Loading...
HomeMy WebLinkAbout5. Cable Franchise Transfer f � �v10SS & BARNETT � /. .-� A YROFESSlONAL A�����.. . � . . � REPORT TO THEN ESO A ROSEMOUN'T� M NS�R REGARQING PRERSHSP FROM OF OWN INC. TQ ST/�4R METRO CABLE, MpRCUS CABLE PARTNERS, L.P. Ma,rch 10, 1994 Prepared bY� Brian, T. Grogan, ESq• M4SS & BARNETT A professional Association 4800 Norwest Center 90 Sauth ��Ve� �5402t4129 Minneapol . (612) 347-a34� � , �S. �. . . . . . .. � . �, MOSS & BARNETT A pRppg55IONAL ASSE�iAT10N TAB� F c�F�ONTENT � in . . . . . . . . , , 1, 1 Introauction � • • • ' ' ' Z . . • • p,pplicable Law . • • • • ' ' ' " � . . � � . � • f .• • •� •. • • , � ��� � � 3 Process. • • • • ' ' ' � . . . . . . . 6 q Deseription of Transfer of Contro 9 Intefview with Louis Borrelli & David Hanson . • 5 16 _Interviews with City Officials . • • • ' ' ' 6 31 ualifications . . . . . • • • • ' " ' ' � � Legal 4 �2 . . • • • • ' ' ' ' g Technical Qualifications . • 33 Financial Qualifications . • • • • ' ' ' ' � � � 9 3fi . . • • • • ' ' ' ' � � ip Additional Issues. . • • 37 . . . , , , , . 11 Recommenc�ations. . • • • • ' ' roving Transfer of 38 12 Draft Resolution App . . . . , . . Control . . . • • . . • • • ' ' 13 Draft Aceeptance of a. Franchise fo� a 44 Cab1e Televisnnesotat� in•the•City of . • . • � Rosemount, Mi 4$ . . • • • • ' ' ' � � � � ' � lq Draft Guaranty ' � � � � MOS� & BARNETT � A PRpFESSIONAL ASSOCIATION . � . � INTRODUCTION The City of Rosemount, Minnesota (the "City") has before it a request from its franehisee Star Mid America Limited Fartnership, a Wisconsin limited paztnership ("SMALP") , which in turn is 97.5$ owned by Star Cablevision Group, a Wisconsia general partnership (hereinafter, unless otherwise specified, collectively referred to as "Star") , to agprove the proposed transfer of ownership and sale of assets to Marcus Cable Partners, L.P. , a Delaware limited partnership {"Marcus") . Pursuant to Minnesota Statutes, Section 238.083 and the City of Rosemount Cable Television Franehise Ordinance No. XI.14 (the "Rosemount Franchise") , at Section 10.04, this proposed transaction is prohibited without the written consent of the City. In light of the request by Star, applicable state law, and Seetion 14.04 of the Rosemount Franchise, Moss & Barnett, A Pr4fessional As'sociation, has been requested to pravide this Report. in preparing this Report we have relied on information provided to us by the Gity, Star and Marcus. This informatian includes the Rosemount Franchise; Marcus's Transfer Application for the Approva2 of a Change of Ownership of a Cable Cammunieations System and Franchise together with ezhibits; agplicable portions • of the Purchase Agreement dated as of November 12, 1993 by and among Star and Marcus (the "Purchase Agreement") ; a draft Assiqnment and Assumption Agreement by and among Star and Marcus; a draft Escrow Agreement by and amonq Star and Marcus; a draft Covenant Not to Compete Agreement by and among Star, Donald G. Jones and Marcus; a draft Retained Sgstem Escrow Agreement by and among Star and Marcus; a draft Management Agreement by and among Star and Marcus; internal management statements dated September 30, 1993 far Star; consolidated financial state�nents and other financial information for Star for the years ending 1991 ana 1992 as prepar�d by Ernst & Younq; Fo�m S-1 Registration St�tement to the Securities & Eachange Commission filed on behaif of Marcus Cable Company, L.P. , and Marcus Cable Capital Corporation dated January 13, 1994; FCC Form 394, Application for Franchise Authority Consent to Assignment or Transfer of Control of Cable Television Franchise dated December 6, I993 submitted by Stas Cablevision Group and SMALP. In addition, we have conducted an interview with Dave Hanson, Vice President of Operations and Louis Borrelli, Senior Vice Fresident, of Marcus and we hav� conducted telephone interviews with the administrators of cable television systems currently owned and oper�tec7 bg Marcus. -1- w � d . . � . � �. � . � MOSS & BARNETT � A PROPESSIONAL ASSOCIATION � � . � . � .� � � APPLIGABLE LAW • The following provisions af Minnesota law and of the Rasemount Franchise qovern the actions of the City in actinq on the request for approval of transfer: Minnesota Statutes Section 238.083 Sale �r Traasfer of Franchise- � rate chan e defin�d. For Subd. l� Fundamental corpo 9 purposes of this section, "fundamental corporate change" means the sale or transfer of a majority of a corporation's assets; merger, includinq a parent and its subsidiary corporation; consolidation or creation of a subsidiarg corporation. Subd. 2. Wzittea approval of franchising authority. A sale or transfer of a franchise, including a sale or transfer by means of a fundamental corporate change, requires the written approval `of the franehising authority. The parties to the sale or transfer of a franchise shall rnake a written �I request to the franchising authority for its approval of the sale or transfer. The franchising autho=ity shall reply, in writing, within 30 days of the request and shall indicate its �I approval of the request or its determination that a public � hearing is necessary if it determines that a sale or transfer !� of a franchise may adversely affect the company•s subscribers. �, The franchisinq authority shall conduct a public hearinq on the ' request within 30 days of that determination. ', Subd. 3. Hotice of hearing. Unless otherwise already _ provided for by loeal law, notice of the hearinq must be given 14 days before the hearing by :publishinq notice of it once in a newspaper of qeneral circulation in the asea being served by the franchise. The notice must contain the date, time, and place of the hearing and must briefly state the substance of the action to be considered by the franchisinq authority. Subd. 4. Approval or deaial of sale or transfer request. Within 30 days after the public hearing, the fr�nchirinq authority shall apprave or den�►, in writinq, the sale or transfer request. The approval. must not be unreasonably withheld. Subd. 5. Sale or transfer of franchise �ithout sgstda. The parties to the sale or transfer of a f ranchise only, without the inclusion o€ a cable coimaunications system in which at least substantial construction has eommenced, shall establish that the sale or transfer of only the franchise will be in the public interest. Subd. 6. Sale or transfer of stock. Sale or transfer of stock in a corporation so as ta create a new controlling -2- , , � MOSS & BARNETT A Paoress�oNni.Assoctenox interest in a eable communications system is subject to the requirements of this section. The term "controlling interest", as used herein, is not limited to majority stock ownership, but includes actual ' working control in whatewer manner eaercised. ', Laws 1985, c. 285, § 22, eff. July 1, 1985 The Rosemount Franchise at Section 10.04 Sale or Transfer of Franchise: This Franchise shall not be sold, assigned or transferred either in whole or in part, nor shall �itle thereto, either leqal or equitable, or any right, interest or pro�erty therein, pass to or vest in any person without written approval of the Franchisor. Such approval shall not be unreasonably withheld. For purposes of this section, the� term "transfer" shall include sale or transfer of all or a majority of the Franchisee's assets, merger (includinq any pa=ent corporation, or sale or transfer of stock in a corporation so as to create a new controlling interest in the System. The term "controlling interest" as used herein is nat limited to majority stock ownership, but includes actual working control in whatever manner eaercised. The parties to the sale or transfer of this Franchise shall make a written request to the Franchisor for its approval of a sale or transfer. Franchisor shall reply in wr3.ting within thirty (3Q) days of the request and shall indieate approval of the request or its determination that a public hearing is necessary if it determines that the sale or transfer may adversely affect the System's subscribers. If a public hearing is deemed necessary, such hearing shall be conducted within thirty (34) days of sueh determination. Notice oE the hearing must be qiven 14 days before the hearing by publishing notice of it once in a newspaper of general circulation in the franchise area. The notice must contain the date, time, and place of the hearing and must briefly state the substance of the action to be considered by Franchisor. Within thirty {30) days after the public hesring, Franchisor shall approve or deny in writing the sale or transfer request. -3- A � MOSS � BARNETT . A PROFESSIONAL ASSOCUTION � � � � . � . . . . . . . . .• ''�� . . . . . . . Based on Minn. Stat. . § 238.083 and § 10.�4 of the Rosemount Franchise, we believe the following grocess promotes an effective and orderly review of the transfer of ownership of Star, resulting in an informed decisions !. Parties to the sale or transfer of a Franchise shall make a written request to the franchisinq authority for approval of the sale or transfer. A. This written request, however, is not final until the parties to the sale or transfer have completed the necessary application forms and returned them to the franchising authoritg. 1. The parties to the sale or transfer should be -_ allowed a reasonable time within which to complete and return the application forms to the franchisinq authozi�y. 2. Upon receipt by the franchising authority of the application forms, the written request from the parties to the sale or transfer is final. II. The franchising authority shall reply within thirty (30� days of the written request by either approving the sale or transfer, or by determining that a public hearing is necessary. A. A public hearinq is necessary if the £ranchising I�, authority determines that a sale or transfer of the Franchise may adversely affect subscribers. 1. The franchising authority shall conduct a public ' hearing on the request within thirty {3�} days ' of that determination. B. During the thirty (34) day perio8, the fraachising authozity shall review the financial, leqai, technical and character qualifications of the buyer or proposed transferee. 1. During this thirty (30) day period, the franchising authority shall also prepare a report to be presented to the ezisting cable operator, as well as the proposed transferee. III. Notice of the public hearing must be given fourteen (14) days before the hearing by publishing notice of it once in a newspaper of general circulation in the area being served by the Franchise. -4- A Y �I A. The notice must contain the aate, time, and place of the hearing and must briefly state the substance of the action to be considere� by the f ranchising authority. IV. The franchisinq authority makes its presentation at the public hearing. A. This public hearing qoes on, if necessary, for two (2) weeks, during which the franchising authority may draft a final report with its recommendations. V. Within thirty (30) days after the public hearing, the franchising authority shall adopt a zesolution in writing approvinq or denyinq the sale or transfer reguest. This approval must not be unreasoaably withheld. A. In addition, this resolution may make findings which include: 1. Amendments to the Franchise Agreement incorporatinq any modifications which are applicable. 2. Acceptance of the Aqreement by the transferee. 3 . Guarantees made by the general partner of the transferee, and the qeneral partners of that entity. 4. Gompliance with other closing requirements, ineluding reimbursement of eapenses of the City for legal and eonsultinq costs, and delivery of partnership authorizations to enter into the Acceptance Agreement. 5. fJpinions of the transferee's leqal counsel. NOTE: The timing of the process outlined above and steps to be followed may be modified based upon the need to evaluate issues in the Franchise that are unresolved and modifications to the Franchise. This is best accomplished thtough a negotiation process. -5- � y .