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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number: 0-13193
CABLE TV FUND 12-A, LTD.
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(Exact name of registrant as specified in its charter)
Colorado 84-098104
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(State of Organization) (IRS Employer Identification No.)
P.O. Box 3309, Englewood, Colorado 80155-3309 (303) 792-3111
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(Address of principal executive office and Zip Code) (Registrant's telephone
no. including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Limited Partnership
Interests
Indicate by check mark whether the registrants, (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days:
Yes [X] No [_]
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Aggregate market value of the voting stock held by non-affiliates of the
registrant: N/A
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ((S)229.405) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
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DOCUMENTS INCORPORATED BY REFERENCE: None
(27611)
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Information contained in this Form 10-K Report contains "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. All statements, other than statements of historical facts, included in
this Form 10-K Report that address activities, events or developments that the
Partnership or the General Partner expects, believes or anticipates will or may
occur in the future are forward-looking statements. These forward-looking
statements are based upon certain assumptions and are subject to a number of
risks and uncertainties. Actual results could differ materially from the
results predicted by these forward-looking statements.
PART I.
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ITEM 1. BUSINESS
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THE PARTNERSHIP. Cable TV Fund 12-A, Ltd. (the "Partnership") is a
Colorado limited partnership that was formed pursuant to the public offering of
limited partnership interests in the Cable TV Fund 12 Limited Partnership
Program (the "Program"), which was sponsored by Jones Intercable, Inc. (the
"General Partner"). Cable TV Fund 12-B, Ltd. ("Fund 12-B"), Cable TV Fund 12-C,
Ltd. ("Fund 12-C") and Cable TV Fund 12-D, Ltd. ("Fund 12-D") are the other
partnerships that were formed pursuant to the Program. The Partnership was
formed for the purpose of acquiring and operating cable television systems.
The Partnership owns the cable television systems serving areas in and
around Fort Myers, Florida (the "Fort Myers System"), Lake County, Illinois (the
"Lake County System"), and Orland Park and Park Forest, Illinois (the "Orland
Park System"). The Fort Myers System, the Lake County System and the
Orland Park System may hereinafter collectively be referred to as the
"Systems."
It is the General Partner's publicly announced policy that it intends to
liquidate its managed limited partnerships, including the Partnership, as
opportunities for sales of partnership cable television systems arise in the
marketplace over the next several years. In accordance with the General
Partner's policy, the Lake County System and the Orland Park System, along
with other Chicago-area systems owned or managed by the General Partner and its
affiliates, were marketed for sale in 1996. The deadline set by the General
Partner for receipt of indications of interest for such systems from prospective
buyers was October 15, 1996. The General Partner did not receive any offer for
the Lake County System or the Orland Park System. The General Partner
will continue to explore other alternatives for sale. There is no assurance as
to the timing or terms of any sales.
CABLE TELEVISION SERVICES. The Systems offer to subscribers various types
of programming, which include basic service, tier service, premium service, pay-
per-view programs and packages including several of these services at combined
rates.
Basic cable television service usually consists of signals of all four
national television networks, various independent and educational television
stations (both VHF and UHF) and certain signals received from satellites. Basic
service also usually includes programs originated locally by the system, which
may consist of music, news, weather reports, stock market and financial
information and live or videotaped programs of a public service or entertainment
nature. FM radio signals are also frequently distributed to subscribers as part
of the basic service.
The Systems offer tier services on an optional basis to its subscribers. A
tier generally includes most of the cable networks such as Entertainment and
Sports Programming Network (ESPN), Cable News Network (CNN), Turner Network
Television (TNT), Family Channel, Discovery and others, and the cable television
operators buy tier programming from these networks. The Systems also offer a
package that includes the basic service channels and the tier services.
The Systems also offer premium services to subscribers, which consist of
feature films, sporting events and other special features that are presented
without commercial interruption. The cable television operators buy premium
programming from suppliers such as HBO, Showtime, Cinemax or others at a cost
based on the number
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of subscribers the cable operator serves. Premium service programming usually is
significantly more expensive than the basic service or tier service programming,
and consequently cable operators price premium service separately when sold to
subscribers.
The Systems also offer to subscribers pay-per-view programming. Pay-per-
view is a service that allows subscribers to receive single programs, frequently
consisting of motion pictures that have recently completed their theatrical
exhibitions and major sporting events, and to pay for such service on a program-
by-program basis.
REVENUES. Monthly service fees for basic, tier and premium services
constitute the major source of revenue for the Systems. At December 31, 1996,
the Systems' monthly basic service rates ranged from $7.99 to $11.86, monthly
basic and tier ("basic plus") service rates ranged from $19.99 to $25.16 and
monthly premium services ranged from $2.00 to $12.95 per premium service. In
addition, the Partnership earns revenues from the Systems' pay-per-view programs
and advertising fees. Related charges may include a nonrecurring installation
fee that ranges from $1.99 to $35.73; however, from time to time the Systems
have followed the common industry practice of reducing or waiving the
installation fee during promotional periods. Commercial subscribers such as
hotels, motels and hospitals are charged a nonrecurring connection fee that
usually covers the cost of installation. Except under the terms of certain
contracts with commercial subscribers and residential apartment and condominium
complexes, the subscribers are free to discontinue the service at any time
without penalty. For the year ended December 31, 1996, of the total fees
received by the Systems, basic service and tier service fees accounted for
approximately 69% of total revenues, premium service fees accounted for
approximately 12% of total revenues, pay-per-view fees were approximately 2% of
total revenues, advertising fees were approximately 8% of total revenues and
the remaining 9% of total revenues came principally from equipment rentals,
installation fees and program guide sales. The Partnership is dependent upon
the timely receipt of service fees to provide for maintenance and replacement of
plant and equipment, current operating expenses and other costs of the Systems.
FRANCHISES. The Systems are constructed and operated under non-exclusive,
fixed-term franchises or other types of operating authorities (referred to
collectively herein as "franchises") granted by local governmental authorities.
These franchises typically contain many conditions, such as time limitations on
commencement and completion of construction, conditions of service, including
the number of channels, types of programming and the provision of free service
to schools and certain other public institutions, and the maintenance of
insurance and indemnity bonds. The provisions of local franchises are subject
to federal regulation.
The Partnership holds 10 franchises relating to the Systems. These
franchises provide for the payment of fees to the issuing authorities and
generally range from 3% to 5% of the gross revenues of a cable television
system. The 1984 Cable Act prohibits franchising authorities from imposing
annual franchise fees in excess of 5% of gross revenues and also permits the
cable television system operator to seek renegotiation and modification of
franchise requirements if warranted by changed circumstances.
The Partnership has never had a franchise revoked. The Partnership is
currently negotiating the renewal of five franchises that are either operating
under extensions or will expire prior to December 31, 1997. The General Partner
has no reason to believe that such franchises will not be renewed in due course.
The General Partner recently has experienced lengthy negotiations with some
franchising authorities for the granting of franchise renewals. Some of the
issues involved in recent renewal negotiations include rate regulation, customer
service standards, cable plant upgrade or replacement and shorter terms of
franchise agreements.
COMPETITION. Cable television systems currently experience competition
from several sources.
Broadcast Television. Cable television systems have traditionally competed
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with broadcast television, which consists of television signals that the viewer
is able to receive directly on his television without charge using an "off-air"
antenna. The extent of such competition is dependent in part upon the quality
and quantity of signals available by such antenna reception as compared to the
services provided by the local cable system. Accordingly, it has generally been
less difficult for cable operators to obtain higher penetration rates in rural
areas where
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signals available off-air are limited, than in metropolitan areas where
numerous, high quality off-air signals are often available without the aid of
cable television systems.
Traditional Overbuild. Cable television franchises are not exclusive, so
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that more than one cable television system may be built in the same area (known
as an "overbuild"), with potential loss of revenues to the operator of the
original cable television system. The General Partner has experienced overbuilds
in connection with certain systems that it has owned or managed for limited
partnerships, and currently there are overbuilds in the systems owned or managed
by the General Partner. Constructing and developing a cable television system
is a capital intensive process, and it is often difficult for a new cable system
operator to create a marketing edge over the existing system. Generally, an
overbuilder would be required to obtain franchises from the local governmental
authorities, although in some instances, the overbuilder could be the local
government itself. In any case, an overbuilder would be required to obtain
programming contracts from entertainment programmers and, in most cases, would
have to build a complete cable system, including headends, trunk lines and drops
to individual subscribers homes, throughout the franchise areas.
DBS. High-powered direct-to-home satellites have made possible the wide-
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scale delivery of programming to individuals throughout the United States using
small roof-top or wall-mounted antennas. Several companies began offering
direct broadcast satellite ("DBS") service over the last few years and
additional entrants are expected. Companies offering DBS service use video
compression technology to increase channel capacity of their systems to 100 or
more channels and to provide packages of movies, satellite network and other
program services which are competitive to those of cable television systems.
DBS cannot currently offer its subscribers local programming, although at least
one future DBS entrant is attempting to offer customers regional delivery of
local broadcast signals. In addition to emerging high-powered DBS competition,
cable television systems face competition from a major medium-powered satellite
distribution provider and several low-powered providers, whose service requires
use of much larger home satellite dishes. Not all subscribers terminate cable
television service upon acquiring a DBS system. The General Partner has
observed that there are DBS subscribers that also elect to subscribe to cable
television service in order to obtain the greatest variety of programming on
multiple television sets, including local programming not available through DBS
service. The ability of DBS service providers to compete successfully with the
cable television industry will depend on, among other factors, the ability of
DBS providers to overcome certain legal and technical hurdles and the
availability of equipment at reasonable prices.
Telephone. Federal cross-ownership restrictions historically limited entry
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by local telephone companies into the cable television business. The 1996
Telecommunications Act (the "1996 Telecom Act") eliminated this cross-ownership
restriction, making it possible for companies with considerable resources to
overbuild existing cable operators and enter the business. Several telephone
companies have begun seeking cable television franchises from local governmental
authorities and constructing cable television systems. Ameritech, one of the
seven regional Bell Operating Companies ("BOCs"), which provides telephone
service in a multi-state region including Illinois, has been the most active BOC
in seeking local cable franchises within its service area. It has already begun
cable service in Naperville, Illinois and has also obtained franchises for Glen
Ellyn and Vernon Hills, Illinois, all of which are currently served by cable
systems owned by three partnerships managed by the General Partner. The General
Partner cannot predict at this time the extent of telephone company competition
that will emerge to owned or managed cable television systems. The entry of
telephone companies as direct competitors, however, is likely to continue over
the next several years and could adversely affect the profitability and market
value of the General Partner's owned and managed systems. The entry of electric
utility companies into the cable television business, as now authorized by the
1996 Telecom Act, could have a similar adverse effect.
Private Cable. Additional competition is provided by private cable
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television systems, known as Satellite Master Antenna Television (SMATV),
serving multi-unit dwellings such as condominiums, apartment complexes, and
private residential communities. These private cable systems may enter into
exclusive agreements with apartment owners and homeowners associations, which
may preclude operators of franchised systems from serving residents of such
private complexes. Private cable systems that do not cross public rights of way
are free from the federal, state and local regulatory requirements imposed on
franchised cable television operators. In
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some cases, the Partnership has been unable to provide cable television service
to buildings in which private operators have secured exclusive contracts to
provide video and telephony services. The Partnership is interested in providing
these same services, but expects that the market to install and provide these
services in multi-unit buildings will continue to be highly competitive.
MMDS. Cable television systems also compete with wireless program
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distribution services such as multichannel, multipoint distribution service
("MMDS") systems, commonly called wireless cable, which are licensed to serve
specific areas. MMDS uses low-power microwave frequencies to transmit
television programming over-the-air to paying subscribers. The MMDS industry is
less capital intensive than the cable television industry, and it is therefore
more practical to construct MMDS systems in areas of lower subscriber
penetration. Wireless cable systems are now in direct competition with cable
television systems in several areas of the country, including the system in Pima
County, Arizona owned by the General Partner. Telephone companies have recently
acquired or invested in wireless companies, and may use MMDS systems to provide
services within their service areas in lieu of wired delivery systems.
