SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 13E-3

(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)

 

Mediacom Communications Corporation

(Name of the Issuer)

Mediacom Communications Corporation
JMC Communications LLC
Rocco B. Commisso
(Name of Person(s) Filing Statement)

Class A Common Stock, $0.01 par value per share
(Title of Class of Securities)

58446K105
(CUSIP Number of Class of Securities)

Joseph E. Young, Esq.
Senior Vice President, General Counsel and Secretary
Mediacom Communications Corporation
100 Crystal Run Road, Middletown, New York 10941
(845) 695-2600

(Name, Address and Telephone Number of Persons Authorized to Receive Notices
and Communications on Behalf of Persons Filing Statement)

Copies to
:

Denise M. Tormey, Esq.		Lee D. Charles, Esq.		Charles I. Cogut, Esq.
Joseph H. Schmitt, Esq.		John M. Winter, Esq.		Sean D. Rodgers, Esq.
SNR Denton LLP		Baker Botts L.L.P.		Simpson Thacher & Bartlett LLP
Two World Financial Center		30 Rockefeller Plaza		425 Lexington Avenue
New York, New York 10281		New York, New York 10112		New York, New York 10017
(212) 768-6700		(212) 408-2500		(212) 455-20000

This statement is filed in connection with (check the appropriate box):

a.		þ		The filing of solicitation materials or an information statement subject to Regulation 14A, Regulation 14-C or Rule 13e-3(c) under the Securities Exchange Act of 1934 (the “Act”).
b.		o		The filing of a registration statement under the Securities Act of 1933.
c.		o		A tender offer.
d.		o		None of the above.

Check the following box if the soliciting materials or information statement referred to in checking box (a) are preliminary copies: þ

Check the following box if the filing is a final amendment reporting the results of the transaction: o

Calculation of Filing Fee

	Transaction Valuation*			Amount of Filing Fee**
	$394,834,294			$28,151.69

*		The filing fee was determined based upon the sum of (a) the product of the per share merger consideration of $8.75 and 41,262,451 shares of common stock (which represents the total number of shares of Mediacom Class A common stock and Class B common stock outstanding as of November 30, 2010, less 27,003,632 shares of Class A common stock and Class B common stock owned by the RBC Stockholders), plus (b) $12,867,910 expected to be paid in connection with the cancellation of outstanding options to purchase shares of common stock having an exercise price less than the per share merger consideration of $8.75 (other than options owned by Rocco B. Commisso), plus (c) $20,919,938 expected to be paid in connection with the cancellation of outstanding restricted stock units (other than restricted stock units owned by Rocco B. Commisso).
**		The amount of the filing fee is calculated in accordance with Rule 0-11 under the Exchange Act and Fee Rate Advisory #4 for fiscal year 2010, issued December 17, 2009, as the product of $394,834,294 and .00007130.

þ

Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) under the Act and identify the filing with which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

Amount Previously Paid: $28,151.69
Form or Registration No.: Schedule 14A
Filing Party: Mediacom Communications Corporation
Date Filed: December 3, 2010

 

 

Introduction

     This Rule 13E-3 Transaction Statement on Schedule 13E-3 (this “Schedule 13E-3”) is being filed with the Securities and Exchange Commission jointly by Mediacom Communications Corporation, a Delaware corporation (“Mediacom”), JMC Communications LLC, a Delaware limited liability company (“Merger Sub”), and Rocco B. Commisso, the sole member and manager of Merger Sub (“Mr. Commisso”) in connection with the Agreement and Plan of Merger, dated as of November 12, 2010, as may be amended from time to time (the “Merger Agreement”), by and among Mediacom, Merger Sub and Mr. Commisso. Mediacom, Merger Sub and Mr. Commisso are referred to herein as the “Filing Persons.” If the Merger Agreement is approved by Mediacom’s stockholders, Merger Sub will merge with and into Mediacom, with Mediacom continuing as the surviving corporation. In the merger, each outstanding share of Mediacom Class A common stock and Class B common stock (other than shares held by Merger Sub, Mr. Commisso or any of their affiliates, held in treasury by Mediacom, and held by stockholders who have perfected their appraisal rights under Delaware law) will be converted into the right to receive the merger consideration of $8.75 per share in cash, without interest. In the merger, each outstanding option to purchase shares of Mediacom common stock granted to Mediacom employees and directors under Mediacom’s stock incentive plans will be cancelled. In exchange for such cancellation, the holders (other than Mr. Commisso) will receive in respect of each option a cash payment equal to the excess, if any, of $8.75 over the per share exercise price of such option for each share of Mediacom common stock subject to such option, subject in certain circumstances to the vesting, payment and other terms of the incentive stock plan and applicable agreement under which such option was granted. Each restricted stock unit representing a share of Mediacom common stock (other than those held by Mr. Commisso) issued and outstanding under Mediacom’s incentive stock plans will convert in the merger into the right to receive $8.75 in cash in respect of each such restricted stock unit, subject in certain circumstances to the vesting, payment and other terms of the incentive stock plan and the applicable agreement. Unvested stock options and restricted stock units held by non-employee directors of Mediacom will accelerate as a result of the merger and the holder will become entitled to receive, in the case of options, a cash payment equal to the excess, if any, of $8.75 over the per share exercise price of such option for each share of common stock subject to such option, and, in the case of restricted stock units, $8.75 in cash for each share of common stock represented by such unit.

     Concurrently with the filing of this Schedule 13E-3, Mediacom is filing a preliminary proxy statement (the “Preliminary Proxy Statement”) under Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), pursuant to the definitive version of which the Mediacom board of directors will be soliciting proxies from stockholders of Mediacom in connection with the merger. The cross reference sheet below is being supplied pursuant to General Instruction F to Schedule 13E-3 and shows the location in the Preliminary Proxy Statement of the information required to be included in response to the items of Schedule 13E-3. The information set forth in the Preliminary Proxy Statement, including all annexes thereto, is hereby incorporated herein by this reference, and the responses to each such item in this Schedule 13E-3 are qualified in their entirety by the information contained in the Preliminary Proxy Statement and the annexes thereto.

     All references in this Schedule 13E-3 to Items numbered 1001 through 1016 are references to Items contained in Regulation M-A under the Exchange Act.

Item 1. Summary Term Sheet.

The information set forth under the caption “Summary Term Sheet” in the Preliminary Proxy Statement is incorporated herein by this reference.

Item 2.       Subject Company Information.

(a)		The name of the subject company is Mediacom Communications Corporation, a Delaware corporation. Mediacom’s executive offices are located at 100 Crystal Run Road, Middletown, New York 10941, telephone, (845) 695-2600.
(b)		The class of securities to which this Schedule 13E-3 relates is the Class A common stock, par value $0.01 per share, of Mediacom, of which 41,264,139 shares were issued and outstanding as of November 30, 2010. In addition, on such date, there were outstanding 27,001,944 shares of Class B common stock, par value $0.01 per share, of Mediacom. Each share of Mediacom Class B common stock is convertible, at the option of the holder, into one share of Class A common stock.
(c)- (d)		The information set forth under the caption “Common Stock Market Price and Dividend Information” in the Preliminary Proxy Statement is incorporated herein by this reference.
(e)		None
(f)		The information set forth under the caption “Certain Purchases and Sales of Mediacom Common Stock” in the Preliminary Proxy Statement is incorporated herein by this reference.

Item 3.       Identity and Background of Filing Person.

(a) — (c)		The information set forth under the captions “Information Concerning Mediacom,” “Directors and Executive Officers of Mediacom” and “Information Concerning the RBC Stockholders” in the Preliminary Proxy Statement is incorporated herein by this reference.

Item 4.       Terms of the Transaction.

(a)(1)		Not applicable.
(a)(2)(i)		The information set forth under the captions “Summary Term Sheet,” “Special Factors,” “The Special Meeting” and “The Merger Agreement” in the Preliminary Proxy Statement is incorporated herein by this reference.
(a)(2)(ii)		The information set forth under the captions “Summary Term Sheet — The Merger Consideration” and “Special Factors — Structure and Steps of the Merger” in the Preliminary Proxy Statement is incorporated herein by this reference.
(a)(2)(iii)		The information set forth under the captions “Special Factors — Background of the Merger,” “Special Factors — Recommendation of the Special Committee and Board of Directors; Reasons for Recommending Approval of the Merger,” “Special Factors — Opinion of Financial Advisor to the Special Committee,” “Special Factors — Position of Mr. Commisso and Merger Sub as to the Fairness of the Merger” and “Special Factors — Reasons of the RBC Stockholders for the Merger” in the Preliminary Proxy Statement is incorporated herein by this reference.
(a)(2)(iv)		The information set forth under the captions “Summary Term Sheet — Required Vote; Voting Agreement” and “The Special Meeting — Vote Required; How Shares are Voted” in the Preliminary Proxy Statement is incorporated herein by this reference.
(a)(2)(v)		The information set forth under the captions “Summary Term Sheet — Effects of the Merger,” “Summary Term Sheet — Interests of Certain Persons in the Merger,” “Special Factors — Effects of the Merger,” “Special Factors — Interests of Certain Persons in the Merger” and “Special Factors — Structure and Steps of the Merger” in the Preliminary Proxy Statement is incorporated herein by this reference.

(a)(2)(vi)		The information set forth under the caption “Special Factors — Accounting Treatment of the Merger” in the Preliminary Proxy Statement is incorporated herein by this reference.
(a)(2)(vii)		The information set forth under the captions “Summary Term Sheet — Tax Consequences” and “Special Factors — Material United States Federal Income Tax Considerations” in the Preliminary Proxy Statement is incorporated herein by this reference.
(c)		The information set forth under the captions “Special Factors — Effects of the Merger,” “Special Factors — Interests of Certain Persons in the Merger” and “Special Factors — Structure and Steps of the Merger” in the Preliminary Proxy Statement is incorporated herein by this reference.
(d)		The information set forth under the captions “Summary Term Sheet — Appraisal Rights” and “Special Factors — Appraisal Rights of Stockholders” in the Preliminary Proxy Statement is incorporated herein by this reference.
(e)		The information set forth under the caption “Special Factors — Provisions for Unaffiliated Security Holders” in the Preliminary Proxy Statement is incorporated herein by this reference.
(f)		Not applicable.

Item 5.         Past Contacts, Transactions, Negotiations and Agreements.

(a)		None.
(b) — (c)		The information set forth under the captions “Special Factors — Background of the Merger,” “Special Factors — Recommendation of the Special Committee and Board of Directors; Reasons for Recommending Approval of the Merger,” “Special Factors — Position of Mr. Commisso and Merger Sub as to the Fairness of the Merger,” “Special Factors — Reasons of the RBC Stockholders for the Merger,” “Special Factors — Effects of the Merger,” “Special Factors — Interests of Certain Persons in the Merger” and “Special Factors — Structure and Steps of the Merger” in the Preliminary Proxy Statement is incorporated herein by this reference.
(e)		The information set forth under the captions “Summary Term Sheet — Required Vote; Voting Agreement,” “Special Factors — Interests of Certain Persons in the Merger,” “Special Factors — Voting Agreement” and “Security Ownership of Certain Beneficial Owners and Management” in the Preliminary Proxy Statement is incorporated herein by this reference.

Item 6.         Purpose of the Transaction and Plans or Proposals.

(b)		The information set forth under the captions “Summary Term Sheet — Effects of the Merger,” “Special Factors — Structure and Steps of the Merger” and “Special Factors — Effects of the Merger” in the Preliminary Proxy Statement is incorporated herein by this reference.
(c)(1) — (8)		The information set forth under the captions “Summary Term Sheet,” “Special Factors — Background of the Merger,” “Special Factors — Reasons of the RBC Stockholders for the Merger,” “Special Factors — Effects of the Merger,” “Special Factors — Structure and Steps of the Merger” and “The Merger Agreement” in the Preliminary Proxy Statement is incorporated herein by this reference.

Item 7.         Purposes, Alternatives, Reasons and Effects.

(a)		The information set forth under the captions “Summary Term Sheet — Effects of the Merger,” “Special Factors — Background of the Merger,” “Special Factors — Recommendation of the Special Committee and Board of Directors; Reasons for Recommending Approval of the Merger,” “Special Factors — Position of Mr. Commisso and Merger Sub as to the Fairness of the Merger,” “Special Factors — Reasons of the RBC Stockholders for the Merger,” “Special Factors — Effects of the

		Merger” and “Special Factors — Interests of Certain Persons in the Merger” in the Preliminary Proxy Statement is incorporated herein by this reference.
(b)		The information set forth under the captions “Special Factors — Background of the Merger,” “Special Factors — Recommendation of the Special Committee and Board of Directors; Reasons for Recommending Approval of the Merger,” “Special Factors — Position of Mr. Commisso and Merger Sub as to the Fairness of the Merger” and “Special Factors — Reasons of the RBC Stockholders for the Merger” in the Preliminary Proxy Statement is incorporated herein by this reference.
(c)		The information set forth under the captions “Special Factors — Background of the Merger,” “Special Factors — Recommendation of the Special Committee and Board of Directors; Reasons for Recommending Approval of the Merger,” “Special Factors — Position of Mr. Commisso and Merger Sub as to the Fairness of the Merger” and “Special Factors — Reasons of the RBC Stockholders for the Merger” in the Preliminary Proxy Statement is incorporated herein by this reference.
(d)		The information set forth under the captions “Summary Term Sheet — Effects of the Merger,” “Special Factors — Position of Mr. Commisso and Merger Sub as to the Fairness of the Merger,” “Special Factors — Reasons of the RBC Stockholders for the Merger,” “Special Factors — Effects of the Merger,” “Special Factors — Structure and Steps of the Merger,” “Special Factors —Interests of Certain Persons in the Merger” and “Special Factors — Material United States Federal Income Tax Considerations” in the Preliminary Proxy Statement is incorporated herein by this reference.

Item 8.         Fairness of the Transaction.

(a) — (b)		The information set forth under the captions “Summary Term Sheet — Recommendations,” “Summary Term Sheet — Opinion of Financial Advisor,” “Special Factors — Recommendation of the Special Committee and Board of Directors; Reasons for Recommending Approval of the Merger,” “Special Factors — Opinion of Financial Advisor to the Special Committee,” “Special Factors — Position of Mr. Commisso and Merger Sub as to the Fairness of the Merger,” “Special Factors — Financial Analyses of J. P. Morgan and BofA Merrill Lynch,” “Special Factors — Reasons of the RBC Stockholders for the Merger,” “Special Factors — Effects of the Merger,” “Special Factors — Effects of the Merger on Mediacom’s Net Book Value and Net Income” and “Special Factors — Interests of Certain Persons in the Merger” in the Preliminary Proxy Statement is incorporated herein by reference.
(c)		The information set forth under the captions “Summary Term Sheet — Required Vote; Voting Agreement,” “Summary Term Sheet — Conditions to Completion of the Merger” and “The Special Meeting — Vote Required; How Shares are Voted” in the Preliminary Proxy Statement is incorporated herein by this reference.
(d)		The information set forth under the captions “Summary Term Sheet — Opinions of Financial Advisor,” “Special Factors—Background of the Merger,” “Special Factors — Recommendation of the Special Committee and Board of Directors; Reasons for Recommending Approval of the Merger,” “Special Factors — Opinion of Financial Advisor to the Special Committee,” “Special Factors — Position of Mr. Commisso and Merger Sub as to the Fairness of the Merger,” “Special Factors — Reasons of the RBC Stockholders for the Merger” and “Special Factors — Interests of Certain Persons in the Merger” in the Preliminary Proxy Statement is incorporated herein by reference.
(e)		The information set forth under the captions “Summary Term Sheet — Recommendations,” “Special Factors — Background of the Merger,” “Special Factors — Recommendation of the Special Committee and Board of Directors; Reasons for Recommending Approval of the Merger,” “Special Factors — Position of Mr. Commisso and Merger Sub as to the Fairness of the Merger,” “Special Factors — Reasons of the RBC Stockholders for the Merger,” and “Special Factors — Interests of Certain Persons in the Merger” in the Preliminary Proxy Statement is incorporated herein by this reference.

(f)		None.

Item 9.         Reports, Opinions, Appraisals and Certain Negotiations.

(a) — (c)		The information set forth under the captions “Summary Term Sheet — Opinion of Financial Advisor,” “Special Factors — Background of the Merger,” “Special Factors — Opinion of Financial Advisor to the Special Committee,” “Special Factors — Financial Analyses of J. P. Morgan and BofA Merrill Lynch,” “Special Factors — Estimated Fees and Expenses” and “Additional Information” in the Preliminary Proxy Statement is incorporated herein by this reference. The written opinion of Barclays Capital, Inc., dated November 12, 2010, is attached to the Preliminary Proxy Statement as Annex B and is incorporated herein by reference.

Item 10.       Source and Amounts of Funds or Other Consideration.

(a) — (b)		The information set forth under the captions “Summary Term Sheet — Financing of the Merger,” “Special Factors — Background of the Merger,” “Special Factors — Recommendation of the Special Committee and Board of Directors; Reasons for Recommending Approval of the Merger” and “Special Factors — Financing of the Merger” in the Preliminary Proxy Statement is incorporated herein by this reference.
(c)		The information set forth under the captions “Summary Term Sheet — Expenses,” “Special Factors —Estimated Fees and Expenses” and “The Merger Agreement — Termination Expenses” in the Preliminary Proxy Statement is incorporated herein by this reference.
(d)		The information set forth under the caption “Special Factors — Financing of the Merger” in the Preliminary Proxy Statement is incorporated herein by reference.

Item 11.       Interest in Securities of the Subject Company.

(a) — (b)		The information set forth under the captions “Special Factors — Interests of Certain Persons in the Merger,” “Security Ownership of Certain Beneficial Owners and Management” and “Certain Purchases and Sales of Mediacom Common Stock” in the Preliminary Proxy Statement is incorporated herein by this reference.

Item 12.       The Solicitation or Recommendation.

(d) — (e)		The information set forth under the captions “Summary Term Sheet — Recommendations,” “Questions and Answers About the Merger and the Special Meeting — Does Mediacom’s Board of Directors Recommend Approval of the Merger Agreement,” “Special Factors — Background of the Merger” “Special Factors — Recommendation of the Special Committee and Board of Directors; Reasons for Recommending Approval of the Merger,” “Special Factors — Position of Mr. Commisso and Merger Sub as to the Fairness of the Merger,” “Special Factors — Reasons of the RBC Stockholders for the Merger,” “Special Factors — Voting Agreement” and “The Special Meeting — Vote Required; How Shares are Voted” in the Preliminary Proxy Statement is incorporated herein by this reference.

Item 13.       Financial Information.

(a)		The information set forth under the captions “Special Factors — Effects of the Merger on Mediacom’s Net Book Value and Net Income,” “Selected Historical Consolidated Financial Data” and “Additional Information” in the Preliminary Proxy Statement is incorporated herein by this reference. Mediacom’s annual report on Form 10-K for the year ended December 31, 2009 and its quarterly report on Form 10-Q for the quarter ended September 30, 2010 are each incorporated herein by reference.

(b)		Not applicable.

Item 14.     Persons/Assets, Retained, Employed, Compensated or Used.

(a) — (b)		The information set forth under the captions “Questions and Answers About the Merger and the Special Meeting — Who Can Help Answer My Questions,” “Special Factors — Estimated Fees and Expenses,” “The Special Meeting — Who to Call for Assistance” and “The Special Meeting — Proxy Solicitation” in the Preliminary Proxy Statement is incorporated herein by this reference.

Item 15.     Additional Information.

(b)		The information contained in the Preliminary Proxy Statement, including all annexes thereto, is incorporated in its entirety herein by this reference.

Item 16.     Exhibits.

(a)(1)		Preliminary Proxy Statement of Mediacom Communications Corporation, filed with the Securities and Exchange Commission on December 3, 2010.
(a)(2)		Form of Proxy Card (included as Appendix I to the Preliminary Proxy Statement filed herewith as Exhibit (a)(1)).
(a)(3)		Press release, dated November 15, 2010 (incorporated by reference to Exhibit 99.1 to Mediacom’s Form 8-K, filed with the SEC on November 15, 2010).
(b)(1)		Credit Agreement, dated as of October 21, 2004, among the operating subsidiaries of Mediacom LLC, the lenders thereto and JPMorgan Chase Bank, as administrative agent for the lenders (incorporated by reference to Exhibit 10.1 to Mediacom’s quarterly report on Form 10-Q for the quarterly period ended September 30, 2004).
(b)(2)		Amendment No. 1, dated as of May 5, 2006, to the Credit Agreement, dated as of October 21, 2004, among the operating subsidiaries of Mediacom LLC, the lenders thereto and JPMorgan Chase Bank, as administrative agent for the lenders (incorporated by reference to Exhibit 10.3 to Mediacom’s quarterly report on Form 10-Q for the quarterly period ended March 31, 2006).
(b)(3)		Amendment No. 2, dated as of June 11, 2007, to the Credit Agreement, dated as of October 21, 2004, among the operating subsidiaries of Mediacom LLC, the lenders party thereto and JPMorgan Chase Bank as administrative agent for the lenders (incorporated by reference to Exhibit 10.3 to Mediacom’s quarterly report on Form 10-Q for the quarterly period ended June 30, 2007).
(b)(4)		Amendment No. 3, dated as of June 11, 2007, to the Credit Agreement, dated of October 21, 2004, among the operating subsidiaries of Mediacom LLC, the lenders party thereto and JPMorgan Chase Bank, as administrative agent for the lenders (incorporated by reference to Exhibit 10.4 to Mediacom’s quarterly report on Form 10-Q for the quarterly period ended June 30, 2007).
(b)(5)		Amendment No. 4, dated as of April 23, 2010, to the Credit Agreement, dated as of October 21, 2004, among the operating subsidiaries of Mediacom LLC, the lenders party thereto and JPMorgan Chase Bank, as administrative agent for the lenders (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K, dated April 23, 2010, of Mediacom LLC).
(b)(6)		Incremental Facility Agreement, dated as of May 5, 2006, between the operating subsidiaries of Mediacom LLC, the lenders signatory thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to Mediacom’s quarterly report on Form 10-Q for the quarterly period ended March 31, 2006).

(b)(7)		Incremental Facility Agreement, dated as of August 25, 2009, between the operating subsidiaries of Mediacom LLC, the lenders signatory thereto and JPMorgan Chase Base, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to Mediacom’s quarterly report on Form 10-Q for the quarterly period ended September 30, 2009).
(b)(8)		Incremental Facility Agreement, dated as of April 23, 2010, between the operating subsidiaries of Mediacom LLC, the lenders signatory thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K, dated April 23, 2010, of Mediacom LLC).
(b)(9)		Amendment and Restatement, dated December 16, 2004, of Credit Agreement, dated as of July 18, 2001, among the operating subsidiaries of Mediacom Broadband LLC, the lenders thereto and JPMorgan Chase Bank, as administrative agent for the lenders (incorporated by reference to Exhibit 10.2 to Mediacom’s annual report on Form 10-K for the year ended December 31, 2004).
(b)(10)		Amendment No. 1, dated as of October 11, 2005, to the Amendment and Restatement, dated as of December 16, 2004, of Credit Agreement, dated as of July 18, 2001, among the operating subsidiaries of Mediacom Broadband LLC, the lenders thereto and JP Morgan Chase Bank, as administrative agent for the lenders (incorporated by reference to Exhibit 10.1 to Mediacom’s quarterly report on Form 10-Q for the quarterly period ended September 30, 2005).
(b)(11)		Amendment No. 2, dated as of May 5, 2006, to the Amendment and Restatement, dated as of December 16, 2004, of Credit Agreement, dated as of July 18, 2001, among the operating subsidiaries of Mediacom Broadband LLC, the lenders thereto and JPMorgan Chase Bank, as administrative agent for the lenders (incorporated by reference to Exhibit 10.4 to Mediacom’s quarterly report on Form 10-Q for the quarterly period ended March 31, 2006).
(b)(12)		Amendment No. 3, dated as of June 11, 2007, to the Amendment and Restatement, dated as of December 16, 2004, of Credit Agreement, dated as of July 18, 2001, among the operating subsidiaries of Mediacom Broadband LLC, the lenders party thereto and JPMorgan Chase Bank, as administrative agent for the lenders (incorporated by reference to Exhibit 10.1 to Mediacom’s quarterly report on Form 10-Q for the quarterly period ended June 30, 2007).
(b)(13)		Amendment No. 4, dated as of June 11, 2007, to the Amendment and Restatement, dates as of December 16, 2004, of Credit Agreement, dated as of July 18, 2001, among the operating subsidiaries of Mediacom Broadband LLC, the lenders party thereto and JPMorgan Chase Bank, as administrative agent for the lenders (incorporated by reference to Exhibit 10.2 to Mediacom’s quarterly report on Form 10-Q for the quarterly period ended June 30, 2007).
(b)(14)		Amendment No. 5, dated as of April 23, 2010, to the Amendment and Restatement, dated as of December 16, 2004, of the Credit Agreement, dated as of July 18, 2001, among the operating subsidiaries of Mediacom Broadband LLC, the lenders party thereto and JPMorgan Chase Bank, as administrative agent for the lenders (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K, dated April 23, 2010, of Mediacom Broadband LLC).
(b)(15)		Incremental Facility Agreement, dated as of May 5, 2006, between the operating subsidiaries of Mediacom Broadband LLC, the lenders signatory thereto and JPMorgan Chase Bank. N.A., as administrative agent (incorporated by reference to Exhibit 10.2 to Mediacom’s quarterly report on Form 10-Q for the quarterly period ended March 31, 2006).
(b)(16)		Incremental Facility Agreement, dated as of April 23, 2010, between the operating subsidiaries of Mediacom Broadband LLC, the lenders signatory thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K, dated April 23, 2010, of Mediacom Broadband LLC).

(c)(1)		Opinion of Barclays Capital Inc. to the Special Committee of the Board of Directors of Mediacom, dated November 12, 2010 (included as Annex B of the Preliminary Proxy Statement filed herewith as Exhibit (a)(1)).
(c)(2)		Discussion Materials presented by Barclays Capital to the Special Committee and the Board of Directors of Mediacom on November 12, 2010.
(c)(3)		Materials presented by J.P. Morgan and BofA Merrill Lynch to Merger Sub on November 12, 2010.
(d)(1)		Agreement and Plan of Merger, dated as of November 12, 2010, between Mediacom, JMC Acquisition LLC and Rocco B. Commisso (included as Annex A of the Preliminary Proxy Statement filed herewith as Exhibit (a)(1)).
(d)(2)		Voting Agreement, dated as of November 12, 2010, by and among Mediacom, JMC Acquisition LLC and Rocco B. Commisso (incorporated by reference to Exhibit 10.1 to Mediacom’s Form 8-K, dated November 12, 2010).
(f)		Section 262 of the Delaware General Corporation Law (included as Annex C of the Preliminary Proxy Statement filed herewith as Exhibit (a)(1)).
(g)		None

SIGNATURES

     After due inquiry and to the best knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct.