���Q nc t`pNTi��I- nFS�RIPTIQN OF TRA: � � "'. Cablevision Group, a Wisconsin At the present time Star interest in SMALP LimiteS general partnership, owns 99 •5� which in turn tnership, a Wisconsin limited partne e pital stock of Stat Par which in turn awns 100� of the issue a W��onsSi a�corporation, Mid America I�. In�• � Inc. , a Minnesota corPoration. �gg3 proviaes for the owns 100� of A=eementraat d1November 12• � Delaware limited The Purchase 9 L•p• � and Star purcbase by Marcus Cable Partners, Pa rtnership, of the assets of Star Cable��sion Group Mid America Limited Partnership. ,.,�o esx T v STRUCT��� n� �t ANGFiT SEE • �`TTi2RE1V� Vt�a�j+•c� Star eablevision Group. A Wisconsin general partnership general partner 99 •5� interest Star Mid America Limiteartnershiphip a Wisconsin limited p 100� Star Mid Ame rica Iv, Inc. a Wisconsin corporation 10 0� Star Metro Cable. Inc. a Minnesota corporation -b- � , MOSS & BARNET`T . � A PROPESSIONAL ASSOCIATION � . . � Pursuant to the November 12, 1993 Purchase Agreement, Marcus Cable Partners, L.P. wiil purchase the as�ets of Staz Cablevision Group and SMAI,P, which owns all of the issued and ' outstanding capital stock of Star Mid America IV, Inc, Star Mid America IV, Inc. is the parent of Star Metro Cable , Inc. Goldman Sachs Marcus Cable Properties, L.P. '�, investors �, general partner limited partner 14.8� 80.2$ Marcus Cable Company, L.P. general partner 99$ limited partner l� Marcus Cable Partners, L.P. The names "Star Cablevision, " "Star Cab2evision Group" or any similar formulation (other than the names "Star Mid America IV, Inc. " and "S�ar Metro Cable, Inc. " which are being transferred to Marcus} are not beinq sold or transferred and may only be used for a period of 120 days after the closing date in the operation of the business of the systems. Marcus Cable Company, L.P. is a holding company which has no significant assets other. -than its investments in the ogerating partnerships identified in the diagram below. Marcus Cable Company, L.P, dervies all of its ogeratinq income and cash flow from the operatinq partnerships. Accordingly, Marcus Cable Company, L.P. must rely entizely upon distributions from the operating partnerships to supply the funds necessary to meet its. obligations including the payment of principle and interest on the debentures (�75 million) . The debentures are being issues solely to Ma=cus Cab1e Company, L.P. and Marcus Cable Capital Corporation. Neither Marcus Cab1e Properties, L.P. , Marcus Cable Properties, Inc. , tbe Goldman Saehs investors or the lirnited partners of the operatinq partnerships, or any of their respective directors, officers, partners, stockholders and employees will be an obliqor under the debentures. There is no present intention, and ther� should be no eapectation that Marcus Cab1e Properties, L.P. , Marcus Cable Properties, Inc. or any other party, will, in the future, fund the operations or deficits of Marcus Cable Company, L.P. or Marcus Cabie Capital Corporation. -7- . Y MOSS bz BARNETT � A PROT85510NAL/45SOCUTiON � � . � � . . �ORPORATE STRUCTURE FOLL�WING STAR AGQUtSIT10N �p. L!l�-i r/e c� N� Marcus Cable Properties, Iac. �i Bmployeea of � General Partner Marcua Cable I, Companp. L.P. Li.m:ted �artner in each Operatiaq , Partnership (1� or less interest) I', Marcus Cab1e Froperties, L.P. Limited Partners General Partner {19.8� iaterest) Goldman Sachs Investors Marcus Cable Company, L.P. (1009� interest) Limitea -'-" ' Partners Marcus Cab1e Capital (80.2� interest) Corporation General Par�aer (99� interest) (99.99� iatereat) (99,999� iatarest) Marcus Cable Marcus Cable of Marcus Cable of Partners, L.P. San Aaqelo, L.P. Delarrare and (Wiscoasin Systems) (San Asgelo Systems) Marylan8, L.P. (Dela�nare and Marylaad Sgstema) (100� iaterest) Marcus Gable. Inc. (formerly. Star Metro. Inc.) -8- . , MOSS & BARNETT � A PROFSSStONAL ASSOCIATION � � . . � � � INTERVIEW WtTH MARCUS REPRESENTATNES On March 3, 1994 I spoke with Mr. Louis Bor=elli, Senior Vice President of Marcus Cable and Mr. Dave Hanson, Vice President of 4perations for Marcus Cable to discuss Marcus Cable's plans and intentions with respect to the cable television systems subject to the Purchase Aqreement. The , following summarizes this telephone conference, in a question and answer format: Brian T. Grogan: What changes do you plan to make locally as a result of this acquisition? Louis Borrelli: Well, I '11 give the easy answer -- none. Hut I ' 11 let Dave talk about whether there is anythinq that has come up in conversations specifically with the Cities that he mag be aware of. Dave Hanson: Well, in terms of our ogerations as we've said all alonq, Star has made a lot of changes since acquiring this group . from Metro and they are moving in the riqht direction. We will probably ask them to focus a little di€ferently on each and every transaction so that customer service becomes more of an issue or an item and that it is upper most in their minds. I think from an administzative standpaint for the company itself, that we attempt ta address public access issues just as soon as we possibly can to see if it is advantageous to everyone at this time to qo in and set it up as a non-profit organization that is controlled by the public. BTG: What about ezisting Star pe=sonnei and iadividuals that are ao� operating Iocallp to provide service in communities? Are you planning to eliminate any jobs, change personnel �r add personnel? DH: No, no, and no. LB: That was part of the deal. If they want to, you know, i mean, it's not unusual when changes of owrzership occur that some people miqht take that as a time to make a change. I don't anticipate anybody at the manaqement 2eve1 certainly makinq that change, but I can't assure that. We are goinq to be offering -9- i � . . . . . � . �I , MOSS & BARNETT � � A PROPESSIONAL ASSOCIATION � � � � � . . �� employment to everyone who is there currently and with no plans to make any changes. It's obviously very prernature, before you own a system. We've never • done a transaction where we have gone in and, done a, you know, whole sale, let's slash and burn. DH: With any transaction that we`ve ever done in the past if there has been a reduction of personnel it has always been strictly throuqh attrition. We have not gone in and eliminated a position to get rid of a person if we determine we can fill that f rom within by changing duties that''s the way it was done. We never went in and fired anybody. I would say that in speaking to the future I think we have an opportunity on some of the advertising sales side to look at potentially offerinq employment to more people in the eommunity. That's just something that we have been lookinq at as we look over these properties but as far as �the rest of the positions go we haven't gone in aepth at all. BTG: Will the sale of the Star Systems to I+tareus cause subscriber rates ta increase? DH: I think the government has kind of taken care of that. There is nothing related to the sale that I think chanqes the economics. If anything they probably improve the economics. I don't know for sure but I think our finaneial position, our overall leverage and access to capital probably is better than what Star's current situation is. But in terms of cuts in the rates, those are all basical2y qonna be dictated by federal statute and then that's basically what we' re going to have to follow. LB: In going to the operating philosophy of the company if you look at past transaction that we have been invoived in, our history has been one that the rates have not changed because of an acquisition. The rates have chanqed tygically at the rate of inflation in our ezistinq properties and with new acquisitions only at a time when we have enhanced the value to the customer either through added services or upgrades. DH: The only time when we have made what I would call drama�ic r�te adjustments has been after system rebuilds or upqrades where we took a capacity from say 12 or 18 channels up to 36 or 60 and �aaea, you know, a dozen or two dozen channels, but as you know, I mean, even if you did that today I think goverr�ment would probably let you get a buck and a half back on a $2 million rebuild. Unfortunatelg, I think what we are goinq to have to say on a lot of these chanqe issues �is the status quo until the laws are c�earer -10- � , MOSS & BARNETT A PxorrssioNu.Assocu�noN and until we can get a reasonable return "and provide them better services. It' s unfortunate but that's the way it' s worked out. BTG: Do gou iatend to increase the tiering of proqramtning. For ezample. Providing more programmiag on aa a la carte b�sis? LB: No. Aqain, what I think I 'd hawe to say on that is that we really can't make any definitive decisions and really we' re out wastinq our time with a lot of what if strateqies until we know ezactly what the new laws allow us to do, what the parameters are that would specifical�y sag that a certai�n channel or group of channels or a la carte and therefore unregulated versus a second or third regulated tier. As a company we are pretty rnuch a plain vanilla company. We don't do a lot af tiesing, we generally just have a broadcast basic level of service and eapanded programming level of service. We are very aggressive in how we package pay televi�ion, but we don't have a lot of varyinq levels of services or a la cartes in any of our other systems. BTG: will the transfer create so much debt to the cable spstem that the cable operator will aot have flezibilitp in the future to meet new technoloqy demands that may arise. LB: No. The one thing that has happened with the new law is that it has caused cable operators to become far more canservatively finaneed. Our financial plan calls for a large amount of capital be ezpended in order to facilitate new technology. I don't think that leverage is anythinq outside of what the normal marketplace would allow because basically its being dane with a traditional bank in public debt financing and the markets today generally don•t like to see high leverage and so, you know, we're putting a large amount of real qreen in this in terms �f real equity and we've got enough �ash in hand and we wili generate enough internal cash to be able to fund ali of our capital plans, service our debts, service the public debt, and amortize the bank debt as well, so, no we don't think that that is going to be a problem at all. BTG: Will the manner ia which you bill customers differ from that of Star. In other words, will you break out charges differently than what Star has doae in the past. LB: We do not believe so. I apoloqize for not being totally f luid on how they c3o it currently, but again, -11- � W MOSS & BARNETT � A PROFESSIONAL ASSOCIA770N . � � � � � � . I think the itemization of bills is one that is fairZy specific as to what the minimum requiferaents are and we would obviously complg with whatever the minimum requirements are. If they are doing more than that my guess is that we would just continue with what they are billinq, but I can't say that for sure. Dave, you may know a little more about that. DH: The billing system they are usinq is one that we will continue to employ and is one that we are familiar with and I don't see any reason to change any o€ it. LB: Unless the community doesn't like what we are doing. But my guess is that we would continue with what they are doing unless someone decided that it doesn't meet whatever we are supposed to comply with at the federal level. gTG; Do you follow any particular set or code of coasumer protection standards. i�or ezample, have you incorporated into pour dag to day operatioas in various commuaities, enforcement of the PCC's customer service standards or have gou developed sepa=ate standards over and above tbase of the FCC? LB: Well, we tend to meet or eaceed the FCC guidelines in our current operations. That has been more than sufficient for the communities that we serve, but I guess my answer is that we tend to, we will meet or ezceed whatever standards people want to set for use but for the most part the FCC standards are ths ones that everyone has been happy with. DH: And in most cases where there is some questions about the effeetiveness of the FCC standards, when we sit down with the city regulators and talk about these standard, we can come up with a plan that is both beneficial to us in terms of and typically ours and is also beneficial to the community. We do both. We have set ourselves up as the FCC standards being minimum and we have gone beyond that in communities where they have asked for same change and it makes sense. BTG: Do you have a separate customer se=vice agreemeat o= contract that you enter into with subscribers? LB: I•m not sure I understand that. BTG: Well, when you sign up ne�w subscribers oz when you take over thes+e s�stems, will .you be introducing aay , new customer service contract as far as the obligations of the subscriber and the company in that -12- � MOSS & BARNETT � A PROPESSION�L ASSOCIA170N . � relationship of providing cable service and paying moathly bills, etc. ' DH: No. I � LB: I don't think so. Z mean, we sign a work order when I we do an install just like any other cable company i but we're operating under the FCC guidelines, we I , don't believe we are changing any of the billinq practices or service practices of the current , operator so I guess the answer is no. ', DH: There is no specific contract that the customear , signs. They sign the work order showing that the ' work was done. BTG: Do pou use any customer satisfaction surveys either in individual communities or on a national basis. LBs Yes. We do informal poilinq as well as formaZ polling. Informal I would say is calling back, you know, recent work whether it's new installs, reconnects, service calls, to determine that the whatever work was done at the house customers were satisfied and we do that on a regular basis. Depending upon volume and time of year, the percentage of people called back vara.es but that is done on an informal basis and then on a more formal basis we do a random survey with an outside research firm and that generally measures not only customer satisfaction in terms of service but as we1Z as programming content and satisfying what the actual product that we have. We also throw some questions there about new technologies and other thinqs that will help us make decisions as we move forward. HTG: Some cable comp�nies are ia th� busiaess of taking over a distressed cable compaay, holding it for e short period of time aad thea sellisg it. Would this applg to Marcus' cable o�rations? LB: No, I don't