HomeMy WebLinkAbout8A - Cable Franchise FromTriax Midwest Inc., to Medicom LLC
CITY COUNCIL AGENDA REPORT
MEETING DATE:
AGENDA #:
PREPARED BY:
August 16, 1999
8A
Frank Boyles, City Manager
AGENDA ITEM:
CONSIDER APPROVAL OF RESOLUTION 99-XX APPROVING
ASSIGNMENT OF CABLE TELEVISION FRANCHISE RIGHTS
FROM TRIAX MIDWEST ASSOCIATES TO MEDIACOM LLC.
DISCUSSION:
History
On May 24, 1999, the City received a letter from Triax Midwest Cable
Company requesting consent to assign the cable television franchise
to Mediacom LLC. The letter included a lengthy application packet as
set forth in Federal Communications (FCC) rules and has been
reviewed by attorney Brian Grogan.
Given the concern among the community for the quality of cable
television services, the City Council published notice and held a public
hearing on July 19, 1999 to receive public input regarding the
proposed assignment. Staff had also contacted persons by mail who
had previously expressed concerns with cable television service
advising them of the public hearing. Representatives from Triax
Midwest and Mediacom LLC were both present to hear public
concerns.
Current Circumstances
Attached is a report from Brian Grogan analyzing the assignment
request and providing his recommendation for Council action.
Conclusion
Given the need for system upgrades, the public discontent with past
service, the resources and verbal commitments of Mediacom, LLC.,
and Mr. Grogan's recommendation, it would be my recommendation
that the Council adopt the resolution approving the transfer which is
conditional on the successful negotiation of a franchise ordinance
between the City and Triax before October 10, 1999 which is the
anticipated closing date for the transfer.
ISSUES:
The primary issue is whether or not it is appropriate for the City
Council to authorize the assignment of the cable franchise from Triax
Midwest, Inc. to Mediacom LLC. The Council should consider public
input, the analysis of Mr. Grogan, and the information provided by the
Mediacom, LLC representative at the public hearing.
16200 Eagle Creek Ave. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245
AN EQUAL OPPORTUNITY EMPLOYER
AL TERNA TIVES:
RECOMMENDED
MOTION:
REVIEWED BY:
..
Agenda Item 8A
August 16, 1999
(1) Adopt Resolution 99-XX authorizing the transfer of the cable franchise
from Triax Midwest, Inc. to Mediacom LLC conditioned upon
negotiating a franchise agreement acceptable to both parties by
October 10, 1999, and direct staff to negotiate a cable franchise
agreement for Council approval.
(2) Reject the request of Triax Midwest, Inc. to assign its cable franchise
rights to Mediacom, LLC recognizing that this means that Triax
Midwest would retain the cable system.
Alternative (1). Motion and second to approve Resolution 99-XX
authorizing the transfer of the cable franchise rights from Triax
Midwest, Inc. to Mediacom, LLC, subject to the successful negotiation
of a franchise agreement by October 10, 1999, and direct staff to
negotiate a cable franchise agreement for Council approval.
1:\council\agdarpt\99\8A_ 081 O.doc
.TI"'-
WHEREAS,
WHEREAS,
WHEREAS,
WHEREAS,
WHEREAS,
WHEREAS,
WHEREAS,
RESOLUTION 99-XX
Approving the Transfer and Assignment
of the Cable Television Franchise
From Triax Midwest Associates to Mediacom LLC.
Motion By:
Second By:
on or about August 15, 1983, the City of Prior Lake ("City") passed and adopted an
Ordinance granting a Cable Television Franchise ("Franchise") currently held by Triax
Midwest Associates, L.P. ("Triax"); and
on April 29, 1999, a certain Asset Purchase Agreement ("Agreement") was made and
entered into by and among Triax and Mediacom LLC; and
Triax and Mediacom have requested consent by the City to transfer the Franchise and
the assets comprising the Cable System to Mediacom Minnesota LLC ("Mediacom");
and
in compliance with the terms of the Asset Purchase Agreement, the name of
grantee/franchisee under the Franchise will be changed to Mediacom; and
under the Franchise and applicable law, the proposed Transfer requires consent from
the City; and
the City has reviewed the proposed Transfer and the legal, technical and financial
qualifications of Mediacom and Mediacom LLC; and
based on information obtained and on the reports and information received by the City,
including the report prepared by the City's cable television consultants, Moss & Barnett,
a Professional Association, which is hereby incorporated by reference, the City has
found no reason to disapprove of the proposed Transfer to Mediacom.
Now THEREFORE, be it resolved by the City Council of the City of Prior Lake as follows:
1. Triax is the lawful holder of the Franchise.
2. The City hereby consents and approves of the proposed Transfer subject to:
· Closing of the transaction contemplated within the Asset Purchase Agreement pursuant to
the terms and conditions described in information provided to the City by Triax and
Mediacom LLC.
· Mediacom LLC notifying the City in writing of the completion of the Transfer within thirty (30)
days of the date of closing of the Transfer.
· Mediacom, within thirty (30) days of the closing of the Transfer, providing the City with a
signed Acceptance of the Franchise in the form attached hereto and incorporated by
reference and a Certificate of Good Standing or Existence for Mediacom for the State of
16200 Eagle Creek Ave. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245
AN EQUAL OPPORTUNITY EMPLOYER
Minnesota, and Mediacom LLC providing the City with a Corporate Guaranty in the form
attached hereto.
. The City and Triax executing a mutually acceptable Cable Television Franchise Ordinance
on or before October 10, 1999, the date on which the franchise is due to expire.
3. The City hereby waives any right of first refusal which the City may have to purchase the
Franchise, or the cable television system serving the City, but only as such right of first refusal
applies to the request for approval of the Transfer now before the City.
4. In the event the Transfer from Triax to Mediacom contemplated by the foregoing resolutions is not
completed, for any reasons, the City's consent shall not be effective.
5. Mediacom may, at any time and from time to time, assign, grant, or pledge or otherwise convey
one or more liens or security interest in its assets, including its rights, obligations and benefits in
and to the Franchise to any lender providing financing to Mediacom.
6. To the maximum extent permitted by all applicable local, state and federal laws, this Resolution
shall not be construed to in any way relieve Triax nor limit Mediacom from any liability under the
Franchise.
This Resolution shall take effect and continue and remain in effect from and after the date of its
passage, approval an~ adoption.
PASSED AND ADOPTED THIS 16TH DAY OF AUGUST, 1999.
Mader Mader
Kedrowski Kedrowski
Petersen Petersen
Schenck Schenck
Wuellner Wuellner
YES
NO
{Seal}
City Manager, City of Prior Lake
R:\COUNCIL\RESOLUTI\ADMINRES\99\CABLETV.DOC
""" ~_~""n
"... 1J tlhiilf:~A:i;f"' .iIo~;~; .. ~I> '~~~"'.'I '
.;.... '. "'~~I'_.~~ '-,w "".1
LAW OFFICES
MOSS & BARNETT
A PROFESSIONAL AssoCIATION
BRIAN T. GROGAN
(612) 347-0340
E-Mail: GroganB@rnoss-bamett.com
4800 NORWEST CENTER
90 SOUTH SEVENTH STREET
MINNEAPOLIS, MINNESOTA 55402-4129
TELEPHONE (6121 347-0300
FACSIMILE (6121 339-6686
August 11, 1999
VIA MESSENGER
Mr. Frank Boyles
City Manager
City of Prior Lake
16200 Eagle Creek Avenue
Prior Lake, l\1N 55372-1714
Re: Moss & Barnett's Report Regarding Triax's Proposed Assignment of the City's
Cable Television Franchise to Mediacom LLC
Our File No.: 39962.1
Dear Frank:
Enclosed herewith please find Moss & Barnett's Report regarding Triax Midwest
Associates, L.P. proposed assignment of the City's Cable Television Franchise to Mediacom
LLC. Although the Report is quite large, I believe that you will find that the Report is broken
down into sections which will allow the reader to quickly ascertain the information they are most
interested in.
The Report provides an overview of the information which both Triax and Mediacom
made available to us on which our Report is based. We also review the applicable law relevant
to consider in a proposed transfer as well as a description of the Asset Purchase Agreement
executed by Mediacom and Triax on April 29, 1999. The Report then reviews Mediacom's legal
and technical qualifications to own and operate the cable system. We also provide detailed
responses of interviews we conducted with sixteen (16) different cities which Mediacom
presently serves around the country to provide the City with an overview of how other similarly
situated communities view Mediacom's performance.
The Report contains a detailed review on Mediacom's financial qualifications based on
the information which Mediacom provided to us. We also address any additional issues which
the City may have under its current franchise, then provide recommendations for action by the
City. Attached to the Report as Exhibits are appropriate background information regarding the
transaction as well as a proposed Resolution at Exhibit D for the City council's consideration and
action. The Report also contains a proposed Acceptance Agreement and Guaranty of
Performance which are referenced within the Resolution.
:? ~ BA.r,>.-v.
,-.0 t<'
::d Sillce ;.;,
~ 1896 ;;
7 .:
</0 "?
'"lleys ;).\
MOSS & BARNETT
A PROFESSIONAL ASSOCIATION
Mr. Frank Boyles
August 11, 1999
Page 2
An advanced copy of this Report was forwarded to Mediacom and Triax and they were
permitted to provide input to Moss & Barnett to ensure the factual accuracy of the Report.
This Report should be distributed to your City attorney and City council for their review,
consideration and input. Thereafter, the City council should take action to issue its decision
regarding the proposed transfer of the City's Cable Television Franchise from Triax to
Mediacom. We recommend that the City utilize the proposed Resolution contained within our
Report at Exhibit D for this purpose. If the Resolution is adopted, an executed copy should be
forwarded to Ms. Jane Bremer at the address below and one copy should be sent to my attention
for my file.
If you should have any questions or if we can provide any additional information or
assistance, please feel free to contact us.
Very truly yours,
117 1 #-
Brian T. Grogan
Timothy L. Gustin
BTG/tlh
cc: Triax Midwest Associates, L.P
Mediacom LLC
c/o Jane Bremer, Esq. (via U.S. Mail w/enclosure)
7900 Xerxes Avenue South
Suite 1500
Bloomington, MN 55431
275473/1
'" :. - "~Illilr:tf.k ',.
,. ... ilL Iii"" ... .'~.~ Iii ,
, ~, dY,!t!lliiill' -,- ~i. .... ,'.
Report to the
City of Prior Lake, Minnesota
Regarding
Triax Midwest Associates, L.P.
Proposed Assignment of the City's
Cable Television Franchise
to
Mediacom LLC
August 11, 1999
Prepared by:
Brian T. Grogan, Esq.
Timothy L. Gustin, Esq.
Michael R. Nixt, Esq.
Vincent J. Fahnlander, Esq.*
Moss & Barnett
A Professional Association
4800 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402-4129
(612) 347-0300
(612) 339-6686 facsimile
.Also licensed to practice in the State of Iowa.
275451/1
Report to the
City of Prior Lake, Minnesota
Regarding
Triax Midwest Associates, L.P.
Proposed Assignment of the City's
Cable Television Franchise
to
Mediacom LLC
August 11, 1999
Table of Contents
Introduction.................................................................................................................. .... 1
Applicable Law................................................................................................................ 3
Description of Transfer and Assignment.......................................................................... 8
Legal Qualifications......................................................................................................... 9
Technical Qualifications.............. .......................... ........... ...................................... ........ 10
Interviews with City Officials.......................................................................................... 13
Financial Qualifications.................................................................................................. 34
Additional Issues........................................................................................................... 46
Recommendations......................................................................................................... 47
Exhibits
A. Transfer Questionnaire/Application Response for Triax Midwest Associates, L.P. and
Mediacom LLC
B. Certificates of Good Standing or Existence for Mediacom LLC
C. Subscribers & Homes Passed by State
D. Draft Resolution Approving Transfer
E. Acceptance of a Franchise For a Cable Television System
F. Guaranty of Performance
G. Ownership Structure
H. July 22, 1999 letter from Larkin, Hoffman
275451/1
ii
';1<' MJ ,(h__=-'-,' ";JI~u1~M~~~;{ '~
.lOIiii, ja. .iLLA.....& ................;u;.~~, -"ii
.'t:,',,~':i:.~;;i:':~1!. ,,..~ .,..
1"8
Introduction
The City of Prior Lake, Minnesota ("City") has before it a request from Triax
Midwest Associates, L.P. ("Triax"), to approve a proposed assignment of its cable
television franchise to Mediacom Minnesota LLC, a wholly owned subsidiary of
Mediacom LLC (hereinafter collectively referred to as "Mediacom"). Pursuant to an
Ordinance adopted on August 15, 1983 at Article XI and XII ("Franchise"), the proposed
transfer of the Franchise from Triax to Mediacom is prohibited without written consent of
the City.
In light of the request by Triax and Mediacom and the procedural requirements
outlined in Article XI and XII of the Franchise, Moss & Barnett, A Professional
Association, has been retained by the City and was asked to provide this report
("Report").
In preparing this Report, Moss & Barnett has relied upon information submitted
by Triax and Mediacom including:
1. FCC Form 394-Application for Franchise Authority Consent to Assignment
or Transfer of Control of Cable Television Franchise received by the City on or about
May 24, 1999.
2.
1999.
Transfer Questionnaire/Application Response for Mediacom dated June 4,
3. Asset Purchase Agreement, dated April 29, 1999, by and between Triax
Midwest Associates, L.P. and Mediacom LLC, including all Schedules and Exhibits
thereto, except for Schedule 1.1 (h), Schedule 3.3(h), Schedule 9.3, Schedule 10.9,
Exhibit F, and Exhibit G, which were withheld by Triax and/or Mediacom for reasons of
confidentiality.
4. Certificates of Good Standing or Existence for Mediacom.
5. Selected financial information as described in the "Financial Qualifications"
section of this Report.
In preparing this Report, Moss & Barnett not only reviewed FCC Form 394 and
the Asset Purchase Agreement by and between Triax and Mediacom, but also
contacted sixteen (16) communities served by Mediacom to solicit input regarding
Mediacom's past performance in these communities. The purpose of these telephone
calls was to review the character and operational performance of Mediacom to provide
the City with a picture of the management philosophy of this company.
The Report has been prepared with Brian 1. Grogan serving as project manager,
Timothy L. Gustin assisting with due diligence and document preparation, legal
275451/1
1
assistant Ken A. Moats assisting in the telephone survey and in updating clients
regarding various procedural requirements. In addition, Mr. Michael R. Nixt, who is a
former CPA with Coopers & Lybrand, performed the financial review of Mediacom, and
Mr. Vincent J. Fahnlander, who is an attorney licensed to practice in both Minnesota
and Iowa, assisted in Report preparation for municipalities which we represent in the
State of Iowa.
Moss & Barnett strongly recommends that this Report be reviewed by your
local City attorney. Your local City attorney has knowledge of state law and the
City's code and we believe it is important to obtain the input of the City attorney
before any action is taken on this Report and our recommended Resolution.
275451/1
2
. ,~ "'~' ,..". ....,..', '~'!'l'
.. .,'*. .Ii .';~r":"*"""'''''' ._lI.'~_"."" 0';" ,~,
/.j...._,,,:~..~....' .. 'lilt ...'
...
Applicable Law
The following provisions of federal law, state law, and the Franchise govern the
actions of the City in acting on the request of Triax and Mediacom for approval of the
transfer and assignment of the Franchise from Triax to Mediacom.
FEDERAL LAW
The Cable Communications Policy Act of 1984, as amended by the Cable
Consumer Protection and Competition Act of 1992 and the Telecommunications Act of
1996 ("Cable Act"), provides at Section 617 (47 U.S.C. S 537):
Sales of Cable Systems
A franchising authority shall, if the franchise requires franchising authority
approval of a sale or transfer, have 120 days to act upon any request for approval of
such sale or transfer that contains or is accompanied by such information as is
required in accordance with Commission regulations and by the franchising authority.
If the franchising authority fails to render a final decision on the request within 120
days, such request shall be deemed granted unless the requesting party and the
franchising authority agree to an extension of time.
The Cable Act also provides at Section 613(d) (47 U.S.C. S 533(d)) as follows:
(d) ReQulation of ownership bv States or franchisinQ authorities
Any State or franchising authority may not prohibit the ownership or control of a
cable system by any person because of such person's ownership or control of any
other media of mass communications or other media interests. Nothing in this section
shall be construed to prevent any State or franchising authority from prohibiting the
ownership or control of a cable system in a jurisdiction by any person (1) because of
such person's ownership or control of any other cable system in such jurisdiction, or
(2) in circumstances in which the State or franchising authority determines that the
acquisition of such a cable system may eliminate or reduce.competition in the delivery
of cable service in such jurisdiction.