Dated as of December 2, 2010

		MEDIACOM COMMUNICATIONS CORPORATION
		By:		/s/ Mark E. Stephan
				Mark E. Stephan
				Executive Vice President and Chief Financial Officer
		JMC COMMUNICATIONS LLC
		By:		/s/ Rocco B. Commisso
				Rocco B. Commisso
				Sole Member and Manager
		/s/ Rocco B. Commisso
		Rocco B. Commisso

EXHIBIT INDEX

(a)(1)		Preliminary Proxy Statement of Mediacom Communications Corporation, filed with the Securities and Exchange Commission on December 3, 2010.
(a)(2)		Form of Proxy Card (included as Appendix I to the Preliminary Proxy Statement filed herewith as Exhibit (a)(1)).
(a)(3)		Press release, dated November 15, 2010 (incorporated by reference to Exhibit 99.1 to Mediacom’s Form 8-K, filed with the SEC on November 15, 2010).
(b)(1)		Credit Agreement, dated as of October 21, 2004, among the operating subsidiaries of Mediacom LLC, the lenders thereto and JPMorgan Chase Bank, as administrative agent for the lenders (incorporated by reference to Exhibit 10.1 to Mediacom’s quarterly report on Form 10-Q for the quarterly period ended September 30, 2004).
(b)(2)		Amendment No. 1, dated as of May 5, 2006, to the Credit Agreement, dated as of October 21, 2004, among the operating subsidiaries of Mediacom LLC, the lenders thereto and JPMorgan Chase Bank, as administrative agent for the lenders (incorporated by reference to Exhibit 10.3 to Mediacom’s quarterly report on Form 10-Q for the quarterly period ended March 31, 2006).
(b)(3)		Amendment No. 2, dated as of June 11, 2007, to the Credit Agreement, dated as of October 21, 2004, among the operating subsidiaries of Mediacom LLC, the lenders party thereto and JPMorgan Chase Bank as administrative agent for the lenders (incorporated by reference to Exhibit 10.3 to Mediacom’s quarterly report on Form 10-Q for the quarterly period ended June 30, 2007).
(b)(4)		Amendment No. 3, dated as of June 11, 2007, to the Credit Agreement, dated of October 21, 2004, among the operating subsidiaries of Mediacom LLC, the lenders party thereto and JPMorgan Chase Bank, as administrative agent for the lenders (incorporated by reference to Exhibit 10.4 to Mediacom’s quarterly report on Form 10-Q for the quarterly period ended June 30, 2007).
(b)(5)		Amendment No. 4, dated as of April 23, 2010, to the Credit Agreement, dated as of October 21, 2004, among the operating subsidiaries of Mediacom LLC, the lenders party thereto and JPMorgan Chase Bank, as administrative agent for the lenders (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K, dated April 23, 2010, of Mediacom LLC).
(b)(6)		Incremental Facility Agreement, dated as of May 5, 2006, between the operating subsidiaries of Mediacom LLC, the lenders signatory thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to Mediacom’s quarterly report on Form 10-Q for the quarterly period ended March 31, 2006).
(b)(7)		Incremental Facility Agreement, dated as of August 25, 2009, between the operating subsidiaries of Mediacom LLC, the lenders signatory thereto and JPMorgan Chase Base, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to Mediacom’s quarterly report on Form 10-Q for the quarterly period ended September 30, 2009).
(b)(8)		Incremental Facility Agreement, dated as of April 23, 2010, between the operating subsidiaries of Mediacom LLC, the lenders signatory thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K, dated April 23, 2010, of Mediacom LLC).
(b)(9)		Amendment and Restatement, dated December 16, 2004, of Credit Agreement, dated as of July 18, 2001, among the operating subsidiaries of Mediacom Broadband LLC, the lenders thereto and

		JPMorgan Chase Bank, as administrative agent for the lenders (incorporated by reference to Exhibit 10.2 to Mediacom’s annual report on Form 10-K for the year ended December 31, 2004).
(b)(10)		Amendment No. 1, dated as of October 11, 2005, to the Amendment and Restatement, dated as of December 16, 2004, of Credit Agreement, dated as of July 18, 2001, among the operating subsidiaries of Mediacom Broadband LLC, the lenders thereto and JP Morgan Chase Bank, as administrative agent for the lenders (incorporated by reference to Exhibit 10.1 to Mediacom’s quarterly report on Form 10-Q for the quarterly period ended September 30, 2005).
(b)(11)		Amendment No. 2, dated as of May 5, 2006, to the Amendment and Restatement, dated as of December 16, 2004, of Credit Agreement, dated as of July 18, 2001, among the operating subsidiaries of Mediacom Broadband LLC, the lenders thereto and JPMorgan Chase Bank, as administrative agent for the lenders (incorporated by reference to Exhibit 10.4 to Mediacom’s quarterly report on Form 10-Q for the quarterly period ended March 31, 2006).
(b)(12)		Amendment No. 3, dated as of June 11, 2007, to the Amendment and Restatement, dated as of December 16, 2004, of Credit Agreement, dated as of July 18, 2001, among the operating subsidiaries of Mediacom Broadband LLC, the lenders party thereto and JPMorgan Chase Bank, as administrative agent for the lenders (incorporated by reference to Exhibit 10.1 to Mediacom’s quarterly report on Form 10-Q for the quarterly period ended June 30, 2007).
(b)(13)		Amendment No. 4, dated as of June 11, 2007, to the Amendment and Restatement, dates as of December 16, 2004, of Credit Agreement, dated as of July 18, 2001, among the operating subsidiaries of Mediacom Broadband LLC, the lenders party thereto and JPMorgan Chase Bank, as administrative agent for the lenders (incorporated by reference to Exhibit 10.2 to Mediacom’s quarterly report on Form 10-Q for the quarterly period ended June 30, 2007).
(b)(14)		Amendment No. 5, dated as of April 23, 2010, to the Amendment and Restatement, dated as of December 16, 2004, of the Credit Agreement, dated as of July 18, 2001, among the operating subsidiaries of Mediacom Broadband LLC, the lenders party thereto and JPMorgan Chase Bank, as administrative agent for the lenders (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K, dated April 23, 2010, of Mediacom Broadband LLC).
(b)(15)		Incremental Facility Agreement, dated as of May 5, 2006, between the operating subsidiaries of Mediacom Broadband LLC, the lenders signatory thereto and JPMorgan Chase Bank. N.A., as administrative agent (incorporated by reference to Exhibit 10.2 to Mediacom’s quarterly report on Form 10-Q for the quarterly period ended March 31, 2006).
(b)(16)		Incremental Facility Agreement, dated as of April 23, 2010, between the operating subsidiaries of Mediacom Broadband LLC, the lenders signatory thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.2 to the current report on Form 8-K, dated April 23, 2010, of Mediacom Broadband LLC).
(c)(1)		Opinion of Barclays Capital Inc. to the Special Committee of the Board of Directors of Mediacom, dated November 12, 2010 (included as Annex B of the Preliminary Proxy Statement filed herewith as Exhibit (a)(1)).
(c)(2)		Discussion Materials presented by Barclays Capital to the Special Committee and the Board of Directors of Mediacom on November 12, 2010.
(c)(3)		Materials presented by J.P. Morgan and BofA Merrill Lynch to Merger Sub on November 12, 2010.

(d)(1)		Agreement and Plan of Merger, dated as of November 12, 2010, between Mediacom, JMC Acquisition LLC and Rocco B. Commisso (included as Annex A of the Preliminary Proxy Statement filed herewith as Exhibit (a)(1)).
(d)(2)		Voting Agreement, dated as of November 12, 2010, by and among Mediacom, JMC Acquisition LLC and Rocco B. Commisso (incorporated by reference to Exhibit 10.1 to Mediacom’s Form 8-K, dated November 12, 2010).
(f)		Section 262 of the Delaware General Corporation Law (included as Annex C of the Preliminary Proxy Statement filed herewith as Exhibit (a)(1)).
(g)		None

Mediacom Communications Corporation
100 Crystal Run Road
Middletown, New York 10941

 

SPECIAL MEETING OF STOCKHOLDERS
PROPOSED MERGER — YOUR VOTE IS VERY IMPORTANT

 

To the Stockholders of Mediacom Communications Corporation:

 

You are cordially invited to attend a special meeting of stockholders of Mediacom Communications Corporation, to be held on [          ], 2011 at 10:00 A.M., New York time, at the offices of SNR Denton US LLP, 1221 Avenue of the Americas, 25th Floor, New York, New York 10020. The attached proxy statement provides information regarding the matters to be acted on at the special meeting, including at any adjournment or postponement thereof.

 

At the special meeting, you will be asked to consider and vote upon a proposal to adopt an Agreement and Plan of Merger, dated as of November 12, 2010 (which we refer to as the “merger agreement”), by and among Mediacom Communications Corporation, JMC Communications LLC (an entity formed to effect the merger discussed below) and Rocco B. Commisso, our founder, Chairman and Chief Executive Officer and the sole member and manager of JMC Communications LLC. Pursuant to the merger agreement, JMC Communications LLC will merge with and into Mediacom, with Mediacom continuing as the surviving corporation. The completion of the merger is conditioned upon, among other things, adoption of the merger agreement by our stockholders.

 

If the merger is completed, then each share of Mediacom common stock will be converted into the right to receive $8.75 in cash (other than shares held by Mr. Commisso and JMC Communications LLC or any of their respective affiliates (the “RBC Stockholders”), shares held in treasury by Mediacom and shares held by stockholders who have perfected their appraisal rights under Delaware law). In the merger, all of the outstanding membership interests of JMC Communications LLC will be converted into shares of the surviving corporation. As a result of the merger, Mediacom will be a private company that is wholly-owned by Mr. Commisso. A copy of the merger agreement is included as Annex A to the attached proxy statement.

 

A special committee of your board of directors, consisting of two independent directors, has unanimously determined that the merger agreement is fair to, and in the best interests of, the holders of Mediacom common stock (other than the RBC Stockholders) and has recommended to the full Mediacom board of directors that the board of directors approve the merger agreement. In determining to make its recommendation to the board of directors, the special committee considered, among other things, the opinion of Barclays Capital Inc., the financial advisor to the special committee, to the effect that, as of the date of its opinion, the cash merger consideration of $8.75 per share to be received by the holders of Mediacom common stock (other than the RBC Stockholders) in the merger is fair, from a financial point of view, to those holders. The opinion of Barclays Capital Inc. is subject to the assumptions, limitations and qualifications set forth in the opinion, which is included as Annex B to the attached proxy statement.

 

Mediacom’s board of directors, after considering the unanimous recommendation of the special committee and the factors considered by the special committee, determined that the merger agreement is advisable and fair to, and in the best interests of, the holders of Mediacom common stock (other than the RBC Stockholders) and unanimously approved the merger agreement. Accordingly, Mediacom’s board of directors recommends that you vote in favor of the adoption of the merger agreement. In arriving at their respective recommendations of the merger agreement, Mediacom’s board of directors and its special committee carefully considered a number of factors which are described in the attached proxy statement.

 

When you consider the recommendation of our board of directors to adopt the merger agreement, you should be aware that some of our directors and executive officers have interests in the merger that may be different from, or in addition to, the interests of our stockholders generally.

 

The attached proxy statement provides you with detailed information about the merger agreement and the merger. We urge you to read the entire document carefully.

The proposal to adopt the merger agreement requires a vote of the holders of Mediacom common stock that satisfies two criteria:

 

 

As Mr. Commisso and JMC Communications LLC have each agreed to vote all shares of our common stock held by them (representing approximately 86% in aggregate voting power) in favor of adoption of the merger agreement, the first of the criteria will be met.

 

If you have any questions or need assistance voting your shares, please call [proxy solicitor], which is assisting us, toll-free at [          ].

 

Sincerely,

 

Rocco B. Commisso
Chairman of the Board

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the merger, or passed upon the fairness or merits of the merger or the adequacy or accuracy of the attached proxy statement. Any contrary representation is a criminal offense.

 

The attached proxy statement is dated [          ], 2011 and is first being mailed to stockholders on or about [          ], 2011.

 

 

Mediacom Communications Corporation
100 Crystal Run Road
Middletown, New York 10941

 

 

 

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held On [          ], 2011

 

To the Stockholders of Mediacom Communications Corporation:

 

We will hold a special meeting of stockholders of Mediacom Communications Corporation on [          ], 2011 at 10:00 A.M., New York time, at the offices of SNR Denton US LLP, 1221 Avenue of the Americas, 25th Floor, New York, New York 10020. The purpose of the special meeting is:

 

1. To consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of November 12, 2010, by and among Mediacom Communications Corporation, JMC Communications LLC (“Merger Sub”) and Rocco B. Commisso, as it may be amended from time to time, which, among other things, provides for the merger of Merger Sub with and into Mediacom, with Mediacom continuing as the surviving corporation.

 

2. To approve any motion to adjourn the special meeting to a later date to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve proposal 1.

 

3. To transact such other business as may properly come before the special meeting or any adjournments or postponements of the special meeting.

 

Only holders of Mediacom common stock at the close of business on [          ], 2011, the record date established for the special meeting, are entitled to notice of, and to vote at, the special meeting. A complete list of stockholders entitled to vote at the special meeting will be available for examination at Mediacom’s corporate headquarters, 100 Crystal Run Road, Middletown, New York, 10941, after [          ], 2011, and at the special meeting.

 

We have described the material terms of the merger agreement and the merger in the accompanying proxy statement, which you should read in its entirety before voting. A copy of the merger agreement is attached as Annex A to the proxy statement.

 

Proposal 1 requires a vote of the holders of Mediacom common stock that satisfies two criteria:

 

 

As Mr. Commisso and Merger Sub have each agreed to vote all shares of our common stock held by them (representing approximately 86% in aggregate voting power) in favor of proposal 1, the first of the criteria will be met. A failure to vote, or an abstention from voting, will have the same effect as a vote “against” the adoption of the merger agreement.

 

Under Delaware law, holders of shares of Mediacom common stock who do not vote in favor of adoption of the merger agreement have the right to exercise appraisal rights and to seek judicial appraisal of the “fair value” of their shares upon compliance with the requirements of the Delaware General Corporation Law. This right is explained more fully under “Special Factors — Appraisal Rights of Stockholders” in the accompanying proxy statement. The appraisal rights provisions of Delaware law are attached to the accompanying proxy statement as Annex C.

 

Your vote is very important. Whether or not you plan to attend the special meeting, please complete, sign, date and promptly mail the enclosed proxy as soon as possible or submit your proxy via telephone or the Internet to make sure your shares are represented at the meeting. If you attend the meeting and wish to vote in

person, then you may revoke your proxy and vote in person. If you have instructed a broker to vote your shares, then you must follow directions received from the broker to change or revoke your proxy.

 

By Order of the Board of Directors,

 

Joseph E. Young
Secretary

 

Middletown, New York

[          ], 2011

 

 

 

The following summary highlights selected information contained in this proxy statement and may not contain all of the information that may be important in your consideration of the proposed merger. We encourage you to read this proxy statement and the documents we have incorporated by reference before voting. We have included section references to direct you to a more complete description of the topics described in this summary.

 

 

 

 

The special committee and our board of directors were aware of these interests, and considered them, among other matters, prior to providing their respective recommendations with respect to the merger agreement.

 

 

Under the terms of the merger agreement, the merger agreement must also be adopted by the affirmative vote of the holders of a majority of the outstanding shares of Mediacom Class A common stock, exclusive of shares of Mediacom Class A common stock held by Merger Sub, Mr. Commisso, any of their respective affiliates, any immediate family member of Mr. Commisso or any of the executive officers or directors of Mediacom and its subsidiaries. We refer to this approval as the “majority of the minority” vote.

 

Based on the number of shares of our Class A common stock expected to be outstanding on the record date, approximately [          ] shares of our Class A common stock owned by unaffiliated stockholders must be voted in favor of the proposal to adopt the merger agreement in order for the proposal to be approved.

 

Pursuant to a voting agreement with Mediacom, the RBC Stockholders have agreed to vote all of their shares of our common stock in favor of the adoption of the merger agreement. The parties to the voting agreement collectively hold shares of our common stock representing approximately 99% of the outstanding shares of our Class B common stock, less than 1% of the outstanding shares of our Class A common stock, and approximately 86% of the total voting power of outstanding shares of our common stock. The shares of our common stock held by the parties to the voting agreement will not be counted in the majority of the minority vote. See “Special Factors — Voting Agreement” beginning on page 44.

 

 

 

See “Special Factors — Recommendation of the Special Committee and Board of Directors; Reasons for Recommending Approval of the Merger” beginning on page 15.

 

Each of the RBC Stockholders believes that the merger is substantively and procedurally fair to the unaffiliated stockholders of Mediacom. See “Special Factors — Position of Mr. Commisso and Merger Sub as to the Fairness of the Merger” beginning on page 25.

 

 

 

At any time before the merger, to the extent legally allowed, Mediacom, Merger Sub or Mr. Commisso may waive compliance with any of the conditions contained in the merger agreement without the approval of their respective stockholders or members, except that the majority of the minority voting condition cannot be waived by any party. As of the date of this proxy statement, neither Mediacom nor the RBC Stockholders expects that any condition will be waived.

 

See “The Merger Agreement — Conditions to Completion of the Merger” beginning on page 63.

 

 

 

See “The Merger Agreement — Termination” beginning on page 64.

 

 

 

 

 

The special committee of independent directors of Mediacom’s board of directors that was appointed to review and evaluate the acquisition proposal from Mr. Commisso unanimously determined that the merger agreement is fair to, and in the best interests of, Mediacom’s stockholders (not including the RBC Stockholders) and recommended to the full Mediacom board of directors that the board of directors approve the merger agreement. After considering the unanimous recommendation of the special committee and the factors considered by the special committee, including the opinion of the financial advisor to the special committee, Mediacom’s board of directors has:

 

 

 

 

 

 

 

 

You also may revoke your proxy by attending the special meeting and voting your shares in person. If your shares are held in “street name” (that is, they are held in the name of a broker, bank or other nominee), you must obtain a proxy from such broker, bank or other nominee and bring it to the meeting.

 

 

 

 

If the merger is not consummated, we may be required, under specified circumstances, to reimburse the RBC Stockholders for some of their out-of-pocket expenses, as described under “Special Factors — Estimated Fees and Expenses” beginning on page 46.

 

 

[insert contact information for proxy solicitor]

TABLE OF CONTENTS

 

 

This proxy statement, including information included or incorporated by reference in this document, contains certain forward-looking statements with respect to the financial condition, results of operations, plans, objectives, future performance and business of Mediacom, as well as certain information relating to the merger, including, without limitation, statements preceded by, followed by or that include the words “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should” or “will,” or the negative of those and other comparable words. We believe it is important to communicate management’s expectations to Mediacom’s stockholders. However, there may be events in the future that we are not able to accurately predict or over which we have no control. The risk factors listed in our Annual Report on Form 10-K for the year ended December 31, 2009, as well as any other cautionary language in this proxy statement, provide examples of risks, uncertainties and events that may cause Mediacom’s actual results to differ materially from the expectations we describe in our forward-looking statements. You should be aware that the occurrence of the events described in these risk factors and elsewhere in this proxy statement could have a material adverse effect on Mediacom’s business, operating results and financial condition. Examples of these risks include:

 

 

We disclaim any obligation to update or revise the forward-looking statements contained herein, except as otherwise required by applicable federal securities laws. The Transaction Statement on Schedule 13E-3 filed with the SEC with respect to the proposed merger (the “Schedule 13E-3”) will be amended to report any material changes in the information set forth in the most recent Schedule 13E-3 filed with the SEC.

 

Rocco B. Commisso, our Chairman and Chief Executive Officer, founded our predecessor company in 1995 to acquire and develop cable television systems serving principally non-metropolitan markets of the United States. Since the completion of the initial public offering of our Class A common stock in February 2000, Mr. Commisso has beneficially owned shares of our common stock representing a majority of the outstanding voting power.

 

Following formation of our predecessor company, we grew primarily by making disciplined and strategic acquisitions of underperforming cable systems and improving their operating and financial performance. In July 2001, we completed our largest acquisition, a purchase from AT&T Broadband, LLC of cable systems for an aggregate purchase price of about $2.1 billion in cash. This acquisition more than doubled our subscriber base, annual revenues and cash flow and its financing significantly increased our outstanding debt and financial leverage.

 

After the transaction with AT&T Broadband, LLC, our ability to grow our business through acquisitions became much more limited because of our high debt levels and changes in the attitude of investors and lenders toward the cable industry generally. In pursuit of their goal of maximizing stockholder value, Mr. Commisso and senior management turned their focus to:

 

 

More specifically, in our efforts to provide liquidity and return capital to stockholders, we acquired since 2001 in open market transactions approximately 27.0 million shares of our Class A common stock at a weighted average price of $5.65 per share. In addition, on February 13, 2009, we completed a share exchange transaction with affiliates of Morris Communications Company, LLC, our largest stockholder at the time who had two designees on our board of directors and who was one of our original investors. Pursuant to this transaction, we exchanged 100% of the shares of stock of a wholly-owned subsidiary, which held approximately $110 million of cash and non-strategic cable systems serving approximately 25,000 basic subscribers, for approximately 28.3 million shares of our Class A common stock beneficially owned by Morris Communications Company, LLC, reflecting a negotiated purchase price of approximately $6.50 per share. We refer to this transaction as the “Morris transaction.”

 

A major reason for undertaking these stock repurchases was our hope that they would have a positive impact on the public trading price of our common stock. That goal also drove our efforts to become “free cash flow positive.” We recognized that the investor community had become increasingly focused on free cash flow, clearly signaling that companies that produced high levels of free cash flow per share would see their stock prices rise and those that underperformed in terms of this metric would suffer stable or declining share prices. The investor community also put new emphasis upon reducing financial leverage.

 

The improvement in Mediacom’s financial and operating performance, together with meaningful stock repurchases, did not produce the commensurate benefits for Mediacom stockholders that Mr. Commisso had hoped. For example, our stock closed at $4.47 per share at the end of 2009, even though that year we grew revenues and cash flows in difficult economic conditions, generated significant and sustainable free cash flow for the first time and continued to reduce our financial leverage, in addition to increasing accumulated federal net operating loss carryforwards (which we refer to as “NOLs”) to approximately $2.4 billion.

 

During the first half of 2010, we continued to generate sustainable free cash flow. Mr. Commisso, however, believed that our stock was still underperforming. He also was aware that for an extended period of time larger

publicly-traded cable companies, such as Comcast Corporation (“Comcast”) and Time Warner Cable (“Time Warner”), which:

 

 

were trading in the public market at significantly lower valuations than Mediacom, based on cash flow multiples. That fact suggested to Mr. Commisso that the prospects for growth in our stock price were not as promising as compared to these other companies, because the cash flow multiples being applied to Mediacom by the investor community were unlikely to increase much, or at all, even if our financial performance and position continued to improve.

 

In May 2010, Mr. Commisso had preliminary discussions with certain advisors, including Baker Botts LLP (“Baker Botts”), regarding a number of legal and tax considerations pertaining to a potential tender offer or merger that would have the effect of taking Mediacom private. One concern was that the trading in our stock that might follow the announcement of any proposed going private transaction could result in changes of ownership that would limit the ability of Mediacom to use its NOLs to offset future tax liabilities, even if the proposed transaction did not occur. Mr. Commisso and certain other members of Mediacom’s senior management consulted the company’s legal and tax advisors regarding this issue and the possibility of mitigating the risk, such as by adopting a shareholder rights plan. Based on those consultations, it was concluded that, while the consummation of a going private transaction would likely result in a significant impairment of the NOLs, such an impairment was not likely to occur merely as a result of the announcement of such a transaction, and therefore, no action with respect to the adoption of a shareholder rights plan or other protective measure was taken at such time.

 

On May 31, 2010, our board of directors received a proposal from Mr. Commisso to acquire all of the shares of our common stock that he did not own for $6.00 per share in cash pursuant to a negotiated merger transaction. The proposal also stated that Mr. Commisso expected to finance the transaction solely through borrowings under our existing bank credit facilities and that after the transaction Mr. Commisso intended to continue in his current roles at Mediacom. In his proposal, Mr. Commisso indicated that he was interested only in pursuing the proposed transaction and that he was not interested in selling his stake in Mediacom or considering any other strategic transaction involving Mediacom. The proposal also stated that Mr. Commisso expected Mediacom’s board of directors would form a special committee of independent directors, which would engage its own legal and financial advisors, to respond to the proposal on behalf of Mediacom’s public stockholders.

 

On May 31, 2010, at a special meeting of the board of directors of Mediacom, the board of directors determined to establish a special committee of independent directors to consider and act with respect to the proposal. With the assistance of SNR Denton US LLP (“SNR”), outside counsel to Mediacom, the board of directors considered the independence of Thomas V. Reifenheiser and Natale S. Ricciardi with respect to service on the special committee. The board of directors determined that there were no relationships with Mediacom or Mr. Commisso that would interfere with the independence of Messrs. Reifenheiser or Ricciardi in connection with considering the proposal and appointed them to the special committee. At the board of directors’ meeting, representatives of SNR also reviewed with the directors their fiduciary duties and responsibilities, as well as the process to be expected in connection with the proposal.

 

The board of directors then authorized the special committee to exercise the power of the board with respect to the consideration and negotiation on behalf of Mediacom of Mr. Commisso’s proposal, any revised proposal or merger or other alternative third party transaction arising out of the proposal, including the exclusive authority to:

 

 

 

The board of directors also resolved at the meeting that it would not recommend, authorize or approve the proposal or any other merger, acquisition or similar proposal involving Mediacom, Mr. Commisso or any of his affiliates unless such transaction was recommended to the board of directors by the special committee. In addition, the board of directors authorized the special committee to retain the services of its own legal and financial advisors at Mediacom’s expense.

 

On June 1, 2010, we issued a press release announcing that we had received the proposal from Mr. Commisso and that our board of directors had appointed a special committee to review the proposal.

 

On or about June 3, 2010, the board of directors of Mediacom received a letter from Bislett Management LLC, a stockholder of Mediacom, stating, among other things, that Bislett Management believed Mr. Commisso’s proposed offer price of $6.00 per share undervalued Mediacom and was unfair, from a financial point of view, to the public stockholders of Mediacom.

 

On June 7, 2010 Mr. Commisso, together with representatives of Baker Botts, met with representatives of J.P. Morgan Securities LLC (“J.P. Morgan”) and Merrill Lynch, Pierce, Fenner & Smith Incorporated (“BofA Merrill Lynch”) at the offices of Baker Botts regarding Mr. Commisso’s proposal. Subsequent to the June 7 meeting, Merger Sub formally engaged J.P. Morgan and BofA Merrill Lynch as its financial advisors in connection with a potential transaction involving Mediacom. At the June 7 meeting, Mr. Commisso and his advisors discussed the anticipated timing and process for the proposal as well as certain valuation considerations.

 

Following the June 7, 2010 meeting, Mr. Commisso had regular conference calls and meetings with J.P. Morgan, BofA Merrill Lynch and Baker Botts regarding the financial and legal aspects of his proposal. During the course of these discussions, Mr. Commisso indicated that Mediacom does not, as a matter of course, create multi-year financial projections or forecasts for submission to Mediacom’s board of directors or that are customarily relied on by the investor or financial community. After reviewing several Wall Street analyst reports with the financial advisors, Mr. Commisso informed J.P. Morgan and BofA Merrill Lynch that, in his opinion, using a compilation of the current Wall Street analyst reports as a benchmark for Mediacom’s projections would be a reasonable basis for evaluating his $6.00 per share offer.

 

On June 8, 2010 the special committee retained Simpson Thacher & Bartlett LLP (“Simpson Thacher”) as its legal advisor. Following such retention, the special committee and representatives of Simpson Thacher met to discuss the function of the special committee, the duties and responsibilities of its members and an overview of the process with respect to the proposal. The special committee and Simpson Thacher also discussed the process for selecting a financial advisor.

 

On June 14, 2010, Cablevision Systems Corporation (“Cablevision”) announced that it had entered into a definitive agreement to acquire Bresnan Communications in a transaction valued at $1.365 billion. We refer to that transaction as the “Bresnan transaction.”

 

On June 16, 2010, after interviewing a number of financial advisors, the special committee formally engaged Barclays Capital Inc. (“Barclays Capital”) as its financial advisor. Following the retention of Barclays Capital and

Simpson Thacher, the special committee held regular meetings, in person and telephonically with such advisors in the course of responding to Mr. Commisso’s proposal.

 

On June 17, 2010, the special committee caused Mediacom to issue a press release announcing that the special committee had retained Barclays Capital as its financial advisor and Simpson Thacher as its legal counsel in connection with its review of Mr. Commisso’s proposal.

 

On June 24, 2010, at the request of Mr. Commisso, the special committee and representatives of Barclays Capital and Simpson Thacher met at the offices of Simpson Thacher with Mr. Commisso and representatives of J.P. Morgan, BofA Merrill Lynch and Baker Botts. At the meeting, J.P. Morgan and BofA Merrill Lynch described several valuation methodologies and metrics they had used in evaluating the $6.00 per share offer price. During the discussion, Mr. Commisso highlighted for the special committee and Barclays Capital certain risks that Mediacom faced in its business and its financial position including increased government regulation and competition; the uncertainties of refinancing its outstanding debt; the capital expenditures required to transition Mediacom’s systems to all digital and to implement a possible wireless strategy; the escalation of programming costs, in particular retransmission consent fees; and the risk that certain changes in the beneficial ownership of Mediacom common stock could result in a limitation of the use of Mediacom’s NOLs. Mr. Commisso also indicated to the special committee and Barclays Capital that a comparison of Mediacom’s valuation on a per subscriber basis with certain other publicly-traded cable operators such as Cablevision or Comcast may be less meaningful because Mediacom’s cable systems generate significantly less cash flow per subscriber than those publicly-traded cable operators. The special committee and Barclays Capital asked a number of questions regarding the discussion materials and Mr. Commisso’s outlook for Mediacom and the cable television industry in general. Specifically, Mr. Reifenheiser inquired about Mr. Commisso’s, J.P. Morgan’s and BofA Merrill Lynch’s thoughts on the Bresnan transaction and whether the valuations being reported for that transaction impacted their analysis.

 

During the June 24 meeting, Mr. Commisso also indicated to the special committee and its advisors that he was interested in reaching an agreement with the special committee as soon as possible with respect to the proposal. To that end, Mr. Commisso suggested that the special committee rely on Wall Street projections rather than request that Mediacom’s management prepare projections in connection with the proposal, based on the conclusion of Mr. Commisso that Wall Street projections were a reasonable basis for an evaluation of his offer. Barclays Capital, on behalf of the special committee, indicated that they would consider the suggestion but would likely be requesting that Mediacom’s management prepare their own projections without the input of Mr. Commisso in order to complete their financial review of Mr. Commisso’s proposal. Following the meeting, the special committee requested that Mediacom’s management (excluding Mr. Commisso) prepare annual financial projections for Mediacom for the 2010 — 2015 period. These projections were delivered to the special committee on June 29, 2010. We refer to these financial projections as the “June Forecast.” See “— Projected Financial Information — Financial Projections — June Forecast.”

 

On July 1, 2010, a representative of Barclays Capital delivered to representatives of J.P. Morgan and BofA Merrill Lynch Mediacom’s 2010 operating budget (“2010 budget”), which had been provided to Barclays Capital by Mediacom’s management during Barclays Capital’s due diligence review, and a list of questions regarding the 2010 budget that Barclays Capital wanted to discuss with Mr. Commisso. Over the next several days, Mr. Commisso reviewed the 2010 budget and Barclays Capital’s proposed questions with J.P. Morgan, BofA Merrill Lynch and Baker Botts, and J.P. Morgan and BofA Merrill Lynch discussed with Mr. Commisso several valuation methodologies and metrics.

 

On July 6, 2010, the financial and legal advisors to the special committee met at the offices of J.P. Morgan with Mr. Commisso, J.P. Morgan, BofA Merrill Lynch and Baker Botts to review the 2010 budget. At this meeting, Barclays Capital discussed with Mr. Commisso the background of the 2010 budget and how management uses it to operate and manage Mediacom’s business. Mr. Commisso discussed with Barclays Capital Mediacom’s performance against the 2010 budget over the first 6 months of 2010 and Mediacom’s long-term and short-term business strategy. Barclays Capital and Mr. Commisso also discussed some of the risks that Mediacom faced in the current business environment, in particular with respect to increased programming costs, increased competition and subscriber losses, as well as some growth drivers and opportunities for Mediacom. In particular, Barclays Capital

questioned Mr. Commisso on the opportunities associated with Mediacom’s high speed data service, phone service and small business enterprise initiative.

 

On or about July 9, 2010, the special committee received a letter from Knickerbocker Advisors LLC, a stockholder of Mediacom, stating, among other things, that Knickerbocker Advisors believed Mr. Commisso’s proposed offer price of $6.00 per share undervalued Mediacom. Also, on or about July 9, 2010, the special committee and its financial advisors received a letter from Act II Capital, a stockholder of Mediacom, in which Act II, among other things, compared Mr. Commisso’s May 31, 2010 offer to comparable transactions and public valuations of Mediacom based on earnings, free cash flow and a discounted cash flow analysis. Based on these valuation metrics, Act II concluded that the $6.00 per share offer price was inadequate.