think we would anybady wauld call this acquisition a distressed acquisition. It's probably one of the best properties in the market in terms of future qrowth and potential. We have in the past been able to acquire companies that some people might consider distressed and make improvements but that's not the business that we are in. We have been in the cable business in one form or another as an ogerating entity since 1982 and before that a lot of us have been in the business far longer than that in other capacities so we �are not an arbitrager if you will of cable systems. We tend to own them and ogerate them and we don't have a three year flip plan on any of -13- � . MOSS & BARNETT � A PROFESSIONAL ASSOCIA710N . . � . . ... � � �. these properties. This is part of a long term plan that we have to enhance and eapand our ezgosure in the Minnesota-Wisconsin area. BTG: What is gour operating philosophy towards system maintenance. LB; Well, we really believe in maintaining system integrity. We have both policies and procedures far maintenance. We have a safety policy. We have a lot of things that if you were to look at from the standpoint of how we operate day to day and how do we take care of things for both short and lonq term that I think would leave most people to believe that we are more interested in doinq thinqs riqht and doing them right the first time because we thing that it is cheapes in the long run. Now, that doesn't mean that we are able to do everything we want to do day one but I think that most people would acknowledge that our companies are well run, that our plant is well maintained and that we have in the past and continue to plan to provide sufficient capital so that customer quality in terms of pictures and reception and services delivered continually improve and maintain the pace you know as far as the industry qoes wi�h properties of similar size. BTG: What is your ogerating philosophy to�vards public, educational and govern�eatal access channels. LB: Well, I think that any product, any programming that is unique to the community that serves purpose is a valuable asset not only to the cammunity but to the cable system. My background is in access. I started out in this business over 15 years aqo as a studio rat doinq origination access progra�m€aing so it's kind of a soft spot in my heart but I have come to realize through my own ezperience indirectly as we11 as in the cable systems we have owned and operated is that there are communities that really put a heavy emphasis on access and in those cases campanies are very smart to facilitate that commitment by allocating resources and channels, etc. What we don't want to do ana that we try to avoid doinq is funding or supporting or facilitating an effort that really doesn't -- I want to say this the riqht way. It doesn't deserve to be supporte8 meaning that the community really has a lack of interest but because of a franchise obliqation or say a minority of people involved that are able to not coerce but force the issue on the local cable operator all the sudden you have this facility but it doesn't qet used, the channels don`t qet used and really that's a waste of time so if• �here is a demonstrated commitment and -i�- y MQSS & BARNETT A PROPESSIONA{.ASSpCIAT10N � . � . . . � there is a liability that ezists and we have been very supportive but I do believe that access is just that and we should be in the position to help facilitate that access but I don't necessarily want to be in the business of producing it for them or to be putting a lot of time and resources that I think should be really better directed from an independent group or from a city group you know funded by franchise fees. -15- � MOSS & BARNETT � A PROf855tONAL ASSOCIA'I'ION ��R�fGl�S A�f f1 L�� [ O�M�? Marcus Cable Partners, L.P. owns, operates or controls cable communication systems in 215 communita.es in Wisconsin. They also ogerate sgstems in Delaware and Maryland. They have forrner franchises in Minnesota, Pennsylvania, South Dakota and Wisconsin. They have 41 potential franchises throughout Minnesota and Wisconsin. In the State of Wisconsin, they serve approximately 142,161 subscribers. The principals of the corporation are Jeffrey A. Marcus, President; Louis A. Borrelli, Jr. , Senior Vice President; Mark Biersmith, Chief Financial Officer; Cynthia Mannes, Vice President; John Pietri, Director of Enqineering; and John Klingstedt, Controller. We contacted ten (10) communities with cable systems currently operated by Marcus to ascertain: (1) how the cable operator has worked with the municipalities; (2) if subscribers appear to be satisfied with the service rendered; and (3) the eatent of support by Marcus for public access programminq and local programminq. At least one municipal official from each con�nunity was contacted and asked the following questions, given responses as summarized below: 1. How many years has Marcus been operating the cable system? Marcus has operated the systems for periods ranqinq from approaimately three years to fifteen yea=s. 2. Did Marcus build the cable system? In no case has Marcus built the cable system. 3. How old is the eaisting system? System aqe ranges from fifteea to forty years. 4. What type of cutbacks or amendments have been made since Marcus took over? All of the communities noted that no cutbacks and/or ' amendments have been made. -16- y l � IViOSS & BARNETT II', .. A PAOPESSiONAL/iSSOCIATION . � � � � �. � � �I 5. Is there a local office for Marcus? If not, how far awa� '� is the office? I Marcus maintains a local affice in all of the I,, communities ranging between one block to two miles , away from the municipality's office. ', b. How many basic cable channels are there? ', Basic cable channeis range from approzirnately ten to ' thirty-seven channels. ' 7. Does Marcus support public access programming2 Ss there ' public access grogramming? A majority of the communities have access programming. However, ther� are quite a few communi�ties that do not use public access programminq. A few only use it as a bulletin board. A few communities are going through a franchise renewal at this time and are hoping to have more use once the system is upgraded. The Whitewater community says it has an active public access channel. It noted that the production quality is poor, It recent2y surveyed the comcaunity and according to the survey, the number one cable show is the City Council meetings. 8. Does Marcus do any local progra�ning? Only a few communities stated that Marcus does local programming. 9. Do the schaols use the system? Only a few com�aunities indicated that the schools . use the system. The school system in Two Rivers at one time did not qet along well with Marcus because it wanted to handle its own proqramming on an access channel. The schools now handle their own channel and have their own equipment. 10, Are most subscribers happy? Has the City received many complaints? Most communities felt that they c]o not receive very many complaints. Ashland said that they received complaints reqarding the reliability of the system. Ladysmith indicated that the subsczibers wanted a package with fewer channels at a lower price. The Tomah system received a lot of complaints reqarding the negotiations for retransmission/must carry. Whitewater received complaints regardinq the production quality of its access chaanel. Another -17- M . . . . . � . ', . MOSS & BARNETT � A PROPESSlONAL ASX)C1ATiON . � � � . �� community commented that they received complaints on ' the franchise fees being shown on the bill. Two ',, Rivers had conducted a survey which indicated that !� the costs were too high, the service was fine, but � the customer service was the weakest point. The City �II official commented that Marcus told the City it wou2d � not increase the rates if it approved of the I transfer. However, four months later Marcus increased the rates. 11. Daes Mazcus satisfactorily resolve subscriber complaints? � Most communities believe that their subscriber com laints are satisfactoril resolved. Quite a few P Y h com laints a of the communitzes stated that t e p g directly to the cable operator or are filtered through a Cable Commission. 12. What are ��e current subscriber rates? Current subscriber rates ranqe from approzimatelp $7.40 to $42.50. HBO runs approaimately $12.95. 13 . Has Marcus made any changes in subscriber rates? Most of the communities do not recall a recent increase in rates ezcept for premium channels in a few communities. 14 . How would you describe the City' s relationship with Marcus? Most of the communities report the relationships ranging from good to positive. One community stated that the relationship is up and down. 15. What types of problems has the Citg ezperienced with Marcus? The problems range from the follawinqt rate increases, electrical system violation after inspectian, not eatendinq service to unserved areas, laying cable while doing construction, nat providing complete financial statements and increased rates after transfer even though the agreement would be not to do so. 16. What are your franchise fees? Are they paid on time7 The franchise fees range from 3� to 5� and are paid on time. One community noted that the cable operator is paying the franchise fees under protest due to the fact that the City feels that the franchise fees received should be on all revenues Marcus is generating. Some of the communities are negotiating -18- M � MOSS & BARNETT � � � � A PRQFESSIONAL ASSOCIATION � � � � . � � '�, 5$ during its franchise renewal. One comrnunity does '� not collect franchise fees. Rice Lake has u�ed the fees to offset property tazes but now uses them for - • the cornmunity access channels. i, 17. What is the proqramminq/gicture quality like? Most of , the communities responded that the proqram/picture quality was qood to very good. Z�o communities stated that two stations are f requently fuzzy. Tamah stated they have problems from time to time, but the cable operator says that the system is old. Marcus claims that the problems will be resolved once the system is rebuilt. 18. Would you qrant a new franchise to Marcus? Why ar why not? Al1 of the comrnunities said they would renew the franchise with Marcus. SPECIFIC RESPOPSES FOR EACH COIYII�IQNITY - BURI�IPC1"ON, WI (414) 763-3717 CONTACT: Chris Kerkman, Clerk/Treasurer Going through renewal. Recently held a public hearinq. Programming problem. Was not servicinq people timely. Doss not recall overwhelminq number af people at hearing. Discussed regulations on proqrams. Must Carry/Retransmission. Has not had many complaints in four years.� Maybe one or two. Up to 10 letters of complaints mainly from retirernent homes. 1. Since March 6, 1990. 2. NO. 3. Built in 1973 or 1974. 4 . None, status quo. 5. Yes, 5 blocks. 6. Appro=imately 37, 4 premium. 7. No access channels, one channel available for PEG. News network is using 5 - 6 minutes every one-half hour. 8. Not aware of. -19- � � , MOSS & BARNETT A Pxorass�oxec Assoct,+nox I I 9 . No. I 10 . Eapense is main complaint. I 11e Feels they do - good response. 12. 3/1/94 HBO, $12.45, CINEMAX, $12.5Q, DISNEY, $9 .35, 2 I, PREMIiJM, $18.9 5 BASIG� $42.50 includes broadcast channels II MVPT $71,89 value for $44.95 I includes Broadcast, Satellite Showcase, 3 Premium '� MVP II Maaimum Value Package I�, Includes Hasic, Satellite Showcase, 4 Premium for $49.95 �, 13 . Does not have information. '� 14 . Have not had much contact until renewal process. ; 15 . None. ' 16. Yes, paid on time. � Franchise fees now listed on I bill. 3$ franchise fee. ' 17. Programming problem. Subscribers want more Chicago ', stations. Settled contracts. Stations wanted to be ' bought. , 18 . Feels City will renew. I ANTIGO, WI . , (715) 623-7849 CONTACT; Donald Schroeder, Town Chairman ' 1. At least 10 �*ears. ', 2. No. I 3 . Doesn't know. ' 4. None, they have made increases. 5. Yes, 1 1/2 mile. 6. Doesn't know. ' 7. Yes, yes. 8. Some. -20- .� - . MOSS & BARNETT � � A PHOP&SSIONAL ASSOCUTION � . � � � � . � � 9. Doesn't know - thinks the technical school uses. la. No complaints. 11. Must or would Come to Town Board to cornplain. 12. Heard $20-$25 a month. 13 . Yes, on movie channels. 14 . Good. 15. Were complaints that rates are too hiqh. 16. Paid on time. Not sure � 17. Good. 18. Probablg. ASI�I�PD, WI (715) 682-7071 CONTACT: Carol Larson, City Clerk l. City has had cable approaimatelg 30 years. Marcus bought out a number of years ago - at least l0. 2. No. - 3. 30 years old, has been upgraded over years. 4. No. 5. Yes. 12 blocks. !� 6. 11 channels, 2 shopping channels� basic broadcast $10.36. � 7. City never requested. Does not have interest City ' has not approached Marcus to provide. � j 8. No. ' 9. No. 10. City conducted survey. Satisfied with everpthing eacept reliability of system. The system is 30 years old. Marcus approached early to start renewal to rebuild system. Complaints include that there are � lines through some channels or there are outages. Marcus is good about bringing system back up. ,- -21- . IviOSS & BARNETT � � A PROFESSSONAL ASSOCIA7ION � � � . . � 11. Yes. 13 . Yes, not recently. 