HomeMy WebLinkAbout6.l. Transfer of Ownership from Marcus Cable to Vulcan Cable CITY OF ROSEMOUNT
EXECUTIVE SUMMARY FOR ACTION
CITY COUNCIL MEETING DATE: MARCH 3, 1999
AGENDA: TRANSFER OF OWNERSHIP FROM AGENDA SECTION:
MARCUS CABLE TO VULCAN CABLE CONSENT AGENDA
PREPARED BY: THOMAS D. BURT, CITY ADMINISTRATOR AGEI����:��. � � �
I �=i111
ATTACHMENTS: RESOLUTION, ATTORNEY'S LETTER APPROVED BY:
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Marcus Cable is in the process of being acquired by Vulcan Cable, Inc. and is requesting a transfer of control of
the existing cable television franchise. The attorney has reviewed the transfer, and id does conform to all rules
and regulations, a copy of the attorney's review is provided for your review. Vulcan Cable's sole shareholder is
Paul Allen, co-founder of Microsoft. Mr. Allen's involvement in the Cable Company presents many exciting
possibilities as the future of the communication industry is developed.
Staff recommends approval o f the attached resolution authorizing the transfer with eight conditions identified �
in the resolution.
RECOMMENDED ACTION: MOTION to adopt a RESOLUTION CONDITIONALLY
CONSENTING TO THE TRANSFER OF CONTROL OF AND CERTAIN OWNERSHIP
INTERESTS IN A CABLE TELEVISION FRANCHISEE TO VULCAN CABLE, INC.
COUNCIL ACTION:
Resolution No.
RESOLUTION CONDITIONALLY CONSENTING TO THE TRANSFER OF
CONTROL OF AND CERTAIN OWNERSHIP INTERESTS IN
A CABLE TELEVISION FRANCHISEE TO VLTI,CAN CABLE, INC.
WHEREAS, the cable television franchise (the "Franchise") of the Ciry of
, Minnesota (the "Authority") is currently owned and operated by Marcus Cable
Partners, LLC ("Marcus Cable"); and
WHEREAS, Marcus Cable is owned by Marcus Cable Properties, LLC (MCP); and
WHEREAS, MCP intends to transfer the Authority's cable system to Vulcan Cable, Inc.
("Vulcan") pursuant to that certain First Amendment to Operating Agreement dated August 25,
1998 (the "MCP/Vulcan Agreement"); and
WHEREAS, Vulcan and MCP have represented and agreed that the MCP/Vulcan
Agreement will not alter any existing title, asset ownership, or management agreement of Marcus
Cable and Marcus Cable will continue to hold the Franchise; and
WHEREAS, the Authoriry has received a request for consent to the transfer of MCP and
Vulcan (the "MCP/Vulcan Transfer"); and
WHEREAS, no notice of breach or default under the Franchise has been issued by
Authority within the past 12 months and none is outstanding; and
WHEREAS, the Authority has determined that subject to certain conditions which must
be met, Vulcan possesses the requisite legal, technical and financial qualifications;
NOW, THEREFORE, BE IT RESOLVED, that the MCP/Vulcan Transfer is hereby
consented to by the Authority and permitted conditioned upon:
1. Execution and delivery of a Corporate Guaranry of Vulcan in the form attached
hereto and other suitable instrument acceptable to the Authority of Charter; and
2. Securing all necessary federal,state,and local government waivers,authorizations,
or approvals relating to Vulcan's acquisition and operation of the system to the
extent provided by law; and
3. The successful closing of the Transaction described in the MCP/Vulcan
Agreement; and
4. The willingness of Vulcan to accept the current cable franchise; and
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5. Non-waiver by City of any unknown yet existing franchise non-compliance issues;
and
6. Non-waiver by City of any right to dispute here-to-date unaudited franchise fee
payments; and
7. Non-waiver by City of any right to require franchise fee payments lawfully
imposed on services delivered by the Grantee via the cable system.
8. Reunbursement of all reasonable fee incurred in the Authority's review of the
proposed transaction.
BE IT RESOLVED FURTHER, that nothing herein shall be construed or interpreted to
constitute any approval of, consent to or support for any proceeding cunently pending before the
FCC, or any other federal, state, or local government waivers, authorizations or approvals, other
than that transaction described above.
BE IT RESOLVED FURTHER, that Vulcan may, from time to time, assign, grant or "
otherwise convey one or more liens or security interests in its assets, including its rights,
obligations and benefits in and to the Franchise (the "Collateral") to any lender providing
financing to Vulcan ("Secured Party"), from time to time. Secured Party shall have no duty to
preserve the confidentiality of the information provided in the Franchise with respect to any
disclosure (a)to Secured Party's regulators, auditors or attorneys, (b) made pursuant to the order
of any governmental authority, (c) consented to by the Authority or (d) any of such information
which was, prior to the date of such disclosure, disclosed by the Authority to any third party and
such party is not subject to any conf'identiality or similar disclosure restriction with respect to such
information subject, however, to each of the terms and conditions of the Franchise.
BE IT RESOLVED FURTHER, that following the MCP/Vulcan Transfer, Vulcan may
undergo additional transfers of control which assign or grant or otherwise convey its assets to a
person or entity in which Paul G. Allen holds majority ownership, which is primarily in the cable
communications business and which is aff'iliated with and operated by Charter Communications;
provided that Vulcan shall no less than thirty (30) days prior to the effective date of such transfer
inform the Municipality in writing of any such change.
BE IT RESOLVED FiJRTHER, that this Resolution am�nds by replacement and
supercedes any prior Resolution concerning these matters.
ADOPTED this day of , 1999.
Mayor
ATTEST:
City Clerk U:\cable\3-CITIESWpple Valley Vulcan Resoludonll2.wpd
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CORPORATE GUARANTY
OF
WLCAN CABLE, INC.
This Corporate Guaranty("Guaranty")is executed as of , 1999,by
Vulcan Cable, Inc. ("Guarantor"), for the benefit of the City of • , 11Nlinnesota
("Authoriry").
WITNESSETH:
WHEREAS, pursuant to the cable television franchise (the "Franchise") between the
Authority and Marcus Cable Partners, LLC ("Marcus"), a wholly owned subsidiary of Marcus
Cable Properties, LLC ("MCP"), and certain agreements, understandings and Franchise
amendments related thereto, Marcus has certain obligations related to the provision of cable
television and related services for the Authority's citizens; and
WHEREAS, Guarantor has proposed a transfer whereby the cable television systems
operated and managed by MCP will be transferred to Guarantor or a subsidiary thereof and the
transfer will result in Guarantor or a subsidiary thereof owning and controlling Marcus; and
. WHEREAS, the Authority's consent to the change of control of Marcus which will result
from the transfer is required; and
WHEREAS, the Authority is not willing to consent to the change of control of MCP
which will result from the transfer unless the Guarantor unconditionally guarantees the payment,
obligations and performance of Marcus pursuant to the terms of the Franchise and certain
agreements, understandings and Franchise amendments related thereto.
NOW, THEREFORE, as a condition of Autliority's consent to the change of control of
MCP, the parties do hereby agree as follows:
1. Guarantor irrevocably and unconditionally guarantees to the Authority or its
successor and assigns prompt and satisfactory payment and performance by Marcus of the
Franchise and those certain agreements, understandings and Franchise amendments related
thereto, and all applicable federal, state and local laws, ordinances and regulations.
2. This Guaranty shall be effective upon the opening of business on the date when the
transfer of MCP and Guarantor or a subsidiary thereof is closed, and shall run throughout the
term of the Franchise and any renewal or extension thereof, except that this Guaranty shall
terminate at such earlier tune that Guarantor lawfully transfers ownership or control of Marcus
or the franchise-holding entity in accordance with the Franchise and applicable federal, state and
local law, including receipt of consent from Authoriry for such transfer.
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3. In the event that Guarantor should breach or fail to tunely perform any of the
obligations required by this Guaranty, Guarantor shall pay Authority all costs and expenses
(including court costs and attorneys' fees) incurred by Authority in the successful enforcement
hereof.
4. Guarantor represents and warrants that the execution, delivery and performance by
Guarantor of this Guaranty and the consummation of the transactions contemplated hereunder do
not, and will not, contravene or conflict with any law, statute or regulation whatsoever to which
Guarantor is subject or constitute a default(or an event which with notice or lapse of time or both
would constitute a default) under, or result in the breach of, any indenture, mortgage, deed of
trust, charge, lien, or any contract, agreement or other instrument to which Guarantor is a party
or which may be applicable to Guarantor. This Guaranty is a legal and binding obligation of
Guarantor and is enforceable in accordance with its terms, except as limited by bankruptcy,
insolvency or other laws of general application relating to the enforcement of creditors' rights.
5. The Guarantor agrees that no failure to exercise, and no delay in exercising, on the
part of the Authority, any right hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise thereof preclude any other or further exercise thereof or the exercise of any �
other right. The rights of the Authority hereunder shall be in addition to all other rights provided
by law. No modification or waiver of any provision of this Guaranty, nor consent to departure
therefrom, shall be effective unless in writing and no such consent or waiver shall extend beyond
the particular case and purpose involved. No notice or demand given in any case shall constitute
a waiver of the right to take other action in the same, similar or other instances without such
notice or demand.
6. This Guaranty shall be governed by and construed in accordance with the laws of
the State of Minnesota and the applicable laws of the United States of America.
7. This Guaranty may be amended only by an instrument in writing executed by the
party or an authorized representative of the party against whom such amendment is sought to be
enforced.
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed by its
authorized officers as of the day and year first above written.
ViJLCAN CABLE, INC.
By
Title
U:\cable\3-CITIESVIpple Valley Vulcan GUARANTY.wpd
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BERNICK AND LIFSON
A PROFESSIONAL ASSOCIATION
ATTO R N EYS AT LAW
NEAL J. SHAPIRO SUITE 1200, TNE GOLONNADE tAL50 ADMiT7ED IN WISCONSIN
SAUL A. BERNICK� �AL50 CERTIFIED PUBLIC ACCOUNTANT
5500 WAYZATA BOULEVARD . 'AL50 ADMITTED IN FIORIDA
THOMAS D. CREIGHTON MINNEAPOLIS, MINNESOTA 55416-1270
SCOTT A. LIFSON
LEGAL ASSISTANT
DAVID K. NIGNTINGALEt TELEPHONE (612) 546-1200 KATHRYN G. MASTERMAN
PAUL J. OUAST� FACSIMILE (612) 546-1003 '
ROBERT J.V.VOSE
WILLIAM 5. FORSBERG��
February 19, 1999
Mr. Charles Grawe Mr. John Erar
Assistant to City Administrator Administrator
Apple Valley Administration Department City of Farmington
14200 Cedar Avenue South 325 Oak Street
Apple Valley, Minnesota 55124 Farmington, Minnesota 55024-1358
Mr. Thomas Burt Mr. Scott Neal
Administrator City of Northfield
City of Rosemount 801 Washington St.
P.O. Box 510 Northfield, MN 55057-2598
Rosemount, Minnesota 55068-0510
Re: Cities of Apple Valley, Farmington, Rosemount and Northfield, Minnesota
Transfer of Ownership
Gentlemen:
Enclosed please find the Report and Resolution for your adoption.
Please do not hesitate to contact me with any questions.
Yours truly,
BERNICK AND LIFSON, P.A.
��������
FEB � ' 1�99 `� ` �' ��1-�-
Robert J. V. Vose
CITY OF f�OS�A�O��fT
Enclosures
cc: Mr. Rollie Bible, Citizen's Committee, City of Apple Valley
BERNICK AND LIFSON, P.A.