Enthusiasm for MMDS has waned in recent months, however, as Bell Atlantic and
NYNEX have suspended their investment in two major MMDS companies. To date, the
Partnership has not lost a significant number of subscribers, nor a significant
amount of revenue, to MMDS operators competing with the Partnership's cable
television systems. A series of actions taken by the FCC, however, including
reallocating certain frequencies to the wireless services, are intended to
facilitate the development of wireless cable television systems as an
alternative means of distributing video programming. The FCC recently held
auctions for spectrum that will be used by wireless operators to provide
additional channels of programming over larger distances. In addition, an
emerging technology, Local Multipoint Distribution services ("LMDS"), could also
pose a significant threat to the cable television industry, if and when it
becomes established. LMDS, sometimes referred to as cellular television, could
have the capability of delivering more than 100 channels of video programming to
a subscriber's home. The potential impact, however, of LMDS is difficult to
assess due to the newness of the technology and the absence of any current fully
operational LMDS systems.
Cable television systems are also in competition, in various degrees with
other communications and entertainment media, including motion pictures and home
video cassette recorders.
REGULATION AND LEGISLATION
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The operation of cable television systems is extensively regulated by the
FCC, some state governments and most local governments. The new 1996 Telecom
Act alters the regulatory structure governing the nation's telecommunications
providers. It removes barriers to competition in both the cable television
market and the local telephone market. Among other things, it also reduces the
scope of cable rate regulation.
The 1996 Telecom Act requires the FCC to undertake a host of implementing
rulemakings, the final outcome of which cannot yet be determined. Moreover,
Congress and the FCC have frequently revisited the subject of cable regulation.
Future legislative and regulatory changes could adversely affect the
Partnership's operations. This section briefly summarizes key laws and
regulations affecting the operation of the Partnership's cable systems and does
not purport to describe all present, proposed, or possible laws and regulations
affecting the Partnership.
Cable Rate Regulation. The 1992 Cable Act imposed an extensive rate
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regulation regime on the cable television industry. Under that regime, all
cable systems are subject to rate regulation, unless they face "effective
competition" in their local franchise area. Federal law now defines "effective
competition" on a community-specific basis as requiring either low penetration
(less than 30%) by the incumbent cable operator, appreciable penetration (more
than 15%) by competing multichannel video providers ("MVPs"), or the presence of
a competing MVP affiliated with a local telephone company.
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Although the FCC rules control, local government units (commonly referred
to as local franchising authorities or "LFAs") are primarily responsible for
administering the regulation of the lowest level of cable -- the basic service
tier ("BST"), which typically contains local broadcast stations and public,
educational, and government ("PEG") access channels. Before an LFA begins BST
rate regulation, it must certify to the FCC that it will follow applicable
federal rules, and many LFAs have voluntarily declined to exercise this
authority. LFAs also have primary responsibility for regulating cable equipment
rates. Under federal law, charges for various types of cable equipment must be
unbundled from each other and from monthly charges for programming services.
The 1996 Telecom Act allows operators to aggregate costs for broad categories of
equipment across geographic and functional lines. This change should facilitate
the introduction of new technology.
The FCC itself directly administers rate regulation of any cable
programming service tiers ("CPST"), which typically contain satellite-delivered
programming. Under the 1996 Telecom Act, the FCC can regulate CPST rates only
if an LFA first receives at least two rate complaints from local subscribers and
then files a formal complaint with the FCC. When new CPST rate complaints are
filed, the FCC now considers only whether the incremental increase is justified
and will not reduce the previously established CPST rate.
Under the FCC's rate regulations, most cable systems were required to
reduce their BST and CPST rates in 1993 and 1994, and have since had their rate
increases governed by a complicated price cap scheme that allows for the
recovery of inflation and certain increased costs, as well as providing some
incentive for expanding channel carriage. The FCC has modified its rate
adjustment regulations to allow for annual rate increases and to minimize
previous problems associated with regulatory lag. Operators also have the
opportunity of bypassing this "benchmark" regulatory scheme in favor of
traditional "cost-of-service" regulation in cases where the latter methodology
appears favorable. Premium cable services offered on a per-channel or per-
program basis remain unregulated, as do affirmatively marketed packages
consisting entirely of new programming product. Federal law requires that the
BST be offered to all cable subscribers, but limits the ability of operators to
require purchase of any CPST before purchasing premium services offered on a
per-channel or per-program basis.
The 1996 Telecom Act sunsets FCC regulation of CPST rates for all systems
(regardless of size) on March 31, 1999. It also relaxes existing uniform rate
requirements by specifying that uniform rate requirements do not apply where the
operator faces "effective competition," and by exempting bulk discounts to
multiple dwelling units, although complaints about predatory pricing still may
be made to the FCC.
Cable Entry Into Telecommunications. The 1996 Telecom Act provides that no
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state or local laws or regulations may prohibit or have the effect of
prohibiting any entity from providing any interstate or intrastate
telecommunications service. States are authorized, however, to impose
"competitively neutral" requirements regarding universal service, public safety
and welfare, service quality, and consumer protection. State and local
governments also retain their authority to manage the public rights-of-way and
may require reasonable, competitively neutral compensation for management of the
public rights-of-way when cable operators provide telecommunications service.
The favorable pole attachment rates afforded cable operators under federal law
can be gradually increased by utility companies owning the poles (beginning in
2001) if the operator provides telecommunications service, as well as cable
service, over its plant.
Cable entry into telecommunications will be affected by the regulatory
landscape now being fashioned by the FCC and state regulators. One critical
component of the 1996 Telecom Act to facilitate the entry of new
telecommunications providers (including cable operators) is the interconnection
obligation imposed on all telecommunications carriers. Review of the FCC's
initial interconnection order is now pending before the Eighth Circuit Court of
Appeals.
Telephone Company Entry Into Cable Television. The 1996 Telecom Act allows
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telephone companies to compete directly with cable operators by repealing the
historic telephone company/cable cross-ownership ban. Local exchange carriers
("LECs"), including the BOCs, can now compete with cable operators both inside
and outside their telephone service areas. Because of their resources, LECs
could be formidable competitors to
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traditional cable operators, and certain LECs have begun offering cable service.
As described above, the General Partner is now witnessing the beginning of LEC
competition in a few of its cable communities.
Under the 1996 Telecom Act, a LEC providing video programming to
subscribers will be regulated as a traditional cable operator (subject to local
franchising and federal regulatory requirements), unless the LEC elects to
provide its programming via an "open video system" ("OVS"). To qualify for OVS
status, the LEC must reserve two-thirds of the system's activated channels for
unaffiliated entities.
Although LECs and cable operators can now expand their offerings across
traditional service boundaries, the general prohibition remains on LEC buyouts
(i.e., any ownership interest exceeding 10 percent) of co-located cable systems,
cable operator buyouts of co-located LEC systems, and joint ventures between
cable operators and LECs in the same market. The 1996 Telecom Act provides a
few limited exceptions to this buyout prohibition, including a carefully
circumscribed "rural exemption." The 1996 Telecom Act also provides the FCC
with the limited authority to grant waivers of the buyout prohibition (subject
to LFA approval).
Electric Utility Entry Into Telecommunications/Cable Television. The 1996
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Telecom Act provides that registered utility holding companies and subsidiaries
may provide telecommunications services (including cable television)
notwithstanding the Public Utilities Holding Company Act. Electric utilities
must establish separate subsidiaries, known as "exempt telecommunications
companies" and must apply to the FCC for operating authority. Again, because of
their resources, electric utilities could be formidable competitors to
traditional cable systems.
Additional Ownership Restrictions. The 1996 Telecom Act eliminates
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statutory restrictions on broadcast/cable cross-ownership (including broadcast
network/cable restrictions), but leaves in place existing FCC regulations
prohibiting local cross-ownership between co-located television stations and
cable systems. The 1996 Telecom Act also eliminates the three year holding
period required under the 1992 Cable Act's "anti-trafficking" provision. The
1996 Telecom Act leaves in place existing restrictions on cable cross-ownership
with SMATV and MMDS facilities, but lifts those restrictions where the cable
operator is subject to effective competition. In January 1995, however, the FCC
adopted regulations which permit cable operators to own and operate SMATV
systems within their franchise area, provided that such operation is consistent
with local cable franchise requirements.
Pursuant to the 1992 Cable Act, the FCC adopted rules precluding a cable
system from devoting more than 40% of its activated channel capacity to the
carriage of affiliated national program services. A companion rule establishing
a nationwide ownership cap on any cable operator equal to 30% of all domestic
cable subscribers has been stayed pending further judicial review.
There are no federal restrictions on non-U.S. entities having an ownership
interest in cable television systems or the FCC licenses commonly employed by
such systems. Section 310(b)(4) of the Communications Act does, however,
prohibit foreign ownership of FCC broadcast and telephone licenses, unless the
FCC concludes that such foreign ownership is consistent with the public
interest. BCI's investment in the General Partner could, therefore, adversely
affect any plan to acquire FCC broadcast or common carrier licenses. The
Partnership, however, does not currently plan to acquire such licenses.
Must Carry/Retransmission Consent. The 1992 Cable Act contains broadcast
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signal carriage requirements that allow local commercial television broadcast
stations to elect once every three years between requiring a cable system to
carry the station ("must carry") or negotiating for payments for granting
permission to the cable operator to carry the station ("retransmission
consent"). Less popular stations typically elect "must carry," and more popular
stations typically elect "retransmission consent." Must carry requests can
dilute the appeal of a cable system's programming offerings, and retransmission
consent demands may require substantial payments or other concessions. Either
option has a potentially adverse affect on the Partnership's business.
Additionally, cable systems are required to obtain retransmission consent for
all "distant" commercial television stations (except for satellite-delivered
independent "superstations" such as WTBS). The constitutionality of the must
carry requirements has been challenged and is awaiting a decision from the U.S.
Supreme Court.
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Access Channels. LFAs can include franchise provisions requiring cable
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operators to set aside certain channels for public, educational and governmental
access programming. Federal law also requires cable systems to designate a
portion of their channel capacity (up to 15% in some cases) for commercial
leased access by unaffiliated third parties. The FCC has adopted rules
regulating the terms, conditions and maximum rates a cable operator may charge
for use of the designated channel capacity, but use of commercial leased access
channels has been relatively limited. The FCC released revised rules in
February 1997 which mandate a modest rate reduction and could make commercial
leased access a more attractive option to third party programmers.
Access to Programming. To spur the development of independent cable
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programmers and competition to incumbent cable operators, the 1992 Cable Act
imposed restrictions on the dealings between cable operators and cable
programmers. Of special significance from a competitive business posture, the
1992 Cable Act precludes video programmers affiliated with cable companies from
favoring cable operators over competitors and requires such programmers to sell
their programming to other multichannel video distributors. This provision
limits the ability of vertically integrated cable programmers to offer exclusive
programming arrangements to cable companies.
Other FCC Regulations. In addition to the FCC regulations noted above,
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there are other FCC regulations covering such areas as equal employment
opportunity, subscriber privacy, programming practices (including, among other
things, syndicated program exclusivity, network program nonduplication, local
sports blackouts, indecent programming, lottery programming, political
programming, sponsorship identification, and children's programming
advertisements), registration of cable systems and facilities licensing,
maintenance of various records and public inspection files, frequency usage,
lockbox availability, antenna structure notification, tower marking and
lighting, consumer protection and customer service standards, technical
standards, and consumer electronics equipment compatibility. The FCC is
expected to impose new Emergency Alert System requirements on cable operators
this year. The FCC has the authority to enforce its regulations through the
imposition of substantial fines, the issuance of cease and desist orders and/or
the imposition of other administrative sanctions, such as the revocation of FCC
licenses needed to operate certain transmission facilities used in connection
with cable operations.
Two pending FCC proceedings of particular competitive concern involve
inside wiring and navigational devices. The former rulemaking is considering
ownership of cable wiring located inside multiple dwelling unit complexes. If
the FCC concludes that such wiring belongs to, or can be unilaterally acquired
by the complex owner, it will become easier for complex owners to terminate
service from the incumbent cable operator in favor of a new entrant. The latter
rulemaking is considering whether cable customers must be allowed to purchase
cable converters from third party vendors. If the FCC concludes that such
distribution is required, and does not make appropriate allowances for signal
piracy concerns, it may become more difficult for cable operators to combat
theft of service.