14 . Good - not close relationship. Good business in City. Not workinq hand in hand -- City business, i.e. Council decided not to regulate rates. Feels Marcus provides quality service and competitive rates. Note: Snaw emerqencies - Mareus, at no charge, gives ' access to City to dial into system to broadcast announcements, i.e. odd/even parking or other emergency (haven't used) . Credit to local management. 15, Very little. City is in renewal process. City inspected electrical sy�stem and noted electrical code violations. Marcus is working at correcting. Noted there are also deficiencies in installation. _ 16. Less than 2$, proposing 5�, yes. 17. ? ' 18 No doubt. ' LADYSMZTH, WZ (715) 532-2600 CONTACT: A1 Christianson, City Administrator ', 1. Several years ago. I 2. Built in 1970. Changed ownership three or four tirnes ' since that time. 3. 23 years. '� 4. None - added. 5. Yes, one block. 6. 12 approaimately. Not many subscribers. Most !i subscribers have ezpanded basic. I 7. In gast, yes. Not much demand to use. With last two � weeks, used erawl-in on weather channel for utiiity company, , 8. No. ' 9. No. -22- x MOSS & BARNETT � A�PROFESSIONAL ASSOCIATION . � � � 10. Have no� received many complaints. At one time; only had one package with 36 channels. Subscribers wanted basie package with fewer channels and lower price. 11. Daes not receive enough to comment. Not aware of anything; unresoTved complaints go directlg to cable company. 12. Basie? Ezpanded $27.42 13 . No. 14 . Good, Anythinq to lower rates would be iooked at. I Cable company is looked at as business. No major , problems. ', 15. None. 16. Not aware. 17. Generally, pretty good. Individuals have complained that one or two channels are fuzzy. 18. Sure they would. MENOMQNIE, WI (715) 232-2187 CONTACT: Loweli Prange, City Administrator 1. Approzimately 5 years.- 2. No, Did rebuild one year ago. 3. 20 years old. 4 . No. 5. Yes, one mile. 6. 13 channels. 7. Have dedicated channe2. City does not use. 8. No. 9. No. 10. Does not receive many complaints. 11. Yes, cable campany is looking to ezpand hours to handle eomplaints and requests. -23- __ . _------- _ MOSS & BARNETT A PnoFessiowiu.Assocunow 12. Broadcast basic (broadcast station) $ 9.46 Satellite Showcase 14.04 - 18 channels Combined Broadcast and Satellite 23.50 HB� 12.95 2 Prema.um 18.95 13 . Not in last 12 - 18 months. 14 . Better than with Star. Star and City did not qet along. 15. Not many other than eztendinq serviees to areas unserved. Marcus thouqht it was not cast e€fective. - Pretty amicable relationship, City Manager meets regularly with manqer of cable company to discuss matters. 16. 5� yes. Also provicle financi,als with franchise fee payments. 17. Picture O.K. 18. A11 things being equal, yes. City seek someone else - no. TOMAH, WI (608) 372-5948 CONTACT: Phyllis Zimmerman, City Clerk I (On Franchise Renewal .Commission) 1. A long time ago. Agproaimately 15 years. �'', 2. No. Does not know how much has been replaced. 'i Marcus hopes to rebuild whole syst�m to give better i, service and wiil also eztend boundaries. The I outlying areas not able to receive cable at this , time. The City does not have a Franchise for ' Marcus. An Ordinance was signed last month. , 3 . No idea. Approaimately €rom the 1960s. , 4. Cannot answer. 5. Yes, one mile. 6. ?, Lost Eau Claire station because ' retransmission/must carry. ! 7. Yes, City not usinq at this time. With upgrade, hope to have more use by schools and City. _24_ Y . . . . � � � . �,�. _ MOSS & BARNETT ! �. .. A PAOFESSiONAL ASSOCLITION � � � . . ... . .. � � i 8. Not aware of. A gentleman tapes different events to put on access channel. He is charged by Marcus. 9 . To some eatent. Hopes to use more. Schools can bring in programming from other areas. 10. While neqotiating with a lot of channels, the City received a lot of complaints. Cable operator provided a switch to subscribers �o activate channels that subscribers are unable to receive through cable system while goinq through negatiations. Not a lot of cornplaints. Have had problems with outages on the weekends and system not beinq brouqht back until first of the week. 11. Cannot answer. Assumes cable operators does. When Commission asks questions, they respond. 12. Auqust 30, 1993 letter to Mayor sets out Basic at $7.40 and Satellite Showcase at $16.10. Mareus reduced rates for aclditional outlines and converters. 13 . Not aware. 14 . Good. 15 . Not active relationship until within last year. Had little eontact, no problems. lb. No franchise fees. Depends on City's involvement. 17. Problems time to time. Cable ogerator tries to resolve problems, but often says system is old. New system will resolve problems. Rebuild should take place in 1944 - 1995. 18. Yes. WHITEWATER, WI (414) 473-0500 CONTACT: Gary Boden, City Manager 1. 5 years or less. Third owner. 2. NO. 3. 15 years old. 4. No. Seeing restructuring of services. Going throuqh franchise renewal. Eacept system upgrade�,. Working with heighboring communities on franchise renewal, -25- � MOSS & BARNETT A�PROlESSiONAL ASSOCIATION � . . � � � . . � ''�, 5. Yes, 4 blocks. ', 6. On edge of two market areas: Madison and Milwaukee - II unique area with 15 channels. � 7. Yes. Have active publie access. City is university community. Unique, has two public access channels. � One used for university, one used for local. Production quality poor. The number one cable shaw, : according to survey, is City Council meetings. 8. No. A£filiation with WIN News. Contraets out for Cablecasting of News. : 9 . Yes, part of gubiic access channels. 10. Very pasitive relationship. Reasonable quality reception. Has not jumped on rate regulation. Feels part of satisfaction issue. No increase in rates. � Complaints not significant, ezcept production quality of local access. 11. Yes. Have active Cable TV Committee which is not comprised of City Council but of volunteers with school system, etc. People complain to them. They monitor service. Have active relationship with Marcus. Filter problems. Community pretty satisfied. 12. Basic $26.00 FiB4/CinemaalDisney and eapanded $46.00 $52.00 is most subscribers pay. 13 . Across board have had one increase in 3 gears. Eapect increase this year. 14. Positive. 15. Problems with laying cable while doing construction. Good management. Sensitive to concerns. Take seriously concerns and to rest�lve. May not be fast enough, but what is reasonable. 16. ? _ . 17. Good. Make subscribers aware when sunspots occur. Working into Franchise ability to have character generators to wire into municipal offices for emergency announcements. 18. Yes. -26- . . M(�SS & BARNETT A PROfES310NAL A550CtATtON � . � � �� � � � MOPROE, WI (608) 325-572? CONTACT: Alois Mayer, Town Chairman Jim Myers, City Clerk 1. 3 years approzimatel�r. 2. No. 3o Approsimately 10 years old. 4, No. 5. Yes. 2 blocks. 6. 20-11. �. City has a channel to use for bulletin board to �ype messages onto. School has channel to put messaqes an bulletin baard and rebroadcast events. 8. Yes, puts message on bulletin board. Also uses for advertising for businesses. 9. �es, see #7. 10. Receive few complaints: Customers upset when franchise fee is shown on bills and fact of havinq to pay for. Also upset about late fee penalty. Received four complaints in last 3 years. 11. Last one, yes. 12. Does not knaw. 13 . Yes, two years ago on premium channels. 14. Good. Used influence on thera. When City moved railroad depot to save for historical purposes, Marcus said they would take down lines for a charge of $12,OOfl. City asked Marcus to pare down. Marcus cut to $3,OU4 and said the rest was a donatiQn to the City. City told 'Marcus Power & Light was charging $3,000 and telephone company was also charqing $3,000 and asked why they could not do the same. Won't look good if $7,000 - $8,000 mare. 15. None. 16, 3% -27- . y MOSS & BARNETT . A PROFESSIONAL ASSOCIATION � � . � . . . 17. Real good, yes. 18. Yes. ZWU RIQERS, WI (414) 793-5525 ' CONTACT: Anthony Roach, Secretary, Franchise Renewal Committee, Finance Director and City Clerk 1. Transfer occurred in 1990. ' 2. No. ' 3 . Fairly old. More than 15 years old. 20-25 years. ' In process of renewal with Marcus. Franchise eapires , January, 1995. J, 4 . No. Had to accept original and in its entirety. I�� 5. Yes, 1 1/2 - 2 miles. I 6. 12 channels. 7. Yes. Yes. 8. Some, limited. 9. Yes. Recent development - schoois aia not get along well with Marcus. Schaols now handles own channels and have their own equigment. 10. As part of franchise renewal., sent survey to eustomers. Survey showed new Cable Act not effective. Service fine. Costs too high. Fairiy satisfied with service. Customer service is the weakest point. Marcus said it would not increase rates if approved transfer. Four months later, � raised rates. Having trouble with Marcus during renewal. Having problems retrieving information under new Act regarding rates. Incomplete xecords regarding financial statements and regarding City•s operations financial statements. Marcus dragging their feet. Marcus may ask for cost-of-servic+e. Marcus is rethinkinq because of 2f22 rulings. 11. For the most part, yes. Questionnaire showed that they do. Rated satisfactorily, but room for improvement. 12. $ 8.55 for 12 channels, $12.95 HBO, $12.50 Showtime/Cinemaa, $9.35 Disney. : -28- y �ri(JSS & BARNETT � A PROlESSIONAL ASSOCIATION � . �� A11 premiurn channels went up $1.00 this month. Customers said not properly notified. City received one week notice. 13 . Prior to rate freeze annual adjustrnents. 14 . Local fine. � 15. See No. 10 above. 16. 3% - 5$ n�gotiating. Yes. Proble� when Marcus took over. Franehise fees shown on bill. City felt should receive franchise fees on all revenues Marcus is qer�erating. Marcus therefore is paying €ees under protest. 17. Reeently conducted technical sweep and showed that everything is good. Isalated areas are troublesome. Marcus resolves to the best of their ability. Surveys showed good response. 18. Yes. No choice. Neqotiating 4 year franchise term. Oriqinally Marcus wanted rebuild as part of r�newal and wanted to eatend term. Due to reeent 73s further rollback, Marcus agrees with City that technoloqy is always changing and should go with four year term. Rebuild is not part of negotiations. Marcus is doing some market driven enhancements to system. RICE �RE, WI (715) 234-2425 CONTACT: Jerry Atherton, Fire Marshall, Zoning Administrator, Building Inspector, Used to be on Cabie Conunission as Technieal Advisor. 1. 7 - 8. 2. NO. 3 . 1950s. Has been upgraded in the 1970s and when Marcus took over and upgraded to mid band and added channels. 4. No. Given 15 year franchise. 5. Yes, one block. 6. 12 - 13 channels at reduced rate. $12 - $13. j -29- � MOSS & BARNETT A Pxores�or�,►t.Assc>cunox 7. Yes, have channel. Marcus installed necessary equipment to feed from headend. Have roam in City Hall. Have offered to put informativn on channel. Have part-time employees who video tape events for channel. Have had very little p,ragramming. Trying to qet more programming. Little input f rom community. 8. Not aware of. 9 . No. Thinks will meet with technical schools to talk abaut usinq channel. 10. Receive a lot of complaints. People Eeel strongly about cable. A lot of complaints are not valid. Complaints include rates and why carry sports. 11. Cable Commission meets monthly. Brought up at meeting. Yes. A lot of miscommunication. A lot of complaints do not go directly to eable operator. Seemed like for a while did not haue good xelatianship. Mr. Atherton is aiso building inspector. Part of subdivision in area not serviced. Marcus would not serve across from area where served. Finally serviced, due to Commission being on top of issue. Complaints registered at Commission meeting went to media. 12. See above. 13 . Deceraber, 1993 prices did not raise. No dramatic ehanqe in prices, l 1/2 year prior to passing of Cable Act, providing basic tier at reduced priee is an option. Told 4 - 5� subscribers would subscribe to basic. Asked cable aperator to look into putting basic channel on system. Took 4 - 5 months to do. 14 . Up and down. Community of 8,000. Feeds weather information hourly. 15. See above. 16. 5�, semi-annual. Yes. I�iand carry over check �30 - $40,000. City would use to offset property tazes. Now use for community aecess channels. 17. Much better. Signal level used to be poor. Problem with teehnical staff. Late with payment. Decided to audit to see if receiving fair share. Provided information, Relations not good clurinq this time. Last two years doing better job. 18 • Yes. Would negotiate di€ferently now since have attended conference to learn about what to negotiate durinq franchise renewai. -30- � MOSS Si. BARNETT � � A PROFESSIONAL ASSOGIATIQN . . � . � . . � . � L.E�a�c�uauFrca�oNs �• The legal qualifications standard relates primarily to an analysis of whether the entities involved in the transactian are duly organizeci and authorized to own the cable system and the Rosemount Franchise. The standard of review applicable is that the City's consent shall not be unreasonably withheld. We have focused our analysis of legal qualifieations on Marcus Cable Partners, I�.P. 