.un acuons cnauenging we statuto 'telco-cable"
jumc~ai review of g~e~e decisions can be allgcipa~. '
18
~ ~ 1~ o~ · ·
~ pm~ g~ ~ ~ ~Bc. ~ m o~r ~ pm~ ~
~m~O~ on ~ ~ ~ n~i~ Of v-~'- ~- --~ --' ..... ~ ' ' ~
a~l, of ~ ~'- ~--a:~ ~L'~.~' --~ ~ ~ ~r l~ m~m ~ or ~
~r~ ~ ~~~ ' ' .- . .
~ ~' ~ ~"~ ~ ~ ~ '~==:~ f~ for ~M .............
~ ~ ~ for " ~ '
~s ~ on ~ ~ of ~ ~ over ~ ~~i ~
~ ...... '~ ~~s. l~ p~v~on ~ ~e ~ of ~le
vem~ o~ of ~le ~ ~,~ ..... - ......... ~ . ~ ~
~'~ ~ ~! ' ' --~' ~"~~
19
it has received numerous petitions requesting reconsideration of various aspects of its mlemaking
proceedings.
Other FCC Regulations. In ~,t,t!fion to the FCC regulations noted above, there are other FCC
regulations cov.er~. ~ at~s.as ~ mlp. loymem opportunity, syndicated program exclusivity, network
progr~., n.o?oup?auon, ~gmrauon o~ cable system, maintem~ of various r~cords mi public
~.L."~!~__ u,_~____m!~Lu~_ .~.nurmn~ ina llglmn~; carnage of local spore pFogrimminL
,,l~,,,,.~m~u. ~ mc mun~s ~ aaa rme~ fovemina volifical broadca~, lhnimiom on
conulined m non-bmadc,~ children's .......
corem ..... M,~,Aee --. . ?? p~,. consumer pr(xe~ion and cu~omer service, leased
or, mi ....... OWlleFSfllp O! IIOIlM WIFII~, ~ i)FO~. DFofrlmil~r access
sut)sunml nnes, me ~ms,,,,e of cease and des~ orders and/or flJe impmition of (xher adnhnisu~ive
saucfions, such as g3e revocalion of FCC licenses needed ~o opeme cemin lransminion facilities often
used in connection with cable operations.
~ ope .rum~_- exp~me~ or cabte. ~eie .~.K)n. ~ and have ruulr_~ in additional
p[~ me munme enea ox me l~;,~z c:at)le Aa or me umnme ot~¢,m~e of various
pro,ashore of the 1992 Cable Aa on the ~ s busi~. However, ~o ~ssumrm can be given
FCC's ra~ re~,~!~*i_'om or the 1992 C~ble Aa on the Compaw's busings.
i,,,,.,,~,.~Ot~.._er~b~ilk__.al~d___~o.n_ p?pos~s pe~.', w.. c~1¢ ~.levision have previously been
g-~a~ _,~,___u~,_~.=~_- w _~omm~ oy.omer goye .mmental bodies over me past several years on mauers
~lepnone co.ml~., y prowslon of cable services. It is probable that funlier atmnl~s ~ I~ ~ by
congress aha omer governmental bodies relat~ to the delivery of communic~ons services.
of ~ele~r/g~t~'-?li~l-?is~n .sy .s~ns.are su?jea ~fede..m. cop .yri~. licensing coverin~ carrias¢
--r .......~ .~-~uo vroa~c~ !~ .p~.. tn ex..c~nse ~.or rumg =nam repons taxi ~ .n~ib?*i~
~ - 7%,,,.~= .~'~*i~m.~ .cop~sn~. nmemi on v .roaiF~... s~s. -lne nmu-e md mom~ of future
mPa~o~_m.s_.~_~_or _?r~..sq~a~...cartage .c~mot be p~ at this time. The possible simplification.
t~micauoa or cu~z~on o! me _ _comlmbmry copyri]~ license is ~he subi~-~ of confinuin~ l~,dqlaflvp_
.,r~w. The elhninafion or sub~m~tl modific~io~ bf/be c~ble comlmlmrv ~could ~hsdv~~
· ~pr.~,=, ra~ cxmn mr mm. c;Imle industry representatives are ~eeothfi~ ~ ASCAP ~t BMI f~r
Ii
.~_n~s~s.__a~l.._ ~_rresl~_..~ __~r~es .~or ~ and ~ use. o..f _A~C,~P/BlVfl" controlled music by cable
_,__TI~_.~ ~'~ k_~_~..~Y ?no~ p.rem~ me ui.unme .our~.~m? or uese ~ nesotimions or the amouni
~, ~y n .~*~?..rees ,, m?y..~ .req~ M.. p~y mr ~ am imure use or ASCAP and BlVll comroiled music,
1~ ooes no~ ~el~eve such ttcense lees will be maierial to the Company's operations.
2O
21
withou~ the ~ [or conve~rs end ~acilitates the delivery of premium service channels to the cuswmer.
~Tt~o~euvgh~ _t~s..'_~ ?p~.L~. ~. the.~ has enhanc~ .cust~n~r convenience and simuluneously
~.,.,= =a ~xgxxmc~mx reoucuons m semce aaa inventory co~ ~na revenue growth through increased
pzemium service orders. In conlrast, the cable plant of the Star System,, are teehnl .caliy capable of, and
of a sufficient size that, · ·
.. , ~ addr'~able lechnology, ineludi~ pay-per-vzew services, ~s economically
desirable. The ~rown Wisconsin Systems presently have addressable t~ixnology available to 45 % of the
c~'tomers wiy. h 15 % of the~e cu~)mers havin~ addressable COllVelT. t~. The ~ ~ ~o c. ontln-e
to expand this addressable base.
i~,b''-"-r~- -*-c-~?~7.~to.' .~ a~d ~ ~ .~.h~!osi~ developme-,, on ~ b~h of
uny m u~ar, e opumm use o! ~ts eyasnn~ assets aha to nmncq~e the ma'oduction of new services and
pro .gr.'.?m ~.~.ery Cal~..ilitles.. ~ use of. fiber .o~tic c~.le as ~n enhancement to coaxial cable is playin~
,~,o=~ oxy. ~ao.~e ~.capao~e_ot cntry~., nunare~ o.x .v~o, am ano v. oice chamP. To dm, ~ Company
~u ~pany. ua~ nugraum w .a.n~r-to4ae*se~-~ arc. mteeture tlxat uses mull/pie nodes to limit the
m~mner, oz customers servea xrom[] any~ specific node. At t~e pre, mi I/1~, node size is being limited to a
.. uxuon m .topi .~e~.saaiog. n~er .OlmC teclmmogy zor me amnl~mon of sendces to customers, the
r~O~_p~_,y plans, to?. fi.~r ~ W. m~rco .nn?t system...head~, to fo.m~, regioml mtworks. These
S:onai networks wm enmace me piac, zm~n~ oz addressability and advenisi~ insertion.
t__ _u~__m~__.u~,. c,o~p, re~. ion ~ · .~ .~nd .w~ am{~lmers, w.mca offer cable operators the potential
,~s . new ~:nnoiogy aaa re~t~ servic~ become available, the ~ imends to carefully assess the
economic remm and market demand for such technology and services m order for the Company to
prudently implement additional services in the most co, t-effective manner.
fr The Con~. ~..y has v. arious co~'~ts, to ~.ba~.ic ~d premium programmm~ for the Systems
.~om _p_ro.,sS~ro__s_up_p_,?rs wnoee ~on.. ,,, ~picany b~d on a fixed fee per-customer. The
~o,-l~uy programming contracts are gener~my ~or a fixed period of time and are s~bjec! to negotiated
wal~ ~ pm.gram ~.s~p. li~ pm_vide volume disc. oma pri¢in~ structures or offer marketin~ support
_m_. _e_ c_' o_ ~_any:..in ]~ucu~r., ~e., C~...~n. y~ negotiated pro..g}'amm~, agreements with premium
_ ~r~minsu~pn Ur~e~ma~_ on.er cos~ ~v? m..me __COml~. ~r wigch p_mnium service unit pric_~s decline
-.~ ,~:~,,, p~-~. ,m ~rv~ce ~ro.v,~..~h-eshoms are met. 'll~e c;oml~ay s suc~ssful mark~in~ of multiple
co ..... T~.e .Company.'s .cable pro~ costs .h~.v.e increased in _rec__,mt years and are expecied to
nmme. w increase a.ue w system.~on,, additiomd programming bein~o provided to customers,
l~o~ co~' to proouce .or ~ cable programming, inflationary increases mi other factors.
.g?m ..mppa..~.. may ~ .to ~ roes. However, uader the new FCC roles, the cable operator
.e can ~e no ~, me ~ believes it will co~lllnue to have access to cable programminv
services at reasonaole price leveh. -
Franchises
Cable television systems ~e g?.nerally co .n.~uu .c~d... and operated un~r non-exclusive frsachi~
granted by local governmental autl~onues. Thee fran~h~ typ~c~ly contain many conditions, such as
time limitations on commencement and com?letion of construction; conditions of ~,rvic~, including number
22
~ls, ~ of p. rogrammm~.n~ the provision of free service to schools and certain other public
· .ons~ .a~ .me maintenance of imutance and ind~m.' bonds The vrovlsiom of I frsnchi~
stw' ' -- ~ · _
,ject to federal regulation under the 1984Cable Act and the 1992 Cable Act.
As of December 31, 1!Pi)4, the Company
francig,s~. Tnese non-exclusive franchises provide
M.._., .,._._,. to the ......... ....--..- . ~ _,~_. ?r..,~m~., .suc. n mmcn~e tees are
~'~~ ~~as/an n~amon to t~e rs_,. for cable .levis,on ..ice. The 1984
Year of Percentage
Franchise Nmnber of Number of of Tottl
Expiration Commm~iti~ ~ Customers
Prior to 1996 ................................... ; ........ 43 43,251 19.4~
1996-2000 ............................................... 9~ 121,096 54.4%
2001 and alter ........................................... 86 51,267 23.0%
Other (1) ................................................. ... 37 7.121 3.2%
· Total ...................................................... 264 222,735 100.0%
franchises u of ............... up
Year of Percentage
Franchise Number of Number of of Total
Expiration Communitie~ Customers Customers
Prior to 1996 ............................................ 22 59,192 30.6%
1996-2000 ............................................... $6 61,443 31.8%
2001 and after ........................................... 94 68,523
Other (I) ................................................. ,13 4,167 2.2%
Total ...................................................... IlLS 193,32~ 100.0%
23
francl~ 19~ .C~.. le A.a prov~, among otl~r flfin~., for ~ o~rly ~ ~ p~ w~
~ ~ ~ ~ ~~ly ~held or, ff ~w~ ~ ~M, ~ ~ ~ofi~ ~
~ ~r ~ '~ ~ v~' for &e ~ ~v,~ by ~ ~. h ~fion, &e 19~
~e ACt ~m ~~ve ~W~ p~ ~t r~ ~t ~ ~ ~ s
~w~ ~on ~ ~ ~ ~ o~ ~ ~ ~.~ ~ of a ~ve pr~ ~ ~
a~h~o~.
~~_~ ~ ~y wr m p~r ~ w~n~ by le~y A. ~ (who ~
v~ ~ ~ ~ ~ ~ ~ 1~9) ~ ~er ~ a ~ ~o~ or ~ w ~ve
a ~ ~. h ~ ~ of ~ ~ of ~e ~y ~ ~ p~~ ehg~le for
re~w~ ~e ~ ~w~ or ~ ~ or prior ~ ~k ~ e~m, ~ w ~ ~
~~ ~ ~ m ~ W a ~ ~fer w ~ ~ or ~ ~ p~r.
~y~
~ ~ 31.1~ ~ ~ W~ ~ ~ ~9 ~ ~loy~, of ~ ~
(d) ~ ln~o~o~n ~ Fo~ ~ ~.~ ~e~s~ ~d ~ ~-
ITEM 2. PROPERTIES
~, The Co .mt~an_y ope~__t~._ the S~ystems in three geographic areas: Wiscomin, Texas, and
tn opemion of Srmm ,or
o~ t~u property mr s~gna~ _rec__~mon m (mmma towm and headends), mi~owave facilities and business
offices, ~ owns most of its setwice vehicles. The Company believes tim its properties, both owned and
leased, are in good condition and are mtitable and adequate for the Co .ml~ny's business operatiom.
~ or specm antennae, mwrowave relays and satellite em~ s~iom. The s~.on~ com~. nenL the
op~c~. !y.~nsms .or ~ or _hoer_ .o~.c cables pu~ea on uumy poles or buried u-~erground, and
.~ _a~c~.? e~.ecum~ . .eq~pm~.. ~ ~,~ of the sys~m is a ~ cable, which ex~emis from
.m~ . .mx~mmuon _mmo.~ - .m~o each customer s home an~. comec~s ~he · .dism_._._..~!. ~.on symem w ~he cusmmer,s
~ ~o.pemn~ .rec~..on or..mo~ ~ 12 . .?m~e. ~ .or prosrmmms. ~me of ~ Sys~ms ~
convermrs ma~ cau oe aaar~e~ oy semlmg coaea sigmas from ~he hesdemt over fl~e cable network.
The ¢.o..m~uy'.s.cabl? .~enerally are ~ .~. u~l.' i~y poles u,,t~r pole remal agreements ~
local public ummes, ~moug~ m some areas me a~nou~on cable is buried in undergrouml ducts or
~renches. The physical componem~ of the Sys~-mz requ~e main~ename and periodic upgrading ~o keep
pace ~ ~echnological advances.
ITEM 3. LEGAL PROC~.~nlNG$
Them are no r,,~t-rial pending legal proceedings to which M¢¢ or any of ~ subsidiaries i~ a party
or to which any of their respective properties are subject.
ITEM 4. SUBMLqSION OF MATrERS TO A VOTE OF SECURITY IIOLnERS
Non~.
ITEM $. MA~T FOR REGISTRANTS COMMON EQUITY AND Ia~ATED
ST~OLDERS MATTERS
There is no emblish~ public tradi~ market for any of the registrants' ~luity.
