-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Pm2WBKeivfC8D6l+QbJfHr+HpQxZqAx0CBqmJ+ZNvSDB1lyIWBTsLJLO+PP65r56 sO8+IrZlz0nf8vCFtrFu1A== 0001005477-99-001559.txt : 19990819 0001005477-99-001559.hdr.sgml : 19990819 ACCESSION NUMBER: 0001005477-99-001559 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CABLEVISION SYSTEMS CORP /NY CENTRAL INDEX KEY: 0001053112 STANDARD INDUSTRIAL CLASSIFICATION: 4841 IRS NUMBER: 112776686 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-14764 FILM NUMBER: 99581430 BUSINESS ADDRESS: STREET 1: ONE MEDIA CROSSWAYS CITY: WOODBURY STATE: NY ZIP: 11797 BUSINESS PHONE: 5163648450 MAIL ADDRESS: STREET 1: ONE MEDIA CROSSWAYS CITY: WOODBURY STATE: NY ZIP: 11797 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CSC HOLDINGS INC CENTRAL INDEX KEY: 0000784681 STANDARD INDUSTRIAL CLASSIFICATION: 4841 IRS NUMBER: 112776686 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-09046 FILM NUMBER: 99581431 BUSINESS ADDRESS: STREET 1: ONE MEDIA CROSSWAYS CITY: WOODBURY STATE: NY ZIP: 11797 BUSINESS PHONE: 5163648450 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1998 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to Commission File Registrant; State of Incorporation; IRS Employer Number Address and Telephone Number Identification No. - - ------ ---------------------------- ------------------ 1-14764 Cablevision Systems Corporation 11-3415180 (formerly CSC Parent Corporation) Delaware 1111 Stewart Avenue Bethpage, NY 11714 (516) 803-2300 1-9046 CSC Holdings, Inc. (formerly 11-2776686 Cablevision Systems Corporation) Delaware 1111 Stewart Avenue Bethpage, NY 11714 (516) 803-2300 Securities registered pursuant to Section 12(b) of the Act: Name of each Exchange Title of each class: on which Registered: Cablevision Systems Corporation American Stock Exchange - - ------------------------------- Class A Common Stock CSC Holdings, Inc. American Stock Exchange - - ------------------ 8-1/2% Series I Cumulative Convertible Exchangeable Preferred Stock Securities registered pursuant to Section 12(g) of the Act: Cablevision Systems Corporation None CSC Holdings, Inc. None Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Cablevision Systems Corporation Yes |X| No |_| CSC Holdings, Inc. Yes |X| No |_| Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrants' knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |_| Aggregate market value of voting stock held by nonaffiliates of Cablevision Systems Corporation based on the closing price at which such stock was sold on the American Stock Exchange on March 19, 1999: $7,673,577,320. Number of shares of common stock outstanding as of March 19, 1999: Cablevision Systems Corporation Class A Common Stock - 108,547,404 Cablevision Systems Corporation Class B Common Stock - 43,126,836 CSC Holdings, Inc. Common Stock - 1,000 Documents incorporated by reference - The Registrants intend to file with the Securities and Exchange Commission, not later than 120 days after the close of their fiscal year, a definitive proxy statement or an amendment to this report containing the information required to be disclosed under Part III of Form 10-K under cover of Form 10-K/A. TABLE OF CONTENTS Page Part I Item 1. Business. 1 2. Properties. 26 3. Legal Proceedings. 27 4. Submission of Matters to a Vote of Security Holders. 27 Part II 5. Market for the Registrants' Common Equity and Related Stockholder Matters. 28 6. Selected Financial Data. 30 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. 34 8. Consolidated Financial Statements. 69 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. 146 Part III* 10. Directors and Executive Officers of the Registrant. * 11. Executive Compensation. * 12. Security Ownership of Certain Beneficial Owners and Management. * 13. Certain Relationships and Related Transactions. * Part IV 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. 146 * These items are omitted because the registrant intends to file with the Securities and Exchange Commission, not later than 120 days after the close of its fiscal year, a definitive proxy statement or an amendment to this report containing the information required to be disclosed under Part III of Form 10-K under cover of Form 10-K/A. PART I Item 1. Business This combined Annual Report on Form 10-K is separately filed by CSC Holdings, Inc. ("CSC Holdings") and Cablevision Systems Corporation ("Cablevision Parent" or the "Company"). Cablevision Parent Cablevision Parent is a Delaware corporation which was organized in 1997. Cablevision Parent's only assets are all of the common stock of CSC Holdings, all of the ownership interests in the entities that own certain cable television systems acquired from Tele-Communications, Inc. in 1998 (the "TCI Systems") and which served 843,000 subscribers at December 31, 1998, and a minority interest in Cablevision Cinemas, LLC, which owns the Company's motion picture theater assets. References herein to the "Systems" refer to the cable television systems owned by CSC Holdings, and, from and after March 4, 1998, such systems and the TCI Systems. CSC Holdings CSC Holdings is a Delaware corporation which was organized in 1985 and owns and operates cable television systems in 6 states with approximately 2,569,000 subscribers at December 31, 1998. Through Rainbow Media Holdings, Inc. ("Rainbow Media"), a company owned 75% by CSC Holdings and 25% by NBC Cable Holding, Inc. ("NBC Cable"), a subsidiary of National Broadcasting Company, Inc. ("NBC"), CSC Holdings owns interests in and manages numerous national and regional programming networks, the Madison Square Garden sports and entertainment business and cable television advertising sales companies. CSC Holdings, through Cablevision Lightpath, Inc. ("Lightpath"), a wholly-owned subsidiary of CSC Holdings, provides switched telephone service. CSC Holdings also owns Cablevision Electronics Investments, Inc., doing business as The Wiz, an electronics retailer operating 40 retail locations in the New York Metropolitan area and a majority interest in Cablevision Cinemas, LLC which owns motion picture theaters containing a total of 283 screens in the New York Metropolitan area. The Holding Company Reorganization and TCI Transactions Until March 4, 1998, CSC Holdings was known as Cablevision Systems Corporation. On that date, CSC Holdings completed a reorganization whereby it formed a holding company (now named Cablevision Systems Corporation) and CSC Holdings became a subsidiary of Cablevision Systems Corporation. This transaction is referred to herein as the "Reorganization". Prior to the Reorganization, CSC Holdings had two outstanding classes of common stock. Its Class A Common Stock was publicly traded on the American Stock Exchange (the "ASE") and its Class B Common Stock was privately held. In the Reorganization, the Class A Common Stock and Class B Common Stock of CSC Holdings were converted into identical securities of Cablevision Parent (1) and the Class A Common Stock of Cablevision Parent became listed on the ASE and trades under the symbol "CVC". Cablevision Parent owns all of the common stock of CSC Holdings. CSC Holdings' outstanding preferred stock was unaffected by the Reorganization except that CSC Holdings' 8-1/2% Series I Cumulative Convertible Exchangeable Preferred Stock is now convertible into Cablevision Parent's Class A Common Stock rather than CSC Holdings' Class A Common Stock. The Series I Preferred Stock continues to be listed on the ASE and to trade under the symbol "CVCp". The outstanding debt of CSC Holdings was not affected by the Reorganization. In connection with the Reorganization, Tele-Communications, Inc. ("TCI") caused to be contributed to Cablevision Parent, and Cablevision Parent acquired the TCI Systems. These systems, which are located in New Jersey, on Long Island and in New York's Rockland and Westchester counties, served approximately 833,000 cable subscribers as of the contribution date. In consideration for those cable television systems, Cablevision Parent issued to certain TCI entities shares of Cablevision Parent Class A Common Stock representing approximately 32.3% of the outstanding common stock of Cablevision Parent and assumed certain liabilities related to such systems. See "Cable Television Operations - TCI Transactions" below for a discussion of these transactions. Stock Splits On March 4, 1998, Cablevision Parent's Board of Directors declared a two-for-one stock split in the form of a stock dividend on the outstanding Class A Common Stock and Class B Common Stock of Cablevision Parent. The dividend was paid on March 30, 1998 to stockholders of record on March 19, 1998. Additionally, on July 22, 1998, Cablevision Parent's Board of Directors declared a two-for-one stock split to be effected as a special stock distribution of one share of Class A Common Stock for each share of Class A Common Stock issued and outstanding as of August 10, 1998 and one share of Class B Common Stock for each share of Class B Common Stock issued and outstanding as of August 10, 1998. The stock dividend was paid on August 21, 1998 to stockholders of record on August 10, 1998. All share and per share amounts of Cablevision Parent and CSC Holdings in this Form 10-K have been restated to reflect the stock splits. Cable Television Operations General Cable television is a service that delivers multiple channels of television programming to subscribers who pay a monthly fee for the services they receive. Television and radio signals are received over-the-air or via satellite delivery by antennas, microwave relay stations and satellite earth stations and are modulated, amplified and distributed over a network of coaxial and fiber optic cable to the subscribers' television sets. Cable television systems typically are constructed and operated pursuant to non-exclusive franchises awarded by local governmental authorities for specified periods of time. (2) The Company's cable television systems offer varying levels of service which may include, among other programming, local broadcast network affiliates and independent television stations, satellite-delivered "superstations", certain other news, information and entertainment channels such as CNN, CNBC, ESPN, and MTV, and certain premium services such as HBO, Showtime, The Movie Channel, Starz and Cinemax. The Company's cable television revenues are derived principally from monthly fees paid by subscribers. In addition to recurring subscriber revenues, the Company derives revenues from installation charges, from the sales of pay-per-view movies and events, and from the sale of advertising time on advertiser supported programming. Certain services and equipment provided by substantially all of the Company's cable television systems are subject to regulation. As of December 31, 1998, the Company's consolidated cable television systems served approximately 3,412,000 subscribers, primarily in the greater New York, Boston and Cleveland metropolitan areas. The following table sets forth certain statistical data regarding the Company's cable television operations.
As of December 31, ----------------------------------------------- 1998 1997 1996 ----------------------------------------------- Homes passed by cable (1) ...................... 5,115,000 4,398,000 3,858,000 Basic service subscribers ...................... 3,412,000 2,844,000 2,445,000 Basic service subscribers as a percentage of homes passed ............................... 66.7% 64.7% 63.4% Number of premium television units ............. 5,137,000 4,183,000 3,862,000 Average number of premium units per basic subscriber at period end ................... 1.5 1.5 1.6 Average monthly revenue per basic subscriber (2) $ 42.56 $ 38.53 $ 36.71
- - ---------- (1) Homes passed is based upon homes actually marketed and does not include multiple dwelling units passed by the cable plant that are not connected to it. (2) Based on recurring service revenues for the last month of the period, excluding installation charges and certain other non-recurring revenues such as pay-per-view, advertising and home shopping revenues. See "Subscriber Rates and Services; Marketing and Sales." The Company's consolidated cable television systems are concentrated in the New York City greater metropolitan area (79% of the Company's total subscribers as of December 31, 1998), the Boston and suburban Massachusetts areas (10% of total subscribers as of December 31, 1998) and the greater Cleveland metropolitan area (9% of total subscribers as of December 31, 1998). The Company believes that its cable systems on Long Island comprise the largest group of contiguous cable television systems under common ownership in the United States (measured by number of subscribers). Cable Television System Sales Since early 1997, the Company has aggressively pursued a plan to dispose of certain nonstrategic cable television systems. The Company has completed the sale or transfer of cable television (3) systems in Alabama, Florida, Illinois, Kentucky, Maine, Missouri, New York, North Carolina, Ohio and neighboring states, representing approximately 440,000 subscribers for an aggregate sales price of $514.7 million in cash. In addition, in October 1998, the Company transferred its cable television system in Rensselaer, New York (which served approximately 29,600 subscribers at September 30, 1998), plus approximately $16 million in cash to Time Warner Entertainment Company, L.P. in exchange for Time Warner's Litchfield, Connecticut system (which served approximately 28,400 subscribers at date of transfer). TCI Transactions On March 4, 1998, Cablevision Parent completed transactions with TCI ("TCI Transactions") pursuant to which Cablevision Parent acquired certain cable television systems owned and operated by TCI and located in New Jersey, on Long Island and in New York's Rockland and Westchester counties. Cablevision Parent issued to certain TCI entities (the "TCI Transferors") an aggregate of 48,942,172 shares (adjusted for the two-for-one stock splits) of Cablevision Parent's Class A Common Stock (See "The Holding Company Reorganization and TCI Transactions"). In addition, Cablevision Parent assumed certain related liabilities, including an aggregate amount of indebtedness for borrowed money equal to $669 million (the "Assumed Debt"). The Assumed Debt was refinanced immediately following the closing of the transactions with borrowings under a new $800 million bridge revolving credit facility (the "Bridge Credit Agreement") entered into by wholly-owned subsidiaries of Cablevision Parent acquired from TCI or that hold assets contributed by TCI (the "Contributed Business Subsidiaries") with a group of banks led by Toronto Dominion (Texas), Inc., as administrative and arranging agent. The Contributed Business Subsidiaries are wholly-owned (directly or indirectly) by Cablevision Parent. CSC Holdings has no ownership interest in the Contributed Business Subsidiaries and has not guaranteed any of their debt or other obligations. See "Management Discussion and Analysis - Liquidity and Capital Resources." Contemporaneous with the Reorganization, CSC Holdings acquired the remaining 1% interest in Cablevision of New York City, L.P. of Mr. Charles F. Dolan ("Mr. Dolan") and satisfied certain payment obligations for a cash payment of approximately $194 million. This transaction was effected pursuant to the provisions of agreements entered into in 1992, as amended in 1997 to delay the exercise date to coincide with the consummation of the Reorganization and related transactions. In connection with securing certain regulatory approvals for the transaction, the Company agreed to divest certain cable television system assets of the Contributed Business Subsidiaries that are located in Paramus and Hillsdale, New Jersey. These systems (which served approximately 5,300 subscribers at November 30, 1998) were sold in December 1998. On January 27, 1998, CSC Holdings, Cablevision Parent and a subsidiary of TCI entered into a non-binding letter of intent for Cablevision Parent to acquire TCI's cable television systems (the "TCI Connecticut Systems") in and around Hartford, Vernon, Branford and Lakeville, Connecticut serving approximately 244,000 subscribers at December 31, 1998, based on information supplied by TCI. In consideration for the TCI Connecticut Systems, which have been valued by the parties at $380 million, Cablevision Parent would: (4) (i) transfer to TCI cable television systems serving Kalamazoo, Michigan (which served approximately 49,000 subscribers as of December 31, 1998 and which have been valued by the parties at $75 million), (ii) transfer to TCI other cable television systems to be identified by TCI and purchased with approximately $25 million of funds provided by Cablevision Parent, (iii) issue shares of Cablevision Parent Class A Common Stock (based on a $28.90 per share valuation), and (vi) assume certain indebtedness relating to the TCI Connecticut Systems, which is anticipated to total approximately $110 million. No definitive documentation has been executed with respect to these transactions and there can be no assurance that such documentation will be executed or that these transactions will be consummated on the above terms or at all. The agreement effecting the TCI Transactions (the "Contribution Agreement") permits Cablevision Parent to combine the cable operations of CSC Holdings and the Contributed Business Subsidiaries. Following such a combination, Cablevision Parent would be permitted to establish Rainbow Media as a separate subsidiary of Cablevision Parent. The Company anticipates that the Contributed Business Subsidiaries will be contributed to CSC Holdings by April 4, 1999. No final decision has been made as to whether such combination of the Contributed Business Subsidiaries and CSC Holdings' cable television systems and the Rainbow Media separation would be effected without a favorable tax ruling from the Internal Revenue Service, and there can be no assurances that such a ruling will be obtained. If the Company effects these transactions, Rainbow Media and its subsidiaries would be subsidiaries of Cablevision Parent and would no longer be subsidiaries of CSC Holdings. Combination of the Contributed Business Subsidiaries and CSC Holdings' cable television systems and any full or partial separation of Rainbow Media from CSC Holdings is also dependent upon compliance with the Company's debt covenants and upon the receipt of regulatory and other approvals. In connection with the TCI Transactions, Cablevision Parent, TCI and certain holders of Cablevision Parent Class B Common Stock (the "Class B Stockholders') entered into a Stockholders Agreement (the "Stockholders Agreement") providing, among other things, for: (i) limits on TCI's ability to buy more than an additional 10% of the Cablevision Parent Class A Common Stock beyond that issued to TCI in the TCI Transactions, (ii) limitations on TCI's ability to transfer Cablevision Parent Class A Common Stock to any person who after such transfer would beneficially own 10% or more of the outstanding Cablevision Parent Class A Common Stock or 5% or more of all outstanding Cablevision Parent Common Stock, except for transfers of all of TCI's Cablevision Parent Class A Common Stock to a single purchaser who agrees to become a party to the Stockholders Agreement, transfers to certain TCI subsidiaries and transfers in connection with a bona fide pledge to secure a borrowing, (iii) consultation rights among Cablevision Parent, TCI and the Class B Stockholders regarding sales of Cablevision Parent as a whole or significant Cablevision Parent assets, sales of Cablevision Parent Class A Common Stock owned by TCI and sales of Cablevision Parent Class B Common Stock owned by the Class B Stockholders, (5) (iv) certain tag-along and drag-along rights between TCI and the Class B Stockholders, (v) preemptive rights for TCI on new issuances of Cablevision Parent Common Stock so that TCI may maintain ownership of 33% of the outstanding Cablevision Parent Common Stock, with certain limited exceptions, (vi) TCI's right to designate two Class B directors to Cablevision Parent's Board of Directors, (vii) the right of TCI director designees to membership on a Cablevision Parent board committee to approve certain transactions with Class B Stockholders and their family members that will give such designees a veto over such transactions, (viii)TCI's agreement to vote in proportion with the public Cablevision Parent Class A Common Stockholders for the election of the 25% of Cablevision Parent directors which the Cablevision Parent Class A Common Stock is entitled to elect, (ix) Cablevision Parent's agreement not to effect acquisition transactions that would cause the debt to cash flow ratio of Cablevision Parent (calculated as described in the Stockholders Agreement) to exceed a specified ratio (initially 8.0 to 1, and declining to 7.5 to 1 after December 31, 1999), and (x) registration rights under the Securities Act for shares of Cablevision Parent Class A Common Stock owned by TCI. On March 9, 1999, TCI merged with a subsidiary of AT&T Corp. and became a wholly-owned subsidiary of AT&T Corp. The following charts summarize the corporate organization structure of Cablevision Parent and CSC Holdings immediately following the TCI Transactions and after giving effect to the combination of the Contributed Business Subsidiaries with CSC Holdings and the Rainbow Media separation. No final decision has been made as to whether a combination of the Contributed Business subsidiaries and CSC Holdings' cable television systems and the Rainbow Media separation will be effected. (6) MANUAL INSERT Chart depicting: Company Structure Immediately following Completion of the TCI Transactions and Prior to Other Possible Related Transactions Chart depicting: Company Structure Following Completion of Other Possible Related Transactions (7) Subscriber Rates and Services; Marketing and Sales. The Company's cable television systems offer a package of services, generally marketed as "Family Cable", which includes, among other programming, broadcast network local affiliates and independent television stations, satellite-delivered "superstations" and certain other news, information and entertainment channels such as CNN, CNBC, ESPN and MTV. For additional charges, the Company's cable television systems provide certain premium services such as HBO, Showtime, The Movie Channel, Starz and Cinemax, which may be purchased either individually (in conjunction with Family Cable) or in combinations or in tiers. In addition, the Company's cable television systems offer a basic package which includes broadcast network local affiliates and public, educational or governmental channels and certain leased access channels. In certain areas with sufficient system capacity, the Company has a branded product offering called "OptimumTV". OptimumTV, which includes a minimum of 77 analog channels, offers the basic and Family packages noted above, as well as premium services, and a group of three packages containing premium networks and ad-supported news, information and entertainment channels. Depending upon the market, OptimumTV offers customers anywhere from 20 to 30 additional cable channels, including additional pay-per-view channels that offer movies and sporting events on a transactional basis. In other areas, the Company offers premium services on an individual basis and as components of different "tiers". Successive tiers include additional premium services for additional charges that reflect discounts from the charges for such services if purchased individually. For example, in most of the Company's cable systems, subscribers may elect to purchase Family Cable plus one, two or three premium services with declining incremental costs for each successive tier. In addition, many systems offer a "Rainbow" package consisting of between five and seven premium services, and a "Rainbow Gold" package consisting of between eight and ten premium services. Since its existing cable television systems are substantially fully built, the Company's sales efforts are primarily directed toward increasing penetration and revenues in its franchise areas. The Company sells its cable television services through door-to-door selling, as well as telemarketing, direct mail advertising, promotional campaigns and local media and newspaper advertising. Certain services and equipment (converters which are leased to subscribers) provided by substantially all of the Company's cable television systems are subject to regulation. See "Cable Television Operations - Regulation - 1992 Cable Act." System Capacity. The Company is engaged in an ongoing effort to upgrade the technical capabilities of its cable plant and to increase channel capacity for the delivery of additional programming and new services. The Company's cable television systems have a minimum capacity of 42 channels and 95% of its homes passed are currently served by systems having a capacity of at least 62 channels. Currently 87% of its homes are served by at least 77 channels. As a result of ongoing upgrades, the Company expects (8) that by December 1999 approximately 94% of its subscribers will be served by systems having a capacity of at least 77 channels. All of the system upgrades either completed or underway will utilize fiber optic cable. Programming. Adequate programming is available to the Systems from a variety of sources including that available from Rainbow Media and affiliates of TCI. Program suppliers' compensation is typically a fixed, per subscriber monthly fee based, in most cases, either on the total number of subscribers of the cable systems and certain of its affiliates, or on the number of subscribers subscribing to the particular service. The programming contracts are generally for a fixed period of time and are subject to negotiated renewal. Cable programming costs have increased in recent years and are expected to continue to increase due to additional programming being provided to most subscribers, increased costs to produce or purchase cable programming and other factors. Management believes that the Systems will continue to have access to programming services at reasonable price levels. Franchises. The Systems are operated primarily under nonexclusive franchise agreements with local governmental franchising authorities, in some cases with the approval of state cable television authorities. Franchising authorities generally charge a fee of up to 5% based on a percentage of certain revenues of the franchisee. The franchise agreements are generally for a term of ten to fifteen years from the date of grant, although recently renewals have often been for five to ten year terms. Some of the franchises grant the cable television system an option to renew. Except for the franchise for the Town of Brookhaven, which has been passed by the town and is pending state approval, the expiration dates for the Company's ten largest franchises range from 2001 to 2007. In situations where the Company's franchises have expired, the Company is operating under temporary operating authority or short term extensions while negotiating renewal terms with the franchising authorities. Franchises usually require the consent of the franchising authority prior to the sale, assignment, transfer or change in ownership or operating control of the franchisee. The Cable Communications Policy Act of 1984 (the "1984 Cable Act") and the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act") provide significant procedural protections for cable operators seeking renewal of their franchises. See "Business - Cable Television Operations - Regulation". In connection with a renewal, a franchising authority may impose different and more stringent terms. The Company has never lost a franchise as a result of a failure to obtain a renewal. (9) Programming and Entertainment Operations General. The Company conducts its programming activities through Rainbow Media, a company 75% owned by CSC Holdings and 25% by NBC Cable. Rainbow Media's businesses include national and regional programming networks and the Madison Square Garden sports and entertainment business. Rainbow Media also owns interests in cable television advertising businesses. Rainbow Media's national entertainment networks include American Movie Classics (which features American theatrically released classic films and original programming), Bravo (which features films and performing arts programs, including jazz, dance, classical music and theatrical and original programming), Romance Classics (which features theatrically released films, mini-series, made for television movies and original programming having a romantic theme), MuchMusic (which features a diverse mix of new and established musical artists) and The Independent Film Channel (which features independent films made outside the traditional Hollywood system). National Sports Partners is a national sports network featuring Fox Sports Net, which provides national sports programming to regional sports networks. National Sports Partners is 50% owned by Rainbow Media and is managed and 50% owned by Fox/Liberty Networks, LLC ("Fox/Liberty"). Rainbow Media owns a 60% interest in, and manages, Regional Programming Partners, a partnership with Fox/Liberty. Regional Programming Partners owns an approximate 96.3% interest in Madison Square Garden, a sports and entertainment company that owns and operates the Madison Square Garden Arena and the adjoining Theater at Madison Square Garden, the New York Knickerbockers professional basketball team, the New York Rangers professional hockey team, the New York Liberty professional women's basketball team, the New England Seawolves professional arena football team, the Hartford Wolf Pack professional hockey team, the Madison Square Garden Network, Fox Sports New York and Radio City Entertainment (which operates Radio City Music Hall in New York City). Additionally, Madison Square Garden manages and operates the Hartford Civic Center. Regional Programming Partners also owns interests in regional sports networks that provide regional sports programming to the New England, Chicago, Cincinnati, Cleveland, San Francisco and Florida areas, in addition to Madison Square Garden Network and Fox Sports New York which provide regional sports programming to the New York City Metropolitan area, as well as MSG MetroChannels which provide regional and local sports, news and educational programming to the New York Metropolitan area. Rainbow Media owns Rainbow News 12 which operates regional news networks servicing suburban areas surrounding New York City. Rainbow Media also owns and operates Rainbow Advertising Sales Corporation, a cable television advertising company and owns a 50% interest in National Advertising Partners, which sells national advertising for regional sports networks and is managed and 50% owned by Fox/Liberty. (10) The following table sets forth ownership information and estimated subscriber information as of December 31, 1998 for each of the programming businesses whose ownership interest is held directly or indirectly by Rainbow Media. Rainbow Media is a 75% owned subsidiary of CSC Holdings. NBC owns the remaining 25% interest. Regional Programming Partners ("RPP") is a 60% owned subsidiary of Rainbow Media, with the remaining 40% interest owned by Fox/Liberty.
Affiliated Programming Viewing Basic Businesses Subscribers Subscribers (1) Ownership (2) - - ---------- ----------- --------------- ------------- (In Millions) National Entertainment: American Movie Classics 63.7 68.6 Rainbow Media - 100% Romance Classics 12.4 19.9 Rainbow Media - 100% Bravo 31.5 38.8 Rainbow Media - 100% Bravo Latin America 4.2 5.2 Rainbow Media - 100% The Independent Film Channel 7.8 21.0 Rainbow Media - 100% MuchMusic 9.6 17.1 Rainbow Media and Chum, Ltd. - 50% each Sports: Madison Square Garden Network/FSNY 11.4 14.5 RPP - 96.3%; ITT - 3.7% (3) Fox Sports Pacific 2.8 3.1 RPP and Fox/Liberty - 50% each Fox Sports Chicago 3.1 3.2 RPP and Fox/Liberty - 50% each Fox Sports New England 2.9 3.7 RPP and Media One - 50% each (4) Fox Sports Ohio 2.1 2.3 RPP - 100% Fox Sports Cincinnati 2.4 2.6 RPP - 100% SportsChannel Florida 3.0 3.1 RPP - 30%; Front Row - 70% News Services: News12 Long Island .7 .8 Rainbow Media - 100% News12 Connecticut .2 .2 Rainbow Media - 100% News12 New Jersey 1.6 1.7 Rainbow Media and Newark Star Ledger - 50% each News12 Westchester .2 .2 Rainbow Media - 100% News12 Bronx .2 .2 Rainbow Media - 100% Neighborhood News L.I. .1 .1 Rainbow Media - 100% Other: MSG Metro Guide 2.4 2.6 RPP - 100% MSG Metro Traffic and Weather 2.4 2.6 RPP - 100% MSG Metro Learning 2.4 2.6 RPP - 100%
- - ---------- (1) Represents the total number of basic subscribers available in systems that carry the service. (2) Various of these programming businesses, other than those which are wholly-owned by Rainbow Media, are subject to puts, calls, rights of first refusal and restrictions on transfer. (3) See "Madison Square Garden" for a discussion of certain puts and calls with respect to Madison Square Garden. (4) In January 1998, Media One, Inc. purchased a 50% interest in Fox Sports New England for approximately $19 million. (11) Rainbow Media's existing structure reflects three significant transactions that were consummated in 1997. NBC Transaction On April 1, 1997, Rainbow Media consummated a transaction in which Rainbow Programming Holdings, Inc. merged with and into Rainbow Media, a newly formed subsidiary of CSC Holdings. In addition, NBC Cable received a 25% equity interest (which interest may be increased by up to an additional 2% under certain circumstances without additional payment) in Class C Common Stock of Rainbow Media. CSC Holdings owns the remaining 75% equity interest in Rainbow Media. The partnership interests in certain of Rainbow Media's programming services formerly owned by NBC Cable are now owned by subsidiaries of Rainbow Media. Fox/Liberty Transactions On December 18, 1997, Rainbow Media organized three partnerships with Fox Sports, a subsidiary of Fox/Liberty: Regional Programming Partners (the partnership that owns the interest in Madison Square Garden and in the regional sports programming businesses previously owned by Rainbow Media), National Sports Partners (the partnership that owns and operates Fox Sports Net) and National Advertising Partners (the partnership that manages and sells national advertising for certain of the regional sports networks in which Regional Programming Partners owns interests and certain regional sports networks owned by Fox/Liberty) (the "Fox/Liberty Transactions"). In connection with the formation of Regional Programming Partners, affiliates of Rainbow Media, through various indirect transfers, contributed to Regional Programming Partners, in consideration for the issuance of a 60% general partnership interest, their interests in Madison Square Garden, SportsChannel Chicago, SportsChannel Pacific, SportsChannel New England, SportsChannel Ohio, SportsChannel Cincinnati, SportsChannel Florida and Metro Channel LLC. Fox/Liberty contributed $850 million in cash to Regional Programming Partners in exchange for a 40% general partnership interest. A subsidiary of Rainbow Media is the managing general partner of Regional Programming Partners. In connection with the formation of National Sports Partners, Rainbow Media contributed to National Sports Partners, in consideration for the issuance of a 50% general partnership interest, its interests in American Sports Classics LLC, Prime SportsChannel and SportsChannel Ventures, Inc. Fox/Liberty contributed, in consideration for the issuance of a 50% general partnership interest, certain assets, including the assets pertaining to or used in the business of Fox Sports and interests in Prime SportsChannel and Fox Watch Productions Inc. A subsidiary of Fox Sports is the managing partner of National Sports Partners. In connection with the formation of National Advertising Partners, Rainbow Media contributed to National Advertising Partners, in consideration for the issuance of a 50% general partnership interest, certain assets relating to the national advertising of certain of the regional sports programming services in which Rainbow Media had an interest. Fox/Liberty contributed, in consideration for the issuance of a 50% general partnership interest, certain assets relating to the national advertising of the regional sports programming services in which Fox Sports had an (12) interest. A subsidiary of Fox Sports is the managing general partner of National Advertising Partners. Madison Square Garden In March 1995, a partnership formed by Rainbow Media and ITT Corporation ("ITT") acquired the business and assets of Madison Square Garden. Madison Square Garden owns and operates the Madison Square Garden Arena and the adjoining Theater at Madison Square Garden, the New York Knickerbockers professional basketball team, the New York Rangers professional hockey team, the New York Liberty professional women's basketball team, the New England Seawolves professional arena football team, the Hartford Wolf Pack professional hockey team, the Madison Square Garden Network, Fox Sports New York and Radio City Entertainment (which operates Radio City Music Hall in New York City). The purchase price was $1,009.1 million. On June 17, 1997, Madison Square Garden redeemed a portion of ITT's interest in Madison Square Garden for $500 million and Rainbow Media contributed its SportsChannel Associates programming company to Madison Square Garden, which, together with the redemption, increased Rainbow Media's interest in Madison Square Garden to 89.8% and reduced ITT's interest to 10.2%. In connection with the Fox/Liberty Transactions discussed above, Rainbow Media's interest in Madison Square Garden was contributed to Regional Programming Partners. ITT's interest in Madison Square Garden was further reduced to 7.8% as a result of the $450 million capital contribution by Regional Programming Partners to Madison Square Garden as of December 18, 1997, which was used by Madison Square Garden to pay down outstanding debt. ITT's interest was further reduced to 3.7% in June 1998, when MSG redeemed a portion of ITT's interest following ITT's exercise of its first put right. In March 1999, ITT and the Company entered into an agreement under which ITT exercised its second put for the remainder of its interest in MSG and settled certain matters between the parties for a net payment of $87 million. Consummation of this transaction is subject to league and regulatory approvals and is expected to occur in the second quarter of 1999. CSC Holdings and Rainbow Media entered into agreements with the National Hockey League (the "NHL") and the National Basketball Association ("NBA"), agreeing, among other things, to conduct themselves in accordance with the relevant rules of each league. The approvals of the NHL and the NBA are required for certain transactions involving Cablevision Parent, CSC Holdings, Rainbow Media, Regional Programming Partners and MSG, including certain transfers of ownership interests. On December 5, 1997, Madison Square Garden purchased Radio City Entertainment, the production company that operates Radio City Music Hall in New York City and produces The Radio City Christmas Spectacular and shows featuring the Radio City Rockettes and simultaneously entered into a 25-year lease for Radio City Music Hall. Telephone and Modem Services The Company, through Lightpath, a Competitive Local Exchange Carrier, provides basic and advanced local telecommunications services to the business market. Lightpath provides a full range of local dial tone, switched services, private line and advanced networking features on the local and (13) long distance levels on its own facilities and network. As of December 31, 1998, Lightpath serviced over 1,200 industrial, commercial and institutional accounts on Long Island. In addition, the Company has begun providing residential telephone and cable modem internet access service in portions of the greater New York City Metropolitan area and parts of southern Connecticut. At December 31, 1998, the Company served approximately 11,200 modem subscribers. The Wiz On February 9, 1998, Cablevision Electronics Investments, Inc. ("Cablevision Electronics"), a wholly-owned subsidiary of CSC Holdings, acquired substantially all of the assets associated with 40 The Wiz consumer electronics store locations from The Wiz, Inc. and certain of its subsidiaries and affiliates (collectively, "TWI"). TWI had filed for bankruptcy protection on December 16, 1997. Cablevision Electronics paid approximately $93 million, including transaction costs, for the assets. In addition, prior to closing, Cablevision Electronics provided approximately $8 million for TWI to meet certain operating costs. The Wiz is an electronics retailer selling primarily video and audio equipment, home office equipment, compact disks and other pre-recorded music, digital video disks, and VHS video and other pre-recorded movies. Theaters In December 1998, Cablevision Parent acquired all of the outstanding shares of stock of Clearview Cinema Group, Inc. ("Clearview") pursuant to an Agreement and Plan of Merger entered into in August 1998. The total purchase price amounted to approximately $157.7 million (including assumed debt of $80 million) of which approximately $33.4 million was paid in shares of Cablevision Parent's Class A Common Stock. From December 1998 through February 1999, CSC Holdings acquired a total of 16 movie theaters from Loews Cineplex Entertainment Corporation ("Loews"), for an aggregate purchase price of approximately $89 million. These theaters are located in the New York Metropolitan area. In connection with this acquisition, Loews has granted CSC Holdings a right of first offer on an additional 21 movie theaters in the greater New York Metropolitan area until December 1999. At Home Corporation The Company owns warrants to acquire approximately 10.2 million shares of common stock of At Home Corporation, which warrants are exercisable at $.50 per share. At Home Corporation distributes high-speed interactive services to residences and businesses using its own network architecture and a variety of transport options, including the cable industry's hybrid fiber coaxial infrastructure. These warrants were issued to the Company in exchange for certain agreements of the Company with respect to the distribution of the At Home internet access service to cable subscribers. (14) Other Investments CSC Holdings holds a 49.9% interest, and certain preferential distribution rights, in NorthCoast Communications, LLC ("NorthCoast"). NorthCoast holds certain licenses to conduct a personal communications service ("PCS") business. CSC Holdings has contributed an aggregate of approximately $38.0 million as of December 31, 1998 to NorthCoast (either directly or through a loan to NorthCoast Operating Co., Inc. ("NorthCoast Operating"), the other member in NorthCoast). Rainbow Media holds a 50% interest in R/L DBS Company LLC, a joint venture with Loral Space and Communications, Ltd. ("R/L DBS"). R/L DBS holds certain frequencies granted by the FCC for the operation of a direct broadcast satellite business. CSC Holdings has contributed an aggregate of approximately $14.9 million through December 31, 1998 to R/L DBS or its predecessor businesses. Competition Cable Television The Systems generally compete with the direct reception of broadcast television signals by antenna and with other methods of delivering television signals to the home for a fee. The extent of such competition depends upon the number and quality of the signals available by direct antenna reception as compared to the number and quality of signals distributed by the cable system. The Systems also compete to varying degrees with other communications and entertainment media, including movies, theater and other entertainment activities. The Telecommunications Act of 1996 ("1996 Telecom Act") repealed the 1984 Act prohibition against telco-cable cross-ownership and provides that a local exchange telephone company may provide video programming directly to subscribers through a variety of means, including (1) as a radio-based (MMDS or DBS) multichannel video programming distributor; (2) as a cable operator, fully subject to the franchising, rate regulation and other provisions of the 1984 and 1992 Cable Acts; and (3) through an "open video system" ("OVS") that is certified by the Federal Communications Commission ("FCC") to be offering nondiscriminatory access to a portion of its channel capacity for unaffiliated program distributors, subject only to selected portions of the regulations applicable to cable operators. Non-telephone companies may also become an OVS and provide video competition to cable systems without obtaining a franchise, although a recent court decision has restored certain municipal franchising powers over OVS, making OVS a less attractive alternative. A local telephone company also may provide the "transmission of video programming" on a common carrier basis. As noted below, telephone companies in several of the Company's franchise areas have applied for franchises to offer cable service fully subject to the 1984 and 1992 Cable Acts. Several companies have sought to become an OVS in areas in which the Company operates cable systems in Boston, New York City and Westchester County, New York. One, RCN Corporation ("RCN") is currently operating an OVS or franchised cable systems in Boston, New York City, and a number of Massachusetts communities in which the Company operates cable systems. (15) The 1996 Telecom Act also prohibits a telephone company or a cable system operator in the same market from acquiring each other, except in limited circumstances, such as areas of smaller population. Four DBS systems are now operational in the United States, some with investment by companies with substantial resources such as Hughes Electronics Corp. Both C-Band and Ku-Band DBS delivery of television signals are competitive alternatives to cable television. Legislation has been introduced in Congress to change the federal copyright laws to permit DBS systems to retransmit local broadcast television signals to DBS customers. If enacted, such legislation could enhance the competitive position of DBS systems. Cable television also competes with the home video industry. Owners of videocassette recorders are able to rent many of the same movies, special events and music videos that are available on certain premium services. The availability of videocassettes has affected the degree to which the Systems are able to sell premium service units and pay-per-view offerings to some of its subscribers. Multipoint distribution services ("MDS"), which deliver premium television programming over microwave superhigh frequency channels received by subscribers with a special antenna, and multichannel multipoint distribution service ("MMDS"), which is capable of carrying four channels of television programming, also compete with certain services provided by the Systems. By acquiring several MMDS licenses or subleasing from several MMDS operators and holders of other types of microwave licenses, a single entity can increase channel capacity to a level more competitive with cable systems. MDS and MMDS systems are not required to obtain a municipal franchise, are less capital intensive, require lower up-front capital expenditures and are subject to fewer local and FCC regulatory requirements than cable systems. The ability of MDS and MMDS systems to serve homes and to appeal to consumers is affected by their less extensive channel capacity and the need for unobstructed line of sight over-the-air transmission. The Systems compete with MDS and MMDS operators generally in its metropolitan service areas. Satellite master antenna systems ("SMATV") generally serve large multiple dwelling units. The FCC has preempted all state and local regulation of SMATV operations. SMATV is limited to the buildings within which the operator has received permission from the building owner to provide service. The Systems compete with SMATV operators primarily in the New York City metropolitan area. The 1996 Telecom Act amends the definition of cable system to exclude facilities that do not use public rights-of-way (e.g., SMATV operators serving multiple buildings not under common ownership or control), thus exempting such facilities from franchise and other requirements applicable to cable operators. The FCC has established a new local multipoint distribution service ("LMDS", sometimes referred to as "cellular cable") in the higher bands of the electromagnetic spectrum that could be used to offer multichannel video in competition with cable systems, as well as two-way communications services. The FCC has held auctions to select licensees. The FCC barred both telephone and cable companies from bidding for LMDS frequencies in their own service areas. The 1984 Cable Act specifically legalized, under certain circumstances, reception by private home earth stations of satellite-delivered cable programming services. Direct broadcast satellite ("DBS") systems permit satellite transmissions from the low-power C-Band to be received by antennae approximately 60 to 72 inches in diameter at the viewer's home. Higher power DBS systems providing transmissions over the Ku-Band permit the use of smaller receiver antennae and thus are more appealing to customers. (16) The full extent to which developing media will compete with cable television systems may not be known for several years. There can be no assurance that existing, proposed or as yet undeveloped technologies will not become dominant in the future and render cable television systems less profitable or even obsolete. Although substantially all the franchises of the Systems are non-exclusive, most franchising authorities have granted only one franchise in an area. Other cable television operators could receive franchises for areas in which the Systems are operated or a municipality could build a competing cable system. Southern New England Telephone ("SNET"), the dominant telephone company in Connecticut has obtained a statewide franchise to build and operate a competing cable television system in the communities in Connecticut in which the Systems are operating pursuant to cable franchises. Ameritech has obtained franchises to offer cable service in certain of the Company's franchise areas in the Midwest. RCN has obtained or applied for cable franchises in a number of communities in Massachusetts in which the Company operates. The 1992 Cable Act described below prohibits municipalities from unreasonably refusing to grant competitive franchises and facilitates the franchising of second cable systems or municipally-owned cable systems. See "Regulation - 1992 Cable Act," below. Programming and Entertainment Rainbow Media competes with numerous programming services for cable television system distribution and for subscribers, including network television, other national and regional cable services, independent broadcast television stations, television superstations, the home videocassette industry, and developing pay-per-view services. Rainbow Media and the other programming services are competing for limited channel capacity and for inclusion in the most widely distributed service tier of the systems offering their programming services. Many of these program distributors are large, publicly-held companies which have greater financial resources than Rainbow Media. Rainbow Media also competes for the availability of programming, through competition for telecast rights to films and competition for rights agreements with sports teams. The Company anticipates that such competition will increase as the number of programming distributors increases. In general, Rainbow Media's programming services compete with other forms of television-related services and entertainment media on the basis of the price of services, the variety and quality of programming offered and the effectiveness of Rainbow Media's marketing efforts. Numerous businesses compete with Madison Square Garden and Radio City Entertainment for the entertainment expenditures of consumers. (17) Telephone and Modem Services Lightpath faces substantial competition from incumbent local exchange carriers ("ILECs"), such as Bell Atlantic, which are the dominant providers of local telephone services in their respective service areas. ILECs have significant advantages over Lightpath, including greater capital resources, an existing fully operational local network, and long-standing relationships with customers. While Lightpath and the ILECs are competitors, Lightpath must also enter into interconnection agreements with each ILEC so that Lightpath's customers can make and receive calls from customers served by the ILEC. Federal and State law and regulations require ILECs to enter into such agreements and provide such facilities and services, and establish the methodology for setting the price for these facilities and services. The specific price, terms and conditions of each agreement, however, depends on the outcome of negotiations between Lightpath and an ILEC. Agreements are also subject to approval by the state public service commission. Lightpath has entered into interconnection agreements with Bell Atlantic for New York, New Jersey and Connecticut, which have been approved by the respective state commissions. In addition, it has reached an agreement with SNET covering SNET's service area in Connecticut, which has been approved by the Connecticut Department of Public Utility Control and an agreement with Ameritech for Ohio, approval for which is pending. Lightpath also faces competition from one or more competitive access providers ("CAPs") and other new entrants in the local telecommunications marketplace, such as Teleport Communications Group, Inc. ("Teleport"), now part of AT&T and MFS Communications Company, Inc. ("MFS"), now part of MCI/Worldcom. In addition to the ILECs and competitive service providers, other potential competitors capable of offering private line and special access services include electric utilities, long distance carriers, microwave carriers, wireless telephone system operators (such as cellular, PCS, and specialized mobile radio), and private networks built by large end users. A continuing trend toward business combinations and alliances in the telecommunications industry may create significant new competitors to Lightpath. Many ILECs and certain of Lightpath's other potential competitors have financial, personnel and other resources significantly greater than those of Lightpath. Some of these competitors have existing networks or conduits that could be adapted to provide local exchange services. There can be no assurance that Lightpath will be able to compete effectively against these competitors. Lightpath may also face competition from new technologies and services introduced in the future. Retail Electronics The consumer retail electronics industry has experienced consolidation and slow growth in recent years due to difficult conditions, including flat demand for consumer electronics and, until recently, a lack of new product introductions. The consumer retail electronics business however, remains highly competitive. The Wiz competes with national and regional retail electronics chains which continue to increase their expansion in the New York Metropolitan area, computer, office product and entertainment superstores, general merchandise retailers, discount stores, local independent retailers and mail order and "e" commerce services. Some of these competitors have significantly (18) greater financial resources than Cablevision Electronics. Competition is primarily based on price, service and selection of merchandise. The Wiz competes on the basis of these factors and also plans to differentiate itself from its competitors by continued implementation of new marketing and merchandising strategies. These new strategies (including a new store prototype, incorporating technological innovations such as interactive kiosks demonstrating cable modem service) are designed to emphasize the variety of other products and services of the Company which are expected to be available to customers of The Wiz. Regulation Cable Television 1984 Cable Act. The 1984 Cable Act set uniform national guidelines for cable regulation under the Communications Act of 1934. While several of the provisions of the 1984 Cable Act have been amended or superseded by the 1992 Cable Act and/or the 1996 Telecom Act, each described below, other provisions of the 1984 Act, including the principal provisions relating to the franchising of cable television systems, remain in place. The 1984 Cable Act authorizes states or localities to franchise cable television systems but sets limits on their franchising powers. It sets a ceiling on cable franchise fees of 5% of gross revenues and prohibits localities from requiring cable operators to carry specific programming services. The 1984 Cable Act protects cable operators seeking franchise renewals by limiting the factors a locality may consider and requiring a due process hearing before denial. The 1984 Cable Act does not, however, prevent another cable operator from being authorized to build a competing system. The 1992 Cable Act prohibits franchising authorities from granting exclusive cable franchises and from unreasonably refusing to award an additional competitive franchise. The 1984 Cable Act allows localities to require free access to public, educational or governmental channels, but sets limits on the number of commercial leased access channels cable television operators must make available for potentially competitive services. The 1984 Cable Act prohibits obscene programming and requires the sale or lease of devices to block programming considered offensive. 1992 Cable Act. The 1992 Cable Act represented a significant change in the regulatory framework under which cable television systems operate. After the effective date of the 1984 Cable Act, and prior to the enactment of the 1992 Cable Act, rates for cable services were unregulated for substantially all of the Systems. The 1992 Cable Act reintroduced rate regulation for certain services and equipment provided by most cable systems in the United States, including substantially all of the Company's systems. While several of the provisions of the 1992 Cable Act have been amended or superseded by the 1996 Telecom Act, other provisions remain in place. The 1992 Cable Act requires each cable system to establish a basic service package consisting, at a minimum, of all local broadcast signals and all non-satellite delivered distant broadcast signals that the cable system wishes to carry, and all public, educational and governmental access (19) programming. The rates for the basic service package are subject to regulation by local franchising authorities. Under the FCC's 1993 rate regulation rules, a cable operator whose per channel rates exceeded an FCC established benchmark was required to reduce its per channel rates for the basic service package by up to 10% unless it could justify higher rates on the basis of its costs. In 1994, after reconsideration, the FCC ordered a further reduction of 7% in rates for the basic service tier, for an overall reduction of 17%. Franchise authorities (local municipalities or state cable television regulators) are also empowered to regulate the rates charged for the installation and lease of the equipment used by subscribers to receive the basic service package (including a converter box, a remote control unit and, if requested by a subscriber, an addressable converter box or other equipment required to access programming offered on a per channel or per program basis), including equipment that may also be used to receive other packages of programming, and the installation and monthly use of connections for additional television sets. The FCC's rules require franchise authorities to regulate rates for equipment and connections for additional television sets on the basis of an actual cost formula developed by the FCC, plus a return of 11.25%. No additional charge is permitted for the delivery of regulated services to additional sets unless the operator incurs additional programming costs in connection with the delivery of such services to multiple sets. The FCC may, in response to complaints by a franchising authority, reduce the rates for service packages other than the basic service package if it finds that such rates are unreasonable. The FCC will in response to complaints also regulate, on the basis of actual cost, the rates for equipment used only to receive these higher packages. Services offered on a per channel or per program basis are not subject to rate regulation by either municipalities or the FCC. The FCC's rules provide that, unless a cable operator can justify higher rates on the basis of its costs, increases in the rates charged by the operator for the basic service package or any other regulated package of service may not exceed an inflation indexed amount, plus increases in certain costs beyond the cable operator's control, such as taxes, franchise fees and increased programming costs that exceed the inflation index. Increases in fees paid to broadcast stations for the retransmission of their signals above those in effect on October 6, 1994 may be passed through to subscribers. In 1994 the FCC also adopted guidelines for cost-of-service showings that establish a regulatory framework pursuant to which a cable television operator may attempt to justify rates in excess of the benchmarks. In addition, the FCC has adopted guidelines that permit rate adjustments attributed to the cost of a rebuild or substantial upgrade of a cable system to be added to the operators benchmark rate. In 1994 the FCC also reversed its prior policy regarding rate regulation of packages of a la carte services. A la carte services that are offered in a package are now subject to rate regulation by the FCC. The FCC, in addition to revising its rules governing a la carte channels, also revised its regulations governing the manner in which cable operators could charge subscribers for new cable programming services. The FCC instituted a three-year flat fee mark-up plan, now lapsed, for (20) charges relating to new channels of cable programming services in addition to the basic formula for calculating the permissible rate for new services. Under the 1992 Cable Act, systems may not require subscribers to purchase any cable programming service tier other than the basic service package as a condition of access to video programming offered on a per channel or per program basis. Cable systems are allowed up to ten years to the extent necessary to implement the necessary technology to facilitate this access. It is expected that the Systems will be capable of implementing the technology mandated by the 1992 Cable Act by the Act's deadline. In addition, the 1992 Cable Act: (i) requires cable programmers under certain circumstances to offer their programming to present and future competitors of cable television such as MMDS, SMATV and DBS, and prohibits new exclusive contracts with program suppliers without FCC approval, (ii) directs the FCC to set standards for limiting the number of channels that a cable television system operator could program with programming services controlled by such operator, (iii) bars municipalities from unreasonably refusing to grant additional competitive franchises, (iv) requires cable television operators to carry ("Must Carry") all local broadcast stations (including home shopping broadcast stations), or, at the option of a local broadcaster, to obtain the broadcaster's prior consent for retransmission of its signal ("Retransmission Consent"), (v) requires cable television operators to obtain the consent of any non-local broadcast station prior to retransmitting its signal, and (vi) regulates the ownership by cable operators of other media such as MMDS and SMATV. In connection with clause (ii) of the immediate preceding paragraph concerning limitations on affiliated programming, the FCC has established a 40% limit on the number of channels of a cable television system that can be occupied by programming services in which the system operator has an attributable interest and a national limit of 30% on the number of households that any cable company can serve. This 30% national limit, because of court proceedings, has never been implemented. The FCC recently asked for comments on whether the limit should be increased beyond 30%, or whether it should revise its rules to consider the presence in the national market of all multichannel video programming providers rather than cable operators alone in applying any national percentage limit. The FCC also issued a parallel notice asking for a review of its cable ownership arbitration rules, to determine whether it should increase its voting stock benchmark, not attribute cable subscribers if an operator certifies that the interest held is a passive minority investor interest, and recognize partial, scaled cable MSO interests in subscribers served by certain joint ventures and other cross-MSO investments. The outcome of these FCC proceedings could affect the Company because of TCI's investment in the Company. In connection with clause (iv) above concerning retransmission of a local broadcaster's signals, a substantial number of local broadcast stations are currently carried by the Systems and have elected to negotiate for Retransmission Consent. The Systems have Retransmission Consent agreements with most broadcast stations they currently carry, but a number of these agreements are temporary in nature and the potential remains for discontinuation of carriage if an agreement is not renewed (21) following their expiration. The Company has had to drop a few local stations because of failure to reach retransmission consent agreements. In connection with clause (i) above the 1992 Cable Act prohibits a cable programmer that is owned by or affiliated with a cable operator (such as Rainbow Media) from unreasonably discriminating among or between cable operators and other multichannel video distribution systems with respect to the price, terms and conditions of sale or distribution of the programmer's satellite-delivered services and from unreasonably refusing to sell any such service to any multichannel video programming distributor. In several instances, Rainbow Media has been ordered by the FCC to provide satellite-delivered programming to multi-channel video programmers after such multi-channel video programmers have filed complaints pursuant to these program-access rules. The FCC has recently declined to extend these program-access rules to cover some terrestrial-delivered programming by programmers such as Rainbow Media, but proposals have been made to Congress in support of such extensions. It is not possible to predict whether such an extension might in the future be adopted by the FCC or Congress and, if so, what effect it might have on the Company. The FCC adopted or imposed new regulations under the 1992 Cable Act in the areas of customer service, technical standards, equal employment opportunity, privacy, rates for leased access channels, obscenity and indecency, disposition of a customer's home wiring and compatibility between cable systems and other consumer electronic equipment such as "cable ready" television sets and videocassette recorders. 1996 Telecom Act. The 1996 Telecom Act deregulates the rates for non-basic tiers of service provided by all cable operators after March 31, 1999. It permits regulated equipment rates to be computed by aggregating costs of broad categories of equipment at the franchise, system, regional or company level. It also eliminates the right of individual subscribers to file rate complaints with the FCC concerning certain non-basic cable programming service tiers, and requires such complaints to be filed by franchising authorities following receipt of at least two subscriber complaints. The 1992 Cable Act provided that all rate regulation, for both the upper tiers and for basic service, is eliminated when a cable system is subject to "effective competition" from another multichannel video programming provider such as MMDS, DBS, a telephone company, or a combination of all of these. The 1996 Telecom Act expanded the definition of "effective competition" to include instances in which a local telephone company or its affiliate (or a multichannel video programming distributor using the facilities of a telephone company or its affiliates) offers comparable video programming directly to subscribers by any means (other than DBS) in the cable operator's franchise area. Since telephone companies are providing or planning to provide video services in several of the franchise areas served by the Systems, this provision will allow the Systems greater flexibility in packaging and pricing in those markets if the FCC makes a finding of "effective competition" in these markets based on telephone company competition. The 1996 Telecom Act also eliminates the uniform rate structure requirements of the 1992 Cable Act for cable operators in areas subject to effective competition or for video programming offered on a per channel or per program basis, and allows non-uniform bulk discount rates to be offered to multiple dwelling units. (22) Other FCC Regulation. In addition to the rules and regulations promulgated by the FCC under the 1984 Cable Act, the 1992 Cable Act and the 1996 Telecom Act, the FCC has promulgated other rules affecting the Company. FCC rules require that cable systems black out certain network and sports programming on imported distant broadcast signals upon request. The FCC also requires that cable systems delete syndicated programming carried on distant signals upon the request of any local station holding the exclusive right to broadcast the same program within the local television market and, in certain cases, upon the request of the copyright owner of such programs. These rules affect the diversity and cost of the programming options for the Systems. FCC regulation also includes matters regarding restrictions on origination and cablecasting by cable system operators; application of the rules governing political broadcasts; customer service; ownership and control of cable home wiring in single family residences and multiple dwelling units and limitations on advertising contained in nonbroadcast children's programming. Implementing provisions of the 1993 Budget Act, the FCC has adopted requirements for payment of annual "regulatory fees" which may be passed on to subscribers as "external cost" adjustments to basic cable service. Fees are also assessed for other licenses held by cable operators, including licenses for business radio, cable television relay systems (CARS) and earth stations, which, however, may not be collected directly from subscribers. The FCC has the authority to regulate utility company rates for cable rental of pole and conduit space. States can establish preemptive regulations in this area, and the states in which the Systems operate have done so. The 1996 Telecom Act modifies the pole attachment provisions of the Communications Act by requiring that utilities provide cable systems and telecommunications carriers with nondiscriminatory access to any pole, conduit or right-of-way controlled by the utility. The FCC has adopted new regulations to govern the charges for pole attachments used by companies providing telecommunications services, including cable operators. These regulations are likely to significantly increase the rates charged to cable companies providing voice and data, in addition to video services. These new pole attachment regulations do not become effective, however, until five years after enactment of the 1996 Telecom Act in 2001, and any subsequent increases in attachment rates resulting from the FCC's new regulations will be phased in equal annual increments over a subsequent period of five years, until 2006. The FCC's technical guidelines for signal leakage became substantially more stringent in 1990, requiring upgrading expenditures by the Systems. Two-way radio stations, microwave-relay stations and satellite earth stations used by the Systems are licensed by the FCC. Federal Copyright Regulation. There are no restrictions on the number of distant broadcast television signals that cable television systems can import, but cable systems are required to pay copyright royalty fees to receive a compulsory license to carry them. The United States Copyright Office has increased the royalty fee from time to time. The FCC and the Copyright offices have, at different times, recommended to Congress changes in the compulsory licenses for cable television carriage of broadcast signals. This could adversely affect the ability of the Systems to obtain such programming and could increase the cost of such programming. No prediction can be made as to whether Congress will enact any such changes to the copyright laws. (23) Cable Television Cross-Media Ownership Limitations. In addition to the prohibition on telephone company-cable cross-ownership, now removed by the 1996 Telecom Act, the 1984 Cable Act prohibited any person or entity from owning broadcast television and cable properties in the same market. The 1992 Cable Act imposed limits on new acquisitions of SMATV or MMDS systems by cable operators in their franchise areas. The 1996 Telecom Act repeals the statutory ban on cable-broadcast station cross-ownership to permit common ownership or control of a television station and a cable system with overlapping service areas, but leaves in place the cable system-television station cross-ownership restriction contained in the FCC's rules and does not prejudge the Commission's review of the regulation, which was initiated in 1998. The FCC has eliminated its regulations concerning broadcast network-cable cross-ownership to permit common control of both a television network and a cable system, as required by the 1996 Telecom Act. The 1996 Telecom Act removes the statutory ban on cable-MMDS cross-ownership on any cable operator in a franchise area where one cable operator is subject to effective competition. State and Municipal Regulation of Cable Television. Regulatory responsibility for essentially local aspects of the cable business such as franchisee selection, system design and construction, safety, and consumer services remains with either state or local officials and, in some jurisdictions, with both. The 1992 Cable Act expanded the factors that a franchising authority can consider in deciding whether to renew a franchise and limits the damages for certain constitutional claims against franchising authorities for their franchising activities. New York law provides for comprehensive state-wide regulation, including approval of transfers of cable franchises and consumer protection legislation. Massachusetts, New Jersey and Connecticut also have substantial cable regulatory authority at the state level. State and local franchising jurisdiction is not unlimited, however, and must be exercised consistently with the provisions of the 1984 Cable Act and the 1992 Cable Act. Among the more significant restrictions that the 1984 Cable Act imposes on the regulatory jurisdiction of local franchising authorities is a 5% ceiling on franchise fees and mandatory renegotiation of certain franchise requirements if warranted by changed circumstances. Telecommunications Regulation. The 1996 Telecom Act removes barriers to entry in the local telephone market that is now monopolized by the BOCs and other incumbent local exchange carriers by preempting state and local laws that restrict competition and by requiring incumbent local exchange telephone companies to provide nondiscriminatory access and interconnection to potential competitors, such as cable operators and long distance companies. At the same time, the law eliminated the Modified Final Judgment and permits the BOCs to enter the market for long distance service (through a separate subsidiary), on a state-by-state basis, after they satisfy a "competitive checklist." The 1996 Telecom Act also facilitates the entry of utility companies into the telecommunications market. One utility company, Boston Edison, has teamed with one of the Company's competitors, RCN, to provide bundled telecommunications and video services in the Boston market. The 1996 Telecom Act also eliminates or streamlines many of the requirements applicable to local exchange carriers, and requires the FCC and states to review universal service programs and encourage access to advanced telecommunications services provided by all entities, including cable companies, by schools, libraries and other public institutions. The FCC and, in some cases, states are required to conduct numerous rulemaking proceedings to implement these provisions. (24) Programming and Entertainment Cable television program distributors such as Rainbow Media are not regulated by the FCC under the Communications Act of 1934. To the extent that regulations and laws, either presently in force or proposed, hinder or stimulate the growth of the cable television and satellite industries, the business of Rainbow Media will be directly affected. As discussed above under "Business - Cable Television Operations - Regulation", the 1992 Cable Act limits in certain ways the Company's ability to freely manage the Rainbow Media services or carry the Rainbow Media services on their affiliates' systems and imposes or could impose other regulations on the Rainbow Media companies. The "program access" provisions of the 1992 Cable Act require that Rainbow Media services be sold, under certain circumstances, to multichannel video programming providers that compete with the Company's local cable systems. The 1996 Telecom Act extends the program access requirements of the 1992 Cable Act to a telephone company that provides video programming by any means directly to subscribers, and to programming in which such a company holds an attributable ownership interest, thus allowing the Company's cable systems similar access to programming developed by their telephone company competitors. The 1984 Cable Act limits the number of commercial leased access channels that a cable television operator must make available for potentially competitive services but the 1992 Cable Act empowered the FCC to set the rates and conditions for such leased access channels, which it has done in a manner designed to increase use of such channels. Satellite common carriers, from whom Rainbow Media and its affiliates obtain transponder channel time to distribute their programming, are directly regulated by the FCC. All common carriers must obtain from the FCC a certificate for the construction and operation of their interstate communications facilities. Satellite common carriers must also obtain FCC authorization to utilize satellite orbital slots assigned to the United States by the World Administrative Radio Conference. Such slots are finite in number, thus limiting the number of carriers that can provide satellite service and the number of channels available for program producers and distributors such as Rainbow Media and its affiliates. Nevertheless, there are at present numerous competing satellite services that provide transponders for video services to the cable industry. All common carriers must offer their communications service to Rainbow Media and others on a nondiscriminatory basis (including by means of a lottery). A satellite carrier cannot unreasonably discriminate against any customer in its charges or conditions of carriage. The operations of the professional sports franchises owned by Madison Square Garden, L.P., are regulated by the leagues in which the teams participate. Both the NBA and the NHL have regulations governing, among other things, player matters and transfers of ownership interests and licensing matters. Telephone and Modem Services As a telecommunications carrier, Lightpath is subject to regulation by the FCC and by the state public service commission in each state in which it provides service. In order to provide service, (25) moreover, Lightpath must seek approval from each such state commission. Lightpath has obtained this approval from the state commissions in New York, Connecticut, Massachusetts, New Jersey and Ohio. Lightpath's regulatory obligations vary from state-to-state and include some or all of the following requirements: filing tariffs (rates, terms and conditions); filing operational, financial, and customer service reports; seeking approval to transfer the assets or capital stock of the telephone company; seeking approval to issue stocks, bonds, and other forms of indebtedness of the telephone company; and filing all contracts or other documentation involving transactions between the telephone company and its affiliates. States may also impose requirements on competitive carriers to contribute to the funding of discounted "universal" telecommunications services for educational institutions, low income persons, and persons in rural areas. As Lightpath offers interstate long distance services, it is subject to various FCC requirements, including the payment of regulatory fees, Telecommunication Relay Services funding, and the contributions to the maintenance of "universal service" as required by the 1996 Telecom Act. Also under the 1996 Telecom Act, Lightpath must compensate carriers that terminate calls originating on Lightpath's network (Lightpath is entitled to compensation from carriers when it terminates calls); interconnect directly or indirectly with other carriers; make its telecommunications services available for resale; and provide number portability, dialing parity, and access-to-rights-of-way. Employees and Labor Relations As of December 31, 1998, the Company had 12,140 full-time, 3,684 part-time and 4,420 temporary employees of which 514, 975 and 2,467, respectively, were covered under collective bargaining agreements. The Company believes that its relations with its employees are satisfactory. Item 2. Properties The Company generally leases the real estate where its business offices, microwave receiving antennae, earth stations, transponders, microwave towers, warehouses, headend equipment, hub sites, program production studios and access studios are located. As of December 1998, the Company occupies a leased headquarters building located in Bethpage, New York with approximately 536,000 square feet of space. Other significant leasehold properties include 106,000 square feet housing Madison Square Garden's office operations and 569,000 square feet comprising Radio City Music Hall. Cablevision Electronics leases 40 retail store locations, a warehouse and a corporate office aggregating approximately 1,537,000 square feet. The Company believes its properties are adequate for its use. The Company generally owns all assets (other than real property) related to its cable television operations, including its program production equipment, headend equipment (towers, antennae, electronic equipment and satellite earth stations), cable system plant (distribution equipment, amplifiers, subscriber drops and hardware), converters, test equipment, tools and maintenance equipment. The Company, through Madison Square Garden, also owns the Madison Square Garden arena and theater complex in New York City comprising 1,016,000 square feet. (26) Cablevision Cinemas, LLC leases 48 theater locations with approximately 45,000 seats and owns an additional 12 theaters with approximately 8,600 seats. The Company generally leases its service and other vehicles. Item 3. Legal Proceedings The Company is party to various lawsuits, some involving substantial amounts. Management does not believe that the resolution of such lawsuits will have a material adverse impact on the financial position of the Company. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. (27) PART II Item 5. Market for the Registrants' Common Equity and Related Stockholder Matters Cablevision Systems Corporation's Class A Common Stock is and CSC Holdings, Inc.'s Class A Common Stock prior to the consummation of the Holding Company Reorganization on March 4, 1998, was traded on the American Stock Exchange under the symbol "CVC". The following table sets forth the high and low sales prices (adjusted for the two-for-one stock splits) for the last two years of Class A Common Stock as reported by the American Stock Exchange for the periods indicated. 1998 1997 ---------------------- --------------------- Quarter High Low High Low ------- ---- --- ---- --- First 33-1/2 21-25/32 8-7/8 7-7/16 Second 42 26-9/16 13-53/64 6-25/32 Third 45-15/16 32 15-11/16 12-9/32 Fourth 50-1/4 36-1/2 23-15/16 15-7/8 As of March 19, 1999, there were 904 holders of record of Cablevision Systems Corporation Class A Common Stock. There is no public trading market for the Cablevision Systems Corporation Class B Common Stock, par value $.01 per share ("Class B Common Stock"). As of March 19, 1999, there were 23 holders of record of Class B Common Stock. All outstanding shares of common stock of CSC Holdings are held by Cablevision Systems Corporation. See Item 1. "Business - The Holding Company Reorganization and TCI Transactions" for a description of the changes to the Company's capitalization as a result of the Reorganization. Dividends. Neither CSC Holdings (prior to the Reorganization) nor Cablevision Systems Corporation (after the Reorganization) have paid any dividends on shares of Class A or Class B Common Stock. Cablevision Systems Corporation does not anticipate paying any cash dividends on shares of Cablevision Systems Corporation Class A or Class B Common Stock in the foreseeable future. Cablevision Systems Corporation and CSC Holdings may pay cash dividends on their capital stock only from surplus as determined under Delaware law. Holders of Cablevision Parent Class A and Cablevision Parent Class B Common Stock are entitled to receive dividends equally on a per share basis if and when such dividends are declared by the Board of Directors of Cablevision Parent from funds legally available therefore. No dividend may be declared or paid in cash or property on shares of either Cablevision Parent Class A or Cablevision Parent Class B Common Stock unless the same dividend is paid simultaneously on each share of the other class of common stock. In the (28) case of any stock dividend, holders of Cablevision Parent Class A Common Stock are entitled to receive the same percentage dividend (payable in shares of Cablevision Parent Class A Common Stock) as the holders of Cablevision Parent Class B Common Stock receive (payable in shares of Cablevision Parent Class B Common Stock). In December 1998, CSC Holdings paid a dividend of $42.1 million to Cablevision Parent. CSC Holdings paid $29.3 million of cash dividends on the Series I Preferred Stock and $132.5 million of dividends in additional shares of Series H and M Preferred Stock in 1998. CSC Holdings is restricted from paying dividends on its preferred stock under the provisions of its senior credit agreement if a default has occurred and is continuing under such agreement. Additionally, CSC Holdings' senior credit agreement, senior debentures and senior subordinated debt instruments may restrict the payment of dividends in respect of any shares of capital stock in certain circumstances. Dividends may not be paid in respect of shares of the Company's common stock unless all dividends due and payable in respect of the preferred stock of CSC Holdings have been paid or provided for. See Item 7. - "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources-Restricted Group." (29) Item 6. Selected Financial Data SELECTED FINANCIAL AND STATISTICAL DATA The operating and balance sheet data included in the following selected financial data have been derived from the consolidated financial statements of Cablevision Systems Corporation and CSC Holdings, Inc. Acquisitions made by these companies were accounted for under the purchase method of accounting and, accordingly, the acquisition costs were allocated to the net assets acquired based on their fair value, except for assets previously owned by Mr. Dolan or affiliates of Mr. Dolan which were recorded at historical cost. Acquisitions are reflected in operating, balance sheet and statistical data from the time of acquisition. The selected financial data presented below should be read in conjunction with the financial statements of Cablevision Systems Corporation and CSC Holdings, Inc. and notes thereto included in Item 8 of this Report.
Cablevision Systems Corporation ----------------------------------------------------------------------- December 31, ----------------------------------------------------------------------- 1998 1997 1996 1995 1994 ----------- ----------- ----------- ----------- ----------- (Dollars in thousands, except per share data) Operating Data: Revenues .............................................. $ 3,265,143 $ 1,949,358 $ 1,315,142 $ 1,078,060 $ 837,169 Operating expenses Technical and operating (including cost of sales of $390,751 in 1998) ................................ 1,659,537 853,800 538,272 412,479 302,885 Selling, general and administrative ............... 882,816 514,574 313,476 266,209 195,942 Restructuring charge .............................. -- -- -- -- 4,306 Depreciation and amortization ..................... 734,107 499,809 388,982 319,929 271,343 ----------- ----------- ----------- ----------- ----------- Operating profit (loss) ............................... (11,317) 81,175 74,412 79,443 62,693 Other income (expense): Interest expense, net ............................. (402,374) (363,208) (265,015) (311,887) (261,781) Share of affiliates' net loss ..................... (37,368) (27,165) (82,028) (93,024) (82,864) Gain on sale of programming interests and cable assets, net ................................ 170,912 372,053 -- 35,989 -- Gain on redemption of subsidiary preferred stock .. -- 181,738 -- -- -- Write off of deferred interest and financing costs (23,482) (24,547) (37,784) (5,517) (9,884) Loss on redemption of debentures .................. -- -- -- -- (7,088) Provision for preferential payment to related party (980) (10,083) (5,600) (5,600) (5,600) Minority interests ................................ (124,677) (209,461) (137,197) (28,886) (9,814) Miscellaneous, net ................................ (19,218) (12,606) (6,647) (8,225) (7,198) ----------- ----------- ----------- ----------- ----------- Net loss .............................................. $ (448,504) $ (12,104) $ (459,859) $ (337,707) $ (321,536) =========== =========== =========== =========== =========== Basic and diluted net loss per common share ........... $ (3.16) $ (.12) $ (4.63) $ (3.54) $ (3.43) =========== =========== =========== =========== =========== Average number of common shares outstanding (in thousands) ....................................... $ 142,016 $ 99,608 $ 99,308 $ 95,304 $ 93,776 =========== =========== =========== =========== =========== Cash dividends declared per common share .............. $ -- $ -- $ -- $ -- $ -- =========== =========== =========== =========== ===========
(30)
Cablevision Systems Corporation --------------------------------------------------------------------------- December 31, --------------------------------------------------------------------------- 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- (Dollars in thousands) Balance Sheet Data: Total assets ................................... $ 7,061,062 $ 5,614,788 $ 3,034,725 $ 2,502,305 $ 2,176,413 Total debt ..................................... 5,357,608 4,694,062 3,334,701 3,157,107 3,169,236 Minority interests ............................. 719,007 821,782 -- -- -- Deficit investment in affiliates ............... -- -- 512,800 453,935 393,637 Preferred stock of CSC Holdings, Inc. .......... 1,579,670 1,456,549 1,338,006 590,492 9,410 Stockholders' deficiency ....................... (2,611,685) (2,711,514) (2,707,026) (2,224,417) (1,827,945) Statistical Data: Homes passed by cable .......................... 5,115,000 4,398,000 3,858,000 3,328,000 2,899,000 Basic service subscribers ...................... 3,412,000 2,844,000 2,445,000 2,061,000 1,768,000 Basic service subscribers as a percentage of homes passed ............................... 66.7% 64.7% 63.4% 61.9% 61.0% Number of premium television units ............. 5,137,000 4,183,000 3,862,000 3,990,000 3,208,000 Average number of premium units per basic subscriber at period end ................... 1.5 1.5 1.6 1.9 1.8 Average monthly revenue per basic subscriber (1) $ 42.56 $ 38.53 $ 36.71 $ 37.07 $ 36.33
- - ---------- (1) Based on recurring service revenues divided by average subscribers for the month of December. (31)
CSC Holdings, Inc. ----------------------------------------------------------------------- December 31, ----------------------------------------------------------------------- 1998 1997 1996 1995 1994 ----------- ----------- ----------- ----------- ----------- (Dollars in thousands, except per share data) Operating Data: Revenues .............................................. $ 2,912,419 $ 1,949,358 $ 1,315,142 $ 1,078,060 $ 837,169 Operating expenses Technical and operating (including cost of sales of $390,751 in 1998) ....................... 1,524,555 853,800 538,272 412,479 302,885 Selling, general and administrative ............... 820,015 514,574 313,476 266,209 195,942 Restructuring charge .............................. -- -- -- -- 4,306 Depreciation and amortization ..................... 577,635 499,809 388,982 319,929 271,343 ----------- ----------- ----------- ----------- ----------- Operating profit (loss) ............................... (9,786) 81,175 74,412 79,443 62,693 Other income (expense): Interest expense, net ............................. (369,072) (363,208) (265,015) (311,887) (261,781) Share of affiliates' net loss ..................... (37,368) (27,165) (82,028) (93,024) (82,864) Gain on sale of programming interests and cable assets, net ...................................... 171,127 372,053 -- 35,989 -- Gain on redemption of subsidiary preferred stock .. -- 181,738 -- -- -- Write off of deferred interest and financing costs (23,482) (24,547) (37,784) (5,517) (9,884) Loss on redemption of debentures .................. -- -- -- -- (7,088) Provision for preferential payment to related party (980) (10,083) (5,600) (5,600) (5,600) Minority interests ................................ 48,378 (60,694) (9,417) (8,637) (3,429) Miscellaneous, net ................................ (18,350) (12,606) (6,647) (8,225) (7,198) ----------- ----------- ----------- ----------- ----------- Net income (loss) ..................................... (239,533) 136,663 (332,079) (317,458) (315,151) Preferred dividend requirements ....................... (161,872) (148,767) (127,780) (20,249) (6,385) ----------- ----------- ----------- ----------- ----------- Net loss applicable to common shareholder ............. $ (401,405) $ (12,104) $ (459,859) $ (337,707) $ (321,536) =========== =========== =========== =========== =========== Basic and diluted net loss per common share* .......... $ -- $ (.12) $ (4.63) $ (3.54) $ (3.43) =========== =========== =========== =========== =========== Average number of common shares outstanding (in thousands)* ........................................... $ -- 99,608 99,308 95,304 93,776 =========== =========== =========== =========== =========== Cash dividends declared per common share* ............. $ -- $ -- $ -- $ -- $ -- =========== =========== =========== =========== ===========
* Per share information for the year ended December 31, 1998 is not presented since CSC Holdings, Inc. became a wholly-owned subsidiary of Cablevision Parent in 1998. (32)
CSC Holdings, Inc. --------------------------------------------------------------------------- December 31, --------------------------------------------------------------------------- 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- (Dollars in thousands) Balance Sheet Data: Total assets ................................... $ 5,935,860 $ 5,614,788 $ 3,034,725 $ 2,502,305 $ 2,176,413 Total debt ..................................... 4,834,608 4,694,062 3,334,701 3,157,107 3,169,236 Minority interests ............................. 785,545 821,782 -- -- -- Deficit investment in affiliates ............... -- -- 512,800 453,935 393,637 Redeemable preferred stock ..................... 1,256,339 1,123,808 1,005,265 257,751 -- Stockholders' deficiency ....................... (2,824,353) (2,378,773) (2,374,285) (1,891,676) (1,818,535) Statistical Data: Homes passed by cable .......................... 3,949,000 4,398,000 3,858,000 3,328,000 2,899,000 Basic service subscribers ...................... 2,569,000 2,844,000 2,445,000 2,061,000 1,768,000 Basic service subscribers as a percentage of homes passed ............................... 65.0% 64.7% 63.4% 61.9% 61.0% Number of premium television units ............. 4,234,000 4,183,000 3,862,000 3,990,000 3,208,000 Average number of premium units per basic subscriber at period end ................... 1.7 1.5 1.6 1.9 1.8 Average monthly revenue per basic subscriber (1) $ 42.74 $ 38.53 $ 36.71 $ 37.07 $ 36.33
- - ---------- (1) Based on recurring service revenues divided by average subscribers for the month of December. (33) Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This Annual Report, including the section entitled "1999 Outlook," contains or incorporates by reference statements that constitute forward looking information within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward looking statements are not guarantees of future performance or results and involve risks and uncertainties and that actual results or developments may differ materially from the forward looking statements as a result of various factors. Factors that may cause such differences to occur include but are not limited to: (i) the level of growth in the Company's revenues, (ii) subscriber demand, competition, the cost of programming and industry conditions, (iii) whether expenses of the Company continue to increase or increase at a rate faster than expected, (iv) whether any unconsummated transactions are consummated on the terms and at the times set forth (if at all), (v) new competitors entering the Company's franchise areas, (vi) other risks and uncertainties inherent in the cable television business, (vii) financial community and rating agency perceptions of the Company and its business, operations, financial condition and the industry in which it operates, and (viii) the factors described in the Company's recently filed registration statement on Form S-3, including the section entitled "Risk Factors" contained therein. The information contained herein concerning Year 2000 issues ("Y2K") constitutes forward looking information. The identification and remediation of Y2K issues is a technological effort that has never been undertaken before and estimates of the outcome, time and expense of this endeavor are, for that reason, particularly hard to make with any certainty. As a result, the Company's estimates may prove to be materially inaccurate. More specifically, the Company's forecasts may prove to be wrong for the following reasons, among other: (i) the Company's forecasts are dependent upon the representations of third parties which may be inaccurate or mistaken; (ii) the nature of the Y2K issue is such that detection of all issues is difficult and cannot be assured and, as a result, problems may exist which have not been, and are not, identified in a timely manner; (iii) because of the lack of experience with problems of this nature and magnitude, it is difficult to estimate remediation costs with accuracy; (iv) remediation requires the efforts of third parties whose performance is beyond the control of the Company; and (v) because the Y2K issues are so widespread and because the number of third parties who can provide meaningful remediation services is limited, the Company may have difficulty obtaining the timely assistance of such third parties, particularly as such services are needed closer to January 1, 2000. The Company disclaims any obligation to update the forward-looking statements contained or incorporated by reference herein. (34) Recent Transactions - Cablevision Systems Corporation 1998 Acquisitions. In March 1998, the Company acquired certain cable television systems in New York and New Jersey from TCI. See also "Recent Transactions - CSC Holdings, Inc." below. Recent Transactions - CSC Holdings, Inc. 1998 Acquisitions. In December 1998, CSC Holdings acquired the net assets of Clearview Cinema Group, Inc. ("Clearview") and certain assets from Loews Cineplex Entertainment Corporation ("Loews"). In February 1998, Cablevision Electronics acquired substantially all of the assets associated with 40 The Wiz consumer electronics store locations. In addition, in June 1998, CSC Holdings purchased 50% of ITT's remaining minority interest in Madison Square Garden. 1998 Dispositions. In 1998, CSC Holdings completed the sale of substantially all of the assets of U.S. Cable Television Group, L.P. ("U.S. Cable") and the sale of several smaller cable television systems. Also in 1998, CSC Holdings transferred its cable television system in Rensselaer, New York plus approximately $16 million in cash in exchange for Time Warner's Litchfield, Connecticut system. In addition, Rainbow Media completed the sale of an interest in a regional sports programming business. 1997 Acquisitions and Transactions. In April 1997, CSC Holdings exchanged 25% of its interest in Rainbow Media for NBC's interest in certain of Rainbow Media's programming entities. In June 1997, CSC Holdings redeemed a portion of ITT's interest in Madison Square Garden which increased Rainbow Media's interest in Madison Square Garden from 50% to 89.8%. In June 1997, CSC Holdings acquired from Warburg Pincus the equity interest that Warburg Pincus had in certain cable television systems in Massachusetts giving the Company full ownership of these systems. In July 1997, CSC Holdings acquired from Warburg Pincus the Series A Preferred Stock of A-R Cable Services, Inc. ("A-R Cable") which resulted in the consolidation of A-R Cable's operations from the date of the transaction. In December 1997, Rainbow Media completed certain transactions with Fox/Liberty Networks, LLC ("Fox/Liberty"). Also in December 1997, Madison Square Garden acquired all of the membership interests in Radio City Entertainment. 1997 Dispositions. In 1997, CSC Holdings completed the sale of certain cable television systems and Rainbow Media completed the sale of the assets of a radio station. The above transactions completed in 1997 and 1998 are collectively referred to as the "Net Acquisitions." (35) Results of Operations - Cablevision Systems Corporation The following table sets forth on a historical basis certain items related to operations as a percentage of net revenues for the periods indicated. STATEMENT OF OPERATIONS DATA
Cablevision Systems Corporation ----------------------------------------------------------- Years Ended December 31, ----------------------------------------------------------- 1998 1997 ---------------------------- ---------------------------- (Increase) % of Net % of Net Decrease Amount Revenues Amount Revenues in Net loss ------ -------- ------ -------- ----------- (Dollars in thousands) Revenues .............................................. $ 3,265,143 100% $ 1,949,358 100% $ 1,315,785 Operating expenses: Technical and operating (including cost of sales of $390,751 in 1998) .......................... 1,659,537 51 853,800 44 (805,737) Selling, general & administrative .................. 882,816 27 514,574 26 (368,242) Depreciation and amortization ...................... 734,107 22 499,809 26 (234,298) ----------- ----------- ----------- Operating profit (loss) ............................... (11,317) -- 81,175 4 (92,492) Other income (expense): Interest expense, net .............................. (402,374) (12) (363,208) (19) (39,166) Share of affiliates' net loss ...................... (37,368) (1) (27,165) (1) (10,203) Gain on sale of programming interests and cable assets, net .................................... 170,912 5 372,053 19 (201,141) Gain on redemption of subsidiary preferred stock ... -- -- 181,738 9 (181,738) Write off of deferred interest and financing costs . (23,482) (1) (24,547) (1) 1,065 Provision for preferential payment to related party (980) -- (10,083) -- 9,103 Minority interests ................................. (124,677) (4) (209,461) (11) 84,784 Miscellaneous, net ................................. (19,218) (1) (12,606) (1) (6,612) ----------- ----------- ----------- Net loss .............................................. $ (448,504) (14)% $ (12,104) (1)% $ (436,400) =========== =========== =========== OTHER OPERATING DATA: Operating profit before depreciation and amortization (1) ............................... $ 722,790 $ 580,984 Net cash provided by operating activities (2) ......... 400,072 241,463 Net cash used in investing activities (2) ............. (468,423) (248,616) Net cash provided by (used in) financing activities (2) (167,964) 405,682
- - ---------- (1) Operating profit before depreciation and amortization is presented here to provide additional information about the Company's ability to meet future debt service, capital expenditures and working capital requirements. Operating profit before depreciation and amortization should be considered in addition to and not as a substitute for net income and cash flows as indicators of financial performance and liquidity as reported in accordance with generally accepted accounting principles. (2) See Item 8. - "Consolidated Statements of Cash Flows." (36) Comparison of Year Ended December 31, 1998 Versus Year Ended December 31, 1997. Consolidated Results - Cablevision Systems Corporation Revenues for the year ended December 31, 1998 increased $1,315.8 million (67%) as compared to revenues for the prior year. Approximately $1,093.7 million (56%) of the increase was attributable to the Net Acquisitions; approximately $88.8 million (5%) resulted from higher revenue per subscriber; and approximately $101.1 million (5%) was from increases in other revenue sources such as Rainbow Media's programming services, advertising on the Company's cable television systems, revenue derived from the developing commercial telephone business and revenue recognized in connection with the At Home transaction. The remaining increase of $32.2 million (1%) was attributable to internal growth of 67,300 in the average number of subscribers during the year. Technical and operating expenses (including cost of sales) for 1998 increased $805.7 million (94%) over the 1997 amount. Approximately $708.4 million (83%) was attributable to the Net Acquisitions, with the remaining $97.3 million (11%) attributable to increased costs directly associated with the growth in subscribers and revenues discussed above, as well as to increases in programming costs for cable television services. As a percentage of revenues, technical and operating expenses increased 7% during 1998 as compared to 1997. Selling, general and administrative expenses increased $368.2 million (72%) for 1998 as compared to the 1997 level. Approximately $212.8 million (41%) was directly attributable to the Net Acquisitions and $74.7 million (15%) was due to charges related to an incentive stock plan. The remaining $80.7 million (16%) increase resulted from higher customer service, administrative and sales and marketing costs. As a percentage of revenues, selling, general and administrative expenses increased 1% in 1998 compared to 1997. Excluding the effects of the incentive stock plan, as a percentage of revenues such costs decreased 1%. Operating profit before depreciation and amortization increased $141.8 million (24%) to $722.8 million for 1998 from $581.0 million for 1997. The Net Acquisitions contributed approximately $172.4 million (29%) of the increase. This increase was partially offset by a decrease of $30.6 million (5%) resulting from the combined effect of the revenue and expense changes discussed above. On a pro forma basis, giving effect to the Net Acquisitions as if they had occurred on January 1, 1997 and excluding the incentive stock plan charges referred to above, operating profit before depreciation and amortization would have increased 11.2% in 1998. Operating profit before depreciation and amortization is presented here to provide additional information about the Company's ability to meet future debt service, capital expenditures and working capital requirements. Operating profit before depreciation and amortization should be considered in addition to and not as a substitute for net income (loss) and cash flows as indicators of financial performance and liquidity as reported in accordance with generally accepted accounting principles. Depreciation and amortization expense increased $234.3 million (47%) during 1998 as compared to 1997. Approximately $212.6 million (43%) of the increase was directly attributable to the Net Acquisitions. The remaining $21.7 million (4%) increase resulted primarily from depreciation on (37) new plant assets, offset by a decrease in amortization expense resulting from certain intangible assets becoming fully amortized during 1998. Net interest expense increased $39.2 million (11%) during 1998 compared to 1997. The net increase is primarily attributable to debt incurred to fund acquisitions and capital expenditures, partly offset by lower interest rates. Share of affiliates' net losses increased to $37.4 million for 1998 from $27.2 million in 1997. For the year ended December 31, 1998, such amount consisted of the Company's share of the net profits and losses of certain programming businesses in which the Company has varying minority ownership interests. For the year ended December 31, 1997, such amount consisted primarily of the Company's share of net losses in certain cable affiliates for the period prior to consolidation ($37.9 million) and the Company's share of the net profits in certain programming businesses in which the Company had varying ownership interests. Gain on sale of programming interests and cable assets for the year ended December 31, 1998 consists primarily of a gain of $153.3 million from the disposition of certain cable television systems and $17.7 million from the sale of an interest in a regional sports programming business. For the year ended December 31, 1997, the gain consists primarily of a gain of approximately $305.0 million resulting from the Fox/Liberty transactions, a gain of approximately $59.0 million resulting from the sale of certain cable television systems, and a gain of approximately $7.4 million from the sale of Rainbow Media's radio station. Gain on redemption of subsidiary preferred stock for the year ended December 31, 1997 represents the gain recognized upon the redemption of A-R Cable's Series A Preferred Stock of $181.7 million. Such gain represents primarily the reversal of accrued preferred dividends in excess of amounts paid. Write off of deferred interest and financing costs of $23.5 million in 1998 consists principally of the premium of $14.9 million paid to redeem Clearview's senior notes payable. Additionally, in 1998 the Company wrote off deferred financing costs of $4.7 million in connection with amendments to the Company's credit agreements. The write off of deferred interest and financing costs of $24.5 million in 1997 consists principally of the payment of a premium of $8.4 million to redeem the Company's 10 3/4% Senior Subordinated Debentures due 2004 and the write off of $5.3 million in deferred financing costs in connection with such redemption. In addition, the Company wrote off deferred financing costs of $4.1 million in connection with the repayment of Cablevision of Ohio's bank debt and $6.5 million in connection with the amendment to and repayment of the term loans of the Madison Square Garden credit facility. Provision for preferential payment to related party consists of the expensing of the proportionate amount due with respect to an annual payment to Charles F. Dolan made in connection with the acquisition of Cablevision of New York City. Effective March 4, 1998 these preferential payments were terminated upon the retirement of Mr. Dolan's preferred interest. Minority interests for the year ended December 31, 1998 include CSC Holdings' preferred stock dividend requirements, Fox Liberty's 40% share of the net income of Regional Programming (38) Partners, ITT's share of the net loss of Madison Square Garden and NBC's share of the net loss of Rainbow Media. Minority interests for the year ended December 31, 1997 include CSC Holdings' preferred stock dividend requirements, Fox Liberty's 40% share of the net income of Regional Programming Partners since the date of the transaction, ITT's share of the net income of Madison Square Garden since the date of acquisition and NBC's 25% share of the net income of Rainbow Media since the date of the transaction. Net miscellaneous expense increased to $19.2 million for the year ended December 31, 1998 compared to $12.6 million for the prior year. Approximately $9.6 million of the increase related to federal alternative minimum taxes and state income taxes. The remaining decrease of $3.0 million reflects a reduction in various other miscellaneous items. Business Segments Results - Cablevision Systems Corporation The Company classifies its business interests into three fundamental areas: Telecommunication Services, consisting principally of its cable television, telephone and modem services operations; Rainbow Media, consisting principally of interests in cable television programming networks and MSG, which owns and operates professional sports teams, regional cable television networks, live productions and entertainment venues; and Retail Electronics, which represents the operations of Cablevision Electronics' retail electronics stores. The Company allocates certain costs to each segment based upon their proportionate estimated usage of services. Telecommunication Services The table below sets forth, for the periods presented, certain historical financial information and the percentage that those items bear to revenue for the Company's telecommunication services segment.
Years Ended December 31, ---------------------------------------------------------- 1998 1997 --------------------------- --------------------------- % of % of Amount Revenues Amount Revenues ------ -------- ------ -------- (dollars in thousands) ---------------------- Revenues $1,888,855 100% $1,366,668 100% Operating expenses 769,842 41 552,355 41 Selling, general and administrative expenses 432,435 23 301,762 22 Depreciation and amortization 547,629 29 399,056 29 ========== ========== Operating profit $ 138,949 7% $ 113,495 8% ========== ==========
Revenues for the year ended December 31, 1998 increased $522.2 million (38%) as compared to revenues for the prior year. Approximately $333.4 million (24%) of the increase was attributable to the Net Acquisitions; approximately $88.8 million (7%) resulted from higher revenue per subscriber and approximately $32.2 million (2%) was attributable to internal growth of 67,300 in the average number of subscribers during the year. Approximately $56.3 million (4%) was attributable to revenues from the Company's developing telephone business and revenue (39) recognized in connection with the At Home transaction. The remaining increase of approximately $11.5 million (1%) resulted from other revenue sources. Operating expenses for 1998 increased $217.5 million (39%) over the 1997 amount. Approximately $137.2 million (25%) was attributable to the Net Acquisitions, with the remaining $80.3 million (14%) attributable to increased costs directly associated with the growth in subscribers and revenues discussed above, as well as to increases in programming costs for cable television services. As a percentage of revenues, operating expenses remained relatively constant during 1998 as compared to 1997. Selling, general and administrative expenses increased $130.7 million (43%) for 1998 as compared to the 1997 level. Approximately $48.8 million (16%) was directly attributable to the Net Acquisitions and $36.1 million (12%) was due to charges related to an incentive stock plan. The remaining $45.8 million (15%) increase resulted from higher customer service, administrative and sales and marketing costs. As a percentage of revenues, selling, general and administrative expenses increased 1% in 1998 compared to 1997. Excluding the effects of the incentive stock plan, as a percentage of revenues such costs decreased 1%. Depreciation and amortization expense increased $148.6 million (37%) during 1998 as compared to 1997. Approximately $135.6 million (34%) of the increase was directly attributable to the Net Acquisitions. The remaining $13.0 million (3%) increase resulted primarily from depreciation on new plant assets, partially offset by a decrease in amortization expense resulting from certain intangible assets becoming fully amortized during 1998. Rainbow Media The table below sets forth, for the periods presented, certain historical financial information and the percentage that those items bear to revenue for Rainbow Media.
Years Ended December 31, ---------------------------------------------------------- 1998 1997 --------------------------- --------------------------- % of % of Amount Revenues Amount Revenues ------ -------- ------ -------- (dollars in thousands) ---------------------- Revenues $ 1,007,639 100% $ 637,648 100% Operating expenses 590,151 58 351,578 55 Selling, general and administrative expenses 351,727 35 214,912 34 Depreciation and amortization 166,661 17 90,634 14 =========== =========== Operating loss $ (100,900) (10)% $ (19,476) (3)% =========== ===========
Revenues for the year ended December 31, 1998 increased $370.0 million (58%) as compared to revenues for the prior year. Approximately $332.5 million (52%) of the increase was attributable to the Net Acquisitions; approximately $24.8 million (4%) resulted from internal growth in programming network subscribers; and approximately $7.4 million (1%) from an increase in cable television advertising sales. The remaining increase of $5.3 million (1%) was primarily attributable to the launch of new programming networks. (40) Operating expenses for 1998 increased $238.6 million (68%) over the 1997 amount. Approximately $218.0 million (62%) was attributable to the Net Acquisitions, with the remaining $20.6 million (6%) attributable to increased costs directly associated with the growth in revenues discussed above. As a percentage of revenues, operating expenses increased 3% during 1998 as compared to 1997. Selling, general and administrative expenses increased $136.8 million (64%) for 1998 as compared to the 1997 level. Approximately $70.2 million (33%) was directly attributable to the Net Acquisitions and $38.5 million (18%) was due to charges related to an incentive stock plan. The remaining $28.1 million (13%) increase was primarily attributable to sales and marketing initiatives related to the promotion of new and established programming networks and from higher administrative costs. As a percentage of revenues, selling, general and administrative expenses increased 1% in 1998 compared to 1997. Excluding the effects of the incentive stock plan, as a percentage of revenues such costs decreased 1%. Depreciation and amortization expense increased $76.0 million (84%) during 1998 as compared to 1997. Approximately $71.4 million (79%) of the increase was directly attributable to the Net Acquisitions. The remaining $4.6 million (5%) increase resulted primarily from depreciation on new fixed assets. Retail Electronics The table below sets forth, for the periods presented, certain historical financial information and the percentage that those items bear to revenue for the Company's retail electronics segment, Cablevision Electronics. The information presented is for the period from the date of acquisition, February 9, 1998 through December 31, 1998. Period Ended December 31, 1998 ------------------------------ Amount % of Revenue ------ ------------ (dollars in thousands) ---------------------- Revenues $ 464,388 100% Cost of sales 390,751 84 Selling, general and administrative expenses 93,803 20 Depreciation and amortization 4,293 1 =========== Operating loss $ (24,459) (5)% =========== Revenues for the period ended December 31, 1998 amounted to approximately $464.4 million. Approximately $179.5 million (39%) was derived from the sale of video equipment, $112.8 million (24%) from the sale of audio equipment and $94.6 million (20%) from the sale of home office equipment. The remaining $77.5 million (17%) of the revenue was derived from the sale of compact disks and other pre-recorded music, digital video disks, VHS video and other pre-recorded movies and warranty and service contracts. (41) Cost of sales for 1998 amounted to approximately $390.8 million (84% of revenues) from the date of acquisition through December 31, 1998. Cost of sales includes the cost of merchandise sold, including freight costs incurred, as well as store occupancy and buying costs. Selling, general and administrative expenses amounted to approximately $93.8 million (20% of revenues) from the date of acquisition through December 31, 1998. Selling, general and administrative expenses consist of all retail store expenses, including the salaries and commissions of sales personnel, the costs of advertising, operating the distribution center and corporate support functions. Depreciation and amortization expense amounted to approximately $4.3 million (1% of revenues) from the date of acquisition through December 31, 1998. Depreciation and amortization expense includes the depreciation of all property and equipment and the amortization of intangible assets which resulted from the acquisition. (42) STATEMENT OF OPERATIONS DATA
Cablevision Systems Corporation ---------------------------------------------------------- Years Ended December 31, ---------------------------------------------------------- 1997 1996 --------------------------- --------------------------- (Increase) % of Net % of Net Decrease Amount Revenues Amount Revenues in Net loss ------ -------- ------ -------- ----------- (Dollars in thousands) Revenues ............................................... $ 1,949,358 100% $ 1,315,142 100% $ 634,216 Operating expenses: Technical and operating ............................. 853,800 44 538,272 41 (315,528) Selling, general & administrative ................... 514,574 26 313,476 24 (201,098) Depreciation and amortization ....................... 499,809 26 388,982 29 (110,827) ----------- ----------- ----------- Operating profit ....................................... 81,175 4 74,412 6 6,763 Other income (expense): Interest expense, net ............................... (363,208) (19) (265,015) (20) (98,193) Share of affiliates' net loss ....................... (27,165) (1) (82,028) (6) 54,863 Gain on sale of programming interests and cable assets, net .................................... 372,053 19 -- -- 372,053 Gain on redemption of subsidiary preferred stock .... 181,738 9 -- -- 181,738 Write off of deferred interest and financing costs .. (24,547) (1) (37,784) (3) 13,237 Provision for preferential payment to related party . (10,083) -- (5,600) -- (4,483) Minority interests .................................. (209,461) (11) (137,197) (11) (72,264) Miscellaneous, net .................................. (12,606) (1) (6,647) (1) (5,959) ----------- ----------- ----------- Net income (loss) ...................................... $ (12,104) (1)% $ (459,859) (35)% $ 447,755 =========== =========== =========== OTHER OPERATING DATA: Operating profit before depreciation and amortization (1) ................................ $ 580,984 $ 463,394 Net cash provided by operating activities (2) .......... 241,463 170,114 Net cash used in investing activities (2) .............. (248,616) (741,748) Net cash provided by financing activities (2) .......... 405,682 567,914
- - ---------- (1) Operating profit before depreciation and amortization is presented here to provide additional information about the Company's ability to meet future debt service, capital expenditures and working capital requirements. Operating profit before depreciation and amortization should be considered in addition to and not as a substitute for net income and cash flows as indicators of financial performance and liquidity as reported in accordance with generally accepted accounting principles. (2) See Item 8. - "Consolidated Statements of Cash Flows." (43) Comparison of Year Ended December 31, 1997 Versus Year Ended December 31, 1996. Cablevision Systems Corporation Revenues for the year ended December 31, 1997 increased $634.2 million (48%) as compared to revenues for the prior year. Approximately $490.4 million (37%) of the increase was attributable to the Net Acquisitions; approximately $60.1 million (5%) resulted from higher revenue per subscriber; and approximately $50.9 million (4%) was from increases in other revenue sources such as Rainbow Media's programming services, advertising on the Company's cable television systems and revenue derived from the developing commercial telephony business. The remaining increase of $32.7 million (2%) was attributable to internal growth of 72,600 in the average number of subscribers during the year. Technical and operating expenses for 1997 increased $315.5 million (59%) over the 1996 amount. Approximately 48% was attributable to the Net Acquisitions, with the remaining 11% attributable to increased costs directly associated with the growth in subscribers and revenues discussed above, as well as to increases in programming rates for certain cable television services. As a percentage of revenues, technical expenses increased 3% during 1997 as compared to 1996. Selling, general and administrative expenses increased $201.1 million (64%) for 1997 as compared to the 1996 level. Approximately 34% was directly attributable to the Net Acquisitions and 21% was due to charges related to an incentive stock plan. The remaining 9% increase resulted from higher customer service, administrative and sales and marketing costs. As a percentage of revenues, selling, general and administrative expenses increased 2% in 1997 compared to 1996. Excluding the effects of the incentive stock plan, as a percentage of revenues such costs decreased 1%. Operating profit before depreciation and amortization increased $117.6 million (25%) to $581.0 million for 1997 from $463.4 million for 1996. Approximately $126.3 million (27%) of the increase was attributable to the Net Acquisitions. The remaining decrease of $8.7 million (2%) resulted from the combined effect of the revenue and expense changes discussed above. On a pro forma basis, giving effect to the Net Acquisitions as if they had occurred on January 1, 1996 and excluding the incentive stock plan charges referred to above, operating profit before depreciation and amortization would have increased 14% in 1997. Operating profit before depreciation and amortization is presented here to provide additional information about the Company's ability to meet future debt service, capital expenditures and working capital requirements. Operating profit before depreciation and amortization should be considered in addition to and not as a substitute for net income and cash flows as indicators of financial performance and liquidity as reported in accordance with generally accepted accounting principles. Depreciation and amortization expense increased $110.8 million (28%) during 1997 as compared to 1996. Approximately 23% of the increase was directly attributable to the Net Acquisitions. The remaining 5% increase resulted primarily from depreciation on new plant assets, offset by a decrease in depreciation and amortization for certain assets held for sale and a decrease in amortization expense resulting from certain intangible assets becoming fully amortized during 1997. (44) Net interest expense increased $98.2 million (37%) during 1997 compared to 1996. Approximately 35% of the increase is attributable to the Net Acquisitions. The remaining increase of 2% is due to higher debt balances, partly offset by lower interest rates on bank debt. Share of affiliates' net losses of $27.2 million for 1997 and $82.0 million for 1996 consist primarily of the Company's share of net losses in certain cable affiliates for the period prior to consolidation ($37.9 million in 1997 and $74.0 million in 1996) and the Company's net share of the profits and losses in certain programming businesses in which the Company has varying ownership interests, which share of net income (losses) amounted to $10.7 million in 1997 and $(8.0) million in 1996. Gain on sale of programming interests and cable assets for the year ended December 31, 1997 consists primarily of a gain of approximately $305.0 million resulting from the Fox/Liberty transactions, a gain of approximately $59.0 million resulting from the sale of certain cable television systems and a gain of approximately $7.4 million from the sale of Rainbow Media's radio station. Gain on redemption of subsidiary preferred stock for the year ended December 31, 1997 represents the gain recognized upon the redemption of A-R Cable's Series A Preferred Stock of $181.7 million. Such gain represents primarily the reversal of accrued preferred dividends in excess of amounts paid. Write off of deferred interest and financing costs of $24.5 million in 1997 consist principally of the payment of a premium of $8.4 million to redeem the Company's 10 3/4% Senior Subordinated Debentures due 2004 and the write off of $5.3 million in deferred financing costs in connection with such redemption. In addition, the Company wrote off deferred financing costs of $4.1 million in connection with the repayment of Cablevision of Ohio's bank debt and $6.5 million in connection with the amendment to and repayment of the term loans of the Madison Square Garden credit facility. Write off of deferred interest and financing costs of $37.8 million for 1996 consist principally of $24 million related to a refinancing of the Company's subsidiary, V Cable, Inc. and approximately $10.7 million related to the replacement of the Company's former $1.5 billion Restricted Group credit facility with a new $1.7 billion credit facility. Provision for preferential payment to related party consists of the expensing of the proportionate amount due with respect to an annual payment to Charles F. Dolan made in connection with the acquisition of Cablevision of New York City. Effective March 4, 1998, these preferential payments were terminated upon the retirement of Mr. Dolan's preferred interest. Minority interest for the year ended December 31, 1997 represents CSC Holdings' preferred stock dividend requirements, Fox Liberty's 40% share of the net income of Regional Programming Partners since the date of the transaction, ITT's share of the net income of Madison Square Garden since the date of acquisition and NBC's 25% share of the net income of Rainbow Media since the date of the transaction. For 1996, the minority interest represented CSC Holdings' preferred stock dividend requirements and NBC's 25% share of the net income of American Movie Classics. (45) Results of Operations - CSC Holdings, Inc. The following table sets forth on a historical basis certain items related to operations as a percentage of net revenues for the periods indicated. STATEMENT OF OPERATIONS DATA
CSC Holdings, Inc. ----------------------------------------------------------- Years Ended December 31, ----------------------------------------------------------- 1998 1997 ---------------------------- ---------------------------- (Increase) % of Net % of Net Decrease Amount Revenues Amount Revenues in Net loss ------ -------- ------ -------- ----------- (Dollars in thousands) Revenues ............................................... $ 2,912,419 100% $ 1,949,358 100% $ 963,061 Operating expenses: Technical and operating (including cost of sales of $390,751 in 1998 ............................ 1,524,555 52 853,800 44 (670,755) Selling, general & administrative ................... 820,015 28 514,574 26 (305,441) Depreciation and amortization ....................... 577,635 20 499,809 26 (77,826) ----------- ----------- ----------- Operating profit (loss) ................................ (9,786) -- 81,175 4 (90,961) Other income (expense): Interest expense, net ............................... (369,072) (13) (363,208) (19) (5,864) Share of affiliates' net loss ....................... (37,368) (1) (27,165) (1) (10,203) Gain on sale of programming interests and cable assets, net .................................... 171,127 6 372,053 19 (200,926) Gain on redemption of subsidiary preferred stock .... -- -- 181,738 9 (181,738) Write off of deferred interest and financing costs .. (23,482) (1) (24,547) (1) 1,065 Provision for preferential payment to related party . (980) -- (10,083) -- 9,103 Minority interests .................................. 48,378 2 (60,694) (3) 109,072 Miscellaneous, net .................................. (18,350) (1) (12,606) (1) (5,744) ----------- ----------- ----------- Net income (loss) ...................................... $ (239,533) (8)% $ 136,663 7% $ (376,196) =========== =========== =========== OTHER OPERATING DATA: Operating profit before depreciation and amortization (1) ................................ $ 567,849 $ 580,984 Net cash provided by operating activities (2) .......... 249,496 271,687 Net cash used in investing activities (2) .............. (387,618) (248,616) Net cash provided by (used in) financing activities (2) (98,320) 375,458
- - ---------- (1) Operating profit before depreciation and amortization is presented here to provide additional information about CSC Holdings' ability to meet future debt service, capital expenditures and working capital requirements. Operating profit before depreciation and amortization should be considered in addition to and not as a substitute for net income and cash flows as indicators of financial performance and liquidity as reported in accordance with generally accepted accounting principles. (2) See Item 8. - "Consolidated Statements of Cash Flows." (46) Comparison of Year Ended December 31, 1998 Versus Year Ended December 31, 1997. Consolidated Results - CSC Holdings, Inc. Revenues for the year ended December 31, 1998 increased $963.1 million (49%) as compared to revenues for the prior year. Approximately $741.0 million (38%) of the increase was attributable to the Net Acquisitions; approximately $88.8 million (5%) resulted from higher revenue per subscriber; and approximately $101.1 million (5%) was from increases in other revenue sources such as Rainbow Media's programming services, advertising on CSC Holdings' cable television systems, revenue derived from the developing commercial telephone business and revenue recognized in connection with the At Home transaction. The remaining increase of $32.2 million (1%) was attributable to internal growth of 67,300 in the average number of subscribers during the year. Technical and operating expenses (including cost of sales) for 1998 increased $670.8 million (79%) over the 1997 amount. Approximately $573.5 million (67%) was attributable to the Net Acquisitions, with the remaining $97.3 million (12%) attributable to increased costs directly associated with the growth in subscribers and revenues discussed above, as well as to increases in programming costs for cable television services. As a percentage of revenues, technical and operating expenses increased 8% during 1998 as compared to 1997. Selling, general and administrative expenses increased $305.4 million (59%) for 1998 as compared to the 1997 level. Approximately $150.0 million (28%) was directly attributable to the Net Acquisitions and $74.7 million (15%) was due to increased charges related to an incentive stock plan. The remaining $80.7 million (16%) increase resulted from higher customer service, administrative and sales and marketing costs. As a percentage of revenues, selling, general and administrative expenses increased 2% in 1998 compared to 1997. Excluding the effects of the incentive stock plan, as a percentage of revenues such costs remained relatively constant. Operating profit before depreciation and amortization decreased $13.1 million (2%) to $567.9 million for 1998 from $581.0 million for 1997. Approximately $30.6 million of the decrease resulted from the combined effect of the revenue and expense changes discussed above, partially offset by an increase of $17.5 million attributable to the Net Acquisitions. On a pro forma basis, giving effect to the Net Acquisitions as if they had occurred on January 1, 1997 and excluding the incentive stock plan charges referred to above, operating profit before depreciation and amortization would have increased 11.5% in 1998. Operating profit before depreciation and amortization is presented here to provide additional information about CSC Holdings' ability to meet future debt service, capital expenditures and working capital requirements. Operating profit before depreciation and amortization should be considered in addition to and not as a substitute for net income (loss) and cash flows as indicators of financial performance and liquidity as reported in accordance with generally accepted accounting principles. Depreciation and amortization expense increased $77.8 million (16%) during 1998 as compared to 1997. Approximately $56.1 million (12%) of the increase was directly attributable to the Net Acquisitions. The remaining $21.7 million (4%) increase resulted primarily from depreciation on (47) new plant assets, offset by a decrease in amortization expense resulting from certain intangible assets becoming fully amortized during 1998. Net interest expense increased $5.9 million (2%) during 1998 compared to 1997. The net increase is primarily attributable to debt incurred to fund acquisitions and capital expenditures, partly offset by lower interest rates. Share of affiliates' net losses increased to $37.4 million for 1998 from $27.2 million in 1997. For the year ended December 31, 1998, such amount consisted of CSC Holdings' share of the net profits and losses of certain programming businesses in which CSC Holdings has varying minority ownership interests. For the year ended December 31, 1997, such amount consisted primarily of CSC Holdings' share of net losses in certain cable affiliates for the period prior to consolidation ($37.9 million) and CSC Holdings' share of the net profits in certain programming businesses in which CSC Holdings had varying ownership interests. Gain on sale of programming interests and cable assets for the year ended December 31, 1998 consists primarily of a gain of $153.4 million from the disposition of certain cable television systems and $17.7 million from the sale of an interest in a regional sports programming business. For the year ended December 31, 1997, the gain consists primarily of a gain of approximately $305.0 million resulting from the Fox/Liberty transactions, a gain of approximately $59.0 million resulting from the sale of certain cable television systems and a gain of approximately $7.4 million from the sale of Rainbow Media's radio station. Gain on redemption of subsidiary preferred stock for the year ended December 31, 1997 represents the gain recognized upon the redemption of A-R Cable's Series A Preferred Stock of $181.7 million. Such gain represents primarily the reversal of accrued preferred dividends in excess of amounts paid. Write off of deferred interest and financing costs of $23.5 million in 1998 consists principally of the premium of $14.9 million paid to redeem Clearview's senior notes payable. Additionally, in 1998 CSC Holdings wrote off deferred financing costs of $4.7 million in connection with amendments to CSC Holdings' credit agreements. The write off of deferred interest and financing costs of $24.5 million in 1997 consists principally of the payment of a premium of $8.4 million to redeem CSC Holdings' 10-3/4% Senior Subordinated Debentures due 2004 and the write off of $5.3 million in deferred financing costs in connection with such redemption. In addition, CSC Holdings wrote off deferred financing costs of $4.1 million in connection with the repayment of Cablevision of Ohio's bank debt and $6.5 million in connection with the amendment to and repayment of the term loans of the Madison Square Garden credit facility. Provision for preferential payment to related party consists of the expensing of the proportionate amount due with respect to an annual payment to Charles F. Dolan made in connection with the acquisition of Cablevision of New York City. Effective March 4, 1998, these preferential payments were terminated upon the retirement of Mr. Dolan's preferred interest. Minority interests for the year ended December 31, 1998 include Fox Liberty's 40% share of the net income of Regional Programming Partners, ITT's share of the net loss of Madison Square (48) Garden and NBC's share of the net loss of Rainbow Media. Minority interests for the year ended December 31, 1997 include Fox Liberty's 40% share of the net income of Regional Programming Partners since the date of the transaction, ITT's share of the net income of Madison Square Garden since the date of acquisition and NBC's 25% share of the net income of Rainbow Media since the date of the transaction. Net miscellaneous expense increased to $18.4 million for the year ended December 31, 1998 compared to $12.6 million for the prior year. Approximately $9.6 million of the increase related to federal alternative minimum taxes and state income taxes. The remaining decrease of $3.8 million reflects a reduction in various other miscellaneous items. Business Segments Results - CSC Holdings, Inc. CSC Holdings classifies its business interests into three fundamental areas: Telecommunication Services, consisting principally of its cable television, telephone and modem services operations; Rainbow Media, consisting principally of interests in cable television programming networks and MSG, which owns and operates professional sports teams, regional cable television networks, live productions and entertainment venues; and Retail Electronics, which represents the operations of Cablevision Electronics' retail electronics stores. Telecommunication Services The table below sets forth, for the periods presented, certain historical financial information and the percentage that those items bear to revenue for CSC Holdings' telecommunication services segment.