'and Marcus Cab1e Company, L.P. Based on the information provided by the above-referenced '�, entities, neither has ever been convicted in a criminal ' proceeding in which offenses applicable to the operation of a ', cable television franchise have been alleged. In addition, I neither of the entities has ever been a party to a civil I proceeding in which it was held liable fo= activities which might affect its performance under the Rosemount Franchise. Within the Purchase Agreement, Marcus represents that it is a limited partnership duly organized, validTy eaisting and in good standing under the laws of the State of Delaware; and that on the Clasing Date under the Purchase Agseement, it will be "qualified to do business as a limited partnership in the states of Minnesota and Wisconsin. " Based upon our review of the information provided, it would appear that the City could not reasonably withhold approval of the transfer of control based upon the legal qualifications of the entities involved in this transaction. -31- � MOSS & BARNETT A PROFESSIONAL ASSOCtATlON � � � � ' � TECHNI�AL QUALtFICATIONS The technical qualifications standard relates to the technical eapertise and eaperience in operating and maintaininq a cable system. In such a review, the standard of review is once again that the City' s consent shall not be unreasonab2y withheld. Under the . proposed transfer of control, the franchisee wi�.l te�nporaril� (for a period of not more than 120 days) remain in eaistence. Star Mid America IV, Inc. , will also temporarily (for a geriod of not more than 120 days} remain in ,, eaistence, although apparently a change in name to Marcus '� Cable, Inc. will occur within 12D days. The proposed transfer I conveys the ownership of all stock in Star Mid America IV, Inc. to Marcus. ' Marcus has stated it intends to retain the local operations peaple currently employed in the systerns it is aGquiring.� '- Further, Ma=cus has represented that no changes are proposed in present billing practices, provision of PEG services, or in the terms and conditions of the Rosemount Franchise. Marcus antici.pates programminq changes will be made in the future, after samplinq the proqramming needs and interests of subscribers. Marcus lans to consolidate the Star systems with P teehnical upgrades usinq fiber optic technology to reduce the number of headends, thereby creatinq eonsolidated systems. The Star systems located in Minnesota will be fed from a single headend in Rosemount. Marcus hopes this consolidation will provide increased operating, technical, and marketing efficiencies. This will allow Marcus to further develop Star systems advertisinq sales operations and to eapand special event pay-per-view operations to include several regular movie - channels utilizing addressable technology. In reviewing the technical abiiities of the entities involved in this transfer of control, together with the representation of continued operations under ezisting personnel, we conclude it wauld be unreasonable to find that Marcus is not technically qualified to own and operate the cable system. -32- � MOSS & BARNETT A PROFESSiONAL ASSOCtATTON . . . � � FINANGtAL QUAIIFlGATIQNS Based on our review of the documents available to us, as well as �ertain representations and projections made by Marcus Cable Partners, L.P. and Marcus Cable Company, L.P. , we do not believe the City can reasonably c3eny the proposed transfer based can the financial qualifications of Marcus Cab1e Partners, L.P. A. OVERVIEW OF AVA�LABLE FINANCING The net proceeds to be received by Marcus Gable Company, L.P. and the operating partnerships from the offering of debentures, after deducting estimated eapenses and underwriting discounts, are estimated to be approaimately $71.5 million. Marcus Cable Company, L.P. and the ogerating partne�ships will use such net proceeds together with net proceeds from initial additional borrowings of approzimately �58'.5 million under a new credit aqreement and $25 million in proceeds from an additional equity investment by Goldman Sachs investors, (i� to acquire the Star systems and (ii) to pay a transaction fee to Marcus Cable Properties, Inc. in connection with the Star acquisition. AVAILABLE FUNDS Initial Additional Borrowinqs Under New Credit Agreement $ 60 Million _o Senior Discount Debentures Due , 2006 75 Million Equity Investment by Goldman Sachs Investors 25 Million TOTAL SOURCES OF FUNDS $160 Million USE OF FUNDS Star Acquisition $149 Million Transaction Fee to Marcus Cable Properties, Inc. $1.5 Million Underwriting Discount, Fees and Other Eapenses �5 Million Eacess Cash �4 .5 Million TOTAL USES OF FUNDS $160 Million -33- � MOSS & BARNETT A PROFESStONAL ASSOCIA710N , � � � . � Concurrently with and as a condition to the closinq of the offering of debentures, Marcus Cable Company, L.P. , throuqh the three (3) opera�ing partnerships, will amend and restate its egisting Bank Credit Agreement entered into on October 13, 1993 (the "Credit Agreement" and as amended and restatecl the "New Credit Agreement") with various financial institutions which will allow for the issuanee of the debentures and will provide the operating partnerships with $165 millian of credit availability (an , increase of $45 million of credit availability) , $130 ', million of which wi11 be in the fo=m of a term loan to be ' outstanding at the closinq of the offering of the I debentures and $35 million o€ which will be in the form of the reduced revolving credit facility, of which $25 ' miZlion will be immediately available and drawn at the closing of the offerinq of the debentures ($60 million in the aggregate, the "Initial Additional Borrowings") and $10 million is available subject to compliance with certain covenants and financial tests under the New Credit Agreement. The closing of the Initial Additional Borrowings under the New Credit Aqreement will occur prior to or simultaneously to the closing of the offering of the debentures. B. SPECIFIC CONCERNS TO NOTE Marcus Cable Company, L.P. is highly leveraged as a result of the substantial indebtedness it had to incur to finance acquisitions and ezpand its operations. It should be noted, however, that the cable industry ge�erally is operating under the constraints of considerable leverage. After giving effect to additional initial borrowings under the New Credit Agreement and to the Application of the n$t proceeds f rom the saie of the debentures as if such transactions has occurred on September 30, 1993, Ma�cus' aggregate cansolidated indebtedness on a pro` forma basis on such date would have been approzimately $33O million. In additian, Marucs may incur other indebtedness to make additional aequisitions in the future. Marcus ,anticigates t�iat, in light of the amount of its e3isting indebtedness, it will continue td have substantial leverage for the foreseeable future. Since its founding in 1990, Marcus has received from the Goldman Sachs investors and its other equity investors, aggregate capital contributions of approzimately $55.9 million and, as of September 30, 1993, Marcus had an aggregate of $160.8 million in consolidated bank indebtedness outstanding. In October 1993, borrowings under the Credit Aqreement and proceeds f rom the sale of the debentures provided Marcus with $188.5 million of net proceeds, of which $160.8 miilian was used to repa� ezisting bank indebtedness and the remainder was used to redeem certain partnership units. Marcus' cash -34- . � MOSS & BARNETT � A PROYBSSIONAL ASSOC1KflON � � . � . . . . � . generated from operating activities has been sufficient to meet the its debt service, working capital and capital ezpenditure requirements. Marcus believes it will continue to generate cash flow and obtain su€ficient financing to meet such requirements in the future. If Marcus were unable to do so, however, it would have to refinance its indebtedness or obtain new financinq. Further, the Federal Co�nunications Commission ("FCC") , on February 22, 1994 adopted a 2nd Report & Order in the matter of rate regulation of cable television rates. Although this Report & Order is as yet unavailable, the FCC estimates an additional 7�k reduction in the rates charged to cable subscribers. These new rate requlations coupled with the ezisting requlatory scheme adopted by the FCC over the 1993 calendar year, presents , significant concerns regarding how Marcus can increase ' operating revenue from its partnerships ta offset its debt �, oblig`a�ions. ' Marcus has been garticularly successful in inereasinq revenues through the introduction of multiple gremium service packages that emphasize customer value and enable Mareus to take advantage of proqramminq aqreements offering cost ineentives based on premium service unit qrowth. Marcus' customer and revenue growth, in combination with the economies of scale (such as volume discounts for equipment) and other operating efficiencies associated with reqional clusters of systems (such as centralized management, billing, marketing, technical and administrative functions) , as well as substantial system-level eapense reductions, has enabled Marcus to increase operating cash flow and operatinq margins in it� systems. Notwithstanding such increases, as a result of the high level of depreciation and amortization associated with Marcus' acquisitions, capital eapenditures and the interest costs related to its financing activities, Marcus has reported net losses since its inception. Notwithstandinq the issues outlined above, the new Credit Aqreement toqether with the aaditional capital which will be made available to Marcus via the debentures, should be adequate to fund ang negative cash flow initially sustained as a result of the Star acquisition. While the FCC's new rate regulatory scheme may have a significant impact on Marcus' ability to satisfy its aebt obligations it is impossible at this time to cietermine the ultimate impact of such revised regulations as they have not yet been released to the public. -35- M4SS �. BARNETT � A PROTESSIONAL ASSOCIATlON . . . . . . . . ADDiTtONl4L ISSUES 1994 from Brian T. Pursuant to a letter dated January 31, System Manag�r� Barnett to Ms. Lisa Co��ment to variaus Grogan of Moss & regarding Marcus' Star Cablevision, overnmental access channels �aae public, ec�ucational and 9 uestions was obligations. Marcus' response to these Q of Lakeville, Minnesota as this �We specifically for the City However, the municipality which formulated the questions• Marcus' s and have therefore incorpo t t�d� believe the information to S be informative regarding n philosophy towarc]s PEG acce 2�� 1g94, as an attachme their response, aated February a specific section of the report. No other additional issues were this of Rosemount, Minnesota requiring raised by the City response of Marcus. -36- r ATTACHMENT TO ADDITIONAL ISSUES .. L�N,Hor��►x,Dai.�&I.n�nGx�,L�• ATTORNEYS AT lAW �$Op NORWEST FINANCIAI CENTER 7900 XERXES'AYENUE SOUTH BLOOMINGTON.MINNESOTA 66431 TELEPHONE 16121 635-380� � FAX(6121 8BS3278 JANE E.BREMER p�p,pIAL i812)899-92Y7 . . . . � . . February 28, 1994 VIA TELEFAX Brian T. Grogan, Esq. p,ND U. S. MAIL Moss & Barnett 4800 Norwest Center 90 South Seventh Street Minneapolis, NIlJ 55402-4129 Dear Brian: Nadolsky a�d �e Thank you for the time you took to speak with GarY ested by the Lakeville Cable regarding the additional information requ onsive to the reciate your clarification of certain �om�nission. As both Stare�na Marcus desire to be resp questions posed, we furth PP of the information requested. lier correspondence, Marcus has �°�'tted that it n from Star in As stated in our ear hilosophically will comply with all franchise oblig���antlyl��rcus$i$Pg shi Wi�� the City of Lakeville. Juat as mP relation p committed to a collaborative and cooperative working y�ile the City rdin subscriber preferences anand e focused on the best i�eeaestsg f the subacribers. a�eg reasonable minds may disagree g latory �d of resources, the �tio alallowefewer d�.scretionary funds► forcing �S required rate redu to choase our priorities wisely. for public programmin3 Further, Marcus believes that responsibii�ti� the CompanY' $ lntent to belongs in the hand� of the communi�y��rd tkie tr�iee�t would not be comanence discussions wi.th�t�l��iateyp�lie body. � responsibility to the app P t or a propriate to commence theseldiaCu��P��i�at�e��le for Nrcus is prepared to commit to a mutual y these d iscussions and welcomes input from the Cable Commission on this topic. With regard to the specific qu estions posed by and far the City of Lakeville, our responses are as follows: a scale and , a �,=i t�at ion_. The P Y 1. �.. i��Pe Pa�• Sca, r a=� lo ees will perfozmance stane�itive�marketufactorssforpeach be based on comp r Lw�txrnt, Ho�vtaN, DAL,Y�i LlrrnGx�rt,Lzv. � Hrian T. Grogan, Esq. February 28, 1994 �age 2 position. Marcus has no current plans to change the pay scale of existing Star employees who join Marcus, but , will continue reviewing pay scales as appropriate. , 2 . Access Rules. Marcus has no plans to cha.nge the current access rules. Of course, our commitment is to nondiscriminatory access to facilities, equipment and channel space in accordance with the appropriate guidelines established by the rules. 3. StaffinQ. Ma.rcus has not definitively determined what its staffing in the City of Lakeville will be. In a11 likelihood, no material changes will be made in public access staffing. 4. A�cesg Tele hone. Nlarcus uaderstands that Star is currently exploring a plan to route access calls through the existing Star customer switchboard. As we understand this question, this should resolve the Commission's cancern. 