ITEM 6. S~-LP. CTED FINANCIAL DATA
~ W ~r. ~ f~ le~ ~ ~ ~..~ ~ ~ C ~i,~ ·
W · · . . .~ ~ ~ FC_ ~ o~ ~le
~~ DATA
(~ ~, ~ ~)
~ ~ ~ 5,~ Il,141 16,1~ 21,~9 ~1,45~
~ ~ ~ ~ O) l,~ 1~81 2~ 3,617 2,~
Im,~ ~ 6,M 1 9,M 11.114 13,~3 ~. 1~
Nm 1~ (10.~) (1B.S~ ~1.~) ~.~) ~.610)
~hDA (4) 6~ 1~.~ 19.~ ~.~1 31.129
T~ ~ $1~.1~ $129.~91 ~.~1 $1~.148 ~1~17
~ llm~ ~ ~ ~.718 29.~ ~.~ ~.7~ ~
~' ~ (~t) ll.T~ (6.1~ 4.~1 (11.~0) ~1~)
(1) Data for th~ period .'.,~, Janua~ 1.1~ m.luly 31.1~90 t.-~,,., to ~tin sys~ms m wisconsin ~ ~ ~y ~
by Iviaro2s ~. Inc. ("MCI'), a Dehwure c~mmwa~ie~ ~ ~ by ,leffr~ A. Marcm. whk:h systesn, s
(2) A{I nmnnnx of ~ -'~- reflect ,~' fuliowin{ af:q,,{.~4~,, by ~he Cmnjm~ f~xn the date of ~: 0) the May
{. ~92, s:qubi,ion of fl,,. San Anaelo Systnna; (,) ,be Ocmb~ i, 1~2, m:quai~m of the Dehware/Mar~lana Syst~n.~;
and ('~) the Jul~ ~. 1O'),{. acquisake of the Sur Sy,,nns.
O) r=.ch o; a'" Ope,atinf Paflm,r, hip, a,te,,~ .,.,. various manapanmt ,~.vice ~ (a.,. "Manasemna ~').
Pur'uant 'o whkh ea,:h Opera,ins ~ paid Ma,cus Cable Manafnnmt, ,,~. (~he *~ ~),-) a
specified Perouasfe of ~he rev"~"" frmn the Sy, tans owned and oj~ant by ,u:h Oper, tinf ~, p{us cert,in
(4) ~{tt~FL')A is equal ~° 'Wxn'uti~ Joss Phas ~ and ~. Tn~ Cmnpeny ~ ~nt EBITI)A b a tmanin~d
compem ~n aJe bMis of apl.-,%- pe,fom,ma~, ieverafe and liq,,,M,,/, la additim, ~be inanmae h' the 11,,4%
dat~d ~____~_ 13. 19'~3. and,.,,,,,,i,~ ~n lqovember 15. 1~{ (th,. 'Credit Afmmsul'). -',--'-:., ceflain covemnts nxnnmst
by comp, an,l.ms sub~antially .h.,n.,. ~o those used in __,~,*,,~,,L,,i,,2 ~BITI)A. However. EBITDA is not L,,,,,,.,a,~ um be a
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDmON
AND RESULTS OF OPERATION
R#~lt~ of
... In each of~e p,~.fl~?e, years., the C~. mpany has genera~l subs~anfi~y all of ~ revenues from
montmy.~. ~. r ~?. for .ua~c:.uremmm and other services (such as the rental of converters and remote
con, roi oev~ces) ana ~rom installation
, m,e sale ot ~a.ve. ms,,~g mm nome _shopping .?orks. Beginning in 5etmnber of 1994,
ere a~o generate nmn managemeni tees eamea in conjunction with the Managed Systems.
Y___~_A _ires.. gr~...wm was.acco .mpasaea primarily ~'ougn acqmsnions and through internal customer
.,nave a~so mcreasea mgnmcanuy aue m acqmmtions, expenses reiaung to rate regulation, and changes in
me .Company's .financ'.ml .r~po..r~...s~_c~ure. Un. ill luly 29, 1994, certain general and _~lminl.u~afive
on of for which si. Opera. s
c~l~:nscs o, me l~nagemeni company ~ a l~n of Overagne, and O~erafine now records
overhead expenses reiagng to the Dallas home office' and the'Wisco-n~in regl'~nal ~-f~c~ within selling"'[
service and sys~n managemem and general and edminim'an've expense, instead of managemen~ fees.
three l~ro .srammi~ expens? ..ha. ye ~ .both in dolia~..mi, as a percemse of revenue for the past
costs ~ pro~_,¢e, or lmrcna~.came ~. ltowever, She mcre~e m the ~y's size will permit
more leverage HI l'ellegOii~tlne COBII'aCtS ~ ~ volume discou~s in ~h~ fumr~
· ._r?esm.mece~p~p.rogranm?g. ?me..ex.~xsuchm~.,~?s.exceedthegemralrateofinfla,lon. The
sigmncani increase m charges ~or aeprecmuon and amomzauon are due to acquisitions and capital
expenditures related to .c?nti,~,,.~ construction and upgrading of She Systems. Depreciation and
smorti.~tion expense an~ ulterest co~s on debt issuance have largely conIribumd to nel losses in the
penonnance ~s considered normal for the cable television industry.
26
The followinE table sets forth for the periods indicated, certain income statement items as a percentage of
total revenues.
Percentage of Revenue for
Periods Ended (1)
Revenues 100.0
Pro~'ammin~ costs 19.6 20.1 21.8
Selhn~, service mi h'y~nl ma~ag~l~l~t 10.7 10.4 11.6
General mind administrative 11.7 11.3 15.1
EBITDA
(2) 52.2 51.3 48.1
Depreciation mind amorti.*tlon 69.6 54.'/ 57.8
Operating 1o~ (I'/.4) (3.4) (9.7)
Interest 29.0 25.7 43.4
Other (income) expense (0.4) 0.4 0.0
Subsidiary limited partner interests (3)
Net loss before extraordinary items (55.5)~ (12.4)~ (43.7)%
(2) EBrrDA is mquni m -~-,~_ iota I~m dqwecialim and mnoni3nsion. The Cmnlmny betiev~ ~** EB1TDA is a n~
~ on the bmsis of operating l~'fm'nmn~, k~..~e and lkluid~. In ~ e~ indmmr~ for the liT4~
dsied O~tober 13, 19~3. and .,,~..~.a onN~ 15' 19~4, (the 'CrMit Agreemmt') ~,ota~oemincovmantsmeastm~
by ~*i,,*,~s mlbmmially similar to titime used in _,~____~minlng i~rrDA. Howe..*m'. I~I'vA is mx bxmd~d to be a
°Peming Perfoflnm~ Q~ to cash flows u I mmm~ of liquidity, is de~milml i~ ic~n-,i.uce wi~h gem. ally m:ep~d
mamgmm~ fe~s ,,ha inU~st.
O) Represents preferred t, mm'ns and aliocased net in.me o~ leto to panners m~o are affiliated with, but not a pm of. ~
gtc, al 1994 Comlnu'td to ,Rte. al 1~93
th~o_~__u.._~__u~_ ~y~ ~ r~..emoer. ~., !~_, o~ w. mch. $10,783,000 reLued to revenue gener*a~d by
~l~a~on O! me~ar ~ysI~s ~ $1,118,00~. relat~l to mauagelilent fee ingome derived from the
v~_~ystems: 'lIle revenu~ gel~r~d from internal growth ~ for 4.3 ~ of the total revenue
~ . ~rrp. A£m~ .~ 16.0~ to S3.~,12~,000 for ~ y~ ~. ~r 31, 1~4, as com.,v,~t
revmeenuYeearne~ ~De~l~m~r ?_1_L1993: .prim~.~y. v_a r~. t..of the.acquasmon of ~ Star sys~ms. Momhly
~--=~v~ re~creas~rom~l.l~asot~r31, 1993, to $29.93 as of Deeember
31, 1994. The $1.25 deer. s. reflected p~y.(i) ~ ~ of $1.64 in basic revenues, due to basic
service ra~ ~g,,!~n, (ii) au mcr~se of $0.38 m imudlation mi otber revenues, mi (iii) au incre~e of
$0.01 in premium
.~ma.~.~ from o~..~ y~ .Io /?..~ ~. 'lll~ ~ acquired from Star llave lower revenues, thus resu]fin~
~ ~ ~.L,~=~_l~. T~ ~,-on of. .~ .S~ Sy.r~ ,~.o~:_~ for 7~,~ of ~
m cusm~e, rs, or ~z.~ of tbe growth. Tbe renumm~ increase m customers r~ulted from imemal
31, 1993, to 1~6,6~6 units al December 31, 1994. The acquisition of the Star Systems acco-m for 54,281
27
Ofmar~lge.'.~rease in p.~rem~, unit~., or 92.5% of the growth. The ~ units were developed through
ung promouom aaa contained implementation of premium packaging.
_.__,.~t_.~...~, o~,..~:~?, m_ ~4, tz/,uuu. -lne mcrease in pw~'ammmt exvense is two-fold F' th,,
~.~:~lU~S.~mo~n..n o, ~ ~?r~ b .'y~tems ~ $2,472,000. represenfi~ five n~ont~ of ex~eme Tl~e
~ ~uuonal co, ts a~oclated w~ new clean. IS offered to customer~. -- -
$1 24° s,~,eUi~_ :.se~ce and ~ m~a. sen~.nt..expense~ increased 38.3~ to ~/,533,000, of which
., o.,}~o, ot m_e ~ncreue relate~ to tae acqu~mon of the Star Svsten~ and the ~mnlnd~,
~omn ~,.~.=m_.~.~co~._~y___g~_v~h_ __~a~d. a ltigher level of co. ncentr~on tn effectively marketing the
.~.t_,_~,c~o o_t me ~, .The_ incision of the former employees and rei~d ex~-~e~---~
~gement ~ _wnnm. t~ Com.-any's financial repo~ng structme acco,,m,,a for ~2.4~
3~1,432,UU0 Th~ tlMl~tJnJn~ ~ ~ ~ ...~.~+,.~ e....--..".~_, ~_--__~ ---r'-=~'-.-.' '=~r'~'""~--~'.
A~reemen~ ~ ~e ~,q~r. rlr,~ Parmershim on July 29 1~24 ~.--. ,, .... ~___n__o.t ~-_-_ ----.o------
· . ~.ompany reorgamzea m oraer to I ·
connectmn with the acquisition of the Star Systen~. comp y with the note terms m
t.)ebentures and the inclusion of five '-- "-- ..... ~ ""
A .................. .nx~..o_f the interest on the 13~% Notes (rephcmg the prior Credit
a_~_,_-.,.~o-,..._,.,.,.,.,.,.,.,~__ at_me muance otme 1~ Notes) Borrowin,,~ increa~ from .tl~ nnn nnn
~m~er ~l, ~, to $327 000 at ' ' · -
.... ;.~._= ,._ ....... ,264, . ___.l~e~)e..r 31: l~J~,, a~ a result of financm~ for the Star System
.*,~.-~=,,,,...f-- w.mg, nt~a. average.intere~ rate mr ~e twelve months ended ~r 31 moY =,as
-.~=:~, aha tl~ weighted average interest rate for the twelve months ended December 31:
11.0%. ~'~l~idinr~ lJ~2J~d r il~r~ts dec
1n~ ~... rd~?_.__~ _ . .~ 31, 1994, w.~ $28,303,000, which ~. $21,736,000
.=o ~uu~. ~ag tm:tots eHectm_.o tills ~ are discussed above.
Both ofd~C°mP -any incurred.exwa.ordin~_ _ 1..~se? of $3,076,000 and $2,307,000 in 1993 and 19~4.
amounts represent the write-off of debt muan~ corn due to L
._ .... o,d .
~T~_e C.ompu. y does not expect extraordinary losses to occur on a -~lucnz ,, umess there are future
nnancm~ aavantages to early debt retirement.
Fiscal 1993 Comimred go ~ 1~22
l,,~u.v u~u ~m aur~m O! twelve ~ or L%uvmm{._ ~ ~
~.~+,~.a_z,,,_~_l .~z: _w_ .hich..co_ma~n$. only_ .elgin. n~. _nths of .venues for the San An!cio
,.,,~,~. ....... ~,,,~ ,,,, ........... ~e~ .~z~.j.._ y . MomMy reveme per
· ,,~ .... , , ~..l~ofDecember31, 1993. ThcS1.46
..~...~..-_ ~_L._,~_..~_ ~_~_.~,u~n..anG.or~e. r revenues, ann ira) an increase of $0.31 in prenfium
~-~,,~-,~ L=,v_=.u~., wn~n was aue to me increase in pay-to-basic percentate from 58 8~
l..n_e__u.om~a~, y.s___l~um_custon~. ~ increased 2.2% from 138,274 at Dee__embeF31, 1992,'to
t~..en~er ~l, l~. Tl~ toial number of,,m uni~; ..... .,.,I ,~,n ,r~; =_ .........
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 month-~ of programming costs from the San Angelo Systems and the
Dehware/Marylnnd Systems of $4,0gl,000, as c~--.,,ared to $1,672,000 for the year ended December 31,
1992. Programming co~ts also grew due to late increa~ by certain progrnmmlng vendors, as well as
additional costs ~._~oclnt_~ with new ,'hnnn~lS offered to customers.
Selling, service and s,/smn management increased 32.5~ to $5,448,000, while general
and administrative expem~ increased e~uses the inclusion of twelve months
31.0~ to ,885,000, due also to
~of e ..xpenses for the ~ An_.elo _S~mns and the ~_ _hV,~JMaryland ~. Management fees increased
r me twelve monms ended December 31, l~g3, by 62.6~ $3,617,000, but the contractual
nas ot revenues tor me ~an nn~eio Systeh~ ~ the Dehware/Ma~land Systems.
h~h~i,_..__D_el?.~ia~iffo,n and .anCo. rti~..?on e...xj~e~?~ ~ 7..4% w. ~28,633,000, principally due to the
to or . ve.mo. of re . d to the
~.i~Y~Un~+c ~.,~ng~!lo~y~ste~ns~ ._a~a,,t~e~,,~,~,~w~ .M~y_ lan~. b~stems. Borrowing in~reased from
..-_..__-_,_--..--,.-,,,,,. -,.~, o,, .~.~,~, ? _~l~,~,ut~,uuu at t.~ceml~r 31, 1993. Tine weiabt~ averaRe
..=m~.__r~t. _r_a~ ?r ..me ?w?ve mo..mas ~_Decem~_ r 31, 1992, was 8.34~, and the wei~,t~ted average
.m~.=,cst ~ wr me. tw_el_ve__m_o__n~s_ .onaea December 31, 1993, was 7.85~. Subsidiary lhnited harmer
tease, due primarily to the factors disomed above. Extraordinary losses of $3,076,000 occurred
during 1993. These losses occurred due to the refinancing of com.nany's debt, thus resulting in an early
extinguislunent of debt.