SUITE 1200, THE COLONNADE
5500 WAYZATA BOULEVARD
MINNEAPOLIS, MN 55416 •
TEL. (612)546-1200
FAX(612)546-1003
MEMORANDUM
TO: City of Apple Valley, Minnesota
City of Farmington, Minnesota
City of Northfield, Minnesota ��
City of Rosemount, Minnesota
FROM: Thomas D. Creighton, Robert J. V. Vose, and Michael R. Bradley
DATE: February 17, 1999
SUBJECT: Request for Franchise Authority Consent to Assignment or Transfer of
Control of Cable Television Franchise from Marcus Cable Properties,
LLC to Vulcan Cable, Inc.
REPORT, ANALYSIS AND CONCLUSIONS
I. INTRODUCTION
This report is prepared on behalf of the Cities of Apple Valley, Farmington, Northfield
and Rosemount,Minnesota(collectively "Authority"). On or about September 1, 1998, the Cities
of Apple Valley, Farmington and Rosemount received an FCC 394 Application for Franchise
Authority Consent to Assignment or Transfer of Control of Cable Television Franchise ("FCC
394")from Marcus Cable Properties, LLC ("MCP")to Vulcan Cable, Inc. ("Vulcan"). The City
of Northfield received the FCC 394 on or about September 8, 1998. The transfer is proposed to
be completed as follows:
Marcus Cable Properties, LLC ("MCP") and Vulcan Cable, Inc. ("Vulcan") entered into
an Operating Agreement dated June 9, 1998. MCP and Vulcan are partners of Marcus
Cable Company, L.P. ("MCC"), a Limited Partnership. MCC owns Marcus Cable
Operating Company ("MCOC"), which owns the cable system in question. Pursuant to
the Operating Agreement, MCP and Vulcan agreed to convert MCC to Marcus Cable
Company, LLC ("Marcus"), a Limited Liability Company. The manager. named in the
operating agreement was MCP. However, the manager was changed to Vulcan in the First
Amendment to Operating Agreement August 25, 1998. Pursuant to the amended
agreement, Vulcan will operate Marcus, and thus Vulcan will become the controlling
parent of the franchisee, Marcus Cable Partners, LLC ("franchisee").
After receiving the FCC 394, the Authority retained our firm to conduct a review of the FCC 394.
The local franchise, state law, federal law, and FCC rules all apply to this transfer. The
franchise requires that the Authority review the transfer pursuant to the same standards used to
award the original franchise. Pursuant to the Cable Communications Policy Act of 1984, as �
amended by the Cable Protection and Competition Act of 1992 and the Telecommunications Act
of 1996 ("Cable Act"), a city has a 120 day review period from the date of receipt of FCC 394,
together with all exhibits, and any additional information required by the terms of the Franchise
Agreement or operative state and local law. 47 U.S.C. sec. 537; See also, 47 C.F.R. 76.502.
Federal law stipulates that the 120 day review period begins upon submission of all information
required or requested pursuant to the franchise. Subsequent to the receipt of the FCC 394,
additional information was required of Vulcan. Our firm prepared a Request for Information and
delivered it to Vulcan on October 10, 1998. Vulcan responded to our request on December 22,
1998. Attached hereto and incorporated herewith as Exhibit 1 is a copy of Vulcan's response to
our request. The review period arguably ends on or about April 20, 1999. Absent Authority
action, the transfer will be deemed approved by operation of federal law.
The purpose of this report is to provide the Authority with an understanding of the
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transaction, the standard for review, our analysis and conclusions.
II. STANDARD OF REVIEW
At the time of awarding the original franchise and in subsequent transfers of the franchise,
the Authority considered and approved the technical ability,financial capacity, legal qualifications
and character of the original and subsequent owners of the cable systems, as well as other
appropriate factors. The same considerations apply to the current review. The sources of
information used in evaluating these factors included the FCC 394, its exhibits, the current
franchise ordinance, various FCC rules and regulations regarding cable communications systems,
state and federal law, and various subsequent written responses and responses to requests for
documents from Vulcan.
The Authority's task in this process,is to review the information provided regarding the
transfer and to approve or deny the transfer. The Authority has the express right to approve or
disapprove this transfer. The standard of review is that the Authority's consent shall not be
unreasonably withheld. For the purpose of determining whether it will consent to the transfer,
the Authority must make inquiry into the legal, technical and financial qualifications and other
appropriate factors regarding the party acquiring the franchise or a controlling interest in the
franchisee, in this case Vulcan, and its affiliates and agents where applicable, as well as other
appropriate factors.
In analyzing the transaction, the Authority must consider whether Vulcan and associated
entities meet all of the criteria originally considered in the granting of the original franchise.
Note, however, that this analysis is not a comparison between Marcus and Vulcan. Rather, this
analysis is an application of factors to determine whether Vulcan satisfies the standards to the
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reasonable satisfaction of the Authority.
The Authoriry should focus on the following factors in determining whether to approve
or deny the transfer:
1, Legal and character quali�cations of Vulcan and its equity partners;
2, Technical ability of Vulcan and its operational staff;
3. Financial stability and qualifications of Vulcan and its equity partners; and
4, Other appropriate factors.
The Authority also must consider the following provision of the Cable Act:
Any state or franchising authority may not prohibit the ownership or control of a cable
system by any person because of such person's ownership or control of any other media
of mass communications or other media interests. Nothing in this section shall be
construed to prevent any State or franchising authority from prohibiting the ownership or
control of a cable system in a jurisdiction by any person (1) because of such person's
ownership or control of any other cable system in such jurisdiction, or(2)in circumstances
in which the State or franchising authority determines that the acquisition of such a cable
system may eliminate or reduce competition in the delivery of cable service in such
jurisdiction.
47 U.S.C. sec. 533(d).
This office has conducted an extensive review of all relevant materials on behalf of the
Authority. This report is a "shorthand" synthesis of that review in an attempt to fully inform the
Authority without overwhelming the decision making body with detail and minutia. Obviously,
our review extended far beyond the summary of this report, and we will be available to further
expand on this summary should the Authority have any questions.
III. DESCRIPTION OF TRANSACTION
It is necessary to understand the corporate structuring of the transaction to determine
whether such structure is lawful, but also to understand the financing and to establish which
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entity's technical qualifications should be reviewed.
A. Background
In April 1998, Vulcan Cable, Inc., invested in Marcus Cable through the purchase of
passive limited partnership interests in various Marcus parent company entities, and Vulcan's
Chairman and sole shareholder, Paul G. Allen, purchased non-voting common stock in Marcus
Cable Properties, Inc., the ultimate general partner in the Marcus corporate organization.
Notwithstanding the Vulcan investment, there was no change of ownership or control of Marcus
Cable Partners, LLC the current franchisee company, ("franchisee"). The franchisee continues
to hold the Authority's cable franchise and continues as the operator of the cable television
system. As before, the parent company of the local franchisee continues to be Marcus Cable
Operating Company. Control of the franchisee and all of the intermediate parent companies, as
has always been the case, continues to reside with Marcus Cable Properties, Inc., over which
Jeffrey A. Marcus retains control through voting shares giving him the sole power to vote for
directors and thereby control the Board of the ultimate parent, Marcus Cable Properties, Inc.
Authorities objected to this change of control without required approval. If the Vulcan
transfer is approved, the Authorities will not need to sustain their objections to original change
of control. In terms of the Marcus Cable corporate structure, the companies in which Vulcan
purchased limited partnership interests and Mr. Allen purchased non-voting stock are upper tier
companies, none of which directly owns or controls the franchisee. After the consummation of
certain transactions,the company's structure will change as reflected in E�ibit 2, attached hereto
and incorporated herewith, with the current franchisee continuing to hold the franchise, but with
Vulcan Cable, Inc. assuming indirect control of each franchisee by becoming the manager of
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Marcus Cable Company, LLC, a Marcus parent entity currently under the ultimate control of
Jeffrey Marcus.l
B. Transfer of Control
Just as before the initial Vulcan investment, the franchisee is under the direct control of
Marcus Cable Operating Company, LLC, which, in turn, is under the direct control of Marcus
Cable Company, LLC. Marcus Cable Company,LLC is under the direct control of Marcus Cable
Properties, LLC. Marcus Cable Company, LLC is currently owned in part by Marcus Cable
Properties, LLC ("Transferor"), its managing member, and in part by Vulcan Cable, Inc.
("Transferee"), its non-managing member. After a number of steps and conditions are met,
Marcus Cable Properties, LLC ("Transferor") will relinquish its control over the franchisee's
, parent, Marcus Cable Company, LLC, by substituting Vulcan Cable ("Transferee") as the
manager. Thus, Vulcan will become the indirect and controlling parent of the franchisee, and
Vulcan will be able to direct the affairs of the franchisee.2
'In order to achieve certain efficiencies in structure. as part of an on-going overall
company reorganization,both the franchise holder and Marcus Cable Operating Company recently
took advantage of the fairly recent development in Delaware law permitting a limited partnership
to convert to a limited liability company. Each, thus, bears the initials "LLC" rather than "LP"
after their names. The Delaware Limited Liability Company Act provides that for all purposes.
the entity remains the same before and after conversion and all the rights, privileges, and powers
of the limited partnership vest in the lunited liability company. As such, the conversions
constituted no change of organization, ownership or control. •
ZAt the same time or shortly thereafter, Paul G. Allen's non-voting stock in Marcus Cable
Properties, Inc. will be converted into voting stock, and Allen will acquire the remaining voting
stock of Jeffrey Marcus in Marcus Cable Properties, Inc. Allen's acquisition of Marcus' voting
stock in Marcus Cable Properties, Inc. at such time will have no effect on the transfer of control
of the franchisee company contemplated by this Form 394 or of Vulcan's control of the franchisee
company.
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C. Future Management of the Franchisee
On October 6, 1998,Marcus Cable Properties, Inc. entered into a Management Consulting
Agreement with Charter Communications, Inc. ("Charter"). Pursuant to the agreement, Charter
will take over management responsibilities for all cable televisions systems currently operated and
managed by Marcus Cable Properties, Inc. In addition, Paul G. Allen, owner of Vulcan, recently
entered into an agreement to acquire Charter Communications, Inc. and affiliated companies
("Charter"). Charter has more than one million subscribers in 18 states. It is currently
contemplated that after the transfer of control of Marcus and the acquisition of Charter are
complete, both companies' cable systems and the combined subscriber base of more than two
million will be combined under the management of current Charter executives as well as some
current Marcus executives and personnel.
IV. LEGAL OUALIFICATIONS
The le�al qualifications standard relates primarily to the analysis of whether Vulcan is duly
organized and authorized to own the cable system via the subsidiary structuring discussed above.
As stated above, Vulcan will become the indirect and controlling parent of the franchisee.
However, there are numerous lower level subsidiary owners within this ultimate ownership
structure. We have reviewed this corporate structuring and the necessary transactions related
thereto. All necessary corporate entities are or will be duly organized. We have concluded that
all of the entities necessary to be qualified to transact business in Minnesota are so qualified.
Additionally, we have no concerns or objections to the current proposed corporate structure.
However, the legal analysis also involves an analysis of whether the overall transaction
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itself complies with federal, state and local law. We have reviewed the Operating Agreement for
Marcus Cable Company, LLC dated as of June 9, 1998 and First Amendment to Operating
Agreement for Marcus Cable Company, LLC, dated August 25, 1998 and Management
Consulting Agreement dated October 6, 1998, by and between Marcus Cable Properties, Inc. and
Charter Communications, Inc. Based upon our thorough review of said documents, it is our
opinion that the proposed transaction does not violate Federal, State or local law. Therefore, the
Authority may not withhold approval of the application based upon legal qualifications standard
of review, conditioned of course upon Vulcan receiving all necessary state and federal approvals
and authorizations.
V. TECHNICAL ABILITY
, The technical ability factor relates to the technical expertise and experience of Vulcan in
operating and maintaining a cable system. This analysis focuses on the current and former
i experience of the proposed owner.