5. Access E �iixunent. Access equipment will be repaired and/or replaced on an as-needed basis using factory-autharized service technicians. The Company has no current plans to add aceess equipment in Lakeville. 6. Star Channel 8. Marcus has made no decisian regarding the retention of Star Channel 8. 7. Conununitv Control of Access. As discussed above, Marcus believes access should be in the hands of the community and, consequently, would support transfer of access responsibility to the appropriate public body. 8. Additional Access Cha,nnels. Marcus will comply with franchise requirements in the City of Lakeville regarding additional access channels. Marcus believes there is a significant difference between character-generated progra.mming and video programming. The overall goal of cable television programming must be subscriber satisfaction as subacriber revenues provide the vast majority of company and access operating reuenue. Consequently, Marcus would not support granting additional access channels for character-generated programming. i � L�xu�t, Ho��, D,�.y& Lwnc�,L�. erian T. Grogan, Es Februar;�, 28, 1994 q� P-�_-.� 9• State-of h n,-,- "state of_t�art Marcus believes that given the " is an essentially meaningless ter�� pace of today�s technoZogical deve2opments. Perhaps the most practical an,d question is that state-of-the-artnistwhatevere eO th�.s prepared, to pay for. P ple are 10. Ins • n installation standards x complianee with gCC �loyed b �� and National l�tr�� .oaeln full standards. The line extension distance measurement$ commence at the last active pedestal. 11. F�nanr_;a i �.._, _ i.nforn�ation on a ' M�rcus will maintain revenue itemized gross revenue�s���b$$i$ �d will fee pa to acco an Provide yments. Financial statementg are not m�intanchise at the eyst� level b and Marcus has no cur ente ���rity of cable operators City-$pecific financial reports, t� �lntain I hope this information is helpful to contact me with any �o�ents or �'au• please feel free to questions you �Y have. Sincerely, .�-- Jane�' . Bremer � N� , for HOFFNIAN. DAI,Y & LINDGREN, Ltd. cc: Gary Nadolaky, Star Ca,blevision Lisa Washa, Star Cablevi$ion Louis A. Borrelli, David Hanson Jr' � Marcus Cable partners , Marcus Ca,ble Partners • L.P. , L.P. JEB:gev:LC4s r � MOSS & BARNE'�'T '� A Pxorrssiox�u,AssocunoN I RECOM'MENDATIONS 'I Hased specifically on the £oreqoing information and evaluations, we believe the entities involved in this transfer of control passess the necessary legal, technical, financial, and character qualifications. Therefore, we find no reasonable grounds on which to deny the request for approval o€ said transfer of control. Based on the findinqs, we recommend that: 1. The City Council review this report, listen to public comment, as necessary or appropriate, and undertake all necessary action to pass and adapt a Resolution similar in form and content to the "draft" document following these Recommendations. 2. The City follow up to ensure that the required Acceptance,� Guaranties, and corporate and partnership documents are delivered within thirty (30) days of �he closinq on the purchase transactian. -37- n � � . � . � � . � DRAFT RESOLUTtON APPROVING TRANSFER OF OWNERSHIP -38- � CITY OF .ROSE�+IOUNT. MINNESOTA RESOLUTION NO. RECOMMENDING AFPROYAL OF T'f� TI2ANSFER OF OWNERSH3P OF STAR METRO CABLE, INC. WHEREAS, on or about May 16, 1989, the City of Rosernount, Minnesota ("City") granted a Cable Communications Franchise to Star Mid America Limited Partnership by adoption of Ordinance No. XI . 14 (the "Rasemount Franchise"); and WHEREAS, Star Mid America Limited Partnership (the "Franchisee") , is the current and lawful holder of the Rosemount Franchise; and WHEREAS, Star Mid America IV, Inc. is a wholly-owned subsidiary of Star Mid America Limited Partnership, a Wisconsin limited partnership ("SMALP") ; and WHEREAS, SMAI,P is owned 99 .5% by Star Cablevisian Group, a Wisconsin general partnership, as its general partner and 4.5� by certain members of Star Cablevision Group' s manaqement team I as its limited partner; and WHEREAS, Star Cablevision Group and SMALP have entered into a Purchase Agreement dated as of November 12, 1993 with Marcus Cable Partners, L.P. , a Delaware limited partnership, for the purchase by Marcus Cable Partners, L.P. , of all of the assets of SMALP and Star Cablevision Group which inciudes all of the issued and outstanding capital stock of Star Mid America �v, ��c; and WHEREAS, Marcus Cab1e Partners, L.P. is owned by Marcus Cable Company, L.P. , a Delaware limited partnership (which is -39- owned 82.5% by institutional investors which are affiliates o€ Goldman Sachs as limited partners and 17.5� by Marcus Cable Properties, L.P. , a Delaware limited partnership, as general partner) , as its general partner, and Marcus Cab1e Properties, L.P. , a Delaware Limited Partnership {which is owned by Marcus Cable Properties, Inc. , a Delaware corporation, as qeneral partner and officers and emplogees of Marcus Cable Manaqement, Inc. as limited partners) ; and WHEREAS, in compliance with the terms of the Furchase Agreement, the narne of SMALP, shall initially rernain unchanged and the name of the Franchisee shall also remain unchanged; and WHEREAS, under the Rosemount Franchise, the transf$r of control of SMALP constitutes a transfsr by means of a fundamental corporate change with respect to the Franchisee; and WHEREAS, under Rosemount Franchise, any such transfer requires the approval of the City; and WHEREAS, the City, with the assistance of Moss & Barnett, A Professional Association, has reviewed the proposed transfer of eontrol of SMALP and the legal, technical, and financial qualifications of Marcus Cable Partners, L.P. ; and WHEREAS, based on information obtained at a public hearing conducted by the City on March 15, 1994 and on the reports and information received by the City, the City has found no reason to disapprove of the transfer of control of the Franchisee. NOW, THEREFORE, the City Council for the City of Rosemount, Minnesota resolves as fallows: -40- 1. The Rosemaunt Franchise is in full foree and effect without default thereunder by the Franchisee to the date hereof in accordance with its terms and conditions as set forth therein. 2. The Rosemount City Council hereby consents and ' approves of the transfer of control of Franchisee subjec� , to: I�', a. Closing of the asset purchase transaction '' pursuant to the terms and conditions described in I' information provided by Star Cablevision Group, , SMALP, Marcus � Cab1e Partners, L.P. ; Marcus Cable � Company L.P. and Marcus Cable Properties, L.P. to the I City. �I c. The Franchisee reimbursing the City of �I Rosemount for all reasonable costs, ezpenses, and professional fees incurred as a result of the II approval of the transfer of control of the Franchisee. d. Marcus Gable Partners, L.P. , Marcus Cabie Campany L.P. and/or Marcus Cable Properties, L.P, promptly notif�ing the City in writing of the completion of the transfer of control of Franchisee. e. Marcus Cable Partners, L.P. , Marcus Cable Company L.P. and/or Marcus Cable Properties, L.P. , within thirty (30) days o€ the closing, abiding by the requirements for acceptance and c3osing as listed below: -41- i. Marcus Cable Partners, L.P. shall , provide a signed Aceeptance Agreement, in a form I'i supplied by the City. ii . Marcus Cable Company L.P. shall provide a siqned Guaranty, in a form supplied by the City. iii. The Franchisee, Marcus Cab1e Partners, L.P. , and Marcus Cable Company L.P. shall each provide evidence of corporate or partnership ' authority; as applicable, in form and substance acceptable to the City, to enter into the Rosemount Franchise, and to sign the Guaranty and/or Acceptance. 3 . The City of Rosemount hereby waives any right of first refusal which the City may have pursuant to Section 10.02 of the Rosemount Franchise, as amended, or, otherwise, to purchase the Rosemount Franchise, or the cable television system servinq the City, but only as sueh right of first refusal apglies to the request for approval of the transfer of control of Franchisee now before the City. 4. Marcus Cable Partners, L.P. may assign or otherwise grant a security interest in and lien upon any capital stock and assets of Franchisee and any of the rights, title and interest represented by the Rosemount Franchise held by Franehisee as collateral for their financings. -42- , 5. In the event the transfer of control o£ Franchisee contemplated by the foregoinq resolutions is not completed, for any reasons, the City's consent to transfer of control shall not be effeetive. A motion t� approve the foregoinq Resolution No. was made by Council Member and duly seconded by Council Member . The foliowing Council Members voted in the affirmative: The following Council Members voted in the negative: Passed and adopted by the City Council for the City of Rosemount this day of March, 1994. ATTEST: CIZ'S� OF ROSEMOUNT, MINNESOTA By: By: Its: -43- ' _ _ . ' . . . . . . .. ,J . . . . . � . . DRAFT ACCEPTANCE OF THE fRANCHISE -44- ACCEPTANCE OF A F'RAPCHISE FOR A CABLE TELEVISIOH SYSZ'F.IK I1Q THE CITY OF ROSEL�UAT, MII�AESOTA WHEREAS, the City of Rosemount, a Minnesota municipal corporation (hereinafter the "City") , by action of its g�vernirng body on March , 1994, adopted a Resolution approvinq the transfer of control of Star Mid America Limited Partnership ("Star") to Marcus Cable Fartners, L.P. (hereinafter the "Franchisee") ; and WHEREAS, the Gity of Rosernount, Minnesota, Cable Communications Franchise Qrdinance ("Rosemount Franchise") requires that Franchisee accept the Rosemount Franchise in form and substance acceptable to the City. NOW, THEREFORE, pursuant to the terms and requirements o€ the Rosemount Franchise, and in consideration of the qrant of a franchise by the City, Franchisee accepts the Rosemount Franchise, and Resolution adopted on March , 1994, and makes the following representations and warranties to the City: 1. Franchisee is a Delaware Limited Partnership duly organized, validly eaisting, and in good standing under the laws of the State of Delaware, is authorized to do business in the State of Minnesota and has the full power, authority, and legal capacity to ezecute, deliver, and perform this Aceeptance and perform the terms and conditions of the Franchise. 2. All actions necessary to authorize the ezecution and delivery of this Acceptance and the per€ormance of the -45- n � � Franchise have been duly authorized b� all necessary and required proceedings. 3 . The e�ecution and delivery of the Acceptance and the perfarmance of the Franchise does not and will not conflict with or result in the breach or termination of, or constitute a default under, any indenture or instrument with respect to the borrawing of money, or any matsrial contract, lease or agreement, or order, judgment or decree or any law, rule or regulation to which Franchisee is a party or by which it or any of its groperty is bound or affected. 4 . Franchisee has carefully read the terms and conditions of the Franehise and accepts the rights, duties, and obligations created thereunder, subject to its rights under applicable state and federal law. 5. Neither Franchisee or any of its representatives or ' agents have committed any illeqal acts or engaged in any wrongful conduct contrary to, or in violation of, any federal, state, or local iaw or regulation in connection with the obtaining of this Franchise. Dated: , 1994 MARCLTS CABLE PARTNERS, L.P. , a Delaware limited partnership By Its -46- . STATE OF ) I ) ss. COUNTY OF ) The foregoinq instrument was subscribed and sworn to hefore me this day of , 1994, by , the of Marcus Cabie Partners, L.P. , . a Delaware limited partnership. Notary Public -4 7- r � DRAFT GUARANTY FOR MARCUS CABLE COMPANY, L.P. -48- r � ��� GUARANTY given by Marcus Cable Company, L.P. , a Delaware limited partnership (hereinafter "Guaxantor"} , to �he City of Rosemount, Minnesota (hereina�ter "City") . WIiEREAS, Marcus Cab1e Partners, L.P. ("Marcus"} has taken over control of, Star Mid America Limited Partnership ("Franchisee") of the Rosemount Cable Television Franchise ("Rosemount Franchise") ; and WHEREAS, Marcus and Guarantor requested the City's approval of the transfer of control of Franchisee; and WHEREAS, the City has passed and adopted Resolution No. on March , 1994 approving the transfer af ownership of Franchisee to Marcus; and WHEREAS, the City' s approval of such transfer of control of Franchisee is continqent upon Guarantar guaranteeing the faithful performance by Marcus. of all of the terms of the Franchise; and WHEREAS, the Guarantor has aqreed to enter into this Guaranty Agreement pursuant to City's request. NOW, THEREFORE, in consideration of the foreqoing, the Guarantor agrees as follows: 1. Obliaation. The Guarantor hereby quarantees the prompt and complete performance by Marcus of all the covenants, conditions, and terms of the Franchise. The Guarantor further guarantees the payment of all damages, judgments, costs and ezpenses, includinq fees which by virtue of the Franchise or -49- � � otherwise, might become recoverable by the City from the Franchisee or Marcus. 