~ and ~
The cable television business requir~ subs~a~ia~ expemiimre~ for sys~m acqu~ifiom and for
con~uucfion, expansion and maintemnae of pT~,~ equ~nent. The Company ~as wadifiomHy rel~ed
on ~ree sources for the nece~ary lundin, sources are: (i) contributions from equity investors,
· ~.,.~m~, o~, ~-/,,, unremm~ _cap,al conmbm/om Eom ~Joldman. Sa,~q & c~ ,,,t
.m.?to.rs to.ed apl?.ro .x~mn~. ly $103,997,000. Tbe Con.any ha~ an ant, re.ate of ~32'; ~ nnn
m~e.t_~._~ess o.tstanding n the form of the 11¥.~ Debentth'es'~,~ the l~i~"~-~l'-~-te~.Th~' -'--'"""Con?any
generated cash flows from operatin~ activities of $9,668,000, $15,56g,000, and $~5,88g,000 for the years
ended December 31, 1992, 1993, ~nd 1994,
meet the Co%n~n. y's debt service, .. .resl?~ti. 'vely. ~ three resources have been sufficient to
purchase costs ln~H'red ' ~;uuu~;uon wKn me ~tar Acqulsmon.
the Co ~A~hv°Ui~s~ ~~Y~h ~1~. ~ g.enerated ea?in?~ ~ defined, sufficient to cover fixed charg.,
~ ..ml.l.l.l.l.l.l.l.~n, ¥ nas ~eneratecl. and ~ .fi~. mg suffic~nt to meet its debt service, working capital
of the 1 l?~OcI°~Debe~.~a~3' ~e~ltzl~ ~ ..~.ital conp. all~lted..t~ public offeri~ of $100,000,000
, mw a cremt Ag---m~nent l)orrowmg $95,000,000 thereunder. The
~.roceeds from these borrowi? were used to repay oumand~ senior bnnlr indebtedness of ~roxl,m.~lv
160, .8~.,000 and to redeem certain pannership vreference units guh~mMmh, on Jul,, ~o
l, zt~,~ iapprox~m,,,.ly ~zl~,~ proceeds). The proceeds were used to fund the acquisifio~ of
the Star Systems and to repay borrowings under the Credit Agreement. The existing Credit
29
Agreement was amended ~s of November 1~, 1994, to sub~ Operating for the Operating Parmerships
.as ~he obligor. Th~e_o,n~,~i~l, ,.'_.d~.mmi of $198,4~.1,000 is bei,.~ am.ortized to interest expense using the
__,.. ....... ,~.~ ~? r~oms are ~maramee/l on a senior ~asis oy the Company and comain certain
upuo~a~ am ,~,,-*roty reaemlxion provisions.
Interest on the 13~A% Norm ~ccrues semi-annually until
August 1, 1999. Comme~ci~ February 1, 2000, interest will be paid
August 1, ')004.
s,~ m~.~ -,,- aa a ~mer, umon mmv, ~s Ageat and ss a Lmder, The Nh-st National Ba~k of
ss of l~ovem~r 15, 1994 (the Credit
~the ,~.__, ...., ........ ~ ~o provides for a $15,000,000 revolvm~ credit loan
~ ~,~,u,,=~ / wan a rmai mammy m~ oI June 30, 2003. Th~
cnargea wltll rmnect to all borrowings m~,4.,,. ~k. r,,.~;, .~'-_Z. _._
Lo_bUt io u _r ,r, by
· .... ~. _~L~,_.ratt~ ~ I..ncmmn~ th~ Wisconsin Partnership), th) subject to certain
.:..,.?p::,~,~-, a !..u? uen. on au tanm'bie ann intanm'ble a,s~ets of r~,,..,..~ .... ,~ .,-. ,-,=__=._- ......
~ ' · · -~ ~'~ ', ~' F'~'~~,' '~.~ Ol ml~rcA)
miner which ~t ~s the payee, (d) a ~msr,,~, of MCr' -"~ ~-~ -- -~ -'~-~-- -'~ ~' . ~mpan. y
. mam~ ...... ,~,,,~ ~, wm~ ~perau~ or ~n overam~ mimershi~
Agreemenl cont~ills num~ro~ ...... . ~- . - r--v .......
~ ......., ~..~_. ......... rm~..?e .fma~. i~i a~d other covenms, ~i~m~ (a) re~ulctiom on the
--r.-*~uom o~ assm 'iti ...... (b) merg__,
· . , ~ om, mv~, tramactiom with afflli~es, e in f~al ear
c._._l~n...ge..m bus .m~s?.conducted, (c) prohibmom on certain acouisitiom by
a~i~ouuons mm (e) certain maintenance financial trots --
W . The Company ~ ~ system *c~tisitiom throup, h ,~,,i, .... -~....~ .........
gcnerami uuemallv flu' eh ~ ~ r~r~--~''--x~- -- · o-rpr°l~n~lmd~mhaveb~n
· .- .OU ...... r-r~uoilS. Lmrma tae rio/is
committed substalltiai il~~ i . _ . pe . p. re~.nted, the Com?~n. y
r,-, ~-.-,- cap .. _ or (a) .c?nmuc~. axed..e~pans~?n of · Systems, Co) ro-,-,,
conm~tion of new ~ ~-~ ~,~,,~,~,,,, -~-~-- _ ._,~., ..,:-t~-~.u~ ~nam sysmm% ia)
me ~our~ quarter of 1994, tl~ 's i~! e . _ ---- .-,-.-- r~..~.,-,,.~
· =--p~uv=ly. r. xpelmaurm to,led $95,669,000 and $139,152,000 in 1992 ~cl 1994;
· for .~xluisi~iom
xpanmng capamt% for ~ extemions and an .,..~
__. _ . customer connecuo_ .,.,,~..,,,= ,~,,a,-~-,,,-,~, .,r
eqtupmen~, plato to · · '.-': "'
_. . _ sr. psmte ' ......
he Wlscollsm Syst~llS tO a mmm~um of 60-
,,- ,~ ~owm,C mum m me upsrme, m~mamS th~ impact of me r~sul~ion on th~ pani~uhr System,
ami its ~ech,,ical feasibility.
.... ram~ rsmps., c~p ,. hich
a corporauon ~y fornled sole~y~or the purpo~ of senm~ as co-muer of the 11?/,~ Debemm-¢s, and
3O
Capital has no operations or assets from which it will be able to repay the 11~ Debentures. MCC
1~. riv.? ail of its cash flow from the Oper~ting PartaershiDs Accordineiv Mf~te~ m,,et r~l~ ..6P~l
.._ ~.~__~.__v.L ~.~ o: pnn~.q~ ~ ~ on .me ~ ]~ Debennu~. 'l'ne Credit Agreement pro. its
~ .. ~ va~a um u~..~peranng Parmetsmps may make distn~outions of cash to MCC for semi-
~..~v-._.- ~,~r w SUCh paytnelll. ~ (O) the (~ratillg Parin~rshins d~_llw, r t~ *1~ I~,,a ..... .~..
Parme-~'-- the * ' under the Credit Agreement, MCC would not receive f~m the Opera~
u.~m/.u~o, ttnnev~lRora~l~lRocctl~w~h to z. · - · . '
of · . tl~ 11 ~ Detmmn~ lmor to ~h~ traaon
. q~u ~__r~a_ ~ ob.liptiom on the 11 ~% Debema~. The Conmam, ~v i.~,
arrange tor any nece~uy nnancmg to enable it to make tine' ors o'n tl~ ~ ~c~
whendue, althouo~ there canbe ........... ~ ....... .p~ _~ipal .payments the llr~ Debentures
d~losur~'"~ l~.l ~&z~ uu U~ ~ S consolll30.~d ~D~31:ioJ Stat~3]~ ~ l*~lnttqt
lm~r~t ~! ~Ae ~9~2 C~ ,a. er mu~ ~ FCC ~
~,~ ~ ~ __ .s~nuax~. xor governmental amno~ to reg, lo,, ti~ rm~ for ce ' ~lhle t~l~v~,in,
ann '_n~nent aha ' -.- __ . ____ rtam ..... .- .........
re'ion coa~.ve~ local broad~ stauom the optmn to elect mand~uory carmS, or req~e
~ ,-j~v~zuu .scrvmes tomer ~ programmm~ offered on a ~e -chanrml nr raarmr~m~ k~.;.~
Utx)n a oencllmark methodol __ . , _r._:. __ r-.- r--,o,-,-, ,,,~-,/~
.......... ogy...R~s were also established for cable eaumment On r,_~,~,~,, 99 mm
in e~,~-, ~"-~,,--,,~ -~f-'"~i?~'"~',,~,-~u~ m pamlm .a~ .ov ._cropping bencl~na~ formulas for
which cable ~-rators ma~ .~-.---. ~ -,-- --- .- ............ eot May 1~. lg94. under
..... basemti~o inalcostof lant o '
pttrcha~ price, minus t~cm~ ~m · ng . ( nginal
,....,_ _L~f ._'T~_..'- -- "~ .m~u_m ~x_._c~a. me reasommle rate aetermined by the methodoloev sele~l
uy LaC ~.~OIC f~I~VLsIon O~el'Rtor 'IIi~ ~.~{~ hns nnm~wu.~ Gt,, ;.,*~*~ .... '..=.._-~ . . ~
are substantially above permi~l benchmark levels uni ........... .~. ~ sy.stems wn.~ rates
..._a_..~_ .. ...... .. :-. ...... --, ~.. ~ ra~ are justmed unner co~t-ot-~rvi~
~ mat nav..e, yet to .oe establL~ed Dy me FCC. The ~ and aznount of m mflhn,,~,., o,,,~
tOf WUI ....
. an?.sYst:em., agpend on a nutnber of factors, mcit~linn, t~e m,.,k~ ,,~ ,.~,.. ~.,.~.._.,=
tile Caole tel · · . . ~ --- ,,,~ ,,,~mmauuu scieCt~l Dy
- .. .e~. ~on .operator,. further clarificauon of ~d~ to the I~'nchmark m~h~,~,,~,
p COSt-of-servIce shownnes submitted by cable ' ' nr~ramr* --,~ ,~-- --,-:-- ...... Y-
. _ television _~__.~.., ~,a m= mm outcome o!
31
~.~.o~, for.~c~,mi~. ,ra~..fil,ed..wi~h the FCC ~~ v~om ~,of ~ FCC's ~om ~
m p~_ ~ m ~ ~ ~ ~ 1~ ~1~ A~ ~ ~ FCC s ~om ~ ~ ~lv~.
~e ~e ~ye~ ~ of ~ ~o~ ~ o~r pmv~io~ of ~ 1~ ~le Act ~t
~ de~ ~ ~ ,~, ~ ~y s b~ ~d ~ ~y ~ ~ve~iy ~ ff ~e
C~ we~ ~ ~ ~ ~ ~. ~ C~y's ~ W ~1~ ~ ~r~ ~m~
~ i~ ~ p~ ~ ~ i~ m=~y ~ ~ NCC's r~om.
~ ~.~y.~ ~ ~ ~ ~ ~ ~ pmvhi~ of ~ 1~ ~le Ac~, ~1~
~om~ ~ ~ ~ ~ofi~ of ~li~? ~ ~ cm~ for ~ ~
~. ~ ~ ~, ~ ~ a~ w~ ~eve ~ ~ ~y ~ ~ o~ w~
wo~d ~ ~ m~ ~ w ~.
~ ~~ ~ ~ .~ ~ve~ ~ ~ ~ c~ ~~. Uowever, ~
~_~mm~i~ ~ve~ o~ ~ re--om ~ ~ ~r pm~iom of ~ 1~ ~le
~ ~ ~ ~'~.~ ~ow~er, ~ ~ ~ ~ g~en ~ ~ ~ ~ ~ ~le ~
~el~ ~ ~Ec~ ~ ~ ~ w m~i~ ~ ~y ~e~ ~ of ~ ~C's
~ ~o~ on ~ ~'s ~.
In~n
~ on ~ NCC's ~ ~ ~on ~, ~ ~oa f~r ~ ~1~ ~ ~e
~ ra~ ~ ~ ~n ~ y~_ ~on ~r ~ ~. h ~on ~ ~ ~
~ ~ve ~ ~ eH~ ~ ~ ~ ~ ~ ~ ~ for fl~ ~ ~t ~y w~ ~
by~~~. ~of~r~l, l~, ~of~~'s~~l~
~e ~ ~ ~ or ~ ~ ~ p~ ~le ~ ~ on ~ ~ ~.
ITEM 8. FINANCIAL STATEMENTS AND b~3PPL~M]~NTARY DATA
The consolidated fimac~ st~m~e~s of the ~ required ~ma~r Regulation S-X are set forth
her~in c, omil~l~in~ on page F-1.
ITEM 9. CHANGES IN AND DISAGRI~M~NTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF ~ REGISTRANTS
Director and F.z~eutive 02~er~ of Mareu~ Cable Pro, wrt~$, Inc.
Parmer ~There~ens~orra~ ove~e offu:ers of M.C~. ,.wh~.' as ~he sole general oatmer of the General
~ o erau mamgemm ot the business and operations o~ the Con~m~., are:
Jeffrey A. Marcus 482~ ~
Director, Preside~, C~ef Executive
Officer and Trea~rer
Loui~ A. Borrelli, Jr. 39 Executive Vice Presiden~ and (~ief
Opera~Z O~cer
Thol~as P. McMillin 33 Vice Pr~idem and Chief Fimaci~l
Officer
Richard A. B. Gleiner 42 Secretary and General Counsel
David L. Hanson 46 Senior Vice President of Wisconsin
Cymhin J. Mmmes 36 Vice Presiden~ of Human Resources
and Administration
John C. Pietri 45 Vice President of Engineerin~ and
Technolo~,
John p. l~lln~{, Jr. 32 Vice President and Controller
Su~an C. Holiiday 29 Vice Pr~ident of Regulatory
David M. Imvator 39 Vi~e Pre~idellt of Marketin~ ~
Prosmmni~
Steven P. Brocket~ 4~ Vice President of Operation~
The foliowln~ sets forth certain biographical information with re~p~t to the director taxi executive
officers of MCPI:
Jeffrey A. Marcus, the Prasident and Chief Executive Officer of MCPI and its sole director,
a cable television industry executive with over twenty-seven years of expe_nence in system operations and
ownership, who founded the
Commumcatious, Inc. in 1982, C°n~la~Y in 1990. Mr. Marcus md previously founded Marcus
a television company that ultitn~tely served and managed over
160,000 customen by the t~,~.~ of its 1988 merger into publicly held Western Tele-Communicatious, Inc.