Copyright. Cable television systems are subject to federal copyright
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licensing covering carriage of television and radio broadcast signals. In
exchange for filing certain reports and contributing a percentage of their
revenues to a federal copyright royalty pool (that varies depending on the size
of the system and the number of distant broadcast television signals carried),
cable operators can obtain blanket permission to retransmit copyrighted material
on broadcast signals. The possible modification or elimination of this
compulsory copyright license is the subject of continuing legislative review and
could adversely affect the Partnership's ability to obtain desired broadcast
programming. In addition, the cable industry pays music licensing fees to BMI
and is negotiating a similar arrangement with ASCAP. Copyright clearances for
nonbroadcast programming services are arranged through private negotiations.
State and Local Regulation. Cable television systems generally are
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operated pursuant to nonexclusive franchises granted by a municipality or other
state or local government entity in order to cross public rights-of-way.
Federal law now prohibits franchise authorities from granting exclusive
franchises or from unreasonably refusing to award additional franchises. Cable
franchises generally are granted for fixed terms and in many cases
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include monetary penalties for non-compliance and may be terminable if the
franchisee fails to comply with material provisions.
The terms and conditions of franchises vary materially from jurisdiction to
jurisdiction. Each franchise generally contains provisions governing cable
operations, service rates, franchise fees, system construction and maintenance
obligations, system channel capacity, design and technical performance, customer
service standards, and indemnification protections. A number of states subject
cable television systems to the jurisdiction of centralized state governmental
agencies, some of which impose regulation of a character similar to that of a
public utility. Although LFAs have considerable discretion in establishing
franchise terms, there are certain federal limitations. For example, LFAs
cannot insist on franchise fees exceeding 5% of the system's gross revenues,
cannot dictate the particular technology used by the system, and cannot specify
video programming other than identifying broad categories of programming.
Federal law contains renewal procedures designed to protect incumbent
franchisees against arbitrary denials of renewal. Even if a franchise is
renewed, the franchise authority may seek to impose new and more onerous
requirements such as significant upgrades in facilities and services or
increased franchise fees as a condition of renewal. Similarly, if a franchise
authority's consent is required for the purchase or sale of a cable system or
franchise, such authority may attempt to impose more burdensome or onerous
franchise requirements in connection with a request for consent. Historically,
franchises have been renewed for cable operators that have provided satisfactory
services and have complied with the terms of their franchises.
GENERAL. The Partnership's business consists of providing cable television
services to a large number of customers, the loss of any one of which would have
no material effect on the Partnership's business. The Systems have had some
subscribers who later terminated the service. Terminations occur primarily
because people move to another home or to another city. In other cases, people
terminate on a seasonal basis or because they no longer can afford or are
dissatisfied with the service. The amount of past due accounts in Systems is
not significant. The Partnership's policy with regard to past due accounts is
basically one of disconnecting service before a past due account becomes
material.
The Partnership does not depend to any material extent on the availability
of raw materials; it carries no significant amounts of inventory and it has no
material backlog of customer orders. The Partnership does not have any
employees because all properties are managed by employees of the General
Partner. The General Partner has engaged in research and development activities
relating to the provision of new services but the amount of the Partnership's
funds expended for such research and development has never been material.
Compliance with federal, state and local provisions that have been enacted
or adopted regulating the discharge of materials into the environment or
otherwise relating to the protection of the environment has had no material
effect upon the capital expenditures, earnings or competitive position of the
Partnership.
ITEM 2. PROPERTIES
-------------------
The cable television systems owned by the Partnership are described below:
<TABLE>
<CAPTION>
SYSTEM ACQUISITION DATE
------ ----------------
<S> <C>
Fort Myers System May 1985
Orland Park May 1985
Lake County System May 1985
</TABLE>
The following sets forth (i) the monthly basic plus service rates charged
to subscribers and (ii) the number of basic subscribers and pay units for the
Systems. The monthly basic service rates set forth herein represent, with
respect to systems with multiple headends, the basic service rate charged to the
majority of the
9
<PAGE>
subscribers within the system. In cable television systems, basic subscribers
can subscribe to more than one pay TV service. Thus, the total number of pay
services subscribed to by basic subscribers are called pay units. As of December
31, 1996, the Lake County System operated cable plant passing approximately
27,800 homes, with an approximate 70% penetration rate; the Orland Park
System operated cable plant passing approximately 30,600 homes, with an
approximate 68% penetration rate; and the Fort Myers System operated cable plant
passing approximately 69,200 homes, with an approximate 56% penetration rate.
Figures for numbers of subscribers and homes passed are compiled from the
General Partner's records and may be subject to adjustments.
<TABLE>
<CAPTION>
At December 31,
-------------------------
LAKE COUNTY SYSTEM 1996 1995 1994
- ------------------ ---- ---- ----
<S> <C> <C> <C>
Monthly basic plus service rate $ 23.38 $ 22.52 $ 21.26
Basic subscribers 19,745 18,611 17,021
Pay units 12,122 12,375 11,671
</TABLE>
<TABLE>
<CAPTION>
At December 31,
-------------------------
ORLAND PARK SYSTEM 1996 1995 1994
- ------------------------ ---- ---- ----
<S> <C> <C> <C>
Monthly basic plus service rate $ 25.16 $ 24.01 $ 22.51
Basic subscribers 20,853 19,730 18,375
Pay units 14,887 14,418 14,996
</TABLE>
<TABLE>
<CAPTION>
At December 31,
-------------------------
FT. MYERS SYSTEM 1996 1995 1994
- ---------------- ---- ---- ----
<S> <C> <C> <C>
Monthly basic plus service rate $ 23.51 $ 20.52 $ 19.52
Basic subscribers 38,944 38,306 37,144
Pay units 23,122 23,425 25,052
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
--------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
None.
PART II.
--------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
-------------------------------------------------
AND RELATED SECURITY HOLDER MATTERS
-----------------------------------
While the Partnership is publicly held, there is no public market for the
limited partnership interests, and it is not expected that a market will develop
in the future. During 1996, several partners of the Partnership conducted
"limited tender offers" for interests in the Partnership at prices ranging from
$570 to $600 per interest. As of February 14, 1997, the number of equity
security holders in the Partnership was 7,151.
10
<PAGE>
Item 6. Selected Financial Data
- --------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------------------------------------
Cable TV Fund 12-A, Ltd. 1996 1995 1994 1993 1992
- ------------------------------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues $34,485,280 $32,080,534 $29,378,010 $28,963,726 $26,693,028
Depreciation and Amortization 7,198,642 7,134,956 7,032,177 7,840,193 7,528,805
Operating Income (Loss) 2,830,368 2,381,418 1,377,680 1,196,824 514,394
Net Income (Loss) 988,478 379,266 (492,539) (409,726) (1,583,447)
Net Income (Loss) per Limited
Partnership Unit 9.41 3.61 (4.69) (3.90) (15.07)
Weighted Average Number of Limited
Partnership Units Outstanding 104,000 104,000 104,000 104,000 104,000
General Partner's Deficit (358,455) (368,340) (372,133) (367,208) (363,111)
Limited Partners' Capital 9,263,710 8,285,117 7,909,644 8,397,258 8,802,887
Total Assets 38,472,570 36,825,106 36,725,141 39,297,990 43,071,609
Debt 27,179,908 26,736,382 26,402,399 29,724,530 32,813,067
General Partner Advances - 373,311 1,305,933 220,722 261,348
</TABLE>
11
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
- -------------------------------------------------------------------------
Results of Operations
- ---------------------
CABLE TV FUND 12-A, LTD.
------------------------
The following discussion of the financial condition and results of
operations of Cable TV Fund 12-A, Ltd. (the "Partnership") contains, in
addition to historical information, forward-looking statements that are based
upon certain assumptions and are subject to a number of risks and uncertainties.
The Partnership's actual results may differ significantly from the results
predicted in such forward-looking statements.
FINANCIAL CONDITION
- -------------------
It is the General Partner's publicly announced policy that it intends
to liquidate its managed limited partnerships, including the Partnership, as
opportunities for sales of partnership cable television systems arise in the
marketplace over the next several years. In accordance with the General
Partner's policy, the cable television systems serving the areas in and around
Orland Park and Park Forest, Illinois (the "Orland Park System") and Lake
County, Illinois (the "Lake County System"), along with other Chicago-area
systems owned or managed by the General Partner and its affiliates, were
marketed for sale in 1996. The deadline set by the General Partner for receipt
of indications of interest for such systems from prospective buyers was October
15, 1996. The General Partner did not receive any offer for the Orland Park
System or the Lake County System. The General Partner will continue to explore
other alternatives for sale. There is no assurance as to the timing or terms of
any sales.
For the year ended December 31, 1996, the Partnership generated net
cash from operating activities totaling approximately $8,605,000, which is
available to fund capital expenditures and non-operating costs. Capital
expenditures totaled approximately $6,322,000 during 1996. Approximately 43
percent of these expenditures related to the construction of service drops to
subscribers' homes. Approximately 24 percent of these expenditures related to
the construction of cable plant associated with new homes passed and
approximately 12 percent of these expenditures was for converters. The
remaining expenditures were used for various enhancements in the Partnership's
systems. Funding for these expenditures was provided by cash on hand, cash
generated from operations and borrowings under the Partnership's credit
facility. Anticipated capital expenditures for 1997 are approximately
$6,336,000. Approximately 37 percent is expected to be used to continue
construction of new cable plant and approximately 32 percent will be used for
the construction of service drops to subscribers' homes. The remainder of
anticipated expenditures is expected to be used for various enhancements in all
of the Partnership's systems. These capital expenditures are necessary to
maintain the value of the Partnership's systems. Funding for these expenditures
is expected to be provided by cash on hand and cash generated from operations.
The Partnership was a party to a $30,000,000 revolving credit facility, the
revolving feature of which expired on December 31, 1996, at which time the then-
outstanding balance of $27,000,000 converted to a term loan. The term loan is
payable in 20 consecutive quarterly installments that will commence on March 31,
1997. Installments due during 1997 total $4,050,000 and will be funded by cash
on hand and cash generated from operations. Generally, interest payable on
amounts borrowed under the revolving credit facility is at the Partnership's
option of Prime or a fixed rate defined as the London Interbank Offered Rate
plus 1 percent. The effective interest rate on outstanding obligations as of
December 31, 1996 and 1995 were approximately 6.73 percent and approximately
6.94 percent, respectively.
The General Partner believes that the Partnership has sufficient sources of
capital from cash on hand and cash generated from operations to meet its
presently anticipated needs.
RESULTS OF OPERATIONS
- ---------------------
1996 compared to 1995
---------------------
Revenues of the Partnership increased $2,404,746, or approximately 7
percent, to $34,485,280 in 1996 from $32,080,534 in 1995. An increase in the
number of basic subscribers accounted for approximately 40 percent of the
increase in revenues. The Partnership added 2,895 basic subscribers in 1996, an
increase of approximately 4 percent. The number of basic subscribers totaled
79,542 at December 31, 1996, compared to 76,647 at December 31, 1995. Basic
service rate increases implemented in all of the Partnership's systems accounted
for approximately 34 percent of the increase in revenues. An increase in
advertising sales revenue also contributed to the increase in revenues. No
other individual factor was significant to the increase in revenues.
12
<PAGE>
Operating expenses consist primarily of costs associated with the
operation and administration of the Partnership's cable television systems. The
principal cost components are salaries paid to system personnel, programming
expenses, professional fees, subscriber billing costs, rent for leased
facilities, cable system maintenance expenses and marketing expenses.
Operating expenses increased $1,824,805, or approximately 10 percent,
to $20,473,736 in 1996 from $18,648,931 in 1995. Operating expenses represented
approximately 59 percent of revenues in 1996 compared to approximately 58
percent of revenues in 1995. This increase was primarily due to an increase in
programming fees which was due, in part, to the increase in the subscriber base.
No other individual factor contributed significantly to the increase in
operating expenses.
Management fees and allocated overhead from the General Partner
increased $67,305, or approximately 2 percent, to $3,982,534 in 1996 from
$3,915,229 in 1995. This increase was due to an increase in management fees.
Management fees, which are based on a percentage of revenues, increase when
revenues increase.
Depreciation and amortization expense increased $63,686, or
approximately 1 percent, to $7,198,642 in 1996 from $7,134,956 in 1995. This
increase was due to additions to the Partnership's depreciable asset base in
1996 and 1995.