Vulcan Cable, Inc. ("Vulcan") is owned by Microsoft co-founder, Paul G. Allen. In
addition to its investment in Marcus Cable Company, L.P. ("MCC"), Vulcan recently entered into
an agreement to purchase controlling interest in Charter Communications of St. Louis, Missouri.
After gaining operating control of MCC and Charter Communications, Vulcan will combine the
operations of MCC and Charter to form the nation's seventh largest Multiple System Operator
� ("MSO"). The following is a summary of the technical qualifications of both MCC and Charter
with a brief description of how Vulcan will operate the two companies as one. It is expected that
the companies will continue to run on a decentralized basis, as local management will remain in
effect.
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Marcus Cable
Through its operating partnerships, MCC owns and manages cable systems serving a total
of approximately 1,100,000 cable customers located in fourteen states providing service over
approximately 25,000 miles of coaxial and fiber optic cable. MCC is the twelfth largest MSO in
the nation, owning or operating approximately 500 cable systems. MCC was recently named
"1998 Cable Operator of the Year" by Cablevision Magazine.
MCC has one of the lowest monthly service call percentages in the industry and one of the
highest levels of customer satisfaction. In its annual survey of customer service for 1997, J.D.
Power & Associates rated MCC second in the country among all cable operators. According to
Vulcan, MCC strives to maintain high technological standards in its cable television systems on
a cost-effective basis and is constantly upgrading its cable plant to achieve this goal. MCC has
an extensive technical staff of corporate and regional engineers who constantly review the system
operating and technical needs of each system to improve system reliability while expanding the
system bandwidth capabilities to add additional services.
Currently, MCC is in the process of systematically rebuilding its cable systems so that
within the next three years substantially all existing systems will have a bandwidth of between 450
MHz and 862 MHz. This program should enable MCC to deliver technological innovations to
its customers as such services become commercially viable. For fiscal year 1998, MCC is
projecting approximately$214,300,000 of capital expenditures,of which$152,000,000 is directly
committed to system rebuilds and upgrades. The capital expenditures projected for 1998 will
provide, among other benefits, a substantial increase in channel capacity. MCC is on schedule
to complete the rebuilds and upgrades projected for 1998.
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As part of its upgrade program, certain systems, such as those serving the areas in and
around Ft. Worth/Tarrant County (Texas), Glendale/Burbank (California) and suburban
Birmingham(Alabama)together with selected systems in Wisconsin,Indiana,Tennessee and other
states in which the Company operates cable systems, are being, or have been, upgraded to 750
MHz or 860 MHz with two-way communication capabilities. As part of the rebuild program, the
Company has deployed approximately 4,800 miles of fiber optic cable and upgraded
approximately 15,500 miles of coaxial cable.
As of December 1, 1997, the average channel capacity of the Systems is approximately
77 analog channels with approximately 42% of the homes passed served by systems with 550
MHz or greater bandwidth capacity and approximately 83% of the homes passed served by
systems that utilize addressable technology. MCC's current plan contemplates that by the end of
1998, its systems will have an average capacity of approximately 89 analog channels with
approximately 66% of the homes passed being served by systems with 550 MHz or greater
bandwidth capacity, including more than 50% at 750 MHz or greater, warehoused digital
spectrum of up to 200 MHz in systems serving approximately 52% of the Company's homes
passed and approximately 84% of the homes passed served by systems that utilize addressable
technology. In addition, as part of the upgrade process, two-way communication capability will
be activated past approximately 1,000,000 homes by the end of 1998, which will support
enhanced digital video, high speed data services and other advanced applications.
In addition to allowing increased channel offerings, the expanded bandwidth of the
upgraded systems creates the optimal medium for transmitting vast amounts of information at high
speed. Cable modem technology enables data traffic to be carried at rates up to 100 times faster
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than current telephone modems. MCC has partnered with HSA and @Home, two intemet source
providers dedicated to providing high speed data products and service specifically for cable
television systems, to deploy high speed Internet service to its customers. The HSA and @Home
networks provide high-speed, fully integrated multimedia services to the home by using the cable
television infrastructure and its own architecture. In the home, a high-speed cable modem
connects to a user's personal computer, providing speeds hundreds of times faster than telephone
modems. Through the introduction of this service, MCC will be delivering high-speed interactive
content over its HFC distribution architecture to an estimated 160,000 homes by the end of 1998.
MCC is now deploying cable modems using the @Home service in its Fort Worth, Texas system
and in its system serving University Park and Highland Park, Texas. Upon completion of the
current rebuild in the Dallas/Ft. Worth Metroplex area, scheduled for the end of 1999, @Home .
will be offered to more than 300,000 homes. MCC is also pursuing additional deployment of
Internet access via MCC's HFC plant in systems located in certain of its other operating groups.
MCC is most proud of its leadership role in developing fiber optic educational service
networks. The upgrade of its cable plant, including the utilization of addressable technology and
fiber optic cable, has allowed MCC to enter into arrangements to provide video and data
transmission services to various educational institutions. The MCC technical staff has and will
continue to work with state and instructional television authorities to respond to RFPs and develop
educational service networks. This level of commitment demands that the MCC technical staff
be fully cognizant of new and developing technologies which would enable us to expand our
service capabilities and 'unprove network reliability. This commitment to the future ultimately
benefits each of our customers.
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Charter Communications, Inc.
Charter Communications has grown to be the nation's eleventh largest MSO in five years,
serving approximately 1,100,000 subscribers in eighteen States. By the end of 1998 Charter will
have a network of over 38,000 miles of coaxial and fiber optic cable. Charter is committed to
heavy investment in infrastructure, spending $200 million on cable plant fiber optics to date in
1998. Charter has established a strong record in developing technology as well. In 1997, Charter
introduced Charter Pipeline (TM), a high speed Internet service, to customers in California. In
the Spring of 1998, Charter was the first MSO to launch universal internal access and e-mail
service over cable television.
Charter ranks at the top of the cable industry in all key performance standards and has
achieved customer Growth that is twice the industry average. Like MCC, Charter has an
extensive technical staff of corporate and regional engineers who constantly review the system ,
operating and technical needs of each system to improve system reliability while expanding the
system bandwidth capabilities to add additional services. Charter management is committed to
technology, customer service, investment in education and community support. Charter donates
hundreds of thousands of dollars annually to national charities and local civic and charitable
organizations. In 1997 Charter management won the Ernst & Young Entrepreneur of the Year
Award in the Communications/Entertainment category. As stated above, Charter has entered into
an agreement to Manage all of the cable television systems currently operated and managed by
Marcus Cable Properties, Inc.
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Vulcan Cable Company, Inc.
Paul Allen, owner of Vulcan, owns and invests in a suite of companies exploring the
potential of multimedia digital communications. Allen's business strategy includes encouraging
communications and synergy between his companies for mutual benefit. His primary companies
include Asymetrix Corp., Vulcan Ventures, Inc. and Vulcan Northwest, Inc. located in Bellevue,
Washington and Interval Research Corp. of Palo Alto, Calif. Allen, the owner of the Portland
Trail Blazers NBA team and the NFL's Seattle Seahawks franchises, is a partner in the
entertainment studio DreamWorks SKG and has invested in more than 50 new-media companies.
A co-founder of Microsoft Corporation with Bill Gates in 1975, Allen served as the company's
executive vice president of research and new product development until 1983, the company's
senior technology post. Since 1986, Allen has been investing in leading companies which further
his vision of a Wired World. Allen gives back to the community through the six Allen Charitable
Foundations which support the arts, medical research, forest protection and other charitable needs
in the Pacific Northwest. He is also the founder of the Experience Music Project in Seattle.
According to Vulcan, Paul Allen, through Vulcan, invested in MCC and Charter
Communications to further his dream of a Wired World in which the high-bandwidth data
channels of cable television are merged with the personal computer. Vulcan will consolidate
MCC and Charter headquarters upon gaining control of both companies. Coincident with the
consolidation of headquarters will be a consolidation of senior level management from both
companies. Vulcan is committed to maintaining both companies' commitments to technology,
system improvement and customer service. Both companies bring a wealth of knowledge and
expertise to what will be the consolidated entiry. Vulcan will integrate into the new entity's
13
I
operations plans MCC's plans and projections for system rebuilds and upgrades as well as for
technological deployments as described above.
From a local operational perspective, there will be no change in any of the cable systems
cunently owned and controlled by MCC as a result of the consolidation. Though the franchise
may draw on the expertise of the Corporate staff of the new merged company, Vulcan recognizes
that providing a quality product and good customer service must be accomplished locally. The
office staff who are now responsible for the management and operations of the franchise will
continue to operate as they have in the past.
Since Vulcan is relying on the technical abilities of Marcus and Charter, it is critical that
the Authority aggressively scrutinize any attempts to eliminate local management, and if such does
occur, the Authoriry should attend to details of customer service and technical upgrades to ensure
franchise compliance and compliance with industry standards. Additionally, in light of the current
franchise renewal processes in Authorities, Authorities should carefully administer municipal
oversight of system development to ensure that Vulcan's and Charter's commitment to technical
upgrade are fully carried out in these local systems.
In conclusion, we determine that Vulcan, coupled with Marcus and Charter, will have the
necessary technical abilities. Therefore, we conclude as to the technical ability of Vulcan, that
_ the Authority would not have a reasonable basis to deny the transfer based on the technical ability
of Vulcan.
VI. FINANCIAL STABILITY
The financial stability factor relates to whether Vulcan has the financial resources available
or committed to not only acquire the systems, but also whether its financial plan, as presented,
14
is reasonable and economically viable. In the past, cities have expended considerable resources
in analyzing whether the acquiring entity had sufficient resources to acquire cable systems.
Although the June 30, 1998 Unaudited Balance sheet, Consolidated Financial Statement and
Consolidating Schedules, with Independent Auditors'Report Thereon for December 31, 1996 and
1997 and Notes to Consolidated Financial Statements were reviewed, a detailed analysis of
Vulcan's ability to acquire and close this transaction was not undertaken. Further, these financial
statements indicate the historical financial results of Vulcan. It is assumed that if Vulcan has the
requisite financial resources to acquire and close the transaction, it will close. It is also assumed
that Marcus is a sophisticated commercial entity which has and will continue to engage in a
detailed evaluation and review of the financial ability of Vulcan to close the transaction and,
further, that Marcus' review would be more thorough than that which the Authority could
reasonably undertake. Accordingly,the Authority's consent should be conditioned primarily upon
successful and lawful closing of the transaction.
Of far greater concern is whether Vulcan's financial plan, to the extent presented, is
reasonable and economically viable. In other words, does Vulcan have adequate financial
resources either currently or at its disposal to own and operate these cable systems and comply
with the Authority's franchise. Our firm has reviewed the June 30, 1998 Unaudited Balance
sheet, Consolidated Financial Statement and Consolidating Schedules,with Independent Auditors'
Report thereon for December 31, 1996 and 1997, and Notes to Consolidated Financial Statements.
Since, Vulcan has no operating history, there is no way to adequately determine whether
the financial documents provided by Vulcan will represent the future performance of Vulcan
following the proposed transfer. Therefore, we recommend requiring a performance guarantee
15
from Vulcan and Charter to ensure continuing operation of the system. This performance
guarantee will serve as a guarantee that should the operating entities be unable to fulfill their
franchise obligations, Vulcan would assume responsibility for and fund if necessary all franchise
obligations. A guarantee of Charter is required, because it will manage the franchisee. Absent
a sufficient financial guarantee of performance, we cannot assure the Authority that the �nancial
plan, to the extent presented by Vulcan, is reasonable and economically viable. This is
particularly true given the di�culty in evaluating the liquidity of assets of a major
telecommunications company like Vulcan which could quickly be made available and brought to
bear in the event of a significant franchise non-compliance in the Authority.