~, et =~u,~ customers au~ng me penon wnen Mr. Marcus served as West.Marc's Chairman and
Chief Executive Officer. Mr. Marcus exchanged hi.~ interest in WestMarc at the end of 1988 for cable
television systems in Wisconsin which were ope~t_~ from 1989 on~ August 1990 by Marcus
.,.~ma~ms, co-rommm ~.~mmumcauous Equity Associates ( CEA ) in 1975 From its inee~,~n until
-ys. cragc rn~n mtne c~le t~le~islOn llXlustl'7. Mr. Ma~'cus atso sm-veal ~ l'~i~,. ~,¢ c.~.. ~,,.
___,._.~__ .... ?,..u~. ':.~rom t:,~t to.x~/o._a~__ as me owner of Markit Communications, Inc, a cable
~r~.x,,~g aha mstzuanon co .~y, ri'om 1~o~ to 1971. '
Long active in state and national cable television ' .tnn'z~_. matters and community affairs, Mr.
Marcus has served as Executive Director of the ~V[innt,,~o~ an,4 Wlscol~in
. Cable Television Associations
and has.served m a rnun~er of mnaeities__~_ for the National Cable T,~.,,,,,,,~-~'"~-;'--' ,-~u. wu' '-~"-'=~ n~" ...... a~so nas serv
as a Dtrector of Daniels & Assoc' .. . , ·
atto, one of the cable telev~smn industry s largest brokerate and
investment services companies, and TCI Northeast, Inc., a subsidiary of Tel~ous, h~.
~¢~ .~,.A-~o,~,_~.r~. h~ se~.as .~ ..~e Vice ~ ~ Chef Op,~,~-o O~cer of
· . o,~,~_,,~u t~-~+, wun respons~o~lay for me ~ompany s general onerations well-as
.~,_.~.__~..__r~_.m_ ? naa a~. e. xtenmve sevent~, n-year, career m the cable television industry, with specific
~ axc~o; =~a~ a_ VK:O Fr~itl0Bt - OperatiOus for We~al~, w~th re~ort~ibi]~q/for a dlvi.~i~n of
From 1978 to 1986, Mr. Borrelli served in various _mpacities for the predecesmr ~y to
United Artists Cable Sysum~ Corp., including service as the t~n'ector of Pfogratml~lgfl~ar~ino from
1984 to 1986,
...... ,.= ~.~,*~,~,.~,,_=u~....~u? tmev~mon Administration ann Marketino ~ocietv ('CTAM"X
scrv~o as l'l'~iQent or L:I'A~I'S South ~ ' -" ' "
,,_.,._=_c_e ~_ ~resion and as Chairman of the Planning rna Deve~opmont
Commin~- of the Me~o Cable r,u~s~u~ ~,.o.4~p, representing over 3 million cable customers in the New
York ~i-state area.
~,~.m~_m=_._~.. ~ml~ry._ ~m._~r 1 .~u~., U. vice t't~_,~...of F~man~e.. and Development. Prior to joining
~,~.~_,, ,,~__~_,__,~_..~;~n.....serv~ t_or .mree_years .as v~ce t'resu~-nt - Cable Development for Crown
,-,,~,: ,~.,. a su~ ...~!~.ry o.t _tt~mart cams. Prior to his position with Crown, Mr. McMillin served five
~A_m__v..~o_~ p~_ .~on~ p.r .ten?m_ C.~bJe A~oc~tes, ~., most ~e~y as Vice ~e~ident-
-- -- cqtu~u.O?., lql?r..to JOmm_.= ~ m 1987, Mr. Mcl~illi. served fous years with Arthttr And~rs~n
ff__~.o.:,.___ce~m. ~ ..p~ ~.. Mr. McM~,~. receded ~ ~or of Scian~ [~-~
~umancy from me umvermty or Missouri - Columbia. °---
~..-~..A..S. ~;~er t; the Secretary ~nd C, ener~ Coun=l of MOl';. ~ responsibtUty for
?ver~.. ~ .or ~ ~elral. ~ of ~ Company. l~ior to joining the ~ in 1994, Mr. Oleiner
oeen or co.~el to Dow, t.onnes & A]bemon, New York, New York from 1988 ~ 1991, where he was
the primary outside counsel to the C.o~ uy and its predecessors. From 1991 until joining Marcus Cable,
Mr. Gleiner was in private practice in Nor, ha~on, Massachnse~. Mr. Gleiner _r~'_eived his A.B. Degree
from Vassar College in 1974, ~ his J.D. Degree from Boston University in 1977.
David L. Hanson is a Senior Vice President of Wisconsin Operation~ of MCPI, with responsibility
for the daily operations of the Wisconsin Systems. Mr. Hanson is a native of Wisconsin and has spent
1~'~3 .t. .... ~. ,~,o., _~. ......... tuareg.__ - .p~.mons _wan Ba~ltger CATV in Wisconsin from
w . . . Y ,Inc ...........
i-Janson asmmzdWisconsinRziioml erofMCI After,he 1988
· . . Mansg . Wzstlviarc m~ er, Mr. Hanson
..... '", m~. m. ~.~ wnen lvir. JViSl~ns exclm~t his ownership Ix~i~ion in Web,arc for the
~as~,ol~nt oSt~bop~? o..~_ by. ~l~. .er_C.ATy: Mr.. Ha~. ..n isa Ion~-eme board member and
a~so,J~S__servmasar~z~nsi v~z-imzctor ~ me national board of ~he ' Ammna Television
ner~, ge~eral a~inim~on mi insurance mat~,~. ~. ~uumes ~g~n mr cable television career in
~l_~ea~s~ ~v~' ~. '~,,~ ~t~c~_ ~ns, Inc., .~ ~r role w~. the Com~n. y in lair
r ~ '~"~'" - ~ '~ ? .r~a~.... wan ..r?po~m or ~.rporate adminiia~ion. Upon
Chairman. Pa~he end of l~aa, ~. Mamas l~t W~Marc tol~me Vice Preside~ of~
Ms Mannes :- -'-- - -~'-i'~-'"Y~ "~'~'~ ~ ~ me c~oJe lelevmon Human Kesource Association.
· -- mao a coaner zeuow oz-l~e umy magness Leadersh'? Institute.
~ .J .olin. C. Pietrl is Vice Presidem of Engineering and Tecimoloev of MC'PI He is r~,~ne,~l,
e !cc ..l~ical o. pe.ra~..o.ns and standards of. the Con~y', cable ~levision S~
and reporting. Mr. bas spin the past seventcenyears in the cable television industry in a variety
~.' ~m~,~l r?.~__ _C~,~._%~,_~ ..Man,er of ..Double 'A" E~..rprises and President of the
cable pl~-- '"'"~" ,~m~m~uu ~ Iz~ lnsliltens~lCe, ilaYlZl~ constructed oYer f,O00 miles of
in 1987 and became ............ '"-'~-'-' '~' . . ,,,~p~mj m~a mar~us ~o ~ons, mc
~-omrouor m 1~, ~ the eJ__~on to Vice ' · · '
· . . -- President following, m 1994. Mr.
Khn~stedt holds a Bac,~lorg of ,~11~i~ Degl'~ m ~ from Oklahoma State I~nivel, si~
for c' of Com .. of Mc i.
........ .~ luSma~..ry ~mp~ s~n p~. Pl'ior ~o joinino ~ Commnv in I ~ ~
rlomaay o~1 ~een ~!1 alidiI ms~o~r wifll · a --~__~ 99
. KPMG Peat Marwick. Ms. Holliday holds a Bachelors Degree
in Business Administration with concentration in Accounting, and is a Certified Public Accom~,,,~t (CPA).
~:.--~--~ - ,.~1~ ..m~y.mr me ~.xanpany s.programming, marketlno, aavertisin~ sal~ and
~_a~i.u~m~Y. ms--vine ~nu~ O_~__._mess.. lv~.. lntr~_r ~ ~ a diverse fifteen year caree~ in the-~b-~e tel~-~'i.~ion
a ~aow. e ray rer view wnere ne was vice President, Affiliate Relations from 1990 to
3S
1994. Mr. Intrator is a me. her 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 thUniversity of
Connecticut and holds a Masters Degree in Public Admini~ration from the Maxwell School of Public
Admini.~ration of S~ University.
_ . Stevon P. Broekett joined the Company in February of ,1995 as the Vice President of
~~ AAdn~m~onr~l~CPI ~ ,re~o?ib~li_ty for ~ ~s mana~.ement of cable operations
? ern~..re _m~on: lnto~ ~rv~es Group, and the O~. fatuous Audit function. Prior to joinino the
,-~,,, - ~-~m~u~ xor ~.rown Mema, mc., a su~y ot Hallmark Cards. Mr. Brockett began his
Other ~ Em~yee$
over f'fft~J' n yC~tlan~ of Fe~n"~thinR~'~leG~e~evis~er. for the_~. ~ . .wa?.~y. land Systen~ and has
............... ~ ...... on INlsin~. Prior ~o joining the Com~ny, he had
~?u ~ t~.~..as ..l~o_nal lVla~g., er xor ~nnmo~. Cable TV for its Systems throughout Maryland and
· ,~,~ ,,urn x~,oo u~ xyoo as a ~.~nera~ lvlannger tot war~r Amex Cable m Na~tla, New
tatung manager tot xogers Ca~lesystems in Syracuse, New York. Mr. Fenger holds a Maste~ Degree
tn Commumcations Management and ~s President and member of the-Board of Directors of Easton
Community Television. He also holds various comm~- positions with the DE/MD/DC Cable
Association.
~J...?y.C ..r~nf? .~!. is the .Regio_na~_ Group Manager for the San Pmgelo, Texas Systems with the
~te~o~_O_u~y,~, tor me amly operalmus of ~ group.. I~.. Cranford began his cable television career in San
,gm.o. ano .nas.. over.twe .n?3,-one years o! experience m the cable television business. He held a variety
· ~ , ,,~, .m~ ..o~:~m. w~ ~v~on ol.umted ~ C, able. His I~ibilities varied bnt aiwa $
Included worirlnv with sv~em mnrmoers tlleir ~ ~,,,~ m~mie~''''~ ---a*-~r~l~O-- .............. Y
cm~mg me pre~mency tn l~.~O. Mr. Cranford holds a Bachelor of Scmnce Degree of Business
Administration and is a past recipient of the 'John Mankin Award' from the Texas Cable TV Association.
36
ITEM 11. EXE~ COMPENSATION
MCPI pr~entiy do~ not pay any compe~on to ~s dkector or officers. The executives of MCPI
are compensated in their capacity u officers of Operating. The following table summnri?.s the
compensatio, n paid .by Olj~rating to its Chief Executive Officer and to each of its four other most hivhly
~e~sat~ ey~X~~r~l', 'lm~~&n ~.ce~ of $100,000 for services rendered
~JMMARY COMPENSATION TABLI~. (1)
Jcffzey A. Marcus 1~2 - $4~9,677
President, Chief Executive Officer 1993 - $817,764 (3)
and Treasurer 1994 $163,949 $200,000 $575,765 (3)
Louis A. Borrelli, Ir. 1992 $104,000 $109,38~ $2,225 (4)
Executive Vice President, 1993 $I07,120 $'218,761 $4,497 (4)
Chief Operating Officer 1994 $176,275 $263,942 $4,620 (4)
David L. Hanson 1992
Senior Vice President of Wisconsin 1993 $67,670 $41,533 $1,984 (4)
Operations 1994 $86,034 $93,380 $2,368 (4)
Cynflfia I. Mannes 1992 $47,810 $64,343 $2,221 (4)
Vice President of Human P.,e~mrc~ 199:3 $56,400 $125,671 $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. Bie~ith (5) 1992
Former Chief Financial Officer 1993 $100,000 $92,951 -
1994 $138,248 $64,621 $4,620 (4)
1~. Sho~n below are (i) tl~ ~al num~ of li,~,~ pannn,ahip train of e~. Cnn~g pmmr held by ex~utive officers
nan~l in d~" ~"u~ary ~ ?nble, as of li~ne~"' 31. 1994. and (ii) ~be v~ing sd~lule, as of l~,o,,~,r 31'
1994. far ~m:h of lhe ~xa~ive offi~s nan~ in IM $mnmary ~ Table:
Nmnl~r and
Dnvid L. Haman 5.0 ~ C 100% 20%
37
· Def.~.~. Profit Agreement. ~ C~n~ral Partner imm entered into a Deferred Profit Agreement
~ J. _~ .F?nger. Mr. Nenger ts ~.R~gig. hal Manal~er of ~ .~l~_la~~land Systems. The
t~eterreo from Agreement was enter~ into m connecUon v~n ~e C. mnpany's acquisition of the
D~efe~laware. _/~/arY~~. ~ .Deferred. Prof~ _.Ag~mnm. pm '_vi,~__ ~ pay
a~_ .o~ OClU~_ ,to .rive _pej~nt o~ .m~ ptv,r~x, act pro.m.r~eiv~d b.y the ~ Parmer from the sale of
t~t~u rant ~ provms mat me e~tectmve s merest under the Deferred Profit Agreement shall
vest. twenty. ~rr--nt. upon execnztio, n .me~...,f and twenty pere.-nt on the first, ~.ond, third and fourth
_an~.ve .rssn_es _~..~t, if such ~e..,, ~ _an employee of the Coznpany. Mr. r~er e~red into their
uezerrea t'rotit Agreement w~tn me ueneral Partner on O~tober 1, 1992.
LYmited PannemAip In2re~ i~ ~ Partner. The General Partner hn~ issued certain limit~l
Pe.o~ .'_R~.? ~ key .e~_loyee~ of_the...Cojn~....y wi~out .re~.'ng $tleh eztlployee$ to m~ke capital
.itel. UUtlOIl8 ID ~ t.t~l~l~l i~'l{~r. ~ Of thc limit~,~! p~tll~r$hi{} ~ Jsstl~d is subject to the
vestea°~ ~_u~e_ restSDy i~,~/, m,__,eo were fully vested in liP)4, and Ihe retaining ouiiianding ..... interests will be fullv_
l.., i~,,+, anu ~..ymma J. lvlalmes ~ peen ~ '/.5 Cia.ss A Limit ~s~4 Partnership Units, which
P .came..muy..v..ested..a.s.o.f August_ 1.: 1994. David L. Hanson has been granted five C{ass C Limited
The iimit,.d partners of the ~ Panner ar~ ~ to _receive di~hilmtions in accordance with
their respective percentage interests in the General Partner, as set forth in the Parmerahip Agreement,
except for the Class C Limited Pa.,U~rs who are entitled only to receive di-i~ibutions of amounts directly
attributable to the Wisconsin Systems.