Further, the Federal Communications Commission ("FCC") has promulgated
regulations governing the sale of cable systems. Section 76.502 of the FCC's
regulations (47 C.F.R. S 76.502) provides:
275451/1
3
47 C.F.R. ~ 76.502 Time Limits Applicable to Franchise Authoritv
Consideration of Transfer Applications
(a) A franchise authority shall have 120 days from the date of submission of
a completed FCC Form 394, together with all exhibits, and any additional
information required by the terms of the franchise agreement or
applicable state or local law to act upon an application to sell, assign, or
otherwise transfer controlling ownership of a cable system.
(b) A franchise authority that questions the accuracy of the information
provided under paragraph (a) must notify the cable operator within 30
days of the filing of such information, or such information shall be
deemed accepted, unless the cable operator has failed to provide any
additional information reasonably requested by the franchise authority
within 10 days of such request.
(c) If the franchise authority fails to act upon such transfer request within
120 days, such request shall be deemed granted unless the franchise
authority and the requesting party otherwise agree to an extension of
time.
STATE LAW
Minnesota Statutes Section 238.083 Sale or Transfer of Franchise
provides:
Subd. 1. Fundamental corporate change defined. For purposes of this
section, "fundamental corporate change" means the sale or transfer of a majority of a
corporation's assets; merger, including a parent and its subsidiary corporation;
consolidation or creation of a subsidiary corporation.
Subd. 2. Written approval of franchising authority. A sale or transfer of a
franchise, including a sale or transfer by means of a fundamental corporate change,
requires the written approval of the franchising authority. The parties to the sale or
transfer of a franchise shall make a written request to the franchising authority for its
approval of the sale or transfer. The franchising authority shall reply, in writing, within
30 days of the request and shall indicate its appro va/ of the request or its
determination that a public hearing is necessary if it determines that a sale or transfer
of a franchise may adversely affect the company's subscribers. The franchising
authority shall conduct a public hearing on the request within 30 days of that
determination.
Subd.3. Notice of hearing. Unless otherwise already provided for by local
law, notice of the hearing must be given 14 days before the hearing by publishing
275451/1
4
:- ~,:-,,<',c,:;;'~.:~~:~~.~!~ .' ~
'." ".'~ "L",~<
notice of it once in a newspaper of genera/ circulation in the area being served by the
franchise. The notice must contain the date, time, and place of the hearing and must
briefly state the substance of the action to be considered by the franchising authority.
Subd. 4. Approval or denial of sale or transfer request. Within 30 days
after the public hearing, the franchising authority shall approve or deny, in writing, the
sale or transfer request. The approval must not be unreasonably withheld.
Subd. 5. Sale or transfer of franchise without system. The parties to the
sale or transfer of a franchise only, without the inclusion of a cable communications
system in which at least substantial construction has commenced, shall establish that
the sale or transfer of only the franchise will be in the public interest.
Subd. 6. Sale or transfer of stock. Sale or transfer of stock in a corporation
so as to create a new controlling interest in a cable communications system is subject
to the requirements of this section.
The term "controlling interest", as used herein, is not limited to majority stock
ownership, but includes actual working control in whatever manner exercised.
LOCAL LAW
The City of Prior Lake's Franchise at Article XI and XII, provides:
ARTICLE XI
PURCHASE OF SYSTEM
SECTION 1.
GENERAL
A. If at any time Grantee offers System for sale, City shall have the right to
purchase System. If at any time Grantee receives a bona fide purchase offer for the
System which Grantee is willing to accept, a complete copy of such offer shall promptly
be given to City and City shall have the right to purchase the System according to the
terms of that offer. City shall exercise such right by submitting to Grantee, within 60
days after City's actual receipt of the bona fide offer, notice that City desires to purchase
the System pursuant to said offer. If City does not exercise such right, the System may
be sold, but on/yon the terms submitted to City. If any changes are made in the
purchase offer given to City, such purchase offer, as so changed, shall again be given
to City and City shall have 60 days from actual receipt by City of the Offer, as changed,
within which to exercise its right to purchase the System pursuant to the offer, as
changed, all as above provided. If City does not exercise its right to purchase the
System pursuant to any offer given to City pursuant to this paragraph, and the System
is not sold to the buyer and on the terms set out in the offer given to City, then the right
of City to purchase the System shall continue, and all subsequent purchase offers shall
be given to City pursuant to this paragraph. Also, the City's right to purchase pursuant
275451/1
5
to this paragraph shall survive every sale to a buyer and shall continue to be binding
upon every buyer of the System.
B. Upon forfeiture, revocation or termination of this Franchise, City shall have
the right to purchase the System. Such right shall be exercised upon written notice to
Grantee within six months after the occurrence of any such event.
ARTICLE XII
MISCELLANEOUS
SECTION 1.
TRANSFER OF OWNERSHIP OR CONTROL
A. This Franchise shall not be assigned or transferred, either in whole or in
part, or leased, sublet or mortgaged in any manner, nor shall title thereto, either legal or
equitable or any right, interest or property therein, pass to or vest in any person without
the prior written consent of City, which consent shall not be unreasonably withheld.
Further, Grantee shall not sell or transfer any stock or ownership interest so as to create
a new controlling interest except with the consent of City, which consent shall not be
unreasonably withheld. The transfers described in this paragraph shall, in the sole
discretion of City, be considered a sale or transfer of Franchise within the meaning and
intent in the following paragraph.
B. Any sale or transfer of Franchise, including a sale or transfer by means of
a fundamental corporate change, requires the written approval of City. Any sale or
transfer of Franchise shall be subject to the provisions of Board rules prohibiting certain
ownership. The parties to the sale or transfer of Franchise shall make a written request
to City of its consent. City shall reply in writing within 30 days of actual receipt of the
request and shall indicate its approval of the request or its determination that a public
hearing is necessary. City shall conduct a public hearing on the Request within 30 days
of such determination if it determines that a sale or transfer of Franchise may adversely
affect the Grantee's subscribers.
C. Unless otherwise already provided for by local law, notice of any such
hearing shall be given 14 days prior to the hearing by publishing notice thereof once in a
newspaper of general circulation in the City. The notice shall contain the date, time and
place of the hearing and shall briefly state the substance of the action to be considered
by City.
D. Within 30 days after the public hearing, City shall approve or deny in
writing the sale or transfer request.
E. Any sale or transfer of Franchise, including a sale or transfer by means of
a fundamental corporate change, requires notification to the Board by City. The
notification shall be accompanied by the written certification of the transferee that it
meets all of the requirements established by City for original Grantee including, but not
limited to, technical ability and financial stability. City shall cause to be sent to the
275451/1
6
-"1' :'!,:..:.J:l~JL..l;n:::::;::il~
':; ::: i.T'T":T"" ':'- '"~'. ... ...' ""'!"'I'l" ~
~.., ~::=! ,~'., ,t ~ '-<y
. III
Board at Grantee's expense a copy of all public documents related to sale or transfer of
the Franchise.
F. The parties to the sale or transfer of only this Franchise, without the
inclusion of the System in which at least substantial construction has commenced, shall
be required to establish to the sole satisfaction of City that the sale or transfer of only
this Franchise is in the public interest.
G. For purposes of this section, a fundamental corporate change means any
sale or transfer of the stock of a corporation which results in a change of controlling
interest or the sale or transfer of all or a majority of a corporation's assets, merger
(including a parent and its subsidiary corporation), consolidation or creation of a
subsidiary corporation.
H. The work {{contro!", or the phrase {{controlling Interesf: as used herein, is
not limited to major stockholders, but includes actual working control in whatever
manner exercised. As a minimum, {{contro/': as used herein, means a legal or beneficial
interest (even though actual working control does not exist) of at least five (5%) percent.
Every change, transfer or acquisition of control of Grantee shall make the Franchise
subject to cancellation unless and until City shall have consented in writing thereto,
which consent shall not be unreasonably withheld. For the purpose of determining
whether it shall consent to such change, transfer or acquisition of control, City may
inquire into the qualifications of the prospective controlling party, and Grantee shall
assist City in any such inquiry and pay all costs incurred by City in so inquiring,
including City staff time at a value determined by City.
I. In the absence of extraordinary circumstances, City will not approve any
transfer or assignment of the Franchise prior to substantial completion of construction of
System, as determined solely by City.
J. In no event shall a transfer or assignment of ownership or control be
approved without transferee becoming a signator to this Franchise.
K.
Any transferee shall be subordinate to any right, title or interest of City.
275451/1
7
Description of Transfer and Assignment
Mediacom presently owns and operates cable systems in fourteen (14) states
and in 313 franchised communities serving over 370,000 cable and Internet customers.
Triax is presently operating cable systems in approximately 617 franchised
communities, serving approximately 342,000 customers. The transaction contemplated
will result in Mediacom expanding its scope of operations into six (6) additional states
where it is not presently doing business, increasing the number of customers by nearly
100%, and increasing the number of communities served by approximately 187%.
On April 29, 1999, Mediacom and Triax entered into an Asset Purchase
Agreement ("Purchase Agreement") which provides for the acquisition of substantially
all of the Triax cable system operations described above ("Systems"), subject to certain
exclusions based upon the success of Triax in obtaining applicable governmental
consent of the several hundred communities which are involved in Triax's operations.
The Purchase Agreement provides that Mediacom will purchase from Triax the Systems
for a stated amount of $740,000,000.00, subject to certain adjustments, both increases
and decreases to the purchase price based on the occurrence of certain events
occurring prior to the Closing Date of the Purchase Agreement.
The current ownership structure' of Mediacom consists of Mr. Rocco B.
Commisso (9.7%), Morris Communications Corporation (64.5%), Chase Manhattan
Corporation (9.5%), U.S. Investor, Inc. (6.9%), Private Market Fund, L.P. (5.3%), and
BMO Financial, an affiliate of Bank of Montreal, and two undisclosed private individuals
(4.1 %). There are presently a number of wholly-owned subsidiaries of Mediacom. One
is Mediacom Capital Corporation, which was formed primarily for the purpose of
facilitating ownership of corporate indentures by entities that are restricted from owning
bonds issues by limited liability companies. The remaining subsidiaries of Mediacom
were formed for operating purposes on a regional basis.
Mediacom has formed new operating subsidiaries, which will hold all of the
Systems acquired in this transaction as well as those from another smaller transaction
with Zylstra Communications Corporation. Mediacom Minnesota LLC, the proposed
grantee, will hold title to the operating assets of the business and will be the operator of
the Systems. Please see the flow chart on Exhibit G for a depiction of the corporate
structure.
275451/1
8
~".fif, . ......'-"'". :~~,.
Legal Qualifications
The legal qualifications standard relates primarily to an analysis of whether
Mediacom is duly organized and authorized to own and control the cable system in the
City. The applicable standard of review is that the City's consent shall not be
unreasonably withheld.1 We have focused our analysis on the legal qualifications of
Mediacom LLC ("Mediacom"), the proposed grantee.
Mediacom, a New York limited liability company, was formed on July 17,1995.
Confirmation was obtained from the New York Secretary of State that Mediacom is in
good standing and has a legal existence in the State of New York. See Exhibit B for the
Certificate from the State of New York Office of the Secretary of State. Mediacom was
formed for the purpose of acquiring, constructing and operating cable television
properties located primarily in Alabama, Florida, Mississippi, Tennessee, Delaware,
Maryland, North Carolina, Missouri, Kansas, Kentucky, Illinois, Oklahoma, California,
and Arizona.
As the proposed Grantee for the City's system, Mediacom Minnesota LLC must
be authorized to conduct business in the State of Minnesota. Mediacom has provided
Certificates of Good Standing or Existence for the State of New York, where Mediacom
is organized, and the States of Arizona and Illinois. These certificates confirm the
authority of Mediacom to own and operate the cable television system in the cities in
those states. However, for the States of Minnesota, Iowa and Wisconsin, Mediacom
plans to qualify the legal entities shortly before closing of the transaction and therefore
has not provided the certificates to confirm the requisite authority. Upon providing the
certificates, however, Mediacom will possess the legal qualifications to own and operate
the cable television systems in the cities located in those states. These cities should
condition their approval of the transfer on receipt of said certificates. See Exhibit B for
the Certificate of Good Standing that have been provided.
Based on our review of the legal qualifications of Mediacom, we conclude it
would be unreasonable for the City to find that upon closing of the transactions
contemplated under the Purchase Agreement and receipt of the requisite Certificate of
Good Standing or Existence, Mediacom will not be legally qualified to own and operate
the cable system in the City.
1 See Minn. Stat. Section 238.083.
275451/1
9
Technical Qualifications
The technical qualifications standard relates to Mediacom's technical expertise
and experience in operating and maintaining cable television systems. In such a
review, the standard is once again that the City's consent shall not be unreasonably
withheld.2
Mediacom currently operates 148 cable television systems that serve over
370,000 subscribers in fourteen (14) different states. Mediacom has established four
(4) operating regions to manage and operate those cable television systems. First, the
Southern Region represents Mediacom's largest region and serves over 139,000
customers in the states of Alabama, Florida, Mississippi, and Tennessee. Second, the
Mid-Atlantic Region serves approximately 88,000 customers in the states of Delaware,
Maryland, and North Carolina. Third, the Central Region serves over 84,000 customers
in Missouri, Kansas, Kentucky, Illinois, and Oklahoma. Fourth, the Western Region
serves over 54,000 cable subscribers and Internet customers in California and Arizona..
Mediacom plans to greatly expand its operations by venturing into jurisdictions
where it does not currently serve. With approval of the transfer, Mediacom will serve
approximately 725,000 subscribers in 20 states and across approximately 930
franchised communities. Since Mediacom previously served 370,000 subscribers in
fourteen (14) states and across 313 franchise communities, this is a substantial
undertaking in terms of technical necessity and expertise.
This undertaking appears even more substantial considering the exponential
growth by Mediacom in certain states, such as Illinois and Minnesota. Illinois, for
example, currently has 5,046 Mediacom subscribers, or 1.4% of the Mediacom
subscriber base. This number would escalate to 121,798 subscribers, or 17.5%, upon
transfer approval. Similarly, in Minnesota, there are currently no Mediacom subscribers.
However, with transfer approval, Mediacom would gain 106,330 subscribers to
comprise 15.3% of the Mediacom subscriber base. Illinois and Minnesota would
become Mediacom's top two states for subscriber count, upon transfer approval. Other
states, such as Indiana, Iowa, Wisconsin, Michigan, and Ohio will also be a large part of
Mediacom's surge in subscriber base. Please see Exhibit C regarding Subscribers &
Homes Passed by State.
Nonetheless, Mediacom has not proposed any changes to the operations or
service in the City, nor has it sought any changes to the obligations under the existing
Franchise. Mediacom has stated that it plans to make new technologies and new
services available to its customers wherever commercially feasible, and it does have a
history of upgrading cable systems to improve capacity, quality, and reliability. As well,
Mediacom claims that subscribers presently served by Triax will generally see little or
no disruption in existing operations, aside from the billing system which will have slight
changes.
2 See Minn. Stat. Section 238.083.
275451/1
10
,'q_ ...~ ~;:w!l1Z~'~~*;jt~.
.j . Jl\4;!;i~.llbM... .,._....j,
;f". ;#.'. ~.t:tlli'(~::...-..n.Jl ,ii. ,It ,'!
Mediacom has stated that it does not anticipate any cost changes to current
services resulting solely from Mediacom's acquisition of the Systems. However,
historical operations suggest that an increase in the cost of basic service borne by the
subscriber. Please see the section titled "Financial Qualifications" for further discussion.
Mediacom will be managed by Mr. Rocco B. Commisso, who is the Manager,
Chairman, and Chief Executive Officer of Mediacom. We understand that the terms of
Mediacom's Operating Agreement provide Mr. Commisso with overall management and
control of the business and affairs of Mediacom and its subsidiaries, with certain issues
requiring approval of the Executive Committee. Also, we understand that neither the
members of Mediacom nor the Executive Committee has the power to remove or
replace Mr. Commisso as Manager of Mediacom except in limited circumstances. We
were unable to verify the accuracy of such representations by Mediacom or determine
what the limited circumstances are because a copy of the Operating Agreement was not
furnished for our review due to reasons of confidentiality.
However, assuming such representations to be true, Mr. Commisso does have
significant experience in the cable television industry and seems well positioned to
manage the new Systems, if the City approves the transfer. After the acquisition, Mr.