Further, since the financial resources of all intermediate entities were not subject to re-
review due to cost sensitivities, absent sufficient financial guarantees of performance from Vulcan
and Charter, we cannot assure the Authority that the financial plan, as presented by Vulcan, is
reasonable and economically viable. Therefore, we advise the Authority that Vulcan has not
presented a financial plan which can be analyzed as reasonable and economically viable
particularly with respect to the intermediate entities. Therefore, a guarantee of performance from
Vulcan and Charter should be required in order to provide the Authority with a sufficient basis
to approve Vulcan's FCC 394.
VII. OTHER RELEVANT FACTORS
Other relevant factors which have been reviewed for the purpose of determining whether
to approve or deny this transfer are contained in the information provided for our review. The
most significant factor to be considered is whether the franchise will remain intact, and whether
Vulcan will agree to comply with all existing franchise requirements,promises and representations
16
of its predecessors. Vulcan has indicated that it will comply with all existing franchise
requirements and obligations. It has not proposed any modifications to the channel capacity or
system design. Vulcan has indicated that it will comply with FCC technical specifications. It will
seek to accommodate each subscriber's request for location of drops and will restore property
damaged during installation. Vulcan does not plan any new types of installation fees, and it has
agreed to comply with all underground installation policies as such are established in existing
franchises. Vulcan will maintain normal business hours for the purpose of receiving customer
complaints. Vulcan has agreed to comply with all existing requirements regarding public,
education, and government access and will continue current channel designations for public,
education and government access channels.
, There has been no adverse finding made or an adverse final action taken by any court or
administrative body with respect to Vulcan in a civil, criminal or administrative proceeding,
brought under the provisions of any law or regulation related to the following: any felony;
revocation, suspension or involuntary transfer or any authorization (including cable franchises)
to provide video programming services; mass media related antitrust or unfair competition;
fraudulent statements to another government unit; or employment discrimination.
Finally, on behalf of the Authority, our firm has demanded that Vulcan pay all of the
Authority's fees incurred as a result of the transfer application as required by the franchise. Any
resolutions regarding FCC 394 adopted by the Authority should include the requirement of
reimbursement of all fees incurred by the Authority.
17
VIII. CONCLUSION
� As a result of the above analysis, we have concluded that the Authority lacks any
reasonable basis to withhold approval of the proposed transfer. Therefore, the Authority should
approve the transfer conditioned upon:
1. The willingness of Vulcan to acknowledge and accept current cable franchise;
2. Receipt of any and all state and federal approvals;
3. Actual closing of the transaction;
4. Receipt of a corporate guarantee from Vulcan and Charter;
5. Non-waiver by Authority of any unknown yet existing franchise non-compliance
issues; "
6. Non-waiver by Authority of any right to dispute here-to-date unaudited franchise
fee payments; ,
7. Non-waiver by Authority of any right to require franchise fee payments on future
services delivered by the Grantee via the cable system; and
8. Payment of all fees incurred in this analysis.
U:\cablel3-CITIES\Apple Valley Vulcan Transfer report#2.wpd
18
LARKIN, HOFFMAN, DALY&LINDGREN, LTD.
ATTORNEYS AT lAW
1500 NORWEST FINANCIAL CENTER
7900 XERXES AVENUE SOUTH
Ja�e E.Bremer BLOOMINGTON,MINNESOTA 55431-1194
OIR.DIAL(812)896-3297 . TELEPHONE(612)835-380�
E-MAILjbremer@Ihdl.com FAX(612)896-3333
� December 21, 1998
Thomas D. Creighton, Esq. , VIA MESSENGER
Bernick and Lifson
Suite 1200, The Colonnade
5500 Wayzata Boulevard
Minneapolis, MN 55416
RE: Municipal Request for Information from Apple Valley,Farmington,Northfield, and
Rosemount, Minnesota regarding Transfer of Control from Marcus Cable Properties,
L.L.C., or Affiliates Thereof, to Vulcan Cable,Inc., or Affiliates Thereof.
Dear Tom: '
In response to the above referenced request,please fmd enclosed the response of Marcus Cable
Properties,L.L.C.
For purposes of this response, defined terms and conditions have the same meaning as given to them in
the FCC Form 394 submission.
'i''nank you for your timely consideration of this transaction. Please feel free to call me with any
questions or comments you may have regarding the enclosed response.
Sincerely,
e E. Bremer, for
LARF�IN, HOFI'MAN,DALY &LINDGREN,LTD. �
Enclosure
cc: Curtis Shaw, Esq.
Donna C. Gregg,Esq.
0452873.01
_ �. � --
u �
�-=EXHIBIT �
� � �
December 21, 1998
MUNICIPAL REQUEST FOR INFORMATION
REGARDING TR.ANSFER OF CONTROL
MARCUS CABLE PROPERTIES,L.L.C.,OR AFFILIATES THEREOF,TO
VIJLCAN CABLE,INC., OR AFFILIATES THEREOF
REGARDING THE FOLLOWIl�tG NZINNESOTA MUrtICIPALITIES IN RESPONSE TO
RECEIPT OF INFORMATION CONTAINED IN FCC FORM 394
CITY OF APPLE VALLEY,MINNESOTA
CITY OF FARMIlVGTON,MINNESOTA
CITY OF NORTHF'IELD,MINNESOTA
CITY OF ROSEMOUNT,MINNESOTA
Prepared by:
Thomas D.Creighton
Robert J.V.Vose
Michael R.Bradley
Bernick and Lifson,P.A.
Suite 1200 The Colonnade
5500 Wayzata Boulevard
Minneapolis,Minnesota 55416
(�12)546-1200
INTRODUCTION
The Cities of Apple Valley,Farmington,Northfield and Rosemount, Minnesota.(hereinafter"Cities") are
in receipt of the FCC Form 394 which was filed on behalf of Vulcan Cable, Inc., and/or subsidiaries
thereof (hereinafter "Transferee"). Some of the information requested herein is duplicative of the
information contained in Form 394 already submitted. Please answer such questions again. The
enclosed format is easier for the lay person to understand in their review and in some instances we wish
to reaffirm your response. Additionally, numerous consultants may be involved in certain portions of
this review, therefore, certain information on the 394 form, has been repeated in sections of these forms
so that those sections can be separately analyzed by those separate consultants.
In an instance where the following material requests information which you may have in a format other
than that provided by the form of the question, please feel free to supply the information in that format
which would afford you the least amount of administrative time in preparation of your responses while
still providing all of the information required by the question. Feel free to attach existing information
and lists which may provide insight to the question, although it has not proven helpful to simply supply
promotional material or prepackaged technical material.
Past respondents to requests for additional information have responded that the applicant "will comply
with all current and future federal, state and local laws." PLEASE BE ADVISED that such a response
is not acceptable herein and may be deemed to be unresponsive in the current inquiry. It is assumed by
all parties that both the Cities and Transferee will comply with all current and future laws. A response
assuring such compliance is therefore redundant. The Cities instead require your response as to your
understanding of your obligation pursuant to the taw which you intend to comply with, and when
possible,a detailed explanation-from you as to how you intend to comply with the law in question. Since
there are often a multitude of "lawful choices" available to a company in any given set of facts, of
particular interest to the Cities would be any information regarding Transferee's intention to perform its
obligations in a manner different than the current owner (Transferor herein). Additionally, since the
Cities are familiar with'different companies and their choices of legal remedies, it is important to the
reviewing Cities that Transferee inform them of the legal choices which Transferee intends to make.
Finally, many questions may relate to existing `.`side agreements" between the Cities and the cunent
operator. The Cities may not only want to know that you will comply with such agreements (since again
that is presumed),but the Cities may want to be sure you are aware of such agreements and that you have
a fundamental understanding of the obligations contained therein which is consistent with the
understanding of the Cities. .
The parties to this transfer are required to use the following forms in addition to the already filed FCC
Form 394 in order to more fully inform the Cities regarding their required analysis.
The Cities herein is affected by the laws of Minnesota. If your response is similarly affected by different
state law,please so designate,or it will be presumed that Minnesota state law affects your response.
In considering the requested transfer, the Cities will consider and review the legal, technical, character
and financial qualifications of the Transferee, together with any requested modifications and any other
factors which the Cities determine reasonably necessary to support a decision regarding the proposed
transfer.
2
Please provide within one week of your receipt of this document twelve(12)of copies of your response .
Please submit the above referenced copies to the following address:
Thomas D.Creighton
Bemick and Lifson,P.A.
Suite 1200 The Colonnade
5500 Wayzata Boulevard .
. Minneapolis,Minnesota 55416
(612)546-1200
The Cities, and anv of their staff or other renresentatives expresslv reserve the ri t to request additional
information of the Transferor or Transferee. Until we have received and reviewed your responses, it will
be impossible to know whether we require additional information. For the nurnose of federal law,please
consider this,vour notice that we have determined that vour 394 filin�was not comnlete and that we do
rec�uire additional information on behalf of our clients.
In the event you have any doubts as to any terms, conditions, or provisions of the enclosed forms, the
cable communications franchises of Cities, any written agreements or amendments which have
developed over the years,a request for information or clarification may be made in writing to:
Thomas D.Creighton
Bemick and Lifson,P.A.
Suite 1200 The Colonnade
5500 Wayzata Boulevard .
Minneapolis,Minnesota 55416
(612)546-1200
A written response to any such request will be made and will be sent to the parties. Only this type of
official response shall be binding upon the Cities. PLEASE TAKE NOTE: The Transferor and
Transferee, by submitting the response to this Request for Information shall have evidenced the fact that
they are aware of any and all such documents, that they have read and understand them, that the
respective predecessors in interest were within their legal authority to enter into such agreements, that
such agreements comply with then current and existing law (federal, state, and local), that no such
agreements exceed any responsibility regarding the payment of franchise fees to the affected
jurisdictions, that the Transferee agrees to comply in all particulazs with such understandings,
-agreements and documents,and the Transferee agrees that it has no unanswered questions with respect to
the aforementioned agreements,understandings,and documents or to the inquiries herein, and shall have
no basis of misunderstanding or future noncompliance.
3
Request for Approval of Transfer of Control
of a Cable Communications System
IDENTTFICATION OF TRANSFEROR
(Some information requested herein is redundant with Form 394, however for analysis purposes it is
helpful to have all of this identifier information in one location. Please submit separate'forms if in fact
there are two transfers,one a stock transfer and the other an asset transfer.)
Name of Transferor Marcus Cable Pronerties,L.L.C.
Address of Transferor 2911 Turtle Creek Boulevard.Suite 1300
Dallas,TX 75219
Telephone 214-521-7898
Fax 214-526-2154
E-mail address
Date December 21. 1998
Please provide the following information for the principal to whom inquiries should be made:
Name Curtis S.Shaw
Fax �314)965-0555
E-mail address cshawna,chartercom.com
Authorized Signature
Date December 21, 1998
4
r
�
IDENTIFICATION OF TRANSFEREE
(Some information requested herein is redundant with Form 394, however for analysis purposes it is
helpful to have identifier information in one location. Please submit separate forms if differences result
due to the distinction between a stock transfer and an asset transfer.)
Name of Transferee Vulcan Cable.Inc.
Address of Transferee 110-110th Avenue.N.E.
Bellewe,Washin�ton 98004
Telephone 425-453-1940
Fax 425-453-1985
E-mail address
Date � December 21. 1998
Please provide the following information for the principal to whom inquiries should be made:
For purposes of this process,please contact:
Name Curtis S.Shaw,Esq.
, c%Jane E.Bremer,Esq.