 

In the morning of July 14, 2010, Barclays Capital provided the June Forecast prepared by Mediacom’s management (excluding Mr. Commisso) to J.P. Morgan and BofA Merrill Lynch. Following receipt of the June Forecast, Mr. Commisso, J.P. Morgan, BofA Merrill Lynch and Baker Botts met telephonically with the financial and legal advisors to the special committee during which Mr. Commisso shared his views regarding the June Forecast. Mr. Commisso indicated to Barclays Capital that the June Forecast was generally consistent with the Wall Street analyst projections that he had instructed J.P. Morgan and BofA Merrill Lynch to use for the purpose of the June 24, 2010 discussion, and that the June Forecast seemed reasonable to him, although he believed the capital expenditure amounts understated the amounts that Mediacom would need to spend to remain competitive. Representatives of Barclays Capital and Mr. Commisso proceeded to discuss the risks and opportunities associated with Mediacom that should be considered when reviewing the June Forecast. Barclays Capital then gave an update on their review of Mediacom’s financial position and the special committee’s process to date.

 

On July 15, 2010, the special committee met with Barclays Capital and Simpson Thacher. At this meeting, representatives of Barclays Capital made a presentation to the special committee regarding their financial due diligence of Mediacom, their analysis of historical and projected financial and operating information and their views on valuation. The presentation included a discussion of the overall process, the various valuation methodologies used by Barclays Capital in its analysis and a discussion of the June Forecast. As a result of these discussions, the special committee formed the view, in consultation with its advisors, that the price of $6.00 per share significantly undervalued Mediacom. The special committee directed Barclays Capital to communicate its position to representatives of J.P. Morgan and BofA Merrill Lynch.

 

On July 16, 2010, representatives of Barclays Capital met telephonically with representatives of J.P. Morgan and BofA Merrill Lynch to report on the special committee’s initial informal reaction to Mr. Commisso’s proposal. During this meeting, Barclays Capital, on behalf of the special committee, indicated that (i) there existed a very significant gap between the special committee’s view of the value of Mediacom and the value implied by Mr. Commisso’s proposal of $6.00 per share, and that gap on a per share basis was “more than a few dollars” and (ii) under no circumstances would the special committee agree to a transaction unless the transaction was conditioned on the approval of a majority of the public stockholders of Mediacom, which we refer to as the “majority of the minority” condition. In addition, Barclays Capital stated that the special committee was focused on the fact that Mr. Commisso’s offer was conditioned on the use of Mediacom’s existing bank credit facilities. Barclays Capital also indicated that because of the significant difference in Mr. Commisso’s position and the position of the special committee, the special committee did not believe it was appropriate to engage in a dialogue around valuation.

 

Over the next few days, Mr. Commisso met with J.P. Morgan, BofA Merrill Lynch and Baker Botts to discuss the informal response from the special committee and Mr. Commisso’s reaction to such response. In addition, J.P. Morgan and BofA Merrill Lynch sought to clarify some of the statements made by Barclays Capital during the July 16 discussion. J.P. Morgan and BofA Merrill Lynch later advised Mr. Commisso that, based on their discussions with Barclays Capital, they believed that the special committee would approve a transaction at a price around $9.00 per share.

 

On July 19, 2010, at the request of Mr. Commisso, the special committee and its financial and legal advisors met at the offices of Simpson Thacher with Mr. Commisso, J.P. Morgan, BofA Merrill Lynch and Baker Botts to give them an opportunity to respond to the special committee’s initial reaction expressed by Barclays Capital on July 16. During the discussions, Mr. Commisso, J.P. Morgan and BofA Merrill Lynch questioned Barclays Capital

about their valuation methodologies in determining that the gap was as substantial as the special committee indicated. J.P. Morgan and BofA Merrill Lynch also noted the premium that Mr. Commisso’s offer represented to Mediacom’s historic trading prices and the firm value to EBITDA multiple implied by the offer price relative to such multiples for larger and better capitalized publicly-traded cable operators. In addition, Mr. Commisso, J.P. Morgan and BofA Merrill Lynch observed that a purchase price in the range that the special committee was suggesting would represent a significantly greater premium to Mediacom’s stock price prior to Mr. Commisso’s proposal than was paid in other going private transactions. Barclays Capital explained that premium analysis was just one metric that the special committee had used in reviewing Mr. Commisso’s proposal, and that they had considered other valuation metrics, including multiples of EBITDA and free cash flow and discounted cash flow analysis. Mr. Commisso and his legal advisors also responded to the special committee’s position with respect to the majority of the minority condition and addressed the use by Mr. Commisso of Mediacom’s bank credit facilities to finance the proposed transaction. After the special committee met separately with its financial and legal advisors, the special committee reiterated its requirement that any transaction be conditioned on the approval of a majority of Mediacom’s public stockholders. With respect to valuation, Barclays Capital indicated that, in their opinion, they had given Mr. Commisso, J.P. Morgan and BofA Merrill Lynch sufficient guidance on how they were valuing Mr. Commisso’s offer and Mediacom’s financial condition, but given the gap in value, the special committee did not think it was in the best interests of Mediacom’s stockholders to propose a counter offer or share Barclays Capital’s analysis with Mr. Commisso. Mr. Commisso noted that Barclays Capital had not provided Mr. Commisso or his advisors with a presentation detailing their valuation analysis. The special committee advised Mr. Commisso that he would need to increase his offer in order for discussions with the special committee to continue or for Barclays Capital to make such a presentation.

 

On July 22, 2010, representatives of J.P. Morgan and BofA Merrill Lynch contacted representatives of Barclays Capital to deliver a message on behalf of Mr. Commisso. Mr. Commisso understood the special committee’s position that it would not engage in negotiations with him unless he was willing to increase his offer; however, Mr. Commisso was frustrated that the special committee was not willing to illustrate for him how they determined that his offer of $6.00 per share was inadequate, how a price around $9.00 per share would be appropriate and what was the specific price increase that the special committee had in mind as being appropriate. J.P. Morgan and BofA Merrill Lynch advised Barclays Capital that Mr. Commisso was not prepared at that time to pay a price anywhere close to what the special committee was suggesting, and stressed that if the special committee’s expectation was that he would increase his offer to something approaching that level, he would prefer to shut down the process and focus his and Mediacom management’s attention entirely on running Mediacom’s business. During this conversation, Barclays Capital indicated that they understood Mr. Commisso’s position and would deliver that message to the special committee. They also stated that the special committee was scheduled to meet on July 23 to receive Barclays Capital’s analysis of Mr. Commisso’s $6.00 per share offer, and that, after such meeting, the special committee would likely formally reject Mr. Commisso’s offer and feel the need to make a public disclosure regarding such rejection.

 

In the morning of July 23, 2010, representatives of J.P. Morgan and BofA Merrill Lynch telephoned representatives of Barclays Capital and advised them that Mr. Commisso was prepared to increase his offer to $6.40 per share, subject to certain conditions, including that the special committee would engage in negotiations with him and that Barclays Capital would provide him with a written presentation illustrating its valuation assumptions and conclusions. J.P. Morgan and BofA Merrill Lynch stated that this was an informal offer to the special committee and that, at this time, Mr. Commisso did not intend to disclose this new price publicly and requested that the special committee keep it confidential. During the conversation, J.P. Morgan and BofA Merrill Lynch indicated that the increase represented a 7% increase from Mr. Commisso’s original offer of $6.00 per share and a 20% premium to Mediacom’s stock price prior to the date Mr. Commisso made his original offer.

 

In the afternoon of July 23, 2010, the special committee met telephonically with its financial and legal advisors. At this meeting, Barclays Capital communicated to the special committee Mr. Commisso’s proposal to revise his offer subject to the conditions described above. The special committee determined that Mr. Commisso’s possible increase in price to $6.40 per share was not meaningful given their view of the value of Mediacom, and not a productive step in negotiations and instructed Barclays Capital to communicate their position to J.P. Morgan and BofA Merrill Lynch.

After the meeting, representatives of Barclays Capital telephoned representatives of J.P. Morgan and BofA Merrill Lynch to advise them that the special committee was displeased with the $6.40 per share offer, which they did not view as a meaningful increase in price. The special committee requested that Mr. Commisso either make a meaningful increase in his offer price or publicly withdraw his proposal, or, failing that, the special committee would reject the $6.00 per share offer publicly. Barclays Capital reiterated to J.P. Morgan and BofA Merrill Lynch that the special committee viewed the appropriate price to be an amount significantly higher than $6.40 per share, and that Mr. Commisso would need to increase his price to a level that represented a material increase in the firm value of Mediacom before they would engage in any further price negotiation with Mr. Commisso.

 

On July 27, 2010, Mr. Commisso delivered the following letter to the special committee:

 

Special Committee of the Board of Directors

Mediacom Communications Corporation

100 Crystal Run Road

Middletown, NY 10941

 

Members of the Special Committee:

 

On May 31, 2010, I submitted a non-binding proposal to the Board of Directors of Mediacom to acquire all of the outstanding shares of common stock that I do not already own for $6.00 per share in cash. In my letter to the Board, I offered to negotiate a transaction with the Special Committee and its advisors as expeditiously as possible.

 

On June 24, 2010, I, together with my financial advisors (JPMorgan and Bank of America Merrill Lynch) and legal advisors (Baker Botts), met with the Special Committee and presented a number of valuation analyses that are customary for the cable industry and for comparable going-private transactions. The presentation was intended to help the Special Committee understand our view as to why the $6.00 per share offer represents compelling value to the Company’s public shareholders.

 

Subsequent to the June 24th meeting, the Special Committee, through its financial advisor (Barclays), has advised us that the Special Committee believes that a significant gap exists between my offer and a price at which the Special Committee believes a transaction can be completed. In addition, I was told that unless I bid against myself and increase my offer, the Special Committee would not be willing to engage in negotiations or explain to us why they view the $6.00 offer as inadequate.

 

In an effort to comply with the Special Committee’s instructions and move the process forward, on July 23, 2010, I instructed my advisors to inform Barclays that I was prepared to increase my offer if the Special Committee would agree to engage in negotiations with me and my advisors, or, at the very least, explain how the Special Committee was valuing the Company.

 

I believe the potential revised offer price communicated to the Special Committee:

 

1. Reflects premiums that are comparable to the final premiums paid by both Insight and Cox in their going-private transactions;

 

2. Implies a higher Firm Value/EBITDA multiple than the multiple at which Time Warner Cable and Comcast currently trade;

 

3. Is within the range of values implied by a discounted cash flow analysis based on the projections that the Special Committee provided to me and my advisors; and

 

4. Is within the range of equity research analyst price targets, both before and after my offer was announced in May.

 

I was disappointed to learn that the proposal we communicated to the Special Committee on July 23rd was met with yet another refusal by the Special Committee to make a counterproposal, or to even engage in a meaningful discussion on valuation. The Special Committee’s response is inconsistent with the process followed in other going-private transactions in the cable business (Insight, Cox and Cablevision) and, in my view, hinders the process of determining whether we can reach agreement on a transaction that is in the best

interests of the Company and its public shareholders. In each of these precedent transactions, the Special Committee, at the very least, explained to the Buyers why it viewed the offer as inadequate before the Buyers were forced to raise their price, despite initially having found a “substantial” value gap. I am at a loss as to why I have not been afforded the same opportunity.

 

The Special Committee’s refusal to negotiate or explain its valuation views has become an impediment to moving the process forward. I have already indicated willingness to increase my offer once. I am, however, unwilling to increase it further until the Special Committee and/or Barclays explains to us the Special Committee’s views on the valuation of the Company.

 

I look forward to receiving a response that will enable us to seek a transaction that is in the best interests of the Company’s public shareholders.

 

Sincerely,

 

 

On July 29, 2010, the special committee responded to Mr. Commisso’s letter with the following letter:

 

Mr. Rocco Commisso

Chairman and CEO

Mediacom Communications Corporation

100 Crystal Run Road

Middletown, New York 10941

 

Dear Rocco:

 

We are in receipt of your letter of July 27, 2010.

 

Our responsibility is to respond to the proposal which you made to the Board of Directors of Mediacom on May 31, 2010 “to acquire all of the outstanding shares of common stock that [you] do not already own for $6.00 per share in cash.” As we have communicated to you, including at a meeting which you and we attended on July 19, 2010, we have concluded that the proposal is totally inadequate, not in the best interests of Mediacom’s public shareholders, and that the Special Committee cannot recommend that the Board approve the transaction contemplated by your proposal. We added at the conclusion of that meeting that we would review any improved offer you chose to make.

 

While we do not have a duty to negotiate with you, to further explain our views, or to seek a transaction, contrary to your assertion, we believe that we and our advisors have been negotiating in good faith with you and your advisors. The third paragraph of your letter states that you had been advised that “a significant gap exists between [your] offer and a price at which the Special Committee believes a transaction can be completed”. In our negotiations, we have informed you that the “completion” of any transaction will need to be determined by the public shareholders and that a meaningful value gap exists between your offer and a proposal which the Special Committee can recommend.

 

Your potential revised offer communicated to us on July 23, 2010 was not constructive in convincing us that the value gap that currently exists can be closed. At this time, we do not believe that it would be productive to have a further discussion on valuation. We remain interested in receiving, and are committed to reviewing in good faith, any revised proposal which you are prepared to make. However, unless you are prepared to meaningfully close the value gap that exists prior to the end of the week, we believe that the market will need to be advised of this impasse.

 

Sincerely,

 

 

/s/ Tom Reifenheiser

 

/s/ Natale Ricciardi

On August 1, 2010, the special committee met telephonically with its legal and financial advisors to discuss the next steps following the delivery of the July 29 letter. As part of this discussion, the parties discussed the text of a press release that the special committee would request Mediacom to issue on its behalf, and the appropriate timing of such request. The press release stated that the special committee could not recommend Mr. Commisso’s May 31 offer to acquire all of the public shares of Mediacom.

 

In the morning of August 2, 2010, upon the instruction of the special committee, Barclays Capital delivered a draft of a press release to J.P. Morgan and BofA Merrill Lynch. Barclays Capital indicated that they expected the press release would be issued after the market closed on August 2. On the same morning, Mr. Commisso, J.P. Morgan, BofA Merrill Lynch and Baker Botts met telephonically to discuss the June Forecast and next steps.

 

In the afternoon of August 2, 2010, the legal and financial advisors to the special committee met telephonically with J.P. Morgan, BofA Merrill Lynch and Baker Botts, during which meeting J.P. Morgan, BofA Merrill Lynch and Baker Botts indicated that Mr. Commisso was surprised that the special committee did not consider his 7% increase on his $6.00 per share offer to be a meaningful increase, and that the special committee and its advisors were not willing to meet with him to further explain their views on value. On behalf of Mr. Commisso, J.P. Morgan, BofA Merrill Lynch and Baker Botts also advised that Mr. Commisso had agreed to the special committee’s demand that any transaction be conditioned on a majority of the minority approval, and indicated that he was prepared to raise his offer above $6.40 per share if the special committee would share with him the special committee’s views on valuation. Finally, J.P. Morgan, BofA Merrill Lynch and Baker Botts requested that the special committee reconsider issuing the press release.

 

In the afternoon of August 3, 2010, the special committee met telephonically with Barclays Capital and Simpson Thacher to discuss the message communicated to the special committee’s advisors the previous day.

 

In the morning of August 4, 2010, Barclays Capital and Simpson Thacher met telephonically with J.P. Morgan, BofA Merrill Lynch and Baker Botts. During this conversation, Barclays Capital reported that the special committee appreciated Mr. Commisso’s desire to get more clarity on valuation and, to that end, the special committee would support a meeting among the advisors during which Barclays Capital would review its valuation assumptions if Mr. Commisso would affirmatively commit that, after such meeting, he would revise his offer price to a level substantially above the current market price of $7.35 per share.

 

In the afternoon of August 4, 2010, the Mediacom board of directors held a regularly scheduled meeting to, among other things, review financial results for the second quarter of 2010. During the meeting, Mr. Commisso provided the directors with an update on the status of his discussions with the special committee. Mr. Commisso expressed to the members of the Board his disappointment with the process to date, and his frustration that the special committee and its financial advisors had not been willing to meet with him to share their valuation assumptions except under a precondition that Mr. Commisso was not prepared to accept. Specifically, Mr. Commisso felt it was unreasonable for him to have to commit to raising his offer price to a specified level before being given the opportunity to assess the validity of the valuation assumptions used by Barclays Capital.

 

On August 5, 2010, Barclays Capital sent a revised draft of the press release to J.P. Morgan and BofA Merrill Lynch. Later that day, J.P. Morgan, BofA Merrill Lynch and Baker Botts contacted the special committee’s financial and legal advisors to advise the special committee that Mr. Commisso would not agree to meet with the special committee or its advisors under the precondition the special committee proposed. In addition, J.P. Morgan, BofA Merrill Lynch and Baker Botts expressed Mr. Commisso’s frustration that the special committee was unwilling to negotiate with him in a manner consistent with other going private transactions, and that Mr. Commisso desired to bring the process to a conclusion. To that end, on behalf of Mr. Commisso, J.P. Morgan, BofA Merrill Lynch and Baker Botts conveyed to the special committee a “best and final” offer of $7.35 per share, which Mr. Commisso believed was a very attractive offer for Mediacom’s public stockholders, and requested that the special committee respond to this offer by 10:00 am on August 8, 2010.

 

On August 6, the special committee, Simpson Thacher and Barclays Capital met telephonically to discuss Mr. Commisso’s revised proposal. At this meeting, the parties also discussed the special committee’s reactions to Mediacom’s earnings release call that had been held earlier that day, as well as the current operating performance of Mediacom. In the course of reviewing Mr. Commisso’s revised proposal, Barclays Capital noted that, in its view, the

$7.35 per share price continued to undervalue Mediacom, was not close to the level communicated to J.P. Morgan and BofA Merrill Lynch in the discussions following the July 16 telephonic meeting, and that Barclays Capital would be unwilling to deliver a fairness opinion to the special committee at that price.

 

On August 7, 2010, the advisors to the special committee met telephonically with J.P. Morgan, BofA Merrill Lynch and Baker Botts to respond to Mr. Commisso’s “best and final” offer. Barclays Capital indicated that the special committee had discussed Mr. Commisso’s revised offer at length with its advisors and the special committee was rejecting the “best and final” offer, primarily on the advice of its advisors. Barclays Capital also stated that the special committee would be willing to consider any increased offer Mr. Commisso elected to make and that the special committee felt strongly that if requested by Mr. Commisso, Barclays Capital should meet with Mr. Commisso, J.P. Morgan and BofA Merrill Lynch to explain more specifically why the special committee determined the offer of $7.35 per share to be unacceptable. On August 9, 2010, Mr. Commisso, J.P. Morgan and BofA Merrill Lynch met telephonically during which meeting J.P. Morgan and BofA Merrill Lynch reviewed with Mr. Commisso several valuation methodologies and metrics.

 

From August 7, 2010 and over the course of the next several days, the legal and financial advisors to the special committee and J.P. Morgan, BofA Merrill Lynch and Baker Botts had several discussions regarding the range of prices at which, and the terms under which, an agreement could be reached between Mr. Commisso and the special committee. During these discussions, the advisors explored, among other things, the ranges at which Barclays Capital might be willing to deliver a fairness opinion and the alternatives, if any, in the event Barclays Capital was unwilling to deliver a fairness opinion at a price that the special committee was ultimately willing to recommend to Mediacom’s public stockholders.

 

On August 14, 2010, representatives of Simpson Thacher contacted representatives of Baker Botts and advised them that the special committee was only willing to recommend a transaction with a fairness opinion from Barclays Capital, and that Simpson Thacher believed that Barclays Capital was not prepared to deliver a fairness opinion at any price less than $9.00 per share at such time. Baker Botts indicated that Mr. Commisso would not agree to raise his offer to $9.00 per share, and the legal advisors discussed next steps, including the substance of, and the process for, a press release announcing the impasse.

 

On August 20, 2010, the financial and legal advisors to the special committee met with J.P. Morgan, BofA Merrill Lynch and Baker Botts at the offices of Barclays Capital. At the meeting, Barclays Capital discussed its views with respect to Mr. Commisso’s proposal and its perspective on Mediacom’s valuation.

 

Over the course of the next several days, J.P. Morgan and BofA Merrill Lynch reviewed for Mr. Commisso their recollection and understanding of the valuation analyses from the oral presentation they received from Barclays Capital on August 20 and, at the request of Mr. Commisso, compared Barclays Capital’s valuation metrics to the valuation metrics they had reviewed with Mr. Commisso on August 9, 2010.

 

On August 24, 2010, Mr. Commisso, J.P. Morgan, BofA Merrill Lynch and Baker Botts met with the special committee and its financial and legal advisors at the offices of Simpson Thacher. At this meeting, J.P. Morgan and BofA Merrill Lynch discussed the key differences between Barclays Capital’s valuation analysis (based on J.P. Morgan’s and BofA Merrill Lynch’s recollection and understanding from Barclays Capital’s oral presentation on August 20, 2010) and J.P. Morgan’s and BofA Merrill Lynch’s valuation analysis. In addition, during this meeting, Mr. Commisso discussed recent trends in the cable television industry, including the industry-wide loss of subscribers, the Federal Communications Commission’s review of broadband access and net neutrality rules and the increased programming costs (in particular with respect to retransmission consent fees) experienced by cable operators. Mr. Commisso also provided his view that Mediacom was unlikely to meet the projections included in the June Forecast based upon Mediacom’s actual results for the first half of 2010 and his forecast for the balance of the year. During these discussions, Barclays Capital made several points, including Barclays Capital’s view that significant growth opportunities existed for Mediacom’s high speed data and business enterprise services; and that for the comparable companies analysis employed by Barclays Capital, they also considered systems with similar demographics to Mediacom’s cable systems. The financial advisors and Mr. Commisso also discussed Mediacom’s capital structure, the appropriate weighted average cost of capital, Mediacom’s long term growth prospects and the appropriate perpetuity growth rates to use in performing a discounted cash flow analysis for Mediacom.

After the meeting with the advisors, the special committee met privately with Mr. Commisso. During this meeting the parties discussed their views on valuation, process and the prospects for reaching an agreement on price.

 

Between August 24 and August 27, 2010, representatives of Barclays Capital had several telephone conversations with members of Mediacom’s management team (excluding Mr. Commisso) to discuss the issues relating to Mediacom’s business, operations and financial performance that were raised by Mr. Commisso during the August 24 meeting.

 

In the morning of August 27, 2010, Mr. Commisso sent a letter to the special committee in which he highlighted certain points that he felt may not have been incorporated into Barclays Capital’s valuation analyses or reflected in management’s projections, including the significant impact on Mediacom’s financial performance of future retransmission consent costs; the recent grants by the U.S. government of approximately $2 billion of broadband stimulus funds to potential broadband competitors in the states in which Mediacom operates; the regulatory uncertainties regarding the Federal Communications Commission’s “net neutrality” principles; the recent negative trends in the Pay-TV marketplace; and the recent trading activity of Mediacom’s largest investors, many of whom sold shares of Mediacom Class A common stock during the quarter ended June 30, 2010 when the volume weighted average stock price was well below the $7.35 per share price Mr. Commisso was offering.

 

In the afternoon of August 27, 2010, Mr. Ricciardi contacted Mr. Commisso to report that Barclays Capital had reviewed its valuation analysis in light of the information given to the special committee at the August 24 meeting and included in Mr. Commisso’s August 27 letter, and that based on the information available to it at that time, the special committee believed that Barclays Capital remained unwilling to deliver a fairness opinion at a price less than $9.00 per share at such time.

 

On August 31, 2010, Mr. Commisso withdrew his offer to acquire all the shares of Mediacom common stock that he did not own. In his press release, Mr. Commisso expressed his disappointment with what he viewed to be a highly unusual process and his frustration that the special committee’s rejection of his offer deprived Mediacom’s public shareholders of the opportunity to decide for themselves whether or not to accept an attractive price for their shares.

 

On September 1, 2010, the special committee sent a letter to Mediacom’s board of directors commenting on Mr. Commisso’s press release. In that letter the special committee shared with the Mediacom board in detail the process by which the special committee reviewed and evaluated Mr. Commisso’s proposal, and expressed disagreement with Mr. Commisso’s statement in his August 31st press release that the process followed by the special committee was “unusual.”

 

On September 2, 2010, a special meeting of Mediacom’s board of directors was held to discuss the events leading up to Mr. Commisso’s withdrawal of his offer. The board also discussed the financial position and prospects of Mediacom. As a result of these discussions, all of the directors agreed that an open dialogue among the parties’ financial advisors was desirable, and Mr. Commisso and Messrs. Reifenheiser and Ricciardi agreed to cause Barclays Capital, J.P. Morgan and BofA Merrill Lynch to have an in-person meeting to discuss their differing valuation assumptions. That meeting was scheduled for September 7, 2010. The following day, representatives of Barclays Capital and management of Mediacom (excluding Mr. Commisso) discussed whether the issues highlighted in Mr. Commisso’s August 27, 2010 letter and the trends in Mediacom’s operating performance in the second quarter of 2010 and for the current portion of the third quarter of 2010 would materially change the June Forecast. Following these discussions, management of Mediacom (excluding Mr. Commisso) adjusted the June Forecast and delivered revised financial projections to Barclays Capital on September 4, 2010.

 

On September 7, 2010, Mr. Commisso, J.P. Morgan, BofA Merrill Lynch, the special committee and Barclays Capital met at the offices of Simpson Thacher to discuss the valuation metrics and assumptions used by Barclays, on the one hand, and J.P. Morgan and BofA Merrill Lynch, on the other hand, to value Mediacom. Mark E. Stephan, the Chief Financial Officer and a director of Mediacom, attended the meeting for the purpose of answering any questions concerning Mediacom’s financial results or performance and Scott W. Seaton and Robert L. Winikoff, two independent directors of Mediacom, also attended the meeting. The parties also discussed whether the incorporation of the revised financial projections would materially change any of the valuation conclusions reached

by the financial advisors. At the end of the meeting, Barclays Capital, J.P. Morgan and BofA Merrill Lynch agreed to continue to review the revised financial projections and make any changes to their valuation assumptions they deemed necessary.

 

Over the course of the next ten days, Barclays Capital conducted an updated due diligence review of Mediacom’s financial results and discussed the revised financial projections with Mediacom’s management team (excluding Mr. Commisso). Barclays Capital was provided additional information relating to Mediacom’s financial performance, including its projected capital expenditures over the next five years.

 

On September 20, 2010, management of Mediacom delivered to Mr. Commisso the revised financial projections and Mr. Commisso delivered the revised financial projections to J.P. Morgan and BofA Merrill Lynch.

 

Also on September 20, 2010, the special committee met telephonically with Barclays Capital and Simpson Thacher to discuss Barclays Capital’s review of the revised financial projections. As part of this presentation, Barclays Capital walked the special committee through the revised financial projections as well as other changes from the June Forecast, and the circumstances under which they would be prepared to deliver a fairness opinion. We refer to the revised financial projections prepared by Mediacom’s management (excluding Mr. Commisso), as modified based on discussions between Barclays Capital and management of Mediacom (excluding Mr. Commisso) and as delivered to the special committee in September 2010, as the “September Forecast.” See “— Projected Financial Information — Updated Financial Projections — September Forecast.”

 

On September 21, 2010, Mr. Ricciardi contacted Mr. Commisso to report that the special committee and Barclays Capital had completed their review of Mediacom, including a review of the September Forecast. Based on that information, Mr. Ricciardi advised Mr. Commisso that the special committee believed it could recommend a transaction at a price of $8.75 per share. On the same day, Mr. Commisso, J.P. Morgan, BofA Merrill Lynch and Baker Botts met telephonically to discuss the September Forecast.

 

On September 22, 2010, Mr. Commisso telephoned Mr. Ricciardi and explained his view that, in connection with the proposed transaction, Mediacom would incur more than $30 million of costs associated with the satisfaction of outstanding stock options and restricted stock units held by Mediacom employees (other than Mr. Commisso). Mr. Commisso expressed his belief that a portion of that cost should be borne by Mediacom’s public stockholders and reflected in a decrease in the share price sought by the special committee. Based partly on the foregoing, Mr. Commisso asked Mr. Ricciardi if the special committee would agree to an offer price of $8.05 per share.

 

On September 24, 2010, Mr. Ricciardi telephoned Mr. Commisso and advised him that the special committee and Barclays Capital had taken into account the treatment of all outstanding stock options and restricted stock units in its valuation analysis, and reiterated that the special committee would not recommend a transaction at any price below $8.75 per share. Subsequent to his conversation with Mr. Ricciardi, Mr. Commisso directed representatives of Baker Botts to explore with representatives of Simpson Thacher the terms and conditions of a merger agreement that the special committee could recommend in the event that Mr. Commisso and the special committee were able to reach an agreement on price.

 

Further to these instructions from Mr. Commisso, on September 28, 2010, representatives of Baker Botts contacted representatives of Simpson Thacher to discuss generally the terms of a merger agreement assuming that Mr. Commisso and the special committee were to agree on price. Subsequent to this conversation, on October 6, 2010, Baker Botts delivered to Simpson Thacher an initial draft of the merger agreement.

 

On October 13, 2010, Simpson Thacher distributed to Baker Botts a revised version of the merger agreement, which, among other things:

 

 

 

On October 14, 2010, Simpson Thacher distributed to Baker Botts an initial draft of a voting agreement between Mr. Commisso, Merger Sub and Mediacom, and representatives of Baker Botts and Simpson Thacher discussed the outstanding issues on the merger agreement. In particular, the legal advisors negotiated the terms of the no solicitation provision, including the force the vote provision, the expense reimbursement and liability cap provisions, and the scope of the Mediacom board of directors’ fiduciary out.

 

During the course of the negotiations with respect to the merger agreement and the voting agreement, Barclays Capital and Simpson Thacher held discussions with the special committee regarding negotiations of such agreements and the terms and provisions thereof, in which the special committee provided its views on such terms and provisions.

 

In the morning of October 15, 2010, representatives of Baker Botts reported to Mr. Commisso and representatives of J.P. Morgan and BofA Merrill Lynch on the status of the negotiations with respect to the merger agreement. Later in the day on October 15, 2010, Baker Botts distributed a revised draft of the merger agreement to Simpson Thacher.

 

On October 18, 2010, Baker Botts distributed to Simpson Thacher comments on the voting agreement.