Operating income increased $448,950, or approximately 19 percent, to
$2,830,368 in 1996 from $2,381,418 in 1995. This increase was due to the
increase in revenues exceeding the increases in operating expenses, management
fees and allocated overhead from the General Partner and depreciation and
amortization expense.
The cable television industry generally measures the performance of a
cable television system in terms of operating income before depreciation and
amortization. This measure is not intended to be a substitute or improvement
upon the items disclosed on the financial statements, rather it is included
because it is an industry standard. Operating income before depreciation and
amortization increased $512,636, or approximately 5 percent, to $10,029,010 in
1996 from $9,516,374 in 1995. This increase was due to the increase in revenues
exceeding increases in operating expenses and management fees and allocated
overhead from the General Partner.
Interest expense decreased $305,175, or approximately 15 percent, to
$1,713,677 in 1996 from $2,018,852 in 1995. This decrease was due to lower
outstanding balances during the year and lower effective interest rates on
interest bearing obligations.
Net income increased $609,212, to $988,478 in 1996 from $379,266 in
1995. This increase was due to the factors discussed above.
1995 compared to 1994
---------------------
Revenues of the Partnership increased $2,702,524, or approximately 9
percent, to $32,080,534 in 1995 from $29,378,010 in 1994. An increase in the
number of basic subscribers accounted for approximately 48 percent of the
increase in revenues. The Partnership added 4,107 basic subscribers in 1995, an
increase of approximately 6 percent. The number of basic subscribers totaled
76,647 at December 31, 1995, compared to 72,540 at December 31, 1994. Basic
service rate increases implemented in all of the Partnership's systems accounted
for approximately 32 percent of the increase in revenues. No other individual
factor was significant to the increase in revenues.
Operating expenses increased $1,399,936, or approximately 8 percent,
to $18,648,931 in 1995 from $17,248,995 in 1994. Operating expenses represented
approximately 58 percent of revenues in 1995 compared to approximately 59
percent of revenues in 1994. An increase in programming fees accounted for
approximately 65 percent of the increase in operating expenses and was due, in
part, to the increase in the subscriber base. In addition, increases in
marketing and plant-related expenses were partially offset by a decrease in
personnel expense. No other individual factors contributed significantly to the
increase in operating expenses.
Management fees and allocated overhead from the General Partner
increased $196,071, or approximately 5 percent, to $3,915,229 in 1995 from
$3,719,158 in 1994 due primarily to the increase in revenues, upon which such
fees and allocations are based.
13
<PAGE>
Depreciation and amortization expense increased $102,779, or
approximately 1 percent, to $7,134,956 in 1995 from $7,032,177 in 1994 due to
additions to the Partnership's depreciable asset base in 1995 and 1994.
Operating income increased $1,033,738, or approximately 73 percent, to
$2,381,418 in 1995 from $1,377,680 in 1994. This increase was due to the
increase in revenues exceeding the increases in operating expenses, management
fees and allocated overhead from the General Partner and depreciation and
amortization expense.
Operating income before depreciation and amortization increased
$1,106,517, or approximately 13 percent, to $9,516,374 in 1995 from $8,409,857
in 1994. This increase was due to the increase in revenues exceeding the
increases in operating expenses and management fees and allocated overhead from
the General Partner.
Interest expense increased $279,858, or approximately 16 percent, to
$2,018,852 in 1995 from $1,738,994 in 1994 due to higher outstanding balances on
interest bearing obligations.
The Partnership reported net income of $379,266 in 1995 compared to a
net loss of $492,539 in 1994. This change was due to the factors discussed
above.
14
<PAGE>
Item 8. Financial Statements
- -----------------------------
CABLE TV FUND 12-A, LTD.
------------------------
FINANCIAL STATEMENTS
--------------------
AS OF DECEMBER 31, 1996 AND 1995
--------------------------------
INDEX
-----
Page
------------
Report of Independent Public Accountants 16
Balance Sheets 17
Statements of Operations 19
Statements of Partners' Capital (Deficit) 20
Statements of Cash Flows 21
Notes to Financial Statements 22
15
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Partners of Cable TV Fund 12-A, Ltd.:
We have audited the accompanying balance sheets of CABLE TV FUND 12-A,
LTD. (a Colorado limited partnership) as of December 31, 1996 and 1995, and the
related statements of operations, partners' capital (deficit) and cash flows for
each of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the General Partner's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Cable TV Fund 12-A,
Ltd. as of December 31, 1996 and 1995, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 7, 1997.
16
<PAGE>
CABLE TV FUND 12-A, LTD.
------------------------
(A Limited Partnership)
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
December 31,
----------------------------
<S> <C> <C>
ASSETS 1996 1995
------ ------------ ------------
CASH $ 4,034,642 $ 1,307,723
TRADE RECEIVABLES, less allowance for doubtful receivables of
$35,573 and $100,732 at December 31, 1996 and 1995, respectively 685,452 914,397
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 80,190,860 78,674,556
Less- accumulated depreciation (48,417,981) (46,771,823)
------------ ------------
31,772,879 31,902,733
Franchise costs and other intangible assets, net of accumulated
amortization of $33,336,216 and $32,573,148 at December 31, 1996
and 1995, respectively 1,688,873 2,389,839
------------ ------------
Total investment in cable television properties 33,461,752 34,292,572
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 290,724 310,414
------------ ------------
Total assets $ 38,472,570 $ 36,825,106
============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
17
<PAGE>
CABLE TV FUND 12-A, LTD.
------------------------
(A Limited Partnership)
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
December 31,
---------------------------
<S> <C> <C>
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1996 1995
- ------------------------------------------- ------------ ------------
LIABILITIES:
Debt $ 27,179,908 $ 26,736,382
Advances from General Partner - 373,311
Trade accounts payable and accrued liabilities 2,261,358 1,674,946
Subscriber prepayments 126,049 123,690
------------ ------------
Total liabilities 29,567,315 28,908,329
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 7)
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (359,455) (369,340)
------------ ------------
(358,455) (368,340)
------------- ------------
Limited Partners-
Net contributed capital (104,000 units outstanding at
December 31, 1996 and 1995) 44,619,655 44,619,655
Accumulated deficit (35,355,945) (36,334,538)
------------ ------------
9,263,710 8,285,117
------------ ------------
Total liabilities and partners' capital (deficit) $ 38,472,570 $ 36,825,106
============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
18
<PAGE>
CABLE TV FUND 12-A, LTD.
------------------------
(A Limited Partnership)
STATEMENTS OF OPERATIONS
------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES $34,485,280 $32,080,534 $29,378,010
COSTS AND EXPENSES:
Operating expenses 20,473,736 18,648,931 17,248,995
Management fees and allocated overhead
from General Partner 3,982,534 3,915,229 3,719,158
Depreciation and amortization 7,198,642 7,134,956 7,032,177
----------- ----------- -----------
OPERATING INCOME 2,830,368 2,381,418 1,377,680
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (1,713,677) (2,018,852) (1,738,994)
Other, net (128,213) 16,700 (131,225)
----------- ----------- -----------
Total other income (expense), net (1,841,890) (2,002,152) (1,870,219)
----------- -----------
NET INCOME (LOSS) $ 988,478 $ 379,266 $ (492,539)
=========== =========== ===========
ALLOCATION OF NET INCOME (LOSS):
General Partner $ 9,885 $ 3,793 $ (4,925)
=========== =========== ===========
Limited Partners $ 978,593 $ 375,473 $ (487,614)
=========== =========== ===========
NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT $9.41 $3.61 $(4.69)
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF LIMITED
PARTNERSHIP UNITS OUTSTANDING 104,000 104,000 104,000
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
19
<PAGE>
CABLE TV FUND 12-A, LTD.
------------------------
(A Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
-----------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
-------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
GENERAL PARTNER:
Balance, beginning of year $ (368,340) $ (372,133) $ (367,208)
Net income (loss) for year 9,885 3,793 (4,925)
---------- ---------- ----------
Balance, end of year $ (358,455) $ (368,340) $ (372,133)
========== ========== ==========
LIMITED PARTNERS:
Balance, beginning of year $8,285,117 $7,909,644 $8,397,258
Net income (loss) for year 978,593 375,473 (487,614)
---------- ---------- ----------
Balance, end of year $9,263,710 $8,285,117 $7,909,644
========== ========== ==========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
20
<PAGE>
CABLE TV FUND 12-A, LTD.
------------------------
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
-----------------------------------------
1996 1995 1994
------------ ------------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 988,478 $ 379,266 $ (492,539)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 7,198,642 7,134,956 7,032,177
Amortization of interest rate protection contract - 50,004 50,004
Decrease (increase) in trade receivables 228,945 (539,580) 118,079
Increase in deposits, prepaid expenses and deferred charges (26,434) (233,483) (43,411)
Increase (decrease) in amount due General Partner (373,311) (932,622) 1,085,211
Increase in trade accounts payable, accrued liabilities and
subscriber prepayments 588,771 319,338 156,610
----------- ------------ -----------
Net cash provided by operating activities 8,605,091 6,177,879 7,906,131
----------- ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (6,321,698) (5,782,796) (5,615,530)
----------- ------------ -----------
Net cash used in investing activities (6,321,698) (5,782,796) (5,615,530)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 2,260,619 28,612,825 192,155
Repayment of debt (1,817,093) (28,278,842) (3,514,286)
----------- ------------ -----------
Net cash provided by (used in) financing activities 443,526 333,983 (3,322,131)
----------- ------------ -----------
Increase (decrease) in cash 2,726,919 729,066 (1,031,530)
Cash, beginning of year 1,307,723 578,657 1,610,187
----------- ------------ -----------
Cash, end of year $ 4,034,642 $ 1,307,723 $ 578,657
=========== ============ ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 1,746,102 $ 1,850,342 $ 1,691,031
=========== ============ ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
21
<PAGE>
CABLE TV FUND 12-A, LTD.
------------------------
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(1) ORGANIZATION AND PARTNERS' INTERESTS
------------------------------------
Formation and Business
----------------------
Cable TV Fund 12-A, Ltd. (the "Partnership"), a Colorado limited
partnership, was formed on January 2, 1985, under a public program sponsored by
Jones Intercable, Inc. ("Intercable"). The Partnership was formed to acquire,
construct, develop and operate cable television systems. The Partnership owns
and operates the cable television systems serving areas in and around Fort
Myers, Florida and Lake County, Orland Park and Park Forest, Illinois.
Intercable, a publicly held Colorado corporation, is the "General Partner" and
manages the Partnership. Intercable and its subsidiaries also own and operate
cable television systems. In addition, Intercable manages cable television
systems for other limited partnerships for which it is general partner and,
also, for affiliated entities.
Contributed Capital
-------------------
The capitalization of the Partnership is set forth in the accompanying
statements of partners' capital (deficit). No limited partner is obligated to
make any additional contributions to partnership capital.
The General Partner purchased its interest in the Partnership by
contributing $1,000 to partnership capital.
All profits and losses of the Partnership are allocated 99 percent to
the limited partners and 1 percent to the General Partner, except for income or
gain from the sale or disposition of cable television properties, which will be
allocated to the partners based upon the formula set forth in the Partnership
Agreement, and interest income earned prior to the first acquisition by the
Partnership of a cable television system, which was allocated 100 percent to the
limited partners.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Accounting Records
------------------
The accompanying financial statements have been prepared on the
accrual basis of accounting in accordance with generally accepted accounting
principles. The Partnership's tax returns are also prepared on the accrual
basis.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the General Partner's management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Property, Plant and Equipment
-----------------------------
Depreciation of property, plant and equipment is provided primarily
using the straight-line method over the following estimated service lives:
Cable distribution system 5 - 15 years
Equipment and tools 3 - 5 years
Office furniture and equipment 5 years
Buildings 20 years
Vehicles 3 years
Replacements, renewals and improvements are capitalized and maintenance and
repairs are charged to expense as incurred.
Property, plant and equipment and the corresponding accumulated
depreciation are written off as certain assets become fully depreciated and are
no longer in service.
22
<PAGE>
Intangible Assets
-----------------
Costs assigned to franchises are being amortized using the straight-line
method over remaining estimated useful lives ranging from one to four years.
Revenue Recognition
-------------------
Subscriber prepayments are initially deferred and recognized as revenue
when earned.