Years Ended December 31, -------------------------------------------- 1998 1997 ---------------------- -------------------- % of % of Amount Revenues Amount Revenues ------ -------- ------ -------- (dollars in thousands) ---------------------- Revenues $ 1,513,393 100% $ 1,366,668 100% Operating expenses 612,122 41 552,355 41 Selling, general and administrative expenses 369,634 24 301,762 22 Depreciation and amortization 391,157 26 399,056 29 ----------- ----------- Operating profit $ 140,480 9% $ 113,495 8% =========== ===========
Revenues for the year ended December 31, 1998 increased $146.7 million (11%) as compared to revenues for the prior year. Approximately $88.8 million (7%) of the increase resulted from higher revenue per subscriber and approximately $32.2 million (2%) was attributable to internal growth of 67,300 in the average number of subscribers during the year. Approximately $56.3 million (4%) was attributable to CSC Holdings' developing telephone business and revenue recognized in connection with the At Home transaction. The remaining increase of approximately $11.5 million (49) (1%) resulted from other revenue sources. These increases were offset by a decrease of approximately $42.1 million (3%) as a result of the Net Acquisitions. Operating expenses for 1998 increased $59.8 million (11%) over the 1997 amount. An approximate $80.3 million (15%) increase was attributable to increased costs directly associated with the growth in subscribers and revenues discussed above, as well as to increases in programming costs for cable television services. This increase was partially offset by a decrease of $20.5 million (4%) as a result of the Net Acquisitions. As a percentage of revenues, operating expenses remained relatively constant during 1998 as compared to 1997. Selling, general and administrative expenses increased $67.9 million (22%) for 1998 as compared to the 1997 level. Approximately $36.1 million (12%) was due to charges related to an incentive stock plan and approximately $45.8 million (15%) resulted from higher customer service, administrative and sales and marketing costs. These increases were partially offset by a decrease of approximately $14.0 million (5%) as a result of the Net Acquisitions. As a percentage of revenues, selling, general and administrative expenses increased 2% in 1998 compared to 1997. Excluding the effects of the incentive stock plan, as a percentage of revenues such costs remained relatively constant. Depreciation and amortization expense decreased $7.9 million (2%) during 1998 as compared to 1997. The net decrease was comprised primarily of a $20.8 million (5%) decrease directly attributable to the Net Acquisitions and a $12.9 million (3%) increase resulting primarily from depreciation on new plant assets, partially offset by a decrease in amortization expense resulting from certain intangible assets becoming fully amortized during 1998. Rainbow Media The table below sets forth, for the periods presented, certain historical financial information and the percentage that those items bear to revenue for Rainbow Media.
Years Ended December 31, -------------------------------------------- 1998 1997 ---------------------- -------------------- % of % of Amount Revenues Amount Revenues ------ -------- ------ -------- (dollars in thousands) ---------------------- Revenues $ 1,007,639 100% $ 637,648 100% Operating expenses 590,151 58 351,578 55 Selling, general and administrative expenses 351,727 35 214,912 34 Depreciation and amortization 166,661 17 90,634 14 ----------- ---------- Operating loss $ (100,900) (10)% $ (19,476) (3)% =========== ==========
Revenues for the year ended December 31, 1998 increased $370.0 million (58%) as compared to revenues for the prior year. Approximately $332.5 million (52%) of the increase was attributable to the Net Acquisitions; approximately $24.8 million (4%) resulted from internal growth in programming network subscribers; and approximately $7.4 million (1%) from an increase in cable (50) television advertising sales. The remaining increase of $5.3 million (1%) was primarily attributable to the launch of new programming networks. Operating expenses for 1998 increased $238.6 million (68%) over the 1997 amount. Approximately $218.0 million (62%) was attributable to the Net Acquisitions, with the remaining $20.6 million (6%) attributable to increased costs directly associated with the growth in revenues discussed above. As a percentage of revenues, operating expenses increased 3% during 1998 as compared to 1997. Selling, general and administrative expenses increased $136.8 million (64%) for 1998 as compared to the 1997 level. Approximately $70.2 million (33%) was directly attributable to the Net Acquisitions and $38.5 million (18%) was due to charges related to an incentive stock plan. The remaining $28.1 million (13%) increase was primarily attributable to sales and marketing initiatives related to the promotion of new and established programming networks and from higher administrative costs. As a percentage of revenues, selling, general and administrative expenses increased 1% in 1998 compared to 1997. Excluding the effects of the incentive stock plan, as a percentage of revenues such costs decreased 1%. Depreciation and amortization expense increased $76.0 million (84%) during 1998 as compared to 1997. Approximately $71.4 million (79%) of the increase was directly attributable to the Net Acquisitions. The remaining $4.6 million (5%) increase resulted primarily from depreciation on new fixed assets. Retail Electronics The table below sets forth, for the periods presented, certain historical financial information and the percentage that those items bear to revenue for CSC Holdings' retail electronics segment, Cablevision Electronics. The information presented is for the period from the date of acquisition, February 9, 1998 through December 31, 1998. Period Ended December 31, 1998 ------------------------------ Amount % of Revenue ------ ------------ (dollars in thousands) ---------------------- Revenues $ 464,388 100% Cost of sales 390,751 84 Selling, general and administrative expenses 93,803 20 Depreciation and amortization 4,293 1 --------- Operating loss $ (24,459) (5)% ========= Revenues for the period ended December 31, 1998 amounted to approximately $464.4 million. Approximately $179.5 million (39%) was derived from the sale of video equipment, $112.8 million (24%) from the sale of audio equipment and $94.6 million (20%) from the sale of home office equipment. The remaining $77.5 million (17%) of the revenue was derived from the sale of compact disks and other pre-recorded music, digital video disks, VHS video and other pre-recorded movies and warranty and service contracts. (51) Cost of sales for 1998 amounted to approximately $390.8 million (84% of revenues) from the date of acquisition through December 31, 1998. Cost of sales includes the cost of merchandise sold, including freight costs incurred, as well as store occupancy and buying costs. Selling, general and administrative expenses amounted to approximately $93.8 million (20% of revenues) from the date of acquisition through December 31, 1998. Selling, general and administrative expenses consist of all retail store expenses, including the salaries and commissions of sales personnel, the costs of advertising, operating the distribution center and corporate support functions. Depreciation and amortization expense amounted to approximately $4.3 million (1% of revenues) from the date of acquisition through December 31, 1998. Depreciation and amortization expense includes the depreciation of all property and equipment and the amortization of intangible assets which resulted from the acquisition. (52) STATEMENT OF OPERATIONS DATA
CSC Holdings, Inc. ----------------------------------------------------------- Years Ended December 31, ----------------------------------------------------------- 1997 1996 ----------------------------------------------------------- (Increase) % of Net % of Net Decrease Amount Revenues Amount Revenues in Net loss ------ -------- ------ -------- ----------- (Dollars in thousands) Revenues ............................................... $ 1,949,358 100% $ 1,315,142 100% $ 634,216 Operating expenses: Technical and operating ............................. 853,800 44 538,272 41 (315,528) Selling, general & administrative ................... 514,574 26 313,476 24 (201,098) Depreciation and amortization ....................... 499,809 26 388,982 29 (110,827) ----------- ----------- ----------- Operating profit ....................................... 81,175 4 74,412 6 6,763 Other income (expense): Interest expense, net ............................... (363,208) (19) (265,015) (20) (98,193) Share of affiliates' net loss ....................... (27,165) (1) (82,028) (6) 54,863 Gain on sale of programming interests and cable assets, net .................................... 372,053 19 -- -- 372,053 Gain on redemption of subsidiary preferred stock .... 181,738 9 -- -- 181,738 Write off of deferred interest and financing costs .. (24,547) (1) (37,784) (3) 13,237 Provision for preferential payment to related party . (10,083) -- (5,600) -- (4,483) Minority interests .................................. (60,694) (3) (9,417) (1) (51,277) Miscellaneous, net .................................. (12,606) (1) (6,647) (1) (5,959) ----------- ----------- ----------- Net income (loss) ...................................... $ 136,663 7% $ (332,079) (25)% $ 468,742 =========== =========== =========== OTHER OPERATING DATA: Operating profit before depreciation and amortization (1) ................................ $ 580,984 $ 463,394 Net cash provided by operating activities (2) .......... 271,687 200,380 Net cash used in investing activities (2) .............. (248,616) (741,748) Net cash provided by financing activities (2) .......... 375,458 537,648
- - ---------- (1) Operating profit before depreciation and amortization is presented here to provide additional information about CSC Holdings' ability to meet future debt service, capital expenditures and working capital requirements. Operating profit before depreciation and amortization should be considered in addition to and not as a substitute for net income and cash flows as indicators of financial performance and liquidity as reported in accordance with generally accepted accounting principles. (2) See Item 8. - "Consolidated Statements of Cash Flows." (53) Comparison of Year Ended December 31, 1997 Versus Year Ended December 31, 1996. CSC Holdings, Inc. Revenues for the year ended December 31, 1997 increased $634.2 million (48%) as compared to revenues for the prior year. Approximately $490.4 million (37%) of the increase was attributable to the Net Acquisitions; approximately $60.1 million (5%) resulted from higher revenue per subscriber; and approximately $50.9 million (4%) was from increases in other revenue sources such as Rainbow Media's programming services, advertising on CSC Holdings' cable television systems and revenue derived from the developing commercial telephony business. The remaining increase of $32.7 million (2%) was attributable to internal growth of 72,600 in the average number of subscribers during the year. Technical and operating expenses for 1997 increased $315.5 million (59%) over the 1996 amount. Approximately 48% was attributable to the Net Acquisitions, with the remaining 11% attributable to increased costs directly associated with the growth in subscribers and revenues discussed above, as well as to increases in programming rates for certain cable television services. As a percentage of revenues, technical expenses increased 3% during 1997 as compared to 1996. Selling, general and administrative expenses increased $201.1 million (64%) for 1997 as compared to the 1996 level. Approximately 34% was directly attributable to the Net Acquisitions and 21% was due to charges related to an incentive stock plan. The remaining 9% increase resulted from higher customer service, administrative and sales and marketing costs. As a percentage of revenues, selling, general and administrative expenses increased 2% in 1997 compared to 1996. Excluding the effects of the incentive stock plan, as a percentage of revenues such costs decreased 1%. Operating profit before depreciation and amortization increased $117.6 million (25%) to $581.0 million for 1997 from $463.4 million for 1996. Approximately $126.3 million (27%) of the increase was attributable to the Net Acquisitions. The remaining decrease of $8.7 million (2%) resulted from the combined effect of the revenue and expense changes discussed above. On a pro forma basis, giving effect to the Net Acquisitions as if they had occurred on January 1, 1996 and excluding the incentive stock plan charges referred to above, operating profit before depreciation and amortization would have increased 14% in 1997. Operating profit before depreciation and amortization is presented here to provide additional information about CSC Holdings' ability to meet future debt service, capital expenditures and working capital requirements. Operating profit before depreciation and amortization should be considered in addition to and not as a substitute for net income and cash flows as indicators of financial performance and liquidity as reported in accordance with generally accepted accounting principles. Depreciation and amortization expense increased $110.8 million (28%) during 1997 as compared to 1996. Approximately 23% of the increase was directly attributable to the Net Acquisitions. The remaining 5% increase resulted primarily from depreciation on new plant assets, offset by a decrease in depreciation and amortization for certain assets held for sale and a decrease in amortization expense resulting from certain intangible assets becoming fully amortized during 1997. (54) Net interest expense increased $98.2 million (37%) during 1997 compared to 1996. Approximately 35% of the increase is attributable to the Net Acquisitions. The remaining increase of 2% is due to higher debt balances, partly offset by lower interest rates on bank debt. Share of affiliates' net losses of $27.2 million for 1997 and $82.0 million for 1996 consist primarily of CSC Holdings' share of net losses in certain cable affiliates for the period prior to consolidation ($37.9 million in 1997 and $74.0 million in 1996) and CSC Holdings' net share of the profits and losses in certain programming businesses in which CSC Holdings has varying ownership interests, which share of net income (losses) amounted to $10.7 million in 1997 and $(8.0) million in 1996. Gain on sale of programming interests and cable assets for the year ended December 31, 1997 consists primarily of a gain of approximately $305.0 million resulting from the Fox/Liberty transactions, a gain of approximately $59.0 million resulting from the sale of certain cable television systems and a gain of approximately $7.4 million from the sale of Rainbow Media's radio station. Gain on redemption of subsidiary preferred stock for the year ended December 31, 1997 represents the gain recognized upon the redemption of A-R Cable's Series A Preferred Stock of $181.7 million. Such gain represents primarily the reversal of accrued preferred dividends in excess of amounts paid. Write off of deferred interest and financing costs of $24.5 million in 1997 consist principally of the payment of a premium of $8.4 million to redeem CSC Holdings' 10 3/4% Senior Subordinated Debentures due 2004 and the write off of $5.3 million in deferred financing costs in connection with such redemption. In addition, CSC Holdings wrote off deferred financing costs of $4.1 million in connection with the repayment of Cablevision of Ohio's bank debt and $6.5 million in connection with the amendment to and repayment of the term loans of the Madison Square Garden credit facility. Write off of deferred interest and financing costs of $37.8 million for 1996 consists principally of $24 million related to a refinancing of CSC Holdings' subsidiary, V Cable, Inc. and approximately $10.7 million related to the replacement of CSC Holdings' former $1.5 billion Restricted Group credit facility with a new $1.7 billion credit facility. Provision for preferential payment to related party consists of the expensing of the proportionate amount due with respect to an annual payment to Charles F. Dolan made in connection with the acquisition of Cablevision of New York City. Effective March 4, 1998, these preferential payments were terminated upon the retirement of Mr. Dolan's preferred interest. Minority interest for the year ended December 31, 1997 represents Fox Liberty's 40% share of the net income of Regional Programming Partners since the date of the transaction, ITT's share of the net income of Madison Square Garden since the date of acquisition and NBC's 25% share of the net income of Rainbow Media since the date of the transaction. For 1996, the minority interest represented NBC's 25% share of the net income of American Movie Classics. (55) Other Items Dividend requirements applicable to preferred stocks amounted to $148.8 million for 1997, representing an increase of $21.0 million for the year primarily due to CSC Holdings' issuances of preferred stock during the first quarter of 1996. Liquidity and Capital Resources Cablevision Systems Corporation does not have any operations independent of its subsidiaries. In addition, Cablevision Systems Corporation has no borrowings and does not have outstanding any securities other than its Class A Common Stock and Class B Common Stock, on which it does not intend to pay any dividends in the foreseeable future. Accordingly, Cablevision Systems Corporation does not have cash needs independent of the needs of its subsidiaries. Cablevision Systems Corporation is structured as a restricted group and an unrestricted group of subsidiaries. The Restricted Group includes all of CSC Holdings' cable operations in and around the greater New York City Metropolitan area, in and around the greater Cleveland, Ohio Metropolitan area and in and around the Boston, Massachusetts Metropolitan area and the commercial telephone operations of the Company's subsidiary, Cablevision Lightpath, Inc. on Long Island, New York. At December 31, 1998, the Restricted Group encompassed approximately 2,569,000 cable television subscribers, including approximately 49,000 subscribers in systems held for sale (see Note 3 - "Net Assets Held for Sale"). The Unrestricted Group principally includes the Company's cable television operations other than those included in the Restricted Group. At December 31, 1998, the Unrestricted Group encompassed approximately 843,000 cable television subscribers of the TCI Systems ("Unrestricted Cable"). Other Unrestricted Group subsidiaries ("Unrestricted Other") include Rainbow Media, including Madison Square Garden, and other companies engaged in certain development activities ("New Media"). Cablevision Electronics which acquired substantially all of the assets associated with 40 The Wiz consumer electronics store locations on February 9, 1998 and Cablevision Cinemas which owns the Company's motion picture theater assets are also included in the Unrestricted Group. 1999 Outlook The Company forecasts capital investment of between $800 million and $900 million in its New York, Massachusetts and Ohio cable properties and Long Island commercial telephone business in 1999. The Company estimates that it will make approximately 75% of such investment in the New York area businesses. This investment includes startup capital for digital video services as well as the rebuild of approximately 40% more plant miles to 750 MHz in 1999 than that which was rebuilt in 1998. Additionally, the Company forecasts capital investments aggregating between $250 million and $300 million for its New Media businesses, Madison Square Garden, Rainbow Media, retail electronics and theaters in 1999. Among other things, this $250-$300 (56) million of capital includes investments for the Radio City Music Hall restoration, as well as investments to expand residential telephone service on Long Island and Connecticut, roll out the non-Long Island based commercial telephone business and nearly double the number of homes marketed for cable modems. In addition, the Company may from time to time complete acquisitions that may be material and that may involve the incurrence of indebtedness. Over the past two years, the Company has reduced its leverage and has experienced improved debt ratings. The Company will seek to finance its 1999 capital expenditures in a manner that does not adversely affect its debt ratings. This may involve raising funds through the issuance of trust preferred securities and/or through asset sales. The following table presents selected historical results of operations and other financial information related to the captioned groups or entities as of and for the year ended December 31, 1998.
Operating Profit (Loss) Before Depreciation and Interest Capital Revenues Amortization Expense Expenditures -------- ------------ ------- ------------ (dollars in thousands) Restricted Group.................. $1,452,526 $ 556,411 $ 326,107 $ 422,079 Other Unrestricted Cable.......... 20,910 5,974 2,034 3,370 TCI Systems....................... 375,462 154,941 33,394 30,858 New Media......................... 39,957 (30,748) 42 48,849 Rainbow Media (including MSG and AMC).............................. 1,007,639 65,761 58,088 45,394 Retail Electronics................ 464,388 (20,166) 5,800 2,332 Other............................. (95,739) (9,383) 937 8,760 ---------- ---------- ---------- ---------- Total.......................... $3,265,143 $ 722,790 $ 426,402 $ 561,642 ========== ========== ========== ==========
Restricted Unrestricted Group Group Total ----- ----- ----- (dollars in thousands) ---------------------- Debt and Redeemable Preferred Stock Senior debt ............................... $ 899,388 $ 523,000 $1,422,388 Senior notes and debentures ............... 2,194,443 -- 2,194,443 Subordinated debentures ................... 1,048,375 -- 1,048,375 ---------- ---------- ---------- 4,142,206 523,000 4,665,206 ---------- ---------- ---------- Redeemable preferred stock of CSC Holdings 1,256,339 -- 1,256,339 Rainbow Media RMHI senior debt ....................... -- 95,548 95,548 AMC senior debt ........................ -- 205,157 205,157 MSG senior debt ........................ -- 330,000 330,000 ---------- ---------- ---------- Total Rainbow Media debt .......... -- 630,705 630,705 ---------- ---------- ---------- Retail Electronics debt ................... -- 44,542 44,542 Other debt ................................ -- 17,155 17,155 ---------- ---------- ---------- Total debt and redeemable preferred stock .......................... $5,398,545 $1,215,402 $6,613,947 ========== ========== ==========
(57) Restricted Group The Company believes that, for the Restricted Group, internally generated funds, together with funds available under the Restricted Group's Credit Agreement, will be sufficient through 1999 to meet projected funding requirements. Acceleration of the Company's plant upgrade, combined with additional amounts in respect of the start up and operation of new businesses, such as high speed internet access and digital video services, to expand residential telephone services and to roll out the non-Long Island based commercial telephone business, as well as additional capital investments or acquisitions may require raising additional capital. The Company may obtain the requisite funds through the incurrence of additional indebtedness, the issuance of trust preferred securities and/or asset sales. The Company will seek to finance its 1999 capital expenditures in a manner that does not adversely affect its debt ratings. In February 1998, CSC Holdings issued $300 million face amount of 7-7/8% Senior Debentures due 2018. The net proceeds of $291.7 million were used to repay outstanding borrowings under the CSC Holdings Credit facility. In June 1998, promissory notes totaling $151 million were redeemed with bank borrowings under the CSC Holdings and MFR credit facilities. In July 1998, CSC Holdings issued $500 million face amount of 7-1/4% Senior Notes due 2008 and $500 million face amount of 7-5/8% Senior Debentures due 2018. The net proceeds of $985 million were used to repay outstanding borrowings under the CSC Holdings credit facility. In May 1998, CSC Holdings and certain other subsidiaries of the Company completed a new $2.8 billion credit facility. The $2.8 billion reducing revolving credit facility, maturing in March 2007, consists of a $1.4 billion CSC Holdings credit facility, a $1.4 billion MFR credit facility (for its New Jersey cable operations) of which $600 million is available, and an $800 million credit facility for the TCI Systems. While the $800 million TCI Systems credit facility is in place, only $600 million of the $1.4 billion MFR facility may be utilized. In July 1998, the Company reduced the CSC Holdings credit facility by $400 million to $1.0 billion, and the MFR credit facility by $200 million to $1.2 billion, which includes a reduction of the TCI credit facility by $100 million to $700 million. On March 3, 1999, taking into account the commitment reduction, the Restricted Group had total usage under its existing Credit Agreement (including the MFR credit facility) of $1,021.0 million and letters of credit of $34.4 million issued on behalf of CSC Holdings. Unrestricted and undrawn funds available to the Restricted Group amounted to approximately $444.6 million as of March 3, 1999. Upon the transfer of the TCI Systems to CSC Holdings, which is expected to occur by April 4, 1999, the full amount of the MFR facility may be utilized. On a pro forma basis, the unrestricted and undrawn funds available to the Restricted Group as of March 3, 1999 would be $654.1 million (see table below). (58)
-------------------------------------------------------------- As of March 3, 1999 (in thousands) -------------------------------------------------------------- CSC Holdings MFR TCI Total ------------ --- --- ----- Total facility $ 1,000,000 $ 500,000(1) $700,000 $ 2,200,000 Outstanding debt 575,000 446,000 490,500 1,511,500 Outstanding letters of credit 34,400 -- -- 34,400 ----------- ---------- -------- ----------- Availability $ 390,600 $ 54,000 $209,500 $ 654,100 =========== ========== ======== ===========
- - ---------- (1) Represents the MFR credit facility of $1.2 billion, net of $700 million restricted for the TCI Systems. The Credit Agreement contains certain financial covenants that may limit the Restricted Group's ability to utilize all of the undrawn funds available thereunder, including covenants requiring the Restricted Group to maintain certain financial ratios and restricting the permitted uses of borrowed funds. As of March 3, 1999, CSC Holdings had entered into interest exchange (swap) agreements with several of its banks on a notional amount of $225 million, on which CSC Holdings pays a fixed rate of interest and receives a variable rate of interest for specified periods, with an average maturity of 11 months. The average effective annual interest rate on all Restricted Group bank debt outstanding as of March 3, 1999 was approximately 6.4%. While the TCI credit facility is outstanding, the terms of the instruments governing the TCI Systems' indebtedness prohibit transfer of funds (except for certain payments related to overhead allocations and expense reimbursement) from the TCI Systems to the Restricted Group and are expected to prohibit such transfer of funds for the foreseeable future. The Company believes that for the Restricted Group such limitations on transfer of funds or payments will not have an adverse effect on the ability of the Company to meet its obligations. TCI Systems In May 1998, the TCI Systems entered into an $800 million credit facility which was reduced by $100 million in July 1998. On March 3, 1999, taking into account the commitment reduction, usage under the $700 million credit facility was $490.5 million with undrawn funds of $209.5 million. The TCI credit facility matures on the earlier of April 4, 1999 or the tenth day after an IRS tax ruling is received. The Company has not received such ruling. The Company expects to transfer the TCI Systems to CSC Holdings by April 4, 1999. (59) Rainbow Media RMHI/AMC Rainbow Media has a $300 million non-amortizing revolving credit facility maturing on December 31, 2000 of which $20 million is restricted for specific purposes. Of the $280 million balance of the facility, a further $180 million is restricted to provide for repayment of a like amount of inter-company borrowings from Regional Programming Partners ("RPP") as described below. Direct borrowings as of March 3, 1999, amounted to $92.7 million leaving a balance of $7.3 million available to Rainbow Media under the credit facility as of that date. American Movie Classics, a wholly owned subsidiary of Rainbow Media, has a $100 million reducing revolving credit facility and a $128 million amortizing term loan, both of which mature on March 31, 2004. The amount of the available commitment under the revolver will not begin to be reduced until 2002. As of March 3, 1999, American Movie Classics had outstanding borrowings of $189.3 million, leaving unrestricted funds available of $38.7 million. In June 1998, American Movie Classics made a $16.4 million distribution to Rainbow Media by drawing under its revolving credit. Rainbow Media used the funds to partly repay its bank debt. Both credit facilities contain certain financial covenants that may limit the ability to utilize all of the undrawn funds available, including covenants requiring that certain financial ratios be maintained. The Company believes that for Rainbow Media and its wholly-owned subsidiaries, which includes American Movie Classics, internally generated funds, together with funds available under their existing credit agreement or increases in such credit facilities will be sufficient through 1999 to meet its projected funding requirements. There can be no assurance that increases in such credit facilities will be obtained on acceptable terms or at all. RPP In June 1998, RPP, a partnership which is 60% owned by Rainbow Media and 40% owned by Fox/Liberty, made an inter-company loan to Rainbow Media of $180 million, which Rainbow Media used to repay bank debt. RPP funded this loan from cash on hand. The inter-company loan is a four year demand note maturing March 31, 2002, which requires quarterly interest payments at LIBOR plus 7/8% per annum, is subordinated to Rainbow Media's bank debt and requires that Rainbow Media maintain sufficient availability under its revolving credit to permit the repayment in full to RPP if RPP requires the funds for its own operating needs. In June 1998, RPP utilized $94 million of its cash on hand to redeem 50% of ITT's remaining interest in Madison Square Garden, L.P. ("MSG"). As of March 3, 1999, RPP had cash on hand of $132.2 million. Rainbow Media has reached an agreement with ITT to purchase its remaining interest in MSG and settle certain matters between the parties for a payment of $87 million and expects to fund the payment from RPP's cash on hand. (60) MSG MSG has a $500 million revolving credit facility maturing on December 31, 2004 (the "MSG Credit Facility"). As of March 3, 1999, outstanding debt under the MSG Credit Facility was $330 million. In addition, MSG had outstanding letters of credit of $10 million resulting in unrestricted and undrawn funds available amounting to $160 million. The MSG Credit Facility contains certain financial covenants that may limit its ability to utilize all of the undrawn funds available thereunder, including covenants requiring MSG to maintain certain financial ratios. The Company believes that for MSG, internally generated funds, together with funds available under its existing credit agreement will be sufficient to meet its debt service requirements and to fund capital expenditures through 1999. Garden Programming, LLC, an unrestricted subsidiary of MSG, has a $20 million term loan maturing on July 11, 2002. Garden Programming, LLC has in turn made a $40 million loan to an unrelated entity, maturing on November 1, 2011. Retail Electronics On February 9, 1998, Cablevision Electronics completed the acquisition of certain assets of TWI. The purchase price and related expenses were funded through a $50 million equity contribution (not including $8 million in pre-acquisition funding) from CSC Holdings and approximately $45 million in borrowings under a $130 million Cablevision Electronics stand alone credit facility. Under the terms of the credit facility, the total amount of borrowings available to Cablevision Electronics is subject to an availability calculation based on a percentage of eligible inventory. On March 3, 1999, usage under the credit facility was $62.2 million with $8.2 million available thereunder, based on the level of inventory as of that date. CSC Holdings' investment in Cablevision Electronics was approximately $87 million at December 31, 1998. Cablevision Electronics has received other financial support of approximately $47.2 million, through March 3, 1999, in the form of letters of credit, guarantees and intercompany loans, in respect of Cablevision Electronics' inventory purchases. The Company believes that Cablevision Electronics will require additional financial support from CSC Holdings in respect of planned increases in inventory purchases and other requirements through 1999 and that funds available under Cablevision Electronics' credit agreement, together with this additional financial support, will be sufficient to meet its projected funding requirements through 1999. Cablevision Cinemas, LLC On December 2, 1998, the Company acquired all of the outstanding shares of stock of Clearview Cinema Group, Inc. ("Clearview") for $24.25 per share. The purchase price amounted to $157.7 million (including assumed debt of $80 million), which was funded with $33.4 million in Cablevision Parent Class A Common Stock and $44.3 million in cash. Additionally, in December 1998, Clearview successfully redeemed all of its 10-7/8% Senior Notes at a cost of $94.8 million in cash, funded by CSC Holdings. (61) Cablevision Cinemas, LLC currently has a $15 million revolving credit bank facility maturing on June 30, 2003. As of March 3, 1999, there were no outstanding borrowings under this bank facility. From December 1998 through February 1999, Cablevision Cinemas, LLC acquired motion picture theaters from Loews for an aggregate purchase price of approximately $89 million which was funded by equity contributions from CSC Holdings. The Company believes that for Cablevision Cinemas, LLC, internally generated funds, together with funds available under the existing credit agreement will be sufficient to meet its debt service requirements and to fund capital expenditures through 1999. Cablevision Systems Corporation Operating Activities Cash provided by operating activities amounted to $400.1 million for the year ended December 31, 1998 compared to $241.5 million for the year ended December 31, 1997. The 1998 cash provided by operating activities consisted primarily of depreciation and amortization of $734.1 million, minority interests of $95.3 million, other non-cash items of $68.8 million and a net increase in cash resulting from changes in assets and liabilities of $121.3 million, offset primarily by a net loss of $448.5 million and by the net gain on the sale of programming interests and cable assets of $170.9 million. Cash provided by operating activities amounted to $241.5 million for the year ended December 31, 1997 compared to $170.1 million for the year ended December 31, 1996. The 1997 cash provided by operating activities consisted primarily of depreciation and amortization of $499.8 million, minority interests of $179.2 million, other non-cash items of $64.8 million and a net increase in cash resulting from changes in assets and liabilities of $63.6 million, offset primarily by a net loss of $12.1 million, the net gain on the sale of programming interests and cable assets of $372.1 million and the gain of $181.7 million on the redemption of A-R Cable's Series A Preferred Stock. Cash provided by operating activities amounted to $170.1 million for the year ended December 31, 1996. The 1996 cash provided by operating activities consisted primarily of depreciation and amortization of $389.0 million, minority interests of $106.9 million and other non-cash items of $143.6 million, partially offset by a net loss of $459.9 million and a net decrease in cash resulting from changes in assets and liabilities of $9.5 million. Investing Activities Net cash used in investing activities for the year ended December 31, 1998 was $468.4 million compared to $248.6 million for the year ended December 31, 1997. The 1998 investing activities consisted of $561.6 million of capital expenditures, $317.6 million of payments for acquisitions (62) and other items of $35.5 million, offset by net proceeds of $446.3 million from the sale of programming interests and cable assets. Net cash used in investing activities for the year ended December 31, 1997 was $248.6 million compared to $741.7 million for the year ended December 31, 1996. The 1997 investing activities consisted of $457.6 million of capital expenditures, $747.1 million of payments for acquisitions, offset by net proceeds of $945.5 million from the sale of programming interests and cable assets and other items of $10.6 million. Net cash used in investing activities for the year ended December 31, 1996 was $741.7 million. The 1996 investing activities consisted of $449.2 million of capital expenditures, $113.1 million of payments for acquisitions, $179.5 million in increases in investment in affiliates, offset by net proceeds from other items of $.1 million. Financing Activities Cash used in financing activities amounted to $168.0 million for the year ended December 31, 1998 compared to net cash provided by financing activities of $405.7 million for the year ended December 31, 1997. In 1998 the Company's financing activities consisted primarily of the net repayment of bank debt, subordinated notes payable, senior notes payable and senior debt of $1,221.0 million, the repayment of an obligation to a related party of $197.2 million and other net cash payments aggregating $45.9 million, partially offset by $1,296.1 million derived from the issuance of senior notes and debentures. Cash provided by financing activities amounted to $405.7 million for the year ended December 31, 1997 compared to $567.9 million for the year ended December 31, 1996. In 1997 the Company's financing activities consisted of $898.0 million from the issuance of senior notes and debentures and $238.5 million of net proceeds from bank debt, offset by the redemption of subordinated debentures of $283.4 million, net repayments of senior debt of $285.9 million, the redemption of A-R Cable's Series A Preferred Stock of $112.3 million and other net cash payments aggregating $49.2 million. Cash provided by financing activities amounted to $567.9 million for the year ended December 31, 1996. In 1996 the Company's financing activities consisted of $624.0 million from the issuance of redeemable exchangeable convertible preferred stock, $399.4 million from the issuance of subordinated debentures, and net proceeds from bank debt of $477.0 million, partially offset by the net repayment of senior debt of $905.6 million and other net cash payments aggregating $26.9 million. CSC Holdings, Inc. Operating Activities Cash provided by operating activities amounted to $249.5 million for the year ended December 31, 1998 compared to $271.7 million for the year ended December 31, 1997. The (63) 1998 cash provided by operating activities consisted primarily of depreciation and amortization of $577.6 million, other non-cash items of $20.0 million and a net increase in cash resulting from changes in assets and liabilities of $62.5 million, offset primarily by a net loss of $239.5 million and by the net gain on the sale of programming interests and cable assets of $171.1 million. Cash provided by operating activities amounted to $271.7 million for the year ended December 31, 1997 compared to $200.4 million for the year ended December 31, 1996. The 1997 cash provided by operating activities consisted primarily of net income of $136.7 million, depreciation and amortization of $499.8 million, other non-cash items of $125.4 million and a net increase in cash resulting from changes in assets and liabilities of $63.6 million, offset primarily by the net gain on the sale of programming interests and cable assets of $372.1 million and the gain of $181.7 million on the redemption of A-R Cable's Series A Preferred Stock. Cash provided by operating activities amounted to $200.4 million for the year ended December 31, 1996. The 1996 cash provided by operating activities consisted primarily of depreciation and amortization of $389.0 million and other non-cash items of $153.0 million, partially offset by a net loss of $332.1 million and a net decrease in cash resulting from changes in assets and liabilities of $9.5 million. Investing Activities Net cash used in investing activities for the year ended December 31, 1998 was $387.6 million compared to $248.6 million for the year ended December 31, 1997. The 1998 investing activities consisted of $530.8 million of capital expenditures, $264.5 million of payments for acquisitions and other net cash payments of $34.7 million, offset by net proceeds of $442.4 million from the sale of programming interests and cable assets. Net cash used in investing activities for the year ended December 31, 1997 was $248.6 million compared to $741.7 million for the year ended December 31, 1996. The 1997 investing activities consisted of $457.6 million of capital expenditures, $747.1 million of payments for acquisitions, offset by net proceeds of $945.5 million from the sale of programming interests and cable assets and other items of $10.6 million. Net cash used in investing activities for the year ended December 31, 1996 was $741.7 million. The 1996 investing activities consisted of $449.2 million of capital expenditures, $113.1 million of payments for acquisitions, $179.5 million in increases in investment in affiliates, offset by net proceeds from other items of $.1 million. Financing Activities Cash used in financing activities amounted to $98.3 million for the year ended December 31, 1998 compared to net cash provided by financing activities of $375.5 million for the year ended December 31, 1997. In 1998 financing activities consisted primarily of the net repayment of bank debt, subordinated notes payable, senior notes payable and senior debt of $1,073.8 million, the repayment of an obligation to a related party of $197.2 million, the payment of a dividend to shareholder of $42.0 million in connection with the acquisition of Clearview, the payment of (64) dividends applicable to preferred stock of $29.3 million, and other net cash payments aggregating $52.1 million, partially offset by $1,296.1 million derived from the issuance of senior notes and debentures. Cash provided by financing activities amounted to $375.5 million for the year ended December 31, 1997 compared to $537.6 million for the year ended December 31, 1996. In 1997 financing activities consisted of $898.0 million from the issuance of senior notes and debentures and $238.5 million of net proceeds from bank debt, offset by the redemption of subordinated debentures of $283.4 million, net repayments of senior debt of $285.9 million, the redemption of A-R Cable's Series A Preferred Stock of $112.3 million, payments of preferred stock dividends of $30.2 million and other net cash payments aggregating $49.2 million. Cash provided by financing activities amounted to $537.6 million for the year ended December 31, 1996. In 1996 financing activities consisted of $624.0 million from the issuance of redeemable exchangeable convertible preferred stock, $399.4 million from the issuance of subordinated debentures, and net proceeds from bank debt of $477.0 million, partially offset by the repayment of senior debt of $905.6 million, payments of preferred stock dividends of $30.3 million and other net cash payments aggregating $26.9 million. Year 2000 The year 2000 issue ("Y2K") refers to the inability of certain computerized systems and technologies to recognize and/or correctly process dates beyond December 31, 1999. As a result of these issues, the potential exists for computer system failure or miscalculations by computer programs, which could cause disruption of the Company's operations. The Company recognizes the need to ensure that any disruption of its operations resulting from the Y2K issue is minimized. Accordingly, the Company developed a plan to identify and address Y2K issues. The Company retained an independent consulting firm to assist in the development and implementation of this plan. Pursuant to the Y2K plan, each of the Company's business units has designated a team (including a Y2K coordinator assisted by a member of the consulting firm) which is responsible for the Y2K compliance of the systems used by that business unit. The efforts of each of these business unit teams is coordinated through, and directed by, a Central Program Management Office (the "CPMO"), consisting of representatives of the Company's information systems, internal audit, controllers, legal and finance departments. The CPMO operates under the direction of the Company's Chief Information Officer, Mr. Thomas Dolan. Y2K issues that cross business unit lines and cannot be resolved between the CPMO and the business unit teams, are referred to an Operations Steering Committee (the "Steering Committee") consisting of the most senior officers of each of the Company's principal business units. The Steering Committee meets periodically to review the progress of the Company's Y2K compliance efforts. The Board of Directors has designated a committee of the Board, consisting of Messrs. James Dolan, Thomas Dolan, Leo Hindery and Richard Hochman, to monitor the Company's progress and report to the full Board. (65) Y2K Program - Phases The Company has developed a six phase program to assess and address the Y2K issue. These phases consist of the following: Phase One - Awareness - The Company maintains an ongoing program of communications with its management and employee base to ensure that all employees are aware of the Y2K issue and the importance of the Company's efforts to address the issue. This is accomplished, among other means, through the distribution of memoranda, the establishment and maintenance of an intranet web site, and meetings and seminars. Phase Two - Inventory and Assessment - This phase consisted of the Company's efforts to identify all of the information technology ("IT") and non-IT systems used in each area of its businesses. Each identified system has been assessed for its criticality to the Company's businesses and assigned a criticality rating on a five point scale consisting of (1) "Critical" (required for continued operation); (2) "High" (major business impact); (3) "Medium" (significant business impact); (4) "Low" (minor business impact); and (5) "Minimal" (insignificant or no business impact). Additionally, during this phase the Company contacted the vendors of each of its systems to determine which systems are Y2K compliant or non-compliant. Based upon its Phase Two review, which was substantially completed during the third fiscal quarter of 1998, the Company believes that approximately 35% of its IT and non-IT systems may be non-compliant and that approximately 65% of these non-compliant systems are of a criticality rating of (3) "Medium" (significant business impact) or above. Phase Three - Strategy and Planning - During this phase, the Company developed a testing plan for all compliant systems and developed a strategy for remediating and testing non-compliant systems. Remediation strategies may range from software upgrades to replacement, discontinuance or bypass of non-compliant systems. The Company has substantially completed the strategy and planning stage for all of its systems. Phase Four - Portfolio Transformation/Remediation - During this phase, the Company will execute the remediation strategies for non-compliant systems as identified during Phase Three. The Company's efforts toward the remediation of its most critical non-compliant systems is underway. Phase Five - Testing - During this phase, which is running concurrently with the remediation phase, the Company is testing all of its compliant systems (of Level 4 or above), and, in conjunction with its Phase Four remediation efforts, its non-compliant systems. The testing of certain of the Company's most critical compliant systems is ongoing, with the most significant effort planned over the next several months. Phase Six - Implementation - During this phase, all of the Company's remediated and tested systems will be redeployed. The completion of phases across the Company's businesses is not expected to occur sequentially. As the Company will focus initially on its most critical systems, it is likely that a number of (66) critical systems will be in Phases Four and Five, while less critical systems are in Phase Three. It is the Company's goal that all IT and non-IT systems with a criticality rating of 1, 2, 3 and 4 will be tested and implemented by the end of the third fiscal quarter of 1999. There can be no assurance that the Company will be successful in achieving this goal. Costs of Compliance - Because the Company is still in the process of analyzing remediation methods for non-compliant systems, and has not completed testing of compliant or non-compliant systems, it is not possible to predict with certainty the costs that will be incurred in connection with the Y2K program. Further, in many cases, the Company planned to replace or upgrade certain non-compliant systems irrespective of Y2K compliance issues. In such cases the portion of such expenditure attributable to Y2K issues is often not reasonably determinable. Based on its review to date, the Company believes that the costs associated with its Y2K program, including costs of replacing or upgrading non-compliant systems that were not already scheduled to be replaced or upgraded, accelerating programs that were already contemplated specifically for the purpose of addressing Y2K issues, and including both internal and external resources, may range between $40 to $60 million for its existing businesses. This estimate includes amounts for the Company's telecommunications systems, including cable, modem and telephone, for Rainbow Media's programming operations, for Madison Square Garden including the arena, its professional sports teams, its cable television networks, and for Radio City Entertainment, for the Wiz and for corporate and company-wide needs. In 1998, the Company incurred approximately $7.6 million of costs relating to Y2K remediation. There can be no assurance that actual expenditures will not deviate from these estimates and that the amount of such deviation will not be material. Such expenditures are expected to be funded from cash flow from operations and borrowings. Risks of the Company's Y2K Issues - Many of the IT and non-IT systems that are necessary for the continued operation of the Company's businesses are dependent upon components that may not be Y2K compliant. While the Company's Y2K compliance program is designed to identify and remediate these systems in order to avoid interruption of its operations, there can be no assurance that it will be able to identify all noncompliant systems or successfully remediate all those that are identified. Failure of IT or non-IT systems that are necessary for the operation of the Company's businesses, including, without limitation, its billing systems, addressable controller and converter systems, purchasing, finance and inventory systems, marketing databases and point of sale systems, could have a material adverse effect on the Company. The Company is dependent upon third-party products and services, such as utility services and programming uplinks, for the operation of its businesses. While, as part of the Inventory and Assessment phase of its Y2K program, the Company has contacted third party product and service providers to ascertain whether Y2K compliance issues may exist, it has in many cases not received assurances from such suppliers. Moreover, in most cases the Company does not have the ability to verify any assurances it does receive from third party suppliers. If critical IT or non-IT systems used by such third party suppliers fail as a result of a Y2K compliance issue, and as a result of such failure the ability of such supplier to continue to provide such product or service to the Company is interrupted, the Company's ability to continue to provide services to its customers may be interrupted. Such an interruption could have a material adverse effect on the Company. The Company has begun a program to develop contingency plans to address those (67) risks, with major risk areas identified. There can be no assurance that any such plan would resolve such problems in a satisfactory manner. In addition to the risks associated with failure of IT Systems due to Y2K problems, the failure of non-IT systems would pose significant risks to the Company. For example, the Company and its subsidiaries operate facilities for both employees and the public. Failure of the non-IT systems at such facilities could result in health and safety risks that could lead to the closure or unavailability of such facilities. This could result in lost revenues to the Company and the risk of actions against the Company if the businesses of others are disrupted. Also, the failure of such non-IT systems could result in injury to individuals which could expose the Company to actions on, by, or on behalf of such individuals. (68) Item 8. Consolidated Financial Statements. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page ---- CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES (formerly CSC Parent Corporation) Independent Auditors' Report........................................ 70 Consolidated Balance Sheets - December 31, 1998 and 1997............ 71 Consolidated Statements of Operations - years ended December 31, 1998, 1997 and 1996.......................... 73 Consolidated Statements of Stockholders' Deficiency - years ended December 31, 1998, 1997 and 1996.......................... 74 Consolidated Statements of Cash Flows - years ended December 31, 1998, 1997 and 1996................................ 75 Notes to Consolidated Financial Statements.......................... 77 CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) Independent Auditors' Report........................................ 109 Consolidated Balance Sheets - December 31, 1998 and 1997............ 110 Consolidated Statements of Operations - years ended December 31, 1998, 1997 and 1996.......................... 112 Consolidated Statements of Stockholder's Deficiency - years ended December 31, 1998, 1997 and 1996.......................... 113 Consolidated Statements of Cash Flows - years ended December 31, 1998, 1997 and 1996................................ 114 Notes to Consolidated Financial Statements.......................... 116 (69) INDEPENDENT AUDITORS' REPORT The Board of Directors Cablevision Systems Corporation We have audited the accompanying consolidated balance sheets of Cablevision Systems Corporation and subsidiaries as of December 31, 1998 and 1997, and the related consolidated statements of operations, stockholders' deficiency and cash flows for each of the years in the three-year period ended December 31, 1998. In connection with our audits of the consolidated financial statements, we also audited the financial statement schedule listed in Item 14(a)(2). These consolidated financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and the financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Cablevision Systems Corporation and subsidiaries at December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1998, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule referred to above, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. KPMG LLP Melville, New York March 12, 1999 (70) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) CONSOLIDATED BALANCE SHEETS December 31, 1998 and 1997 (Dollars in thousands)
ASSETS 1998 1997 ---- ---- Cash and cash equivalents ............................. $ 173,826 $ 410,141 Accounts receivable trade (less allowance for doubtful accounts of $34,377 and $29,584) .......... 197,726 214,721 Notes and other receivables ........................... 188,455 98,756 Inventory, prepaid expenses and other assets .......... 206,073 55,324 Property, plant and equipment, net .................... 2,506,834 1,831,167 Investments in affiliates ............................. 276,231 207,776 Advances to affiliates ................................ 36,964 19,823 Feature film inventory ................................ 293,310 180,576 Net assets held for sale .............................. 11,006 252,610 Franchises, net of accumulated amortization of $640,735 and $481,895 .............................. 850,653 383,369 Affiliation and other agreements, net of accumulated amortization of $181,928 and $129,087 .............. 206,456 253,734 Excess costs over fair value of net assets acquired and other intangible assets, net of accumulated amortization of $775,557 and $684,141 .............. 2,003,128 1,615,786 Deferred financing, acquisition and other costs, net of accumulated amortization of $41,882 and $40,061 .... 110,400 91,005 ---------- ---------- $7,061,062 $5,614,788 ========== ==========
See accompanying notes to consolidated financial statements. (71) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) CONSOLIDATED BALANCE SHEETS December 31, 1998 and 1997 (Dollars in thousands, except per share amounts)
1998 1997 ---- ---- LIABILITIES AND STOCKHOLDERS' DEFICIENCY Accounts payable........................................................ $ 423,039 $ 278,630 Accrued liabilities: Interest ........................................................... 88,798 54,107 Employee related costs ............................................. 330,700 196,138 Other .............................................................. 465,990 254,621 Feature film and contract obligations .................................. 373,722 292,720 Deferred revenue ....................................................... 334,213 277,693 Bank debt .............................................................. 2,051,549 2,240,358 Senior debt ............................................................ -- 112,500 Senior notes and debentures ............................................ 2,194,443 898,024 Subordinated notes and debentures ...................................... 1,048,375 1,048,245 Subordinated notes payable ............................................. -- 151,000 Obligation to related party ............................................ -- 197,183 Capital lease obligations and other debt ............................... 63,241 46,752 ----------- ----------- Total liabilities .................................................. 7,374,070 6,047,971 ----------- ----------- Minority interests ..................................................... 719,007 821,782 ----------- ----------- Preferred Stock of CSC Holdings ........................................ 1,579,670 1,456,549 Commitments and contingencies Stockholders' deficiency: Preferred Stock, $.01 par value, 10,000,000 shares authorized, none issued ..................................................... -- -- Class A Common Stock, $.01 par value, 200,000,000 shares authorized, 108,267,606 and 55,897,984 shares issued ........................ 1,083 560 Class B Common Stock, $.01 par value, 80,000,000 shares authorized, 43,226,836 and 44,386,836 shares issued ......................... 432 444 Paid-in capital .................................................... 386,495 (161,327) Accumulated deficit ................................................ (2,999,695) (2,551,191) ----------- ----------- Total stockholders' deficiency ..................................... (2,611,685) (2,711,514) ----------- ----------- $ 7,061,062 $ 5,614,788 =========== ===========
See accompanying notes to consolidated financial statements. (72) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (Dollars in thousands, except per share amounts)
1998 1997 1996 ---- ---- ---- Revenues (including affiliate amounts of $8,009, $9,424 and $9,487) $ 3,265,143 $ 1,949,358 $ 1,315,142 ----------- ----------- ----------- Operating expenses: Technical and operating (including affiliate amounts of $2,942, $16,581 and $37,610 and cost of sales of $390,751 in 1998) .... 1,659,537 853,800 538,272 Selling, general and administrative ............................. 882,816 514,574 313,476 Depreciation and amortization ................................... 734,107 499,809 388,982 ----------- ----------- ----------- 3,276,460 1,868,183 1,240,730 ----------- ----------- ----------- Operating profit (loss) ........................................... (11,317) 81,175 74,412 ----------- ----------- ----------- Other income (expense): Interest expense ................................................ (426,402) (368,700) (268,177) Interest income (including affiliate amounts of $6,041, $1,600 and $568) ................................... 24,028 5,492 3,162 Share of affiliates' net loss ................................... (37,368) (27,165) (82,028) Gain on sale of programming interests and cable assets, net ..... 170,912 372,053 -- Gain on redemption of subsidiary preferred stock ................ -- 181,738 -- Write off of deferred interest and financing costs .............. (23,482) (24,547) (37,784) Provision for preferential payment to related party ............. (980) (10,083) (5,600) Minority interests .............................................. (124,677) (209,461) (137,197) Miscellaneous, net .............................................. (19,218) (12,606) (6,647) ----------- ----------- ----------- (437,187) (93,279) (534,271) ----------- ----------- ----------- Net loss .......................................................... $ (448,504) $ (12,104) $ (459,859) =========== =========== =========== Basic and diluted net loss per common share........................ $ (3.16) $ (.12) $ (4.63) =========== =========== =========== Average number of common shares outstanding (in thousands) ........ 142,016 99,608 99,308 =========== =========== ===========
See accompanying notes to consolidated financial statements. (73) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY Years Ended December 31, 1998, 1997 and 1996 (Dollars in thousands)
Class A Class B Common Common Paid-in Accumulated Treasury Stock Stock Capital Deficit Stock Total ----- ----- ------- ------- ----- ----- Balance December 31, 1995 ......... $ 568 $ 464 $ (85,829) $(2,079,228) $ (60,392) $(2,224,417) Net loss ....................... -- -- -- (459,859) -- (459,859) Issuances of preferred stock ... -- -- (25,979) -- -- (25,979) Employee stock transactions .... 4 -- 3,225 -- -- 3,229 Conversion of Class B to Class A 12 (12) -- -- -- -- Retirement of treasury stock ... (40) -- (60,352) -- 60,392 -- ----------- ----------- ----------- ----------- ----------- ----------- Balance December 31, 1996 ......... 544 452 (168,935) (2,539,087) -- (2,707,026) Net loss ....................... -- -- -- (12,104) -- (12,104) Employee stock transactions .... 8 -- 7,608 -- -- 7,616 Conversion of Class B to Class A 8 (8) -- -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- Balance December 31, 1997 ......... 560 444 (161,327) (2,551,191) -- (2,711,514) Net loss ....................... -- -- -- (448,504) -- (448,504) Employee stock transactions .... 12 -- 12,071 -- -- 12,083 Issuance of common stock ....... 499 -- 535,751 -- -- 536,250 Conversion of Class B to Class A 12 (12) -- -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- Balance December 31, 1998 ......... $ 1,083 $ 432 $ 386,495 $(2,999,695) $ -- $(2,611,685) =========== =========== =========== =========== =========== ===========
See accompanying notes to consolidated financial statements. (74) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1998, 1997 and 1996 (Dollars in thousands)
1998 1997 1996 --------- --------- --------- Cash flows from operating activities: Net loss ..................................................................... $(448,504) $ (12,104) $(459,859) --------- --------- --------- Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization ............................................ 734,107 499,809 388,982 Share of affiliates' net loss ............................................ 37,368 27,165 82,028 Minority interests ....................................................... 95,336 179,237 106,931 Gain on sale of programming interests and cable assets, net .............. (170,912) (372,053) -- Write off of deferred interest and financing costs ....................... 23,482 24,547 37,784 Gain on redemption of subsidiary preferred stock ......................... -- (181,738) -- (Gain) loss on sale of equipment, net .................................... (604) 5,325 4,733 Amortization of deferred financing and debenture discount ................ 8,532 7,707 12,191 Accretion of interest on debt ............................................ -- -- 6,828 Change in assets and liabilities, net of effects of acquisitions and dispositions: Accounts receivable trade ............................................ 19,007 (34,268) (2,709) Notes and other receivables .......................................... (94,164) (67,683) (1,810) Inventory, prepaid expenses and other assets ......................... (51,425) 1,232 (12,428) Advances to affiliates ............................................... (21,701) (528) (2,168) Feature film inventory ............................................... (112,734) (8,269) 9,658 Other deferred costs ................................................. 11,689 -- -- Accounts payable ..................................................... 133,891 50,667 17,134 Accrued liabilities .................................................. 174,557 91,497 (4,618) Feature film and contract obligations ................................ 81,376 (258) (12,563) Deferred revenue ..................................................... (18,268) 37,664 -- Minority interests ................................................... (961) (6,486) -- --------- --------- --------- Net cash provided by operating activities .................................. 400,072 241,463 170,114 --------- --------- --------- Cash flows from investing activities: Capital expenditures ......................................................... (561,642) (457,590) (449,165) Payments for acquisitions, net of cash acquired .............................. (317,594) (747,134) (113,095) Net proceeds from sale of programming interests and cable assets ............. 446,284 945,534 -- Proceeds from sale of equipment .............................................. 8,817 1,930 814 (Increase) decrease in investments in affiliates, net ........................ (31,035) 9,267 (179,536) Additions to other intangible assets ......................................... (13,253) (623) (766) --------- --------- --------- Net cash used in investing activities............................. $(468,423) $(248,616) $(741,748) --------- --------- ---------
See accompanying notes to consolidated financial statements. (75) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1998, 1997 and 1996 (Dollars in thousands) (continued)
1998 1997 1996 ---- ---- ---- Cash flows from financing activities: Proceeds from bank debt ............................. $ 5,442,101 $ 3,385,703 $ 2,053,566 Repayment of bank debt .............................. (6,304,757) (3,147,165) (1,576,585) Proceeds from senior debt ........................... -- 147,750 12,500 Repayment of senior debt ............................ (112,500) (433,617) (918,131) Repayment of subordinated notes payable ............. (151,000) -- -- Redemption of senior notes payable .................. (94,848) -- -- Issuance of subordinated debentures ................. -- -- 399,385 Redemption of senior subordinated debt .............. -- (283,445) -- Issuance of senior notes and debentures ............. 1,296,076 897,983 -- Redemption of subsidiary preferred stock ............ (9,409) (112,301) -- Issuances of redeemable exchangeable convertible preferred stock of CSC Holdings, Inc. . -- -- 624,021 Issuance of common stock ............................ 12,082 7,616 3,229 Obligation to related party ......................... (197,183) 4,364 (126) Payments on capital lease obligations and other debt (12,306) (7,501) (3,321) Additions to deferred financing and other costs ..... (36,220) (53,705) (26,624) ----------- ----------- ----------- Net cash provided by (used in) financing activities (167,964) 405,682 567,914 ----------- ----------- ----------- Net increase (decrease) in cash and cash equivalents .. (236,315) 398,529 (3,720) Cash and cash equivalents at beginning of year ........ 410,141 11,612 15,332 ----------- ----------- ----------- Cash and cash equivalents at end of year .............. $ 173,826 $ 410,141 $ 11,612 =========== =========== ===========
See accompanying notes to consolidated financial statements. (76) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Company and Related Matters CSC Parent Corporation ("Parent") was formed on November 21, 1997 as a wholly-owned subsidiary of Cablevision Systems Corporation ("Cablevision"). Parent did not conduct any business activities prior to March 4, 1998, other than those incident to its formation and the execution of certain documents in connection with contributions to Parent of certain partnership interests and assets of TCI Communications, Inc. (see Note 2). In connection with the Contribution and Merger Agreement described in Note 2, a wholly-owned subsidiary of Parent was merged with and into Cablevision and Cablevision became a wholly-owned subsidiary of Parent (the "Merger"). In the Merger, each outstanding share of Cablevision Class A Common Stock and Cablevision Class B Common Stock was converted into one share of Parent Class A Common Stock and Parent Class B Common Stock, respectively. Subsequent to the Merger, Cablevision changed its name to CSC Holdings, Inc. ("CSC Holdings") and Parent changed its name to Cablevision Systems Corporation (the "Company"). The Merger was accounted for in a manner similar to a pooling of interests, whereby the assets and liabilities of CSC Holdings have been recorded at historical book value. Cablevision Systems Corporation's historical financial information represents the historical financial information of CSC Holdings. References to the "Company" refer to Cablevision Systems Corporation or CSC Holdings, Inc. as the context may require. The Company owns and operates cable television systems and has ownership interests in companies that produce and distribute national and regional entertainment and sports programming services, including a majority interest in Madison Square Garden, L.P. ("MSG"). The Company also owns companies that provide advertising sales services for the cable television industry, provide switched telephone service, operate a retail electronics chain and operate motion picture theaters. The Company classifies its business interests into three fundamental areas: Telecommunication Services, consisting principally of its cable television, telephone and modem services operations; Rainbow Media, consisting principally of interests in cable television programming networks and MSG, which owns and operates professional sports teams, regional cable television networks, live productions and entertainment venues; and Retail Electronics, which represents the operations of its retail electronics stores. Two-for-One Stock Splits On March 4, 1998, the Company's Board of Directors declared a two-for-one stock split to be effected in the form of a common stock dividend of one share of Class A Common Stock for each share of Class A Common Stock issued and outstanding and one share of Class B Common Stock for each share of Class B Common Stock issued and outstanding. The stock dividend was paid on March 30, 1998 to stockholders of record on March 19, 1998. (77) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) On July 22, 1998, the Company's Board of Directors declared a two-for-one stock split to be effected as a special stock distribution of one share of Class A Common Stock for each share of Class A Common Stock issued and outstanding as of August 10, 1998 and one share of Class B Common Stock for each share of Class B Common Stock issued and outstanding as of August 10, 1998. The stock dividend was paid on August 21, 1998 to stockholders of record on August 10, 1998. All share and per share information has been adjusted to reflect the above two-for-one stock splits described above. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. The Company's interests in less than majority-owned entities and until July 2, 1997, its 100% common stock interest in A-R Cable Services, Inc., are carried on the equity method. Subsequent to July 2, 1997, results of operations of A-R Cable Services, Inc. are consolidated with those of the Company (see Note 2). Advances to affiliates are recorded at cost, adjusted when recoverability is doubtful. All significant intercompany transactions and balances are eliminated in consolidation. Revenue Recognition The Company recognizes cable television and programming revenues as services are provided to subscribers. Advertising revenues are recognized when commercials are telecast. Revenues derived from other sources are recognized when services are provided, events occur or products are delivered. Long-Lived Assets Property, plant and equipment, including construction materials, are carried at cost, which includes all direct costs and certain indirect costs associated with the construction of cable television transmission and distribution systems, and the costs of new subscriber installations. Franchises are amortized on the straight-line basis over the average remaining terms (7 to 11 years) of the franchises at the time of acquisition. Affiliation and other agreements (primarily cable television system programming agreements) are amortized on a straight-line basis over periods ranging from 6 to 10 years. Other intangible assets are amortized on the straight-line basis over the periods benefited (2 to 10 years), except that excess costs over fair value of net assets acquired are being amortized on the straight-line basis over periods ranging from 5 to 40 years. The Company reviews its long-lived assets (property, plant and equipment, and related intangible assets that arose from business combinations accounted for under the purchase method) for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected cash flows, undiscounted and without interest, is less than the carrying amount of (78) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) the asset, an impairment loss is recognized as the amount by which the carrying amount of the asset exceeds its fair value. Feature Film Inventory Rights to feature film inventory acquired under license agreements along with the related obligations are recorded at the contract value. Costs are charged to technical and operating expense on the straight-line basis over the respective contract periods. Amounts payable during the five years subsequent to December 31, 1998 related to feature film telecast rights are $44,438 in 1999, $38,394 in 2000, $27,332 in 2001, $22,375 in 2002 and $19,751 in 2003. Inventory Carrying amounts of retail merchandise are determined on an average cost basis and are stated at the lower of cost or market. Deferred Financing Costs Costs incurred to obtain debt are deferred and amortized, on a straight-line basis, over the life of the related debt. Income Taxes Income taxes are provided based upon the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", which requires the liability method of accounting for deferred income taxes and permits the recognition of deferred tax assets, subject to an ongoing assessment of realizability. Loss Per Share Basic and diluted net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding. Potential dilutive common shares were not included in the computation as their effect would be antidilutive. Loss per share amounts have been adjusted, for all years presented, to reflect the two-for-one stock splits of the Company's common stock effective March 30, 1998 and August 21, 1998 (see discussion above). Segment Information On December 31, 1998, the Company adopted Statement of Financial Accounting Standards No. 131, `Disclosures about Segments of an Enterprise and Related Information' (`SFAS 131'). The new rules establish revised standards for public companies relating to the reporting of financial and descriptive information about their operating segments in financial statements. The adoption of (79) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) SFAS 131 does not have a material effect on the Company's primary financial statements, but does affect the disclosure of segment information contained elsewhere herein (see Note 15). Reclassifications Certain reclassifications have been made in the 1997 and 1996 financial statements to conform to the 1998 presentation. Cash Flows For purposes of the consolidated statements of cash flows, the Company considers short-term investments with a maturity at date of purchase of three months or less to be cash equivalents. The Company paid cash interest expense of approximately $383,179, $352,660, and $252,120 during 1998, 1997 and 1996, respectively. During 1998, 1997, and 1996, the Company's noncash investing and financing activities were as follows: Years Ended December 31, ------------------------ 1998 1997 1996 ---- ---- ---- Capital lease obligations .................. $ 28,795 $ 24,820 $ 2,571 Issuance of common stock in connection with acquisitions and redemption of partnership interests .............. 536,250 -- -- Receipt of warrants from At Home Corporation ........................... 74,788 173,346 -- Capital contribution of equipment by minority partner ...................... -- 38,000 -- Use of Estimates in Preparation of Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (80) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) NOTE 2. ACQUISITIONS, DISPOSITIONS AND RESTRUCTURINGS Acquisitions 1998 Acquisitions The Wiz On February 9, 1998, Cablevision Electronics Investments, Inc. ("Cablevision Electronics"), a wholly-owned subsidiary of CSC Holdings, acquired substantially all of the assets associated with 40 The Wiz consumer electronics store locations from The Wiz, Inc. and certain of its subsidiaries and affiliates (collectively, "TWI"). TWI had filed for bankruptcy protection on December 16, 1997. Cablevision Electronics paid approximately $101,300 for the assets (including transaction costs and pre-closing operating costs). The acquisition was accounted for as a purchase with the operations of the stores being consolidated with the operations of the Company as of the date of acquisition. The purchase price was allocated to the specific assets acquired based upon independent appraisals as follows: Inventory $ 66,200 Property and equipment 16,800 Other assets 4,000 Liabilities (24,000) Excess cost over fair value of net assets acquired 38,300 ---------- $ 101,300 ========== TCI Systems On March 4, 1998, the Company completed a holding company reorganization (the "Holding Company Reorganization") pursuant to an Amended and Restated Contribution and Merger Agreement, dated June 6, 1997 (the "Contribution and Merger Agreement"), by and among the Company, CSC Holdings and TCI Communications, Inc. ("TCI"). Pursuant to the Contribution and Merger Agreement, TCI caused to be contributed to the Company or its designees all of the partnership interests and capital stock of certain entities owned directly or indirectly by TCI and all the assets related to the businesses of certain cable television systems owned and operated directly or indirectly by TCI ("TCI Systems"). In consideration for those cable television systems, the Company issued to certain TCI entities an aggregate of 48,942,172 shares (after adjusting for the March 1998 and August 1998 two-for-one stock splits discussed in Note 1) of the Company's Class A Common Stock, valued for accounting purposes at approximately $498,000, and assumed certain liabilities related to such (81) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) systems (including an aggregate amount of indebtedness for borrowed money equal to $669,000). The acquisition was accounted for as a purchase with the operations of the acquired systems being consolidated with those of the Company as of the acquisition date. The excess of the purchase price over the net book value of assets acquired of approximately $739,272 was allocated to the specific assets acquired based upon independent appraisals as follows: Property, plant and equipment $ (17,133) Franchises 594,921 Excess cost over fair value of net assets acquired 161,484 --------- $ 739,272 ========= Madison Square Garden On June 17, 1998, the Company purchased 50% of ITT's remaining interest in MSG for $94,000 pursuant to ITT's exercise of its first put option increasing RPP's interest in MSG to 96.3% (see discussion below). In March 1999, ITT and the Company entered into an agreement under which ITT exercised its second put for the remainder of its interest in MSG and will settle certain matters between the parties for a payment of $87,000. Clearview In December 1998, the Company acquired all of the outstanding shares of stock of Clearview Cinema Group, Inc. ("Clearview") for approximately $157,700 (including assumed debt of $80,000) of which approximately $33,400 was paid in shares of the Company's Class A Common Stock. The remaining purchase price was funded primarily by a dividend received from CSC Holdings of approximately $42,000. The acquisition was accounted for as a purchase with the operations of the acquired business being consolidated with those of the Company as of the acquisition date. The excess of the purchase price over the net book value of assets acquired approximates $122,300 and will be allocated to the specific assets acquired when independent appraisals are obtained. Loews In December 1998, the Company acquired interests in the real property and assets specifically related to 15 movie theaters from Loews Cineplex Entertainment Corporation ("Loews") for an aggregate purchase price of approximately $67,300. (82) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) The acquisition was accounted for as a purchase with the operations of the acquired assets being consolidated with those of the Company as of the acquisition date. The purchase was allocated to the specific assets acquired based upon independent appraisals as follows: Property and equipment $ 12,600 Other assets 4,100 Excess cost over fair value of net assets acquired 50,600 -------- $ 67,300 ======== In the first quarter of 1999, the Company purchased one additional theater and Loews has granted the Company a right of first offer on an additional 21 movie theaters until December 1999. 1997 Acquisitions: NBC Transaction On April 1, 1997, Rainbow Media Holdings, Inc. ("Rainbow Media") consummated a transaction in which Rainbow Programming Holdings, Inc. merged with and into Rainbow Media, a newly formed subsidiary of the Company. In addition, NBC Cable, Inc. (a subsidiary of National Broadcasting Company ("NBC")) received a 25% equity interest (which interest may be increased by up to an additional 2% under certain circumstances without additional payment) in Class C Common Stock of Rainbow Media. The Company owns the remaining 75% equity interest in Rainbow Media. The partnership interests in certain of Rainbow Media's programming services formerly owned by NBC are now owned by subsidiaries of Rainbow Media. The exchange of 25% of the Company's interest in Rainbow Media for NBC's interests in certain entities was accounted for at historical cost with the difference between the cost basis of a 25% interest in Rainbow Media and the partnership interests received in exchange recorded as goodwill of $54,385, which is being amortized over a 10 year period. Madison Square Garden In February 1997, Rainbow Media made a payment to ITT Corporation ("ITT") of $168,750 plus interest, fully equalizing its interest in MSG, a partnership among subsidiaries of Rainbow Media and subsidiaries of ITT, and bringing Rainbow Media's total payments at that time to $360,000, plus interest payments aggregating $47,700. In April 1997, the Company and certain of its affiliates and ITT and certain of its affiliates entered into definitive agreements ("MSG Agreement") relating to the acquisition by subsidiaries of the Company of ITT's 50 percent interest in MSG. The transaction closed on June 17, 1997 when MSG borrowed $799,000 under its credit facility which was used to redeem a portion of ITT's interest in MSG for $500,000 and to repay its existing indebtedness. Rainbow Media contributed its SportsChannel Associates programming company to MSG, which, together with the redemption, (83) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) increased Rainbow Media's interest in MSG to 89.8% and reduced ITT's interest to 10.2%. In connection with the Fox/Liberty transaction discussed below, Rainbow Media's interest in MSG was contributed to Regional Programming Partners. ITT's interest in MSG was further reduced to 7.8% as a result of the $450,000 capital contribution by Regional Programming Partners to MSG which was used by MSG to pay down outstanding debt. The remaining 7.8% interest held by ITT is subject to certain puts and calls as specified in the MSG Agreement (see "1998 Acquisitions" above). The acquisition was accounted for using the purchase method of accounting. The assets and liabilities and results of operations of MSG have been consolidated with those of the Company as of June 17, 1997. Previously, the Company's investment in MSG was accounted for using the equity method of accounting. The excess of the purchase price over the net book value of assets acquired of approximately $397,093 was allocated to the specific assets acquired based upon independent appraisals as follows: Property, plant and equipment $ 19,687 Affiliation and other agreements 34,168 Franchises 46,125 Excess cost over fair value of net assets acquired 297,113 ---------- $ 397,093 ========== Warburg Transactions In June 1997, the Company acquired from Warburg Pincus Investors, L.P. ("Warburg") the interests that the Company did not already own in A-R Cable Partners ("Nashoba") and Cablevision of Framingham Holdings, Inc. ("CFHI") for a purchase price of approximately $33,348 and $7,865, respectively. The acquisitions of Nashoba and CFHI were accounted for as purchases with the operations of these companies being consolidated with those of the Company as of the acquisition date. The excess of the purchase price over the net book value of assets acquired approximates $97,015 and has been allocated based upon independent appraisals as follows: Property, plant and equipment $ 4,060 Franchises 59,923 Excess cost over fair value of net assets acquired 33,032 -------- $ 97,015 ======== On July 2, 1997, the Company redeemed from Warburg the Series A Preferred Stock of A-R Cable Services, Inc. ("A-R Cable") for an aggregate amount of approximately $112,301. The assets and liabilities of A-R Cable have been consolidated with those of the Company as of July 2, 1997. Previously, the Company's investment in A-R Cable was accounted for using the equity method of accounting. In connection with this transaction, the Company recognized a gain of $181,738 representing principally the reversal of accrued preferred dividends in excess of amounts paid. (84) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) Radio City On December 5, 1997, MSG purchased all of the membership interests in Radio City Entertainment ("Radio City"), the production company that operates Radio City Music Hall in New York City, for approximately $70,000 in cash. Simultaneously, Radio City entered into a 25-year lease for Radio City Music Hall. The assets and liabilities and results of operations of Radio City have been consolidated with those of the Company as of the date of acquisition. The excess of the purchase price over the net book value of assets acquired of approximately $76,200 was allocated to the specific assets acquired based upon independent appraisals as follows:. Property, plant and equipment $ 1,500 Capital lease obligation (80,000) Other liabilities (13,400) Excess cost over fair value of net assets acquired 168,100 --------- $ 76,200 ========= Dispositions Cable Systems In October 1998, A-R Cable transferred its cable television system in Rensselaer, New York plus approximately $16,000 in cash to Time Warner Entertainment Company, L.P. (Time Warner) in exchange for Time Warner's Litchfield, Connecticut system. The Company recognized a gain of approximately $15,500 in connection with this transaction. In February 1997, the Company announced that it was pursuing a plan to dispose of certain nonstrategic cable television systems. In 1998 and 1997, the Company completed the sale of cable television systems for aggregate sales prices of approximately $426,500 and $88,200, respectively, and recognized aggregate gains of approximately $137,700 and $59,000, respectively. Regional Programming Partners In December 1997, Rainbow Media and Fox/Liberty Networks, LLC ("Fox") organized Regional Programming Partners (a partnership that owns the interest in MSG and in regional sports programming businesses previously owned by Rainbow Media) ("RPP"). In connection with the formation of RPP, affiliates of Rainbow Media indirectly contributed to RPP in consideration for the issuance of a 60% general partnership interest in RPP their ownership interests in several regional sports networks, including their interest in MSG. In consideration for the issuance of a 40% general partnership interest in RPP, Fox contributed $850,000 in cash to RPP. Thereafter, RPP made a capital contribution of approximately $450,000 to MSG which was used by MSG to repay a portion of MSG's debt. As a result of RPP's investment in MSG, RPP's interest in MSG increased from 89.8% to 92.2%. In connection with this transaction, Rainbow Media recognized a (85) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) gain of approximately $305,000. See discussion above under "Acquisitions - 1998 Acquisitions - Madison Square Garden" for further increases in RPP's interest in MSG. Other In 1998 and 1997, RPP and Rainbow Media completed the sale of an interest in a sports programming business and substantially all of the assets of a radio station. In connection with these sales, RPP and Rainbow Media recognized gains of $17,700 and $7,400, respectively. A-R Cable Restructuring In 1992, the Company and A-R Cable consummated a restructuring and refinancing transaction (the "A-R Cable Restructuring"). Among other things, this transaction involved an additional $45,000 investment in A-R Cable by the Company to purchase a new Series B Preferred Stock and the purchase of a new Series A Preferred Stock in A-R Cable by Warburg for $105,000. As a result of the A-R Cable Restructuring, the Company no longer had financial or voting control over A-R Cable's operations. Prior to the redemption of A-R Cable's Series A Preferred Stock on July 2, 1997 (see discussion above), the Company accounted for its investment in A-R Cable using the equity method of accounting whereby the Company recorded 100% of the net losses of A-R Cable since it continued to own 100% of A-R Cable's outstanding common stock. Included in share of affiliates' net loss in the accompanying consolidated statements of operations for the period ended July 1, 1997 and for the year ended December 31, 1996 is $35,835 and $68,492, respectively, representing A-R Cable's net loss plus dividend requirements for the Series A Preferred Stock of A-R Cable, which was not owned by the Company. Beginning on July 2, 1997, the operations of A-R Cable have been consolidated with those of the Company. Pro Forma Results of Operations The following unaudited pro forma condensed results of operations are presented for the years ended December 31, 1998 and 1997 as if the acquisitions of the TCI Systems, MSG, Nashoba, CFHI, the NBC transaction, the A-R Cable consolidation and the sale of assets of certain cable systems had occurred on January 1, 1998 and 1997, respectively. (86) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) Years Ended December 31, ------------------------ 1998 1997 ---- ---- Net revenues $3,329,627 $2,554,019 ========== ========== Net loss $ (520,968) $ (21,047) ========== ========== Net loss per common share $ (3.47) $ (.14) ========== ========== The pro forma information presented above gives effect to certain adjustments, including the amortization of acquired intangible assets and increased interest expense on acquisition debt. The pro forma information has been prepared for comparative purposes only and does not purport to indicate the results of operations which would actually have occurred had the transactions been made at the beginning of the periods indicated or which may occur in the future. NOTE 3. NET ASSETS HELD FOR SALE Pursuant to the Company's decision to dispose of certain nonstrategic cable television systems (see Note 2), the Company had entered into definitive agreements covering the sale of certain cable television systems as of December 31, 1998 and 1997. In January 1998, the Company, CSC Holdings and a subsidiary of TCI entered into a non-binding letter of intent for the Company to acquire TCI's cable television systems (the "TCI Connecticut Systems") in and around Hartford, Vernon, Branford and Lakeville, Connecticut (the "Proposed TCI CT Transactions"). Under the non-binding letter of intent, in consideration for the TCI Connecticut Systems, the Company would (i) transfer to TCI the cable television systems serving Kalamazoo, Michigan, (ii) transfer to TCI other cable television systems to be identified by TCI and purchased with approximately $25,000 of funds provided by the Company, (iii) issue shares of the Company's Class A Common Stock, and (iv) assume certain indebtedness relating to the TCI Connecticut Systems, which is anticipated to total approximately $110,000. A binding definitive agreement has not yet been completed. There can be no assurance that the Proposed TCI CT Transactions will be consummated in a timely fashion, or at all. For financial reporting purposes, the assets and liabilities attributable to cable systems whose sale or transfer was pending at December 31, 1998 and 1997 have been classified in the consolidated balance sheet as net assets held for sale and consist of the following:. (87) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) December, 31 ------------ 1998 1997 ---- ---- Property, plant and equipment, net $ 14,548 $122,577 Intangible assets, net 215 154,352 Other assets (including trade receivables, prepaid expenses, etc.) 603 2,815 -------- -------- Total assets 15,366 279,744 Total liabilities 4,360 27,134 -------- -------- Net assets $ 11,006 $252,610 ======== ======== The accompanying consolidated statement of operations for the year ended December 31, 1998 and 1997 includes net revenues aggregating approximately $18,937 and $102,971, respectively, and net income (loss) aggregating approximately $9,095 and $(11,275), respectively, relating to the cable systems held for sale or transfer. NOTE 4. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consist of the following items, which are depreciated or amortized primarily on a straight-line basis over the estimated useful lives shown below:
December 31, Estimated 1998 1997 Useful Lives ---- ---- ------------ Communication transmission and distribution systems: Customer equipment..................... $ 615,867 $ 508,959 4 to 5 years Headends............................... 125,013 100,551 7 to 10 years Multimedia............................. 9,075 - 10 years Central office equipment............... 87,208 60,672 10 years Infrastructure......................... 2,189,625 1,651,236 10 to 15 years Program, service and test equipment............................. 380,350 282,635 2 to 10 years Microwave equipment.................... 16,947 16,641 2 to 10 years Construction in progress (including materials and supplies)............... 133,848 140,455 - Furniture and fixtures..................... 195,660 128,442 1 to 12 years Transportation equipment................... 131,476 107,159 4 to 15 years Building and building improvements......... 171,567 156,254 23 to 40 years Leasehold improvements..................... 140,766 70,991 Term of lease Land and land improvements................. 45,573 34,070 - ----------- ----------- 4,242,975 3,258,065 Less accumulated depreciation and amortization............................. 1,736,141 1,426,898 ----------- ----------- $ 2,506,834 $ 1,831,167 =========== ===========
(88) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) NOTE 5. DEBT Bank Debt Restricted Group/TCI Systems For financing purposes, CSC Holdings, Inc. and certain of its subsidiaries are collectively referred to as the "Restricted Group". In May 1998, CSC Holdings and certain other subsidiaries of the Company entered into a new $2.8 billion reducing revolving credit facility (the "Credit Agreement") with a group of banks led by Toronto-Dominion (Texas), Inc. ("Toronto-Dominion"), as administrative and arranging agent. This Credit Agreement replaced a $1.7 billion facility that was also with a group of banks led by Toronto-Dominion. The $2.8 billion reducing revolving credit facility, maturing in March 2007, consists of a $1.4 billion CSC Holdings credit facility, a $1.4 billion MFR credit facility of which $600,000 is available, and an $800,000 credit facility for the TCI Systems. While the $800,000 TCI Systems credit facility is in place, only $600,000 of the $1.4 billion MFR facility may be utilized. In July 1998, CSC Holdings' credit facility was reduced by $400,000 to $1.0 billion, and the MFR credit facility was reduced by $200,000 to $1.2 billion, which includes a reduction of the TCI Systems credit facility by $100,000 to $700,000. The TCI Systems credit facility matures on April 4, 1999 and concurrent with the transfer of the TCI Systems to CSC Holdings, which is expected to occur by April 4, 1999, the restriction on the MFR credit facility will be eliminated and the borrowings under the MFR facility will increase by an amount equal to the borrowings outstanding under the TCI Systems credit facility. The total amount of bank debt outstanding under the Credit Agreement at December 31, 1998 and 1997 was $1,410,226 and $1,328,098, respectively. As of December 31, 1998, approximately $57,313 was restricted for certain letters of credit issued on behalf of CSC Holdings. Unrestricted and undrawn funds available to the Restricted Group and the TCI Systems under the Credit Agreement amounted to approximately $749,687 at December 31, 1998. The Credit Agreement contains certain financial covenants that may limit the Restricted Group's and the TCI Systems' ability to utilize all of the undrawn funds available thereunder. The Credit Agreement contains various restrictive covenants, among which are the maintenance of various financial ratios and tests, and limitations on various payments, including preferred dividends and dividends on its common stock. The Company was in compliance with the covenants of its Credit Agreement at December 31, 1998. Interest on outstanding amounts may be paid, at the option of the Company, based on the prime rate or Eurodollar rate. CSC Holdings has entered into interest rate swap agreements with several banks on a notional amount of $225,000 as of December 31, 1998 whereby CSC Holdings pays a fixed rate of interest ranging from 5.94% to 8.00% and receives a variable rate ranging from 5.38% to 5.72%. CSC Holdings enters into interest rate swap agreements to hedge against interest rate risk, as required by its Credit Agreement, and therefore accounts for these agreements as hedges of (89) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) floating rate debt, whereby interest expense is recorded using the revised rate, with any fees or other payments amortized as yield adjustments. As of December 31, 1998, the interest rate swap agreements expire at various times through the year 2000 and have a weighted average life of approximately 11 months. The Company is exposed to credit loss in the event of nonperformance by the other parties to the interest rate swap agreements; however, the Company does not anticipate nonperformance by the counterparties. The weighted average interest rate on all bank indebtedness was 6.48% and 7.60% on December 31, 1998 and 1997, respectively. The Company is also obligated to pay fees from .1875% to .25% per annum on the unused loan commitment and from .4% to 1.375% per annum on letters of credit issued under the Credit Agreement. Unrestricted Group U.S. Cable U.S. Cable Television Group, L.P. ("U.S. Cable"), a subsidiary of the Company, had a three year $175,000 revolving credit facility maturing on August 13, 1999. As of December 31, 1997, U.S. Cable had outstanding borrowings under its revolving credit facility of approximately $155,000. Amounts outstanding under the facility bore interest at varying rates based upon the banks' base rate or LIBOR rate, as defined in the loan agreement. The weighted average interest rate was 7.1% on December 31, 1997. In January 1998, all remaining indebtedness of U.S. Cable amounting to approximately $156,000 was repaid and its credit agreement was terminated. The proceeds for such repayment came from the sale of substantially all the assets of U.S. Cable. Rainbow Media In April 1997, Rainbow Media executed a new $300,000, three year credit facility with Canadian Imperial Bank of Commerce and Toronto-Dominion as co-agents, and a group of banks. Upon closing, approximately $172,000 was drawn to refinance, in part, its previous $202,000 credit facility. The balance of the funds utilized to fully repay the $202,000 facility and to repay $169,000 to the Restricted Group came from a distribution by American Movie Classics Company. The Rainbow Media revolving credit facility was amended in December 1997 which, among other things, extended the maturity date to December 31, 2000. The credit facility contains certain financial covenants that may limit Rainbow Media's ability to utilize all the undrawn funds available thereunder, including covenants requiring it to maintain certain financial ratios. The facility bears interest at varying rates above the lead bank's base or Eurodollar rate depending on the ratio of debt to borrower value, as defined in the credit agreement. The loan is secured by a pledge of the Company's stock in Rainbow Media, a pledge of all of the stock of all wholly-owned subsidiaries of Rainbow Media and is guaranteed by the subsidiaries of Rainbow Media, as permitted. (90) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) At December 31, 1998 and 1997, Rainbow Media had outstanding borrowings of $67,200 and $176,500, respectively, under its credit facility. Undrawn funds available to Rainbow Media under the credit facility amounted to approximately $12,800 at December 31, 1998. The weighted average interest rate on Rainbow Media's bank debt was 7.7% and 7.8% on December 31, 1998 and 1997, respectively. The credit agreement contains various restrictive covenants with which Rainbow Media was in compliance at December 31, 1998. American Movie Classics Company In April 1997, American Movie Classics Company ("AMCC") put into place a new $250,000 credit facility. The facility was comprised of a $200,000 term loan and a $50,000 revolving loan. The facility was used to make a $205,000 cash distribution to Rainbow Media, refinance existing indebtedness and for general corporate purposes. In December 1997, the loan was amended, decreasing the term loan to $146,000 and increasing the revolving loan to $100,000 ("AMCC Loan Agreement"). Both loans will mature on March 31, 2004. Borrowings under the AMCC Loan Agreement bear interest at varying rates above or at the lead bank's base or above the Eurodollar rate depending on the ratio of debt to cash flow, as defined in the AMCC Loan Agreement. At December 31, 1998 and 1997, the weighted average interest rate on bank indebtedness was 6.1% and 6.8%, respectively. The term loan began amortizing September 30, 1997 and requires quarterly amortization payments. The revolving loan does not start to reduce until June 30, 2002. On December 31, 1998 and 1997, $128,000 and $143,000, respectively, was outstanding under the term loan and $64,250 and $56,500, respectively, was outstanding under the revolving loan. Substantially all of the assets of AMCC, amounting to approximately $274,600 at December 31, 1998, have been pledged to secure the borrowings under the AMCC Loan Agreement. The AMCC Loan Agreement contains various restrictive covenants with which AMCC was in compliance at December 31, 1998. Madison Square Garden In June 1997, MSG entered into an $850,000 credit agreement (the "MSG Credit Facility") with a group of banks led by Chase Manhattan Bank, as agent. The MSG Credit Facility expires on December 31, 2004. MSG initially borrowed $650,000 and $149,000 under the term loan and revolver portions, respectively, of the MSG Credit Facility. In December 1997, the facility was amended to increase the revolver to $500,000 from $200,000. Also in December 1997, MSG repaid the term loan of $650,000 with $450,000 contributed by RPP as described in Note 2 and $200,000 of additional borrowings under the revolver. Loans under the MSG Credit Facility bear interest at current market rates plus a margin based upon MSG's consolidated leverage ratio. At December 31, 1998 and 1997, loans outstanding amounted to $310,000 and $360,000, respectively, and bore interest at 6.038% and 6.785%, respectively. The MSG Credit Facility contains certain financial covenants with which MSG was in compliance at December 31, 1998. The MSG Credit (91) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) Facility also contains certain financial covenants that may limit MSG's ability to utilize all of the undrawn funds available thereunder. In July 1997, a wholly-owned subsidiary of MSG borrowed $20,000 under promissory notes with various lending institutions which bear interest at LIBOR plus a margin (7.22% and 7.85% at December 31, 1998 and 1997, respectively) and mature in July 2002. Cablevision Electronics In February 1998, Cablevision Electronics entered into a three year $130,000 revolving credit facility. Under the terms of the credit facility, the total amount of borrowings available to Cablevision Electronics is subject to an availability calculation based on a percentage of eligible inventory. The total amount outstanding under the credit agreement at December 31, 1998 was approximately $44,542 and bore interest at 7.2%. As of December 31, 1998, $30,197 was restricted for certain letters of credit issued on behalf of Cablevision Electronics. Unrestricted and undrawn funds available amounted to $54,403 on December 31, 1998 based on the level of inventory as of that date. Borrowings under the credit agreement are secured by Cablevision Electronics' assets. The credit agreement contains various restrictive covenants with which Cablevision Electronics was in compliance at December 31, 1998. Cablevision Cinemas Cablevision Cinemas, LLC has a $15,000 revolving credit bank facility maturing on June 30, 2003. As of December 31, 1998, there were no outstanding borrowings under this bank facility. Senior Debt On December 30, 1997, CSC Holdings repaid $222,000 of A-R Cable's debt with borrowings under CSC Holdings' Credit Facility in connection with the transfer of certain cable systems from A-R Cable to the Restricted Group. A-R Cable had outstanding borrowings of $112,500 at December 31, 1997, which was repaid in 1998. Senior Notes and Debentures In December 1998, the Company redeemed Clearview's 10-7/8% Senior Notes for approximately $94,800 in cash. This payment included a premium of $11,200, a consent fee of $3,600 and accrued interest of $48. In July 1998, CSC Holdings issued $500,000 principal amount of 7-1/4% Senior Notes due 2008 (the "2008 Notes") and $500,000 principal amount ($499,516 amortized amount at December 31, (92) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) 1998) of 7-5/8 % Senior Debentures due 2018 (the "Debentures"). The Debentures were issued at a discount of $495. The 2008 Notes and Debentures are not redeemable by CSC Holdings prior to maturity. In February 1998, CSC Holdings issued $300,000 principal amount ($296,721 amortized amount at December 31, 1998) of 7-7/8% Senior Debentures due 2018 (the "2018 Debentures"). The 2018 Debentures were issued at a discount of $3,429. The 2018 Debentures are not redeemable by CSC Holdings prior to maturity. In December 1997, CSC Holdings issued $500,000 principal amount ($499,532 and $499,475 amortized amount at December 31, 1998 and 1997, respectively) of 7-7/8% Senior Notes due 2007 (the "2007 Notes"). The notes were issued at a discount of $525. The 2007 Notes are not redeemable by CSC Holdings prior to maturity. The net proceeds were used to reduce bank borrowings. In August 1997, CSC Holdings issued $400,000 principal amount ($398,674 and $398,549 amortized amount at December 31, 1998 and 1997, respectively) of 8-1/8% Senior Debentures due 2009 (the "2009 Notes"). The 2009 Notes were issued at a discount of $1,492. The 2009 Notes are not redeemable by CSC Holdings prior to maturity. The net proceeds were used to reduce bank borrowings. The indentures under which the senior notes and debentures were issued contain various convenants, which are generally less restrictive than those contained in the Company's Credit Agreement, with which the Company was in compliance at December 31, 1998. Subordinated Debentures In May 1996, CSC Holdings issued $150,000 principal amount ($149,545 and $149,485 amortized amount at December 31, 1998 and 1997, respectively) of 9-7/8% Senior Subordinated Notes due 2006 (the "2006 Notes") and $250,000 principal amount of 10-1/2% Senior Subordinated Debentures due 2016 (the "2016 Debentures"). The 2006 Notes are redeemable at CSC Holdings' option, in whole or in part, on May 15, 2001, May 15, 2002 and May 15, 2003 at the redemption price of 104.938%, 103.292% and 101.646%, respectively, of the principal amount and thereafter at 100% of the aggregate principal amount, in each case together with accrued interest to the redemption date. The 2016 Debentures are redeemable at CSC Holdings' option, in whole or in part, on May 15, 2006, May 15, 2007, May 15, 2008 and May 15, 2009, at the redemption price of 105.25%, 103.938%, 102.625% and 101.313%, respectively, of the principal amount and thereafter at 100% of the aggregate principal amount, in each case together with accrued interest to the redemption date. In November 1995, CSC Holdings issued $300,000 principal amount of 9-1/4% Senior Subordinated Notes due 2005 (the "2005 Notes"). The 2005 Notes are redeemable at CSC (93) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) Holdings' option, in whole or in part, on November 1, 2000, November 1, 2001 and November 1, 2002 at the redemption price of 104.625%, 103.1% and 101.5%, respectively, of the principal amount and thereafter at 100% of the principal amount, in each case together with accrued interest to the redemption date. In February 1993, CSC Holdings issued $200,000 face amount ($199,117 and $199,056 amortized amounts at December 31, 1998 and 1997, respectively) of its 9-7/8% Senior Subordinated Debentures due 2013 (the "2013 Debentures"). The 2013 Debentures are redeemable, at CSC Holdings' option, on February 15, 2003, February 15, 2004, February 15, 2005 and February 15, 2006 at the redemption price of 104.80%, 103.60%, 102.40% and 101.20%, respectively, of the principal amount and thereafter at the redemption price of 100% of the principal amount, in each case together with accrued interest to the redemption date. Also in 1993, CSC Holdings issued $150,000 face amount ($149,713 and $149,704 amortized amounts at December 31, 1998 and 1997, respectively) of its 9-7/8% Senior Subordinated Debentures due 2023 (the "2023 Debentures"). The 2023 Debentures are redeemable, at CSC Holdings' option, on and after April 1, 2003 at the redemption price of 104.938% reducing ratably to 100% of the principal amount on and after April 1, 2010, in each case together with accrued interest to the redemption date. The indentures under which the subordinated notes and debentures were issued contain various covenants, which are generally less restrictive than those contained in the Company's Credit Agreement and with which the Company was in compliance at December 31, 1998. Subordinated Notes Payable In connection with certain acquisitions made in 1994, a subsidiary of the Company issued promissory notes totaling $141,268 and the Company assumed $9,732 of promissory notes, both of which were repaid in June 1998. Summary of Five Year Debt Maturities Total amounts payable by the Company and its subsidiaries under its various debt obligations, including capital leases, during the five years subsequent to December 31, 1998 are as follows: 1999 $54,401 2000 98,354 2001 76,020 2002 56,265 2003 229,451 (94) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) NOTE 6. PREFERRED STOCK OF CSC HOLDINGS, INC. In February 1996, CSC Holdings issued 6,500,000 depositary shares, representing 65,000 shares of 11-1/8% Series L Redeemable Exchangeable Preferred Stock (the "Series L Preferred Stock") with a liquidation preference of $650,000, which were subsequently exchanged for Series M Redeemable Exchangeable Preferred Stock (the "Series M Preferred Stock") on August 2, 1996 with terms identical to the Series L Preferred Stock. Net proceeds were approximately $626,000. The depositary shares are exchangeable, in whole but not in part, at the option of CSC Holdings, for CSC Holdings' 11-1/8% Senior Subordinated Debentures due 2008. CSC Holdings is required to redeem the Series M Preferred Stock on April 1, 2008 at a redemption price equal to the liquidation preference of $10,000 per share plus accumulated and unpaid dividends. The Series M Preferred Stock is redeemable at various redemption prices beginning at 105.563% at any time on or after April 1, 2003, at the option of CSC Holdings, with accumulated and unpaid dividends thereon to the date of redemption. Before April 1, 2001, dividends may, at the option of CSC Holdings, be paid in cash or by issuing fully paid and nonassessable shares of Series M Preferred Stock with an aggregate liquidation preference equal to the amount of such dividends. On and after April 1, 2001, dividends must be paid in cash. CSC Holdings satisfied its dividend requirements by issuing 9,263, 8,300 and 6,576 additional shares of Series M Preferred Stock in 1998, 1997 and 1996, respectively. In November 1995, CSC Holdings issued 13,800,000 depositary shares representing 1,380,000 shares of 8-1/2% Series I Cumulative Convertible Exchangeable Preferred Stock (the "Series I Preferred Stock") with an aggregate liquidation preference of $345,000. The depositary shares are convertible into shares of the Company's Class A Common Stock, at any time after January 8, 1996 at the option of the holder, at an initial conversion price of $16.86 per share (adjusted for the two-for-one stock splits - see Note 1) of Class A Common Stock subject to adjustment under certain conditions. The Series I Preferred Stock is exchangeable into 8-1/2% Convertible Subordinated Debentures due 2007, at the option of CSC Holdings, in whole but not in part, on or after January 1, 1998 at a rate of $25.00 principal amount of exchange debentures for each depositary share. The Series I Preferred Stock is redeemable at the option of CSC Holdings, in whole or in part, on November 1, 1999, November 1, 2000, and November 1, 2001 and thereafter at 102.8%, 101.4% and 100.0%, respectively, of the principal amount plus accrued and unpaid dividends thereon. CSC Holdings paid a cash dividend of approximately $29,325 in each of 1998, 1997 and 1996. In September 1995, CSC Holdings issued 2,500,000 shares of its $.01 par value 11-3/4% Series H Redeemable Exchangeable Preferred Stock (the "Series H Preferred Stock") with an aggregate liquidation preference of $100 per share. CSC Holdings is required to redeem the Series H Preferred Stock on October 1, 2007 at a redemption price per share equal to the liquidation preference of $100 per share, plus accrued and unpaid dividends thereon. Before October 1, 2000, dividends may, at the option of CSC Holdings, be paid in cash or by issuing fully paid and nonassessable shares of Series H Preferred Stock with an aggregate liquidation preference equal to the amount of such dividends. On and after October 1, 2000, dividends must be paid in cash. The (95) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) terms of the Series H Preferred Stock permit CSC Holdings, at its option, to exchange the Series H Preferred Stock for CSC Holdings' 11-3/4% Senior Subordinated Debentures due 2007 in an aggregate principal amount equal to the aggregate liquidation preference of the shares of Series H Preferred Stock. CSC Holdings satisfied its dividend requirements by issuing 399,050, 355,415 and 317,549 additional shares of Series H Preferred Stock in 1998, 1997 and 1996, respectively. In January 1998, CSC Holdings redeemed all of its outstanding 8% Series C Cumulative Preferred Stock ("Series C Preferred Stock") for cash of approximately $9,400 in the aggregate for all outstanding shares, including accrued dividends. Preferred stock dividend requirements of CSC Holdings are included in minority interests in the accompanying consolidated statements of operations. NOTE 7. INCOME TAXES The Company and certain of its subsidiaries file consolidated income tax returns. Effective April 1, 1997, as a result of the transaction described in Note 2, Rainbow Media files a separate consolidated federal income tax return with its subsidiaries. At December 31, 1998, the Company had consolidated net operating loss carry forwards of approximately $880,000 and Rainbow Media had consolidated federal net operating loss carry forwards of approximately $539,000. As a result of a holding company reorganization and the 1997 change in Rainbow Media's ownership described in Note 2, Rainbow Media's loss carry forwards may be subject to annual limitations on deductions. The tax effects of temporary differences which give rise to significant portions of deferred tax assets or liabilities and the corresponding valuation allowance at December 31, 1998 and 1997 are as follows: 1998 1997 ---- ---- Deferred Asset (Liability) Depreciation and amortization $(182,226) $ 67,234 Receivables from affiliates 23,406 18,681 Benefit plans 108,495 29,841 Allowance for doubtful accounts 7,016 5,538 Deferred gain (130,650) (131,460) Benefits of tax loss carry forwards 596,175 601,983 Other (50) (58) --------- --------- Net deferred tax assets 422,166 591,759 Valuation allowance (422,166) (591,759) --------- --------- $ -- $ -- ========= ========= (96) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) The Company has provided a valuation allowance for the total amount of net deferred tax assets since realization of these assets is not assured due principally to the Company's history of operating losses. NOTE 8. OPERATING LEASES The Company leases certain office, production, transmission, theater and retail store facilities under terms of leases expiring at various dates through 2023. The leases generally provide for fixed annual rentals plus certain real estate taxes and other costs. Rent expense for the years ended December 31, 1998, 1997 and 1996 amounted to $83,003, $26,773 and $22,195, respectively. In addition, the Company rents space on utility poles for its operations. The Company's pole rental agreements are for varying terms, and management anticipates renewals as they expire. Pole rental expense for the years ended December 31, 1998, 1997 and 1996 amounted to approximately $12,490, $10,737 and $8,585, respectively. The minimum future annual rentals for all operating leases during the next five years, including pole rentals from January 1, 1999 through December 31, 2003, and thereafter, at rates now in force are approximately: 1999, $96,200; 2000, $87,800; 2001, $83,565; 2002, $80,852; 2003, 78,488; thereafter, $661,758. NOTE 9. AFFILIATE TRANSACTIONS The Company has affiliation agreements with certain cable television programming companies, in which Rainbow Media directly or indirectly held varying ownership interests during the three years ended December 31, 1998. Accordingly, the Company recorded income (losses) of approximately $(31,851), $10,672 and $(8,018) in 1998, 1997 and 1996, respectively, representing its percentage interests in the results of operations of these programming companies. At December 31, 1998, the Company's net deficit investment in these programming companies amounted to approximately $338. At December 31, 1997, the Company's investment in these programming companies amounted to approximately $29,644. Costs incurred by the Company for programming services provided by these non-consolidated affiliates and included in operating expense for the years ended December 31, 1998, 1997 and 1996 amounted to approximately $2,942, $16,581 and $37,610, respectively. At December 31, 1998 and 1997 amounts due to certain of these affiliates, primarily for programming services provided to the Company, aggregated $3,644 and $7,978, respectively, and are included in accounts payable. At December 31, 1998 and 1997, amounts due from certain of these programming affiliates aggregated $13,075 and $2,335, respectively, and are included in advances to affiliates. In 1992, the Company acquired from Mr. Dolan substantially all of the interests in Cablevision of New York City ("CNYC") that it did not previously own. Mr. Dolan remained a 1% partner in CNYC and was entitled to certain preferential payments. The total amount owed to Mr. Dolan at December 31, 1997 amounted to approximately $197,183. In 1998, the Company paid all amounts due Mr. Dolan. (97) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) During 1998, 1997 and 1996, the Company made advances to or incurred costs on behalf of other affiliates engaged in providing cable television, cable television programming, and related services. Amounts due from these affiliates amounted to $310 and $2,599 at December 31, 1998 and 1997, respectively and are included in advances to affiliates. In October 1997, the Company entered into an agreement with At Home Corporation ("@Home") and certain of its shareholders, pursuant to which the Company agreed to enter into agreements for the distribution of the @Home service over the Company's cable television systems on the same terms and conditions as @Home's founding partners, TCI, Comcast Corporation and Cox Communications, Inc. The Company received a warrant to purchase 7,875,784 shares of @Home's Series A Common Stock at an exercise price of $.50 per share. Additionally, in 1998 a warrant to purchase 2,355,514 shares of @Home's Series A Common Stock at $.50 per share was received in connection with the acquisition of the TCI Systems (see Note 2). The @Home network distributes high-speed interactive services to residences and businesses using its own network architecture and a variety of transport options, including the cable industry's hybrid fiber coaxial infrastructure. The aggregate fair market value of the warrants received of $248,134, as determined by independent appraisals, has been recorded in investments in affiliates in the accompanying consolidated balance sheets. The difference between the appraised value of the warrants and the price paid has been recorded as deferred revenue and is being amortized to income over the period which the Company is obligated to provide the necessary services to @Home. In 1998, the Company recorded $35,821 of revenue relating to this transaction. Prior to their acquisition by the Company, the operations of several cable systems were managed by the Company for a fee equal to 3-1/2% of gross receipts, as defined, plus reimbursement of certain costs and an allocation of certain selling, general and administrative expenses. In certain cases, interest was charged on unpaid amounts. For 1997 and 1996, such management fees, expenses and interest amounted to approximately $5,973 and $12,436, respectively, of which $7,724 was reserved by the Company in 1996. The Company managed the properties of U.S. Cable until its acquisition in August 1996, under management agreements that provided for cost reimbursement, including an allocation of overhead charges. For 1996, such cost reimbursement amounted to $2,396. In August 1996, the Company entered into an agreement with NorthCoast Operating Co., Inc. ("NorthCoast") and certain of its affiliates, to form a limited liability company (the "LLC") to participate in the auctions conducted by the Federal Communications Commission ("FCC") for certain licenses to conduct a personal communications service ("PCS") business. The Company has contributed an aggregate of approximately $38,000 to the LLC (either directly or through a loan to NorthCoast) and holds a 49.9% interest in the LLC and certain preferential distribution rights. The Company recorded a loss of $5,517 in 1998, representing its share of the losses of the LLC. (98) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) NorthCoast is a Delaware corporation controlled by John Dolan. John Dolan is a nephew of Mr. Dolan and a cousin of James Dolan. In 1996, Rainbow Media invested in a joint venture formed with a subsidiary of Loral Space and Communications, Ltd. for the purpose of exploiting certain direct broadcast satellite ("DBS") frequencies. Rainbow Media's investment amounted to $14,913, $12,867 and $5,756 at December 31, 1998, 1997 and 1996, respectively. Rainbow Media also contributed to the joint venture its interest in certain agreements with the licensee of such frequencies. NOTE 10. BENEFIT PLANS The Company maintains the CSSC Supplemental Benefit Plan (the "Supplemental Plan") for the benefit of certain officers and employees of the Company. As part of the Supplemental Plan, the Company established a nonqualified defined benefit pension plan, which provides that, upon attaining normal retirement age, a participant will receive a benefit equal to a specified percentage of the participant's average compensation, as defined. All participants are 100% vested in the Supplemental Plan. Net periodic pension cost for the years ended December 31, 1998, 1997 and 1996 was negligible. At December 31, 1998 and 1997, the fair value of Supplemental Plan assets exceeded the projected benefit obligation by approximately $2,688 and $2,135 respectively. Effective January 1, 1998, the Company established a Cash Balance Retirement Plan (the "Retirement Plan"), which replaced the Company's former money purchase pension plan. Under the Retirement Plan, the Company will credit a certain percentage of eligible base pay into an account established for each employee which will earn a market based rate of return annually. The Company also maintains a 401(k) savings plan, pursuant to which an employee can contribute a percentage of eligible annual compensation, as defined. The Company also makes matching contributions for a portion of employee contributions to the 401(k) savings plan. The cost associated with the Retirement Plan, the money purchase pension plan and the 401(k) savings plan was approximately $10,047, $7,445 and $5,565 for the years ended December 31, 1998, 1997 and 1996, respectively. MSG sponsors several non-contributory pension plans covering MSG's employees. Benefits payable to retirees under these plans are based upon years of service and participant's compensation and are funded through trusts established under the plans. Plan assets are invested primarily in common stocks, bonds, United States government securities and cash. At December 31, 1998 and 1997, the accrued pension liability amounted to $8,883 and $7,796, respectively, and for the years ended December 31, 1998 and 1997, net periodic pension cost amounted to $2,254 and $1,613, respectively. (99) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) MSG also sponsors a welfare plan which provides certain postretirement health care and life insurance benefits to certain employees and their dependents who are eligible for early or normal retirement under MSG's retirement plan. The welfare plan is insured through a managed care provider and MSG funds these benefits with premium payments. For the years ended December 31, 1998 and 1997, the periodic postretirement benefit cost amounted to $84 and $133, respectively, and the accrued postretirement benefit obligation amounted to $6,087 and $6,036, respectively. NOTE 11. STOCK BENEFIT PLANS The Company has an Employee Stock Plan (the "Stock Plan") under which the Company is authorized to issue a maximum of 14,000,000 shares. Pursuant to its terms, no awards could be granted under the Stock Plan after December 5, 1995. The Company granted under the Stock Plan incentive stock options, nonqualified stock options, restricted stock, conjunctive stock appreciation rights, stock grants and stock bonus awards. The exercise price of stock options could not be less than the fair market value per share of Class A Common Stock on the date the option was granted and the options could expire no longer than ten years from date of grant. Conjunctive stock appreciation rights permit the employee to elect to receive payment in cash, either in lieu of the right to exercise such option or in addition to the stock received upon the exercise of such option, in an amount equal to the difference between the fair market value of the stock as of the date the right is exercised, and the exercise price. In June 1996, the Company's shareholders approved the First Amended and Restated 1996 Employee Stock Plan, as amended, (the "1996 Plan"), under which the Company is authorized to issue a maximum of 13,000,000 shares. Under the 1996 Plan, the Company is able to grant incentive stock options, nonqualified stock options, restricted stock, conjunctive and alternative stock appreciation rights, stock grants and stock bonus awards. The other terms of the 1996 Plan are substantially identical to those of the Stock Plan except that under the 1996 Plan the Compensation Committee has the authority, in its discretion, to add performance criteria as a condition to any employee's exercise of an award granted under the 1996 Plan. During 1998, the Company granted options under the 1996 Plan to purchase 2,265,500 shares of Class A Common Stock and stock appreciation rights related to 2,265,500 shares under option. The options and related conjunctive stock appreciation rights are exercisable at various prices ranging from $27.63 to $43.50 per share and vest in 33 1/3% annual increments beginning one year from the date of grant. During 1997, the Company granted options under the 1996 Plan to purchase 2,230,888 shares of Class A Common Stock and stock appreciation rights related to 2,210,288 shares under option. The options and related conjunctive stock appreciation rights are exercisable at prices of $7.13 and $7.88 per share and vest in either 25% or 33 1/3% annual increments beginning one year from the date of the grant or the beginning of 1997. (100) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) During 1996, the Company granted options under the 1996 Plan to purchase 2,194,220 shares of Class A Common Stock, stock appreciation rights related to 2,194,220 shares under option and 368,400 bonus award shares. The options and related conjunctive stock appreciation rights are exercisable at various prices ranging from $11.97 to $12.38 per share and vest in either 25% or 33 1/3% annual increments beginning one year from the date of the grant. The bonus awards vest primarily over a four year period. As a result of stock awards, bonus awards, stock appreciation rights and the expensing of the cash payment made for certain executive stock options, the Company recorded (income)/expense of approximately $146,179, $64,361 and $(8,558) in 1998, 1997 and 1996, respectively. These amounts reflect vesting schedules for applicable grants as well as fluctuations in the market price of the Company's Class A Common Stock. The Company applies APB 25 and related interpretations in accounting for its stock option plans. Had compensation cost been recognized consistent with Statement of Financial Accounting Standards No. 123 ("SFAS 123"), for options granted in 1995 through 1998, the Company's net loss would have increased by $16,151, $7,323 and $4,191 in 1998, 1997 and 1996, respectively. Pro forma net loss per share would have been $(3.27), $(.20) and $(4.67) for the years ended December 31, 1998, 1997 and 1996, respectively. The per share weighted average value of stock options issued by the Company during 1998, 1997 and 1996, as determined by the Black-Scholes option pricing model, was $14.25, $3.32 and $4.97, respectively, on the date of grant. In 1998, 1997 and 1996, the assumptions of no dividends and an expected life of five years were used by the Company in determining the value of stock options granted by the Company. In addition, the calculations assumed a risk free interest rate of approximately 5.0%, 5.9% and 6.7% and expected volatility of 52.8%, 43.5% and 34% in 1998, 1997 and 1996, respectively. Pro forma net loss reflects only options granted since December 31, 1994. Therefore, the full impact of calculating compensation cost for stock options under SFAS 123 is not reflected in the pro forma net loss amounts discussed above because compensation cost is calculated over the options' vesting periods and compensation costs for options granted prior to January 1, 1995 are not considered. (101) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) Stock transactions under the Stock Plan and the 1996 Plan are as follows:
Shares Stock Under Appreciation Stock Available Option Option Rights Awards For Grant Price Range ------ ------ ------ --------- ----------- Balance, December 31, 1995 4,262,728 4,510,748 599,200 -- $3.63-$14.13 1996 Stock Plan -- -- -- 6,000,000 Granted 2,194,220 2,194,220 368,400 (2,562,620) $11.97-$12.38 Exercised/issued (748,564) (954,564) (589,776) -- $3.63-$10.50 Cancelled-Stock Plan (176,568) (87,188) (24,824) -- $6.13-$13.03 Cancelled-1996 Plan (39,200) (39,200) (1,200) 40,400 $12.38 ---------- ---------- ---------- ---------- Balance, December 31, 1996 5,492,616 5,624,016 351,800 3,477,780 $3.63-$13.04 Granted 2,230,888 2,210,288 -- (2,230,888) $7.13-$7.88 Exercised/issued (950,924) (1,245,160) -- -- $5.32-$13.03 Cancelled-Stock Plan (964,356) (948,024) (31,196) -- $5.32-$13.03 Cancelled-1996 Plan (300,676) (300,176) (45,452) 346,128 $7.13-$12.38 ---------- ---------- ---------- ---------- Balance, December 31, 1997 5,507,548 5,340,944 275,152 1,593,020 $5.32-$13.03 1996 Plan amendment -- -- -- 7,000,000 Granted 2,265,500 2,265,500 -- (2,265,500) $27.63-$43.50 Exercised/issued (1,263,220) (1,164,932) (221,852) -- $6.13-$30.16 Cancelled-Stock Plan (6,604) (6,604) (6,840) -- $6.91-$13.03 Cancelled-1996 Plan (345,364) (345,360) (32,060) 377,424 $7.13-$12.38 ---------- ---------- ---------- ---------- Balance, December 31, 1998 6,157,860 6,089,548 14,400 6,704,944 $6.13-$43.50 ========== ========== ========== ==========
The following table summarizes significant ranges of outstanding and exercisable options at December 31, 1998:
Options Outstanding Options Exercisable ------------------------------------------- -------------------------- Weighted Weighted Weighted Average Average Average Ranges of Remaining Exercise Exercise Exercise Prices Shares Life in Years Price Shares Price - - ---------------------------------------------------------------------------------------------- $ 6.13 - 9.00 2,582,248 7.7 $7.15 1,683,556 $ 7.12 10.50 - 13.19 1,321,112 6.6 11.72 819,016 11.31 27.63 - 43.50 2,254,500 9.5 29.06 85,667 30.16
At December 31, 1998, options for approximately 6,157,860 shares were outstanding with a weighted average exercise price of $16.15 and a weighted average remaining life of 8 years. At December 31, 1998, options for approximately 2,588,200 shares were exercisable with a weighted average exercise price of $9.20 and a weighted average remaining life of 7 years. (102) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) NOTE 12. COMMITMENTS AND CONTINGENCIES The Company, through Rainbow Media, has entered into several contracts, including rights agreements, with professional sports teams and others relating to cable television programming. In addition, Rainbow Media, through MSG has employment agreements with both players and coaches of its professional sports teams. Certain of these contracts, which provide for payments that are guaranteed regardless of employee injury or termination, are covered by disability insurance if certain conditions are met. Future cash payments required under these contracts as of December 31, 1998 are as follows: 1999 $ 229,933 2000 217,752 2001 153,717 2002 113,925 2003 98,150 Thereafter 1,093,373 ---------- Total $1,906,850 ========== The Company and its cable television affiliates have an affiliation agreement with a program supplier whereby the Company is obligated to make base rate annual payments, as defined and subject to certain adjustments pursuant to the agreement, through 2004. The Company would be contingently liable for the base rate annual payments, based on subscriber usage, of approximately $12,890 in 1999 and for the years 2000 through 2004 such payments would increase by percentage increases in the Consumer Price Index, or five percent, whichever is less, over the prior year's base rate annual payment. NOTE 13. OTHER MATTERS The Company is party to various lawsuits, some involving substantial amounts. Management does not believe that the resolution of these lawsuits will have a material adverse impact on the financial position of the Company. NOTE 14. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS Cash and Cash Equivalents, Accounts Receivable Trade, Notes and Other Receivables, Prepaid Expenses and Other Assets, Advances to Affiliates, Accounts Payable, Accrued Liabilities, Accounts Payable to Affiliates, Feature Film and Contract Obligations, and Obligation to Related Party. The carrying amount approximates fair value due to the short maturity of these instruments. (103) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) At Home Warrants The fair value of the At Home warrants has been determined by an independent investment advisor. Bank Debt, Senior Debt, Senior Notes and Debentures, Subordinated Notes and Debentures and Subordinated Notes Payable. The fair values of each of the Company's long-term debt instruments are based on quoted market prices for the same or similar issues or on the current rates offered to the Company for instruments of the same remaining maturities. Interest Rate Swap Agreements The fair values of interest rate swap and cap agreements are obtained from dealer quotes. These values represent the estimated amount the Company would receive or pay to terminate agreements, taking into consideration current interest rates and the current creditworthiness of the counterparties. The fair value of the Company's financial instruments are summarized as follows: December 31, 1998 --------------------------- Carrying Estimated Amount Fair Value ------ ---------- At Home warrants $ 248,134 $ 755,479 ========== ========== Long term debt instruments: Bank debt $2,051,549 $2,051,549 Senior notes and debentures 2,194,443 2,271,340 Subordinated notes and debentures 1,048,375 1,168,375 Redeemable exchangeable preferred stock of CSC Holdings 1,256,339 1,417,241 ---------- ---------- $6,550,706 $6,908,505 ========== ========== Interest rate swap agreements: In a net payable position $ -- $ 4,116 ========== ========== (104) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) December 31, 1997 --------------------------- Carrying Estimated Amount Fair Value ------ ---------- Long term debt instruments: Bank debt $2,240,358 $2,240,358 Senior debt 112,500 112,500 Senior notes and debentures 898,024 919,125 Subordinated notes and debentures 1,048,245 1,158,750 Subordinated notes payable 151,000 148,300 Redeemable exchangeable preferred stock of CSC Holdings 1,123,808 1,307,750 ---------- ---------- $5,573,935 $5,886,783 ========== ========== Interest rate swap agreements: In a net payable position $ -- $ 3,141 ========== ========== Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. NOTE 15. SEGMENT INFORMATION The Company classifies its business interests into three fundamental areas: Telecommunication Services, consisting principally of its cable television, telephone and modem services operations; Rainbow Media, consisting principally of interests in cable television programming networks and MSG, which owns and operates professional sports teams, regional cable television networks, live productions and entertainment venues; and Retail Electronics, which represents the operations of Cablevision Electronics' retail electronics stores. The Company's reportable segments are strategic business units that are managed separately . The Company evaluates segment performance based on several factors, of which the primary financial measure is business segment adjusted operating cash flow (defined as operating income (loss) before depreciation and amortization and incentive stock plan expense). The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Intersegment sales are accounted for at fair value as if the sales were to third parties. Information as to the operations of the Company's business segments is set forth below. (105) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) Years Ended December 31, ------------------------------------------- 1998 1997 1996 ---- ---- ---- Revenues Telecommunication Services ..... $ 1,888,855 $ 1,366,668 $ 1,096,634 Rainbow Media .................. 1,007,639 637,648 241,911 Retail Electronics ............. 464,388 -- -- All Other ...................... 6,614 1,707 3,473 Intersegment Elimination ....... (102,353) (56,665) (26,876) ----------- ----------- ----------- Total .................. $ 3,265,143 $ 1,949,358 $ 1,315,142 =========== =========== =========== Years Ended December 31, ------------------------------------------- 1998 1997 1996 ---- ---- ---- Adjusted Operating Cash Flow Telecommunication Services ..... $ 762,823 $ 545,927 $ 434,904 Rainbow Media .................. 135,259 101,122 21,294 Retail Electronics ............. (19,737) -- -- All Other ...................... (9,376) (1,704) (1,362) ----------- ----------- ----------- Total .................. $ 868,969 $ 645,345 $ 454,836 =========== =========== =========== Years Ended December 31, ------------------------------------------- 1998 1997 1996 ---- ---- ---- Assets Telecommunication Services ..... $ 4,163,060 $ 2,927,640 $ 2,719,091 Rainbow Media .................. 2,720,127 2,838,987 738,851 Retail Electronics ............. 199,194 -- -- Other .......................... 253,564 10,270 8,802 Corporate and intersegment eliminations ................. (274,883) (162,109) (432,019) ----------- ----------- ----------- Total .................. $ 7,061,062 $ 5,614,788 $ 3,034,725 =========== =========== =========== (106) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) A reconciliation of reportable segment amounts to the Company's consolidated balances is as follows:
Years Ended December 31, ----------------------------------------- 1998 1997 1996 ---- ---- ---- Revenue Total revenue for reportable segments ................ $ 3,360,882 $ 2,004,316 $ 1,338,545 Other revenue and intersegment eliminations .......... (95,739) (54,958) (23,403) ----------- ----------- ----------- Total consolidated revenue ...................... $ 3,265,143 $ 1,949,358 $ 1,315,142 =========== =========== =========== Adjusted Operating Cash Flow to Net Loss Total adjusted operating cash flow for reportable segments ............................. 878,345 647,049 456,198 Other adjusted operating cash flow deficit ........... (9,376) (1,704) (1,362) Items excluded from adjusted operating cash flow Depreciation and amortization ................... (734,107) (499,809) (388,982) Incentive stock plan (expense) income ........... (146,179) (64,361) 8,558 Interest expense ................................ (426,402) (368,700) (268,177) Interest income ................................. 24,028 5,492 3,162 Share of affiliates' net loss ................... (37,368) (27,165) (82,028) Gain on sale of programming interests and cable assets, net ................................ 170,912 372,053 -- Gain on redemption of subsidiary preferred stock -- 181,738 -- Write off of deferred interest and financing costs ...................................... (23,482) (24,547) (37,784) Provision for preferential payment to related party ...................................... (980) (10,083) (5,600) Minority interests .............................. (124,677) (209,461) (137,197) Miscellaneous, net .............................. (19,218) (12,606) (6,647) ----------- ----------- ----------- Net loss .............................. $ (448,504) $ (12,104) $ (459,859) =========== =========== ===========
Substantially all revenues and assets of the Company's reportable segments are attributed to or located in the United States. The Company does not have a single external customer which represents 10 percent or more of its consolidated revenues. (107) CABLEVISION SYSTEMS CORPORATION (formerly CSC Parent Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) NOTE 16. INTERIM FINANCIAL INFORMATION (Unaudited) The following is a summary of selected quarterly financial data for the years ended December 31, 1998 and 1997.