 

From October 20 through October 29, 2010, the legal advisors for Mr. Commisso and for the special committee engaged in extensive negotiations regarding the merger agreement and voting agreement and exchanged drafts of each document. The discussions regarding the merger agreement were focused on the no solicitation provision and the scope of the fiduciary out provisions; the expense reimbursement provision; and the extent of Mr. Commisso’s liability under the agreement if the transaction was not completed. Simpson Thacher also obtained in the merger agreement certain assurances from Mr. Commisso regarding any material negotiations Mr. Commisso may have had with respect to Mediacom as well as covenants from Mr. Commisso regarding Mediacom’s credit facilities. During these discussions, Mr. Commisso agreed to give Mediacom’s board of directors greater flexibility to change its recommendation in the event of a superior proposal or intervening event, but insisted on a force the vote provision. In addition, the special committee agreed that Mediacom would reimburse Mr. Commisso for his transaction expenses up to $2.5 million if the transaction was not completed other than by reason of Mr. Commisso’s material breach of the merger agreement.

 

On October 29, 2010, Simpson Thacher reported to Baker Botts that the special committee would be willing to consider a cap of $20 million on Mr. Commisso’s potential liability under the merger agreement. In addition, Simpson Thacher stated that the special committee did not think it would be productive to have any further discussions with Mr. Commisso regarding price as the special committee would not recommend any offer below the $8.75 per share price that the special committee had previously communicated to Mr. Commisso.

 

Over the next several days, Mr. Commisso, together with his legal advisors, reviewed the status of the negotiations regarding the outstanding issues in the merger agreement, including the price Mr. Commisso was willing to pay.

 

On November 3, 2010, Mr. Commisso telephoned Messrs. Ricciardi and Reifenheiser to discuss the outstanding issues in the merger agreement. Mr. Commisso reiterated his belief that the treatment of the outstanding employee stock options and restricted stock units as contemplated by the merger agreement justified a reduction to the $8.75 per share price the special committee was seeking. Mr. Commisso and Mr. Reifenheiser continued these discussions telephonically in the morning of November 4, 2010.

Later in the afternoon on November 4, 2010, Mediacom’s board of directors held a regularly scheduled meeting to, among other things, review Mediacom’s financial results for the third quarter of 2010. During the meeting, Mr. Commisso gave the directors an update on the status of discussions with the special committee.

 

Following Mediacom’s board of directors meeting and continuing for the next several days, Mr. Commisso conferred with J.P. Morgan, BofA Merrill Lynch and Baker Botts regarding the outstanding terms of the merger agreement, including the price.

 

On November 9, 2010, representatives of Simpson Thacher advised representatives of Baker Botts on behalf of the special committee that if Mr. Commisso did not increase his offer to at least $8.75 per share and finalize the terms of the merger agreement by the end of the week, Messrs. Ricciardi and Reifenheiser would formally request that the Mediacom board disband the special committee or resign from the special committee.

 

From November 10 until November 12, 2010, the legal advisors to the special committee continued to negotiate the final terms of the merger agreement with Mr. Commisso’s legal advisors. In particular, the special committee and Mr. Commisso agreed to a $10 million liability cap for Mr. Commisso in the event that the merger was not completed as a result of a willful and material breach of the agreement by Mr. Commisso. On the evening of November 10, 2010, J.P. Morgan and BofA Merrill Lynch telephoned Mr. Stephan to confirm that no changes had been made to the September Forecast as a result of Mediacom’s actual performance during the third quarter of fiscal year 2010, which Mr. Stephan confirmed. In addition, on November 10, 2010, Barclays Capital telephoned Mr. Stephan to confirm that no changes had been made, or would be required to be made, to the September Forecast as a result of Mediacom’s actual performance during the third quarter of fiscal year 2010 or from the end of such quarter to the then-current date.

 

In the morning of November 12, 2010, J.P. Morgan and BofA Merrill Lynch made a presentation to Mr. Commisso regarding the financial aspects of the proposed merger. For more information regarding this presentation, see “— Financial Analyses of J.P. Morgan and BofA Merrill Lynch.” Later in the day on November 12, representatives of Baker Botts, on behalf of Mr. Commisso, advised Simpson Thacher of Mr. Commisso’s offer to purchase all of the shares of Mediacom common stock that he did not own for $8.75 per share in cash, upon the terms and subject to the conditions set forth in the most recent draft of the merger agreement that had been negotiated with the special committee.

 

The special committee then met with its advisors and considered the position of Mr. Commisso. They discussed the terms of the deal, the risks and consequences of not accepting the proposal and the benefits of affording Mediacom’s unaffiliated stockholders the opportunity and ability to review, evaluate and consider the transaction on their own, based on the majority of the minority condition. Barclays Capital indicated that they were prepared to render a fairness opinion with respect to the fairness, from a financial point of view, of the consideration to be offered to the stockholders of Mediacom (other than Mr. Commisso and his affiliates). The special committee then resolved that the proposal of $8.75 per share, the merger agreement, the voting agreement and the transactions contemplated thereby were fair to, and in the best interests of, the unaffiliated stockholders of Mediacom. The special committee approved, and recommended approval by the board of directors of the proposal, the merger agreement, the voting agreement and the transactions contemplated thereby.

 

Following the special committee meeting, the board of directors held a meeting to consider the proposal of Mr. Commisso and the recommendation of the special committee. The special committee reported to the board of directors on the special committee’s deliberations, and determination and recommendation, and Barclays Capital gave a presentation to the board regarding its financial review of Mediacom and Mr. Commisso’s offer, which indicated that Barclays Capital was prepared to render a fairness opinion with respect to the fairness, from a financial point of view, of the consideration to be received by the public stockholders of Mediacom pursuant to the merger agreement. See “— Opinion of Financial Advisor to the Special Committee” beginning on page 18. During its presentation the directors were given the opportunity to ask questions of Barclays Capital and there was a discussion about their analysis and conclusions. After further discussions, at the request of the special committee, the financial advisors issued an oral opinion, confirmed in writing later that day, that as of November 12, 2010, and based upon and subject to the assumptions stated in its opinion, the $8.75 per share to be received by the public stockholders of Mediacom, pursuant to the merger agreement, was fair from a financial point of view to such holders. Mediacom’s legal advisors then reviewed the terms of the proposed agreements and reviewed for the board

their fiduciary duties with respect to the transaction. The board of directors then deliberated, without Mr. Commisso present, on the merger agreement, the voting agreement and the transactions contemplated thereby. After the deliberations were completed, in separate votes, (i) the special committee unanimously approved the merger agreement, the voting agreement and the transactions contemplated thereby, (ii) the independent directors of Mediacom’s board of directors, including the members of the special committee, unanimously approved the merger agreement, the voting agreement and the transactions contemplated thereby, and (iii) the full board of directors unanimously approved the merger agreement, the voting agreement and the transactions contemplated thereby.

 

Following the execution of the merger agreement and voting agreement on the evening of November 12, 2010, Mediacom issued a press release on the morning of November 15, 2010 announcing the execution of the merger agreement.

 

The Special Committee

 

The special committee, by unanimous vote at a meeting held on November 12, 2010 and after a presentation by its financial advisor, determined that the merger, the merger agreement and the transactions contemplated thereby are fair to and in the best interests of the unaffiliated holders of Mediacom’s Class A common stock. The special committee approved the merger and the merger agreement and recommended that Mediacom’s stockholders vote to adopt the merger agreement. The special committee also recommended that Mediacom’s board of directors approve the proposed transaction, including the merger, the merger agreement and the other transactions contemplated thereby, and recommend to Mediacom’s stockholders that they vote to adopt the merger agreement.

 

In the course of reaching the determinations and making the recommendations described above, the special committee considered a number of factors. The material factors are summarized below.

 

The special committee viewed the following factors as being generally positive or favorable in coming to its determinations and recommendations:

 

 

 

 

In the course of reaching the determinations and making the recommendations described above, the special committee considered the following factors to be generally negative or unfavorable in making its determinations and recommendations:

 

 

 

In the course of reaching the determinations and decisions, and making the recommendations, described above, the special committee considered the following factors relating to the procedural safeguards that the special committee believes were present to ensure the fairness of the merger and to permit the special committee to represent the interests of our unaffiliated stockholders, each of which the special committee believes supports its decision and provides assurance of the fairness of the merger to Mediacom and its unaffiliated stockholders:

 

 

The foregoing discussion of the information and factors considered by the special committee addresses the material factors considered by the special committee in its consideration of the merger agreement. In view of the variety of factors considered in connection with its evaluation of the merger agreement and the merger, the special committee did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. In addition, individual special committee members may have given different weights to factors. The special committee approved the merger agreement and the merger and recommended adoption of the merger agreement based upon the totality of the information presented to and considered by it. The special committee conducted extensive discussions of, among other things, the factors described above, including asking questions of our management and the special committee’s financial and legal advisors, and unanimously determined that the merger is both procedurally and substantively fair to and in the best interests of our unaffiliated stockholders, and to recommend to the board of directors that it approve the merger agreement and the merger.

 

The special committee did not consider liquidation value in determining the fairness of the merger to Mediacom’s unaffiliated stockholders because of its belief, after consultation with its financial advisors, that liquidation value does not present a meaningful valuation for Mediacom and its business.

 

The special committee also did not consider net book value in determining the fairness of the merger to Mediacom’s unaffiliated stockholders because of its belief, after consultation with its financial advisors, that net book value does not present a meaningful valuation metric for Mediacom and its business.

The Board of Directors

 

Mediacom’s board of directors created the special committee to evaluate and negotiate Mr. Commisso’s proposal for a going private transaction on behalf of Mediacom’s unaffiliated stockholders. The special committee is comprised of two members of Mediacom’s board of directors who are independent under the rules of The NASDAQ Stock Market and who have no relationship with Mr. Commisso or any of his affiliates that Mediacom’s board of directors viewed as undermining the independence of the special committee. On November 12, 2010, Mediacom’s board of directors met to consider the report and recommendation of the special committee. On the basis of the special committee’s recommendation and the factors considered by the special committee as described above, Mediacom’s board of directors (1) determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger, are advisable and fair to, and in the best interests of, the unaffiliated stockholders of Mediacom, (2) approved the voting agreement and (3) recommended that Mediacom’s stockholders vote to adopt the merger agreement.

 

In determining that the merger agreement is advisable and fair to, and in the best interests of, the unaffiliated stockholders of Mediacom and approving the merger agreement and the transactions contemplated thereby, including the merger, and recommending that Mediacom’s stockholders vote for the adoption of the merger agreement, the board of directors considered a number of factors, including the following material factors:

 

1. The determination and recommendation of the special committee; and

 

2. The factors considered by the special committee, described above as factors that the special committee viewed as being generally positive or favorable, which the board of directors adopted in determining that the merger agreement is advisable, fair to, and in the best interests of, the unaffiliated stockholders of Mediacom.

 

The foregoing discussion of the information and factors considered by Mediacom’s board of directors is not intended to be exhaustive, but includes the material factors considered by the board of directors. In view of the variety of factors considered in connection with its evaluation of the merger, Mediacom’s board of directors did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. In addition, individual directors may have given different weights to different factors. These factors generally figured positively or favorably.

 

Despite the fact that Mediacom’s board of directors did not retain an unaffiliated representative to act solely on behalf of Mediacom’s unaffiliated stockholders for the purposes of negotiating the terms of the merger agreement, the board of directors believes that the merger is procedurally fair because (1) of the independence, absence of conflicts of interest and role and actions of the special committee (permitting them to represent effectively the interests of Mediacom’s unaffiliated stockholders), (2) of the approval of the merger agreement by a majority of the directors who are not employees of Mediacom and (3) the terms of the merger agreement require the approval by the holders of a majority of the outstanding shares of Mediacom Class A common stock, exclusive of shares of Mediacom Class A common stock held by Merger Sub, Mr. Commisso, any of their respective affiliates, any immediate family member of Mr. Commisso or any of the executive officers or directors of Mediacom and its subsidiaries. The board of directors believes that each of these procedural safeguards supports its decision and provides assurance of the fairness of the merger to Mediacom’s unaffiliated stockholders.

 

The special committee engaged Barclays Capital on June 16, 2010 to act as its financial advisor with respect to the proposal received from Mr. Commisso. On November 12, 2010, Barclays Capital rendered its oral opinion (which was subsequently confirmed in writing) to the special committee that, as of such date and based upon and subject to the qualifications, limitations and assumptions stated in its opinion, the consideration to be received by the stockholders of Mediacom (other than Mr. Commisso and his affiliates) is fair, from a financial point of view, to such stockholders.

 

The full text of Barclays Capital’s written opinion, dated as of November 12, 2010, is attached as Annex B to this Proxy Statement. Barclays Capital’s written opinion sets forth, among other things, the assumptions made, procedures followed, factors considered and limitations upon the review undertaken by Barclays Capital in rendering its opinion. You are encouraged to read the opinion carefully in its entirety. The

following is a summary of Barclays Capital’s opinion and the methodology that Barclays Capital used to render its opinion. This summary is qualified in its entirety by reference to the full text of the opinion.

 

Barclays Capital’s opinion, the issuance of which was approved by Barclays Capital’s Fairness Opinion Committee, is addressed to the special committee, addresses only the fairness, from a financial point of view, of the consideration to be offered to the stockholders of Mediacom (other than Mr. Commisso and his affiliates) and does not constitute a recommendation to any stockholder of Mediacom as to how such stockholder should vote with respect to the proposed transaction or any other matter. The terms of the proposed transaction were determined through active and lengthy negotiations between Mr. Commisso and the special committee and were unanimously approved by the special committee and Mediacom’s board of directors. Barclays Capital did not recommend any specific form of consideration to the special committee or that any specific form of consideration constituted the only appropriate consideration for the proposed transaction. Barclays Capital was not requested to address, and its opinion does not in any manner address, the special committee’s, the Mediacom board of directors’ or the management of Mediacom’s underlying business decision to proceed with or effect the proposed transaction. In addition, Barclays Capital expressed no opinion on, and its opinion does not in any manner address, the fairness of the amount or the nature of any compensation to any officers, directors or employees of any parties to the proposed transaction, or any class of such persons, relative to the consideration to be offered to the stockholders of Mediacom in the proposed transaction. No limitations were imposed by Mediacom’s special committee, its board of directors or the management of Mediacom upon Barclays Capital with respect to the investigations made or procedures followed by it in rendering its opinion.

 

In arriving at its opinion, Barclays Capital, among other things:

 

 

In arriving at its opinion, Barclays Capital assumed and relied upon the accuracy and completeness of the financial and other information used by Barclays Capital without any independent verification of such information. Barclays Capital also relied upon the assurances of management of Mediacom that they were not aware of any facts or circumstances that would make such information inaccurate or misleading. With respect to the Company Projections, upon advice of Mediacom, Barclays Capital assumed that such projections were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of Mediacom as to Mediacom’s future financial performance. In arriving at its opinion, Barclays Capital assumed no responsibility for and expressed no view as to any such projections or the assumptions on which they were based. In arriving at its

opinion, Barclays Capital did not conduct a physical inspection of the properties and facilities of Mediacom and did not make or obtain any evaluations or appraisals of the assets or liabilities of Mediacom. In addition, Barclays Capital was not authorized by the special committee to solicit, and did not solicit, any indications of interest from any third party with respect to the purchase of all or a part of Mediacom’s business. Barclays Capital’s opinion was necessarily based upon market, economic and other conditions as they existed on, and could be evaluated as of November 12, 2010. Barclays Capital assumed no responsibility for updating or revising its opinion based on events or circumstances that may have occurred after November 12, 2010.

 

In connection with rendering its opinion, Barclays Capital performed certain financial, comparative and other analyses as summarized below. In arriving at its opinion, Barclays Capital did not ascribe a specific range of values to the shares of Mediacom common stock but rather made its determination as to fairness, from a financial point of view, to Mediacom’s stockholders (other than Mr. Commisso and his affiliates) of the consideration to be offered to such stockholders in the proposed transaction on the basis of various financial and comparative analyses. The preparation of a fairness opinion is a complex process and involves various determinations as to the most appropriate and relevant methods of financial and comparative analyses and the application of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to summary description.

 

In arriving at its opinion, Barclays Capital did not attribute any particular weight to any single analysis or factor considered by it but rather made qualitative judgments as to the significance and relevance of each analysis and factor relative to all other analyses and factors performed and considered by it and in the context of the circumstances of the particular transaction. Accordingly, Barclays Capital believes that its analyses must be considered as a whole, as considering any portion of such analyses and factors, without considering all analyses and factors as a whole, could create a misleading or incomplete view of the process underlying its opinion.

 

The following is a summary of the material financial analyses used by Barclays Capital in preparing its opinion to Mediacom’s special committee. In performing its analyses, Barclays Capital made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of Mediacom or any other parties to the proposed transaction. None of Mediacom, Merger Sub, Barclays Capital or any other person assumes responsibility if future results are materially different from those discussed. Any estimates contained in these analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth below. In addition, analyses relating to the value of the businesses do not purport to be appraisals or reflect the prices at which the businesses may actually be sold. Each of the analyses relating to the value of the business was performed initially using the June Forecast, which was delivered to the special committee on June 29, 2010. Following the delivery, in September 2010, to the special committee of the September Forecast, each of the analyses was performed using the September Forecast. In arriving at its opinion, Barclays Capital considered the results of the analyses under the September Forecast and under the June Forecast.

 

Historical Share Price Analysis

 

To illustrate the trend in the historical trading prices of Mediacom common stock, Barclays Capital considered historical data with regard to the trading prices of Mediacom common stock for the period from September 30, 2008 to November 10, 2010.

 

Barclays Capital noted that during the period from September 30, 2008 to November 10, 2010, the closing price of Mediacom common stock ranged from $2.00 to $7.39.

 

Selected Comparable Company Analysis

 

In order to assess how the public market values shares of similar publicly traded companies, Barclays Capital reviewed and compared specific financial and operating data relating to Mediacom from the Company Projections with selected companies that Barclays Capital, based on its experience in the cable industry, deemed comparable to Mediacom. The selected comparable companies were:

 

Cablevision Systems Corporation

 

Charter Communications, Inc.

Comcast Corporation

 

Time Warner Cable Inc.

 

Barclays Capital calculated and compared various financial multiples and ratios of Mediacom and the selected comparable companies. As part of its selected comparable company analysis, Barclays Capital calculated and analyzed each company’s ratio of its enterprise value to certain historical financial criteria including (i) earnings before interest, taxes, depreciation and amortization, or EBITDA, (ii) number of video subscribers, and (iii) levered free cash flow, or LFCF. The enterprise value of each company was obtained by adding its short and long-term debt to the sum of the market value of its common equity, the value of any preferred stock (at liquidation value) and the book value of any minority interest, and subtracting its cash and cash equivalents and the present value of the net operating loss carryforwards, if any. All of these calculations were performed on November 10, 2010 and based on publicly available financial data (other than the Mediacom share count and the net operating loss balance which were provided by Mediacom management) and closing prices as of such date, the second to last trading date prior to the delivery of Barclays Capital’s opinion.

 

Barclays Capital selected the comparable companies listed above because their businesses are reasonably similar to that of Mediacom. However, because of the inherent differences between the business, operations and prospects of Mediacom and those of the selected comparable companies, Barclays Capital believed that it was inappropriate to, and therefore did not, rely solely on the quantitative results of the selected comparable company analysis. Accordingly, Barclays Capital also made qualitative judgments concerning differences between the business, financial and operating characteristics and prospects of Mediacom and the selected comparable companies that could affect the public trading values of each in order to provide a context in which to consider the results of the quantitative analysis. These qualitative judgments related primarily to their capital structures and the differing sizes, growth prospects, profitability levels and degree of operational risk between Mediacom and the companies included in the selected company analysis.

 

Based upon the judgments discussed above, Barclays Capital assumed the following in its analysis of the Company Projections: (i) a range of 5.5x to 6.5x multiples of fiscal year 2011 EBITDA for Mediacom; (ii) Mediacom has 1.2 million video subscribers as of the end of third quarter period of 2010; (iii) a range of plus and minus 5% from the median enterprise value per subscriber calculated for the selected comparable companies; (iv) a projected fiscal year 2011 LFCF multiple range of 7.8x to 9.5x; and (v) a range of plus and minus 10% from the median ratio of enterprise value to projected fiscal year 2011 LFCF calculated for the selected comparable companies. Barclays Capital applied such assumptions to the Company Projections under the September Forecast and June Forecast, as applicable, to calculate a range of implied prices per share of Mediacom.

 

EBITDA

 

Barclays Capital noted that on the basis of the selected comparable company analysis, as applied to determine the ratio of Mediacom’s November 10, 2010 enterprise value to its projected fiscal year 2011 EBITDA, the ranges of implied values per share calculated using each of the September Forecast and the June Forecast were $1.32 to $8.88 and $2.41 to $10.06, respectively, and the transaction consideration of $8.75 per share was within each such range.

 

Subscribers

 

Barclays Capital noted that on the basis of the selected comparable company analysis, as applied to determine the ratio of Mediacom’s November 10, 2010 enterprise value to its estimated number of subscribers as of the end of third quarter period of 2010, the ranges of implied values per share calculated using each of the September Forecast and the June Forecast were $10.46 to $15.55 and $10.59 to $15.71, respectively, and the transaction consideration of $8.75 per share was below each such range.

 

LFCF

 

Barclays Capital noted that on the basis of the selected comparable company analysis, as applied to determine the ratio of Mediacom’s November 10, 2010 enterprise value to its projected fiscal year 2011 LFCF, (a) the range of implied values per share calculated using the September Forecast was $7.20 to $9.51, and the transaction

consideration of $8.75 per share was within such range, and (b) the range of implied values per share calculated using the June Forecast was $9.51 to $12.33, and the transaction consideration of $8.75 per share was below such range.

 

Discounted Cash Flow Analysis — EBITDA Exit Multiple

 

In order to estimate the present value of Mediacom common stock, Barclays Capital performed a discounted cash flow analysis of Mediacom relying on a range of terminal value multiples. A discounted cash flow analysis is a traditional valuation methodology used to derive a valuation of an asset by calculating the “present value” of estimated future cash flows of the asset. “Present value” refers to the current value of future cash flows or amounts and is obtained by discounting those future cash flows or amounts by a discount rate that takes into account macroeconomic assumptions and estimates of risk, the opportunity cost of capital, expected returns and other appropriate factors.

 

To calculate the estimated enterprise value of Mediacom using the discounted cash flow method, Barclays Capital added (i) Mediacom’s projected after-tax unlevered free cash flows for the fiscal fourth quarter of 2010 and fiscal years 2011 through 2015 based on the Company’s Projections under the September Forecast and the June Forecast, as applicable, and (ii) the “terminal value” of Mediacom as of December 31, 2015, and discounted such amount to its present value using a range of selected discount rates. The after-tax unlevered free cash flows were calculated by taking the tax-affected earnings before interest, tax expense and amortization (excluding amortization of purchased intangibles) and subtracting capital expenditures and adjusting for changes in working capital. The residual value of Mediacom at the end of the forecast period, or “terminal value,” was estimated by selecting a range of terminal value multiples based on selected comparable company analysis for the end of third quarter period of 2010 of 5.5x to 6.5x, which was derived by analyzing the results from the selected comparable company analysis, and applying such range to the Company Projections in the September Forecast or the June Forecast, as applicable. The range of after-tax discount rates of 7.5% to 8.5% was selected based on an analysis of the weighted average cost of capital of Mediacom. Barclays Capital then calculated a range of implied prices per share of Mediacom by subtracting estimated net debt as of the end of third quarter of 2010 in the amount of $3,248 million from the estimated enterprise value using the discounted cash flow method and dividing the result by the fully diluted number of shares of Mediacom common stock.

 

Based upon the assumptions described above, Barclays Capital applied the 5.5x to 6.5x terminal EBITDA range and the 7.5% to 8.5% range of after-tax discount rates to the Company Projections to calculate a range of implied prices per share of Mediacom. Barclays Capital noted that on the basis of the discounted cash flow analysis, the ranges of implied values per share calculated using each of the September Forecast and the June Forecast were $2.56 to $10.05 and $4.59 to $12.21, respectively, and the transaction consideration of $8.75 per share was within each such range.

 

Discounted Cash Flow Analysis — Nominal Perpetuity Growth Rate

 

In order to estimate the present value of Mediacom common stock, Barclays Capital also performed a discounted cash flow analysis of Mediacom relying on a range of nominal perpetuity growth rates.

 

To calculate the estimated enterprise value of Mediacom using the discounted cash flow method, Barclays Capital added (i) Mediacom’s projected after-tax unlevered free cash flows for the fiscal fourth quarter of 2010 and fiscal years 2011 through 2015 based on the Company’s Projections under the September Forecast and the June Forecast, as applicable, and (ii) the “terminal value” of Mediacom as of December 31, 2015, and discounted such amount to its present value using a range of selected discount rates. The after-tax unlevered free cash flows were calculated by taking the tax-affected earnings before interest, tax expense and amortization (excluding amortization of purchased intangibles) and subtracting capital expenditures and adjusting for changes in working capital. The residual value of Mediacom at the end of the forecast period, or “terminal value,” was estimated by selecting a range of nominal perpetuity growth rates of 2.0% to 3.0%. The range of after-tax discount rates of 7.5% to 8.5% was selected based on an analysis of the weighted average cost of capital of Mediacom. Barclays Capital then calculated a range of implied prices per share of Mediacom by subtracting estimated net debt as of the end of third quarter of

2010 in the amount of $3,248 million from the estimated enterprise value using the discounted cash flow method and dividing the result by the fully diluted number of shares of Mediacom common stock.

 

Based upon the assumptions described above, Barclays Capital applied the 2.0% to 3.0% nominal perpetuity growth rate range and the 7.5% to 8.5% range of after-tax discount rates to the Company Projections to calculate a range of implied prices per share of Mediacom. Barclays Capital noted that on the basis of the discounted cash flow analysis (a) the range of implied values per share calculated using the September Forecast was $6.42 to $23.95, and the transaction consideration of $8.75 per share was within such range, and (b) the range of implied values per share calculated using the June Forecast was $9.34 to $27.84, and the transaction consideration of $8.75 per share was below such range.

 

Leveraged Acquisition Analysis

 

Barclays Capital performed a leveraged acquisition analysis in order to ascertain a price for Mediacom common stock which might be achieved in a leveraged buyout transaction by a financial buyer using a debt capital structure based upon current market conditions. Barclays Capital assumed the following in its analysis: (i) the consummation of an exit transaction by the financial buyer in 2015; (ii) utilization of net operating loss carryforwards in accordance with section 382 of the Internal Revenue Code of 1986, as amended, with remaining net operating loss carryforwards in 2015 included in the valuation of Mediacom upon consummation of the transaction; (iii) a debt capital structure of Mediacom comprised of $2.742 billion in debt; (iv) an equity investment in the amount of $968 million in the case of the September Forecast, and $1,072 million in the case of the June Forecast; (v) a projected EBITDA terminal value multiple of 5.5x, 6.0x or 6.5x; (vi) a required internal rate of return of 15.0%, 17.5% or 20.0%; and (vii) a tax rate of 37.5%.

 

Based upon the assumptions described above, Barclays Capital applied the 5.5x to 6.5x terminal EBITDA range and the 15.0% to 20.0% range of required internal rate of return to the Company Projections to calculate a range of implied prices per share of Mediacom. Barclays Capital noted that on the basis of the leveraged acquisition analysis, the ranges of implied values per share calculated using each of the September Forecast and the June Forecast were $0.00 to $6.00 and $1.05 to $7.74, respectively, and the transaction consideration of $8.75 per share was above each such range.

 

Levered Paydown Analysis

 

As a further analysis in estimating the present value of Mediacom common stock, Barclays Capital performed a levered paydown analysis using the Company Projections under the September Forecast and the June Forecast. Barclays Capital assumed the following in its analysis: (i) a tax rate of 37.5%; (ii) all free cash flow is used to pay down debt; and (iii) EBITDA growth of 2.1% from 2016 through 2022, based on management of Mediacom’s growth assumption in its NOL usage schedule, whereas from 2010 through 2015, EBITDA was assumed to equal the respective estimates in the September Forecast or June Forecast, as applicable.

 

2010-2015

 

Barclays Capital applied an EBITDA multiple of 5.9x (the average of certain comparable companies’ NOL-adjusted enterprise value divided by EBITDA for 2011) to the EBITDA projected by management of Mediacom under the September Forecast and the June Forecast for each of the years 2010 through 2015 to estimate Mediacom’s enterprise value as of December 31 of each such year. Barclays Capital then assumed that all free cash flow projected by management of Mediacom is used to pay down debt and estimated Mediacom’s net debt as of December 31 of each such year. Barclays Capital estimated Mediacom’s equity value at the end of each such year by starting with the applicable estimated enterprise value, subtracting the value of net debt estimated for such year and adding the value of net operating loss carryforwards estimated to be available to Mediacom on each such date. The resulting total equity value was divided by the fully diluted number of shares of Mediacom common stock to calculate the per share value at December 31 of each such year. Barclays Capital discounted the per share value calculated as of December 31 of each year to its present value using both a 15.0% discount rate and a 12.0% discount rate and then calculated (i) the average of the present values of the per share values for 2010 through 2015

at the 15.0% discount rate and (ii) the average of the present values of the per share values for 2010 through 2015 at the 12.0% discount rate.

 

Barclays Capital noted that on the basis of the 2010-2015 levered paydown analysis, (a) the range of implied values per share calculated using the September Forecast was $7.97 to $8.67, and the transaction consideration of $8.75 per share was above such range, and (b) the range of implied values per share calculated using the June Forecast was $9.88 to $10.73, and the transaction consideration of $8.75 per share was below such range.

 

2010-2022

 

Barclays Capital applied an EBITDA multiple of 5.9x (the average of certain comparable companies’ NOL-adjusted enterprise value divided by EBITDA for 2011) to the EBITDA projected by management of Mediacom under the September Forecast and the June Forecast for each of the years 2010 through 2015 and the EBITDA assumed for each of the years 2016 through 2022, based on management of Mediacom’s projected EBITDA for 2015 and an assumed annual growth rate of EBITDA of 2.1%, as described above, to estimate Mediacom’s enterprise value as of December 31 of each such year. Barclays Capital then assumed that all free cash flow projected by management of Mediacom is used to pay down debt and estimated Mediacom’s net debt as of December 31 of each such year. Barclays Capital estimated Mediacom’s equity value at the end of each such year by starting with the applicable estimated enterprise value, subtracting the value of net debt estimated for such year and adding the value of net operating loss carryforwards estimated to be available to Mediacom on each such date. The resulting total equity value was divided by the fully diluted number of shares of Mediacom common stock to calculate the per share value at December 31 of each such year. Barclays Capital discounted the per share value calculated as of December 31 of each year to its present value using both a 15.0% discount rate and a 12.0% discount rate and then calculated (i) the average of the present values of the per share values for 2010 through 2022 at the 15.0% discount rate and (ii) the average of the present values of the per share values for 2010 through 2022 at the 12.0% discount rate.