Reclassification
----------------
Certain prior year amounts have been reclassified to conform to the 1996
presentation.
(3) TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES
----------------------------------------------------
Management Fees, Distribution Ratios and Reimbursements
-------------------------------------------------------
Intercable manages the Partnership and receives a fee for its services
equal to 5 percent of the gross revenues of the Partnership, excluding revenues
from the sale of cable television systems or franchises. Management fees for
the years ended December 31, 1996, 1995 and 1994 were $1,724,264, $1,604,027 and
$1,468,900, respectively.
Any distributions made from cash flow (defined as cash receipts derived
from routine operations, less debt principal and interest payments and cash
expenses) are allocated 99 percent to the limited partners and 1 percent to the
General Partner. Any distributions other than from cash flow, such as from the
sale or refinancing of a system or upon dissolution of the Partnership, will be
made as follows: first, to the limited partners in an amount which, together
with all prior distributions, will equal the amount initially contributed to the
partnership capital by the limited partners; the balance, 75 percent to the
limited partners and 25 percent to Intercable.
The Partnership reimburses Intercable for certain allocated overhead
and administrative expenses. These expenses represent the salaries and related
benefits paid for corporate personnel, rent, data processing services and other
facilities costs. Such personnel provide engineering, marketing,
administrative, accounting, legal and investor relations services to the
Partnership. Such services, and their related costs, are necessary to the
operation of the Partnership and would have been incurred by the Partnership, if
it was a stand alone entity. Allocations of personnel costs are based primarily
on actual time spent by employees of Intercable with respect to each partnership
managed. Remaining expenses are allocated based on the pro rata relationship of
the Partnership's revenues to the total revenues of all systems owned or managed
by Intercable and certain of its subsidiaries. Systems owned by Intercable and
all other systems owned by partnerships for which Intercable is the general
partner are also allocated a proportionate share of these expenses. Intercable
believes that the methodology used in allocating overhead and administrative
expenses is reasonable. Reimbursements by the Partnership to Intercable for
allocated overhead and administrative expenses were $2,258,270, $2,311,202 and
$2,250,258 in 1996, 1995 and 1994, respectively.
The Partnership was charged interest during 1996 at an average
interest rate of 8.58 percent on the amounts due Intercable, which approximated
Intercable's weighted average cost of borrowing. Total interest charged to the
Partnership by Intercable was $15,139, $16,426 and $32,220 in 1996, 1995 and
1994, respectively.
Payments to/from Affiliates for Programming Services
----------------------------------------------------
The Partnership receives programming from Superaudio, Jones Education
Company, Great American Country, Inc. and Product Information Network, all of
which are affiliates of Intercable.
Payments to Superaudio totaled $51,583, $45,536 and $45,861 in 1996, 1995
and 1994, respectively. Payments to Jones Education Company totaled $114,521,
$101,804 and, $54,750 in 1996, 1995 and 1994, respectively. Payments to Great
American Country, Inc., which initiated service in 1996, totaled $34,642 in
1996.
The Partnership receives a commission from Product Information Network
based on a percentage of advertising revenue and number of subscribers. Product
Information Network paid commissions to the Partnership totaling $60,794,
$44,608 and $16,302 in 1996, 1995 and 1994, respectively.
23
<PAGE>
(4) PROPERTY, PLANT AND EQUIPMENT
-----------------------------
Property, plant and equipment as of December 31, 1996 and 1995, consisted
of the following:
December 31,
----------------------------
1996 1995
------------ ------------
Cable distribution system $ 73,282,202 $ 70,573,280
Equipment and tools 2,330,714 2,847,574
Office furniture and equipment 1,538,832 1,646,703
Buildings 1,627,424 1,620,275
Vehicles 987,194 1,562,360
Land 424,494 424,364
------------ ------------
80,190,860 78,674,556
Less: accumulated depreciation (48,417,981) (46,771,823)
------------ ------------
$ 31,772,879 $ 31,902,733
============ ============
(5) DEBT
----
Debt consists of the following: December 31,
---------------------------
1996 1995
------------ ------------
Lending institutions-
Revolving credit and term loan $27,000,000 $26,500,000
Capital lease obligations 179,908 236,382
------------ ------------
$27,179,908 $26,736,382
============ ============
The Partnership was a party to a $30,000,000 revolving credit
facility, the revolving feature of which expired on December 31, 1996, at which
time the then-outstanding balance of $27,000,000 converted to a term loan. The
term loan is payable in 20 consecutive quarterly installments that will commence
on March 31, 1997. Installments due in 1997 total $4,050,000. Generally,
interest payable on amounts borrowed under the revolving credit facility is at
the Partnership's option of Prime or a fixed rate defined as the London
Interbank Offered Rate plus 1 percent. The effective interest rate on
outstanding obligations as of December 31, 1996 and 1995 were approximately 6.73
percent and approximately 6.94 percent, respectively.
Installments due on all debt principal for each of the five years in
the period ending December 31, 2001, respectively, are: $4,103,972, $4,103,972,
$5,453,972, $6,767,992 and $6,750,000. At December 31, 1996, substantially all
of the Partnership's property, plant and equipment secured the above
indebtedness.
At December 31, 1996, the carrying amount of the Partnership's long-
term debt did not differ significantly from the estimated fair value of the
financial instruments. The fair value of the Partnership's long-term debt is
estimated based on the discounted amount of future debt service payments using
rates of borrowing for a liability of similar risk.
(6) INCOME TAXES
------------
Income taxes have not been recorded in the accompanying financial
statements because they accrue directly to the partners. The federal and state
income tax returns of the Partnership are prepared and filed by Intercable.
The Partnership's tax returns, the qualification of the Partnership as
such for tax purposes, and the amount of distributable partnership income or
loss are subject to examination by federal and state taxing authorities. If
such
24
<PAGE>
examinations result in changes with respect to the Partnership's recorded
income or loss, the tax liability of the general and limited partners would
likely be changed accordingly.
Taxable income (loss) reported to the partners is different from
that reported in the statements of operations due to the difference in
depreciation recognized under generally accepted accounting principles and the
expense allowed for tax purposes under the Modified Accelerated Cost Recovery
System (MACRS). There are no other significant differences between taxable
income (loss) and the net income (loss) reported in the statements of
operations.
(7) COMMITMENTS AND CONTINGENCIES
----------- --- -------------
The Partnership rents office and other facilities under various long-term
operating lease arrangements. Rent paid under such lease arrangements totaled
$83,191, $74,376 and $79,337, respectively, for the years ended December 31,
1996, 1995 and 1994. Minimum commitments under operating leases for each of the
five years ended December 31, 2001 and thereafter total $107,034, $61,652,
$11,299, $11,299, $2,825 and $-0-, respectively.
(8) SUPPLEMENTARY PROFIT AND LOSS INFORMATION
-----------------------------------------
Supplementary profit and loss information is presented below:
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Maintenance and repairs $ 311,696 $ 248,042 $ 315,149
========== ========== ==========
Taxes, other than income and payroll taxes $ 502,687 $ 364,657 $ 306,902
========== ========== ==========
Advertising $ 448,330 $ 520,795 $ 485,911
========== ========== ==========
Depreciation of property, plant and equipment $6,435,574 $6,055,408 $5,636,122
========== ========== ==========
Amortization of intangible assets $ 763,068 $1,079,548 $1,396,055
========== ========== ==========
</TABLE>
25
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
---------------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
None.
PART III.
---------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------
The Partnership itself has no officers or directors. Certain information
concerning the directors and executive officers of the General Partner is set
forth below. Directors of the General Partner serve until the next annual
meeting of the General Partner and until their successors shall be elected and
qualified.
<TABLE>
<S> <C>
Glenn R. Jones 67 Chairman of the Board and Chief Executive Officer
Derek H. Burney 57 Vice Chairman of the Board
James B. O'Brien 47 President and Director
Ruth E. Warren 47 Group Vice President/Operations
Kevin P. Coyle 45 Group Vice President/Finance
Christopher J. Bowick 41 Group Vice President/Technology
George H. Newton 62 Group Vice President/Telecommunications
Raymond L. Vigil 50 Group Vice President/Human Resources
Cynthia A. Winning 45 Group Vice President/Marketing
Elizabeth M. Steele 45 Vice President/General Counsel/Secretary
Larry W. Kaschinske 37 Vice President/Controller
Robert E. Cole 64 Director
William E. Frenzel 68 Director
Donald L. Jacobs 58 Director
James J. Krejci 55 Director
John A. MacDonald 43 Director
Raphael M. Solot 63 Director
Howard O. Thrall 49 Director
Siim A. Vanaselja 40 Director
Sanford Zisman 57 Director
Robert B. Zoellick 43 Director
</TABLE>
Mr. Glenn R. Jones has served as Chairman of the Board of Directors and
Chief Executive Officer of the General Partner since its formation in 1970, and
he was President from June 1984 until April 1988. Mr. Jones is the sole
shareholder, President and Chairman of the Board of Directors of Jones
International, Ltd. He is also Chairman of the Board of Directors of the
subsidiaries of the General Partner and of certain other affiliates of the
General Partner. Mr. Jones has been involved in the cable television business
in various capacities since 1961, is a member of the Board of Directors and the
Executive Committee of the National Cable Television Association. Additionally,
Mr. Jones is a member of the Board of Governors for the American Society for
Training and Development, and a member of the Board of Education Council of the
National Alliance of Business. Mr. Jones is also a founding member of the James
Madison Council of the Library of Congress. Mr. Jones has been the recipient of
several awards including the Grand Tam Award in 1989, the highest award from the
Cable Television Administration and Marketing Society; the President's Award
from the Cable Television Public Affairs Association in recognition of Jones
International's educational efforts through Mind Extension University (now
Knowledge TV); the Donald G. McGannon Award for the advancement of minorities
and women in cable from the United Church of Christ Office of Communications;
the STAR Award from American Women in Radio and Television, Inc. for exhibition
of a commitment to the issues and concerns of women in television and radio; the
Cableforce 2000 Accolade awarded by Women in Cable in recognition of the General
Partner's innovative employee programs; the Most Outstanding Corporate
Individual Achievement Award from the International Distance Learning Conference
for his contributions to distance education; the Golden Plate Award from the
American Academy of Achievement for his advances in distance education; the Man
of the Year named by the
26
<PAGE>
Denver chapter of the Achievement Rewards for College Scientists; and in 1994
Mr. Jones was inducted into Broadcasting and Cable's Hall of Fame.
Mr. Derek H. Burney was appointed a Director of the General Partner in
December 1994 and Vice Chairman of the Board of Directors on January 31, 1995.
Mr. Burney joined BCE Inc., Canada's largest telecommunications company, in
January 1993 as Executive Vice President, International. He has been the
Chairman of Bell Canada International Inc., a subsidiary of BCE, since January
1993 and, in addition, has been Chief Executive Officer of BCI since July 1993.
Prior to joining BCE, Mr. Burney served as Canada's ambassador to the United
States from 1989 to 1992. Mr. Burney also served as chief of staff to the Prime
Minister of Canada from March 1987 to January 1989 where he was directly
involved with the negotiation of the U.S. - Canada Free Trade Agreement. In July
1993, he was named an Officer of the Order of Canada. Mr. Burney is also a
director of Bell Cablemedia plc, Mercury Communications Limited, Videotron
Holdings plc, Tele-Direct (Publications) Inc., Teleglobe Inc., Bimcor Inc.,
Maritime Telegraph and Telephone Company, Limited, Moore Corporation Limited,
Northbridge Programming Inc. and certain subsidiaries of Bell Canada
International.
Mr. James B. O'Brien, the General Partner's President, joined the General
Partner in January 1982. Prior to being elected President and a Director of the
General Partner in December 1989, Mr. O'Brien served as a Division Manager,
Director of Operations Planning/Assistant to the CEO, Fund Vice President and
Group Vice President/Operations. Mr. O'Brien was appointed to the General
Partner's Executive Committee in August 1993. As President, he is responsible
for the day-to-day operations of the cable television systems managed and owned
by the General Partner. Mr. O'Brien is a board member of Cable Labs, Inc., the
research arm of the U.S. cable television industry. He also serves as the Vice
Chairman and as a director of the Cable Television Administration and Marketing
Association and as a director and member of the Executive Committee of the
Walter Kaitz Foundation, a foundation that places people of ethnic minority
groups in positions with cable television systems, networks and vendor
companies.