MARCH 31, JUNE 30, SEPTEMBER 30, -------------------------- -------------------------- -------------------------- 1998 1997 1998 1997 1998 1997 ----------- ----------- ----------- ----------- ----------- ----------- Revenues .................... $ 675,728 $ 358,549 $ 805,190 $ 438,516 $ 806,871 $ 517,930 Operating expenses .......... 686,888 344,271 785,935 433,359 790,822 501,057 ----------- ----------- ----------- ----------- ----------- ----------- Operating profit (loss) ..... $ (11,160) $ 14,278 $ 19,255 $ 5,157 $ 16,049 $ 16,873 =========== =========== =========== =========== =========== =========== Net income (loss) ........... $ (27,204) $ (111,921) $ (122,951) $ (128,776) $ (113,614) $ 46,454 =========== =========== =========== =========== =========== =========== Basic net income (loss) per common share .............. $ (.23) $ (1.13) $ (.82) $ (1.30) $ (.75) $ .47 =========== =========== =========== =========== =========== =========== Diluted net income (loss) per common share .............. $ (.23) $ (1.13) $ (.82) $ (1.30) $ (.75) $ .44 =========== =========== =========== =========== =========== =========== DECEMBER 31, TOTAL -------------------------- -------------------------- 1998 1997 1998 1997 ----------- ----------- ----------- ----------- Revenues .................... $ 977,354 $ 634,363 $ 3,265,143 $ 1,949,358 Operating expenses .......... 1,012,815 589,496 3,276,460 1,868,183 ----------- ----------- ----------- ----------- Operating profit (loss) ..... $ (35,461) $ 44,867 $ (11,317) $ 81,175 =========== =========== =========== =========== Net income (loss) ........... $ (184,735) $ 182,139 $ (448,504) $ (12,104) =========== =========== =========== =========== Basic net income (loss) per common share .............. $ (1.22) $ 1.82 $ (3.16) $ (.12) =========== =========== =========== =========== Diluted net income (loss) per common share .............. $ (1.22) $ 1.53 $ (3.16) $ (.12) =========== =========== =========== ===========
(108) INDEPENDENT AUDITORS' REPORT The Stockholder CSC Holdings, Inc. We have audited the accompanying consolidated balance sheets of CSC Holdings, Inc. (formerly Cablevision Systems Corporation) and subsidiaries as of December 31, 1998 and 1997, and the related consolidated statements of operations, stockholder's deficiency and cash flows for each of the years in the three-year period ended December 31, 1998. In connection with our audits of the consolidated financial statements, we also audited the financial statement schedule listed in Item 14(a)(2). These consolidated financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and the financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of CSC Holdings, Inc. and subsidiaries at December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1998, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule referred to above, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. KPMG LLP Melville, New York March 12, 1999 (109) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) CONSOLIDATED BALANCE SHEETS December 31, 1998 and 1997 (Dollars in thousands)
ASSETS 1998 1997 ---- ---- Cash and cash equivalents ................................... $ 173,699 $ 410,141 Accounts receivable trade (less allowance for doubtful accounts of $31,910 and $29,584) ......................... 191,954 214,721 Notes and other receivables ................................. 143,666 98,756 Inventory, prepaid expenses and other assets ................ 202,512 55,324 Property, plant and equipment, net .......................... 2,110,839 1,831,167 Investments in affiliates ................................... 276,231 207,776 Advances to affiliates ...................................... 37,001 19,823 Feature film inventory ...................................... 293,310 180,576 Net assets held for sale .................................... 11,006 252,610 Franchises, net of accumulated amortization of $570,319 and $481,895 .................................... 327,293 383,369 Affiliation and other agreements, net of accumulated amortization of $181,928 and $129,087 .................... 206,456 253,734 Excess costs over fair value of net assets acquired and other intangible assets, net of accumulated amortization of $762,589 and $684,141 .................................... 1,854,605 1,615,786 Deferred financing, acquisition and other costs, net of accumulated amortization of $41,566 and $40,061 .......... 107,288 91,005 ---------- ---------- $5,935,860 $5,614,788 ========== ==========
See accompanying notes to consolidated financial statements. (110) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) CONSOLIDATED BALANCE SHEETS December 31, 1998 and 1997 (Dollars in thousands, except per share amounts)
1998 1997 ---- ---- LIABILITIES AND STOCKHOLDER'S DEFICIENCY Accounts payable.................................................... $ 382,877 $ 278,630 Accrued liabilities: Interest ........................................................ 85,960 54,107 Employee related costs .......................................... 315,645 196,138 Other ........................................................... 391,304 254,621 Feature film and contract obligations ............................... 373,722 292,720 Deferred revenue .................................................... 334,213 277,693 Bank debt ........................................................... 1,528,549 2,240,358 Senior debt ......................................................... -- 112,500 Senior notes and debentures ......................................... 2,194,443 898,024 Subordinated notes and debentures ................................... 1,048,375 1,048,245 Subordinated notes payable .......................................... -- 151,000 Obligation to related party ......................................... -- 197,183 Capital lease obligations and other debt ............................ 63,241 46,752 ----------- ----------- Total liabilities ............................................... 6,718,329 6,047,971 ----------- ----------- Minority interests .................................................. 785,545 821,782 ----------- ----------- Series H Redeemable Exchangeable Preferred Stock .................... 364,953 325,048 ----------- ----------- Series M Redeemable Exchangeable Preferred Stock .................... 891,386 798,760 ----------- ----------- Commitments and contingencies Stockholder's deficiency: Series A Cumulative Convertible Preferred Stock, 200,000 shares authorized, none issued ....................... -- -- Series B Cumulative Convertible Preferred Stock, 200,000 shares authorized, none issued ....................... -- -- 8% Series C Cumulative Preferred Stock, $.01 par value, 112,500 shares authorized, 110,622 shares issued ($100 per share liquidation preference) ...................... -- 1 8% Series D Cumulative Preferred Stock, $.01 par value, 112,500 shares authorized, none issued ($100 per share liquidation preference) ................................ -- -- 8-1/2% Series I Cumulative Convertible Exchangeable Preferred Stock, $.01 par value, 1,380,000 shares authorized and issued ($250 per share liquidation preference) 14 14 Common Stock, $1.00 par value, 1,000 shares authorized, 1,000 and -0- shares issued .................................. 1 -- Class A Common Stock, $.01 par value, -0- and 55,897,984 shares issued ............................. -- 560 Class B Common Stock, $.01 par value, -0- and 44,386,836 shares issued ............................. -- 444 Paid-in capital ................................................. 170,287 171,399 Accumulated deficit ............................................. (2,994,655) (2,551,191) ----------- ----------- Total stockholder's deficiency .................................. (2,824,353) (2,378,773) ----------- ----------- $ 5,935,860 $ 5,614,788 =========== ===========
See accompanying notes to consolidated financial statements. (111) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (Dollars in thousands, except per share amounts)
1998 1997 1996 ---- ---- ---- Revenues (including affiliate amounts of $8,009, $9,424 and $9,487) ...... $ 2,912,419 $ 1,949,358 $ 1,315,142 ----------- ----------- ----------- Operating expenses: Technical and operating (including affiliate amounts of $2,298, $16,581 and $37,610 and cost of sales of $390,751 in 1998) ........... 1,524,555 853,800 538,272 Selling, general and administrative .................................... 820,015 514,574 313,476 Depreciation and amortization .......................................... 577,635 499,809 388,982 ----------- ----------- ----------- 2,922,205 1,868,183 1,240,730 ----------- ----------- ----------- Operating profit (loss) .................................................. (9,786) 81,175 74,412 ----------- ----------- ----------- Other income (expense): Interest expense ....................................................... (393,008) (368,700) (268,177) Interest income (including affiliate amounts of $6,041, $1,600 and $568) 23,936 5,492 3,162 Share of affiliates' net loss .......................................... (37,368) (27,165) (82,028) Gain on sale of programming interests and cable assets, net ............ 171,127 372,053 -- Gain on redemption of subsidiary preferred stock ....................... -- 181,738 -- Write off of deferred interest and financing costs ..................... (23,482) (24,547) (37,784) Provision for preferential payment to related party .................... (980) (10,083) (5,600) Minority interests ..................................................... 48,378 (60,694) (9,417) Miscellaneous, net ..................................................... (18,350) (12,606) (6,647) ----------- ----------- ----------- (229,747) 55,488 (406,491) ----------- ----------- ----------- Net income (loss) ........................................................ (239,533) 136,663 (332,079) Dividend requirements applicable to preferred stock ...................... (161,872) (148,767) (127,780) ----------- ----------- ----------- Net loss applicable to common shareholder ................................ $ (401,405) $ (12,104) $ (459,859) =========== =========== =========== Basic and diluted net loss per common share .............................. $ -- $ (.12) $ (4.63) =========== =========== =========== Average number of common shares outstanding (in thousands) ............... -- 99,608 99,308 =========== =========== ===========
See accompanying notes to consolidated financial statements. (112) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY Years Ended December 31, 1998, 1997 and 1996 (Dollars in thousands)
Series C Series I Class A Class B Preferred Preferred Common Common Common Stock Stock Stock Stock Stock Paid-in Capital ----- ----- ----- ----- ----- --------------- Balance December 31, 1995 ........... $ 1 $ 14 $ -- $ 568 $ 464 $ 246,897 Net loss ....................... -- -- -- -- -- -- Issuances of preferred stock ... -- -- -- -- -- (25,979) Employee stock transactions .... -- -- -- 4 -- 3,225 Conversion of Class B to Class A -- -- -- 12 (12) -- Retirement of treasury stock ... -- -- -- (40) -- (60,352) Preferred dividend requirements -- -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- Balance December 31, 1996 ........... 1 14 -- 544 452 163,791 Net income ..................... -- -- -- -- -- -- Employee stock transactions .... -- -- -- 8 -- 7,608 Conversion of Class B to Class A -- -- -- 8 (8) -- Preferred dividend requirements -- -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- Balance December 31, 1997 ........... 1 14 -- 560 444 171,399 Net loss ....................... -- -- -- -- -- -- Employee stock transactions .... -- -- -- -- -- 2,444 Redemption of preferred stock .. (1) -- -- -- -- (9,408) Dividend payment to Parent ..... -- -- -- -- -- -- Issuance of stock .............. -- -- -- -- -- 4,849 Common stock conversion ........ -- -- 1 (560) (444) 1,003 Preferred dividend requirements -- -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- Balance December 31, 1998 ........... $ -- $ 14 $ 1 $ -- $ -- $ 170,287 =========== =========== =========== =========== =========== =========== Accumulated Treasury Deficit Stock Total ------- ----- ----- Balance December 31, 1995 ........... $(2,079,228) $ (60,392) $(1,891,676) Net loss ....................... (332,079) -- (332,079) Issuances of preferred stock ... -- -- (25,979) Employee stock transactions .... -- -- 3,229 Conversion of Class B to Class A -- -- -- Retirement of treasury stock ... -- 60,392 -- Preferred dividend requirements (127,780) -- (127,780) ----------- ----------- ----------- Balance December 31, 1996 ........... (2,539,087) -- (2,374,285) Net income ..................... 136,663 -- 136,663 Employee stock transactions .... -- -- 7,616 Conversion of Class B to Class A -- -- -- Preferred dividend requirements (148,767) -- (148,767) ----------- ----------- ----------- Balance December 31, 1997 ........... (2,551,191) -- (2,378,773) Net loss ....................... (239,533) -- (239,533) Employee stock transactions .... -- -- 2,444 Redemption of preferred stock .. -- -- (9,409) Dividend payment to Parent ..... (42,059) -- (42,059) Issuance of stock .............. -- -- 4,849 Common stock conversion ........ -- -- -- Preferred dividend requirements (161,872) -- (161,872) ----------- ----------- ----------- Balance December 31, 1998 ........... $(2,994,655) $ -- $(2,824,353) =========== =========== ===========
See accompanying notes to consolidated financial statements. (113) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1998, 1997 and 1996 (Dollars in thousands)
1998 1997 1996 ---- ---- ---- Cash flows from operating activities: Net income (loss) .......................................................... $(239,533) $ 136,663 $(332,079) --------- --------- --------- Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization .......................................... 577,635 499,809 388,982 Share of affiliates' net loss .......................................... 37,368 27,165 82,028 Minority interests ..................................................... (48,378) 60,694 9,417 Gain on sale of programming interests and cable assets, net ............ (171,127) (372,053) -- Write off of deferred interest and financing costs ..................... 23,482 24,547 37,784 Gain on redemption of subsidiary preferred stock ....................... -- (181,738) -- (Gain) loss on sale of equipment, net .................................. (642) 5,325 4,733 Amortization of deferred financing and debenture discount .............. 8,216 7,707 12,191 Accretion of interest on debt .......................................... -- -- 6,828 Change in assets and liabilities, net of effects of acquisitions and dispositions: Accounts receivable trade .......................................... 20,625 (34,268) (2,709) Notes and other receivables ........................................ (49,375) (67,683) (1,810) Inventory, prepaid expenses and other assets ....................... (90,277) 1,232 (12,428) Advances to affiliates ............................................. (21,738) (528) (2,168) Feature film inventory ............................................. (112,734) (8,269) 9,658 Other deferred costs ............................................... 11,689 -- -- Accounts payable ................................................... 93,729 50,667 17,134 Accrued liabilities ................................................ 148,409 91,497 (4,618) Feature film and contract obligations .............................. 81,376 (258) (12,563) Deferred revenue ................................................... (18,268) 37,664 -- Minority interests ................................................. (961) (6,486) -- --------- --------- --------- Net cash provided by operating activities ................................ 249,496 271,687 200,380 --------- --------- --------- Cash flows from investing activities: Capital expenditures ....................................................... (530,784) (457,590) (449,165) Payments for acquisitions, net of cash acquired ............................ (264,510) (747,134) (113,095) Net proceeds from sale of programming interests and cable assets ........... 442,425 945,534 -- Proceeds from sale of equipment ............................................ 8,945 1,930 814 (Increase) decrease in investments in affiliates, net ...................... (31,035) 9,267 (179,536) Additions to other intangible assets ....................................... (12,659) (623) (766) --------- --------- --------- Net cash used in investing activities .................................... $(387,618) $(248,616) $(741,748) --------- --------- ---------
See accompanying notes to consolidated financial statements. (114) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1998, 1997 and 1996 (Dollars in thousands) (continued)
1998 1997 1996 ---- ---- ---- Cash flows from financing activities: Proceeds from bank debt ............................. $ 4,804,101 $ 3,385,703 $ 2,053,566 Repayment of bank debt .............................. (5,519,507) (3,147,165) (1,576,585) Proceeds from senior debt ........................... -- 147,750 12,500 Repayment of senior debt ............................ (112,500) (433,617) (918,131) Repayment of subordinated notes payable ............. (151,000) -- -- Redemption of senior notes payable .................. (94,848) -- -- Issuance of subordinated debentures ................. -- -- 399,385 Redemption of senior subordinated debt .............. -- (283,445) -- Issuance of senior notes and debentures ............. 1,296,076 897,983 -- Redemption of subsidiary preferred stock ............ -- (112,301) -- Redemption of preferred stock ....................... (9,409) -- -- Issuances of redeemable exchangeable convertible preferred stock ....................... -- -- 624,021 Dividends applicable to preferred stock ............. (29,341) (30,224) (30,266) Payment of dividend to shareholder .................. (42,059) -- -- Issuance of common stock ............................ 2,444 7,616 3,229 Obligation to related party ......................... (197,183) 4,364 (126) Payments on capital lease obligations and other debt (12,306) (7,501) (3,321) Additions to deferred financing and other costs ..... (32,788) (53,705) (26,624) ----------- ----------- ----------- Net cash provided by (used in) financing activities (98,320) 375,458 537,648 ----------- ----------- ----------- Net increase (decrease) in cash and cash equivalents .. (236,442) 398,529 (3,720) Cash and cash equivalents at beginning of year ........ 410,141 11,612 15,332 ----------- ----------- ----------- Cash and cash equivalents at end of year .............. $ 173,699 $ 410,141 $ 11,612 =========== =========== ===========
See accompanying notes to consolidated financial statements. (115) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Company and Related Matters On March 4, 1998, CSC Holdings, Inc. (the "Company") completed a holding company reorganization (the "Holding Company Reorganization") pursuant to an Amended and Restated Contribution and Merger Agreement (the "Contribution and Merger Agreement"), by and among the Company, CSC Parent Corporation ("Parent"), CSC Merger Corporation, and TCI Communications, Inc., ("TCI"). Pursuant to the Contribution and Merger Agreement, each outstanding share of the Company's Class A Common Stock and each outstanding share of the Company's Class B Common Stock were automatically converted on a share for share basis for Class A Common Stock and Class B Common Stock of Parent. As a result of the Holding Company Reorganization, Parent became the holding company of the Company. In connection with the Holding Company Reorganization, the Company's name, which formerly was Cablevision Systems Corporation, was changed to CSC Holdings, Inc. and Parent's name was changed to Cablevision Systems Corporation. The preferred stock and debt of the Company remain unchanged as securities of CSC Holdings, Inc., except that the Company's 8-1/2% Cumulative Convertible Exchangeable Preferred Stock, par value $0.01 per share (the "Series I Preferred Stock"), in accordance with its terms, became exchangeable for Parent's Class A Common Stock instead of being convertible into the Company's Class A Common Stock. The Company and its majority-owned subsidiaries own and operate cable television systems and have ownership interests in companies that produce and distribute national and regional entertainment and sports programming services, including a majority interest in Madison Square Garden, L.P. ("MSG"). The Company also owns companies that provide advertising sales services for the cable television industry, provide switched telephone service, operate a retail electronics chain and operate motion picture theaters. Parent allocates certain costs to the Company based upon its proportionate estimated usage of services. The Company classifies its business interests into three fundamental areas: Telecommunication Services, consisting principally of its cable television, telephone and modem services operations; Rainbow Media, consisting principally of interests in cable television programming networks and MSG, which owns and operates professional sports teams, regional cable television networks, live productions and entertainment venues; and Retail Electronics, which represents the operations of its retail electronics stores. Two-for-One Stock Splits On March 4, 1998, Parent's Board of Directors declared a two-for-one stock split to be effected in the form of a common stock dividend of one share of Class A Common Stock for each share of (116) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) Class A Common Stock issued and outstanding and one share of Class B Common Stock for each share of Class B Common Stock issued and outstanding. The stock dividend was paid on March 30, 1998 to stockholders of record on March 19, 1998. On July 22, 1998, Parent's Board of Directors declared a two-for-one stock split to be effected as a special stock distribution of one share of Class A Common Stock for each share of Class A Common Stock issued and outstanding as of August 10, 1998 and one share of Class B Common Stock for each share of Class B Common Stock issued and outstanding as of August 10, 1998. The stock dividend was paid on August 21, 1998 to stockholders of record on August 10, 1998. For purposes of the accompanying consolidated financial statements of the Company, all share and per share information has been adjusted for the two-for-one splits discussed above. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. The Company's interests in less than majority-owned entities and until July 2, 1997, its 100% common stock interest in A-R Cable Services, Inc., are carried on the equity method. Subsequent to July 2, 1997, results of operations of A-R Cable Services, Inc. are consolidated with those of the Company (see Note 2). Advances to affiliates are recorded at cost, adjusted when recoverability is doubtful. All significant intercompany transactions and balances are eliminated in consolidation. Revenue Recognition The Company recognizes cable television and programming revenues as services are provided to subscribers. Advertising revenues are recognized when commercials are telecast. Revenues derived from other sources are recognized when services are provided, events occur or products are delivered. Long-Lived Assets Property, plant and equipment, including construction materials, are carried at cost, which includes all direct costs and certain indirect costs associated with the construction of cable television transmission and distribution systems, and the costs of new subscriber installations. Franchises are amortized on the straight-line basis over the average remaining terms (7 to 11 years) of the franchises at the time of acquisition. Affiliation and other agreements (primarily cable television system programming agreements) are amortized on a straight-line basis over periods ranging from 6 to 10 years. Other intangible assets are amortized on the straight-line basis over the periods benefited (2 to 10 years), except that excess costs over fair value of net assets acquired are being amortized on the straight-line basis over periods ranging from 5 to 40 years. The Company reviews its long-lived assets (property, plant and equipment, and related intangible assets that arose from business combinations accounted for under the purchase method) for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum (117) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) of the expected cash flows, undiscounted and without interest, is less than the carrying amount of the asset, an impairment loss is recognized as the amount by which the carrying amount of the asset exceeds its fair value. Feature Film Inventory Rights to feature film inventory acquired under license agreements along with the related obligations are recorded at the contract value. Costs are charged to technical and operating expense on the straight-line basis over the respective contract periods. Amounts payable during the five years subsequent to December 31, 1998 related to feature film telecast rights are $44,438 in 1999, $38,394 in 2000, $27,332 in 2001, $22,375 in 2002 and $19,751 in 2003. Inventory Carrying amounts of retail merchandise are determined on an average cost basis and are stated at the lower of cost or market. Deferred Financing Costs Costs incurred to obtain debt are deferred and amortized, on a straight-line basis, over the life of the related debt. Income Taxes Income taxes are provided based upon the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", which requires the liability method of accounting for deferred income taxes and permits the recognition of deferred tax assets, subject to an ongoing assessment of realizability. Loss Per Share Basic and diluted net loss per common share for the years ended December 31, 1997 and 1996 is computed by dividing net loss after deduction of preferred stock dividends by the weighted average number of common shares outstanding. Potential dilutive common shares were not included in the computation as their effect would be antidilutive. Basic and diluted net loss per common share for the year ended December 31, 1998 is not presented since the Company is a wholly-owned subsidiary of Parent. Loss per share amounts have been adjusted, for all years presented, to reflect the two-for-one stock splits discussed above. (118) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) Segment Information On December 31, 1998, the Company adopted Statement of Financial Accounting Standards No. 131, `Disclosures about Segments of an Enterprise and Related Information' (`SFAS 131'). The new rules establish revised standards for public companies relating to the reporting of financial and descriptive information about their operating segments in financial statements. The adoption of SFAS 131 does not have a material effect on the Company's financial statements, but does affect the disclosure of segment information contained elsewhere herein (see Note 15). Reclassifications Certain reclassifications have been made in the 1997 and 1996 financial statements to conform to the 1998 presentation. Cash Flows For purposes of the consolidated statements of cash flows, the Company considers short-term investments with a maturity at date of purchase of three months or less to be cash equivalents. The Company paid cash interest expense of approximately $352,929, $352,660, and $252,120 during 1998, 1997 and 1996, respectively. During 1998, 1997, and 1996, the Company's noncash investing and financing activities were as follows: Years Ended December 31, ------------------------ 1998 1997 1996 ---- ---- ---- Capital lease obligations ..................... 28,795 24,820 2,571 Preferred stock dividends ..................... 132,531 118,542 97,514 Issuance of common stock to redeem certain limited partnership interests .... 4,849 -- -- Receipt of warrants from At Home Corporation .............................. 74,788 173,346 -- Capital contribution of equipment by minority partner ......................... -- 38,000 -- Use of Estimates in Preparation of Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (119) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) NOTE 2. ACQUISITIONS, DISPOSITIONS AND RESTRUCTURINGS Acquisitions 1998 Acquisitions The Wiz On February 9, 1998, Cablevision Electronics Investments, Inc. ("Cablevision Electronics"), a wholly-owned subsidiary of the Company, acquired substantially all of the assets associated with 40 The Wiz consumer electronics store locations from The Wiz, Inc. and certain of its subsidiaries and affiliates (collectively, "TWI"). TWI had filed for bankruptcy protection on December 16, 1997. Cablevision Electronics paid approximately $101,300 for the assets (including transaction costs and pre-closing operating costs). The acquisition was accounted for as a purchase with the operations of the stores being consolidated with the operations of the Company as of the date of acquisition. The purchase price was allocated to the specific assets acquired based upon independent appraisals as follows: Inventory $ 66,200 Property and equipment 16,800 Other assets 4,000 Liabilities (24,000) Excess cost over fair value of net assets acquired 38,300 ---------- $ 101,300 ========== Madison Square Garden On June 17, 1998, the Company purchased 50% of ITT's remaining interest in MSG for $94,000 pursuant to ITT's exercise of its first put option increasing RPP's interest in MSG to 96.3% (see discussion below). In March 1999, ITT and the Company entered into an agreement under which ITT exercised its second put for the remainder of its interest in MSG and will settle certain matters between the parties for a payment of $87,000. Loews In December 1998, a subsidiary of the Company acquired interests in the real property and assets specifically related to 15 movie theaters from Loews Cineplex Entertainment Corporation ("Loews") for an aggregate purchase price of approximately $67,300. (120) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) The acquisition was accounted for as a purchase with the operations of the acquired assets being consolidated with those of the Company as of the acquisition date. The purchase price was allocated to the specific assets acquired based upon independent appraisals as follows: Property and equipment $12,600 Other assets 4,100 Excess cost over fair value of net assets acquired 50,600 ------- $67,300 ======= In the first quarter of 1999, the Company acquired one additional theater and Loews has granted the Company a right of first offer on an additional 21 movie theaters until December 1999. Clearview In December 1998, Parent acquired all of the outstanding shares of stock of Clearview Cinema Group, Inc. ("Clearview") for approximately $157,700 (including assumed debt of $80,000) of which approximately $33,400 was paid in shares of Parent's Class A Common Stock. The remaining purchase price was funded primarily by a dividend paid by the Company to Parent of approximately $42,000. Concurrent with the acquisition of Clearview, Parent contributed its entire interest in Clearview to the subsidiary formed to purchase the Loews theaters in exchange for a minority interest in that subsidiary. As a result, the operations of Clearview have been consolidated with those of the Company since the date of the acquisition and the Company has recorded a minority interest representing Parent's share of the results of operations of the newly formed subsidiary which owns the Loews theatres and Clearview. The acquisition of Clearview was accounted for as a purchase with the operations of the acquired business being consolidated with those of the Company as of the acquisition date. The excess of the purchase price over the net book value of assets acquired approximates $122,300 and will be allocated to the specific assets acquired when independent appraisals are obtained. 1997 Acquisitions: NBC Transaction On April 1, 1997, Rainbow Media Holdings, Inc. ("Rainbow Media") consummated a transaction in which Rainbow Programming Holdings, Inc. merged with and into Rainbow Media, a newly formed subsidiary of the Company. In addition, NBC Cable, Inc. (a subsidiary of National Broadcasting Company ("NBC")) received a 25% equity interest (which interest may be increased by up to an additional 2% under certain circumstances without additional payment) in Class C Common Stock of Rainbow Media. The Company owns the remaining 75% equity interest in Rainbow Media. The partnership interests in certain of Rainbow Media's programming services formerly owned by NBC are now owned by subsidiaries of Rainbow Media. The exchange of 25% of the Company's interest in Rainbow (121) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) Media for NBC's interests in certain entities was accounted for at historical cost with the difference between the cost basis of a 25% interest in Rainbow Media and the partnership interests received in exchange recorded as goodwill of $54,385, which is being amortized over a 10 year period. Madison Square Garden In February 1997, Rainbow Media made a payment to ITT Corporation ("ITT") of $168,750 plus interest, fully equalizing its interest in MSG, a partnership among subsidiaries of Rainbow Media and subsidiaries of ITT, and bringing Rainbow Media's total payments at that time to $360,000, plus interest payments aggregating $47,700. In April 1997, the Company and certain of its affiliates and ITT and certain of its affiliates entered into definitive agreements ("MSG Agreement") relating to the acquisition by subsidiaries of the Company of ITT's 50 percent interest in MSG. The transaction closed on June 17, 1997 when MSG borrowed $799,000 under its credit facility which was used to redeem a portion of ITT's interest in MSG for $500,000 and to repay its existing indebtedness. Rainbow Media contributed its SportsChannel Associates programming company to MSG, which, together with the redemption, increased Rainbow Media's interest in MSG to 89.8% and reduced ITT's interest to 10.2%. In connection with the Fox/Liberty transaction discussed below, Rainbow Media's interest in MSG was contributed to Regional Programming Partners. ITT's interest in MSG was further reduced to 7.8% as a result of the $450,000 capital contribution by Regional Programming Partners to MSG which was used by MSG to pay down outstanding debt. The remaining 7.8% interest held by ITT is subject to certain puts and calls as specified in the MSG Agreement (see "1998 Acquisitions" above). The acquisition was accounted for using the purchase method of accounting. The assets and liabilities and results of operations of MSG have been consolidated with those of the Company as of June 17, 1997. Previously, the Company's investment in MSG was accounted for using the equity method of accounting. The excess of the purchase price over the net book value of assets acquired of approximately $397,093 was allocated to the specific assets acquired based upon independent appraisals as follows: Property, plant and equipment $ 19,687 Affiliation and other agreements 34,168 Franchises 46,125 Excess cost over fair value of net assets acquired 297,113 -------- $397,093 ======== (122) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) Warburg Transactions In June 1997, the Company acquired from Warburg Pincus Investors, L.P. ("Warburg") the interests that the Company did not already own in A-R Cable Partners ("Nashoba") and Cablevision of Framingham Holdings, Inc. ("CFHI") for a purchase price of approximately $33,348 and $7,865, respectively. The acquisitions of Nashoba and CFHI were accounted for as purchases with the operations of these companies being consolidated with those of the Company as of the acquisition date. The excess of the purchase price over the net book value of assets acquired approximates $97,015 and has been allocated based upon independent appraisals as follows: Property, plant and equipment $ 4,060 Franchises 59,923 Excess cost over fair value of net assets acquired 33,032 -------- $ 97,015 ======== On July 2, 1997, the Company redeemed from Warburg the Series A Preferred Stock of A-R Cable Services, Inc. ("A-R Cable") for an aggregate amount of approximately $112,301. The assets and liabilities of A-R Cable have been consolidated with those of the Company as of July 2, 1997. Previously, the Company's investment in A-R Cable was accounted for using the equity method of accounting. In connection with this transaction, the Company recognized a gain of $181,738 representing principally the reversal of accrued preferred dividends in excess of amounts paid. Radio City On December 5, 1997, MSG purchased all of the membership interests in Radio City Entertainment ("Radio City"), the production company that operates Radio City Music Hall in New York City, for approximately $70,000 in cash. Simultaneously, Radio City entered into a 25-year lease for Radio City Music Hall. The assets and liabilities and results of operations of Radio City have been consolidated with those of the Company as of the date of acquisition. The excess of the purchase price over the net book value of assets acquired of approximately $76,200 was allocated to the specific assets acquired based upon independent appraisals as follows:. Property, plant and equipment $ 1,500 Capital lease obligation (80,000) Other liabilities (13,400) Excess cost over fair value of net assets acquired 168,100 --------- $ 76,200 ========= (123) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) Dispositions Cable Systems In October 1998, A-R Cable transferred its cable television system in Rensselaer, New York plus approximately $16,000 in cash to Time Warner Entertainment Company, L.P. ("Time Warner") in exchange for Time Warner's Litchfield, Connecticut system. The Company recognized a gain of approximately $15,500 in connection with this transaction. In February 1997, the Company announced that it was pursuing a plan to dispose of certain nonstrategic cable television systems. In 1998 and 1997, the Company completed the sale of cable television systems for aggregate sales prices of approximately $426,500 and $88,200, respectively, and recognized aggregate gains of approximately $137,900 and $59,000, respectively. Regional Programming Partners In December 1997, Rainbow Media and Fox/Liberty Networks, LLC ("Fox") organized Regional Programming Partners (a partnership that owns the interest in MSG and in regional sports programming businesses previously owned by Rainbow Media) ("RPP"). In connection with the formation of RPP, affiliates of Rainbow Media indirectly contributed to RPP in consideration for the issuance of a 60% general partnership interest in RPP their ownership interests in several regional sports networks, including their interest in MSG. In consideration for the issuance of a 40% general partnership interest in RPP, Fox contributed $850,000 in cash to RPP. Thereafter, RPP made a capital contribution of approximately $450,000 to MSG which was used by MSG to repay a portion of MSG's debt. As a result of RPP's investment in MSG, RPP's interest in MSG increased from 89.8% to 92.2%. In connection with this transaction, Rainbow Media recognized a gain of approximately $305,000. See discussion above under "Acquisitions - 1998 Acquisitions - Madison Square Garden for further increases in RPP's interest in MSG. Other In 1998 and 1997, RPP and Rainbow Media completed the sale of an interest in a sports programming business and substantially all of the assets of a radio station. In connection with these sales, RPP and Rainbow Media recognized gains of $17,700 and $7,400, respectively. A-R Cable Restructuring In 1992, the Company and A-R Cable consummated a restructuring and refinancing transaction (the "A-R Cable Restructuring"). Among other things, this transaction involved an additional $45,000 investment in A-R Cable by the Company to purchase a new Series B Preferred Stock and the purchase of a new Series A Preferred Stock in A-R Cable by Warburg for $105,000. As a result of the A-R Cable Restructuring, the Company no longer had financial or voting control over A-R Cable's operations. Prior to the redemption of A-R (124) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) Cable's Series A Preferred Stock on July 2, 1997 (see discussion above), the Company accounted for its investment in A-R Cable using the equity method of accounting whereby the Company recorded 100% of the net losses of A-R Cable since it continued to own 100% of A-R Cable's outstanding common stock. Included in share of affiliates' net loss in the accompanying consolidated statements of operations for the period ended July 1, 1997 and for the year ended December 31, 1996 is $35,835 and $68,492, respectively, representing A-R Cable's net loss plus dividend requirements for the Series A Preferred Stock of A-R Cable, which was not owned by the Company. Beginning on July 2, 1997, the operations of A-R Cable have been consolidated with those of the Company. Pro Forma Results of Operations The following unaudited pro forma condensed results of operations are presented for the years ended December 31, 1998 and 1997 as if the acquisitions of MSG, Nashoba, CFHI, the NBC transaction, the A-R Cable consolidation and the sale of assets of certain cable systems had occurred on January 1, 1998 and 1997, respectively. Years Ended December 31, ------------------------ 1998 1997 ---- ---- Net revenues $2,907,145 $2,160,778 ========== ========== Net income (loss) $ (472,567) $ 1,000 ========== ========== The pro forma information presented above gives effect to certain adjustments, including the amortization of acquired intangible assets and increased interest expense on acquisition debt. The pro forma information has been prepared for comparative purposes only and does not purport to indicate the results of operations which would actually have occurred had the transactions been made at the beginning of the periods indicated or which may occur in the future. NOTE 3. NET ASSETS HELD FOR SALE Pursuant to the Company's decision to dispose of certain nonstrategic cable television systems (see Note 2), the Company had entered into definitive agreements covering the sale of certain cable television systems as of December 31, 1998 and 1997. In January 1998, the Company, Parent and a subsidiary of TCI entered into a non-binding letter of intent for Parent to acquire TCI's cable television systems (the "TCI Connecticut Systems") in and around Hartford, Vernon, Branford and Lakeville, Connecticut (the "Proposed TCI CT Transactions"). Under the non-binding letter of intent, in consideration for the TCI Connecticut Systems, Parent would (i) transfer to TCI the cable television systems serving Kalamazoo, (125) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) Michigan, (ii) transfer to TCI other cable television systems to be identified by TCI and purchased with approximately $25,000 of funds provided by Parent, (iii) issue shares of Parent's Class A Common Stock, and (iv) assume certain indebtedness relating to the TCI Connecticut Systems, which is anticipated to total approximately $110,000. A binding definitive agreement has not yet been completed. There can be no assurance that the Proposed TCI CT Transactions will be consummated in a timely fashion, or at all. For financial reporting purposes, the assets and liabilities attributable to cable systems whose sale or transfer was pending at December 31, 1998 and 1997 have been classified in the consolidated balance sheet as net assets held for sale and consist of the following: December, 31 ------------ 1998 1997 ---- ---- Property, plant and equipment, net $ 14,548 $122,577 Intangible assets, net 215 154,352 Other assets (including trade receivables, prepaid expenses, etc.) 603 2,815 -------- -------- Total assets 15,366 279,744 Total liabilities 4,360 27,134 -------- -------- Net assets $ 11,006 $252,610 ======== ======== The accompanying consolidated statement of operations for the year ended December 31, 1998 and 1997 includes net revenues aggregating approximately $18,937 and $102,971, respectively, and net income (loss) aggregating approximately $9,095 and $(11,275), respectively, relating to the cable systems held for sale or transfer. (126) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) NOTE 4. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consist of the following items, which are depreciated or amortized primarily on a straight-line basis over the estimated useful lives shown below:
December 31, ------------------ Estimated 1998 1997 Useful Lives ---- ---- ------------ Communication transmission and distribution systems: Customer equipment ................. $ 537,066 $ 508,959 4 to 5 years Headends ........................... 109,080 100,551 7 to 10 years Multimedia ......................... 9,075 -- 10 years Central office equipment ........... 87,203 60,672 10 years Infrastructure ..................... 1,864,294 1,651,236 10 to 15 years Program, service and test equipment ......................... 372,644 282,635 2 to 10 years Microwave equipment ................ 16,070 16,641 2 to 10 years Construction in progress (including materials and supplies) ........... 131,314 140,455 -- Furniture and fixtures ................. 191,607 128,442 1 to 12 years Transportation equipment ............... 123,797 107,159 4 to 15 years Building and building improvements ..... 159,166 156,254 23 to 40 years Leasehold improvements ................. 131,492 70,991 Term of lease Land and land improvements ............. 41,136 34,070 -- ---------- ---------- 3,773,944 3,258,065 Less accumulated depreciation and amortization ......................... 1,663,105 1,426,898 ---------- ---------- $2,110,839 $1,831,167 ========== ==========
NOTE 5. DEBT Bank Debt Restricted Group/TCI Systems For financing purposes, the Company and certain of its subsidiaries are collectively referred to as the "Restricted Group". In May 1998, the Company and certain other subsidiaries of Parent entered into a new $2.8 billion reducing revolving credit facility (the "Credit Agreement") with a group of banks led by Toronto-Dominion (Texas), Inc. ("Toronto-Dominion"), as administrative and arranging agent. This Credit Agreement replaced a $1.7 billion facility that was also with a group of banks led by Toronto-Dominion. The $2.8 billion reducing revolving credit facility, maturing in March 2007, consists of a $1.4 billion CSC Holdings credit facility, a $1.4 billion MFR credit facility of which $600,000 is (127) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) available, and an $800,000 credit facility for certain unrestricted subsidiaries of Parent acquired from TCI on March 4, 1998 ("TCI Systems"). While the $800,000 TCI Systems credit facility is in place, only $600,000 of the $1.4 billion MFR facility may be utilized. In July 1998, CSC Holdings' credit facility was reduced by $400,000 to $1.0 billion, and the MFR credit facility was reduced by $200,000 to $1.2 billion, which includes a reduction of the TCI Systems credit facility by $100,000 to $700,000. The TCI Systems credit facility matures on April 4, 1999 and concurrent with the transfer of the TCI Systems to CSC Holdings, which is expected to occur by April 4, 1999, the restriction on the MFR credit facility will be eliminated and the borrowings under the MFR facility will increase by an amount equal to the borrowings outstanding under the TCI Systems credit facility. The total amount of bank debt outstanding under the Restricted Group Credit Agreement at December 31, 1998 and 1997 was $887,226 and $1,328,098, respectively. As of December 31, 1998, approximately $57,313 was restricted for certain letters of credit issued on behalf of the Company. Unrestricted and undrawn funds available to the Restricted Group under the Credit Agreement amounted to approximately $572,687 at December 31, 1998. The Credit Agreement contains certain financial covenants that may limit the Restricted Group's ability to utilize all of the undrawn funds available thereunder. The Credit Agreement contains various restrictive covenants, among which are the maintenance of various financial ratios and tests, and limitations on various payments, including preferred dividends and dividends on its common stock. The Company was in compliance with the covenants of its Credit Agreement at December 31, 1998. Interest on outstanding amounts may be paid, at the option of the Company, based on the prime rate or Eurodollar rate. The Company has entered into interest rate swap agreements with several banks on a notional amount of $225,000 as of December 31, 1998 whereby the Company pays a fixed rate of interest ranging from 5.94% to 8.00% and receives a variable rate ranging from 5.38% to 5.72%. The Company enters into interest rate swap agreements to hedge against interest rate risk, as required by its Credit Agreement, and therefore accounts for these agreements as hedges of floating rate debt, whereby interest expense is recorded using the revised rate, with any fees or other payments amortized as yield adjustments. As of December 31, 1998, the interest rate swap agreements expire at various times through the year 2000 and have a weighted average life of approximately 11 months. The Company is exposed to credit loss in the event of nonperformance by the other parties to the interest rate swap agreements; however, the Company does not anticipate nonperformance by the counterparties. The weighted average interest rate on all bank indebtedness was 6.53% and 7.60% on December 31, 1998 and 1997, respectively. The Company is also obligated to pay fees from .1875% to .25% per annum on the unused loan commitment and from .4% to 1.375% per annum on letters of credit issued under the Credit Agreement. (128) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) Unrestricted Group U.S. Cable U.S. Cable Television Group, L.P. ("U.S. Cable"), a subsidiary of the Company, had a three year $175,000 revolving credit facility maturing on August 13, 1999. As of December 31, 1997, U.S. Cable had outstanding borrowings under its revolving credit facility of approximately $155,000. Amounts outstanding under the facility bore interest at varying rates based upon the banks' base rate or LIBOR rate, as defined in the loan agreement. The weighted average interest rate was 7.1% on December 31, 1997. In January 1998, all remaining indebtedness of U.S. Cable amounting to approximately $156,000 was repaid and its credit agreement was terminated. The proceeds for such repayment came from the sale of substantially all the assets of U.S. Cable. Rainbow Media In April 1997, Rainbow Media executed a new $300,000, three year credit facility with Canadian Imperial Bank of Commerce and Toronto-Dominion as co-agents, and a group of banks. Upon closing, approximately $172,000 was drawn to refinance, in part, its previous $202,000 credit facility. The balance of the funds utilized to fully repay the $202,000 facility and to repay $169,000 to the Restricted Group came from a distribution by American Movie Classics Company. The Rainbow Media revolving credit facility was amended in December 1997 which, among other things, extended the maturity date to December 31, 2000. The credit facility contains certain financial covenants that may limit Rainbow Media's ability to utilize all the undrawn funds available thereunder, including covenants requiring it to maintain certain financial ratios. The facility bears interest at varying rates above the lead bank's base or Eurodollar rate depending on the ratio of debt to borrower value, as defined in the credit agreement. The loan is secured by a pledge of the Company's stock in Rainbow Media, a pledge of all of the stock of all wholly-owned subsidiaries of Rainbow Media and is guaranteed by the subsidiaries of Rainbow Media, as permitted. At December 31, 1998 and 1997, Rainbow Media had outstanding borrowings of $67,200 and $176,500, respectively, under its credit facility. Undrawn funds available to Rainbow Media under the credit facility amounted to approximately $12,800 at December 31, 1998. The weighted average interest rate on Rainbow Media's bank debt was 7.7% and 7.8% on December 31, 1998 and 1997, respectively. The credit agreement contains various restrictive covenants with which Rainbow Media was in compliance at December 31, 1998. American Movie Classics Company In April 1997, American Movie Classics Company ("AMCC") put into place a new $250,000 credit facility. The facility was comprised of a $200,000 term loan and a $50,000 revolving loan. (129) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) The facility was used to make a $205,000 cash distribution to Rainbow Media, refinance existing indebtedness and for general corporate purposes. In December 1997, the loan was amended, decreasing the term loan to $146,000 and increasing the revolving loan to $100,000 ("AMCC Loan Agreement"). Both loans will mature on March 31, 2004. Borrowings under the AMCC Loan Agreement bear interest at varying rates above or at the lead bank's base or above the Eurodollar rate depending on the ratio of debt to cash flow, as defined in the AMCC Loan Agreement. At December 31, 1998 and 1997, the weighted average interest rate on bank indebtedness was 6.1% and 6.8%, respectively. The term loan began amortizing September 30, 1997 and requires quarterly amortization payments. The revolving loan does not start to reduce until June 30, 2002. On December 31, 1998 and 1997, $128,000 and $143,000, respectively, was outstanding under the term loan and $64,250 and $56,500, respectively, was outstanding under the revolving loan. Substantially all of the assets of AMCC, amounting to approximately $274,600 at December 31, 1998, have been pledged to secure the borrowings under the AMCC Loan Agreement. The AMCC Loan Agreement contains various restrictive covenants with which AMCC was in compliance at December 31, 1998. Madison Square Garden In June 1997, MSG entered into an $850,000 credit agreement (the "MSG Credit Facility") with a group of banks led by Chase Manhattan Bank, as agent. The MSG Credit Facility expires on December 31, 2004. MSG initially borrowed $650,000 and $149,000 under the term loan and revolver portions, respectively, of the MSG Credit Facility. In December 1997, the facility was amended to increase the revolver to $500,000 from $200,000. Also in December 1997, MSG repaid the term loan of $650,000 with $450,000 contributed by RPP as described in Note 2 and $200,000 of additional borrowings under the revolver. Loans under the MSG Credit Facility bear interest at current market rates plus a margin based upon MSG's consolidated leverage ratio. At December 31, 1998 and 1997, loans outstanding amounted to $310,000 and $360,000, respectively, and bore interest at 6.038% and 6.785%, respectively. The MSG Credit Facility contains certain financial covenants with which MSG was in compliance at December 31, 1998. The MSG Credit Facility also contains certain convenants that may limit MSG's ability to utilize all of the undrawn funds available thereunder. In July 1997, a wholly-owned subsidiary of MSG borrowed $20,000 under promissory notes with various lending institutions which bear interest at LIBOR plus a margin (7.22% and 7.85% at December 31, 1998 and 1997, respectively) and mature in July 2002. Cablevision Electronics In February 1998, Cablevision Electronics entered into a three year $130,000 revolving credit facility. Under the terms of the credit facility, the total amount of borrowings available to Cablevision Electronics is subject to an availability calculation based on a percentage of eligible inventory. The total amount outstanding under the credit agreement at December 31, 1998 was (130) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) approximately $44,542 and bore interest at 7.2%. As of December 31, 1998, $30,197 was restricted for certain letters of credit issued on behalf of Cablevision Electronics. Unrestricted and undrawn funds available amounted to $54,403 on December 31, 1998 based on the level of inventory as of that date. Borrowings under the credit agreement are secured by Cablevision Electronics' assets. The credit agreement contains various restrictive covenants with which Cablevision Electronics was in compliance at December 31, 1998. Cablevision Cinemas Cablevision Cinemas, LLC has a $15,000 revolving credit bank facility maturing on June 30, 2003. As of December 31, 1998, there were no outstanding borrowings under this bank facility. Senior Debt On December 30, 1997, the Company repaid $222,000 of A-R Cable's debt with borrowings under CSC Holdings' Credit Facility in connection with the transfer of certain cable systems from A-R Cable to the Restricted Group. A-R Cable had outstanding borrowings of $112,500 at December 31, 1997, which was repaid in 1998. Senior Notes and Debentures In December 1998, the Company redeemed Clearview's 10-7/8% Senior Notes for approximately $94,800 in cash. This payment included a premium of $11,200, a consent fee of $3,600 and accrued interest of $48. In July 1998, the Company issued $500,000 principal amount of 7-1/4% Senior Notes due 2008 (the "2008 Notes") and $500,000 principal amount ($499,516 amortized amount at December 31, 1998) of 7-5/8 % Senior Debentures due 2018 (the "Debentures"). The Debentures were issued at a discount of $495. The 2008 Notes and Debentures are not redeemable by the Company prior to maturity. In February 1998, the Company issued $300,000 principal amount of ($296,721 amortized amount at December 31, 1998) 7- 7/8% Senior Debentures due 2018 (the "2018 Debentures"). The 2018 Debentures were issued at a discount of $3,429. The 2018 Debentures are not redeemable by the Company prior to maturity. In December 1997, the Company issued $500,000 principal amount ($499,532 and $499,475 amortized amount at December 31, 1998 and 1997, respectively) of 7-7/8% Senior Notes due 2007 (the "2007 Notes"). The notes were issued at a discount of $525. The 2007 Notes are not (131) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) redeemable by the Company prior to maturity. The net proceeds were used to reduce bank borrowings. In August 1997, the Company issued $400,000 principal amount ($398,674 and $398,549 amortized amount at December 31, 1998 and 1997, respectively) of 8-1/8% Senior Debentures due 2009 (the "2009 Notes"). The 2009 Notes were issued at a discount of $1,492. The 2009 Notes are not redeemable by the Company prior to maturity. The net proceeds were used to reduce bank borrowings. The indentures under which the senior notes and debentures were issued contain various convenants, which are generally less restrictive than those contained in the Company's Credit Agreement, with which the Company was in compliance at December 31, 1998. Subordinated Debentures In May 1996, the Company issued $150,000 principal amount ($149,545 and $149,485 amortized amount at December 31, 1998 and 1997, respectively) of 9-7/8% Senior Subordinated Notes due 2006 (the "2006 Notes") and $250,000 principal amount of 10-1/2% Senior Subordinated Debentures due 2016 (the "2016 Debentures"). The 2006 Notes are redeemable at the Company's option, in whole or in part, on May 15, 2001, May 15, 2002 and May 15, 2003 at the redemption price of 104.938%, 103.292% and 101.646%, respectively, of the principal amount and thereafter at 100% of the aggregate principal amount, in each case together with accrued interest to the redemption date. The 2016 Debentures are redeemable at the Company's option, in whole or in part, on May 15, 2006, May 15, 2007, May 15, 2008 and May 15, 2009, at the redemption price of 105.25%, 103.938%, 102.625% and 101.313%, respectively, of the principal amount and thereafter at 100% of the aggregate principal amount, in each case together with accrued interest to the redemption date. In November 1995, the Company issued $300,000 principal amount of 9-1/4% Senior Subordinated Notes due 2005 (the "2005 Notes"). The 2005 Notes are redeemable at the Company's option, in whole or in part, on November 1, 2000, November 1, 2001 and November 1, 2002 at the redemption price of 104.625%, 103.1% and 101.5%, respectively, of the principal amount and thereafter at 100% of the principal amount, in each case together with accrued interest to the redemption date. In February 1993, the Company issued $200,000 face amount ($199,117 and $199,056 amortized amounts at December 31, 1998 and 1997, respectively) of its 9-7/8% Senior Subordinated Debentures due 2013 (the "2013 Debentures"). The 2013 Debentures are redeemable, at the Company's option, on February 15, 2003, February 15, 2004, February 15, 2005 and February 15, 2006 at the redemption price of 104.80%, 103.60%, 102.40% and 101.20%, respectively, of the principal amount and thereafter at the redemption price of 100% of the principal amount, in each case together with accrued interest to the redemption date. (132) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) Also in 1993, the Company issued $150,000 face amount ($149,713 and $149,704 amortized amounts at December 31, 1998 and 1997, respectively) of its 9-7/8% Senior Subordinated Debentures due 2023 (the "2023 Debentures"). The 2023 Debentures are redeemable, at the Company's option, on and after April 1, 2003 at the redemption price of 104.938% reducing ratably to 100% of the principal amount on and after April 1, 2010, in each case together with accrued interest to the redemption date. The indentures under which the subordinated notes and debentures were issued contain various covenants, which are generally less restrictive than those contained in the Company's Credit Agreement and with which the Company was in compliance at December 31, 1998. Subordinated Notes Payable In connection with certain acquisitions made in 1994, a subsidiary of the Company issued promissory notes totaling $141,268 and the Company assumed $9,732 of promissory notes, both of which were repaid in June 1998. Summary of Five Year Debt Maturities Total amounts payable by the Company and its subsidiaries under its various debt obligations, including capital leases, during the five years subsequent to December 31, 1998 are as follows: 1999 $54,401 2000 98,354 2001 76,020 2002 56,265 2003 229,451 NOTE 6. PREFERRED STOCK In February 1996, the Company issued 6,500,000 depositary shares, representing 65,000 shares of 11-1/8% Series L Redeemable Exchangeable Preferred Stock (the "Series L Preferred Stock") with a liquidation preference of $650,000, which were subsequently exchanged for Series M Redeemable Exchangeable Preferred Stock (the "Series M Preferred Stock") on August 2, 1996 with terms identical to the Series L Preferred Stock. Net proceeds were approximately $626,000. The depositary shares are exchangeable, in whole but not in part, at the option of the Company, for the Company's 11-1/8% Senior Subordinated Debentures due 2008. The Company is required to redeem the Series M Preferred Stock on April 1, 2008 at a redemption price equal to the liquidation preference of $10,000 per share plus accumulated and unpaid dividends. The Series M Preferred Stock is redeemable at various redemption prices beginning at 105.563% at any time on or after April 1, 2003, at the option of the Company, with accumulated and unpaid dividends thereon to the (133) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) date of redemption. Before April 1, 2001, dividends may, at the option of the Company, be paid in cash or by issuing fully paid and nonassessable shares of Series M Preferred Stock with an aggregate liquidation preference equal to the amount of such dividends. On and after April 1, 2001, dividends must be paid in cash. The Company satisfied its dividend requirements by issuing 9,263, 8,300 and 6,576 additional shares of Series M Preferred Stock in 1998, 1997 and 1996, respectively. In November 1995, the Company issued 13,800,000 depositary shares representing 1,380,000 shares of 8-1/2% Series I Cumulative Convertible Exchangeable Preferred Stock (the "Series I Preferred Stock") with an aggregate liquidation preference of $345,000. The depositary shares are convertible into shares of Parent's Class A Common Stock, at any time after January 8, 1996 at the option of the holder, at an initial conversion price of $16.86 per share (adjusted for the two-for-one stock splits - see Note 1) of Parent's Class A Common Stock subject to adjustment under certain conditions. Following the Holding Company Reorganization referred to in Note 1, the depositary shares are convertible into a comparable number of shares of Class A Common Stock of Parent. The Series I Preferred Stock is exchangeable into 8-1/2% Convertible Subordinated Debentures due 2007, at the option of the Company, in whole but not in part, on or after January 1, 1998 at a rate of $25.00 principal amount of exchange debentures for each depositary share. The Series I Preferred Stock is redeemable at the option of the Company, in whole or in part, on November 1, 1999, November 1, 2000, and November 1, 2001 and thereafter at 102.8%, 101.4% and 100.0%, respectively, of the principal amount plus accrued and unpaid dividends thereon. The Company paid a cash dividend of approximately $29,325 in each of 1998, 1997 and 1996. In September 1995, the Company issued 2,500,000 shares of its $.01 par value 11-3/4% Series H Redeemable Exchangeable Preferred Stock (the "Series H Preferred Stock") with an aggregate liquidation preference of $100 per share. The Company is required to redeem the Series H Preferred Stock on October 1, 2007 at a redemption price per share equal to the liquidation preference of $100 per share, plus accrued and unpaid dividends thereon. Before October 1, 2000, dividends may, at the option of the Company, be paid in cash or by issuing fully paid and nonassessable shares of Series H Preferred Stock with an aggregate liquidation preference equal to the amount of such dividends. On and after October 1, 2000, dividends must be paid in cash. The terms of the Series H Preferred Stock permit the Company, at its option, to exchange the Series H Preferred Stock for the Company's 11-3/4% Senior Subordinated Debentures due 2007 in an aggregate principal amount equal to the aggregate liquidation preference of the shares of Series H Preferred Stock. The Company satisfied its dividend requirements by issuing 399,050, 355,415 and 317,549 additional shares of Series H Preferred Stock in 1998, 1997 and 1996, respectively. In January 1998, the Company redeemed all of its outstanding 8% Series C Cumulative Preferred Stock ("Series C Preferred Stock") for cash of approximately $9,400 in the aggregate for all outstanding shares, including accrued dividends. (134) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) NOTE 7. INCOME TAXES The Company, Parent and certain of its subsidiaries file consolidated federal income tax returns. Effective April 1, 1997, as a result of the transaction described in Note 2, Rainbow Media is no longer included in Parent's consolidated federal income tax returns, but rather files a separate consolidated federal income tax return with its subsidiaries. At December 31, 1998, the Company had consolidated net operating loss carry forwards of approximately $880,000 and Rainbow Media had consolidated federal net operating loss carry forwards of approximately $539,000. As a result of the Holding Company Reorganization, described in Note 1 and the 1997 change in Rainbow Media's ownership described in Note 2, Rainbow Media's loss carry forwards may be subject to annual limitations on deductions. The tax effects of temporary differences which give rise to significant portions of deferred tax assets or liabilities and the corresponding valuation allowance at December 31, 1998 and 1997 are as follows: 1998 1997 ---- ---- Deferred Asset (Liability) Depreciation and amortization $ 28,918 $ 67,234 Receivables from affiliates 23,406 18,681 Benefit plans 105,439 29,841 Allowance for doubtful accounts 5,980 5,538 Deferred gain (130,650) (131,460) Benefits of tax loss carry forwards 596,175 601,983 Other (50) (58) --------- --------- Net deferred tax assets 629,218 591,759 Valuation allowance (629,218) (591,759) --------- --------- $ -- $ -- ========= ========= The Company has provided a valuation allowance for the total amount of net deferred tax assets since realization of these assets is not assured due principally to the Company's history of operating losses. NOTE 8. OPERATING LEASES The Company leases certain office, production, transmission, theater and retail store facilities under terms of leases expiring at various dates through 2023. The leases generally provide for fixed annual rentals plus certain real estate taxes and other costs. Rent expense for the years ended December 31, 1998, 1997 and 1996 amounted to $79,822, $26,773 and $22,195, respectively. (135) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) In addition, the Company rents space on utility poles for its operations. The Company's pole rental agreements are for varying terms, and management anticipates renewals as they expire. Pole rental expense for the years ended December 31, 1998, 1997 and 1996 amounted to approximately $9,855, $10,737 and $8,585, respectively. The minimum future annual rentals for all operating leases during the next five years, including pole rentals from January 1, 1999 through December 31, 2003, and thereafter, at rates now in force are approximately: 1999, $91,822; 2000, $83,557; 2001, $79,538; 2002, $77,256; 2003, 74,905; thereafter, $656,303. NOTE 9. AFFILIATE TRANSACTIONS The Company has affiliation agreements with certain cable television programming companies, in which Rainbow Media directly or indirectly held varying ownership interests during the three years ended December 31, 1998. Accordingly, the Company recorded income (losses) of approximately $(31,851), $10,672 and $(8,018) in 1998, 1997 and 1996, respectively, representing its percentage interests in the results of operations of these programming companies. At December 31, 1998, the Company's net deficit investment in these programming companies amounted to approximately $338. At December 31, 1997, the Company's investment in these programming companies amounted to approximately $29,644. Costs incurred by the Company for programming services provided by these non-consolidated affiliates and included in operating expense for the years ended December 31, 1998, 1997 and 1996 amounted to approximately $2,298, $16,581 and $37,610, respectively. At December 31, 1998 and 1997 amounts due to certain of these affiliates, primarily for programming services provided to the Company, aggregated $3,644 and $7,978, respectively, and are included in accounts payable. At December 31, 1998 and 1997, amounts due from certain of these programming affiliates aggregated $13,112 and $2,335, respectively, and are included in advances to affiliates. In 1992, the Company acquired from Mr. Dolan substantially all of the interests in Cablevision of New York City ("CNYC") that it did not previously own. Mr. Dolan remained a 1% partner in CNYC and was entitled to certain preferential payments. The total amount owed to Mr. Dolan at December 31, 1997 amounted to approximately $197,183. In 1998, the Company paid all amounts due Mr. Dolan. During 1998, 1997 and 1996, the Company made advances to or incurred costs on behalf of other affiliates engaged in providing cable television, cable television programming, and related services. Amounts due from these affiliates amounted to $310 and $2,599 at December 31, 1998 and 1997, respectively and are included in advances to affiliates. In October 1997, the Company entered into an agreement with At Home Corporation ("@Home") and certain of its shareholders, pursuant to which the Company agreed to enter into agreements for the distribution of the @Home service over the Company's cable television systems on the same terms and conditions as @Home's founding partners, TCI, Comcast Corporation and Cox Communications, Inc. The Company received a warrant to purchase 7,875,784 shares of @Home's (136) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) Series A Common Stock at an exercise price of $.50 per share. Additionally, in 1998 a warrant to purchase 2,355,514 shares of @Home's Series A Common Stock at $.50 per share was received in connection with Parent's acquisition of certain cable television systems from TCI. The @Home network distributes high-speed interactive services to residences and businesses using its own network architecture and a variety of transport options, including the cable industry's hybrid fiber coaxial infrastructure. The aggregate fair market value of the warrants received of $248,134, as determined by independent appraisals, has been recorded in investments in affiliates in the accompanying consolidated balance sheets. The difference between the appraised value of the warrants and the price paid has been recorded as deferred revenue and is being amortized to income over the period which the Company is obligated to provide the necessary services to @Home. In 1998, the Company recorded $35,821 of revenue relating to this transaction. Prior to their acquisition by the Company, the operations of several cable systems were managed by the Company for a fee equal to 3-1/2% of gross receipts, as defined, plus reimbursement of certain costs and an allocation of certain selling, general and administrative expenses. In certain cases, interest was charged on unpaid amounts. For 1997 and 1996, such management fees, expenses and interest amounted to approximately $5,973 and $12,436, respectively, of which $7,724 was reserved by the Company in 1996. The Company managed the properties of U.S. Cable until its acquisition in August 1996, under management agreements that provided for cost reimbursement, including an allocation of overhead charges. For 1996, such cost reimbursement amounted to $2,396. In August 1996, the Company entered into an agreement with NorthCoast Operating Co., Inc. ("NorthCoast") and certain of its affiliates, to form a limited liability company (the "LLC") to participate in the auctions conducted by the Federal Communications Commission ("FCC") for certain licenses to conduct a personal communications service ("PCS") business. The Company has contributed an aggregate of approximately $38,000 to the LLC (either directly or through a loan to NorthCoast) and holds a 49.9% interest in the LLC and certain preferential distribution rights. The Company recorded a loss of $5,517 in 1998, representing its share of the losses of the LLC. NorthCoast is a Delaware corporation controlled by John Dolan. John Dolan is a nephew of Mr. Dolan and a cousin of James Dolan. In 1996, Rainbow Media invested in a joint venture formed with a subsidiary of Loral Space and Communications, Ltd. for the purpose of exploiting certain direct broadcast satellite ("DBS") frequencies. Rainbow Media's investment amounted to $14,913, $12,867 and $5,756 at December 31, 1998, 1997 and 1996, respectively. Rainbow Media also contributed to the joint venture its interest in certain agreements with the licensee of such frequencies. (137) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) NOTE 10. BENEFIT PLANS The Company maintains the CSSC Supplemental Benefit Plan (the "Supplemental Plan") for the benefit of certain officers and employees of the Company. As part of the Supplemental Plan, the Company established a nonqualified defined benefit pension plan, which provides that, upon attaining normal retirement age, a participant will receive a benefit equal to a specified percentage of the participant's average compensation, as defined. All participants are 100% vested in the Supplemental Plan. Net periodic pension cost for the years ended December 31, 1998, 1997 and 1996 was negligible. At December 31, 1998 and 1997, the fair value of Supplemental Plan assets exceeded the projected benefit obligation by approximately $2,688 and $2,135 respectively. Effective January 1, 1998, the Company established a Cash Balance Retirement Plan (the "Retirement Plan"), which replaced the Company's former money purchase pension plan. Under the Retirement Plan, the Company will credit a certain percentage of eligible base pay into an account established for each employee which will earn a market based rate of return annually. The Company also maintains a 401(k) savings plan, pursuant to which an employee can contribute a percentage of eligible annual compensation, as defined. The Company also makes matching contributions for a portion of employee contributions to the 401(k) savings plan. The cost associated with the Retirement Plan, the money purchase pension plan and the 401(k) savings plan was approximately $9,272, $7,445 and $5,565 for the years ended December 31, 1998, 1997 and 1996, respectively. MSG sponsors several non-contributory pension plans covering MSG's employees. Benefits payable to retirees under these plans are based upon years of service and participant's compensation and are funded through trusts established under the plans. Plan assets are invested primarily in common stocks, bonds, United States government securities and cash. At December 31, 1998 and 1997, the accrued pension liability amounted to $8,883 and $7,796, respectively, and for the years ended December 31, 1998 and 1997, net periodic pension cost amounted to $2,254 and $1,613, respectively. MSG also sponsors a welfare plan which provides certain postretirement health care and life insurance benefits to certain employees and their dependents who are eligible for early or normal retirement under MSG's retirement plan. The welfare plan is insured through a managed care provider and MSG funds these benefits with premium payments. For the years ended December 31, 1998 and 1997, the periodic postretirement benefit cost amounted to $84 and $133, respectively, and the accrued postretirement benefit obligation amounted to $6,087 and $6,036, respectively. (138) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) NOTE 11. STOCK BENEFIT PLANS Parent has Employee Stock Plans (the "Stock Plans") under which it is authorized to issue incentive stock options, nonqualified stock options, restricted stock, conjunctive stock appreciation rights, stock grants and stock bonus awards. The exercise price of stock options can not be less than the fair market value per share of Parent's Class A Common Stock on the date the option was granted and the options expire no longer than ten years from date of grant. Conjunctive stock appreciation rights permit the employee to elect to receive payment in cash, either in lieu of the right to exercise such option or in addition to the stock received upon the exercise of such option, in an amount equal to the difference between the fair market value of the stock as of the date the right is exercised, and the exercise price. Under the Stock Plans, employees of the Company have received stock awards, bonus awards, stock appreciation rights and cash payments made for certain executive stock options. As a result the Company recorded (income)/expense of approximately $137,554, $64,361 and $(8,558) in 1998, 1997 and 1996, respectively. These amounts reflect vesting schedules for applicable grants as well as fluctuations in the market price of Parent's Class A Common Stock. NOTE 12. COMMITMENTS AND CONTINGENCIES The Company, through Rainbow Media, has entered into several contracts, including rights agreements, with professional sports teams and others relating to cable television programming. In addition, Rainbow Media, through MSG has employment agreements with both players and coaches of its professional sports teams. Certain of these contracts, which provide for payments that are guaranteed regardless of employee injury or termination, are covered by disability insurance if certain conditions are met. Future cash payments required under these contracts as of December 31, 1998 are as follows: 1999 $ 229,933 2000 217,752 2001 153,717 2002 113,925 2003 98,150 Thereafter 1,093,373 ---------- Total $1,906,850 ========== The Company and its cable television affiliates have an affiliation agreement with a program supplier whereby the Company is obligated to make base rate annual payments, as defined and subject to certain adjustments pursuant to the agreement, through 2004. The Company would be contingently liable for its proportionate share of the base rate annual payments, based on subscriber usage, of approximately $12,890 in 1999 and for the years 2000 through 2004 such payments would increase by percentage increases in the Consumer Price Index, or five percent, whichever is less, over the prior year's base rate annual payment. (139) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) NOTE 13. OTHER MATTERS The Company is party to various lawsuits, some involving substantial amounts. Management does not believe that the resolution of these lawsuits will have a material adverse impact on the financial position of the Company. NOTE 14. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS Cash and Cash Equivalents, Accounts Receivable Trade, Notes and Other Receivables, Prepaid Expenses and Other Assets, Advances to Affiliates, Accounts Payable, Accrued Liabilities, Accounts Payable to Affiliates, Feature Film and Contract Obligations, and Obligation to Related Party. The carrying amount approximates fair value due to the short maturity of these instruments. At Home Warrants The fair value of the At Home warrants has been determined by an independent investment advisor. Bank Debt, Senior Debt, Senior Notes and Debentures, Subordinated Notes and Debentures, Subordinated Notes Payable and Redeemable Exchangeable Preferred Stock The fair values of each of the Company's long-term debt instruments and redeemable preferred stock are based on quoted market prices for the same or similar issues or on the current rates offered to the Company for instruments of the same remaining maturities. Interest Rate Swap Agreements The fair values of interest rate swap and cap agreements are obtained from dealer quotes. These values represent the estimated amount the Company would receive or pay to terminate agreements, taking into consideration current interest rates and the current creditworthiness of the counterparties. (140) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) The fair value of the Company's financial instruments are summarized as follows: December 31, 1998 ----------------- Carrying Estimated Amount Fair Value ------ ---------- At Home warrants $ 248,134 $ 755,479 ========== ========== Long term debt instruments: Bank debt $1,528,549 $1,528,549 Senior notes and debentures 2,194,443 2,271,340 Subordinated notes and debentures 1,048,375 1,168,375 Redeemable exchangeable preferred stock 1,256,339 1,417,241 ---------- ---------- $6,027,706 $6,385,505 ========== ========== Interest rate swap agreements: In a net payable position $ -- $ 4,116 ========== ========== December 31, 1997 ----------------- Carrying Estimated Amount Fair Value ------ ---------- Long term debt instruments: Bank debt $2,240,358 $2,240,358 Senior debt 112,500 112,500 Senior notes and debentures 898,024 919,125 Subordinated notes and debentures 1,048,245 1,158,750 Subordinated notes payable 151,000 148,300 Redeemable exchangeable preferred stock 1,123,808 1,307,750 ---------- ---------- $5,573,935 $5,886,783 ========== ========== Interest rate swap agreements: In a net payable position $ -- $ 3,141 ========== ========== Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. NOTE 15. SEGMENT INFORMATION The Company classifies its business interests into three fundamental areas: Telecommunication Services, consisting principally of its cable television, telephone and modem services operations; Rainbow Media, consisting principally of interests in cable television programming networks and MSG, which owns and operates professional sports teams, regional cable television (141) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) networks, live productions and entertainment venues; and Retail Electronics, which represents the operations of Cablevision Electronics' retail electronics stores. The Company's reportable segments are strategic business units that are managed separately . The Company evaluates segment performance based on several factors, of which the primary financial measure is business segment adjusted operating cash flow (defined as operating income (loss) before depreciation and amortization and incentive stock plan expense). The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Intersegment sales are accounted for at fair value as if the sales were to third parties. Information as to the operations of the Company's business segments is set forth below. Years Ended December 31, ------------------------------------------- 1998 1997 1996 ---- ---- ---- Revenues Telecommunication Services ...... $ 1,513,393 $ 1,366,668 $ 1,096,634 Rainbow Media ................... 1,007,639 637,648 241,911 Retail Electronics .............. 464,388 -- -- All Other ....................... 6,614 1,707 3,473 Intersegment Elimination ........ (79,615) (56,665) (26,876) ----------- ----------- ----------- Total ................... $ 2,912,419 $ 1,949,358 $ 1,315,142 =========== =========== =========== Years Ended December 31, ------------------------------------------- 1998 1997 1996 ---- ---- ---- Adjusted Operating Cash Flow Telecommunication Services ...... $ 599,257 $ 545,927 $ 434,904 Rainbow Media ................... 135,259 101,122 21,294 Retail Electronics .............. (19,737) -- -- All Other ....................... (9,376) (1,704) (1,362) --------- --------- --------- Total ................... $ 705,403 $ 645,345 $ 454,836 ========= ========= ========= (142) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued)
Years Ended December 31, ----------------------------------------- 1998 1997 1996 ---- ---- ---- Assets Telecommunication Services ............ $ 3,035,212 $ 2,927,640 $ 2,719,091 Rainbow Media ......................... 2,720,127 2,838,987 738,851 Retail Electronics .................... 199,194 -- -- Other ................................. 253,564 10,270 8,802 Corporate and intersegment eliminations (272,237) (162,109) (432,019) ----------- ----------- ----------- Total ......................... $ 5,935,860 $ 5,614,788 $ 3,034,725 =========== =========== ===========
A reconciliation of reportable segment amounts to the Company's consolidated balances is as follows:
Years Ended December 31, ----------------------------------------- 1998 1997 1996 ---- ---- ---- Revenue Total revenue for reportable segments ................ $ 2,985,420 $ 2,004,316 $ 1,338,545 Other revenue and intersegment eliminations .......... (73,001) (54,958) (23,403) ----------- ----------- ----------- Total consolidated revenue ...................... $ 2,912,419 $ 1,949,358 $ 1,315,142 =========== =========== =========== Adjusted Operating Cash Flow to Net Loss Total adjusted operating cash flow for reportable segments ............................. 714,779 647,049 456,198 Other adjusted operating cash flow deficit ........... (9,376) (1,704) (1,362) Items excluded from adjusted operating cash flow Depreciation and amortization ................... (577,635) (499,809) (388,982) Incentive stock plan (expense) income ........... (137,554) (64,361) 8,558 Interest expense ................................ (393,008) (368,700) (268,177) Interest income ................................. 23,936 5,492 3,162 Share of affiliates' net loss ................... (37,368) (27,165) (82,028) Gain on sale of programming interests and cable assets, net .......................... 171,127 372,053 -- Gain on redemption of subsidiary preferred stock -- 181,738 -- Write off of deferred interest and financing costs ...................................... (23,482) (24,547) (37,784) Provision for preferential payment to related party ...................................... (980) (10,083) (5,600) Minority interests .............................. 48,378 (60,694) (9,417) Miscellaneous, net .............................. (18,350) (12,606) (6,647) ----------- ----------- ----------- Net income (loss) ..................... $ (239,533) $ 136,663 $ (332,079) =========== =========== ===========
(143) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) Substantially all revenues and assets of the Company's reportable segments are attributed to or located in the United States. The Company does not have a single external customer which represents 10 percent or more of its consolidated revenues. (144) CSC HOLDINGS, INC. AND SUBSIDIARIES (formerly Cablevision Systems Corporation) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts) (continued) NOTE 16. INTERIM FINANCIAL INFORMATION (Unaudited) The following is a summary of selected quarterly financial data for the years ended December 31, 1998 and 1997.