PemVon and Profi~ Sha,-im{ ~
· .The ..Con,any spot~o, rs .a 401(k) plan for its employees Ihat are age 21 or older and have been
emp,oy~ ?.y .me .company m.r.at ~,t ?ne.year:. Employ. ecs or the Comp!n_ y can contribute up to nrteen
~.rc. ent, o..t me~r ,-,,-..,'y, .on a Uetore-tax oas,s, wUU a maxunum 1994 conm'bution of S9,240 (as set by the
tuterna, .aevenu.e ?_~,.ce); I'ne...Comp~. y match., participant c?ntributiom up to a maximum of two
perce..nt 0t. a par~. prat s story. _AU ,.nnpioy .ey"-parg. ctpm conm'butions and ear,,i,? are fully vested upon
omp,-y ?,mSs
~omp~y tot rive years. ~ee ~ununaty ,.;om.~nsauon ~able.
38
Compentation of Director$
Beginning on July 29, 1994, the sole director of MCPI, Jeffrey A. Marcus, received aa annual
r~!~ry of $400,000 from Operating for hi.~ role az President and Chief Executive Officer. Mr. Marcus'
~l~ry will increase to $500,000 in 1995.
CompewmYon Comm~ee Inter~ocl~ and Insider Pm'licipa~n
ccuu · positions wi~ Operating.
ITl~t]2. SECURI'I~ O~ OF CERTAIN BEN]~ICIAL OWNERS AND
MANAG~
~mray Ownen~p of Certa~ Benefldni
· ~ xecuuve omcers o~ M~PI en~ eech rson wh
..known to M. CC m own beneficiall more ~ 50~ o . . :_pc _ o.~
officer of MCP ' . y director or exeeuuve
I named m the .
............ .Summar~ ~n Table and by all executive officen ,~ uc,m o~ o
stoup, m~..~., owns a~ ~,ooo snares of oui~anding common stock of Capital. "
# of Units/ % of
Name ,,nd Addrms of ~;-.qetml On~. ~ Sharm
Marcus Cable Properties, L.P. (1) Class B Oenerai Partner Units 6,434.53 100.00%
2911 Turtle Creek Boulevard, Suite 1300 of MCC
Dallaz, Texas 75219
Marcus Cable Properties, L.P. (1) DCA Class B Units 7,470.00 100.00fl;
2911 Turtle Creek Boulevard, Suite 1300 of MCC
Dallaz, Texas 75219
Marcus Cable Properties, L.P. (1) General Partner Profit 4,943.66 100.00%
2911 Turtle Creek Boulevard, Suite 1300 Interest of MCC
Dallas, Texas 75219
Goldman, Sachs & Co. Affiliates (2) Ciasa B Limited Partnership 96,366.24 65.84%
85 Broad Street Units of MCC
New York, New York 10004
Freeman Spogli & Co., Inc. Affilia~ (3) Class B Limited Partnership 25,000.00 17.08%
599 Lexin~o~on Avenue, 18th Floor Units of MCC
New York, NY 10022
Greenwich Street Capital Parmer$, In. Class B lJmi~,,-~ Partnership 15,625.00 10.67%
AITdiates (4) U-!ts of MCC
388 Greenwich Street
New York, NY 10013
Weiss, Peck & Greer Affili=t~ (5) Ciasa B Limited Partnership 9,375.00 6.41
One New York pla?~,, 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
39
# of Units/ % of
Name and Address of Beneficial Owner~ ~ ~ Class
Louis A. Borrelli, Jr. (1) Class A Limited Parmership 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
(I) Th~ ~ Patmar, Ihe sole ~a~al Patm~r of MCC, owm an 11.41 ~ equit~ int~ in MCC. MCI~i is the sole general
parmer of the C.~m. al Parmet. A majority oft~e limited parmers oftheGene, ral ~ate members of the Company,s
managemeri t~an~ la totsl, Ihe limi~d panners own approximately 34.75% of~l~ ir~r~t of the General Parmer.
lcff~-'y A. Marcus and hl* wife, Nancy C. Marcus, own all the issu~ and ~,a..,4h~g ~ock of MCPI, which ~tack i~ subject
(2) The foil°wing affilia~z °f Cmidman Sachs & C°' °~n ~be on~ Cia** B IJmi~ed Par~ U~ of MCC: Broad
Su~et lnvemmnt Fund I, L.P. C/$,0~7.69~ unaa); Broad Street Acqu~iti~ Corpomion (5,02~.885 units); the C~dman
Sachs Grm~, L.P. (8,155.847 traits); Stone Su~t Fund 1992, L.P. (1,416.686 units); Bridge Strut Fund 1992, L.P.
(831.16~ uni~); Broad Su~e~ Va~p~ Cor~ (405.405 units); ~ Smut Fund 1990, L.P. (462.834 units); Stone
$~ee~ Fund 1991, L.P. C257.670 units); Bridge $u~et Fund 1990, L.P. 008.272 units); Broad Su~t Empire Corporation
(121.616 units) and Broad Su~t Income Cotton (1,456.490 units), Broad Street Yield Co~on (866.083 units),
Stone Sm~ Fund 1994, L.P. (941.874 units), Broil Su~e~ V~lue Cordon (79.497 units) and Bridge Street Pund 1994,
L.P. (986.220 units).
(3) The following affilllt,~ of Fm~nan Spogli own the outs~andlng Cla~ B Limited Patmetahip Units of MCC: FS Equity
Parm~rs RI, L.P. OA,129.00 units) and MCC l~e~n~ional Holdings, Lui. (871.00).
(4) The following affdlat~ of Gmeawich Street Capital Pa.nmra own the oumanding Class B Limited Pa.naership Units of
MCC: ~ $tr~ Capital Patmers, L.P. (9,371.$78 units), GSCP Off, hole Holdings, Inc. (511.992 units), TRY
Employeea Fund, L.P. 0,899.650 units), The Travelera lmuraace Company (.~4.127 umts), and The Travelers Life and
(5) The following aff'tliat~ of Weiss, Pw.k & Greet own the out~ Cia~ B 12vnited Parmerahip Units of MCC: WPG
Corporate Developmem Aasociau~ IV, L.P. (7,553.00 units) and ~ M Holding, Inc. (1,822.00 units).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Management Company
Prior to July 29, 1994, each Operating Partnership had entered into various Management
Agreement~ with the Management Company, whereby the Management Co.mpany performed various
general, a~trative and
_ operating services to the Operating Partnerships. The Management
Agreements with the Operating Partnerships. provided that the Management Company was to manage all
aspects of each of the partnerships' business m consideration for a management fee payable monthly, equal
to 5.5% of the total revenues of the Systems from all sources (other than extraordinary gains or losses
derived from sales or dispositions of all or part of the System). The total amounts paid for management
e~es by. the .O~..rating Partnerships for the years ended December 31, 1992, 1993, and 1994 were
~PePrr_O.X_~u~_.~tel. y_ ~$.1,,693~,..007~,~$.3,.193, .0~ ~.d $1,.6.83.,000, r..esl~.c, tively. These Management Agreements
crc t~rmmateo Jmy z~, 1~,94, m conjuncuon vattt ~e acqu~tton of the Star Systems and the issuance of
the 13~i % Notes. All management functions previously performed by the Management Company were
transferred to Operating.
4O
to' ..~..T...ran~..on fee~ for serv'.w~, re!a~-~ to the planning and ne~ot/ation of acquisitions have been paid
m~r~ oy me ore,ny upon ciosm~ o! certain tran~_nions. In 1994, MCPI received a transaction fee
aO~S~,i~:o0o, ix, ~...,,j~_ ~on__,~_. ,he ,~Si!.itio,~.o.f .ne S~r .S..V~ =d in J=,~.,/~S, MC~I r~iv,d
um __ -uon tee ox ~1,7,~o,ooo m connec~on w~ ~ acqmsl~on of ~he Crown Sys~m.
Inve;tment Banking Agreement
MCC, the General Partner, MCPI, Jeffrey A. Marcus and Goldman Sachs have entered into an
lc ~a~m~_ ,(? 'Iavmmm ~ ^p'mnem'), purmm to which the parties have am~l taat, for so
umetwnung or placement agent services on Denait of gae ~.
Recent Developments in the Ownerthip of Equity Intt~ttt in MCC and the Operating Partnerships
th~ --'-~}~Y- ~,~._~.Co .~y ~!~,,~ .a. porao~ of ~ ~p~o=~d~ ~,~d ~y ~ Co?=. y f~om
ammhfiv~e_e Co.~mpany. redeemed 1,2T2.126 Class A Un/~ ~ a face value of $1,000 per uni~ and
with a face value of $1,~00 per unii~ ' m~s and 201.95 Class B Limited ~ Units, each
and As .°f ~r ~ 1, 1994, ~he General Parmer owned 19.5~90% of ~he equity in~re,~ in MCC,
a 2~ ~m~.,~ parmer~h~ imeres~ in Operating. After ~he Crown acquisition, the Geaeral Parmer's
non-prexerrea equny imerests in MCC is 11.408~ ~.
Agen~ Agreemems
~p~m u ~s acung ~ au agem o~ operau~ m serw~5 as co-issuer of the 1~4 No~.
41
ITF2VI 14. Ex--mITS, FINANCXAL STATEMENT SCI~ULF.~ AND I~I~.PORTS ON FORM
(a) (1) ~
Included in thi~ Report:
Independent Auditors' Report F-1
December 31, 1993 and 1994 F-2
Con~ol~ttnt_~_ Statement~ of Operatiort~
Years ended Dec___-'mber 31, 1992, 1993, and 1994 F-3
Consolidated Statnnents of Partners' Capittl (Deficit)
Years ended December 31, 1992, 1993, and 1994 F-4
Consolidat~ Stat~n~ of Cash Flows
Years ended December 31, 1992, 1993, and 1994 F-5
Notes to Consolidated Financial Stat~nents F-6
Separate fina~iai statements of Mareus Cable Operaling Company, L.P. as issuers of the 13~%
Senior Su~r~lina~. ~ ~.iscount ~.ot~ have not been presented, as ~ a~greg~_,e net
ass. e~, ..e~-.. ,,,~s ~ ~ c. ap. itai (den¢it) oS ~ C~le Oper-~-_~ ~y, L.?. are
su~ .~. ,,-~?.y .eq~. vaient to me .ne.t assets, .ea~...s aha partners' capita (d~ficit) of the Corn?any
oecause mese enuues nave no operanons ann 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 stat~nents or noted therein.
Included in this Report:
'3.1 Amnxled and R~t~d Agreement of l.lmit,-d ~ of MCC, dated
as of August 1, 1990. (Exhibit 3.1)
*3.2 Certifi~-*t,, of Limited Partnership of MCC. (Exhibit 3.2)
*3.3 Agreement of ~ ~ of the Gen~.nl ~r, dated as of May
14, 1990 (She General Partner Pam~ership Agreement"). (Exhibit 3.3)
*3.4 Amendment Number One, d~ted as of August 1, 1990, to she General
Panner P~tner*~i? Agreement. (Exhibit 3.4)
*3.5 Atn~dment Nmnber Two, dated as of l)e~er 15, 1990, to th~ General
Panner Pannership Agreen~nt. (Ex,'bit 3.5)
42
*3.6 Amendm~ Number Three, dated az of March 15, 1993, to the General
Panner Partnership Agreement. (Extu~oit 3.6)
*3.7 Amendment Nmnber Four, dated as of August 1, 1993, to the General
Panner Parmer~h'.m Agreement. (Exhibit 3.18)
*3.8 Cel'tificate of Limited Paztoel~hip of the C_m~era] Partner. (Exlu'bit 3.7)
*3.9 Amended and Restated Agreement of Limlt,~l Partnership of the
Wisconsin Partner~hi?, dated Augtm 1, 1990. (Exhibit 3.8)
'3.10 Cel'fificate of Limil~d ~ of th~ Wiaco~in patmership. (Exhibit
3.9)
*3.11 ~ and Reamed Agreem~ of ~ Parmership of the San
~,nge~o Parmetship, dasd az of April 30, 1992. (F~h~it 3.10)
'3.12 ~ °f I Jmi°'d ~ of the S~ Aagelo ~. (F~h~it
3.11)
'3.13 ~ and Re,ted Agl~me~ of Limited ' of the
3.12) 1, {Exhibit
*3.14 Certificate of I~imi~,,s4
(Exhibit 3.13) Partoe~ of Ihe De~wam/Matyland PartnerShip.
'3.15 Certificate of Incorporation of MCPI. (Ey, tu'bit 3.14)
*3.16 Bylaws of MCPI. (Exhibit 3.
*3.17 Certificate of Incorporation of Capital. (Exiu'bit 3.16)
'3.18 Bylaws of Capital. (F, xhJbit 3.17)
*'3.19 SecOnd Amended and Re~t,~d Agreement of Limit,-d Partne~ of
MCC, d~_,~5_ az of October 13, 1993. (Exhibit 3.15)
*-3.2o _,.,~...o. nd .Am?ded .mi. Resined Azreem~ of ~ Partners ' of the
w~comm Partmrship, dated az of October 13, 1993. (Exlu'b~thi~.16)
*'3.22 Second Amended and Restated Am'~ment of Limited Parmership of the
Dela~~nd ParmershJp, dated az of October 13, 1993. (Exhibit
3.18)
**3.23 Cenifica~ of l~i~i~4 Panm~ of Ope~-~. (Extu~oit 3.20)
**3.24 Agreement of Limited Paztma~ of Operafino, dated June 23, 1994.
(Exh,'bit 3.21)
*'3.25 Certifica~ of lnco~0oralion of Capital II. (Exhibit 3.13)
**3.26 Bylaws of Capital II. (Exhibit 3.14)
43
***3.27 Form of Third Amended and Re~ated Agreement of Lim~i!e,q Parmersh/p
of MCC. (F, xhibit 3.16)
*****3.28 Fourth Amended and Restated Agreement of Limited Partnership of
Marcus Cable Co .m!~ny, L.P. ('MCC') (Exhibit 4.1)
'4.1 ofl~Te °f ~.ln~l~ar? b~ ~ ~ ~ ~~ ~ U.S. Tms~ Company
~oz, a~, ~.a., as 'trustee, retatoa to the llYa% Debentures.