Ms. Ruth E. Warren joined the General Partner in August 1980 and has served
in various operational capacities, including system manager and Fund Vice
President, since then. Ms. Warren was elected Group Vice President/Operations
of the General Partner in September 1990.
Mr. Kevin P. Coyle joined The Jones Group, Ltd. in July 1981 as Vice
President/Financial Services. In September 1985, he was appointed Senior Vice
President/Financial Services. He was elected Treasurer of the General Partner
in August 1987, Vice President/Treasurer in April 1988 and Group Vice
President/Finance and Chief Financial Officer in October 1990.
Mr. Christopher J. Bowick joined the General Partner in September 1991 as
Group Vice President/Technology and Chief Technical Officer. Previous to
joining the General Partner, Mr. Bowick worked for Scientific Atlanta's
Transmission Systems Business Division in various technical management
capacities since 1981, and as Vice President of Engineering since 1989.
Mr. George H. Newton joined the General Partner in January 1996 as Group
Vice President/Telecommunications. Prior to joining the General Partner, Mr.
Newton was President of his own consulting business, Clear Solutions, and since
1994 Mr. Newton has served as a Senior Advisor to Bell Canada International.
From 1990 to 1993, Mr. Newton served as the founding Chief Executive Officer and
Managing Director of Clear Communications, New Zealand, where he established an
alternative telephone company in New Zealand. From 1964 to 1990, Mr. Newton
held a wide variety of operational and business assignments with Bell Canada
International.
Mr. Raymond L. Vigil joined the General Partner in June 1993 as Group Vice
President/Human Resources. Previous to joining the General Partner, Mr. Vigil
served as Executive Director of Learning with USWest. Prior to USWest, Mr.
Vigil worked in various human resources posts over a 14-year term with the IBM
Corporation.
Ms. Cynthia A. Winning joined the General Partner as Group Vice
President/Marketing in December 1994. Previous to joining the General Partner,
Ms. Winning served since 1994 as the President of PRS Inc.,
27
<PAGE>
Denver, Colorado, a sports and event marketing company. From 1979 to 1981 and
from 1986 to 1994, Ms. Winning served as the Vice President and Director of
Marketing for Citicorp Retail Services, Inc., a provider of private-label credit
cards for ten national retail department store chains. From 1981 to 1986, Ms.
Winning was the Director of Marketing Services for Daniels & Associates cable
television operations, as well as the Western Division Marketing Director for
Capital Cities Cable. Ms. Winning also serves as a board member of Cities in
Schools, a dropout intervention/prevention program.
Ms. Elizabeth M. Steele joined the General Partner in August 1987 as Vice
President/General Counsel and Secretary. From August 1980 until joining the
General Partner, Ms. Steele was an associate and then a partner at the Denver
law firm of Davis, Graham & Stubbs, which serves as counsel to the General
Partner.
Mr. Larry Kaschinske joined the General Partner in 1984 as a staff
accountant in the General Partner's former Wisconsin Division, was promoted to
Assistant Controller in 1990, named Controller in August 1994 and was elected
Vice President/Controller in June 1996.
Mr. Robert E. Cole was appointed a Director of the General Partner in March
1996. Mr. Cole is currently self-employed as a partner of First Variable
Insurance Marketing and is responsible for marketing to National Association of
Securities Dealers, Inc. firms in northern California, Oregon, Washington and
Alaska. From 1993 to 1995, Mr. Cole was the Director of Marketing for Lamar
Life Insurance Company; from 1992 to 1993, Mr. Cole was Senior Vice President of
PMI Inc., a third party lender serving the special needs of Corporate Owned Life
Insurance (COLI) and from 1988 to 1992, Mr. Cole was the principal and co-
founder of a specialty investment banking firm that provided services to finance
the ownership and growth of emerging companies, productive assets and real
property. Mr. Cole is a Certified Financial Planner and a former United States
Naval Aviator.
Mr. William E. Frenzel was appointed a Director of the General Partner in
April 1995. Mr. Frenzel has been a Guest Scholar since 1991 with the Brookings
Institution, a research organization located in Washington D. C. Until his
retirement in January 1991, Mr. Frenzel served for twenty years in the United
States House of Representatives, representing the State of Minnesota, where he
was a member of the House Ways and Means Committee and its Trade Subcommittee,
the Congressional Representative to the General Agreement on Tariffs and Trade
(GATT), the Ranking Minority Member on the House Budget Committee and a member
of the National Economic Commission. Mr. Frenzel also served in the Minnesota
Legislature for eight years. He is a Distinguished Fellow of the Tax
Foundation, Vice Chairman of the Eurasia Foundation, a Board Member of the U.S.-
Japan Foundation, the Close-Up Foundation, Sit Mutual Funds and Chairman of the
Japan-America Society of Washington.
Mr. Donald L. Jacobs was appointed a Director of the General Partner in
April 1995. Mr. Jacobs is a retired executive officer of TRW. Prior to his
retirement, he was Vice President and Deputy Manager of the Space and Defense
Sector; prior to that appointment, he was the Vice President and General Manager
of the Defense Systems Group and prior to his appointment as Group General
Manager, he was President of ESL, Inc., a wholly owned subsidiary of TRW.
During his career, Mr. Jacobs served on several corporate, professional and
civic boards.
Mr. James J. Krejci was President of the International Division of
International Gaming Technology, International headquartered in Reno, Nevada,
until March 1995. Prior to joining IGT in May 1994, Mr. Krejci was Group Vice
President of Jones International, Ltd. and was Group Vice President of the
General Partner. He also served as an officer of subsidiaries of Jones
International, Ltd. until leaving the General Partner in May 1994. Mr.
Krejci has been a Director of the General Partner since August 1987.
28
<PAGE>
Mr. John A. MacDonald was appointed a Director of the General Partner in
November 1995. Mr. MacDonald is Executive Vice President of Business
Development and Chief Technology Officer of Bell Canada International Inc.
Prior to joining Bell Canada in November 1994, Mr. MacDonald was President and
Chief Executive Officer of The New Brunswick Telephone Company, Limited, a post
he had held since March of that year. Prior to March 1994, Mr. MacDonald was
with NBTel for 17 years serving in various capacities, including Market Planning
Manager, Corporate Planning Manager, Manager of Systems Planning and Development
and General Manager, Chief Engineer and General Manager of Engineering and
Information Systems and Vice President of Planning. Mr. MacDonald was the
former Chairman of the New Brunswick section of the Institute of Electrical and
Electronic Engineers and also served on the Federal Government's Information
Highway Advisory Council. Mr. MacDonald is Chairman of MediaLinx Interactive
Inc. and Stentor Canadian Network Management and is presently a Governor of the
Montreal Exchange. He also serves on the Board of Directors of Tele-Direct
(Publications) Inc., Bell-Northern Research, Ltd., SRCI, Bell Sygma, Canarie
Inc., and is a member of the University of New Brunswick Venture Campaign
Cabinet.
Mr. Raphael M. Solot was appointed a Director of the General Partner in
March 1996. Mr. Solot is an attorney and has practiced law for 31 years with an
emphasis on franchise, corporate and partnership law and complex litigation.
Mr. Howard O. Thrall was appointed a Director of the General Partner in
March 1996. Mr. Thrall had previously served as a Director of the General
Partner from December 1988 to December 1994. Mr. Thrall is Senior Vice
President - Corporate Development for First National Net, Inc., a leading
service provider for the mortgage banking industry, and he heads First National
Net's Washington, D.C. regional office. From September 1993 through July 1996,
Mr. Thrall has served as Vice President of Sales, Asian Region, for World
Airways, Inc. headquartered at the Washington Dulles International Airport. From
1984 until August 1993, Mr. Thrall was with the McDonnell Douglas Corporation,
where he concluded as a Regional Vice President, Commercial Marketing with the
Douglas Aircraft Company subsidiary. Mr. Thrall is also an active management and
international marketing consultant, having completed assignments with McDonnell
Douglas Aerospace, JAL Trading, Inc., Technology Solutions Company, Cheong Kang
Associated (Korea), Aero Investment Alliance, Inc. and Western Real Estate
Partners, among others.
Mr. Siim A. Vanaselja was appointed a Director of the General Partner in
August 1996. Mr. Vanaselja joined BCE Inc., Canada's largest telecommunications
company, in February 1994 as Assistant Vice-President, International Taxation.
In June 1994, he was appointed Assistant Vice-President and Director of
Taxation, and in February 1995, Mr. Vanaselja was appointed Vice-President,
Taxation. On August 1, 1996, Mr. Vanaselja was appointed the Chief Financial
Officer of Bell Canada International Inc., a subsidiary of BCE Inc. Prior to
joining BCE Inc. and since August 1989, Mr. Vanaselja was a partner in the
Toronto office of KPMG Peat Marwick Thorne. Mr. Vanaselja has been a member of
the Institute of Chartered Accountants of Ontario since 1982 and is a member of
the Canadian Tax Foundation, the Tax Executives Institute and the International
Fiscal Association.
Mr. Sanford Zisman was appointed a director of the General Partner in June
1996. Mr. Zisman is a member of the law firm, Zisman & Ingraham, P.C. of
Denver, Colorado and has practiced law for 31 years, with an emphasis on tax,
business and estate planning and probate administration. Mr. Zisman currently
serves as a member of the Board of Directors of Saint Joseph Hospital, the
largest hospital in Colorado, and he has served as Chairman of the Board,
Chairman of the Finance Committee and Chairman of the Strategic Planning
Committee of the hospital. Since 1992, he has also served on the Board of
Directors of Maxim Series Fund, Inc., a subsidiary of Great-West Life Assurance
Company.
Mr. Robert B. Zoellick was appointed a Director of the General Partner in
April 1995. Mr. Zoellick is Executive Vice President for Housing and Law of
Fannie Mae, a federally chartered and stockholder-owned corporation that is the
largest housing finance investor in the United States. From August 1992 to
January 1993, Mr. Zoellick served as Deputy Chief of Staff of the White House
and Assistant to the President. From May 1991 to August 1992, Mr. Zoellick
served concurrently as the Under Secretary of State for Economic and
Agricultural Affairs and as Counselor of the Department of State, a post he
assumed in March 1989. From 1985 to 1988, Mr. Zoellick served at the Department
of Treasury in a number of capacities, including Counselor to the Secretary. Mr.
Zoellick received the Alexander Hamilton and Distinguished Service Awards,
highest honors of the Departments of Treasury and State, respectively. The
German Government awarded him the Knight Commanders Cross for his work on
Germany unification. Mr. Zoellick currently serves on the boards of Alliance
Capital, Said
29
<PAGE>
Holdings, the Council on Foreign Relations, the Congressional Institute, the
German Marshall Fund of the U.S., the European Institute, the National Bureau of
Asian Research, the American Council on Germany, the American Institute for
Contemporary German Studies and the Overseas Development Council.
ITEM 11. EXECUTIVE COMPENSATION
--------------------------------
The Partnership has no employees; however, various personnel are required
to operate the Systems. Such personnel are employed by the General Partner and,
pursuant to the terms of the limited partnership agreement of the Partnership,
the cost of such employment is charged by the General Partner to the Partnership
as a direct reimbursement item. See Item 13.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS
----------------------------------------------------------------------
As of March 4, 1997, no person or entity owned more than 5 percent of the
limited partnership interests of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------
The General Partner and its affiliates engage in certain transactions with
the Partnership. The General Partner believes that the terms of such
transactions are generally as favorable as could be obtained by the Partnership
from unaffiliated parties. This determination has been made by the General
Partner in good faith, but none of the terms were or will be negotiated at
arm's-length and there can be no assurance that the terms of such transactions
have been or will be as favorable as those that could have been obtained by the
Partnership from unaffiliated parties.
TRANSACTIONS WITH THE GENERAL PARTNER
The General Partner charges a management fee, and the General Partner is
reimbursed for certain allocated overhead and administrative expenses. These
expenses represent the salaries and benefits paid to corporate personnel, rent,
data processing services and other corporate facilities costs. Such personnel
provide engineering, marketing, administrative, accounting, legal and investor
relations services to the Partnership. Allocations of personnel costs are based
primarily on actual time spent by employees of the General Partner with respect
to each partnership managed. Remaining expenses are allocated based on the pro
rata relationship of the Partnership's revenues to the total revenues of all
systems owned or managed by the General Partner and certain of its subsidiaries.