2. Terms of Guarantv. This Guaranty shall be absolute, complete, continuing, and irrevoeable, and the Guarantor shall ', not be released of its obligation hereunder so long as any ��I claira of City against Franchisee arising out of the Fxanchise or otherwise is not settled or discharged in full. No notice of any indebtedness heretofore or hereafter contracted or acquired by the Franchisee need be given to the Guarantor. 3 . Waiver. The Guarantor hereby waives notice of the City' s acceptance of this Guaranty. The Guarantor acknowledges that it is Guarantor's responsibility to be informed of the financial condition of Franchisee and Marcus, and the City has no duty to advise the Guarantor of any information known to it in that regard. 4 . _ Liabilitv or Defsult, All liability of the Guarantor to the City shall mature immediately, without notice or demand, ugon the occurrence of any of the followinq acts or events by or with respect to the Franchisee: (a) default on any liability or obligation to the City; (b) dissolution, in case i i of the Fran hisee or Marcus • c Insolvenc or inab 1 t to c . Y Y ( ) meet obligations as they become due; (d) filing of a petition for relief in bankruptclr; (e) failure to pay any franchise fee, taz, or assessment when due; (f) appointment of a trustee, custodian, or receiver; (g) entry of any judgment, or issuance of an injunction or a warrant of attaehment or ezecution. -50- ► � 5. �emedies. No right or power of the City hereunder shall be deemed to have been waived by any act or conduct on the part of the City, or by any neglect to eaercise such riqht or power, or by any delay in so doing; and every riqht or power shall continue in full force and effect until specifically waived or released by an instrument in writing eaecuted by the City. 6. Governina Law. This Guaranty shall be deemed to be made under and sha11 be governed by the laws of the State of Minnesota in all respects, including matters of construction, validity and per£ormance, and the terms and provisions hereof may not be waived, altered, modified, or amended eacept in writing du7.y signed by an authorized representative of the City. By eaecuting this Guaranty, Guarantor does not waive any rights under federal, state, or local law. 7. Severabilitv. If any of the provisions of this Guaranty shall contravene or be. hela invalid under the laws of ' any jurisdiction, this Guaranty shall be construed as if not containing those provisions and the rights and obligations of � the parties hereto shall be cons�rued and enforced accordingly. , 8. Benefit. This Guaranty shall inure to �he sole I�� benefit of the City, its successors and shall be binding upon the Guarantor and its successors. �I -5i- 1 � ' N WITNESS WH ersi ned G arantor has ea I I EREOF, the una g u ecuted this Guaranty as of , 1994. MARCUS CABLE CUMPANY, L.P. a Delaware Liinited Partnership By Its STATE OF ) ) ss. COUNTY OF ) The foregoing instrument was acknowledged before me this day of , 1994, by the of Marcus Cable Company, L.P. , a Delaware Limited Partnership. Notary Public 855Z140 -52- ' Rosemount Town Pages AFFIDAVIT OF PUBLICATION Diane Berge, being duly sworn, on oath says that she is an authorized agent and emplayee of tlie publisher of the riewspaper, known as The ������ Rosemount Town Pages, and has fuil lrnowledge of the facts which are stated below: r�o.�a���ccw��s� (A)The newspaper has comptied with all of.tbe requirements constituting �a�aa�.d.�•��=w� qualification as a legal newspaper, as prqvided by Minnesata Statues ����,��;�,"�,p�, 331 A,02,331 A.07 and other applicable laws,as amended: �r��r����ms�s�� The rinted � �.r"�r'b°caa'T°�.�°�"�a`y�s� B) P �uh4A,t� �„SIt/u.t ec �C3-�iC� s�aemaawa�rw�..��,.,i.r•� -r-- cuyt�.nt�w�au2sts usrusa�wr�.�. Hcme�a. �Y Penoe�7�w tm°6q�dnE W° pmpo�ed amfer et 0ie tlme�d�e po1+�e Leainy A� pe[[cu mqy wUm�a�O oa�u bY��° � which is attached, was cut from the columns of said newspaper, and was ���a����"°°�'�°°"�° rinted and ublished once each week for successive '""�"`°�°''"`�`�'�`����� P P me cs�x��io me�o��tns o�e��sn�w weeks; it was first published on Thursday� [he _�`�^__ day Of �ku�p°��°°'�"�'�b°'��"°�` in tha C�iq Coundl C6�s ivime�atel9 F�m 10 lha , 19�� and was thereafter printed and publisl�ed on n�s.'�ab c.wr.��u cai2�az+- ever Thursda to and includin Thursda the da of �aii. Y Y, g Y� ----- y , 19 --- , and printed below is a copy of the �����M�1�'• lower case alpl�abet from A to Z, both inclusive, which is hereby BY�o��c�r�ra�rrcn. acknowledged as being the size and kind of type used in the composition �,,��,,�,,,,� and publicaGon of the notice: s��� a�c� aa�rxo.�► .e�r$m���n�n n.t��� xa �y�-�c�.�-��� Title:'Typesetter Subscribed a�}d� sworn to before me on this �day of�Y',���c K/ , 19 Notary Public AFFIDAVIT t""'""".'�. �,,,,e�„�..,� , . �.>>_n,vnlE K EIBENT � ' ' : ��•e;�� ,anlary Vub11C M�nnasota �� �• Oako►a Cuunty � MY C:omm; Ezp 5-t5-96 I � CITY OF ROSEMOUNT FsXECQTIVE SIIi�l,ARY FOR ACTION CSTY COUNCIL MEETING DATE: Ma.rch 15, 1994 : AGENDA SECTION� AGENDA ITEM: Public Hearing for Cable public Hearing• Franchise Transfer PREPARED BY: Ron Wasmund AG�A �E� # � � Interim City Administrator ATTACI�+lENTS: Document for Councilmembers APP VE Y: Public review available) Brian Grogan from the legal firm o� Mns�handtBansfer�willrbeepresenthto discussfwith Lakeville, Farmington and Rosemoun Council some of the particular items relating to the transfer. He has prepared and I have enclosed for you a document report that I would liseinto eonsiderable detail�regardingathe oe rin . Brian g • r,,� esda ni hts public hea g f �rcus. By revie prior to Tu Y J ial alifications o C le al ri hts, technical qualifications and finan qu g arl . 5 red e of the report, some of your questions may be answe Y The purpose of the public hearing loft��cuseCable Partnersgassa business�toeacquirelthe their interests and the legitimacy assets and franchise from Star Cable. We will also be looking at the technical and financial qualifications of Marcus. In addition to review of those legal, technical and financial qualifications, there will also be an opportunity to ask questions about specific areas of the franchise agreement. Some of the questions that have Technicaled to me to date are: � Service drop to schools, specifically the Dakota County College request to have service brought to their school. This has been presented to Star Cable and Marcus Cable in writing �ain° oftCity Hall £or theeability to broadcast thet written inquiry. � Interactive c g City meetings. The franchise agreement specifies that within 60 days of the request that interactive cabling will be provided. We need to confirm with Ma.rcus that they are willing to honor that request. � Intera.ctive cabling of commn;ty4CeE�ipmentpab1City access. Are they going to Pn�V�tates�t at thesequipmentqwill be p�ided for interactive Hall. The franchise agreeme cabling. The question that we need to pose to Star is what they'reSde�cr�hatgsome oftthe suggesting that modulators only will be supplied, or are they sugg 5 camera equipment will be provided. The franchise aeae�m�ht�Yunk lineswheT�new1f� divisions are constructed that they shall be equipp question then that we have to ask of Marcus and Star is what do we do with rura areas that develop on large acreage lots and may be developed single lots individeneral itemsr than a subdivision. When do they get served. The last item would be any 5 relating to the franchise agreement. The desired results or conclusions of the public hearing are to describe and come to agreement on any amendments to the franchise agreement based upon the questions that I have outlined, or any others that are identified and concluded the night of the hearing. And then a final resolution authorizing the transfer. Again Brian Grogan will go through his report, he will review the financial qualifications of the company and providnluhtwith the information needed to make the decisions we will be asked to make on Tuesday 3 AUTHORIZING RECObII�lENDED ACTION� RSH�IPIOF STAR. METROECAB EI�INC1T04MAFtCUS CABLE THE TRANSFER OF OWNE PARTNERS ���� �C1,o-ri a-�r-� h� COUNCIL ACTION: 8 . �/ � a CITY OF ROSEMOUNT DAROTA COUNTY, MINNESOTA RESOLUTION 1994 - 27 A RESOLUTION RECOMMENDING APPROVAL OF THE TR�NSFER OF O�INERSHIP OF STAR METRO CABLT, INC. Y�HEREAS, the Cable Television Franchise in the City of Rosemount, Minnesota ( "City" ) is currently owned and operated by Star Metro Cable, Inc. ( "Franchisee") , a wholly-owned subsi.diary of Star Mid-American IV, Inc. , pursuant to the City of Rosemount, Minnesota Resolution No. 1988-40, adapted on May 17, 1988; and �1HEREAS, Star Mid America IV, Inc. is a wholly-owned subsidiary of Star Mid America Limited Partnership, a Wisconsin limited partnership ( °SMALP") ; and WIiEREAS, the Franchise was renewed in the name of SMALP by mutual mistake of City and Fran�hisee pursuant to City of Rosemount, Minnesota Ordinance No. XI. 14, adopted May 16, 1989 (the "Rosemount Franchise") ; and DPHEREAS, the City hereby acknowledges and ratifies Star Metro Cable, Inc. as the Franchisee pursuant to the Rosemount Franchise; and DPHEREAS, SMALP is owned 99 . 5% by Star Cablevision Group, a Wisconsin general partnership, as its general partner and 4 .5% by certain members of Star Cablevision Group' s management team as its limited partner; and WHEREAS, Star Cablevision Group and SMALP have entered into a Purchase Agreement dated as of November 12, 1993 with Ma.rcus Cable Partners, L.P. , a Delaware limited partnership, for the purchase by Marcus Cable Partners, L.P. , of all of the assets of SMALP and Star Cablevision Group which includes all of the issued and outstanding capital stock of Star Mid America IV, Inc. ; and WHEREAS, Marcus Cable Partners, L.P. is owned by Mareus Cable Company, L.P. , a Delaware limited partnership (which is owned I 82 .5% by institutional investors which are affiliates of Goldman �, Sachs as limited partners and 17.5o by Marcus Cable Properties, ', L.P. , a Delaware limited partnership, as general partner) , as ', its general partner, and Marcus Cable Properties, L.P. , a , Delaware Limited Partnership (which is owned by Marcus Cable ' Properties, Inc. , a Delaware corporation, as general partner and officers and employees of Marcus Cable Management, Inc. as limited partners) ; and WHEREAS, in compliance with the terms of the Purchase Agreement, the name of Star Metro Cable, Inc. , shall initially remain unchanged and the name of the Franchisee shall also remain unchanged; and RESOLUTION 1994 - 27 WHEREAS, under the Rosemount Franchise, the transfer of control of Star Metro Cable, Inc. constitutes a transfer by means of a fundamental corporate change with respect o the Franchisee; and WHBREAS, under Rosemount Franchise, any such transfer requires the approval of the City; and WHEREAS, the City, with the assistance of Moss & Barnett, A Professional Association, has reviewed the proposed transfer of control of Star Metro Cable, Inc. and the legal, technical, and financial qualifications of Ma.rcus Cable Partners, L.P. ; and D�HEREAS, based on information obtained at a public hearing conducted by the City on March 15, 1994 and on the reports and information received by the City, the City has found no reason to disapprove of the transfer of control of the Franchisee. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Rosemount, Minnesota hereby approves the following: 1 . The Rosemount Franchise is in full force and effect without default thereunder by the Franchisee to the date hereof in accordance with its terms and conditions as set forth therein. ' 2 . The Rosemount City Council hereby consents and approves of ' the transfer of control of Franchisee subject to: �,I a. Closing of the asset purchase transaction pursuant to the terms and conditions described in information provided by Star Cablevision Group, SMALP, Marcus Cable Partners, L.P. ; Marcus Cable Company L.P. and Marcus Cable Properties, L.P. to the City. b. The Franchisee reimbursing the City of Rosemount for all reasonable costs, expenses, and professional fees incurred as a result of the approval of the transfer of control of the Franchisee. c. Marcus Cable Partners, L.P. , Marcus Cable Company L.P. and/or Marcus Cable Properties, L.P. promptly notifying the City in writing of the completion of the transfer of control of Franchisee. d. Marcus Cable Partners, L. P. , Marcus Cable Company L.P. and/or Marcus Cable Properties, L.P. within thirty (30) days of the closing, abiding by the requirements for acceptance and closing as listed below: i. Marcus Cable Partners, L.P. shall provide a signed Acceptance Agreement, in a form supplied by the City. 2 RESOLUTION 1994 - 27 ii. Marcus Cable Company L.P. shall provide a signed Guaranty, in a form supplied by the City. iii . The Franchisee, Marcus Cable Partners, L.P. , and Marcus Cable Company L.P. shall each provide evidence of corporate or partnership authority, as applicable, in form and substance acceptable to the City, to enter into the Rosemount Franchise, and to sign the Guaranty and/or Acceptance. 3 . The City of Rosemount hereby waives any right of first refusal which the City may have pursuant to Section 10 . 