(F. xhibit 4.1)
****4.2 Indenture by and among tl~ Registram and the U.S. Tru~ Company of
Texas, N.A., as Trustee, relating to the 139~% Notes. (F. xhibit 4.1)
smcznoiaers ami Jeffrey A. Ivlareus as uustee. (~.xtu'oit 9.1)
*10.1 _ __M~ag_ ement Agreement, dated_as of Jantmry 1~, 1990, by and between
.~cP and the _M..~ement Con, an. y (the Wiscomin Management
,,~reement'). (F. xhibn 10.1)
'10.2 First Amendment to the Wisconsin Managemem Agreement, d.~ as of
July 31, 1990. (F..xhmit 10.2)
'10.3 Letter Agreement, ~ as of August 1, 1990, from MCC to the
'10.4 Malmgement Agreement, dated February 10, 1992, by and between the
San .~%oelo Parmership and the Management Company. (Exhibit 10.4)
*10.S M~l,.~_gem_? . .AS~e~_, .da~ed. October 1, 1992, by and bemeen the
s.~.mwar~vlarylaml Parmership and the Management Company. (Exhibit
10.5)
'10.6 Coml~nsation Agreement, dated as of Jmmary 17, 1990, by and between
*~ompensauon Agreement). (F. xhroit 10.6)
'10.7 First Ame~lme~ to the ~ Agreement, dated as of August 1,
1990. (F. xhibi~ 10.7)
'10.8 ~_..v.__e~ff~t~,,~ ~.Ba~.. ~A~an~t. ,.~ as of January 17, 1990, by and
..~__._~_~..~,..M.~. ~, ,.emey a....t~ar~s_ and Goldman Sachs & Co. (the
mvesun~a tmirmg ~greement-). (F. xhibit 10.8)
'10.9 Amemtme~ to the Investment Banking A~reement, ~l**~ as of August 1,
1990. (Exhibit 10.9) -
-1O. lO ~..mii~ . _A~f~, ~ as of Ausust I, 1~0, by and ~mong the
w~,onsm Partnership, the Banks listed therein and The Fire National
Bank of Cl~.~o, as Age~ (the "Wisconsin Credit Asreement"). (Exhibit
10.10)
'10.11 First Amendment, dated as of September 21, 1990, to the Wisconsin
Credit Asreeme~. (Exhibit 10.11)
'10.12 Second Agreement, dated as of JH~e 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. (Exi~'bit 10.13)
· 10.14 .CredO. ~, d.n.t~ as.of Februm'y 10, 1992, by afld nmong the Sail
· q%~elo Faflnership, t~ lenfl_~s named therein nnd ~atlt~nel:~onL.
...... -,,~, u ,u amnmlstranve ~enner, as atnended as of October
1, 1992 ('San Angelo Credit Agreen~nt'). (F.,xlu'bit 10.14)
auonsl~allK O! Texas, N A , ind~, ~ -- -.~--:..-'~-= ......
~mc t,,~awar~Marylana Agreement ). (Exlu"oit 10.15)
· 10.16 San Angelo Cable Television Franchise Ordinance, dated as of February
2, 1977, as mnended. (Exhibit 10.16)
· ,10.17 ~c .r~dit ..A~n~n~. _, dated October 13, 1993, among ~e
10.11)
· ,10.1s 't .A r me. d, ed as of Nov r 23. 1993.
v~uumfy ann as AotnlntsUafive Lend~r, and the other lenders parties
thereto. (Exhibit 10.12)
· '10.19 Letter Agreement, ,~_r~ October 1, 1993 from the Goldman Sachs & Co.
Investors to MCPI. (Exiu'bit 10.16)
· '10.20 Purchase Agreement, dated as of November 12, 1993 between St~r and
the Wisconsin Partnership. (Exhibit 10.17)
· '10.21 _E~c..row .Agreement, dated November 12, 1993 between Star, the
wJ,sconsm Pam~r~h',m and Wailer Capital Corporation. ('Exhibit 10.18)
· *'10.22 Amendment Number One ~ Purchase Agreement dated as of May 31,
1994 between Star and the wisconsin Parme~. ('Exhibit 10.16)
· **,10.23 ,A~.e ~_~m lq_?~., r Tw.o to Purchase Axreement, dated as of ~uly 29,
~y~q, oetween ~ellers ~ the Wisconsin I~'tnerslfip. (Exhibit 2.3)
· **'10.24 ~ and ,.ASSMI~OI~ A~rl'eei3~el~, dntp~4 JLtJV 29, 1994, between
Sellers and the Wisconsin Paflne~. (Exhi~i~
· **'10.:~ ~.on_..~.~w. _A~em~: dated Ju~y 29, 1994, by and among
mc ~euers, me WLSCOnsm t'arn~rsnip and Wafter Capital Corporation.
(F,~h~it 99.3)
· ***'10.26 Form of Subscription Agreement for the Pttrchase and Sale of CLL~ B LP
Units dated as of?anuary 11, 1995, among MCC, Marcus Cable
Propertie~, L.P. an~ a new investor. (F. xlu'bit 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 rnmding and Adju~uent Agreement dat~l as of January 18, 1995 among
C/VIA, MCP, CCI, CCA and CCfl. (Exlu'bit 99.2)
*****10.29 $250,000,000 An~nd~d and P.t. mtt~ Credit Agreement among Marcus
__C~ble .Operating Corn?any, L.P., NationsBank of Texas, N.A., as
?a~ .ru~ ~ .auo~ ~ of.Boston and Banque Pm~bas, u Co-Age, s aad
t.~m~r~. ~a certain otl~r t~na~r~ ~ therein dated as of November
15, 1994. (F, xi~it 99.3)
10.30 Am~mtmm to Stock Purclu~ A~, d~d November 18, 1994.
10.32 Pre-Closing F~:row Agr~m~nt, dat~l M~ch 24. 1995. among the San
A~elo l~a~na~ip mi TCA.
12.1 Con~?~ion of ~ of ~ to Fixed Chargu.
**'21.1 Sul~ ofOpc~r~tl,g. (F~,h~it 21.1)
**'21.2 Sui~idi~ of MCC. (F, xhl'bit 21.2)
to 29. by ,mong u rs.
d ~. ~onu and the Wi~omin l~t~nhip. (F,~it 99.2)
* ~c~.rpo~ted_by refe.r~_ to the e_x~.."oit shown in pamnth~is contained in the Regiat~ants'
tcegmration :itatement on form S-I (File Noa. 33-67390 and 33-67390-01).
** ReI~irpo .r'~ted_by reference_to the e_x~..it shown in parentheses contained in the Registrants'
gmrauon 3tatement on form S-1 (File Nos. 33-74104 and 33-74104-01).
*** _In~.rpo~ted_by reference to the .e_x~.. it shown in parentheses contained in the Registrant'
tceg~strauon ~tatement on Form S-1 (File Nos. 33-81008, 22-81008.O1 and 33-81008..02).
**** Incorporated by reference to the exhibit shown in ~ contaimd in Form 8-K dated July
29, 1994.
***** Incorporated by refmm~ce to the e~thibit shown in ~ comained in Form 8.K dated January
18, 1995.
Co) Reports on Form 8-K:
cO~cmp2am~a~y 18, 1995, Marcus Cable Company, L.P. and Marcus Cable Ol?erating
any, L..P..filed a r~p~.rt o.n Fo .r~.. 8-K relating to flae _ .aC~l~isitio_n' of certain cable
systems serving me areas m Janesville, Wausau, Stevens Pouu, Wisconsin Rapids,
~, .Depere~ Do?r ~ in Nonhmn.Wiscomin and in ~he suburbs of Madison
and Milwaukee, w~y~ln, including West ~,iha, and in Altura, Roilingstone, Lewiston
and Hidden Valley, Minmaotn.
On Mm'ch 10, 1995, IVigrct~ Cable Company, L.P. nnd Marcus Cable Oper~dn~
~, .L:P. filed a report on Form 8-K ~ to the ~to acqui~ cer',am
c~ble te~evts~on systems from Sammons Communications, Inc.
~On~ 24, ~, ~v~-cus cable __compaq, ~..~,. tnd ~ C.,b~e Operatin~
~..~.?any L.P. filed a report on Form 8-K relating to the announcement of the divestiture
of certain cable systems in San Angelo, Texa~ and the diso,~ons relating to the
acquisition of CALP.
47
II, DEPENDENT AUDITORS' REPORT
The Partne~
Marcus Cable Con, any, 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 r~pousibility of the
Parmer~hip'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 examim'ng, 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 ~nnd~ 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 Marens 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 accep~d accoun6ng principles.
KPMG Peat Marwick LLP
Dallas, Texas
February 17, 199~, except for note 11,
which is as of March 24, 1995
F-1
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1993 and 1994
(in thousands)
Asses 1993 1994
Current assets:
Cash and cash equivalents $ 8,837 $ 5,328
Accounts receivable:
Customers, net of allowance of $142 in 1993 and
$240 in 1994 1,033 1,899
Other _ 190 1,971
Prepaid e~penses 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 2338 3.421
69,289 110,026
Net property and equipment 46,666 76,657
Other assets, net (note 3) 137.959 228.677
$195,148 $ 315r217
Liabilities and Pn~ners' D~fieit
Currant liabiliti~:
Current maturities of long-tea,= debt (note 4) $ 2,850 $-
Accounts payable aad other ~ liabilities 2,882 6,519
Accrued intemat 3.14~ 2~70
Total current liabiliti~ 8,880 9,489
Long-t~,m debt, l~s current maturitiez (note 4) 192,150 327,264
Subsidiary limi~l partm, r inter, ts (~ote 5) 5,788 (246)
Parmers' deficit - r~le~mable i~'tner inter.ts (note 6) (11,670) (21,290)
Commi~lents and gollth~*l~ (notes 2, 4, 5 ~ 9)
$195~148 $ 315~217
See accom?anying 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)
19~2 1993 199~
R~v~nu~:
Basic service $ 29,894 $ 40,532 $ 47,792
Premium service 5,705 7,917 10,397
Installation and other 2,711 3,858 5,440
Mnnn~t fees - - 1.11 g
Total revenm$ 38.310 52.30~ 64.747
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,$g5 9,793
Manngement f~ and expenses (note 7) 2,224 3,617 2,165
Depreciation and amortization 26.652 2~.633 37.412
44.990 54.09~ 71.030
Operating loss ~6.670) ~
Other (income) expense:
Interest expense 11,114 13,443 28,105
Interest income and other, net ~133) 251
10.9gl 13_604
Loss before subsidiary limi~d panner
interests and extraordinary item (17,651) (15,486) 04337)
Subsidiar~ limited partner interests (note 6) (3.672~ 8.919 6.03~
Lo~s before extraordinary item (21,323) (6,567) (28,303)
Extraordina~ item - loss on early retirement of debt - ~3.07~)
Net loss S(21,323) $ (9,643) $(30,610)
See accompanying notes to consolidated financial statements.
F-3
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Comolidated Stater.,ents of Parmers' Capital (Deficit)
Years ended December 31, 1992, 1993 and 1994
(in thou.sands)
Redeemshle Panner Interests
Class B
General Limited Class A
Bni~aceatDeeember31, 1991 $ (2,.~00) $ - $(3,687) $ (6,187)
Capilal contribution - 32,501 - 32,.S01
Net loss
Balance at Dec___~nber 31, 1992 (2,713) 11,391 (3,687) 4,991
Distribution of prefer~ce
returns on Class A units
r~..-med (187) (1,717) - (1,~4)
Redemption of Class A u,~i~s (63) (6,030) 1,771 (4,322)
Reallocalion of loses on
redemption of subsidia~
limited ~ interests
(note 6) (4,302) - - (4,3O2)
Capitol contribution - 3,$10 - 3,510
Net loss
Balance at Dec~mber 31, 1993 (7,361) - (4,309) (11,670)
Distribution of preference
returns on Class A units
redeemed (7) (721) - (728)
Redemption of Class A units (25) (2,519) 1,272 (1,272)
Conversion of Class A units (3,844) (166) 4,010 -
Capital contribution - 22,990 - 22,990
Net loss ¢ 10.0~3~ (19.584) ¢973~ (30.610)
Balance at December 31, 1994 $(21~290) $ - - $ - $(21,290)
See ~ceompanying notes to consolidar~l financial
F-4
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1992, 1993 and 1994
(in thousands)
~ 1993 199a
Cash flows from operating activities:
Netloss $ (21,323) $ (9,643) $ (30,610
Adjusunents to reconcile net loss to net cash
provided by operating activities:
Extra~imlry item - loss on early retirement
of debt - 3,0/6 2,307
Loss on r~*ment of fixed assets - 400 -
Loss. on redemption of subsiai,ry limi~_~ panner
umts - 4,302 -
Depreciation and amor~v*~ion 26,652 28,633 37,412
Accretion of discount on notes - - 12,26~
Subsidiary limit~l panner 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 .igi~ 1 .,~ll~ ~
Net cash provided by operating activities 9.6~ 15.$69 15.889
Cash flows f, om investing activities:
Escrow deposit on acquisition of cable systems - (2,980) (5,000
Acquisition of cable systems and franchises, net of
cash acquimt (95,669) - (139,130
Additions to property and equipment ($.35~) (3.969~ (6.~92
Net cash used in investing activities ~ (6.94~) ~
Cash flows from financing activities:
Proceeds from long-term debt 66,500 195,000 215,000
Repayment of long-t~m~ debt (7,000) (162,500) (95,000
Contributions by limited parme~ 32,501 3,510 22,990
Conlributions by subsidiary iimit~! partner 1,000 - _
Purchase of subsidia~ limited parmer 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 panner units - (16,846) -
Preference returns distributed - ¢8.910) -
Net cash provided by (used in)
fixaacing a~vities ~ ~ ~
Net increase (decrease) in cash and cash equivalents (484) 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 $ 1,225 $ 8,837 $ 5,328
Supplemental diaclosur~ of cash flow information -
interest paid $ 10,409 $ 11,510 $ 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
(1) Summaw of Si_tmificant Accountin? Policim
Famm
Mar~us Cable Company, L.P. ("MCC"), a I~lawar~ limit! partn~hip, and subsidiaries
(collectively, the "Company") was formal on January 17, 1990 for the purpos~ of acquiring,
operating and developing cable television system.~. In July 1994 thc Company crca~d a n~w
subsidiary, Marcus Cable Operating Company, L.P. ('Opsra~g'). Operating acu as a
holding company and general par~er for thc throe subsidiary partoershi~ns discussed below.
In addition, Opmlting has a subsidiary, Marcus Cable of Alabama, Inc., which has a general
parmer in~ in a parmer~h~ with cable systems in Alabama (s~ note 2).