Commisso will maintain authority over most of the management decisions, and his
considerable experience should provide relative comfort to the City. In addition, it
appears that Mr. Commisso will retain his current management team after the proposed
transaction. His management team also has significant experience in the cable
television industry.
The Mediacom management team, through Mr. Rocco B. Commisso, has
significant experience in the day-to-day operations of cable televisions systems
throughout the country. Such management expertise should provide sufficient technical
oversight to assist the proposed grantee in the day-to-day operations of its systems.
Based on our review, we believe Mediacom possesses significant cable
management expertise and experience in operating cable television systems. In
addition, the following section regarding Interviews with City Officials demonstrates the
high satisfaction among cities presently served by Mediacom. In fact, thirteen (13) of
the sixteen (16) community officials we interviewed expressed great satisfaction with
Mediacom's programming quality, service, and customer relations.
We remain concerned, however, that the proposed transaction will more than
double the size of Mediacom resulting in increased pressure on management. While
we understand Mediacom will attempt to retain existing Triax personnel when possible,
technical service and customer service remain concerns.
275451/1
11
Based on the foregoing, we conclude it would be unreasonable for the City to find
that upon closing of the transaction contemplated under the Purchase Agreement,
Mediacom will not be technically qualified to own and operate the cable system in the
City.
275451/1
12
:!IIi .,,~l.i!""'!~J.~::il:).',,:'!
'::5ii.. .. .',~,i,""~8'CAldllio'l_II!~'.'~ ,.t..
tl l~~,"~ilw~i .*
u
Interviews with City Officials
Mediacom owns, operates, or controls the cable communications systems
serving approximately 370,000 cable and Internet subscribers. After the proposed
transaction, the communities served will include the states of Illinois, Indiana, Iowa,
Michigan, Minnesota, Ohio, and Wisconsin. Currently, Mediacom serves subscribers in
Alabama, Florida, Mississippi, Tennessee, Delaware, Maryland, North Carolina,
Missouri, Kansas, Kentucky, Illinois, Oklahoma, California, and Arizona. We attempted
to contact city officials in communities representative of cable systems in each of these
states. (The subscriber numbers used in this Report are approximated based on the
Television & Cable Factbook and include a five percent (5%) increase from the last
reported subscriber census provided therein.)
We contacted a total of sixteen (16) communities in June and July 1999 with
cable systems currently operated by Mediacom in order to ascertain the following:
1. The nature and quality of the relationship between Mediacom and the
community;
2. Whether Mediacom worked well with the community in resolving cable
service problems;
3. Whether subscribers appear to be satisfied with the services they received
from Mediacom; and
4. The extent that Mediacom supports public access programming and local
programming.
These sixteen (16) communities were selected in order to obtain a response from
communities with different characteristics. We contacted municipalities in the following
states: Mississippi, Delaware, Kentucky, Alabama, Missouri, North Carolina, Florida,
Kansas, and Tennessee. The number of subscribers in these cities ranged from
approximately 251 subscribers in Huntland, Tennessee to 2,735 subscribers in Excel,
Alabama to 23,415 in the Millsboro, Oceanview, and Bethany Beach, Delaware area.
Please note that we requested from Mediacom a list of each and every
community in which it operates along with appropriate contact information.
Mediacom responded by providing only 44 communities. The sixteen (16)
communities we contacted were taken from the list although the results may be
suspect given that we worked from Mediacom's hand picked list rather than from
the 316 community list we requested but never received.
275451/1
13
Sixteen (16) Communities Contacted in June and July 1999
An official from each community was contacted and asked the following
questions with the responses summarized below.
1. How many years has Mediacom been operating the cable system?
Mediacom has operated the cable systems for periods ranging from
approximately two (2) years to over five (5) years. Most of the cable systems
were acquired within the last two (2) to three (3) years.
2. Did Mediacom build the cable system?
Mediacom has not built the systems in any of the communities interviewed. As
such, it acquired the existing system from providers in all sixteen (16)
communities.
3. How old is the existing system?
System age ranges from approximately ten (10) years to over 25 years. Six of
the communities have systems that are over 20 years old. Thirteen (13) of the
communities have systems that are over fifteen (15) years old.
4. Does Mediacom provide any high speed data services via the cable system to
the city or any of its subscribers?
Mediacom does not provide any high speed data services via the cable system to
the interviewed communities at this time. However, in at least three (3) of the
communities, Mediacom has installed fiber optic cable necessary to provide such
service.
5. What type of operational cutbacks or franchise amendments have been made
since Mediacom took over?
In only one (1) community of the sixteen (16) interviewed was a cutback
reported. This community lost certain sports channels when Mediacom took
over. In almost all of the other communities, officials noted that there have been
additional channel offerings since Mediacom took over. Two (2) officials noted
that Mediacom was agreeable to a franchise fee increase when it acquired the
system.
6. Is there a local office for Mediacom? If not, how far is the office?
Eight (8) communities had a local office. Five (5) of the other communities had a
local office within 10 to 35 miles. One community had an office 45 to 50 miles
away, while another had an office 100 miles away, and another had an office
approximately 150 miles away.
275451/1 14
" .".~......... . ......... .,",. -'.
7. How many basic cable channels are there?
Basic cable channels range from approximately 9 to 40 channels. Most officials
were unsure how many basic channels were offered in their community as the
"family basic package" is the more common package subscribed to. This is likely
due to the limited offerings with the basic cable package, which is common in
other communities with different cable television providers. The "family basic
package" provides anywhere from 44 to 60 channels.
8. Does Mediacom support public access programming?
Mediacom supports public access programming in all of the interviewed
communities except for one. There, the community has not requested a public
access channel.
9. Does Mediacom do any local programming?
Mediacom does not do any local programming in any of the communities
interviewed.
10. Do the schools use the system?
At least eleven (11) of the communities have schools that use the system. Four
(4) officials did not know if the schools use the system. One (1) community does
not have schools, but the franchise requires access for schools, if built. Another
community recently requested installation of a line that would provide the schools
with access to the system.
11. Are most subscribers happy? Has the city received many complaints?
All sixteen (16) of the sixteen (16) officials interviewed indicated that subscribers
are pleased with Mediacom's service and quality in their municipality. These
officials noted that their municipality has received very few complaints.
Mediacom appears to be providing quality programming and good customer
service. The few complaints these municipalities do receive are regarding the
cable television rates. With increased channel offerings has come increased
rates, in many of the communities.
12. Does Mediacom satisfactorily resolve subscriber complaints?
All sixteen (16) officials interviewed indicated that Mediacom satisfactorily
resolves subscriber complaints.
13. What are current subscriber rates?
Current subscriber rates range from approximately $8.00 to $30.00 per month for
a basic channel package, with most subscribers receiving family basic coverage
with rates around $20.00 to $30.00 per month.
275451/1
15
14. Has Mediacom made any changes to subscriber rates?
Fourteen (14) of the sixteen (16) communities have experienced rate increases
upon Mediacom's acquisition of the system. Most of these communities,
however, have also experienced an increase in channel offerings.
15. How would you describe the city's relationship with Mediacom?
Most of the officials described the relationship with Mediacom as good, very
good, or excellent. Most responses were clearly positive. In only two (2)
communities was there a more reserved description of the relationship with
Mediacom, where it was described as "fair but distant" and "cordiaL" No officials
described the relationship in a negative fashion.
16. What types of problems has the city experienced with Mediacom?
All sixteen (16) of the officials stated that the municipality has had no problems
with Mediacom. Complaints about Mediacom center primarily on the rate
structure and the increase in rates.
17. What are your franchise fees? Are they paid on time?
The franchise fees range from three percent (3%) to five percent (5%) of
Mediacom's gross revenues. One community does not base its fee on a
percentage of gross revenues, but instead receives a $25,000.00 flat franchise
fee. All of the interviewed officials noted that the fees are always paid on time.
One official provided one instance where a fee was not paid on time, but
Mediacom seemed to be operating under a previous payment date. Upon notice
to Mediacom, the franchise fee was immediately paid.
18. What is the programming/picture quality like?
The majority of responses ranged from good to very good. A few officials stated
that local channels may experience sun spots or shadows at times. One official
described the quality as less than desirable, another described it as fair, and
another as satisfactory. Overall, the communities seemed satisfied with the
programming/picture quality.
19. Would you grant a new franchise to Mediacom? Why or why not?
Fifteen (15) of the sixteen (16) officials said that the municipality would probably
grant Mediacom a new franchise. The other official was unsure, but thought that
a new franchise would be granted. Overall, the officials indicated that the
municipality and its residents were satisfied with Mediacom. This satisfaction
was conditioned by six (6) of the officials on the fact that Mediacom is the only
provider available in that city. It seems that many of the cities would welcome
competition and an alternative provider. Five (5) of the cities indicated that their
franchise was recently renewed.
275451/1
16
f""'~.: ~..:J ~,
~.......... ......_~ ~
'1' ,...,.~", :"'''.~ "'-cJ:.--. ..,~~ _ 'IIiJ. w
SPECIFIC RESPONSES FOR EACH OF THE
SIXTEEN (16) MUNICIPALITIES
The cities interviewed were from a list of 44 cities provided by Mediacom and
may not be a true random sample. The responses provided mayor may not be the
same as for the cities that were not included on the list of cities provided by Mediacom.
An official from each community was contacted and asked the following questions.
1. How many years has Mediacom been operating the cable system?
2. Did Mediacom build the cable system?
3. How old is the existing system?
4. Does Mediacom provide any high speed data services via the cable system to
the city or any of its subscribers?
5. What type of operational cutbacks or franchise amendments have been made
since Mediacom took over?
6. Is there a local office for Mediacom? If not, how far is the office?
7. How many basic cable channels are there?
8. Does Mediacom support public access programming?
9. Does Mediacom do any local programming?
10. Do the schools use the system?
11. Are most subscribers happy? Has the city received many complaints?
12. Does Mediacom satisfactorily resolve subscriber complaints?
13. What are current subscriber rates?
14. Has Mediacom made any changes to subscriber rates?
15. How would you describe the city's relationship with Mediacom?
16. What types of problems has the city experienced with Mediacom?
17. What are your franchise fees? Are they paid on time?
18. What is the programming/picture quality like?
275451/1 17
19. Would you grant a new franchise to Mediacom? Why or why not?
The following is a very short synopsis of the information that was conveyed by the city
officials. As such, the following responses cannot be taken as a true reflection of the
attitudes that the city officials have toward Mediacom.
City:
Contact:
Title:
Louisville, Mississippi
Andy Woods
Mayor
1. Two to three years.
2. No.
3. Approximately 25 years.
4. No.
5. None.
6. Yes.
7. Mr. Woods is not sure of the number of channels offered in the basic cable
package.
8. Yes.
9. No.
10. Yes.
11. Yes. He has received very few complaints with regards to Mediacom.
12. Yes.
13. The average rates vary from $28.00 to $33.00.
14. The subscriber rates were increased last year. Along with the rate increases,
Mediacom offered additional channels.
.
15. Good.
16. No.
17. The city collects a 3 1/2% franchise fee which is paid quarterly and received on
time.
18. Good to very good.
275451/1 18
"" ":.;.JIll, _li11llr.111ii1&1!r.-t:',;;
~ . . '_.. . ; "!i,:IIU;_ Ji,
'!);~ii1__ 1IIrl 11 . ii '
p
19. Yes. The city just renewed the franchise last year for an additional 15 years.
City:
Contact:
Title:
Millsboro, Delaware
Faye Lingo
Town Manager
1. Two to three years.
2. No.
3. Over 15 years.
4. No. Fiber optic cable was just added in October 1998.
5. None.
6. Yes.
7. Ms. Lingo thought that there were ten channels offered in the basic package.
There was also a family basic package but she was not sure of the number of
channels.
8. Yes.
9. No.
10. Yes.
11. It appears that most subscribers are happy. She has received very few
complaints.
12. Yes.
13. Ms. Lingo was not sure of the rate for the basic package. She believed that the
family basic package was $27.00 per month.
14. Yes. The rates were increased when the system was upgraded last year.
15. Very good.
16. None.
17. Mediacom pays the city a franchise fee of 5%. Fees are paid quarterly and are
paid on time.
18. Good.
19. Yes. The franchise was renewed just last year.
275451/1 19
City:
Contact:
Title:
Cadiz, Kentucky
Jim Lancaster
City Clerk
1 . Three years.
2. .. No.
3. 20 years.
4. No.
5. No.
6. No. The local office is 45 - 50 miles away.
7. Mr. Lancaster believes the basic package has approximately nine channels.
There is also a family basic package but he is not sure of the number of channels
offered.
8. Yes.
9. No.
10. Yes.
11. Mr. Lancaster would say the subscribers are satisfied. He has not received
many complaints.
12. Yes.
13. The basic package rates are $7.88 per month. The expanded basic rate it
$17.37 per month and the total family total package rate is $25.25 per month.
14. Subscriber rates were increased in March, 1999. At that time, additional
channels were offered when the rates were increased.
15. Mr. Lancaster would say the city has a good relationship with Mediacom.
16. None.
17. Mediacom pays the city a 3% franchisee fee on a quarterly basis. The fees are
paid on time.
18. Good.
19. Mr. Lancaster believes the city would grant Mediacom a new franchise. The
current franchise is due for renewal in 2002. He does not believe that with the
275451/1 20
;'- -~ _ ,>6~>',i.-_;,_~~~',~~.;.
.: . ...~ 4iijl'-.t.~,*"-,~l>;;,,a;,.. '''''';'il;'1~ Ui;f.
.', .ti - ,Mi't,:;,..~i''';~~';'''1H! ,*'"
_t.
size of the city a competing cable company would come in and offer a better
package than Mediacom.
City:
Contact:
Title:
Oak Grove, Kentucky
Ron Ramage
City Administrator
1. Two years.
2. No.
3. 15 years.
4. No, although Mediacom has considered it. Fiber optic cable was just installed in
July.
5. No.
6. Yes.
7. Mr. Ramage was not sure however he thinks there are about 14 channels in the
basic package.
8. Yes.
9. No.
10. There are no schools in the City of Oak Grove. However, the franchise
agreement does provide for this service should schools be built.
11. Yes. The city has not received many complaints since Mediacom took over.
12. Yes.
13. Mr. Ramage was not sure of the current subscriber rates. They were just
increased on July 1, 1999.
14. Mediacom has increased the subscriber rates but has also increased channel
offerings.
15. Excellent.
16. None.
17. Mediacom pays the city a 5% franchise fee on a quarterly basis. The fees are
paid on time.
275451/1 21
18. Mr. Ramage's response was that he could not ask for any better programming
options. The picture quality is sometimes less than desirable, but it is a problem
that cannot be corrected.
19. Yes. Based on Mediacom's present performance.
City:
Contact:
Title:
Ardmore, Alabama
Stacy McCormick
Town Clerk
1. Two years.
2. No.
3. Ms. McCormick was not sure how old the existing system is, but believes it to be
over ten years old.
4. No.
5. None.
6. No. The local office is in Huntsville, Alabama which is approximately 30 miles
away.
7. Ms. McCormick was not sure of the number of channels offered.
8. Yes.
9. No.
10. Yes.
11. She has not received many complaints. She would assume most subscribers
are happy.
12. Yes.
13. Ms. McCormick was not sure of the current subscriber rates.
14. Mediacom just increased the subscriber rates but also increased channel
offerings.
15. Good.
16. None.
17. Mediacom pays the city a 3% franchise fee on a quarterly basis. The fees are
paid on time.
275451/1 22
- L~'J1':"L:""""~.. -,~,~~.'~~
-
~""L.;.._,,,I:.c':'..._..,,- 'C..
18. Fair.
19. Yes. Ms. McCormick felt that the city would look at a competing franchise if an
interest was expressed.
City:
Contact:
Title:
Excel, Alabama
Gracie Guy
City Clerk
1. Three to four years.
2. No.
3. Over fifteen years.
4. Ms. Guy did not believe that Mediacom provides any high speed data services at
this time, but was not certain.
5. None.
6. Yes.
7. Ms. Guy was not sure of the number of basic channels. She thought that it was
20-25.
8. Yes. Mediacom provides a public access station.
9. No.
10. Yes.
11. Yes. Ms. Guy indicated that she has not received many complaints.
12. Yes.
13. The basic subscriber rate is approximately $20.00.
14. Mediacom just increased the rates recently. However, it also offered additional
channels at that time.
15. Very good.
16. None.
17. Mediacom pays the city a 5% franchise fee on a quarterly basis. The fees are
paid on time.