Systems owned by the General Partner and all other systems owned by partnerships
for which Jones Intercable, Inc. is the general partner are also allocated a
proportionate share of these expenses.
The General Partner also advances funds and charges interest on the balance
payable. The interest rate charged approximates the General Partner's weighted
average cost of borrowing.
TRANSACTIONS WITH AFFILIATES
Jones Education Company ("JEC") is owned 63% by Jones International, Ltd.
("International"), an affiliate of the General Partner, 9% by Glenn R. Jones,
12% by Bell Canada International Inc. ("BCI") and 16% by the General Partner.
JEC operates two television networks, JEC Knowledge TV and Jones Computer
Network. JEC Knowledge TV provides programming related to computers and
technology; business, careers and finance; health and wellness; and global
culture and languages. Jones Computer Network provides programming focused
primarily on computers and technology. JEC sells its programming to certain
cable television systems owned or managed by the General Partner.
30
<PAGE>
The Great American Country network provides country music video programming
to certain cable television systems owned or managed by the General Partner.
This network is owned and operated by Great American Country, Inc., a subsidiary
of Jones International Networks, Ltd., an affiliate of International.
Jones Galactic Radio, Inc. is a company now owned by Jones International
Networks, Ltd., an affiliate of International. Superaudio, a joint venture
between Jones Galactic Radio, Inc. and an unaffiliated entity, provides
satellite programming to certain cable television systems owned or managed by
the General Partner.
The Product Information Network Venture (the "PIN Venture") is a venture
among a subsidiary of Jones International Networks, Ltd., an affiliate of
International, and two unaffiliated cable system operators. The PIN Venture
operates the Product Information Network ("PIN"), which is a 24-hour network
that airs long-form advertising generally known as "infomercials." The PIN
Venture generally makes incentive payments of approximately 60% of its net
advertising revenue to the cable systems that carry its programming. Most of
the General Partner's owned and managed systems carry PIN for all or part of
each day. Revenues received by the Partnership from the PIN Venture relating to
the Partnership's owned cable television systems totaled approximately $50,794
for the year ended December 31, 1996.
The charges to the Partnership for related party transactions are as
follows for the periods indicated:
<TABLE>
<CAPTION>
Cable TV Fund 12-A, Ltd. For the Year Ended December 31,
- ------------------------ -------------------------------
1996 1995 1994
---- --- ----
<S> <C> <C> <C>
Management fees $1,724,624 $1,604,027 $1,468,900
Allocation of expenses 2,258,270 2,311,202 2,250,258
Interest expense 15,139 16,426 32,220
Amount of advances outstanding 0 373,311 1,305,933
Highest amount of advances outstanding 27,647 373,311 1,305,933
Programming fees:
Jones Education Company 114,521 101,804 54,750
Great American Country 34,642 0 0
Superaudio 51,583 45,536 45,861
</TABLE>
31
<PAGE>
PART IV.
--------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
-------------------------------------------------------------------------
(a)1. See index to financial statements for list of financial
statements and exhibits thereto filed as a part of this report.
3. The following exhibits are filed herewith.
4.1 Limited Partnership Agreement of Cable TV Fund 12-A. (1)
10.1.1 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the City of
Fort Myers, Florida (Fund 12-A). (1)
10.1.2 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for Lee County,
Florida (Fund 12-A). (1)
10.1.3 Renewal of Permit dated 3/4/92 (Fund 12-A). (2)
10.1.4 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the
Unincorporated portions of Cook County, Illinois (Fund 12-A). (3)
10.1.5 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Village of
Grayslake, Illinois (Fund 12-A). (1)
10.1.6 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the
Unincorporated Area of Lake County, Illinois (Fund 12-A). (1)
10.1.7 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Village of
Libertyville, Illinois (Fund 12-A). (1)
10.1.8 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Village of
Mundelein, Illinois (Fund 12-A). (1)
10.1.9 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Village of
Orland Park, Illinois (Fund 12-A).
10.1.10 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Village of
Park Forest, Illinois (Fund 12-A).
10.1.11 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Village of
Wauconda, Illinois (Fund 12-A). (1)
10.2.1 Credit Agreement, dated as of January 30, 1995, between Cable TV
Fund 12-A, Ltd. and Toronto Dominion (Texas), Inc., for itself
and as agent for various lenders. (4)
27 Financial Data Schedule
__________
(1) Incorporated by reference from Registrant's Report on Form 10-K
for the fiscal year ended December 31, 1985 (Commission File No.
0-13193).
32
<PAGE>
(2) Incorporated by reference from Registrant's Report on Form 10-K
for the fiscal year ended December 31, 1992 (Commission File No.
0-13193).
(3) Incorporated by reference from Registrant's Report on Form 10-K
for the fiscal year ended December 31, 1987 (Commission File Nos.
0-13192, 0-13807, 0-13964 and 0-14206).
(4) Incorporated by reference from Registration's Report on Form 10-K
for the fiscal year ended December 31, 1994.
(b) Reports on Form 8-K.
None.
33
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CABLE TV FUND 12-A, LTD.
a Colorado limited partnership
By: Jones Intercable, Inc.
By: /s/ Glenn R. Jones
_____________________________________
Glenn R. Jones
Chairman of the Board and Chief
Dated: March 24, 1997 Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/ Glenn R. Jones
_____________________________________
Glenn R. Jones
Chairman of the Board and Chief
Executive Officer
Dated: March 24, 1997 (Principal Executive Officer)
By: /s/ Kevin P. Coyle
_____________________________________
Kevin P. Coyle
Group Vice President/Finance
Dated: March 24, 1997 (Principal Financial Officer)
By: /s/ Larry Kaschinske
_____________________________________
Larry Kaschinske
Vice President/Controller
Dated: March 24, 1997 (Principal Accounting Officer)
By: /s/ James B. O'Brien
_____________________________________
James B. O'Brien
Dated: March 24, 1997 President and Director
By: /s/ Derek H. Burney
_____________________________________
Derek H. Burney
Dated: March 24, 1997 Director
By: /s/ Robert E. Cole
_____________________________________
Robert E. Cole
Dated: March 24, 1997 Director
34
<PAGE>
By: /s/ William E. Frenzel
_____________________________________
William E. Frenzel
Dated: March 24, 1997 Director
By: /s/ Donald L. Jacobs
_____________________________________
Donald L. Jacobs
Dated: March 24, 1997 Director
By: /s/ James J. Krejci
_____________________________________
James J. Krejci
Dated: March 24, 1997 Director
By:
_____________________________________
John A. MacDonald
Dated: March 24, 1997 Director
By: /s/ Raphael M. Solot
_____________________________________
Raphael M. Solot
Dated: March 24, 1997 Director
By:
_____________________________________
Howard O. Thrall
Dated: March 24, 1997 Director
By: /s/ Siim A. Vanaselja
_____________________________________
Siim A. Vanaselja
Dated: March 24, 1997 Director
By: /s/ Sanford Zisman
_____________________________________
Sanford Zisman
Dated: March 24, 1997 Director
By: /s/ Robert B. Zoellick
_____________________________________
Robert B. Zoellick
Dated: March 24, 1997 Director
35
<PAGE>
FRANCHISE AGREEMENT MADE AND ENTERED INTO THIS
3RD DAY OF JUNE, 1996 BY AND BETWEEN THE VILLAGE
OF ORLAND PARK, COOK AND WILL COUNTIES, ILLINOIS,
AND CABLE TV FUND 12-A, LTD., A COLORADO LIMITED
PARTNERSHIP DOING BUSINESS AS JONES INTERCABLE, INC.
----------------------------------------------------
WHEREAS, the Village of Orland Park has heretofore adopted Ordinance
No. 982, as amended, which generally provides for the granting of a
non-exclusive cable television franchise; and
WHEREAS, Cable TV Fund 12-A, Ltd., a Colorado limited partnership
doing business as Jones Intercable, Inc. ("Jones"), is the owner of a
non-exclusive franchise to provide cable television service to the residents of
Orland Park; and
WHEREAS, Jones has asked the Village to grant a new non-exclusive
franchise on the terms and conditions set forth herein; and
WHEREAS, the Village has identified the future cable related needs
and interests of the community, and has reviewed the performance of Jones under
the prior franchise, and after careful consideration, analysis and deliberation,
has determined that the technical ability, financial conditions, legal
qualifications and past performance of Jones are adequate; and
WHEREAS, the Village has afforded the public adequate notice and
opportunity for comment on Jones' proposal for the grant of a new franchise; and
WHEREAS, the President and Board of Trustees of the Village have
determined that, subject to the terms and conditions set forth herein, the grant
of a new non-exclusive franchise to Jones, to supersede the prior franchise, is
consistent with the public interest; and
WHEREAS, Section 11-42-11 of the Illinois Municipal Code (65 ILCS
5/11-42-11) provides that municipalities "...may license, franchise and tax the
business of operating a community antenna television system..."; and
WHEREAS, Division 80 of Article 11 of the Illinois Municipal Code (65
ILCS 5/11-80-1 et seq.) grants to municipalities general powers over streets and
-- ---
public ways with respect to improvements in connection with a cable television
franchise; and
WHEREAS, the Village and Jones have reached agreement on the terms
and conditions of the new franchise, as set forth herein;
-1-
<PAGE>
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and conditions hereinafter set forth, the Village and Jones
hereby agree as follows:
SECTION 1: TITLE
---------
This Village of Orland Park, Illinois, Cable Television Franchise
Agreement shall be known as and may be cited as the Franchise Agreement.
SECTION 2: DEFINITIONS
---------
For the purpose of this Agreement the following words, phrases and
their derivations shall have the meanings given herein. When not inconsistent
with the context, words used in present tense include the future; words in the
plural number include the singular number. The word "shall" is mandatory, and
"may" is permissive.
(a) "Channel" means a frequency in the electromagnetic spectrum
capable of carrying an audio-data or an audio-visual
television signal, as defined by FCC rules and regulations.
(b) "Company" means Cable TV Fund 12-A, Ltd., a Colorado
limited partnership.
(c) "Corporate Authorities" means the President and Board of
Trustees of the Village of Orland Park, Cook and Will
Counties, Illinois.
(d) "FCC" means the Federal Communications Commission,
established by the Communications Act of 1934, as amended,
and shall include any successor agency or other agency with
respect to the federal regulation and licensing in
connection with the subject matter of this Ordinance.
(e) "Franchise Area" means the corporate limits of the Village
of Orland Park, including all territory hereafter annexed
by the Village.
(f) "Gross Revenues" shall mean all amounts received, directly
or indirectly, by the Company from the operation or use of
the System in the Municipality, including but not limited
to revenue received from regular subscriber service fees,
premium programming fees, installation fees, reconnection
fees, subscriber revenues, revenues for security monitoring
services, leased channel fees, converter rentals, studio
rental, production equipment fees, workshop fees and
advertising revenues; provided,
-2-
<PAGE>
however, that Gross Revenues does not include revenue
derived from the sale of company assets (except that
revenue from retail sales shall be included in "Gross
Revenues"), any franchise fees imposed by this Ordinance
and collected by the Company from Subscribers, or any taxes
on services furnished by the Company herein imposed
directly upon any Subscriber by the state, local or other
governmental units and collected by the Company on behalf
of said governmental unit. With respect to nonSubscriber
revenues (e.g., studio rental revenue, leased access
revenue and advertising revenue), Gross Revenues shall
include only a pro-rated portion of such revenues, with
such pro-rated amount based on the ratio of number of
subscribers served by the Company who reside in the
Municipality and the total number of subscribers served by
the System who do not reside in the Municipality.
(g) "Grant" means the right, privilege and franchise provided
in Subsection (a) of Section 3 of this Franchise Agreement.
(h) "Municipality" means The Village of Orland Park, Cook and
Will Counties, Illinois.
(i) "Person" means any individual, firm, partnership, limited
partnership, association, corporation, company or
organization of any kind.
(j) "Potential Subscribers" means those Persons within the
Franchise Area who are not Subscribers.