The Company's operations ar~ conduc~l through thr~ subsidiary parmerships which arc
orsanized by Seographic resion. MCC, through OpcralinS, serves as the Seneral panner of
all three partnerships. The fl~LreC subsjainry pannerships include: Marcus Cable Panners,
L.P., which operates cable syst~..-~ primarily in Wisconsin and Minnesota, Marcus Cable of
San Angelo, L_P., which opiates cable syst~os in Texas, and Marcus Cable of Delaware and
Maryland, L.P., which opcrat~ cable syst~ns in l~iaware and Maryland. MCC also has two
subsidiaries, Marcus Cable Capital Corporation ('Capital') and Marcus Cable Capital
Corponuion II ('Capitol 11'), which were erred in August 1993 and July 1994, respectively,
for the purpose of sc~ing as co-issuers on public debt offerings. Capit~l and CapRal II have
no opemtiom.
In Sept~aber 1994, the Company also began managing certain cable sysiems in Maryland
Co)
The consolidated financial s~atements include the accounts of the Company, Operaling,
Capitol, Capit~l !I and t~ir subsiais~ pannerships. All significant intercompany accounts
and Iransaoious have b~m ¢limlnst,,d in consolidalion. C6r~ain rccla~ifications have been
made ~o prior y~' consolidated balanc~ ~o conform to the current y~ar presentation.
(c) r., iu' l limlmia
For purposes of ~he stab,mm, hr of cash flows, the Company considers all highly liquid
inveslments with ori~insl mat~rilies of thr~e months or less at inception to be cash
equivalents. At Dec~nher 31, 1993 and 1994, the Company had cash equivalen~ of
$4,291,000 and $1,900,000, msp~clively, consisling of cenifics_t~ of d~posit.
F-6 (Continm~d)
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(d) Pro_nervy and ~__]i_nm~nT
Property and equipment are recorded at cost, mchidmg all direct costs and certain redirect
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
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)
Franchise rights and going concern value of acquired cable systems are amortized on
su'aight-line basis over ten years. The cost of noncompe, litinn agreements is mnortized by the
straight-line method over the periods of the respective agreements. Def~,x~xl debt issuance
costs are amortized to interest expense using the interest method over the term of the related
debt.
The Company assesses the recov~,.bility of intangible assets as well As the related
amorti?ntion lives by determinln~ 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 ~ amounts of the related intangible assets, such cAnnfing
amounts are adjusted for im?nirment to a ]eve] commensullte with a ([iscoonted c~h
(f)
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.
remainder, if any, is def~,Gd and amortized to income over the estimnt~l average period that
customers are expected to remain connected to the cable television systan.
The Company hn~ not provided for federal income tnxes since such taxes are the
responsibility of the individual pertners. Capital and Capital H are subject to federal income
utx but have no operations and, therefore, no tax since their inception.
Ch) Sul~i&inrv Limit~cl Pnrtner Intere~
Limited partner interests of subsJdiar~ partnerships which are not directly held by the
Coml~ny nre nc. counted for in a manner simib~ to minority interests. Net income or loss and
preference returns related to the limited partner interests of subsJdiar~ partnerships are
reflected in the accompanying statements of operations as "subsidiary limited partner
inte~sts."
F-7 (Continued)
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Notes w Consolidated Finaacial Statements
(2) Atalla,~ia~
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 parmership
for cash of $139,152,000 (including direct acquisition costs of $2,152,000).
On September 1, 1994, the Co ~y acquired from Crown Mediu. Inc, ("Crown"), an unaffiliated
third party, a noncontrolling general parmer into'est in Cencom of Alabanm, L.P. ("CALP"), the
managem~t conm~ct punuant to which the Co~ny will provide management services to CALP,
and accrued end unpaid management f~s, for total ca~h cun~ideration of $2,878,000. The
inve~ment in CALP is accounted for ming the equity method.
The ~_c~m6~fionz of Star and CALla wer~ accounted for as purch~m~ ~nd, accordingly, the purchase
prices were ailoca~l ~o tangible md intangible ~ based on e~irmt~l fair market values at the
date~ of acquisifiun. Fair market values were determined u~ing iud~endent appraisers. In
connection with the acquisitiom, the Company aho a~maed re~pomibility for settling outstanding
receivables md payables of the cable mlevision sysmms acquired. Net ~ acquired as a result of
the~ ~_cqrmitiom ~re nmmm-ized as follow~ (in thousaade):
Property and equipment $ 34,147
Franchise rights 94,437
Going concern value 10,412
Noueo...pefifion agreement 1 O0
Other a~ets 3.014
Net cash paid, including S2,980
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 acquisitiom had occurred at January 1, 1993 follows (in thousands):
1993 1994
Revenues $ 81,077 $ 82,202
Opemfin.o income (loss) 2,357 (2,781)
Net loss (42,146) (45,831)
On Jtlly 1, 1994, the Com.r~ly, 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 l~Oceeds from an emended
credit facility (note 4) and additional equity investments in the Company. At December 31, 1994,
the Company had incun-ed direct acquisition costs relating to this acquisition of approximately
$136,000, all of which have been deferred.
F-8 (Centmued)
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) hra. ae
Other assets consist of the following at December 31, 1993 and 1994 (m thousands):
1993 1994
Franchi.ae fights S 146,052 S 240,489
Going concern value of acquired cable systems 3,169 13,365
Noncom~ctition agreements 36,600 36,700
Debt issuance costs 6,606 13,773
Escrow deposits for acquisitions 2,980 5,000
Management fees receivnble from CALP - 3,410
Other 197 584
195,604 313,321
Accumulated anv, rtization 57.~ 84.644
$1377959 $ 228,677
(4)
The Company h~t, outstanding bon'owings on long-t~,tu debt arrangements at December 31, 1993
and 1994 as follows (m thousands):
1993 1994
13-1/2% Senior Subordinated Discount Notes $ - $ 227,264
11 7/8% Senior Debentur~ 100,000 100,000
Credit facility 95.000 -
195,000 327,264
Less curr~at portion 2.850 -
$192,150 $ 327,264
On July 29, 1994, Operating and Capital II issued $413,461,000 of 13 1/2% Senior Subordinated
Discount Notes (the "Notes") through a public offering for net proceeds of approximately
$215,000,000. The Notes arc tmse~ are guaranteed by the Corn?any on a senior basis, and arc
redeemable, at the option of Operating, at amounts decreasing fxom 105% to 100% of par beglnnin~
on August 1, 2001. No interest is payable on the Notes until Febroar~ 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 acoreted ~ the interest method at an interest rate of 13 1/2% from
the date ofisanance to August 1, 1999. The unamortized discount was $186,197,000 at December
31, 1994. Proceeds from the Notes were used to retire outstandm$ borrowings under the
Company's existiug credit facility and to fund the 1994 acquisitions.
On October 13, 1993, the Company and Capital issued $100,000,000 of 11 7/8% Semor Debentures
(the "Debentures") tim)ugh a public offering. The Debentures are ~m-*ecured 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 f~om the Debentures, together with borrowings under the Company's credit facility, were
F-9 (Continued)
MARCUS CABLE COMPANY, L.P. A_ND SUBSIDIARIES
Notes to Consolidated Finnncia! Statements
used to repay indebtedness of subsidiary partnerships and to redeem certain parmership preference
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 form of two
tenn loans. Amounts outstanding under the credit facility bear interest at either the (i) base rate or
(ii) London In~ Offend 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 nnnualized 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 parme~hip interests in the subsidiary partnerships.
Operating pays a commitment fee of .5% on the unused commitment under the reducing revolving
loall. Commi~mt 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, ~pactiveiy. Operating borrowed
$235,000,000 on the term loans on JanuarylS, 1995 to acquire certain cable systems from Crown
(see note 2).
The Notes, Debentut~ and credit facility all require the Co?any and/or its subsidiaries to comply
with various financial and other covenants, including the maintenance of cerutin operating and
financial ratios. These debt instruments also contain substantial limitations on, or prohibitions of,
distributions, additional indebtedness, liens, asset sales and certain other items.
(5) Sub~idinrv Limited Pnrmer
Subsidiary limited partner interests represent limited partner units of the subsidiary parmerships
held by entities affiliated with, but not n part of, the Company. These limited partner units have
voting fights and share in the profit or loss of the respective parm~h~$. Certain of the subsidia~
limit~l partner interests receive preference returns on their capital c~ntributions. A summary of
u-~,~sactions in subsidiary limited partner interests during the years ended December 31, 1992, 1993
and 1994 follows (m thousands):
1992 1993 1994
Bni~nce at beginning ofyosr $ 29,936 $ 34,608 $ 5,788
Contributioos 1,000 - _
Accrued pmferwace retux~ (through July 29,
1994) 3,797 3,373 764
Redemption of subsidiary limited parmer units - (19,550) -
Purch~t~e of subsidim'y limited pa~tller Ilnits
by the Company - (351) -
Net loss (115~ (~ (6.798~
Balance at cud of year $ .34,608 $ 5,788 $ (246)
Certain subsidiary limited parmer interests are allocated loases in excess of their contributed capital
to the extent t~t the fai~ value of assets contributed by the subsidiary limited partners exceeded the
book value at the date of con~butiun. As of December 31, 1994, preference returns are no longer
accrued on subsidiary limited par~er mter~.
F- 10 (Continued)
MARCUS CABLE COMPANY, L.P. AND SUBSIDIARIES
Notes to Consohdated Financial Statements
(6) Parmer~' Cap_ ital (Deficitl - l~4~emahle Partner Intere~t~
(a) Genernl Parm~r and C. la~ A Pnrmei'
Marcus Cable Properties, L.P. (HProperties") is the Geueral 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 $727,875 for cash of $2,000,000. Also on th,t 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 general partner units
and 201.95 Class B limited panner units of MCC, each with a face value of $1,300 per unit.
In the event that the holders of 75% or more of the CIn_~, B limited partner units vote to
dissolve the Company (and the General Pnrmer does not consent to ~uch dissolution), such
holders have the right to require the Com.nany to redeem all of the Class B limited partner
units held by the ex~ising 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 Cins, 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 dete~nipe the fair market value.
In connection with a disabling event (as defined in the partnership ag~,-'ment), the general
partner units held by the General Partner immediately convert into an equivalent number of
Class B limited pa.emer units. Upon conversion of these general partner units into Class B
limited part~er lluits, the holders of the converted units have the right to cause the Company
to redeem all parmership units owned by such holders at a price equal to the fair market value
of the units.
(c) Allocation of Income nncl Lo~ to Pnrtner~
Income is allocated to the [mrmers first to eliminnte any negative capital account bnlnnce (as
defined in the parmership agreement) until no partner has a negative capital account balance
and then to the Class A l~mner (through July 29, 1994), Class B limited pm'mers and the
General Partner as specified in the partnership agreement.
Losses a~ allocated as follows:
· Fi~t, to the Clans B limited partners and the General Partner until each holder's capit~l
account balance de~ not exceed zero. If the capital account is less than zero prior to this
· Next, to the Class A partner (through July 29, 1994) until its capital account balance does
not exceed zero; and
· Next, to the Chis B limited partners and the General Panner.
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 SUBSIDLARIES
Note~ to Consolidated Financial Statements
(d) ~
The amount of dislxibutions is at the discretion of the General Parmer, subject to the
restrictions in the Company's credit facilities (see note 4). The manner of distribution is as
follows:
· Fi~t, to each partner in an smount sufficient to pay income taxes on net taxable income
allocated to each parma,
· Next, to the Class A partner (through July 29, 1994) equal to any cumulative unpaid
prefermce returns and any unreeovered capital, as defined; and
· Next, to the Class B limited partners and the General Parlller.
On July 29, 1994, the Class B limited panners msde a cash capital contribution of
$22,990,000. The proceeds of this contribution were used to partially fund the purchase of
cable television sysmms from Star (see note 2).
(7) ReLsted Party Tr~n~,'lions
Through July 29, 1994, each subsidiary pannership had a management as~nent 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
subsidiar~ for these services was 5.5% of revenue. The Company and its subsidiary partnerships
recorded msnsgement fees and expenses of $2,224,000, $3,617,000 and $2,165,000 for the yea~
ended Decomber31, 1992, 1993 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 ~rvices directly related to the acquisition. The fee was
capitalized as part of the co~t of acquiling the cable television system~.
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 pannership 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 bstsnce sheet.
F- 12 (continued)
MARC~S CABLE COMPANY, L.P. AND SUBSIDIARIES
Notes to Consolidated Financml Stat~a~nts
(8)
The Company sponsors a 4010c) plan for its employees whereby employees that qualify for
participation under the plan cnn contribute up to 15% of their salary, on a before tax basis, subject
to a maximum contribution llmii as ~termim~d by the Internn! 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 1~94, the Company made contributions to the plan of
approximately $29,000, $50,000 and $83,000, respectively.
(9) Commitments nnd Contin~etlci~-s
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, $391,000 and $461,000, r~ctively.
In October 1992, Congress enacted the Cable Television Consumer Protection and Competition
of 1992 (the '1992 Cable Act"). D~<,,.o May 1993, pursuant to authority s~anted to it under the
1992 Cable Act, the Federal Communications Commie. sion ("FCC") issued its rate regulation niles
which became effective September 1, 1993. These rate regulation rules required certain cable
systems in franchise areas which r~eive 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
installatiolls, pursuant to general cost-of-service standards or FCC prescribed benchmarks. These
FCC benchmarks were based on an average I{P.4 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 10°.4 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 ~ c, om?etitive differerltial of 17%, which bec. nme 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 Corn?ally believes that it has complied with all provisions of the 1992 Cable Act, inclt~ling 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 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
December31, 1994. The carrying value of long-term debt approximated fair value at
December31, 1993.
(11) ~
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 Teleservice
Corporation of America for approximately $65.5 million, subject to closing adjustments.
Consummation of the sale, which is anticipated to occur in the third quarter of 1995, is subject to
approval of the FCC and local regulatory authorities.
F-14
SIGNATURES
Pursuant to the re0uireg~nts of the .Secu~.'fies F, xchaa~e Act of 1934, each of the
r~e~stra~., ts have duly caused this report to be s~gned on its behaff by the undersi~med thereunto
amy authorized.
March 30, 199~ By: Jeffrey A. Marcus
Jeffrey A. Mantas
Its: Cksirman, Presid~ ami Chief ~ecu~ve Offi~r
By: Thomas P. McMillin
· noma$ P. McMimn
ks: V~e PmsMem and Chef Fhumci~ Officer
MARCUS CABI.~. OPERATING COMPANY, L.P.