18. Good.
275451/1 23
19. Yes. The city just renewed the franchise two years ago primarily because
citizens want cable television, and Mediacom has the only system available.
City:
Contact:
Title:
Richmond, Missouri
Ron Brohaumer
City Manager
1. Two years.
2. No.
3. Over ten years old.
4. No.
5. No.
6. Yes.
7. Mr. Brohaumer believes that the basic cable provides 12 channels and the family
basic cable provides 44 channels.
8. Yes.
9. No.
10. Mr. Brohaumer is not sure if the schools use the system or not.
11. Mr. Brohaumer believes that subscribers are more satisfied with Mediacom than
with previous providers. He indicated that the satisfaction has increased in the
last six months.
12. Yes.
13. Mr. Brohaumer believes that the basic package is about $10.00 per month and
the family basic package is about $19.95 per month.
14. Mediacom has increased the rates within the FCC guidelines and has offered
additional channels with the rate increases.
15. Very good.
16. None.
17. Mediacom pays the city a 3% franchise fee on a quarterly basis. The fees are
paid on time.
18. Good.
275451/1 24
., ".1" ..,. .'. =,!f!Ik""
,,,10 . fIIlI' ~1'''1-'j~'""Jr...''', !..~."'..,....,~." "lI'IO. ::<.
"'.~~' .;......"" I
19. Yes. Mediacom responds efficiently and effectively to questions and complaints.
Yet, Mediacom is the only cable television provider in the area.
City:
Contact:
Title:
Cameron, Missouri
Phillip Lammers
City Manager
1. Two years.
2. No.
3. Over 25 years old.
4. No.
5. None that he is aware of.
6. No. The local office is approximately 30 miles away.
7. Mr. Lammers was not sure of the number of channels offered in the basic cable
package.
8. Yes.
9. No. The franchise with Mediacom provides that a channel will be provided, but
the city would need to purchase the hardware.
10. Mr. Lammers is not sure if the schools are using the system or not.
11. Mr. Lammers feels that subscribers are more satisfied than previously. He
receives occasional complaints with regard to unclear stations, which have
decreased since Mediacom installed a new conductor and amplifiers.
12. Yes.
13. Mr. Lammers is not sure of the current subscriber rates.
14. Mediacom has raised rates but has offered additional channels at the time of the
rate increases.
15. Mr. Lammers would describe the relationship as fair but distant. He has not had
much contact with Mediacom.
16. None.
17. The city receives a 5% franchise fee and a $2.00 pole fee from Mediacom. The
fees are paid on time.
275451/1 25
18. Satisfactory.
19. Yes. Mediacom has been easy to work with.
City:
Contact:
Title:
Princeton, Kentucky
Howard Hurt
City Clerk
1. Two years.
2. No.
3. Over 20 years.
4. Mr. Hurt is not aware of any high speed data services available at this time.
5. None.
6. Yes.
7. Mr. Hurt believes that there are approximately 10 or 11 channels offered on the
basic cable package.
8. Yes.
9. No.
10. Yes.
11. Mr. Hurt believes that most subscribers are happy. He has received very few
complaints.
12. Yes.
13. Mr. Hurt was not sure of the current subscriber rates.
14. Mediacom has increased the subscriber rates but at the same time added
additional channels and options.
15. Good.
16. None.
17. Mediacom pays the city a 5% franchise fee on a quarterly basis. Fees are paid
on time.
18. Good.
275451/1 26
~,;'., a,,i,t-" -'""""iIIIiIlo',.:'<iil.i! ': ," '* A.. "'............. .,""....IiiiIIiIllII,d
.t i L;."- ~.~~,....
;. fi a;
.
19. Yes. The franchise was just renegotiated last year for an additional 15 years.
City:
Contact:
Title:
Windsor, North Carolina
David Overton
Town Administrator
1. Mr. Overton thought that Mediacom acquired the cable system 3-4 years ago.
2. No.
3. Mr. Overton indicated that the current system is 20+ years old.
4. Not that he is aware of.
5. None.
6. No. The local office is about 20 miles away.
7. Mr. Overton was unsure of the number of channels offered for the different
packages available to subscribers.
8. Yes.
9. No.
10. The schools have access to the cable but Mr. Overton was not sure to what
extent the schools used the system.
11. Mr. Overton indicated that he felt most people were happy. He has not had very
many complaints.
12. Yes.
13. Mr. Overton was not sure of what the current rates were.
14. The rates have been periodically increased, but, at the same time, more
channels were offered.
15. Good.
16. None to speak of.
17. Mediacom pays the city a 3% franchise fee and a pole rental feel of $4.00 per
pole. The fees are paid on time by Mediacom.
18. Excellent.
275451/1 27
19. Mr. Overton said he did not know of any reason why the city would not grant
Mediacom a new franchise. The subscribers seem to be happy with the service,
but Mediacom is the only operator in the area.
City:
Contact:
Title:
Ocean View, Delaware
Joseph P. Lobb
Town Manager
1. 2 years. Mediacom acquired the cable system in July 1997.
2. No.
3. 15-16 years old.
4. None.
5. There were no operational cutbacks when Mediacom acquired the system. The
franchise was amended to increase the franchise fee, and Mediacom was very
agreeable to the amendment.
6. No. The local office is about 10 miles from the city.
7. Approximately 35 channels.
8. Yes.
9. No.
10. The schools have access to the system and do use it.
11. Yes. Very few complaints are received.
12. Yes. Mr. Lobb has not heard that the complaints referred to Mediacom have not
been resolved.
13. Mr. Lobb was unsure of the current subscriber rates.
14. There was a slight increase in the subscriber rates, but additional channels were
offered along with the rate increase.
15. Very good.
16. None.
17. Mediacom pays a 5% franchise fee based on the gross receipts of the
subscribers that are within the town limits. Fees are paid on time.
275451/1 28
<" ,,,,-' -..., ,,,,.
~', ....~.. .",,-
18. Mr. Lobb would rate the programming and picture quality as good. There have
been very few outages.
19. Yes. Based upon past experience, Mediacom has been very easy to deal with.
City:
Contact:
Title:
Santa Rosa County, Florida
Hunter Walker
County Manager
Note: Mediacom has a franchise with Santa Rosa County. The county represents the
unincorporated cities within the county. There are approximately 17,000-18,000
subscribers within the county represented by this franchise.
1. Mediacom acquired the cable system about 2 years ago from Cablevision.
2. No.
3. Over 15 years old. The system has been upgraded in the last 3 years.
4. Not yet, although there has been discussions about providing the service.
5. None.
6. There is a local office in each of the outlet communities serviced.
7. Mr. Walker thought that the basic service provided approximately 14 channels
and the enhanced basic service provided 50-60 channels.
8. Yes.
9. No.
10. Yes.
11. Yes. Mr. Walker indicated that he receives few complaints. Most of the
complaints center around rates and rate structure.
12. Yes.
13. Mr. Walker did not have the current subscriber rates available.
14. There has been regular increases within the FCC guidelines. Along with the rate
increases, however, Mediacom usually adds channels.
15. Cordial. Mr. Walker says that he has only periodic contact with Mediacom.
16. None.
275451/1 29
17. The county receives a 5% franchise fee. Fees are paid on time.
18. Mr. Walker would rate the programming quality as beyond adequate and the
picture quality as very good.
19. Yes, primarily because Mediacom is the only operator in the area.
City:
Contact:
Title:
Lucedale, Mississippi
Kathy Johnson
City Clerk
1. Mediacom acquired the cable system about 3 years ago.
2. No.
3. Approximately 11-12 years old.
4. No.
5. There were no operational cutbacks. The franchise was amended to raise the
franchise fee which Mediacom was agreeable to.
6. No. The local office is about 2 1/2 hours away.
7. Ms. Johnson was not sure of the number of channels offered in the basic
package.
8. Yes.
9. No.
10. Yes.
11. Yes. Ms. Johnson indicated that she has received very few complaints.
12. Yes.
13. Ms. Johnson did not have the current subscriber rates available.
14. None that she is aware of.
15. She described the city's working relationship with the Mediacom representatives
as very good.
16. None.
17. Mediacom pays the city a 5% franchise fee, which is paid on time.
275451/1 30
:::.' ~ ~i__!il_.&.-il1J~~"~
~ 1" J~:.;"~"""JdjLL:' '" ,.. .d'L:...ilol.~<'
'at." .,,,,,,'6i,.ni,,iIb~.!l",
18. Very good.
19. Yes. The city just renewed the franchise about 2 years ago. Mediacom has
provided good service to the city.
City:
Contact:
Title:
Edgerton, Kansas
Rita Moore
City Clerk
1. Mediacom acquired the cable system about 2 years ago.
2. No.
3. Over 20 years.
4. No.
5. None.
6. No. The local office is about 100 miles from the city.
7. Ms. Moore believes there are about 20 channels offered in the Basic package.
8. There is no public access channel in the city and the city has not requested one.
9. No.
10. Not at this time. A line to the schools has just been requested.
11. Yes. Ms. Moore has seen a reduction in the number of complaints.
12. Yes.
13. Ms. Moore was not aware of the current rates being charged by Mediacom.
14. The rates were raised slightly but additional channels were added.
15. Good.
16. None.
17. Mediacom pays the city a 5% franchise fee. The payment was late for the first
quarter of this year; however, she believed that Mediacom was operating under
the payment date of the old franchise. The check was immediately sent when
she called Mediacom.
18. Good.
275451/1 31
19. Yes. The franchise was just renewed in May 1999.
City:
Contact:
Title:
Huntland, Tennessee
Marie Stovall
City Recorder
1. Mediacom acquired the franchise approximately 5 years ago.
2. No.
3. Over 15 years old.
4. No.
5. None.
6. No. The local office is in Huntsville, Alabama, which is about 35 miles from the
City.
7. There are approximately 40 channels on the expanded basic package.
8. Yes.
9. No.
10. Yes.
11. Yes. The only complaints received concern the rate increases.
12. Yes.
13. The basic package is $10.00 per month. The expanded basic is $19.95 per
month.
14. Rates were increased last fall but additional channels were also added.
15. Very good.
16. None.
17. Mediacom pays the city a 5% franchise fee. The fee has been paid on time.
18. Good.
.
19. Yes. Ms. Stovall indicated that Mediacom was easy to work with, yet she also
added that Mediacom is the only operator in the area.
275451/1 32
, """ __IJIIt:j! ... . ;1
~ ~ ~.....";r",,, "1:,."'1""". ',,_.....,'l'f"-,~~
.I." .... "'
_-.:Ii
City:
Contact:
Title:
Bethany Beach, Delaware
Glen Hudson
Town Manager
1. 2 years.
2. No.
3. 12-15 years old.
4. No.
5. No.
6. Yes.
7. Approximately 21 channels.
8. Yes.
9. No.
10. The schools are wired for cable access, but Mr. Hudson was not sure whether
they utilized the service.
11. Yes. Mr. Hudson has received very few complaints. The main complaint has
been the discontinuance of some of the channels from Philadelphia and New
Jersey. Bethany Beach is a retirement community, and when Mediacom took
over, some of the sports channels from Philadelphia and New Jersey were
discontinued.
12. Yes.
13. The basic cable rate is $29.95 per month.
14. No.
15. Very professional.
16. No.
17. Mediacom pays the city a franchise fee of $25,000.00 per year. The fees have
been paid on time.
18. Mr. Hudson would rate the picture quality good. However, many subscribers
would like the channels from Philadelphia returned.
19. Yes. Mediacom provides good service to the community.
275451/1 33
Financial Qualifications
I. SCOPE OF REVIEW
The financial qualifications relate in part to Mediacom's ability to demonstrate it
has "sufficient net liquid assets on hand or available from committed resources to
consummate the transaction and operate the facilities for three (3) months.,,3 The
standard of review is that the City's consent shall not be unreasonably withheld.4
We have reviewed selected financial information provided by Mediacom LLC, a
New York limited liability company ("Mediacom") in conjunction with Mediacom's
request for consent to the change in ownership of a television cable system (the
"System") serving the City which is presently operated by Triax Midwest Associates,
L.P., ("Triax").
The selected financial information which was provided, and to which our review
has been limited, consisted solely of the following financial information (hereinafter
referred to collectively as the "Financial Statements"):
(a) Consolidated balance sheets of Mediacom and subsidiaries as of
December 31, 1998, 1997 and 1996, and the related consolidated
statements of operations, changes in members' eguity and cash
flows for the years ended December 31, 1998 and 1997, and for
the period from the commencement of operations (March 12, 1996)
to December 31, 1996 and the statements of operations and cash
flows from the period January 1, 1996 through March 11, 1996,
together with the report of Independent Public Accountants,
Auditor's Report and Opinion dated March 5, 1999, does not
contain any material qualifications of the foregoing financial
statements except with respect to Schedule" - Valuation and
Qualifying Accounts, which is not part of the basic consolidated
financial statements and is included for SEC reporting purposes
only. All of the same is published in Mediacom's Form 10-K and
the amended Form 10-K for the year ending December 31, 1998,
as the same were filed with the Securities and Exchange
Commission as of March 31, 1999 and May 7, 1999, respectively;
and
(b) Unaudited consolidated balance sheets of Mediacom and
subsidiaries as of March 31, 1999 and December 31, 1998, and the
related consolidated statements of operations, changes in
3 See FCC Form 394 Section I1I(I). This criteria is not referenced as a "standard" but rather as one component of a
froposed transferee's financial qualifications.
See Minn. Stat. Section 238.083.
275451/1
34
,....iiIi,~
i"Bi ......
.
.:!l, -a.... 1II111l_,......,"-'.,i.I"L."_".. 'fI:.;...,.l;;i;w..;JiI!IiI;;;,,,
" '" _ ...... _,,"';,~\j' ;",;'._t',Jo"III...Jm.,' ... .'-"
.....
members' equity and cash flows for the three months ended March
31, 1999 and 1998, as the same is published in Mediacom's Form
10-0 for the quarter ending March 31, 1999, as the same was filed
with the Securities and Exchange Commission as of May 17,1999.
Our procedure is limited to providing a summary of our analysis of the Audited
Financial Statements and Unaudited Financial Statements to facilitate the City's
assessment of the financial capabilities of Mediacom to become the successor operator
of the System serving the City currently operated by Triax.
II. OVERVIEW OF TRANSACTION
Mediacom and Triax have entered into an Asset Purchase Agreement dated April
29, 1999 (the "Purchase Agreement"), pursuant to which agreement Triax has agreed to
sell and Mediacom (and/or a designated assignee of Mediacom which may be one or
more acquisition subsidiaries (hereinafter the "Acquisition Sub") which entity/ies must be
affiliated with Mediacom by virtue of common ownership or control) has agreed to
purchase substantially all of the cable television system assets of Triax, including those
which are used in or otherwise relate to the System serving the City. The purchase
price for all of the assets to be transferred by Triax to Mediacom andlor the Acquisition
Sub is $740.0 million, subject to adjustments (both increases and decreases) to the
purchase price in accordance with the provisions of the Purchase Agreement.
The transaction contemplated by the Purchase Agreement is scheduled to close
as early as October 1, 1999, with a reasonably anticipated closing date of November 1,
1999. The closing is subject to the satisfaction of several contingencies described in
the Purchase Agreement, the most significant of which include: (i) obtaining all material
third party consents; (ii) satisfying the applicable waiting period and any extensions
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976; and (iii) a minimum
subscriber threshold for the Triax systems which are being transferred, all of which
contingencies are, in all material respects, customary for a transaction of this
magnitude.
In the event that Triax terminates the Purchase Agreement on account of an
uncured material breach by Mediacom, Triax is entitled to liquidated damages in an
amount between $20.0 million to $45.0 million. Mediacom is entitled to seek its actual
damages in the event of a corresponding termination by Mediacom on account of
Triax's material breach in lieu of seeking specific performance of Triax's obligations
under the Purchase Agreement. Although Mediacom was requested to provide copies
of all schedules and exhibits to the Purchase Agreement, certain schedules and
exhibits, in particular those regarding "retained franchises" were intentionally omitted by
Mediacom as containing confidential or proprietary information. As such, our review of
the Purchase Agreement is conditioned on our inability to review such information.
275451/1
35
III. OVERVIEW OF MEDIACOM
1. Summarv of Mediacom LLC and Subsidiaries. Mediacom LLC, a New
York limited liability company, was founded on July 17, 1995 by Rocco B. Commisso to
act as a holding company for its four (4) operating subsidiaries, for the purpose of
acquiring, operating and developing cable television systems in selected
non-metropolitan markets of the United States.5 As of December 31 1998 Mediacom
LLC had completed nine (9) acquisitions of cable television systems6 (the "Acquired
SystemsIJ), which Acquired Systems are owned by the operating subsidiaries of
Mediacom LLC.7 Mediacom has presently divided its operations into four (4) regional
bases of operations.