MARCH 31, JUNE 30, SEPTEMBER 30, -------------------------- -------------------------- -------------------------- 1998 1997 1998 1997 1998 1997 ----------- ----------- ----------- ----------- ----------- ----------- Revenues...................... $ 645,382 $ 358,549 $ 700,352 $ 438,516 $ 697,866 $ 517,930 Operating expenses ........... 656,249 344,271 687,465 433,359 692,571 501,057 ----------- ----------- ----------- ----------- ----------- ----------- Operating profit (loss) ...... $ (10,867) $ 14,278 $ 12,887 $ 5,157 $ 5,295 $ 16,873 =========== =========== =========== =========== =========== =========== Net income (loss) applicable to common shareholder ................ $ (23,461) $ (111,921) $ (116,774) $ (128,776) $ (113,083) $ 46,454 =========== =========== =========== =========== =========== =========== Basic net income (loss) per common share ............... -- $ (1.13) -- $ (1.30) -- $ .47 =========== =========== =========== =========== =========== =========== Diluted net income (loss) per common share ............... -- $ (1.13) -- $ (1.30) -- $ .44 =========== =========== =========== =========== =========== =========== DECEMBER 31, TOTAL -------------------------- -------------------------- 1998 1997 1998 1997 ----------- ----------- ----------- ----------- Revenues...................... $ 868,819 $ 634,363 $ 2,912,419 $ 1,949,358 Operating expenses ........... 885,920 589,496 2,922,205 1,868,183 ----------- ----------- ----------- ----------- Operating profit (loss) ...... $ (17,101) $ 44,867 $ (9,786) $ 81,175 =========== =========== =========== =========== Net income (loss) applicable to common shareholder ................ $ (148,087) $ 182,139 $ (401,405) $ (12,104) =========== =========== =========== =========== Basic net income (loss) per common share ............... -- $ 1.82 -- $ (.12) =========== =========== =========== =========== Diluted net income (loss) per common share ............... -- $ 1.53 -- $ (.12) =========== =========== =========== ===========
(145) Item 9. Changes in and Disagreements with Accountants on Accounting and Financial disclosure. None. PART III The information called for by Item 401 of Regulation S-K under Item 10, Directors and Executive Officers of the Registrant, Item 11, Executive Compensation, Item 12, Security Ownership of Certain Beneficial Owners and Management and Item 13, Certain Relationships and Related Transactions, is hereby incorporated by reference to Cablevision Parent's definitive proxy statement for its Annual Meeting of Shareholders anticipated to be held in June 1999 or if such definitive proxy statement is not filed with the Commission prior to April 30, 1999, to an amendment to this report on Form 10-K filed under cover of Form 10-K/A. Compliance with Section 16(a) of the Securities Exchange Act of 1934. Pursuant to regulations promulgated by the Securities and Exchange Commission, the Company is required to identify, based solely on a review of reports filed under Section 16(a) of the Securities Exchange Act of 1934, each person who, at any time during its fiscal year ended December 31, 1998, was a director, officer or beneficial owner of more than ten percent of the Company's Class A Common Stock that failed to file on a timely basis any such reports. Based on such review, the Company is aware of no such failure. PART IV Item 14. Exhibits, Financial Statements, Financial Statement Schedule, and Reports on Form 8-K. (a) The following documents are filed as part of this report: 1. The financial statements as indicated in the index set forth on page 69. 2. Financial Statement schedule: Page No. --- Schedule supporting consolidated financial statements: Schedule II - Valuation and Qualifying Accounts.............. 147 Schedules other than that listed above have been omitted, since they are either not applicable, not required or the information is included elsewhere herein. 3. The Index to Exhibits is on page 150. (b) Reports on Form 8-K: Cablevision Systems Corporation has not filed any current reports on Form 8-K with the Commission during the last quarter of the fiscal period covered by this report. CSC Holdings, Inc. has not filed any current reports on Form 8-K with the Commission during the last quarter of the fiscal period covered by this report. (146) SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS (Dollars in thousands) Cablevision Systems Corporation
Balance at Beginning Charged to Costs Charged to Deductions Balance at of Period and Expenses Other Accounts Write-Offs End of Period --------- ------------ -------------- ---------- ------------- Year Ended December 31, 1998 Allowance for doubtful accounts................ $29,584 $32,110 $ - $(27,317) $34,377 ======= ======= ========= ======== ======= Year Ended December 31, 1997 Allowance for doubtful accounts................ $12,955 $26,283 $ - $ (9,654) $29,584 ======= ======= ========== ========= ======= Year Ended December 31, 1996 Allowance for doubtful accounts................ $12,678 $18,489 $ - $(18,212) $12,955 ======= ======= ========== ======== ======= CSC Holdings, Inc. Balance at Beginning Charged to Costs Charged to Deductions Balance at of Period and Expenses Other Accounts Write-Offs End of Period --------- ------------ -------------- ---------- ------------- Year Ended December 31, 1998 Allowance for doubtful accounts................ $29,584 $28,897 $ - $(26,571) $31,910 ======= ======= =========== ======== ======= Year Ended December 31, 1997 Allowance for doubtful accounts................ $12,955 $26,283 $ - $ (9,654) $29,584 ======= ======= ========== ========= ======= Year Ended December 31, 1996 Allowance for doubtful accounts................ $12,678 $18,489 $ - $(18,212) $12,955 ======= ======= ========== ======== =======
(147) SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 30th day of March, 1999. Cablevision Systems Corporation CSC Holdings, Inc. By: /s/ William J. Bell -------------------------- Name: William J. Bell Title: Vice Chairman (Cablevision Systems Corporation and CSC Holdings, Inc.) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Marc A. Lustgarten and Robert S. Lemle, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him in his name, place and stead, in any and all capacities, to sign this report, and file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons in the capacities and on the dates indicated on behalf of each of the Registrants. Name Title Date ---- ----- ---- /s/ James L. Dolan Chief Executive Officer and Director March 30, 1999 - - ------------------------- (Principal Executive Officer) James L. Dolan /s/ William J. Bell Vice Chairman and Director March 30, 1999 - - ------------------------- (Principal Financial Officer) William J. Bell /s/ Andrew B. Rosengard Executive Vice President March 30, 1999 - - ------------------------- Financial Planning and Controller Andrew B. Rosengard (Principal Accounting Officer) (148) SIGNATURES (continued) /s/ Charles F. Dolan Chairman of the Board of Directors March 30, 1999 - - ------------------------- Charles F. Dolan /s/ Marc A. Lustgarten Vice Chairman and Director March 30, 1999 - - ------------------------- Marc A. Lustgarten /s/ Robert S. Lemle Executive Vice President, General March 30, 1999 - - ------------------------- Counsel, Secretary and Director Robert S. Lemle /s/ Sheila A. Mahony Senior Vice President and Director March 30, 1999 - - ------------------------- Sheila A. Mahony /s/ Thomas C. Dolan Senior Vice President and March 30, 1999 - - ------------------------- Chief Information Officer Thomas C. Dolan and Director /s/ John Tatta Director and Chairman of the March 30, 1999 - - ------------------------- Executive Committee John Tatta /s/ Patrick F. Dolan Director March 30, 1999 - - ------------------------- Patrick F. Dolan /s/ Charles D. Ferris Director March 30, 1999 - - ------------------------- Charles D. Ferris Director March 30, 1999 - - ------------------------- Richard H. Hochman /s/ Victor Oristano Director March 30, 1999 - - ------------------------- Victor Oristano Director March 30, 1999 - - ------------------------- Vincent Tese /s/ John C. Malone Director March 30, 1999 - - ------------------------- John C. Malone /s/ Leo J. Hindery, Jr. Director March 30, 1999 - - ------------------------- Leo J. Hindery, Jr. (149) INDEX TO EXHIBITS (continued) EXHIBIT NO. DESCRIPTION - - ------- ----------- 3.1 Amended and Restated Certificate of Incorporation of Cablevision Parent (incorporated herein by reference to Exhibit 3.1 to Cablevision Parent's Registration Statement on Form S-4, dated January 20, 1998, File No. 333-44547 (the "S-4")). 3.2 Bylaws of Cablevision Parent (incorporated herein by reference to Exhibit 3.2 to the S-4). 3.3 Certificate of Incorporation of CSC Holdings, Inc. (incorporated herein by reference to Exhibits 3.1A(i) and 3.1A(ii) to CSC Holdings' Annual Report on Form 10-K for the fiscal year ended December 31, 1989 (the "1989 10-K")). 3.4 Amendment to By-laws and complete copy of amended and restated By-laws of CSC Holdings, Inc. (incorporated herein by reference to Exhibit 3.2D to CSC Holdings' Registration Statement on Form S-4, File No. 33-62717). 4.1 Certificate of Designations for CSC Holdings' Series H Redeemable Exchangeable Preferred Stock (incorporated by reference to Exhibit 4.1E to CSC Holdings' Registration Statement on Form S-4, Registration No. 33-63691). 4.2 Certificate of Designations for CSC Holdings' Series I Cumulative Convertible Exchangeable Preferred Stock (incorporated by reference to Exhibit 99.3 to CSC Holdings' Current Report on Form 8-K (File No. 1-9046) filed November 7, 1995). 4.3 Certificate of Designations for CSC Holdings' Series M Redeemable Exchangeable Preferred Stock (incorporated by reference to Exhibit 4.1(f) to CSC Holdings' Registration Statement on Form S-4, Registration No. 333-00527). 4.4 Indenture dated as of December 1, 1997 relating to CSC Holdings' $500,000,000 7 7/8% Senior Notes due 2007 (incorporated herein by reference to Exhibit 4.4 to the S-4). 4.5 Indenture dated as of February 15, 1993 relating to CSC Holdings' $200,000,000 9 7/8% Senior Subordinated Debentures due February 15, 2013 (incorporated herein by reference to Exhibit 4.3 to the 1992 10-K). 4.6 Indenture dated as of April 1, 1993 relating to CSC Holdings' $150,000,000 9 7/8% Senior Subordinated Debentures due 2023 (incorporated by reference to CSC Holdings' Registration Statement on Form S-4, Registration No. 33-61814). 4.7 Supplemental Indenture dated as of November 1, 1995 between CSC Holdings and the Bank of New York, Trustee to the Indenture dated November 1, 1995 (incorporated by reference to Exhibit 99.6 to CSC Holdings' Current Report on Form 8-K (File No. 1-9046), filed November 1, 1995). (150) INDEX TO EXHIBITS (continued) EXHIBIT NO. DESCRIPTION - - ------- ----------- 4.8 Indenture dated August 15, 1997 relating to CSC Holdings' $400,000,000 8 1/8% Senior Debentures due 2009 (incorporated herein by reference to CSC Holdings' Registration Statement on Form S-4, Registration No. 333-38013). 4.9 Indenture dated as of November 1, 1995 relating to CSC Holdings' $150,000,000 9 7/8% Senior Subordinated Notes due 2006, $300,000,000 9 1/4% Senior Subordinated Notes due 2005 and $250,000,000 10 1/2% Senior Subordinated Debentures due 2016 (incorporated by reference to Exhibit 99.6 to CSC Holdings' Current Report on Form 8-K filed November 1, 1995). 4.10 Senior Indenture (incorporated by reference to Exhibit 4.1 to CSC Holdings' Registration Statement on Form S-3, Registration No. 333-57407). 4.11 Subordinated Indenture (incorporated by reference to Exhibit 4.2 to CSC Holdings' Registration Statement on Form S-3, Registration No. 333-57407). 10.1 Registration Rights Agreement between CSC Systems Company and CSC Holdings (incorporated herein by reference to Exhibit 10.1 of CSC Holdings' Registration Statement on Form S-1, Registration No. 033-01936 ("CSC Holdings' Form S-1")). 10.2 Registration Rights Agreement between Cablevision Company and CSC Holdings (incorporated herein by reference to Exhibit 10.2 to CSC Holdings' Form S-1). 10.3 Form of Right of First Refusal Agreement between Dolan and CSC Holdings (incorporated herein by reference to Exhibit 10.4 to CSC Holdings' Form S-1). 10.4 Supplemental Benefit Plan of CSC Holdings (incorporated herein by reference to Exhibit 10.7 to CSC Holdings' Form S-1). 10.5 Cablevision Money Purchase Pension Plan, and Trust Agreement dated as of December 1, 1983 between Cablevision Systems Development Company and Dolan and Tatta, as Trustees (incorporated herein by reference to Exhibit 10.8 to CSC Holdings' Form S-1). 10.6 Amendment to the Cablevision Money Purchase Pension Plan adopted November 6, 1992 (incorporated herein by reference to Exhibit 10.6A to the 1992 10-K). 10.7 Employment Agreement between Charles F. Dolan and CSC Holdings dated January 27, 1986 (incorporated herein by reference to Exhibit 10.9 to CSC Holdings' Form S-1). 10.8 Cablevision Amended and Restated Employee Stock Plan (incorporated herein by reference to Exhibit 10.46 to the 1992 10-K). (151) INDEX TO EXHIBITS (continued) EXHIBIT NO. DESCRIPTION - - ------- ----------- 10.9 Cablevision 401(k) Savings Plan (incorporated herein by reference to Exhibit 10.47 to the 1992 10-K). 10.10 Acquisition Agreement and Plan of Merger and Reorganization, dated as of June 14, 1994, among Cablevision of Boston Limited Partnership, Cablevision of Boston, Inc., Charles F. Dolan, Cablevision Systems Boston Corporation, CSC Holdings, COB, Inc., Cablevision Systems Services Corporation and Cablevision Finance Limited Partnership (incorporated herein by reference to Exhibit 10.59 to the June 1994 10-Q). 10.11 Agreement and undertaking, dated as of March 10, 1995 from MSG Holdings, LP, MSG Eden Corporation, CSC Holdings, Rainbow Programming Holdings, Inc., Rainbow Garden Corporation, Garden L.P. Holdings Corp., ITT Corporation, ITT Eden Corp. in favor of the National Basketball Association (the "NBA"), the member terms of the NBA, NBA Properties, Inc., the NBA Market Extension Partnership and Planet Insurance, Ltd. (incorporated herein by reference to Exhibit 10.66 to the 1994 10-K). 10.12 Consent Agreement, dated as of March 10, 1995 by and among the National Hockey League, MSG Holdings, L.P., MSG Eden Corporation, ITT Eden Corporation, ITT MSG Inc., ITT Corporation, Garden L.P. Holdings Corp., Rainbow Garden Corporation, Rainbow Programming Holdings Inc. and CSC Holdings (incorporated herein by reference to Exhibit 10.67 to the 1994 10-K). 10.13 Amendment to consulting agreement dated as of November 28, 1994 between CSC Holdings and John Tatta (incorporated herein by reference to Exhibit 10.68 to the 1994 10-K). 10.14 Employment Agreement, dated as of November 30, 1994, between CSC Holdings and William J. Bell (incorporated herein by reference to Exhibit 10.69 to the 1994 10-K). 10.15 Employment Agreement, dated as of November 30, 1994, between CSC Holdings and Marc A. Lustgarten (incorporated herein by reference to Exhibit 10.70 to the 1994 10-K). 10.16 Employment Agreement, dated as of November 30, 1994, between CSC Holdings and Robert S. Lemle (incorporated herein by reference to Exhibit 10.71 to the 1994 10-K). 10.17 Cablevision Parent Employee Stock Plan (incorporated herein by reference to Exhibit 10.40 to the S-4). 10.18 Cablevision Parent Long-Term Incentive Plan (incorporated herein by reference to Exhibit 10.41 to the S-4). (152) INDEX TO EXHIBITS (continued) EXHIBIT NO. DESCRIPTION - - ------- ----------- 10.19 Cablevision Systems Corporation 1996 Non-Employee Directors Stock Option Plan (incorporated by reference to CSC Holdings' 1996 Definitive Proxy Statement). 10.20 Agreement, dated February 4, 1996, among CSC Holdings, Rainbow Programming Holdings, Inc. and ITT Corporation (incorporated herein by reference to Exhibit 10.74 to the September 1996 10-Q). 10.21 Master Stock Purchase Agreement, dated as of May 10, 1996, between Warburg Pincus Investors, L.P., a Delaware limited partnership, and CSC Holdings (incorporated by reference to Exhibit 99 to CSC Holdings' Current Report on Form 8-K (File No. 1-9046) dated May 10, 1996). 10.22 Letter, dated March 6, 1997, among ITT MSG Inc., ITT Eden Corp., Rainbow Garden Corp. and Garden L.P. Holding Corp. (incorporated by reference to Exhibit 99.2 of CSC Holdings' Current Report on Form 8-K (File No. 1-9046) dated March 6, 1997). 10.23 Letter, dated November 25, 1997, from CSC Holdings to Charles F. Dolan (incorporated herein by reference to Exhibit 10.49 to the S-4). 10.24 Form of Guarantee and Indemnification Agreement among Charles F. Dolan, the Registrant and officers and directors of the Registrant (incorporated herein by reference to Exhibit 28 to CSC Holdings' Form S-1). 10.25 Partnership Interest Transfer Agreement, among ITT Corporation, ITT Eden Corporation, ITT MSG, Inc., CSC Holdings, Rainbow Media Holdings, Inc., Rainbow Garden Corp., Garden L.P. Holding Corp., MSG Eden Corporation and Madison Square Garden, L.P., dated as of April 15, 1997. (incorporated by reference to Exhibit 2(a) of CSC Holdings' Current Report on Form 8-K (File No. 1-9046) dated April 18, 1997 (the "April 1997 8-K")). 10.26 Amendment No. 1 to Partnership Interest Transfer Agreement, dated as of March 16, 1999. 10.27 Amended and Restated Agreement of Limited Partnership of Madison Square Garden, L.P., among MSG Eden Corporation, ITT MSG Inc. and Garden L.P. Holding Corp., dated as of April 15, 1997. (incorporated by reference to Exhibit 2(b) of the April 1997 8-K). 10.28 SportsChannel Contribution Agreement, among Rainbow Media Holdings, Inc., Garden L.P. Holding Corp., Rainbow Garden Corp., SportsChannel New York Holding Partnership, SportsChannel Associates Holding Corporation, MSG Eden Corporation, ITT MSG Inc., ITT Eden Corporation, and Madison Square Garden, L.P., dated as of April 15, 1997. (incorporated by reference to Exhibit 2(c) of the April 1997 8-K). (153) INDEX TO EXHIBITS (continued) EXHIBIT NO. DESCRIPTION - - ------- ----------- 10.29 Aircraft Contribution Agreement, among Garden L.P. Holding Corp., MSG Eden Corporation, ITT MSG Inc., ITT Flight Operations, Inc., and Madison Square Garden, L.P., dated as of April 15, 1997. (incorporated by reference to Exhibit 2(d) of the April 1997 8-K). 10.30 Formation Agreement, dated as of June 22, 1997, among Rainbow Media Sports Holdings, Inc. and Fox Sports Net, LLC, attaching Partners) and Annex B (Partnership Agreement of National Sports Partners). (incorporated by reference to Exhibit 99.1 of the April 1997 8-K). 10.31 Lease Agreement between Nassau Cable Business Trust, as Landlord and CSC Holdings, as Tenant, dated as of November 1, 1997 (incorporated herein by reference to Exhibit 10.56 to the S-4). 10.32 Letter Agreement and Term Sheet, dated October 2, 1997 among CSC Holdings, At Home Corporation ("At Home"), Comcast Corporation, Cox Enterprises, Inc., Kleiner, Perkins, Caufield & Byers and Tele-Communications, Inc., as amended October 10, 1997 (incorporated by reference to Exhibit 10.01 of the Current Report on Form 8-K filed by At Home (File No. 000-22697) on October 22, 1997 (the "At Home October 8-K")). 10.33 Warrant to purchase shares of Series A Common Stock of At Home issued to CSC Holdings (incorporated by reference to Exhibit 10.03 of the At Home October 8-K). 10.34 Contingent Warrant to purchase shares of Series A Common Stock of At Home issued to CSC Holdings (incorporated by reference to Exhibit 10.04 of the At Home October 8-K). 10.35 Warrant Purchase Agreement, dated October 10, 1997, between At Home and CSC Holdings (incorporated by reference to Exhibit 10.02 of the At Home October 8-K). 10.36 Amended and Restated Stockholders Agreement, dated August 1, 1996, as amended in May, 1997 (incorporated by reference to Exhibit 4.04 of the Registration Statement on Form S-1 of At Home (File No. 333-27323) (the "At Home S-1")). 10.37 Letter Agreement dated May 15, 1997 among At Home and the parties thereto, including as exhibits the Master Distribution Agreement Term Sheet and the Term Sheet for Form of LCO Agreement (incorporated by reference to Exhibit 10.20 of the At Home S-1). 10.38 Credit Agreement, dated as of June 6, 1997, among Madison Square Garden, L.P., the several lenders from time to time parties thereto, the Chase Manhattan Bank, as Administrative Agent, Toronto Dominion (New York), Inc., as Documentation Agent, and The Bank of Nova Scotia, as Syndication Agent (incorporated herein by reference to Exhibit 10.63 to the S-4). (154) INDEX TO EXHIBITS (continued) EXHIBIT NO. DESCRIPTION - - ------- ----------- 10.39 Asset Purchase Agreement, dated as of August 29, 1997, by and among U.S. Cable Television Group, L.P., ECC Holding Corporation, Missouri Cable Partners, L.P., CSC Holdings and Mediacom LLC (incorporated herein by reference to Exhibit 10.64 to the S-4). 10.40 Loan Agreement, dated as of April 2, 1997, among Rainbow Media Holdings, Inc., the Guarantors, Canadian Imperial Bank of Commerce, and Toronto Dominion (Texas), Inc. as Arranging Agents and Documentation Agents, Canadian Imperial Bank of Commerce, as Syndication Agent, Toronto Dominion (Texas), Inc., as Administrative Agent and the other Credit Parties thereto (incorporated by reference to Exhibit 10.77 of CSC Holdings' Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1997). 10.41 First Amendment, dated November 5, 1997 to the Credit Agreement, dated as of June 6, 1997, among Madison Square Garden, L.P., the several lenders from time to time parties thereto, the Chase Manhattan Bank, as Administrative Agent, Toronto Dominion (New York), Inc., as Documentation Agent, and The Bank of Nova Scotia, as Syndication Agent (incorporated herein by reference to Exhibit 10.66 to the S-4). 10.42 Second Amendment, dated December 10, 1997, to the Credit Agreement, dated as of June 6, 1997, among Madison Square Garden, L.P., the several lenders from time to time parties thereto, the Chase Manhattan Bank, as Administrative Agent, Toronto Dominion (New York), Inc., as Documentation Agent, and The Bank of Nova Scotia, as Syndication Agent (incorporated herein by reference to Exhibit 10.67 to the S-4). 10.43 Cablevision Parent Stock Option Plan for Non-Employee Directors (incorporated herein by reference to Exhibit 10.68 to the S-4). 10.44 Asset Purchase Agreement, dated as of January 29, 1998, between The Wiz, Inc. and each of its subsidiaries and affiliates listed on the signature pages thereto and Cablevision Electronics Investments, Inc. (incorporated by reference to Exhibit 99.1 of CSC Holdings' report on Form 8-K (file no. 1-9046) dated February 5, 1998. 10.45 Amended and Restated Contribution and Merger Agreement, dated as of June 6, 1997, among Cablevision Parent, CSC Holdings, CSC Merger Corporation and TCI Communications, Inc. (incorporated herein by reference to Exhibit 2.1 to the S-4). 10.46 Stockholders Agreement, dated as of March 4, 1998, by and among CSC Holdings, Tele-Communications, Inc., a Delaware corporation, the Class B Entities (as defined in the Stockholders Agreement) and the Investors (as defined in the Stockholders Agreement) (incorporated herein by reference to Exhibit 4.1 to CSC Holdings' Current Report on Form 8-K (File No. 1-9046) dated March 4, 1998). (155) INDEX TO EXHIBITS (continued) EXHIBIT NO. DESCRIPTION - - ------- ----------- 10.47 Sixth Amended and Restated Credit Agreement, dated as of May 28, 1998, among CSC Holdings, Inc., the Restricted Subsidiaries which are parties thereto, the lenders which are parties thereto (the "Banks"). Toronto Dominion (Texas), Inc., as Arranging Agent and as Administrative Agent, The Bank of New York, The Bank of Nova Scotia, The Canadian Imperial Bank of Commerce, NationsBank, N.A., and The Chase Manhattan Bank, as Managing Agents, Bank of Montreal, Chicago Branch, Barclays Bank, PLC, Fleet Bank, N.A., and Royal Bank of Canada, as agents, Banque Paribas, Credit Lyonnais, BankBoston, N.A., The First National Bank of Chicago, Mellon Bank, N.A. and Societe Generale, New York Branch, as Co-Agents, and The Canadian Imperial Bank of Commerce, The Chase Manhattan Bank and NationsBank, N.A., as Co-Syndication Agents. 10.48 First Amended and Restated Credit Agreement, dated as of May 28, 1998, among Cablevision MFR, Inc. ("MFR"), CSC Holdings, Inc., the Guarantors which are parties thereto, the lenders which are parties thereto (the "Banks"), Toronto Dominion (Texas), Inc., as Arranging Agent and as Administrative Agent, The Bank of New York, The Bank of Nova Scotia, The Canadian Imperial Bank of Commerce, NationsBank, N.A., and The Chase Manhattan Bank, as Managing Agents, Bank of Montreal, Chicago Branch, Barclays Bank, PLC, Fleet Bank, N.A., and Royal Bank of Canada, as Agents, Banque Paribas, Credit Lyonnais, BankBoston, N.A., The First National Bank of Chicago, Mellon Bank, N.A. and Societe Generale, New York Branch, as Co-Agents, and The Bank of New York and The Bank of Nova Scotia as Co Syndication Agents. 10.49 First Amended and Restated Credit Agreement, dated as of May 28, 1998 among CSC TKR, Inc. Cablevision of Brookhaven, Inc., Cablevision of Oakland, Inc. Cablevision of Paterson, Inc. CSC TKR I, Inc. and UA-Columbia Cablevision of Westchester, Inc., the lenders which are parties thereto, Toronto Dominion (Texas), Inc., as Arranging Agent and as Administrative Agent, The Bank of New York, The Bank of Nova Scotia, The Canadian Imperial Bank of Commerce, NationsBank, N.A. and The Chase Manhattan Bank, as Managing Agents, the Bank of Montreal, Chicago Branch, Barclays Bank PLC, Fleet Bank, N.A. and the Royal Bank of Canada, as Agents, and Banque Paribas, Credit Lyonnais, BankBoston, N.A., The First National Bank of Chicago, Mellon Bank, N.A. and Societe Generale, New York Branch, as Co-Agents. 10.50 Agreement and Plan of Merger, dated as of August 12, 1998 among Cablevision Parent, CCG Holdings, Inc. and Clearview Cinema Group, Inc. (incorporated herein by reference to Exhibit 10.1 of Cablevision Parent's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1998). (156) INDEX TO EXHIBITS (continued) EXHIBIT NO. DESCRIPTION - - ------- ----------- 10.51 Stockholders Agreement, dated as of August 12, 1998 between Cablevision Parent and the stockholders of Clearview Cinema Group, Inc. party thereto (incorporated herein by reference to Exhibit 10.1 of Cablevision Parent's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1998). 21 Subsidiaries of the Registrants. 23.1 Consent of Independent Auditors. 23.2 Consent of Independent Auditors. 27 Financial Data Schedule - CSC Holdings, Inc. and Subsidiaries. 27.1 Financial Data Schedule - Cablevision Systems Corporation and Subsidiaries. EX-10.26 2 AMEND. NO.1 TO PARTNERSHIP AGREEMENT [Execution Copy] AMENDMENT NO. 1 TO PARTNERSHIP INTEREST TRANSFER AGREEMENT This is AMENDMENT NO. 1, dated as of March __, 1999, to the PARTNERSHIP INTEREST TRANSFER AGREEMENT dated as of April 15, 1997 (the "Agreement"), and is among Starwood Hotels and Resorts Worldwide, Inc., a Maryland corporation ("Starwood"), ITT Corporation, a Nevada corporation ("ITT"), ITT Eden Corporation, a Delaware corporation ("ITTE"), ITT MSG Inc., a Delaware corporation ("ITT MSG"), Cablevision Systems Corporation, a Delaware corporation ("Cablevision"), Rainbow Media Holdings, Inc., a Delaware corporation ("RMHI"), Rainbow Garden Corp., a Delaware corporation ("RGC"), Garden L.P. Holding Corp., a Delaware corporation ("GHC"), MSG Eden Corporation, a Delaware corporation ("MSGE"), and Madison Square Garden, L.P., a Delaware limited partnership ("MSG") (this "Amendment"). Starwood, ITT, ITTE and ITT MSG are referred to herein collectively as the "Starwood Entities", and Cablevision, RMHI, RGC, GHC, MSGE and MSG are referred to herein collectively as the "Cablevision Entities". Capitalized terms used in this Amendment and not otherwise defined herein shall have them meaning assigned thereto in the Agreement. WHEREAS, ITT, ITTE, ITT MSG, Cablevision, RMHI, RGC, GHC, MSGE and MSG are parties to the Agreement; WHEREAS, pursuant to Section 2.03 of the Agreement, ITT MSG exercised the First Put Option and MSG redeemed the Second Transferred Interest for the First Put Purchase Price on June 17, 1998; WHEREAS, the parties to the Agreement desire to amend the Agreement to provide for (a) the acceleration of the Second Put Option and (b) the revision of the Second Put Purchase Price, and to acknowledge and agree to the release, waiver and discharge of Claims (as defined in the Releases attached as Exhibits A and B hereto); NOW, THEREFORE, in consideration of the premises and representations, warranties, covenants and agreements set forth herein, the parties hereto hereby agree as follows: SECTION 1. Amendment to Section 2.04 of the Agreement. Section 2.04 of the Agreement is hereby amended in its entirety as follows: SECTION 2.04. Purchase of Remaining MSG ITT Interest. (a) In addition to the First Put Option and upon the terms and subject to the conditions set forth in this Agreement, ITT MSG shall have the option (the "Second Put Option"; each of the First Put Option and Second Put Option may be hereinafter referred to as a "Put Option") to require Cablevision to purchase, or, at the election of Cablevision, MSG to redeem, the balance of the remaining ITT MSG Interest such that immediately following such transfer or redemption, ITT MSG does not beneficially own an ITT MSG Interest (the ITT MSG Interest so transferred or redeemed hereunder is referred to as the "Third Transferred Interest"), on the Second Put Cash Closing Date for a purchase price of $87 million in cash (such purchase price, the "Second Put Purchase Price"; each of the First Put Purchase Price and the Second Put Purchase Price may be hereinafter referred to as a "Put Purchase Price"). If ITT MSG exercises the Second Put Option, Cablevision shall purchase, or, at the election of Cablevision, cause MSG to redeem, the Third Transferred Interest pursuant to the terms of this Agreement. (b) Manner of Exercise of the Second Put Option. ITT MSG's execution and delivery of Amendment No. 1 to this Agreement shall be deemed to be the exercise of the Second Put Option for all purposes of this Agreement and such exercise shall be irrevocable. (c) Cablevision Obligation. Cablevision acknowledges and agrees that the obligation to pay the Second Put Purchase Price upon the exercise by ITT MSG of the Second Put Option is and shall remain an obligation of Cablevision, whether or not Cablevision elects to have MSG pay such Second Put Purchase Price or has the ability to control MSG. SECTION 2. Amendment to Section 2.05(b) of the Agreement. Section 2.05(b) of the Agreement is hereby -2- amended in its entirety as follows: (b) The closing of the Second Put Option (the "Second Put Cash Closing") shall be held at the offices of Sullivan & Cromwell, 125 Broad Street, New York, New York at 10:00 a.m., New York City time, as soon as practicable after the conditions to the Second Put Cash Closing set forth in Section 3 of Amendment No. 1 to this Agreement dated as of March __, 1999 have been satisfied or waived. The date on which the Second Put Cash Closing shall occur is hereinafter referred to as the "Second Put Cash Closing Date". At the Second Put Cash Closing (i) Cablevision shall deliver, or cause to be delivered by MSG, to ITT MSG, by wire transfer to a bank account designated by ITT MSG at least two business days prior to the Second Put Cash Closing Date, immediately available funds in an amount equal to the Second Put Purchase Price and (ii) ITT MSG shall deliver to Cablevision or MSG, as the case may be, a Bill of Sale and Assignment of Partnership Interest in the form of Exhibit A to effect delivery of title to the Third Transferred Interest. SECTION 3. Exercise of Second Put Option; Conditions. (a) On the date of this Amendment and by the execution hereof by ITT MSG, ITT MSG shall be deemed to have irrevocably exercised the Second Put Option and the parties hereto agree that such deemed exercise of the Second Put Option shall be effective for all purposes of the Agreement. (b) Conditions to the Obligations of Cablevision Entities. The obligations of each of the Cablevision Entities to consummate the Second Put Cash Closing are subject to the satisfaction (or waiver by the Cablevision Entities) as of the time of the Second Put Cash Closing of the following conditions: (i) The representations and warranties of each of ITTE and ITT MSG made in the Agreement shall be true and correct, as of the date of the Second Put Cash Closing as though made as of such time, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct on and as of such earlier date). ITTE and ITT MSG shall have -3- performed or complied in all material respects with all obligations and covenants required by the Agreement to be performed or complied with by each of them by the time of the Second Put Cash Closing. ITT MSG shall have delivered to Cablevision a certificate dated the Second Put Cash Closing Date and signed by an authorized officer of ITT MSG confirming the foregoing. (ii) MSG shall have received an opinion dated the Second Put Cash Closing Date of the general counsel or an officer responsible for legal affairs of Starwood in form and substance reasonably satisfactory to Cablevision. (iii) No statute, rule, regulation, executive order, decree, temporary restraining order, preliminary or permanent injunction or other order enacted, entered, promulgated, enforced or issued by any Governmental Entity or other legal restraint or prohibition shall be in force and have the effect of preventing the consummation of the transactions contemplated to occur at the Second Put Cash Closing. (iv) Any waiting period under the HSR Act applicable to the transactions contemplated to occur at the Second Put Cash Closing shall have expired or been terminated. (v) All necessary approvals from the NBA and the NHL in accordance with the League Rules to enable the Cablevision Entities to consummate the transactions contemplated to occur at the Second Put Cash Closing shall have been received and such approvals shall be in effect. (vi) The Release, in the form attached as Exhibit A to this Amendment, shall be executed and delivered by each of the Starwood Entities. (c) Conditions to the Obligations of Starwood Entities. The obligations of each of the Starwood Entities to consummate the Second Put Cash Closing are subject to the satisfaction (or waiver by the Starwood Entities) as of the -4- time of the Second Put Cash Closing of the following conditions: (i) The representations and warranties of Cablevision, RGC, GHC and MSG made in the Agreement shall be true and correct, as of the date of the Second Put Cash Closing as though made as of such time, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct on and as of such earlier date). Cablevision, RGC, GHC and MSG shall have performed or complied in all material respects with all obligations and covenants required by the Agreement to be performed or complied with by each of them by the time of the Second Put Cash Closing. Cablevision shall have delivered to ITT MSG a certificate dated such Closing Date and signed by an authorized officer of Cablevision confirming the foregoing. (ii) ITT MSG shall have received an opinion dated the Second Put Cash Closing Date of the general counsel of MSG, in form and substance reasonably satisfactory to ITT MSG. (iii) No statute, rule, regulation, executive order, decree, temporary restraining order, preliminary or permanent injunction or other order enacted, entered, promulgated, enforced or issued by any Governmental Entity or other legal restraint or prohibition shall be in force and have the effect of preventing the consummation of the transactions contemplated to occur at the Second Put Cash Closing. (iv) Any waiting period under the HSR Act applicable to the transactions contemplated to occur at the Second Put Cash Closing shall have expired or been terminated. (v) All necessary approvals from the NBA and the NHL in accordance with the League Rules to enable the Cablevision Entities to consummate all the transactions contemplated to occur at the Second Put Cash Closing shall have been received -5- and such approvals shall be in effect. (vi) The Release, in the form attached as Exhibit B to this Amendment, shall be executed and delivered by each of the Cablevision Entities. SECTION 4. General Waiver and Release. On the Second Put Cash Closing Date, the parties hereto shall execute and deliver the Releases, in the forms attached as Exhibits A and B to this Amendment. The Releases shall be effective on the Second Put Cash Closing Date. SECTION 5. Representations and Warranties; Other Agreements. (i) Each Releasor (as defined in the applicable Release) hereby represents and warrants that it is the sole and lawful owner of all right, title and interest in and to every Claim (as defined in the applicable Release) which such Releasor has agreed to release pursuant to the applicable Release. Each Releasor represents and warrants that it has not assigned or transferred or purported to assign or transfer, and agrees that it will not assign or transfer, or purport to assign or transfer, to any person, any Claims released therein. Each Releasor shall indemnify, defend and hold harmless the Releasees (as defined in the applicable Release), and each of them, from and against any Claims based upon or arising in connection with any such assignment or transfer. Each Releasor represents that it has not filed any Claims in any jurisdiction against any Releasees regarding or relating to the matters released through the applicable Release. (ii) Each of ITTE and ITT MSG hereby represents and warrants to Cablevision, RGC and GHC that the representations and warranties of each of ITTE and ITT MSG made in the Agreement are true and correct as of the date hereof as though made as of the date hereof, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct on and as of such earlier date). Each of Cablevision, RGC and GHC hereby represents and warrants to ITTE and ITT MSG that the representations and warranties of each of Cablevision, RGC and GHC made in the Agreement are true and correct as of the date hereof as though made as of the date hereof, except to the extent such representations and warranties expressly -6- relate to an earlier date (in which case such representations and warranties shall be true and correct on and as of such earlier date). SECTION 6. Assignment. This Amendment, the Releases and the rights and obligations hereunder and thereunder shall not be assignable by any of the parties hereto without the prior written consent of Cablevision and Starwood. SECTION 7. Successors and Assigns; No Third-Party Beneficiaries. This Amendment and the Releases shall be binding on the parties hereto and their respective permitted successors and permitted assigns. This Amendment and the Releases are for the sole benefit of the parties hereto and thereto and their permitted assigns and nothing herein or therein expressed or implied shall give or be construed to give to any person, other than the parties hereto and thereto and such assigns and the persons released and discharged pursuant to the Releases, any legal or equitable rights hereunder and thereunder. SECTION 8. Amendments. No amendment, modification or waiver in respect of this Amendment or the Releases shall be effective unless it shall be in writing and signed by the party against which it is enforced. SECTION 9. Notices. All notices or other communications required or permitted to be given hereunder or under the Releases shall be in writing and shall be deemed to have been duly given (i) on the date of delivery if delivered personally, or by telecopy or telefacsimile, upon confirmation of receipt, (ii) on the second business day following the date of dispatch if delivered by Federal Express or other nationally reputable next-day courier service or (iii) on the third business day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder or under the Releases shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice, as follows: (i) if to Cablevision, RMHI, RGC, GHC or MSG, Cablevision Systems Corporation 1111 Stewart Avenue -7- Bethpage, New York 11714 Telefacsimile: (516) 803-1190 Attention: Robert S. Lemle, Esq. with a copy to: Sullivan & Cromwell 125 Broad Street New York, New York 10004 Telefacsimile: (212) 558-3588 Attention: John P. Mead, Esq.; and (ii) if to Starwood, ITT, ITTE or ITT MSG, Starwood Hotels & Resorts Worldwide, Inc. 777 Westchester Avenue White Plains, NY 10604 Telefacsimile: (914) 640-8250 Attention: Thomas C. Janson, Jr. with a copy to: Cravath, Swaine & Moore 825 Eighth Avenue New York, NY 10019 Telefacsimile: (212) 474-3700 Attention: George W. Bilicic, Jr., Esq. SECTION 10. Confidentiality. Except as may be necessary to enforce the provisions of the Agreement, no party hereto shall hereafter issue any press release or make any other public statement, filing or report that includes information with respect to the Agreement or the transactions contemplated thereby without submitting such release, statement, filing or report to the other parties sufficiently in advance of its issuance to afford the other parties a reasonable opportunity to review and comment thereon. The parties will consult with each other in good faith with respect to the need for and substance of any such release, statement, filing or report, the timing of its issuance and the means and extent of its dissemination. If -8- a party determines to make public disclosure of information that is subject to this Section 10, it shall coordinate the contents and timing of its disclosure with the other parties, and the parties shall make such disclosure jointly wherever convenient or appropriate. SECTION 11. Specific Performance. In the event of any actual or threatened default in, or breach of, any of the terms, covenants, conditions and provisions of this Amendment, the party or parties who are or are to be thereby adversely affected, in addition to any and all other rights and remedies at law or in equity, shall have the right of specific performance and injunctive relief giving effect to its or their rights under this Amendment and all such rights and remedies shall be cumulative. The parties agree that the remedies at law for any breach or threatened breach, including monetary damages, are inadequate compensation for any loss, that the adversely affected party or parties shall be entitled to obtain specific performance and injunctive relief without the necessity or proving irreparable injury or posting bond or other security, and that any defense in any action for specific performance or injunctive relief that a remedy at law would be adequate is waived. SECTION 12. Counterparts. This Amendment may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to the other parties. SECTION 13. Consent to Jurisdiction. Each of the parties hereto irrevocably submits to the exclusive jurisdiction of (a) the Supreme Court of the State of New York, New York County, and (b) the United States District Court for the Southern District of New York, for the purposes of any suit, action or other proceeding arising out of this Amendment and the Release or any transaction contemplated hereby or thereby. Each of the parties hereto and to the Release agrees to commence any action, suit or proceeding relating hereto either in the United States District Court for the Southern District of New York or if such suit, action or other proceeding may not be brought in such court for jurisdictional reasons, in the Supreme Court of the State of New York, New York County. Each of the parties hereto and to the Release further agrees that service of any process, summons, notice or document by U.S. -9- registered mail to such party's respective address set forth above shall be effective service of process for any action, suit or proceeding in New York with respect to any matters to which it has submitted to jurisdiction in this Section 11. Each of the parties hereto and to the Release irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Amendment and the Release or the transactions contemplated hereby or thereby in (i) the Supreme Court of the State of New York, New York County, or (ii) the United States District Court for the Southern District of New York, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. SECTION 14. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE AND WITHOUT REGARD TO ANY PRINCIPLES OF CONFLICTS OF LAWS. -10- IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed as of the date first written above. STARWOOD HOTELS AND RESORTS WORLDWIDE, INC. By: -------------------------------- Name: Title: ITT CORPORATION By: -------------------------------- Name: Title: ITT EDEN CORPORATION By: -------------------------------- Name: Title: ITT MSG INC. By: -------------------------------- Name: Title: CABLEVISION SYSTEMS CORPORATION By: -------------------------------- Name: Title: RAINBOW MEDIA HOLDINGS, INC. By: -------------------------------- Name: Title: RAINBOW GARDEN CORP. By: -------------------------------- Name: Title: -11- GARDEN L.P. HOLDING CORP. By: -------------------------------- Name: Title: MSG EDEN CORPORATION By: -------------------------------- Name: Title: MADISON SQUARE GARDEN, L.P., By: MSG Eden Corporation, as general partner By: -------------------------------- Name: Title: -12- EX-10.47 3 SIXTH AMENDED AND RESTATED CREDIT AGREEMENT EXECUTION COPY - - -------------------------------------------------------------------------------- CSC HOLDINGS, INC. ------------------------- $1,400,000,000 SIXTH AMENDED AND RESTATED CREDIT AGREEMENT Dated as of May 28, 1998 TORONTO DOMINION (TEXAS), INC. as Arranging Agent and as Administrative Agent THE BANK OF NEW YORK THE BANK OF NOVA SCOTIA THE CANADIAN IMPERIAL BANK OF COMMERCE NATIONSBANK, N.A. THE CHASE MANHATTAN BANK as Managing Agents BANK OF MONTREAL, CHICAGO BRANCH BARCLAYS BANK PLC FLEET BANK, N.A. ROYAL BANK OF CANADA as Agents BANQUE PARIBAS CREDIT LYONNAIS BANKBOSTON, N.A. THE FIRST NATIONAL BANK OF CHICAGO MELLON BANK, N.A. SOCIETE GENERALE, NEW YORK BRANCH as Co-Agents THE CANADIAN IMPERIAL BANK OF COMMERCE THE CHASE MANHATTAN BANK NATIONSBANK, N.A. as Co-Syndication Agents - - -------------------------------------------------------------------------------- TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS AND ACCOUNTING MATTERS Section 1.01 Certain Defined Terms..........................................2 Section 1.02 Accounting Terms and Determinations...........................22 ARTICLE II LOANS AND LETTERS OF CREDIT Section 2.01 Loans.........................................................22 Section 2.02 Manner of Borrowing; Conversion and Continuation..............22 Section 2.03 Letters of Credit.............................................24 Section 2.04 Reductions and Changes of Commitments.........................26 Section 2.05 Commitment Fees...............................................28 Section 2.06 Notes.........................................................28 Section 2.07 Lending Offices...............................................29 Section 2.08 Several Obligations; Remedies Independent....................29 Section 2.09 Use of Proceeds...............................................29 ARTICLE III PAYMENTS OF PRINCIPAL AND INTEREST Section 3.01 Prepayments...................................................29 Section 3.02 Repayment of Loans............................................30 Section 3.03 Interest......................................................30 ARTICLE IV PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC. Section 4.01 Payments......................................................31 Section 4.02 Pro Rata Treatment............................................32 Section 4.03 Computations..................................................32 Section 4.04 Non-Receipt of Funds by Administrative Agent..................32 Section 4.05 Sharing of Payments, Etc......................................32 i Section 4.06 Commercial Practices in Respect of Letters of Credit..........33 Section 4.07 No Reductions.................................................34 Section 4.08 Taxes.........................................................34 ARTICLE V YIELD PROTECTION AND ILLEGALITY Section 5.01 Additional Costs in Respect of Loans..........................35 Section 5.02 Limitation on Types of Loans..................................37 Section 5.03 Illegality....................................................37 Section 5.04 Certain Conversions of Loans Pursuant to Section 5.01 or 5.03.37 Section 5.05 Compensation..................................................37 Section 5.06 Additional Costs in Respect of Letters of Credit..............38 Section 5.07 Replacement of Banks..........................................38 ARTICLE VI GUARANTEE................................39 ARTICLE VII CONDITIONS PRECEDENT Section 7.01 Initial Loan or Syndicated Letter of Credit...................41 Section 7.02 Each Loan and Letter of Credit................................43 ARTICLE VIII REPRESENTATIONS Section 8.01 Existence and Power...........................................43 Section 8.02 Subsidiaries and Affiliates...................................43 Section 8.03 Authority; No Conflict........................................44 Section 8.04 Financial Condition...........................................44 Section 8.05 Litigation, Etc...............................................45 Section 8.06 Titles and Liens..............................................45 Section 8.07 Regulation U..................................................45 Section 8.08 Taxes.........................................................46 Section 8.09 Other Credit Agreements.......................................46 Section 8.10 Full Disclosure...............................................46 ii Section 8.11 No Default....................................................46 Section 8.12 Approval of Regulatory Authorities............................46 Section 8.13 Binding Agreements............................................47 Section 8.14 Franchises....................................................47 Section 8.15 Collective Bargaining Agreements..............................47 Section 8.16 Investments...................................................47 ARTICLE IX PARTICULAR COVENANTS OF THE COMPANY AND THE RESTRICTED SUBSIDIARIES Section 9.01 Financial Statements and Other Information....................47 Section 9.02 Taxes and Claims..............................................49 Section 9.03 Insurance.....................................................50 Section 9.04 Maintenance of Existence; Conduct of Business.................50 Section 9.05 Maintenance of and Access to Properties.......................50 Section 9.06 Compliance with Applicable Laws...............................50 Section 9.07 Litigation....................................................50 Section 9.08 Subsidiaries..................................................50 Section 9.09 Franchises....................................................51 Section 9.10 Interest Selection; Interest Swap Agreements..................51 Section 9.11 Indebtedness..................................................51 Section 9.12 Contingent Liabilities........................................52 Section 9.13 Liens.........................................................54 Section 9.14 Leases........................................................54 Section 9.15 Mergers, Acquisitions and Dispositions, Etc...................55 Section 9.16 Investments...................................................57 Section 9.17 Restricted Payments...........................................58 Section 9.18 Business......................................................58 Section 9.19 Transactions with Affiliates..................................59 Section 9.20 Amendments of Certain Instruments.............................59 Section 9.21 Issuance of Stock.............................................59 Section 9.22 Operating Cash Flow...........................................59 Section 9.23 Cash Flow Ratio...............................................60 Section 9.24 Certain Subsidiaries..........................................61 Section 9.25 Permitted Restricted Subsidiary Transactions..................61 iii ARTICLE X DEFAULTS Section 10.01 Events of Default.............................................61 Section 10.02 Cash Collateral Account.......................................64 ARTICLE XI THE ADMINISTRATIVE AGENT Section 11.01 Appointment, Powers and Immunities............................64 Section 11.02 Reliance by Administrative Agent..............................65 Section 11.03 Defaults......................................................65 Section 11.04 Rights as a Bank..............................................65 Section 11.05 Indemnification...............................................65 Section 11.06 Non-Reliance on Administrative Agent and Other Banks..........66 Section 11.07 Failure to Act................................................66 Section 11.08 Resignation or Removal of Administrative Agent................66 Section 11.09 Agency Fee....................................................67 ARTICLE XII MISCELLANEOUS Section 12.01 No Waiver.....................................................67 Section 12.02 Notices.......................................................67 Section 12.03 Expenses, Etc.................................................67 Section 12.04 Letter of Credit Indemnification..............................68 Section 12.05 Amendments, Etc...............................................68 Section 12.06 Successors and Assigns........................................69 Section 12.07 Survival......................................................72 Section 12.08 Senior Indebtedness...........................................73 Section 12.09 Conditions to Effectiveness; Assignment.......................73 Section 12.10 Liability of General Partners and Other Persons...............73 Section 12.11 Counterparts..................................................73 Section 12.12 Waiver........................................................73 Section 12.13 Entire Agreement..............................................73 Section 12.14 Governing Law.................................................74 Section 12.15 Captions, Etc.................................................74 Section 12.16 Acceptance of Release of Rights of Guarantors.................74 iv Section 12.17 Authorization of Third Parties to Deliver Information and Discuss Affairs...........................................74 Schedule 1.01(i) Adams-Russell Companies Schedule 1.01(ii) Franchise Holding Companies Schedule 1.01(iii) Guarantors Schedule 1.01(iv) Programming Companies Schedule 1.01(v) Restricted Subsidiaries Schedule 1.01(vi) Unrestricted Subsidiaries Schedule 2.02(a) Notice of Loans Schedule 2.02(c) Notice of Conversion or Continuation Schedule 2.07 Applicable Lending Offices Schedule 8.02 Affiliates Schedule 8.03 Required Consents and Regulatory Approvals Schedule 8.05 Existing Litigation Schedule 8.14 Existing Franchises Schedule 9.11 Existing Indebtedness Schedule 9.12 Existing Guarantees Schedule 9.13 Existing Liens Schedule 9.16 Existing Investments Schedule 9.17 Accretion Calculations for Series H and Series M Preferred Stock Schedule 12.02 Addresses for Notices EXHIBIT A Form of Note EXHIBIT B Form of Compliance Certificate EXHIBIT C Form of Subscribers' Certificate EXHIBIT D(1) Form of Certificate as to Quarterly Financial Statements EXHIBIT D(2) Form of Certificate as to Annual Financial Statements EXHIBIT E Form of Opinion of General Counsel to the Company and the Restricted Subsidiaries EXHIBIT F(1) Form of Opinion of Special New York Counsel to the Company and the Restricted Subsidiaries EXHIBIT F(2) Form of Opinion of Special New Jersey Counsel to the Company and the Restricted Subsidiaries EXHIBIT F(3) Form of Opinion of Special FCC Counsel to the Company and the Restricted Subsidiaries EXHIBIT G Form of Opinion of Special New York Counsel to the Administrative Agent EXHIBIT H Form of Assignment and Acceptance Agreement v SIXTH AMENDED AND RESTATED CREDIT AGREEMENT dated as of May 28, 1998 among CSC HOLDINGS, INC. (formerly known as Cablevision Systems Corporation), a Delaware corporation (the "Company"), the Restricted Subsidiaries (as defined below) which are parties hereto, the Lenders which are parties hereto, together with their respective successors and assigns (the "Banks"), and TORONTO DOMINION (TEXAS), INC., as Arranging Agent and as Administrative Agent, THE BANK OF NEW YORK, THE BANK OF NOVA SCOTIA, THE CANADIAN IMPERIAL BANK OF COMMERCE, NATIONSBANK, N.A. and THE CHASE MANHATTAN BANK, as Managing Agents, BANK OF MONTREAL, CHICAGO BRANCH, BARCLAYS BANK, PLC, FLEET BANK, N.A., and ROYAL BANK OF CANADA, as Agents, BANQUE PARIBAS, CREDIT LYONNAIS, BANKBOSTON, N.A., THE FIRST NATIONAL BANK OF CHICAGO, MELLON BANK, N.A. AND SOCIETE GENERALE, NEW YORK BRANCH as Co-Agents and THE CANADIAN IMPERIAL BANK OF COMMERCE, THE CHASE MANHATTAN BANK and NATIONSBANK, N.A. as Co-Syndication Agents. WHEREAS, on September 5, 1996, the Company, certain of its subsidiaries named therein, the several banks whose names are set forth on the signature pages thereto, and Toronto Dominion (Texas), Inc., as Arranging Agent and as Administrative Agent, The Bank of New York, The Bank of Nova Scotia, The Canadian Imperial Bank of Commerce, NationsBank of Texas, N.A. and The Chase Manhattan Bank, as Agents, Bank of Montreal, Chicago Branch, Fleet Bank, N.A., Mellon Bank, N.A. and Royal Bank of Canada, as Co-Agents, The Bank of Nova Scotia and The Canadian Imperial Bank of Commerce, as Co-Syndication Agents, and The Bank of New York, as Documentation Agent, entered into a Fifth Amended and Restated Credit Agreement, as amended (such Fifth Amended and Restated Credit Agreement, as amended, being referred to herein as the "1996 Agreement"); WHEREAS, the Company and the Restricted Subsidiaries are engaged in the business of developing, constructing, owning, acquiring, altering, repairing, financing, operating, maintaining, publishing, distributing, promoting and otherwise exploiting cable television systems and related businesses, including, without limitation, telecommunications services, data transmission and telephony activities; and WHEREAS, the Banks have extended credit to the Company, by the making of loans to the Company and the issuance of letters of credit for the account of the Company; the Company and the Guarantors have requested that the Total Commitment (as defined in the 1996 Agreement) be increased; and the proceeds of the extensions of credit hereunder are to be employed in accordance with Section 2.09 hereof, and each of the Guarantors expects to derive benefit, directly or indirectly, from such loans and letters of credit. NOW, THEREFORE, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING MATTERS Section 1.01 Certain Defined Terms. As used herein, the following terms shall have the following meanings (all terms defined in this Article I or in other provisions of this Agreement in the singular to have the same meanings when used in the plural and vice versa): "1996 Agreement" shall have the meaning given to such term in the first "Whereas" clause of this Agreement. "1996 Banks" shall mean the "Banks" as defined in the 1996 Agreement. "Accumulated Funding Deficiency" shall mean an accumulated funding deficiency as defined in Section 302 of ERISA. "Adams-Russell Companies" shall mean, collectively, the Persons set forth on Schedule 1.01(i) hereto. "Additional Costs" shall have the meaning given to such term in Section 5.01 hereof. "Administrative Agent" shall mean Toronto Dominion (Texas), Inc. in its capacity as administrative agent for the Banks hereunder and its successors in such capacity. "Affected Loans" shall have the meaning given to such term in Section 5.04 hereof. "Affected Type" shall have the meaning given to such term in Section 5.04 hereof. "Affiliate" shall mean, as to any Person, any other Person which directly or indirectly controls, or is under common control with, or is controlled by, such Person. As used in this definition, "control" (including, with its correlative meanings, "controlled by" and "under common control with") shall mean possession, directly or indirectly, of the power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise), provided that, in any event, any Person which owns directly or indirectly 10% or more of the securities having ordinary voting power for the election of directors or other governing body of a corporation or 10% or more of the partnership or other ownership interests of any other Person (other than as a limited partner of such other Person) will be deemed to control such corporation or other Person; and provided further that no individual shall be an Affiliate of a corporation or partnership solely by reason of his or her being an officer, director or partner of such entity, except in the case of a partner if his or her interests in such partnership shall qualify him or her as an Affiliate. "Aggregate Commitment" shall mean, at any time, as to each Bank, the sum of such Bank's Commitment, CMFRI Commitment and New York/New Jersey Commitment at such time. 2 "Agreement" shall mean this Sixth Amended and Restated Credit Agreement, including all schedules and exhibits hereto, as the same may be amended, supplemented or modified from time to time. "Annualized Operating Cash Flow" shall mean, as at any date, an amount equal to Operating Cash Flow for the period of three complete consecutive calendar months ending on or most recently prior to such date, multiplied by four. "Applicable Lending Office" shall mean, with respect to each Bank, for each type of Loan, the lending office of such Bank (or of an affiliate of such Bank) designated for such type of Loan in Schedule 2.07 hereto or such other office of such Bank (or of an affiliate of such Bank) as such Bank may from time to time specify to the Administrative Agent and the Company as the office by which its Loans of such type are to be made and maintained. "Applicable Margin" shall mean: (a) With respect to Base Rate Loans, 0.250% at all times during any Applicable Period if the Cash Flow Ratio as at the end of the immediately preceding Quarter was greater than 6.00 to 1; 0.125% at all times during any Applicable Period if the Cash Flow Ratio as at the end of the immediately preceding Quarter was less than or equal to 6.00 to 1 and greater than 5.50 to 1; and 0.000% at all times during any Applicable Period if the Cash Flow Ratio as at the end of the immediately preceding Quarter was less than or equal to 5.50 to 1; and (b) With respect to Eurodollar Loans, 1.125% at all times during any Applicable Period if the Cash Flow Ratio as at the end of the immediately preceding Quarter was greater than 6.00 to 1; 0.875% at all times during any Applicable Period if the Cash Flow Ratio as at the end of the immediately preceding Quarter was less than or equal to 6.00 to 1 and greater than 5.50 to 1; 0.750% at all times during any Applicable Period if the Cash Flow Ratio as at the end of the immediately preceding Quarter was less than or equal to 5.50 to 1 and greater than 5.00 to 1; 0.600% at all times during any Applicable Period if the Cash Flow Ratio as at the end of the immediately preceding Quarter was less than or equal to 5.00 to 1 and greater than 4.50 to 1; and 0.400% at all times during any Applicable Period if the Cash Flow Ratio as at the end of the immediately preceding Quarter was less than or equal to 4.50 to 1. For purposes of this definition, the Cash Flow Ratio as at the end of any Quarter (the "Subject Quarter") shall be determined based upon (i) for the Quarter ended immediately prior to the Effective Date, the Compliance Certificate delivered in accordance with Section 7.01, and (ii) for each Subject Quarter commencing thereafter, (x) the Annualized Operating Cash Flow (as set forth in the Subscribers' Certificate delivered pursuant to Section 9.01(e) with respect to the second month of such Subject Quarter and (y) the aggregate outstanding principal amount of Indebtedness of CSC, the Restricted Subsidiaries and the New York/New Jersey Companies (as calculated in accordance with the definition of Cash Flow Ratio) as of the last day of such Subject Quarter (as certified by the Company to the Administrative Agent at the time of the delivery of such Subscribers' Certificate). 3 As used in this definition, "Applicable Period" shall mean the period from and including (i)(a) in the case of the first Applicable Period, the Effective Date and (b) in the case of each subsequent Applicable Period, the first day after the immediately preceding Applicable Period to but excluding (ii) the fifth Business Day of the next July, October, January or April (whichever occurs first) to occur thereafter. "Assignment and Acceptance" shall have the meaning given to such term in Section 5.07 hereof. "Bank Letters of Credit" shall have the meaning given such term in Section 2.03(b) hereof. "Banks" shall have the meaning given to such term in the preamble to this Agreement. "Base Rate" shall mean, for any period, a fluctuating interest rate per annum as shall be in effect from time to time, which rate per annum shall at all times be equal to the higher of: (a) the rate of interest adopted by The Toronto-Dominion Bank (New York Branch), from time to time, as its reference rate for the determination of interest rates on loans of varying maturities in Dollars to United States residents of varying degrees of creditworthiness and being quoted at such time by The Toronto-Dominion Bank (New York Branch) as its "prime rate," which rate is not necessarily The Toronto-Dominion Bank's lowest rate of interest; and (b) the sum (adjusted to the nearest one-quarter of one percent (1/4 of 1%) or, if there is no nearest one-quarter of one percent (1/4 of 1%), to the next higher one-quarter of one percent (1/4 of 1%)) of (i) one-half of one percent (1/2 of 1%) per annum plus (ii) the Federal Funds Rate. "Base Rate Loans" shall mean Loans the interest rates on which are determined on the basis of rates referred to in the definition of "Base Rate" in this Section 1.01. "Business Day" shall mean any day on which commercial banks are not authorized or required to close in New York City or London. "Cablevision NYC MLP" shall mean Cablevision of New York City - Master LP, a New York limited partnership. "Capital Lease Obligations" shall mean, as to any Person, the obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) real and/or personal property, which obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under generally accepted accounting principles (including Statement of Financial Accounting Standards No. 13 of the Financial Accounting Standards Board) and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with generally accepted accounting principles (including such Statement No. 13). 4 "Capital Maintenance Costs" shall mean, with respect to the Loans, Syndicated Letters of Credit (or participations therein) or Bank Letters of Credit of each Bank, any costs which such Bank determines are attributable to the maintenance by such Bank or any of its affiliates, pursuant to any law or regulation or any interpretation, directive or request (whether or not having the force of law) of any court or governmental or monetary authority, whether in effect on the Effective Date or thereafter, of capital in respect of its maintaining Loans, Syndicated Letters of Credit or Bank Letters of Credit hereunder or its commitment to make Loans or issue or participate in Syndicated Letters of Credit or Bank Letters of Credit hereunder. "Cash Flow Ratio" shall mean, as at any date, the ratio of (i) the sum of the aggregate outstanding principal amount of all Indebtedness of the Company, the Restricted Subsidiaries and the New York/New Jersey Companies outstanding on such date (determined on a consolidated and, in respect of the New York/New Jersey Companies to the extent such companies are not Restricted Subsidiaries on such date, a combined basis) plus (but without duplication of Indebtedness supported by Syndicated Letters of Credit or Bank Letters of Credit) the aggregate undrawn face amount of all Syndicated Letters of Credit and Bank Letters of Credit outstanding on such date to (ii) Annualized Operating Cash Flow determined as at the last day of the month covered by the then most recent Subscribers' Certificate delivered to the Banks pursuant to Section 9.01(e) hereof, a copy of which has been delivered to the Administrative Agent (and any change in such ratio as a result of a change in the amount of Indebtedness or Syndicated Letters of Credit, or Bank Letters of Credit shall be effective as of the date such change shall occur and any change in such ratio as a result of a change in the amount of Annualized Operating Cash Flow shall be effective as of the date of receipt by the Administrative Agent of the Subscribers' Certificate reflecting such change). Notwithstanding the foregoing, for purposes of calculating the Cash Flow Ratio, (i) there shall be excluded from Indebtedness (A) the principal amount of any Indebtedness which would constitute an Investment but for the provision of clause (A) of the final paragraph of Section 9.16 hereof; (B) any deferred purchase price that would constitute Indebtedness in connection with any acquisition permitted by Section 9.15(b) to the extent that the Company's obligations in respect of such deferred purchase price consist solely of an agreement to deliver common stock of the Company; (C) all obligations under any Interest Swap Agreement; and (D)(x) all obligations under any Guarantee permitted under subparagraph (ix) of Section 9.12 hereof and (y) all obligations under any Guarantee permitted under subparagraph (x)(B) of Section 9.12 hereof so long as the obligations under such Guarantees referred to in this clause (y) are payable, solely at the option of the Company, in common stock of the Company; and (ii) if on the date of calculation there are no Loans outstanding, there shall be deducted from Indebtedness the aggregate amount of Cash On Hand of the Company and its Restricted Subsidiaries on the date of calculation. "Cash On Hand" of any Person at any time shall mean all cash held by such Person at such time and all Investments of such Person of the types specified in Section 9.16(i) or (ii) of this Agreement held at such time. "CMFRI" shall mean Cablevision MFR, Inc., a Delaware corporation. "CMFRI Agreement" shall mean the First Amended and Restated Credit Agreement, dated as of May 28, 1998, among CMFRI, the Company, the Guarantors that are 5 parties thereto, the Banks that are parties thereto, Toronto Dominion (Texas), Inc., as Arranging Agent and as Administrative Agent, The Bank of New York, The Bank of Nova Scotia, The Canadian Imperial Bank of Commerce, NationsBank, N.A. and The Chase Manhattan Bank, as Managing Agents, Bank of Montreal, Chicago Branch, Barclays Bank PLC, Fleet Bank, N.A. and Royal Bank of Canada, as Agents, Banque Paribas, Credit Lyonnais, BankBoston, N.A., The First National Bank of Chicago, Mellon Bank, N.A. and Societe Generale, New York Branch, as Co-Agents, and The Bank of New York and The Bank of Nova Scotia, as Co-Syndication Agents, as amended and/or restated and in effect from time to time. "CMFRI Commitment" shall mean, as to each Bank, its "Commitment" as such term is used in the CMFRI Agreement (as the same may be reduced or otherwise adjusted from time to time as provided in the CMFRI Agreement). "CMFRI Commitment Fees" shall mean "Commitment Fees" as such term is used in the CMFRI Agreement. "CMFRI Loans" shall mean "Loans" as such term is used in the CMFRI Agreement. "CMFRI Specified Investments" shall mean "Specified Investments" as such term is used in the CMFRI Agreement. "CMFRI Total Commitment" shall mean at any time the "Total Commitment", as that term is used in the CMFRI Agreement (as the same may be reduced or otherwise adjusted from time to time as provided in the CMFRI Agreement). "Code" shall mean the Internal Revenue Code of 1986, as amended. "Commitment" shall mean, as to each Bank, the amount set forth opposite its name on the signature pages hereto under the heading "Commitment" or amount set forth on any Assignment and Acceptance (as the same may be reduced or otherwise adjusted from time to time as provided in this Agreement). "Commitment Fee" shall have the meaning given to such term in Section 2.05 hereof. "Commitment Percentage" shall mean, as to each Bank at any time, the percentage obtained by dividing such Bank's Commitment by the Total Commitment. "Commitment Termination Date" shall mean the Quarterly Date falling on or nearest to March 31, 2007. "Company" shall have the meaning given to such term in the preamble to this Agreement. "Compliance Certificate" shall mean a certificate of a senior financial executive of the Company and of the New York/New Jersey Obligors in substantially the form of Exhibit B hereto. 6 "Consolidated Cash Taxes" shall mean, for any period, the sum of all federal, state and local income and other taxes on operations paid during such period in respect of the operating revenues of the Company, the Restricted Subsidiaries, the New York/New Jersey Companies and all tax consolidated Unrestricted Subsidiaries taken as a whole, net of any actual reimbursements therefor received from any Unrestricted Subsidiaries. "Controlled Group" shall mean all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Company, are treated as a single employer under Section 414(b) or 414(c) of the Code. "CSC Technology" shall mean CSC Technology, Inc., a Delaware corporation. "Debt Instruments" shall mean, collectively, the respective notes and debentures evidencing, and indentures and other agreements governing, any Indebtedness. "Default" shall mean an Event of Default or any other event which with notice and/or passage of time would become an Event of Default. "Dolan" shall mean Charles F. Dolan. "Dolan Family Interests" shall mean (i) any Dolan Family Member, (ii) any trusts for the benefit of any Dolan Family Members, (iii) any estate or testamentary trust of any Dolan Family Member for the benefit of any Dolan Family Members, (iv) any executor, administrator, conservator or legal or personal representative of any Person or Persons specified in clauses (i), (ii) and (iii) above to the extent acting in such capacity on behalf of any Dolan Family Member or Members and not individually and (v) any corporation, partnership, limited liability company or other similar entity, in each case 80% of which is owned and controlled by any of the foregoing or combination of the foregoing. "Dolan Family Members" shall mean Dolan, his spouse, his descendants and any spouse of any of such descendants. "Dollars" and "$" shall mean lawful money of the United States of America. "Effective Date" shall have the meaning given to such term in Section 12.09 hereof. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "ERISA Affiliate" shall mean, when used with respect to a Plan, ERISA, the PBGC or a provision of the Code pertaining to employee benefit plans, any Person that is a member of any group of organizations within the meaning of Sections 414(b), (c), (m) or (o) of the Code of which the Company is a member. "Eurodollar Base Rate" shall mean, with respect to any Eurodollar Loan, for any Interest Period, the rate per annum determined by the Administrative Agent at approximately 11:00 a.m. (London time) on the second Business Day prior to the first day of such Interest 7 Period by reference to the British Bankers' Association Interest Settlement Rates for deposits in Dollars (as set forth by any service selected by the Administrative Agent that has been nominated by the British Bankers' Association as an authorized information vendor for the purpose of displaying such rates) for a period equal to such Interest Period (rounded upward, if necessary, to the nearest 1/16 of 1%); provided that, if, for any reason, the Administrative Agent cannot determine the Eurodollar Base Rate for any Interest Period pursuant to the foregoing provisions of this definition, the Administrative Agent shall determine the Eurodollar Base Rate by using the offered rates of any three major banks active in the London interbank market selected by the Administrative Agent, but in all other respects in accordance with the foregoing provisions of this definition. "Eurodollar Loans" shall mean Loans the interest rates on which are determined on the basis of rates referred to in the definition of "Eurodollar Base Rate" in this Section 1.01. "Eurodollar Rate" shall mean, for any Eurodollar Loans for any Interest Period therefor, a rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) determined by the Administrative Agent to be equal to the Eurodollar Base Rate for such Loans for such Interest Period divided by 1 minus the Reserve Requirement for such Loans for such Interest Period. "Event of Default" shall mean any of the events described in Article X hereof. "Excluded Indebtedness" shall have the meaning given to such term in Section 10.01(e) hereto. "Federal Funds Rate" shall mean, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (i) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (ii) if such rate is not so published for any day, the Federal Funds Rate for such day shall be the average rate quoted to The Toronto-Dominion Bank (New York Branch) on such day on such transactions with Federal funds brokers of recognized standing as may be determined by the Administrative Agent. "Franchise" shall mean a franchise, license or other authorization or right to construct, own, operate, promote and/or otherwise exploit any cable television system granted by the Federal Communications Commission (or any successor agency of the Federal government) or any state, county, city, town, village or other local governmental authority. "Franchise Holding Companies" shall mean the Persons set forth on Schedule 1.01(ii) hereto and each other corporation which holds a Franchise as nominee of the Company or a Restricted Subsidiary. "Funding Costs" for any Bank shall mean, with respect to any Eurodollar Loan, an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the principal amount paid, prepaid or converted or not borrowed or converted for the period from 8 the date of such payment, prepayment or conversion or failure to borrow or convert to the last day of the Interest Period for such Loan (or, in the case of a failure to borrow or convert, the Interest Period for such Loan which would have commenced on the date of such failure to borrow or convert) had such principal amount borne interest at the Eurodollar Rate applicable to such Loan over (ii) the interest component of the amount such Bank would have bid in the London interbank market for Dollar deposits of leading banks in amounts comparable to such principal amount and with maturities comparable to such period (as reasonably determined by such Bank). "Guarantee" shall have the meaning given to such term in Section 9.12 hereof. "Guarantors" shall mean the Persons set forth on Schedule 1.01(iii) hereto and each New Restricted Subsidiary required to become a Guarantor pursuant to Section 9.08 hereof. "Indebtedness" shall mean, as to any Person, Capital Lease Obligations of such Person and other indebtedness of such Person for borrowed money (whether by loan or the issuance and sale of debt securities) or for the deferred purchase or acquisition price of property or services (and including, without limitation, obligations of such Person for property taxes and judgments and other awards giving rise to Permitted Liens described in clauses (ii) and (iii) of the definition of "Permitted Liens" in this Section 1.01) other than accounts payable (other than for borrowed money) incurred in the ordinary course of business of such Person. Without limiting the generality of the foregoing, such term shall include (a) when applied to the Company, any Restricted Subsidiary and/or any New York/New Jersey Company, all obligations of the Company, any Restricted Subsidiary and/or any New York/New Jersey Company under Interest Swap Agreements and (b) when applied to the Company or any other Person, all Indebtedness of others Guaranteed by such Person. "Interest Period" shall mean: (a) With respect to any Eurodollar Loans, the period commencing on the date such Eurodollar Loans are made and ending on the same day in the first, second, third, sixth or, subject to availability from each Bank, twelfth calendar month thereafter, as the Company may select as provided in Section 2.02 hereof; and (b) With respect to any Base Rate Loans, the period commencing on the date such Base Rate Loans are made and ending on the next Quarterly Date thereafter. Notwithstanding the foregoing: (i) no Interest Period may commence before and end after any Quarterly Date upon which the Commitments are to be reduced pursuant to Section 2.04(a) hereof unless, after giving effect thereto, the aggregate principal amount of the Loans having Interest Periods which end after such Quarterly Date shall be equal to or less than the amount to which the Commitments are to be reduced on such Quarterly Date pursuant to said Section 2.04(a); (ii) no Interest Period with respect to any Loan may end after the Commitment Termination Date; (iii) each Interest Period which would otherwise end on a day which is not a Business Day shall end on the next succeeding Business Day (or, in the case of an Interest Period for Eurodollar Loans, if such next succeeding Business Day falls in the next succeeding calendar month, on the next preceding Business Day); (iv) any Interest Period for a Eurodollar Loan that 9 begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month in which such Interest Period ends) shall, subject to clause (i) above, end on the last Business Day of a calendar month; and (v) no more than 24 Interest Periods for all Eurodollar Loans hereunder shall be in effect at the same time and, if the number of Interest Periods for Eurodollar Loans would otherwise be in excess of 24, additional Eurodollar Loans shall not be available hereunder. "Interest Swap Agreement" shall mean an interest rate swap, cap or collar agreement or similar arrangement among the Company, any Restricted Subsidiary and/or any New York/New Jersey Company and one or more banks or financial institutions providing for protection against fluctuations in interest rates or the exchange of nominal interest obligations among the Company, such Restricted Subsidiary and/or such New York/New Jersey Company and such banks or financial institutions, either generally or under specific contingencies, as said agreement or arrangement shall be modified and supplemented and in effect from time to time. "Investments" shall have the meaning given to such term in Section 9.16 hereof. "Kalamazoo Sale" shall mean the sale of the Kalamazoo, Michigan cable system currently owned by Cablevision of Michigan, Inc. provided for in the letter of intent dated as of January 22, 1998 between TCI and the Company. "Leases" shall mean leases and subleases (excluding Capital Lease Obligations), licenses to use real and/or tangible personal property, easements and pole attachments and conduit or trench agreements and other rights to use telephone or utility poles, conduits or trenches. "Letter of Credit Liabilities" shall mean, at any time, the sum of (i) the aggregate undrawn face amount of all Syndicated Letters of Credit outstanding at such time and (ii) the aggregate unpaid amount of all Reimbursement Obligations at the time due and payable in respect of previous drawings made under all Syndicated Letters of Credit. "Liens" shall have the meaning given to such term in Section 9.13 hereof. "Loans" shall mean Base Rate Loans and Eurodollar Loans made pursuant to Section 2.01 hereof. "Majority Banks" shall mean at any time, Banks having Commitments aggregating at least 51% of the amount of the Total Commitment. "Margin Stock" shall mean "margin stock" as defined in Regulation U. "Materially Adverse Effect" shall mean a materially adverse effect upon (i) the business, assets, financial condition or results of operations of the Company, the Restricted Subsidiaries and the New York/New Jersey Companies taken as a whole on a combined basis in accordance with generally accepted accounting principles, (ii) the ability of the Company and the Restricted Subsidiaries taken as a whole to perform the Obligations hereunder or (iii) the legality, validity, binding nature or enforceability of this Agreement. 10 "Multiemployer Plan" shall mean a Plan that is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Cash Proceeds" shall mean proceeds received by the Company or any of the Restricted Subsidiaries in cash from (x) the sale or other disposition of property of the Company or any of the Restricted Subsidiaries or from the incurrence, issuance or sale of Indebtedness or capital stock of the Company or any of the Restricted Subsidiaries, in each case after deduction of the costs of, and any income, franchise, transfer or other tax liability arising from, such sale, disposition, incurrence or issuance or (y) a capital contribution in respect of the common stock of any class of the Company to the Company by the holder thereof. If any amount payable to the Company or any such Restricted Subsidiary in respect of any such sale, disposition, incurrence or issuance shall be or become evidenced by any promissory note or other negotiable or non-negotiable instrument, the cash proceeds received on any such note or instrument shall constitute Net Cash Proceeds. "New Common Stock" shall mean (x) any common stock of any class of the Company issued after the Effective Date or (y) any capital contribution to the Company in respect of the common stock of any class of the Company to the Company by the holder thereof made after the Effective Date. "New Preferred Stock" shall mean any preferred stock of the Company issued after the Effective Date, provided that pursuant to the terms thereof and of any provision of the Company's charter in respect thereof, such preferred stock is neither (i) redeemable, payable or required to be purchased or otherwise retired or extinguished in whole or in part (other than with common stock or other New Preferred Stock of the Company), or convertible into any Indebtedness of the Company, at a fixed or determinable date (whether by operation of a sinking fund or otherwise), at the option of any Person other than the Company or upon the occurrence of a condition not solely within the control of the Company (such as a redemption required to be made out of future earnings) nor (ii) convertible into preferred stock of the Company that may be so retired, extinguished or converted, in the case of clause (i) or (ii) above, at any time before the date that is two years after the Commitment Termination Date as in effect at the time of the issuance of such preferred stock. "New Restricted Subsidiary" shall mean any New Subsidiary designated as a Restricted Subsidiary pursuant to Section 9.08(b) and any Unrestricted Subsidiary redesignated as a Restricted Subsidiary pursuant to Section 9.08(c). "New Subordinated Debt" shall mean any Permitted Debt having terms of subordination no less favorable to the Banks than the terms of subordination of the Company's 9- 7/8% Senior Subordinated Debentures due 2023. "New Subsidiary" shall mean any Person which becomes a Subsidiary of the Company after the Effective Date. "New Unrestricted Subsidiary" shall mean any New Subsidiary deemed an Unrestricted Subsidiary pursuant to Section 9.08(a). 11 "New York/New Jersey Agreement" shall mean the First Amended and Restated Credit Agreement, dated as of May 28, 1998, among CSC TKR, Inc., Cablevision of Brookhaven, Inc., Cablevision of Oakland, Inc., Cablevision of Paterson, Inc., CSC TKR I, Inc. and UA-Columbia Cablevision of Westchester, Inc., the Guarantors that are parties thereto, the Banks that are parties thereto, Toronto Dominion (Texas), Inc., as Arranging Agent and Administrative Agent, The Bank of New York, The Bank of Nova Scotia, The Canadian Imperial Bank of Commerce, NationsBank, N.A. and The Chase Manhattan Bank, as Managing Agents, Bank of Montreal, Chicago Branch, Barclays Bank PLC, Fleet Bank, N.A. and Royal Bank of Canada, as Agents, and Banque Paribas, Credit Lyonnais, BankBoston, N.A., The First National Bank of Chicago, Mellon Bank, N.A. and Societe Generale, New York Branch as Co-Agents, as amended and/or restated and in effect from time to time. "New York/New Jersey Commitment" shall mean, as to any Bank, its "Commitment" as such term is used in the New York/New Jersey Agreement (as the same may be reduced or otherwise adjusted from time to time as provided in the New York/New Jersey Agreement). "New York/New Jersey Companies" shall mean the New York/New Jersey Obligors and the New York/New Jersey Subsidiaries. "New York/New Jersey Loans" shall mean "Loans" as such term is used in the New York/New Jersey Agreement. "New York/New Jersey Obligors" shall mean the "Obligors" as such term is used in the New York/New Jersey Agreement. "New York/New Jersey Subsidiaries" shall mean the Subsidiaries of the New York/New Jersey Obligors. "New York/New Jersey Total Commitment" shall mean at any time the "Total Commitment" as such term is used in the New York/New Jersey Agreement (as the same may be reduced or otherwise adjusted from time to time as provided in the New York/New Jersey Agreement). "Non-US Bank" means a Person that is not a United States Person and that is not described in Section 881(c)(3) of the Code. "Notes" shall mean the promissory notes provided for by Section 2.06(a) hereof evidencing the Loans. "Obligations" shall mean, collectively, the obligations of the Company hereunder in respect of the principal of and interest on the Loans and in respect of Bank Letters of Credit, Letter of Credit Liabilities, and all obligations in respect of fees and other amounts payable by the Company hereunder. "Operating Cash Flow" shall mean, for any period, the following for the Company, the Restricted Subsidiaries and the New York/New Jersey Companies for such period, determined on a consolidated and, in respect of the New York/New Jersey Companies to the 12 extent such companies are not Restricted Companies during such period, a combined basis in accordance with generally accepted accounting principles: (i) aggregate operating revenues minus (ii) aggregate operating expenses (including technical, programming, sales, selling, general administrative expenses and salaries and other compensation, in each case net of amounts allocated to Affiliates, paid to any general partner, director, officer or employee of the Company, any Restricted Subsidiary or any New York/New Jersey Company, but excluding interest, depreciation and amortization and compensation in respect of the Company's employee incentive stock programs (not to exceed in the aggregate for any calendar year 7% of the Operating Cash Flow for the Company and the Restricted Subsidiaries for the previous calendar year) and, to the extent otherwise included in operating expenses, any losses resulting from a write-off or writedown of Investments by the Company, any Restricted Subsidiary or any New York/New Jersey Company in Affiliates); provided, however, that for purposes of determining Operating Cash Flow for any period (A) there shall be excluded (x) all management fees paid to the Company, any Restricted Subsidiary or any New York/New Jersey Company during such period by any Unrestricted Subsidiary other than any such fees paid in cash to the extent not in excess of 3% of Operating Cash Flow for the Company, the Restricted Subsidiaries and the New York/New Jersey Companies as determined without including any such fees and (y) the amortization of deferred installation income and (B) Operating Cash Flow for such period shall be increased or (except for purposes of the calculations required by Section 9.15(a)(v)(B)) reduced, as the case may be, by the Operating Cash Flow of assets acquired or disposed of (including by means of any redesignation of any Subsidiary pursuant to Section 9.08(c)) by the Company, any Restricted Subsidiary or any New York/New Jersey Company on or after the first day of such period, determined on a pro forma basis reasonably satisfactory to the Administrative Agent (it being agreed that it shall be satisfactory to the Administrative Agent that such pro forma calculations may be based upon generally accepted accounting principles as applied in the preparation of the financial statements for the Company or such New York/New Jersey Company, as the case may be, delivered in accordance with Section 9.01 hereof rather than as applied in the financial statements of the company whose assets were acquired and may include, in the Company's discretion, a reasonable estimate of savings under existing contracts resulting from any such acquisitions), as though the Company, such Restricted Subsidiary or such New York/New Jersey Company acquired or disposed of such assets on the first day of such period. "Parent Corp." shall mean Cablevision Systems Corp., a Delaware corporation. "Participation Agreement" shall have the meaning given to such term in Section 12.06(c) hereof. "Payor" shall have the meaning given to such term in Section 4.04 hereof. "PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Permitted Debt" shall mean any Indebtedness incurred, issued or sold by the Company after the Effective Date, provided that: 13 (i) such Indebtedness (A) shall be unsecured, (B) shall have a commercially reasonable interest rate (which rate shall be deemed commercially reasonable if such Indebtedness is sold by a member of the National Association of Securities Dealers, Inc. in an underwritten offering or on a 'best efforts' basis), (C) shall be neither (1) redeemable, payable or required to be purchased or otherwise retired or extinguished in whole or in part at a fixed or determinable date (whether by operation of a sinking fund or otherwise), at the option of any Person other than the Company or upon the occurrence of a condition not solely within the control of the Company (such as a redemption required to be made out of future earnings) nor (2) convertible into any other Indebtedness or capital stock of the Company that may be so retired, extinguished or converted, in the case of clause (1) or (2) above, at any time before the date that is one year after the Commitment Termination Date as in effect at the time of the incurrence, issuance or sale of such Indebtedness and (D) shall have terms and conditions no more restrictive or burdensome than the terms and conditions of the Company's Senior Debentures due 2009 in an aggregate principal amount of $300,000,000 issued on or about August 21, 1997; and (ii) at the time of and immediately after giving effect to the incurrence, issuance or sale of such Indebtedness, no Default shall have occurred and be continuing, and the Company shall have so certified to the Administrative Agent; and provided further, that the Company shall (i) prior to the issuance of any such Indebtedness, provide notice to the Administrative Agent of the proposed issuance thereof and of the use of the proceeds thereof and (ii) as soon as available, provide to the Administrative Agent copies of the Debt Instruments governing such Indebtedness. "Permitted Liens" shall mean, with respect to any Person: (i) pledges or deposits by such Person under workers' compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or Leases to which such Person is a party, or deposits to secure public or statutory obligations of such Person or deposits of cash or U.S. Government bonds to secure surety or appeal bonds to which such Person is a party, or deposits as security for contested taxes or import duties or for the payment of rent; (ii) Liens imposed by law, such as carriers', warehousemen's and mechanics' Liens or other Liens arising out of judgments or awards against such Person with respect to which such Person shall then be prosecuting appeal or other proceedings for review (and as to which all foreclosures and other enforcement proceedings shall have been fully bonded or otherwise effectively stayed); (iii) Liens for property taxes not yet subject to penalties for non-payment or which are being contested in good faith and by appropriate proceedings (and as to which all foreclosures and other enforcement proceedings shall have been fully bonded or otherwise effectively stayed); (iv) Liens in favor of issuers of performance bonds issued pursuant to the request of and for the account of such Person in the ordinary course of its business; (v) minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for rights of way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real properties or Liens incidental to the conduct of the business of such Person or to the ownership of its properties which were not incurred in connection with Indebtedness or other extensions of credit and which do not in the aggregate materially detract from the value of said properties or 14 materially impair their use in the operation of the business of such Person; or (vi) any Lien on any Margin Stock. "Permitted Restricted Subsidiary Transaction" shall mean any transaction by which any Restricted Subsidiary shall (i) pay dividends or make any distribution on its capital stock or other equity securities or pay any of its Indebtedness owed to any other Restricted Subsidiaries, (ii) make any loans or advances to any other Restricted Subsidiaries or (iii) transfer any of its properties or assets to, or merge or consolidate with or into, any other Restricted Subsidiaries. "Person" shall mean an individual, a corporation, a partnership, a limited liability company, a joint venture or adventure, a trust or estate or unincorporated organization, a joint stock company or other similar organization, a government or any political subdivision thereof, or any other legal entity. "Plan" shall mean, at any time, an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and is either (i) maintained by the Company or an ERISA Affiliate or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which the Company or an ERISA Affiliate is then making or accruing an obligation to make contributions or has within the preceding six plan years made contributions. "Pole Rental Leases" shall mean Leases under which the Company and the Restricted Subsidiaries have the right to use telephone or utility poles, conduits or trenches for the purpose of supporting or housing cables of the respective systems. "Post-Default Rate" shall mean, in respect of any principal of any Loan or any other amount payable by the Company under this Agreement which is not paid when due (whether at stated maturity, by acceleration or otherwise), a rate per annum during the period commencing on the due date until such amount is paid in full equal to 2% above the Base Rate as in effect from time to time plus the Applicable Margin for Base Rate Loans; provided that, if such amount in default is principal of a Eurodollar Loan and the due date is a day other than the last day of an Interest Period therefor, the "Post-Default Rate" for such principal shall be, for the period commencing on the due date and ending on the last day of the Interest Period therefor, 2% above the interest rate for such Loan for such Interest Period as provided in Section 3.03 hereof, and thereafter the rate provided for above in this definition and; provided further, that if such amount in default is any Reimbursement Obligation, the "Post-Default Rate" for such Reimbursement Obligation shall be a rate per annum equal to 2 and 3/4% above the Base Rate as in effect from time to time. "Programming Companies" shall mean, collectively, the Persons set forth on Schedule 1.01(iv) hereto, and any New Unrestricted Subsidiary designated as a Programming Company. 15 "Prohibited Transaction" shall mean a transaction that is prohibited under Section 4975 of the Code or Section 406 of ERISA and not exempt under Section 4975 of the Code or Section 408 of ERISA. "Proposed Bank" shall have the meaning given to such term in Section 12.06(h) hereof. "Quarter" shall mean a fiscal quarterly period of the Company. "Quarterly Dates" shall mean the last day of each March, June, September and December, the first of which shall be on June 30, 1998, provided that, if any such day is not a Business Day, the relevant Quarterly Date shall be the next succeeding Business Day. "Reduction Amount" shall have the meaning given to such term in Section 2.04(a) hereof. "Refunding Proceeds" shall mean, with respect to any New Subordinated Debt, any New Preferred Stock or any New Common Stock of the Company, (i) an amount equal to up to 100% of the Net Cash Proceeds thereof, but only to the extent that the Company purchases, acquires, redeems, retires, pays or prepays Subordinated Debt or preferred stock of the Company with such Net Cash Proceeds immediately upon receipt thereof or (ii) the proceeds of Loans reborrowed by the Company in an aggregate amount not to exceed other Loans that were prepaid with the Net Cash Proceeds of such New Subordinated Debt, New Preferred Stock or New Common Stock (less the amount of any such Net Cash Proceeds constituting Refunding Proceeds by reason of clause (i) above), but, in each case, only to the extent that the Company purchases, acquires, redeems, retires, pays or prepays Subordinated Debt or preferred stock of the Company with such reborrowed amounts. "Regulation D" shall mean Regulation D of the Board of Governors of the Federal Reserve System as the same may be amended or supplemented from time to time. "Regulation U" shall mean Regulation U of the Board of Governors of the Federal Reserve System as the same may be amended or supplemented from time to time. "Regulatory Change" shall mean, with respect to any Bank, any change on or after the Effective Date in United States Federal, state or foreign laws or regulations (including Regulation D) or the adoption or making on or after such date of any interpretations, directives or requests applying to a class of banks including such Bank of or under any United States Federal or state, or any foreign, laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof. "Reimbursement Obligations" shall mean the obligations of the Company then outstanding to reimburse the Banks for the amount paid by the Banks in respect of any drawing under a Syndicated Letter of Credit. "Reportable Event" shall mean (i) any of the events set forth in Section 4043(b) (other than a Reportable Event as to which the provision of 30 days' notice to the PBGC is 16 waived under applicable regulations), 4068(f) or 4063(a) of ERISA or the regulations thereunder, (ii) an event requiring the Company or any ERISA Affiliate to provide security to a Plan under Section 401(a)(29) of the Code and (iii) any failure to make payments required by Section 412(m) of the Code if such failure continues for 30 days following the due date for any required installment. "Required Payment" shall have the meaning given to such term in Section 4.04 hereof. "Required Principal Payments" shall mean for any period an amount equal to the aggregate of (i) the excess, if any, of the aggregate amount of Loans and Letter of Credit Liabilities outstanding at the beginning of such period over the Total Commitment at the end of such period and (ii) the excess, if any, of the aggregate amount of CMFRI Loans and New York/New Jersey Loans outstanding at the beginning of such period over the aggregate amount of the CMFRI Total Commitment and the New York/New Jersey Total Commitment at the end of such period. "Reserve Requirement" shall mean, for any Eurodollar Loans of any Bank for any Interest Period, the rate at which such Bank actually is required to maintain reserves (including any marginal, supplemental or emergency reserves) during such Interest Period under Regulation D against "Eurocurrency liabilities" (as such term is used in Regulation D). Without limiting the effect of the foregoing, the Reserve Requirement shall reflect any other reserves actually required to be maintained by such Bank by reason of any Regulatory Change against (A) any category of liabilities which includes deposits by reference to which the Eurodollar Base Rate for such Eurodollar Loans is to be determined as provided in the definition of "Eurodollar Base Rate" in this Section 1.01 or (B) any category of extensions of credit or other assets which include Eurodollar Loans. "Restricted Payments" shall mean direct or indirect distributions, dividends or other payments by the Company or any Restricted Subsidiary on account of (including, without limitation, sinking fund or other payments on account of the redemption, retirement, purchase or acquisition of) any general or limited partnership or joint venture interest in, or any capital stock of, the Company or such Restricted Subsidiary, as the case may be (whether made in cash, property or other obligations), other than (i) any such distributions, dividends and other payments made by the Company or one Restricted Subsidiary to the Company or another Restricted Subsidiary in respect of such interest in or stock of the former held by the latter, (ii) distributions of any or all of the stock of the Adams-Russell Companies or RMHI or (iii) dividends, distributions and other payments made by Cablevision NYC MLP or Cablevision of Brookline Limited Partnership to all of the respective partners thereof pro rata in respect of their interests therein, provided that no change (other than a change resulting from the redemption of Dolan's interests therein) in (A) the ownership by such partners of Cablevision NYC MLP or Cablevision of Brookline Limited Partnership, as the case may be, or (B) the rights of such partners to receive such payments shall have occurred since the Effective Date. "Restricted Subsidiaries" shall mean the Persons set forth on Schedule 1.01(v) hereto and any New Restricted Subsidiary, provided that any Restricted Subsidiary redesignated 17 as an Unrestricted Subsidiary pursuant to and in compliance with Section 9.08(c) shall cease to be a Restricted Subsidiary. "RMHI" shall mean RMHI Rainbow Media Holdings, Inc., a New York corporation. "Scheduled Reduction Date" shall have the meaning given to such term in Section 2.04(a) hereof. "SEC Reports" shall mean the Form 10-K Annual Report of the Company for the fiscal year ended December 31, 1997 and the Form 10-Q Quarterly Report of the Company for the period ended March 31, 1998. "Specified Investments" shall mean any Investment or series of related Investments by the Company or any of the Restricted Subsidiaries in an aggregate amount, when added with all CMFRI Specified Investments (without duplication), for all such Investments not in excess of $100,000,000 in businesses engaged primarily in the provision of video on demand, cable modem or residential telephony services and other closely related businesses. "Subordinated Debt" shall mean (i) $150,000,000 principal amount of the Company's 9 7/8% Senior Subordinated Debentures due 2023, (ii) $200,000,000 principal amount of the Company's 9 7/8% Senior Subordinated Debentures due 2013, (iii) $150,000,000 principal amount of the Company's 9 7/8% Senior Subordinated Notes due 2006, (iv) $250,000,000 principal amount of the Company's 10 1/2% Senior Subordinated Debentures due 2016, (v) $300,000,000 principal amount of the Company's 9 1/4% Senior Subordinated Notes due 2005, (vi) any New Subordinated Debt and (vii) any other Indebtedness of the Company incurred after the Effective Date that is subordinated to all Obligations and obligations of the Company in respect of Interest Swap Agreements. "Subscribers' Certificate" shall mean a certificate of a senior financial executive of the Company and the New York/New Jersey Obligors in substantially the form of Exhibit C hereto. "Subsidiary" shall mean, with respect to any Person, any corporation, partnership, joint venture or adventure, limited liability company, trust or estate: (a) in the case of a corporation, of which a majority of the outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether or not at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency); (b) in the case of a partnership or joint venture, in which such Person is a general partner or joint venturer or of which a majority of the partnership or other ownership interests; (c) in the case of a limited liability company, of which a majority of the ownership interests; or 18 (d) in the case of a trust or estate, the beneficial interest of which is at the time directly or indirectly owned by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other Subsidiaries. "Syndicated Letters of Credit" shall have the meaning given to such term in Section 2.03(a) hereof. "Syndicated Letters of Credit Commitment" shall have the meaning given to such term in Section 2.03(a)(i) hereof. "Tax" means any Federal, State or foreign tax, assessment or other governmental charge (including any withholding tax) upon a Person or upon its assets, revenues, income or profits. "TCI Acquisition" shall mean the transactions contemplated by the TCI Acquisition Documents, other than the Second-Tier Reorganization (as defined in and contemplated by the Master Reorganization Agreement referred to in the definition of "TCI Acquisition Documents" herein). "TCI Acquisition Documents" shall mean (i) the Amended and Restated Contribution and Merger Agreement, dated as of June 6, 1997, by and among the Company, Parent Corp., CSC Merger Corporation and TCI Communications, Inc., (ii) the Master Reorganization Agreement, dated as of March 3, 1998, among Parent Corp. and the Company, and (iii) the Assignment and Assumption Agreement, dated as of March 4, 1998, by and among Parent Corp., CSC TKR, Inc., CSC TKR I, Inc., Cablevision of Oakland, Inc., Cablevision of Brookhaven, Inc. and Cablevision of Paterson, Inc. "TD" shall mean The Toronto-Dominion Bank. "Termination Event" shall mean (i) a Reportable Event, (ii) the termination of a Plan, or the filing of a notice of intent to terminate a Plan, or the treatment of a Plan amendment as a termination under Section 4041(c) of ERISA, (iii) the institution of proceedings to terminate a Plan under Section 4042 of ERISA or (iv) the appointment of a trustee to administer any Plan under Section 4042 of ERISA. "Total Available Commitment" shall mean, as of any date, the Total Commitment as of such date minus an amount equal to the excess of (i) the aggregate Net Cash Proceeds to be used as specified in all notices given by the Company to the Administrative Agent in accordance with Sections 2.04(c) hereof over (ii) the sum of (x) the aggregate amount of all reductions of the Total Commitment required by reason of the provisos to Section 2.04(c) with respect to such Net Cash Proceeds and (y) the aggregate amount of Loans (including the Loans requested to be made on such date) the proceeds of which have been or, upon the making thereof, will be used for the purposes specified in such notices in accordance with such Sections. "Total Commitment" shall mean at any time the aggregate amount of the Commitments of all the Banks (as the same may be reduced or otherwise adjusted from time to time as provided in this Agreement). 19 "Total Debt Expense" shall mean, for any period, Total Interest Expense for such period plus an amount equal to the aggregate amount of Required Principal Payments for such period and all other scheduled payments of principal on other Indebtedness of the Company, the Restricted Subsidiaries and the New York/New Jersey Companies (on a consolidated and, in respect of the New York/New Jersey Companies to the extent such companies are not Restricted Subsidiaries during such period, a combined basis) during such period (including, but not limited to, the principal portion paid with respect to Capital Lease Obligations, but excluding (i) scheduled payments of principal on Subordinated Debt to the extent such payments are made with Refunding Proceeds or, solely in the case of any payments of principal of the Company's 9 1/4% Senior Subordinated Debentures due 2005 in an aggregate principal amount of $300,000,000 or the Company's 9 7/8% Senior Subordinated Debentures due 2006 in an aggregate principal amount of $150,000,000 at the final maturity thereof, the Net Cash Proceeds of Permitted Debt, (ii) all obligations under any Guarantee permitted under subparagraph (ix) of Section 9.12 hereof, and (iii) all obligations under any Guarantee permitted under subparagraph (x)(B) of Section 9.12 hereof to the extent the obligation under any such Guarantee was paid in common stock of the Company); provided that, for purposes of determining Total Debt Expense for any period, there shall be included or excluded, as the case may be, all scheduled payments of principal (other than Required Principal Payments) during such period on Indebtedness of the Company, any Restricted Subsidiary or any New York/New Jersey Company in respect of assets acquired or disposed of (including by means of any redesignation of any Subsidiary pursuant to Section 9.08(c)) by the Company, such Restricted Subsidiary or such New York/New Jersey Company on or after the first day of such period, determined on a pro forma basis reasonably satisfactory to the Administrative Agent (it being agreed that it shall be satisfactory to the Administrative Agent that such pro forma calculations may be based upon generally accepted accounting principles as applied in the preparation of the financial statements for the Company or such New York/New Jersey Company, as the case may be, delivered in accordance with Section 9.01 hereof rather than as applied in the financial statements of the company whose assets were acquired and may include, in the Company's discretion, a reasonable estimate of savings under existing contracts resulting from any such acquisitions), as though the Company, such Restricted Subsidiary or such New York/New Jersey Company acquired or disposed of such assets on the first day of such period. "Total Fixed Charges" shall mean, for any period, Total Debt Expense for such period plus (i) all dividends and other distributions in respect of preferred stock of the Company during such period (other than to the extent any such dividends and distributions are paid in New Common Stock or New Preferred Stock) and (ii) all payments on account of the redemption, retirement or extinguishment in whole or in part (whether by operation of a sinking fund or otherwise) of any preferred stock of the Company, excluding any such payments to the extent made with Refunding Proceeds and any such payments made in respect of the Company's Series H Preferred Stock or Series M Preferred Stock to the extent permitted by Section 9.17(vii). "Total Interest Expense" shall mean, for any period, the sum of (i) the aggregate amount of interest accrued during such period in respect of Indebtedness (including the interest component of rentals in respect of Capital Lease Obligations and including, without duplication, discount in respect of Subordinated Debt and Permitted Debt) of the Company and the Restricted Subsidiaries and the New York/New Jersey Companies (determined on a consolidated and, in respect of the New York/New Jersey Companies to the extent such companies are not Restricted 20 Subsidiaries during such period, a combined basis), other than (x) obligations under any Guarantee permitted under subparagraph (ix) of Section 9.12 hereof, and (y) obligations under any Guarantee permitted under subparagraph (x)(B) of Section 9.12 hereof to the extent that such obligation was paid in common stock of the Company, (ii) the aggregate amount of fees accrued in respect of the Syndicated Letters of Credit and Bank Letters of Credit hereunder during such period and (iii) the aggregate amount of Commitment Fees accrued hereunder and CMFRI Commitment Fees accrued under the CMFRI Agreement and the New York/New Jersey Commitment Fees accrued under the New York/New Jersey Agreement during such period. For purposes hereof, the amount of interest accrued in respect of Indebtedness for any period (A) shall be increased (to the extent not already treated as interest expense or income, as the case may be) by the excess, if any, of amounts payable by the Company, any Restricted Subsidiary and/or any New York/New Jersey Company arising under any Interest Swap Agreements during such period over amounts receivable by the Company, any Restricted Subsidiary and/or any New York/New Jersey Company thereunder (or reduced by the excess, if any, of such amounts receivable over such amounts payable) and interest on a Capital Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by the Company to be the rate of interest implicit in such Capital Lease Obligation in accordance with generally accepted accounting principles (including Statement of Financial Accounting Standards No. 13) and (B) shall be increased or reduced, as the case may be, by the amount of interest accrued during such period in respect of Indebtedness of the Company or any Restricted Subsidiary or any New York/New Jersey Company in respect of assets acquired or disposed of (including by means of any redesignation of any Subsidiary pursuant to Section 9.08(c)) by the Company or such Restricted Subsidiary or such New York/New Jersey Company on or after the first day of such period, determined on a pro forma basis reasonably satisfactory to the Administrative Agent (it being agreed that it shall be satisfactory to the Administrative Agent that such pro forma calculations may be based upon generally accepted accounting principles as applied in the preparation of the financial statements for the Company or such New York/New Jersey Company, as the case may be, delivered in accordance with Section 9.01 hereof rather than as applied in the financial statements of the company whose assets were acquired and may include, in the Company's discretion, a reasonable estimate of savings under existing contracts resulting from any such acquisitions), as though the Company or such Restricted Subsidiary or such New York/New Jersey Company acquired or disposed of such assets on the first day of such period. "UCP" shall mean the Uniform Customs and Practice for Documentary Credits, 1993 revision, International Chamber of Commerce Publication No. 500, as the same may be amended and in effect from time to time. "United States Person" means a corporation, partnership or other entity created, organized or incorporated under the laws of the United States of America or a State thereof (including the District of Columbia). "Unrestricted Subsidiaries" shall mean the Persons set forth on Schedule 1.01(vi) hereto and any New Unrestricted Subsidiaries, provided that any Unrestricted Subsidiary redesignated by the Company as a Restricted Subsidiary pursuant to and in compliance with Section 9.08(c) shall cease to be an Unrestricted Subsidiary. 