Telephone 612-896-3297
Fax 612-896-1598
E-mail address �bremer(a�lhdl.com
Authorized Signature
Date December 21,1998
For purposes of these forms and this inquiry, Transferee is directed to review all applicable
provisions of eacisting Cable Communications Franchise Ordinances, all amendments thereto, and
additional agreements of the parties such as, but not limited to, access transfer agreements,
amended agreements, definitive agreements, leases, subleases, channel loan agreements, rate
agreements, FCC opinions related to the parties and franchising authorities hereto, and any
Memoranda of Understanding between the parties hereto. It is presumed that Transferee has access
to and understands the applicable provisions whether specifically or generally referenced herein.
5
FORM A
OWNERSHIP QUALIFICATIONS OF TRANSFEREE
1. Does the proposed ownership structure comply with any and all state and federal restrictions
upon ownership of cable communications systems.
(X•)Yes ( )No
If no,please explain
6
FORM B
CHARACTER QUALIFICATTONS OF TRANSFEREE
1. Has the Transferee (including pazent corporation or subsidiaries, if applicable)or any principall
ever been convicted in a criminal proceeding (felonies or misdemeanors) in wluch any of the
following offenses were charged?
a. Fraud O Yes (X) No
b. Embezzlement ( ) Yes (X) No
c. Tax evasion ( ) Yes (X) No
d. Bribery ( ) Yes (� No
e. Extortion ( ) Yes (X) No
f. Obstruction of justice(or other
misconduct affecting public or judicial
officers'performance of their o�cial
duties) ( ) Yes (X) No
, g. False/misleading advertising ( ) Yes (X) No
h. Perjury ( ) Yes (X) No
I. Anti-trust violations(state and federal) ( ) Yes (X) No
j. Violations of FCC regulations ( ) Yes (X) No
k. Conspiracy to commit any of the
� foregoing offenses ( ) Yes (X) No
2. If"yes",attach separate statement providing specifics such as date,court,sentence or fine,etc.
iFor purposes of this form, "principal" means any officer or director of applicant, and any
person, firm, corporation, partnership,joint venture, or other entity, who or which owns or
controls five (5) percent or more of the voting stock(or any equivalent voting interest of a
partnership or joint venture) of the Transferee. � -
7
FORM C
CABLE HOLDINGS OWNED BY TRANSFEREE
NOTE: It is presumed that much of the information traditionally requested in this form will be supplied
in the Form FCC 394. However, the reviewing authorities reserve the right to further investigate
individual cable holdings and to request additional information related thereto.
Please respond to the following inquiries regarding systems currently held by the Transferee, or as they
may relate to systems which have been previously owned or operated by any principal of the Transferee.
1. Has the Transferee or any principal thereof ever received a cable or telecommunications
franchise violation notice or notice of franchise noncompliance? Has Transferee or any
principal thereof ever been fined or otherwise sanctioned by the holder of a cable or
telecommunications franchise.
( ) Yes (X) No
If yes,please explain
2. Has Transferee or any principal thereof ever filed suit or commenced any administrative
or other adversarial legal proceeding against a franchising authority over issues related to
a cable or telecommunications Franchise or system? ,
( ) Yes � (X) No
If yes,please explain
3. Do any of the systems identified in your Form FCC 394 filing have an institutional
network? If yes, please identify those systems, the length in plant miles of the
institutional network in that system, the services offered on that network, the network
capacity(activated), and any rates charged and for what services.
( ) Yes (X) No
If yes,please explain
* For purposes of this form, "principal" means any o�cer or director of Transferee, and
any person, firm, corporation, subsidiary, joint venture or other entity, who or which
owns or controls five (5) percent or more of the voting stock (or any equivalent voting
interest of a partnership or joint venture) of the Transferee.
** Indicate all political subdivisions served by system (political subdivision and state).
8
FORM D
EXISTING SERVICE AREA AND LINE EXTENSION
1. Does Transferee agree to comply with all existing franchise requirements regazding the
provision of cable television service to subscribers served by currently constructed cable
television plant?
(X)Yes ( )No
If no,please explain
2. Does Transferee agree to comply with ali existing franchise requirements regarding the
expansion of cable television service to areas within the bouiidaries of the franchising
authority which are not currently provided service by e�cisting cable plant?
(X)Yes ( )No �
If no, please explain your proposed line extension policy including rates, time table for
offering services, and conditions. Show how your policies aze based on the cost of the
� , plant needed to reach the azeas.
3. Please provide the identification of the system which is indicative of the most liberal and
most conservative line extension policy in the systems Transferee currently owns or
operates. What would Transferee est�mate is its average line e�ension policy, ie., how
many homes per cable mile are required before Transferee will construct cable plant in
that azea?
This information is not relevant to assessing the Transferee's legal, financial and
� technical qualifications. However, Transferee will comply with the terms of the
franchises.
4. Does the Transferee agree to offer those services and rates proposed for the existing
service area to any area which reaches or exceeds an average density as set forth in the
current line extension policy of the franchise?
(�Yes . ( )No
The Transferee will comply with the franchise terms and conditions.
9
If no,please explain.
5. Has Transferee or any of its owners or principals ever been sanctioned or otherwise
penalized by any level of government for failure to comply with construction standards
applicable to any currently or formerly owned or operated cable system? �
( }Yes (�No
If yes,please explain.
6. With regard to individual residential subscriber installations, describe policies for placing
cable in homes, including the ability of the subscriber to determine where the drop will
enter the dwelling, restorations of property disturbed or damaged during the installation,
etc. If any additional fees will be charged for other than standard installations, and such
fees are different from those currently in existence in the franchise territory, please list
such fees, policies, and procedures. (You may attach already prepared policy or fee
statements.)
The Transferee works with the cnstomer to determine drop locations and repairs
any uroperty disturbed or damaged during the installation process in accordance
with the franchise and/or its installation policies. There are no current plans to
increase rates as a result of this transaction.
7. Has Transferee or any of its owners or partners ever been sanctioned or otherwise
penalized by any level of govemment for failure to comply with subscriber installation
standazds applicable to any currently or formerly owned or operated cable systems?
( ) Yes (�No
�If yes,please e�lain in detail.
8. Underground Policy
a. Does Transferee agree to constiuct cable distribution plant underground in any
areas where other utilities are now or hereafter underground?
(I� Yes ( )No
10
Transferee a�rees to comniv with the terms and conditions of the franchise
If no,please expla.in.
b. Does Transferee agree to construct underground cable plant in newly platted azeas
at the time that electronic and telephone distribution plants are constructed
underground?
(� Yes ( )No
Transferee aQrees to comolv with the terms and conditions of the franchise.
If no,please explain.
c. Please explain policies for the construction of underground subscriber drops
during winter months or during otherwise inclement weather.
Whenever nossible, subscribers drops are buried within a reasonable time of
installation. When this is not possible, drop buries are scheduled after the
� �round is thawed and are generally concluded bv late spring/early summer
9. Will Transferor agree to participate in joint trenching of cable line extensions in new
construction azeas/developments?
(X)Yes ( )No
Whenever economicallv and technically feasible. Transferee will participate in joint
trenching. Joint trenching is generally provided by the power and telephone
. utilities.not the cable operator.
11
FORM E
CHANNEL CAPACITY AND SYSTEM DESIGN
1. Does Transferee propose any modification of the existing cable communications system?
Included in any proposed modification aze there any electronics, converter, headend, etc.
changesproposed? '
( )Yes (�No
If yes,please explain.
There are no chan�es re4uired as a result of this transaction
2. Please explai.n any plans you may have to interconnect these systems or rebuild for the
purpose of participating in a metropolitan-wide telecommunications network. In your
explanation, please . include your corporate philosophy or past practice in the
interconnection of adjoining systems. Please also include a discussion of your current
thinking regarding the future of inetropolitan-wide communications systems, future
technologies related to such systems, and future services which could be offered by such
systems. Please provide such a discussion and attach to your response hereto. (Should
such a discussion require the disclosure of confidential or proprietary information, please
so advise and the confidentiality of such information can be maintained.) �
Where it makes technical and economic sense and would enhance subscriber
services,it will be interconnected.
3. Performance Tests - Will Transferee agree to comply with all existing obligations
regarding on-going performance tests of the system as well as all existing reporting
requirements related to such tests?
(�Yes ( )No
If no,please explain.
4. System Maintenance - Will Transferee agree to comply with all existing preventive
maintenance requirements and procedures currently required of or being implemented by
Transferor?
(X)Yes ( )No
If no,please explai.n.
Transferee will comply with the terms and conditions of the franchise.
5. Customer Complaint Policies
12
a. Will Transferee assume all current obligations applicable to and current
procedures and policies undertaken by Transferor regazding responding to and
resolving customer complaints?
(7� Yes ( )No
If no,please explain.
� Transferee will complv with the terms and conditions of the franchise
b. Will answeri.ng services or automatic answering machines be used at any time?
( ) Yes (X)No
If yes, please explain. (Include company maximum initial response time to such
customer inquiries received via answering services.)
c. Will Transferee agree to not change the location of the local office* and also
agree not to modify the services currently offered at that office, the equivalerit
staff currently serving at each office,and the current office hours?
( ) Yes (�No
Local office nolicies are not expected to change as a result of this
Transaction. Transferee will continue to complv with all franchise
requirements re�arding local offices: however, it must reserve the right to
maintain flezibilitv and be able to change to accommodate changing
customer needs.
*Transferor's current"local office"may not be located within the geographic territory of one of
-the Cities. Please identify the office most analogous to a"local office"which will serve any such
City and such local office location,and respond to this question related to such office.
13
FORM F
PROPOSED SIGNAL CARRIAGE AND C�[ANNEL ALLOCATIONS
1. Does Transferee propose the addition or deletion of any programming services (including
data, audio or video)in the first three (3)yeazs of ownership?
If yes,please explain.
Under Federal Law, aaproval of Form 394 cannot be based upon requirements with
resnect to urogrammin�. The transaction does not require any such changes and
the Transferor has not announced anv chanEes.
2. Will Transferee agree to keep the public, education and government access channels on
their cunent cable channel location(nu.mber) designations for the term of the franchise or
any renewals thereof and will you agree that any change in access channel location
(number) designations is subject to the approval of the affected franchising authorities or
their delegatee. (Please be advised that the Cities require such approval prior to such
change.)
If no,please explain.
Transferee will comnlv with all franchise repuirements with regard to PEG
3. Will Transferee seek or a11ow public input on the addition or deletion of any
programming services(including data, audio or video)?
(�Yes ( )No
The Transferee will comnlv with all terms and conditions of the franchise
If yes,please explain.
14
FORM G
COMMU1vITY ACCESS PROGR,AMNIING
1. Does Transferee agree to assume all local programming/access (i.e., public, educational,
government, etc.) commihnents of Transferor (including franchise requirements and
� procedures,channel capacity, channel designation, equipment, facilities and staf fl?
(I�Yes ( )No
If no,please explain.
2. Please specify your allocation of channel time and programiniiig support to leased access
users if different from current policies of Transferor (subscriber and institutional
network). Regarding leased access, please explain Transferee's policies, rates and
procedures for the leasing of channel time or entire channels by individuals, corporations
(both for- and non-profit), associations, or the like.
The Transferee will continue to set these policies and procedures in accordance with
state and federal law and no chan�es are required as a result of this Transaction
�
15
FORM H
SUBSCRIBER RATES
1. Will Transferee assume all existing Transferor rates and charges?
(�Yes ( )No '
If no, please explain.
Please state the date of the next scheduled rate increase and the minunum anticipated
increases in each category of rates.
The next rate chan�e has not been scheduled This Transaction will not result in
rate changes.
2. Does Transferee plan to change the existing billing service?
( )Yes (I�No
If yes, please explain Transferee's billing practice which will differ from existing
practices.
3. Will Transferee agree to continue the timing of the charge for late payment of subscriber
fees?
(X) Yes ( )No
Transferee agrees to comnlv with all the terms and conditions of the franchise
If no,please explain.
16
4. Will Transferee agree to chazge any late fees only to the extent of Transferee's actual
expenses related to late payments?