These regional basis of operations include Southern, Mid-Atlantic, Central and
Western regions of the United States, with operations as follows:8 (i) The Southern
region represents Mediacom's present largest region, as of December 31, 1998
providing service to approximately 134,200 basic subscribers in the outlining areas of
Pensacola, Ft. Walton Beach and Panama City, Florida; Mobile and Huntsville,
Alabama; and Biloxi, Mississippi; (ii) The Mid-Atlantic region, as of December 31,
1998, providing service to approximately 85,500 basic subscribers in lower Delaware,
southeastern Maryland and the northeastern and western areas of North Carolina; (iii)
The Central Region, as of December 31, 1998, providing service to approximately
81,100 basic subscribers located in the suburbs and outlying areas of Kansas City and
Springfield, Missouri and Topeka, Kansas and communities in the western portion of
Kentucky; and (iv) The Western Region, as of December 31, 1998, providing service to
approximately 53,200 basic subscribers located in the following areas: Clear Lake,
California; Indian Wells Valley in Central California; portions of Riverside County and
San Diego County, California and Nogales, Arizona and outlying areas.
As of March 31, 1999, Mediacom is among the top twenty-five (25) multiple
system operators ("MSO'sIJ) in the United States, operating in fourteen (14) states and
serving 313 franchise communities with approximately 370,000 basic subscribers.s
Following the consummation of the transaction contemplated by the Purchase
Agreement, Mediacom will conduct operations in 20 states and serve in excess of 900
franchise communities, with approximately 712,000 basic subscribers10 and will conduct
operations in an additional six (6) states with an increase of approximately 187% in the
total number of communities served and an increase of approximately 95% in the total
number of basic subscribers.
S See Mediacom Form lO-Kfor the fiscal year ended December 31,1998 ("1998 lO-K"), at page 1.
6 See discussion Section 2 infra summarizing the "Acquired Systems."
7 Mediacom LLC's operating subsidiaries consist of Media com Southeast LLC, Mediacom Delaware LLC,
Mediacom Arizona LLC and Mediacom California LLC. Mediacom LLC, together with its four operating
subsidiaries and Mediacom Capital Corporation, a New York corporation, are collectively referred to herein as
("Mediacom").
8 See 1998 10-K at page 6.
9 Id. at page 1.
10 Sum of 370,000 existing subscribers plus 342,000 subscribers to be acquired from Triax.
275451/1
36
:',~. = ~~:~:-~~:;r.Y;;;:~'":.:~~~,-.
l.
."-',.,.l'::"',~.....
2. Acquired Systems - Recent Acquisitions. As Mediacom has been
engaged in the significant growth of its system through acquisition of the Acquired
Systems, the following is a summary of the acquisition cost per subscriber of each of
the Acquired Systems compared to the acquisition cost per subscriber from the
transaction contemplated by the Purchase Agreement (pending transaction in italicized
text).
Richcrest CA March, 1996 $18.8 9,450 1,989
Curran Valle , CA June, 1996 $ 11.0 6,100 1,803
Nogales, AZ December, $11.4 8,100 1,407
1996
Valley Center, CA December, $ 2.5 1,900 1,316
1996
Da sboro, DE June, 1997 $42.6 29,800 1 ,430
Sun City, CA December, $ 11.5 9,900 1,162
1997
Clear Lake, CA Janua ,1998 $ 21.4 17,750 1,206
Various states Janua ,1998 $ 308.2 267,200 1,153
Caruthersville, October, 1998 $5.0 3,800 1,316
MO
Various (Triax) Fall '99 $ 740.0 342,000 2,164
3. Manaaement and Operations - Related Party Transactions. Mediacom
relies on Mediacom Management Corporation, a Delaware corporation wholly owned by
Rocco B. Commisso, for all of its strategic, managerial, financial and operational
oversight and advice.11 Separate management agreements with each of Mediacom's
four (4) operating subsidiaries provide for Mediacom Management to be paid
compensation for management services performed for Mediacom.
Under such agreements, Mediacom Management is entitled to receive annual
management fees calculated as follows: (i) 5.0% of the first $50 million of annual gross
operating revenues of Mediacom; (ii) 4.5% of revenues in excess of thereof up to $75
million; and (iii) 4.0% of such revenues in excess of $75 million. In addition,
Mediacom's operating agreement provides for Mediacom Management to be paid a fee
of 1.0% of the purchase price of acquisitions made by Mediacom until Mediacom's
proforma consolidated annual operating revenue equals $75 million and .5% of such
purchase price thereafter.
4. Competitive Environment. The financial performance of cable television
system operators are subject to many factors, including the competitive environment in
which they operate. Mediacom, as a cable television system operator, faces
11 See 1998 10-K at page 24.
275451/1
37
competition from several alternative methods of distributing video programming and
from other sources of news, information and entertainment, the future growth and
success of which could have a material adverse impact on Mediacom's prospective
financial results of operation. Principal sources of such alternative entertainment
include off-air television broadcast programming, newspapers, movie theaters, live
sporting events, interactive on-line computer services and home video products.12
Principal competition comes from high-power DBS services such as those which
are currently being provided by DirecTV Inc. and EchoStar Communications
Corporation and medium-power service provided by PrimeStar, Inc. With pending
transactions, DirecTV and EchoStar could obtain high-power DBS channel capacity
through the acquisition of other DBS facilities, the result of which would be a significant
increase in the number of channels on which DBS providers would be able to provide
programming to subscribers thereby improving significantly their competitive positions
with respect to cable system operators such as Mediacom and Triax.
5. Financino. The cable television business is inherently capital intensive,
requiring substantial capital for the construction, maintenance and expansion of cable,
plant and distribution equipment as well as to fund acquisitions. In addition to funding
its ongoing operations, in 1998, Mediacom commenced the implementation of a
substantial capital improvements program pursuant to which program Mediacom will
invest in excess of $125 million between 1998 and 2000 to upgrade cable systems
serving approximately 75% of Mediacom's subscriber base with state-of-the-art
technology.13 Mediacom's financing strategy is to raise equity from its members and to
issue public long-term debt by utilizing its operating subsidiaries to access debt capital,
principally in the commercial bank market.
Financing of Mediacom's operating subsidiaries are currently effected through
two stand-alone borrowing groups. The credit arrangements in these borrowing groups
are non-recourse to Mediacom, have no cross-default provisions relating directly to
each other, have different revolving credit and term periods and contain separately
negotiated covenants tailored for each borrowing group.14
As of March 31, 1999, Mediacom was in compliance with all of the financial and
other covenants provided for in its bank credit agreements,15which credit arrangements
included the following: (i) a $100 million revolving bank credit facility expiring in
September 2005; (ii) a $225 million revolving bank credit facility expiring in September
2006; (Hi) a seller note in the original principal amount of $2.8 million issued in
connection with the acquisition of a cable television system; (iv) $200 million offering of
8.5% senior notes due 2008; (v) $125 million offering of 7.7/8% senior notes due 2011;
and (vi) $125 million of equity capital invested in Mediacom by the members of
Mediacom.
12 See 1998 10-K at pages 10 and 11.
13 See Exhibit 10 at page 1.
14 See Note 3(c) to the unaudited financial statements of Mediacom and Subsidiaries accompanying Form lO-Q for
the quarterly period ended March 31, 1999 (" 1999 10-Q").
15 Id.
275451/1
38
ft. . ",';;':'::';C"'i.m-;;.L ;'~~~;1~.,ttj":'1..,
.". -,Ii, .. "'".\Af'.:;:<V~!' ':"40- '1l-,J'~iifMii.Jiii, iil:
';':;~!I._~. 1J
.-
As of March 31, 1999 Mediacom had approximately $306 million of unused bank
commitments under the bank credit agreements described in (i) and (ii) above, all of
which amount could have been borrowed under the most restrictive covenants in the
bank credit agreements.16
Reviewer's Note: Although Mediacom believes that it will be able to
generate cash and obtain financing sufficient to meet its working capital
requirements, there are no assurances that Mediacom can provide that it
will be successful in these endeavors. As Mediacom has not funded its
ongoing cable system operation solely from working capital resources
generated from operating activities,17 Mediacom's continued reliance on
external capital and borrowings as a means of remaining a going concern
raises questions about its long-term stability, especially in light of the fact
that the future performance of Mediacom is subject to general economic
conditions and to financial, political, competitive, regulatory and other
factors, many of which are beyond Mediacom's control (although many of
such factors, as they relate to the cable television system industry as a
whole, would also have an adverse effect on other cable system
operators).
In addition, a significant portion of the purchase price to be paid
pursuant to the Purchase Agreement is to be paid in cash concurrent with
the closing. As of March 31, 1999 Mediacom had current assets of
approximately $12.5 million and unused bank commitments of
approximately $306.0 million, which amounts are significantly less than
the $740.0 million purchase price. Although Mediacom may significantly
reduce the amount of its escrow by providing a commitment letter to Triax
establishing Mediacom's ability to meet its financial covenants under the
Purchase Agreement, Mediacom has indicated in its application that it has
not made final arrangements for the financing of same. It is appropriate
to consider the fact that Mediacom has not demonstrated that it has
secured the necessary financial accommodations to fulfill its
financial obligations under the Purchase Agreement, together with
sufficient evidence of working capital to operate the System (and
other systems to be acquired) upon consummation of the
transaction contemplated by the Purchase Agreement as a material
issue with respect to Mediacom's financial qualifications to become
the transferee of the System. Please see Exhibit H, July 22, 1999
letter from Larkin, Hoffman regarding Mediacom's efforts regarding
financing of this transaction.
Mediacom LLC is in the process of restructuring its bank based credit
facilities. Mediacom has represented that the restructuring will result in two
16 Id.
17 See Mediacom LLC and Subsidiaries Consolidated Statements of Cash Flows accompanying 1998 Fonn lO-K and
1999 Fonn 10-Q at pages 40 and 5, respectively.
275451/1
39
borrowering groups, Mediacom Midwest and Mediacom USA, each of which will
have $500 million bank credit facilities. The Mediacom Midwest facility will
replace the existing bank lines of credit, and the Mediacom USA facility will be
new. Mediacom has indicated that both efforts are on schedule, and are
proceeding through the bank syndication process as planned. According to
Mediacom, three of its existing lenders, including The Chase Manhattan Bank,
have committed $100 million each for a total of $300 million toward the $500
million Mediacom USA facility. Mediacom intends that this structure will provide
Mediacom with efficient pricing as well as maximum financial flexibility for the
future.
IV. FINDINGS
1. Analysis of Mediacom Financial Statements. Neither "federal law nor
state laws provide guidance on how a franchising authority is to 'consider' an applicant's
financial ability."18 In certain circumstances, it is appropriate to consider the
performance of an applicant based on the applicant's historical performance in relation
to recognized industry standards. Given the fact that Mediacom has a history of cable
system operations, such statistical analysis is relevant with respect to the transaction
contemplated by the Purchase Agreement. We have based our analysis, in part, on
industry standards which are generally recognized in making such a determination.
These industry standards are more precisely described below.19
Based on the selected financial information which we reviewed, the following is a
summary of the various financial factors, as compared to the applicable Industry
Standards, for the three month period ended March 31, 1999 and the 12-month periods
ended December 31,1998 and 1997.20
18 See In Re Application of Dakota Telecommunications Group, for a Cable Television Franchise in Marshall,
Minnesota, C8-98-1139 Minn. Ct. of Appeals March 16, 1999 (case regarding award of a competitive cable
television franchise) citing Minn. Stat. Section 238.084, Subd 1(1); 47 U.S.C. Section 54 1 (a)(II)(c). See also FCC
Form 394 Section III(1) which provides some clarification regarding "minimwn" fmancial qualifications.
19 Except with respect to EBITDA margin, industry data based on information compiled by Paul Kagan and
Associates.
20 Where indicated, selected 1997 fmancial information and analysis is based on pro-forma data. Due to effect of
Mediacom's acquisition of the Acquired Systems, pro-forma effect is given to selected financial information to
make comparison of financial information between separate reporting periods meaningful for the reviewer. The use
of pro-forma data is an accepted method of measuring financial performance, however, no assurance can be given
that the pro-forma financial information is representative of actual results.
275451/1
40
...1fNI~' ~;_,._;-~_,>o;t
~.. --- r ~
.1~r~!IIr...\II~lllii l!il!!;iii::ii:iliii~;;;::':::::::."":::::."::.:.J:ll:li~:I:l::l!!:!:illlll~:i!~:::ll~ll~::;:~i:
1. EBITDAlrevenue(1 )*
(Cash flow percentage) 39.09% to 42.53% 41.81% 35.13%
54.83%
2. Operating Income Percentage*
o eratin Income/Revenue +11% (14.15%) (9.08%) (12.74%)
3. Debt/Equity Ratio"
Ion -term debt/total e uit 2.20:1 5.18:1 4.27:1 2.90:1
4. Current Ratio
current assets/current liabilities 1.0:1 .33:1 .40:1 .53:1
5. EBITDA
N/A 15,309,000 54,055,000 8,509,000
(1) Range based on a Domestic Suburban/Rural Wireline Cable Comparisons prepared by CIBC
Oppenheimer, as supplied by Mediacom. Data has not been independently verified by the
reviewer.
* 1997 data based on pro forma financial information;
** Long term debt is estimated excluding current maturities identified in Notes to 1998 Form 10-K.
2. Specific Financial Statement Data and Analysis:
(a) Assets. Mediacom had (i) current assets of $12.5 million and $14.7
million; (ii) working capital of a negative $25.6 million and a
negative $21.9 million; and (iii) total assets of $ 448.1 million and
$451.1 million as of March 31, 1999 and December 31, 1998,
respectively. Working capital, which is the excess of current assets
over current liabilities, is a short-term analytical tool used to assess
the ability of a particular entity to meets its current financial
obligations in the ordinary course of business. The negative
working capital balance of $25.6 million as of March 31, 1999,
suggests that Mediacom may experience a short-term deficiency in
available working capital resources which will need to be overcome
by Mediacom drawing on other capital resources including
borrowings and/or investing activities to meet its short-term
operating requirements (See Section III, paragraph 5 regarding
available borrowing limits as of March 31, 1999). Mediacom's
current ratio (current assets divided by current liabilities) as of
March 31, 1999, of .33: 1 is below recognized industry standards of
1.0:1.
(b) Liabilities. Mediacom had (i) current liabilities of $38.1 million and
$36.6 million; (ii) long-term debt net of current maturities
(estimated) of $343.0 million and $335.9 million; and (iii) member
equity of $66.2 million and $78.7 million as of March 31, 1999 and
December 31, 1998, respectively. As of March 31, 1999,
Mediacom's debt to equity ratio, which is a measure of the amount
of debt in relation to total equity, was approximately 5.18:1.
Generally, a low debt to equity ratio is considered favorable.
Mediacom's debt to equity ratio is higher than the industry trend of
275451/1
41
2.2: 1. The acquisition of the Acquired Systems, together with
Mediacom's $125.0 million capital improvement program have
contributed significantly to Mediacom's high debt to equity ratio.
(c) Operatino Income. Mediacom had: (i) revenue of $36.0 million and
$129.3 million; (ii) operating expenses of $41.0 million and $140.7
million; and (iii) net loss of $12.5 million and $39.8 million for the
three months ending March 31, 1999 and the year ending
December 31,1998, respectively. Mediacom's operating income
percentage of (14.15%), (9.08%), and (12.74%) for the three (3)
months ended March 31, 1999 for the years ended December 31,
1998 and 1997 (pro forma) respectively, are all significantly below
the industry average of 11.0%.
The deviation from the industry average is primarily due to
significant increases in service costs, selling, general and
administrative expenses, management fees and depreciation and
amortization expenses associated with the inclusion of the assets
of the Acquired Systems,21 as well as the effect of significant capital
expenditures reflected in depreciation and amortization costs
associated with Mediacom's implementation of its capital
improvements project, 22 which are factors not necessarily reflected
in the industry average.
Due to the effect of the foregoing factors, it is unlikely that
Mediacom's operating income percentage will approximate the
industry average in the near future.
(d) Cash Flow. Mediacom had an operating cash flow percentage for the
twelve months ending December 31, 1998, of 41.81 %, is within the
range of operating cash flow percentages as described in the chart
on the previous page. Cash flow and the cash flow percentage
provide a measure of the ability of a business entity to generate
cash. A higher cash flow percentage generally means that more
cash will be available to meet the business entity's various
obligations. See discussion in Section III, paragraph 5 regarding
historical cash flow and working capital requirements.