21 Section 1.01 Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all determinations with respect to accounting matters hereunder shall be made, and all financial statements and certificates and reports as to financial matters required to be delivered hereunder shall be prepared, in accordance with generally accepted accounting principles as in effect on December 31, 1997, applied on a consolidated basis consistent with the audited financial statements of the Company referred to in Section 8.04 hereof. When any definition involving the New York/New Jersey Companies (prior to such companies becoming Restricted Subsidiaries) requires calculations on a combined basis, such calculations shall eliminate any intercompany items as between the Company, the Restricted Subsidiaries and the New York/New Jersey Companies. To enable the ready determination of compliance by the Company and the Restricted Subsidiaries with the various covenants set forth in Article IX hereof, the Company agrees to cause the fiscal year of itself, each Restricted Subsidiary and each New York/New Jersey Company to end each year on December 31 and the first three Quarters for each such Person in each year to end on March 31, June 30 and September 30, respectively. ARTICLE II LOANS AND LETTERS OF CREDIT Section 2.01 Loans. Each Bank severally agrees, on the terms and conditions set forth in this Agreement: (a) The Loans. On or after the Effective Date, to make one or more Loans to the Company from time to time on any Business Day prior to the Commitment Termination Date in an aggregate principal amount not to exceed at any time outstanding such Bank's Commitment, provided that at no time shall the aggregate outstanding principal amount of all Loans, together with the aggregate outstanding principal amount of the Letter of Credit Liabilities, exceed the Total Available Commitment. (b) Types of Loans. The Loans, at the option of the Company, may be made as, and from time to time continued as or converted into, Base Rate Loans or Eurodollar Loans of any permitted type, or any combination thereof; provided, however, that each borrowing of Loans shall be in an aggregate amount equal to $500,000 or an integral multiple of $250,000 in excess thereof. Section 2.02 Manner of Borrowing; Conversion and Continuation. (a) Notice of Borrowing. The Company shall give the Administrative Agent (which shall promptly notify the Banks) notice of each borrowing of Loans hereunder substantially in the form of Schedule 2.02(a) hereto, which notices shall be irrevocable and effective only upon receipt by the Administrative Agent, shall specify the aggregate amount, the type or types and date of the Loans to be borrowed and (in the case of Eurodollar Loans) the duration of the Interest Period therefor and shall be given not later than 11:00 a.m. New York time on the day which is not less than the number of Business Days prior to the date of such borrowing specified below: 22 Type Number of Business Days ---- ----------------------- Base Rate Loan 0 Eurodollar Loan 3 Notwithstanding the foregoing, any notice given by the Company to the Administrative Agent under this Section 2.02(a) may be given orally by telephone and confirmed in writing within one Business Day. In the case of any discrepancies between oral and written notices received by the Administrative Agent, the oral notice shall be effective as understood in good faith by the Administrative Agent. (b) Funding. Not later than 1:00 p.m. New York time on the date specified for each borrowing hereunder, each Bank shall make available the amount of the Loan to be made by it on such date to the Administrative Agent in immediately available funds, for the account of the Company. The amount so received by the Administrative Agent shall, subject to the terms and conditions of this Agreement, be made available to the Company by depositing the same, in immediately available funds, in an account of the Company designated by the Company or by wiring the same, in immediately available funds, to any account specified by the Company in its notice of borrowing. (c) Conversion and Continuation. (i) All or any part of the principal amount of any Loan may, on any Business Day, be converted into another type or types of Loan, except that Eurodollar Loans may be converted only on the last day of the applicable Interest Period. (ii) Base Rate Loans shall continue as Base Rate Loans unless and until such Loans are converted into Eurodollar Loans of any type. Each Eurodollar Loan shall continue as a Eurodollar Loan until the end of the then current Interest Period therefor, at which time it shall be automatically converted into a Base Rate Loan unless the Company shall have given the Administrative Agent notice in accordance with Section 2.02(c)(iv) hereof requesting either that such Eurodollar Loan continue as a Eurodollar Loan of such type for another Interest Period or that such Eurodollar Loan be converted into a Eurodollar Loan of another type at the end of such Interest Period. (iii) Notwithstanding anything to the contrary contained in Section 2.02(c)(i) or (ii) hereof, during an Event of Default, the Administrative Agent shall, at the direction of the Majority Banks, notify the Company that Loans may only be converted into or continued as Loans of certain specified types and, thereafter, until no Event of Default shall continue to exist, Loans may not be converted into or continued as Loans of any type other than one or more of such specified types. (iv) The Company shall give the Administrative Agent (which shall promptly notify the Banks) notice of each conversion or continuation of Loans hereunder substantially in the form of Schedule 2.02(c) hereto, which notices shall be irrevocable and effective only upon receipt by the Administrative Agent, shall specify (x) the aggregate amount and the type of the Loans to be converted or continued and (in the case of Eurodollar Loans) the duration of the Interest Period therefor, (y) the requested date of such conversion or continuation and (z) the amount and type or types of Loans into which such Loans are to be converted or as 23 which such Loans are to be continued, and shall be given not later than 11:00 a.m. New York time on the day which is not less than the number of Business Days prior to the date of such conversion or continuation into or as the type of Loans specified below: Type Number of Business Days ---- ----------------------- Base Rate Loan 0 Eurodollar Loan 3 Notwithstanding the foregoing, any notice given by the Company to the Administrative Agent under this Section 2.02(c)(iv) may be given orally by telephone and confirmed in writing within one Business Day. In the case of any discrepancies between oral and written notices received by the Administrative Agent, the oral notice shall be effective as understood in good faith by the Administrative Agent. Section 2.03 Letters of Credit. (a) Syndicated Letters of Credit. Subject to the terms and conditions hereof, TD shall issue for the account of the Company one or more letters of credit (the "Syndicated Letters of Credit"). The following provisions shall apply to the Syndicated Letters of Credit: (i) The Syndicated Letters of Credit Commitment shall be an amount equal to the lesser of (x) $60,000,000 less the aggregate amount of Reimbursement Obligations then outstanding and (y) the Total Available Commitment less the aggregate principal amount of the Loans and Reimbursement Obligations then outstanding. (ii) The Syndicated Letters of Credit (A) shall each have a minimum face amount at least equal to $25,000, (B) shall have an aggregate undrawn face amount not in excess of the Syndicated Letters of Credit Commitment, (C) shall each have a term not in excess of one year, (D) may, at the sole option of TD, be renewable, (E) shall not extend beyond the Commitment Termination Date and (F) shall be utilized for general business purposes. (iii) The Company shall give the Administrative Agent at least five Business Days' prior notice (effective upon receipt) specifying the date each Syndicated Letter of Credit is to be issued and attaching a completed form of such Syndicated Letter of Credit and a description of the nature of the transactions proposed to be supported thereby. Upon the issuance of each Syndicated Letter of Credit, the Administrative Agent shall notify each Bank of the contents thereof. (iv) Upon the date of issuance of each Syndicated Letter of Credit, TD shall be deemed, without further action by any party hereto, to have sold to each Bank, and each Bank shall be deemed, without further action by any party hereto, to have purchased from TD an undivided and continuing participation, to the extent of such Bank's Commitment Percentage, in such Syndicated Letter of Credit. (v) Upon receipt from the beneficiary of any Syndicated Letter of Credit of any demand for payment under such Syndicated Letter of Credit, TD shall promptly 24 notify the Company as to the amount to be paid as a result of such demand and the respective payment date. (vi) Each Bank shall promptly, upon demand by TD, remit to TD, through the Administrative Agent, its pro rata share of the payment made by TD together with interest thereon for each day from the day of demand through the day of payment at a rate equal to the Federal Funds Rate. TD shall promptly remit to each Bank, through the Administrative Agent, such Bank's pro rata share of any payment received by TD to the extent that such Bank has reimbursed TD in accordance with this clause (vi). (vii) The Company shall not later than noon New York time on the date of payment of each drawing, reimburse TD, through the Administrative Agent, for any amounts paid by TD under any Syndicated Letter of Credit. (viii) The Company will pay to the Administrative Agent for the account of each Bank a letter of credit fee on such Bank's Commitment Percentage of the daily average undrawn face amount of each Syndicated Letter of Credit for the period from and including the date of issuance thereof to and including the date of expiration or termination thereof at a rate per annum equal to the Applicable Margin which would then be in effect for Eurodollar Loans, such fee to be paid quarterly in arrears on each Quarterly Date. (ix) On each day during the period commencing with the issuance by TD of any Syndicated Letter of Credit and until such Syndicated Letter of Credit shall have expired or been terminated, the Commitment of each Bank shall be deemed to be utilized for all purposes hereof in an amount equal to such Bank's Commitment Percentage of the then undrawn face amount of such Syndicated Letter of Credit. (x) The issuance by TD of each Syndicated Letter of Credit shall, in addition to the conditions precedent set forth in Sections 7.01 and 7.02 hereof, be subject to the conditions precedent that such Syndicated Letter of Credit shall be completed in such form as shall be satisfactory to TD in its sole discretion and that the Company shall have executed and delivered such other instruments and agreements relating to such Syndicated Letter of Credit as TD shall have requested. (xi) Each of the parties hereto hereby agrees that the Syndicated Letters of Credit (as defined in the 1996 Agreement) issued by TD under the 1996 Agreement prior to the Effective Date, including any renewals thereof and extensions thereto, shall constitute Syndicated Letters of Credit for all purposes of this Agreement. (b) Bank Letters of Credit. Subject to the terms and conditions hereof, any Bank may from time to time in its sole discretion, upon the request of the Company, elect to issue for the account of the Company one or more letters of credit (the "Bank Letters of Credit"). The following provisions shall apply to the Bank Letters of Credit: (i) The Bank Letters of Credit (A) shall have an aggregate face amount not in excess of $10,000,000 and (B) shall not extend beyond the Commitment Termination Date. 25 (ii) Upon receipt from the beneficiary of any Bank Letter of Credit of any demand for payment under such Bank Letter of Credit, such Bank shall promptly notify the Company as to the amount to be paid as a result of such demand and the respective payment date. (iii) The Company shall immediately upon such drawing reimburse each Bank issuing a Bank Letter of Credit for any amounts paid by such Bank upon any drawing under any Bank Letter of Credit. (iv) The issuance by any Bank of each Bank Letter of Credit shall, in addition to the conditions precedent set forth in Sections 7.01 and 7.02 hereof, be subject to the conditions precedent that such Bank Letter of Credit be in such form, contain such terms and support such transactions as shall be satisfactory to such Bank and that the Company shall have executed and delivered such other instruments and agreements relating to such Bank Letter of Credit as such Bank shall have requested. (c) Reimbursement of Costs and Expenses. The Company agrees to reimburse the Administrative Agent, the Banks and TD for any costs and expenses incurred by such parties in connection with the preparation of any Syndicated Letter of Credit or Bank Letter of Credit pursuant to a notice from the Company which notice was revoked. Section 2.04 Reductions and Changes of Commitments. (a) Scheduled Reductions to Total Commitment. Subject to the adjustments described in Section 2.04(d) hereof, the Total Commitment shall be automatically reduced on each Quarterly Date falling on or nearest to the date specified in column (x) below (each such Quarterly Date, a "Scheduled Reduction Date") by the Dollar amount specified in column (y) below opposite such date (the "Reduction Amount"): (x) (y) Quarterly Date Falling on or Nearest to Reduction Amount - - ------------------------ ---------------- June 30, 2001 $23,333,333 September 30, 2001 $23,333,333 December 31, 2001 $23,333,334 March 31, 2002 $35,000,000 June 30, 2002 $35,000,000 September 30, 2002 $35,000,000 December 31, 2002 $35,000,000 March 31, 2003 $52,500,000 June 30, 2003 $52,500,000 September 30, 2003 $52,500,000 December 31, 2003 $52,500,000 March 31, 2004 $52,500,000 June 30, 2004 $52,500,000 September 30, 2004 $52,500,000 December 31, 2004 $52,500,000 26 March 31, 2005 $52,500,000 June 30, 2005 $52,500,000 September 30, 2005 $52,500,000 December 31, 2005 $52,500,000 March 31, 2006 $70,000,000 June 30, 2006 $70,000,000 September 30, 2006 $70,000,000 December 31, 2006 $70,000,000 March 31, 2007 $280,000,000 The Total Commitment shall be reduced to zero on the Commitment Termination Date. (b) Optional Reductions and Terminations. (i) The Company shall have the right to terminate or reduce the Total Commitment at any time or from time to time, provided that (A) the Company shall give notice of each such termination or reduction to the Administrative Agent at least two Business Days prior thereto, (B) each partial reduction thereof shall be in an aggregate amount at least equal to $5,000,000 and (C) the Total Commitment may not be reduced at any time to an amount less than the aggregate principal amount of the Loans and the Letter of Credit Liabilities outstanding at such time. (ii) Notwithstanding anything to the contrary in this Agreement, so long as no Default has occurred and is continuing, the Company shall have the right to reduce or terminate the Aggregate Commitment of any Bank at any time or from time to time (subject to clause (F) below) without reducing or terminating the Aggregate Commitment (or any part thereof) of any other Bank at such time, provided that (A) such reduction or termination shall be made on terms and conditions agreed upon in writing by the Company and such Bank, (B) the Company and such Bank shall have notified the Administrative Agent in writing of such reduction or termination at least two Business Days prior thereto, (C) such reduction or termination shall be made pro rata among such Bank's Commitment, such Bank's CMFRI Commitment and, if the New York/New Jersey Agreement is then in effect, such Bank's New York/New Jersey Commitment based on the relationship of each such Commitment to such Bank's Aggregate Commitment, (D) the aggregate amount of all reductions and terminations of the Aggregate Commitments of Banks made pursuant to this clause (ii) shall not exceed $420,000,000, (E) after giving effect to each reduction or termination and any prepayment of such Bank's Loans pursuant to Section 3.01(b)(iii) in connection therewith, the Total Commitment may not be less than the aggregate principal amount of the Loans and the Letter of Credit Liabilities outstanding at such time, and (F) no such reduction or termination may be made pursuant to this clause (ii) after November 18, 1999 (or such later date as is agreed in writing by the Majority Banks). (c) Special Mandatory Reductions. At any time at which the Cash Flow Ratio exceeds 5.50 to 1, the Total Commitment shall be automatically reduced upon the date of any sale, transfer or other disposition of the types permitted under Section 9.15(a)(v) hereof (other than the Kalamazoo Sale), by an amount equal to 50% of the excess of the Net Cash Proceeds thereof over all or any portion of such Net Cash Proceeds that will be used, as specified in a notice from the Company to the Administrative Agent, for an acquisition permitted under Section 9.15(b)(ii) hereof; provided, however, that if the Company or the applicable Restricted Subsidiary shall not have entered into a binding purchase agreement with respect to any such 27 acquisition on or before the date that is six months after the date of such disposition, the Total Commitment shall be automatically reduced (without duplication) on such date by an amount by equal to 50% of the entire Net Cash Proceeds of such sale, transfer or disposition; and provided further, however, that if the Company or the applicable Restricted Subsidiary shall have entered into a binding purchase agreement within six months after the date of such disposition, but does not complete such acquisition within nine months of signing such binding purchase agreement, the Total Commitment shall automatically be reduced (without duplication) on the last day of such nine-month period by an amount equal to 50% of the entire Net Cash Proceeds of such sale, transfer or disposition. (d) Adjustments to Scheduled Reduction. Upon any reduction of the Total Commitment pursuant to Section 2.04(b)(i) or (c) hereof on any date, the schedule set forth in Section 2.04(a) hereof shall be adjusted, after giving effect to any prior adjustments thereto pursuant to this Section 2.04(d), by reducing the Reduction Amount set forth in column (y) of such schedule opposite each Scheduled Reduction Date occurring after such date by an amount equal to (x) the amount of such reduction of the Total Commitment effected pursuant to Section 2.04(b)(i) or (c) hereof multiplied by (y) a fraction, the numerator of which is such Reduction Amount as then in effect and the denominator of which is the Total Commitment then in effect. (e) No Reinstatement. The Total Commitment once terminated or reduced may not be reinstated. (f) Pro Rata Treatment. Except to the extent otherwise provided herein, each reduction of the Total Commitment shall be applied to the Commitments of the Banks pro rata in accordance with their respective Commitment Percentages. Section 2.05 Commitment Fees. The Company shall pay to the Administrative Agent for the account of each Bank a commitment fee (the "Commitment Fee") (i) for the period from and including May 28, 1998 to but excluding the earlier of (x) the Effective Date and (y) June 30, 1998, on the daily average amount representing the result of (A) such Bank's Commitment minus (B) such Bank's Commitment, if any, under (and as defined in) the 1996 Agreement during such period, at a rate per annum equal to 0.1250% and (ii) for the period from and including the earlier of (x) the Effective Date and (y) June 30, 1998 to but not including the earlier of the date such Bank's Commitment is terminated and the Commitment Termination Date, on the amount of the daily average unutilized amount of such Bank's Commitment during such period, at a rate per annum equal to (A) 0.2500% at any time at which the Cash Flow Ratio is greater than or equal to 5.50 to 1 and (B) 0.1875% at any time at which the Cash Flow Ratio is less than 5.50 to 1. For purposes of calculating the Commitment Fee, the Commitment of each Bank shall be deemed to be utilized in an amount equal to (i) the aggregate outstanding principal amount of such Bank's Loans plus (ii) such Bank's Commitment Percentage multiplied by the aggregate amount of Letter of Credit Liabilities. Accrued Commitment Fees under this Section 2.05 shall be payable in arrears on each Quarterly Date. Section 2.06 Notes. (a) Form of Notes. The Loans made by each Bank shall be evidenced by a single Note of the Company, in substantially the form of Exhibit A hereto, dated the Effective Date and payable to the order of such Bank in a principal amount equal to its Commitment, as originally in effect, and otherwise duly completed. Each Bank that is a 1996 28 Bank shall deliver its Notes (as defined in the 1996 Agreement), marked "canceled", to the Company on or promptly after the Effective Date. (b) Endorsements. Each Bank is hereby authorized by the Company to endorse on a schedule attached to the Note of such Bank (or any continuation thereof) the amount and date of each Loan made by such Bank to the Company hereunder, and the amount of each payment on account of principal of such Loan received by such Bank, provided that any failure by such Bank to make any such endorsement shall not affect the obligations of the Company under such Note or hereunder in respect of such Loans. Section 2.07 Lending Offices. The Loans of each type made by each Bank shall be made and maintained at such Bank's Applicable Lending Office set forth on Schedule 2.07 for Loans of such type. Section 2.08 Several Obligations; Remedies Independent. The failure of any Bank to make any Loan to be made by it on the date specified therefor shall not relieve any other Bank of its obligation to make its Loan on such date, but neither the Administrative Agent nor any Bank shall be responsible for the failure of any other Bank to make a Loan to be made by such other Bank. The amounts payable by the Company at any time hereunder and under the Notes to each Bank shall be a separate and independent debt and each Bank shall, subject to Section 10.01 hereof, be entitled to protect and enforce its rights arising out of this Agreement and the Notes, and it shall not be necessary for any other Bank or the Administrative Agent to consent to, or be joined as an additional party in, any proceedings for such purposes. Section 2.09 Use of Proceeds. The proceeds of the Loans made hereunder shall be used only for the general business purposes of the Company and the Restricted Subsidiaries and for any transaction or activity in which the Company and the Restricted Subsidiaries are permitted to engage under the provisions of this Agreement. The proceeds of any extension of credit hereunder shall not be used in violation of the provisions of Section 8.07 hereof. ARTICLE III PAYMENTS OF PRINCIPAL AND INTEREST Section 3.01 Prepayments. (a) Optional Prepayments. The Company may, at any time and from time to time (subject, in the case of Eurodollar Loans, to Section 5.05 hereof), prepay Base Rate Loans on any Business Day if prior notice is given to the Administrative Agent before 11:00 a.m. New York time on such day (and if such notice is received by the Administrative Agent after 11:00 a.m. New York time, on the next succeeding Business Day), and Eurodollar Loans upon not less than three Business Days' prior notice to the Administrative Agent (and the Administrative Agent shall promptly notify the Banks in each case of such notice), which notice shall specify the prepayment date (which shall be a Business Day) and the amount of the prepayment (which shall be not less than $5,000,000), and shall be irrevocable and effective only upon receipt by the Administrative Agent, provided that, in the case of Eurodollar Loans, interest on the principal prepaid, accrued to the prepayment date, shall be paid on the prepayment date. 29 (b) Mandatory Prepayments. (i) The Company shall, in the event of any reduction of the Total Commitment that reduces the Total Available Commitment to an amount less than the outstanding undrawn face amount of the Syndicated Letters of Credit, cause the respective beneficiaries of such Syndicated Letters of Credit to reduce such undrawn face amount to an amount not greater than the amount of the Total Available Commitment as so reduced. If such reduction is not promptly effected, the Company shall upon demand by the Majority Banks pay to the Administrative Agent an amount in immediately available funds equal in the aggregate to the undrawn face amount of the Syndicated Letters of Credit in excess of the Total Available Commitment as so reduced to be held by the Administrative Agent in a cash collateral account as collateral for the prompt payment and performance when due of the Company's Obligations under such Syndicated Letters of Credit. (ii) The Company shall, upon (A) the incurrence, issuance or sale of any Permitted Debt permitted under Section 9.11(iii) hereof, prepay Loans in an amount equal to the Net Cash Proceeds of such Permitted Debt or (B) any sale, transfer or other disposition permitted under Section 9.15(a)(v) hereof (other than the Kalamazoo Sale), prepay Loans in an amount equal to 50% of the Net Cash Proceeds thereof. Amounts prepaid pursuant to this clause (ii) may be reborrowed in accordance with the provisions of this Agreement, provided that, notwithstanding anything in this Agreement to the contrary, amounts prepaid from any sale, transfer or other disposition pursuant to clause (B) above may be reborrowed by the Company solely for the purpose of effecting acquisitions permitted under Section 9.15(b)(ii) hereof and solely to the extent that such disposition has not resulted in a mandatory reduction of the Total Commitment pursuant to the provisos to Section 2.04(c) hereof. (iii) On the date of any reduction or termination of any Bank's Aggregate Commitment pursuant to Section 2.04(b)(ii), the Company shall repay such Bank's Loans and Reimbursement Obligations in an aggregate amount such that, after giving effect to such reduction or termination and such repayment, the respective aggregate outstanding amounts of such Bank's Loans and Reimbursement Obligations shall equal such Bank's Commitment Percentage of the respective amounts of all outstanding Loans and Reimbursement Obligations. Each repayment required by this Section 3.01(b)(iii) shall be applied pro rata among each type of Loan held by such Bank. The requirements of Section 4.02 shall not apply to any payment made by the Company pursuant to this clause (iii). Section 3.02 Repayment of Loans. On each Scheduled Reduction Date, the Company shall pay to the Administrative Agent for the account of the Banks the excess, if any, of (i) the aggregate principal amount of the Loans, together with the Letter of Credit Liabilities, outstanding on such Scheduled Reduction Date over (ii) the Total Available Commitment (after giving effect to any termination or reduction of the Total Commitment pursuant to Section 2.04(a) hereof) on such Scheduled Reduction Date, together with interest thereon accrued to such Scheduled Reduction Date and any amounts payable pursuant to Section 5.05 hereof in connection therewith. Section 3.03 Interest. (a) The Company hereby promises to pay to the Administrative Agent for the account of each Bank interest on the unpaid principal amount of each Loan made by such Bank for the period commencing on the date of such Loan to but excluding the date such Loan shall be paid in full, at the following rates per annum: 30 (i) if such Loan is a Base Rate Loan, the Base Rate plus the Applicable Margin; and (ii) if such Loan is a Eurodollar Loan, the Eurodollar Rate for such Loan for the Interest Period therefor plus the Applicable Margin. Notwithstanding the foregoing, the Company hereby promises to pay to the Administrative Agent for the account of each Bank interest at the applicable Post-Default Rate on any principal of any Loan made by such Bank, and on any other amount (including, without limitation, any Reimbursement Obligation and any obligation of the Company in respect of any Bank Letter of Credit) payable by the Company hereunder to or for the account of such Bank (but, if such amount is interest, only to the extent legally enforceable), which shall not be paid in full when due (whether at stated maturity, by acceleration or otherwise), for the period commencing on the due date thereof until the same is paid in full. (b) Accrued interest on each Loan shall be payable (i) on the last day of each Interest Period for such Loan (and, if such Interest Period is longer than three months (in the case of a Eurodollar Loan), on each three-month anniversary of the first day of such Interest Period), (ii) in the case of a Eurodollar Loan, when such Loan shall be converted or be due by reason of prepayment and (iii) when such Loan shall be due at maturity or by reason of acceleration or otherwise (other than by reason of prepayment), except that interest payable at the Post-Default Rate shall be payable from time to time on demand of the Administrative Agent, the Majority Banks or any Bank in respect of its Bank Letter of Credit. Promptly after the determination of any interest rate provided for herein or any change therein, the Administrative Agent shall notify the Banks and the Company thereof. ARTICLE IV PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC. Section 4.01 Payments. Except to the extent otherwise provided herein, all payments of principal, interest and other amounts to be made by the Company hereunder and under the Notes shall be made in Dollars, in immediately available funds, to the Administrative Agent not later than 11:00 a.m. New York time on the date on which such payment shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day). The Administrative Agent, or any Bank for whose account any such payment is made, may (but shall not be obligated to) debit the amount of any such payment which is not made by such time to any ordinary deposit account of the Company with the Administrative Agent or such Bank, as the case may be. The Company shall, at the time of making each payment hereunder or under any Note, specify to the Administrative Agent the Loans or other amounts payable by the Company hereunder to which such payment is to be applied (but in the event that the Company fails to so specify, or if an Event of Default has occurred and is continuing, the Administrative Agent may apply such payment as it may elect in its sole discretion, but subject to Section 4.02 hereof). Each payment received by the Administrative Agent hereunder or under any Note for the account of a Bank shall be paid promptly to such Bank, in immediately available funds, for the account of such Bank's Applicable Lending Office for the Loan in respect of which such payment is made. 31 Section 4.02 Pro Rata Treatment. Except to the extent otherwise provided herein: (a) subsequent to the initial borrowing hereunder, the Loans shall be made by the Banks pro rata according to their respective Commitment Percentages; (b) each payment by the Company of principal of the Loans shall be made to the Administrative Agent for the account of the Banks pro rata in accordance with the respective unpaid principal amounts of such Loans held by the Banks plus such Banks' respective Commitment Percentages of outstanding Letter of Credit Liabilities; (c) each payment by the Company of interest on the Loans of a particular type shall be made to the Administrative Agent for the account of the Banks holding Loans of such type pro rata in accordance with the respective unpaid principal amounts of such Loans held by such Banks; and (d) each payment of the Commitment Fee shall be made for the account of the Banks pro rata in accordance with their respective Commitment Percentages. In no event shall the Company at any time be entitled to request or receive any Loans or Syndicated Letters of Credit if, after giving effect to the making or issuance thereof and the application of the proceeds thereof, the amount of any Bank's Loans plus its Letter of Credit Liabilities would exceed such Bank's Commitment Percentage of the aggregate amount of Loans plus Letter of Credit Liabilities of all Banks outstanding at such time. Section 4.03 Computations. Interest on Eurodollar Loans, the Commitment Fee and fees in respect of Syndicated Letters of Credit shall be computed on the basis of a year of 360 days and actual days elapsed (including the first day but excluding the last day) occurring in the period for which payable, and interest on Base Rate Loans shall be computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed (including the first day but excluding the last day) occurring in the period for which payable, except that all interest determined on the basis of the Post-Default Rate shall be computed on the basis of a year of 360 days and actual days elapsed (including the first day but excluding the last day). Section 4.04 Non-Receipt of Funds by Administrative Agent. Unless the Administrative Agent shall have been notified by a Bank or the Company (the "Payor") prior to the date on which such Bank is to make payment to the Administrative Agent of the proceeds of a Loan to be made by it hereunder (or the purchase of a participation by such Bank in a Syndicated Letter of Credit) or the Company is to make a payment to the Administrative Agent for the account of one or more of the Banks, as the case may be (such payment being herein called the "Required Payment"), which notice shall be effective upon receipt, that the Payor does not intend to make the Required Payment to the Administrative Agent, the Administrative Agent may assume that the Required Payment has been made and may, in reliance upon such assumption (but shall not be required to), make the amount thereof available to the intended recipient on such date and, if the Payor has not in fact made the Required Payment to the Administrative Agent, the recipient of such payment if the Company or a Bank (and, if such recipient is the Company or the beneficiary of a Syndicated Letter of Credit and the Company fails to pay the amount thereof to the Administrative Agent forthwith upon such demand, the Payor) shall, on demand, pay to the Administrative Agent the amount made available to it together with interest thereon in respect of the period commencing on the date such amount was so made available by the Administrative Agent until the date the Administrative Agent recovers such amount at the Federal Funds Rate. Section 4.05 Sharing of Payments, Etc. Each of the Company and the Guarantors agrees that, in addition to (and without limitation of) any right of set-off, banker's lien or 32 counterclaim a Bank may otherwise have, each Bank shall be entitled, at its option, to offset balances held by it for account of the Company or any Restricted Subsidiary at any of its offices, in Dollars or in any other currency, against any principal of or interest on any of such Bank's Loans hereunder, or any Reimbursement Obligation or obligations then outstanding in respect of Bank Letters of Credit held by such Bank hereunder, which is not paid when due (regardless of whether such balances are then due to the Company or such Guarantor), in which case it shall promptly notify the Company and the Administrative Agent thereof, provided that such Bank's failure to give such notice shall not affect the validity thereof. If a Bank shall obtain payment of any principal of or interest on any Loan made by it to the Company under this Agreement, or on any Reimbursement Obligation or obligations then outstanding in respect of Bank Letters of Credit held by such Bank hereunder, through the exercise of any right of set-off, banker's lien, counterclaim or similar right, or otherwise, and, as a result of such payment, such Bank shall have received a greater percentage of the amounts then due hereunder by the Company to such Bank than the percentage received by other Banks, it shall promptly purchase from such other Banks participations in the Loans made, or Reimbursement Obligations or obligations then outstanding in respect of Bank Letters of Credit held, by such other Banks in such amounts, and make such other adjustments from time to time as shall be equitable to the end that all the Banks shall share the benefit of such excess payment (net of any expense which may be incurred by such Bank in obtaining or preserving such excess payment) pro rata in accordance with the unpaid principal and interest on the Loans and Reimbursement Obligations or obligations then outstanding in respect of Bank Letters of Credit held by each of the Banks. To such end all the Banks shall make appropriate adjustments among themselves (by the resale of participations sold or otherwise) if such payment is rescinded or must otherwise be restored. Each of the Company and the Guarantors agrees that any Bank so purchasing a participation in the Loans made, or Reimbursement Obligations or obligations then outstanding in respect of Bank Letters of Credit held, by other Banks may exercise all rights of set-off, banker's lien, counterclaim or similar rights with respect to such participation as fully as if such Bank were a direct holder of Loans in the amount of such participation. Nothing contained herein shall require any Bank to exercise any such right or shall affect the right of any Bank to exercise, and retain the benefits of exercising, any such right with respect to any other indebtedness or obligation of the Company or any other Guarantor. If under any applicable bankruptcy, insolvency or other similar law, any Bank receives a secured claim in lieu of a set-off to which this Section 4.05 applies, such Bank shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Banks entitled under this Section 4.05 to share in the benefits of any recovery on such secured claim. Section 4.06 Commercial Practices in Respect of Letters of Credit. Without affecting any rights the Banks may have under applicable law (including under the UCP), the Company agrees that none of the Banks, the Administrative Agent, nor any of their respective officers or directors shall be liable or responsible for, and the obligations of the Company to the Banks, and the Administrative Agent hereunder shall not in any manner be affected by: (i) the use which may be made of any Syndicated Letter of Credit or Bank Letter of Credit or the proceeds thereof by the beneficiary thereof or any other Person; (ii) the validity, sufficiency or genuineness of documents other than the Syndicated Letters of Credit or Bank Letters of Credit, or of any endorsement(s) thereon, even if such documents should, in fact, prove to be in any or all respects, invalid, insufficient, fraudulent or forged; or (iii) any other circumstances whatsoever in making or failing to make payment under any Syndicated Letter of Credit or Bank Letter of 33 Credit, except that the Company shall have a claim against a Bank, and such Bank shall be liable to the Company, to the extent, but only to the extent, of any direct, as opposed to consequential, damages suffered by the Company which are caused by such Bank's willful misconduct or gross negligence in determining whether documents presented under any Syndicated Letter of Credit or Bank Letter of Credit complied with the terms of such Syndicated Letter of Credit or Bank Letter of Credit or such Bank's willful failure to pay under such Syndicated Letter of Credit or Bank Letter of Credit after the presentation to it of documents strictly complying with the terms and conditions of such Syndicated Letter of Credit or Bank Letter of Credit. In furtherance and not in limitation of the foregoing, any Bank may accept documents that appear on their face to be in order without responsibility for further investigation, regardless of any notice or information to the contrary. Section 4.07 No Reductions. All payments due to the Administrative Agent or any Bank under this Agreement shall be made by the Company without any reduction or deduction whatsoever, including any reduction or deduction for any set-off, recoupment, counterclaim or Tax, except, subject to Section 4.08, for any withholding or deduction for Taxes required to be withheld or deducted under applicable law. Section 4.08 Taxes. (a) Taxes Payable by the Company. If under applicable law any Tax is required to be withheld or deducted from, or is otherwise payable by the Company in connection with, any payment to the Administrative Agent or any Bank under this Agreement, the Company shall, subject to Section 4.08(b), pay to the Administrative Agent or such Bank, as applicable, such additional amounts as may be necessary so that the net amount received by the Administrative Agent or such Bank with respect to such payment, after withholding or deducting all Taxes required to be withheld or deducted, is equal to the full amount payable under this Agreement. (b) Limitations . Notwithstanding anything to the contrary contained herein, the Company shall not be required to pay any additional amount in respect of withholding of United States Federal income taxes pursuant to this Section 4.08 to any Bank except to the extent (A) such Taxes are required to be withheld solely as a result of (1) in the case of a person that is a Bank on the Effective Date, a Regulatory Change enacted after the Effective Date and (2) in the case of a Person that becomes a Bank after the Effective Date, a Regulatory Change enacted after such Person becomes a Bank, and (B) such Bank has not failed to submit any form or certificate that it is entitled to so submit under applicable law. (c) Exemption from U.S. Withholding Taxes . There shall be submitted to the Company and the Administrative Agent, (A) on or before the first date that interest or fees are payable to such Bank under this Agreement, (1) if at the time the same are applicable, (aa) by each Bank that is not a United States Person, two duly completed and signed copies of Internal Revenue Service Form 1001 or 4224 (or any successor form to the applicable form), in either case entitling such Bank to a complete exemption from withholding of any United States federal income taxes on all amounts to be received by such Bank under this Agreement, or (bb) by each Bank that is a Non-US Bank, (x) a duly completed Internal Revenue Service Form W-8 (or any successor form to such form) and (y) a certification in the form of Schedule 4.08(c) that such Bank is a Non-US Bank or (2) if at the time any of the foregoing are inapplicable, duly completed and signed copies of such form, if any, as entitles such Bank to exemption from 34 withholding of United States federal income taxes to the maximum extent to which such Bank is then entitled under applicable law, and (B) from time to time thereafter, prior to the expiration or obsolescence of any previously delivered form or upon any previously delivered form becoming inaccurate or inapplicable, such further duly completed and signed copies of such form, if any, as entitles such Bank to exemption from withholding of United States federal income taxes to the maximum extent to which such Bank is then entitled under applicable law. Each Bank shall promptly notify the Company and the Administrative Agent if (A) it is required to withdraw or cancel any form or certificate previously submitted by it or any such form or certificate has otherwise become ineffective or inaccurate or (B) payments to it are or will be subject to withholding of United States federal income taxes to a greater extent than the extent to which payments to it were previously subject. Upon the request of the Company or the Administrative Agent, each Bank that is a United States Person shall from time to time submit to the Company and the Administrative Agent a certificate to the effect that it is such a United States Person and a duly completed Internal Revenue Service Form W-9 (or a successor form to such form). ARTICLE V YIELD PROTECTION AND ILLEGALITY Section 5.01 Additional Costs in Respect of Loans. (a) The Company shall pay to the Administrative Agent for the account of each Bank from time to time such amounts as such Bank may determine to be necessary to compensate it for any costs incurred by such Bank which such Bank determines are attributable to its making or maintaining any Eurodollar Loans hereunder or its commitment to make such Eurodollar Loans hereunder, or any reduction in any amount receivable by such Bank hereunder in respect of such Eurodollar Loans or such obligation (such increases in costs and reductions in amounts receivable being herein called "Additional Costs"), resulting from any Regulatory Change which: (i) changes the basis of taxation of any amounts payable to such Bank under this Agreement or its Note in respect of such Eurodollar Loans (other than taxes imposed on the overall net income of such Bank or of its Applicable Lending Office for such Eurodollar Loans by the jurisdiction in which such Bank has its principal office or such Applicable Lending Office); or (ii) imposes or modifies any reserve, special deposit, minimum capital, capital ratio or similar requirements relating to any extensions of credit or other assets of, or any deposits with or other liabilities of, such Bank (including such Eurodollar Loans or any deposits referred to in the definition of "Eurodollar Base Rate" in Section 1.01 hereof), or any commitments of such Bank; or (iii) imposes any other condition affecting this Agreement or the Commitment of such Bank (or any of such extensions of credit or liabilities). Each Bank will notify the Company through the Administrative Agent of any event which will entitle such Bank to compensation pursuant to this Section 5.01(a) as promptly as practicable after it obtains knowledge thereof and determines to request such compensation, and (if so 35 requested by the Company through the Administrative Agent) will designate a different Applicable Lending Office for the Loans of such Bank affected by such event if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the sole opinion of such Bank, be disadvantageous to such Bank, provided that the Company shall not be obligated to compensate any Bank under this Section 5.01(a) for any Additional Costs incurred more than six months prior to the date the respective Bank requests the Company for such compensation, except for periods preceding such date but which are after the date such Bank notified the Company of the possibility that such Additional Costs might be incurred as a result of the respective Regulatory Change. Each Bank will furnish the Company with a statement setting forth the basis and amount of each request by such Bank for compensation under this Section 5.01(a). If any Bank requests compensation from the Company under this Section 5.01(a), the Company may, by notice to such Bank through the Administrative Agent, require that such Bank's Loans of the type with respect to which such compensation is requested be converted into Base Rate Loans in accordance with Section 5.04 hereof. (b) Without limiting the effect of the foregoing provisions of this Section 5.01, in the event that, by reason of any Regulatory Change, any Bank either (i) incurs Additional Costs based on or measured by the excess above a specified level of the amount of a category of deposits or other liabilities of such Bank which includes deposits by reference to which the interest rate on any Eurodollar Loans is determined as provided in this Agreement or a category of extensions of credit or other assets of such Bank which includes any Eurodollar Loans or (ii) becomes subject to restrictions on the amount of such a category of liabilities or assets which it may hold, then, if such Bank so elects by notice to the Company (with a copy to the Administrative Agent), the obligation of such Bank to make, and to convert Loans of any other type into, Loans of such type hereunder shall be suspended until the date such Regulatory Change ceases to be in effect. (c) Without limiting the effect of the foregoing provisions of this Section 5.01 (but without duplication), the Company shall pay directly to each Bank from time to time on request such amounts as such Bank may determine to be necessary to compensate such Bank for Capital Maintenance Costs with respect to its Loans or Commitment (such compensation to include, without limitation, an amount equal to any reduction of the rate of return on assets or equity of such Bank to a level below that which such Bank could have achieved but for such law, regulation, interpretation, directive or request). Each Bank will notify the Company that it is entitled to compensation pursuant to this Section 5.01(c) as promptly as practicable after it determines to request such compensation, provided that the Company shall not be obligated to compensate any Bank under this Section 5.01(c) for any such costs incurred more than six months prior to the date the respective Bank requests the Company for such compensation, except for periods preceding such date but which are after the date such Bank notified the Company of the possibility that such costs might be incurred. (d) Determinations by any Bank for purposes of this Section 5.01 of the effect of any Regulatory Change on its costs of making or maintaining Loans or maintaining its Commitment or on amounts receivable by it in respect of Loans or its Commitment, and of the additional amounts required to compensate such Bank in respect of any Additional Costs, shall be conclusive, provided that such determinations are made on a reasonable basis. 36 Section 5.02 Limitation on Types of Loans. Anything herein to the contrary notwithstanding, if, with respect to any Eurodollar Loans: (a) the Administrative Agent determines (which determination shall be conclusive) that quotations of interest rates for the relevant deposits referred to in the definition of "Eurodollar Base Rate" in Section 1.01 hereof are not being provided in the relevant amounts or for the relevant maturities for purposes of determining the rate of interest for such Loans as provided in this Agreement; or (b) the Majority Banks determine (which determination shall be conclusive) and notify the Administrative Agent that the relevant rates of interest referred to in the definition of "Eurodollar Base Rate" in Section 1.01 hereof upon the basis of which the rates of interest for such Eurodollar Loans are to be determined do not adequately cover the cost to such Banks of making or maintaining such Loans; then the Administrative Agent shall promptly notify the Company and each Bank thereof, and so long as such condition remains in effect, the Banks shall be under no obligation to make Eurodollar Loans of the affected type. Section 5.03 Illegality. Notwithstanding any other provision of this Agreement to the contrary, in the event that it becomes unlawful for any Bank or its Applicable Lending Office to (a) honor its obligation to make Eurodollar Loans hereunder, or (b) maintain Eurodollar Loans hereunder, then such Bank shall promptly notify the Company thereof through the Administrative Agent (which notice shall include a statement explaining the nature of such unlawfulness) and such Bank's obligation to make Eurodollar Loans shall be suspended until such time as such Bank may again make and maintain Eurodollar Loans and such Bank's outstanding Eurodollar Loans shall be converted into Base Rate Loans in accordance with Section 5.04 hereof. Section 5.04 Certain Conversions of Loans Pursuant to Section 5.01 or 5.03. If the obligation of any Bank to make any type of Eurodollar Loans shall be suspended pursuant to Section 5.01 or 5.03 hereof (Loans of such type being herein called "Affected Loans" and such type being herein called the "Affected Type"), all Loans which would otherwise be made by such Bank as Loans of the Affected Type shall be made instead as Base Rate Loans (and, if an event referred to in Section 5.01 or 5.03 hereof has occurred and such Bank determines that it is required to convert such Loans, then, by notice to the Company with a copy to the Administrative Agent, all Affected Loans of such Bank then outstanding shall be automatically converted into Base Rate Loans on the date specified by such Bank in such notice) and, to the extent that Affected Loans are so made as (or converted into) Base Rate Loans, all payments of principal which would otherwise be applied to such Bank's Affected Loans shall be applied instead to its Base Rate Loans. Section 5.05 Compensation. (a) The Company shall pay to the Administrative Agent for the account of each Bank, upon the request of such Bank through the Administrative Agent, such amount or amounts as shall be sufficient (in the reasonable opinion of such Bank) to compensate it for any loss, costs or expense incurred by it as a result of: 37 (i) any payment, prepayment or conversion of a Eurodollar Loan made by such Bank for any reason (including, without limitation, the acceleration of the Loans pursuant to Article X hereof) on a date other than the last day of an Interest Period for such Loan; or (ii) any failure by the Company for any reason (including, without limitation, the failure of any of the conditions precedent specified in Article VII hereof to be satisfied) to borrow or convert a Eurodollar Loan to be made by such Bank on the date for such borrowing specified in the relevant notice of borrowing under Section 2.02 hereof. (b) Such compensation shall include Funding Costs in the case of any payment, prepayment or conversion of, or failure to borrow or convert, any Loan made or to be made as a Eurodollar Loan. Section 5.06 Additional Costs in Respect of Letters of Credit. If as a result of any Regulatory Change there shall be imposed, modified or deemed applicable any Tax, reserve, special deposit, Capital Maintenance Costs or other requirements against or with respect to or measured by reference to Syndicated Letters of Credit or Bank Letters of Credit issued or to be issued by any Bank hereunder or participated in by a Bank party to this Agreement on the Effective Date, and the result shall be to increase the cost to such Bank of issuing or maintaining any Syndicated Letters of Credit or Bank Letters of Credit hereunder or to such Bank party to this Agreement on the Effective Date participating therein, or reduce any amount receivable by such Bank hereunder in respect of any Syndicated Letters of Credit or Bank Letters of Credit (which increase in cost, or reduction in amount receivable, shall be the result of such Bank's reasonable allocation of the aggregate of such increases or reductions resulting from such event), then, upon demand by such Bank, the Company agrees to pay immediately to such Bank, such additional amounts as such Bank from time to time specifies as necessary to compensate such Bank for such increased costs or reductions in the amounts incurred by such Bank, all as set forth in a statement submitted to the Company, which statement shall be conclusive provided that such costs or reductions are determined on a reasonable basis; any such statement shall set forth the basis for the respective calculation. Section 5.07 Replacement of Banks. If any Bank requests compensation pursuant to Section 5.01 or 5.06, or such Bank's obligation to make or continue, or to convert Loans of any other type into, any type of Eurodollar Loan shall be suspended pursuant to Section 5.02 or 5.03, or if an event occurs that entitles such Bank to make a claim pursuant to Section 4.08, the Company, upon three Business Days' notice to the Administrative Agent and such Bank, may require that such Bank transfer all of its right, title and interest under this Agreement, the CMFRI Agreement and the New York/New Jersey Agreement and such Bank's Note issued hereunder and its notes issued under the CMFRI Agreement and the New York/New Jersey Agreement to any bank or financial institution identified by the Company with the consent of the Administrative Agent (which consent shall not be unreasonably withheld), such assignment to be made pursuant to an Assignment and Acceptance Agreement substantially in the form of Exhibit H hereto (an "Assignment and Acceptance") (a) if such proposed transferee agrees to assume all of the obligations of such Bank hereunder, under the CMFRI Agreement and under the New York/New Jersey Agreement for consideration equal to the aggregate outstanding principal 38 amount of such Bank's Loans, CMFRI Loans and New York/New Jersey Loans, together with interest thereon to the date of such transfer, and satisfactory arrangements are made for payment to such Bank of all other amounts payable hereunder, under the CMFRI Agreement and under the New York/New Jersey Agreement to such Bank on or prior to the date of such transfer (including the amounts so requested pursuant to Section 5.01 or 5.06 or so entitled to be claimed pursuant to Section 4.08, any fees accrued hereunder and any amounts that would be payable under Section 5.05 as if all of such Bank's Loans were being prepaid in full on such date) and (b) if such Bank being replaced has requested compensation pursuant to Section 5.01 or 5.06 or is entitled to make a claim pursuant to Section 4.08, such proposed transferee's aggregate requested compensation, if any, pursuant to Section 5.01 or 5.06, or the amounts, if any, entitled to be claimed by such proposed transferee pursuant to Section 4.08, with respect to such replaced Bank's Loans would be lower than that of the Bank replaced. Without prejudice to the survival of any other agreement of the Company hereunder, the agreements of the Company contained in Sections 4.08, 5.01, 5.06, 12.03 and 12.04 (without duplication of any payments made to such Bank by the Company or the proposed transferee) shall survive for the benefit of any Bank replaced under this Section 5.07 with respect to the time prior to such replacement. ARTICLE VI GUARANTEE (a) Each of the Guarantors hereby, jointly and severally, unconditionally guarantees to the Banks and the Administrative Agent and their respective successors and assigns and the subsequent holders of the Notes, irrespective of the validity and enforceability of this Agreement or the Notes or the obligations of the Company or any of the other Guarantors hereunder or thereunder or any other circumstance that might otherwise affect the liability of a guarantor, that: (i) the principal of and interest on the Loans, the Notes, the Reimbursement Obligations and the obligations of the Company in respect of Bank Letters of Credit and all other obligations of the Company and the other Guarantors to the Banks or the Administrative Agent under this Agreement and the Notes will be promptly paid in full when due, whether at stated maturity, by acceleration or otherwise, in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, the same will be promptly paid in full when due in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed for whatever reason, the Guarantors will be obligated, jointly and severally, to pay the same immediately. (b) Each of the Guarantors hereby waives notice of, and consents to, any extensions of time of payment, renewals, releases of or delays in obtaining or realizing upon or failures to obtain or realize upon any collateral for the obligations of the Company or the other Guarantors under this Agreement, or other indulgence from time to time granted by any of the Banks or the Administrative Agent in respect of the Notes or this Agreement. Each of the Guarantors hereby releases the Company from all, and agrees not to assert or enforce (whether by or in a legal or equitable proceeding or otherwise) any, "claims" (as defined in section 101(5) of the Bankruptcy Code) against the Company, whether arising under applicable law or otherwise, to which such Guarantors are or would be entitled by virtue of their obligations 39 hereunder, any payment made pursuant hereto, or the exercise by the Administrative Agent or the Banks of their rights with respect to any collateral for the obligations of the Company or the other Guarantors under this Agreement, including any such claims to which such Guarantors may be entitled as a result of any right of subrogation, exoneration or reimbursement in each case to the extent, but only to the extent, that such Guarantor would be deemed a "creditor" of the Company for purposes of Section 547 of the Bankruptcy Code solely by reason of such Guarantor's holding or asserting such claim. To the extent not released by the Guarantors under this Article VI, each of the Guarantors agrees that it shall not be entitled to any right of subrogation, exoneration, reimbursement or contribution in respect of any obligations guaranteed hereby until payment in full of all the Obligations. With respect to the Notes and this Agreement, each of the Guarantors hereby waives presentment, protest, demand of payment, notice of dishonor and all other notices and demands whatsoever. Each of the Guarantors further agrees that, as between such Guarantor, on the one hand, and the Administrative Agent and the Banks, on the other hand, (i) the maturity of the obligations guaranteed hereby may be accelerated as provided in Section 10.01 hereof for the purposes of this guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (ii) in the event of any declaration of acceleration of such obligations as provided in Section 10.01 hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by each of the Guarantors for the purpose of this guarantee. The obligations of each of the Guarantors under this Article VI shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the Company is rescinded or must be otherwise restored by any holder of any of the obligations guaranteed hereunder, whether as a result of any proceedings in bankruptcy or reorganization or otherwise and each of the Guarantors agrees that it will indemnify the Banks and the Administrative Agent on demand for reasonable costs and expenses (including, without limitation, fees of counsel) incurred by the Banks or the Administrative Agent in connection with such rescission or restoration. (c) It is the intention of the Guarantors, the Banks and the Company that the obligations of each Guarantor hereunder shall be in, but not in excess of, the maximum amount permitted by applicable law. To that end, but only to the extent such obligations would otherwise be avoidable, the obligations of each Guarantor hereunder shall be limited to the maximum amount that, after giving effect to the incurrence thereof, would not render such Guarantor insolvent or unable to make payments in respect of any of its indebtedness as such indebtedness matures or leave such Guarantor with an unreasonably small capital. The need for any such limitation shall be determined, and any such needed limitation shall be effective, at the time or times that such Guarantor is deemed, under applicable law, to incur the Obligations hereunder. Any such limitation shall be apportioned amongst the Obligations pro rata in accordance with the respective amounts thereof. This paragraph is intended solely to preserve the rights of the Banks under this Agreement to the maximum extent permitted by applicable law, and neither the Guarantors, the Company nor any other Person shall have any right under this paragraph that it would not otherwise have under applicable law. The Company and each Guarantor agree not to commence any proceeding or action seeking to limit the amount of the obligation of such Guarantor under this Article VI by reason of this paragraph. For the purposes of this paragraph, "insolvency", "unreasonably small capital" and "unable to make payments in respect of any of its indebtedness as such indebtedness matures" shall be determined in accordance with applicable law. 40 ARTICLE VII CONDITIONS PRECEDENT Section 7.01 Initial Loan or Syndicated Letter of Credit. The obligation of each Bank to make the initial extension of credit hereunder is subject to the satisfaction of the following conditions precedent on or prior to the date of such initial extension of credit but in any event no later than June 30, 1998: (a) Execution and Notes. This Agreement shall have been duly executed and delivered by each of the Company, the Guarantors, the Banks and the Administrative Agent, and the Company shall have executed and delivered to each Bank its respective Note evidencing the Loans to be made by such Bank hereunder. (b) Signatures. Each of the Company and the Restricted Subsidiaries shall have certified to the Administrative Agent (with copies to be provided for each Bank) the name and signature of each of the persons authorized (i) to sign on its respective behalf this Agreement and, in the case of the Company, the Notes and (ii) in the case of the Company, to borrow under this Agreement. The Banks may conclusively rely on such certifications until they receive notice in writing from the Company or such Restricted Subsidiary, as the case may be, to the contrary. (c) Proof of Action. The Administrative Agent shall have received certified copies of all necessary action taken by each of the Company and the Restricted Subsidiaries to authorize the execution, delivery and performance of this Agreement and, in the case of the Company, the Notes. (d) Opinions of Counsel to the Company and the Restricted Subsidiaries. The Administrative Agent shall have received opinions of: (i) Robert Lemle, Esq., General Counsel to the Company and the Restricted Subsidiaries, substantially in the form of Exhibit E hereto; (ii) Sullivan & Cromwell, special New York counsel to the Company and the Restricted Subsidiaries, substantially in the form of Exhibit F(1) hereto; (iii) Schenk, Price, Smith & King, special New Jersey counsel to the Company and the Restricted Subsidiaries, substantially in the form of Exhibit F(2) hereto; and (iv) Piper & Marbury, special FCC counsel to the Company and the Restricted Subsidiaries, substantially in the form of Exhibit F(3) hereto; and covering such other matters as any Bank or Banks or special New York counsel to the Administrative Agent, Winthrop, Stimson, Putnam & Roberts, may reasonably request (and for purposes of such opinions such counsel may rely upon 41 opinions of counsel in other jurisdictions, provided that such other counsel are satisfactory to special counsel to the Administrative Agent and such other opinions state that the Banks are entitled to rely thereon). (e) Opinion of Banks' Counsel. Each Bank shall have received an opinion of Winthrop, Stimson, Putnam & Roberts, special New York counsel to the Administrative Agent, substantially in the form of Exhibit G hereto and covering such other matters as any Bank or Banks may reasonably request. (f) Funding Adjustment. The Company shall have made arrangements satisfactory to the Administrative Agent such that, after giving effect to the initial extension of credit hereunder, (i) the outstanding Loans hereunder shall be made by the Banks pro rata in accordance with their respective Commitment Percentages and (ii) the Loans (as defined in the 1996 Agreement) and all other amounts owing under the 1996 Agreement to any Bank (as defined in the 1996 Agreement) which is not a Bank hereunder shall have been repaid in full. (g) Subscribers' Certificate. The Administrative Agent shall have received the most recent Subscribers' Certificate required to be delivered under the 1996 Agreement. (h) Compliance Certificate. The Banks shall have received a Compliance Certificate showing that, after giving effect to this Agreement, the Company is in compliance with the provisions of this Agreement on a pro forma basis as of the Effective Date. (i) Other Documents. Such other documents and papers relating to the documents referred to herein and the transactions contemplated hereby as any Bank or special counsel to the Administrative Agent shall reasonably require shall have been received by the Administrative Agent. (j) Certain Fees. The Company shall have paid the Administrative Agent, for its own account, fees calculated as specified in a letter dated the date hereof. (k) Other Fees. The Company shall have paid such other fees as may have been agreed by the parties hereto. (l) Regulatory Approvals. The Company shall have obtained the approvals of any regulatory authority set forth on Schedule 8.03 hereto required with respect to this Agreement. (m) NYC Preferential Payments, NYC Redemption Price and Sutton Notes. (i) Arrangements satisfactory to the Administrative Agent shall have been made such that upon giving effect to the initial borrowing hereunder and the application of the proceeds thereof, all obligations of the Company and the Restricted Subsidiaries in respect of the NYC Preferential Payments and the NYC Redemption Price shall have been satisfied in full and (ii) the Company shall have caused irrevocable notice to be given sufficient to effect the redemption of the Sutton Notes (as defined in the 1996 42 Agreement) on a date not later than the twentieth day after the Effective Date, and the Administrative Agent shall have received a certificate of an officer of the Company to such effect. (n) CMFRI and New York/New Jersey Agreements. All conditions precedent to the initial borrowings under the CMFRI Agreement and the New York/New Jersey Agreement shall have been satisfied. Section 7.02 Each Loan and Syndicated Letter of Credit. The obligation of each Bank to make each extension of credit hereunder (which shall not include any conversion or continuation of any outstanding Loan) is subject to the additional conditions precedent that: (i) no Default or Event of Default shall have occurred and be continuing; (ii) the representations and warranties in Article VIII hereof shall be true on and as of the date of the making of, and after giving effect to, such extension of credit with the same force and effect as if made on and as of such date, except to the extent that such representations and warranties expressly relate to an earlier date; and (iii) to the extent requested by the Administrative Agent or any Bank, a senior executive of the Company shall have certified compliance with clauses (i) and (ii) above to the Administrative Agent. The Company shall be deemed to have made a representation and warranty hereunder as of the time of each extension of credit hereunder that the conditions specified in such clauses have been fulfilled as of such time. ARTICLE VIII REPRESENTATIONS Each of the Company and the other parties hereto (other than the Banks and the Administrative Agent) represents, warrants and covenants as follows: Section 8.01 Existence and Power. Each of the Company and the Restricted Subsidiaries is a limited or general partnership or corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and is duly qualified to transact business and is in good standing in all jurisdictions in which such qualification is necessary in view of the properties and assets owned and presently intended to be owned and the business transacted and presently intended to be transacted by it except for qualifications the lack of which, singly or in the aggregate, have not had and are not likely to have a Materially Adverse Effect, and each of the Company and the Restricted Subsidiaries has full power, authority and legal right to make and perform such of this Agreement and the Notes to which it is a party. Section 8.02 Subsidiaries and Affiliates. Schedules 1.01(v) and 1.01(vi) contain a complete and correct list, as at the date hereof and the date of the initial extension of credit hereunder, of all Subsidiaries of the Company and a description of the legal nature of such Subsidiaries, the nature of the ownership interests (shares of stock or general or limited partnership or other interests) in such Subsidiaries and the holders of such interests and, except as disclosed to the Banks in writing prior to the Effective Date, the Company and each of its Subsidiaries owns all of the ownership interests of its Subsidiaries indicated in such Schedules as 43 being owned by the Company or such Subsidiary, as the case may be, and all such ownership interests are validly issued and, in the case of shares of stock, fully paid and non-assessable. Schedule 8.02 hereto contains a complete and correct list, as at the date hereof and the date of the initial extension of credit hereunder, of all Affiliates of the Company (including, but not limited to, the New York/New Jersey Companies) which are not Subsidiaries of the Company, the nature of the respective ownership interests in each such Affiliate, and the holder of each such interest. Section 8.03 Authority; No Conflict. The making and performance by each of the Company and the Restricted Subsidiaries of such of this Agreement and the Notes to which it is a party, and each extension of credit hereunder, have been duly authorized by all necessary action and do not and will not: (i) subject to the consummation of the action described in Section 8.12 hereof, violate any provision of any laws, orders, rules or regulations presently in effect (other than violations that, singly or in the aggregate, have not had and are not likely to have a Materially Adverse Effect), or any provision of any of the Company's or the Restricted Subsidiaries' respective partnership agreements, charters or by-laws presently in effect; or (ii) result in the breach of, or constitute a default or require any consent (except for the consents described on Schedule 8.03 hereto, each of which has been duly obtained) under, any existing indenture or other agreement or instrument to which the Company or any of the Restricted Subsidiaries is a party or their respective properties may be bound or affected (other than any breach, default or required consent that, singly or in the aggregate, have not had and are not likely to have a Materially Adverse Effect); or (iii) result in, or require, the creation or imposition of any Lien upon or with respect to any of the properties or assets now owned or hereafter acquired by the Company or any of the Restricted Subsidiaries. Section 8.04 Financial Condition. The Company has furnished to each Bank: (a) The consolidated balance sheet of the Company and its consolidated Subsidiaries as at December 31, 1997, and the related consolidated statements of operations, stockholders' equity (deficiency) and cash flows for the fiscal year ended on said date, said financial statements having been certified by KPMG Peat Marwick; (b) The unaudited consolidated balance sheets of the Company and its consolidated Restricted Subsidiaries as at December 31, 1997, and the related consolidated statements of operations, stockholders' equity (deficiency) and cash flows for the fiscal year ended on said date; and (c) the respective combined balance sheets of the TKR New Jersey/New York Systems and the TCI New Jersey and New York Systems, in each case as at December 31, 1995, December 31, 1996 and December 31, 1997, and the respective related combined statements of operations or earnings, parent's investment or combined deficit and cash flows for the fiscal years ended on said dates, said financial statements having been certified by KPMG Peat Marwick. All financial statements referred to above are complete and correct in all material respects (subject, in the case of the unaudited financial statements referred to above, to year-end and audit adjustments) and fairly present the financial condition of the respective entity or groups of entities which is or are the subject of such financial statements (as stated above), on a combined 44 and/or consolidated basis to the extent so indicated above, as at the respective dates of the balance sheets included in such financial statements and the results of operations of such entity or groups of entities for the respective periods ended on said dates. None of the Company, its Restricted Subsidiaries and the New York/New Jersey Companies had on any of said dates any material contingent liabilities, liabilities for Taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments or operations which are substantial in amount, except as referred to or reflected or provided for in said financial statements as at said respective dates or as disclosed to the Banks in writing prior to the date hereof. Except as disclosed to the Banks in writing prior to the date hereof, since December 31, 1997 there has been no material adverse change in the financial condition (from that shown by the respective balance sheets as at December 31, 1997 included in said financial statements) or the businesses or operations of the Company, the Restricted Subsidiaries and the New York/New Jersey Companies taken as a whole on a pro forma combined basis. As of the Effective Date, except as disclosed to the Banks in writing prior to the date hereof, since December 31, 1997 there has been no material adverse change in the financial condition or the businesses or operations of the New York/New Jersey Companies taken as a whole on a combined basis from that shown by the balance sheets as at December 31, 1997 included in said financial statements for the New York/New Jersey Companies (it being understood that for purposes of this sentence the New York/New Jersey Companies shall be deemed to have owned all of the assets acquired by the New York/New Jersey Companies pursuant to the TCI Acquisition for all periods covered by said balance sheets until and including the Effective Date). Section 8.05 Litigation, Etc. Except as disclosed to the Banks on Schedule 8.05, there are no lawsuits or other proceedings pending, or to the knowledge of the Company or any Restricted Subsidiary threatened, against the Company or any Restricted Subsidiary or any of their respective properties or assets, before any court or arbitrator or by or before any governmental commission, bureau or other regulatory authority that, singly or in the aggregate, could reasonably be expected to have a Materially Adverse Effect. Neither the Company nor any Restricted Subsidiary is in default under or in violation of or with respect to any laws or orders, or any material provision of any rules or regulations, or any writ, injunction or decree of any court, arbitrator, governmental commission, bureau or other regulatory authority, or any Franchise, except for minor defaults which, if continued unremedied, are not likely to have a Materially Adverse Effect. Section 8.06 Titles and Liens. Except as set forth on Schedule 9.13, each of the Company and the Restricted Subsidiaries has good title to its properties and assets, free and clear of all Liens except those permitted by Section 9.13 hereof. Section 8.07 Regulation U. None of the proceeds of any of the Loans, Syndicated Letters of Credit or Bank Letters of Credit shall be used to purchase or carry, or to reduce or retire or refinance any credit incurred to purchase or carry, any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock, except that up to $10,000,000 in the aggregate of such proceeds may be used for such purposes provided that both at the time of such use and thereafter compliance with Regulation U is maintained. If requested by any Bank, the Company will furnish to the Banks statements in conformity with the requirements of Regulation U. 45 Section 8.08 Taxes. Each of the Company and the Restricted Subsidiaries has filed all material tax returns which are required to be filed under any law applicable thereto except such returns as to which the failure to file, singly or in the aggregate, has not had and will not have a Materially Adverse Effect, and has paid, or made provision for the payment of, all Taxes shown to be due pursuant to said returns or pursuant to any assessment received by the Company or any of the Restricted Subsidiaries, except such Taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided or as to which the failure to pay, singly or in the aggregate, has not had and is not likely to have a Materially Adverse Effect. Section 8.09 Other Credit Agreements. Schedule 9.11 (Existing Indebtedness), Schedule 9.12 (Existing Guarantees) and Schedule 9.13 (Existing Liens) contain complete and correct lists, as at the date hereof and the date of the initial extension of credit hereunder, of all credit agreements, indentures, purchase agreements, obligations in respect of letters of credit, guarantees and other instruments presently in effect (including Capital Lease Obligations) providing for, evidencing, securing or otherwise relating to any Indebtedness of the Company and the Restricted Subsidiaries in a principal or face amount equal to $1,000,000 or more and such lists correctly set forth the names of the debtor or lessee and creditor or lessor with respect to the Indebtedness outstanding or to be outstanding thereunder, the rate of interest or rentals, a description of any security given or to be given therefor, and the maturity or maturities or expiration date or dates thereof. Section 8.10 Full Disclosure. None of the financial statements referred to in Section 8.04 hereof, the SEC Reports or any written statements delivered pursuant to Section 8.02, 8.04 or 8.15 hereof (each of which has heretofore been furnished to each Bank) contains, as at the date hereof or the date of the initial extension of credit hereunder, any untrue statement of a material fact nor do such financial statements, the SEC Reports and such written statements, taken as a whole, omit to state a material fact necessary to make the statements contained therein not misleading. Section 8.11 No Default. None of the Company and the Restricted Subsidiaries is in default in the payment or performance or observance of any contract, agreement or other instrument to which it is a party or by which it or its properties or assets may be affected or bound, which default, either alone or in conjunction with all other such defaults, has had or is likely to have a Materially Adverse Effect. Section 8.12 Approval of Regulatory Authorities. Except as set forth on Schedule 8.03 hereto, no approval or consent of, or filing or registration with, any Federal, state or local commission or other regulatory authority is required in connection with the execution, delivery and performance by the Company or any of the Restricted Subsidiaries of such of this Agreement and the Notes to which it is a party. All such described action required to be taken as a condition to the execution and delivery of such of this Agreement and the Notes to which the Company or any of the Restricted Subsidiaries is a party has been duly taken by all such commissions and authorities or other Persons, as the case may be, and all such action required to be taken as a condition to the initial extension of credit hereunder has been or will be duly taken prior to such initial extension of credit. 46 Section 8.13 Binding Agreements. This Agreement constitutes, and the Notes when executed and delivered will constitute, the legal, valid and binding obligations of each of the Company and the Restricted Subsidiaries which is a party thereto, enforceable in accordance with their respective terms (except for limitations on enforceability under bankruptcy, reorganization, insolvency and other similar laws affecting creditors' rights generally and limitations on the availability of the remedy of specific performance imposed by the application of general equitable principles). Section 8.14 Franchises. Schedule 8.14 hereto contains a complete and correct list, as of the date hereof and the date of the initial extension of credit hereunder, of all of the Franchises granted to the Company and the Restricted Subsidiaries, in each case together with the expiration date thereof, or for which applications have been made, or are planned to be made, by the Company or any Restricted Subsidiary. Section 8.15 Collective Bargaining Agreements. Except as disclosed to the Banks in writing prior to the Effective Date, there are no collective bargaining agreements between the Company or the Restricted Subsidiaries and any trade or labor union or other employee collective bargaining agent. Section 8.16 Investments. Schedule 9.16 hereto contains a complete and correct list, as at the date hereof, of all Investments of the Company and the Restricted Subsidiaries (other than any Investments in other Restricted Subsidiaries) in excess of $500,000, showing the respective amounts of each such Investment and the respective entity (or group thereof) in which each such Investment has been made. ARTICLE IX PARTICULAR COVENANTS OF THE COMPANY AND THE RESTRICTED SUBSIDIARIES From the Effective Date and so long as the Commitments of the Banks shall be in effect and until the payment in full of all Obligations hereunder, the expiration or termination of all Syndicated Letters of Credit and Bank Letters of Credit and the performance of all other obligations of the Company under this Agreement, each of the Company and the Restricted Subsidiaries agrees that, unless the Majority Banks shall otherwise consent in writing: A. Informational Covenants: Section 9.01 Financial Statements and Other Information. The Company will deliver to each Bank: (a) As soon as available and in any event within 60 days after the end of each of the first three Quarters of each fiscal year of the Company: (i) (A) consolidated statements of operations, stockholders' equity (deficiency) and cash flows of the Company and its consolidated Subsidiaries, taken together, and of the Company and the Restricted Subsidiaries, taken together, for such Quarter and for the period from the beginning of such fiscal year to the end of such Quarter and (B) the related consolidated balance sheets of the Company and its consolidated 47 Subsidiaries, taken together, and of the Company and the Restricted Subsidiaries, taken together, as at the end of such Quarter (which financial statements shall set forth in comparative form the corresponding figures as at the end of and for the corresponding Quarter in the preceding fiscal year) and (ii)(A) combined statements of operations or earnings, parent's investment or combined deficit and cash flows of the New York/New Jersey Companies, prepared on the same basis as the financial statements referred to in Section 8.04(c), for such Quarter and for the period from the beginning of such fiscal year to the end of such Quarter and (B) the related combined balance sheets of the New York/New Jersey Companies, prepared on the same basis as the financial statements referred to in Section 8.04(c), as at the end of such Quarter (which financial statements shall set forth in comparative form the corresponding figures as at the end of and for the corresponding Quarter in the preceding fiscal year), all in reasonable detail and accompanied by a certificate in the form of Exhibit D(1) hereto of a senior financial executive of the Company and of the New York/New Jersey Companies certifying such financial statements, subject, however, to year-end and audit adjustments, which certificate shall include a statement that the senior financial executive signing the same has no knowledge, except as specifically stated, that any Default has occurred and is continuing. (b) As soon as available and in any event within 120 days after the end of each fiscal year of the Company: (i)(A) consolidated statements of operations, stockholders' equity (deficiency) and cash flows of the Company and its consolidated Subsidiaries, taken together, and of the Company and the Restricted Subsidiaries, taken together, for such fiscal year and (B) the related consolidated balance sheets of the Company and its consolidated Subsidiaries, taken together, and of the Company and the Restricted Subsidiaries, taken together, as at the end of such fiscal year (which financial statements shall set forth in comparative form the corresponding figures as at the end of and for the preceding fiscal year) and (ii)(A) combined statements of operations or earnings, parent's investment or combined deficit and cash flows of the New York/New Jersey Companies, prepared on the same basis as the financial statements referred to in Section 8.04(c), for such fiscal year and (B) the related combined balance sheets of the New York/New Jersey Companies, prepared on the same basis as the financial statements referred to in Section 8.04(c) as at the end of such fiscal year (which financial statements shall set forth in comparative form the corresponding figures as at the end of and for the preceding fiscal year), all in reasonable detail and accompanied by (x) an opinion of KPMG Peat Marwick or other independent certified public accountants of recognized standing selected by the Company and reasonably acceptable to the Majority Banks as to said combined and/or consolidated financial statements and a certificate of such accountants stating that, in making the examination necessary for said opinion, they obtained no knowledge, except as specifically stated, of any failure by the Company, any Restricted Subsidiaries or any New York/New Jersey Company to perform or observe any of its covenants relating to financial matters in this Agreement and (y) a certificate in the form of Exhibit D(2) hereto of a senior financial executive of the Company and of the New York/New Jersey Companies stating that such financial statements are correct and complete and fairly present the financial condition and results of operations of the respective entities covered thereby as at the end of and for such fiscal year and that the executive signing the same has no knowledge, except as specifically stated, that any Default has occurred and is continuing. (c) Promptly after their becoming available, copies of all financial statements and reports which the Company, any Restricted Subsidiary or any New York/New Jersey Company 48 shall have sent its shareholders generally (other than tax returns unless specifically requested under clause (h) of this Section 9.01), copies of financial statements and reports which the Company shall have sent to the holders of any Permitted Debt or any Indebtedness specified in Schedule 9.11, to the extent such statements and reports contain information relating to the designation of the Company's Subsidiaries as "restricted subsidiaries" under the Debt Instruments governing any such Indebtedness, and to the calculation of financial ratios thereunder and copies of all regular and periodic reports, if any, which the Company, any Restricted Subsidiary or any New York/New Jersey Company shall have filed with the Securities and Exchange Commission, or any governmental agency substituted therefor, or with any national securities exchange, or with the Federal Communications Commission, or any governmental agency substituted therefor. (d) Within 60 days after the end of each of the first three Quarters of each year, and within 120 days after the end of each fiscal year of the Company, a Compliance Certificate, duly completed with respect to such Quarter or fiscal year, as the case may be. (e) Within 35 days after the end of each calendar month, a Subscribers' Certificate, duly completed with respect to such month. (f) Promptly, notice of the termination, cancellation, nonrenewal or other loss of any Franchise for a cable television system or systems that has had or is likely to have, either alone or in conjunction with all other such losses, a Materially Adverse Effect, the filing of a competing application in connection with any proceeding for renewal of any such Franchise and of any proceeding which involves a material risk of the termination, cancellation, nonrenewal or other loss of any such Franchise. (g) As soon as possible and in any event within ten days after any senior executive of the Company or any Restricted Subsidiary or of any general partner of any Restricted Subsidiary shall have obtained knowledge of the occurrence of a Default, a statement describing such Default and the action which is proposed to be taken with respect thereto. (h) From time to time, with reasonable promptness, such further information regarding the business, affairs and financial condition of the Company or any of the Restricted Subsidiaries or any of the New York/New Jersey Companies or any of their respective Affiliates or other affiliates as any Bank may reasonably request. B. Affirmative Covenants: Section 9.02 Taxes and Claims. Each of the Company and the Restricted Subsidiaries will pay and discharge all Taxes imposed upon it or upon its income or profits, or upon any properties or assets belonging to it, and all fees or other charges for Franchises, prior to the date on which penalties attach thereto, and all other lawful claims which, if unpaid, might become a Lien (other than Permitted Liens) upon the property of the Company or any of the Restricted Subsidiaries or result in the loss of a Franchise, provided that none of the Company and the Restricted Subsidiaries shall be required to pay any such Tax, fee or other claim the payment of which is being contested in good faith and by proper proceedings if it maintains adequate reserves in accordance with generally accepted accounting principles with respect thereto. 49 Section 9.03 Insurance. Each of the Company and the Restricted Subsidiaries will maintain insurance issued by responsible companies in such amounts and against such risks as is usually carried by owners of similar businesses and properties in the same general areas in which the Company or such Restricted Subsidiary operates. The Company will furnish to any Bank, upon the request of such Bank from time to time, full information as to the insurance maintained in accordance with this Section 9.03. Section 9.04 Maintenance of Existence; Conduct of Business. Each of the Company and the Restricted Subsidiaries will preserve and maintain its legal existence and all of its rights, privileges and franchises (including Franchises), except (i) where a failure to do so, singly or in the aggregate, is not likely to have a Materially Adverse Effect or (ii) pursuant to a Permitted Restricted Subsidiary Transaction. Section 9.05 Maintenance of and Access to Properties. Each of the Company and the Restricted Subsidiaries will keep all of its properties and assets necessary in its business in good working order and condition, ordinary wear and tear excepted, and will permit representatives of the respective Banks to inspect such properties, and to examine and make extracts from its books and records, during normal business hours. Section 9.06 Compliance with Applicable Laws. Each of the Company and the Restricted Subsidiaries will comply with the requirements of all applicable, including but not limited to environmental, laws, rules, regulations and orders of any governmental body or regulatory authority a breach of which is likely to have, singly or in the aggregate, a Materially Adverse Effect, except where contested in good faith and by proper proceedings if it maintains adequate reserves in accordance with generally accepted accounting principles with respect thereto. Section 9.07 Litigation. Each of the Company and the Restricted Subsidiaries will promptly give to the Administrative Agent notice in writing (and the Administrative Agent will notify each Bank) of all litigation and of all proceedings before any courts, arbitrators or governmental or regulatory agencies against it or, to its knowledge, otherwise affecting it or any of its respective properties or assets, except litigation or proceedings which, if adversely determined, is not likely to, singly or in the aggregate, have a Materially Adverse Effect. Following the initial notice of each such litigation or proceeding, supplementary notices of all material developments in respect thereof shall be given from time to time in like manner. Section 9.08 Subsidiaries. (a) Unless Section 9.08(b) is applicable, any New Subsidiary acquired or formed by the Company shall be deemed an Unrestricted Subsidiary. The Company may designate any such New Unrestricted Subsidiary as a Programming Company by giving a notice captioned "Designation of Unrestricted Subsidiary as Programming Company" to the Administrative Agent promptly upon the acquisition or formation of such New Unrestricted Subsidiary, such notice to specify whether such New Unrestricted Subsidiary has been designated as a "restricted subsidiary" for purposes of any Debt Instruments governing any Permitted Debt or any Indebtedness specified in Schedule 9.11. (b) The Company may designate any New Subsidiary as a Restricted Subsidiary by giving a notice captioned "Designation of Restricted Subsidiary" to the Administrative Agent 50 promptly upon the acquisition or formation of such New Subsidiary, such notice to specify whether such New Subsidiary has been designated as a "restricted subsidiary" for purposes of any Debt Instruments governing any Permitted Debt or any Indebtedness specified in Schedule 9.11. Promptly upon such designation, the Company will cause (by documentation satisfactory to the Majority Banks) such New Restricted Subsidiary to undertake all of the obligations of a "Restricted Subsidiary" and, except in the case of any New Subsidiary that is a Subsidiary of CMFRI, a "Guarantor" under this Agreement. Each such New Restricted Subsidiary shall thereafter be a "Restricted Subsidiary" and, if applicable, a "Guarantor" for all purposes of this Agreement. (c)(i) The Company may redesignate any Restricted Subsidiary as an Unrestricted Subsidiary or any Unrestricted Subsidiary as a Restricted Subsidiary by giving a notice to the Administrative Agent captioned "Redesignation of Restricted Subsidiary" or "Redesignation of Unrestricted Subsidiary", as the case may be, so long as the Company and the Restricted Subsidiaries shall comply with Section 9.15(a) and (b), as applicable, in connection with any such redesignation. In the case of any redesignation of any Unrestricted Subsidiary as a Restricted Subsidiary, promptly upon such redesignation, the Company will cause (by documentation satisfactory to the Majority Banks) such New Restricted Subsidiary to undertake all of the obligations of a "Restricted Subsidiary" and, except in the case of CMFRI or any Subsidiary of CMFRI, a "Guarantor" under this Agreement. Each such New Restricted Subsidiary shall thereafter be a "Restricted Subsidiary" and, if applicable, a "Guarantor" for all purposes of this Agreement. (ii) Notwithstanding anything to the contrary in this Agreement, each redesignation of any Restricted Subsidiary as an Unrestricted Subsidiary or of any Unrestricted Subsidiary as a Restricted Subsidiary pursuant to subparagraph (i) above shall be deemed a disposition or acquisition of assets, as the case may be, which shall be subject to Section 9.15(a) and (b), as applicable. Section 9.09 Franchises. The Restricted Subsidiaries will comply with all of their obligations under their respective Franchises, except for failures to comply which, singly or in the aggregate, are not likely to have a Materially Adverse Effect. Section 9.10 Interest Selection; Interest Swap Agreements. The Company shall, not later than 60 days after the Effective Date and at all times thereafter, fix or place a limit upon its interest obligations in respect of at least 50% of the Indebtedness (other than Indebtedness consisting of Obligations arising solely under Interest Swap Agreements) of the Company and the Restricted Subsidiaries outstanding at such times, either by the terms of such Indebtedness or by the entering into of Interest Swap Agreements. C. Negative Covenants: Section 9.11 Indebtedness. Neither the Company nor any Restricted Subsidiary will create, incur or suffer to exist any Indebtedness except: 51 (i) Indebtedness hereunder and under the CMFRI Agreement; (ii) short-term Indebtedness incurred for working capital purposes up to but not exceeding $30,000,000 in aggregate principal amount at any one time outstanding provided, however, that no more than $10,000,000 of such short-term Indebtedness may be incurred from any Person that is not a Bank; (iii) Permitted Debt; (iv) obligations under or in respect of Interest Swap Agreements up to an aggregate notional principal amount not to exceed at any time an amount equal to the Aggregate Commitments of all the Banks in the aggregate at such time less, at any time that any New York/New Jersey Commitment is in effect, $800,000,000; (v) Guarantees and letters of credit permitted by Section 9.12 hereof; (vi) Indebtedness to Restricted Subsidiaries or the Company; (vii) Capital Lease Obligations other than in respect of leases of real property, and Indebtedness incurred to finance the purchase price of property other than real property, so long as the aggregate principal amount of all such Indebtedness outstanding at any one time shall not exceed the sum of $50,000,000; (viii) Indebtedness issued and outstanding on the date hereof to the extent set forth on Schedule 9.11 hereto and any renewals, extensions or refundings thereof in a principal amount not to exceed the amount so renewed, extended or refunded; (ix) Indebtedness incurred as consideration for any acquisition permitted by Section 9.15(b) and consisting solely of a deferred or contingent obligation to deliver common stock of the Company; (x) (A) Indebtedness in respect of the acquisition, development or improvement of real estate (including, without limitation, Indebtedness incurred in connection with the issuance of tax-exempt industrial development bonds or in connection with a letter of credit supporting such bonds) and (B) Indebtedness in respect of aircraft leases up to but not exceeding $45,000,000 in aggregate principal amount at any one time outstanding, provided that the aggregate principal amount of all such Indebtedness described in clauses (A) and (B) of this clause (x) at any one time outstanding shall not exceed $90,000,000; and (xi) Indebtedness in respect of the Sutton Notes (as defined in the 1996 Agreement) in an aggregate principal amount not in excess of $151,000,000, provided that such Indebtedness shall be repaid in full on or prior to the twentieth day after the Effective Date. Section 9.12 Contingent Liabilities. Neither the Company nor any Restricted Subsidiary will, directly or indirectly (including, without limitation, by means of causing a bank 52 to open a letter of credit), guarantee, endorse, contingently agree to purchase or to furnish funds for the payment or maintenance of, or otherwise be or become contingently liable upon or with respect to, the Indebtedness, other obligations, net worth, working capital or earnings of any Person, or guarantee the payment of dividends or other distributions upon the stock or other ownership interests of any Person, or agree to purchase, sell or lease (as lessee or lessor) property, products, materials, supplies or services primarily for the purpose of enabling a debtor to make payment of its obligations or to assure a creditor against loss (all such transactions being herein called "Guarantees"), except: (i) the Guarantees in Article VI hereof; (ii) endorsements of negotiable instruments for deposit or collection in the ordinary course of business; (iii) the Guarantees described in Schedule 9.12; (iv) Guarantees by the Company or one or more of the Restricted Subsidiaries of Indebtedness of, and other obligations (incurred in the ordinary course of business) of, another Restricted Subsidiary, but only if such Indebtedness or obligations are permitted by this Agreement; (v) other Guarantees by the Company, provided that the outstanding aggregate amount of the obligations guaranteed does not exceed $30,000,000 at any time; (vi) Capital Lease Obligations to the extent they constitute Guarantees by reason of having been assigned by the lessor to a lender to such lessor (provided that the obligors in respect of such Capital Lease Obligations do not increase their liability by reason of such assignment); (vii) the Syndicated Letters of Credit or Bank Letters of Credit, provided that Syndicated Letters of Credit or Bank Letters of Credit which constitute Investments shall be subject to the limits specified in Section 9.16 hereof; (viii) surety bonds in an aggregate amount at any one time not to exceed $50,000,000; (ix) any Guarantee by the Company of the obligations of any Unrestricted Subsidiary so long as (A) recourse to the Company thereunder is limited solely to shares of capital stock of such Unrestricted Subsidiary or its Subsidiaries and to no other assets of the Company or the Restricted Subsidiaries and (B) neither the Company nor any Restricted Subsidiary agrees, in connection therewith, to any limitation on the amount of Indebtedness which may be incurred by them, to the granting of any Liens on assets of the Company or any of the Restricted Subsidiaries (other than shares of stock of such Unrestricted Subsidiary or its Subsidiaries), to any acquisition or disposition of any assets of the Company or the Restricted Subsidiaries (other than shares of capital stock of such Unrestricted Subsidiary or its Subsidiaries) or to any modification or supplement of this 53 Agreement or any agreement entered into by the Company or any of the Restricted Subsidiaries refinancing any substantial portion of the Indebtedness outstanding under this Agreement; and (x) Guarantees which (A) would constitute Investments which are not prohibited by Section 9.16 hereof (other than by reason of subsection (iv) thereof) or (B) would constitute Investments but for the provision of clause (A) of the final paragraph of Section 9.16 hereof. Section 9.13 Liens. Neither the Company nor any Restricted Subsidiary will create or suffer to exist any mortgage, pledge, security interest, conditional sale or other title retention agreement, lien, charge or encumbrance upon any of its assets, now owned or hereafter acquired, securing any Indebtedness or other obligation (all such security being herein called "Liens"), except: (i) Liens on tangible personal property securing Indebtedness owed to the Company; (ii) Liens securing Indebtedness permitted by Section 9.11(vii) hereof to the extent such Liens attach solely to the assets (x) subject to Capital Leases constituting such Indebtedness or (y) acquired with the proceeds of such Indebtedness; (iii) Liens securing the obligations of the Company and the Restricted Subsidiaries hereunder, under the CMFRI Agreement and under New York/New Jersey Agreement. (iv) Permitted Liens; (v) other Liens on tangible personal property in effect on the date hereof to the extent set forth on Schedule 9.13 hereto; and (vi) Liens on shares of the capital stock of, or partnership interest in, any Unrestricted Subsidiary. In addition, neither the Company nor any Restricted Subsidiary will enter into or permit to exist any undertaking by it or affecting any of its properties whereby the Company or such Restricted Subsidiary shall agree with any Person (other than the Banks or the Administrative Agent) not to create or suffer to exist any Liens in favor of any other Person, provided that the foregoing restriction shall not apply to any such undertaking contained in any indenture or other agreement governing any Permitted Debt (other than any New Subordinated Debt). Section 9.14 Leases. Neither the Company nor any Restricted Subsidiary will incur, assume or have outstanding any obligation to pay rent under Leases (as lessee, guarantor or otherwise) except: (i) Pole Rental Leases and Leases of microwave transmission and/or reception rights related to the operation of the Company and the Restricted Subsidiaries; 54 (ii) obligations under Leases by one Restricted Subsidiary to another Restricted Subsidiary; and (iii) obligations under Leases of equipment and other real or personal property for use in the ordinary course of its business or the business of a Programming Company or CSC Technology. Section 9.15 Mergers, Acquisitions and Dispositions, Etc. (a) Neither the Company nor any Restricted Subsidiary will consolidate or merge with any Person, or sell, lease, license, assign, transfer or otherwise dispose of any part of its business, assets or rights (including by means of any redesignation of any Restricted Subsidiary as an Unrestricted Subsidiary pursuant to Section 9.08(c)), except: (i) dispositions by Restricted Subsidiaries to, or mergers or consolidations of Restricted Subsidiaries with or into, the Company or other Restricted Subsidiaries; (ii) subject to Section 9.19 hereof, sales by the Company or any Restricted Subsidiary to Affiliates of surplus inventory, equipment and fixed assets originally acquired for use by the Company or such Restricted Subsidiary in its own business; (iii) dispositions in the ordinary course of business (including dispositions of obsolete or worn-out property and other property reasonably determined by the management of the disposing entity to be not used or useful in its business); (iv) dispositions of any Margin Stock; (v) dispositions by the Company or any Restricted Subsidiary (including, but not limited to, by merger or consolidation of any Restricted Subsidiary) of assets (including any such dispositions in connection with which assets are acquired in exchange for any assets so disposed), provided that, in the case of any such disposition: (A) immediately prior to, and after giving effect to, such disposition, no Default shall have occurred and be continuing; and (B) at any time when the Cash Flow Ratio exceeds 5.50 to 1, the amount of Operating Cash Flow attributable to the assets to be disposed (other than pursuant to the Kalamazoo Sale) for the twelve-month or five-year, as the case may be, period ending on the last day of the calendar month immediately preceding the month in which such disposition is to occur (such twelve-month or five-year period being referred to herein as the relevant "Test Period"), together with the aggregate amount of Operating Cash Flow for the relevant Test Period attributable to any other assets so disposed by the Company, any Restricted Subsidiary or any New York/New Jersey Company (other than pursuant to the Kalamazoo Sale) during the twelve-month or five-year, as the case may be, period prior to the date that such disposition is to occur, shall not exceed (x) in the case of such twelve-month Test Period, 35% of the aggregate amount of Operating 55 Cash Flow for such Test Period and (y) in the case of such five-year Test Period, 50% of the aggregate amount of Operating Cash Flow for such Test Period. The Company shall furnish to the Administrative Agent prior to any such disposition (1) a certificate of an officer of the Company certifying compliance with the requirements of clauses (A) and, if applicable, (B) of this subparagraph (v) and (2) in the case of any disposition to which clause (B) is applicable, a reasonably detailed description of such disposition demonstrating compliance with all of its and the Restricted Subsidiaries' covenants and agreements under this Agreement both before and after giving effect to such disposition. (b) Neither the Company nor any Restricted Subsidiary will purchase or acquire assets from, or the business or assets of, any other Person (including by means of any redesignation of any Unrestricted Subsidiary as a Restricted Subsidiary pursuant to Section 9.08(c)), except: (i) the purchase of assets in the ordinary course of business as conducted on the Effective Date by the Company and the Restricted Subsidiaries; (ii) the acquisition (including, without limitation, by merger or consolidation of any Restricted Subsidiary) of all or any part of the business or assets of any Person, provided that, in the case of any such acquisition: (A) immediately prior to, and after giving effect to, any such acquisition no Default shall have occurred and be continuing; and (B) if the assets so acquired consist of stock or other ownership interests of any Person which is to be designated (or redesignated) a "Restricted Subsidiary", the Company and the Restricted Subsidiaries shall acquire in the aggregate not less than 80% of the issued and outstanding shares of all classes of stock, or other ownership interests, of such Person; the Company shall furnish to the Administrative Agent prior to any such acquisition (1) a certificate of an officer of the Company certifying compliance with the requirements of clauses (A) and (B) of this subparagraph (ii) and (2) a reasonably detailed description of such acquisition demonstrating compliance with all of its and the Restricted Subsidiaries' covenants and agreements under this Agreement both before and after giving effect to such acquisition; and (iii) purchases and acquisitions by the Company or Restricted Subsidiaries from (including, but not limited to, by merger or consolidation with) other Restricted Subsidiaries. 56 Section 9.16 Investments. Neither the Company nor any Restricted Subsidiary will, directly or indirectly, make or permit to remain outstanding any advances, loans, accounts receivable (other than (x) accounts receivable arising in the ordinary course of business of the Company or such Restricted Subsidiary and (y) accounts receivable owing to the Company from any Unrestricted Subsidiary for management services (other than such accounts receivable that constitute direct charges or out-of-pocket expenses relating to such services) provided by the Company to such Unrestricted Subsidiary) or other extensions of credit (excluding, however, accrued and unpaid interest in respect of any advance, loan or other extension of credit) or capital contributions to (by means of transfers of property to others, or payments for property or services for the account or use of others, or otherwise), or purchase or own any stocks, bonds, notes, debentures or other securities (including, without limitation, any interests in any partnership, joint venture or joint adventure) of, or any bank accounts with, or Guarantee any Indebtedness or other obligations of, any Person (all such transactions being herein called "Investments"), except: (i) Bank Deposits. Bank accounts with, and banker's acceptances and certificates of deposit of, banks having a combined capital and surplus of at least $100,000,000 and (in the case of the Company, so long as no Default exists) certificates of deposit of Norstar Bank of Long Island and (in the case of Restricted Subsidiaries, so long as no Default exists) demand deposits with Norstar Bank of Long Island and other banks, provided that the aggregate amount of all such certificates of deposit and demand deposits with Norstar Bank of Long Island and such other banks shall not exceed $5,000,000; (ii) Government Securities and Commercial Paper. Readily marketable securities issued or guaranteed by the United States Government and commercial paper rated P-1 by the National Credit Office of Moody's Investors Service Inc. or bearing a similar rating by another nationally recognized rating agency; (iii) Existing Investments. Investments outstanding as of the date hereof to the extent set forth on Schedule 9.16 hereto; (iv) Permitted Guarantees. Guarantees permitted under Section 9.12 hereof; (v) Unspecified Investments. Other Investments made after the Effective Date so long as, in the case of any Investment in any Person other than a Restricted Subsidiary or the Company, (A) no Default shall have occurred both before and after giving effect to each such Investment and (B) in the case of any such Investment or series of related Investments (other than Specified Investments) in an aggregate amount in excess of $50,000,000, the Company shall have furnished to the Banks a reasonably detailed description of such Investment or series of Investments demonstrating compliance with all of its and the Restricted Subsidiaries' covenants and agreements under this Agreement both before and after giving effect to such Investment or series of Investments. 57 Notwithstanding anything in this Section 9.16 to the contrary, (A) Investments shall not include any transaction that would otherwise constitute an Investment to the extent the consideration provided by the Company in connection therewith consists of common stock of the Company or, to the extent that the consideration provided by the Company consists of a deferred or contingent obligation, (x) such obligation can be satisfied with the delivery of common stock of the Company and (y) the Company covenants and agrees in a notice to the Banks that such obligation shall be satisfied solely by the delivery of such common stock and (B) the amount of any Investments described herein shall be determined without regard to writedowns or write-offs thereof that may occur at any time and from time to time after the date. Section 9.17 Restricted Payments. Neither the Company nor any Restricted Subsidiary will, directly or indirectly, make or declare any Restricted Payment (other than any Restricted Payment payable (and paid) in common stock of the Company) at any time, except that so long as no Default shall have occurred and be continuing at the time such Restricted Payment is made or would result from the making or declaration of such Restricted Payment, the Company may (i) make Restricted Payments at any time when the Cash Flow Ratio is less than 5.50 to 1, (ii) make Restricted Payments in respect of preferred stock of the Company to the extent made with Refunding Proceeds, (iii) purchase for cash, or pay dividends on the Company's common stock in amounts to be applied by Parent Corp. solely for the purchase for cash of, capital stock of the Company or Parent Corp. from any employee of the Company other than Dolan, so long as the amount of such purchase, together with the amount of all other purchases and payments of dividends by the Company contemplated by this Section 9.17(iii) on or after the Effective Date, does not exceed $50,000,000, (iv) make any Restricted Payment in respect of the preferred stock of the Company to the extent payable in New Preferred Stock of the Company, (v) pay any dividends or other distributions in respect of any preferred stock of the Company, (vi) pay any dividends or other distributions on any common stock of the Company, provided that the aggregate amount of all such dividends or other distributions made pursuant to this clause (vi) shall not exceed the sum of (x) $100,000,000 and (y) the aggregate amount of all Net Cash Proceeds from New Common Stock (other than any such Net Cash Proceeds previously applied as Refunding Proceeds) and (vii) make Restricted Payments in cash to the extent made to redeem not more than 33 1/3% of the Company's Series H Preferred Stock and/or not more than 50%of the Company's Series M Preferred Stock, provided that the aggregate amount of all such Restricted Payments made pursuant to this clause (vii) shall not exceed 110% of the aggregate accreted amount of such percentage of such Series H and Series M Preferred Stock determined in accordance with the calculations set forth on Schedule 9.17 hereto. Section 9.18 Business. At any time at which the Cash Flow Ratio exceeds 5.50 to 1, the Company and the Restricted Subsidiaries shall not permit the portion of consolidated gross revenues of the Company and the Restricted Subsidiaries derived from the business of developing, constructing, owning, acquiring, altering, repairing, financing, operating, maintaining, publishing, distributing, promoting and otherwise exploiting cable television systems and related businesses, including, without limitation, telecommunications services, data transmission and telephony activities, for any Quarter to be less than 90% of the total consolidated gross revenues of the Company and the Restricted Subsidiaries for such Quarter. None of the Franchise Holding Companies will engage in any business other than acting as a nominee for the Company or Restricted Subsidiary for which it holds a Franchise or Franchises and will not own or hold any property other than such Franchise or Franchises, pole attachment 58 agreements, insurance contracts and related bonds, and stock of other Franchise Holding Companies, or incur or be liable for any Indebtedness or other obligations other than obligations (except for borrowed money) arising out of the ownership or leasing as lessee of any such property which such Franchise Holding Company is permitted to own or hold by this Section 9.18 (provided that each such obligation would not be prohibited by any provision of this Agreement were it incurred by the Company or the Restricted Subsidiary for which such Franchise Holding Company acts as nominee and all such obligations which, under generally accepted accounting principles, are required to be reflected on a balance sheet of such Franchise Holding Company are reflected in the balance sheets of the Company or the Restricted Subsidiary for which such Franchise Holding Company acts as nominee required to be furnished to the Banks hereunder). Section 9.19 Transactions with Affiliates. Neither the Company nor any Restricted Subsidiary will effect any transaction with any of its Affiliates that is not a Restricted Subsidiary on a basis less favorable to the Company or such Restricted Subsidiary than would at the time be obtainable for a comparable transaction in arms-length dealing with an unrelated third party. Section 9.20 Amendments of Certain Instruments. Neither the Company nor any Restricted Subsidiary will modify or supplement, or consent to any waiver of any of the provisions of, any Debt Instrument governing any Permitted Debt or any Indebtedness specified in Schedule 9.11. In addition, the Company will not amend, modify or supplement any of the provisions of its charter in respect of preferred stock of the Company, except that the Company may (i) file any amendment or modification thereto or supplement thereof to permit the issuance of New Preferred Stock of the Company and (ii) file a certificate of retirement thereto in respect of (A) the Series A Cumulative Convertible Preferred Stock and the Series B Cumulative Convertible Preferred Stock of the Company and (B) any other series of preferred stock of the Company the purchase, acquisition, redemption or retirement of which is permitted by this Agreement. Section 9.21 Issuance of Stock. The Company will not permit any Restricted Subsidiary to issue any shares of stock or other ownership interests in such Restricted Subsidiary if, after giving effect thereto, the percentage of the ownership interests in such Restricted Subsidiary held by the Company and the Restricted Subsidiaries immediately prior to such issuance would be decreased. D. Financial Covenants: Section 9.22 Operating Cash Flow. (a) Operating Cash Flow to Total Interest Expense. The Company and the Restricted Subsidiaries will cause, for each Quarter, the ratio of Operating Cash Flow for the period of two Quarters ending with such Quarter to Total Interest Expense for such period of two Quarters ending with such Quarter to be at least the following respective amounts at any time during the following respective periods: 59 Period Ratio ------ ----- from and including the Effective Date to and including the Quarter ended December 31, 1998 1.50 to 1 from and including January 1, 1999 to and including the Quarter ended December 31, 2000 1.75 to 1 on and after January 1, 2000 2.00 to 1 (b) Operating Cash Flow less Consolidated Cash Taxes to Total Fixed Charges. The Company and the Restricted Subsidiaries will cause, for each Quarter, the ratio of (i) Operating Cash Flow for the period of two Quarters ending with such Quarter less Consolidated Cash Taxes paid during such period of two Quarters to (ii) Total Fixed Charges for such period of two Quarters ending with such Quarter to be at least 1.20 to 1. Section 9.23 Cash Flow Ratio. The Company and the Restricted Subsidiaries will not permit the Cash Flow Ratio to exceed the following respective amounts at any time during the following respective periods: Period Ratio ------ ----- from and including the Effective 6.50 to 1 Date to and including December 31, 1999 from and including January 1, 2000 6.25 to 1 to and including September 30, 2000 from and including October 1, 2000 6.00 to 1 to and including June 30, 2001 from and including July 1, 2001 5.75 to 1 to and including December 31, 2001 from and including January 1, 2002 5.50 to 1 to and including June 30, 2002 from and including July 1, 2002 5.25 to 1 to and including December 31, 2002 on and after January 1, 2003 5.00 to 1 60 E. Additional Covenants: Section 9.24 Certain Subsidiaries. The Company will cause each of CMFRI and its Subsidiaries to comply with each covenant hereunder applicable to it. Section 9.25 Permitted Restricted Subsidiary Transactions. In the event of any Permitted Restricted Subsidiary Transaction by CMFRI or any of its Subsidiaries to any other Restricted Subsidiary, the Company shall cause such Restricted Subsidiary to, and such Restricted Subsidiary shall, no later than two Business Days prior to such event, undertake (by documentation satisfactory to the Majority Banks) all of the obligations of the Company and CMFRI under the CMFRI Agreement, whereupon such Restricted Subsidiary shall be obligated to pay all amounts thereunder in accordance with the terms thereof. ARTICLE X DEFAULTS Section 10.01 Events of Default. If any one of the following "Events of Default" shall occur and be continuing, namely: (a) Any representation or warranty in this Agreement or in any certificate, statement or other document furnished to the Banks or the Administrative Agent under this Agreement (including, without limitation, any amendment thereto), or any certification made or deemed to have been made by the Company to any Bank hereunder, shall prove to have been incorrect, or shall be breached, in any material respect when made or deemed made; or (b) Default in the payment when due of any principal on any Note or any Reimbursement Obligation or default in the payment when due of interest on any Note or any other amount payable to any Bank or the Administrative Agent hereunder, and the failure to pay such interest or such other amount by 11:00 a.m. on the second next following Business Day; or (c) Default by the Company or any of the Restricted Subsidiaries in the performance or observance of any of its agreements in Article IX hereof (other than Sections 9.01, 9.02, 9.03, 9.04, 9.05, 9.06, 9.07 and 9.16 hereof but including Section 9.01(g) hereof); or (d) Default by the Company or any of the Restricted Subsidiaries in the performance or observance of any of its other agreements herein which shall remain unremedied for 30 days after notice thereof shall have been given to the Company by any Bank (provided that such period shall be five days and no such notice shall be required in the case of a default under Section 9.01(e) or 9.16 hereof and provided further that such period shall be fifteen days and no such notice shall be required in the case of a default under Section 9.01(d) hereof); or (e) Any Indebtedness of the Company or any of the Restricted Subsidiaries in an aggregate principal amount of $10,000,000 or more, excluding any Indebtedness for the deferred purchase price of property or services owed to the Person providing such property or services as to which the Company or such Restricted Subsidiary is contesting its obligation to pay the same in good faith and by proper proceedings and for which the Company or such Restricted 61 Subsidiary has established appropriate reserves (herein called "Excluded Indebtedness"), shall (i) become due before stated maturity by the acceleration of the maturity thereof by reason of default or (ii) become due by its terms and shall not be promptly paid or extended; or (f) Any default under any indenture, credit agreement or loan agreement or other agreement or instrument under which Indebtedness of the Company or any of the Restricted Subsidiaries constituting indebtedness for borrowed money in an aggregate principal amount of $2,000,000 or more is outstanding (other than Excluded Indebtedness), or by which any such Indebtedness is evidenced, shall have occurred and shall continue for a period of time sufficient to permit the holder or holders of any such Indebtedness (or a trustee or agent on its or their behalf) to accelerate the maturity thereof or to enforce any Lien provided for by any such indenture, agreement or instrument, as the case may be, unless such default shall have been permanently waived by the respective holder of such Indebtedness; or (g) The Company or any of the Restricted Subsidiaries shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (ii) admit in writing its inability, or be generally unable, to pay its debts as they become due, (iii) make a general assignment for the benefit of creditors, (iv) be adjudicated a bankrupt or insolvent, (v) commence a voluntary case under the Federal bankruptcy laws (as now or hereafter in effect), (vi) file a petition seeking to take advantage of any law relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, (vii) acquiesce in writing to, or fail to controvert in a timely and appropriate manner, any petition filed against the Company or any Restricted Subsidiary in any involuntary case under such bankruptcy laws, or (viii) take any action for the purpose of effecting any of the foregoing; or (h) A case or other proceeding shall be commenced, without the application, approval or consent of the Company or any of the Restricted Subsidiaries, in any court of competent jurisdiction, seeking the liquidation, reorganization, dissolution, winding up, or composition or readjustment or debts of the Company or any Restricted Subsidiary, the appointment of a trustee, receiver, custodian, liquidator or the like of the Company or such Restricted Subsidiary or of all or any substantial part of its assets, or any other similar action with respect to the Company or such Restricted Subsidiary under the laws of bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, and such case or proceeding shall continue undismissed, or unstayed and in effect, for any period of 30 consecutive days, or an order for relief against the Company or any Restricted Subsidiary shall be entered in an involuntary case under the Federal bankruptcy laws (as now or hereafter in effect); or (i) A judgment for the payment of money in excess of $1,000,000 shall be rendered against the Company or any Restricted Subsidiary and such judgment shall remain unsatisfied and in effect for any period of 30 consecutive days without a stay of execution or (if a stay is not provided for by applicable law) without having been fully bonded; or (j) Any Franchise issued to the Company or any Restricted Subsidiary shall be revoked or canceled or expire by its terms and not be renewed, or shall be modified in a manner 62 adverse to the Company or the Restricted Subsidiary utilizing such Franchise, if such action is likely to have a Materially Adverse Effect; or (k) (i) Any Termination Event shall occur; (ii) any Accumulated Funding Deficiency, whether or not waived, shall exist with respect to any Plan; (iii) any Person shall engage in any Prohibited Transaction involving any Plan; (iv) the Company or any ERISA Affiliate is in "default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan resulting from the Company's or any ERISA Affiliate's complete or partial withdrawal (as described in Section 4203 or 4205 of ERISA) from such Plan; (v) the Company or any ERISA Affiliate shall fail to pay when due an amount which is payable by it to the PBGC or to a Plan under Title IV of ERISA and which, when aggregated with all other such amounts with respect to the payment of which the Company and its ERISA Affiliates are at the time in default, exceeds $500,000; (vi) a proceeding shall be instituted by a fiduciary of any Plan against the Company or any ERISA Affiliate to enforce Section 515 of ERISA and such proceeding shall not have been dismissed within 30 days thereafter; and by reason of any or all of such events described in clauses (i) through (vi) as applicable there shall or could result in actual or potential liability of the Company and any ERISA Affiliate in excess of $500,000 in the aggregate; or (l) (i) Dolan Family Interests shall cease at any time to have beneficial ownership (within the meaning of Rule 13d-3 (as in effect on the date hereof) promulgated under the Securities and Exchange Act of 1934, as amended) of shares of the capital stock of Parent Corp. having sufficient votes to elect (or otherwise designate) at such time a majority of the members of the Board of Directors of Parent Corp. or (ii) Parent Corp. shall cease to own directly 100% of the common stock of the Company, or any Person (other than Parent Corp.) shall obtain the legal or contractual right to own, or to cause the transfer of the ownership of, any of the common stock of the Company, without regard to any required approval of any other Person; or (m) Any Event of Default under (and as defined in) the CMFRI Agreement or the New York/New Jersey Agreement shall have occurred and be continuing; or (n) The New York/New Jersey Agreement (other than any provision thereof which by the terms thereof survives a termination thereof) shall cease to be in effect at any time and any of the New York/New Jersey Companies shall have failed to become a Restricted Subsidiary in accordance with Section 9.08(b) either at or before such time. THEREUPON, the Administrative Agent may (and, if directed by the Majority Banks, shall) by notice to the Company terminate the Commitments of the Banks hereunder (if then outstanding) and the obligation to issue any Syndicated Letter of Credit hereunder, and/or terminate any Syndicated Letter of Credit and/or any Bank Letter of Credit by sending the notice of termination as provided therein and/or declare the unpaid principal of and accrued interest on the Notes, and all other amounts owing hereunder, to be forthwith due and payable, whereupon the same shall be and become forthwith due and payable, without presentment or demand for payment, notice of nonpayment, protest or further notice or demand of any kind, all of which are hereby expressly waived by the Company (provided that the Banks' Commitments hereunder, and the obligation to issue Syndicated Letters of Credit hereunder, shall forthwith terminate and the 63 unpaid principal of and accrued interest on the Notes, and all other amounts owing hereunder, shall automatically become and be forthwith due and payable upon the occurrence of any event specified in clause (g) or (h) above without any such notice or other action, all of which are hereby expressly waived by the Company). Section 10.02 Cash Collateral Account. The Company hereby agrees, in addition to the provisions of Section 10.01 hereof, that upon the occurrence and during the continuance of any Event of Default, it shall, upon demand by the Majority Banks (and, in the case of any Event of Default specified in clause (g) or (h) of Section 10.01 hereof, forthwith, without any demand or the taking of any other action by the Banks) pay to the Administrative Agent an amount in immediately available funds equal to the then aggregate undrawn face amount of the Syndicated Letters of Credit and Bank Letters of Credit and that any amounts received by the Administrative Agent pursuant to this Section 10.02 (and all investments of such amounts and earnings and proceeds of such investments) shall be held by the Administrative Agent in a cash collateral account in the name of the Administrative Agent entitled "Cablevision Systems Corporation Letter of Credit Cash Collateral Account" as collateral for the prompt payment and performance when due of the Company's Obligations to the Banks, as the case may be, in respect of all then outstanding Syndicated Letters of Credit and Bank Letters of Credit, and upon satisfaction of the Reimbursement Obligations and the obligations then outstanding of the Company in respect of the Bank Letters of Credit, as collateral for all other Obligations. The balance in such collateral account from time to time (including all earnings thereon) shall be invested and reinvested by the