 

Barclays Capital noted that on the basis of the 2010-2022 levered paydown analysis, the ranges of implied values per share calculated using each of the September Forecast and the June Forecast were $9.13 to $10.95 and $10.72 to $12.80, respectively, and the transaction consideration of $8.75 per share was below each such range.

 

Research Analyst Price Targets

 

Barclays Capital reviewed the publicly available price targets for Mediacom published by independent equity research analysts associated with various Wall Street firms in order to calculate the implied equity value per share range for Mediacom. The independent equity research analyst target prices ranged from $5.00 to $10.00 per share. Barclays Capital noted that the transaction consideration of $8.75 per share was within the range of implied values per share calculated using both the September Forecast and the June Forecast.

 

General

 

Barclays Capital is an internationally recognized investment banking firm and, as part of its investment banking activities, is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. Mediacom’s special committee selected Barclays Capital because of its familiarity with Mediacom and Barclays Capital’s qualifications, reputation and experience in the valuation of businesses and securities in connection with mergers and acquisitions generally.

 

Barclays Capital is acting as financial advisor to the special committee in connection with the proposed transaction. As compensation for its services in connection with the proposed transaction, Mediacom paid Barclays Capital a fee of $500,000 upon execution of Barclays Capital’s engagement letter with Mediacom and $1 million upon the delivery of Barclays Capital’s opinion. Additional compensation of $2 million will be payable on completion of the proposed transaction. In addition, Mediacom has agreed to reimburse Barclays Capital for its reasonable out-of-pocket expenses incurred in connection with the proposed transaction and to indemnify Barclays Capital for certain liabilities that may arise out of its engagement by Mediacom and the rendering of Barclays

Capital’s opinion. Barclays Capital has performed investment banking services for Mediacom in the past, and may perform such services for Mediacom in the future, and has received, and expects to receive, customary fees for such services. Specifically, in the past, Barclays Capital acted as financial advisor to a special committee of Mediacom’s board of directors in connection with the Morris transaction, for which Barclays Capital received customary fees for its services.

 

Barclays Capital and its affiliates engage in a wide range of businesses from investment and commercial banking, lending, asset management and other financial and non-financial services. In the ordinary course of its business, Barclays Capital and affiliates may actively trade and effect transactions in the equity, debt and/or other securities (and any derivatives thereof) and financial instruments (including loans and other obligations) of Mediacom and its affiliates for its own account and for the accounts of its customers and, accordingly, may at any time hold long or short positions and investments in such securities and financial instruments.

 

Under SEC rules, Mr. Commisso and Merger Sub are required to provide certain information regarding their position as to the substantive and procedural fairness of the merger to the common stockholders of Mediacom (other than the RBC Stockholders). The RBC Stockholders are making the statements included in this section solely for purposes of complying with such requirements. The RBC Stockholders’ views as to the fairness of the merger should not be construed as a recommendation to any stockholder as to how that stockholder should vote on the proposal to adopt the merger agreement.

 

The RBC Stockholders did not participate in the deliberations of Mediacom’s board of directors regarding, and did not receive advice from the special committee’s legal or financial advisors as to, the fairness of the merger. Merger Sub engaged J.P. Morgan and BofA Merrill Lynch as its financial advisors to provide certain financial advisory services in connection with a potential transaction involving Mediacom. Neither J.P. Morgan nor BofA Merrill Lynch was asked to deliver and neither has delivered an opinion to any of the RBC Stockholders, the special committee or Mediacom’s board of directors as to the fairness, from a financial point of view or otherwise, of the merger consideration to be paid or received, as the case may be, in connection with the merger. J.P. Morgan’s and BofA Merrill Lynch’s November 12, 2010 presentation does not constitute a recommendation to Mediacom’s unaffiliated stockholders with respect to the merger consideration or as to whether any such stockholder should vote to adopt the merger agreement. The RBC Stockholders believe that the merger consideration is substantively fair to the unaffiliated stockholders of Mediacom based on the following factors:

 

 

 

The RBC Stockholders believe that, even though Mediacom’s board of directors did not retain an unaffiliated representative to act solely on behalf of Mediacom’s unaffiliated stockholders for purposes of negotiating the terms of the merger agreement, the merger is procedurally fair to the unaffiliated stockholders based on the following factors:

 

 

 

The RBC Stockholders did not consider Mediacom’s net book value or liquidation value in their evaluation of the fairness of the merger to the unaffiliated stockholders of Mediacom because the RBC Stockholders did not believe that Mediacom’s net book value or liquidation value were material or relevant to a determination of the substantive fairness of the merger. The RBC Stockholders did not believe that Mediacom’s net book value was material to their conclusion regarding the substantive fairness of the merger because, in their view, net book value is not indicative of Mediacom’s market value since it is a purely historical measurement of financial position in accordance with U.S. generally accepted accounting principles (“GAAP”) and is not forward-looking or wholly based on fair value. The RBC Stockholders did not consider the liquidation value of Mediacom to be a relevant valuation methodology because liquidation was not an acceptable option to the RBC Stockholders, who are the controlling stockholders of Mediacom.

 

The RBC Stockholders did not find it practicable to assign, and did not assign, relative weights to the individual factors considered in reaching their conclusion as to the fairness of the merger. Rather, their fairness determination was made after consideration of all of the foregoing factors as a whole.

 

Merger Sub retained J.P. Morgan and BofA Merrill Lynch in June 2010 as its financial advisors in connection with a potential transaction involving Mediacom. In selecting J.P. Morgan and BofA Merrill Lynch as its financial advisor, Merger Sub considered primarily J.P. Morgan and BofA Merrill Lynch’s qualifications and knowledge of the business affairs of Mediacom and the cable industry generally, as well as the reputation of each as an internationally recognized investment banking firm with substantial experience in transactions similar to the merger.

 

At the request of Merger Sub, J.P. Morgan and BofA Merrill Lynch prepared and presented to Mr. Commisso on November 12, 2010 a presentation (the “Presentation”), and answered related questions.

 

Neither J.P. Morgan nor BofA Merrill Lynch was asked to deliver and neither has delivered an opinion to any of the RBC Stockholders, the special committee or Mediacom’s board of directors as to the fairness, from a financial point of view or otherwise, of the consideration to be paid or received, as the case may be, in connection with the merger. J.P. Morgan and BofA Merrill Lynch did not prepare the Presentation for the benefit of any party (including any of Mediacom’s unaffiliated stockholders, the special committee or the board of directors of Mediacom) apart from Merger Sub. Neither J.P. Morgan nor BofA Merrill Lynch determined or recommended the consideration of $8.75 per share to be paid in the merger, which was determined by negotiation between Mr. Commisso and the special committee and approved by the board of directors of Mediacom. The Presentation does not constitute a recommendation or support a recommendation to Mediacom’s unaffiliated stockholders with respect to any particular offer price for the shares not held by the RBC Stockholders. J.P. Morgan and BofA Merrill Lynch also did not prepare the Presentation to support a determination that the offer price is fair, from a financial point of view or otherwise, to either the RBC Stockholders or Mediacom’s unaffiliated stockholders.

 

THE FULL TEXT OF THE PRESENTATION OF J.P. MORGAN AND BOFA MERRILL LYNCH HAS BEEN FILED AS AN EXHIBIT TO ITEM 16 TO THE SCHEDULE 13E-3 FILED WITH THE SEC IN CONNECTION WITH THE MERGER AND IS INCORPORATED HEREIN BY REFERENCE. COPIES OF THE PRESENTATION MAY BE OBTAINED FROM THE SEC. SEE “ADDITIONAL INFORMATION” BEGINNING ON PAGE 76. YOU ARE URGED TO, AND SHOULD, READ THE PRESENTATION IN ITS ENTIRETY. THE PRESENTATION DOES NOT CONSTITUTE A RECOMMENDATION AS TO WHETHER ANY STOCKHOLDER SHOULD VOTE IN FAVOR OF THE ADOPTION OF THE MERGER AGREEMENT.

 

J.P. Morgan and BofA Merrill Lynch were provided with two sets of financial projections as part of the due diligence process in connection with the merger: (a) the June Forecast prepared by Mediacom’s management (excluding Mr. Commisso), as approved by Merger Sub for use by J.P. Morgan and BofA Merrill Lynch, provided to J.P. Morgan and BofA Merrill Lynch in July 2010, and (b) the September Forecast prepared by Mediacom’s management (excluding Mr. Commisso), as approved by Merger Sub for use by J.P. Morgan and BofA Merrill Lynch, provided to J.P. Morgan and BofA Merrill Lynch in September 2010. For the purposes of the Presentation, J.P. Morgan and BofA Merrill Lynch considered both the June Forecast and the September Forecast. The summary of the June Forecast and the September Forecast included in this proxy statement (see “— Projected Financial Information”) uses rounded numbers. For purposes of the Presentation, J.P. Morgan and BofA Merrill Lynch used the actual numbers contained in the June Forecast and the September Forecast received by them.

 

In providing financial advice and preparing the Presentation, J.P. Morgan and BofA Merrill Lynch, among other things:

 

 

 

The following is a summary of the material financial analyses presented by J.P. Morgan and BofA Merrill Lynch to Mr. Commisso on November 12, 2010. This summary does not purport to be, and is not, a complete description of the financial analyses or data undertaken, performed or presented by J.P. Morgan and BofA Merrill Lynch.

 

Comparable Publicly Traded Companies Analysis

 

J.P. Morgan and BofA Merrill Lynch compared Mediacom to the following other cable operators: Cablevision Systems Corporation (“Cablevision”), Comcast Corporation (“Comcast”), Charter Communications, Inc. (“Charter”) and Time Warner Cable Inc. (“Time Warner Cable”). Although none of the selected companies is directly comparable to Mediacom, the companies included were chosen because they are publicly traded companies with operations that for purposes of analysis may be considered similar to the operations of Mediacom. However, J.P. Morgan and BofA Merrill Lynch consider Cablevision to be less comparable to Mediacom due to Cablevision’s significantly superior subscriber and operating metrics.

 

J.P. Morgan and BofA Merrill Lynch applied a range of multiples of adjusted cable firm value (calculated as total firm value less the value of unconsolidated investments, less the value of non-cable assets and less the present value of the expected tax shield from the future usage of net operating loss (“NOL”) carryforwards (based on equity research analyst estimates available to them as of November 12, 2010)) to estimated 2011 EBITDA of each publicly traded peer’s cable business (after deduction of stock-based compensation), which range of multiples was 4.9x-5.9x for Mediacom’s comparable companies, with the minimum corresponding to Comcast’s multiple and the maximum (excluding Cablevision) corresponding to Charter’s multiple. This analysis indicated implied per share values for Mediacom within a range of negative $1.51 to positive $5.70 using the June Forecast and negative $2.85 to positive $4.27 using the September Forecast. The firm value for Mediacom was calculated by J.P. Morgan and BofA Merrill Lynch, for the purposes of each of their analyses described herein, by adjusting for the present value of the expected tax shield from the usage of NOL carryforwards as calculated based upon the June Forecast and September Forecast, respectively. J.P. Morgan and BofA Merrill Lynch also noted that based on Cablevision’s multiple of 7.0x, the highest among the publicly traded cable companies, the implied per share value of Mediacom would be $13.77 using the June Forecast and $12.22 using the September Forecast. J.P. Morgan and BofA Merrill Lynch noted that, assuming that the ability to utilize Mediacom’s NOL carryforwards annually would be limited under Section 382 of the Internal Revenue Code (the “Code”) due to a change in control following the acquisition of the shares of Mediacom not owned by the RBC Stockholders, the value of the tax shield from the usage of NOL carryforwards would be lower and would indicate implied per share values for Mediacom, using the range of multiples of 4.9x-5.9x for Mediacom’s comparable companies (excluding Cablevision), within a range of negative $3.35 to positive $3.93 using the June Forecast and negative $4.42 to positive $2.71 using the September Forecast, and, using Cablevision’s multiple of 7.0x, of $12.07 using the June Forecast and $10.77 using the September Forecast.

 

J.P. Morgan and BofA Merrill Lynch applied a range of multiples of adjusted equity value (calculated as equity value less the present value of the tax shield from the future usage of NOL carryforwards) to estimated 2011 fully-taxed levered free cash flow (calculated as levered free cash flow adjusted to assume the full payment of taxes), which range of multiples was 5.9x-9.6x for Mediacom’s comparable companies, with the minimum corresponding to Charter’s multiple and the maximum (excluding Cablevision) corresponding to Comcast’s multiple. This analysis

indicated implied per share values for Mediacom within a range of $11.93 to $16.24 using the June Forecast and $10.10 to $13.57 using the September Forecast. J.P. Morgan and BofA Merrill Lynch also noted that based on Cablevision’s multiple of 9.6x, the highest among the publicly traded cable companies, the implied per share value of Mediacom would be $16.27 using the June Forecast and $13.59 using the September Forecast. J.P. Morgan and BofA Merrill Lynch noted that, assuming that the ability to utilize Mediacom’s NOL carryforwards annually would be limited under Section 382 of the Code due to a change in control following the acquisition of the shares of Mediacom not owned by the RBC Stockholders, the value of the tax shield from the usage of NOL carryforwards would be lower and would indicate implied per share values for Mediacom, using the range of multiples of 5.9x-9.6x for Mediacom’s comparable companies (excluding Cablevision), within a range of $10.22 to $14.54 using the June Forecast and $8.65 to $12.12 using the September Forecast, and, using Cablevision’s multiple of 9.6x, of $14.57 using the June Forecast and $12.15 using the September Forecast.

 

J.P. Morgan and BofA Merrill Lynch applied a range of multiples of adjusted cable firm value (as defined above) to estimated 2011 cable EBITDA (after deduction of stock-based compensation) less estimated 2011 cable capital expenditures, which range of multiples was 7.2x-10.5x for Mediacom’s comparable companies, with the minimum corresponding to Comcast’s multiple and the maximum corresponding to Charter’s multiple. This analysis indicated implied per share values for Mediacom within a range of negative $7.17 to positive $8.30 using the June Forecast and negative $9.40 to positive $5.45 using the September Forecast. J.P. Morgan and BofA Merrill Lynch also noted that, assuming that the ability to utilize Mediacom’s NOL carryforwards annually would be limited under Section 382 of the Code due to a change in control following the acquisition of the shares of Mediacom not owned by the RBC Stockholders, the value of the tax shield from the usage of NOL carryforwards would be lower and would indicate implied per share values for Mediacom, using the range of multiples of 7.2x-10.5x for Mediacom’s comparable companies, within a range of negative $9.02 to positive $6.57 using the June Forecast and negative $10.97 to positive $3.93 using the September Forecast.

 

J.P. Morgan and BofA Merrill Lynch applied a range of multiples of adjusted cable firm value (as defined above) to revenue generating units (“RGU”) as of September 30, 2010, which range of multiples was $1,053 per RGU to $1,205 per RGU for Mediacom’s comparable companies, with the minimum corresponding to Comcast’s multiple and the maximum (excluding Cablevision) corresponding to Charter’s multiple. This analysis indicated implied per share values for Mediacom within a range of $4.35 to $10.53. J.P. Morgan and BofA Merrill Lynch also noted that based on Cablevision’s multiple of $1,440 per RGU, the highest among the publicly traded cable companies, the implied per share value of Mediacom would be $19.84. J.P. Morgan and BofA Merrill Lynch also noted that, assuming that the ability to utilize Mediacom’s NOL carryforwards annually would be limited under Section 382 of the Code due to a change in control following the acquisition of the shares of Mediacom not owned by the RBC Stockholders, the value of the tax shield from the usage of NOL carryforwards would be lower and would indicate implied per share values for Mediacom, using the range of multiples of $1,053 per RGU to $1,205 per RGU for Mediacom’s comparable companies (excluding Cablevision), within a range of $2.79 to $9.08, and, using Cablevision’s multiple of $1,440 per RGU, of $18.40.

 

J.P. Morgan and BofA Merrill Lynch applied a range of multiples of adjusted cable firm value (as defined above) to basic subscribers (“sub”) as of September 30, 2010, which range of multiples was $3,101 per sub to $3,357 per sub for Mediacom’s comparable companies, with the minimum corresponding to Comcast’s multiple and the maximum (excluding Cablevision) corresponding to Charter’s multiple. This analysis indicated implied per share values for Mediacom within a range of $10.90 to $14.90. J.P. Morgan and BofA Merrill Lynch also noted that based on Cablevision’s multiple of $4,892 per sub, the highest among the publicly traded cable companies, the implied per share value of Mediacom would be $38.71. J.P. Morgan and BofA Merrill Lynch also noted that, assuming that the ability to utilize Mediacom’s NOL carryforwards annually would be limited under Section 382 of the Code due to a change of control following the acquisition of the shares of Mediacom not owned by the RBC Stockholders, the value of the tax shield from the usage of NOL carryforwards would be lower and would indicate implied per share values for Mediacom, using the range of multiples of $3,101 per sub to $3,357 per sub for Mediacom’s comparable companies (excluding Cablevision), within a range of $9.45 to $13.45, and, using Cablevision’s multiple of $4,892 per sub, of $37.26.

Discounted Cash Flow Analysis

 

J.P. Morgan and BofA Merrill Lynch conducted a discounted cash flow (“DCF”) analysis of Mediacom. A DCF analysis is a method used to derive an implied total firm value and equity value of a business by calculating the “present value” of the estimated future unlevered after-tax free cash flows of the business. The term unlevered as used in this analysis means that no adjustment has been made for interest expenses. The present value is obtained by discounting both (i) the estimated unlevered after-tax free cash flows of the business over the period for which estimates are available, referred to as the estimate period and (ii) a “terminal value” for the business as of the end of the estimate period, using a selected discount rate intended to reflect an estimate of the average cost of capital for the business. The terminal value refers to the implied value of all future cash flows from a business from the end of the estimate period to perpetuity, calculated by (a) projecting an amount of terminal free cash flow using a perpetuity growth rate and (b) dividing the terminal free cash flow by a percentage equal to the discount rate minus the perpetuity growth rate. It also includes the present value of the estimated future tax savings from the utilization of Mediacom’s NOL carryforwards.

 

J.P. Morgan and BofA Merrill Lynch performed this analysis using both the June Forecast and September Forecast for 2010 through 2015. J.P. Morgan and BofA Merrill Lynch calculated a terminal value based on the perpetuity growth method using a 2% perpetuity growth rate. The unlevered free cash flows were discounted to present value (assuming a September 30, 2010 valuation date) using discount rates of 8% to 9%. The other principal assumptions upon which J.P. Morgan and BofA Merrill Lynch based its DCF analysis are set forth in the full text of the Presentation, which is attached as Exhibit (c)(3) to the Schedule 13E-3 filed with the SEC in connection with the merger. J.P. Morgan and BofA Merrill Lynch calculated per share equity values by first determining a range of total firm values of Mediacom by adding the present values of the after-tax unlevered free cash flows (excluding any tax savings from the utilization of Mediacom’s NOL carryforwards) and terminal values for each perpetuity growth rate and discount rate combination, then subtracting from the total firm value the net debt as of September 30, 2010 (which is total debt minus cash) of Mediacom, then adding the present value of the estimated future tax savings from the utilization of Mediacom’s NOL carryforwards, and dividing those amounts by the number of fully diluted shares of Mediacom using the treasury stock method. This analysis yielded implied per share equity value reference ranges for Mediacom of $4.88 to $11.66 using the June Forecast and $2.19 to $8.88 using the September Forecast. J.P. Morgan and BofA Merrill Lynch also noted that, assuming that the usage of Mediacom’s NOL carryforwards would be limited by Section 382 of the Code due to a change in control following the acquisition of the shares of Mediacom not owned by the RBC Stockholders, this analysis yielded implied per share equity value reference ranges for Mediacom of $3.07 to $9.96 using the June Forecast and $0.62 to $7.41 using the September Forecast.

 

Premium Summary of Minority Buy-In Transactions

 

For reference purposes only, J.P. Morgan and BofA Merrill Lynch reviewed completed transactions since July 2001 involving the acquisition of all outstanding shares of target companies by a stockholder holding either 30% or more of economic shares or a majority of voting power prior to the transaction and reported: (i) the premiums implied by the median and mean final offer premiums over the closing price one day prior to the first offer made in the transaction were 33% and 39%, respectively (below the 64% premium implied by Mr. Commisso’s offer of $8.75 per share over the closing price of $5.33 per share on May 28, 2010, the last trading day before the public announcement of Mr. Commisso’s initial offer of $6.00 per share), (ii) the premiums implied by the median and mean final offer premiums over the average closing price for the 6-month period ending one day prior to the first offer made in the transaction were 27% and 32% (below the 69% premium implied by Mr. Commisso’s offer of $8.75 per share over the average closing price of $5.18 for the 6-month period ending on May 28, 2010, the last trading day before the public announcement of Mr. Commisso’s initial offer of $6.00 per share), respectively, and (iii) the premiums implied by the mean and median final offer premiums over the average closing price for the 1-year period ending one day prior to the first offer made in the transaction were 22% and 23%, respectively (below the 69% premium implied by Mr. Commisso’s offer of $8.75 per share over the average closing price of $5.18 for the 1-year period ending on May 28, 2010, the last trading day before the public announcement of Mr. Commisso’s initial offer of $6.00 per share). J.P. Morgan and BofA Merrill Lynch noted that applying these premiums to the corresponding prices for Mediacom for the period ending May 28, 2010 (the last trading day prior to Mr. Commisso’s initial offer of $6.00 per share on May 31, 2010), implied a per share equity value reference range for

Mediacom of $6.32 to $7.41. J.P. Morgan and BofA Merrill Lynch also noted that, adjusting such implied per share equity values for Mediacom for the average appreciation in publicly traded cable company share prices between May 28, 2010 and November 10, 2010, would result in the high end of the per share equity value reference range being increased to $8.46.

 

Equity Research Analysts’ Price Targets

 

For reference purposes only, J.P. Morgan and BofA Merrill Lynch noted that equity research analyst reports available to J.P. Morgan and BofA Merrill Lynch on November 12, 2010 (from May 7, 2010 to November 9, 2010) had established price targets for Mediacom’s shares ranging from $5.00 to $10.00 per share. For reference purposes only, J.P. Morgan and BofA Merrill Lynch also noted that prior to Mr. Commisso’s initial offer of $6.00 per share on May 31, 2010, equity research analyst reports available to J.P. Morgan and BofA Merrill Lynch on June 1, 2010 (from May 7, 2010 to June 1, 2010) had established price targets for the shares ranging from $4.00 to $8.00 per share.

 

Miscellaneous

 

No company or transaction reviewed by J.P. Morgan and BofA Merrill Lynch in the Presentation is identical to Mediacom or the proposed merger, as the case may be. Accordingly, the values of such companies or transactions, as the case may be, should not be construed as illustrative of a value for Mediacom or the shares of Mediacom.

 

J.P. Morgan and BofA Merrill Lynch’s advice was necessarily based on economic, market and other conditions as in effect on, and the information made available to J.P. Morgan and BofA Merrill Lynch as of, the date of the Presentation. In connection with their financial advisory services, including the Presentation, J.P. Morgan and BofA Merrill Lynch relied upon and assumed, without independent verification, the accuracy and completeness of all information that was publicly available or was furnished to J.P. Morgan and BofA Merrill Lynch or otherwise reviewed by J.P. Morgan and BofA Merrill Lynch, and have not assumed any responsibility or liability therefor. With respect to the June Forecast and the September Forecast, J.P. Morgan and BofA Merrill Lynch assumed that they had been reasonably prepared on bases reflecting the best then currently available estimates and good faith judgments of the management of Mediacom as to the future financial performance of Mediacom.

 

Neither J.P. Morgan nor BofA Merrill Lynch was asked to make, and neither has assumed responsibility for making, any independent evaluation of Mediacom, and did not verify and has not assumed any responsibility for making any independent verification of the information J.P. Morgan and BofA Merrill Lynch reviewed. In addition, neither J.P. Morgan nor BofA Merrill Lynch conducted any valuation or appraisal of any assets or liabilities, nor have any such valuations or appraisals been provided to J.P. Morgan or BofA Merrill Lynch. J.P. Morgan and BofA Merrill Lynch also assumed that there have been no material changes in Mediacom’s condition, results of operations, business or prospects since the date of the most recent financial statements made available to J.P. Morgan and BofA Merrill Lynch and neither J.P. Morgan nor BofA Merrill Lynch has any obligation to update, revise or reaffirm the Presentation. J.P. Morgan and BofA Merrill Lynch based their analyses on assumptions that they deemed reasonable, including assumptions concerning general business and economic conditions and industry-specific factors. The June Forecast and September Forecast used in or underlying J.P. Morgan and BofA Merrill Lynch’s analyses are not necessarily indicative of actual values or actual future results that might be achieved, which values or results may be higher or lower than those indicated in the June Forecast, the September Forecast, or J.P. Morgan and BofA Merrill Lynch’s analyses. Accordingly, the financial forecasts used in, and the ranges of valuations resulting from, any particular analysis described above are inherently subject to substantial uncertainty and should not be taken to be J.P. Morgan’s or BofA Merrill Lynch’s view of the actual value of Mediacom. Moreover, J.P. Morgan and BofA Merrill Lynch’s analyses are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses actually could be bought or sold.

 

J.P. Morgan and its affiliates comprise a full service securities firm and a commercial bank engaged in securities trading and brokerage activities, as well as providing investment banking, asset management, financing, and financial advisory services and other commercial and investment banking products and services to a wide range of corporations and individuals. In the ordinary course of their businesses, J.P. Morgan and its affiliates may actively invest in or trade debt and equity securities or other financial instruments (including derivatives, bank loans or other

obligations) of Mediacom and its affiliates for their own account or for the accounts of customers and, accordingly, they may at any time hold long or short positions in such securities or other financial instruments. Merger Sub has agreed to pay J.P. Morgan as compensation for its services as financial advisor in connection with the merger an aggregate fee of $2 million, all of which is contingent and payable upon the completion of the merger. In addition, Merger Sub has agreed to reimburse J.P. Morgan for certain expenses incurred in connection with such services and to indemnify J.P. Morgan and its affiliates and their respective officers, directors, agents and employees for certain liabilities arising out of its engagement. During the preceding two years, J.P. Morgan and its affiliates have provided certain investment banking, commercial banking and other financial services to Mediacom and its affiliates for customary compensation, including acting as bookrunner in connection with an offering of senior notes by Mediacom LLC, an affiliate of Mediacom, in August 2009. In addition, on a ongoing basis, certain affiliates of J.P. Morgan act as agent bank and lender under certain credit facilities of certain affiliates of Mediacom and provide cash management and other treasury and security services to Mediacom and its affiliates, for which such J.P. Morgan affiliates receive customary compensation.

 

BofA Merrill Lynch and its affiliates comprise a full service securities firm and commercial bank engaged in securities, commodities and derivatives trading, foreign exchange and other brokerage activities, and principal investing as well as providing investment, corporate and private banking, asset and investment management, financing and financial advisory services and other commercial services and products to a wide range of companies, governments and individuals. In the ordinary course of their businesses, BofA Merrill Lynch and its affiliates may invest on a principal basis or on behalf of customers or manage funds that invest, make or hold long or short positions, finance positions or trade or otherwise effect transactions in the equity, debt or other securities or financial instruments (including derivatives, bank loans or other obligations) of Mediacom and its affiliates. During the preceding two years, BofA Merrill Lynch and its affiliates have provided certain investment banking, commercial banking and other financial services to Mediacom and its affiliates for customary compensation, including (i) acting as financial advisor to Mediacom in connection with the Morris transaction, (ii) acting as bookrunner in connection with an offering of senior notes by Mediacom LLC, an affiliate of Mediacom, in August 2009, and (iii) acting as arranger and bookrunner and/or lender under certain credit facilities of certain affiliates of Mediacom. In addition, on a ongoing basis, certain affiliates of BofA Merrill Lynch continue to act as lender under the credit facilities described above, for which such BofA Merrill Lynch affiliates receive customary compensation, and BofA Merrill Lynch or its affiliates may provide additional investment banking, commercial banking or other financial services to Mediacom and its affiliates in the future, for which BofA Merrill Lynch or its affiliates may receive compensation. Merger Sub has agreed to pay BofA Merrill Lynch as compensation for its services as financial advisor in connection with the merger an aggregate fee of $2 million, all of which is contingent and payable upon the completion of the merger. Merger Sub has also agreed to reimburse BofA Merrill Lynch for its expenses incurred in connection with BofA Merrill Lynch’s engagement and to indemnify BofA Merrill Lynch, any controlling person of BofA Merrill Lynch and each of their respective directors, officers, employees, agents and affiliates against specified liabilities, including liabilities under the federal securities laws.

 

The RBC Stockholders decided to pursue the merger because they believe that Mediacom can be operated more effectively as a privately-owned company. In addition, the RBC Stockholders believe that the merger will allow the unaffiliated stockholders to receive a significantly attractive value for their shares in Mediacom, which value had not been reflected in the recent trading price of Mediacom common stock. The RBC Stockholders believe that, because of the substantial risks to Mediacom’s business presented by recent market developments, including the rising costs of programming and increased competition and government regulation, and Mediacom’s highly leveraged capital structure, being a privately-owned company is the best way for Mediacom to deliver quality services to customers, provide good jobs and opportunities for advancement to Mediacom’s employees and contribute to the communities in which Mediacom operates.