3. Mediacom Manaoement Discussion and Analysis of Financial Statements.
As the Acquired Systems comprise a substantial portion of Mediacom's basic
subscribers, Mediacom has included a narrative analysis of the pro-forma operations of
Mediacom for the year ended December 31, 1998 compared to pro-forma results for the
21 See Chart in Section III, Paragraph 5, Supra
22 See Section III, Paragraph 5, Supra.
275451/1
42
'! :IlIi'~:.411~"'.
'1' ,. .:U~'1l,.A'~"!1I!' il. P""!'.~ -'~
r" ...~"";:'''-;! "l""'"-..If'V. ,..... ,,.
year ended December 31, 1997. 23 The following is a summary of the narrative pro-
forma analysis included in the 1998 Form 10-K:
Pro Forma Results for the Year Ended December 31, 1998 compared to Pro
Forma Results for the Year Ended December 31, 1997:
(a) Revenue. Revenues increased to approximately $136.1 million for
the year ended December 31, 1998, from approximately $120.5
million for the prior fiscal year. This increase was attributable
principally to internal subscriber growth of approximately 2.5% in
higher average monthly revenue per subscriber.
Reviewer's Note: Average monthly revenue per subscriber increased to
$32.88 per basic subscriber for the year ended 1998 from $29.67 per
basic subscriber for the prior fiscal year, or an increase of approximately
10.82%. Mediacom's management discussion and analysis did not
describe the reason for the increase although Mediacom has verbally
stated that a portion of the increase was due to an increase in the number
of programmed channels. Although Mediacom has indicated that they do
not have any plans to change the service and operations of the System,
historical operations suggest that following an acquisition, Mediacom has
increased its average revenue per subscriber, a result which presumably
occurs as a result of the increase in the cost of basic service borne by the
consumer.
(b) Expenses. Service costs and SGA (Selling, General and
Administrative) expenses in the aggregate decreased to
approximately $72.9 million for the year ended 1998 from
approximately $76.7 million for the prior fiscal year. This decrease
was principally due to the allocation in 1997 of annual corporate
overhead expenses and employee stock expenses of the previous
owners of the Acquired Systems, offset by an increase in
management fee expense to approximately $6.1 million for the year
ended 1998 from approximately $1.5 million for the prior fiscal year.
The increase in management fee expense was due to the higher
revenue generated in 1998.
(c) EBITDA. EBITDA 24 increased to approximately $57.2 million for
the year ended 1998 from approximately $42.3 million for the prior
fiscal year. EBITDA as a percentage of revenues increased to
23 1997 nwnbers in the pro forma analysis are annualized based on the projected results of operations asswning the
f,urchase of the Acquired Systems had been consununated on January 1, 1997.
4 EBITDA is the swn of earnings before interest, taxes, depreciation and amortization and is utilized as a
performance measure within the cable television industry. EBITDA is not a measurement of financial performance
under generally accepted accounting principles and does not reflect all of the expenses of doing business (i.e.,
interest expense, depreciation). Although EBITDA and Cash Flow From Operations may be interchangeable, these
terms are not necessarily synonymous.
275451/1
43
42.0% for the year ended 1998 from 35.1 % for the prior fiscal year.
This increase was due to internal subscriber growth, higher
average monthly revenue per subscriber and decrease in service
cost and SGA expenses described above, off set by an increase in
management fee expense.
Actual Results for 3 Months Ended December 31, 1998 Compared to Pro Forma
Results For 3 Months Ended December 31, 1997.
(a) Revenue. Revenues increased to approximately $34.9 million for
the 3 months ended December 31, 1998, from approximately $30.8
million for the corresponding period of 1997. This increase was
attributable principally to internal subscriber growth of
approximately 2.5% and higher average monthly revenue per
subscriber.
(b) Expenses. Service costs and SGA expenses in the aggregate
decreased to approximately $18.5 million for the 1998 period from
approximately $19.6 million for the corresponding period of 1997.
This decrease was principally due to the allocation of the 1997
period of annual corporate overhead expenses and employee stock
expenses of the previous owners of the acquired systems, offset by
an increase in management fee expense to approximately $1.5
million for the 1998 period from approximately $0.7 million for the
corresponding period of 1997. This increase in management fee
expense was due to the higher revenues generated by Mediacom
in the 1998 period.
(c) EBITDA. EBITDA increase to approximately $15.0 million for the
1 ~98 period from approximately $10.4 million for the corresponding
period of 1997. EBITDA as a percentage of revenues increase to
42.9% for the 1998 period from 33.8% for the corresponding period
of 1997. Increase was due to internal subscriber growth, higher
average monthly revenue per subscriber and the aforementioned
decrease in service costs and SGA expenses, offset by the
increase in management fee expense.
V. SUMMARY
Based on the foregoing and limited strictly to the Financial Statements reviewed
by Moss & Barnett in conducting this review, we do not believe that Mediacom's request
for transfer of ownership of the franchise to operate the System can reasonably be
denied based solely on a lack of financial qualifications of Mediacom, notwithstanding
the fact that Mediacom has failed to demonstrate as of the date of this report that it has
275451/1
44
: ;: ..*1;:--_lJiio.;,.,iii''-~
;.1. jl .. -~ll~"'~:~;.......~k;. .,,-~~ _~~
,"\.'I-;-!"";;,;_I~I;&.'",,"'
secured the necessary financial accommodations to fulfill its financial obligations
pursuant to the Purchase Agreement. 25
In the event the City elects to proceed with approving the transfer of the
franchise, the assessment of Mediacom's financial qualifications should not be
construed in any way to constitute an opinion as to the financial capability or
stability of Mediacom to (i) operate its existing cable franchise operations; (ii) to
operate the System or (iii) successfully consummate the transactions
contemplated by the Purchase Agreement, upon which we express no opinion.
The sufficiency of the procedures used in making an assessment of Mediacom's
financial qualifications and capability to become the successor operator of the System is
solely the responsibility of the City. Consequently, we make no representation
regarding the sufficiency of the procedures used either for the purpose for which this
analysis of financial capabilities and qualifications was requested or for any other
purpose.
However, in order to ensure compliance with its obligations to operate the
System, we recommend that the City condition its approval of the change of ownership
of the System as a result of the transaction contemplated by the Purchase Agreement
on the delivery of a guaranty from Mediacom LLC, in form reasonably acceptable to the
City, pursuant to which Mediacom LLC will guaranty the payment and performance of
Mediacom Minnesota LLC's obligations to the City pursuant to the Franchise.
2S See Exhibit H, July 22, 1999 letter from Larkin, Hoffman.
275451/1
45
Additional Issues
1. Renewal.
The Franchise currently held by Triax is soon due to expire. The City and Triax
have engaged in renewal negotiations pursuant to 47 U.S.C. 9546(h). Triax and the
City have discussed several key issues with respect to renewal of the Cable Television
Franchise although several outstanding issues remain.
Given that the proposed transfer of the Franchise from Triax to Mediacom is set
to close on or about October 10, 1999 it is imperative that the renewal be concluded
prior to that date. This is particularly true given the provisions of 47 U.S.C. 9546 with
respect to renewal of a Cable Television Franchise. In particular, 9546 was amended
in 1996 at which time a conference committee issued a report with respect to 9 546
which provided that franchising authorities should address any deficiencies in the
service of the original franchisee at the time of transfer. .
The implication of this legislative history is that if the City approves the transfer to
Mediacom it may not be able to hold Mediacom responsible for deficiencies in Triax's
service or franchise compliance over the term of the Franchise. Given that this is one of
the key elements on which the City may deny renewal of the Cable Television Franchise
and given further that the City's Franchise with Triax will soon expire, any approval of
the proposed transfer from Triax to Mediacom must be conditioned on a mutually
acceptable Franchise Ordinance being executed prior to closing of the proposed
transaction between Triax and Mediacom.
. ;. '., .'.lI!II!!IIl.~".""j"
,~r ~ ~. "',,,,,.
......1;', .
..f . ." ".
J
275451/1
46
Recommendations
Based strictly on the information made available to us at the time of this review,
we believe Mediacom possesses the necessary legal, technical and financial
qualifications based on the standards of review identified in applicable law, and the
Franchise as described within this Report. With respect to Mediacom's financial
qualifications, we recommend that the City require a parental guaranty from Mediacom
LLC to insure that Mediacom Minnesota LLC fully complies with all terms and conditions
of the Franchise. To the extent that such guaranties are provided, we find no
reasonable grounds on which to deny Triax's request for approval of the transfer of the
Franchise to Mediacom.
Based on these findings, we recommend that:
1. The City Council review this Report, listen to public comment, as
necessary or appropriate, and undertake all necessary action to pass and adopt a
resolution similar in form and content to the document following these
recommendations.
2. The City follow-up to ensure that Mediacom submits the required
documents including the Acceptance Agreement and a Certificate of Good Standing or
Existence for cities in the States of Minnesota, Wisconsin and Iowa, which must be
delivered following closing of the transaction.
3. The City follow-up to ensure that Mediacom LLC submits the guaranty, for
Mediacom Minnesota LLC.
275451/1
47
Exhibit A
Transfer Questionnaire/Application Response for Mediacom
Telecommunications Company Limited Partnership
and Mediacom LLC
275451/1
A-1
::.';.. ~j_Hai~lo,i;~;~~
~j ~ _-'_!l~...,;;~JWl:lli.......... .;,,,," _I~;~' S.
li#~ ,;,_:;,'~..~"'lit~... c~ .,.. ..
TRIAX MIDWEST ASSOCIATES, L.P.
CONSENT TO ASSIGN
CABLE TELEVISION FRANCmSE
TO
MEDIACOM LLC
TRANSFER QUESTIONNAIRE/APPLICATION
June 4, 1999
Preoared by:
Brian T. Grogan
Timothy L. Gustin
Michael R. Nixt, C.P.A.
Kenneth A. Moats, Paralegal
MOSS & BARNETT
A Professional Association
4800 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402-4129
(612) 347-0300 (telephone)
(612) 339-6676 (facsimile)
@Moss & Barnett, A Professional Association, 1999
261697/1
INTRODUCTION
Moss & Barnett, A Professional Association, has, as of this date, been retained to represent
the below-listed cities (hereinafter "City") regarding the proposed assignment of cable television
systems and franchises to Mediacom LLC. This list may be modified and/or increased if additional
communities seek our assistance.
This Transfer Questionnaire/Application will serve as a request on behalf of the City for
supplemental information regarding the proposed assignment.
The Applicant for the assignment is requested to use the following forms in order to inform
the City of the Applicant's legal, technical and financial qualifications. In addition to the
qualifications, the Applicant is requested to identify any and all changes proposed to the cable
communications system now serving the City, the operation of that system or the franchise
document.
In considering a request for transfer and assignment, the City will consider and review the
legal, technical and financial qualifications of the Applicant together with any modifications
requested by the Applicant. The City will comply with any and all state or federal procedural
requirements.
Cities represented bv Moss & Barnett
1. Apache Junction, AZ
2. Boscobel, WI
3. Caledonia, MN
4. Cannon Falls, MN
5. Canton, MN
6. Chanhassen, MN
7. Granite Falls, MN
8. Ivanhoe,MN
9. Lake City, MN
10. Litchfield, MN
11. Marseilles, IL
12. Mound, MN
13. Ottawa, IL
14. Paynesville, MN
15. Pipestone, MN
16. Prior Lake, MN
17. Rushford, MN
18. St. James, MN
19. Savage, MN
20. Slayton, MN
21. Spencer,IA
22. Waconia, MN
23. Wayzata, MN
261697/1 2
~ '~'j1~ . J__, .~.~ ,'.
~~ ~r 'l'lW"".,,
NOTE: Moss & Barnett will also be assisting Municipal & County Management Services
("MCMS) and its principal, Patrick Callahan, Esq. in its review of this proposed assignment on
behalf of MCMS clients.
Please provide five (5) copies of Applicant's Transfer Questionnaire/Application to:
Brian T. Grogan
Moss & Barnett
4800 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402-4129
The Citv expressly reserves the ril!ht to reauest additional information.
DEFINITIONS
Unless the context otherwise requires, when used in this Application, the terms listed in this
section shall have the following meanings:
261697/1
A.
The term "Affiliate," when used in reference to the Applicant or a Principal of the
Applicant, shall mean any Person that directly, or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control with the
Applicant or the Principal of the Applicant.
B.
The term "Applicant" shall mean Mediacom LLC (as identified in FCC Form 394;
please clarify if this is incorrect).
C.
The term "Person" shall mean any individual, corporation, general or limited
partnership, joint venture, limited liability company, trust, association, or other
entity.
D.
The term "Principal," when used in reference to the Applicant, shall mean (i) any
officer, director, or beneficial owner of five percent (5%) or more of any class of
voting securities of the Applicant and any Affiliates of the Applicant, (ii) any Person
who provides management or operational services with respect to the "System" (as
hereinafter defined) and any officers, directors, or beneficial owners of five percent
(5%) or more of any class of voting securities of any such Person, (iii) any general or
limited partner of the Applicant or any Affiliate of the Applicant and any officer,
director, or beneficial owner of five percent (5%) or more of any class of voting
securities of any such partner, and (iv) any Person who or which serves in a capacity
or stands in a relationship similar to any of the foregoing.
E.
The term "System" shall mean the cable communications systems covered by the
Franchise Ordinances awarded by the City, to which this Application relates.
3
OVERVIEW OF TRANSACTION
Below we have outlined an overview of the transaction based upon our initial review of FCC
Form 394. If any errors have been made in our description, please provide clarification as part of
your response to this application.
The Applicant presently owns and operates cable systems in fourteen (14) states and in 313
franchise communities serving over 370,000 cable and internet customers. Triax is presently
operating cable systems in approximately 617 franchised communities, serving approximately
355,000 customers. The transaction contemplated will result in the Applicant expanding its scope
of operations into six (6) additional states where it is not presently doing business, increasing the
number of customers by nearly 100% and increasing the number of communities served by more
than 300%.
The Applicant and Triax entered into an Asset Purchase Agreement dated April 29, 1999
("Purchase Agreement") which provides for the acquisition of substantially all ofTriax's cable
system operations hereinabove described (the "Systems"), subject to certain exclusions based upon
the success of the Applicant in obtaining applicable governmental consent of the several hundred
communities which are involved in Triax's operations. The Purchase Agreement provides that the
Applicant will purchase from Triax the Systems for a stated amount of $740,000,000.00, subject to
certain adjustments, both increases and decreases to the purchase price based on the occurrence of
certain events occurring prior to the Closing Date of the Purchase Agreement.
1. Ownershio Information
A. Multiole Svstems Ooerator
Please specify which of the Applicant's Principals will guarantee the payment and
performance of the Grantee's obligations under this franchise.
B. Certificates of Authority. Good Standing. and Existence
Please provide copies of Applicant's Certificate of Authority and, if available,
Certificate of Good Standing for the State of New York and Applicant's Certificates
of Existence for the States of Arizona, Illinois, Iowa, Minnesota, and Wisconsin. If
Applicant is not yet qualified to conduct business in these States, please provide any
applications or further documentation of its attempt to qualify to conduct business in
said States.
C. Pledge of Grantee's Stock
Please provide any documents, agreements, or other information that discusses the
proposed financing plan between Grantee and a group of lenders that would include
a pledge of the Grantee's interest.
261697/1
4
.: =~T.~~~t",..~_,
I.:.i.,dl .~ tl~;_.;..""',"",-",,......, ._,L.,".~ ,..iI, ;;...
.,..,'_'-'...:.........~J,_:I!iIoA..."""";~...:..c ~....... ...
"
2. Current Franchises
Please provide a list of forty (40) cable communications Systems owned, operated or
controlled by the Applicant or any Principal of the applicant. (please specify whether the
svstems below are owned and operated by Applicant or a parent or subsidiary of Applicant).
Please do not include in this list those Systems in which representative comments were
provided from local leaders in Attachment A to the FCC Form 394. When preparing the list,
please provide the following information.
A. Name of Franchise Holder (Municipality/State)
B. Contact Person and Phone Number
C. Date of Franchise Award
D. Number of Current Subscribers
3. Potential Franchises
Please state the number of subscribers the Applicant currently serves In each state where it
provides service and the number of subscribers the Applicant will serve in each state if the
transfer is approved.
Please provide a list of communities where the Applicant or any Principal of the Applicant
has submitted a request for ~ initial franchise or the approval for a transfer of ownership.