Administrative Agent in such interest-bearing obligations of the type described in clauses (i) and (ii) of Section 9.16 hereof as the Administrative Agent shall from time to time select, and the Company hereby authorizes and directs the Administrative Agent to collect and receive any earnings and proceeds of any such Investments and to credit the net amount of all such receipts to such cash collateral account. ARTICLE XI THE ADMINISTRATIVE AGENT Section 11.01 Appointment, Powers and Immunities. Each Bank hereby appoints and authorizes the Administrative Agent to act as its agent hereunder with such powers as are specifically delegated to the Administrative Agent by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. The Administrative Agent shall not have any duties or responsibilities except those expressly set forth in this Agreement and shall not by reason of this Agreement be a trustee for any Bank. The Administrative Agent shall not be responsible to any of the Banks for any recitals, statements, representations or warranties contained in this Agreement or in any certificate or other document referred to or provided for in, or received by any of the Banks under, this Agreement, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other document referred to or provided for herein or for any failure by the Company to perform any of its obligations hereunder. The Administrative Agent may employ agents and attorneys-in-fact and shall not be responsible, except as to money or securities received by it or its authorized agents, for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. Neither the Administrative Agent nor any of its directors, officers, employees or agents 64 shall be liable or responsible for any action taken or omitted to be taken by it or them hereunder or in connection herewith or therewith, except for its or their own gross negligence or willful misconduct. Section 11.02 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof received by telephone, telex, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by the Administrative Agent. As to any matters not expressly provided for by this Agreement, the Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder or thereunder in accordance with instructions signed by the Majority Banks, and such instructions of the Majority Banks and any action taken or failure to act pursuant thereto shall be binding on all of the Banks. Section 11.03 Defaults. The Administrative Agent shall not be deemed to have knowledge of the occurrence of a Default (other than the non-payment of principal of or interest on the Obligations) unless the Administrative Agent has received notice from a Bank or the Company specifying such Default and stating that such notice is a "Notice of Default". In the event that the Administrative Agent receives such a notice of the occurrence of a Default, the Administrative Agent shall give prompt notice thereof to the Banks (and shall give each Bank prompt notice of each such non-payment). The Administrative Agent shall (subject to Section 11.07 hereof) take such action with respect to such Default as shall be reasonably directed by the Majority Banks, provided that, unless and until the Administrative Agent shall have received such directions, the Administrative Agent may take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interest of the Banks. Section 11.04 Rights as a Bank. With respect to its Commitment and the Loans made by it, the Administrative Agent in its capacity as a Bank hereunder shall have the same rights and powers hereunder as any other Bank and may exercise the same as though it were not acting as Administrative Agent, and the term "Bank" or "Banks" shall, unless the context otherwise indicates, include the Administrative Agent in its individual capacity. The Administrative Agent and its affiliates may (without having to account therefor to any Bank) accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with the Company, the Restricted Subsidiaries and any of their affiliates as if it were not acting as Administrative Agent, and the Administrative Agent and its affiliates may accept fees and other consideration from the Company, the Restricted Subsidiaries and any of their affiliates for services in connection with this Agreement or otherwise without having to account for the same to the Banks. Section 11.05 Indemnification. The Banks agree to indemnify the Administrative Agent and the Predecessor Agents (to the extent not reimbursed under Sections 12.03 and 12.04 hereof, but without limiting the obligations of the Company under said Sections 12.03 and 12.04), ratably in accordance with the aggregate principal amount of the Obligations held by the Banks (or, if no Loans are at the time outstanding, ratably in accordance with their respective Commitments), for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may 65 be imposed on, incurred by or asserted against the Administrative Agent or any Predecessor Agent in any way relating to or arising out of this Agreement or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby (including, without limitation, the costs and expenses which the Company is obligated to pay under Sections 12.03 and 12.04 hereof but excluding, unless a Default has occurred and is continuing, normal administrative costs and expenses incident to the performance of its agency duties hereunder) or the enforcement of any of the terms hereof or of any such other documents, provided that no Bank shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Person to be indemnified. Section 11.06 Non-Reliance on Administrative Agent and Other Banks. Each Bank agrees that it has, independently and without reliance on the Administrative Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Company, the Restricted Subsidiaries and the New York/New Jersey Companies and decision to enter into this Agreement and that it will, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or any other document contemplated by or referred to herein. The Administrative Agent shall not be required to keep itself informed as to the performance or observance by the Company, the Restricted Subsidiaries and the New York/New Jersey Companies of this Agreement or to inspect the properties or books of the Company, the Restricted Subsidiaries and the New York/New Jersey Companies. Except for notices, reports and other documents and information expressly required to be furnished to the Banks by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the affairs, financial condition or business of the Company, the Restricted Subsidiaries and the New York/New Jersey Companies (or any of their Affiliates) which may come into the possession of the Administrative Agent or any of its affiliates. Section 11.07 Failure to Act. Except for action expressly required of the Administrative Agent hereunder, the Administrative Agent shall in all cases be fully justified in failing or refusing to act hereunder unless it shall be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Section 11.08 Resignation or Removal of Administrative Agent. Subject to the appointment and acceptance of a successor Administrative Agent as provided below, the Administrative Agent may resign at any time by giving notice thereof to the Banks and the Company and the Administrative Agent may be removed at any time with or without cause by the Majority Banks. Upon any such resignation or removal, the Majority Banks shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Majority Banks and shall have accepted such appointment within 30 days after the retiring Administrative Agent's giving of notice of resignation or the Majority Banks' removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Banks, appoint a successor Administrative Agent, which shall be a bank organized or licensed under the laws of the United States of America or any State having an office (or an affiliate with an office) in New York, New York and a combined capital and surplus 66 of at least $100,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After the retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article XI shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Administrative Agent. Section 11.09 Agency Fee. So long as the Commitments are outstanding and until payment in full of all Obligations hereunder and the expiration or termination of all Syndicated Letters of Credit and Bank Letters of Credit, the Company will pay to the Administrative Agent such fees as may have been agreed to by the Company and the Administrative Agent. Such fees, once paid, shall be non-refundable. ARTICLE XII MISCELLANEOUS Section 12.01 No Waiver. No failure on the part of the Administrative Agent or any Bank to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. Section 12.02 Notices. All notices and other communications provided for herein shall be by telegraph, cable or in writing and telecopied, telegraphed, cabled, mailed or delivered to the intended recipient at the "Address for Notices" specified in Schedule 12.02 hereto or, as to any party, at such other address as shall be designated by such party in a notice to each other party. Except as otherwise provided in Section 2.02 hereof, all notices and other communications hereunder shall be deemed to have been duly given when transmitted by telecopier, delivered to the telegraph or cable office or personally delivered or, in the case of a mailed notice, four Business Days after the date deposited in the mails, airmail postage prepaid, in each case given or addressed as aforesaid. Section 12.03 Expenses, Etc. The Company shall pay or reimburse each of the Banks and the Administrative Agent for: (a) the reasonable fees and expenses of Winthrop, Stimson, Putnam & Roberts, special New York counsel to the Administrative Agent, in connection with (i) the negotiation, preparation, execution and delivery of this Agreement, the Notes and the other documents contemplated by or referred to herein, the making of the Loans and the issuance of Syndicated Letters of Credit or Bank Letters of Credit hereunder and (ii) any amendment, modification or waiver of any of the terms of this Agreement, the Notes or any of such other documents; (b) all reasonable costs and expenses of the Banks and the Administrative Agent (including reasonable counsels' fees and expenses) in connection with the enforcement, protection, preservation or exercise of any of their rights under this Agreement, the Notes and the other documents contemplated by or referred to herein; and (c) all transfer, stamp, documentary 67 or other similar taxes, assessments or charges levied by any governmental or revenue authority in respect of this Agreement, any of the Notes or any other document referred to herein. The Company shall (to the fullest extent permitted by applicable law) indemnify the Administrative Agent, the Predecessor Agents, the Banks and each affiliate thereof and their respective directors, officers, employees and agents from, and hold each of them harmless against, any and all losses, liabilities, claims or damages to which any of them may become subject, insofar as such losses, liabilities, claims or damages arise out of or in any way relate to or result from any actual or proposed use by the Company of the proceeds of any of the extensions of credit (whether a Loan, a Syndicated Letter of Credit or a participation therein, or a Bank Letter of Credit) hereunder and/or the negotiation, execution, delivery or performance of this Agreement or the Notes or any extensions of credit (whether a Loan, a Syndicated Letter of Credit or a participation therein, or a Bank Letter of Credit) made or to be made hereunder or from any investigation, litigation or other proceeding (including any threatened investigation or proceeding) relating to the foregoing, and the Company shall reimburse the Administrative Agent and each Bank, and each affiliate thereof and their respective directors, officers, employees and agents, upon demand, for any expenses (including legal fees) incurred in connection with any such investigation or proceeding (but excluding any such losses, liabilities, claims, damages, or expenses to the extent, but only to the extent, caused by action taken which constitutes the gross negligence or willful misconduct of the Person to be indemnified). If and to the extent that the obligations of the Company under the preceding sentence may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the losses, liabilities, claims, damages and expenses referred to above as may be permitted by applicable law. Section 12.04 Letter of Credit Indemnification. The Company hereby indemnifies and holds harmless each Bank and the Administrative Agent from and against any and all claims and damages, losses, liabilities, costs or expenses which such Bank or the Administrative Agent may incur (or which may be claimed against such Bank or the Administrative Agent by any Person whatsoever) by reason of or in connection with the execution and delivery or transfer of or payment or failure to pay under any Syndicated Letter of Credit or Bank Letter of Credit; provided that the Company shall not be required to indemnify any Bank or the Administrative Agent for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by (i) the willful misconduct or gross negligence of such Bank or the Administrative Agent in determining whether a request presented under any Syndicated Letter of Credit or Bank Letter of Credit complied with the terms of such Syndicated Letter of Credit or Bank Letter of Credit or (ii) such Bank's failure to pay under any Syndicated Letter of Credit or Bank Letter of Credit after the presentation to it of a request strictly complying with the terms and conditions of the Syndicated Letter of Credit or Bank Letter of Credit. Nothing in this Section 12.04 is intended to limit the obligations of the Company hereunder. Section 12.05 Amendments, Etc. No amendment or waiver of any provision of this Agreement or the Notes, nor any consent to any departure by the Company therefrom, shall in any event be effective unless the same shall be agreed or consented to by the Majority Banks, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that no amendment, waiver or consent shall, unless in writing and signed by all the Banks, do any of the following: (a) increase the Commitment of any of the Banks, extend the Commitment Termination Date or any date on which the 68 Commitments are scheduled to reduce hereunder, or subject the Banks to any additional obligations; (b) reduce the principal of, or interest on, or fees with respect to, the Obligations or the amount of any scheduled payments thereof; (c) postpone any date fixed for payment of principal of, or interest on, or fees with respect to, the Obligations or the Notes; (d) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Obligations, or the number of Banks which shall be required for the Banks or any of them to take any action under this Agreement; (e) release all or a significant portion of any collateral for the Obligations; (f) change any provision contained in Section 2.04(b)(ii) (other than clause (F) of the proviso therein), Section 3.01(b)(iii), Section 4.05, Articles V, VI, VII, Section 12.03 hereof or this Section 12.05; and (g) release or remove any Guarantor from its obligations hereunder other than any such release or removal resulting from a transaction permitted by Section 9.15 hereof. Anything in this Section 12.05 to the contrary, no amendment, waiver or consent shall be made with respect to the matters set forth in the proviso to the previous sentence and the Administrative Agent shall not release any balance in the cash collateral account described in Section 10.02 hereof without the prior written consent of each Bank. Section 12.06 Successors and Assigns. (a) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. (b) Neither the Company nor any Guarantor may sell or assign its rights or obligations hereunder or under the Notes without the prior consent of all of the Banks and the Administrative Agent. (c) At any time after the Effective Date, a Bank may sell a participation of all or part of its rights and obligations under such Bank's Commitment under this Agreement and the Notes to one or more commercial banks, investment companies or other financial institutions that enter into participations of the type contemplated by this Section 12.06 in the ordinary course of their business and that qualify as "accredited investors," as such term is defined under Regulation D of the Securities Act of 1933, as amended (each, a "participant"), such participant's rights against such Bank to be set forth in a participation agreement (a "Participation Agreement"); provided, however, that (i) such Bank shall have submitted in writing to the Company and to the Administrative Agent a request that each of the Company and the Administrative Agent consent to the choice of such participant, (ii) the Company and the Administrative Agent shall have consented in writing to the choice of such participant prior to the time of effectiveness of such participation, such consent not to be unreasonably withheld or delayed, (iii) such participation, when added to the contemporaneous participations made by such Bank under the CMFRI Agreement and, if then in effect, the New York/New Jersey Agreement, must be in an amount not less than $10,000,000, (iv) such participation shall be sold pro rata between such Bank's Commitment, such Bank's CMFRI Commitment and, if the New York/New Jersey Agreement is then in effect, such Bank's New York/New Jersey Commitment based on the relationship of each such Commitment to such Bank's Aggregate Commitment and (v) in the event such Bank was party to this Agreement on the Effective Date, after giving effect to such participation such Bank's Aggregate Commitment not so participated if any shall be at least $10,000,000. All amounts payable by the Company to any Bank under Article V hereof shall be determined as if such Bank had not sold any such participation and as if such Bank were funding all of its Commitment and Loans in the same way that it is funding the Commitment and Loans in which no participations have been sold. In no event shall a Bank that sells a 69 participation be obligated to the participant under its Participation Agreement to refrain from taking any action hereunder or under such Bank's Note except that such Bank may agree in such Participation Agreement that it will not, without the consent of such participant, agree to (A) extend the Commitment Termination Date or any date on which any Commitments are scheduled to reduce hereunder, (B) reduce the principal of, or interest on, the Obligations or under the Notes or any Commitment Fee, (C) postpone any date fixed for payment of the principal of, or interest on, the Obligations or under the Notes, (D) consent to any release of all or a significant portion of any collateral for the Obligations or (E) change any provision contained in Article VI hereof. Any Bank selling a participation hereunder shall promptly notify the Company of the effectiveness thereof. (d) At any time after the Effective Date, a Bank may assign part of its rights and obligations under such Bank's Commitment under this Agreement and the Notes to one or more commercial banks or other financial institution (each, an "assignee") pursuant to an Assignment and Acceptance; provided, that (i) such Bank shall have submitted in writing to the Company and the Administrative Agent a request that each of the Company and the Administrative Agent consent to the choice of such assignee, (ii) the Company and the Administrative Agent shall have consented in writing to the choice of such assignee prior to the time of effectiveness of such assignment, such consent not to be unreasonably withheld or delayed, (iii) such assignment, when added to the contemporaneous assignments made by such Bank under the CMFRI Agreement and, if then in effect, the New York/New Jersey Agreement, must be in an aggregate amount not less than $10,000,000, (iv) such assignment shall be made pro rata between such Bank's Commitment, such Bank's CMFRI Commitment and, if the New York/New Jersey Agreement is then in effect, such Bank's New York/New Jersey Commitment based on the relationship of each such Commitment to such Bank's Aggregate Commitment, (v) the parties to each assignment shall execute and deliver to the Administrative Agent, for its approval, acceptance and recording in the books and records maintained pursuant to Section 12.06(f) hereof an Assignment and Acceptance, together with a processing and recordation fee of, when added to the processing and recordation fee under the contemporaneous assignment under the CMFRI Agreement and, if then in effect, the New York/New Jersey Agreement, $3,500 and (vi) in the event such Bank was party to this Agreement on the Effective Date, after giving effect to such assignment, such Bank's Aggregate Commitment shall not be less than $10,000,000. Upon such execution, delivery, approval, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto, and to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Bank hereunder and under the Notes and (y) the Bank assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations hereunder and under the Notes. Any Bank making an assignment hereunder shall promptly notify the Company of the effectiveness thereof. In the event of any such assignment, the Company shall, against receipt of the existing Note of the Bank assignor, issue a new Note to the Bank assignee and, in the case of a partial assignment, to such Bank assignor, in either case appropriately reflecting such assignment. (e) By executing and delivering an Assignment and Acceptance, the Bank assignor thereunder and the assignee thereunder shall confirm to and agree with each other 70 and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Bank makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such assigning Bank makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Company or its Subsidiaries or the performance or observance by the Company or its Subsidiaries of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Sections 8.04 and 9.01 hereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Administrative Agent, such assigning Bank or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto; and (vi) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Bank. (f) The Administrative Agent shall maintain books and records in which shall be recorded (i) the names and addresses of the Banks and the Commitments of, and principal amount of Obligations, including the Letter of Credit Liabilities, owing to, each Bank from time to time; (ii) all other appropriate debits and credits as provided in this Agreement, including, without limitation, all interest, fees (including attorneys' fees and disbursements to the extent reimbursable hereunder), expenses, charges and other Obligations; and (iii) all payments of Obligations made by the Company or for the Company's account. All entries in such books and records shall be made in accordance with the Administrative Agent's customary accounting practices as in effect from time to time. The Administrative Agent will render a quarterly statement to the Company detailing all relevant transactions for billing purposes. Each and every such statement shall be deemed final, binding and conclusive upon the Company in all respects as to all matters reflected therein (absent manifest error), unless the Company, within 15 days after the date such statement is rendered, delivers to the Administrative Agent written notice of any objections which the Company may have to any such statement. In that event, only those items expressly objected to in such notice shall be deemed to be disputed by the Company. Notwithstanding the foregoing, the Administrative Agent's entries in the books and records evidencing Loans and other financial accommodations made from time to time shall be final, binding and conclusive upon the Company (absent manifest error) as to the existence and amount of the Obligations recorded in such books and records. (g) The Administrative Agent shall maintain at the applicable address for notices as determined in accordance with Section 12.02 hereof a copy of each Assignment and Acceptance delivered to and accepted by it and shall record in such books and records the names and addresses of each Bank and the Commitment of, and principal amount of the Loans owing 71 to, such Bank from time to time. The Company, the Administrative Agent and the Banks may treat each Person whose name is so recorded as a Bank hereunder for all purposes of this Agreement. (h) If any Bank (or, if such Bank has participated any part of its Loans or Commitment, any of such Bank's participants) does not agree with a proposal of the Company for an amendment, waiver or consent in respect of an issue described in the penultimate sentence of Section 12.06(c) hereof, the Company may require that such Bank (and each of its participants, if any) transfer all of its right, title and interest under this Agreement, under the CMFRI Agreement and, if then in effect, under the New York/New Jersey Agreement and such Bank's Note issued hereunder, its note issued under the CMFRI Agreement and its note issued under the New York/New Jersey Agreement to any Person (a "Proposed Bank") identified by the Company who agrees to assume the obligations of such Bank for a consideration equal to the outstanding principal amount of such Bank's Loans, CMFRI Loans and New York/New Jersey Loans, together with interest thereon to the date of such transfer and all other amounts payable hereunder, under the CMFRI Agreement and, if then in effect, under the New York/New Jersey Agreement to such Bank on or prior to the date of such transfer (including any fees accrued hereunder and any amounts which would be payable under Section 5.05 hereof (or the equivalent provisions of the CMFRI Agreement and, if then in effect, the New York/New Jersey Agreement) as if all of such Bank's Loans, CMFRI Loans and New York/New Jersey Loans were being prepaid in full on such date. Subject to the execution and delivery of such instruments and agreements relating to such transfer as the Banks (including the Proposed Bank and such Bank) shall request, such Proposed Bank shall be a "Bank" for all purposes hereunder. (i) A Bank may furnish any information concerning the Company, any of its Subsidiaries or any of the New York/New Jersey Companies in the possession of such Bank from time to time to assignees and participants (including prospective assignees and participants). (j) Notwithstanding anything in the foregoing to the contrary, (x) each Bank may, without complying with any restrictions set forth in this Section 12.06, sell participations in or assign all or any part of its rights and obligations under such Bank's Commitment under this Agreement and the Notes to any affiliate of such Bank, provided that the Company shall consent to the choice of such affiliate, such consent not to be unreasonably withheld or delayed, and provided, however, that any participation or assignment made by such affiliate to a non-affiliate must be effected contemporaneously with its other affiliates such that the non-affiliate participant or assignee holds pro rata amounts of the Commitment, the CMFRI Commitment and, if the New York/New Jersey Agreement is then in effect, the New York/New Jersey Commitment as if such participation or assignment had been made by such Bank; and (y) each Bank may at any time, without complying with any restrictions set forth in this Section 12.06, assign all or any portion of its rights under this Agreement and the Notes to a Federal Reserve Bank, provided that such assignment shall not release the Bank assignor from its obligations under this Agreement. Section 12.07 Survival. The obligations of the Company under Sections 5.01, 5.05, 5.06, 12.03 and 12.04 hereof shall survive the repayment of the Loans, the Reimbursement Obligations and the obligations of the Company in respect of Bank Letters of Credit and the expiration and termination of the Syndicated Letters of Credit and Bank Letters of Credit. 72 Section 12.08 Senior Indebtedness. The Obligations (including, without limitation, the obligations of the Company and the Guarantors to pay, when due (whether at stated maturity, by acceleration or otherwise) the principal of and interest on the Loans to be made by the Banks to the Company pursuant to Section 2.01 hereof and the Obligations in respect of Syndicated Letters of Credit and Bank Letters of Credit issued pursuant to Section 2.03 hereof) and the obligations of the Company and the Restricted Subsidiaries with respect to Interest Swap Agreements shall constitute "Senior Indebtedness" as such term is defined in all documents to which the Company or any Restricted Subsidiary is a party. Section 12.09 Conditions to Effectiveness; Assignment. (a) This Agreement shall become effective on the first day (the "Effective Date") on which (i) this Agreement shall have been duly executed by the parties hereto and (ii) the conditions precedent to the initial extension of credit under Article VII hereof shall have been satisfied, at which time the 1996 Agreement shall be amended and restated by this Agreement. If no Effective Date shall occur, the 1996 Agreement shall remain in full force and effect. (b) Upon the Effective Date, each 1996 Bank shall be released from all duties and obligations under the 1996 Agreement and, except in the case of any Bank, shall have no further duties or obligations under this Agreement. Section 12.10 Liability of General Partners and Other Persons. No general partner of any Restricted Subsidiary that is a partnership, joint venture or joint adventure shall have any personal liability in respect of such Restricted Subsidiary's obligation under this Agreement or the Notes by reason of his, her or its status as such general partner. In addition, no limited partner, officer, employee, director, stockholder or other holder of an ownership interest of or in the Company or any Restricted Subsidiary or any partnership, corporation or other entity which is a stockholder or other holder of an ownership interest of or in the Company or any Restricted Subsidiary shall have any personal liability in respect of such obligations by reason of his, her or its status as such limited partner, officer, employee, director, stockholder or holder. Section 12.11 Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Agreement by signing any such counterpart. Section 12.12 Waiver. THE COMPANY, THE RESTRICTED SUBSIDIARIES, THE ADMINISTRATIVE AGENT AND THE BANKS HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH ANY OF THEM IS A PARTY INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, THE NOTES OR THE RELATIONSHIP ESTABLISHED HEREUNDER. Section 12.13 Entire Agreement. This Agreement, the Notes and the letter referred to in Section 7.01(j) hereof embody the entire agreement among the Company, the Restricted Subsidiaries and the Banks and supersede all prior agreements, representations and understandings, if any, relating to the subject matter hereof. 73 Section 12.14 Governing Law. This Agreement and the Notes shall be governed by, and construed in accordance with, the law of the State of New York. Section 12.15 Captions, Etc. Captions, section headings and the table of contents appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement. Section 12.16 Acceptance of Release of Rights of Guarantors. The Company hereby accepts the release effected by Article VI and agrees not to restore or attempt to restore any of the rights thereby released. Section 12.17 Authorization of Third Parties to Deliver Information and Discuss Affairs. The Company hereby confirms that it has authorized and directed each Person whose preparation or delivery to the Administrative Agent or the Banks of any opinion, report or other information is a condition or covenant under this Agreement (including under Article VII and Article IX) to so prepare or deliver such opinions, reports or other information for the benefit of the Administrative Agent and the Banks. The Company agrees to confirm such authorizations and directions provided for in this Section 12.17 from time to time as may be requested by the Administrative Agent. Section 12.18 Acknowledgement. The Company hereby acknowledges that neither the Administrative Agent nor any Bank has any fiduciary relationship with or fiduciary duty to the Company arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Administrative Agent and the Banks, on the one hand, and the Company, on the other hand, in connection herewith or therewith is solely that of debtor and creditor. 74 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. CSC HOLDINGS, INC., for itself and as General Partner of Cablevision Finance Limited Partnership By -------------------------------------------------- Name: Title: CABLEVISION OF CONNECTICUT CORPORATION CABLEVISION AREA 9 CORPORATION CABLEVISION FAIRFIELD CORPORATION COMMUNICATIONS DEVELOPMENT CORPORATION CABLEVISION OF MICHIGAN, INC. CABLEVISION SYSTEMS DUTCHESS CORPORATION CABLEVISION SYSTEMS EAST HAMPTON CORPORATION CABLEVISION SYSTEMS GREAT NECK CORPORATION CABLEVISION SYSTEMS HUNTINGTON CORPORATION CABLEVISION SYSTEMS ISLIP CORPORATION CABLEVISION SYSTEMS LONG ISLAND CORPORATION CABLEVISION SYSTEMS SUFFOLK CORPORATION Sixth Amended and Restated Credit Agreement for CSC Holdings, Inc. CABLEVISION SYSTEMS WESTCHESTER CORPORATION CABLEVISION OF CLEVELAND G.P., INC., for itself and as General Partner of Cablevision of Cleveland, L.P. CABLEVISION OF CLEVELAND L.P., INC. 3300 LAKESIDE CORPORATION V CABLE, INC. VC HOLDING, INC. ARSENAL MSUB 7, INC. TELERAMA, INC. CABLEVISION OF THE MIDWEST HOLDING CO., INC. CABLEVISION OF THE MIDWEST, INC., for itself and as General Partner of Complexicable of Cuyahoga Valley, Ltd. CABLEVISION SYSTEMS OHIO INVESTMENT CORPORATION, for itself and as General Partner of each of Ohio Cablevision Investors, Ltd., Cablevision of Ohio, Ltd.,Cablevision of Geauga County, Space Cable of Ohio, Ltd. and Space Cable of Strongsville, Ltd. SHAMROCK CABLE CORPORATION, for itself and as General Partner of each of Shamrock Cleveland Cablevision, L.P., Shamrock Cuyahoga County Cablevision Associates, L.P. and Shamrock Ohio Cablevision Associates, L.P. CSC ACQUISITION CORPORATION Sixth Amended and Restated Credit Agreement for CSC Holdings, Inc. CSC ACQUISITION - NY, INC. CSC ACQUISITION - MA, INC. A-R CABLE SERVICES - NY, INC. CABLEVISION LIGHTPATH, INC. CABLEVISION FINANCE CORPORATION CABLEVISION OF BOSTON, INC. CABLEVISION OF BROOKLINE, INC. CABLEVISION SYSTEMS BROOKLINE CORPORATION, for itself and as Managing General Partner of Cablevision of Brookline, L.P. ARSENAL MSUB 2, INC. PETRA CABLEVISION CORPORATION SUFFOLK CABLE CORPORATION SAMSON CABLEVISION CORP. SUFFOLK CABLE OF SMITHTOWN, INC. SUFFOLK CABLE OF SHELTER ISLAND, INC. NYCGP CORP., for itself and as General Partner of Cablevision of New York City - Master L.P. NYC LP CORP. CABLEVISION SYSTEMS NEW YORK CITY CORPORATION, for itself and as Corporate General Partner of Cablevision of New York City - Phase I L.P. Sixth Amended and Restated Credit Agreement for CSC Holdings, Inc. CABLE SCIENCE CORPORATION A-R CABLE INVESTMENTS, INC. FRAMINGHAM HOLDINGS, INC. CABLEVISION OF FRAMINGHAM HOLDINGS, INC. CABLEVISION OF FRAMINGHAM, INC. CABLEVISION OF NASHOBA HOLDINGS, INC. WP NASHOBA CABLE, INC. CABLEVISION OF NASHOBA, INC., for itself and as General Partner of A-R Cable Partners By -------------------------------------------------- Name: Title: of each of the above-named fifty corporations CABLEVISION FINANCE LIMITED PARTNERSHIP By CSC Holdings, Inc., as General Partner CABLEVISION OF BROOKLINE, L.P. By Cablevision Systems Brookline Corporation, as Managing General Partner CABLEVISION OF NEW YORK CITY - MASTER L.P. By NYC GP Corp., as General Partner Sixth Amended and Restated Credit Agreement for CSC Holdings, Inc. CABLEVISION OF NEW YORK CITY - PHASE I L.P. By Cablevision Systems New York City Corporation, as Corporate General Partner A-R CABLE PARTNERS By Cablevision of Nashoba, Inc., as General Partner CABLEVISION OF CLEVELAND, L.P. By Cablevision of Cleveland G.P., Inc., as General Partner COMPLEXICABLE OF CUYAHOGA VALLEY, LTD. By Cablevision of the Midwest, Inc., as General Partner OHIO CABLEVISION INVESTORS, LTD. By Cablevision Systems Ohio Investment Corporation, as General Partner CABLEVISION OF OHIO, LTD. By Cablevision Systems Ohio Investment Corporation, as General Partner CABLEVISION OF GEAUGA COUNTY By Cablevision Systems Ohio Investment Corporation, as General Partner SPACE CABLE OF OHIO, LTD. By Cablevision Systems Ohio Investment Corporation, as General Partner Sixth Amended and Restated Credit Agreement for CSC Holdings, Inc. SPACE CABLE OF STRONGSVILLE, LTD. By Cablevision Systems Ohio Investment Corporation, as General Partner SHAMROCK CLEVELAND CABLEVISION, L.P. By Shamrock Cable Corporation, as General Partner SHAMROCK CUYAHOGA COUNTY CABLEVISION ASSOCIATES, L.P. By Shamrock Cable Corporation, as General Partner SHAMROCK OHIO CABLEVISION ASSOCIATES, L.P. By Shamrock Cable Corporation, as General Partner Sixth Amended and Restated Credit Agreement for CSC Holdings, Inc. Commitment $112,500,000 TORONTO DOMINION (TEXAS), INC., as Arranging Agent, Administrative Agent and Bank By ----------------------------------------- Name: Title: THE BANK OF NEW YORK, as Managing Agent By ----------------------------------------- Name: Title: $87,500,000 THE BANK OF NEW YORK COMPANY, INC., as Bank By ----------------------------------------- Name: Title: $87,500,000 THE BANK OF NOVA SCOTIA, as Bank and Managing Agent By ----------------------------------------- Name: Title: $87,500,000 THE CANADIAN IMPERIAL BANK OF COMMERCE, as Bank, Managing Agent and Co-Syndication Agent By ----------------------------------------- Name: Title: Sixth Amended and Restated Credit Agreement for CSC Holdings, Inc. Commitment $87,500,000 NATIONSBANK, N.A., as Bank, Managing Agent and Co-Syndication Agent By ----------------------------------------- Name: Title: $87,500,000 THE CHASE MANHATTAN BANK, as Bank, Managing Agent and Co-Syndication Agent By ----------------------------------------- Name: Title: $70,000,000 BANK OF MONTREAL, CHICAGO BRANCH, as Bank and Agent By ----------------------------------------- Name: Title: $70,000,000 BARCLAYS BANK PLC, as Bank and Agent By ----------------------------------------- Name: Title: $70,000,000 FLEET BANK, N.A., as Bank and Agent By ----------------------------------------- Name: Title: Sixth Amended and Restated Credit Agreement for CSC Holdings, Inc. Commitment $70,000,000 ROYAL BANK OF CANADA, as Bank and Agent By ----------------------------------------- Name: Title: $57,500,000 MELLON BANK, N.A., as Bank and Co-Agent By ----------------------------------------- Name: Title: $50,000,000 BANKBOSTON, N.A., as Bank and Co-Agent By ----------------------------------------- Name: Title: $50,000,000 BANQUE PARIBAS, as Bank and Co-Agent By ----------------------------------------- Name: Title: By ----------------------------------------- Name: Title: Sixth Amended and Restated Credit Agreement for CSC Holdings, Inc. Commitment $50,000,000 CREDIT LYONNAIS, as Bank and Co-Agent By ----------------------------------------- Name: Title: $50,000,000 THE FIRST NATIONAL BANK OF CHICAGO, as Bank and Co-Agent By ----------------------------------------- Name: Title: $50,000,000 SOCIETE GENERALE, NEW YORK BRANCH, as Bank and Co-Agent, By ----------------------------------------- Name: Title: $37,500,000 FIRST UNION NATIONAL BANK By ----------------------------------------- Name: Title: $37,500,000 PNC BANK, NATIONAL ASSOCIATION By ----------------------------------------- Name: Title: Sixth Amended and Restated Credit Agreement for CSC Holdings, Inc. Commitment $25,000,000 ABN AMRO BANK N.V. By ----------------------------------------- Name: Title: By ----------------------------------------- Name: Title: $25,000,000 COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE By ----------------------------------------- Name: Title: By ----------------------------------------- Name: Title: $25,000,000 UNION BANK OF CALIFORNIA, N.A. By ----------------------------------------- Name: Title: $12,500,000 BANK OF HAWAII By ----------------------------------------- Name: Title: Sixth Amended and Restated Credit Agreement for CSC Holdings, Inc. Commitment $12,500,000 BANQUE FRANCAISE DU COMMERCE EXTERIEUER By ----------------------------------------- Name: Title: $12,500,000 THE DAI-ICHI KANGYO BANK, LTD. By ----------------------------------------- Name: Title: $12,500,000 DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES By ----------------------------------------- Name: Title: $12,500,000 THE FUJI BANK LIMITED, NEW YORK BRANCH By ----------------------------------------- Name: Title: $12,500,000 GENERAL ELECTRIC CREDIT CORPORATION By ----------------------------------------- Name: Title: Sixth Amended and Restated Credit Agreement for CSC Holdings, Inc. Commitment $12,500,000 THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED By ----------------------------------------- Name: Title: $12,500,000 THE SUMITOMO BANK, LIMITED By ----------------------------------------- Name: Title: By ----------------------------------------- Name: Title: $12,500,000 SUMMIT BANK By ----------------------------------------- Name: Title: - - ----------------- $1,400,000,000.00 Sixth Amended and Restated Credit Agreement for CSC Holdings, Inc. EX-10.48 4 FIRST AMENDED AND RESTATED CREDIT AGREEMENT EXECUTION COPY CABLEVISION MFR, INC. ----------- $1,400,000,000 FIRST AMENDED AND RESTATED CREDIT AGREEMENT Dated as of May 28, 1998 TORONTO DOMINION (TEXAS), INC. as Arranging Agent and as Administrative Agent THE BANK OF NEW YORK THE BANK OF NOVA SCOTIA THE CANADIAN IMPERIAL BANK OF COMMERCE NATIONSBANK, N.A. THE CHASE MANHATTAN BANK as Managing Agents BANK OF MONTREAL, CHICAGO BRANCH BARCLAYS BANK PLC FLEET BANK, N.A. ROYAL BANK OF CANADA as Agents BANQUE PARIBAS CREDIT LYONNAIS BANKBOSTON, N.A. THE FIRST NATIONAL BANK OF CHICAGO MELLON BANK, N.A. SOCIETE GENERALE, NEW YORK BRANCH as Co-Agents THE BANK OF NEW YORK THE BANK OF NOVA SCOTIA as Co-Syndication Agents TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS AND ACCOUNTING MATTERS Section 1.01 Certain Defined Terms...........................................2 Section 1.02 Accounting Terms and Determinations............................17 ARTICLE II LOANS Section 2.01 Loans..........................................................17 Section 2.02 Manner of Borrowing; Conversion and Continuation...............18 Section 2.03 Reductions and Changes of Commitments.........................19 Section 2.04 Commitment Fee.................................................21 Section 2.05 Notes..........................................................22 Section 2.06 Lending Offices................................................22 Section 2.07 Several Obligations; Remedies Independent......................22 Section 2.08 Use of Proceeds................................................22 ARTICLE III PAYMENTS OF PRINCIPAL AND INTEREST Section 3.01 Prepayments....................................................22 Section 3.02 Repayment of Loans.............................................23 Section 3.03 Interest.......................................................23 ARTICLE IV PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC. Section 4.01 Payments.......................................................24 Section 4.02 Pro Rata Treatment.............................................24 Section 4.03 Computations...................................................25 Section 4.04 Non-Receipt of Funds by the Administrative Agent...............25 Section 4.05 Sharing of Payments, Etc.......................................25 Section 4.06 No Reductions..................................................26 Section 4.07 Taxes..........................................................26 ARTICLE V YIELD PROTECTION AND ILLEGALITY Section 5.01 Additional Costs in Respect of Loans...........................27 Section 5.02 Limitation on Types of Loans...................................29 Section 5.03 Illegality.....................................................29 Section 5.04 Certain Conversions of Loans Pursuant to Section 5.01 or 5.03..................................................29 Section 5.05 Compensation...................................................29 Section 5.06 Replacement of Banks...........................................30 ARTICLE VI GUARANTEE.................................31 ARTICLE VII CONDITIONS PRECEDENT Section 7.01 Initial Loan...................................................32 Section 7.02 Each Loan......................................................34 ii ARTICLE VIII REPRESENTATIONS Section 8.01 Existence and Power............................................34 Section 8.02 Subsidiaries...................................................35 Section 8.03 Authority; No Conflict.........................................35 Section 8.04 Financial Condition............................................35 Section 8.05 Litigation; Etc................................................36 Section 8.06 Titles and Liens...............................................36 Section 8.07 Regulation U...................................................36 Section 8.08 Taxes..........................................................36 Section 8.09 Other Credit Agreements........................................37 Section 8.10 Full Disclosure................................................37 Section 8.11 No Default.....................................................37 Section 8.12 Approval of Regulatory Authorities.............................37 Section 8.13 Binding Agreements.............................................37 Section 8.14 Franchises.....................................................38 Section 8.15 Collective Bargaining Agreements...............................38 Section 8.16 Investments...................................................38 ARTICLE IX PARTICULAR COVENANTS OF THE COMPANY AND THE GUARANTORS Section 9.01 Financial Statements and Other Information.....................38 Section 9.02 Taxes and Claims...............................................40 Section 9.03 Insurance......................................................40 Section 9.04 Maintenance of Existence; Conduct of Business..................40 Section 9.05 Maintenance of and Access to Properties........................40 iii Section 9.06 Compliance with Applicable Laws................................41 Section 9.07 Litigation.....................................................41 Section 9.08 New Subsidiaries...............................................41 Section 9.09 Franchises.....................................................41 Section 9.10 Indebtedness...................................................41 Section 9.11 Contingent Liabilities.........................................42 Section 9.12 Liens..........................................................43 Section 9.13 Leases.........................................................43 Section 9.14 Mergers, Acquisitions and Dispositions, Etc....................43 Section 9.15 Investments....................................................45 Section 9.16 Restricted Payments............................................46 Section 9.17 Business.......................................................46 Section 9.18 Transactions with Affiliates...................................46 Section 9.19 Issuance of Stock..............................................47 Section 9.20 Operating Cash Flow............................................47 Section 9.21 Cash Flow Ratio................................................47 ARTICLE X DEFAULTS Section 10.01 Events of Default..............................................48 ARTICLE XI THE ADMINISTRATIVE AGENT Section 11.01 Appointment, Powers and Immunities.............................51 Section 11.02 Reliance by Administrative Agent...............................51 Section 11.03 Defaults.......................................................51 iv Section 11.04 Rights as a Bank...............................................52 Section 11.05 Indemnification................................................52 Section 11.06 Non-Reliance on Administrative Agent and Other Banks...........52 Section 11.07 Failure to Act.................................................53 Section 11.08 Resignation or Removal of Administrative Agent.................53 Section 11.09 Agency Fee.....................................................53 ARTICLE XII MISCELLANEOUS Section 12.01 No Waiver......................................................53 Section 12.02 Notices........................................................54 Section 12.03 Expenses, Etc..................................................54 Section 12.04 Amendments, Etc................................................54 Section 12.05 Successors and Assigns.........................................55 Section 12.06 Survival.......................................................58 Section 12.07 Senior Indebtedness............................................58 Section 12.08 Conditions to Effectiveness....................................59 Section 12.09 Liability of General Partners and Other Persons................59 Section 12.10 Counterparts...................................................59 Section 12.11 Waiver.........................................................59 Section 12.12 Entire Agreement...............................................59 Section 12.13 Governing Law..................................................59 Section 12.14 Captions, Etc..................................................59 Section 12.15 Waiver of Certain Defenses.....................................59 Section 12.16 Release; Acceptance of Release.................................60 Section 12.17 Authorization of Third Parties to Deliver Information and Discuss Affairs............................................60 v Section 12.18 Termination of 1996 Agreement and 1996 Pledge Agreement and Release of Security Interests....................60 Section 12.19 CSC Agreement..................................................61 Section 12.20 Acknowledgement................................................61 vi Schedule 2.02(a)(i) Form of Notice of Loan Schedule 2.02(c) Form of Notice of Conversion and Continuation Schedule 2.06 Applicable Lending Offices Schedule 4.07(c) Form of Certificate of Non-US Bank Schedule 8.02 Subsidiaries Schedule 8.03 Required Consents and Governmental Approvals Schedule 8.05 Existing Litigation Schedule 8.14 Existing Franchises Schedule 9.10 Existing Indebtedness Schedule 9.11 Existing Guarantees Schedule 9.12 Existing Liens Schedule 9.15 Existing Investments Schedule 12.02 Addresses for Notices EXHIBIT A Form of Note EXHIBIT B Form of Compliance Certificate EXHIBIT C Form of Subscribers' Certificate EXHIBIT D(1) Form of Certificate as to Quarterly Financial Statements EXHIBIT D(2) Form of Certificate as to Annual Financial Statements EXHIBIT E Form of Opinion of General Counsel to the Obligors EXHIBIT F(1) Form of Opinion of Special New York Counsel to the Obligors EXHIBIT F(2) Form of Opinion of Special New Jersey Counsel to the Obligors EXHIBIT F(3) Form of Opinion of Special FCC Counsel Counsel to the Obligors EXHIBIT G Form of Opinion of Special New York Counsel to the Administrative Agent EXHIBIT H Form of Assignment and Acceptance vii FIRST AMENDED AND RESTATED CREDIT AGREEMENT dated as of May 28, 1998 among CABLEVISION MFR, INC., a Delaware corporation (the "Company"), CSC HOLDINGS, INC. (formerly known as Cablevision Systems Corporation), a Delaware corporation ("CSC"), the Guarantors (as defined below) which are parties hereto, the lenders which are parties hereto, together with their respective successors and assigns (the "Banks"), and TORONTO DOMINION (TEXAS), INC., as Arranging Agent and as Administrative Agent, THE BANK OF NEW YORK, THE BANK OF NOVA SCOTIA, THE CANADIAN IMPERIAL BANK OF COMMERCE, NATIONSBANK, N.A. and THE CHASE MANHATTAN BANK, as Managing Agents, BANK OF MONTREAL, CHICAGO BRANCH, BARCLAYS BANK, PLC, FLEET BANK, N.A., and ROYAL BANK OF CANADA, as Agents, BANQUE PARIBAS, CREDIT LYONNAIS, BANKBOSTON, N.A., THE FIRST NATIONAL BANK OF CHICAGO, MELLON BANK, N.A. and SOCIETE GENERALE, NEW YORK BRANCH as Co-Agents, and THE BANK OF NEW YORK and THE BANK OF NOVA SCOTIA as Co-Syndication Agents. WHEREAS, on September 5, 1996, the Company, CSC, the Guarantors named therein, the several banks whose names are set forth on the signature pages thereto, and Toronto Dominion (Texas), Inc., as Arranging Agent and as Administrative Agent, The Bank of New York, The Bank of Nova Scotia, The Canadian Imperial Bank of Commerce, NationsBank of Texas, N.A. and The Chase Manhattan Bank, as Agents, Bank of Montreal, Chicago Branch, Fleet Bank, N.A., Mellon Bank, N.A. and Royal Bank of Canada, as Co-Agents, The Chase Manhattan Bank, as Syndication Agent, and NationsBank of Texas, N.A., as Documentation Agent, entered into a Credit Agreement (such Credit Agreement being referred to herein as the "1996 Agreement"); WHEREAS, the Company and its Subsidiaries are engaged in the business of developing, constructing, owning, acquiring, altering, repairing, financing, operating, maintaining, publishing, distributing, promoting and otherwise exploiting cable television systems and related businesses, including, without limitation, telecommunications services, data transmission and telephony activities; and WHEREAS, the Banks have extended credit to the Company, by the making of loans to the Company, in reliance upon collateral security furnished by the Company and its Subsidiaries; the Company and the Guarantors have requested that the Total Commitment (as defined in the 1996 Agreement) be increased and that such collateral security be released; the proceeds of the Loans hereunder are to be employed in accordance with Section 2.08 hereof; and each of the Obligors and the Guarantors expects to derive benefit, directly or indirectly, from such loans. NOW, THEREFORE, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING MATTERS Section 1.01 Certain Defined Terms. As used herein, the following terms shall have the following meanings (all terms defined in this Article I or in other provisions of this Agreement in the singular to have the same meanings when used in the plural and vice versa): "1996 Agreement" shall have the meaning given to such term in the first "Whereas" clause of this Agreement. "1996 Banks" shall have the meaning given to the term "Banks" in the 1996 Agreement. "1996 Pledge Agreement" shall mean the "Pledge Agreement" as such term is used in the 1996 Agreement. "1996 Security Agent" shall mean Toronto Dominion (Texas), Inc., in its capacity as Security Agent under the 1996 Pledge Agreement. "Accumulated Funding Deficiency" shall mean an accumulated funding deficiency as defined in Section 302 of ERISA. "Additional Costs" shall have the meaning given to such term in Section 5.01 hereof. "Administrative Agent" shall mean Toronto Dominion (Texas), Inc. in its capacity as administrative agent for the Banks hereunder and its successors in such capacity. "Affected Loans" shall have the meaning given to such term in Section 5.04 hereof. "Affected Type" shall have the meaning given to such term in Section 5.04 hereof. "Affiliate" shall mean, as to any Person, any other Person which directly or indirectly controls, or is under common control with, or is controlled by, such Person. As used in this definition, "control" (including, with its correlative meanings, "controlled by" and "under common control with") shall mean possession, directly or indirectly, of the power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise), provided that, in any event, any Person which owns directly or indirectly 10% or more of the securities having ordinary voting power for the election of directors or other governing body of a corporation or 10% or more of the partnership or other ownership interests of any other Person (other than as a limited partner of such other Person) will be deemed to control such corporation or other Person; and provided further that no individual shall be an Affiliate of a corporation or partnership solely by 2 reason of his or her being an officer, director or partner of such entity, except in the case of a partner if his or her interests in such partnership shall qualify him or her as an Affiliate. "Aggregate Commitment" shall mean, at any time, as to each Bank, the sum of such Bank's Commitment, CSC Commitment and New York/New Jersey Commitment at such time. "Agreement" shall mean this First Amended and Restated Credit Agreement, including all schedules and exhibits hereto, as the same may be amended, supplemented or modified from time to time. "Annualized Operating Cash Flow" shall mean, as at any date, an amount equal to Operating Cash Flow for the period of three complete consecutive calendar months ending on or most recently prior to such date, multiplied by four. "Applicable Lending Office" shall mean, with respect to each Bank, for each type of Loan, the lending office of such Bank (or of an affiliate of such Bank) designated for such type of Loan in Schedule 2.06 hereto or such other office of such Bank (or of an affiliate of such Bank) as such Bank may from time to time specify to the Administrative Agent and the Company as the office by which its Loans of such type are to be made and maintained. "Applicable Margin" shall mean: (a) With respect to Base Rate Loans, 0.250% at all times during any Applicable Period if the CSC Cash Flow Ratio as at the end of the immediately preceding Quarter was greater than 6.00 to 1; .125% at all times during any Applicable Period if the CSC Cash Flow Ratio as at the end of the immediately preceding Quarter was less than or equal to 6.00 to 1 and greater than 5.50 to 1; and 0.000% at all times during any Applicable Period if the CSC Cash Flow Ratio as at the end of the immediately preceding Quarter was less than or equal to 5.50 to 1; and (b) With respect to Eurodollar Loans, 1.125% at all times during any Applicable Period if the CSC Cash Flow Ratio as at the end of the immediately preceding Quarter was greater than 6.00 to 1; 0.875% at all times during any Applicable Period if the CSC Cash Flow Ratio as at the end of the immediately preceding Quarter was less than or equal to 6.00 to 1 and greater than 5.50 to 1; 0.750% at all times during any Applicable Period if the CSC Cash Flow Ratio as at the end of the immediately preceding Quarter was less than or equal to 5.50 to 1 and greater than 5.00 to 1; 0.600% at all times during any Applicable Period if the CSC Cash Flow Ratio as at the end of the immediately preceding Quarter was less than or equal to 5.00 to 1 and greater than 4.50 to 1; and 0.400% at all times during any Applicable Period if the CSC Cash Flow Ratio as at the end of the immediately preceding Quarter was less than or equal to 4.50 to 1;. For purposes of this definition, the CSC Cash Flow Ratio as at the end of any Quarter (the "Subject Quarter") shall be determined based upon (i) for the Quarter ended immediately prior to the Effective Date, the Compliance Certificate delivered in accordance with Section 7.01 of the CSC Credit Agreement, and (ii) for each Subject Quarter commencing thereafter, (x) the 3 Annualized Operating Cash Flow (as defined in the CSC Agreement) as set forth in the Subscribers' Certificate (as defined in the CSC Credit Agreement) delivered pursuant to Section 9.01(e) of the CSC Credit Agreement with respect to the second month of such Subject Quarter and (y) the aggregate outstanding principal amount of Indebtedness of CSC, the Restricted Subsidiaries and the New York/New Jersey Companies (as calculated in accordance with the definition of CSC Cash Flow Ratio) as of the last day of such Subject Quarter (as certified by the Company and the New York/New Jersey Obligors to the Administrative Agent at the time of the delivery of such Subscribers' Certificate). As used in this definition, "Applicable Period" shall mean the period from and including (i)(a) in the case of the first Applicable Period, the Effective Date and (b) in the case of each subsequent Applicable Period, the first day after the immediately preceding Applicable Period to but excluding (ii) the fifth Business Day of the next July, October, January or April (whichever occurs first) to occur thereafter. "Assignment and Acceptance" shall have the meaning given to such term in Section 5.06 hereof. "Banks" shall have the meaning given to such term in the preamble to this Agreement. "Base Rate" shall mean, for any period, a fluctuating interest rate per annum as shall be in effect from time to time, which rate per annum shall at all times be equal to the higher of: (a) the rate of interest adopted by The Toronto-Dominion Bank (New York Branch), from time to time, as its reference rate for the determination of interest rates on loans of varying maturities in Dollars to United States residents of varying degrees of creditworthiness and being quoted at such time by The Toronto-Dominion Bank (New York Branch) as its "prime rate," which rate is not necessarily The Toronto-Dominion Bank's lowest rate of interest; and (b) the sum (adjusted to the nearest one-quarter of one percent (1/4 of 1%) or, if there is no nearest one-quarter of one percent (1/4 of 1%), to the next higher one-quarter of one percent (1/4 of 1%)) of (i) one-half of one percent (1/2 of 1%) per annum plus (ii) the Federal Funds Rate. "Base Rate Loans" shall mean Loans the interest rates on which are determined on the basis of rates referred to in the definition of "Base Rate" in this Section 1.01. "BPU" shall mean the New Jersey Board of Public Utilities or successor thereto. "Business Day" shall mean any day on which commercial banks are not authorized or required to close in New York City or London. "Capital Lease Obligations" shall mean, as to any Person, the obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to 4 use) real and/or personal property, which obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under generally accepted accounting principles (including Statement of Financial Accounting Standards No. 13 of the Financial Accounting Standards Board) and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with generally accepted accounting principles (including such Statement No. 13). "Capital Maintenance Costs" shall mean, with respect to the Loans of each Bank, any costs which such Bank determines are attributable to the maintenance by such Bank or any of its affiliates, pursuant to any law or regulation or any interpretation, directive or request (whether or not having the force of law) of any court or governmental or monetary authority, whether in effect on the Effective Date or thereafter, of capital in respect of its maintaining Loans hereunder or its commitment to make Loans hereunder. "Cash Flow Ratio" shall mean, as at any date, the ratio of (i) the sum of the aggregate outstanding principal amount of all Indebtedness of the Company and the Guarantors (determined on a consolidated and, in respect of the New York/New Jersey Companies to the extent such companies are not Restricted Subsidiaries on such date, a combined basis, but excluding all obligations under any Interest Swap Agreement) outstanding on such date to (ii) Annualized Operating Cash Flow determined as at the last day of the month covered by the then most recent Subscribers' Certificate delivered to the Banks pursuant to Section 9.01(e) hereof, a copy of which has been delivered to the Administrative Agent (and any change in such ratio as a result of a change in the amount of Indebtedness shall be effective as of the date such change shall occur and any change in such ratio as a result of a change in the amount of Annualized Operating Cash Flow shall be effective as of the date of receipt by the Administrative Agent of the Subscribers' Certificate reflecting such change). "Cash Taxes" shall mean, for any period, the sum of (i) all federal income and other taxes on operations paid by the Company and the Guarantors during such period in respect of the operating revenues of the Company and the Guarantors taken as a whole and (ii) all state and local income and other taxes on operations paid by the Company and the Guarantors during such period in respect of the income and operations of the Company and the Guarantors taken as a whole. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Commitment" shall mean, as to each Bank, the amount set forth opposite its name on the signature pages hereto under the heading "Commitment" or amount set forth on any Assignment and Acceptance (as the same may be reduced or otherwise adjusted from time to time as provided in this Agreement). "Commitment Fee" shall have the meaning given to such term in Section 2.04 hereof. "Commitment Percentage" shall mean, as to each Bank at any time, the percentage obtained by dividing such Bank's Commitment by the Total Commitment. 5 "Commitment Termination Date" shall mean the Quarterly Date falling on or nearest to March 31, 2007. "Company" shall mean Cablevision MFR, Inc. "Compliance Certificate" shall mean a certificate of a senior financial executive of the Company and the New York/New Jersey Obligors in substantially the form of Exhibit B hereto. "Controlled Group" shall mean all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Company, are treated as a single employer under Section 414(b) or 414(c) of the Code. "CSC" shall have the meaning given to such term in the preamble to this Agreement. "CSC Agreement" shall mean the Sixth Amended and Restated Credit Agreement, dated as of May 28, 1998, among CSC, the Restricted Subsidiaries parties thereto, the banks parties thereto and Toronto Dominion (Texas), Inc., as Arranging Agent and as Administrative Agent, The Bank of New York, The Bank of Nova Scotia, The Canadian Imperial Bank of Commerce, NationsBank, N.A. and The Chase Manhattan Bank, as Managing Agents, Bank of Montreal, Chicago Branch, Barclays Bank PLC, Fleet Bank, N.A. and Royal Bank of Canada, as Agents, Banque Paribas, Credit Lyonnais, The First National Bank of Boston, The First National Bank of Chicago, Mellon Bank, N.A. and Societe Generale, as Co-Agents, and The Canadian Imperial Bank of Commerce, The Chase Manhattan Bank and NationsBank, N.A., as Co-Syndication Agents, as amended and/or restated and in effect from time to time, or, if such agreement shall cease to be in effect, as last in effect. "CSC Cash Flow Ratio" shall have the meaning given to the term "Cash Flow Ratio" in the CSC Agreement. "CSC Commitment" shall mean, as to each Bank, its "Commitment" as such term is used in the CSC Agreement (as the same may be reduced or otherwise adjusted from time to time as provided in the CSC Agreement). "CSC Loans" shall mean "Loans" as such term is used in the CSC Agreement. "CSC Specified Investments" shall mean "Specified Investments" as such term is used in the CSC Agreement. "Default" shall mean an Event of Default or any other event which with notice and/or passage of time would become an Event of Default or an Event of Default under (and as defined in) the New York/New Jersey Agreement. "Dollars" and "$" shall mean lawful money of the United States of America. "Effective Date" shall have the meaning given to such term in Section 12.08 hereof. 6 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "ERISA Affiliate" shall mean, when used with respect to a Plan, ERISA, the PBGC or a provision of the Code pertaining to employee benefit plans, any Person that is a member of any group of organizations within the meaning of Sections 414(b), (c), (m) or (o) of the Code of which the Company or any Guarantor is a member. "Eurodollar Base Rate" shall mean, with respect to any Eurodollar Loan, for any Interest Period, the rate per annum determined by the Administrative Agent at approximately 11:00 a.m. (London time) on the second Business Day prior to the first day of such Interest Period by reference to the British Bankers' Association Interest Settlement Rates for deposits in Dollars (as set forth by any service selected by the Administrative Agent that has been nominated by the British Bankers' Association as an authorized information vendor for the purpose of displaying such rates) for a period equal to such Interest Period (rounded upward, if necessary, to the nearest 1/16 of 1%); provided that, if, for any reason, the Administrative Agent cannot determine the Eurodollar Base Rate for any Interest Period pursuant to the foregoing provisions of this definition, the Administrative Agent shall determine the Eurodollar Base Rate by using the offered rates of any three major banks active in the London interbank market selected by the Administrative Agent, but in all other respects in accordance with the foregoing provisions of this definition. "Eurodollar Loans" shall mean Loans the interest rates on which are determined on the basis of rates referred to in the definition of "Eurodollar Base Rate" in this Section 1.01. "Eurodollar Rate" shall mean, for any Eurodollar Loans for any Interest Period therefor, a rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) determined by the Administrative Agent to be equal to the Eurodollar Base Rate for such Loans for such Interest Period divided by 1 minus the Reserve Requirement for such Loans for such Interest Period. "Event of Default" shall mean any of the events described in Article X hereof. "Excluded Indebtedness" shall have the meaning given to such term in Section 10.01(e) hereto. "Federal Funds Rate" shall mean, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (i) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (ii) if such rate is not so published for any day, the Federal Funds Rate for such day shall be the average rate quoted to The Toronto-Dominion Bank (New York Branch) on such day on such transactions with Federal funds brokers of recognized standing as may be determined by the Administrative Agent. 7 "Franchise" shall mean a franchise, license or other authorization or right to construct, own, operate, promote and/or otherwise exploit any cable television system granted by the Federal Communications Commission (or any successor agency of the Federal government) or any state, county, city, town, village or other local governmental authority. "Funding Costs" for any Bank shall mean, with respect to any Eurodollar Loan, an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the principal amount paid, prepaid or converted or not borrowed or converted for the period from the date of such payment, prepayment or conversion or failure to borrow or convert to the last day of the Interest Period for such Loan (or, in the case of a failure to borrow or convert, the Interest Period for such Loan which would have commenced on the date of such failure to borrow or convert) had such principal amount borne interest at the Eurodollar Rate applicable to such Loan over (ii) the interest component of the amount such Bank would have bid in the London interbank market for Dollar deposits of leading banks in amounts comparable to such principal amount and with maturities comparable to such period (as reasonably determined by such Bank). "Guarantee" shall have the meaning given to such term in Section 9.11 hereof. "Guarantor" shall mean each Subsidiary of the Company and to the extent any New York/New Jersey Company is not a Restricted Subsidiary, each New York/New Jersey Company. "Indebtedness" shall mean, as to any Person, Capital Lease Obligations of such Person and other indebtedness of such Person for borrowed money (whether by loan or the issuance and sale of debt securities) or for the deferred purchase or acquisition price of property or services (and including, without limitation, obligations of such Person for property taxes and judgments and other awards giving rise to Permitted Liens described in clauses (ii) and (iii) of the definition of "Permitted Liens" in this Section 1.01) other than accounts payable (other than for borrowed money) incurred in the ordinary course of business of such Person. Without limiting the generality of the foregoing, such term shall include (a) when applied to the Company, all obligations of the Company and/or any Guarantor under Interest Swap Agreements and (b) when applied to the Company or any other Person, all Indebtedness of others Guaranteed by such Person. "Interest Period" shall mean: (a) With respect to any Eurodollar Loans, the period commencing on the date such Eurodollar Loans are made and ending on the same day in the first, second, third, sixth or, subject to availability from each Bank, twelfth calendar month thereafter, as the Company may select as provided in Section 2.02 hereof; and (b) With respect to any Base Rate Loans, the period commencing on the date such Base Rate Loans are made and ending on the next Quarterly Date thereafter. Notwithstanding the foregoing: (i) no Interest Period may commence before and end after any Quarterly Date upon which the Commitments are to be reduced pursuant to Section 2.03(a) 8 hereof unless, after giving effect thereto, the aggregate principal amount of the Loans having Interest Periods which end after such Quarterly Date shall be equal to or less than the amount to which the Commitments are to be reduced on such Quarterly Date pursuant to said Section 2.03(a); (ii) no Interest Period with respect to any Loan may end after the Commitment Termination Date; (iii) each Interest Period which would otherwise end on a day which is not a Business Day shall end on the next succeeding Business Day (or, in the case of an Interest Period for Eurodollar Loans, if such next succeeding Business Day falls in the next succeeding calendar month, on the next preceding Business Day); (iv) any Interest Period for a Eurodollar Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month in which such Interest Period ends) shall, subject to clause (i) above, end on the last Business Day of a calendar month; and (v) no more than 12 Interest Periods for all Eurodollar Loans hereunder shall be in effect at the same time and, if the number of Interest Periods for Eurodollar Loans would otherwise be in excess of 12, Eurodollar Loans shall not be available hereunder. "Interest Swap Agreement" shall mean an interest rate swap, cap or collar agreement or similar arrangement among the Company and/or any Guarantor and one or more banks or financial institutions providing for protection against fluctuations in interest rates or the exchange of nominal interest obligations among the Company and/or such Guarantor and such banks or financial institutions, either generally or under specific contingencies, as said agreement or arrangement shall be modified and supplemented and in effect from time to time. "Investments" shall have the meaning given to such term in Section 9.15 hereof. "Leases" shall mean leases and subleases (excluding Capital Lease Obligations), licenses to use real and/or tangible personal property, easements and pole attachments and conduit or trench agreements and other rights to use telephone or utility poles, conduits or trenches. "Liens" shall have the meaning given to such term in Section 9.12 hereof. "Loans" shall mean Base Rate Loans and Eurodollar Loans made pursuant to Section 2.01 hereof. "Majority Banks" shall mean, at any time, Banks having Commitments aggregating at least 51% of the amount of the Total Commitment. "Margin Stock" shall mean "margin stock" as defined in Regulation U. "Materially Adverse Effect" shall mean a materially adverse effect upon (i) the business, assets, financial condition or results of operations of the Company and the Guarantors taken as a whole, (ii) the ability of the Company and the Guarantors to perform their respective obligations hereunder or under the New York/New Jersey Agreement or (iii) the legality, validity, binding nature or enforceability of this Agreement or the New York/New Jersey Agreement. "Multiemployer Plan" shall mean a Plan that is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. 9 "Net Cash Proceeds" shall mean proceeds received by the Company or any of its Subsidiaries in cash from the sale or other disposition of property of the Company or any of its Subsidiaries, after deduction of the costs of, and any income, franchise, transfer or other tax liability arising from, such sale or disposition. If any amount payable to the Company or any such Subsidiary in respect of any such sale or disposition, shall be or become evidenced by any promissory note or other negotiable or non-negotiable instrument, the cash proceeds received on any such note or instrument shall constitute Net Cash Proceeds. "New Subsidiary" shall mean any Person that becomes a Subsidiary of the Company or any New York/New Jersey Company after the date of this Agreement. "New York/New Jersey Agreement" shall mean the First Amended and Restated Credit Agreement, dated as of May 28, 1998, among CSC TKR, Inc., Cablevision of Brookhaven, Inc., Cablevision of Oakland, Inc., Cablevision of Paterson, Inc., CSC TKR I, Inc. and UA-Columbia Cablevision of Westchester, Inc., the Guarantors that are parties thereto, the Banks that are parties thereto, Toronto Dominion (Texas), Inc., as Arranging Agent and Administrative Agent, The Bank of New York, The Bank of Nova Scotia, The Canadian Imperial Bank of Commerce, NationsBank, N.A. and The Chase Manhattan Bank, as Managing Agents, Bank of Montreal, Chicago Branch, Barclays Bank PLC, Fleet Bank, N.A. and Royal Bank of Canada, as Agents, Banque Paribas, Credit Lyonnais, The First National Bank of Boston, The First National Bank of Chicago, and Mellon Bank, N.A. and Societe Generale, as Co-Agents, as amended and/or restated and in effect from time to time. "New York/New Jersey Commitment" shall mean, as to any Bank, its "Commitment" as such term is used in the New York/New Jersey Agreement (as the same may be reduced or otherwise adjusted from time to time as provided in the New York/New Jersey Agreement). "New York/New Jersey Companies" shall mean the New York/New Jersey Obligors and the New York/New Jersey Subsidiaries. "New York/New Jersey Loans" shall mean "Loans" as such term is used in the New York/New Jersey Agreement. "New York/New Jersey Obligors" shall mean the "Obligors" as such term is used in the New York/New Jersey Agreement. "New York/New Jersey Subsidiaries" shall mean the Subsidiaries of the New York/New Jersey Obligors. "New York/New Jersey Total Commitment" shall mean the "Total Commitment" as such term is used in the New York/New Jersey Agreement. "Non-US Bank" shall mean a Person that is not a United States Person and that is not described in Section 881(c)(3) of the Code. "Notes" shall mean the promissory notes provided for by Section 2.05 hereof evidencing the Loans. 10 "Obligations" shall mean, collectively, the obligations of the Obligors hereunder in respect of the principal of and interest on the Loans and all obligations in respect of fees and other amounts payable by the Obligors hereunder. "Obligors" shall mean, jointly and severally, the Company and CSC, and "Obligor" shall mean the Company or CSC. "Operating Cash Flow" shall mean, for any period, the following for the Company and the Guarantors for such period, determined on a consolidated and, in respect of the New York/New Jersey Companies to the extent such companies are not Restricted Subsidiaries during such period, a combined basis in accordance with generally accepted accounting principles: (i) aggregate operating revenues minus (ii) aggregate operating expenses (including technical, programming, sales, selling, general administrative expenses and salaries and other compensation, in each case net of amounts allocated to Affiliates, paid to any general partner, director, officer or employee of the Company or any Guarantor but excluding interest, depreciation and amortization and, to the extent otherwise included in operating expenses, any losses resulting from a writeoff or writedown of Investments by the Company or any Guarantor in Affiliates); provided, however, that for purposes of determining Operating Cash Flow for any period (A) there shall be excluded (x) all management fees paid to the Company during such period other than any such fees paid in cash to the extent not in excess of 3% of Operating Cash Flow for the Company and its Subsidiaries as determined without including any such fees and (y) the amortization of deferred installation income and (B) Operating Cash Flow for such period shall be increased or (except for purposes of the calculations required by Section 9.14(a)(vi)(B)) reduced, as the case may be, by the Operating Cash Flow of assets acquired or disposed of by the Company or any Guarantor on or after the first day of such period, determined on a pro forma basis reasonably satisfactory to the Administrative Agent (it being agreed that it shall be satisfactory to the Administrative Agent that such pro forma calculations may be based upon generally accepted accounting principles as applied in the preparation of the financial statements for the Company or (if a New York/New Jersey Company) such Guarantor, as the case may be, delivered in accordance with Section 9.01 hereof rather than as applied in the financial statements of the company whose assets were acquired and may include, in the Company's discretion a reasonable estimate of savings under existing contracts resulting from any such acquisitions), as though the Company or such Guarantor acquired or disposed of such assets on the first day of such period. "Paramus-Hillsdale Sale" shall mean the "Paramus-Hillsdale Sale" as defined in the New York/New Jersey Agreement. "Participation Agreement" shall have the meaning given to such term in Section 12.05(c) hereof. "Parent Corp." shall mean Cablevision Systems Corp., a Delaware corporation. "Payor" shall have the meaning given to such term in Section 4.04 hereof. "PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. 11 "Permitted Affiliate Transaction" shall mean any transaction by which the Company or any of its Subsidiaries shall (i) pay dividends or make any distribution on its capital stock or other equity securities or pay any of its Indebtedness owed to CSC or any other Restricted Subsidiary, (ii) make any loans or advances to CSC or any other Restricted Subsidiary or (iii) transfer any of its properties or assets to, or merge or consolidate into, CSC or any other Restricted Subsidiary. "Permitted Liens" shall mean, with respect to any Person: (i) pledges or deposits by such Person under workers' compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or Leases to which such Person is a party, or deposits to secure public or statutory obligations of such Person or deposits of cash or U.S. Government bonds to secure surety or appeal bonds to which such Person is a party, or deposits as security for contested taxes or import duties or for the payment of rent; (ii) Liens imposed by law, such as carriers', warehousemen's and mechanics' Liens or other Liens arising out of judgments or awards against such Person with respect to which such Person shall then be prosecuting appeal or other proceedings for review (and as to which all foreclosures and other enforcement proceedings shall have been fully bonded or otherwise effectively stayed); (iii) Liens for property taxes not yet subject to penalties for non-payment or which are being contested in good faith and by appropriate proceedings (and as to which all foreclosures and other enforcement proceedings shall have been fully bonded or otherwise effectively stayed); (iv) Liens in favor of issuers of performance bonds issued pursuant to the request of and for the account of such Person in the ordinary course of its business; (v) minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for rights of way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real properties or Liens incidental to the conduct of the business of such Person or to the ownership of its properties which were not incurred in connection with Indebtedness or other extensions of credit and which do not in the aggregate materially detract from the value of said properties or materially impair their use in the operation of the business of such Person; or (vi) any Lien on any Margin Stock. "Person" shall mean an individual, a corporation, a partnership, a limited liability company, a joint venture or adventure, a trust or estate or unincorporated organization, a joint stock company or other similar organization, a government or any political subdivision thereof, or any other legal entity. "Plan" shall mean, at any time, an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and is either (i) maintained by the Company or an ERISA Affiliate or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which the Company or an ERISA Affiliate is then making or accruing an obligation to make contributions or has within the preceding six plan years made contributions. "Pole Rental Leases" shall mean Leases under which the Company, its Subsidiaries and/or the New York/New Jersey Companies, have the right to use telephone or 12 utility poles, conduits or trenches for the purpose of supporting or housing cables of the respective systems. "Post-Default Rate" shall mean, in respect of any principal of any Loan or any other amount payable by the Company under this Agreement which is not paid when due (whether at stated maturity, by acceleration or otherwise), a rate per annum during the period commencing on the due date until such amount is paid in full equal to 2% above the Base Rate as in effect from time to time plus the Applicable Margin for Base Rate Loans; provided that, if such amount in default is principal of a Eurodollar Loan and the due date is a day other than the last day of an Interest Period therefor, the "Post-Default Rate" for such principal shall be, for the period commencing on the due date and ending on the last day of the Interest Period therefor, 2% above the interest rate for such Loan for such Interest Period as provided in Section 3.03 hereof, and thereafter the rate provided for above in this definition. "Prohibited Transaction" shall mean a transaction that is prohibited under Section 4975 of the Code or Section 406 of ERISA and not exempt under Section 4975 of the Code or Section 408 of ERISA. "Proposed Bank" shall have the meaning given to such term in Section 12.05(h) hereof. "Quarter" shall mean a fiscal quarterly period of the Company. "Quarterly Dates" shall mean the last day of each March, June, September and December, the first of which shall be on June 30, 1998, provided that, if any such day is not a Business Day, the relevant Quarterly Date shall be the next succeeding Business Day. "Reduction Amount" shall have the meaning given to such term in Section 2.03(a) hereof. "Regulation D" shall mean Regulation D of the Board of Governors of the Federal Reserve System as the same may be amended or supplemented from time to time. "Regulation U" shall mean Regulation U of the Board of Governors of the Federal Reserve System as the same may be amended or supplemented from time to time. "Regulatory Change" shall mean, with respect to any Bank, any change on or after the Effective Date in United States Federal, state or foreign laws or regulations (including Regulation D) or the adoption or making on or after such date of any interpretations, directives or requests applying to a class of banks including such Bank of or under any United States Federal or state, or any foreign, laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof. "Reportable Event" shall mean (i) any of the events set forth in Section 4043(b) (other than a Reportable Event as to which the provision of 30 days' notice to the PBGC is waived under applicable regulations), 4068(f) or 4063(a) of ERISA or the regulations thereunder, (ii) an event requiring the Company or any ERISA Affiliate to provide security to a Plan under 13 Section 401(a)(29) of the Code and (iii) any failure to make payments required by Section 412(m) of the Code if such failure continues for 30 days following the due date for any required installment. "Required Payment" shall have the meaning given to such term in Section 4.04 hereof. "Required Principal Payments" shall mean for any period an amount equal the excess, if any, of the aggregate amount of Loans and New York/New Jersey Loans outstanding at the beginning of such period over the aggregate amount of the Total Commitment and the New York/New Jersey Total Commitment at the end of such period. "Reserve Requirement" shall mean, for any Eurodollar Loans of any Bank for any Interest Period, the rate at which such Bank actually is required to maintain reserves (including any marginal, supplemental or emergency reserves) during such Interest Period under Regulation D against "Eurocurrency liabilities" (as such term is used in Regulation D). Without limiting the effect of the foregoing, the Reserve Requirement shall reflect any other reserves actually required to be maintained by such Bank by reason of any Regulatory Change against (A) any category of liabilities which includes deposits by reference to which the Eurodollar Base Rate for such Eurodollar Loans is to be determined as provided in the definition of "Eurodollar Base Rate" in this Section 1.01 or (B) any category of extensions of credit or other assets which include Eurodollar Loans. "Restricted Payments" shall mean direct or indirect distributions, dividends or other payments by the Company or any Guarantor on account of (including, without limitation, sinking fund or other payments on account of the redemption, retirement, purchase or acquisition of) any general or limited partnership or joint venture interest in, or any capital stock of, the Company or such Guarantor, as the case may be (whether made in cash, property or obligations), other than (i) any such distributions, dividends and other payments made by (i) the Company or any of its Subsidiaries to CSC, or any other Restricted Subsidiary and (ii) any such distributions, dividends and other payments made by any New York/New Jersey Subsidiary to any New York/New Jersey Company. "Restricted Subsidiary" shall have the meaning given to such term in the CSC Agreement. "Scheduled Reduction Date" shall have the meaning given to such term in Section 2.03(a) hereof. "Specified Investments" shall mean any Investment or series of related Investments by the Company or any Guarantor in an aggregate amount, when added with all CSC Specified Investments (without duplication), for all such Investments not in excess of $100,000,000 in businesses engaged primarily in the provision of video on demand, cable modem or residential telephony services and other closely related businesses. "Subscribers' Certificate" shall mean a certificate of a senior financial executive of the Company and the New York/New Jersey Obligors in substantially the form of Exhibit C hereto. 14 "Subsidiary" shall mean, with respect to any Person, any corporation, partnership, joint venture or adventure, limited liability company, trust or estate: (a) in the case of a corporation, of which a majority of the outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether or not at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency); (b) in the case of a partnership or joint venture, in which such Person is a general partner or joint venturer or of which a majority of the partnership or other ownership interests; (c) in the case of a limited liability company, of which a majority of the ownership interests; or (d) in the case of a trust or estate, the beneficial interest of which, is at the time directly or indirectly owned by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other Subsidiaries. "Tax" means any Federal, State or foreign tax, assessment or other governmental charge (including any withholding tax) upon a Person or upon its assets, revenues, income or profits. "TCI Acquisition" shall mean the transactions contemplated by the TCI Acquisition Documents, other than the Second-Tier Reorganization (as defined in and contemplated by the Master Reorganization Agreement referred to in the definition of "TCI Acquisition Documents" herein). "TCI Acquisition Documents" shall mean (i) the Amended and Restated Contribution and Merger Agreement, dated as of June 6, 1997, by and among CSC, Parent Corp., CSC Merger Corporation and TCI Communications, Inc., (ii) the Master Reorganization Agreement, dated as of March 3, 1998, between Parent Corp. and CSC and (iii) the Assignment and Assumption Agreement, dated as of March 4, 1998, by and among Parent Corp., CSC TKR, Inc., CSC TKR I, Inc., Cablevision of Oakland, Inc., Cablevision of Brookhaven, Inc. and Cablevision of Paterson, Inc. "Termination Event" shall mean (i) a Reportable Event, (ii) the termination of a Plan, or the filing of a notice of intent to terminate a Plan, or the treatment of a Plan amendment as a termination under Section 4041(c) of ERISA, (iii) the institution of proceedings to terminate a Plan under Section 4042 of ERISA, or (iv) the appointment of a trustee to administer any Plan under Section 4042 of ERISA. "Total Available Commitment" shall mean, as of any date, the Total Commitment as of such date minus an amount equal to the excess of (i) the aggregate Net Cash Proceeds to be used as specified in all notices given by the Company to the Administrative Agent in accordance with Sections 2.03(c) hereof over (ii) the sum of (x) the aggregate amount of all reductions of the Total Commitment required by reason of the provisos to Section 2.03(c) with respect to such Net Cash Proceeds and (y) the aggregate amount of Loans (including the Loans requested to be made 15 on such date) the proceeds of which have been or, upon the making thereof, will be used for the purposes specified in such notices in accordance with such Section. "Total Commitment" shall mean at any time the aggregate amount of the Commitments of all the Banks (as the same may be reduced or otherwise adjusted from time to time as provided in this Agreement). "Total Debt Expense" shall mean, for any period, Total Interest Expense for such period plus an amount equal to Required Principal Payments for such period and all other scheduled payments of principal on other Indebtedness of the Company and the Guarantors (on a consolidated and, in respect of the New York/New Jersey Companies to the extent such companies are not Restricted Subsidiaries during such period, a combined basis) during such period (including, but not limited to, the principal portion paid with respect to Capital Lease Obligations); provided that, for purposes of determining Total Debt Expense for any period, there shall be included or excluded, as the case may be, all scheduled payments of principal (other than Required Principal Payments) during such period on Indebtedness of the Company or any Guarantor in respect of assets acquired or disposed of by the Company or such Guarantor on or after the first day of such period, determined on a pro forma basis reasonably satisfactory to the Administrative Agent (it being agreed that it shall be satisfactory to the Administrative Agent that such pro forma calculations may be based upon generally accepted accounting principles as applied in the preparation of the financial statements for the Company or (if a New York/New Jersey Company) such Guarantor, as the case may be, delivered in accordance with Section 9.01 hereof rather than as applied in the financial statements of the company whose assets were acquired and may include, in the Company's discretion, a reasonable estimate of savings under existing contracts resulting from any such acquisitions), as though the Company or such Guarantor acquired or disposed of such assets on the first day of such period. "Total Interest Expense" shall mean, for any period, the aggregate amount of interest accrued in respect of Indebtedness (including the interest component of rentals in respect of Capital Lease Obligations) of the Company and the Guarantors (determined on a consolidated and, in respect of the New York/New Jersey Companies to the extent such companies are not Restricted Subsidiaries during such period, a combined basis) during such period. For purposes hereof, the amount of interest accrued in respect of Indebtedness for any period (A) shall be increased (to the extent not already treated as interest expense or income, as the case may be) by the excess, if any, of amounts payable by the Company or any Guarantor arising under any Interest Swap Agreements during such period over amounts receivable by the Company or such Guarantor, as the case may be, thereunder (or reduced by the excess, if any, of such amounts receivable over such amounts payable) and interest on a Capital Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by the Company to be the rate of interest implicit in such Capital Lease Obligation in accordance with generally accepted accounting principles (including Statement of Financial Accounting Standards No. 13) and (B) shall be increased or reduced, as the case may be, by the amount of interest accrued during such period in respect of Indebtedness of the Company or any Guarantor in respect of assets acquired or disposed of by the Company or such Guarantor on or after the first day of such period, determined on a pro forma basis reasonably satisfactory to the Administrative Agent (it being agreed that it shall be satisfactory to the Administrative Agent that such pro forma calculations may be based upon generally accepted accounting principles as applied in the preparation of the 16 financial statements for the Company or (if a New York/New Jersey Company) such Guarantor, as the case may be, delivered in accordance with Section 9.01 hereof rather than as applied in the financial statements of the company whose assets were acquired and may include, in the discretion of the Company, a reasonable estimate of savings under existing contracts resulting from any such acquisitions), as though the Company or such Guarantor acquired or disposed of such assets on the first day of such period. "United States Person" means a corporation, partnership or other entity created, organized or incorporated under the laws of the United States of America or a State thereof (including the District of Columbia). Section 1.02 Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all determinations with respect to accounting matters hereunder shall be made, and all financial statements and certificates and reports as to financial matters required to be delivered hereunder shall be prepared, in accordance with generally accepted accounting principles as in effect on December 31, 1996, applied on a consolidated basis consistent with the audited financial statements of the Company referred to in Section 9.01 hereof. When any definition involving the New York/New Jersey Companies (prior to such companies becoming Restricted Subsidiaries) requires calculations on a combined basis, such calculations shall eliminate any intercompany items as between the Company, its Subsidiaries and the New York/New Jersey Companies. To enable the ready determination of compliance by the Company and the Guarantors with the various covenants set forth in Article IX hereof, each of the Company and the Guarantors agrees to cause its fiscal year to end each year on December 31 and the first three Quarters for each such Person in each year to end on March 31, June 30 and September 30, respectively. ARTICLE II LOANS Section 2.01 Loans. Each Bank severally agrees, on the terms and conditions set forth in this Agreement: (a) The Loans. On or after the Effective Date, to make one or more Loans to the Obligors from time to time on any Business Day prior to the Commitment Termination Date in an aggregate principal amount not to exceed at any time outstanding such Bank's Commitment; provided that at no time shall the aggregate outstanding principal amount of all Loans exceed the Total Available Commitment. (b) Types of Loans. The Loans, at the option of the Company, may be made as, and from time to time continued as or converted into, Base Rate Loans or Eurodollar Loans of any permitted type, or any combination thereof; provided, however, that each borrowing of Loans shall be in an aggregate amount equal to $500,000 or an integral multiple of $250,000 in excess thereof. 17 Section 2.02 Manner of Borrowing; Conversion and Continuation. (a) Notice of Borrowing. The Company shall give the Administrative Agent (which shall promptly notify the Banks) notice of each borrowing of Loans hereunder substantially in the form of Schedule 2.02(a) hereto, which notices shall be irrevocable and effective only upon receipt by the Administrative Agent, shall specify the aggregate amount, the type or types and date of the Loans to be borrowed and (in the case of Eurodollar Loans) the duration of the Interest Period therefor and shall be given not later than 11:00 a.m. New York time on the day which is not less than the number of Business Days prior to the date of such borrowing specified below: Type Number of Business Days ---- ----------------------- Base Rate Loan 0 Eurodollar Loan 3 Notwithstanding the foregoing, any notice given by the Company to the Administrative Agent under this Section 2.02(a) may be given orally by telephone and confirmed in writing within one Business Day. In the case of any discrepancies between oral and written notices received by the Administrative Agent, the oral notice shall be effective as understood in good faith by the Administrative Agent. (b) Funding. Not later than 1:00 p.m. New York time on the date specified for borrowing hereunder, each Bank shall make available the amount of the Loan to be made by it on such date to the Administrative Agent in immediately available funds, for the account of the Obligors. The amount so received by the Administrative Agent shall, subject to the terms and conditions of this Agreement, be made available to the Obligors by depositing the same, in immediately available funds, in a joint account of the Obligors designated by the Company or by wiring the same, in immediately available funds, to any account specified by the Company in its notice of borrowing. (c) Conversion and Continuation. (i) All or any part of the principal amount of any Loan may, on any Business Day, be converted into another type or types of Loans, except that Eurodollar Loans may be converted only on the last day of the applicable Interest Period. (ii) Base Rate Loans shall continue as Base Rate Loans unless and until such Loans are converted into Eurodollar Loans of any type. Each Eurodollar Loan shall continue as a Eurodollar Loan until the end of the then current Interest Period therefor, at which time it shall be automatically converted into a Base Rate Loan unless the Company shall have given the Administrative Agent notice in accordance with Section 2.02(c)(iv) hereof requesting either that such Eurodollar Loans continue as Eurodollar Loans of such type for another Interest Period or that such Eurodollar Loans be converted into Eurodollar Loans of another type at the end of such Interest Period. (iii) Notwithstanding anything to the contrary contained in Section 2.02(c)(i) or (ii), during an Event of Default, the Administrative Agent shall, at the direction of the Majority Banks, notify the Company that Loans may only be converted into or continued as Loans of certain specified types and, thereafter, until no Event of Default shall continue to exist, Loans 18 may not be converted into or continued as Loans of any type other than one or more of such specified types. (iv) The Company shall give the Administrative Agent (which shall promptly notify the Banks) notice of each conversion or continuation of Loans hereunder substantially in the form of Schedule 2.02(c) hereto, which notices shall be irrevocable and effective only upon receipt by the Administrative Agent, shall specify (x) the aggregate amount and the type of the Loans to be converted or continued and (in the case of Eurodollar Loans) the duration of the Interest Period therefor, (y) the requested date of such conversion or continuation and (z) the amount and type or types of Loans into which such Loans are to be converted or as which such Loans are to be continued, and shall be given not later than 11:00 a.m. New York time on the day which is not less than the number of Business Days prior to the date of such conversion into or continuation as the type of Loans specified below: Type Number of Business Days ---- ----------------------- Base Rate Loan 0 Eurodollar Loan 3 Notwithstanding the foregoing, any notice given by the Company to the Administrative Agent under this Section 2.02(c)(iv) may be given orally by telephone and confirmed in writing within one Business Day. In the case of any discrepancies between oral and written notices received by the Administrative Agent, the oral notice shall be effective as understood in good faith by the Administrative Agent. Section 2.03 Reductions and Changes of Commitments. (a) Scheduled Reductions to Total Commitment. Subject to the adjustments described in Section 2.03(e) hereof, the Total Commitment shall be automatically reduced on each Quarterly Date falling on or nearest to the date specified in column (x) below (each such Quarterly Date, a "Scheduled Reduction Date") by the Dollar amount specified in column (y) below opposite such date (the "Reduction Amount"): (x) (y) Quarterly Date Falling on or Nearest to Reduction Amount - - ------------------------ ---------------- June 30, 2001 $23,333,333.00 September 30, 2001 $23,333,333.00 December 31, 2001 $23,333,334.00 March 31, 2002 $35,000,000.00 June 30, 2002 $35,000,000.00 September 30, 2002 $35,000,000.00 December 31, 2002 $35,000,000.00 March 31, 2003 $52,500,000.00 June 30, 2003 $52,500,000.00 September 30, 2003 $52,500,000.00 December 31, 2003 $52,500,000.00 19 March 31, 2004 $52,500,000.00 June 30, 2004 $52,500,000.00 September 30, 2004 $52,500,000.00 December 31, 2004 $52,500,000.00 March 31, 2005 $52,500,000.00 June 30, 2005 $52,500,000.00 September 30, 2005 $52,500,000.00 December 31, 2005 $52,500,000.00 March 31, 2006 $70,000,000.00 June 30, 2006 $70,000,000.00 September 30, 2006 $70,000,000.00 December 31, 2006 $70,000,000.00 March 31, 2007 $280,000,000.00 The Total Commitment shall be reduced to zero on the Commitment Termination Date. (b) Optional Reductions and Terminations. (i) The Company shall have the right to terminate or reduce the unutilized Total Commitment at any time or from time to time, provided that (A) the Company shall give notice of each such termination or reduction to the Administrative Agent at least two Business Days prior thereto, (B) each partial reduction thereof shall be in an aggregate amount at least equal to $5,000,000 and (C) the Total Commitment may not be reduced at any time to an amount less than the aggregate principal amount of the Loans outstanding at such time. (ii) Notwithstanding anything to the contrary in this Agreement, so long as no Default has occurred and is continuing, the Company shall have the right to reduce or terminate the Aggregate Commitment of any Bank at any time or from time to time (subject to clause (F) below) without reducing or terminating the Aggregate Commitment (or any part thereof) of any other Bank at such time, provided that (A) such reduction or termination shall be made on terms and conditions agreed upon in writing by the Company and such Bank, (B) the Company and such Bank shall have notified the Administrative Agent in writing of such reduction or termination at least two Business Days prior thereto, (C) such reduction or termination shall be made pro rata among such Bank's Commitment, such Bank's CSC Commitment and, if the New York/New Jersey Agreement is then in effect, such Bank's New York/New Jersey Commitment based on the relationship of each such Commitment to such Bank's Aggregate Commitment, (D) the aggregate amount of all reductions and terminations of the Aggregate Commitments of Banks made pursuant to this clause (ii) shall not exceed $420,000,000, (E) after giving effect to each reduction or termination and any prepayment of such Bank's Loans pursuant to Section 3.01(b)(iii) in connection therewith, the Total Commitment may not be less than the aggregate principal amount of the Loans outstanding at such time, and (F) no such reduction or termination may be made pursuant to this clause (ii) after November 18, 1999 (or such later date as is agreed in writing by the Majority Banks). (c) Special Mandatory Reductions. At any time at which the Cash Flow Ratio exceeds 5.50 to 1, the Total Commitment shall be automatically reduced upon the date of any sale, transfer or other disposition of any asset of the Company or any of its Subsidiaries of the types permitted under Section 9.14(a)(vi) hereof (other than the Paramus-Hillsdale Sale), by an amount 20 equal to 50% of the excess of the Net Cash Proceeds thereof over all or any portion of such Net Cash Proceeds that will be used, as specified in a notice from the Company to the Administrative Agent, for an acquisition permitted under Section 9.14(b)(ii) hereof; provided, however, that if the Company or the applicable Subsidiary shall not have entered into a binding purchase agreement with respect to any such acquisition on or before the date that is six months after the date of such disposition, the Total Commitment shall be automatically reduced (without duplication) on such date by an amount equal to 50% of the entire Net Cash Proceeds of such sale, transfer or disposition; and provided further, however, that if the Company or the applicable Subsidiary shall have entered into a binding purchase agreement within six months after the date of such disposition, but does not complete such acquisition within nine months of signing such binding purchase agreement, the Total Commitment shall automatically be reduced (without duplication) on the last day of such nine-month period by an amount equal to 50% of the entire Net Cash Proceeds of such sale, transfer or disposition. (d) New York/New Jersey Agreement. (i) The Total Commitment shall be reduced by $800,000,000, and the Commitment of each Bank reduced by an amount equal to its pro rata share of such amount, so long as any New York/New Jersey Commitment is in effect or any Obligation under (and as defined in) the New York/New Jersey Agreement remains unpaid. (ii) At the time when the reduction required by clause (i) above shall no longer be required, the Total Commitment shall be reduced by an amount equal to the aggregate amount of all reductions of the New York/New Jersey Commitments pursuant to Section 2.03(b) of the New York/New Jersey Agreement during the term of such agreement. (e) Adjustments to Scheduled Reductions. Upon any reduction of the Total Commitment pursuant to Section 2.03(b), (c) or (d)(ii) hereof on any date, the schedule set forth in Section 2.03(a) hereof shall be adjusted, after giving effect to any prior adjustments thereto pursuant to this Section 2.03(e), by reducing the Reduction Amount set forth in column (y) of such schedule opposite each Scheduled Reduction Date occurring after such date by an amount equal to (x) the amount of such reduction of the Total Commitment effected pursuant to Section 2.03(b), (c) or (d)(ii) hereof multiplied by (y) a fraction, the numerator of which is such Reduction Amount as then in effect and the denominator of which is the Total Commitment then in effect. (f) No Reinstatement. The Total Commitment once terminated or reduced (other than pursuant to Section 2.03(d)(i) hereof) may not be reinstated. (g) Pro Rata Treatment. Except to the extent otherwise provided herein, each reduction of the Total Commitment shall be applied to the Commitments of the Banks pro rata in accordance with their respective Commitment Percentages. Section 2.04 Commitment Fee. The Obligors shall pay to the Administrative Agent for the account of each Bank a commitment fee (the "Commitment Fee") (i) for the period from and including May 28, 1998 to but excluding the earlier of (x) the Effective Date and (y) June 30, 1998, on the daily average amount representing the result of (A) such Bank's Commitment appearing on the signature pages hereof (without giving effect to any reduction of such Commitment pursuant to the terms hereof) minus (B) such Bank's Commitment, if any, under (and as defined in) the 1996 Agreement during such period, at a rate per annum equal to 21 0.1250% and (ii) for the period from and including the earlier of (x) the Effective Date and (y) June 30, 1998 to but not including the earlier of the date such Bank's Commitment is terminated and the Commitment Termination Date, on the amount of the daily average unutilized amount of such Bank's Commitment during such period, at a rate per annum equal to (A) 0.2500% at any time at which the CSC Cash Flow Ratio is greater than or equal to 5.50 to 1 and (B) 0.1875% at any time at which the CSC Cash Flow Ratio is less than 5.50 to 1. For purposes of calculating the Commitment Fee, the Commitment of each Bank shall be deemed to be utilized in an amount equal to the sum of the aggregate outstanding principal amount of such Bank's Loans. Accrued Commitment Fees under this Section 2.04 shall be payable in arrears on each Quarterly Date. Section 2.05 Notes. (a) Form of Notes. The Loans made by each Bank shall be evidenced by a single Note of the Obligors in substantially the form of Exhibit A hereto, dated the Effective Date and payable to the order of such Bank in a principal amount equal to its Commitment as originally in effect, and otherwise duly completed. (b) Endorsements. Each Bank is hereby authorized by the Obligors to endorse on a schedule attached to each Note of such Bank (or any continuation thereof) the amount and date of each Loan made by such Bank to the Obligors hereunder, and the amount of each payment on account of principal of such Loan received by such Bank, provided that any failure by such Bank to make any such endorsement shall not affect the obligations of the Obligors under such Note or hereunder in respect of such Loans. Section 2.06 Lending Offices. The Loans of each type made by each Bank shall be made and maintained at such Bank's Applicable Lending Office set forth on Schedule 2.06 for Loans of such type. Section 2.07 Several Obligations; Remedies Independent. The failure of any Bank to make any Loan to be made by it on the date specified therefor shall not relieve any other Bank of its obligation to make its Loan on such date, but neither the Administrative Agent nor any Bank shall be responsible for the failure of any other Bank to make a Loan to be made by such other Bank. The amounts payable by the Obligors at any time hereunder and under the Notes to each Bank shall be a separate and independent debt and each Bank shall, subject to Section 10.01 hereof, be entitled to protect and enforce its rights arising out of this Agreement and its Note and it shall not be necessary for any other Bank or the Administrative Agent to consent to, or be joined as an additional party in, any proceedings for such purposes. Section 2.08 Use of Proceeds. The proceeds of the Loans made hereunder shall be used only (x) to refinance the New York/New Jersey Agreement and (y) for the general business purposes of the Company and its Subsidiaries and (z) for any transaction or activity in which the Company and its Subsidiaries are permitted to engage under the provisions of this Agreement. ARTICLE III PAYMENTS OF PRINCIPAL AND INTEREST Section 3.01 Prepayments. (a) Optional Prepayments. Either Obligor may, at any time and from time to time (subject, in the case of Eurodollar Loans, to Section 5.05 hereof), 22 prepay Base Rate Loans on any Business Day if prior notice is given to the Administrative Agent before 11:00 a.m. New York time on such day (and if such notice is received by the Administrative Agent after 11:00 a.m. New York time, on the next succeeding Business Day), and Eurodollar Loans upon not less than three Business Days' prior notice to the Administrative Agent (and the Administrative Agent shall promptly notify the Banks in each case of such notice), which notice shall specify the prepayment date (which shall be a Business Day) and the amount of the prepayment (which shall be not less than $1,000,000), and shall be irrevocable and effective only upon receipt by the Administrative Agent, provided that, in the case of Eurodollar Loans, interest on the principal prepaid, accrued to the prepayment date, shall be paid on the prepayment date. (b) Mandatory Prepayments. (i) The Obligors shall, upon any sale, transfer or other disposition of any asset of the Company or any of its Subsidiaries permitted under Section 9.14(a)(vi) hereof, (other than the Paramus-Hillsdale Sale) prepay Loans in an amount equal to 50% of the Net Cash Proceeds thereof. Notwithstanding anything in this Agreement to the contrary, amounts prepaid from any sale, transfer or other disposition pursuant to the foregoing sentence may be reborrowed by the Obligors solely for the purpose of effecting acquisitions permitted under Section 9.14(b)(ii) hereof and solely to the extent that such disposition has not resulted in a mandatory reduction of the Total Commitment pursuant to the provisos to Section 2.03(c) hereof. (ii) The Obligors shall, on the date of any reduction of the Total Commitment pursuant to Section 2.03(d)(ii) hereof, prepay Loans in an amount equal to the excess of (A) the aggregate amount of the Loans outstanding on such date over (B) the Total Commitment as so reduced. (iii) On the date of any reduction or termination of any Bank's Aggregate Commitment pursuant to Section 2.03(b)(ii), the Obligors shall repay such Bank's Loans in an aggregate amount such that, after giving effect to such reduction or termination and such repayment, the aggregate outstanding amount of such Bank's Loans shall equal such Bank's Commitment Percentage of the amount of all outstanding Loans. Each repayment required by this Section 3.01(b)(iii) shall be applied pro rata among each type of Loan held by such Bank. The requirements of Section 4.02 shall not apply to any payment made by the Obligors pursuant to this clause (iii). Section 3.02 Repayment of Loans. On each Scheduled Reduction Date, the Obligors shall pay to the Administrative Agent for the account of the Banks the excess, if any, of (i) the aggregate principal amount of the Loans outstanding on such Scheduled Reduction Date over (ii) the Total Available Commitment (after giving effect to any termination or reduction thereof pursuant to Section 2.03(a) hereof) on such Scheduled Reduction Date, together with interest thereon accrued to such Scheduled Reduction Date and any amounts payable pursuant to Section 5.05 hereof in connection therewith. Section 3.03 Interest. (a) The Obligors hereby promise to pay to the Administrative Agent for the account of each Bank interest on the unpaid principal amount of each Loan made by such Bank for the period commencing on the date of such Loan to but excluding the date such Loan shall be paid in full, at the following rates per annum: 23 (i) if such Loan is a Base Rate Loan, the Base Rate plus the Applicable Margin; and (ii) if such Loan is a Eurodollar Loan, the Eurodollar Rate for such Loan for the Interest Period therefor plus the Applicable Margin. Notwithstanding the foregoing, the Obligors hereby promise to pay to the Administrative Agent for the account of each Bank interest at the applicable Post-Default Rate on any principal of any Loan made by such Bank, and on any other amount payable by the Obligors hereunder to or for the account of such Bank (but, if such amount is interest, only to the extent legally enforceable), which shall not be paid in full when due (whether at stated maturity, by acceleration or otherwise), for the period commencing on the due date thereof until the same is paid in full. (b) Accrued interest on each Loan shall be payable (i) on the last day of each Interest Period for such Loan (and, if such Interest Period is longer than three months (in the case of a Eurodollar Loan) on each three-month anniversary of the first day of such Interest Period), (ii) in the case of a Eurodollar Loan, when such Loan shall be converted or be due by reason of prepayment or (iii) when such Loan shall be due at maturity or by reason of acceleration or otherwise (other than by reason of prepayment). Promptly after the determination of any interest rate provided for herein or any change therein, the Administrative Agent shall notify the Banks and the Obligors thereof. ARTICLE IV PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC. Section 4.01 Payments. Except to the extent otherwise provided herein, all payments of principal, interest and other amounts to be made by the Obligors hereunder and under the Notes shall be made in Dollars, in immediately available funds, to the Administrative Agent not later than 11:00 a.m. New York time on the date on which such payment shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day). The Administrative Agent, or any Bank for whose account any such payment is made, may (but shall not be obligated to) debit the amount of any such payment which is not made by such time to any ordinary deposit account of either of the Obligors with the Administrative Agent or such Bank, as the case may be. The Obligors shall, at the time of making each payment hereunder or under any Note, specify to the Administrative Agent the Loans or other amounts payable by the Obligors hereunder to which such payment is to be applied (but in the event that either of the Obligors fails to so specify, or if an Event of Default has occurred and is continuing, the Administrative Agent may apply such payment as it may elect in its sole discretion, but subject to Section 4.02 hereof). Each payment received by the Administrative Agent hereunder or under any Note for account of a Bank shall be paid promptly to such Bank, in immediately available funds, for account of such Bank's Applicable Lending Office for the Loan in respect of which such payment is made. Section 4.02 Pro Rata Treatment. Except to the extent otherwise provided herein: (a) subsequent to the initial borrowing hereunder, the Loans shall be made by the Banks pro rata according to their respective Commitment Percentages; (b) each payment by either Obligor of 24 principal of the Loans shall be made to the Administrative Agent for the account of the Banks pro rata in accordance with the respective unpaid principal amounts of such Loans held by the Banks; (c) each payment by either Obligor of interest on Loans of a particular type shall be made to the Administrative Agent for the account of the Banks holding Loans of such type pro rata in accordance with the respective unpaid principal amounts of such Loans held by such Banks; and (d) each payment of the Commitment Fee shall be made for the account of the Banks pro rata in accordance with their respective Commitment Percentages. Section 4.03 Computations. Interest on Eurodollar Loans and the Commitment Fee shall be computed on the basis of a year of 360 days and actual days elapsed (including the first day but excluding the last day) occurring in the period for which payable, and interest on Base Rate Loans shall be computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed (including the first day but excluding the last day) occurring in the period for which payable, except that all interest determined on the basis of the Post-Default Rate shall be computed on the basis of a year of 360 days and actual days elapsed (including the first day but excluding the last day). Section 4.04 Non-Receipt of Funds by the Administrative Agent. Unless the Administrative Agent shall have been notified by a Bank or either of the Obligors (the "Payor") prior to the date on which such Bank is to make payment to the Agent of the proceeds of a Loan to be made by it hereunder or the Obligors are to make a payment to the Administrative Agent for the account of one or more of the Banks, as the case may be (such payment being herein called the "Required Payment"), which notice shall be effective upon receipt, that the Payor does not intend to make the Required Payment to the Administrative Agent, the Administrative Agent may assume that the Required Payment has been made and may, in reliance upon such assumption (but shall not be required to), make the amount thereof available to the intended recipient on such date and, if the Payor has not in fact made the Required Payment to the Administrative Agent, the recipient of such payment shall, on demand, pay to the Administrative Agent the amount made available to it together with interest thereon in respect of the period commencing on the date such amount was so made available by the Administrative Agent until the date the Administrative Agent recovers such amount at the Federal Funds Rate. Section 4.05 Sharing of Payments, Etc. Each of the Obligors and the Guarantors agrees that, in addition to (and without limitation of) any right of set-off, banker's lien or counterclaim a Bank may otherwise have, each Bank shall be entitled, at its option, to offset balances held by it for account of the Obligors or any Guarantor at any of its offices, in Dollars or in any other currency, against any principal of or interest on any of such Bank's Loans hereunder, which is not paid when due (regardless of whether such balances are then due to either Obligor or such Guarantor), in which case it shall promptly notify the Administrative Agent and each Obligor or such Guarantor thereof, provided that such Bank's failure to give such notice shall not affect the validity thereof. If a Bank shall obtain payment of any principal of or interest on any Loan made by it to the Obligors under this Agreement, through the exercise of any right of set-off, banker's lien, counterclaim or similar right, or otherwise, and, as a result of such payment, such Bank shall have received a greater percentage of the amounts then due hereunder by the Obligors to such Bank than the percentage received by other Banks, it shall promptly purchase from such other Banks participations in the Loans made by such other Banks in such amounts, and make such other adjustments from time to time as shall be equitable to the 25 end that all the Banks shall share the benefit of such excess payment (net of any expense which may be incurred by such Bank in obtaining or preserving such excess payment) pro rata in accordance with the unpaid principal and interest on the Loans held by each of the Banks. To such end all the Banks shall make appropriate adjustments among themselves (by the resale of participations sold or otherwise) if such payment is rescinded or must otherwise be restored. The Obligors and the Guarantors agree that any Bank so purchasing a participation in the Loans made by other Banks may exercise all rights of set-off, banker's lien, counterclaim or similar rights with respect to such participation as fully as if such Bank were a direct holder of Loans in the amount of such participation. Nothing contained herein shall require any Bank to exercise any such right or shall affect the right of any Bank to exercise, and retain the benefits of exercising, any such right with respect to any other indebtedness or obligation of the Obligors or the Guarantors. If under any applicable bankruptcy, insolvency or other similar law, any Bank receives a secured claim in lieu of a set-off to which this Section 4.05 applies, such Bank shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Banks entitled under this Section 4.05 to share in the benefits of any recovery on such secured claim. Section 4.06 No Reductions. All payments due to the Administrative Agent or any Bank under this Agreement shall be made by the Obligors without any reduction or deduction whatsoever, including any reduction or deduction for any set-off, recoupment, counterclaim or Tax, except, subject to Section 4.07, for any withholding or deduction for Taxes required to be withheld or deducted under applicable law. Section 4.07 Taxes. (a) Taxes Payable by the Obligors. If under applicable law any Tax is required to be withheld or deducted from, or is otherwise payable by the Obligors in connection with, any payment to the Administrative Agent or any Bank under this Agreement, the Obligors shall, subject to Section 4.07(b), pay to the Administrative Agent or such Bank, as applicable, such additional amounts as may be necessary so that the net amount received by the Administrative Agent or such Bank with respect to such payment, after withholding or deducting all Taxes required to be withheld or deducted, is equal to the full amount payable under this Agreement. (b) Limitations. Notwithstanding anything to the contrary contained herein, the Obligors shall not be required to pay any additional amount in respect of withholding of United States Federal income taxes pursuant to this Section 4.07 to any Bank except to the extent (A) such Taxes are required to be withheld solely as a result of (1) in the case of a person that is a Bank on the Effective Date, a Regulatory Change enacted after the Effective Date and (2) in the case of a Person that becomes a Bank after the Effective Date, a Regulatory Change enacted after such Person becomes a Bank, and (B) such Bank has not failed to submit any form or certificate that it is entitled to so submit under applicable law. (c) Exemption from U.S. Withholding Taxes (c) Exemption from U.S. Withholding Taxes. There shall be submitted to the Company and the Administrative Agent, (A) on or before the first date that interest or fees are payable to such Bank under this Agreement, (1) if at the time the same are applicable, (aa) by each Bank that is not a United States Person, two duly completed and signed copies of Internal Revenue Service Form 1001 or 4224 (or any successor form to the applicable form), in either case entitling such Bank to a complete exemption from withholding of any United States federal 26 income taxes on all amounts to be received by such Bank under this Agreement, or (bb) by each Bank that is a Non-US Bank, (x) a duly completed Internal Revenue Service Form W-8 (or any successor form to such form) and (y) a certification in the form of Schedule 4.07(c) that such Bank is a Non-US Bank or (2) if at the time any of the foregoing are inapplicable, duly completed and signed copies of such form, if any, as entitles such Bank to exemption from withholding of United States federal income taxes to the maximum extent to which such Bank is then entitled under applicable law, and (B) from time to time thereafter, prior to the expiration or obsolescence of any previously delivered form or upon any previously delivered form becoming inaccurate or inapplicable, such further duly completed and signed copies of such form, if any, as entitles such Bank to exemption from withholding of United States federal income taxes to the maximum extent to which such Bank is then entitled under applicable law. Each Bank shall promptly notify the Company and the Administrative Agent if (A) it is required to withdraw or cancel any form or certificate previously submitted by it or any such form or certificate has otherwise become ineffective or inaccurate or (B) payments to it are or will be subject to withholding of United States federal income taxes to a greater extent than the extent to which payments to it were previously subject. Upon the request of the Company or the Administrative Agent, each Bank that is a United States Person shall from time to time submit to the Company and the Administrative Agent a certificate to the effect that it is such a United States Person and a duly completed Internal Revenue Service Form W-9 (or any successor form to such form). ARTICLE V YIELD PROTECTION AND ILLEGALITY Section 5.01 Additional Costs in Respect of Loans (a) The Obligors shall pay to the Administrative Agent for the account of each Bank from time to time such amounts as such Bank may determine to be necessary to compensate it for any costs incurred by such Bank which such Bank determines are attributable to its making or maintaining any Eurodollar Loans hereunder or its commitment to make such Eurodollar Loans hereunder, or any reduction in any amount receivable by such Bank hereunder in respect of such Eurodollar Loans or such obligation (such increases in costs and reductions in amounts receivable being herein called "Additional Costs"), resulting from any Regulatory Change which: (i) changes the basis of taxation of any amounts payable to such Bank under this Agreement or its Note in respect of such Eurodollar Loans (other than taxes imposed on the overall net income of such Bank or of its Applicable Lending Office for such Eurodollar Loans by the jurisdiction in which such Bank has its principal office or such Applicable Lending Office); or (ii) imposes or modifies any reserve, special deposit, minimum capital, capital ratio or similar requirements relating to any extensions of credit or other assets of, or any deposits with or other liabilities of, such Bank (including such Eurodollar Loans or any deposits referred to in the definition of "Eurodollar Base Rate" in Section 1.01 hereof), or any commitments of such Bank; or (iii) imposes any other condition affecting this Agreement or the Commitment of such Bank (or any of such extensions of credit or liabilities). 