02 of the Rosemount Franchise, as amended, or, otherwise, to purchase the Rosemount Franchise, or the cable television system serving the City, but only as such right of first refusal applies to the request for approval of the transfer of control of Franchisee now before the City. 4 . Marcus Cable Partners, L. P. may assign or otherwise grant a security interest in and lien upon any capital stock and � assets of Franchisee and any of the rights, title and interest represented by the Rosemount Franchise held by Franchisee as collateral for their financings. �� 5 . In the event the transfer of control of Franchisee �I contemplated by the foregoing resolutions is not completed, for any reasons, the City' s consent to transfer of control i shall not be effective. ' ADOPTED this 15th day of March, 1994 . ' E. B. McMenomy, Mayor ATTEST: Susan M. Walsh, City Clerk Motion by:_ McMenomy Seconded by: Busho Voted in favor: Busho. Anderson, McMenomy, Staats Voted against: None. 3 CITY OF ROSffi�OUNT, MINPESOTA � RESOLUTION I�O. RECOI�II+�NDIHG APPBOVAL OF THE TRA�SFSR OF OW�ERSHIP OF STAR MLTRO CABLE, IHC. WHEREAS, the Cable Television Franchise in the City of Rosemount, Minnesota ("City") is currently owned and operated by Star Metro Cable, Inc. ("Franchisee") , a wholly-owned subsidiary of Star Mid-America IV, Inc. , pursuant to the City ' � of Rosemount, Minnesota Resolution No. 1988-40, adopted on May 17, 1988; and WHEREAS, Star Mid America IV, Inc. is a wholly-owned subsidiary of Star Mid America Limited Partnership, a Wisconsin limited partnership ("SMALP") ; and WHEREAS, the Franchise was renewe`d in the name of SNlALP by mutual mistake of City and Franchisee pursuant to City of Rosemount, Minnesota Ordinance No. XI .14, aaopted May 16, 1989 {the "Rosemount Franchise") ; and WHEREAS, City hereby acknowledges and ratifies Star Metro Cable, Inc. as the Franchisee pursuant to the Rosemount Franchise; and WHEREAS, SMALP is owned 99.5� by Star Cablevision Group, a Wisconsin general partnership, as its general partner and 4 .5� by certain members of Star Cablevision Group's management team as its limited partner; and WHEREAS, Star Cablevision Group and SMALP have entered into a Purchase Agreement dated as of November 12, 1993 with Marcus Cable Partners, L.P., a Delaware limited partnership, for the purchase by Marcus Cable Partners, L.P. , of all of the assets of SMALP and Star Cablevision Group which includes all of the issued and outstanding capital stock of Star Mid America IV, Inc; and WHEREAS, Marcus Cable Partners, L.P. is owned by Marcus Cable Company, L.P. , a Delaware limited partnership (which is owned 82.5� by institutional investors which are affiliates of Goldman Sachs as limited partners and 17.5$ by Marcus Cable Properties, L.P. , a Delaware limited partnership, as general partner) , as its general partner, and Marcus Cable Properties, L.P. , a Delaware Limited Partnership (which is owned by Marcus Cable Properties, Inc. , a Delaware corporation, as general partner and officers and employees of Marcus Cab1e Management, Inc. as limited partners) ; and WHEREAS, in compliance with the terms of the Purchase i Agreement, the name of Star Metro Cable, Inc. , shall initially remain unchanged and the name of the Franchisee shall also remain unchanged; and WHEREAS, under the Rosemount Franchise, the transfer of control of Star Metro Cable, Inc. constitutes a transfer by means of a fundamental corporate change with respect to the Franchisee; and WHEREAS, under Rosemount Franchise, any such transfer requires the approval of the City, and WHEREAS, the City, with the assistance of Moss & Barnett, A Professional Association, has reviewed the proposed transfer of control of Star Metro Cable, Inc. and the legal, technical, and financial qualifications of Marcus Cable Partners, L.P. ; and WHEREAS, based on information obtained at a public hearing conducted by the City on March 15, 1994 and on the reports and information received by the City, the City has found no reason I�� to disapprove of the transfer of control of the Franchisee. II NOW, THEREFORE, the City Council for the City of I!, Rosemount, Minnesota resolves as follows: ' 1. The Rosemount Franchise is in full force and effect without default thereunder by the Franehisee to the date hereof in accordance with its terms and conditions as set forth therein. 2. The Rosemount City Council hereby consents and • approves of the transfer of control of Franchisee subject to: a. Closing of the asset purchase transaction pursuant to the terms and conditions described in information provided by Star Cablevision Group, SMALP, Marcus Cable Partners, L.P. ; Marcus Cable Company L.P. and Marcus Cable Properties, L.P. to the City. b. The Franchisee reimbursing the City of Rosemount for all reasonable costs, ezpenses, and professional fees incurred as a result of the approval of the transfer of control of the Franchisee. . . c. Marcus Cable Partners, L.P. , Marcus Cable Company L.P. and/or Marcus Cable Properties, L.P. promptly notifying the City in writing of the completion of the transfer of control of Franchisee. d. Marcus Cable Partners, L.P. , Marcus Cable Company L.F. and/or Marcus Cable Properties, L.P. , within thirty (30) days of the closing, abiding by the requirements for acceptance and closing as listed below: i. Marcus Cable Partners, L.P. shall provide a signed Accept'ance Agreement, in a form supplied by the City. ii . Marcus Cable Company L.P. shall provide a signed Guaranty, in a form supplied by the City. iii . The Franchisee, Marcus Cable Partners, L.P. , and Marcus Cable Company L.P. shall each provide evidence of corporate or partnership authority, as applicable, in form and substance acceptable to the City, to enter into the Rosemount Franchise, and to sign the Guaranty and/or Acceptance. 3 . The City of Rosemount hereby waives any right of first refusal 'which the City may have pursuant to Section 10 .02 of the Rosemount Franchise, as amended, or, otherwise, to purchase the Rosemount Franchise, or the cable television system serving the City, but only as such d � Y right of first refusal applies to the request for approval of the transfer of control of Franchisee now before the City. 4 . Marcus Cable Partners, L.P. may assign or otherwise grant a security interest in and lien upon any capital stock and assets of Franchisee and any of the rights, title and interest represented by the Rosemount Franchise held by Franchisee as collateral for their financings. 5. In the event the transfer of control of Franchisee contemplated by the foregoing resolutions is not completed, for any reasons, the City's consent to transfer of control shall not be effective. A motion to approve the foregoing Resolution No. was made by Council Member and duly seconded by Council Member . The following Council Members voted in the affirmative: The following Council Members voted in the negative: Passed and adopted by the City Council for the City of II Rosemount this day of March, 1994. ATTEST: CITY OF ROSEMOUNT, MINNESOTA By: ' By: Its: 856Z140 _..� � � ' 9l7 j. � �;���1 �1s�r�c� � g� Dakota Counfy Special Education Programs ` �11�����'��1�1� y . Gaxota Caurt/Sec�n�ary T��hnicat Center • Dakota County Te�h►�icat Coflege February 9, 1994 Ms. Lisa Washa, Manager Star Cablevisi Avenue 16900 Cedar Rosemount, Minnesota 550b8 Technical College, I am Dear Lisa: understanding that It is mY reement. termediate School District 917(Dakota County On behalf of 1n ls �t of your Franchise Ag to form�lY 1equest connection to cable service. writing all schools> as stated in Section 4.06, P connection to free basic It indicates that: rovide a free cable dbuP dings, schools, 4.0 6 Franchisee shall. p . remium services to all City service and all p �tments. police and fire deP yVe were unawaze that to all schools. This situation at service wasn t available in our �ea• Monday, were told �'uired that service be provided ln Rosemount on In the p�t `'�e eeting be �onnected. This the franchise agreement Ieq our desire to e pub�l� Utilitie��°mad�es outl n ng �is franchise was discussed at � A Presentation arties involved in February 7, 1994. uest known to all p letter is to officially m�e our req to continue to provide edncau°nal agreement. �at is available ortant to our ability ro ramming V,7e view this connection as imp The educational p g teachers. excellent addition to our media services � pzOgramming to students ande� will make an from the cable television Sy needs. us to and support our curriculum steni s coverage a�ea-.- an educational access �h�el'�ablels sy °uld allow Further, we are also requesting to �e subscribers : in ro ramming ton, Lakeviile, and Apple Valley. provide educational P g Farming which includes Rosemount, t attention to these requests. We would appreciate your promp Since�ely, 8��; G.Hebert � �f�,�� R.Schneider �� � �� `' D.Schroeder, I•iorsted, Ed.D. K.0'Brien ; Roger M. D.Sullivan ; Superintendent Cit Manager C.Jackson � Wasmund, Rosemount Interim Y : cc: Roe W alsh, Commissioner p.S. _ Roger wi11 7ohn Oxborough, Com�issioner report on this at i S�a,Nn ivlulhern, Commissioner —2 j15/94 Sch.Bd•Mtg` ,.��i w?a-2L3t 7 � � 'Isi�c;:��,��;;��L::S'i`��=f F.Y..�.Y l•�-•�°(_ � � �.r----^�". ^ rf ar� . ' ]�( .� 1�C ' � . . .. �.f`r){.t;' �r s 1�i11 .r✓ _ � _..�:;G;'f:�5 . - �fi i i i�'�i�"..��:ic i'_• `,j �...'t D;t..Ci:�7:a-� _ � ;;;l;u �� _ . i�.•^i; v� 3 r��7ru�V�rii � ..�—. -..c:C;.�r...r:7�G1L;•�S: � . ..' ,.'r=`y:a'vy . ' _ r. �F' iiJ:li.'o% � . � � ,:_ �i..... ,.. � ''�� LARHIN, HOFFMAN, DALY BL LINDGREN, LTD. ATTORNEYS AT LAW 1500 NORWEST FINANCIAL CENTER .. ° 7900 XERXES AVENUE SOUTH BLOOMINGTON, MINNESOTA 56437 TEIEPHONE{612}835-3800 FAX(612)69&3278 JANE E. BREMER ���� � � Y�y4 DIR.DIAL 18121 8983297 . . . �� � � . . . March 11, 1994 Mr. Roger M. Norsted, Superintendent Intermediate School District 917 1300 145th Street East (County Rd. 42) Rosemount, MN 55068 Dear Mr. Norsted: This office serves as counsel to Star Metro Cable, Inc. (°Star") , the franchisee in the City of Rosemount. Your letter to Ms. Lisa Washa, General Manager of Star, dated February 9, 1994, has been referred to me f or review and comment. While the Intermediate School District is certainly entitled to request connection to the cable system, there is no obligation in the Rosemount franchise that this extension be provided free of charge to the Dakota County Technical College. Section 4.06 specifically applies to C1tY buildings, schools, police and fire departments, rendering the Dakota County Technical College outside the scope of this franchise provision. The logic of this exclusion is obvious: because the Dakota County Technical College serves a broad range of communities and individuals, there is certainly no reason that the cable subscribers of Rosemount should be wholly responsible for subsidizing cable installation to the Technical College. Further, even if the Dakota County Technical College were included in this provision, Section 4.-06 obligates the company to provide a free cable drop, a term of art which means the extension from the nearest feeder cable to the exterior wall of the facility. In th�e case of the Dakota County Technical College, approximately 2 . 6 miles separate the , feeder cable from the point where a drop could be provided, requiring an extension of the cable system to accommodate your request. The cost of this extension would be the responsibility of Intermediate School District 917 . Enclosed for your convenience please find a rough es�ima:te of the cost to extend the cable system in order provide a drop to the Dakota Coun;ty Technical College. This estimate of approximately $42, 000 _ assumes we can meet federal technical standards, does not include` end t�ser. equipment and is subject to change based on precise measurements � and cost information as of the date you decide to proceed. ; ,� LARHIN; HOFFMAN, DALY& LINDGREN, LTD. Mr. Roger M. Norsted March 11, 1994 � Page 2 - Finally, the educational access channel required by the Rosemount cable franchise has already been allocated to Apple Valley-Rosemount School District #196 . You may either request time directly from the school district, which has both scheduling and editorial responsibility for the channel, or we would be happy to discuss a channel lease arrangement whereby the Intermediate School District would lease a channel from Star to. service the communities we serve. If you have any comments or questions, please feel free to contact me. Sincerely, Ja E. Bremer, for KIN, HOFFMAN, DALY & LINDGREN, Ltd. Enclosure . cc: Ms . Lisa Washa _ : _ 1 - - '� JEB:gev:LE5s .V , lu�a4 1�:28 F�1 612 432 5765 STAR C�BLEVISIOY ��� J�tiE BRE4IER � �002;00? - ' Dakot� County Technical College Estim (2.6 Miles off Existing Cable Systeni) a�e Materials: 13,728 ft. .7�0 Underground cable X 600 ft. .500 Underground cable X '70 pe� ft. $ g�6�9 Q� 9 Trunk Amplifiers .4� per ft. $ 24Q.00 X �1,100.00 $ 9,900.00 1 Lzne Extencier Am p X $ 250.aQ $ 250.00 9 Trunk Amp Pedestais 1 x � 70.00 $ 630.00 Line Extender Ped 2 � � 3 8.00 $ 3 8.00 Power Supply . X � 300.40 Labor: - $21,267.00 ; 14,328 ft. Plawing 25� ft. X � 1.00 $1�,328.00 Boring X � 6.SQ $ 3,900.00 Splicing and Activation 2 Grand Total $20,72 8.00 $4�,9=Qp Currently our amplifier cascade is at 2 3 tru we would be at 32 arn.plifiers, A cascade of that dptl���r�' tivith. this build marginal in meeting the FCC proof of�e�oxmance ance becomes spec�fications.