 

As a privately-owned company, Mediacom would have increased flexibility to make decisions that may negatively affect quarterly results but that may, over the long term, increase Mediacom’s value. In contrast, as a publicly-traded company, Mediacom currently faces public stockholder and investment analyst pressure to make decisions that may produce better short-term results, but which may over the long term lead to a reduction in the per

share price of its publicly-traded equity securities. As a privately-owned company, Mediacom would also be relieved of many of the other burdens and constraints imposed on public companies. The need for management to be responsive to public stockholder concerns and to engage in an ongoing dialogue with public stockholders may at times distract management’s time and attention from the effective operation and improvement of the business. The RBC Stockholders considered effecting the going private transaction through a tender offer and second step merger, but ultimately determined to structure the transaction as a cash merger in order to provide Mediacom’s unaffiliated stockholders with cash for their shares of Mediacom common stock in a single step, without the necessity of financing separate purchases of Mediacom common stock in a tender offer and implementing a second-step merger to acquire any shares of common stock not tendered into any such tender offer, and without incurring any additional transaction costs associated with such activities. The RBC Stockholders have undertaken to pursue the merger at this time (as opposed to any other time in Mediacom’s public company history) in light of the risks to Mediacom’s business referred to above and the persistently sluggish performance of Mediacom’s stock price.

 

After the effective time of the merger, the RBC Stockholders anticipate that Mediacom will continue its current operations, except that it will cease to be a public company and will instead be wholly-owned by Mr. Commisso. Mr. Commisso has advised Mediacom that he does not have any current plans or proposals that relate to or would result in an extraordinary corporate transaction following completion of the merger involving Mediacom’s corporate structure, business or management, such as a merger, reorganization, liquidation, relocation of any operations or sale or transfer of a material amount of assets. Mr. Commisso expects to continuously evaluate and review Mediacom’s business and operations following the merger and may develop new plans and proposals that he considers appropriate to maximize the value of Mediacom. Mr. Commisso expressly reserves the right to make any changes he deems appropriate in light of such evaluation and review or in light of future developments.

 

In connection with its review of Mr. Commisso’s proposal, the special committee requested that Mediacom’s management team (excluding Mr. Commisso) prepare financial projections for Mediacom. Mediacom does not, as a matter of course, create multi-year projections or forecasts for submission to Mediacom’s board of directors or that are customarily relied on by the investor or financial community. The June Forecast was provided to the special committee on June 29, 2010 and is summarized below. The June Forecast was adjusted in September 2010 as described below and the September Forecast was delivered to the special committee in September 2010 and is summarized below. Additional information regarding the June Forecast and the September Forecast is available in the presentation materials that have been filed with the Schedule 13E-3.

 

Summaries of the June Forecast and the September Forecast are being included in this document not to influence your decision whether to vote for or against the proposal to adopt the merger agreement, but because such projected financial information was available to the special committee and Barclays Capital as well as Mr. Commisso, Merger Sub, J.P. Morgan and BofA Merrill Lynch. Projections of this type are based on estimates and assumptions that are inherently subject to significant economic, industry and competitive uncertainties and contingencies, all of which are difficult to predict and many of which are beyond Mediacom’s control. Because the projections cover multiple years, such information by its nature becomes less reliable with each successive year. Accordingly, there can be no assurance that the projected results would be realized or that actual results would not be significantly higher or lower than projected. In light of the uncertainties inherent in forward-looking information of any kind, we caution against placing undue reliance on any of the information summarized below. For information concerning the variety of factors which may cause the future financial results of Mediacom to materially vary from such projected results, see “Cautionary Statement Regarding Forward-Looking Information.” Mediacom does not intend to update or revise any of the financial projections included in the June Forecast or the September Forecast to reflect circumstances existing after the date such projections were prepared or to reflect the occurrence of future events. None of the financial projections included in the June Forecast or the September Forecast should be viewed as a representation by Mediacom, the special committee or any of their advisors or representatives that the forecasts reflected therein will be achieved.

 

The financial projections included in the June Forecast and the September Forecast were prepared solely for internal use in connection with the proposed merger and not for publication or with a view of complying with the published guidelines of the SEC regarding projections or with guidelines established by the American Institute of

Certified Public Accountants for preparation and presentation of prospective financial information. The projected financial information included in this proxy statement has been prepared by, and is the responsibility of, Mediacom’s management (excluding Mr. Commisso). Mediacom’s independent registered public accounting firm, PricewaterhouseCoopers LLP, has neither examined, compiled nor performed any procedures with respect to the accompanying projected financial information and, accordingly, PricewaterhouseCoopers LLP does not express an opinion or any other form of assurance with respect thereto. The PricewaterhouseCoopers LLP report incorporated by reference in this proxy statement relates to Mediacom’s historical financial information. It does not extend to the projected financial information and should not be read to do so. None of the financial projections included in the June Forecast or the September Forecast were prepared for purposes of the proposed merger and hence do not give any effect to the merger. There can be no assurance that the assumptions made in preparing the projections summarized below will prove accurate, and the future financial results of Mediacom as summarized below may differ materially from those reflected in such projections.

 

Financial Projections — June Forecast

 

At the request of the special committee, management of Mediacom (excluding Mr. Commisso) provided the June Forecast to the special committee on June 29, 2010, which is summarized as follows:

 

Summary Projected Consolidated Financial Data — June Forecast
(provided on June 29, 2010)

 

 

 

 

Note: The numbers used in the table above represent rounded numbers. For purposes of their financial analyses, Barclays Capital, J.P. Morgan and BofA Merrill Lynch used the actual numbers contained in the June Forecast received by them.

 

Updated Financial Projections — September Forecast

 

Management of Mediacom (excluding Mr. Commisso) was requested to prepare, and in September 2010 delivered to the special committee, updated financial projections, or the September Forecast. This forecast reflected (i) actual results through August 2010, and adjustments of certain assumptions for the year ending 2010, which were made because the second half of 2010 was trending below the full year projections in the June Forecast, (ii) the impact of projected weaker results for the full year 2010 on the five-year projections, (iii) new developments regarding higher programming costs over the long-term forecast period than originally expected that arose from ongoing negotiations with programming vendors, and (iv) certain other assumptions regarding the five-year projections, as follows:

 

 

 

The following table summarizes the September Forecast:

 

Summary Projected Consolidated Financial Data — September Forecast
(updated as of September 2010)

 

 

Note: The numbers used in the table above represent rounded numbers. For purposes of their financial analyses, Barclays Capital, J.P. Morgan and BofA Merrill Lynch used the actual numbers contained in the September Forecast received by them.

 

Summary of Material Assumptions Underlying each Forecast

 

The projected financial information included in the June Forecast and the September Forecast was based on a number of assumptions. The following outlines the material assumptions underlying each forecast:

 

Penetration Rates.  Penetration of services is calculated as a percent of homes passed, except for digital penetration, which is calculated as a percent of basic subscribers. Penetration assumptions with respect to the June Forecast are as follows: (i) basic penetration decreasing from 42% in 2010 to 36% in 2015; (ii) digital penetration increasing from 61% in 2010 to 81% in 2015; (iii) data penetration increasing from 30% in 2010 to 36% in 2015; and (iv) phone penetration increasing from 13% in 2010 to 18% in 2015. With respect to the September Forecast, the penetration assumptions reflected the following changes: (i) digital penetration increasing from 61% in 2010 to 84% in 2015; and (ii) data penetration increasing from 30% in 2010 to 37% in 2015.

 

ARPU.  Assumes monthly average revenue per unit, or ARPU, with respect to the June Forecast for the different services as follows: (i) total ARPU, or average monthly total revenue per basic subscriber, increasing from $103.38 in 2010 to $137.39 in 2015; (ii) HSD ARPU, or average monthly high-speed data revenue per HSD customer, increasing from $38.02 in 2010 to $39.67 in 2015; and (iii) phone ARPU, or average monthly phone revenue per phone customer, decreasing from $33.16 in 2010 to $28.70 in 2015. With respect to the September Forecast, the ARPU assumptions are as follows: (i) total ARPU increasing from $103.12 in 2010 to $137.43 in 2015; (ii) HSD ARPU increasing from $37.98 in 2010 to $38.63 in 2015; and (iii) phone ARPU decreasing from $33.06 in 2010 to $28.52 in 2015.

 

Capital Expenditures.  The June Forecast assumes capital expenditures are $227 million in 2010, $230 million per year from 2011 through 2014, and $229 million for 2015. Capital expenditures, as a percentage of revenues, decrease from 15.1% in 2010 to 13.3% in 2015. The September Forecast assumes capital expenditures are $231 million

in 2010, $235 million in 2011, $237 million in 2012, $236 million in 2013, $235 million in 2014 and $231 million for 2015. Capital expenditures, as a percentage of revenues, decrease from 15.4% in 2010 to 13.4% in 2015.

 

Operating Expenses.  The June Forecast assumes operating expenses increase from $922 million in 2010 to $1,068 million in 2015, or a compound annual growth rate (“CAGR”) of 3.0%, and, as a percentage of revenues, from 61.3% in 2010 to 62.0% in 2015. In the June Forecast, programming expense, the largest expense category, grows at a CAGR of 5.0% for the 2010-2015 period, well in excess of the 2.8% CAGR for total revenues for the same period. The September Forecast assumes operating expenses increase from $925 million in 2010 to $1,082 million in 2015, or a CAGR of 3.2%, and, as a percentage of revenues, from 61.6% in 2010 to 63.0% in 2015. In the September Forecast, programming expense grows at a CAGR of 5.3% for the 2010-2015 period, well in excess of the 2.7% CAGR for total revenues for the same period.

 

Private Ownership

 

If the merger agreement is adopted by Mediacom’s stockholders and the other conditions to the closing of the merger are either satisfied or waived, Merger Sub will be merged with and into Mediacom, with Mediacom continuing as the Surviving Corporation. See “— Structure and Steps of the Merger.” As a result of the merger, Mediacom, as the Surviving Corporation, will be a private company that is wholly-owned by Mr. Commisso.

 

Directors and Management of the Surviving Corporation

 

Mr. Commisso will be the initial director of the Surviving Corporation following the merger. It is further contemplated that the officers of Mediacom immediately prior to the effective time of the merger will be the initial officers of the Surviving Corporation.

 

Mediacom’s certificate of incorporation and bylaws will be amended in their entirety and serve as the certificate of incorporation and bylaws of the Surviving Corporation following the merger, until such time as the certificate of incorporation and bylaws are further amended.

 

Primary Benefits and Detriments of the Merger

 

As a result of the merger, Mediacom will be a privately-owned company and there will be no public market for its common stock. Upon the completion of the merger, Mediacom Class A common stock will be delisted from The NASDAQ Global Select Market. In addition, the registration of Mediacom Class A common stock under Section 12 of the Exchange Act will be terminated.

 

The primary benefits of the merger to Mediacom’s unaffiliated stockholders include the following:

 

 

The primary detriments of the merger to Mediacom’s unaffiliated stockholders include the following:

 

 

The primary benefits of the merger to Mr. Commisso include the following:

 

 

The primary detriments of the merger to Mr. Commisso include the following:

 

 

At September 30, 2010, Mediacom had a consolidated net book value of $271 million, or $3.97 per share, and reported a net income of $0.674 million for the nine months ended September 30, 2010. Based upon their respective aggregate share ownerships, the RBC Stockholders had an indirect approximate 39.6% interest in that net book value and net income. Common stockholders other than the RBC Stockholders owned the remaining indirect approximate 60.4% interest in the net book value and net income. Following the consummation of the merger, Mr. Commisso will have a direct 100% ownership interest in the Surviving Corporation’s net book value and net income or loss and the other current stockholders of Mediacom will have no direct or indirect interest in that net book value and net income or loss. See “— Accounting Treatment of the Merger” beginning on page 47.

 

In considering the recommendations of the special committee and of the board of directors with respect to the merger, Mediacom’s unaffiliated stockholders should be aware that certain officers and directors of Mediacom have interests in the merger that are different from, or in addition to, the interests of Mediacom’s unaffiliated stockholders in general. As discussed above, Mr. Commisso is the Chairman of Mediacom’s board of directors and its Chief Executive Officer and owns 100% of the ownership interests of Merger Sub. The members of Mediacom’s board of directors and the special committee were aware of such interests in the proposed merger when deciding to approve

the merger, as was the special committee when deciding to recommend such approval. See “— Background of the Merger” and “— Recommendation of the Special Committee and Board of Directors; Reasons for Recommending Approval of the Merger.”

 

Options and Restricted Stock Units

 

Vested Employee Stock Options.  Each outstanding, vested and unexercised option to purchase shares of our common stock held by an employee of Mediacom (including our executive officers) will be cancelled and the holder thereof (other than Mr. Commisso) will be entitled to receive a cash payment promptly following the merger equal to the product of (a) the number of shares of our common stock previously subject to such option multiplied by (b) the excess, if any, of $8.75 over the exercise price per share previously subject to such option, subject to applicable tax withholding.

 

Unvested Employee Stock Options.  Each outstanding, unvested and unexercised option to purchase shares of our common stock held by an employee of Mediacom (including our executive officers) will be cancelled and the holder thereof (other than Mr. Commisso) will be entitled to receive a cash payment on each vesting date (subject to vesting in accordance with the vesting schedule provided in the applicable option award agreement) equal to the product of (a) the number of shares of our common stock previously subject to such option that would have vested on such date multiplied by (b) the excess, if any, of $8.75 over the exercise price per share previously subject to such option, subject to applicable tax withholding.

 

Employee Restricted Stock Units.  Each outstanding restricted stock unit representing shares of our common stock held by an employee of Mediacom (including our executive officers) will be cancelled and the holder thereof (other than Mr. Commisso) will be entitled to receive a cash payment on each vesting date (subject to vesting in accordance with the vesting schedule provided in the applicable agreement) equal to the product of (a) the number of shares of our common stock previously subject to such unit that would have vested on such date multiplied by (b) $8.75, subject to applicable tax withholding.

 

Non-employee Director Stock Options.  As of the effective time of the merger, each outstanding and unexercised option to purchase shares of our common stock (whether vested or unvested) held by a non-employee director of Mediacom will be cancelled and the holder thereof will be entitled to receive a cash payment promptly following the merger equal to the product of (a) the number of shares of our common stock previously subject to such option multiplied by (b) the excess, if any, of $8.75 over the exercise price per share previously subject to such option, subject to applicable tax withholding.

 

Non-employee Director Restricted Stock Units.  As of the effective time of the merger, each outstanding restricted stock unit representing shares of our common stock held by a non-employee director of Mediacom will be cancelled and the holder thereof will be entitled to receive a cash payment promptly following the merger equal to the product of (a) the number of shares of our common stock previously subject to such unit multiplied by (b) $8.75, subject to applicable tax withholding.

 

As of the effective time of the merger, each outstanding stock option that has an exercise price that equals or exceeds $8.75 per share, and each stock option and restricted stock unit held by Mr. Commisso, will be cancelled without any cash payment to the holder thereof.

 

In connection with the merger, we estimate that our executive officers (other than Mr. Commisso) will immediately receive $[          ] from the settlement of vested stock options and in the future, subject to the satisfaction of the applicable vesting requirements, our executive officers (other than Mr. Commisso) will receive $[          ] from the settlement of unvested stock options and $[          ] from the settlement of restricted stock units. In connection with the merger, we estimate that our non-employee directors will immediately receive $[          ] from the settlement of vested and unvested stock options and $[          ] from the settlement of restricted stock units.

The following table sets forth, for each of our directors and executive officers (other than Mr. Commisso), the consideration to be provided in connection with the merger, based on their ownership of our common stock, options and restricted stock units as of [          ], 2010:

 

 

 

 

Indemnification of Directors

 

The merger agreement provides that until the sixth anniversary of the effective time of the merger, the Surviving Corporation will provide to present and former directors and officers of Mediacom or any Mediacom subsidiary the right to indemnification, advancement of expenses and exculpation provided for them in the constituent documents of Mediacom and the Mediacom subsidiaries on terms no less favorable as in effect on the date of the merger agreement.

 

The merger agreement provides that the Surviving Corporation will maintain, until the sixth anniversary of the effective time of the merger, officers’ and directors’ liability insurance covering Mediacom’s present and former officers and directors at the effective time of the merger, on terms with respect to coverage and amounts no less favorable than those of the applicable policies in effect on the date of the merger agreement, with respect to matters occurring prior to the effective time of the merger, to the extent that such coverage can be maintained at an annual cost to the Surviving Corporation of not greater than 200% of Mediacom’s annual premium for such insurance policies in effect on November 12, 2010, and, if such tail coverage cannot be so maintained at such cost, providing as much of such insurance coverage as can be so maintained at a cost equal to 200% of the annual premium for Mediacom’s insurance policies.

 

Special Committee Compensation

 

Thomas V. Reifenheiser and Natale S. Ricciardi each will receive compensation of $20,000 per month (not to exceed $150,000) commencing June 1, 2010 as members of the special committee.

 

The following summarizes the material United States federal income tax consequences of the merger to those holders of shares of Mediacom common stock that are U.S. Holders (as defined below) who exchange such shares for the cash consideration pursuant to the merger. This summary is based upon the Internal Revenue Code of 1986, as amended (which we refer to as the “Code”), existing and proposed regulations promulgated thereunder, published and administrative rulings, pronouncements and practices, and court decisions, all as in effect and existing on the date hereof and all of which are subject to change at any time, which change may be retroactive or prospective. No rulings have been sought or are expected to be sought from the Internal Revenue Service (which we refer to as the “I.R.S.”) with respect to any of the tax consequences discussed below, and no assurance can be given that the I.R.S. will not take contrary positions. Unless otherwise specifically noted, this summary applies only to those persons that hold their shares of Mediacom common stock as a capital asset and does not apply to persons who hold such shares pursuant to the exercise of employee stock options or otherwise as compensation.

 

This summary addresses only the material United States federal income tax consequences, and not all tax consequences, of the merger that may be relevant to a U.S. Holder (as defined below) of shares of Mediacom common stock. It also does not address any of the tax consequences of the merger to holders of shares of Mediacom common stock that may be subject to special tax treatment, such as financial institutions, real estate investment trusts, personal holding companies, tax-exempt organizations, regulated investment companies, insurance companies, S corporations, brokers and dealers in securities or currencies and certain expatriates. Further, this summary does not address the United States federal income tax consequences of the merger to stockholders, partners or beneficiaries of an entity that is a holder of shares of Mediacom common stock; United States federal estate, gift or alternative minimum tax consequences of the merger; United States federal income tax consequences to persons who hold shares of Mediacom common stock in a straddle or as part of a hedging, conversion, constructive sale or other integrated transaction or whose functional currency is not the U.S. dollar; any state, local or foreign tax consequences of the merger; or the United States federal income tax consequences to any person that will own directly, indirectly or constructively shares of Mediacom capital stock following the merger. For example, this summary does not address the United States federal income tax consequences of the merger to the RBC Stockholders.

 

Each holder of shares of Mediacom common stock should consult its own tax advisor regarding the tax consequences of the merger in such holder’s particular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign or other non-United States taxing jurisdiction and the possible effects of changes in United States federal or other tax laws.

 

A “U.S. Holder” means a beneficial owner of shares of Mediacom common stock that, for United States federal income tax purposes, is: (i) a citizen or individual resident of the United States; (ii) a corporation, including any entity treated as a corporation for United States federal income tax purposes, created or organized in the United States or under the laws of the United States, any State thereof or the District of Columbia; (iii) an estate, the income of which is subject to United States federal income tax without regard to its source; or (iv) a trust that is either subject to the primary supervision of a court within the United States and the control of one or more United States persons or has a valid election in effect under applicable Treasury regulations to be treated as a United States person.

 

A “Non-U.S. Holder” means a beneficial owner of shares of Mediacom common stock that is not a U.S. Holder. We urge holders of shares of Mediacom common stock that are Non-U.S. Holders to consult their own tax advisors regarding the United States federal income tax consequences of the merger, including potential application of United States withholding taxes and possible eligibility for benefits under applicable income tax treaties.

 

If a partnership holds shares of Mediacom common stock, the tax treatment of each of its partners generally will depend upon the status of such partner and the activities of the partnership. Partners of partnerships holding shares of Mediacom common stock should consult their own tax advisors regarding the United States federal tax consequences of the merger.

Exchange of Shares of Mediacom Common Stock

 

The exchange of shares of Mediacom common stock for the cash consideration pursuant to the merger will be a taxable transaction to U.S. Holders for United States federal income tax purposes. In general, a U.S. Holder who receives the cash consideration in exchange for shares of Mediacom common stock pursuant to the merger will recognize gain or loss for United States federal income tax purposes in an amount equal to the difference, if any, between the amount of cash received and the U.S. Holder’s adjusted tax basis in the shares of Mediacom common stock exchanged. Any recognized gain or loss will be capital gain or loss and any such capital gain or loss will be long term (and, thus, eligible for reduced rates of taxation for noncorporate U.S. Holders) if, as of the date of merger, such stockholder has held the shares of Mediacom common stock for more than one year. The amount and character of gain or loss will be determined separately for each block of shares (that is, shares acquired at the same cost in a single transaction) exchanged for the cash consideration pursuant to the merger. The deductibility of capital losses is subject to certain limitations.

 

An exchange of shares pursuant to the merger should result in capital gain or loss treatment described above if a U.S. Holder’s interest in Mediacom completely terminates as a result of (a) all of the shares actually and constructively owned (within the meaning of section 318 of the Code) by the U.S. Holder being exchanged in the merger; or (b) all shares actually owned by the U.S. Holder being exchanged in the merger and, with respect to constructively owned shares, the U.S. Holder is eligible to waive (and effectively waives) constructive ownership of all such shares under procedures described in section 302(c) of the Code. Under the constructive ownership rules of section 318 of the Code, a U.S. Holder is considered to own shares owned, directly or indirectly, by certain members of the U.S. Holder’s family and certain entities (such as corporations, partnerships, trusts and estates) in which the U.S. Holder has an equity interest, as well as shares which the U.S. Holder has an option to acquire. U.S. Holders who constructively own shares should consult their tax advisors regarding the constructive ownership rules and the availability of this waiver procedure.

 

Information Reporting and Backup Withholding

 

Payment of the cash consideration with respect to the exchange of shares of Mediacom common stock pursuant to the merger will generally be subject to information reporting and will generally be subject to backup withholding at the applicable rate if any U.S. Holder fails to supply an accurate taxpayer identification number or otherwise fails to comply with applicable certification requirements. These requirements will be set forth in the Letter of Transmittal and should be carefully reviewed by each holder of shares of Mediacom common stock. Backup withholding is not an additional tax. Any amounts so withheld will be allowed as a refund or a credit against such U.S. Holder’s United States federal income tax liability if the required information is timely furnished to the I.R.S.

 

If the merger agreement is adopted by Mediacom’s stockholders and the other conditions to the closing of the merger are either satisfied or waived, Merger Sub will be merged with and into Mediacom, with Mediacom continuing as the Surviving Corporation. When the merger is completed, each share of Mediacom common stock (other than shares owned by the RBC Stockholders, shares held in Mediacom’s treasury and shares held by stockholders who have perfected their appraisal rights under Delaware law) will be cancelled and will be converted into the right to receive the merger consideration of $8.75 in cash. In the merger, the RBC Stockholders’ shares of Mediacom common stock will be cancelled and cease to exist. All of the outstanding membership interests of Merger Sub, in the aggregate, will be converted into 1,000 shares of newly issued common stock of the Surviving Corporation.

The Merger

 

Merger Sub will merge with and into Mediacom, with Mediacom continuing as the Surviving Corporation. For a detailed description of the merger agreement, see “The Merger Agreement” beginning on page 55. In the merger, at the effective time:

 

Capital Stock

 

 

Stock Options

 

Vested Employee Stock Options.  Each outstanding, vested and unexercised option to purchase shares of Mediacom common stock held by an employee of Mediacom will be cancelled and the holder thereof (other than Mr. Commisso) will be entitled to receive a cash payment promptly following the merger equal to the product of (a) the number of shares of Mediacom common stock previously subject to such option multiplied by (b) the excess, if any, of the merger consideration over the exercise price per share previously subject to such option, subject to applicable tax withholding.

 

Unvested Employee Stock Options.  Each outstanding, unvested and unexercised option to purchase shares of Mediacom common stock held by an employee of Mediacom will be cancelled and the holder thereof (other than Mr. Commisso) will be entitled to receive a cash payment on each vesting date (subject to vesting in accordance with the vesting schedule provided in the applicable option award agreement) equal to the product of (a) the number of shares of common stock previously subject to such option that would have vested on such date multiplied by (b) the excess, if any, of the merger consideration over the exercise price per share previously subject to such option, subject to applicable tax withholding.

 

Non-employee Director Stock Options.  Each outstanding and unexercised option to purchase shares of Mediacom common stock (whether vested or unvested) held by a non-employee director of Mediacom will be cancelled and the holder thereof will be entitled to receive a cash payment promptly following the merger equal to the product of (a) the number of shares of Mediacom common stock previously subject to such option multiplied by (b) the excess, if any, of the merger consideration over the exercise price per share previously subject to such option, subject to applicable tax withholding.

 

Restricted Stock Units

 

Employee Restricted Stock Units.  Each outstanding restricted stock unit representing shares of Mediacom common stock held by an employee of Mediacom will be cancelled and the holder thereof (other than Mr. Commisso) will be entitled to receive a cash payment on each vesting date (subject to vesting in accordance with the vesting schedule provided in the applicable agreement) equal to the product of (a) the number of shares of Mediacom common stock previously subject to such unit that would have vested on such date multiplied by (b) the merger consideration, subject to applicable tax withholding.

 

Non-employee Director Restricted Stock Units.  Each outstanding restricted stock unit representing shares of Mediacom common stock held by a non-employee director of Mediacom will be cancelled and the holder thereof will be entitled to receive a cash payment promptly following the merger equal to the product of (a) the number of shares of Mediacom common stock previously subject to such unit multiplied by (b) the merger consideration, subject to applicable tax withholding.

 

Mr. Commisso and Merger Sub have entered into a voting agreement with Mediacom, pursuant to which Mr. Commisso and Merger Sub have, among other things:

 

 

Each of Mr. Commisso and Merger Sub is entitled to transfer shares of Mediacom Class B common stock to the other and Mr. Commisso is entitled to transfer shares of Mediacom Class B common stock, with the prior consent of the special committee, to (a) his wife, children and other members of his family, (b) trusts, foundations, limited and general partnerships, limited liability companies and other entities in connection with good faith estate planning and similar wealth management programs and arrangements and (c) foundations charitable organizations and similar entities in connection with Mr. Commisso’s charitable giving, in each case so long as Mr. Commisso has the right to vote such shares in accordance with the terms of the voting agreement.

 

The voting agreement terminates on the earlier of (a) the termination of the merger agreement in accordance with its terms, (b) a written agreement between Mediacom and either Mr. Commisso or Merger Sub to terminate the voting agreement, provided that any such termination will be effective only with respect to such stockholder and (c) the consummation of the merger. The termination of the voting agreement in accordance with these provisions will not relieve any party from liability for any willful breach of its obligations under the voting agreement committed prior to such termination.

 

The total amount of funds necessary to consummate the merger is anticipated to be approximately $377.3 million, consisting of (1) approximately $361.0 million to fund the payment of the merger consideration, (2) approximately $4.3 million to fund the payout of employee and director equity awards that are vested as of the closing of the merger (assuming the closing would occur on November 30, 2010) or that vest as a result of the merger, and (3) approximately $12.0 million to pay transaction fees and expenses. Under the merger agreement, the completion of the merger is conditioned upon the receipt of these funds by Mediacom from our principal subsidiaries Mediacom LLC and Mediacom Broadband LLC, which are referred to as “LLC” and “Broadband,” respectively. That amount does not include approximately $29.5 million that the Surviving Corporation will be required to pay to Mediacom employees (other than Mr. Commisso) in respect of outstanding unvested stock options and restricted stock units, subject to the vesting terms thereof. The various operating subsidiaries of LLC and Broadband will borrow the necessary funds under their revolving credit facilities, and, under the credit agreements governing the credit facilities and the indentures governing outstanding senior notes issued by LLC and Broadband, such borrowings can only be made and distributed to us if certain conditions are met. Such conditions include the accuracy of representations and warranties under the credit agreements, the absence of any event of default and certain other conditions relating to restricted payments. Set forth below are summaries of the LLC and Broadband credit facilities and the credit agreements governing such facilities.

 

As of September 30, 2010, subsidiaries of LLC and Broadband maintained an aggregate $3.275 billion of senior secured credit facilities (the “LLC credit facility,” the “Broadband credit facility” and, together, the “credit

facilities”), of which $2.541 billion was outstanding. As of September 30, 2010, we had no outstanding balance under our aggregate revolving credit commitments of $734.5 million, of which $731.0 million was unused and available to be borrowed based on the terms and conditions of our credit facilities. Our revolving credit commitments expire in the amounts of $79.0 million, $430.3 million and $225.2 million on September 30, 2011, December 31, 2012 and December 31, 2014, respectively.

 

Mediacom LLC Credit Facility

 

The LLC credit facility consists of revolving credit commitments (the “LLC revolver”) and three outstanding term loans (“LLC term loan C,” “LLC term loan D” and “LLC term loan E”). The LLC credit agreement provides for interest at varying rates based upon various borrowing options and certain financial ratios, and for customary commitment fees on the unused portion of the available revolving credit commitment. Interest on the outstanding LLC revolver balances and on each of the outstanding term loans is payable at either the Eurodollar rate or an alternate base rate plus, in each case, an applicable margin.

 

As of September 30, 2010, the LLC revolver had commitments of $304.2 million, which were scheduled to expire on December 31, 2014, with a scheduled reduction of $79.0 million on September 30, 2011. As of the same date, the LLC term loan C had an outstanding balance of $625.6 million and was scheduled to mature on January 31, 2015, the LLC term loan D had an outstanding balance of $297.0 million and was scheduled to mature on March 31, 2017, and the LLC term loan E had an outstanding balance of $249.4 million and was scheduled to mature on October 23, 2017.

 

Mediacom Broadband Credit Facility

 

The Broadband credit facility consists of revolving credit commitments (the “Broadband revolver”) and two outstanding term loans (“Broadband term loan D” and “Broadband term loan F”). The Broadband credit agreement provides for interest at varying rates based upon various borrowing options and certain financial ratios, and for customary commitment fees on the unused portion of the available revolving credit commitment. Interest on the outstanding Broadband revolver balances and on each of the outstanding term loans is payable at either the Eurodollar rate or an alternate base rate plus, in each case, an applicable margin.

 

As of September 30, 2010, the Broadband revolver had commitments of $430.3 million, which were scheduled to expire on December 31, 2012 and were not subject to scheduled reductions prior to maturity. As of the same date, the Broadband term loan D had an outstanding balance of $770.0 million and was scheduled to mature on January 31, 2015, and the Broadband term loan F had an outstanding balance of $598.5 million, and was scheduled to mature on October 23, 2017.