A. Community in which Franchise is Sought
B. Date of Application
C. Expected Date of Action
D. Estimated Number of Subscribers
E. Municipal Contact Person & Phone
4. Changes to the System
Is the Applicant proposing or will the Applicant undertake any technical changes in the
System.
5. Changes in the Ooeration of the System
Is the Applicant proposing, or will the Applicant undertake any changes in the operation of
the System including, but not limited to, the following areas: rate increases, programming,
customer service practices, billing practices, personnel, etc.? Please describe in detail.
261697/1
5
6. Future Plans
Please provide any applicable information to help explain any future plans Applicant may
have regarding the implementation of new technologies into the System serving the City.
How will the introduction of these new technologies impact the growth of the System in the
City?
7. New Services
Does the Applicant have any plans to add new services to the existing system? Please
describe any potential services which Applicant may consider providing over the system.
8. Programming Line-up
Does Applicant own an interest in any cable programming services? Will Applicant make
any changes to the programming line-up in the City? Will Applicant consider changing the
programming line-up in the future? If so, in what way?
9. Costs Increases
Please comment on any projected cost increases to the current services offered by applicant
over the next three (3) years.
10. Billing Svstem
Please describe any changes Applicant will make in the current billing system. Will
subscribers see a new billing system and if so, what modifications or improvements will
result due to a change in the billing format?
11. Customer Service Centers
Please describe how customer service will be handled. Will there be any planned cutbacks in
staff, operations or locations for customer service centers. What phone numbers will be
used, e.g., will they change from existing numbers? Will customer service be centralized,
and if so, where and how will it accommodate the increase in telephone traffic?
12. Reauired Waivers
Please provide copies of requests made to any federal or state governmental entity seeking
waiver of cross ownership prohibitions existing under federal law. Please fully describe the
process and timing for receipt of any required waivers. Please also provide copies of
requests or information regarding any other state or federal regulatory approvals which must
be obtained as part of this proposed transfer.
261697/1
6
.. ~ ~t dr..;;' _:,J!'~,:m~,_~,~~'''-,Iila _~-.
i' . lit ~~~,,,,~.;;;-';";.4llliJ~""", .. .
. _"..~~' 'j,.oi:.i..i~~~iii:
I
I
J
7 i1Ii
13. System Upgrade
Please describe any and all plans to upgrade and/or rebuild the system serving the City.
14. High Speed Data
Please describe Applicant's plans regarding implementation of high speed data services in
the system serving the City.
15. Technical and Managerial Employees
Please explain whether Applicant will retain employees currently providing technical and
managerial services for the cable System serving the City.
16. Asset Purchase Agreement between Triax Midwest Associates and Mediacom LLC
Please provide a copy of all schedules and exhibits part of the Asset Purchase Agreement.
17. Security Ownership of Certain Beneficial Owners and Management
Please explain the equity interests presented in the chart following page 3 and responding to
Section II, Question 2 of the FCC Form 394. As presented, the equity interests do not total
100 percent. Exhibit 10, Page 11 provides a similar chart that totals 100 percent and
references "Other Investors" as part of the percentage equity interests. Who are the "Other
Investors"?
18. Applicant's Operating Agreement
Please provide a copy of Applicant's Operating Agreement.
19. Financial Oualifications
With respect to financial information, the Applicant submitted the following financial
information in support of its fmancial qualifications to acquire and become the successor
operator of the Systems:
A.
Applicant's Form 10-K filed with the Securities and Exchange Commission ("SEC")
on March 31, 1999, including the consolidated audited financial statements of the
Applicant and subsidiaries consisting of (i) report of independent public accountants;
(ii) consolidated balance sheets as of December 31, 1998 and 1997; (Hi)
consolidated statements of operations for the years ended December 31, 1998 and
1997; (iv) consolidated statements of Changes in Member's Equity for the years
ended December 31,1998 and 1997; (v) consolidated statements of cash flows for
the years ended December 31, 1998 and 1997 ; (vi) notes to consolidated financial
statements; and (vii) valuation and qualifying accounts.
261697/1
7
B. Form lO-K/A-l; and
C. Form 10-Q for the three months ended March 31, 1999, filed with the SEC on May
17, 1999, including Financial Statements consisting of (i) consolidated financial
statements of Applicant and Subsidiaries; (ii) notes to consolidated financial
statements; (Hi) Financial Statement of Media co tn's Capital Corporation; and (iv)
Notes to financial statement.
With respect to the information provided, we have the following comments and/or requests
for additional information:
A. Applicant shall provide a detailed organizational chart of Mediacom, LLC and
subsidiaries (including the Applicant's four (4) operating subsidiaries, Mediacom
Capital Corporation and the acquisition subsidiary or subsidiaries ("Acquisition
Sub") which is intended to be formed as the Assignee of the Purchase Agreement
and to consummate the transactions contemplated thereby. A description of the
relationship between Mediacom, LLC and Mediacom Capital Corporation shall also
be provided to the extent that Mediacom Capital is not engaged merely as a shell for
offering securities.
B. To the extent that the Applicant intends to form an Acquisition Sub to effect the
consummation of the transaction contemplated by the Purchase Agreement, a
description of the subsidiary(ies) to be formed, where the subsidiaries will fit within
the Applicant's organizational structure, and details surrounding the management
structure of the Acquisition Sub shall be provided for consideration by the City.
C. The Applicant has indicated that "it is likely that this transaction will be financed
from the proceeds of a credit facility that Mediacom intends to arrange on behalf of
its operating subsidiaries." As the bulk of the Purchase Price to be paid for the
System is to be paid in cash, the Applicant shall provide the City with an update as to
the progress which has been made in securing such a credit facility, including a
summary of the terms relating thereto (Le., maximum facility available, repayment
terms, security, etc.).
D. The Applicant is advised that, in the event it elects to make an assignment of its
rights under the Purchase Agreement to the Acquisition Sub, the Applicant should
anticipate the City requiring that the Applicant provide a guarantee of the
performance of the operating subsidiaries with respect to the franchise, as well as
possibly being required to provide performance bonds and other forms of fmancial
assurance of the subsidiaries operating performance, as the same are customary
under local law or as otherwise may be deemed reasonably necessary under the
circumstances by the City.
- END OF APPLICATION _
261697/1
8
.. .....1'<...'" .}'ki'''''J;~
'01.. fili~ "',,'''"If.
.~~ . '. ,. 'I "',"ti~ ,
Exhibit B
Certificates of Good Standing
275451/1
B-1
06/~7/99 11:27 FAX 9146952679
BG/11/1999 82:18 212-755-2e39
CLkL&N
IaJ 015
PAGE 84
State of New York I 55:
Departmf~nt of State
r JaqoUy .,.ft.i~ I tIJ.~ .. d.1Ugellt ~""".dOD lI.. beg ...d. o~ t:lae
lbdt. l.:LAlUl.it:y ~u:r bJdez ~t eert:l.t~o.f;.. ~.tJ..d ~ 't11U DepartllJ8IIt
by lCEDZACDIf u,c:, a ~.Ua.ited ljab,Utt:y CfQIIpany, uet ~.IJ.t upon .u~h
ex...iaaticm tJle *,~~otr.:bJ, JJ.. b..1I ~iJ.ed vitJr U.ta or~.:Lo.z
A C.rc.t1'1oae. o~ Art.1el.. o~ orgu.:b.tjOll o~ lIJ!:D!Act)Jf z.r.C .,.. ~.ll.d 011
011J7IJ9',.
A c.,rI:Jr,tGue OJ~ .Ame.adlaIlC .,.. ~.:LJ.ed on .12/0'/11'5.
A c.rc~~tt1at. O:! A~~J.d.."jt o~ ,pub.1.to.~.101.11 o~ NJU)XACOIf z.%,C' .,... ~j,.1.d 0l.I
()~1Z$/1."6 .
A C.nJ.~tcal:. cE AL~J.dayj:t o~ !'W:I.1.ioauoD 01' .NBDUOOII z.r,c .,.. ~i.~.tI Oil
03 /J51 1."6.
A ..ienn:l..l se.e...."e ..... ~jl.tI ()1! ~21l'97.
:r t'urC1a.t CaR!tY ~.u no ol:.her oo~J.t.tc.t.. JJave beeD ~.tl.d by auch
lbU.t:.tl U&b.il.!ey eampuy. . I" ': . . . .
. ,',
',.";.. .,
... .:
,.-..,.....
,.
..
I. ....
. :~.ttr!iliaiui 4U tk Dffit:itd se4/
.~' ~ t&:~epllrtment t1f SUte. tit tM. CUg
. t1f ~~, ~ ZJrt{ I14g t1f !FeD1Wlr!J
~M<<M#w"ftiM IUuuIrd tUU/
. 1linftJ"'ftVrc.
~L
2.99902240084 36
Sped4l !D~JI,t.y .5ecret:ATy gf St4U
06/11/99 FRI 15;19 (TX/R! NO 55201
..,_:.-.::t:'!:::l':~:;~
:', ;.~~._..~.:-l, - .", "
J
File Number
0015924-7
To all to whom these Presents Shall Come, Greeting:
I, Jesse White, Secretary of State of the State of Illinois, do
hereby certifu that
MEri'IACOM LLC,
A NEW YORK LIMITED LIABILITY COMPANY, APPEARS TO HAVE COMPLIED
WITH ALL PROVISIONS OF THE LIMITED LIABILITY COMPANY ACT OF THIS
STATE RELATING TO THE FILING OF THE APPLICATION FOR ADMISSION ON
JANUARY 5, 1998 AND IS REGISTERED TO TRANSACT BUSINESS IN
THE STATE'OF ILLINOIS ******************************************
In Testimony Whereof; I, hereto set
my hand and cause to be affixed the Great Seal of
the State of Illinois, this 14TH
JULY 1999
day of A.D.
~~~
SECRETARY OF STATE
C-260.1
07/22 16:20 1999 FROM:
07/22/99 18:Z7.FAI 9148952879
.n.t.-02-1999 is 145 a...w..&N PC _.
9146952679
TO: 6123395267
- -,
....... u_ 3IIU
1~
.
'.
ARIZONA CORPOIrAnON OOMMISSION
APPUCATION POR. RBOISTR.A"TIQN
OPA
FOREIGN LIMIT1to UABn"ITY COMj?ANY
PAGE: 4
~004
P.02/03
~l.~l NO.006 P.02
.s ~ . .:: .t1l ~ ~ . . ': _..
.t ~;,.~., ~~ t . ::.~.
.. ""II ,1.\,...._."
=-'! ..:0 '..-...10;1
"......
DEe 1/ If 29 &:/ .S&
AP": ~ ~_
D"~I' -"l' ~'~~
..:-...., ,,,
:,..!.!.: J6.JI.,~
u~;~ . ~
.
~-0'1i~445 _-:
p~ !l'O '1'Ill!l PROvX8%0118 '" "...8. 8l!=o.os U~801 llZ' 880. 01" TH1i
lUtrllO~ loIJIrnlD Ln8u.x'l.'r CIlIIPARlr JlC1'. 'rill! llH:)IIl8:tGllIlD COI!pAIIY
HllUBlI APPLus - RIlQI8T1W!XOlf To ~C1' Bll.s:r~. %If ~BClIIA.
PIlt9T: fA) 1"ha D" 0: 1:11. LSal.tad LJ,&b.L1.1ty cOIGp.lI1Y tin
Jle4iaOOlll AJ:iaona Lt.C
CS) :It 'th. n~ ~l"Opg.ed tor ~.. .lq b....Oft4 .1.8
di~feren~, Chen tb. name ..1.ct.~ ~or q.u in ArLzon.
iL.r
MEDIACOM ARIZONA CABLE NETWORK LLC
CO) :t.t tb n.. O~ ~bo oCllDptony do.. not oClnt:.,Ln the
word. .~imL~Qd L1.b11i\y Camp&D~., "~~t.d
e--P6~., wL.L.C.- O~ -L.C.-, -hah tho na*. of the
company w.Ltih 1::1\. WOJ!'d. DI:' --.....v1.t;io~ whl.Oh b
.l.o~. t:o Add tia.l:'8to foZ' u.o 11) Ju:J.cona .~.I
.
SECOND :
.
.
~ COlUpany La o~9aallllMl "n~.J: th. h..,. Of,
~be datu 0' ~ba o~.n~'. ~O=m4tiOft i.,
Del."are
1'HDU):
l'Ot1~ll'H:
-
S~Ptember 4, 1996
~ P'llrptt.. a' 'tho voapal)" 01:' tbe 9enDI:'&1 E:'hu.C1C.Z' 01 __In... ~t
JlIJopca..1I tv;) tt"aaMOil Ln kbone u.
.
Cab~e ~.1"'i8.i.ol1 Qst:em opera1:i.ol:1
-
iEP;J4-19SlS 1~: 13
212 B2I7 9114
P.1!Il2I2
07/02/99 PHI 16:ff [TIJRI NO 7552J
.~: .~~~', 7:~,{ .5. ,
ljJ
l' ..
l""DI'
9 FROM:
07/22 16:20 199 9146952679
07/22/99 16:27 FAX ClWL&N PC
ll-B2-1999 16: ~
/ '
" '"
/. .
9146952679
TO: 6123395267
PAGE: 5
iii 005
F'. e3/03
- -.. ..... ."..."" r. U.~
w,
prPTlf, '. "-...d Ad_.. Of ~b. -........ "..u_.. ...... _ "",loa of
~Gu.. LIl ~.tl:oa. ~.
- Co~~Oratton S't'Vtca Ooatpany
3aS6 Il8l'1h Ceatr41 A"NlU8. l"boen12c, Al'UOIUf. 8.5012
~
sXX!ta:
- &0-110,," ..........o.laa Cooa.f...lta Lo. ._I....." .. t:IIo Shto..."!'
A90ut for DOrYI.. of POOae.. i, aLOha< o. tbe fallowing OeoOt.
tAl.... ...... ..... -- - '1'l'O......... ....... t:IIo Uftb -.~o;oll .. U
~h. Ag.qt.. .uth~4t~ h.. beea ~.voke~.
(8) orb" "W... c""","" ... ta.... .... ..-.. "i~ "'.. n..ct.. 0'
reU"Dab1e c.tU.Lgenaa.
SEYElITa, <rloa 0<I1ko.. o. ~.. .,.... _ t<o ... "'Ln.oho4 .n t:IIo
~""i_I.... ODd"" - 1.... ., ....... .... _.... L. --"10"", 11
-......, ..... .. - -~. - - 001_.. o. ~ PJ'Lnclpo.\
o~ILCfI .:.1 the ~ ,f,a:
The Prentice-SaU' Co~Orat;ion Systea, In~.
- -
-
~
lDl3 Center Iload, ....i~, lle.1aware 18805
J:)ate:
/2//0 J''9"
AalcnowJ.eclgeC~ by:
~
.BY :
· er
COJlBIIisso, 1'ts Manage%"
I, _c.,p.,..... S."I~. Comp.ny , hllVillg' been <Iestgn.te.t to
act lls Statutory ~~t, ~ OOft8ent to net in that capaoity
until remOVed or ~ign.tion is subaittad 1n .co~'nc. witb the
Arb"n.. :!levi....d Staartea. CorpOJ:att.. ......ic. C.......,
Dat.,,_ /..7-//- 96 BZ:'~~ ~..,..~c::;...-
- - ,-- -(S 9>-....... 0 ll1:ol ""1' ,ant)
't1L09 PeD: 5150.00 CO...,
IP~.... moke <bock P<Yob1a .. ... Ari.... ~"Lan ComoL..~Ft)\^'rv
Asslsr~NT ~~9,~NALl
r-ttr;SIDENr
..
(2)
:eP-a4-19$ 1~: 14
212 997 9114
I'o!t8tQN
..
07/02/99 FRI 16:44
p. eaJ TOTFt... P.03
ITX/RX NO 7552J
275451/1
':1" ~"~:>,!7l.~J~":~"A ~,.
Exhibit C
Subscribers & Homes Passed by State
C-1
-,
....~;:::~..:~_....-._. ~
_.~
Subscribers & Homes Passed by State
($
01
"-
...