27 Each Bank will notify the Obligors through the Administrative Agent of any event which will entitle such Bank to compensation pursuant to this Section 5.01(a) as promptly as practicable after it obtains knowledge thereof and determines to request such compensation, and (if so requested by the Obligors through the Administrative Agent) will designate a different Applicable Lending Office for the Loans of such Bank affected by such event if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the sole opinion of such Bank, be disadvantageous to such Bank, provided that neither Obligor shall be obligated to compensate any Bank under this Section 5.01(a) for any Additional Costs incurred more than six months prior to the date the respective Bank requests the Company for such compensation, except for periods preceding such date but which are after the date such Bank notified the Obligors of the possibility that such Additional Costs might be incurred as a result of the respective Regulatory Change. Each Bank will furnish the Company with a statement setting forth the basis and amount of each request by such Bank for compensation under this Section 5.01(a). If any Bank requests compensation from the Obligors under this Section 5.01(a), the Company may, by notice to such Bank through the Administrative Agent, require that such Bank's Loans of the type with respect to which such compensation is requested be converted into Base Rate Loans in accordance with Section 5.04 hereof. (b) Without limiting the effect of the foregoing provisions of this Section 5.01, in the event that, by reason of any Regulatory Change, any Bank either (i) incurs Additional Costs based on or measured by the excess above a specified level of the amount of a category of deposits or other liabilities of such Bank which includes deposits by reference to which the interest rate on any Eurodollar Loans is determined as provided in this Agreement or a category of extensions of credit or other assets of such Bank which includes any Eurodollar Loans or (ii) becomes subject to restrictions on the amount of such a category of liabilities or assets which it may hold, then, if such Bank so elects by notice to the Obligors (with a copy to the Administrative Agent), the obligation of such Bank to make, and to convert Loans of any other type into, Loans of such type hereunder shall be suspended until the date such Regulatory Change ceases to be in effect. (c) Without limiting the effect of the foregoing provisions of this Section 5.01 (but without duplication), the Obligors shall pay directly to each Bank from time to time on request such amounts as such Bank may determine to be necessary to compensate such Bank for Capital Maintenance Costs with respect to its Loans or Commitment (such compensation to include, without limitation, an amount equal to any reduction of the rate of return on assets or equity of such Bank to a level below that which such Bank could have achieved but for such law, regulation, interpretation, directive or request). Each Bank will notify the Company that it is entitled to compensation pursuant to this Section 5.01(c) as promptly as practicable after it determines to request such compensation, provided that neither Obligor shall be obligated to compensate any Bank under this Section 5.01(c) for any such costs incurred more than six months prior to the date the respective Bank requests the Obligors for such compensation, except for periods preceding such date but which are after the date such Bank notified the Obligors of the possibility that such costs might be incurred. (d) Determinations by any Bank for purposes of this Section 5.01 of the effect of any Regulatory Change on its costs of making or maintaining Loans or maintaining its Commitment 28 or on amounts receivable by it in respect of Loans or such Commitment, and of the additional amounts required to compensate such Bank in respect of any Additional Costs, shall be conclusive, provided that such determinations are made on a reasonable basis. Section 5.02 Limitation on Types of Loans. Anything herein to the contrary notwithstanding, if, with respect to any Eurodollar Loans: (a) the Administrative Agent determines (which determination shall be conclusive) that quotations of interest rates for the relevant deposits referred to in the definition of "Eurodollar Base Rate" in Section 1.01 hereof are not being provided in the relevant amounts or for the relevant maturities for purposes of determining the rate of interest for such Loans as provided in this Agreement; or (b) the Majority Banks determine (which determination shall be conclusive) and notify the Administrative Agent that the relevant rates of interest referred to in the definition of "Eurodollar Base Rate" in Section 1.01 hereof upon the basis of which the rates of interest for such Loans are to be determined do not adequately cover the cost to such Banks of making or maintaining such Loans; then the Administrative Agent shall promptly notify the Obligors and each Bank thereof, and so long as such condition remains in effect, the Banks shall be under no obligation to make Eurodollar Loans of the affected type. Section 5.03 Illegality. Notwithstanding any other provision of this Agreement to the contrary, in the event that it becomes unlawful for any Bank or its Applicable Lending Office to (a) honor its obligation to make Eurodollar Loans hereunder, or (b) maintain Eurodollar Loans hereunder, then such Bank shall promptly notify the Obligors thereof through the Administrative Agent (which notice shall include a statement explaining the nature of such unlawfulness) and such Bank's obligation to make Eurodollar Loans shall be suspended until such time as such Bank may again make and maintain Eurodollar Loans and such Bank's outstanding Eurodollar Loans shall be converted into Base Rate Loans in accordance with Section 5.04 hereof. Section 5.04 Certain Conversions of Loans Pursuant to Section 5.01 or 5.03. If the obligation of any Bank to make any type of Eurodollar Loans shall be suspended pursuant to Section 5.01 or 5.03 hereof (Loans of such type being herein called "Affected Loans" and such type being herein called the "Affected Type"), all Loans which would otherwise be made by such Bank as Loans of the Affected Type shall be made instead as Base Rate Loans (and, if an event referred to in Section 5.01 or 5.03 hereof has occurred and such Bank determines that it is required to convert such Loans, then, by notice to the Obligors with a copy to the Administrative Agent, all Affected Loans of such Bank then outstanding shall be automatically converted into Base Rate Loans on the date specified by such Bank in such notice) and, to the extent that Affected Loans are so made as (or converted into) Base Rate Loans, all payments of principal which would otherwise be applied to such Bank's Affected Loans shall be applied instead to its Base Rate Loans. Section 5.05 Compensation. (a) The Obligors shall pay to the Administrative Agent for the account of each Bank, upon the request of such Bank through the Administrative Agent, 29 such amount or amounts as shall be sufficient (in the reasonable opinion of such Bank) to compensate it for any loss, costs or expense incurred by it as a result of: (i) any payment, prepayment or conversion of a Eurodollar Loan made by such Bank for any reason (including, without limitation, the acceleration of the Loans pursuant to Article X hereof) on a date other than the last day of an Interest Period for such Loan; or (ii) any failure by either Obligor for any reason (including, without limitation, the failure of any of the conditions precedent specified in Article VII hereof to be satisfied) to borrow or convert a Eurodollar Loan to be made by such Bank on the date for such borrowing specified in the relevant notice of borrowing under Section 2.02 hereof. (b) Such compensation shall include Funding Costs in the case of any payment, prepayment or conversion of, or failure to borrow or convert, any Loan made or to be made as a Eurodollar Loan. Section 5.06 Replacement of Banks. If any Bank requests compensation pursuant to Section 5.01, or such Bank's obligation to make or continue, or to convert Loans of any other type into, any type of Eurodollar Loan shall be suspended pursuant to Section 5.02 or 5.03, or if an event occurs that entitles such Bank to make a claim pursuant to Section 4.07, the Company upon three Business Days' notice to the Administrative Agent and such Bank, may require that such Bank transfer all of its right, title and interest under this Agreement, the CSC Agreement and the New York/New Jersey Agreement, such Bank's Notes and its notes issued under the CSC Agreement and the New York/New Jersey Agreement to any bank or financial institution identified by the Company with the consent of the Administrative Agent (which consent shall not be unreasonably withheld), such assignment to be made pursuant to an Assignment and Acceptance Agreement substantially in the form of Exhibit H hereto (an "Assignment and Acceptance") (a) if such proposed transferee agrees to assume all of the obligations of such Bank hereunder, under the CSC Agreement and the New York/New Jersey Agreement for consideration equal to the aggregate outstanding principal amount of such Bank's Loans, CSC Loans and New York/New Jersey Loans, together with interest thereon to the date of such transfer, and satisfactory arrangements are made for payment to such Bank of all other amounts payable hereunder, under the CSC Agreement and under the New York/New Jersey Agreement to such Bank on or prior to the date of such transfer (including the amounts so requested pursuant to Section 5.01 or so entitled to be claimed pursuant to Section 4.07, any fees accrued hereunder and any amounts that would be payable under Section 5.05 as if all of such Bank's Loans were being prepaid in full on such date) and (b) if such Bank being replaced has requested compensation pursuant to Section 5.01 or is entitled to make a claim pursuant to Section 4.07, such proposed transferee's aggregate requested compensation, if any, pursuant to Section 5.01, or the amounts, if any, entitled to be claimed by such proposed transferee pursuant to Section 4.07, with respect to such replaced Bank's Loans would be lower than that of the Bank replaced. Without prejudice to the survival of any other agreement of the Company hereunder, the agreements of the Company contained in Sections 4.07, 5.01 and 12.03 (without duplication of any payments made to such Bank by the Company or the proposed transferee) shall survive for the benefit of any Bank replaced under this Section 5.06 with respect to the time prior to such replacement. 30 ARTICLE VI GUARANTEE (a) Each of the Guarantors hereby, jointly and severally, unconditionally guarantees to the Banks and the Administrative Agent and their respective successors and assigns and the subsequent holders of the Notes, irrespective of the validity and enforceability of this Agreement or the Notes or the obligations of the Obligors or any of the other Guarantors hereunder or thereunder or any other circumstance that might otherwise affect the liability of a guarantor, that: (i) the principal of and interest on the Loans and the Notes and all other obligations of the Obligors and the other Guarantors to the Banks or the Administrative Agent under this Agreement and the Notes will be promptly paid in full when due, whether at stated maturity, by acceleration or otherwise, in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, the same will be promptly paid in full when due in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed for whatever reason, the Guarantors will be obligated, jointly and severally, to pay the same immediately. (b) Each of the Guarantors hereby waives notice of, and consents to, any extensions of time of payment, renewals, releases of collateral, delays in obtaining or realizing upon or failures to obtain or realize upon collateral or other indulgence from time to time granted by any of the Banks or the Administrative Agent in respect of the Notes or this Agreement. Each of the Guarantors hereby releases the Obligors from all, and agrees not to assert or enforce (whether by or in a legal or equitable proceeding or otherwise) any, "claims" (as defined in section 101(5) of the Bankruptcy Code) against the Obligors, whether arising under applicable law or otherwise, to which such Guarantors are or would be entitled by virtue of their obligations hereunder, any payment made pursuant hereto, or the exercise by the Administrative Agent or the Banks of their rights with respect to any collateral for the obligations of the Company or the Guarantors under this Agreement, including any such claims to which such Guarantors may be entitled as a result of any right of subrogation, exoneration or reimbursement in each case to the extent, but only to the extent, that such Guarantor would be deemed a "creditor" of the Obligors for purposes of Section 547 of the Bankruptcy Code solely by reason of such Guarantor's holding or asserting such claim. To the extent not released by the Guarantors under this Article VI, each of the Guarantors agrees that it shall not be entitled to any right of subrogation, exoneration, reimbursement or contribution in respect of any obligations guaranteed hereby until payment in full of all the Obligations. With respect to the Notes and this Agreement, each of the Guarantors hereby waives presentment, protest, demand of payment, notice of dishonor and all other notices and demands whatsoever. Each of the Guarantors further agrees that, as between such Guarantor, on the one hand, and the Administrative Agent and the Banks, on the other hand, (i) the maturity of the obligations guaranteed hereby may be accelerated as provided in Section 10.01 hereof for the purposes of this guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (ii) in the event of any declaration of acceleration of such obligations as provided in Section 10.01 hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by each of the Guarantors for the purpose of this guarantee. The obligations of each of the Guarantors under this Article VI shall be automatically reinstated if and to the extent that for 31 any reason any payment by or on behalf of the Obligors is rescinded or must be otherwise restored by any holder of any of the obligations guaranteed hereunder, whether as a result of any proceedings in bankruptcy or reorganization or otherwise and each of the Guarantors agrees that it will indemnify the Banks and the Administrative Agent on demand for reasonable costs and expenses (including, without limitation, fees of counsel) incurred by the Banks or the Administrative Agent in connection with such rescission or restoration. (c) It is the intention of the Guarantors, the Banks and the Obligors that the obligations of each Guarantor hereunder shall be in, but not in excess of, the maximum amount permitted by applicable law. To that end, but only to the extent such obligations would otherwise be avoidable, the obligations of each Guarantor hereunder shall be limited to the maximum amount that, after giving effect to the incurrence thereof, would not render such Guarantor insolvent or unable to make payments in respect of any of its indebtedness as such indebtedness matures or leave such Guarantor with an unreasonably small capital. The need for any such limitation shall be determined, and any such needed limitation shall be effective, at the time or times that such Guarantor is deemed, under applicable law, to incur the Obligations hereunder. Any such limitation shall be apportioned amongst the Obligations pro rata in accordance with the respective amounts thereof. This paragraph is intended solely to preserve the rights of the Banks under this Agreement to the maximum extent permitted by applicable law, and neither the Guarantors, the Obligors nor any other Person shall have any right under this paragraph that it would not otherwise have under applicable law. The Obligors and each Guarantor agree not to commence any proceeding or action seeking to limit the amount of the obligation of such Guarantor under this Article VI by reason of this paragraph. For the purposes of this paragraph, "insolvency", "unreasonably small capital" and "unable to make payments in respect of any of its indebtedness as such indebtedness matures" shall be determined in accordance with applicable law. ARTICLE VII CONDITIONS PRECEDENT Section 7.01 Initial Loan. The obligation of each Bank to make its initial Loan hereunder is subject to the satisfaction of the following conditions precedent on or prior to the date of such initial Loan but in any event no later than June 30, 1998: (a) Execution and Notes. This Agreement shall have been duly executed and delivered by each of the Obligors, the Guarantors, the Banks and the Administrative Agent, and the Obligors shall have executed and delivered to each Bank its respective Note evidencing the Loans to be made by such Bank hereunder. (b) Signatures. Each of the Obligors and the Guarantors shall have certified to the Administrative Agent (with copies to be provided for each Bank) the name and signature of each of the persons authorized to sign on its respective behalf such of this Agreement and the Notes to which it is a party and to borrow under this Agreement. The Banks may conclusively rely on such certifications until they receive notice in writing from the applicable Obligor or Guarantor to the contrary. 32 (c) Proof of Action. The Administrative Agent shall have received certified copies of all necessary action taken by each of the Obligors and the Guarantors to authorize the execution, delivery and performance of such of this Agreement and the Notes to which it is a party. (d) Opinions of Counsel to the Obligors. The Administrative Agent shall have received opinions of: (i) Robert Lemle, Esq., General Counsel to the Obligors and the Guarantors, substantially in the form of Exhibit E hereto; (ii) Sullivan & Cromwell, special New York counsel to the Obligors and the Guarantors, substantially in the form of Exhibit F(1) hereto; (iii) Schenk, Price, Smith & King, special New Jersey counsel to the Obligors and the Guarantors, substantially in the form of Exhibit F(2) hereto; and (iv) Piper & Marbury, special FCC counsel to the Obligors, substantially in the form of Exhibit F(3) hereto; and covering such other matters as any Bank or Banks or special New York counsel to the Administrative Agent, Winthrop, Stimson, Putnam & Roberts, may reasonably request (and for purposes of such opinions such counsel may rely upon opinions of counsel in other jurisdictions, provided that such other counsel are satisfactory to special counsel to the Administrative Agent and such other opinions state that the Banks are entitled to rely thereon). (e) Opinion of Banks' Counsel. Each Bank shall have received an opinion of Winthrop, Stimson, Putnam & Roberts, special New York counsel to the Administrative Agent, substantially in the form of Exhibit G hereto and covering such other matters as any Bank or Banks may reasonably request. (f) Certain Fees. The Company shall have paid to the Administrative Agent, for its own account, fees calculated as specified in a letter dated the date hereof. (g) Other Fees. The Company shall have paid such other fees as may have been agreed by the parties hereto. (h) CSC and New York/New Jersey Agreements. All conditions precedent to the initial extensions of credit under the CSC Agreement and the New York/New Jersey Agreement shall have been satisfied. (i) Subscribers' Certificate. The Administrative Agent shall have received the Subscribers' Certificate for the month ended March 31, 1998. 33 (j) Compliance Certificate. The Banks shall have received a Compliance Certificate showing that, after giving effect to this Agreement, the Company and the Guarantors are in compliance with the provisions of this Agreement on a pro forma basis as of the Effective Date. (k) Other Documents. Such other documents and papers relating to the documents referred to herein and the transactions contemplated hereby as any Bank or special counsel to the Banks shall reasonably require shall have been received by the Administrative Agent. (l) Regulatory Approvals. The Obligors shall have obtained the approval of the BPU with respect to this Agreement and the uses of proceeds of the Loans specified in Section 2.08. (m) Funding Adjustment. The Company shall have made arrangements satisfactory to the Administrative Agent such that, after giving effect to the initial Loan hereunder, (i) the outstanding Loans hereunder shall be made by the Banks pro rata in accordance with their respective Commitment Percentages and (ii) the Loans (as defined in the 1996 Agreement) and all other amounts owing under the 1996 Agreement to any Bank (as defined in the 1996 Agreement) which is not a Bank hereunder shall have been repaid in full. Section 7.02 Each Loan. The obligation of each Bank to make each of its Loans (including its initial Loan) hereunder (which shall not include any conversion or continuation of any outstanding Loan) is subject to the additional conditions precedent that: (a) no Default shall have occurred and be continuing; (b) the representations and warranties in Article VIII hereof shall be true on and as of the date of the making of, and after giving effect to, such Loan with the same force and effect as if made on and as of such date, except to the extent that such representations and warranties expressly relate to an earlier date; and (c) to the extent requested by the Administrative Agent or any Bank, a senior executive of the Obligors shall have certified compliance with paragraphs (a) and (b) above to the Administrative Agent. The Company shall be deemed to have made a representation and warranty hereunder as of the time of the making of such Loans hereunder that the conditions specified in such clauses have been fulfilled as of such time. ARTICLE VIII REPRESENTATIONS Each of the Obligors and the Guarantors represents, warrants and covenants as follows: Section 8.01 Existence and Power. Each Obligor and each Guarantor is a limited or general partnership or corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and is duly qualified to transact business and is in good standing in all jurisdictions in which such qualification is necessary in view of the 34 properties and assets owned and presently intended to be owned and the business transacted and presently intended to be transacted by it except for qualifications the lack of which, singly or in the aggregate, have not had and are not likely to have a Materially Adverse Effect, and each of CSC, the Company and each Guarantor has full power, authority and legal right to make and perform such of this Agreement and the Notes to which it is a party. Section 8.02 Subsidiaries. As at the Effective Date and the date of the initial Loan hereunder, the Company has no Subsidiaries other than those set forth on Schedule 8.02. Section 8.03 Authority; No Conflict. The making and performance by each of the Obligors and the Guarantors of such of this Agreement and the Notes to which it is a party, and each extension of credit hereunder, have been duly authorized by all necessary action and do not and will not: (i) subject to the consummation of the action described in Section 8.12 hereof, violate any provision of any laws, orders, rules or regulations presently in effect (other than violations that, singly or in the aggregate, have not had and are not likely to have a Materially Adverse Effect), or any provision of any of the Obligors' or the Guarantors' partnership agreement, charter or by-laws presently in effect; or (ii) result in the breach of, or constitute a default or require any consent (except for the consents described on Schedule 8.03 hereto, each of which has been duly obtained) under, any existing indenture or other agreement or instrument to which either Obligor or any Guarantor is a party or its properties may be bound or affected (other than any breach, default or required consent that, singly or in the aggregate, have not had and are not likely to have a Materially Adverse Effect); or (iii) result in, or require, the creation or imposition of any Lien upon or with respect to any of the properties or assets now owned or hereafter acquired by either Obligor or any Guarantor. Section 8.04 Financial Condition. (a) The Company has furnished to each Bank: (i) The consolidated balance sheet of the Company and its consolidated Subsidiaries as at December 31, 1997, and the related consolidated statements of operations, stockholders' equity (deficiency) and cash flows for the fiscal year ended on said date, said financial statements having been certified by KPMG Peat Marwick; and (ii) the respective combined balance sheets of the TKR New Jersey/New York Systems and the TCI New Jersey and New York Systems, in each case as at December 31, 1995, December 31, 1996 and December 31, 1997, and the respective related combined statements of operations or earnings, parent's investment or combined deficit and cash flows for the fiscal years ended on said dates, said financial statements having been certified by KPMG Peat Marwick. All financial statements referred to above are complete and correct in all material respects (subject, in the case of the unaudited financial statements referred to above, to year-end and audit adjustments) and fairly present the financial condition of the respective entity or groups of entities which is or are the subject of such financial statements (as stated above), on a combined and/or consolidated basis to the extent so indicated above, as at the respective dates of the balance sheets included in such financial statements and the results of operations of such entity or groups of entities for the respective periods ended on said dates. None of the Company and the Guarantors had on any of said dates any material contingent liabilities, liabilities for Taxes, 35 unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments or operations which are substantial in amount, except as referred to or reflected or provided for in said financial statements as at said respective dates or as disclosed to the Banks in writing prior to the date hereof. Except as disclosed to the Banks in writing prior to the date hereof, since December 31, 1997 there has been no material adverse change in the financial condition (from that shown by the respective balance sheets as at December 31, 1997 included in said financial statements) or the businesses or operations of the Company, its Subsidiaries and the New York/New Jersey Companies taken as a whole on a pro forma combined basis. As of the Effective Date, except as disclosed to the Banks in writing prior to the date hereof, since December 31, 1997 there has been no material adverse change in the financial condition or the businesses or operations of the New York/New Jersey Companies taken as a whole on a combined basis from that shown by the balance sheets as at December 31, 1997 included in said financial statements for the New York/New Jersey Companies (it being understood that for purposes of this sentence the New York/New Jersey Companies shall be deemed to have owned all of the assets acquired by the New York/New Jersey Companies pursuant to the TCI Acquisition for all periods covered by said balance sheets until and including the Effective Date). Section 8.05 Litigation; Etc. Except as disclosed to the Banks on Schedule 8.05, there are no lawsuits or other proceedings pending, or to the knowledge of the Company or any of the Guarantors threatened, against the Company or any of the Guarantors or any of their respective properties or assets, before any court or arbitrator or by or before any governmental commission, bureau or other regulatory authority that, singly or in the aggregate, could reasonably be expected to have a Materially Adverse Effect. Neither the Company nor any of the Guarantors is in default under or in violation of or with respect to any laws or orders, or any material provision of any rules or regulations, or any writ, injunction or decree of any court, arbitrator, governmental commission, bureau or other regulatory authority, or any Franchise, except for minor defaults which, if continued unremedied, are not likely to have a Materially Adverse Effect. Section 8.06 Titles and Liens. Except as set forth on Schedule 9.12, each of the Company and the Guarantors has good title to its properties and assets, free and clear of all Liens except those permitted by Section 9.12 hereof. Section 8.07 Regulation U. None of the proceeds of the Loans shall be used to purchase or carry, or to reduce or retire or refinance any credit incurred to purchase or carry, any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock. If requested by any Bank, the Obligors will furnish to the Banks statements in conformity with the requirements of Regulation U. Section 8.08 Taxes. Each of the Company and the Guarantors has filed all material tax returns which are required to be filed under any law applicable thereto except such returns as to which the failure to file, singly or in the aggregate, has not had and will not have a Materially Adverse Effect, and has paid, or made provision for the payment of, all Taxes shown to be due pursuant to said returns or pursuant to any assessment received by the Company or any of the Guarantors, except such Taxes, if any, as are being contested in good faith and as to which 36 adequate reserves have been provided or as to which the failure to pay, singly or in the aggregate, has not had and is not likely to have a Materially Adverse Effect. Section 8.09 Other Credit Agreements. Schedule 9.10 (Existing Indebtedness), Schedule 9.11 (Existing Guarantees) and Schedule 9.12 (Existing Liens) contain complete and correct lists, as at the date hereof and the date of the initial Loan hereunder, of all credit agreements, indentures, purchase agreements, obligations in respect of letters of credit, guarantees and other instruments presently in effect (including Capital Lease Obligations) providing for, evidencing, securing or otherwise relating to any Indebtedness of the Company and the Guarantors in a principal or face amount equal to $150,000 or more and such lists correctly set forth the names of the debtor or lessee and creditor or lessor with respect to the Indebtedness outstanding or to be outstanding thereunder, the rate of interest or rentals, a description of any security given or to be given therefor, and the maturity or maturities or expiration date or dates thereof. Section 8.10 Full Disclosure. None of the financial statements referred to in Section 8.04 hereof or any written statements delivered pursuant to Section 8.02, 8.04 or 8.15 (each of which has heretofore been furnished to each Bank) contains, as at the date hereof or the date of the initial Loan, any untrue statement of a material fact nor do such financial statements and such written statements, taken as a whole, omit to state a material fact necessary to make the statements contained therein not misleading. Section 8.11 No Default. None of the Company and the Guarantors is in default in the payment or performance or observance of any contract, agreement or other instrument to which it is a party or by which it or its properties or assets may be affected or bound, which default, either alone or in conjunction with all other such defaults, has had or is likely to have a Materially Adverse Effect. Section 8.12 Approval of Regulatory Authorities. Except as set forth on Schedule 8.03 hereto and other than the approvals of the BPU referred to in Section 7.01(l) hereof, no approval or consent of, or filing or registration with, any Federal, state or local commission or other regulatory authority is required in connection with the execution, delivery and performance by the Obligors and the Guarantors of such of this Agreement and the Notes to which they are a party. All such described action required to be taken as a condition to the execution and delivery of such of this Agreement and the Notes to which the Obligors and the Guarantors are a party has been duly taken by all such commissions and authorities or other Persons, as the case may be, and all such action required to be taken as a condition to the initial Loans hereunder has been or will be duly taken prior to such initial Loans. Section 8.13 Binding Agreements. This Agreement constitutes and the Notes when executed and delivered will constitute, the legal, valid and binding obligations of each of the Obligors and the Guarantors, enforceable in accordance with their respective terms (except for limitations on enforceability under bankruptcy, reorganization, insolvency and other similar laws affecting creditors' rights generally and limitations on the availability of the remedy of specific performance imposed by the application of general equitable principles). 37 Section 8.14 Franchises. Schedule 8.14 hereto contains a complete and correct list, as of the date hereof and the date of the initial Loan hereunder, of all of the Franchises granted to the Company and the Guarantors, in each case together with the expiration date thereof, or for which applications have been made, or are planned to be made, by the Company or any of the Guarantors. Section 8.15 Collective Bargaining Agreements. Except as disclosed to the Banks in writing prior to the Effective Date, there are no collective bargaining agreements between the Company or any of the Guarantors and any trade or labor union or other employee collective bargaining agent. Section 8.16 Investments. Schedule 9.15 hereto contains a complete and correct list, as at the date hereof, of all Investments of the Company and the Guarantors in excess of $350,000, showing the respective amounts of each such Investment and the respective entity in which each such Investment has been made. ARTICLE IX PARTICULAR COVENANTS OF THE COMPANY AND THE GUARANTORS From the Effective Date and so long as the Commitments of the Banks shall be in effect and until the payment in full of all Obligations hereunder and the performance of all other obligations of the Obligors and Guarantors under this Agreement, each of the Company and the Guarantors agrees that, unless the Majority Banks shall otherwise consent in writing: A. Informational Covenants: Section 9.01 Financial Statements and Other Information. The Company and the Guarantors will deliver to each Bank: (a) As soon as available and in any event within 60 days after the end of each of the first three Quarters of each fiscal year of the Company: (i)(A) consolidated statements of operations, stockholders' equity (deficiency) and cash flows of the Company and its consolidated Subsidiaries, taken together, for such Quarter and for the period from the beginning of such fiscal year to the end of such Quarter and (B) the related consolidated balance sheets of the Company and its consolidated Subsidiaries, taken together, as at the end of such Quarter (which financial statements shall set forth in comparative form the corresponding figures as at the end of and for the corresponding Quarter in the preceding fiscal year) and (ii)(A) combined statements of operations or earnings, parent's investment or combined deficit and cash flows of the New York/New Jersey Companies, prepared on the same basis as the financial statements referred to in Section 8.04(b), for such Quarter and for the period from the beginning of such fiscal year to the end of such Quarter and (B) the related combined balance sheets of the New York/New 38 Jersey Companies, prepared on the same basis as the financial statements referred to in Section 8.04(b), as at the end of such Quarter (which financial statements shall set forth in comparative form the corresponding figures as at the end of and for the corresponding Quarter in the preceding fiscal year), all in reasonable detail and accompanied by a certificate in the form of Exhibit D(1) hereto of a senior financial executive of the Company and of the New York/New Jersey Companies certifying such financial statements, subject, however, to year-end and audit adjustments, which certificate shall include a statement that the senior financial executive signing the same has no knowledge, except as specifically stated, that any Default has occurred and is continuing. (b) As soon as available and in any event within 120 days after the end of each fiscal year of the Company: (i)(A) consolidated statements of operations, stockholders' equity (deficiency) and cash flows of the Company and its consolidated Subsidiaries, taken together, for such fiscal year and (B) the related consolidated balance sheets of the Company and its consolidated Subsidiaries, taken together, as at the end of such fiscal year (which financial statements shall set forth in comparative form the corresponding figures as at the end of and for the preceding fiscal year) and (ii)(A) combined statements of operations or earnings, parent's investment or combined deficit and cash flows of the New York/New Jersey Companies, prepared on the same basis as the financial statements referred to in Section 8.04(b), for such fiscal year and (B) the related combined balance sheets of the New York/New Jersey Companies, prepared on the same basis as the financial statements referred to in Section 8.04(b), as at the end of such fiscal year (which financial statements shall set forth in comparative form the corresponding figures as at the end of and for the preceding fiscal year), all in reasonable detail and accompanied by (x) an opinion of KPMG Peat Marwick or other independent certified public accountants of recognized standing selected by the Company and reasonably acceptable to the Majority Banks as to said combined and/or consolidated financial statements and a certificate of such accountants stating that, in making the examination necessary for said opinion, they obtained no knowledge, except as specifically stated, of any failure by the Company, any of its Subsidiaries or any of the New York/New Jersey Companies to perform or observe any of its covenants relating to financial matters in this Agreement, and (y) a certificate in the form of Exhibit D(2) hereto of a senior financial executive of the Company and of the New York/New Jersey Companies, stating that such financial statements are correct and complete and fairly present the financial condition and results of operations of the respective entities covered thereby as at the end of and for such fiscal year and that the executive signing the same has no knowledge, except as specifically stated, that any Default has occurred and is continuing. (c) Promptly after their becoming available, copies of all financial statements and reports which the Company or any Guarantor shall have sent its shareholders generally (other than tax returns unless specifically requested under clause (h) of this Section 9.01), and copies of all regular and periodic reports, if any, which the Company or any Guarantor shall have filed with the Securities and Exchange Commission, or any governmental agency substituted therefor, or with any national securities exchange, or with the Federal Communications Commission, or any governmental agency substituted therefor. (d) Within 60 days after the end of each of the first three Quarters of each year, and within 120 days after the end of each fiscal year of the Company, a Compliance Certificate, duly completed with respect to such Quarter or fiscal year, as the case may be. (e) Within 35 days after the end of each calendar month, a Subscribers' Certificate, duly completed with respect to such month. 39 (f) Promptly, notice of the termination, cancellation, nonrenewal or other loss of any Franchise for a cable television system or systems that has had or is likely to have, either alone or in conjunction with all other such losses, a Materially Adverse Effect, the filing of a competing application in connection with any proceeding for renewal of any such Franchise and of any proceeding which involves a material risk of the termination, cancellation, nonrenewal or other loss of any such Franchise. (g) As soon as possible and in any event within ten days after any senior executive of the Company or any Guarantor or of any general partner of any Guarantor shall have obtained knowledge of the occurrence of a Default, a statement describing such Default and the action which is proposed to be taken with respect thereto. (h) From time to time, with reasonable promptness, such further information regarding the business, affairs and financial condition of the Company or any Guarantor or any of their respective Affiliates or other affiliates as any Bank may reasonably request. B. Affirmative Covenants: Section 9.02 Taxes and Claims. Each of the Company and the Guarantors will pay and discharge all Taxes imposed upon it or upon its income or profits, or upon any properties or assets belonging to it, and all fees or other charges for Franchises, prior to the date on which penalties attach thereto, and all other lawful claims which, if unpaid, might become a Lien (other than Permitted Liens) upon the property of the Company or any Guarantor or result in the loss of a Franchise, provided that neither the Company nor any Guarantor shall be required to pay any such Tax, fee or other charge the payment of which is being contested in good faith and by proper proceedings if it maintains adequate reserves in accordance with generally accepted accounting principles with respect thereto. Section 9.03 Insurance. Each of the Company and the Guarantors will maintain insurance issued by responsible companies in such amounts and against such risks as is usually carried by owners of similar businesses and properties in the same general areas in which the Company or such Guarantor operates. The Company and the Guarantors will furnish to any Bank, upon the request of such Bank from time to time, full information as to the insurance maintained in accordance with this Section 9.03. Section 9.04 Maintenance of Existence; Conduct of Business. Each of the Company and the Guarantors will preserve and maintain its existence and all of its rights, privileges and franchises (including Franchises), except (i) where a failure to do so, singly or in the aggregate, is not likely to have a Materially Adverse Effect, (ii) pursuant to a Permitted Affiliate Transaction or (iii) pursuant to any merger or consolidation permitted by Section 9.14(a)(i). Section 9.05 Maintenance of and Access to Properties. Each of the Company and the Guarantors will keep all of its properties and assets necessary in its business in good working order and condition, ordinary wear and tear excepted, and will permit representatives of the respective Banks to inspect such properties, and to examine and make extracts from its books and records, during normal business hours. 40 Section 9.06 Compliance with Applicable Laws Each of the Company and the Guarantors will comply with the requirements of all applicable, including but not limited to environmental, laws, rules, regulations and orders of any governmental body or regulatory authority a breach of which is likely to have, singly or in the aggregate, a Materially Adverse Effect, except where contested in good faith and by proper proceedings if it maintains adequate reserves in accordance with generally accepted accounting principles with respect thereto. Section 9.07 Litigation. Each of the Company and the Guarantors will promptly give to the Administrative Agent notice in writing (and the Administrative Agent will notify each Bank) of all litigation and of all proceedings before any courts, arbitrators or governmental or regulatory agencies against it or, to its knowledge, otherwise affecting it or any of its respective properties or assets, except litigation or proceedings which, if adversely determined, is not likely to, singly or in the aggregate, have a Materially Adverse Effect. Following the initial notice of each such litigation or proceeding, supplementary notices of all material developments in respect thereof shall be given from time to time in like manner. Section 9.08 New Subsidiaries. Promptly upon the acquisition or formation of any New Subsidiary, the Company and the Guarantors will cause (by documentation satisfactory to the Administrative Agent) such New Subsidiary to undertake all of the obligations of a "Guarantor" under this Agreement and, in the case of any such New Subsidiary which is a Subsidiary of a New York/New Jersey Company, of a "Guarantor" under (and as defined in) the New York/New Jersey Agreement. Each such New Subsidiary shall be a "Guarantor" for all purposes of this Agreement and, as applicable, under the New York/New Jersey Agreement. Section 9.09 Franchises. The Company and the Guarantors will comply with all of their obligations under their respective Franchises, except for failures to comply which, singly or in the aggregate, are not likely to have a Materially Adverse Effect. C. Negative Covenants: Section 9.10 Indebtedness. Neither the Company nor any of the Guarantors will create, incur or suffer to exist any Indebtedness except: (i) Indebtedness hereunder and under the New York/New Jersey Agreement; (ii) short-term Indebtedness incurred for working capital purposes from one or more of the Banks up to but not exceeding $12,000,000 in aggregate principal amount at any one time outstanding; (iii) obligations under or in respect of Interest Swap Agreements up to an aggregate notional principal amount not to exceed at any time the Total Commitment at such time; (iv) Guarantees and letters of credit permitted by Section 9.11 hereof; (v)(A) Indebtedness of the Company or any of its Subsidiaries to any Guarantor or the Company and (B) Indebtedness of any New York/New Jersey Company to any other New York/New Jersey Company; 41 (vi) Indebtedness in respect of Capital Lease Obligations, so long as the aggregate principal amount of such Indebtedness outstanding at any one time shall not exceed the sum of $18,000,000; (vii) all other Indebtedness issued and outstanding on the date hereof to the extent set forth on Schedule 9.10 hereto and any renewals, extensions or refundings thereof in a principal amount not to exceed the amount so renewed, extended or refunded; and (viii) Indebtedness in respect of the Sutton Notes (as defined in the 1996 Agreement) in an aggregate principal amount not tin excess of $141,300,000, provided that such Indebtedness shall be paid in full on or prior to the twentieth day after the Effective Date. Section 9.11 Contingent Liabilities. Neither the Company nor any of the Guarantors will, directly or indirectly (including, without limitation, by means of causing a bank to open a letter of credit), guarantee, endorse, contingently agree to purchase or to furnish funds for the payment or maintenance of, or otherwise be or become contingently liable upon or with respect to, the Indebtedness, other obligations, net worth, working capital or earnings of any Person, or guarantee the payment of dividends or other distributions upon the stock or other ownership interests of any Person, or agree to purchase, sell or lease (as lessee or lessor) property, products, materials, supplies or services primarily for the purpose of enabling a debtor to make payment of its obligations or to assure a creditor against loss (all such transactions being herein called "Guarantees"), except: (i) endorsements of negotiable instruments for deposit or collection in the ordinary course of business; (ii) the Guarantees described in Schedule 9.11; (iii)(A) Guarantees by the Company or one or more of its Subsidiaries of Indebtedness of, and other obligations (incurred in the ordinary course of business) of, the Company or any of the Guarantors and (B) Guarantees by a New York/New Jersey Company of Indebtedness of, and other obligations (incurred in the ordinary course of business) of another New York/New Jersey Company, but only if, in the case of clauses (A) and (B) of this clause (iii), such Indebtedness or other obligations are permitted by the Agreement; (iv) Capital Lease Obligations to the extent they constitute Guarantees by reason of having been assigned by the lessor to a lender to such lessor (provided that the obligors in respect of such Capital Lease Obligations do not increase their liability by reason of such assignment); (v) surety bonds in an aggregate amount at any one time not to exceed $12,500,000; (vi) Guarantees of Indebtedness which would constitute Investments which are not prohibited by Section 9.15 (other than by reason of subsection (iii) thereof); (vii) the Guarantees in Article VI hereof and in Article VI of the New York/New Jersey Agreement; and 42 (viii) other Guarantees by the Company or any of the Guarantors, provided that the outstanding aggregate amount of the obligations guaranteed does not exceed $7,500,000 at any time. Section 9.12 Liens. Neither the Company nor any of the Guarantors will create or suffer to exist any mortgage, pledge, security interest, conditional sale or other title retention agreement, lien, charge or encumbrance upon any of its assets, now owned or hereafter acquired, securing any Indebtedness or other obligation (all such security being herein called "Liens"), except: (i)(A) Liens on tangible personal property of any Subsidiary of the Company securing Indebtedness owed to the Company and (B) Liens on tangible personal property of any New York/New Jersey Subsidiary securing Indebtedness owed to any New York/New Jersey Obligor; (ii) Liens securing Indebtedness permitted by Section 9.10(vi) hereof to the extent such Liens attach solely to the assets (x) subject to Capital Leases constituting such Indebtedness or (y) acquired with the proceeds of such Indebtedness; (iii) Permitted Liens; and (iv) other Liens on tangible personal property in effect on the date hereof to the extent set forth on Schedule 9.12 hereto. In addition, neither the Company nor any of the Guarantors will enter into or permit to exist any undertaking by it or affecting any of its properties whereby the Company or such Guarantor shall agree with any Person (other than the Banks or the Administrative Agent hereunder or under the New York/New Jersey Agreement) not to create or suffer to exist any Liens in favor of any other Person. Section 9.13 Leases. Neither the Company nor any of the Guarantors will incur, assume or have outstanding any obligation to pay rent under Leases (as lessee, guarantor or otherwise) except: (i) Pole Rental Leases and Leases of microwave transmission and/or reception rights related to the operation of the Company and the Guarantors; (ii) obligations under Leases by one Subsidiary of the Company or any New York/New Jersey Obligor to another Subsidiary of the Company or any New York/New Jersey Obligor, as the case may be; and (iii) obligations under Leases of equipment and other real or personal property for use in the ordinary course of its business. Section 9.14 Mergers, Acquisitions and Dispositions, Etc. (a) Neither the Company nor any of the Guarantors will consolidate or merge with any Person, or sell, lease, license, assign, transfer or otherwise dispose of any part of its business, assets or rights except: 43 (i) dispositions by the Company or any of its Subsidiaries to, or mergers or consolidations of any of the Company's Subsidiaries with, CSC or any other Restricted Subsidiary and dispositions by any New York/New Jersey Company to, or mergers or consolidations of any New York/New Jersey Company with and into, any other New York/New Jersey Company or, so long as the New York/New Jersey Agreement is no longer in effect, the Company or any of its Subsidiaries; (ii) subject to Section 9.18 hereof, sales by the Company or any of the Guarantors to Affiliates of surplus inventory, equipment and fixed assets originally acquired for use by the Company or such Guarantor in its own business; (iii) dispositions in the ordinary course of business (including, without limitation, dispositions of obsolete or worn-out property and other property reasonably determined by the management of the disposing entity to be not used or useful in its business); (iv) dispositions of any Margin Stock; (v) the Paramus-Hillsdale Sale; and (vi) dispositions by the Company or any of the Guarantors (other than, so long as the New York/New Jersey Agreement is in effect, any disposition by any New York/New Jersey Company to CSC or any Restricted Subsidiary) (including, without limitation, by merger or consolidation of any Subsidiary of the Company or any New York/New Jersey Subsidiary) of cable television systems or portions thereof (including but not limited to, (i) dispositions by way of merger or consolidation of any Subsidiary of the Company or any New York/New Jersey Subsidiary and (ii) dispositions in connection with which cable television systems or portions thereof are acquired in exchange for the cable television systems or portions thereof so disposed), provided that, in the case of any such disposition: (A) immediately prior to, and after giving effect to, such disposition, no Default shall have occurred and be continuing; and (B) at any time when the Cash Flow Ratio exceeds 5.50 to 1, the amount of Operating Cash Flow attributable to the assets to be disposed for the twelve-month or five-year, as the case may be, period ending on the last day of the calendar month immediately preceding the month in which such disposition is to occur (such twelve-month or five year period being referred to herein as the relevant "Test Period"), together with the aggregate amount of Operating Cash Flow for the relevant Test Period attributable to any other assets so disposed by the Company or any Guarantor during the twelve-month or five-year, as the case may be, period prior to the date that such disposition is to occur, shall not exceed (x) in the case of such twelve-month Test Period, 25% of the aggregate amount of Operating Cash Flow for such Test Period, and (y) in the case of such five-year Test Period, 35% of the aggregate amount of Operating Cash Flow for such Test Period. The Company shall furnish to the Administrative Agent prior to any such disposition (1) a certificate of an officer of the Company and, if applicable, the New York/New Jersey Obligors 44 certifying compliance with the requirements of clauses (A) and, if applicable, (B) of this subparagraph (v) and (2) in the case of any disposition to which clause (b) is applicable, a reasonably detailed description of such disposition demonstrating compliance with all of the Company's and the Guarantors' covenants and agreements under this Agreement both before and after giving effect to such disposition. (b) Neither the Company nor any of the Guarantors will purchase or acquire assets from, or the business or assets of, any other Person, except: (i) the purchase of assets in the ordinary course of business as conducted on the Effective Date by the Company and the Guarantors; and (ii) the acquisition (including, without limitation, by merger or consolidation of any Subsidiary of the Company or any New York/New Jersey Subsidiary) of all or any part of the business or assets of any Person engaged in the business of developing, constructing, owning, acquiring, altering, repairing, financing, operating, maintaining, publishing, distributing, promoting and otherwise exploiting cable television systems and related businesses, including, without limitation, telecommunications services, data transmission and telephony activities, provided that, in the case of any such acquisition: (A) immediately prior to, and after giving effect to, any such acquisition no Default shall have occurred and be continuing; and (B) if the assets so acquired consist of stock or other ownership interests of any Person which is to become either a Subsidiary of the Company or a New York/New Jersey Subsidiary, the Company and its Subsidiaries or the New York/New Jersey Companies, as the case may be, shall acquire in the aggregate not less than 80% of the issued and outstanding shares of all classes of stock, or other ownership interests, of such Person. The Company shall furnish to the Administrative Agent prior to any such acquisition (1) a certificate of an officer of the Company and, if applicable, the New York/New Jersey Obligors certifying compliance with the requirements of clauses (A) and (B) of this subparagraph (ii) and (2) a reasonably detailed description of such acquisition demonstrating compliance with all of the Company's and the Guarantors' covenants and agreements under this Agreement both before and after giving effect to such acquisition. Section 9.15 Investments. Neither the Company nor any of the Guarantors will make or permit to remain outstanding any advances, loans, accounts receivable (other than accounts receivable arising in the ordinary course of business of the Company or such Guarantor) or other extensions of credit (excluding, however, accrued and unpaid interest in respect of any advance, loan or other extension of credit) or capital contributions to (by means of transfers of property to others, or payments for property or services for the account or use of others, or otherwise), or purchase or own any stocks, bonds, notes, debentures or other securities (including, without limitation, any interests in any partnership, joint venture or joint adventure) of, or any bank accounts with, or Guarantee any Indebtedness or other obligations of, any Person (all such transactions being herein called "Investments"), except: 45 (i) bank accounts with, and banker's acceptances and certificates of deposit of, banks having a combined capital and surplus of at least $100,000,000; (ii) readily marketable securities issued or guaranteed by the United States Government and commercial paper rated P-1 by the National Credit Office of Moody's Investors Service Inc. or bearing a similar rating by another nationally recognized rating agency; (iii) Guarantees permitted by Section 9.11 hereof; (iv)(A) loans and advances by the Company or any of its Subsidiaries to CSC or any other Restricted Subsidiary and (B) loans and advances by any New York/New Jersey Company to any other New York/New Jersey Company; (v) Investments outstanding as of the date hereof to the extent set forth on Schedule 9.15 hereto; and (vi) other Investments made by the Company and the Guarantors after the Effective Date so long as, in the case of any Investment by the Company or any of its Subsidiaries in any Person other than a Subsidiary of the Company and in the case of any Investment by any New York/New Jersey Company in any Person other than the Company or any of its Subsidiaries or any New York/New Jersey Subsidiary, (A) no Default shall have occurred both before and after giving effect to each such Investment and (B) in the case of any such Investment or series of related Investments (other than Specified Investments) in an aggregate amount in excess of $50,000,000, the Company and the Guarantors shall have furnished to the Banks a reasonably detailed description of such Investment or series of Investments demonstrating compliance with all of the Company's and the Guarantors' covenants and agreements under this Agreement and under the New York/New Jersey Agreement both before and after giving effect to such Investment or series of Investments. Section 9.16 Restricted Payments. Neither the Company nor any Guarantor will, directly or indirectly, make any Restricted Payment. Section 9.17 Business. At any time when the Cash Flow Ratio exceeds 5.50 to 1, neither the Company and its Subsidiaries nor the New York/New Jersey Companies shall permit the portion of consolidated gross revenues of the Company and its Subsidiaries or the New York/New Jersey Companies, as the case may be, derived from the business of developing, constructing, owning, acquiring, altering, repairing, financing, operating, maintaining, publishing, distributing, promoting and otherwise exploiting cable television systems and related businesses, including, without limitation, telecommunications services, data transmission and telephony activities, for any Quarter to be less than 90% of the total consolidated gross revenues of the Company and its Subsidiaries or the New York/New Jersey Companies, as the case may be, for such Quarter. Section 9.18 Transactions with Affiliates. Neither the Company nor any Guarantor will effect any transaction with any of its Affiliates that is not a Restricted Subsidiary or a New York/New Jersey Company on a basis less favorable to the Company or such Guarantor than 46 would at the time be obtainable for a comparable transaction in arm's-length dealing with an unrelated third party. Section 9.19 Issuance of Stock. Neither the Company nor any of the New York/New Jersey Obligors will permit any of its Subsidiaries to issue any shares of stock or other ownership interests in such Subsidiary other than to, in the case of the Subsidiaries of the Company, the Company and its Subsidiaries or, in the case of the New York/New Jersey Subsidiaries, the New York/New Jersey Obligors. D. Financial Covenants: Section 9.20 Operating Cash Flow. (a) Operating Cash Flow to Total Interest Expense. The Company and the Guarantors will cause, for each Quarter, the ratio of Operating Cash Flow for the period of two Quarters ending with such Quarter to Total Interest Expense for such period of two Quarters ending with such Quarter to be at least the following respective amounts at any time during the following respective periods: Period Ratio ------ ----- from and including the Effective Date to and including the Quarter ended December 31, 1998 1.50 to 1 from and including January 1, 1999 to and including the Quarter ended December 31, 2000 1.75 to 1 on and after January 1, 2001 2.00 to 1 (b) Operating Cash Flow less Cash Taxes to Total Debt Expense. The Company and the Guarantors will cause, for each Quarter, the ratio of (i) Operating Cash Flow for the period of two Quarters ending with such Quarter less Cash Taxes paid during such period of two Quarters to (ii) Total Debt Expense for such period of two Quarters ending with such Quarter to be at least 1.20 to 1. Section 9.21 Cash Flow Ratio. The Company and the Guarantors will not permit the Cash Flow Ratio to exceed the following respective amounts at any time during the following respective periods: 47 Period Ratio ------ ----- from and including the Effective Date to and including December 31, 1999 6.50 to 1 from and including January 1, 2000 to and including September 30, 2000 6.25 to 1 from and including October 1, 2000 to and including June 30, 2001 6.00 to 1 from and including July 1, 2001 to and including December 31, 2001 5.75 to 1 from and including January 1, 2002 to and including June 30, 2002 5.50 to 1 from and including July 1, 2002 to and including December 31, 2002 5.25 to 1 on and after January 1, 2003 5.00 to 1. ARTICLE X DEFAULTS Section 10.01 Events of Default. If any one of the following "Events of Default" shall occur and be continuing, namely: (a) Any representation or warranty in this Agreement or in any certificate, statement or other document furnished to the Banks or the Administrative Agent under this Agreement (including, without limitation, any amendment to any of the foregoing), or any certification made or deemed to have been made by either Obligor or any Guarantor to any Bank hereunder, shall prove to have been incorrect, or shall be breached, in any material respect, when made or deemed made; or (b) Default in the payment when due of any principal on any Note, or default in the payment when due of interest on any Note or any other amount payable to any Bank or the Administrative Agent hereunder and the failure to pay such interest or other amount by 11:00 a.m. on the second next following Business Day; or (c) Default by the Company or any of the Guarantors in the performance or observance of any of its agreements in Article IX hereof (other than Sections 9.01, 9.02, 9.03, 9.04, 9.05, 9.06, 9.07 and 9.15 hereof but including Section 9.01(g) hereof); or (d) Default by the Company or any of the Guarantors in the performance or observance of any of its other agreements herein which shall remain unremedied for 30 days 48 after notice thereof shall have been given to the Company by any Bank (provided that such period shall be five days and no such notice shall be required in the case of a default under Section 9.01(e) or 9.15 hereof and provided further that such period shall be fifteen days and no such notice shall be required in the case of a default under Section 9.01(d) hereof); or (e) Any Indebtedness of the Company or any of the Guarantors in an aggregate principal amount of $2,500,000 or more, excluding any Indebtedness for the deferred purchase price of property or services owed to the Person providing such property or services as to which the Company or such Guarantor is contesting its obligation to pay the same in good faith and by proper proceedings and for which the Company or such Guarantor has established appropriate reserves (herein called "Excluded Indebtedness"), shall (i) become due before stated maturity by the acceleration of the maturity thereof by reason of default or (ii) become due by its terms and shall not be promptly paid or extended; or (f) Any default under any indenture, credit agreement or loan agreement or other agreement or instrument under which Indebtedness of the Company or any of the Guarantors constituting indebtedness for borrowed money in an aggregate principal amount of $500,000 or more is outstanding (other than Excluded Indebtedness), or by which any such Indebtedness is evidenced, shall have occurred and shall continue for a period of time sufficient to permit the holder or holders of any such Indebtedness (or a trustee or agent on its or their behalf) to accelerate the maturity thereof or to enforce any Lien provided for by any such indenture, agreement or instrument, as the case may be, unless such default shall have been permanently waived by the respective holder of such Indebtedness; or (g) The Company or any of the Guarantors shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (ii) admit in writing its inability, or be generally unable, to pay its debts as they become due, (iii) make a general assignment for the benefit of creditors, (iv) be adjudicated a bankrupt or insolvent, (v) commence a voluntary case under the Federal bankruptcy laws (as now or hereafter in effect), (vi) file a petition seeking to take advantage of any law relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, (vii) acquiesce in writing to, or fail to controvert in a timely and appropriate manner, any petition filed against the Company or any of the Guarantors in any involuntary case under such bankruptcy laws, or (viii) take any action for the purpose of effecting any of the foregoing; or (h) A case or other proceeding shall be commenced, without the application, approval or consent of the Company or any of the Guarantors in any court of competent jurisdiction, seeking the liquidation, reorganization, dissolution, winding up, or composition or readjustment or debts of the Company or any of the Guarantors the appointment of a trustee, receiver, custodian, liquidator or the like of the Company or any of the Guarantors or of all or any substantial part of its assets, or any other similar action with respect to the Company or any of the Guarantors under the laws of bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, and such case or proceeding shall continue undismissed, or unstayed and in effect, for any period of 30 consecutive days, or an order for relief against the 49 Company or any of the Guarantors shall be entered in an involuntary case under the Federal bankruptcy laws (as now or hereafter in effect); or (i) A judgment for the payment of money in excess of $250,000 shall be rendered against the Company or any of the Guarantors and such judgment shall remain unsatisfied and in effect for any period of 30 consecutive days without a stay of execution or (if a stay is not provided for by applicable law) without having been fully bonded; or (j) Any Franchise issued to the Company or any of the Guarantors shall be revoked or canceled or expire by its terms and not be renewed, or shall be modified in a manner adverse to the Company or any of the Guarantors utilizing such Franchise, if such action is likely to have a Materially Adverse Effect; or (k) (i) Any Termination Event shall occur; (ii) any Accumulated Funding Deficiency, whether or not waived, shall exist with respect to any Plan; (iii) any Person shall engage in any Prohibited Transaction involving any Plan; (iv) the Company, any Guarantor or any ERISA Affiliate is in "default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan resulting from the Company's, any Guarantor's or any ERISA Affiliate's complete or partial withdrawal (as described in Section 4203 or 4205 of ERISA) from such Plan; (v) the Company, any Guarantor or any ERISA Affiliate of any such Person shall fail to pay when due an amount which is payable by it to the PBGC or to a Plan under Title IV of ERISA and which, when aggregated with all other such amounts with respect to the payment of which the Company, the Guarantors and the ERISA Affiliates are at the time in default, exceeds $125,000; (vi) a proceeding shall be instituted by a fiduciary of any Plan against the Company, any Guarantor or any ERISA Affiliate to enforce Section 515 of ERISA and such proceeding shall not have been dismissed within 30 days thereafter; and by reason of any or all of such events described in clauses (i) through (vi) as applicable there shall or could result in actual or potential liability of the Company, any Guarantor and any ERISA Affiliate in excess of $125,000 in the aggregate; or (l) CSC shall either cease to own, either directly or indirectly, 100% of the common stock of the Company, or any Person other than CSC or a direct or indirect wholly-owned Subsidiary of CSC shall obtain the legal or contractual right to own, or to cause the transfer of the ownership of, any of the common stock of the Company, without regard to any required approval of any other Person; or (m) Any Event of Default under (and as defined in) the New York/New Jersey Agreement shall have occurred and be continuing; or (n) The New York/New Jersey Agreement (other than any provision thereof which by the terms thereof survives a termination thereof) shall cease to be in effect at any time and any of the New York/New Jersey Companies shall have failed to become a Subsidiary of the Company and a Restricted Subsidiary under (and as defined in) the CSC Agreement in accordance with Section 9.08 (b) thereof either at or before such time. THEREUPON, the Administrative Agent may (and, if directed by the Majority Banks, shall) by notice to the Company, terminate the Commitments of the Banks hereunder (if then outstanding) 50 and/or declare the unpaid principal of and accrued interest on the Notes, and all other amounts owing hereunder, to be forthwith due and payable, whereupon the same shall be and become forthwith due and payable, without presentment or demand for payment, notice of nonpayment, protest or further notice or demand of any kind, all of which are hereby expressly waived by the Company (provided that the Banks' Commitments hereunder shall forthwith terminate and the unpaid principal of and accrued interest on the Notes, and all other amounts owing hereunder, shall automatically become and be forthwith due and payable upon the occurrence of any event specified in clause (g) or (h) above without any such notice or other action, all of which are hereby expressly waived by the Company). ARTICLE XI THE ADMINISTRATIVE AGENT Section 11.01 Appointment, Powers and Immunities. Each Bank hereby irrevocably appoints and authorizes the Administrative Agent to act as its agent hereunder with such powers as are specifically delegated to the Administrative Agent by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. The Administrative Agent shall not have any duties or responsibilities except those expressly set forth in this Agreement and shall not by reason of this Agreement be a trustee for any Bank. The Administrative Agent shall not be responsible to any of the Banks for any recitals, statements, representations or warranties contained in this Agreement, or in any certificate or other document referred to or provided for in, or received by any of the Banks under, this Agreement, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other document referred to or provided for herein or for any failure by either Obligor to perform any of its obligations hereunder. The Administrative Agent may employ agents and attorneys-in-fact and shall not be responsible, except as to money or securities received by it or its authorized agents, for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. Neither the Administrative Agent nor any of its directors, officers, employees or agents shall be liable or responsible for any action taken or omitted to be taken by it or them hereunder or in connection herewith, except for its or their own gross negligence or willful misconduct. Section 11.02 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof received by telephone, telex, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by the Administrative Agent. As to any matters not expressly provided for by this Agreement, the Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder or thereunder in accordance with instructions signed by the Majority Banks, and such instructions of the Majority Banks and any action taken or failure to act pursuant thereto shall be binding on all of the Banks. Section 11.03 Defaults. The Administrative Agent shall not be deemed to have knowledge of the occurrence of a Default (other than the non-payment of principal of or interest on the Obligations) unless the Administrative Agent has received notice from a Bank or the 51 Company specifying such Default and stating that such notice is a "Notice of Default". In the event that the Administrative Agent receives such a notice of the occurrence of a Default, the Administrative Agent shall give prompt notice thereof to the Banks (and shall give each Bank prompt notice of each such non-payment). The Administrative Agent shall (subject to Section 11.07 hereof) take such action with respect to such Default as shall be reasonably directed by the Majority Banks, provided that, unless and until the Administrative Agent shall have received such directions, the Administrative Agent may take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interest of the Banks. Section 11.04 Rights as a Bank. With respect to its Commitment and the Loans made by it, the Administrative Agent in its capacity as a Bank hereunder shall have the same rights and powers hereunder as any other Bank and may exercise the same as though it were not acting as Administrative Agent, and the term "Bank" or "Banks" shall, unless the context otherwise indicates, include the Administrative Agent in its individual capacity. The Administrative Agent and its affiliates may (without having to account therefor to any Bank) accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with the Company, the Guarantors, CSC and any of their Affiliates as if it were not acting as Administrative Agent, and the Administrative Agent and its affiliates may accept fees and other consideration from the Company, the Guarantors and CSC for services in connection with this Agreement or otherwise without having to account for the same to the Banks. Section 11.05 Indemnification. The Banks agree to indemnify the Administrative Agent (to the extent not reimbursed under Section 12.03 hereof, but without limiting the obligations of the Company under said Section 12.03), ratably in accordance with the aggregate principal amount of the Obligations held by the Banks (or, if no Loans are at the time outstanding, ratably in accordance with their respective Commitments), for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of this Agreement or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby (including, without limitation, the costs and expenses which the Company is obligated to pay under Section 12.03 hereof but excluding, unless a Default has occurred and is continuing, normal administrative costs and expenses incident to the performance of its agency duties hereunder) or the enforcement of any of the terms hereof or of any such other documents, provided that no Bank shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Person to be indemnified. Section 11.06 Non-Reliance on Administrative Agent and Other Banks. Each Bank agrees that it has, independently and without reliance on the Administrative Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis of CSC, the Company and the Guarantors, and decision to enter into this Agreement and that it will, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or any other document contemplated by or referred to herein. The Administrative Agent shall not be required to keep itself informed as to the performance or observance by CSC, 52 the Company and the Guarantors of this Agreement or to inspect the properties or books of the Company and its Subsidiaries. Except for notices, reports and other documents and information expressly required to be furnished to the Banks by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the affairs, financial condition or business of CSC, the Company and the Guarantors (or any of their Affiliates) which may come into the possession of the Administrative Agent or any of its affiliates. Section 11.07 Failure to Act. Except for action expressly required of the Administrative Agent hereunder, the Administrative Agent shall in all cases be fully justified in failing or refusing to act hereunder unless it shall be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Section 11.08 Resignation or Removal of Administrative Agent. Subject to the appointment and acceptance of a successor Administrative Agent as provided below, the Administrative Agent may resign at any time by giving notice thereof to the Banks and the Obligors and the Administrative Agent may be removed at any time with or without cause by the Majority Banks. Upon any such resignation or removal, the Majority Banks shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Majority Banks and shall have accepted such appointment within 30 days after the retiring Administrative Agent's giving of notice of resignation or the Majority Banks' removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Banks, appoint a successor Administrative Agent, which shall be a bank organized or licensed under the laws of the United States of America or any State having an office (or an affiliate with an office) in New York, New York and a combined capital and surplus of at least $100,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After the retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article XI shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Administrative Agent. Section 11.09 Agency Fee. So long as the Commitments are outstanding and until payment in full of all Obligations hereunder, the Obligors will pay to the Administrative Agent such fees as may have been agreed to by the Company and the Administrative Agent. Such fees, once paid, shall be non-refundable. ARTICLE XII MISCELLANEOUS Section 12.01 No Waiver. No failure on the part of the Administrative Agent or any Bank to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or 53 partial exercise of any right, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. Section 12.02 Notices. All notices and other communications provided for herein shall be by telegraph, cable or in writing and telecopied, telegraphed, cabled, mailed or delivered to the intended recipient at the "Address for Notices" specified in Schedule 12.02 hereto or, as to any party, at such other address as shall be designated by such party in a notice to each other party. Except as otherwise provided in Section 2.02 hereof, all notices and other communications hereunder shall be deemed to have been duly given when transmitted by telecopier, delivered to the telegraph or cable office or personally delivered or, in the case of a mailed notice, four Business Days after the date deposited in the mails, airmail postage prepaid, in each case given or addressed as aforesaid. Section 12.03 Expenses, Etc. The Company or CSC shall pay or reimburse each of the Banks and the Administrative Agent for: (a) the reasonable fees and expenses of Winthrop, Stimson, Putnam & Roberts, special New York counsel to the Administrative Agent, in connection with (i) the negotiation, preparation, execution and delivery of this Agreement, the Notes and the other documents contemplated by or referred to herein and the making of the Loans hereunder and (ii) any amendment, modification or waiver of any of the terms of this Agreement, the Notes or any of such other documents; (b) all reasonable costs and expenses of the Banks and the Administrative Agent (including reasonable counsels' fees and expenses) in connection with the enforcement, protection, preservation or exercise of any of their rights under this Agreement, the Notes and the other documents contemplated by or referred to herein; and (c) all transfer, stamp, documentary or other similar taxes, assessments or charges levied by any governmental or revenue authority in respect of this Agreement, any of the Notes or any other document referred to herein. Each Obligor shall (to the fullest extent permitted by applicable law) indemnify the Administrative Agent, the Banks and each affiliate thereof and their respective directors, officers, employees and agents from, and hold each of them harmless against, any and all losses, liabilities, claims or damages to which any of them may become subject, insofar as such losses, liabilities, claims or damages arise out of or in any way relate to or result from any actual or proposed use by either Obligor of the proceeds of any Loan hereunder and/or the negotiation, execution, delivery or performance of this Agreement or the Notes or any Loan made or to be made hereunder or from any investigation, litigation or other proceeding (including any threatened investigation or proceeding) relating to the foregoing, and the Obligors shall reimburse the Administrative Agent and each Bank, and each affiliate thereof and their respective directors, officers, employees and agents, upon demand, for any expenses (including legal fees) incurred in connection with any such investigation or proceeding (but excluding any such losses, liabilities, claims, damages, or expenses to the extent, but only to the extent, caused by action taken which constitutes the gross negligence or willful misconduct of the Person to be indemnified). If and to the extent that the obligations of either Obligor under the preceding sentence may be unenforceable for any reason, such Obligor shall make the maximum contribution to the payment and satisfaction of each of the losses, liabilities, claims, damages and expenses referred to above as may be permitted by applicable law. Section 12.04 Amendments, Etc. No amendment or waiver of any provision of this Agreement or the Notes, nor any consent to any departure by either Obligor therefrom, shall in 54 any event be effective unless the same shall be agreed or consented to by the Majority Banks, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that no amendment, waiver or consent shall, unless in writing and signed by all the Banks, do any of the following: (a) increase the Commitment of any of the Banks, extend the Commitment Termination Date or any date on which the Commitments are scheduled to reduce hereunder, or subject the Banks to any additional obligations; (b) reduce the principal of, or interest on, or fees with respect to, the Obligations or the amount of any scheduled payments thereof; (c) postpone any date fixed for payment of principal of, or interest on, or fees with respect to, the Obligations or the Notes; (d) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Obligations, or the number of Banks which shall be required for the Banks or any of them to take any action under this Agreement; (e) change any provision contained in Section 2.03(b)(ii) (other than clause (F) of the proviso therein), Section 3.01(b)(iii), Section 4.05, Articles V, VI, VII, Section 12.03 or this Section 12.04; or (f) release or remove any Guarantor from its obligations hereunder other than any such release or removal resulting from a transaction permitted by Section 9.14 hereof. Section 12.05 Successors and Assigns. (a) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. (b) Neither Obligor and no Guarantor may sell or assign its respective rights or obligations hereunder or under the Notes without the prior consent of all of the Banks and the Administrative Agent. (c) At any time after the Effective Date, a Bank may sell a participation of all or part of its rights and obligations under such Bank's Commitment under this Agreement and the Notes to one or more commercial banks, investment companies or other financial institutions that enter into participations of the type contemplated by this Section 12.05 in the ordinary course of their business and that qualify as "accredited investors," as such term is defined in Regulation D of the Securities Act of 1933, as amended (each, a "participant"), such participant's rights against such Bank to be set forth in a participation agreement (a "Participation Agreement"); provided, however, that (i) such Bank shall submit in writing to the Company and to the Administrative Agent a request that each of the Company and the Administrative Agent consent to the choice of such participant, (ii) the Company and the Administrative Agent shall consent in writing to the choice of such participant prior to the time of effectiveness of such participation, such consent not to be unreasonably withheld or delayed, (iii) such participation, when added to the contemporaneous participations made by such Bank under the CSC Agreement and, if then in effect, the New York/New Jersey Agreement, must be in an amount not less than $10,000,000 (iv) such participation shall be sold pro rata between such Bank's Commitment, such Bank's CSC Commitment and, if the New York/New Jersey Agreement is then in effect, such Bank's New York/New Jersey Commitment based on the relationship of each such Commitment to such Bank's Aggregate Commitment and (v) in the event such Bank was party to this Agreement on the Effective Date, after giving effect to such participation, such Bank's Aggregate Commitment not so participated if any shall be at least $10,000,000. All amounts payable by the Obligors to any Bank under Article V hereof shall be determined as if such Bank had not sold any such participations and as if such Bank were funding all of its Commitments and Loans in the same way that it is funding the Commitments and Loans in which no participations have been sold. In 55 no event shall a Bank that sells a participation be obligated to the participant under its Participation Agreement to refrain from taking any action hereunder or under such Bank's Note except that such Bank may agree in such Participation Agreement that it will not, without the consent of such participant, agree to (A) extend the Commitment Termination Date or any date on which any Commitments are scheduled to reduce hereunder, (B) reduce the principal of, or interest on, the Obligations or under the Notes or any Commitment Fee, (C) postpone any date fixed for payment of the principal of, or interest on, the Obligations or under the Notes, (D) consent to any release of all or a significant portion of any collateral for the Obligations or (E) change any provision in Article VI hereof. Any Bank selling a participation hereunder shall promptly notify the Company of the effectiveness thereof. (d) At any time after the Effective Date, a Bank may assign part of its rights and obligations under such Bank's Commitment under this Agreement and the Notes to one or more commercial banks or other financial institutions (each, an "assignee") pursuant to an Assignment and Acceptance; provided, that (i) such Bank shall submit in writing to the Company and the Administrative Agent a request that each of the Company and the Administrative Agent consent to the choice of such assignee, (ii) the Company and the Administrative Agent shall consent in writing to the choice of such assignee prior to the time of effectiveness of such assignment, such consent not to be unreasonably withheld or delayed, (iii) such assignment, when added to the contemporaneous assignments made by such Bank under the CSC Agreement and, if then in effect, the New York/New Jersey Agreement, must be in an aggregate amount not less than $10,000,000, (iv) such assignment shall be made pro rata between such Bank's Commitment, such Bank's CSC Commitment and, if the New York/New Jersey Agreement is then in effect, such Bank's New York/New Jersey Commitment based on the relationship of each such Commitment to such Bank's Aggregate Commitment, (v) the parties to each assignment shall execute and deliver to the Administrative Agent, for its approval, acceptance and recording in the books and records maintained pursuant to Section 12.05(f) hereof an Assignment and Acceptance, together with a processing and recordation fee of, when added to the processing and recordation fee under the contemporaneous assignments under the CSC Agreement and, if then in effect, the New York/New Jersey Agreement, $3,500 and (vi) in the event such Bank was party to this Agreement on the Effective Date, after giving effect to such assignment, such Bank's Aggregate Commitment shall be at least $10,000,000. Upon such execution, delivery, approval, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto, and to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Bank hereunder and under the Notes and (y) the Bank assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations hereunder and under the Notes. Any Bank making an assignment hereunder shall promptly notify the Company of the effectiveness thereof. In the event of any such assignment, the Obligors shall, against receipt of the existing Note of the Bank assignor, issue a new Note to the Bank assignee and, in the case of a partial assignment, to such Bank assignor, in either case appropriately reflecting such assignment. (e) By executing and delivering an Assignment and Acceptance, the Bank assignor hereunder and the assignee thereunder shall confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such 56 assigning Bank makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such assigning Bank makes no representation or warranty with respect to the financial condition of either Obligor or the performance or observance by either Obligor of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Sections 8.04 and 9.01 hereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Administrative Agent, such assigning Bank or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto; and (vi) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Bank. (f) The Administrative Agent shall maintain books and records in which shall be recorded (i) the names and addresses of the Banks and the Commitments of, and principal amount of Obligations owing to, each Bank from time to time; (ii) all other appropriate debits and credits as provided in this Agreement, including, without limitation, all interest, fees (including attorneys' fees and disbursements to the extent reimbursable hereunder), expenses, charges and other Obligations; and (iii) all payments of Obligations made by the Obligors or for the Obligors' account. All entries in such books and records shall be made in accordance with the Administrative Agent's customary accounting practices as in effect from time to time. The Administrative Agent will render a quarterly statement to the Obligors detailing all relevant transactions for billing purposes. Each and every such statement shall be deemed final, binding and conclusive upon the Company in all respects as to all matters reflected therein (absent manifest error), unless the Company, within 15 days after the date such statement is rendered, delivers to the Administrative Agent written notice of any objections which the Company may have to such statement. In that event, only those items expressly objected to in such notice shall be deemed to be disputed by the Company. Notwithstanding the foregoing, the Administrative Agent's entries in the books and records evidencing Loans and other financial accommodations made from time to time shall be final, binding and conclusive upon the Company (absent manifest error) as to the existence and amount of the Obligations recorded in such books and records. (g) The Administrative Agent shall maintain at the applicable address for notices as determined in accordance with Section 12.02 hereof a copy of each Assignment and Acceptance delivered to and accepted by it and shall record in such books and records the names and addresses of each Bank and the Commitment of, and principal amount of the Loans owing to, such Bank from time to time. The Obligors, the Guarantors, the Administrative Agent and the 57 Banks may treat each Person whose name is so recorded as a Bank hereunder for all purposes of this Agreement. (h) If any Bank (or, if such Bank has participated in any part of its Loans or Commitment, any of such Bank's participants) does not agree with a proposal of the Company for an amendment, waiver or consent in respect of an issue described in the penultimate sentence of 12.05(c) hereof, the Obligors may require that such Bank (and each of its participants, if any) transfer all of its right, title and interest under this Agreement, under the CSC Agreement and, if then in effect, the New York/New Jersey Agreement and such Bank's Note issued hereunder, its note issued under the CSC Agreement and its note issued under the New York/New Jersey Agreement to any Person (a "Proposed Bank") identified by the Obligors who agrees to assume the obligations of such Bank and the CSC Loans and New York/New Jersey Loans for a consideration equal to the outstanding principal amount of such Bank's Loans, together with interest thereon to the date of such transfer and all other amounts payable hereunder, under the CSC Agreement and, if then in effect, the New York/New Jersey Agreement to such Bank on or prior to the date of such transfer (including any fees accrued hereunder and any amounts which would be payable under Section 5.05 hereof (or the equivalent provisions of the CSC Agreement and, if then in effect, the New York/New Jersey Agreement) as if all of such Bank's Loans, CSC Loans and New York/New Jersey Loans were being prepaid in full on such date). Subject to the execution and delivery of such instruments and agreements relating to such transfer as the Banks (including the Proposed Bank and such Bank) shall request, such Proposed Bank shall be a "Bank" for all purposes hereunder. (i) A Bank may furnish any information concerning the Company , any of the Guarantors or CSC in the possession of such Bank from time to time to assignees and participants (including prospective assignees and participants). (j) Notwithstanding anything in the foregoing to the contrary, (x) each Bank may, without complying with any restrictions set forth in this Section 12.05, sell a participation or assign all or any part of its rights and obligations under such Bank's Commitment under this Agreement and Notes to any affiliate of such Bank, provided that the Company shall consent to the choice of such affiliate, such consent not to be unreasonably withheld or delayed, and provided, however, that any participation or assignment made by such affiliate to a non-affiliate must be effected contemporaneously with its other affiliates such that the non-affiliate participant or assignee holds pro rata amounts of the Commitment, the CSC Commitment and, if the New York/New Jersey Agreement is then in effect, the New York/New Jersey Commitment as if such participation or assignment had been made by such Bank; and (y) each Bank may at any time, without complying with any restrictions set forth in Section 12.05, assign all or any portion of its rights under this Agreement and its Note to a Federal Reserve Bank, provided that such assignment shall not release the Bank assignor from its obligations under this Agreement. Section 12.06 Survival. The obligations of the Company under Sections 5.01, 5.05 and 12.03 hereof shall survive the repayment of the Loans. Section 12.07 Senior Indebtedness. The Obligations (including, without limitation, the obligations of the Obligors and the Guarantors to pay, when due (whether at stated maturity, by acceleration or otherwise), the principal of and interest on the Loans to be made by the Banks to 58 the Obligors pursuant to Section 2.01 hereof and the obligations of the Company and its Subsidiaries with respect to Interest Swap Agreements shall constitute "Senior Indebtedness" or "Senior Debt" as such terms are defined in all documents to which CSC or any Restricted Subsidiary is a party. Section 12.08 Conditions to Effectiveness. This Agreement shall become effective on the first day (the "Effective Date") on which (i) this Agreement shall have been duly executed by the parties hereto and thereto and (ii) the conditions precedent to the initial Loan under Article VII hereof shall have been satisfied, at which time the 1996 Agreement shall be amended and restated by this Agreement. If no Effective Date shall occur, the 1996 Agreement shall remain in full force and effect. Section 12.09 Liability of General Partners and Other Persons. No general partner of any Subsidiary of the Company which is a partnership, joint venture or joint adventure shall have any personal liability in respect of such Subsidiary's obligation under this Agreement or the Notes by reason of his, her or its status as such general partner. In addition, no limited partner, officer, employee, director, stockholder or other holder of an ownership interest of or in CSC, the Company or any of the Guarantors or any partnership, corporation or other entity which is a stockholder or other holder of an ownership interest of or in the Company, any of the Guarantors or CSC shall have any personal liability in respect of such obligations by reason of his, her or its status as such limited partner, officer, employee, director, stockholder or holder. Section 12.10 Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Agreement by signing any such counterpart. Section 12.11 Waiver. THE COMPANY, THE GUARANTORS, CSC, THE ADMINISTRATIVE AGENT AND THE BANKS HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH ANY OF THEM IS A PARTY INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, THE NOTES OR THE RELATIONSHIP ESTABLISHED HEREUNDER. Section 12.12 Entire Agreement. This Agreement and the Notes embody the entire agreement among the Obligors, the Guarantors and the Banks and supersede all prior agreements, representations and understandings, if any, relating to the subject matter hereof and thereof. Section 12.13 Governing Law. This Agreement and the Notes shall be governed by, and construed in accordance with, the law of the State of New York. Section 12.14 Captions, Etc. Captions, section headings and the table of contents appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement. Section 12.15 Waiver of Certain Defenses. The obligations of each Obligor to pay amounts hereunder and under the Notes in accordance with the terms hereof and thereof shall 59 survive irrespective of the validity and enforceability of this Agreement or the Notes against, or the obligations of, the other Obligor hereunder or thereunder and any other circumstance that might otherwise affect the liability of such other Obligor. The obligations of each Obligor under this Agreement shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the other Obligor is rescinded or must be otherwise restored by any holder of the obligations guaranteed hereunder whether as a result of any proceedings in bankruptcy or reorganization or otherwise and the Obligors agree that they will indemnify the Banks and the Administrative Agent on demand for reasonable costs and expenses (including, without limitation, fees of counsel) incurred by the Banks or the Administrative Agent in connection with such rescission or restoration. Section 12.16 Release; Acceptance of Release. (a) Release. (i) Each Obligor hereby releases the other Obligor from all, and agrees not to assert or enforce (whether by or in a legal or equitable proceeding or otherwise), any "claims" (as defined in Section 101(5) of the Bankruptcy Code), whether arising under applicable law or otherwise, to which such Obligor is or would at any time be entitled by virtue of its obligations under the Notes or this Agreement or any payment made pursuant hereto, including any such claims to which such Obligor may be entitled as a result of any right of subrogation, exoneration or reimbursement. (ii) To the extent not released by the Obligors under Section 12.16(a)(i), each Obligor agrees that it shall not be entitled to any rights of subrogation, exoneration, reimbursement and contribution in respect of any obligations hereunder until payment in full of all of the Obligations. (b) Acceptance of Release. (i) Each of the Company and CSC hereby accepts the releases effected by Section 12.16(a) hereof and agrees not to restore or attempt to restore any of the rights thereby released. (ii) The Obligors hereby accept the release effected by Article VI and agree not to restore or attempt to restore any of the rights thereby released. Section 12.17 Authorization of Third Parties to Deliver Information and Discuss Affairs. Each of the Obligors hereby confirms that it has authorized and directed each Person whose preparation or delivery to the Administrative Agent or the Banks of any opinion, report or other information is a condition or covenant under this Agreement (including under Article VII and Article VIII) to so prepare or deliver such opinions, reports or other information for the benefit of the Administrative Agent and the Banks. The Obligors agree to confirm such authorizations and directions provided for in this Section 12.17 from time to time as may be requested by the Administrative Agent. Section 12.18 Termination of 1996 Agreement and 1996 Pledge Agreement and Release of Security Interests. The 1996 Agreement and the 1996 Pledge Agreement are hereby terminated, and the security interests created by the 1996 Pledge Agreement are hereby released in full. Promptly after the Effective Date, the 1996 Security Agent shall return to the Company all Collateral (as defined in the 1996 Pledge Agreement) in its possession. The 1996 Security Agent and each of the Banks (in its capacity as a 1996 Bank) hereby further agree to execute such further instruments and documents (including UCC termination statements) as the 60 Company shall reasonably request to evidence or give effect to the termination and release effected hereby. Section 12.19 CSC Agreement. Notwithstanding any termination of the CSC Agreement, CSC shall at all times comply with the terms of Section 9.25 thereof; provided that, after any termination of the CSC Agreement, the term "Majority Banks" in such section shall have the meaning ascribed to such term in this Agreement. Section 12.20 Acknowledgement. The Obligors hereby acknowledge that neither the Administrative Agent nor any Bank has any fiduciary relationship with or fiduciary duty to the Obligors arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Administrative Agent and the Banks, on the one hand, and each of the Obligors, on the other hand, in connection herewith and therewith is solely that of debtor and creditor. 61 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. OBLIGORS CABLEVISION MFR, INC. CSC HOLDINGS, INC. By --------------------------------------------- Name: Title: of each of the above-named two corporations GUARANTORS CABLEVISION OF MONMOUTH, INC. CABLEVISION OF HUDSON COUNTY, INC. CABLEVISION OF NEW JERSEY, INC., for itself and as a General Partner of Cablevision of Newark CSC GATEWAY CORPORATION, for itself and as a General Partner of Cablevision of Newark CSC TKR, INC., for itself and as General Partner of KRC/CCC Investment Partnership CABLEVISION OF BROOKHAVEN, INC. CABLEVISION OF OAKLAND, INC. CABLEVISION OF PATERSON, INC. CSC TKR I, INC. UA-COLUMBIA CABLEVISION OF WESTCHESTER, INC. First Amended and Restated Credit Agreement for Cablevision MFR, Inc. CABLEVISION OF ROCKLAND/RAMAPO, INC. CABLEVISION OF WARWICK, INC. By --------------------------------------------- Name: Title: of each of the above-named twelve corporations CABLEVISION OF NEWARK By Cablevision of New Jersey, Inc., as a General Partner By CSC Gateway Corporation, as a General Partner KRC/CCC INVESTMENT PARTNERSHIP By CSC TKR, Inc., as General Partner First Amended and Restated Credit Agreement for Cablevision MFR, Inc. Commitment $112,500,000 TORONTO DOMINION (TEXAS), INC., as Arranging Agent, Administrative Agent and Bank By ----------------------------------------- Name: Title: THE BANK OF NEW YORK, as Managing Agent and Co-Syndication Agent By ----------------------------------------- Name: Title: $87,500,000 THE BANK OF NEW YORK COMPANY, INC., as Bank By ----------------------------------------- Name: Title: $87,500,000 THE BANK OF NOVA SCOTIA, as Bank, Managing Agent and Co-Syndication Agent By ----------------------------------------- Name: Title: $87,500,000 THE CANADIAN IMPERIAL BANK OF COMMERCE, as Bank and Managing Agent By ----------------------------------------- Name: Title: First Amended and Restated Credit Agreement for Cablevision MFR, Inc. Commitment $87,500,000 NATIONSBANK, N.A., as Bank and Managing Agent By ----------------------------------------- Name: Title: $87,500,000 THE CHASE MANHATTAN BANK, as Bank and Managing Agent By ----------------------------------------- Name: Title: $70,000,000 BANK OF MONTREAL, CHICAGO BRANCH, as Bank and Agent By ----------------------------------------- Name: Title: $70,000,000 BARCLAYS BANK PLC, as Bank and Agent By ----------------------------------------- Name: Title: $70,000,000 FLEET BANK, N.A., as Bank and Agent By ----------------------------------------- Name: Title: First Amended and Restated Credit Agreement for Cablevision MFR, Inc. Commitment $70,000,000 ROYAL BANK OF CANADA, as Bank and Agent By ----------------------------------------- Name: Title: $57,500,000 MELLON BANK, N.A., as Bank and Co-Agent By ----------------------------------------- Name: Title: $50,000,000 BANKBOSTON, N.A., as Bank and Co-Agent By ----------------------------------------- Name: Title: $50,000,000 BANQUE PARIBAS, as Bank and Co-Agent By ----------------------------------------- Name: Title: By ----------------------------------------- Name: Title: First Amended and Restated Credit Agreement for Cablevision MFR, Inc. Commitment $50,000,000 CREDIT LYONNAIS, as Bank and Co-Agent By ----------------------------------------- Name: Title: $50,000,000 THE FIRST NATIONAL BANK OF CHICAGO, as Bank and Co-Agent By ----------------------------------------- Name: Title: $50,000,000 SOCIETE GENERALE, NEW YORK BRANCH, as Bank and Co-Agent By ----------------------------------------- Name: Title: $37,500,000 FIRST UNION NATIONAL BANK By ----------------------------------------- Name: Title: $37,500,000 PNC BANK, NATIONAL ASSOCIATION By ----------------------------------------- Name: Title: First Amended and Restated Credit Agreement for Cablevision MFR, Inc. Commitment $25,000,000 ABN AMRO BANK N.V. By ----------------------------------------- Name: Title: $25,000,000 COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE By ----------------------------------------- Name: Title: By ----------------------------------------- Name: Title: $25,000,000 UNION BANK OF CALIFORNIA, N.A. By ----------------------------------------- Name: Title: $12,500,000 BANK OF HAWAII By ----------------------------------------- Name: Title: First Amended and Restated Credit Agreement for Cablevision MFR, Inc. Commitment $12,500,000 NATEXIS BANQUE BFCE By ----------------------------------------- Name: Title: $12,500,000 THE DAI-ICHI KANGYO BANK, LTD. By ----------------------------------------- Name: Title: $12,500,000 DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES By ----------------------------------------- Name: Title: By ----------------------------------------- Name: Title: $12,500,000 THE FUJI BANK LIMITED, NEW YORK BRANCH By ----------------------------------------- Name: Title: $12,500,000 GENERAL ELECTRIC CAPITAL CORPORATION By ----------------------------------------- Name: Title: First Amended and Restated Credit Agreement for Cablevision MFR, Inc. Commitment $12,500,000 THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED By ----------------------------------------- Name: Title: $12,500,000 THE SUMITOMO BANK, LIMITED By ----------------------------------------- Name: Title: By ----------------------------------------- Name: Title: $12,500,000 SUMMIT BANK By ----------------------------------------- Name: Title: - - ----------------- $1,400,000,000.00 EX-10.49 5 FIRST AMENDED AND RESTATED CREDIT AGREEMENT EXECUTION COPY CSC TKR, INC. CABLEVISION OF BROOKHAVEN, INC. CABLEVISION OF OAKLAND, INC. CABLEVISION OF PATERSON, INC. CSC TKR I, INC. UA-COLUMBIA CABLEVISION OF WESTCHESTER, INC. ---------- $800,000,000 FIRST AMENDED AND RESTATED CREDIT AGREEMENT Dated as of May 28, 1998 TORONTO DOMINION (TEXAS), INC. as Arranging Agent and as Administrative Agent THE BANK OF NEW YORK THE BANK OF NOVA SCOTIA THE CANADIAN IMPERIAL BANK OF COMMERCE NATIONSBANK, N.A. THE CHASE MANHATTAN BANK as Managing Agents BANK OF MONTREAL, CHICAGO BRANCH BARCLAYS BANK PLC FLEET BANK, N.A. ROYAL BANK OF CANADA as Agents BANQUE PARIBAS CREDIT LYONNAIS BANKBOSTON, N.A. THE FIRST NATIONAL BANK OF CHICAGO MELLON BANK, N.A. SOCIETE GENERALE, NEW YORK BRANCH as Co-Agents TABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND ACCOUNTING MATTERS Section 1.01 Certain Defined Terms.......................................1 Section 1.02 Accounting Terms and Determinations........................11 ARTICLE II LOANS Section 2.01 Loans......................................................12 Section 2.02 Manner of Borrowing; Conversion and Continuation...........12 Section 2.03 Reductions and Changes of Commitments......................14 Section 2.04 Commitment Fee.............................................15 Section 2.05 Notes......................................................15 Section 2.06 Lending Offices............................................15 Section 2.07 Several Obligations; Remedies Independent..................15 Section 2.08 Use of Proceeds............................................15 ARTICLE III PAYMENTS OF PRINCIPAL AND INTEREST Section 3.01 Prepayments................................................16 Section 3.02 Repayment of Loans.........................................16 Section 3.03 Interest...................................................16 i ARTICLE IV PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC. Section 4.01 Payments...................................................17 Section 4.02 Pro Rata Treatment.........................................17 Section 4.03 Computations...............................................18 Section 4.04 Non-Receipt of Funds by the Administrative Agent...........18 Section 4.05 Sharing of Payments, Etc...................................18 Section 4.06 No Reductions..............................................19 Section 4.07 Taxes......................................................19 ARTICLE V YIELD PROTECTION AND ILLEGALITY Section 5.01 Additional Costs in Respect of Loans.......................20 Section 5.02 Limitation on Types of Loans...............................22 Section 5.03 Illegality.................................................22 Section 5.04 Certain Conversions of Loans Pursuant to Section 5.01 or 5.03..................................................22 Section 5.05 Compensation...............................................23 Section 5.06 Replacement of Banks.......................................23 ARTICLE VI GUARANTEE................................24 ARTICLE VII CONDITIONS PRECEDENT Section 7.01 Initial Loan...............................................25 Section 7.02 Each Loan..................................................27 ii ARTICLE VIII REPRESENTATIONS Section 8.01 Existence and Power........................................28 Section 8.02 Subsidiaries...............................................28 Section 8.03 Authority; No Conflict.....................................28 Section 8.04 Regulation U...............................................28 Section 8.05 Approval of Regulatory Authorities.........................28 Section 8.06 Binding Agreements.........................................29 ARTICLE IX PARTICULAR COVENANTS OF THE OBLIGORS AND THEIR SUBSIDIARIES.......29 ARTICLE X DEFAULTS Section 10.01 Events of Default..........................................29 ARTICLE XI THE ADMINISTRATIVE AGENT Section 11.01 Appointment, Powers and Immunities.........................31 Section 11.02 Reliance by Administrative Agent...........................31 Section 11.03 Defaults...................................................32 Section 11.04 Rights as a Bank...........................................32 Section 11.05 Indemnification............................................32 Section 11.06 Non-Reliance on Administrative Agent and Other Banks.......33 Section 11.07 Failure to Act.............................................33 Section 11.08 Resignation or Removal of Administrative Agent.............33 Section 11.09 Agency Fee.................................................34 iii ARTICLE XII MISCELLANEOUS Section 12.01 No Waiver..................................................34 Section 12.02 Notices....................................................34 Section 12.03 Expenses, Etc..............................................34 Section 12.04 Amendments, Etc............................................35 Section 12.05 Successors and Assigns.....................................35 Section 12.06 Survival...................................................39 Section 12.07 Conditions to Effectiveness................................39 Section 12.08 Liability of General Partners and Other Persons............39 Section 12.09 Counterparts...............................................39 Section 12.10 Waiver.....................................................39 Section 12.11 Entire Agreement...........................................39 Section 12.12 Governing Law..............................................39 Section 12.13 Captions, Etc..............................................39 Section 12.14 Waiver of Certain Defenses.................................39 Section 12.15 Release; Acceptance of Release.............................40 Section 12.16 Authorization of Third Parties to Deliver Information and Discuss Affairs......................................40 Section 12.17 Termination of Existing Credit Agreement...................40 Section 12.18 Joint and Several Obligations..............................40 Section 12.19 Acknowledgement............................................41 iv Schedule 2.02(a)(i) Form of Notice of Loan Schedule 2.02(c) Form of Notice of Conversion and Continuation Schedule 2.06 Applicable Lending Offices Schedule 4.07(c) Form of Certificate of Non-US Bank Schedule 8.02 Subsidiaries Schedule 8.03 Required Consents and Governmental Approvals Schedule 12.02 Addresses for Notices EXHIBIT A Form of Note EXHIBIT B Form of Opinion of General Counsel to the Obligors EXHIBIT C(1) Form of Opinion of Special New York Counsel to the Obligors EXHIBIT C(2)) Form of Opinion of Special New Jersey Counsel to the Obligors EXHIBIT C(3) Form of Opinion of Special FCC Counsel Counsel to the Obligors EXHIBIT D Form of Opinion of Special New York Counsel to the Administrative Agent EXHIBIT E Form of Assignment and Acceptance FIRST AMENDED AND RESTATED CREDIT AGREEMENT dated as of May 28, 1998 among CSC TKR, INC., CABLEVISION OF BROOKHAVEN, INC., CABLEVISION OF OAKLAND, INC., CABLEVISION OF PATERSON, INC., CSC TKR I, INC., each a Delaware corporation, and UA-COLUMBIA CABLEVISION OF WESTCHESTER INC., a New York corporation (collectively, the "Obligors"; individually, each an "Obligor"), the Guarantors (as defined below) which are parties hereto, the lenders which are parties hereto, together with their respective successors and assigns (the "Banks"), TORONTO DOMINION (TEXAS), INC., as Arranging Agent and as Administrative Agent, and THE BANK OF NEW YORK, THE BANK OF NOVA SCOTIA, THE CANADIAN IMPERIAL BANK OF COMMERCE, NATIONSBANK, N.A. and THE CHASE MANHATTAN BANK, as Managing Agents, BANK OF MONTREAL, CHICAGO BRANCH, BARCLAYS BANK, PLC, FLEET BANK, N.A., and ROYAL BANK OF CANADA, as Agents, and BANQUE PARIBAS, CREDIT LYONNAIS, BANKBOSTON, N.A., THE FIRST NATIONAL BANK OF CHICAGO, MELLON BANK, N.A. AND SOCIETE GENERALE, NEW YORK BRANCH, as Co-Agents. WHEREAS, on March 4, 1998, the Obligors, the Guarantors named therein, the several banks whose names are set forth on the signature pages thereto, and Toronto Dominion (Texas), Inc. as Arranging Agent and Administrative Agent, and The Bank of New York, The Bank of Nova Scotia, The Canadian Imperial Bank of Commerce, NationsBank of Texas, N.A. and The Chase Manhattan Bank, as Managing Agents, entered into a Credit Agreement (such Credit Agreement being referred to herein as the "Existing Credit Agreement"); WHEREAS, the Obligors are engaged in the business of developing, constructing, owning, acquiring, altering, repairing, financing, operating, maintaining, publishing, distributing, promoting and otherwise exploiting cable television systems and related businesses, including, without limitation, telecommunications services, data transmission and telephony activities; and WHEREAS, the Existing Loan Banks have extended credit to the Obligors, by the making of the Existing Loans to the Obligors; the proceeds of the Loans hereunder are to be employed in accordance with Section 2.08 hereof, including to repay the Existing Loans and all other amounts owing by the Obligors under the Existing Credit Agreement; and each of the Obligors and their Subsidiaries expects to derive benefit, directly or indirectly, from such loans. The Banks have agreed to make the Loans provided for hereby in reliance upon certain guarantees furnished by the Guarantors. NOW, THEREFORE, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING MATTERS Section 1.01 Certain Defined Terms. As used herein, the following terms shall have the following meanings (all terms defined in this Article I or in other provisions of this Agreement in the singular to have the same meanings when used in the plural and vice versa): "Additional Costs" shall have the meaning given to such term in Section 5.01 hereof. "Administrative Agent" shall mean Toronto Dominion (Texas), Inc. in its capacity as administrative agent for the Banks hereunder and its successors in such capacity. "Affected Loans" shall have the meaning given to such term in Section 5.04 hereof. "Affected Type" shall have the meaning given to such term in Section 5.04 hereof. "Affiliate" shall mean, as to any Person, any other Person which directly or indirectly controls, or is under common control with, or is controlled by, such Person. As used in this definition, "control" (including, with its correlative meanings, "controlled by" and "under common control with") shall mean possession, directly or indirectly, of the power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise), provided that, in any event, any Person which owns directly or indirectly 10% or more of the securities having ordinary voting power for the election of directors or other governing body of a corporation or 10% or more of the partnership or other ownership interests of any other Person (other than as a limited partner of such other Person) will be deemed to control such corporation or other Person; and provided further that no individual shall be an Affiliate of a corporation or partnership solely by reason of his or her being an officer, director or partner of such entity, except in the case of a partner if his or her interests in such partnership shall qualify him or her as an Affiliate. "Aggregate Commitment" shall mean, at any time, as to each Bank, the sum of such Bank's Commitment, CSC Commitment and CMFRI Commitment at such time. "Agreement" shall mean this First Amended and Restated Credit Agreement, including all schedules and exhibits hereto, as the same may be amended, supplemented or modified from time to time. "Applicable Lending Office" shall mean, with respect to each Bank, for each type of Loan, the lending office of such Bank (or of an affiliate of such Bank) designated for such type of Loan in Schedule 2.06 hereto or such other office of such Bank (or of an affiliate of such Bank) as such Bank may from time to time specify to the Administrative Agent and the Obligors' Representative as the office by which its Loans of such type are to be made and maintained. "Applicable Margin" (a) With respect to Base Rate Loans, 0.250% at all times during any Applicable Period if the CSC Cash Flow Ratio as at the end of the immediately preceding Quarter was greater than 6.00 to 1; .125% at all times during any Applicable Period if the 2 CSC Cash Flow Ratio as at the end of the immediately preceding Quarter was less than or equal to 6.00 to 1 and greater than 5.50 to 1; and 0.000% at all times during any Applicable Period if the CSC Cash Flow Ratio as at the end of the immediately preceding Quarter was less than or equal to 5.50 to 1; and (b) With respect to Eurodollar Loans, 1.125% at all times during any Applicable Period if the CSC Cash Flow Ratio as at the end of the immediately preceding Quarter was greater than 6.00 to 1; 0.875% at all times during any Applicable Period if the CSC Cash Flow Ratio as at the end of the immediately preceding Quarter was less than or equal to 6.00 to 1 and greater than 5.50 to 1; 0.750% at all times during any Applicable Period if the CSC Cash Flow Ratio as at the end of the immediately preceding Quarter was less than or equal to 5.50 to 1 and greater than 5.00 to 1; 0.600% at all times during any Applicable Period if the CSC Cash Flow Ratio as at the end of the immediately preceding Quarter was less than or equal to 5.00 to 1 and greater than 4.50 to 1; and 0.400% at all times during any Applicable Period if the CSC Cash Flow Ratio as at the end of the immediately preceding Quarter was less than or equal to 4.50 to 1;. For purposes of this definition, the CSC Cash Flow Ratio as at the end of any Quarter (the "Subject Quarter") shall be determined based upon (i) for the Quarter ended immediately prior to the Effective Date, the Compliance Certificate delivered in accordance with Section 7.01 of the CSC Credit Agreement, and (ii) for each Subject Quarter commencing thereafter, (x) the Annualized Operating Cash Flow (as defined in the CSC Agreement) as set forth in the Subscribers' Certificate (as defined in the CSC Credit Agreement) delivered pursuant to Section 9.01(e) of the CSC Credit Agreement with respect to the second month of such Subject Quarter and (y) the aggregate outstanding principal amount of Indebtedness of CSC, the Restricted Subsidiaries and the New York/New Jersey Companies (as calculated in accordance with the definition of CSC Cash Flow Ratio) as of the last day of such Subject Quarter (as certified by CMFRI and the New York/New Jersey Obligors to the Administrative Agent at the time of the delivery of such Subscribers' Certificate). As used in this definition, "Applicable Period" shall mean the period from and including (i)(a) in the case of the first Applicable Period, the Effective Date and (b) in the case of each subsequent Applicable Period, the first day after the immediately preceding Applicable Period to but excluding (ii) the fifth Business Day of the next July, October, January or April (whichever occurs first) to occur thereafter. "Assignment and Acceptance" shall have the meaning given to such term in Section 5.06 hereof. "Banks" shall have the meaning given to such term in the preamble to this Agreement. "Base Rate" shall mean, for any period, a fluctuating interest rate per annum as shall be in effect from time to time, which rate per annum shall at all times be equal to the higher of: (a) the rate of interest adopted by The Toronto-Dominion Bank (New York Branch), from time to time, as its reference rate for the determination of interest rates on loans of varying maturities in Dollars to United States residents of varying degrees of creditworthiness 3 and being quoted at such time by The Toronto-Dominion Bank (New York Branch) as its "prime rate," which rate is not necessarily The Toronto-Dominion Bank's lowest rate of interest; and (b) the sum (adjusted to the nearest one-quarter of one percent (1/4 of 1%) or, if there is no nearest one-quarter of one percent (1/4 of 1%), to the next higher one-quarter of one percent (1/4 of 1%)) of (i) one-half of one percent (1/2 of 1%) per annum plus (ii) the Federal Funds Rate. "Base Rate Loans" shall mean Loans the interest rates on which are determined on the basis of rates referred to in the definition of "Base Rate" in this Section 1.01. "BPU" shall mean the New Jersey Board of Public Utilities or successor thereto. "Business Day" shall mean any day on which commercial banks are not authorized or required to close in New York City or London. "Capital Maintenance Costs" shall mean, with respect to the Loans of each Bank, any costs which such Bank determines are attributable to the maintenance by such Bank or any of its affiliates, pursuant to any law or regulation or any interpretation, directive or request (whether or not having the force of law) of any court or governmental or monetary authority, whether in effect on the Effective Date or thereafter, of capital in respect of its maintaining Loans hereunder or its commitment to make Loans hereunder. "CMFRI" shall mean Cablevision MFR, Inc., a Delaware corporation. "CMFRI Agreement" shall mean the First Amended and Restated Credit Agreement, dated as of May 28, 1998, among CMFRI, the Company, the Guarantors that are parties thereto, the Banks that are parties thereto, Toronto Dominion (Texas), Inc., as Arranging Agent and as Administrative Agent, The Bank of New York, The Bank of Nova Scotia, The Canadian Imperial Bank of Commerce, NationsBank, N.A. and The Chase Manhattan Bank, as Managing Agents, Bank of Montreal, Chicago Branch, Barclays Bank PLC, Fleet Bank, N.A. and Royal Bank of Canada, as Agents, Banque Paribas, Credit Lyonnais, BankBoston, N.A., The First National Bank of Chicago, Mellon Bank, N.A. and Societe Generale, New York Branch, as Co-Agents, and The Bank of New York and The Bank of Nova Scotia, as Co-Syndication Agents, as amended and/or restated and in effect from time to time, or if such agreement shall cease to be in effect, as last in effect. "CMFRI Commitment" shall mean, as to each Bank, its "Commitment" as such term is used in the CMFRI Agreement (as the same may be reduced or otherwise adjusted from time to time as provided in the CMFRI Agreement). "CMFRI Loans" shall mean "Loans" as such term is used in the CMFRI Agreement. "CMFRI Specified Investments" shall mean "Specified Investments" as such term is used in the CMFRI Agreement. "Code" shall mean the Internal Revenue Code of 1986, as amended. 