 

Covenant Compliance

 

The credit agreements to each of the credit facilities contain various covenants that, among other things, impose certain limitations on mergers and acquisitions, consolidations and sales of certain assets, liens, the incurrence of additional indebtedness, certain restricted payments and certain transactions with affiliates. The principal financial covenants of the LLC credit facility require compliance with a total leverage ratio of no more than 6.0 to 1.0 and an interest coverage ratio of no less than 2.0 to 1.0. As of, and for the three months ended, September 30, 2010, the LLC credit facility’s total leverage ratio and interest coverage ratio were 4.4 to 1.0 and 2.6 to 1.0, respectively. The principal financial covenant of the Broadband credit facility requires compliance with a total leverage ratio of no more than 6.0 to 1.0. As of September 30, 2010, the Broadband credit facility’s total leverage ratio was 4.4 to 1.0. The terms “total leverage ratio” and “interest coverage ratio” are defined in the credit agreements governing the credit facilities. The credit facilities are collateralized by the pledge of all of LLC’s and Broadband’s ownership interests in their respective operating subsidiaries, and are guaranteed by them on a limited recourse basis to the extent of such ownership interests.

 

The indentures governing LLC’s and Broadband’s senior notes contain various covenants, though they are generally less restrictive than those found in the credit facilities. The principal financial covenant of these senior notes has a limitation on the incurrence of additional indebtedness based upon a maximum debt to operating cash flow ratio of 8.5 to 1.0. As of September 30, 2010, the debt to operating cash flow ratios for LLC and Broadband

were 6.0 to 1.0 and 6.3 to 1.0, respectively. The term “debt to operating cash flow ratio” is defined in the indentures governing LLC’s and Broadband’s senior notes. These covenants also restrict LLC’s and Broadband’s ability, among other things, to make certain distributions, investments and other restricted payments, sell certain assets, create certain liens, merge, consolidate or sell substantially all of our assets and enter into certain transactions with affiliates.

 

Under the terms of the merger agreement, all expenses will be borne by the party incurring such expenses and expenses associated with the preparation, printing, filing and mailing of this proxy statement and the Schedule 13E-3 and any amendments or supplements thereto, the solicitation of stockholder approvals and the solvency opinion will be borne by Mediacom. If the merger agreement is terminated by any party (other than in the event Mediacom terminates the merger agreement as a result of a material breach of the merger agreement by a RBC Stockholder), then Mediacom will reimburse the RBC Stockholders for all of their expenses incurred in connection with the transactions contemplated by the merger agreement up to $2.5 million in the aggregate.

 

Barclays Capital has provided certain financial advisory services to the special committee in connection with the merger. Mediacom will pay Barclays Capital compensation for their services and Mediacom has agreed to reimburse Barclays Capital for all reasonable out-of-pocket expenses incurred by them, including certain reasonable fees and expenses of legal counsel, and to indemnify Barclays Capital against certain liabilities and expenses in connection with their engagement, including certain liabilities under the federal securities laws. See “— Opinion of Financial Advisor to the Special Committee” for more information about Barclays Capital’s compensation.

 

J.P. Morgan and BofA Merrill Lynch have provided certain financial advisory services to Merger Sub in connection with the merger. Merger Sub has agreed to pay J.P. Morgan and BofA Merrill Lynch compensation for their services upon completion of the merger and has agreed to reimburse J.P. Morgan and BofA Merrill Lynch for certain expenses incurred by them in connection with their engagement, including certain reasonable fees and expenses of legal counsel, and to indemnify J.P. Morgan, BofA Merrill Lynch and their directors, officers, employees, agents and affiliates against certain liabilities and expenses in connection with their engagement, including certain liabilities under the federal securities laws. See “— Financial Analyses of J.P. Morgan and BofA Merrill Lynch” for more information about the compensation payable to J.P. Morgan and BofA Merrill Lynch.

 

Mediacom has retained [          ] as a proxy solicitation and information agent, and BNY Mellon as the paying agent, in connection with the merger. [Proxy solicitor] may contact holders of Mediacom common stock by mail, telephone, facsimile, e-mail and personal interview and may request banks, brokers, dealers and other nominee stockholders to forward materials relating to the merger to beneficial owners.

 

As compensation for acting as a proxy solicitation and information agent in connection with the merger, [          ] will receive reasonable and customary compensation. Mediacom will pay the paying agent reasonable and customary compensation for its services in connection with the merger, plus reimbursement for out-of-pocket expenses, and will indemnify the paying agent against certain liabilities and expenses in connection therewith, including certain liabilities under federal securities laws. Brokers, dealers, commercial banks and trust companies will be reimbursed by Mediacom for customary handling and mailing expenses incurred by them in forwarding material to their customers.

The following is an estimate of fees and expenses to be incurred by Mediacom, or in certain circumstances described above, by the RBC Stockholders, in connection with the merger:

 

 

 

 

Mediacom will account for this transaction as a purchase of treasury stock with no change to the basis of the existing assets and liabilities of Mediacom. The controlling stockholder, Mr. Commisso, controls Mediacom by holding shares of common stock that represent approximately 86% of the outstanding voting power of Mediacom. Due to the existing control, the transaction to acquire the remaining non-controlling shares of Mediacom common stock will be accounted for as an equity transaction.

 

State Takeover Laws

 

Mediacom is incorporated under the laws of the State of Delaware. Generally, Section 203 of the Delaware General Corporation Law (which we refer to as “Section 203”) prevents an “interested stockholder” (including a person who owns or has the right to acquire 15% or more of the corporation’s outstanding voting stock) from engaging in a “business combination” (defined to include mergers and certain other actions) with a Delaware corporation for a period of three years following the date such person became an interested stockholder unless the board of directors of the target approves the business combination prior to the date the person becomes an interested stockholder. Mr. Commisso and his affiliates have owned more than 15% of our voting stock for more than three years. In addition, Mediacom’s board of directors approved the merger agreement and the voting agreement prior to the execution of the merger agreement specifically to render the restrictions in Section 203 inapplicable to the merger agreement and the voting agreement, the merger and the other transactions contemplated by the merger agreement. Therefore, Mediacom does not believe that Section 203 would apply to the merger.

 

Certain Litigation

 

Between June 3, 2010 and June 10, 2010, three purported class actions lawsuits were filed against us and our directors, including Mr. Commisso, all in the Court of Chancery of the State of Delaware, under the captions Colleen Witmer v. Mediacom Communications Corporation, et al., J. Malcolm Gray v. Mediacom Communications Corporation, et al. and Haverhill Retirement System v. Mediacom Communications Corporation, et al. The lawsuits, which were subsequently consolidated for all purposes in the Delaware Court of Chancery under the caption In Re Mediacom Communications Corporation Shareholders Litigation, allege, among other things, that the defendant directors breached their fiduciary duties to the stockholders of Mediacom in connection with

Mr. Commisso’s proposal and that Mediacom and Mr. Commisso aided and abetted such breaches. The plaintiffs seek injunctive relief or, in the alternative, compensatory damages.

 

On November 18, 2010, another purported class action lawsuit was filed against us and our directors, including Mr. Commisso, in the Supreme Court of the State of New York, Orange County, under the caption Wendy Kwait v. Mediacom Communications Corporation, et al. The lawsuit alleges, among other things, that the director defendants breached their fiduciary duties to the stockholders of Mediacom in connection with Mr. Commisso’s proposal and that Mediacom and Mr. Commisso aided and abetted such breaches. The plaintiffs seek injunctive relief, rescission of the transaction or rescissory damages.

 

On November 29, 2010, another purported class action lawsuit was filed against us and our directors, including Mr. Commisso, in the United States District Court for the Southern District of New York, under the caption Thomas Turberg v. Mediacom Communications Corporation, et al. The lawsuit alleges, among other things, that the director defendants breached their fiduciary duties to the stockholders of Mediacom in connection with Mr. Commisso’s proposal and that Mediacom and JMC Communications LLC aided and abetted such breaches. The plaintiffs seek injunctive relief and damages.

 

We are also involved in various other legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these other matters will not have a material adverse effect on our consolidated financial position, results of operations, cash flows or business.

 

No provision has been made to grant Mediacom’s stockholders, other than the RBC Stockholders or its affiliates, access to the corporate files of Mediacom or any other party to the merger or to obtain counsel or appraisal services at the expense of Mediacom or any other such party.

 

If the merger is consummated, holders of shares of Mediacom common stock who do not vote in favor of adoption of the merger agreement and who properly demand appraisal of their shares will be entitled to appraisal rights under Section 262 (which we refer to as “Section 262”) of the Delaware General Corporation Law, provided that such stockholders comply with the conditions established by Section 262.

 

Section 262 is reprinted in its entirety as Annex C to this proxy statement. The following discussion is not a complete statement of the law relating to appraisal rights and is qualified in its entirety by reference to the full text of Section 262 in Annex C. Any holder of shares of Mediacom common stock who wishes to exercise statutory appraisal rights or who wishes to preserve the right to do so should review this discussion and Annex C carefully because failure to comply with the procedures set forth in Annex C will result in the loss of appraisal rights. All references in this summary of appraisal rights to a “stockholder” or “holder of shares of Mediacom common stock” are to the holder of record of shares of Mediacom common stock. A person having a beneficial interest in shares of Mediacom common stock held of record in the name of another person, such as a broker, fiduciary, depositary or other nominee, must act promptly to cause the record holder to follow the steps summarized below properly and in a timely manner to perfect appraisal rights.

 

A stockholder who makes the demand described below and in Annex C with respect to shares of Mediacom common stock, who continuously holds such shares through the effective time of the merger, who otherwise complies with the statutory requirements of Section 262 and who neither votes in favor of adoption of the merger agreement nor consents thereto in writing, will be entitled to an appraisal by the Delaware Court of Chancery (which we refer to as the “Delaware Court”) of the “fair value” of such stockholder’s shares of Mediacom common stock, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with a fair rate of interest, if any, as determined by the court.

 

Under Section 262, where a merger is to be submitted for approval at a meeting of stockholders, such as the special meeting, not less than 20 days prior to the meeting, a constituent corporation must notify each of the holders of its stock for whom appraisal rights are available that appraisal rights are available and include in each notice a copy of Section 262. This proxy statement constitutes such notice to the holders of shares of Mediacom common

stock, and the full text of Section 262 is attached to this proxy statement as Annex C. Any holder of Mediacom common stock who wishes to exercise appraisal rights, or who wishes to preserve such holder’s right to do so, should review the following discussion and Annex C carefully because failure to timely and properly comply with the procedures specified will result in the loss of appraisal rights. Moreover, because of the complexity of the procedures for exercising the right to seek appraisal of shares of Mediacom common stock, if a stockholder is considering exercising such rights, such stockholder should seek the advice of legal counsel.

 

Filing Written Demand

 

Holders of shares of Mediacom common stock who desire to exercise their appraisal rights must not vote in favor of adoption of the merger agreement. A stockholder who signs and returns a proxy card without expressly directing that its shares of Mediacom common stock be voted against the merger agreement will effectively waive its appraisal rights because such shares represented by the proxy card will be voted for the adoption of the merger agreement. Accordingly, a stockholder who desires to exercise and perfect appraisal rights with respect to any of his or her shares of Mediacom common stock must check either the “against” or the “abstain” box next to the proposal to adopt the merger agreement on such card or affirmatively vote in person against the proposal or register in person an abstention with respect to such proposal or timely revoke any proxy in favor of the adoption of the merger agreement or not vote at all. In addition, holders of shares of Mediacom common stock who desire to exercise their appraisal rights must deliver to Mediacom, before the vote on the proposal to adopt the merger agreement, a written demand for appraisal of such stockholder’s shares of Mediacom common stock. A proxy or vote against adoption of the merger agreement will not by itself constitute a demand for appraisal; the written demand for appraisal must be in addition to and separate from any proxy or vote. The demand must reasonably inform us of the identity of the holder as well as the intention of the holder to demand an appraisal of the “fair value” of the shares held by the holder. A stockholder’s failure to make the written demand prior to the taking of the vote on the adoption of the merger agreement at Mediacom’s special meeting of stockholders will constitute a waiver of appraisal rights.

 

Only a holder of record of shares of Mediacom common stock is entitled to demand appraisal rights for the shares registered in that holder’s name. A demand for appraisal in respect of shares of Mediacom common stock must be executed by or on behalf of the holder of record, fully and correctly, as the holder’s name appears on the holder’s stock certificates, must specify the holder’s name and mailing address and the number of shares registered in the holder’s name and must state that the person intends thereby to demand appraisal of the holder’s shares in connection with the merger. If the shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of the demand must be made in that capacity, and if the shares are owned of record by more than one person, as in a joint tenancy or tenancy in common, the demand should be executed by or on behalf of all joint owners. An authorized agent, including an agent for two or more joint owners, may execute a demand for appraisal on behalf of a holder of record; however, the agent must identify the record owner or owners and expressly disclose that, in executing the demand, the agent is acting as agent for the record owner or owners. If the shares are held in “street name” by a broker, bank or nominee, the broker, bank or nominee may exercise appraisal rights with respect to the shares held for one or more beneficial owners while not exercising the rights with respect to the shares held for other beneficial owners; in such case, however, the written demand must set forth the number of shares as to which appraisal is sought and where no number of shares is expressly mentioned the demand will be presumed to cover all shares of Mediacom common stock held in the name of the record holder. Stockholders who hold their shares in brokerage accounts or other nominee forms and who wish to exercise appraisal rights are urged to consult with their brokers to determine the appropriate procedures for the making of a demand for appraisal by such a nominee.

 

A stockholder who elects to exercise appraisal rights should mail or deliver his or her written demand for appraisal of such stockholder’s shares before the taking of the vote on the merger to: Mediacom Communications Corporation, 100 Crystal Run Road, Middletown, New York 10941, Attention: Joseph E. Young, Secretary.

 

Notice by the Surviving Corporation

 

Within ten days after the effective time of the merger, Mediacom must notify each holder of Mediacom common stock who has properly made a written demand for appraisal in accordance with Section 262, and who has not voted in favor of the adoption of the merger agreement, that the merger has become effective.

Filing a Petition for Appraisal

 

Within 120 days after the effective time of the merger, but not thereafter, either Mediacom or any stockholder who has complied with the required conditions of Section 262 and who is otherwise entitled to appraisal rights may file a petition in the Delaware Court, with a copy served on Mediacom in the case of a petition filed by a stockholder, demanding a determination of the fair value of the shares of all dissenting stockholders. There is no present intention on the part of Mediacom to file an appraisal petition and stockholders seeking to exercise appraisal rights should not assume that Mediacom will file an appraisal petition or that Mediacom will initiate any negotiations with respect to the fair value of the shares. Accordingly, it is the obligation of holders of Mediacom common stock who desire to have their shares appraised to initiate all necessary action to perfect their appraisal rights within the time periods and in the manner prescribed in Section 262.

 

Within 120 days after the effective time of the merger, any stockholder who has complied with the applicable provisions of Section 262 by then will be entitled, upon written request, to receive from Mediacom a statement setting forth the aggregate number of shares of Mediacom common stock not voting in favor of the adoption of the merger agreement with respect to which demands for appraisal were received by Mediacom and the number of holders of such shares. The statement must be mailed within 10 days after the written request for the statement has been received by Mediacom or within 10 days after the expiration of the period for the delivery of demands as described above, whichever is later.

 

A person who is the beneficial owner of shares held either in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file a petition for appraisal or request from the Surviving Corporation such statement.

 

Appraisal Proceeding By Delaware Court

 

If a petition for an appraisal is timely filed and litigated by a holder of shares of Mediacom common stock and a copy thereof is served upon Mediacom, Mediacom will then be obligated within 20 days to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all stockholders who have demanded an appraisal of their shares and with whom agreements as to the value of their shares have not been reached. After notice to the stockholders as may be required by the court, the Delaware Court is empowered to conduct a hearing on the petition to determine those stockholders who have complied with Section 262 and who have become entitled to appraisal rights thereunder. The Delaware Court may require the stockholders who demanded appraisal to submit their stock certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceeding; and if any stockholder fails to comply with the direction, the Delaware Court may dismiss the proceedings as to the stockholder.

 

After determining the holders of shares of Mediacom common stock who are entitled to appraisal, the Delaware Court will appraise the “fair value” of their shares, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. Unless the Delaware Court in its discretion determines otherwise for good cause shown, interest from the effective date of the merger through the date of payment of the judgment shall be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective time and the date of payment of the judgment.

 

In determining fair value, the Delaware Court will take into account all relevant factors. In Weinberger v. UOP, Inc., the Delaware Supreme Court discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered, and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court has stated that, in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts that could be ascertained as of the date of the merger that throw any light on future prospects of the merged corporation. Section 262 provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the merger.” In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative

elements of value arising from such accomplishment or expectation. In Weinberger, the Delaware Supreme Court also stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.”

 

You should be aware that an investment banking opinion as to fairness from a financial point of view is not necessarily an opinion as to fair value under Section 262. No representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court, and stockholders should recognize that an appraisal could result in a determination of a value higher or lower than, or the same as, the merger consideration. Moreover, Mediacom does not anticipate offering more than the merger consideration to any stockholder exercising appraisal rights and reserves the right to assert, in any appraisal proceeding, that, for purposes of Section 262, the “fair value” of a share of Mediacom common stock is less than the merger consideration. In determining “fair value,” the Delaware Court is required to take into account all relevant factors.

 

The costs of the appraisal proceeding may be determined by the Delaware Court and taxed against the parties as the Delaware Court deems equitable under the circumstances. However, costs do not include attorneys’ and expert witness fees. Each dissenting stockholder is responsible for its attorneys’ and expert witness expenses, although, upon application of a dissenting Mediacom stockholder, the Delaware Court may order that all or a portion of the expenses incurred by any dissenting stockholder in connection with the appraisal proceeding, including without limitation, reasonable attorneys’ fees and the fees and expenses of experts, be charged pro-rata against the value of all shares of stock entitled to appraisal. In the absence of such a determination or assessment, each party bears its own expenses.

 

Any holder of shares of Mediacom common stock who has duly demanded appraisal in compliance with Section 262 will not, after the effective time of the merger, be entitled to vote for any purpose any shares subject to the demand or to receive payment of dividends or other distributions on the shares, except for dividends or distributions payable to stockholders of record at a date before the effective time of the merger.

 

At any time within 60 days after the effective time of the merger, any stockholder who has not commenced an appraisal proceeding or joined an appraisal proceeding as a named party may withdraw his or her demand for appraisal and accept the terms offered in the merger agreement by delivering to Mediacom a written withdrawal of his or her demand for appraisal and acceptance of the merger consideration. After this period, the stockholder may withdraw the demand for appraisal and receive payment for the shares as provided in the merger agreement only with the written approval of Mediacom. If no petition for appraisal is filed with the Delaware Court within 120 days after the effective time of the merger, stockholders’ rights to appraisal (if available) will cease, and all holders of shares of Mediacom common stock (other than the RBC Stockholders with respect to their shares of common stock that will be cancelled) will be entitled to receive the consideration offered pursuant to the merger agreement. Inasmuch as Mediacom has no obligation to file a petition for appraisal, and Mediacom has no present intention to do so, any holder of shares of Mediacom common stock who desires a petition for appraisal to be filed is advised to file it on a timely basis. Except in respect of a stockholder who has properly withdrawn its demand for appraisal within sixty days after the effective date of the merger (and who did not file the petition for appraisal or join the appraisal proceeding as a named party), no appraisal proceeding in the Delaware Court will be dismissed as to any stockholder without the approval of the Delaware Court, and such approval may be conditioned upon such terms as the Delaware Court deems just.

 

Failure of any stockholder to comply strictly with all of the procedures set forth in Section 262 will result in the loss of a stockholder’s statutory appraisal rights. Consequently, any stockholder wishing to exercise appraisal rights is urged to consult legal counsel before attempting to exercise those rights.

 

The special meeting of stockholders of Mediacom will be held on [          ], 2011 at 10:00 A.M., New York time, at the offices of SNR Denton US LLP, 1221 Avenue of the Americas, 25th Floor, New York, New York 10020.

 

At the special meeting, you will be asked:

 

1. To consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of November 12, 2010, by and among Mediacom, Merger Sub and Mr. Commisso, as it may be amended from time to time, which, among other things, provides for the merger of Merger Sub with and into Mediacom, with Mediacom continuing as the surviving corporation.

 

2. To approve any motion to adjourn the special meeting to a later date to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve proposal 1.

 

3. To transact such other business as may properly come before the special meeting or any adjournments or postponements of the special meeting.

 

We have fixed [          ], 2011, as the record date. Only holders of record of Mediacom common stock as of the close of business on the record date will be entitled to notice of, and to vote at, the special meeting. At the close of business on the record date, we expect that there will be approximately [          ] shares of Mediacom Class A common stock issued and outstanding held by approximately [          ] holders of record and 27,001,944 shares of Mediacom Class B common stock issued and outstanding held by three holders of record.

 

Each holder of record of Mediacom Class A common stock at the close of business on the record date is entitled to one vote for each share then held on each matter submitted to a vote of stockholders at the special meeting. Each holder of record of Mediacom Class B common stock at the close of business on the record date is entitled to ten votes for each share then held on each matter submitted to a vote of stockholders at the special meeting.

 

The presence, in person or by proxy, of stockholders entitled to cast a majority of the votes entitled to be cast by the stockholders will constitute a quorum for the special meeting. If you are a record holder on the record date and vote by proxy or in person at the special meeting, you will be counted for purposes of determining whether there is a quorum at the special meeting. Shares of Mediacom common stock that are present and entitled to vote but abstain from voting will be counted for purposes of determining whether a quorum is present, but their abstention will have the same effect as a vote “against” the merger proposal. Brokers, banks and other nominees holding shares for beneficial owners will not have discretionary power to vote the shares they hold unless they receive instructions from the beneficial owners of such shares. Uninstructed shares result in “broker non-votes,” which will have the same effect as votes “against” the merger proposal but will be counted for the purpose of determining whether there is a quorum for the transaction of business at the special meeting.

 

Holders of record can ensure that their shares are voted at the special meeting by completing, signing, dating and mailing the enclosed proxy card in the enclosed postage-prepaid envelope. Submitting instructions by this method will not affect your right to attend the special meeting and vote.

 

Submitting your proxy via telephone or the Internet is fast, convenient and your proxy is immediately confirmed and tabulated. If you choose to submit your proxy via telephone or the Internet, instructions to do so are set forth on the enclosed proxy card. The telephone and Internet proxy procedures are designed to authenticate proxies by use of a personal identification number, which appears on the proxy card. These procedures, which

comply with Delaware law, allow stockholders to appoint a proxy to vote their shares and to confirm that their instructions have been properly recorded. If you submit your proxy via telephone or the Internet, you do not have to mail in your proxy card, but your proxy must be received by 11:59 P.M., New York time, on [          ], 2011.

 

If you own your shares of Mediacom common stock in your own name, you can submit your proxy via the Internet in accordance with the instructions provided on the enclosed proxy card. If your shares are held by a bank, broker or other nominee, please follow the instructions provided with your proxy materials to determine if Internet or telephone voting are available. If your bank or broker does make Internet or telephone voting available, please follow the directions provided on the voting form supplied by your bank or broker.

 

You may revoke your proxy at any time before your shares are voted at the special meeting by:

 

 

All revocations of your proxy must be received prior to the special meeting. Merely attending the special meeting will not revoke your proxy, but voting in person at the special meeting will revoke any previously submitted proxy.

 

If you need assistance, including help in changing or revoking your proxy, please contact [proxy solicitor], which is acting as a proxy solicitation agent and information agent in connection with the merger as follows:

 

[insert contact information for proxy solicitor]

 

Submitting a proxy now will not limit your right to vote at the special meeting if you decide to attend in person. If you plan to attend the special meeting and wish to vote in person, you will be given a ballot at the special meeting. Please note, however, that if your shares are held in “street name,” which means your shares are held of record by a broker, bank or other nominee, and you wish to vote at the special meeting, you must bring to the special meeting a proxy from the record holder of the shares authorizing you to vote at the special meeting. Please contact your broker, bank or nominee for specific instructions.

 

Approval of the adoption of the merger agreement (proposal 1) requires a vote of the holders of Mediacom common stock that satisfies two criteria:

 

 

Pursuant to Mediacom’s bylaws, the special meeting may be adjourned by the chairman of the meeting or by the affirmative vote of holders of a majority of the votes represented by shares present in person or by proxy and entitled to vote at the special meeting.

Subject to revocation, all shares represented by each properly executed proxy will be voted in accordance with the instructions indicated on the proxy. If you return a signed proxy card but do not provide voting instructions (other than in the case of broker non-votes), the persons named as proxies on the proxy card will vote “FOR” the adoption of the merger agreement and “FOR” any adjournment or postponement of the special meeting, and in such manner as the persons named on the proxy card in their discretion determine with respect to such other business as may properly come before the special meeting.

 

Abstentions and broker non-votes will have the same effect as a vote “AGAINST” adoption of the merger agreement. Broker non-votes will have no effect on, but abstentions will have the same effect as a vote “AGAINST,” any motion to adjourn the special meeting. If the special meeting is adjourned for any reason, at any subsequent reconvening of the special meeting, all proxies will be voted in the same manner as such proxies would have been voted at the original convening of the meeting (except for any proxies that have been revoked or withdrawn).

 

The proxy card confers discretionary authority on the persons named on the proxy card to vote the shares represented by the proxy card on any other matter that is properly presented for action at the special meeting. As of the date of this proxy statement, we do not know of any other matter to be raised at the special meeting.

 

The RBC Stockholders who, as of November 30, 2010, collectively held shares representing approximately 99% of the outstanding shares of Mediacom Class B common stock, less than 1% of the outstanding shares of Mediacom Class A common stock and approximately 86% of the total voting power of Mediacom common stock, have entered into a voting agreement in which they have agreed to vote their shares in favor of the adoption of the merger agreement. See “Special Factors — Structure and Steps of the Merger.” The shares held by the RBC Stockholders subject to the voting agreement will not be counted in the majority of the minority vote.

 

This proxy statement is being furnished in connection with the solicitation of proxies by Mediacom. Mediacom will bear the cost of soliciting proxies. These costs include the preparation, assembly and mailing of this proxy statement, the notice of the special meeting of stockholders and the enclosed proxy card, as well as the cost of forwarding these materials to the beneficial owners of Mediacom common stock. Mediacom directors, officers and regular employees may, without compensation other than their regular compensation, solicit proxies by telephone, e-mail, the Internet, facsimile or personal conversation, as well as by mail. Mediacom has retained [          ], a proxy solicitation firm, to assist with the solicitation of proxies for the special meeting for a fee estimated not to exceed $[          ] plus expenses. We may also reimburse brokerage firms, custodians, nominees, fiduciaries and others for expenses incurred in forwarding proxy material to the beneficial owners of Mediacom common stock. See “Special Factors — Estimated Fees and Expenses” for more information about the fees Mediacom expects to pay in connection with the merger.

 

Please do not send any certificates representing shares of Mediacom common stock with your proxy card. If the merger is completed, the procedure for the exchange of certificates representing shares of Mediacom common stock will be as described in this proxy statement. For a description of procedures for exchanging certificates representing shares of Mediacom common stock for the merger consideration following completion of the merger, see “The Merger Agreement — Payment for Mediacom Common Stock in the Merger.”

 

The following is a summary of the material terms of the merger agreement. Although we believe that this description covers the material terms of the merger agreement, it may not contain all the information that is important to you and is qualified in its entirety by reference to the merger agreement, a copy of which is attached as Annex A to this proxy statement and incorporated herein by reference. You should read the merger agreement because it, and not this proxy statement, is the legal document that governs the merger.

 

At the closing of the merger, Merger Sub will merge with and into Mediacom and the separate corporate existence of Merger Sub will cease. Mediacom will be the Surviving Corporation in the merger and will continue to be a Delaware corporation after the merger. The certificate of incorporation and bylaws of Mediacom, as amended and restated pursuant to the merger agreement, will be the certificate of incorporation and bylaws of the Surviving Corporation. Mr. Commisso will, from and after the closing of the merger, be the initial director of the Surviving Corporation, until his respective successor is duly elected or appointed and qualified in the manner provided in the certificate of incorporation and bylaws of the Surviving Corporation or until his earlier death, resignation or removal. The officers of Mediacom immediately prior to the effective time of the merger will, from and after the effective time of the merger, be the initial officers of the Surviving Corporation, until their respective successors are duly elected or appointed and qualified in the manner provided in the certificate of incorporation and bylaws of the Surviving Corporation or until their earlier death, resignation or removal.

 

The closing of the merger will take place as soon as practicable, but in no event later than the third business day, after the satisfaction or waiver (if permitted) of the conditions to closing (other than those conditions that by their terms are to be satisfied at the closing), unless another date is agreed to in writing by Mr. Commisso and Mediacom. The merger will become effective at the time, which we refer to as the effective time of the merger, when Mediacom files a certificate of merger with the Secretary of State of the State of Delaware or such later time as the parties agree and specify in the certificate of merger.

 

Capital Stock

 

At the effective time of the merger:

 

 

Stock Options

 

Vested Employee Stock Options.  As of the effective time of the merger, each outstanding vested and unexercised option to purchase shares of Mediacom common stock held by an employee of Mediacom will be cancelled and the holder thereof (other than Mr. Commisso) will be entitled to receive a cash payment promptly following the merger equal to the product of (a) the number of shares of Mediacom common stock previously

subject to such option multiplied by (b) the excess, if any, of the merger consideration over the exercise price per share previously subject to such option, subject to applicable tax withholding.

 

Unvested Employee Stock Options.  As of the effective time of the merger, each outstanding unvested and unexercised option to purchase shares of Mediacom common stock held by an employee of Mediacom will be cancelled and the holder thereof (other than Mr. Commisso) will be entitled to receive a cash payment on each vesting date (according to the vesting schedule provided in, and subject to the terms of, the applicable option award agreement) equal to the product of (a) the number of shares of Mediacom common stock previously subject to such option that would have vested on such date multiplied by (b) the excess, if any, of the merger consideration over the exercise price per share previously subject to such option, subject to applicable tax withholding.