If no,please explain.
There is no chan�e in anv rates or fees,including late fees required bv this
Transaction. �
5. Will Transferee agree to include in Gross Revenues the Franchise Fees collected from
subscribers and pay Cities five percent(5%)thereon?
If no,please explain.
Transferee a�rees to comulv with all the terms and conditions of the franchises
17
FORM I
EMPLOYMENT PRACTICES
l. Will Transferee comply with a11 federal, state and local laws pertaining to discrimination,
equal opportunity employment programs and�rmative action programs?
(7� Yes ( )No �
If no, please explain.
2. Will Transferee assume all e�cisting staff osition obligations of Transferor?
(X) Yes ( )No
If no,please explain.
3. Please explain any proposed changes in management or staff positions of system.
, Transferee anticinates little change at the svstem level
4. If no staff osition changes are proposed, please explain any plans you have for analysis
of existing staff positions for the purpose of proposing such changes after the ownership
is transferred.
Transferee plans its staffin� based primarilv on customer needs This Transaction
is not exuected to result in anv chan�es.
5. In all of the above regarding the management structure of the systems, will Transferee
agree to its responses for the first three years of ownership of the systems?
( ) Yes (I�No
If no,please e�cplain.
Mana�ement needs flexibilitv to respond to changing business and technological
conditions.
18
FORM J �
l. Does Transferee agree to accept the e�cisting Franchises, as amended, and to comply with
a11 terms and conditions of said Franchises?
(�Yes ( )No �
2. Please list with specificity any Franchise modifications Transferee will request of
Franchise Authority. Please attach proposed Franchise langua.ge for any such requested
modifications. If no such modifications are proposed at this time, it will be assumed that
Transferee agrees to take the system "as is" with all attendant and associated
responsibilities and obligations of previous Franchise holders and owners.
Not anplicable
Note: For the purpose of Forms A through J, inclusive, please note that the term "Franchise"
sha11 include the Cable Communications Ordinances for the Cities which aze the subject of this �
inquiry and any amendments and agreements between Cities and previous owners.
19
FORM K
SUPPLEMENTAL NARRATIVE QUESTIONS
The questions below are based on the following understandings:
Marcus Cable Properties, LLC ("MCP") and Vulcan Cable, Inc. ("Vulcan") entered into an
Operating Agreement dated June 9, 1998. MCP and Vulcan are partners of 1�Iarcus Cable
Company, L.P. ("MCC"), a Limited Partnership. MCC owns Marcus Cable Operating Company
("MCOC"), which will own the cable systems in question. Pursuant to the Operating
Agreement, MCP and Vulcan agreed to convert MCC to Marcus Cable Company, LLC
("Marcus"), a Limited Liability Company. The manager named in the operating agreement was
MCP, however the manager was changed to Vulcan in the First Amendment to Operating
Agreement August 25, 1998. Pursuant to the amended agreement, Vulcan will operate Marcus,
and thus Vulcan will become the controlling parent of the franchisee.
If any of the above is inaccurate,please clarify.
1. Please describe all financial and performance guarantees that Transferee will provide to
Cities.
Transferee will comnlv with all financial and performance guarantees contained in
the franchises.
2. Please indicate the consideration paid for the Operating Agreement between Marcus and
Vulcan.
NothinE.
3. Please indicate the consideration paid for the First Amendment to the Operating
Agreement between Marcus and Vulcan.
Nothing. * '
-4. Please describe the reasons why the parties entered into the First Amendment to the
Operating Agreement.
Vulcan Cable a�reed to assume control of Marcus Cable Company,L L C
5. Please provide a copy of the MCC, LP Agreement that is referred to in section 3.1 of the
Operating Agreement.
This document mav be reviewed at the offices of Larkin, Hoffman, Dalv &
Lindgren,Ltd. �
20
* For information regarding the current management structure please see the Management
Consulting Agreement between Mazcus Cable Properties, Inc. and Charter
Communications,Inc., attached as Exhibit A.
6. What aze the projected costs and expenses referred to in Article IV of the Operating
Agreement. �
The mana�ement function has been assumed bv Charter. Please see Exhibit A
7. The FCC 394 indicates that there will be a relationship between Vulcan and Charter.
Please fully disclose what the current relationship is and what the parties anticipate the
relationship being in the future.
Mr. Paul G. Allen is acquiring a majoritv interest in both MCCLLC and Charter
Communications Inc. and its affiliates (Charter) either directly or indirectiv. Mr
Jerry L. Kent, the current President CEO of Charter.will be President CEO of Mr
Allen's cable operations. (Please also see Ezhibit A)
8. Please explain what company will be ultimately responsible for any liabilities under the
current cable franchises.
The Transferee.
9. The FCC 394 indicates that Transferee is requesting the right to undertake some
additional corporate restructuring. Please explain in detail.
Subsequent to the issuance of FCC Form 394, Marcus and Charter entered into the
Management Agreement referenced in Form K. Question 6 of this request and
attached as Exhibit A. At this time, no additional corporate restructuring is
planned.
10. Please provide any and all existing and/or proposed management agreements for the
� operation of the cable system.
Not Applicable.
LFIDL Doc.#445829
U:\cablelAPPLEVAL�Request for Info-Apple Valley.wpd
21
BIT A
�
li�ATIAG�tYL�i�i'I'C`flrt�L�.'ING AG � ,
TF�S MArtAGEMEN"r C�N�UL�'Il�ICS AGRP�I�NT.d-�as a�
Qctobc�;6, 1498,by�uzi b�tw�n.MAR.CUS CAB�PR4PERTFES,ING,�T?�Tawar�
�
�r�io�("OPezato�"�,asxd CH.ART�Z GQh2i�CrNZGATIQI�?S,II�iC,a D�Iawarc
caiP°Zattou�"Ma�a��
'�1�TNESSET�i
- ����=�1 �t�a��sud�cabl�ttltrsrisioa��t.�s(e�h
u�iv�Ily a�yst�m"az�.c.olI�ivzIY th�¢Sps�'�ia.v�iQus m.�rke�:�n�e t�nz�
S ta�s{e�u��jy a"�vfar�t�'2nd callcctiwrlp r�`2v1��;Lud
w�REAS,'af�Ifa#�s o�'�p�r�ald ti�rzsa i�ucxl by fh.e�cder�I
Couuncmic�a�s � C"�CC'�ar'.d loral f���v�s(`�"�Pl�.'s'�
��S Ci}���z of cabLc�rela5'SYs�r.as usai in t�c ogcsation ofti�
Syu�zs�d�c Q�'ezing of c�1e televi�z�sc�vir�s,�ui�n�}�e a�-atiar� of tha �`ystems
�in tb.c M�.-�s(rAllective�y t�.e '�;an�
' w�'��h�g��.s�sc ia th�gz'ovisian and��c�f'c�bl�
���S�3L 0�2:,�L'b2�1CYC3 FJIII 2SS'�St III�e�2YC or�1Q�Q�L�l,e
�� 1 •
�r���A��Qpt��r wLSI�i��j�pVlO.0 �CC:LIIJ$'
�
���a�ancc, t�der the su�r�ian$ad uI�cantml uf operafr�r�zd t�e
h.fllri�s o�t�c Z.�s a�d�cz�t wzth aIt zci,cv-dnt�i����;�,us oftfs��CC
�
-2- �
�t�c 7..gA.'s,in�C opt�a�tx of t�SYsieats. S�o as t0 sc�.rve d�fi,c,�eutiy pper�tax�a
ct�sfvtac�s aud cnb�-�th�vaIt�of tb�Sy��an� .
w����M��, �cag�g�sa of��sc7-vic�au i� aws�
bch�f aud ix�its capacity as M�a.gr.r of�.e S�'ste�s,c�p�sC cc�-iu cx�mr�ant�w�3
,
�^j..upaleIIt�S�Vl,CC�in a lnarc CoS�-�f1Y�438a��n Cl�Qp��r Or���c;�a
C�O�Il.fCS�WII; ,
Nf�W,���ORF,,at OO�On O.f�he�'arCgvirzg ptrm�..S�s an.c�tf IC
�t cave�ts btr�in c�.cd,t�pa�-tits b.�r�tv do Tzereby a.gl,oc ss foI[�:
1- �-�crr.�s. �is usc3�u�,t�.e folinw:�tcrms s�1I�vz ttu
rQlcaFra�g mca�ain�.s: . -
. `�Zoss R��"�ar�yperi�d shaIl�t�hc gxoss mv,�cs far s�c
pcaod as�.i�cd,for gurpo�s csf�]1 of iTS�ri�i�r,�,in.ac�:ds��
�h g�allY ar:�Prz�d sc�acz��Pr'.a�ipl�s, �o�y aPP�-
`�sgu"�f1 u��uY i.��t�id�1,carPvt�ion,�oc�atib�l�rr�Iiabilttp
a�P�7'� P���3°�v�,�-'�cst�Ic o¢'at�'c�ty ot orgf.3ui�fiQri.
`rR�:mbr�szblc F.x�-ses"s�all meazt ouf-�f'�oc3cc:c�s�aud ac�
�c��Y��m p�n�g sezvirxs�ader,mctadi��,�v�ith.ovt li-mit�.��,,navel
��a�t a.ny f�s paid or a�ghcd �y M�tg�fs�z-the ben.cr�t or au bc�o��c
Syst�ms. Th�ca�t of Ma.n�gcr's g�ucrai ov�ad exnt.�ses a�i tirue rb�g�fi-�r e�Iaye�s
of Managrs 5I1aII nnt hc i�cicrd,cd in Ie�;peuses.'' ..
"I'csm" �att�t�.e t�m af t�i.s A�cm�as sct��S�tz.aa 8.
-3 -
�- mt Scxvices. Msnagrx sh�p�vy�av�all
�d eobfiuliin.g setvic�,tA{7pczatAr in�on WiLh tb.c m.annge�c,ut uud op�ott a��
SY�.s,ul�dcr th,c�mai�d�a aud control oF Op��,or and.the ha�dcrs+aFtf�e
T.zceu5es. IA�atale�� t�rewFth,�g��1 p1'�d,c i�manag�cansujt�r,.�
,
s�;viccs n.es��;,�y f�o sssi�pp�raiar in tb.c ov�t�ht aad dzz�cti.on a�the a�-atzou af th�
S�rstemS m$ccarda�.ce wif�gaod bus�ucss F�cEir'-�;�rovtd.cd that Oprxa�ShaII c�v�l t�
imp}.cra�on af any such a.dvi�c r�ivcd fra�u Ivf xn�g�cr aud shall ba fully r�g�n,gi�lc�or
tI�da.y-to-day ap�iau �f'�S�y��_ ��L����� .
incIt�tb.G follovri�.�
I) AdVit��ad c�nsaIfatiaa reg�rding az�uini�tr�v�,hook�p-�z�,
�u� �e3i�c�lcc�an,i�sur�zce,pu�c;�as�cI�I� scxc�x
at�.�r ge�-aZ sc�ria�Ps zuay�n.�sary t�t�e� " " af ti�
5�...��ms;
u7 Rzvie�r o!�� ���e�,and p c�nrma�rcc
r�I�ve ta hudge��relalz�s,�nd fltha�ial Po�.�"�r�
iu� C�I�:,on a.n,d�dvic�zz�ing oP�.-'"�Sint�1, �ne�ixz�,
rn.-t;rrt ._r,�.,.�,����-,�S�',IIIL��OA S�tP�pt`� sLIC� Q'�'
�C�.dCIY1C�;'r ffi TlI3��JC II�X9S8TY LO I�IC OPQa�C.Z O��IG
S9s�s,�i the�nil�i.ou of gre-��.�n�d up��Dn thc
5`5..��°.