(~sutrm)
By: Maums Cable Co~,my, L.P., its senem panner,
By: Mam~ ~ ~, L.P., its general parmer,
By: Marcus Cable ~, ln~., ks ~neral panner,
March 30, 199~ By: _Jeffrey A. Marcus
Jeffrey A. Matins
Its: C~,~,mnn, Preaide~ and Chief Ex~'mive Officer
By: Thomas P. McMillin
Thomas P. Mc~in~
ks: V~e ~ and Chef F~anztM Officer
MARCUS CABIJ~. CAPITAL CORPORATION
March30, I~ By: Jeffrey A. Marcus
~effr~ A. ~
Its: Ch~mma, Presid~m ~d Chief Exeomive Offi~r
By: Thomas P, McMilli~
T~omas P.
Ira: Vice Pr~idm~ smi Chief Niam~al Of Scer
MARCUS CABI.~. CAPITAL CORPORATION H
(~-~...~)
March30, 1~ By: Jet,rev A. Marcu.~
~era~y A. M~
Its: ~hni~nnn, ~l~id~ nnd Chief ~V~ O~er
By: Thomas P. McMillin
~ P. McMillin
Its: Vice Pt~id~t and C~hi~f Financial Officer
Exhibit 11.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(in thousands)
Year Ended December 31.
1990 1991 1992 1993 1994
Earnings:
Net loss $ (10,923) $ (18,377) $ (21,323) $(9,643) $ (30,610)
Add:
Fixed charges per CO)
below 7r591 13r598 14)939 16)847 29,346
Earnings for computation
purposes(a) $ (4.779~ $ (6.38~
Fixed Charges:
interest Costs $ 6,224 $ 9,566 $ 10,687 $12,912 $ 27,699
Amortization of de-
ferred financing
costs 117 282 427 531 406
Preference Returns 1,250 3,750 3,825 3 r404 1,241
Total Fixed Charges Co) $ 7.591 $ 13.598 $ 14.939 $16.8~7
Ratio of earnings to
r~ed charges (aVCo) ~ -- ~ -- ~ -- ~ _ $ _
Deficiency of earnings
to cover fixed charges ~ $ (18.377~ ~ $(9.643~ $ (30.610~
~~~
~~ j
EXHIBIT "C"
CATV POLE LEASE AGREEMENT
BETWEEN
CITY OF DENTON, TEXAS
AND
GOLDEN TRIANGLE COMMUNICATIONS
CATV Pole Lease Agreement
Index
Pa~e
Application for Pe~missi;n to Attach, Article III 3
Cost.of Pole Replacements, Article VI 10
Definitions, Article I 2
Existing Contracts, Article k-l~ 19
General, Article XII . - 17
Ind-m-lty and Insttrance, Artic'le X 14
Installation and Maintenance of Attachments and Poles, Article V 6
Notice, Article kW . 19
Payment of ~ills, Article XIII 18
Protection Against Clslms 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 A§reement, Article IX 13
CATV POLE LEASE AGREEMENT
THIS AGREEMENT made as of the 7~ 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 ~he State of
Texas, having its principal office at Atlanta, Georgia, hereinafter called
Licensee,
WI TNESSETH:
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 attachmen~ 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.
NOW, THEREFORE, in consideration of the mutual covenants, terms and
conditions herein coutained, 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. Ail references herein to "joint user" shall menu (1) a company or
municipality wh/ch 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 o~s poles on which
Licensor has ~ttach~ent pr. ivileges. ·
3. Ail references herein to "CATV serwice" shall mean t~e 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 t/mat its equipment to be attached ~o Licensor's
poles shall be i-~talled for the purpose of providing CATV service and shall be
used primarily for fur~ishing CATV service. Any residual cha--el capacity,
however, may be ~sed by Licensee for any lawful purpose.
3. Licensee agrees to secure from the proper franchising authority,
a fra~hlse 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, pezmits or licenses t~at 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
ARTICTX III
.- APPLICATION FOR PEP~HIS$ION TO ATTACH
1. At least thirty (30) dais 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 E~-hibit B attached hereto and made a part hereof, in-
t-he number of copies from time to time prescribed by Licensor. ~pon approval of
-3-
said application, Licensor shall return one copy of Exhibit B to the Licensee
bearing the endorsemenzt 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 t-herein, 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
co~letion 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 t~e costs in ~he 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 receivin§ Licensor's permission to do so, all as
-4-
prescribed in paragraph I 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 a~reed that a charge equal to one and one half (1-1/2) times
the pole rental amount, as specified in Article VIII, par attachment shall be
levied against and paid bF Licensee to l,~censor for any unauthorized attachment
made by Licensee to Li~ensor"s poles or facilities. This =barge will be in
addition to rental charges from the t~me.of said ~mauthorized attachment,
rearrangement costs, or other appropriate charges. In the event that the time
of the unauthorized attachm-nt 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 1 of Article V.
5.-It is agreed and ~nderstood that in the case of jointly-u§ed
poles, permission to attach thereto shall be subject to Licensor's obtaining
approval from such joint users and/or o%~ers whenever necessary.
ARTICLE IV
SPECIFICATIONS
1.' Licensee, at its o~ cost and expanse, 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 affect 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 witk
this Agreement and Exhibits 1-10 attached hereto and made a part hereof.
Licensee agrees to comply, at its sole risk and expense, witt~ the specifications
of all E~h{bits attached hereto, as revised from t~me to time by Licensor in
accordance with the provisions of th~s Article IV. '
ARTICLE V
INSTALT.&TION AND MAINTENANCE OF ATTACI~XENTS AND POT.~-~
1. The exa~t 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 viCin/ty of its lines or appliances and may make periodic inspections of
the entire plant of Licensee as plan% 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 rearran~img or ch,~ging the facilities of Licensor or other 3oint
users, Licensee agrees ~o pay Licensor tm advance the cost of making suck
rearrangements or changes. Strengthening of poles (guying) requ~ired 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, amd in such eveu~
Licensee shall pay to Licensor in advance the cos~ of all suck 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 ~%th said equipment
F-hat 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, arran§e to relocate or replacer_he facilities attached to said
poles by Licensee, transfer ~ham'to substituted poles or perform any other work
i~ connection with said facilities that may be required in the maintenance, re-
plac-ment, removal or relocation of said poles., the facilities thereon or the
equipment which may be placed thereon, or fort he servi~e needs of Licensor.
4. Licensee shall notify Licensgr in advanced of the time wh~u it
proposes to replace any of its equipment'attached to Licensor's poles.
5. All 'tree tr~.mm~ng 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 tole risk and expense, maintain all of its
attachments on Licensor's poles in safe condition and in thorou§h repair.
-7-
7. Licensor reserves to itself, its successors and assigns the
right to maintain its poles and to operate its facilities thereon ia such manner
as ~ill best enable it to fulfill its public service requirements. Licensor or
o~her joint users shall not be liable to Licensee for any interruption to ~he
service of Licensee or for interference with the operation of ~he equipment of
Licensee, ,~less the service interruption was created solely by acts of
Licensor.
8. No~hing herein contained shall give to the Licensee ~he right to
place a crossarm on any pole. ~f a crossarm is required to accommodate the
'facilities of the Licensee, ~hen Licensee shall so state the reasons ~herefore
/nits application for attachment.
9.; Licensee shall not at any time make any additions to, or changes
in, the l~cation of its attachments on the poles covered by this Agreement
m~thout the prior Written consent of Licensor except~ in cases of emergency,
when oral permission shall have been obtained from Licensor's a~thorized
representative at Denton, Texas ..
and subsequently confirmed in writing.
10. If Licensee should require the location of i~s equ/pment upon any
public thoroughfare or other publi6 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 t~e service requirements of bot~ 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 t~e re~tal being
charged Licensee hereunder.
11. Nothing i~ this Agre~eat s~ll be construed to obligate
Liceusor to graat Licensee pe~aissioa to use aayparticula: pole and ~ic~sor at
its discretioa may revoke pe~issio~ the:eto~ore grated to Liceusee vith
respect to any particular pole. If such pe~issioa is :e~used, Licensee is ~ree
to make any other arrangement ~ot prohibited un&erie te~s o~ this Agre~eat,
it-may wish to provide for its equipment at'the location in q~estion.
12. b~enever, pursuant to the provisions of this Agreement, Licensee
shall be required to remove its attachments from any pole, such r~moval 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 such. attachments within such thirty (30) days or
as otherwise.reqLtired, Licelxsor may remove them and charge all costs associated
with such r~moval 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~EPL~CEME~rs
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 Licamsee's attachments, or in the event that Licensor or a
joint user of the pole shall require the space occupied by Licensee's existing
att. a~hments, Licensor s~all notify Liceusee of snch 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. Wi~n thirty (30)
days of such notification, Licensee shall either notif~ Licensor (i) of its
approval of such repine-sent 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 attachm~ts from the pole.
2. In the event of Licensee's approval of such replacement,
l.~censor shall replace the pole and Licensee shall pay to Licensor in advance
the charges therefore computed as follows: :.-
The total cost of the new polel 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 amy,
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.
ARTICL~ VII
RIGHTS-OF-WAY~ LEGAL AUTHORITY AND DEFAULT
1. Upon execution of this Agreement, Licensee shall submit evidence
satisfactory to licensor of its authority to erect and maintain its equipment
witb/n public streets, highways and other thoroughfares and shall secure any
necessar~ license, permit or consent from Federal, state or m,,n{cipal
authorities and from the owneres of property now or hereafter required to
construct and maintain such equipment at the locations of pol~s of Licensor to
which it desires to attach. In the event any such francb/se, license, perm{t or
consent is revoked or is thereafter denied to Licensee for any reason,
permission to attach to lice:sor's poles shall ~..~,ediately 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 LiceDsee that ~he cessatioR of the
use of any pole or poles has been requested or directed by Federal,'state or
mum/cipal authorities, or property o~ers, permission to attach to such pole.~r
poles shall .~--ediately terminate and Licensee shall forthwith remove its
equipment therefrom.
3. If Licensee shall fail to co~q~l~ with an~ of the provisions of
this Agreement, ~-cludin~ the speci£ications hereinbefore referred to, or
defaults in any of its obli§ations under this Agreement, and shall fail within.
thirty (30) days after written notice from Licen-~or to correct such default or'
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 nonqompliance,
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
l. 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-
5. 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 physicai inventory shall be shared proportionally among
the participating companies.
6. In the event Licensee makes an attachment to the Licensor'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
ma~e 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
attachm,nts. Licensor shall credit such advance reimbursement by Licensee
to initial and sub§equent 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 ~ND TERMINATION OF AGREEMENT
1. This Agreeu~,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 m.y 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 writteff
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 §ire 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, wh_-re 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
IKDEMNIT~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 Wor~meu's Compensation Law a~d
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 £espective cables, wires, apparatus and
appliances of the parties hereto or other joi~t users of said poles, or arising
out of any act or omission or alleged act or omission of Licensee, includin§ 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 $30,000 in security as required by Section
27-43 of Ordinance No. 78-21 (Cable Television Franchise Ordinance) and such
sum shall also guarantee the performance of all the covenants, terms and
conditions of this agreement.
3. Licensee shall exercise special precautions to avoid damage to
facilities of Licensor and of other joint users on said poles and hereby
assumes all responsibility for any and all loss for such damage. Licensee
shall make an immediate report to Licensor of the occurrence of any s'uch
damage and hereby agrees to reimburse Licensor for the expense incurred in
making repairs necessitated thereby.
-15-
ARTICLE XI
PROTECTION AGAINST CLAIMS FOR LIBEL AND
SLANDER~ COPYRICdfr AND PATENT INFRINGE~F~NT
1. : Licensee shall ind~m-ify, protect and hold harmless Licensor
from a~d against any and all claims fo~ libel and slander, copyright and/or
patent infringement arisEn$ 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 *th'e' facilities of Licensee* for the purpos~ of
f~nancing thc installation, improvement, maintenance or extensio- of its
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 con~trued to compel Licensor to maintain any
of its poles for a period longer than that demanded by its ow~ service require-
ments.
-]6-
3. Nothing herein contained shall be construed as affecting the
rights or privileges previously conferred by Licensor to others, by contract or
o~herwise, to use any poles covered b~ 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
arrangemen:s and nothing contained herein shall be construed as affecting the
right of Licensor to graft attachment privileges to such other parties as it may
desire to do so.
&. Failure to enforce or insist, upon compliance with any of the
terms or conditions of tkis 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 of paragraph 1 .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 under present or future
'gover-mental authority or regulation. .. :'
-- ARTICLE XlII
PAYMENT OF BILLS
1. AL1 amotults payable'by Licensee to Licensor tmder the provisions
of this Agreement shall, ,mless 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.
ARTICLE XIV
EXISTING CONTRACTS
1. 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 Comnunications
63 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.
CITY OF DENTON, TEXAS, LICENSOR
ATTEST: ~,
C'IT~ SECRETARY
GOLDEN TRIANGLE COMMUNICATIONS, LICENSEE
ATTEST: (,.
SECRETARY
-lg-
. i/ /
~ _l•
EXHIBIT "D"
CABLE DUCT USE AGREEMENT
BETWEEN THE CITY OF DENTON, TEXAS
AND SAMMONS COMMUNICATIONS, INC.
2095L
TABLE OF CONTENTS
Article Pase
I. Definitions 1
II. Scope of Agreement 2
III. Application for Permission to Install Cable 3
IV. Specifications 4
V. Installation and Maintenance of Cable and Duct 4
VI. Rights-Of-Way, Legal Authority and Default 5
VII. Fee 6
VIII. Term and Termination of Agreement 6
IX. Force Majeure 7
X. Indemnity and Insurance 7
XI. Limitation on Assignment and Transfer 8
XII. Supplemental Operating Routines or Working Practices 9
XIII. Notice 9
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 O, 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 O, Dated July 5, 1985
- 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 the. mutual covenants,
terms and conditions herein contained, the parties hereto do
mutually covenant and agree as follows:
ARTICLE I.
DEFINITIONS
1. Ail 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. Ail 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
1. 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.
TE~M 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 ~ayment 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 INSURJ~NCE
1. 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 of paragraph 1 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 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: TO LICENSOR:
Sammons Communications, Inc. City of Denton
205 Industrial Attn: Director of Utilities
Denton, Texas 76201 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
RAY ST~[ENS, ~AYOR
ATTEST:
APPROVED AS TO LEGAL FO~4:
DEBRA ADAMI DRAYOVITCH, CITY ATTORNEY
BY: ,~
SAMMONS COMMUNICATIONS, INC.,
LICENSEE
BY: .....
ATTEST:
S? .ETARY
PAGE 10