-I
"-
CI)
.CI)
Triax Media com Total Combined
STATE Stlbs % Subs % Subs ole
illinois 116,752 34.1% 5,046 1.4% 12f,798 17.5%
Minnesola 106,330 31.1% 106,330 15.3%
Alabama 66,064 18.6% 66,064 9.5%
North Carolina 56,000 15.8% 56,000 8.0%
Florida 48,433 13.6% 48,433 6.9%
Indiana 48,429 14.2% 46,429 6.9%
California 44,850 12.6% 44,850 6.4%
Iowa 39,483 11.5% 39,483 5.7%
Missouri 36,906 10.4% 36,908 5.3%
Kentucky 28,224 8.0% 28,224 4.0%
Delaware 22,830 6.4% 22,830 3.3%
Mississippi 19,891 5.6% 19,891 2.9%
Wisconsin 19,457 5.7<<% 19,457 2.8%
ArIzona 8,713 2.5% 8,000 2.3% 16,713 2.4%
Kansas 9,682 2.7% 9.682 1.4%
Maryland 6,820 1.9% 6,820 1.0%
Michigan 1,921 0.6% 1,921 0.3%
Tennessee 1,571 0.4% 1,571 0.2%
Ohio 1,085 0.3% 1,065 0.2%
Oklahoma 681 0.2% 661 0.1%
Total 342,170 100% 355,000 100% 697,170 1000/0
...
...
N
00
~
CI)
...
~
01
CI)
01
N
01
-I
CI)
~
o
...
CI)
Franl<lAcqulre/Pros/Homes PassedlSheel1
6/16/99 5:17 PM
275451/1
,", .,,",'''', "1M (<S, '0
~
Exhibit D
Draft Resolution - Approving Transfer
0-1
.it!' :. ....'tti~~.,,' !.,,'M" -Ii', '~">t:.:,..:,,i
..w~
" I, _ ", ",;'-";';:~:;I"-';)'h#~.ij~.., ...... "'.. ',.,i
RESOLUTION NO.
APPROVING THE TRANSFER AND
ASSIGNMENT OF THE CABLE TELEVISION FRANCHISE
TO MEDIACOM LLC
WHEREAS, on or about August 15, 1983, the City of Prior Lake ("City") passed
and adopted an Ordinance granting a Cable Television Franchise (" Franchise")
currently held by Triax Midwest Associates, L.P. ("Triax"); and
WHEREAS, on April 29, 1999, a certain Asset Purchase Agreement
("Agreement") was made and entered into by and among Triax and Mediacom LLC; and
WHEREAS, Triax and Mediacom have requested consent by the City to transfer
the Franchise and the assets comprising the Cable System to Mediacom Minnesota
LLC ("Mediacom"); and
WHEREAS, in compliance with the terms of the Asset Purchase Agreement, the
name of grantee/franchisee under the Franchise will be changed to Mediacom; and
WHEREAS, under the Franchise and applicable law, the proposed Transfer
require consent from the City; and
WHEREAS, the City has reviewed the proposed Transfer and the legal,
technical, and financial qualifications of Mediacom and Mediacom LLC; and
WHEREAS, based on information obtained and on the reports and information
received by the City, including the report prepared by the City's cable television
consultants, Moss & Barnett, a Professional Association, which is hereby incorporated
by reference, the City has found no reason to disapprove of the proposed Transfer to
Mediacom.
275451/1
NOW, THEREFORE, the City Council for the City of Prior Lake resolves as
follows:
1. Triax is the lawful holder of the Franchise.
2. The City hereby consents and approves of the proposed Transfer
subject to:
a. Closing of the transaction contemplated within the
Asset Purchase Agreement pursuant to the terms and conditions
described in information provided to the City by Triax and
Mediacom LLC.
b. Mediacom LLC notifying the City in writing of the
. completion of the Transfer within thirty (30) days of the date of
closing of the Transfer.
c. Mediacom, within thirty (30) days of the closing of the
Transfer, providing the City with a signed Acceptance of the
Franchise in the form attached hereto and incorporated by
reference and a Certificate of Good Standing or Existence for
Mediacom for the State of Minnesota, and Mediacom LLC providing
the City with a Corporate Guaranty in the form attached hereto.
d. The City and Triax executing a mutually acceptable
Cable Television Franchise Ordinance on or before October 10,
1999, the date on which the Franchise is due to expire.
3. The City hereby waives any right of first refusal which the City may
have to purchase the Franchise, or the cable television system
275451/1 2
0. ~ ...v.~~;~~-~+,
.., . . 1!lPi,,,...lit~.;;; ;.111II". """.~, ,
'-:;. il;B~~_.___~~'II'qI. :~, \
serving the City, but only as such right of first refusal applies to the
request for approval of the Transfer now before the City.
4. In the event the Transfer from Triax to Mediacom contemplated by
the foregoing resolutions is not completed, for any reasons, the
City's consent shall not be effective.
5. Mediacom may, at any time and from time to time, assign, grant, or
pledge or otherwise convey one or more liens or security interests
in its assets, including its rights, obligations and benefits in and to
the Franchise to any lender providing financing to Mediacom.
6. To the maximum extent permitted by all applicable local, state and
federal laws, this Resolution shall not be construed to in any way
relieve Triax nor limit Mediacom from any liability under the
Franchise.
This Resolution shall take effect and continue and remain in effect from and after
the date of its passage, approval, and adoption.
A motion to approve the foregoing Resolution No. was made by
Council Member and duly seconded by Council Member
The following Council Members voted in the affirmative:
The following Council Members voted in the negative:
275451/1
3
"
Passed and adopted by the City Council for the City of Prior Lake this _ day
of ,1999.
ATTEST:
CITY OF PRIOR LAKE
By:
By:
Its:
275451/1
4
.' ~~" 'iiIi ,;L-:-'l?iliE~~'l'~,.~";,.
~ .. ~1lO.,~",~,~~~" jJ, "
~" . 't~;~"i~~~:II:i, ,lIt .,.Iii
1"11
275451/1
Exhibit E
Acceptance of a Franchise For a Cable Television System
E-1
ACCEPTANCE OF A FRANCHISE FOR A
CABLE TELEVISION SYSTEM IN THE
CITY OF PRIOR LAKE
WHEREAS, the City of Prior Lake, Minnesota ("City") by action of its governing body on
_' 1999, adopted a Resolution No.
("Resolution") approving the
transfer of the cable system and franchise to Mediacom Minnesota LLC ("Mediacom"); and
WHEREAS, the City's Cable Television Franchise ("Franchise"), together with the
Resolution, require that Mediacom accept the Franchise and the conditions contained in the
Resolution in form and substance acceptable to the City.
NOW, THEREFORE, pursuant to the terms and requirements of the Franchise and the
Resolution, and in consideration of the City's approval of the transfer of the Franchise,
Mediacom accepts the Franchise and all conditions in the Resolution and makes the following
representations and warranties to the City:
I. Mediacom is a limited liability company duly organized, validly existing, and in
good standing under the laws of the State of
, and authorized to do business in
Minnesota and with full power, authority, and legal capacity to execute, deliver, and perform
this Acceptance and perform the terms and conditions of the Franchise and the Resolution.
2. All actions necessary to authorize the execution and delivery of this Acceptance
and the performance of the Franchise and Resolution, have been duly authorized by all
necessary and required proceedings.
3. The execution and delivery of the Acceptance and the performance of the
Franchise and the Resolution, does not and will not conflict with or result in the breach or
termination of, or constitute a default under, any indenture or instrument with respect to the
borrowing of money, or any material contract, lease or agreement, or order, judgment or
275451/1
';)f:Z
!E1' '-,",~
'f. l..... "'.1' ."'fr ~,. M'; ~1"!II''Y'll:. ~"'~'lI.~' .,
:"'."H<!;''',,".~l. If ...
decree or any law, rule or regulation to which Mediacom is a party or by which it or any of its
property is bound or affected.
4. Mediacom has carefully read the terms and conditions of the Franchise and the
Resolution, and accepts the rights, duties, and obligations created thereunder, subject to its
rights under applicable state and federal law.
5. Neither Mediacom or any of its representatives or agents have committed any
illegal acts or engaged in any wrongful conduct contrary to, or in violation of, any federal, state,
or local law or regulation in connection with the obtaining of the Franchise.
Dated
_,1999
MEDIACOM MINNESOTA LLC
By:
Its:
STATE OF
COUNTY OF
)
) ss.
)
The foregoing instrument was subscribed and sworn to before me this _ day of
1999, by , the of Mediacom Minnesota LLC.
SEAL
Notary Public
275451/1
2
275451/1
Exhibit F
Guaranty of Performance
F-1
!Ia;- ~_~ ~~,. _;.'.":'''''''0'
;" '~Iio' """.(.", '.
/'J <,;.,i~'t:"!!i.~.. ...ar
Corporate Guaranty
THIS AGREEMENT is made this _ day of , 1999 between Mediacom
LLC ("Guarantor"), the City of Prior Lake, Minnesota ("Franchising Authority"), and Mediacom
Minnesota LLC ("Company").
WITNESSETH
WHEREAS, the Franchising Authority by action of its governing body on
_' 1999 adopted Resolution No. ("Resolution") approving the
transfer of the cable system ("System") and the Franchising Authority's Cable Television
Franchise ("Franchise") to Company; and
WHEREAS, Guarantor is the parent of Company; and whereas, Guarantor has a
substantial interest in the System and the conduct of the Company in complying with the
Franchise and any and all amendments thereof and any agreements related thereto, which
Franchise and amendments are hereby specifically referred to, incorporated herein, and made
a part hereof; and
WHEREAS, the Resolution requires the Company to furnish a guaranty to ensure the
faithful payment and performance of the Company's obligations under the Franchise; and
WHEREAS, the Guarantor desires to provide its unconditional guaranty to fulfill the
requirements of the Resolution.
NOW, THEREFORE, in consideration of the foregoing premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
Guarantor hereby unconditionally guarantees the due and punctual payment and performance
of all of the debts, liabilities and obligations of Company contained in the Franchise
(" Indebtedness").
This Agreement, unless terminated, substituted, or canceled, as provided herein, shall
remain in full force and effect for the duration of the term of the Franchise, except as expressly
provided otherwise in the Franchise.
Upon substitution of another Guarantor reasonably satisfactory to the Franchising
Authority or upon transfer of the Franchise to another entity not under common control of
Mediacom, this Agreement shall be terminated, substituted, or canceled upon thirty (30) days
prior written notice from Guarantor to the Franchising Authority and the Company.
Such termination shall not affect liability incurred or accrued under this Agreement prior
to the effective date of such termination or cancellation.
275451/1
The Guarantor will not exercise or enforce any right of contribution, reimbursement,
recourse or subrogation available to the Guarantor against the Company or any other person
liable for payment of the Indebtedness any collateral security therefor, unless and until all of
the Indebtedness shall have been fully paid and discharged.
The Guarantor will payor reimburse the Franchising Authority for all reasonable costs
and expenses (including reasonable attorneys' fees and legal expenses) incurred by the
Franchising Authority in connection with the protection, defense or enforcement of this
guaranty in any arbitration, litigation or bankruptcy or insolvency proceedings.
The Guarantor waives presentment, demand for payment, notice of dishonor or
nonpayment, and protest of any instrument evidencing Indebtedness. The Franchising
Authority shall not be required first to resort for payment of the Indebtedness to the Company
or other persons or their properties, or first to enforce, realize upon or exhaust any collateral
security for Indebtedness, before enforcing this guaranty. The Guarantor will not assert, plead
or enforce against the Franchising Authority any defense of discharge in bankruptcy of the
Company, statute of frauds, or unenforceability of the Guaranty which may be available to the
Company or any other person liable in respect of any Indebtedness, or any setoff available
against the Franchising Authority to the Company or any such other person, whether or not on
account of a related transaction.
Any notices given pursuant to this Agreement shall be addressed to the Guarantor and
Company at 100 Crystal Run Road, Middletown, New York 10941 and to the
Franchising Authority at 16200 Eagle Creek Avenue, Prior Lake, Minnesota 55372.
275451/1
2
'<;:',l!C~ ",':"'"':"f_,..-r;~~'
II~ ~ ... ~'.~.'ff<"'JI;_ '~'.Il".,.J<,~.k- '"
. """"~~""1'~" ;", " .~
..,
IN WITNESS WHEREOF, the Company, Franchising Authority, and Guarantor have
executed this Corporate Guaranty as of the day, month and year first above written.
GUARANTOR:
MEDIACOM LLC
By:
Its:
COMPANY:
MEDIACOM MINNESOTA LLC
By:
Its:
FRANCHISING AUTHORITY:
CITY OF PRIOR LAKE, MINNESOTA
, Mayor
, Clerk
275451/1
3
Exhibit G
Ownership Structure
275451/1
G-1
.c '.'- ~".
,i:: ,... ~
"J
" " ' :i1:,.~J~;J# ;!,.~;;j'.'R~AI~,i. '.... ;.,
j'
Ownership Structure
100%
Mediacom Rocco B.
Other 90.3% ~ Commisso
... LLC I""'""
Investors ""
100%
100%
~ ~
Mediacom Mediacom 1
Capital Management
Corporation Corporation
~
100% 100% 100% 100% 100% 100% 100% 99% 99%
,Ir
%
Mediacorn
Iowa LLC
Mediacorn Mediacorn Mediacorn Mediacorn Zylstra
Illinois LLC Wisconsin Indiana LLC Minnesota Cornrn. Corp.
LLC LLC
Mediacorn
Southeast
LLC
Mediacorn
Delaware
LLC
Mediacorn ~ Mediacorn
Arizona LLC California
LLC
275451/1
1
275451/1
Exhibit H
July 22, 1999 Letter from Larkin, Hoffman
H-1
-
"......,.,..."'~..~..;...:
'11'. ... 'itIit..;, """...",~- ....... .'''!;\'4'tllij." ~
'''''''.\f~II''''''''.
LARKIN, HOFFMAN, DALY & LINDGREN, LTD.
ATTORNEYS AT LAW
~:e-Ce-IVeo
JUL 2 3 1999
Jane E. Bremer
DIR. DIAL (612) 896-3297
E-MAIL jbremer@lhdl.com
1500 NORWEST FINANCIAL CENTER
7900 XERXES AVENUE SOUTH
BLOOMINGTON, MINNESOTA 55431-1194
TELEPHONE (612) 835-3800
FAX (612) 896-3333
July 22, 1999
Brian T. Grogan, Esq.
Moss & Barnett
4800 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402-4129
VIA FACSIMILE 612-339-6686 &
US MAIL
Re: Application ofTriax Midwest Associates, L.P. for Consent to
Assign Cable Television Franchise to Mediacom LLC
Moss & Barnett Clients
Dear Mr. Grogan:
Following are the responses to the memo written by Michael Nixt, CPA to Brian Grogan on July 14,
1999.
On or prior to consummating the Triax acquisition, Mediacom LLC ("Mediacom") will assign its rights
to an operating subsidiary. Mediacom is in the process of creating the appropriate operating subsidiaries
for this transaction. The assignee will be a joint and several co-borrower of a new borrowing group
("Mediacom Midwest") of Mediacom LLC.
Mediacom Midwest is expected to arrange new $500 million bank facilities on terms and conditions
similar to Mediacom's existing $325 million bank facilities and the new Mediacom USA bank facilities
(see below) that will contain industry standard financial covenants and will be on a stand alone basis (i.e.
not subject to cross-default or cross-collateralization to other operating companies of Mediacom or
Mediacom itself). Based on its business plans, the leverage profile of Mediacom Midwest will not
impair its financial ability to operate, maintain, and upgrade the cable television systems in this
transaction.
To help finance the Triax acquisition, in addition to the planned Mediacom Midwest credit facilities
(discussed above), Mediacom has now underway the syndication of new $500 million facilities for its
Mediacom USA borrowing group. Borrowings under the Mediacom USA credit facilities in the amount
of$375 million will be invested in Mediacom Midwest to help complete the funding necessary to close
the Triax transaction. The Chase Manhattan Bank and two other institutions have each committed $100
million to the Mediacom USA facilities ($300 million in total) prior to launching the syndication to our
existing and new lenders. .
"
LARKIN, HOFFMAN, DALY & LINDGREN, LTD.
\
~
Brian T. Grogan, Esq.
July 22, 1999
Page 2
At this time Mediacom has not delivered a commitment letter to Triax pursuant to Section 3.2(a) of the
Purchase Agreement, and has no immediate plans to do so.
I hope this information is helpful. If you have any additional comments or questions, please feel free to
contact me.
e E. Bremer, for
LARKIN, HOFFMAN, DAL Y & LINDGREN, Ltd.
cc: Chris O'Toole
Tom Bordwell
Eric Schultz
Calvin Craib
Eric Breisach, Esq.
0507663.01
"'. ,......,~,";)L: "
'I',
...- -
_. __ 111""
:\:'~!~::;.::;:'~ ,.'~ .~
ilL