,
,4-
iv) Causultst3on�nd�dYice zig�di�m�g,sales,a.dvcrt�szn�aad
sucb�o�ther p�uo�i�aj�s as may be�y�o the marketzng
of t�e�yb�s' �; �
v) cvusnl4�an and advi�e rcg�g tho�, �g�nd sup�vis�r�u
' of p�soz�1 ta manag,e and op�rat�t� Systctns;
vt� Review vf pc�'armauce of t��ystecn's general mamage:s�su,d o�r
P�'SO��
�rii) Corssulta�n a�d�dvi�rt�ng pz�cun�ncnz 8�d.Ilcg�r�.ri�o�'th�e
tum.s of gr�x-.�m:�,�q��,a�i other items r��,d f�tb.e
oper�tiAa of fh.�System.r,
vin) Can�ulta�ian and a.dvi�e zu c�aa w�th�a.y�sd aII us,�o,f t�a
Sys#Gms sud t�,e d�y fo day vpc�tiaa fli�of aad ca�ultx��zt with
C?p���w�x z�pe..�to the se�cctiaa of a�ney�, �zlt$atx zr�d
and
�c} �ztc�t at�s�..-�►iccs to dpera�r as ta which��s�i p�craior
�a.
� 3. 7�R�ha�s�..�S�• QP�l��j''a�uri�s A�nna,gcr I.0
.
co�w'r.Efr Mas�g�;'s pz'oct�ut of'��agram.m�g�,rius,e�ii�c�. and ot�
�c;,s and s�c�viccs for al.F�.cc cablt�a sy�n.s vw�cd or mansg�d by I�ua�,ta
pmcaae s�i�f�r f�.e be�efit oEfh.e Systcros when aa�.as�qn�sted bY�pe�� sz�b]e�t
ta azud ia accord-�e wiih aay tcanB aad cundiEio��bY ppa�'m��lr�t1
trm,e t�a ttmr.
-5-
4. U�t�an---��p�w�- T�tu�g tb�e Te�m,Op�shau
�,e�ud.per€v�the fr�llawing respanst '�' "es aud ablig�tio�,
�• ��. Qp�z�r s`�II abtain,zaav,t�i.u,kecp in futt ���j
cff�ct, and comFJ�y with the fer�s,oa�d.itians usd ra�ui�m�,r4 of ttr�I.icc�u� �1
.
ot�t FGC;LFA 2.ud a�her�iccn..�s n�y�'oz��a�ti�on of lh�Systz�tns zn ti�
Ma�s,and in c�n�ctivu tF�erewi�c�ng�y with the CamaIIunfca.�ioDs Act af I934,
a1I�plic�.b.�e nzlrs a�d r�gvIat�,�ns t��rezmd�r gna�I.t�o,plica.blc staze
a�z3 Iocal rnles anr�n�aI$fin�s.. �pez�tor shaII provid�to Ma�a',mPQ��equ�t,
do�ry GYIdErt��f 211 reForLts s�c�ions,$z1d Othrx fi�iII�H ma�e by I.t wit�2
t�FCC aad LFA's.
b- ���`ces• opaa�crr s�all,cu�x a�ot�eswisc�tD
betv4�ccu M.��uu'arad O��provzric the�ors�t persomr.zc�e�ai,Fme�z,fuads,
aad at�r z�.sor�;es n�cd�a opczate th�Sys�ms• (J�pua#oz�uw3edges t�t
�u'�p����'�ed to pmYidc a�a.tiaa�1 gcso�.el, and is$ct�
ao1$iy m a snpe�visary aad udvis�arY�Y-
°• P �of�euse.�_ Opexat�¢-sbsll pay ali cos-Es a� exgmsa
in.cu�rcd ia c�with t�c�hip aud op�n af t�e Systcr�.�,i�,clu,dz'.u.g,.
wif�uf I i.mit�i�aa,�salari�az�tf atb.�lahor c�s,�qa.igmcat casrs, i.�s.�ag
�s,t��, ��'�arty fc�s- A�gtr maY,bat sha11 nat be r�ui�'sd tfl.paY an
�f bf�iar�y sucFt a�uEs tbat ar�dc�and�b I,c but�av�c na t bcaz�ai,d
�� �Q����Y���P���invozcc fhcz�or f�.
M�a�,r�i�'�rse M�gGr for aII a�n,a�s so paici
-b-
s- �.�cpn.. �naga and�sh.ell eaah pz�ide to ihc atb�r
�u�h r�o�t� an�i iu�ion rEgarding tba zna�ctti�„bcc�nic�I,opc�r.ai, bti�s,aztd
f a�us;i�z1 G�ncli.tiaa of the Syzte�s a� �crthcr�a�from fimc tv� rc�onab�r tc�t�ze.,
6- I��n�t�Fecs. In c�usiderarion tar� ��.
,
s�rf ces pz�ovzd�ed by I��au�i.ti acca�au�here�t� (�ra�-������ .
��1*n�^--.�-��fee cqu�1 to thrct percent(3%)of the Grass�t�v�nu� of the b`ystc�su�.
�a�iditiou,fl�ax�or shali re.ir�busc I1��au.�es fnr aI1 Ra.mbursable�es}ar�.uz�.�d by
i��nagex: �
• 7. Fce pavm�at Sch�c�uule aad Ten�s_
a- Ma.n�r sasIl pro�idc Opr�tor w it�fz a
r�c�rly s�ofx���E:�in�c�ed�Y Msaa�.~,s.n�-s�ii b�
rcin�uts...--'i�or�:ermbt�.able��s�ed dzamg�h man�Ez wi�hm. t 5 d3ys
ufl.�rcxipt of�tc st�#�t��
�. ��v F�ne� A�it�u.45 i�r aftcr the cnd cf r.a� c�c�ar
quar�, Op�t�'s�►.all c�Ic�3ate t�,e manageia�z#�ec p�yabie fnr s.�h��i
s�a1i n.�sr�a�agu vf sIIc.�a-m�uut,�a�cr w�it�z • ���g�
r�I�d,�tail�c�rta.$nd zz�x.�hndaingy uu�cdyiag q1�ulab,on af such�ut.
�gez�all3dv��af�ay disput�with tr.spect to such caIcu�t�.,cas
wit�ia �5 d.a�a$�rcc�pt o�sara uoti�e,. Tn t��veat o�a disPu�,any Q�cfisp�x�d
aaa�tm�s�.bc gaid and cb.e pa�s�all u�oti�in g�ad f�itb to resal�,-c
Fz'�'�'Y �3'�c�di4putes. Subieu ta�r�ary cons��rom QF.erat�r's leisdfug
�,Pz9�of�N��Y�8���11 bcs dn�wzt�m I 0 d�s afLea-the
-�- �
pFzrii�s a�,ee oa�uzonuts di1,�aud paymtnt msy bt ddS.Yod an�y i1s to spcal�o i�ms
zz�clispu�c.
� ��.t� A�i� Og�trx-shall gn�gti,y grovide ta I��na�,�at
Manage�s requcst�ulf aad.completc d ��Y aPa'"�
cvideu�ing a.�.I re�veuncs includ.e�i in ti�n calcuIaiion of(�ross l�tvz�ucs. Ni�ger
,
sbs�,l fi�vc the righ2,at M.��mag�'s soIe cv�a.nd rx�,ta c.�u�c zts iu�,deut
ccrti�cd gabii,c a�cau�nt�azmuzlly tQ�th.c b�and z�vrds of Op��r
rc�ng t� Chc�. Q�per�.tor shall ca�per�witb s�Il n�anahl�requrss�d
zuq�ies fxv-�sucl�accoun�nts in t�c�ofzhe pc�arma�c af'such sud"zL
� T.ate Pavmer�tPcn.altirs. Ia the evt�t t�#�zy�uYrur.ats tc D!L�agg�
�ome zu� d;a�n fu��u(�5�days p�st du�ei�due�Go a d�y z�vbiaining b�
cou�s or oth�ris�.,3�l�an�shall bc e���I�m obtain Ia�c�rg�at tb�r�e of
cight pczc:-�t(8`�}��rtum ou t�t�noux�ts�ast duc.
e- �n.c�t T�ollawiu�T�r,rn-rti�, ,��,�z.a�d�xc h�d�fat a.�y
��-���a ��r�����:s�a���a� �a
payable i�z�wi�the te�s�� suc�.�ruin�.io�rL
&. �'.�,
z I��zti on o f�'�uL T�t�cm of tf�A� tfhc"T'e.�'� sh.�ll
�oms��ou�x dzte�nf a�.d, �ml�saon,er f�in�tcd iu accoszi�.ce b�
ar c�i�i by wai?r��of I�Sanag�a.�d �pcxst�t, s�ll�nat�aa t3.�c
f�z m�iva�ry h�eo£ .
-�-
b. �at'IY�'ezmivatio� Lifih.�party shall h$va the zigI�!ta tc�mmai�e t�ti.s
Agtccxneat for auy reason,withaut pettaIty,upon 3 0 c�ys nA Cicc to#be o�cr p�ty_
9. "ons at�d�VV"asa�es..
,
$. �.s�rtaiio�_azzc�W'azz-ant�es b_v_�. C��aior rep��and
�ava��s to Marsag-�r as follrn�
� �Fcx�r is e.�orpar�.ian dt�Iy or�.a.uiz.e:l a�.validly exisiing .
urtcier i�e Ia.ws of thc St�e�'T�ciaw�rc and has aII ue�s�ry a�ir.�oIIsl
pc�a,�z�d�y i�op�rate ih�8ystetns- •
, �z7 Aff��i.a�s of�ab�r�old�Lircase.$and$re in campiz.�zc�
wilh a11�gpli�I�It�a�d reguia�rp cauditio�s aud re��utufs af t�c
FCC�t�ss�..FA's,�ad the�,icr�ses�izm �ult�orcE and e�t. •
iiz7 This P.gr�r��ias bc�duly e�zz�3 by�IL v�ec�y
cor-�actio.n af apera.tar a��t1�v�zd ffi�bin�tiug a��
af O�or.a�bie a.�st Op�t�r i�.a,coardauc�w�i its te�uLs,�t
as cs�.�'oxrrz�-tY may bc 4.imifr.d� iapr;��v�ng ba.n.kzuptcy,z�olvmcy,
az�d s��.ar mat�s or by gen�panaFits af�ur�Y•
� iv) �s Agre�ezt ri�Cs nat oos�fli.a,'wzf�or c�n.s�rate$breac*�
af c�d�r��s auy taw,t�v��, ar Judicial ar$�,.�+five�d�c��o
vf�„r.h Qg�•ia a�j cc�th�C�e of I��rpo�tion at ByIaars a�
Qpc�at�,�c Li.r,c�.sc.or a��1 c�ra�t ar sgrcc�tto which
D�Crat�x is z pany.
-9-
b. �tpz�s�9�,�d�f�trxrsties b� ar�► �'- ��re�'�;�
w�-�m �x�s follows= • '
� �gcz is a�rgor�ozt duly��y��idly cxf�g
urdcr the}aws Qf't�c State o;F Dcl�zwstc� aud b2�sll nx�azy cvrpcuate
power aa.d aut�uriiy ta pczf�ih nbligaiions tmdcz t�ris A�tnt
Il� �IhiS A,�tne.II�h3s beea du�a1d�Ori�by au ne�s�ry
corporatc actian a£M,�-tn.�cr,and causti�es 2hc val�d and biudutg agre�te�zt
Qf Mau.ager,en�vrceahle�gaiasf M��in�rdaace wi�,it�� exc�pt
as cx�r�may�Ii�iit�3 br la�s gaveming ba�kru�tcY>i�n�yr.,��y.