4 "Commitment" shall mean, as to each Bank, the amount set forth opposite its name on the signature pages hereto under the heading "Commitment" or amount set forth on any Assignment and Acceptance (as the same may be reduced or otherwise adjusted from time to time as provided in this Agreement). "Commitment Fee" shall have the meaning given to such term in Section 2.04 hereof. "Commitment Percentage" shall mean, as to each Bank at any time, the percentage obtained by dividing such Bank's Commitment by the Total Commitment. "Commitment Termination Date" shall mean the earlier of (i) April 4, 1999 and (ii) the tenth day after the date on which CSC and the Obligors receive a tax ruling from the Internal Revenue Service that the transfer of the New York/New Jersey Companies to CMFRI and/or its Subsidiaries will not adversely affect the tax-free treatment of the TCI Acquisition under Section 351 of the Code. "Controlled Group" shall mean all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Obligors, are treated as a single employer under Section 414(b) or 414(c) of the Code. "CSC" shall mean CSC Holdings, Inc. (formerly known as Cablevision Systems Corporation), a Delaware corporation. "CSC Agreement" shall mean the Sixth Amended and Restated Credit Agreement, dated as of May 28, 1998, among CSC, the Restricted Subsidiaries parties thereto, the banks parties thereto and Toronto Dominion (Texas), Inc., as Arranging Agent and as Administrative Agent, The Bank of New York, The Bank of Nova Scotia, The Canadian Imperial Bank of Commerce, NationsBank, N.A. and The Chase Manhattan Bank, as Managing Agents, Bank of Montreal, Chicago Branch, Barclays Bank PLC, Fleet Bank, N.A. and Royal Bank of Canada, as Agents, Banque Paribas, Credit Lyonnais, BankBoston, N.A., The First National Bank of Chicago, Mellon Bank, N.A. and Societe Generale, New York Branch, as Co-Agents, and The Canadian Imperial Bank of Commerce, The Chase Manhattan Bank and NationsBank, N.A., as Co-Syndication Agents, as amended and/or restated and in effect from time to time, or if such agreement shall cease to be in effect, as last in effect. "CSC Cash Flow Ratio" shall have the meaning given to the term "Cash Flow Ratio" in the CSC Agreement. "CSC Commitment" shall mean, as to each Bank, its "Commitment" as such term is used in the CSC Agreement (as the same may be reduced or otherwise adjusted from time to time as provided in the CSC Agreement). "CSC Loans" shall mean "Loans" as such term is used in the CSC Agreement. "CSC Specified Investments" shall mean "Specified Investments" as such term is used in the CSC Agreement. 5 "Default" shall mean an Event of Default or any other event which with notice and/or passage of time would become an Event of Default. "Dolan" shall mean Charles F. Dolan. "Dolan Family Interests" shall mean (i) any Dolan Family Member, (ii) any trusts for the benefit of any Dolan Family Members, (iii) any estate or testamentary trust of any Dolan Family Member for the benefit of any Dolan Family Members, (iv) any executor, administrator, conservator or legal or personal representative of any Person or Persons specified in clauses (i), (ii) or (iii) above to the extent acting in such capacity and not individually and (v) any corporation, partnership, limited liability company or other similar entity, in each case 80% of the ownership interests of which is owned or controlled by any of the foregoing or combination of the foregoing. "Dolan Family Members" shall mean Dolan, his spouse, his descendants and any spouse of any such descendants. "Dollars" and "$" shall mean lawful money of the United States of America. "Effective Date" shall have the meaning given to such term in Section 12.07 hereof. "Eurodollar Base Rate" shall mean, with respect to any Eurodollar Loan, for any Interest Period, the rate per annum determined by the Administrative Agent at approximately 11:00 a.m. (London time) on the second Business Day prior to the first day of such Interest Period by reference to the British Bankers' Association Interest Settlement Rates for deposits in Dollars (as set forth by any service selected by the Administrative Agent that has been nominated by the British Bankers' Association as an authorized information vendor for the purpose of displaying such rates) for a period equal to such Interest Period (rounded upward, if necessary, to the nearest 1/16 of 1%); provided that, if, for any reason, the Administrative Agent cannot determine the Eurodollar Base Rate for any Interest Period pursuant to the foregoing provisions of this definition, the Administrative Agent shall determine the Eurodollar Base Rate by using the offered rates of any three major banks active in the London interbank market selected by the Administrative Agent, but in all other respects in accordance with the foregoing provisions of this definition. "Eurodollar Loans" shall mean Loans the interest rates on which are determined on the basis of rates referred to in the definition of "Eurodollar Base Rate" in this Section 1.01. "Eurodollar Rate" shall mean, for any Eurodollar Loans for any Interest Period therefor, a rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) determined by the Administrative Agent to be equal to the Eurodollar Base Rate for such Loans for such Interest Period divided by 1 minus the Reserve Requirement for such Loans for such Interest Period. "Event of Default" shall mean any of the events described in Article X hereof. 6 "Existing Credit Agreement" shall have the meaning given to such term in the first "Whereas" clause of this Agreement. "Existing Loans" shall mean "Loans" as such term is used in the Existing Credit Agreement. "Federal Funds Rate" shall mean, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (i) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (ii) if such rate is not so published for any day, the Federal Funds Rate for such day shall be the average rate quoted to The Toronto-Dominion Bank (New York Branch) on such day on such transactions with Federal funds brokers of recognized standing as may be determined by the Administrative Agent. "Funding Costs" for any Bank shall mean, with respect to any Eurodollar Loan, an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the principal amount paid, prepaid or converted or not borrowed or converted for the period from the date of such payment, prepayment or conversion or failure to borrow or convert to the last day of the Interest Period for such Loan (or, in the case of a failure to borrow or convert, the Interest Period for such Loan which would have commenced on the date of such failure to borrow or convert) had such principal amount borne interest at the Eurodollar Rate applicable to such Loan over (ii) the interest component of the amount such Bank would have bid in the London interbank market for Dollar deposits of leading banks in amounts comparable to such principal amount and with maturities comparable to such period (as reasonably determined by such Bank). "Guarantee" shall have the meaning given to such term in Section 9.11 of the CMFRI Agreement. "Guarantor" shall mean each Subsidiary of each Obligor, other than any such Subsidiary that is an Obligor. "Interest Period" shall mean: (a) With respect to any Eurodollar Loans, the period commencing on the date such Eurodollar Loans are made and ending on the same day in the first, second, third, sixth or, subject to availability from each Bank, twelfth calendar month thereafter, as the Obligors' Representative may select as provided in Section 2.02 hereof; and (b) With respect to any Base Rate Loans, the period commencing on the date such Base Rate Loans are made and ending on the next Quarterly Date thereafter. Notwithstanding the foregoing: (i) no Interest Period with respect to any Loan may end after the Commitment Termination Date; (ii) each Interest Period which would otherwise end on a day which is not a Business Day shall end on the next succeeding Business Day (or, in the case of an 7 Interest Period for Eurodollar Loans, if such next succeeding Business Day falls in the next succeeding calendar month, on the next preceding Business Day); (iii) any Interest Period for a Eurodollar Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month in which such Interest Period ends) shall, subject to clause (i) above, end on the last Business Day of a calendar month; and (iv) no more than 12 Interest Periods for all Eurodollar Loans hereunder shall be in effect at the same time and, if the number of Interest Periods for Eurodollar Loans would otherwise be in excess of 12, Eurodollar Loans shall not be available hereunder. "Interest Swap Agreement" shall mean an interest rate swap, cap or collar agreement or similar arrangement among any Obligor and/or any Subsidiary of any Obligor and one or more banks or financial institutions providing for protection against fluctuations in interest rates or the exchange of nominal interest obligations among such Obligor and/or such Subsidiary and such banks or financial institutions, either generally or under specific contingencies, as said agreement or arrangement shall be modified and supplemented and in effect from time to time. "Liens" shall have the meaning given to such term in Section 9.12 of the CMFRI Agreement. "Loans" shall mean Base Rate Loans and Eurodollar Loans made pursuant to Section 2.01 hereof. "Majority Banks" shall mean, at any time, Banks having Commitments aggregating at least 51% of the amount of the Total Commitment. "Margin Stock" shall mean "margin stock" as defined in Regulation U. "Materially Adverse Effect" shall mean a materially adverse effect upon (i) the business, assets, financial condition or results of operations of the Obligors and their Subsidiaries taken as a whole, (ii) the ability of the Obligors and their Subsidiaries to perform the Obligations hereunder or (iii) the legality, validity, binding nature or enforceability of this Agreement. "Net Cash Proceeds" shall mean proceeds received by any Obligor or any Subsidiary of any Obligor in cash from the sale or other disposition of property of any Obligor or any Subsidiary of any Obligor, after deduction of the costs of, and any income, franchise, transfer or other tax liability arising from, such sale or disposition. If any amount payable to any Obligor or any such Subsidiary in respect of any such sale or disposition shall be or become evidenced by any promissory note or other negotiable or non-negotiable instrument, the cash proceeds received on any such note or instrument shall constitute Net Cash Proceeds. "Non-US Bank" means a Person that is not a United States Person and that is not described in Section 881(c)(3) of the Code. "Notes" shall mean the promissory notes provided for by Section 2.05 hereof evidencing the Loans. 8 "Obligations" shall mean, collectively, the obligations of the Obligors hereunder in respect of the principal of and interest on the Loans and all obligations in respect of fees and other amounts payable by the Obligors hereunder. "Obligor" and "Obligors" shall have the meaning given to such terms in the preamble to this Agreement. "Obligors' Representative" means Cablevision of Oakland, Inc. "Paramus-Hillsdale Sale" shall mean the sale by the Obligors of the cable television systems of the Obligors serving approximately 5,200 subscribers on the Effective Date in the communities of Paramus and Hillsdale, New Jersey. "Parent Corp." shall mean Cablevision Systems Corp., a Delaware corporation. "Participation Agreement" shall have the meaning given to such term in Section 12.05(c) hereof. "Person" shall mean an individual, a corporation, a partnership, a limited liability company, a joint venture or adventure, a trust or estate or unincorporated organization, a joint stock company or other similar organization, a government or any political subdivision thereof, or any other legal entity. "Post-Default Rate" shall mean, in respect of any principal of any Loan or any other amount payable by the Obligors under this Agreement which is not paid when due (whether at stated maturity, by acceleration or otherwise), a rate per annum during the period commencing on the due date until such amount is paid in full equal to 2% above the Base Rate as in effect from time to time plus the Applicable Margin for Base Rate Loans; provided that, if such amount in default is principal of a Eurodollar Loan and the due date is a day other than the last day of an Interest Period therefor, the "Post-Default Rate" for such principal shall be, for the period commencing on the due date and ending on the last day of the Interest Period therefor, 2% above the interest rate for such Loan for such Interest Period as provided in Section 3.03 hereof, and thereafter the rate provided for above in this definition. "Proposed Bank" shall have the meaning given to such term in Section 12.05(h) hereof. "Quarter" shall mean a fiscal quarterly period of the Obligors. "Quarterly Dates" shall mean the last day of each March, June, September and December, the first of which shall be on June 30, 1998, provided that, if any such day is not a Business Day, the relevant Quarterly Date shall be the next succeeding Business Day. "Regulation D" shall mean Regulation D of the Board of Governors of the Federal Reserve System as the same may be amended or supplemented from time to time. "Regulation U" shall mean Regulation U of the Board of Governors of the Federal Reserve System as the same may be amended or supplemented from time to time. 9 "Regulatory Change" shall mean, with respect to any Bank, any change on or after the Effective Date in United States Federal, state or foreign laws or regulations (including Regulation D) or the adoption or making on or after such date of any interpretations, directives or requests applying to a class of banks including such Bank of or under any United States Federal or state, or any foreign, laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof. "Required Payment" shall have the meaning given to such term in Section 4.04 hereof. "Reserve Requirement" shall mean, for any Eurodollar Loans of any Bank for any Interest Period, the rate at which such Bank actually is required to maintain reserves (including any marginal, supplemental or emergency reserves) during such Interest Period under Regulation D against "Eurocurrency liabilities" (as such term is used in Regulation D). Without limiting the effect of the foregoing, the Reserve Requirement shall reflect any other reserves actually required to be maintained by such Bank by reason of any Regulatory Change against (A) any category of liabilities which includes deposits by reference to which the Eurodollar Base Rate for such Eurodollar Loans is to be determined as provided in the definition of "Eurodollar Base Rate" in this Section 1.01 or (B) any category of extensions of credit or other assets which include Eurodollar Loans. "Subscribers' Certificate" shall mean a certificate of a senior financial executive of CMFRI and the Obligors in substantially the form of Exhibit C to the CMFRI Agreement. "Subsidiary" shall mean, with respect to any Person, any corporation, partnership, joint venture or adventure, limited liability company, trust or estate: (a) in the case of a corporation, of which a majority of the outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether or not at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency); (b) in the case of a partnership or joint venture, in which such Person is a general partner or joint venturer or of which a majority of the partnership or other ownership interests; (c) in the case of a limited liability company, of which a majority of the ownership interests; or (d) in the case of a trust or estate, the beneficial interest of which, is at the time directly or indirectly owned by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other Subsidiaries. "Tax" means any Federal, State or foreign tax, assessment or other governmental charge (including any withholding tax) upon a Person or upon its assets, revenues, income or profits. 10 "TCI Acquisition" shall mean the transactions contemplated by the TCI Acquisition Documents, other than the Second-Tier Reorganization (as defined in and contemplated by the Master Reorganization Agreement referred to in the definition of "TCI Acquisition Documents" herein). "TCI Acquisition Documents" shall mean (i) the Amended and Restated Contribution and Merger Agreement, dated as of June 6, 1997, by and among Cablevision Systems Corporation, Parent Corp., CSC Merger Corporation and TCI Communications, Inc., (ii) the Master Reorganization Agreement, dated as of March 3, 1998, among Parent Corp. and Cablevision Systems Corporation, and (iii) the Assignment and Assumption Agreement, dated as of March 4, 1998, by and among Parent Corp., CSC TKR, Inc., CSC TKR I, Inc., Cablevision of Oakland, Inc., Cablevision of Brookhaven, Inc. and Cablevision of Paterson, Inc. "Total Available Commitment" shall mean, as of any date, the Total Commitment as of such date minus an amount equal to the excess of (i) the aggregate Net Cash Proceeds to be used as specified in all notices given by the Obligors' Representative to the Administrative Agent in accordance with Sections 2.03(b) hereof over (ii) the sum of (x) the aggregate amount of all reductions of the Total Commitment required by reason of the provisos to Section 2.03(b) with respect to such Net Cash Proceeds and (y) the aggregate amount of Loans (including the Loans requested to be made on such date) the proceeds of which have been or, upon the making thereof, will be used for the purposes specified in such notices in accordance with such Section. "Total Commitment" shall mean at any time the aggregate amount of the Commitments of all the Banks (as the same may be reduced or otherwise adjusted from time to time as provided in this Agreement). "United States Person" means a corporation, partnership or other entity created, organized or incorporated under the laws of the United States of America or a State thereof (including the District of Columbia). Section 1.02 Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all determinations with respect to accounting matters hereunder shall be made, and all financial statements and certificates and reports as to financial matters required to be delivered hereunder shall be prepared, in accordance with generally accepted accounting principles as in effect on December 31, 1996, applied on a consolidated basis consistent with the audited financial statements of the Obligors referred to in Section 8.04 of the CMFRI Agreement. To enable the ready determination of compliance by the Obligors and their Subsidiaries with the various covenants set forth in Article IX hereof, each of the Obligors agrees that the fiscal year of itself and each of its Subsidiaries shall end each year on December 31 and the first three Quarters in each year shall end on March 31, June 30 and September 30, respectively. 11 ARTICLE II LOANS Section 2.01 Loans. Each Bank severally agrees, on the terms and conditions set forth in this Agreement: (a) The Loans. On or after the Effective Date, to make one or more Loans to the Obligors from time to time on any Business Day prior to the Commitment Termination Date in an aggregate principal amount not to exceed at any time outstanding such Bank's Commitment; provided that at no time shall the aggregate outstanding principal amount of all Loans exceed the Total Available Commitment. (b) Types of Loans. The Loans, at the option of the Obligors, may be made as, and from time to time continued as or converted into, Base Rate Loans or Eurodollar Loans of any permitted type, or any combination thereof; provided, however, that each borrowing of Loans shall be in an aggregate amount equal to $500,000 or an integral multiple of $250,000 in excess thereof. Section 2.02 Manner of Borrowing; Conversion and Continuation. (a) Notice of Borrowing. The Obligors' Representative shall give the Administrative Agent (which shall promptly notify the Banks) notice of each borrowing of Loans hereunder substantially in the form of Schedule 2.02(a) hereto, which notices shall be irrevocable and effective only upon receipt by the Administrative Agent, shall specify the aggregate amount, the type or types and date of the Loans to be borrowed and (in the case of Eurodollar Loans) the duration of the Interest Period therefor and shall be given not later than 11:00 a.m. New York time on the day which is not less than the number of Business Days prior to the date of such borrowing specified below: Type Number of ---- Business Days ------------- Base Rate Loan 0 Eurodollar Loan 3 Notwithstanding the foregoing, any notice given by the Obligors' Representative to the Administrative Agent under this Section 2.02(a) may be given orally by telephone and confirmed in writing within one Business Day. In the case of any discrepancies between oral and written notices received by the Administrative Agent, the oral notice shall be effective as understood in good faith by the Administrative Agent. (b) Funding. Not later than 1:00 p.m. New York time on the date specified for borrowing hereunder, each Bank shall make available the amount of the Loan to be made by it on such date to the Administrative Agent in immediately available funds, for the account of the Obligors. The amount so received by the Administrative Agent shall, subject to the terms and conditions of this Agreement, be made available to the Obligors by depositing the same, in immediately available funds, in a joint account of the Obligors designated by the Obligors' 12 Representative or by wiring the same, in immediately available funds, to any account specified by the Obligors' Representative in its notice of borrowing. (c) Conversion and Continuation. (i) All or any part of the principal amount of any Loan may, on any Business Day, be converted into another type or types of Loans, except that Eurodollar Loans may be converted only on the last day of the applicable Interest Period. (ii) Base Rate Loans shall continue as Base Rate Loans unless and until such Loans are converted into Eurodollar Loans of any type. Each Eurodollar Loan shall continue as a Eurodollar Loan until the end of the then current Interest Period therefor, at which time it shall be automatically converted into a Base Rate Loan unless the Obligors' Representative shall have given the Administrative Agent notice in accordance with Section 2.02(c)(iv) hereof requesting either that such Eurodollar Loans continue as Eurodollar Loans of such type for another Interest Period or that such Eurodollar Loans be converted into Eurodollar Loans of another type at the end of such Interest Period. (iii) Notwithstanding anything to the contrary contained in Section 2.02(c)(i) or (ii), during an Event of Default, the Administrative Agent shall, at the direction of the Majority Banks, notify the Obligors' Representative that Loans may only be converted into or continued as Loans of certain specified types and, thereafter, until no Event of Default shall continue to exist, Loans may not be converted into or continued as Loans of any type other than one or more of such specified types. (iv) The Obligors' Representative shall give the Administrative Agent (which shall promptly notify the Banks) notice of each conversion or continuation of Loans hereunder substantially in the form of Schedule 2.02(c) hereto, which notices shall be irrevocable and effective only upon receipt by the Administrative Agent, shall specify (x) the aggregate amount and the type of the Loans to be converted or continued and (in the case of Eurodollar Loans) the duration of the Interest Period therefor, (y) the requested date of such conversion or continuation and (z) the amount and type or types of Loans into which such Loans are to be converted or as which such Loans are to be continued, and shall be given not later than 11:00 a.m. New York time on the day which is not less than the number of Business Days prior to the date of such conversion into or continuation as the type of Loans specified below: Type Number of ---- Business Days ------------- Base Rate Loan 0 Eurodollar Loan 3 Notwithstanding the foregoing, any notice given by the Obligors' Representative to the Administrative Agent under this Section 2.02(c)(iv) may be given orally by telephone and confirmed in writing within one Business Day. In the case of any discrepancies between oral and written notices received by the Administrative Agent, the oral notice shall be effective as understood in good faith by the Administrative Agent. 13 Section 2.03 Reductions and Changes of Commitments. (a) Optional Reductions and Terminations. (i) The Obligors shall have the right to terminate or reduce the Total Commitment at any time or from time to time, provided that (A) the Obligors' Representative shall give notice of each such termination or reduction to the Administrative Agent at least two Business Days prior thereto, (B) each partial reduction thereof shall be in an aggregate amount at least equal to $5,000,000 and (C) the Total Commitment may not be reduced at any time to an amount less than the aggregate principal amount of the Loans outstanding at such time. (ii) Notwithstanding anything to the contrary in this Agreement, so long as no Default has occurred and is continuing, the Obligors shall have the right to reduce or terminate the Aggregate Commitment of any Bank at any time or from time to time (subject to clause (F) below) without reducing or terminating the Aggregate Commitment (or any part thereof) of any other Bank at such time, provided that (A) such reduction or termination shall be made on terms and conditions agreed upon in writing by the Obligors' Representative and such Bank, (B) the Obligors' Representative and such Bank shall have notified the Administrative Agent in writing of such reduction or termination at least two Business Days prior thereto, (C) such reduction or termination shall be made pro rata among such Bank's Commitment, such Bank's CSC Commitment, and such Bank's CMFRI Commitment based on the relationship of each such Commitment to such Bank's Aggregate Commitment, (D) the aggregate amount of all reductions and terminations of the Aggregate Commitments of Banks made pursuant to this clause (ii) shall not exceed $420,000,000, (E) after giving effect to each reduction or termination and any prepayment of such Bank's Loans pursuant to Section 3.01(b)(ii) in connection therewith, the Total Commitment may not be less than the aggregate principal amount of the Loans outstanding at such time, and (F) no such reduction or termination may be made pursuant to this clause (ii) after November 18, 1999 (or such later date as is agreed in writing by the Majority Banks). (b) Special Mandatory Reductions. The Total Commitment shall be automatically reduced upon the date of any sale, transfer or other disposition of any asset of any Obligor or any Guarantor of the types permitted under Section 9.14(a)(vi) of the CMFRI Agreement (other than the Paramus-Hillsdale Sale), by an amount equal to 50% of the excess of the Net Cash Proceeds thereof over all or any portion of such Net Cash Proceeds that will be used, as specified in a notice from the Obligors' Representative to the Administrative Agent, for an acquisition permitted under Section 9.14(b)(ii) of the CMFRI Agreement; provided, however, that if the applicable Obligor or the applicable Subsidiary shall not have entered into a binding purchase agreement with respect to any such acquisition on or before the date that is six months after the date of such disposition, the Total Commitment shall be automatically reduced (without duplication) on such date by an amount equal to 50% of the entire Net Cash Proceeds of such sale, transfer or disposition; and provided further, however, that if the applicable Obligor or the applicable Subsidiary shall have entered into a binding purchase agreement within six months after the date of such disposition, but does not complete such acquisition within nine months of signing such binding purchase agreement, the Total Commitment shall automatically be reduced (without duplication) on the last day of such nine-month period by an amount equal to 50% of the entire Net Cash Proceeds of such sale, transfer or disposition. (c) No Reinstatement. The Total Commitment once terminated or reduced may not be reinstated. 14 (d) Pro Rata Treatment. Except to the extent otherwise provided herein, each reduction of the Total Commitment shall be applied to the Commitments of the Banks pro rata in accordance with their respective Commitment Percentages. Section 2.04 Commitment Fee. The Obligors shall pay to the Administrative Agent for the account of each Bank a commitment fee (the "Commitment Fee") on the daily average unutilized amount of such Bank's Commitment for the period from and including the earlier of (x) the Effective Date and (y) June 30, 1998 to but not including the earlier of the date such Bank's Commitment is terminated and the Commitment Termination Date, at a rate per annum equal to (i) 0.250% at any time at which the CSC Cash Flow Ratio is greater than or equal to 5.50 to 1 and (ii) 0.1875% at any time at which the CSC Cash Flow Ratio is less than 5.50 to 1. For purposes of calculating the Commitment Fee, the Commitment of each Bank shall be deemed to be utilized in an amount equal to the sum of the aggregate outstanding principal amount of such Bank's Loans. Accrued Commitment Fees under this Section 2.04 shall be payable in arrears on each Quarterly Date. Section 2.05 Notes. (a) Form of Notes. The Loans made by each Bank shall be evidenced by a single Note of the Obligors in substantially the form of Exhibit A hereto, dated the Effective Date and duly completed. (b) Endorsements. Each Bank is hereby authorized by the Obligors to endorse on a schedule attached to each Note of such Bank (or any continuation thereof) the amount and date of each Loan made by such Bank to the Obligors hereunder, and the amount of each payment on account of principal of such Loan received by such Bank, provided that any failure by such Bank to make any such endorsement shall not affect the obligations of the Obligors under such Note or hereunder in respect of such Loans. Section 2.06 Lending Offices. The Loans of each type made by each Bank shall be made and maintained at such Bank's Applicable Lending Office set forth on Schedule 2.06 for Loans of such type. Section 2.07 Several Obligations; Remedies Independent. The failure of any Bank to make any Loan to be made by it on the date specified therefor shall not relieve any other Bank of its obligation to make its Loan on such date, but neither the Administrative Agent nor any Bank shall be responsible for the failure of any other Bank to make a Loan to be made by such other Bank. The amounts payable by the Obligors at any time hereunder and under the Notes to each Bank shall be a separate and independent debt and each Bank shall, subject to Section 10.01 hereof, be entitled to protect and enforce its rights arising out of this Agreement and its Note and it shall not be necessary for any other Bank or the Administrative Agent to consent to, or be joined as an additional party in, any proceedings for such purposes. Section 2.08 Use of Proceeds. The proceeds of the Loans made hereunder shall be used only (x) to repay the Existing Loans and all other amounts owing by the Obligors under the Existing Credit Agreement, (y) for the general business purposes of the Obligors and their Subsidiaries and (z) for any transaction or activity in which the Obligors and their Subsidiaries are permitted to engage under the provisions of this Agreement. 15 ARTICLE III PAYMENTS OF PRINCIPAL AND INTEREST Section 3.01 Prepayments. (a) Optional Prepayments. Any Obligor may, at any time and from time to time (subject, in the case of Eurodollar Loans, to Section 5.05 hereof), prepay Base Rate Loans on any Business Day if prior notice is given to the Administrative Agent before 11:00 a.m. New York time on such day (and if such notice is received by the Administrative Agent after 11:00 a.m. New York time, on the next succeeding Business Day), and Eurodollar Loans upon not less than three Business Days' prior notice to the Administrative Agent (and the Administrative Agent shall promptly notify the Banks in each case of such notice), which notice shall specify the prepayment date (which shall be a Business Day) and the amount of the prepayment (which shall be not less than $1,000,000), and shall be irrevocable and effective only upon receipt by the Administrative Agent, provided that, in the case of Eurodollar Loans, interest on the principal prepaid, accrued to the prepayment date, shall be paid on the prepayment date. (b) Mandatory Prepayments. (i) The Obligors shall, upon any sale, transfer or other disposition of any asset of any Obligor or any Guarantor permitted under Section 9.14(a)(vi) of the CMFRI Agreement (other than the Paramus-Hillsdale Sale), prepay Loans in an amount equal to 50% of the Net Cash Proceeds thereof. Notwithstanding anything in this Agreement to the contrary, amounts prepaid from any sale, transfer or other disposition pursuant to the foregoing sentence may be reborrowed by the Obligors solely for the purpose of effecting acquisitions permitted under Section 9.14(b)(ii) of the CMFRI Agreement and solely to the extent that such disposition has not resulted in a mandatory reduction of the Total Commitment pursuant to the provisos to Section 2.03(b) hereof. (ii) On the date of any reduction or termination of any Bank's Aggregate Commitment pursuant to Section 2.03(a)(ii), the Obligors shall repay such Bank's Loans in an aggregate amount such that, after giving effect to such reduction or termination and such repayment, the aggregate outstanding amount of such Bank's Loans shall equal such Bank's Commitment Percentage of the amount of all outstanding Loans. Each repayment required by this Section 3.01(b)(ii) shall be applied pro rata among each type of Loan held by such Bank. The requirements of Section 4.02 shall not apply to any payment made by the Obligors pursuant to this clause (ii). Section 3.02 Repayment of Loans. The aggregate outstanding principal amount of the Loans shall mature and become due and payable, and shall be repaid by the Obligors, together with all accrued and unpaid interest thereon and any amounts payable pursuant to Section 5.05 hereof in connection therewith, on the Commitment Termination Date. Section 3.03 Interest. (a) The Obligors hereby promise to pay to the Administrative Agent for the account of each Bank interest on the unpaid principal amount of each Loan made by such Bank for the period commencing on the date of such Loan to but excluding the date such Loan shall be paid in full, at the following rates per annum: (i) if such Loan is a Base Rate Loan, the Base Rate plus the Applicable Margin; and 16 (ii) if such Loan is a Eurodollar Loan, the Eurodollar Rate for such Loan for the Interest Period therefor plus the Applicable Margin. Notwithstanding the foregoing, the Obligors hereby promise to pay to the Administrative Agent for the account of each Bank interest at the applicable Post-Default Rate on any principal of any Loan made by such Bank, and on any other amount payable by the Obligors hereunder to or for the account of such Bank (but, if such amount is interest, only to the extent legally enforceable), which shall not be paid in full when due (whether at stated maturity, by acceleration or otherwise), for the period commencing on the due date thereof until the same is paid in full. Interest at the Post-Default Rate shall be payable upon demand. (b) Accrued interest on each Loan shall be payable (i) on the last day of each Interest Period for such Loan (and, if such Interest Period is longer than three months (in the case of a Eurodollar Loan) on each three-month anniversary of the first day of such Interest Period), (ii) in the case of a Eurodollar Loan, when such Loan shall be converted or be due by reason of prepayment or (iii) when such Loan shall be due at maturity or by reason of acceleration or otherwise (other than by reason of prepayment). Promptly after the determination of any interest rate provided for herein or any change therein, the Administrative Agent shall notify the Banks and the Obligors' Representative thereof. ARTICLE IV PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC. Section 4.01 Payments. Except to the extent otherwise provided herein, all payments of principal, interest and other amounts to be made by the Obligors hereunder and under the Notes shall be made in Dollars, in immediately available funds, to the Administrative Agent not later than 11:00 a.m. New York time on the date on which such payment shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day). The Administrative Agent, or any Bank for whose account any such payment is made, may (but shall not be obligated to) debit the amount of any such payment which is not made by such time to any ordinary deposit account of any of the Obligors with the Administrative Agent or such Bank, as the case may be. The Obligors' Representative shall, at the time of any Obligor making each payment hereunder or under any Note, specify to the Administrative Agent the Loans or other amounts payable by the Obligors hereunder to which such payment is to be applied (but in the event that the Obligors' Representative fails to so specify, or if an Event of Default has occurred and is continuing, the Administrative Agent may apply such payment as it may elect in its sole discretion, but subject to Section 4.02 hereof). Each payment received by the Administrative Agent hereunder or under any Note for account of a Bank shall be paid promptly to such Bank, in immediately available funds, for account of such Bank's Applicable Lending Office for the Loan in respect of which such payment is made. Section 4.02 Pro Rata Treatment. Except to the extent otherwise provided herein: (a) subsequent to the initial borrowing hereunder, the Loans shall be made by the Banks pro rata according to their respective Commitment Percentages; (b) each payment by any Obligor of principal of the Loans shall be made to the Administrative Agent for the account of the Banks pro rata in accordance with the respective unpaid principal amounts of such Loans held by the 17 Banks; (c) each payment by any Obligor of interest on Loans of a particular type shall be made to the Administrative Agent for the account of the Banks holding Loans of such type pro rata in accordance with the respective unpaid principal amounts of such Loans held by such Banks; and (d) each payment of the Commitment Fee shall be made for the account of the Banks pro rata in accordance with their respective Commitment Percentages. Section 4.03 Computations. Interest on Eurodollar Loans and the Commitment Fee shall be computed on the basis of a year of 360 days and actual days elapsed (including the first day but excluding the last day) occurring in the period for which payable, and interest on Base Rate Loans shall be computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed (including the first day but excluding the last day) occurring in the period for which payable, except that all interest determined on the basis of the Post-Default Rate shall be computed on the basis of a year of 360 days and actual days elapsed (including the first day but excluding the last day). Section 4.04 Non-Receipt of Funds by the Administrative Agent. Unless the Administrative Agent shall have been notified by a Bank or the Obligors' Representative prior to the date on which such Bank is to make payment to the Administrative Agent of the proceeds of a Loan to be made by it hereunder or the Obligors are to make a payment to the Administrative Agent for the account of one or more of the Banks, as the case may be (such payment being herein called the "Required Payment"), which notice shall be effective upon receipt, that such Bank or the Obligors, as the case may be, do not intend to make the Required Payment to the Administrative Agent, the Administrative Agent may assume that the Required Payment has been made and may, in reliance upon such assumption (but shall not be required to), make the amount thereof available to the intended recipient on such date and, if such Bank or the Obligors, as the case may be, have not in fact made the Required Payment to the Administrative Agent, the recipient of such payment shall, on demand, pay to the Administrative Agent the amount made available to it together with interest thereon in respect of the period commencing on the date such amount was so made available by the Administrative Agent until the date the Administrative Agent recovers such amount at the Federal Funds Rate. Section 4.05 Sharing of Payments, Etc. Each of the Obligors and the Guarantors agrees that, in addition to (and without limitation of) any right of set-off, banker's lien or counterclaim a Bank may otherwise have, each Bank shall be entitled, at its option, to offset balances held by it for account of such Obligor or such Guarantor at any of its offices, in Dollars or in any other currency, against any principal of or interest on any of such Bank's Loans hereunder, which is not paid when due (regardless of whether such balances are then due to such Obligor or such Guarantor), in which case it shall promptly notify the Administrative Agent and such Obligor or such Guarantor thereof, provided that such Bank's failure to give such notice shall not affect the validity thereof. If a Bank shall obtain payment of any principal of or interest on any Loan made by it to the Obligors under this Agreement, through the exercise of any right of set-off, banker's lien, counterclaim or similar right, or otherwise, and, as a result of such payment, such Bank shall have received a greater percentage of the amounts then due hereunder by the Obligors to such Bank than the percentage received by other Banks, it shall promptly purchase from such other Banks participations in the Loans made by such other Banks in such amounts, and make such other adjustments from time to time as shall be equitable to the end that all the Banks shall share the benefit of such excess payment (net of any expense which may be incurred by such 18 Bank in obtaining or preserving such excess payment) pro rata in accordance with the unpaid principal and interest on the Loans held by each of the Banks. To such end all the Banks shall make appropriate adjustments among themselves (by the resale of participations sold or otherwise) if such payment is rescinded or must otherwise be restored. The Obligors and the Guarantors agree that any Bank so purchasing a participation in the Loans made by other Banks may exercise all rights of set-off, banker's lien, counterclaim or similar rights with respect to such participation as fully as if such Bank were a direct holder of Loans in the amount of such participation. Nothing contained herein shall require any Bank to exercise any such right or shall affect the right of any Bank to exercise, and retain the benefits of exercising, any such right with respect to any other indebtedness or obligation of the Obligors or the Guarantors. If under any applicable bankruptcy, insolvency or other similar law, any Bank receives a secured claim in lieu of a set-off to which this Section 4.05 applies, such Bank shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Banks entitled under this Section 4.05 to share in the benefits of any recovery on such secured claim. Section 4.06 No Reductions. All payments due to the Administrative Agent or any Bank under this Agreement shall be made by the Obligors, without any reduction or deduction whatsoever, including any reduction or deduction for any set-off, recoupment, counterclaim or Tax, except, subject to Section 4.07, for any withholding or deduction for Taxes required to be withheld or deducted under applicable law. Section 4.07 Taxes. (a) Taxes Payable by the Obligors. If under applicable law any Tax is required to be withheld or deducted from, or is otherwise payable by the Obligors in connection with, any payment to the Administrative Agent or any Bank under this Agreement, the Obligors shall, subject to Section 4.07(b), pay to the Administrative Agent or such Bank, as applicable, such additional amounts as may be necessary so that the net amount received by the Administrative Agent or such Bank with respect to such payment, after withholding or deducting all Taxes required to be withheld or deducted, is equal to the full amount payable under this Agreement. (b) Limitations. Notwithstanding anything to the contrary contained herein, the Obligors shall not be required to pay any additional amount in respect of withholding of United States Federal income taxes pursuant to this Section 4.07 to any Bank except to the extent (A) such Taxes are required to be withheld solely as a result of (1) in the case of a person that is a Bank on the Effective Date, a Regulatory Change enacted after the Effective Date and (2) in the case of a Person that becomes a Bank after the Effective Date, a Regulatory Change enacted after such Person becomes a Bank, and (B) such Bank has not failed to submit any form or certificate that it is entitled to so submit under applicable law. (c) Exemption from U.S. Withholding Taxes. There shall be submitted to the Obligors' Representative and the Administrative Agent, (A) on or before the first date that interest or fees are payable to such Bank under this Agreement, (1) if at the time the same are applicable, (aa) by each Bank that is not a United States Person, two duly completed and signed copies of Internal Revenue Service Form 1001 or 4224 (or any successor form to the applicable form), in either case entitling such Bank to a complete exemption from withholding of any United States federal income taxes on all amounts to be received by such Bank under this Agreement, or (bb) by each Bank that is a Non-US Bank, (x) a duly completed Internal Revenue 19 Service Form W-8 (or any successor form to such form) and (y) a certification in the form of Schedule 4.07(c) that such Bank is a Non-US Bank or (2) if at the time any of the foregoing are inapplicable, duly completed and signed copies of such form, if any, as entitles such Bank to exemption from withholding of United States federal income taxes to the maximum extent to which such Bank is then entitled under applicable law, and (B) from time to time thereafter, prior to the expiration or obsolescence of any previously delivered form or upon any previously delivered form becoming inaccurate or inapplicable, such further duly completed and signed copies of such form, if any, as entitles such Bank to exemption from withholding of United States federal income taxes to the maximum extent to which such Bank is then entitled under applicable law. Each Bank shall promptly notify the Obligors' Representative and the Administrative Agent if (A) it is required to withdraw or cancel any form or certificate previously submitted by it or any such form or certificate has otherwise become ineffective or inaccurate or (B) payments to it are or will be subject to withholding of United States federal income taxes to a greater extent than the extent to which payments to it were previously subject. Upon the request of the Obligors' Representative or the Administrative Agent, each Bank that is a United States Person shall from time to time submit to the Obligors' Representative and the Administrative Agent a certificate to the effect that it is such a United States Person and a duly completed Internal Revenue Service Form W-9 (or any successor form to such form). ARTICLE V YIELD PROTECTION AND ILLEGALITY Section 5.01 Additional Costs in Respect of Loans. (a) The Obligors shall pay to the Administrative Agent for the account of each Bank from time to time such amounts as such Bank may determine to be necessary to compensate it for any costs incurred by such Bank which such Bank determines are attributable to its making or maintaining any Eurodollar Loans hereunder or its commitment to make such Eurodollar Loans hereunder, or any reduction in any amount receivable by such Bank hereunder in respect of such Eurodollar Loans or such obligation (such increases in costs and reductions in amounts receivable being herein called "Additional Costs"), resulting from any Regulatory Change which: (i) changes the basis of taxation of any amounts payable to such Bank under this Agreement or its Note in respect of such Eurodollar Loans (other than taxes imposed on the overall net income of such Bank or of its Applicable Lending Office for such Eurodollar Loans by the jurisdiction in which such Bank has its principal office or such Applicable Lending Office); or (ii) imposes or modifies any reserve, special deposit, minimum capital, capital ratio or similar requirements relating to any extensions of credit or other assets of, or any deposits with or other liabilities of, such Bank (including such Eurodollar Loans or any deposits referred to in the definition of "Eurodollar Base Rate" in Section 1.01 hereof), or any commitments of such Bank; or (iii) mposes any other condition affecting this Agreement or the Commitment of such Bank (or any of such extensions of credit or liabilities). 20 Each Bank will notify the Obligors' Representative through the Administrative Agent of any event which will entitle such Bank to compensation pursuant to this Section 5.01(a) as promptly as practicable after it obtains knowledge thereof and determines to request such compensation, and (if so requested by the Obligors' Representative through the Administrative Agent) will designate a different Applicable Lending Office for the Loans of such Bank affected by such event if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the sole opinion of such Bank, be disadvantageous to such Bank, provided that no Obligor shall be obligated to compensate any Bank under this Section 5.01(a) for any Additional Costs incurred more than six months prior to the date the respective Bank requests such compensation from the Obligors, except for periods preceding such date but which are after the date such Bank notified the Obligors' Representative of the possibility that such Additional Costs might be incurred as a result of the respective Regulatory Change. Each Bank will furnish the Obligors' Representative with a statement setting forth the basis and amount of each request by such Bank for compensation under this Section 5.01(a). If any Bank requests compensation from the Obligors under this Section 5.01(a), the Obligors' Representative may, by notice to such Bank through the Administrative Agent, require that such Bank's Loans of the type with respect to which such compensation is requested be converted into Base Rate Loans in accordance with Section 5.04 hereof. (b) Without limiting the effect of the foregoing provisions of this Section 5.01, in the event that, by reason of any Regulatory Change, any Bank either (i) incurs Additional Costs based on or measured by the excess above a specified level of the amount of a category of deposits or other liabilities of such Bank which includes deposits by reference to which the interest rate on any Eurodollar Loans is determined as provided in this Agreement or a category of extensions of credit or other assets of such Bank which includes any Eurodollar Loans or (ii) becomes subject to restrictions on the amount of such a category of liabilities or assets which it may hold, then, if such Bank so elects by notice to the Obligors' Representative (with a copy to the Administrative Agent), the obligation of such Bank to make, and to convert Loans of any other type into, Loans of such type hereunder shall be suspended until the date such Regulatory Change ceases to be in effect. (c) Without limiting the effect of the foregoing provisions of this Section 5.01 (but without duplication), the Obligors shall pay directly to each Bank from time to time on request such amounts as such Bank may determine to be necessary to compensate such Bank for Capital Maintenance Costs with respect to its Loans or Commitment (such compensation to include, without limitation, an amount equal to any reduction of the rate of return on assets or equity of such Bank to a level below that which such Bank could have achieved but for such law, regulation, interpretation, directive or request). Each Bank will notify the Obligors' Representative that it is entitled to compensation pursuant to this Section 5.01(c) as promptly as practicable after it determines to request such compensation, provided that no Obligor shall be obligated to compensate any Bank under this Section 5.01(c) for any such costs incurred more than six months prior to the date the respective Bank requests such compensation from the Obligors, except for periods preceding such date but which are after the date such Bank notified the Obligors' Representative of the possibility that such costs might be incurred. (d) Determinations by any Bank for purposes of this Section 5.01 of the effect of any Regulatory Change on its costs of making or maintaining Loans or maintaining its Commitment 21 or on amounts receivable by it in respect of Loans or such Commitment, and of the additional amounts required to compensate such Bank in respect of any Additional Costs, shall be conclusive, provided that such determinations are made on a reasonable basis. Section 5.02 Limitation on Types of Loans. Anything herein to the contrary notwithstanding, if, with respect to any Eurodollar Loans: (a) the Administrative Agent determines (which determination shall be conclusive) that quotations of interest rates for the relevant deposits referred to in the definition of "Eurodollar Base Rate" in Section 1.01 hereof are not being provided in the relevant amounts or for the relevant maturities for purposes of determining the rate of interest for such Loans as provided in this Agreement; or (b) the Majority Banks determine (which determination shall be conclusive) and notify the Administrative Agent that the relevant rates of interest referred to in the definition of "Eurodollar Base Rate" in Section 1.01 hereof upon the basis of which the rates of interest for such Loans are to be determined do not adequately cover the cost to such Banks of making or maintaining such Loans; then the Administrative Agent shall promptly notify the Obligors' Representative and each Bank thereof, and so long as such condition remains in effect, the Banks shall be under no obligation to make Eurodollar Loans of the affected type. Section 5.03 Illegality. Notwithstanding any other provision of this Agreement to the contrary, in the event that it becomes unlawful for any Bank or its Applicable Lending Office to (a) honor its obligation to make Eurodollar Loans hereunder, or (b) maintain Eurodollar Loans hereunder, then such Bank shall promptly notify the Obligors' Representative thereof through the Administrative Agent (which notice shall include a statement explaining the nature of such unlawfulness) and such Bank's obligation to make Eurodollar Loans shall be suspended until such time as such Bank may again make and maintain Eurodollar Loans and such Bank's outstanding Eurodollar Loans shall be converted into Base Rate Loans in accordance with Section 5.04 hereof. Section 5.04 Certain Conversions of Loans Pursuant to Section 5.01 or 5.03. If the obligation of any Bank to make any type of Eurodollar Loans shall be suspended pursuant to Section 5.01 or 5.03 hereof (Loans of such type being herein called "Affected Loans" and such type being herein called the "Affected Type"), all Loans which would otherwise be made by such Bank as Loans of the Affected Type shall be made instead as Base Rate Loans (and, if an event referred to in Section 5.01 or 5.03 hereof has occurred and such Bank determines that it is required to convert such Loans, then, by notice to the Obligors' Representative with a copy to the Administrative Agent, all Affected Loans of such Bank then outstanding shall be automatically converted into Base Rate Loans on the date specified by such Bank in such notice) and, to the extent that Affected Loans are so made as (or converted into) Base Rate Loans, all payments of principal which would otherwise be applied to such Bank's Affected Loans shall be applied instead to its Base Rate Loans. 22 Section 5.05 Compensation. (a) The Obligors shall pay to the Administrative Agent for the account of each Bank, upon the request of such Bank through the Administrative Agent, such amount or amounts as shall be sufficient (in the reasonable opinion of such Bank) to compensate it for any loss, costs or expense incurred by it as a result of: (i) any payment, prepayment or conversion of a Eurodollar Loan made by such Bank for any reason (including, without limitation, the acceleration of the Loans pursuant to Article X hereof) on a date other than the last day of an Interest Period for such Loan; or (ii) any failure by any Obligor for any reason (including, without limitation, the failure of any of the conditions precedent specified in Article VII hereof to be satisfied) to borrow or convert a Eurodollar Loan to be made by such Bank on the date for such borrowing specified in the relevant notice of borrowing under Section 2.02 hereof. (b) Such compensation shall include Funding Costs in the case of any payment, prepayment or conversion of, or failure to borrow or convert, any Loan made or to be made as a Eurodollar Loan. Section 5.06 Replacement of Banks. If any Bank requests compensation pursuant to Section 5.01, or such Bank's obligation to make or continue, or to convert Loans of any other type into, any type of Eurodollar Loan shall be suspended pursuant to Section 5.02 or 5.03, or if an event occurs that entitles such Bank to make a claim pursuant to Section 4.07, the Obligors' Representative, upon three Business Days' notice to the Administrative Agent and such Bank, may require that such Bank transfer all of its right, title and interest under this Agreement, the CSC Agreement and the CMFRI Agreement and such Bank's Notes and its notes issued under the CSC Agreement and the CMFRI Agreement to any bank or financial institution identified by the Obligors' Representative with the consent of the Administrative Agent (which consent shall not be unreasonably withheld), such assignment to be made pursuant to an Assignment and Acceptance Agreement substantially in the form of Exhibit E hereto (an "Assignment and Acceptance") (a) if such proposed transferee agrees to assume all of the obligations of such Bank hereunder, under the CSC Agreement and under the CMFRI Agreement for consideration equal to the aggregate outstanding principal amount of such Bank's Loans, CSC Loans and the CMFRI Loans, together with interest thereon to the date of such transfer, and satisfactory arrangements are made for payment to such Bank of all other amounts payable hereunder, under the CSC Agreement and under the CMFRI Agreement to such Bank on or prior to the date of such transfer (including the amounts so requested pursuant to Section 5.01 (or the equivalent provisions of the CSC Agreement and the CMFRI Agreement) or so entitled to be claimed pursuant to Section 4.07 (or the equivalent provisions of the CSC Agreement and the CMFRI Agreement), any fees accrued hereunder, under the CSC Agreement and under the CMFRI Agreement and any amounts that would be payable under Section 5.05 (or the equivalent provisions of the CSC Agreement and the CMFRI Agreement) as if all of such Bank's Loans, CSC Loans and CMFRI Loans were being prepaid in full on such date) and (b) if such Bank being replaced has requested compensation pursuant to Section 5.01 or is entitled to make a claim pursuant to Section 4.07, such proposed transferee's aggregate requested compensation, if any, pursuant to Section 5.01, or the amounts, if any, entitled to be claimed by such proposed transferee pursuant to Section 4.07, with respect to such replaced Bank's Loans would be lower than that of the Bank replaced. Without prejudice to the survival of any other agreement of the 23 Obligors hereunder, the agreements of the Obligors contained in Sections 4.07, 5.01 and 12.03 (without duplication of any payments made to such Bank by the Obligors or the proposed transferee) shall survive for the benefit of any Bank replaced under this Section 5.06 with respect to the time prior to such replacement. ARTICLE VI GUARANTEE (a) Each of the Guarantors hereby, jointly and severally, unconditionally guarantees to the Banks and the Administrative Agent and their respective successors and assigns and the subsequent holders of the Notes, irrespective of the validity and enforceability of this Agreement or the Notes or the obligations of the Obligors or any of the other Guarantors hereunder or thereunder, or any other circumstance that might otherwise affect the liability of a guarantor, that: (i) the principal of and interest on the Loans and the Notes and all other obligations of the Obligors and the other Guarantors to the Banks or the Administrative Agent under this Agreement and the Notes will be promptly paid in full when due, whether at stated maturity, by acceleration or otherwise, in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, the same will be promptly paid in full when due in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed for whatever reason, the Guarantors will be obligated, jointly and severally, to pay the same immediately. (b) Each of the Guarantors hereby waives notice of, and consents to, any extensions of time of payment, renewals, releases of collateral, delays in obtaining or realizing upon or failure to obtain or realize upon collateral or other indulgence from time to time granted by any of the Banks or the Administrative Agent in respect of the Notes or this Agreement. Each of the Guarantors hereby releases the Obligors from all, and agrees not to assert or enforce (whether by or in a legal or equitable proceeding or otherwise) any, "claims" (as defined in section 101(5) of the Bankruptcy Code) against the Obligors, whether arising under applicable law or otherwise, to which such Guarantors are or would be entitled by virtue of their obligations hereunder or any payment made pursuant hereto, or the exercise by the Administrative Agent or the Banks of their rights with respect to any collateral for the obligations of the Obligors or the Guarantors under this Agreement including any such claims to which such Guarantors may be entitled as a result of any right of subrogation, exoneration or reimbursement in each case to the extent, but only to the extent, that such Guarantor would be deemed a "creditor" of the Obligors for purposes of Section 547 of the Bankruptcy Code solely by reason of such Guarantor's holding or asserting such claim. To the extent not released by the Guarantors under this Article VI, each of the Guarantors agrees that it shall not be entitled to any right of subrogation, exoneration, reimbursement or contribution in respect of any obligations guaranteed hereby until payment in full of all the Obligations. With respect to the Notes and this Agreement, each of the Guarantors hereby waives presentment, protest, demand of payment, notice of dishonor and all other notices and demands whatsoever. Each of the Guarantors further agrees that, as between such Guarantor, on the one hand, and the Administrative Agent and the Banks, on the other hand, (i) the maturity of the obligations guaranteed hereby may be accelerated as provided in Section 10.01 hereof for the purposes of this guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (ii) in the event of any declaration of acceleration of such obligations as provided in Section 24 10.01 hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by each of the Guarantors for the purpose of this guarantee. The obligations of each of the Guarantors under this Article VI shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the Obligors is rescinded or must be otherwise restored by any holder of any of the obligations guaranteed hereunder, whether as a result of any proceedings in bankruptcy or reorganization or otherwise and each of the Guarantors agrees that it will indemnify the Banks and the Administrative Agent on demand for reasonable costs and expenses (including, without limitation, fees of counsel) incurred by the Banks or the Administrative Agent in connection with such rescission or restoration. (c) It is the intention of the Guarantors, the Banks and the Obligors that the obligations of each Guarantor hereunder shall be in, but not in excess of, the maximum amount permitted by applicable law. To that end, but only to the extent such obligations would otherwise be avoidable, the obligations of each Guarantor hereunder shall be limited to the maximum amount that, after giving effect to the incurrence thereof, would not render such Guarantor insolvent or unable to make payments in respect of any of its indebtedness as such indebtedness matures or leave such Guarantor with an unreasonably small capital. The need for any such limitation shall be determined, and any such needed limitation shall be effective, at the time or times that such Guarantor is deemed, under applicable law, to incur the Obligations hereunder. Any such limitation shall be apportioned amongst the Obligations pro rata in accordance with the respective amounts thereof. This paragraph is intended solely to preserve the rights of the Banks under this Agreement to the maximum extent permitted by applicable law, and neither the Guarantors, the Obligors nor any other Person shall have any right under this paragraph that it would not otherwise have under applicable law. The Obligors and each Guarantor agree not to commence any proceeding or action seeking to limit the amount of the obligation of such Guarantor under this Article VI by reason of this paragraph. For the purposes of this paragraph, "insolvency", "unreasonably small capital" and "unable to make payments in respect of any of its indebtedness as such indebtedness matures" shall be determined in accordance with applicable law. ARTICLE VII CONDITIONS PRECEDENT Section 7.01 Initial Loan. The obligation of each Bank to make its initial Loan hereunder is subject to the satisfaction of the following conditions precedent on or prior to the date of such initial Loan but in any event no later than June 30, 1998: (a) Execution and Notes. This Agreement shall have been duly executed and delivered by each of the Obligors, the Guarantors in existence on the Effective Date, the Banks and the Administrative Agent, and the Obligors shall have executed and delivered to each Bank its Note evidencing the Loans to be made by such Bank hereunder. 25 (b) Signatures. Each of the Obligors and the Guarantors in existence on the Effective Date shall have certified to the Administrative Agent (with copies to be provided for each Bank) the name and signature of each of the persons authorized to sign on its respective behalf such of this Agreement and the Notes to which it is a party and to borrow under this Agreement. The Banks may conclusively rely on such certifications until they receive notice in writing from the applicable Obligor or Guarantor to the contrary. (c) Proof of Action. The Administrative Agent shall have received certified copies of all necessary action taken by each of the Obligors and the Guarantors in existence on the Effective Date to authorize the execution, delivery and performance of such of this Agreement and the Notes to which it is a party. (d) Opinions of Counsel to the Obligors. The Administrative Agent shall have received opinions of: (i) Robert Lemle, Esq., General Counsel to the Obligors and the Guarantors, substantially in the form of Exhibit B hereto; (ii) Sullivan & Cromwell, special New York counsel to the Obligors and the Guarantors, substantially in the form of Exhibit C(1) hereto; (iii) Schenk, Price, Smith & King, special New Jersey counsel to the Obligors and the Guarantors, substantially in the form of Exhibit C(2) hereto; and (iv) Piper & Marbury, special FCC counsel to the Obligors, substantially in the form of Exhibit C(3) hereto; and covering such other matters as any Bank or Banks or special New York counsel to the Administrative Agent, Winthrop, Stimson, Putnam & Roberts, may reasonably request (and for purposes of such opinions such counsel may rely upon opinions of counsel in other jurisdictions, provided that such other counsel are satisfactory to special counsel to the Administrative Agent and such other opinions state that the Banks are entitled to rely thereon). (e) Opinion of Banks' Counsel. Each Bank shall have received an opinion of Winthrop, Stimson, Putnam & Roberts, special New York counsel to the Administrative Agent, substantially in the form of Exhibit D hereto and covering such other matters as any Bank or Banks may reasonably request. (f) Certain Fees. The Obligors shall have paid to the Administrative Agent, for its own account, fees calculated as specified in a letter dated the date hereof. (g) Other Fees. The Obligors shall have paid such other fees as may have been agreed by the parties hereto. 26 (h) CSC and CMFRI Agreements. All conditions precedent to the initial extensions of credit under the CSC Agreement and the CMFRI Agreement shall have been satisfied. (i) Subscribers' Certificate. The Administrative Agent shall have received the most recent Subscribers' Certificate required to be delivered under Section 7.01 of the CMFRI Credit Agreement. (i) Other Documents. Such other documents and papers relating to the documents referred to herein and the transactions contemplated hereby as any Bank or special counsel to the Banks shall reasonably require shall have been received by the Administrative Agent. (j) Regulatory Approvals. The Obligors shall have obtained the approval of the BPU with respect to this Agreement and the uses of the proceeds of the Loans specified in Section 2.08 hereof. (k) Funding Adjustment. The Company shall have made arrangements satisfactory to the Administrative Agent such that, after giving effect to the initial Loans hereunder, (i) the outstanding Loans hereunder shall be made by the Banks pro rata in accordance with their respective Commitment Percentages, and (ii) the Loans (as defined in the Existing Credit Agreement) and all other amounts owing under the Existing Credit Agreement to any Bank (as defined in the Existing Credit Agreement) which is not a Bank hereunder shall have been repaid in full. Section 7.02 Each Loan. The obligation of each Bank to make each of its Loans (including its initial Loan) hereunder (which shall not include any conversion or continuation of any outstanding Loan) is subject to the additional conditions precedent that: (a) no Default shall have occurred and be continuing; (b) the representations and warranties in Article VIII hereof and in Article VIII of the CMFRI Agreement shall be true on and as of the date of the making of, and after giving effect to, such Loan with the same force and effect as if made on and as of such date, except to the extent that such representations and warranties expressly relate to an earlier date; and (c) to the extent requested by the Administrative Agent or any Bank, a senior executive of the Obligors shall have certified compliance with paragraphs (a) and (b) above to the Administrative Agent. Each of the Obligors shall be deemed to have made a representation and warranty hereunder as of the time of the making of such Loans hereunder that the conditions specified in such clauses have been fulfilled as of such time. 27 ARTICLE VIII REPRESENTATIONS Each of the Obligors and the Guarantors represents, warrants and covenants as follows: Section 8.01 Existence and Power. Each of the Obligors and their Subsidiaries is a limited or general partnership or corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and is duly qualified to transact business and is in good standing in all jurisdictions in which such qualification is necessary in view of the properties and assets owned and presently intended to be owned and the business transacted and presently intended to be transacted by it except for qualifications the lack of which, singly or in the aggregate, have not had and are not likely to have a Materially Adverse Effect, and each of the Obligors and their Subsidiaries has full power, authority and legal right to make and perform such of this Agreement and the Notes to which it is a party or signatory. Section 8.02 Subsidiaries. As at the Effective Date and the date of the initial Loan hereunder, none of the Obligors has any Subsidiaries other than those set forth on Schedule 8.02. Section 8.03 Authority; No Conflict. The making and performance by each of the Obligors and their Subsidiaries of such of this Agreement and the Notes to which it is a party or signatory, and each extension of credit hereunder, have been duly authorized by all necessary action and do not and will not: (i) subject to the consummation of the action described in Section 8.05 hereof, violate any provision of any laws, orders, rules or regulations presently in effect (other than violations that, singly or in the aggregate, have not had and are not likely to have a Materially Adverse Effect), or any provision of any of the Obligors' or their Subsidiaries' partnership agreement, charter or by-laws presently in effect; or (ii) result in the breach of, or constitute a default or require any consent (except for the consents described on Schedule 8.03 hereto, each of which has been duly obtained) under, any existing indenture or other agreement or instrument to which any Obligor or any Subsidiary of any Obligor is a party or its properties may be bound or affected (other than any breach, default or required consent that, singly or in the aggregate, have not had and are not likely to have a Materially Adverse Effect); or (iii) result in, or require, the creation or imposition of any Lien upon or with respect to any of the properties or assets now owned or hereafter acquired by any Obligor or any Subsidiary of any Obligor. Section 8.04 Regulation U. None of the proceeds of the Loans shall be used to purchase or carry, or to reduce or retire or refinance any credit incurred to purchase or carry, any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock. If requested by any Bank, the Obligors will furnish to the Banks statements in conformity with the requirements of Regulation U. Section 8.05 Approval of Regulatory Authorities. Except as set forth on Schedule 8.03 hereto and other than the approvals of the BPU referred to in Section 7.01(j) hereof, no approval or consent of, or filing or registration with, any Federal, state or local commission or other regulatory authority is required in connection with the execution, delivery and performance by the Obligors and their Subsidiaries of such of this Agreement and the Notes to which they are a party. All such described action required to be taken as a condition to the execution and delivery 28 of such of this Agreement and the Notes to which the Obligors and their Subsidiaries are a party has been duly taken by all such commissions and authorities or other Persons, as the case may be, and all such action required to be taken as a condition to the initial Loan hereunder has been or will be duly taken prior to such initial Loans. Section 8.06 Binding Agreements. This Agreement constitutes, and the Notes when executed and delivered will constitute, the legal, valid and binding obligations of each of the Obligors and their Subsidiaries that is a party thereto, enforceable in accordance with their respective terms (except for limitations on enforceability under bankruptcy, reorganization, insolvency and other similar laws affecting creditors' rights generally and limitations on the availability of the remedy of specific performance imposed by the application of general equitable principles). ARTICLE IX PARTICULAR COVENANTS OF THE OBLIGORS AND THEIR SUBSIDIARIES From the Effective Date and so long as the Commitments of the Banks shall be in effect and until the payment in full of all Obligations hereunder and the performance of all other obligations of the Obligors and their Subsidiaries under this Agreement, each of the Obligors and their Subsidiaries agrees that, unless the Majority Banks shall otherwise consent in writing, it will perform and observe each of its agreements (in its capacity as a Guarantor under (and as defined in) the CMFRI Agreement) in Article IX of the CMFRI Agreement. ARTICLE X DEFAULTS Section 10.01 Events of Default. If any one of the following "Events of Default" shall occur and be continuing, namely: (a) Any representation or warranty in this Agreement, or in any certificate, statement or other document furnished to the Banks or the Administrative Agent under this Agreement (including, without limitation, any amendment to any of the foregoing), or any certification made or deemed to have been made by any Obligor or any Subsidiary of any Obligor to any Bank hereunder, shall prove to have been incorrect, or shall be breached, in any material respect, when made or deemed made; or (b) Default in the payment when due of any principal on any Note, or default in the payment when due of interest on any Note or any other amount payable to any Bank or the Administrative Agent hereunder, and the failure to pay such interest or other amount by 11:00 a.m. on the second next following Business Day; or 29 (c) Default by any Obligor or any Subsidiary of any Obligor in the performance or observance of its agreement in Article IX hereof as a result of its failure to perform or observe any of its agreements (in its capacity as a Guarantor under (and as defined in) the CMFRI Agreement) in Article IX of the CMFRI Agreement (other than Sections 9.01, 9.02, 9.03, 9.04, 9.05, 9.06, 9.07 and 9.15 thereof but including Section 9.01(g) thereof); or (d) Default by any Obligor or any Subsidiary of any Obligor in the performance or observance of (i) its agreement in Article IX hereof as a result of its failure to perform or observe any of its agreements (in its capacity as a Guarantor under (and as defined in) the CMFRI Credit Agreement) in Sections 9.01 (other than clause (g) thereof), 9.02, 9.03, 9.04, 9.05, 9.06, 9.07 and 9.15 thereof or (ii) any of its other agreements herein, in each case which shall remain unremedied for 30 days after notice thereof shall have been given to the Obligors' Representative by any Bank (provided that such period shall be five days and no such notice shall be required in the case of a default arising from a failure to perform or observe Section 9.01(e) or 9.15 of the CMFRI Agreement and provided further that such period shall be fifteen days and no such notice shall be required in the case of a default arising from a failure to perform or observe Section 9.01(d) of the CMFRI Agreement); or (e) Any Obligor or any Subsidiary of any Obligor shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (ii) admit in writing its inability, or be generally unable, to pay its debts as they become due, (iii) make a general assignment for the benefit of creditors, (iv) be adjudicated a bankrupt or insolvent, (v) commence a voluntary case under the Federal bankruptcy laws (as now or hereafter in effect), (vi) file a petition seeking to take advantage of any law relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, (vii) acquiesce in writing to, or fail to controvert in a timely and appropriate manner, any petition filed against such Obligor or such Subsidiary in any involuntary case under such bankruptcy laws, or (viii) take any action for the purpose of effecting any of the foregoing; or (f) A case or other proceeding shall be commenced, without the application, approval or consent of any Obligor or any Subsidiary of any Obligor, in any court of competent jurisdiction, seeking the liquidation, reorganization, dissolution, winding up, or composition or readjustment or debts of any Obligor or any Subsidiary of any Obligor , the appointment of a trustee, receiver, custodian, liquidator or the like of any Obligor or any Subsidiary of any Obligor or of all or any substantial part of its assets, or any other similar action with respect to any Obligor or any Subsidiary of any Obligor under the laws of bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, and such case or proceeding shall continue undismissed, or unstayed and in effect, for any period of 30 consecutive days, or an order for relief against any Obligor or any Subsidiary of any Obligor shall be entered in an involuntary case under the Federal bankruptcy laws (as now or hereafter in effect); or (g) (i) Dolan Family Interests shall cease at any time to have beneficial ownership (within the meaning of Rule 13d-3 (as in effect on the date hereof) promulgated under the Securities and Exchange Act of 1934, as amended) of shares of the capital stock of Parent Corp. having sufficient votes to elect (or otherwise designate) at such time a majority of the members of the Board of Directors of Parent Corp. or (ii) Parent Corp. shall cease to own directly (or, in 30 the case of CSC TKR I, Inc. indirectly through CSC TKR, Inc.) 100% of the common stock of each Obligor, or any Person (other than Parent Corp. or, in the case of CSC TKR I, Inc., CSC TKR, Inc.) shall obtain the legal or contractual right to own, or to cause the transfer of the ownership of, any of the common stock of any Obligor, without regard to any required approval of any other Person; or (h) Any Event of Default under (and as defined in) the CMFRI Agreement shall have occurred and be continuing; THEREUPON, the Administrative Agent may (and, if directed by the Majority Banks, shall) by notice to the Obligors' Representative, terminate the Commitments of the Banks hereunder (if then outstanding) and/or declare the unpaid principal of and accrued interest on the Notes, and all other amounts owing hereunder, to be forthwith due and payable, whereupon the same shall be and become forthwith due and payable, without presentment or demand for payment, notice of nonpayment, protest or further notice or demand of any kind, all of which are hereby expressly waived by the Obligors (provided that the Banks' Commitments hereunder shall forthwith terminate and the unpaid principal of and accrued interest on the Notes, and all other amounts owing hereunder, shall automatically become and be forthwith due and payable upon the occurrence of any event specified in clause (g) or (h) above without any such notice or other action, all of which are hereby expressly waived by the Obligors). ARTICLE XI THE ADMINISTRATIVE AGENT Section 11.01 Appointment, Powers and Immunities. Each Bank hereby irrevocably appoints and authorizes the Administrative Agent to act as its agent hereunder with such powers as are specifically delegated to the Administrative Agent by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. The Administrative Agent shall not have any duties or responsibilities except those expressly set forth in this Agreement and shall not by reason of this Agreement be a trustee for any Bank. The Administrative Agent shall not be responsible to any of the Banks for any recitals, statements, representations or warranties contained in this Agreement, or in any certificate or other document referred to or provided for in, or received by any of the Banks under, this Agreement, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, or any other document referred to or provided for herein or for any failure by any Obligor to perform any of its obligations hereunder. The Administrative Agent may employ agents and attorneys-in-fact and shall not be responsible, except as to money or securities received by it or its authorized agents, for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. Neither the Administrative Agent nor any of its directors, officers, employees or agents shall be liable or responsible for any action taken or omitted to be taken by it or them hereunder or in connection herewith, except for its or their own gross negligence or willful misconduct. Section 11.02 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof 31 received by telephone, telex, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by the Administrative Agent. As to any matters not expressly provided for by this Agreement, the Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder or thereunder in accordance with instructions signed by the Majority Banks, and such instructions of the Majority Banks and any action taken or failure to act pursuant thereto shall be binding on all of the Banks. Section 11.03 Defaults. The Administrative Agent shall not be deemed to have knowledge of the occurrence of a Default (other than the non-payment of principal of or interest on the Obligations) unless the Administrative Agent has received notice from a Bank or the Obligors' Representative specifying such Default and stating that such notice is a "Notice of Default". In the event that the Administrative Agent receives such a notice of the occurrence of a Default, the Administrative Agent shall give prompt notice thereof to the Banks (and shall give each Bank prompt notice of each such non-payment). The Administrative Agent shall (subject to Section 11.07 hereof) take such action with respect to such Default as shall be reasonably directed by the Majority Banks, provided that, unless and until the Administrative Agent shall have received such directions, the Administrative Agent may take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interest of the Banks. Section 11.04 Rights as a Bank. With respect to its Commitment and the Loans made by it, the Administrative Agent in its capacity as a Bank hereunder shall have the same rights and powers hereunder as any other Bank and may exercise the same as though it were not acting as Administrative Agent, and the term "Bank" or "Banks" shall, unless the context otherwise indicates, include the Administrative Agent in its individual capacity. The Administrative Agent and its affiliates may (without having to account therefor to any Bank) accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with the Obligors, their Subsidiaries and any of their Affiliates as if it were not acting as Administrative Agent, and the Administrative Agent and its affiliates may accept fees and other consideration from the Obligors and their Subsidiaries for services in connection with this Agreement or otherwise without having to account for the same to the Banks. Section 11.05 Indemnification. The Banks agree to indemnify the Administrative Agent (to the extent not reimbursed under Section 12.03 hereof, but without limiting the obligations of the Obligors under said Section 12.03), ratably in accordance with the aggregate principal amount of the Obligations held by the Banks (or, if no Loans are at the time outstanding, ratably in accordance with their respective Commitments), for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of this Agreement or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby (including, without limitation, the costs and expenses which the Obligors are obligated to pay under Section 12.03 hereof but excluding, unless a Default has occurred and is continuing, normal administrative costs and expenses incident to the performance of its agency duties hereunder) or the enforcement of any of the terms hereof or of any such other documents, 32 provided that no Bank shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Person to be indemnified. Section 11.06 Non-Reliance on Administrative Agent and Other Banks. Each Bank agrees that it has, independently and without reliance on the Administrative Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Obligors and their Subsidiaries and decision to enter into this Agreement and that it will, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or any other document contemplated by or referred to herein. The Administrative Agent shall not be required to keep itself informed as to the performance or observance by the Obligors and their Subsidiaries of this Agreement or to inspect the properties or books of the Obligors and their Subsidiaries. Except for notices, reports and other documents and information expressly required to be furnished to the Banks by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the affairs, financial condition or business of the Obligors and their Subsidiaries (or any of their Affiliates) which may come into the possession of the Administrative Agent or any of its affiliates. Section 11.07 Failure to Act. Except for action expressly required of the Administrative Agent hereunder, the Administrative Agent shall in all cases be fully justified in failing or refusing to act hereunder unless it shall be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Section 11.08 Resignation or Removal of Administrative Agent. Subject to the appointment and acceptance of a successor Administrative Agent as provided below, the Administrative Agent may resign at any time by giving notice thereof to the Banks and the Obligors' Representative, and the Administrative Agent may be removed at any time with or without cause by the Majority Banks. Upon any such resignation or removal, the Majority Banks shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Majority Banks and shall have accepted such appointment within 30 days after the retiring Administrative Agent's giving of notice of resignation or the Majority Banks' removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Banks, appoint a successor Administrative Agent, which shall be a bank organized or licensed under the laws of the United States of America or any State having an office (or an affiliate with an office) in New York, New York and a combined capital and surplus of at least $100,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After the retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article XI shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Administrative Agent. 33 Section 11.09 Agency Fee. So long as the Commitments are outstanding and until payment in full of all Obligations hereunder, the Obligors will pay to the Administrative Agent such fees as may have been agreed to by the Obligors and the Administrative Agent. Such fees, once paid, shall be non-refundable. ARTICLE XII MISCELLANEOUS Section 12.01 No Waiver. No failure on the part of the Administrative Agent or any Bank to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. Section 12.02 Notices. All notices and other communications provided for herein shall be by telegraph, cable or in writing and telecopied, telegraphed, cabled, mailed or delivered to the intended recipient at the "Address for Notices" specified in Schedule 12.02 hereto or, as to any party, at such other address as shall be designated by such party in a notice to each other party. Except as otherwise provided in Section 2.02 hereof, all notices and other communications hereunder shall be deemed to have been duly given when transmitted by telecopier, delivered to the telegraph or cable office or personally delivered or, in the case of a mailed notice, four Business Days after the date deposited in the mails, airmail postage prepaid, in each case given or addressed as aforesaid. Section 12.03 Expenses, Etc. The Obligors shall pay or reimburse each of the Banks and the Administrative Agent for: (a) the reasonable fees and expenses of Winthrop, Stimson, Putnam & Roberts, special New York counsel to the Administrative Agent, in connection with (i) the negotiation, preparation, execution and delivery of this Agreement, the Notes and the other documents contemplated by or referred to herein and the making of the Loans hereunder and (ii) any amendment, modification or waiver of any of the terms of this Agreement, the Notes or any of such other documents; (b) all reasonable costs and expenses of the Banks and the Administrative Agent (including reasonable counsels' fees and expenses) in connection with the enforcement, protection, preservation or exercise of any of their rights under this Agreement, the Notes and the other documents contemplated by or referred to herein; and (c) all transfer, stamp, documentary or other similar taxes, assessments or charges levied by any governmental or revenue authority in respect of this Agreement, any of the Notes or any other document referred to herein. Each Obligor shall (to the fullest extent permitted by applicable law) indemnify the Administrative Agent, the Banks and each affiliate thereof and their respective directors, officers, employees and agents from, and hold each of them harmless against, any and all losses, liabilities, claims or damages to which any of them may become subject, insofar as such losses, liabilities, claims or damages arise out of or in any way relate to or result from any actual or proposed use by any Obligor of the proceeds of any Loan hereunder and/or the negotiation, execution, delivery or performance of this Agreement or the Notes or any Loan made or to be made hereunder or from any investigation, litigation or other proceeding (including any 34 threatened investigation or proceeding) relating to the foregoing, and the Obligors shall reimburse the Administrative Agent and each Bank, and each affiliate thereof and their respective directors, officers, employees and agents, upon demand, for any expenses (including legal fees) incurred in connection with any such investigation or proceeding (but excluding any such losses, liabilities, claims, damages, or expenses to the extent, but only to the extent, caused by action taken which constitutes the gross negligence or willful misconduct of the Person to be indemnified). If and to the extent that the obligations of any Obligor under the preceding sentence may be unenforceable for any reason, such Obligor shall make the maximum contribution to the payment and satisfaction of each of the losses, liabilities, claims, damages and expenses referred to above as may be permitted by applicable law. Section 12.04 Amendments, Etc. No amendment or waiver of any provision of this Agreement or the Notes, nor any consent to any departure by any Obligor therefrom, shall in any event be effective unless the same shall be agreed or consented to by the Majority Banks, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that no amendment, waiver or consent shall, unless in writing and signed by all the Banks, do any of the following: (a) increase the Commitment of any of the Banks, extend the Commitment Termination Date or subject the Banks to any additional obligations; (b) reduce the principal of, or interest on, or fees with respect to, the Obligations or the amount of any scheduled payments thereof; (c) postpone any date fixed for payment of principal of, or interest on, or fees with respect to, the Obligations or the Notes; (d) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Obligations, or the number of Banks which shall be required for the Banks or any of them to take any action under this Agreement; (e) release all or a significant portion of any collateral for the Obligations; (f) change any provision contained in Section 2.03(a)(ii) (other than clause (F) of the proviso therein), Section 3.01(b)(ii), Section 4.05, Articles V, VI, VII, Section 12.03 or this Section 12.04; or (g) release or remove any Guarantor from its obligations hereunder other than any such release or removal resulting from a transaction permitted by Section 9.14 of the CMFRI Agreement. Section 12.05 Successors and Assigns. (a) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. (b) No Obligor and no Guarantor may sell or assign its respective rights or obligations hereunder or under the Notes without the prior consent of all of the Banks and the Administrative Agent. (c) At any time after the Effective Date, a Bank may sell a participation of all or in part of its rights and obligations under such Bank's Commitment under this Agreement and the Notes to one or more commercial banks, investment companies or other financial institutions that enter into participations of the type contemplated by this Section 12.05 in the ordinary course of their business and that qualify as "accredited investors," as such term is defined in Regulation D of the Securities Act of 1933, as amended (each, a "participant"), such participant's rights against such Bank to be set forth in a participation agreement (a "Participation Agreement"); provided, however, that (i) such Bank shall submit in writing to the Obligors' Representative and to the Administrative Agent a request that each of the Obligors' Representative and the Administrative Agent consent to the choice of such participant, (ii) the Obligors' Representative 35 and the Administrative Agent shall consent in writing to the choice of such participant prior to the time of effectiveness of such participation, such consent not to be unreasonably withheld or delayed, (iii) such participation when added to the contemporaneous participations made by such Bank under the CSC Agreement and the CMFRI Agreement, must be in an amount not less than $10,000,000 and (iv) such participation shall be sold pro rata between such Bank's Commitment, such Bank's CSC Commitment and such Bank's CMFRI Commitment based on the relationship of each such Commitment to such Bank's Aggregate Commitment and (v) in the event such Bank was party to this Agreement on the Effective Date, after giving effect to such participation, such Bank's Commitment not so participated if any shall be at least $10,000,000. All amounts payable by the Obligors to any Bank under Article V hereof shall be determined as if such Bank had not sold any such participations and as if such Bank were funding all of its Commitments and Loans in the same way that it is funding the Commitments and Loans in which no participations have been sold. In no event shall a Bank that sells a participation be obligated to the participant under its Participation Agreement to refrain from taking any action hereunder or under such Bank's Note except that such Bank may agree in such Participation Agreement that it will not, without the consent of such participant, agree to (A) extend the Commitment Termination Date, (B) reduce the principal of, or interest on, the Obligations or under the Notes or any Commitment Fee, (C) postpone any date fixed for payment of the principal of, or interest on, the Obligations or under the Notes or any Commitment Fee, (D) consent to any release of all or a significant portion of any collateral for the Obligations or (E) change any provision in Article VI hereof. Any Bank selling a participation hereunder shall promptly notify the Obligors' Representative of the effectiveness thereof. (d) At any time after the Effective Date, a Bank may assign part of its rights and obligations under such Bank's Commitment under this Agreement and the Notes to one or more commercial banks or other financial institutions (each, an "assignee") pursuant to an Assignment and Acceptance; provided, that (i) such Bank shall submit in writing to the Obligors' Representative and the Administrative Agent a request that each of the Obligors' Representative and the Administrative Agent consent to the choice of such assignee, (ii) the Obligors' Representative and the Administrative Agent shall consent in writing to the choice of such assignee prior to the time of effectiveness of such assignment, such consent not to be unreasonably withheld or delayed, (iii) such assignment, when added to the contemporaneous assignments made by such Bank under the CSC Agreement and the CMFRI Agreement, must be in an aggregate amount not less than $10,000,000, (iv) such assignment shall be made pro rata between such Bank's Commitment, such Bank's CSC Commitment and such Bank's CMFRI Commitment based on the relationship of each such Commitment to such Bank's Aggregate Commitment, (v) the parties to each assignment shall execute and deliver to the Administrative Agent, for its approval, acceptance and recording in the books and records maintained pursuant to Section 12.05(f) hereof an Assignment and Acceptance, together with a processing and recordation fee of, when added to the processing and recordation fee under the contemporaneous assignments under the CSC Agreement and the CMFRI Agreement, $3,500 and (vi) in the event such Bank was party to this Agreement on the Effective Date, after giving effect to such assignment, such Bank's Aggregate Commitment shall be at least $10,000,000. Upon such execution, delivery, approval, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto, and to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Bank hereunder and under the 36 Notes and (y) the Bank assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations hereunder and under the Notes. Any Bank making an assignment hereunder shall promptly notify the Obligors' Representative of the effectiveness thereof. In the event of any such assignment, the Obligors shall, against receipt of the existing Note of the Bank assignor, issue a new Note to the Bank assignee and, in the case of a partial assignment, to such Bank assignor, in either case appropriately reflecting such assignment. (e) By executing and delivering an Assignment and Acceptance, the Bank assignor hereunder and the assignee thereunder shall confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Bank makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such assigning Bank makes no representation or warranty with respect to the financial condition of any Obligor or the performance or observance by any Obligor of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Sections 8.04 and 9.01 of the CMFRI Agreement and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Administrative Agent, such assigning Bank or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto; and (vi) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Bank. (f) The Administrative Agent shall maintain books and records in which shall be recorded (i) the names and addresses of the Banks and the Commitments of, and principal amount of Obligations owing to, each Bank from time to time; (ii) all other appropriate debits and credits as provided in this Agreement, including, without limitation, all interest, fees (including attorneys' fees and disbursements to the extent reimbursable hereunder), expenses, charges and other Obligations; and (iii) all payments of Obligations made by the Obligors or for the Obligors' account. All entries in such books and records shall be made in accordance with the Administrative Agent's customary accounting practices as in effect from time to time. The Administrative Agent will render a quarterly statement to the Obligors' Representative detailing all relevant transactions for billing purposes. Each and every such statement shall be deemed final, binding and conclusive upon the Obligors in all respects as to all matters reflected therein (absent manifest error), unless the Obligors' Representative, within 15 days after the date such statement is rendered, delivers to the Administrative Agent written notice of any objections which the Obligors may have to such statement. In that event, only those items expressly objected to in such notice shall be deemed to be disputed by the Obligors. Notwithstanding the foregoing, the Administrative Agent's entries in the books and records evidencing Loans and 37 other financial accommodations made from time to time shall be final, binding and conclusive upon the Obligors (absent manifest error) as to the existence and amount of the Obligations recorded in such books and records. (g) The Administrative Agent shall maintain at the applicable address for notices as determined in accordance with Section 12.02 hereof a copy of each Assignment and Acceptance delivered to and accepted by it and shall record in such books and records the names and addresses of each Bank and the Commitment of, and principal amount of the Loans owing to, such Bank from time to time. The Obligors, the Guarantors, the Administrative Agent and the Banks may treat each Person whose name is so recorded as a Bank hereunder for all purposes of this Agreement. (h) If any Bank (or, if such Bank has participated in any part of its Loans or Commitment, any of such Bank's participants) does not agree with a proposal of the Obligors for an amendment, waiver or consent in respect of an issue described in the penultimate sentence of 12.05(c) hereof, the Obligors may require that such Bank (and each of its participants, if any) transfer all of its right, title and interest under this Agreement, the CSC Agreement and the CMFRI Agreement and such Bank's Note issued hereunder, its note issued under the CSC Agreement and its note issued under the CMFRI Agreement to any Person (a "Proposed Bank") identified by the Obligors who agrees to assume the obligations of such Bank for a consideration equal to the outstanding principal amount of such Bank's Loans, CSC Loans and CMFRI Loans, together with interest thereon to the date of such transfer and all other amounts payable hereunder, under the CSC Agreement and under the CMFRI Agreement to such Bank on or prior to the date of such transfer (including any fees accrued hereunder and any amounts which would be payable under Section 5.05 hereof (or the equivalent provisions of the CSC Agreement and the CMFRI Agreement) as if all of such Bank's Loans, CSC Loans and CMFRI Loans were being prepaid in full on such date). Subject to the execution and delivery of such instruments and agreements relating to such transfer as the Banks (including the Proposed Bank and such Bank) shall request, such Proposed Bank shall be a "Bank" for all purposes hereunder. (i) A Bank may furnish any information concerning any of the Obligors or any of their Subsidiaries or Affiliates in the possession of such Bank from time to time to assignees and participants (including prospective assignees and participants). (j) Notwithstanding anything in the foregoing to the contrary, (x) each Bank may, without complying with any restrictions set forth in this Section 12.05, sell a participation or assign all or any part of its rights and obligations under such Bank's Commitment under this Agreement and Notes to any affiliate of such Bank, provided that the Obligors' Representative shall consent to the choice of such affiliate, such consent not to be unreasonably withheld or delayed, and provided, however, that any participation or assignment made by such affiliate to a non-affiliate must be effected contemporaneously with its other affiliates such that the non-affiliate participant or assignee holds pro rata amounts of the Commitment, the CSC Commitment and the CMFRI Commitment as if such participation or assignment had been made by such Bank; and (y) each Bank may at any time, without complying with any restrictions set forth in Section 12.05, assign all or any portion of its rights under this Agreement and its Note to a Federal Reserve Bank, provided that such assignment shall not release the Bank assignor from its obligations under this Agreement. 38 Section 12.06 Survival. The obligations of the Obligors under Sections 5.01, 5.05 and 12.03 hereof shall survive the repayment of the Loans. Section 12.07 Conditions to Effectiveness. This Agreement shall become effective on the first day (the "Effective Date") on which (i) this Agreement shall have been duly executed by the parties hereto and (ii) the conditions precedent to the initial Loans under Article VII hereof shall have been satisfied, at which time the Existing Credit Agreement shall be amended and restated by this Agreement. If no Effective Date shall occur, the Existing Credit Agreement shall remain in full force and effect. Section 12.08 Liability of General Partners and Other Persons. No general partner of any Subsidiary of any Obligor which is a partnership, joint venture or joint adventure shall have any personal liability in respect of such Subsidiary's obligations under this Agreement or the Notes by reason of his, her or its status as such general partner. In addition, no limited partner, officer, employee, director, stockholder or other holder of an ownership interest of or in any Obligor or any Subsidiary of any Obligor or any partnership, corporation or other entity which is a stockholder or other holder of an ownership interest of or in any Obligor or any Subsidiary of any Obligor shall have any personal liability in respect of such obligations by reason of his, her or its status as such limited partner, officer, employee, director, stockholder or holder. Section 12.09 Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Agreement by signing any such counterpart. Section 12.10 Waiver. THE OBLIGORS, THEIR SUBSIDIARIES, THE ADMINISTRATIVE AGENT AND THE BANKS HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH ANY OF THEM IS A PARTY INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, THE NOTES OR THE RELATIONSHIP ESTABLISHED HEREUNDER. Section 12.11 Entire Agreement. This Agreement and the Notes embody the entire agreement among the Obligors, their Subsidiaries and the Banks and supersede all prior agreements, representations and understandings, if any, relating to the subject matter hereof and thereof. Section 12.12 Governing Law. This Agreement and the Notes shall be governed by, and construed in accordance with, the law of the State of New York. Section 12.13 Captions, Etc. Captions, section headings and the table of contents appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement. Section 12.14 Waiver of Certain Defenses. The obligations of each Obligor to pay amounts hereunder and under the Notes in accordance with the terms hereof and thereof shall survive irrespective of the validity and enforceability of this Agreement or the Notes, or the obligations of, any other Obligor hereunder or thereunder and any other circumstance that might 39 otherwise affect the liability of such other Obligor. The obligations of each Obligor under this Agreement shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of any other Obligor is rescinded or must be otherwise restored by any holder of the obligations guaranteed hereunder whether as a result of any proceedings in bankruptcy or reorganization or otherwise and the Obligors agree that they will indemnify the Banks and the Administrative Agent on demand for reasonable costs and expenses (including, without limitation, fees of counsel) incurred by the Banks or the Administrative Agent in connection with such rescission or restoration. Section 12.15 Release; Acceptance of Release. (a) Release. (i) Each Obligor hereby releases each other Obligor from all, and agrees not to assert or enforce (whether by or in a legal or equitable proceeding or otherwise), any "claims" (as defined in Section 101(5) of the Bankruptcy Code), whether arising under applicable law or otherwise, to which such Obligor is or would at any time be entitled by virtue of its obligations under the Notes or this Agreement or any payment made pursuant hereto, including any such claims to which such Obligor may be entitled as a result of any right of subrogation, exoneration or reimbursement. (ii) To the extent not released by the Obligors under Section 12.14(a)(i), each Obligor agrees that it shall not be entitled to any rights of subrogation, exoneration, reimbursement and contribution in respect of any obligations hereunder until payment in full of all of the Obligations. (b) Acceptance of Release. (i) Each Obligor hereby accepts the releases effected by Section 12.14(a) hereof and agrees not to restore or attempt to restore any of the rights thereby released. (ii) Each Obligor hereby accepts the release effected by Article VI and agrees not to restore or attempt to restore any of the rights thereby released. Section 12.16 Authorization of Third Parties to Deliver Information and Discuss Affairs. Each Obligor hereby confirms that it has authorized and directed each Person whose preparation or delivery to the Administrative Agent or the Banks of any opinion, report or other information is a condition or covenant under this Agreement (including under Article VII and Article VIII) to so prepare or deliver such opinions, reports or other information for the benefit of the Administrative Agent and the Banks. The Obligors agree to confirm such authorizations and directions provided for in this Section 12.15 from time to time as may be requested by the Administrative Agent. Section 12.17 Termination of Existing Credit Agreement. The Existing Credit Agreement is hereby terminated. Section 12.18 Joint and Several Obligations. The Obligations shall be the joint and several obligations of the Obligors, and all payments in respect of the Obligations shall be made by the Obligors jointly and severally. 40 Section 12.19 Acknowledgement. The Obligors hereby acknowledge that neither the Administrative Agent nor any Bank has any fiduciary relationship with or fiduciary duty to the Obligors arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Administrative Agent and the Banks, on the one hand, and each of the Obligors, on the other hand, in connection herewith and therewith is solely that of debtor and creditor. 41 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. OBLIGORS CSC TKR, INC., for itself and as General Partner of KRC/CCC Investment Partnership CABLEVISION OF BROOKHAVEN, INC. CABLEVISION OF OAKLAND, INC. CABLEVISION OF PATERSON, INC. CSC TKR I, INC. UA-COLUMBIA CABLEVISION OF WESTCHESTER, INC. By ----------------------------------------------- Name: Title: of each of the above-named six corporations GUARANTORS TKR CABLE COMPANY OF RAMAPO, INC. TKR CABLE COMPANY OF WARWICK, INC. By ----------------------------------------------- Name: Title: of each of the above-named two corporations KRC/CCC INVESTMENT PARTNERSHIP By: CSC TKR, Inc., as General Partner Commitment $64,285,714.30 TORONTO DOMINION (TEXAS), INC., as Arranging Agent, Administrative Agent and Bank By ----------------------------------------------- Name: Title: THE BANK OF NEW YORK, as Managing Agent By ----------------------------------------------- Name: Title: $50,000,000 THE BANK OF NEW YORK COMPANY, INC., as Bank By ----------------------------------------------- Name: Title: $50,000,000 THE BANK OF NOVA SCOTIA, as Bank and Managing Agent By ----------------------------------------------- Name: Title: $50,000,000 THE CANADIAN IMPERIAL BANK OF COMMERCE, as Bank and Managing Agent By ----------------------------------------------- Name: Title: 2 Commitment $50,000,000 NATIONSBANK, N.A., as Bank and Managing Agent By ----------------------------------------------- Name: Title: $50,000,000 THE CHASE MANHATTAN BANK, as Bank and Managing Agent By ----------------------------------------------- Name: Title: $40,000,000 BANK OF MONTREAL, CHICAGO BRANCH, as Bank and Agent By ----------------------------------------------- Name: Title: $40,000,000 BARCLAYS BANK PLC, as Bank and Agent By ----------------------------------------------- Name: Title: $40,000,000 FLEET BANK, N.A., as Bank and Agent By ----------------------------------------------- Name: Title: 3 Commitment $40,000,000 ROYAL BANK OF CANADA, as Bank and Agent By ----------------------------------------------- Name: Title: $32,857,142.86 MELLON BANK, N.A., as Bank and Co-Agent By ----------------------------------------------- Name: Title: $28,571,428.57 BANKBOSTON, N.A., as Bank and Co-Agent By ----------------------------------------------- Name: Title: $28,571,428.57 BANQUE PARIBAS, as Bank and Co-Agent By ----------------------------------------------- Name: Title: By ----------------------------------------------- Name: Title: 4 Commitment $28,571,428.57 CREDIT LYONNAIS, as Bank and Co-Agent By ----------------------------------------------- Name: Title: $28,571,428.57 THE FIRST NATIONAL BANK OF CHICAGO, as Bank and Co-Agent By ----------------------------------------------- Name: Title: $28,571,428.57 SOCIETE GENERALE, NEW YORK BRANCH, as Bank and Co-Agent, By ----------------------------------------------- Name: Title: $21,428,571.43 FIRST UNION NATIONAL BANK By ----------------------------------------------- Name: Title: $21,428,571.43 PNC BANK, NATIONAL ASSOCIATION By ----------------------------------------------- Name: Title: 5 Commitment $14,285,714.29 ABN AMRO BANK N.V. By ----------------------------------------------- Name: Title: By ----------------------------------------------- Name: Title: $14,285,714.29 COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE By ----------------------------------------------- Name: Title: By ----------------------------------------------- Name: Title: $14,285,714.29 UNION BANK OF CALIFORNIA, N.A. By ----------------------------------------------- Name: Title: $7,142,857.14 BANK OF HAWAII By ----------------------------------------------- Name: Title: 6 Commitment $7,142,857.14 NATEXIS BANQUE BFCE By ----------------------------------------------- Name: Title: $7,142,857.14 THE DAI-ICHI KANGYO BANK, LTD. By ----------------------------------------------- Name: Title: $7,142,857.14 DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES By ----------------------------------------------- Name: Title: By ----------------------------------------------- Name: Title: $7,142,857.14 THE FUJI BANK LIMITED, NEW YORK BRANCH By ----------------------------------------------- Name: Title: $7,142,857.14 GENERAL ELECTRIC CAPITAL CORPORATION By ----------------------------------------------- Name: Title: 7 Commitment $7,142,857.14 THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED By ----------------------------------------------- Name: Title: $7,142,857.14 THE SUMITOMO BANK, LIMITED By ----------------------------------------------- Name: Title: By ----------------------------------------------- Name: Title: $7,142,857.14 SUMMIT BANK By ----------------------------------------------- Name: Title: - - --------------- $800,000,000.00 8 EX-21 6 SUBSIDIARIES OF CABLEVISION SYSTEMS CORP. SUBSIDIARIES OF CABLEVISION SYSTEMS CORPORATION State of Name Organization - - ---- ------------ CSC Holdings, Inc. Delaware A-R Cable Investments, Inc. Delaware A-R Cable Services, Inc. Massachusetts Rainbow Media Holdings, Inc. New York NYC LP Corp. Delaware Cablevision of New York City - Master L.P. Delaware Cablevision of NYC - Phase I New York Cablevision MFR, Inc. Delaware Regional Programming Partners New York Regional MSG Holdings, LLC New York Madison Square Garden, L.P. Delaware SUBSIDIARIES OF CSC HOLDINGS, INC. A-R Cable Investments, Inc. Delaware A-R Cable Services, Inc. Massachusetts Rainbow Media Holdings, Inc. New York NYC LP Corp. Delaware Cablevision of New York City - Master L.P. Delaware Cablevision of NYC - Phase I New York Cablevision MFR, Inc. Delaware Regional Programming Partners New York Regional MSG Holdings, LLC New York Madison Square Garden, L.P. Delaware EX-23.1 7 CONSENT OF INDEPENDENT AUDITORS CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the registration statement (number 333-44547) filed on Form S-4 of Cablevision Systems Corporation of our report dated March 12, 1999 relating to the consolidated balance sheets of Cablevision Systems Corporation and Subsidiaries as of December 31, 1998 and 1997 and the related consolidated statements of operations, stockholders' deficiency and cash flows and related schedule for each of the years in the three year period ended December 31, 1998 which report appears in the December 31, 1998 annual report on Form 10-K of Cablevision Systems Corporation. Melville, New York March 29, 1999 EX-23.2 8 CONSENT OF INDEPENDENT AUDITORS CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the registration statements (numbers 33-05987, 33-08768, 33-19409, 33-20583, 33-54346 and 333-41349) filed on Forms S-8, the registration statements (numbers 33-29192, 33-33596 and 333-35263) filed on Forms S-3 and in the registration statement (number 333-44547) filed on Form S-4 of CSC Holdings, Inc. of our report dated March 12, 1999 relating to the consolidated balance sheets of CSC Holdings, Inc. and Subsidiaries as of December 31, 1998 and 1997 and the related consolidated statements of operations, stockholders' deficiency and cash flows and related schedule for each of the years in the three-year period ended December 31, 1998 which report appears in the December 31, 1998 annual report on Form 10-K of CSC Holdings, Inc. Melville, New York March 29, 1999 EX-27 9 FINANCIAL DATA SCHEDULE
5 0000784681 CSC Holdings, Inc. and Subsidiaries 1,000 12-MOS DEC-31-1998 DEC-31-1998 173,699 0 223,864 (31,910) 293,310 0 3,773,944 (1,663,105) 5,935,860 0 4,834,608 1,256,339 14 1 (2,824,368) 5,935,860 0 2,941,316 0 1,524,555 577,635 (28,897) 393,008 (239,533) 0 (239,533) 0 0 0 (239,533) 0 0 Not presented as the resultant computation would be a decrease in net loss per share and therefore not meaningful.
EX-27.1 10 FINANCIAL DATA SCHEDULE
5 0001053112 Cablevision Systems Corporation and Subsidiaries 1,000 12-MOS DEC-31-1998 DEC-31-1998 173,826 0 232,103 (34,377) 293,310 0 4,242,975 (1,736,141) 7,061,062 0 5,357,608 0 0 1,515 (2,613,200) 7,061,062 0 3,297,253 0 1,659,537 734,107 (32,110) 426,402 (448,504) 0 (448,504) 0 0 0 (448,504) (3.16) 0 Not presented as the resultant computation would be a decrease in net loss per share and therefore not meaningful.
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