 

Non-employee Director Stock Options.  As of the effective time of the merger, each outstanding and unexercised option to purchase shares of Mediacom common stock (whether vested or unvested) held by a non-employee director of Mediacom will be cancelled and the holder thereof will be entitled to receive a cash payment promptly following the merger equal to the product of (a) the number of shares of Mediacom common stock previously subject to such option multiplied by (b) the excess, if any, of the merger consideration over the exercise price per share previously subject to such option, without any interest and subject to applicable tax withholding.

 

As of the effective time of the merger, each outstanding stock option that has an exercise price that equals or exceeds $8.75 per share, and each stock option held by Mr. Commisso, will be cancelled without any cash payment to the holder thereof.

 

Restricted Stock Units

 

Employee Restricted Stock Units.  As of the effective time of the merger, each outstanding restricted stock unit representing shares of Mediacom common stock held by an employee of Mediacom will be cancelled and the holder thereof (other than Mr. Commisso) will be entitled to receive a cash payment on each vesting date (according to the vesting schedule provided in, and subject to the terms of, the applicable agreement) equal to the product of (a) the number of shares of Mediacom common stock previously subject to such unit that would have vested on such date multiplied by (b) the merger consideration, subject to applicable tax withholding.

 

Non-employee Director Restricted Stock Units.  As of the effective time of the merger, each outstanding restricted stock unit representing shares of Mediacom common stock held by a non-employee director of Mediacom will be cancelled and the holder thereof will be entitled to receive a cash payment promptly following the merger equal to the product of (a) the number of shares of common stock previously subject to such unit multiplied by (b) the merger consideration, subject to applicable tax withholding.

 

As of the effective time of the merger, each outstanding restricted stock unit held by Mr. Commisso will be cancelled without any cash payment to Mr. Commisso.

 

Employee Stock Purchase Plan

 

Under the merger agreement, we have agreed to terminate our employee stock purchase plan effective as of the date that is three days prior to the effective time of the merger.

 

As promptly as reasonably practicable after the effective time of the merger, the Surviving Corporation will deposit, or cause to be deposited, with BNY Mellon, as paying agent, sufficient cash to pay to the holders of Mediacom common stock the merger consideration of $8.75 per share. As soon as reasonably practicable after the effective time, the Surviving Corporation will instruct the paying agent to mail to each record holder of Mediacom common stock (excluding the RBC Stockholders, Mediacom or any of its wholly-owned subsidiaries and stockholders perfecting appraisal rights under Delaware law), a letter of transmittal and instructions for use in effecting the surrender of all Mediacom common stock certificates and shares of Mediacom common stock represented by book-entry held by such record holder in exchange for a cash payment of $8.75, without interest, for

each share of Mediacom common stock owned. Shareholders should not send in their Mediacom common stock certificates until they receive the letter of transmittal.

 

If payment is to be made to a person other than the person in whose name the Mediacom common stock certificate or book-entry share surrendered is registered, it will be a condition of payment that the certificate or book-entry share so surrendered be properly endorsed or otherwise in proper form for transfer and that the person requesting payment pay any transfer or other taxes required by reason of the payment to a person other than the registered holder of the certificate or book-entry share surrendered of the amount due to Mediacom common stockholders under the merger agreement, or that such person establish to the satisfaction of the paying agent that any such taxes have been paid or are not applicable.

 

Any portion of the payment fund held by the paying agent not distributed to the holders of Mediacom common stock six months following the effective time of the merger will be delivered to the Surviving Corporation, and after such transfer, any stockholders of Mediacom who have not properly surrendered their stock certificates or book-entry shares may look only to the Surviving Corporation for payment of the merger consideration.

 

The merger agreement contains representations and warranties of each of Mediacom, Mr. Commisso and Merger Sub as to, among other things:

 

 

The merger agreement also contains representations and warranties of Mediacom as to, among other things:

 

 

 

The merger agreement also contains representations and warranties of Mr. Commisso and Merger Sub as to, among other things:

 

 

Some of the representations and warranties in the merger agreement are qualified by materiality qualifications or a “material adverse effect” clause. For purposes of the merger agreement, “material adverse effect” means any event, change, or development having an effect that individually or in the aggregate is or would reasonably be expected to be materially adverse to the business, assets (including intangible assets), condition (financial or otherwise) or results of operations of Mediacom and its subsidiaries, taken as a whole, or would reasonably be expected to materially impair Mediacom’s ability to perform its obligations under the merger agreement, other than any adverse effect (a) that results from general economic, business, financial or market conditions that does not disproportionately affect Mediacom or any of its subsidiaries, (b) arising from any action taken by Mediacom to comply with its obligations under the merger agreement and (c) generally affecting the industries in which Mediacom or its subsidiaries operates that does not disproportionately affect Mediacom or its subsidiaries relative to the other participants in such industry.

 

The merger agreement provides that, subject to certain exceptions or as consented to in writing by Mr. Commisso, during the period from the signing of the merger agreement to the effective time of the merger, Mediacom, among other things, will, and will cause its subsidiaries to, conduct their respective businesses in the ordinary course and use its reasonable best efforts to preserve intact and maintain its business organization, assets and goodwill and relationship with customers, suppliers and others having business dealings with it and to keep available the services of its key officers and employees on terms and conditions substantially comparable to those currently in effect and maintain its current material franchises and other rights, in each case, consistent with past practice and, subject to certain exceptions, will not and will not permit any of its subsidiaries to, without the prior consent of Mr. Commisso:

 

 

 

Notification of Certain Matters

 

We must give prompt notice to Mr. Commisso and Merger Sub, and Mr. Commisso and Merger Sub must give prompt notice to us, of the occurrence or failure to occur of any event that would be likely to cause (a) any representation or warranty contained in the merger agreement to be untrue or inaccurate in any material respect, or (b) any material failure of Mediacom, Mr. Commisso or Merger Sub, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under the merger agreement.

 

Mr. Commisso must also give us notice if Mr. Commisso engages in negotiations relating to, agrees to, or executes any agreement involving (a) the sale, lease or exchange of all or substantially all of Mediacom’s or the Surviving Corporation’s assets, (b) the offer or sale of a material number of shares of Mediacom or the Surviving Corporation, or (c) the merger, combination or reorganization of Mediacom or the Surviving Corporation with another person or entity subsequent to the Closing.

 

Indemnification of Directors and Officers; Insurance

 

Until the sixth anniversary of the effective time of the merger, the right to indemnification, advancement of expenses and exculpation of officers and directors provided for in the constituent documents of Mediacom and its subsidiaries on terms no less favorable than as in effect on the date of the merger agreement must be maintained with respect to matters occurring prior to the effective time.

 

Until the sixth anniversary of the effective time of the merger, the Surviving Corporation must maintain officers’ and directors’ liability insurance covering Mediacom’s present and former officers and directors at the effective time of the merger with respect to matters occurring prior to the effective time of the merger, on terms with respect to coverage and amount no less favorable than those of the applicable policies in effect on the date of the merger agreement, to the extent that such coverage can be maintained at an annual cost to the Surviving Corporation of not greater than 200% of the aggregate premiums currently paid by Mediacom, and, if such tail coverage cannot be so maintained at such cost, providing as much of such insurance coverage as can be so maintained at a cost equal to 200% of the annual premium for Mediacom’s insurance policies.

 

Access and Information

 

We must afford to Mr. Commisso, Merger Sub and their respective representatives reasonable access during normal business hours, during the period prior to the effective time of the merger, to all of its books and records, facilities, personnel, management reports and other information. Mr. Commisso and Merger Sub agree to keep all non-public information obtained through this access in strict confidence.

 

Reasonable Best Efforts; Restricted Payment Capacity

 

Mediacom, Mr. Commisso and Merger Sub must cooperate and use their reasonable best efforts to take or cause to be taken all actions, and to do or cause to be done all things, necessary, proper or advisable to consummate the transactions contemplated by the merger agreement, including using their reasonable best efforts to (a) obtain all necessary consents, approvals, waivers, authorizations, permits, filings or notifications from other parties to material agreements, leases and other contracts, provided that Mediacom will not be required to make any payments or provide any economic benefits to third parties prior to the effective time of the merger in order to obtain any waivers, consents or approvals from third parties, (b) obtain all necessary consents, approvals, waivers, authorizations, permits, filings or notifications as are required to be obtained under any applicable law, (c) lift or rescind any charge, order, writ, injunction, judgment, decree, ruling, determination, directive, award or settlement, whether civil, criminal or administrative and whether formal or informal, adversely affecting the ability of Mediacom, Mr. Commisso and Merger Sub to consummate the transactions contemplated by the merger agreement, (d) effect any necessary registrations and filings and submissions of information requested by governmental authorities, (e) assist in the preparation, execution and delivery of certificates and documents demonstrating compliance with restrictive covenants in Mediacom’s subsidiaries’ indentures and credit agreements, and (f) fulfill all conditions to the merger agreement.

Mediacom and its subsidiaries will take all necessary action, as required by the merger agreement, to execute and deliver all documents and certificates necessary to borrow sufficient funds under certain specified credit agreements to fund the aggregate merger consideration and other payments required to be paid by the Surviving Corporation pursuant to the merger agreement.

 

No Solicitation of Competing Proposals

 

Mediacom and its subsidiaries are prohibited from directly or indirectly (i) initiating, inducing, soliciting, facilitating or encouraging any inquiry or the making, submission or announcement of any proposal that constitutes a Takeover Proposal (as defined below), (ii) entering into any letter of intent, memorandum of understanding, merger agreement or other agreement, arrangement or understanding relating to any Takeover Proposal or (iii) continuing or otherwise participating in any discussions or negotiations regarding, furnishing to any person any information or data with respect to Mediacom in connection with or in response to, or otherwise cooperating with or taking any other action to facilitate any proposal that (A) constitutes a Takeover Proposal or (B) requires Mediacom to abandon, terminate or fail to consummate the merger or any other transaction contemplated by the merger agreement. Notwithstanding the foregoing, prior to the adoption of the merger agreement by Mediacom’s stockholders (including the majority of the minority vote), Mediacom may, in response to a bona fide written Takeover Proposal that did not result from a breach of this covenant:

 

 

provided, in each case, that the special committee determines in good faith, by resolution duly adopted after consultation with its outside legal counsel and financial advisors, that (i) the failure to furnish such information or participate in such discussions or negotiations would reasonably be expected to constitute a breach of its fiduciary duties to the stockholders of Mediacom (other than the RBC Stockholders) under applicable law and (ii) such Takeover Proposal constitutes or would reasonably be expected to lead to a Superior Proposal (as defined below).

 

Within twenty-four hours after the receipt by Mediacom of any Takeover Proposal or any inquiry with respect to any Takeover Proposal, Mediacom must provide notice to the RBC Stockholders of (i) the Takeover Proposal or inquiry, (ii) the identity of the person making any such Takeover Proposal or inquiry and (iii) the material terms and conditions of any such Takeover Proposal or inquiry (including any amendments or modifications thereto). Mediacom is also required to keep the RBC Stockholders informed on a current basis of the status of any such Takeover Proposal, including any changes to the price or other material terms and conditions thereof.

 

Neither the board of directors of Mediacom nor any committee of the board of directors may (i) withdraw, modify or qualify in any manner adverse to Mr. Commisso, its recommendation that Mediacom’s stockholders adopt the merger agreement or take any action or make any statement in connection with the special meeting inconsistent with such recommendation or (ii) approve any letter of intent, memorandum of understanding, merger agreement or other agreement, arrangement or understanding relating to any Takeover Proposal. However, at any time prior to the adoption of the merger agreement by Mediacom’s stockholders (including the majority of the minority vote), the special committee may, in response to a Superior Proposal or an Intervening Event (as defined below) and subject to compliance with the terms summarized in the succeeding sentence, change its recommendation that Mediacom’s stockholders adopt the merger agreement, if the special committee determines in good faith, by resolution duly adopted after consultation with its outside legal counsel and financial advisors, that such action is required to comply with its fiduciary duties to the stockholders of Mediacom (other than the RBC Stockholders) under applicable law. The Special Committee may not withdraw, modify or qualify in any manner adverse to Mr. Commisso its recommendation that Mediacom’s stockholders adopt the merger agreement or take

any action or make any statement in connection with the special meeting inconsistent with such recommendation pursuant to the preceding sentence unless the special committee (x) provided prior written notice to the RBC Stockholders that it is prepared to effect a change in its recommendation in response to the Superior Proposal or an Intervening Event (which notice must, in the case of a Superior Proposal, specify the material terms and conditions of the Superior Proposal and identify the person making the Superior Proposal or, in the case of an Intervening Event, describe such event and its effect on Mediacom), and (ii) negotiated during the four business day period following the RBC Stockholders’ receipt of such notice with the RBC Stockholders (to the extent the RBC Stockholders wish to negotiate) to enable the RBC Stockholders to make a proposal that renders the Superior Proposal no longer a Superior Proposal, or obviates the need for the special committee to change their recommendation as a result of the Intervening Event, as the case may be. Notwithstanding any change in the recommendation of Mediacom’s board of directors, the merger agreement must be submitted to the stockholders of Mediacom at the special meeting for the purpose of adopting the merger agreement.

 

As used in the merger agreement, “Intervening Event” means an event, fact, circumstance or development, unknown to the special committee as of the date of the merger agreement, which becomes known prior to the adoption of the merger agreement by Mediacom’s stockholders (including the majority of the minority vote).

 

As used in the merger agreement, “Takeover Proposal” means any proposal or offer in respect of (i) a tender or exchange offer, merger, consolidation, business combination, share exchange, reorganization, recapitalization, liquidation, dissolution, or similar transaction involving Mediacom with any person other than Mr. Commisso, Merger Sub or any affiliate thereof, (ii) Mediacom’s acquisition of any third party in a business combination transaction in which the stockholders of the third-party immediately prior to consummation of such business combination transaction will own more than 20% of Mediacom’s outstanding capital stock immediately following such transaction, including the issuance by Mediacom of more than 20% of any class of its equity securities as consideration for assets or securities of a third-party, or (iii) any direct or indirect acquisition by any third-party of 20% or more of the outstanding capital stock of Mediacom or of 20% or more of the consolidated assets of Mediacom and its subsidiaries, in a single transaction or a series of related transactions.

 

As used in the merger agreement, “Superior Proposal” means any bona fide written proposal or offer made by a third-party in respect of a business combination transaction involving, or any purchase or acquisition of, (i) at least 66% of Mediacom’s outstanding common stock (ii) at least 66% of the voting power of Mediacom’s capital stock or (iii) at least 66% of the consolidated assets of Mediacom and its subsidiaries, which business combination transaction or other purchase or acquisition contains terms and conditions that the special committee determines in good faith, by resolution duly adopted after consultation with its outside counsel and financial advisor, would result in a transaction that if consummated would be more favorable to Mediacom’s stockholders (other than the RBC Stockholders) than the transactions contemplated by the merger agreement; provided, however, that such business combination transaction shall not be deemed to be a “Superior Proposal” unless the Special Committee determines in good faith that any financing required to consummate such business combination transaction is capable of being, and is reasonably likely to be, obtained.

 

Proxy Statement; Schedule 13E-3

 

On [          ], Mediacom filed with the SEC this definitive proxy statement, and Mediacom, Mr. Commisso and Merger Sub filed with the SEC an amended Schedule 13E-3.

 

Stockholders Meeting

 

Mediacom, as soon as reasonably practicable after the SEC completes its review of the proxy statement, must duly call, give notice of, convene and hold a special meeting of its stockholders for the purpose of considering and taking action upon the adoption of the merger agreement. The board of directors of Mediacom recommends that stockholders adopt the merger agreement. However, the special committee may withdraw or modify its recommendation in accordance with the terms of the merger agreement as described above. The RBC Stockholders have agreed to vote all of the shares of Mediacom stock owned of record by them in favor of the adoption of the merger agreement. See “Special Factors — Voting Agreement” for more information.

Solvency Opinion

 

Mediacom, Mr. Commisso and Merger Sub must use their reasonable best efforts to retain a nationally recognized appraisal or valuation firm for purposes of obtaining from such firm its opinion as to whether each of Mediacom and each of its subsidiaries that is contemplated to make a distribution in connection with the transactions contemplated the merger agreement will (i) in the case of any such entity that is a corporation, have at the closing of the merger sufficient surplus under Delaware law out of which to make such distribution, (ii) in the case any such entity that is a limited liability company, after giving effect to the transactions contemplated by the merger agreement, have at the closing of the merger assets the fair market value of which exceed its liabilities and (iii) in the case of all such entities, after giving effect to the transactions contemplated by the merger agreement, (x) be able to pay its debts as they come due, (y) have assets the fair value and present fair salable value of which exceed its stated liabilities and identified contingent liabilities and (z) have remaining capital that is not unreasonably small for the business in which such entity is engaged and proposed to be engaged.

 

The obligations of Mediacom, Mr. Commisso and Merger Sub to consummate the transactions contemplated by the merger agreement are subject to the satisfaction or waiver (if waivable), at or before the closing date of the merger, of the following conditions:

 

 

The obligations of Mr. Commisso and Merger Sub to effect the transactions contemplated by the merger agreement are subject to the satisfaction or waiver, at or before the closing date of the merger, of the following additional conditions:

 

 

 

The obligation of Mediacom to effect the transactions contemplated by the merger agreement is subject to the satisfaction or waiver, at or before the closing of the merger, of the following additional conditions:

 

 

The merger agreement may be terminated and the merger may be abandoned at any time prior to the effective time of the merger, whether prior to or after Mediacom’s stockholders adopt the merger agreement by the required votes:

 

 

 

 

 

 

If the merger agreement is terminated in accordance with its terms, it will become void and have no effect, and there will be no liability on the part of any of the parties, except that the provisions with respect to the payment of expenses as described below and certain other general provisions will survive, and no party will be relieved from any liability or damages arising from a willful and material breach of any provision of the merger agreement.

 

No party to the merger agreement will have any liability for monetary damages except for a willful and material breach of the merger agreement. In addition, Mr. Commisso and Merger Sub’s liability for monetary damages is capped at $10,000,000.

 

If the merger agreement is terminated by any party for any reason other than by Mediacom as a result of Mr. Commisso’s or Merger Sub’s breach or failure to perform in any material respect, then Mediacom shall, no later than ten business days after such termination, reimburse Mr. Commisso and Merger Sub for all of their expenses (not to exceed $2,500,000 in the aggregate).

 

The merger agreement may not be amended and no waiver, consent or approval by or on behalf of Mediacom may be granted except pursuant to an instrument in writing signed by or on behalf of Mediacom (or the special committee, if applicable) following approval of such action by the special committee and signed by Mr. Commisso and Merger Sub; provided, however, that following adoption of the merger agreement at the special meeting, no amendment may be made to the merger agreement that by law requires further approval or authorization by the stockholders of Mediacom without such further approval or authorization. From and after the date of the merger agreement, the board of directors of Mediacom can act solely through the special committee with respect to any actions of Mediacom to be taken with respect to the merger agreement, including any amendment, modification, or waiver of the merger agreement.

 

At any time prior to the effective time of the merger, the special committee on behalf of Mediacom or Mr. Commisso and Merger Sub may (a) extend the time for the performance of any of the obligations of the other party, (b) waive any inaccuracies in the representations and warranties contained in the merger agreement or in any document, certificate or writing delivered by the other party pursuant to the merger agreement, or (c) waive compliance by the other party with any of the agreements or with any conditions to such party’s obligations.

 

Pursuant to Mediacom’s bylaws, the special meeting may be adjourned by the chairman of the meeting or by the affirmative vote of holders of a majority of the votes represented by shares present in person or by proxy and entitled to vote at the special meeting. Upon receiving the requisite authorization, Mediacom may then adjourn the special meeting (including a further adjournment of an adjourned meeting) to a date within 30 days of the special meeting without further notice other than by an announcement made at the special meeting (or such adjourned meeting). If the requisite stockholder vote to adopt the merger agreement has not been received at the time of the special meeting (or such adjourned meeting), Mediacom may choose to solicit additional proxies in favor of adoption of the merger agreement.

 

We are the nation’s eighth largest cable company based on the number of customers who purchase one or more video services, also known as basic subscribers. We are among the leading cable operators focused on serving the smaller cities in the United States, with a significant customer concentration in the Midwestern and Southeastern regions. We are the largest and second largest cable company in Iowa and Illinois, respectively. Approximately 69% of our basic subscribers are in the top 100 television markets in the United States, commonly referred to as Nielsen Media Research designated market areas, with more than 55% in DMAs that rank between the 60th and 100th largest.

 

Through our interactive broadband network, we provide our customers with a wide variety of advanced products and services, including video services, such as video-on-demand, high-definition television and digital video recorders, high-speed data (which we refer to “HSD”) and phone service. We offer the triple-play bundle of video, HSD and phone over a single communications platform, a significant advantage over most competitors in our service areas. As of September 30, 2010, we offered our bundle of video, HSD and phone services to approximately 94% of our estimated 2.81 million homes passed in 22 states. As of the same date, we served approximately 1.20 million basic subscribers, 717,000 digital video customers, 827,000 HSD customers and 324,000 phone customers, aggregating 3.07 million revenue generating units.

 

Our Class A common stock trades on The NASDAQ Global Select Market under the symbol “MCCC.” Our predecessor company was founded in July 1995 by Mr. Commisso, who beneficially owns shares of our common stock representing the majority of the aggregate voting power of our common stock.

 

Mediacom’s mailing address is 100 Crystal Run Road, Middletown, New York 10941, and its telephone number is (845) 695-2600. A detailed description of Mediacom’s business is contained in Mediacom’s Annual Report on Form 10-K for the year ended December 31, 2009 and the Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, each of which is incorporated by reference into this proxy statement. See “Additional Information.”

 

The following persons are the executive officers and directors of Mediacom as of the date of this proxy statement. Each executive officer will serve until the earlier of the time a successor is elected by the board of directors or his or her resignation or removal. None of these persons or Mediacom has been convicted in a criminal proceeding during the past five years (excluding traffic violations or similar misdemeanors), and none of these persons has been a party to any judicial or administrative proceeding during the past five years that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws or a finding of any violation of federal or state securities laws. All of the directors and executive officers of Mediacom are citizens of the United States and can be reached c/o Mediacom Commumications Corporation, 100 Crystal Run Road, Middletown, New York 10941.

 

Rocco B. Commisso.  Mr. Commisso has 32 years of experience with the cable television industry and has served as our Chairman and Chief Executive Officer since founding our predecessor company in July 1995. He has served as a director of our company since November 1999. From 1986 to 1995, he served as Executive Vice President, Chief Financial Officer and a director of Cablevision Industries Corporation. From 1981 to 1986, Mr. Commisso served as Senior Vice President of Royal Bank of Canada’s affiliate in the United States, where he founded and directed a specialized lending group to media and communications companies. Mr. Commisso began his association with the cable industry in 1978 at The Chase Manhattan Bank, where he managed the bank’s lending activities to communications firms including the cable industry. He serves on the board of directors and executive committees of the National Cable Television Association and Cable Television Laboratories, Inc., and on the board of directors of C-SPAN and the National Italian American Foundation. Mr. Commisso holds a Bachelor of Science in Industrial Engineering and a Master of Business Administration from Columbia University.

 

Thomas V. Reifenheiser.  Mr. Reifenheiser has been a director of our company since February 2000. Mr. Reifenheiser retired as a Managing Director of JPMorgan Chase & Co., overseeing the Global Media and Telecommunications Division, in September 2000 after 38 years with JPMorgan Chase & Co. and its predecessors. Mr. Reifenheiser is a member of the board of directors and various committees of Cablevision Systems Corporation, Lamar Advertising Company and, until April 2010, Citadel Broadcasting Corporation.

 

Natale S. Ricciardi.  Mr. Ricciardi has been a director of our company since February 2000. Mr. Ricciardi has held various management positions with Pfizer Inc. for the past 38 years. Mr. Ricciardi joined Pfizer in 1972 and currently serves as Senior Vice President, Pfizer Inc. and President/Team Leader, Pfizer Global Manufacturing, with responsibility for all of Pfizer’s manufacturing and supply activities. He is a member of the Pfizer Executive Leadership Team.

 

Scott W. Seaton.  Mr. Seaton has been a director of our company since April 2009. Mr. Seaton has been in investment banking for over 20 years. Since June 2010, he has been a managing director in the media investment banking group of Oppenheimer & Co., a unit of Oppenheimer Holdings Inc. From April 2009 to July 2010 he was a Partner of Londonderry Capital LLC, a financial advisory firm focused on media and telecommunications companies. From 2002 to April 2009, he was a Managing Director in the Technology, Media and Telecommunications investment banking group of Bank of America. From 1996 to 2002, Mr. Seaton was a Managing Director in the investment banking department of Credit Suisse First Boston.

 

Mark E. Stephan.  Mr. Stephan has 24 years of experience with the cable television industry and has served as a director of our company since November 1999 and as our Executive Vice President and Chief Financial Officer since July 2005. From November 2003 to July 2005, he was Executive Vice President, Chief Financial Officer and Treasurer, and from March 1996, the commencement of our operations, to November 2003 our Senior Vice President, Chief Financial Officer and Treasurer. From July 1993 to March 1996, Mr. Stephan served as Vice President, Finance, for Cablevision Industries. Prior to that time, he served as Manager of the telecommunications and media lending group of Royal Bank of Canada.

 

Robert L. Winikoff.  Mr. Winikoff has been a director of our company since February 2000. Mr. Winikoff has been a partner of the law firm of Sonnenschein Nath & Rosenthal LLP (now known as SNR Denton) since August 2000. Prior to that time, he was a partner of the law firm of Cooperman Levitt Winikoff Lester & Newman, P.C. for

more than 20 years. SNR Denton currently serves as our outside general counsel, and prior to such representation, Cooperman Levitt Winikoff Lester & Newman, P.C. served as our outside general counsel from 1995.

 

John G. Pascarelli.  Mr. Pascarelli has 30 years of experience with the cable industry and has served as our Executive Vice President, Operations since November 2003. Prior to that he was our Senior Vice President, Marketing and Consumer Services from June 2000 and our Vice President of Marketing from March 1998. Before joining us in March 1998, Mr. Pascarelli served as Vice President, Marketing for Helicon Communications Corporation from January 1996 to February 1998 and as Corporate Director of Marketing for Cablevision Industries from 1988 to 1995. Prior to that time, Mr. Pascarelli served in various marketing and system management capacities for Continental Cablevision, Inc., Cablevision Systems and Storer Communications.

 

Italia Commisso Weinand.  Mrs. Weinand has 34 years of experience with the cable industry and has served as our Senior Vice President, Programming and Human Resources since 1998. Before joining us in April 1996, Ms. Weinand served as Regional Manager for Comcast Corporation from July 1985. Prior to that time, Ms. Weinand held various management positions with Tele-Communications, Inc., Times Mirror Cable and Time Warner, Inc. Ms. Weinand is the sister of Mr. Commisso.

 

Joseph E. Young.  Mr. Young has 26 years of experience with the cable industry and has served as our Senior Vice President, General Counsel and Secretary since November 2001. Before joining us, Mr. Young served as Executive Vice President, Legal and Business Affairs, for LinkShare Corporation, an Internet-based provider of marketing services, from September 1999 to October 2001. Prior to that time, he practiced corporate law with Baker Botts, LLP from January 1995 to September 1999. Previously, Mr. Young was a partner with the Law Offices of Jerome H. Kern and a partner with Shea & Gould.

 

Charles J. Bartolotta.  Mr. Bartolotta has 28 years of experience with the cable industry and has served as our Senior Vice President, Enterprise Solutions and Field Service Operations since July 2008. Before joining us in October 2000, Mr. Bartolotta served as Division President for AT&T Broadband, LLC from July 1998, where he was responsible for managing an operating division serving nearly three million customers. Prior to that time, he served as Regional Vice President of Tele-Communications, Inc. from January 1997 and as Vice President and General Manager for TKR Cable Company from 1989. Prior to that time, Mr. Bartolotta held various management positions with Cablevision Systems Corporation.

 

Calvin G. Craib.  Mr. Craib has 29 years of experience with the cable industry, and has served as our Senior Vice President, Business Development since August 2001. He also assumed responsibility of Corporate Finance in June 2008. Prior to that time, Mr. Craib was our Vice President, Business Development since April 1999. Before joining us in April 1999, he served as Vice President, Finance and Administration for Interactive Marketing Group from June 1997 to December 1998 and as Senior Vice President, Operations, and Chief Financial Officer for Douglas Communications from January 1990 to May 1997. Prior to that time, Mr. Craib served in various financial management capacities at Warner Amex Cable and Tribune Cable.

 

Brian M. Walsh.  Mr. Walsh has 23 years of experience with the cable industry and has served as our Senior Vice President and Corporate Controller since February 2005. Prior to that time, he was our Senior Vice President, Financial Operations from November 2003, our Vice President, Finance and Assistant to the Chairman from November 2001, our Vice President and Corporate Controller from February 1998 and our Director of Accounting from November 1996. Before joining us in April 1996, Mr. Walsh held various management positions with Cablevision Industries from 1988 to 1995.

 

For information about the directors and officers of the Surviving Corporation after the completion of the merger, see “Special Factors — Effects of the Merger — Directors and Management of the Surviving Corporation.”

 

Set forth below is certain selected financial and other information relating to Mediacom. The selected financial data has been excerpted or derived from the financial statements and selected financial data contained in Mediacom’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009 (referred to as the “Form 10-K”) and the unaudited financial statements contained in Mediacom’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2010 (referred to as the “Form 10-Q”). This data should be read in conjunction with the audited and unaudited consolidated financial statements and other financial information contained in the Form 10-K and the Form 10-Q, respectively, including the notes thereto. More comprehensive financial information is included in such reports (including management’s discussion and analysis of financial condition and results of operations) and the following summary is qualified in its entirety by reference to such reports and all of the financial information and notes contained therein. Copies of such reports may be examined at or obtained from the SEC. Mediacom’s audited financial statements as of December 31, 2009 and 2008 and for the years ended December 31, 2009, 2008 and 2007 are incorporated by reference into this proxy statement from the Form 10-K. Mediacom’s unaudited financial statements as of September 30, 2010 and September 30, 2009, and for the nine months ended September 30, 2010 and September 30, 2009 are incorporated by reference into this proxy statement from the Form 10-Q. See “Additional Information” below.