��*..ilai-m�Lt�rs Qr hY g�al�PJ.�s of rqvat�'- �
i.u'} '�us A,�ncnt dnes urn a7uflict wit� ar ca�futQ a brear�.
af'or ticf.zult und a uur la�,regula�nu,or jv�c�.al vr��v�ord�to
W�iCYz D�S.��P,r iS subSect,ihc C:�a�In�arporatiou cu$yI��ws af'
2��er, or any zB.a�i��cautract ox e.grc�acut�w�c.�M$aagcr is s p�rt^y.
IQ. • - -vu arsd�a�of�i�.bilitv-
' � Lia�:zl:*tv of hqsn�cr. T�Cvmpauy shaIl bear a�y ancl a11�,
lia.hc�zLi�,Io�,�s�au�d-�mag�z�g from�opera�inn of t�,c�ys�.t, and
D�tager aad 1 t�t�spedivc affic�,d�vrs, e�pIay�s, �o�,lt�ts and
s�c�Ides(col�ecfivc�y,the'qnd�ifi�d.Fc�soug'� �iIl n.a�tind�a�y
cu�rta�xs,be heid liable t�tGf'nr,exc�gt t�Man�gu�hall t�Iiablc frn ariy
Iass a�damage w�r,ch r�salts fmm�s own,g��.'F,}.i�vr wiIlful mi scnr�.u�
- 10 - �
b.. lads�ni r�or�. o�afur s�hau znd�nify and b.oIa L�"
' Pas�ns"hazmlcss 8'onl and aga�st a,n,y�os� IiabflitY,d$maSe,s�ri�c]szm or accima,
iu,�Iu�iug witFwvz Ii�mi�on auy att�mcy's focx o�lcgal cosls in�z���r �in
tha def�zsa a.gainst a.�such sctiau(coller�vcTy,`Z.oasrs'�, �ising out of{i)t�,c
o�fup ar opera�,�a by ppera�of any Syst�m;Cii) �y debts,o�liP,�ns. a� .
Iiabilities of�pezatqr,or Cu)s�acdon c,a�n�any Znd�Pe��.�ny
, fsiha�b�a�Ia��mtzz.�e�d pczs,oc�fo t��y�cti.an,in it�rolc��ager af t�e
SysLem,except tv thc cxt�t thaz snr,h�tic�or fa�ure cvnstiu�cs Wi11fuF zx�i�n�u�t
�r gzvss uc.gl�gtuco oa t�xc ggtt af t�e I��ui Persan.
c_ C�f.�tx�rs aud ' zs afo or. Noue ofth,c O�cets ot I�ir�cs
4f Up�e�rtor s�all bc�.cl.d I�abIL#'or arry aczs�arnzs�ioas of'A�sna��.
, d. 2�o C4rts��t�N'I�A�AAMAGES_ ?�t�i�.PA�zTY �
�bR�-C7AIDF,,.�t S'$ALL IIL I,�A�LE TO�Q'ITi$R FOR LQSS C�F�US��'SS
OR OT�t�ONS£QLIEN'I'IAL DA3YIA.K`r�3 ARL�+IC�p'E�'I-0�AI�'Y BRE�CF�.
B Y 9UC�i pARTY OF AI�IY aR ALL o�T�S �BLIQ�Tt4NS u.�DER TH�S
A
�1_ A�sian,.,_m�t_
a f�ssi�a�t by�� �er shal��at srIl, as�.�ign,t�xr�r,
coizvcy,ar�in any way,rts ri�r orr ohligaii,�;s�ndrs this A.�ncrtL
wi�ut x�pnor wri�a caas�af Opc�t,w�ich c�sball not b�
ua.tea.soua�Ip'wi�heSd;�v�d�howev�r,tha� C?�c f�eg�mg Shal.i�at zcstdet
the rig�z of�Mar�a�r b�p�tfarm,obli,g,az�ans he•r�r througF�sub�o�at�cns,on ibt
c,o�diLiaa�#.Mana�er�„��r�fzzIIy sts.d d,irect�y Ii,�ble ta Opn�K fnr th�
of scz�-�oblfga.�ous,au���the f�egc�ing shatt n,ot appiy t�v fhc sa.l,c or
/
- ll -
trar�Z Qf eIi or subst�ntiallp�II a��ie sto�k dr�s�vf Managa. �i�,�z-shall �
�t.s�a�y assigrux tv as.lum,c z�tip�ts and obl.igatia�ns und�z�his Agreexnc�,upon
which�ve.�Marrag�s�all Ird.vc no f�utfier Iiability h�rctu�,d,.'�r,pzvvit�ed$�at 6ur.Et
�
sssi�e has�uet work�z at 1e.�.�t ea��o ihat cr€�M�zb�r and ha.s�goad b�s.in�
��a- , .
� .��si�r�t bY_t7vu�toz. O��z s�aLE not s:II, ass.igz,f�nsf�t-, c�nv�y,
4r e�cumbez in a�way�i�ri�ht�ar abli��ns t�r.r fhis A�rcr��t w�t.hout the
prio;writ�u�t af�ar,g�v d h��:tha�Qg�atnr�I b�x�c�ed
to ay�ign i��:s azu� a�oas h�c�md�:to any P�e.zsau st�cecding tv �tnr's .
�izt a�to'tb,c L�s,Sad C?gerat�r Sball c�s.c s�h P��an (n assu�,e 5-a�z
�aud��n�,upo�w�Zick evrr,�O�a.��r s}��li�na fuzther li�Zity
�..m��.
I2 �.cztices. AIi ua�s hcrcuz�es s�be iu��dtmg amd�call be
dccm..-d c�e�v�i�'g;t�ar i�z pcx$an,czt if ddi�+ezed�ry��tx-ausra7s�ioz�vr by ovc.,miglat
�e.Iiv�y scmG��ing r�ds of z�ece�rt�f�addrr,,�s��is-�c3 beIow:
If to Qo� .
Iv�.�Ca41c Frapr�tizs,Frcc.
29I I 'T3a tIc C7�k�lv�S��1�0�
i�auas,ZX 7sug
� r�.m: G�zal Cova�
��ilk�: (2I4}52I�34�i S
\
- 12-
I.0 ta 2�'fanc�g�r
C�x-ra - • ��
I2444 P��urt Drivc,S�t.c 44t7 �
S�Lcruia,ll�i3O 63�31
Atta: Jeiald L.�ux
,
F�imile#: {31�9b5-.�713
wi.t�a c.opy fa:
G`hari�Couzmu�ai�cafsQne,Iua.
Z 744�P`owe�court T?rivc� Suit�4{�0
�t Lou�,Mi� 63 I3�
Atta-. G`�tis S.S�aw
�acsiauZe#: (314}968-8793
or,in ea�h case,to such ofhcr asidress as s�part,m�Y gPe�''bY notic�to ti�e s�t�r,gi,ven
as grovYdcd �ksov�. •
13- ,DF,ci.�^�ciiaaeau..�.
a. Fxcl�iv_�A��aC. 2�e parti�he� �tb�ti�is,A.gre�ui
erc t�e�lctc�rni e�.zcl�ive�t of the agreemen��exwe�u ih�parti�s
heze�o,sugc.�xde aI1 p�r agr�csnrn�s,oral and t�rit�i, snd aIl oth�tr eflmmz�nic�II
b�iweaz�e�tics�rcto ir�.ating tn�svb�a;t�r vf this Ag��enf.
b. �ov 1.a� I�sdit�ion. This Agrc�meal sh�11�e in�xpret�
zm3,�r th�laws of 4�e Sta�e of D�fi.s�..om�i,wici�ut r�¢d to�,e conf3.zcL� of Iaws
�rwixzaas�£ Ear,�garty canscu�s to the j��.�d v�zzze a�tb.e Fcd eral,
,
�zad stabe c��Iacitr�i.0 �� 'for 4�t resalutiou of�zy dispts�s aasiug under
dzi5 Ag�.t,B�d,WithoBt limit�tion�'arry ofizcr mrt�ci of st'.,�vic�of pz�ce-�
ava�able tm�a�pIi�-ablc Iaw,caus�uts ba�svicc o�pi�css�zpera it hy wrif�eu.
-13-
notict,gf.v�en.as pmvided'm�cctinu 12 htreofT in�y actiou broug,�t in canue�u
wi�h�uc�disp�Yc.
c_ succcsws aud��, 'I$is t��ua.te�sh3tI bc bi�g�u�.
�Zc ta the be�fit of tI-�e pa�cs b�creto ar�,sub,�ect�o se�fion 11, �ir respectiv�
,
�u.cc.ess�aud assign.�,�rut is�t i�dr.d tr�azyd ci�s�anr cr��trry rig�t�
e�o2'cc�bl�by any at�ie�Persan.
d- I�o a�dme�L fp or modi�,cation�t�e ferms of this
Agz�mcnt or waivrx oF�y ri.ghts�cr shalt b��v�un�..�s ia wzxttn.$�ui
�by thc gard�1��0.
t- �tt� ' . �hip of t�r.�. N'eth�zg coz��in��ia shall�eny .
����P�R.Ivirrt ve�re,.otfiac reiatiao�hzp a��i�igs.( Guzd&�*�.."t
bctv��t�.�pzrties�, 'rE b�ng un�stcad that t�u rr.Ja(�onship o�'M�nag�ta
O_n�tnz is tha�o#�m��x�r3�*��tor,aud,cxc�r�as oth�xwi�ocpr�y
Pr�dd�'�,u�b:g�ty b� s�iati have thc�r t� bzIIL tf�e flthu-oz t�
vfber's rcp��m auy w�ay-
� C� ��Y arbitr�fr.o.0 vr Ir.��tian '�.:zng aut o�f or c��t�a
�=S A�m�,thc�cvm�ing T�fiY ShaII ba c�tlEd ta bc reu�tn�d fo�5tuh
�rty's reag,�rable�ys' {�an�i c�.
g- ��is`�nt PmviSiQris_ In the eve:tt thaz t�FCC d��iD.�that
any g�Yisia�vf thi.�A.�e��s is i�,cons�.J-i�t a,� th�Fedc-e.I Carn�ica#i�s
f�t af I 934,as r.m�drd.,nr the kCC's rul�,re�ul2tions ar poiid�cs(an
2'zvvisi�a'�,or iEzcg�or i�gislativc a�tian subsaqr.ec.z�to t�ic da�
- 24-
b�f Causes auy provisivn c�this Agc�nt t�bc aa Provi_�au,�fte.n
the garties sball.rcacgotiaze this,A�ccma�t in good�azth m ord��m�-t this
.A.gtcewcnt in�sms thai are Iikcly to c�such de�ec�wit�ivctt mstt�iall�r eh'er�o,g thc
beu�fru tp bc obt�uYcd bY�Y P�'� rf r�g chzs Agz�to
�
resvive s�ch defccr.s gs 4nz�a�i.bl�,t�ar t�s A�c�s�all b�d�m� to bc
�cen,�.cd so as� d�1�t,�as�r�J�cansi�t���n�-
h. Cons#zucf3o�.. As�sed hcrein,c�oc'.ept a$tbe cc��oth.erwise
reqt�ires,the��ar skall iurl.u�tb�glt�al a�Lci.vicc vc�sa,worc�s af en,y�ndcr
s�:�l�Iudc w�rds�f�y oth�g��c,�.a,d`��"is tac�i iu t#�inclt�Ye S�use.
_ 5c�nah,c�.dings az�vsaci I�an for c�v�rueuca a�Iy� c�o aot cou.sC�tuie a p�ct of
�� or aff't#fae tueaning of 4us A.�-
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EXHIBIT Il - 1
Corporate Structure of Transferee
Foliowing Transfer
Paul G.Ailan •
f OQ•/.
Mareus Cabla PropeRies,LLC Vulcan Cabla,Inc.
4Y.(non-managing) 96 h(mansgln9)
TRANSFEROR TRANSFEREE
Marcus Cable Company,LLC •
f OOY.
Marcus Cabla
OpenUng Company,LLC
f OOY.
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