(k) "Public Rights-of-Way" means all sidewalks, streets and
alleys in the Municipality which are dedicated to the
Municipality for street, highway, sidewalk, lighting,
drainage, utility or cable television purposes, and all
public ways and places contiguous thereto.
(l) "Subscriber" means any Person lawfully receiving service
from or using the System under the Grant pursuant to this
Franchise Agreement.
(m) "System" means the cable communications system owned by the
Company and used to serve the Municipality and composed of,
without limitation, antenna, cables, wires, lines, towers,
amplifiers, conductors, converters, equipment or facilities
designed, constructed or wired for the purpose of
providing: (i) one-way transmission to Subscribers of video
programming or other programming services, any Subscriber
interaction that is required for the selection of such
video programming or other programming services, and (ii)
any other lawful communications services.
-3-
<PAGE>
SECTION 3: GRANT OF FRANCHISE
---------
(a) The Municipality, to the full extent that it may do so, hereby
grants to the Company, in accordance with the terms, conditions and provisions
of this Franchise Agreement, the right, privilege and franchise within the
Franchise Area: to establish, construct, operate and maintain the System in,
upon, over and under the Public Rights-of-Way and within easements or other
rights to use property which are effective for the purposes of the Grant; to
extend the System to and offer the services of the System to all Potential
Subscribers; to acquire by lease, license, purchase or other right to use
equipment, facilities and improvements, and land constituting all or part of the
System; to connect Subscribers to the System; and to repair, replace, enlarge
and extend the System. All previous grants and franchises to the Company by the
Municipality are revoked and cancelled by the Municipality and the Company;
provided, however, that the Company shall remain liable for all outstanding
breaches and defaults of the Company (if any) under all such previous grants and
franchises.
(b) The term of the Grant is seven years from the date of this
Franchise Agreement.
(c) The Grant shall not be exclusive. The Municipality may make a
grant to any other Person on terms no less burdensome and no more favorable than
the terms of the Grant.
SECTION 4: EXTENSION OF SERVICE
---------
(a) The Company shall be required to extend the System to and to
offer the services of the System to Potential Subscribers where there are at
least a total of thirty-five (35) residential dwelling units and/or "occupied
commercial or industrial structures" per linear mile. Further, in the event that
a tract or tracts within the Franchise Area is undeveloped at the time of the
Grant, the Company shall, upon development of said tract or tracts, be required
to extend the System (subject to the foregoing density requirement) in
cooperation with public utilities servicing the tract or tracts.
(b) Notwithstanding the Grant, the Company shall obtain all necessary
federal, state and local government permits, licenses and other required
authorizations in connection with the establishment, construction, operation and
maintenance of the System.
(c) Where adverse terrain or other factors render extension of the
System and offer of services impractical or technically unfeasible, or creates
an economic hardship, the Corporate Authorities shall, upon petition of the
Company, either waive the extension of the System into such areas, or allow the
extension and offer of
-4-
<PAGE>
services on such special terms, conditions and provisions as are reasonable and
fair to the Municipality, the Company and Potential Subscribers in such areas.
SECTION 5: ACTIVITIES PROHIBITED
---------
The Company shall not allow the System to interfere with television
reception by Persons not served by the Company, nor shall the System interfere
with, obstruct or hinder in any manner, the operation of the various utilities
serving the residents of the Municipality.
SECTION 6: FRANCHISE FEE
---------
(a) The Company shall pay to the Municipality for the right,
privilege and franchise set forth in the Grant, an amount equal to five percent
(5%) of the Gross Revenues derived from the operation of the System in the
Municipality. Such franchise fee is to be payable quarterly within 45 days of
the end of each calendar quarter based on the Gross Revenues for such calendar
quarter. Each payment shall be accompanied by a statement certified by an
official or representative of the Company having the requisite knowledge to make
such a statement setting forth the Gross Revenues upon which the franchise fee
is based.
(b) Delinquent payments shall bear interest at the allowable legal
rate, with the minimum delinquency being a one (1) month interest charge.
(c) Within ninety (90) days of the end of each fiscal year of the
Company, the Company shall file with the Corporate Authorities an annual report
prepared in the normal course of business, the accuracy of which is verified by
a duly authorized officer of the corporation, showing the financial status of
the Company and the Gross Revenues of the Company for the report period.
SECTION 7: RECORDS
---------
(a) All financial records of the Company in connection with its
activities within the boundaries of the Municipality, shall be maintained in a
manner which permits, to the extent reasonably practicable, distinguishing
revenues earned within the Municipality from revenues earned by the Company in
other municipalities.
(b) The Municipality shall have the right, upon reasonable notice to
the Company and at reasonable times, hours, dates and frequencies, to inspect
all or any part of the Company's records and documents, planning records and
documents, and engineering records and documents of every kind in connection
with the Grant, the
-5-
<PAGE>
System and the Company's undertakings with respect to this Franchise Agreement.
(c) Upon the request of the Municipality, the Company shall file with
the Municipality a copy of applications or files submitted by the Company with
any governmental entity or agency having jurisdiction with respect to any matter
affecting the System or the Company's undertakings with respect to this
Franchise Agreement.
(d) At least thirty (30) days prior to any rebuild or upgrade of any
part of the System in the Public Rights-of-Way, the Company shall file with the
Municipality copies of maps, plats or other drawings which accurately show the
nature of the proposed construction or improvements.
(e) The Company shall, upon the request of the Municipality, make
available to the Municipality copies of all rules, regulations, terms and
conditions, excepting proprietary information, established or imposed by the
Company in connection with the establishment, construction, operation and
maintenance of the System.
SECTION 8: GENERAL OPERATIONAL STANDARDS
---------
(a) Use. All structures, wires, cables, equipment and facilities
---
erected or maintained by the Company within the Municipality shall be located so
as to cause minimum interference with the proper and intended use of the Public
Rights-of-Way and with the rights or reasonable convenience of the owners or
occupiers of property which adjoins any of such Public Rights-of-Way.
(b) Restoration. The surface of any Public Rights-of-Way disturbed by
-----------
the Company in laying, constructing, maintaining, operating, using, extending,
removing, replacing or repairing its System shall be restored by the Company as
soon as possible after the completion of the work, at the Company's cost and
expense, to substantially the same condition as before the commencement of the
work. If there is an unreasonable delay by the Company in restoring and
maintaining the Public Rights-of-Way after such excavations or repairs have been
made, the Municipality shall have the right without further notice to restore or
repair the same and to require the Company to pay the reasonable cost of such
restoration or repair.
(c) Relocation. Whenever by reason of the construction, repair,
----------
maintenance, relocation, widening, raising or lowering of the grade of any
Public Rights-of-Way by the Municipality or by the location or manner of
construction, reconstruction, maintenance or repair of any public property,
structure or facility by the Municipality, it shall be deemed necessary by the
Municipality for the Company to move, relocate, change, alter or modify any of
its facilities or structures, such change, relocation, alteration or
modification shall be promptly made by the Company, at its cost and expense.
-6-
<PAGE>
(d) Temporary Removal of Wire for Building Moving. Upon written
---------------------------------------------
request of any person holding a building moving permit issued by the
Municipality, the Company shall remove, raise or lower its wires and cables
temporarily to permit the moving of houses, buildings or other structures. The
reasonable expense of such temporary removal, raising or lowering shall be paid
by the benefited person, and the Company may require such payment in advance,
the Company being without obligation to remove, raise or lower its wires and
cables until such payment shall have been made. The Company shall be given not
less than seventy-two (72) hours advance written notice to arrange for such
temporary wire and cable adjustments.
(e) Tree Trimming. Except when in conflict with a current or future
-------------
Village ordinance, the Company shall have the authority, upon obtaining the
prior written consent of the Village Manager, to trim trees upon or overhanging
Public Rights-of-Way to the same extent that the Municipality has such
authority, in order to prevent the branches of such trees from coming into
contact with the System. When so directed by the Municipality, said trimming
shall be done under the supervision and direction of the Municipality or in
compliance with any policies or ordinances that the Municipality may have
regulating the trimming or removal of trees on or along Public Rights-of-Way.
(f) Safety Reg. Requirements. The Company shall put, keep and
------------------------
maintain all parts of the System in good and standard condition throughout the
entire period of the Grant. Construction, installation, and maintenance of the
System shall be performed in an orderly and workmanlike manner. All such work
shall be performed in substantial compliance with applicable FCC or other
federal, state, and local regulations. The System shall not unreasonably
endanger or interfere with the safety of Persons or property in the Franchise
Area.
SECTION 9: SYSTEM SPECIFICATIONS AND LOCAL PROGRAMMING
--------- REQUIREMENTS
(a) Channel Capacity. During the term of the Grant, the System
----------------
shall at all times have a minimum capacity of at least 54 Channels.
(b) Technological Developments. The Company shall continuously
--------------------------
monitor developments in cable technology. At the Municipality's request, at any
time during the fifth year of the term of the Grant, the Franchisee shall
prepare and deliver a report describing developments in cable technology and
whether and when the Company plans to incorporate such developments into System.
Based on this report, the Municipality may determine that the System or this
Franchise Agreement should be updated, changed, revised, or that additional
services should be provided, but only if such update, change, revision or
provision of additional services is economically feasible for the Company.
Economic feasibility shall be mutually determined by the
-7-
<PAGE>
Municipality and the Company in good faith following an evaluation of the
Company's financial condition, economic waste, if any, that would occur should
the changes be made, the remaining term of the Grant, and the rate of return on
the Company's investment (both prior investment and proposed future investment)
in the System. Upon the mutual consent of the Municipality and the Company, this
Franchise Agreement shall be amended to incorporate the determinations made as a
result of this process.
(c) Leased Access. The Company shall provide leased access channels
-------------
on the System in accordance with applicable requirements of federal law and the
regulations of the FCC.
(d) No Obscenity. Within the limits of federal, state and local law,
------------
the Company shall not offer or permit the System to present obscene material.
(e) Emergency Alert System. In the event of an emergency or disaster,
----------------------
the Company shall, upon request of the Municipality, make available the System
for emergency use during the period of such emergency or disaster and shall use
its best efforts to provide such personnel as may be necessary to operate the
System under the circumstances. The Company shall be deemed to be in compliance
with the requirements of this subsection (e) so long as it is in compliance with
the regulations promulgated by the FCC relating to the Emergency Alert System
(47 C. F. R. Part 11), as amended from time to time.
(f) Local Studio. During the term of the Grant, the Company shall
------------
maintain its current studio within the Municipality for local programming. To
improve the quality of such programming, the Company shall purchase and install,
within 12 months of the effective date of this Franchise Agreement, a Sony UVW
Beta Editing System consisting of the following: UVW 1800 Edit Recorder, UVW
1600 Source Deck, UVW 100L Sony Betacom SP Camcorder, Cannon 17 x 1/2" Hot Zoom
Lens and RM 450 Edit Controller. In addition, the Company shall purchase a Sony
UVW 1200 Player for system playback. Upon request, the local studio shall be
made available from time to time to the Municipality, its agencies, public
service organizations, local producers and schools lying wholly or partly within
the Municipality for production of community-related programming. The Company
shall establish and disseminate a procedure for reserving studio time and use of
the studio. Additionally, the Company shall hold training classes for interested
persons at least twice each calendar year, or more often if there are at least
eight interested people registered at any given time. The availability of the
training classes will be publicized on the Company's local origination channel.
(g) Local Origination Programming. During the term of the Grant, the
-----------------------------
Company shall maintain at least one Channel on the System for the carriage of
local origination programming. Local origination programming shall consist of
programming
-8-
<PAGE>
(i) produced or acquired by the Company and of local interest to the
Municipality and its residents, (ii) produced by residents of the Municipality,
subject to the Company's editorial control, and (iii) character generated
programming, which will include information and public notices submitted by the
Municipality. The Company shall make up to 25 hours per week of the local
origination channel's program schedule available for programming produced by
residents of the Municipality, at least 10 hours of which would be aired between
6:00 p.m. and 11:00 p.m.
(h) Production Internships.
----------------------
i) During the term of the Grant, the Company and its
affiliates serving communities in the south suburban area shall
sponsor an internship program for college students and qualified
residents who are pursuing degrees and/or careers in the
telecommunications industry. Between two and four internships per
trimester shall be offered to college students residing in the south
suburban area as part of this program, and the program shall be
conducted in substantially the same manner as the college internship
program offered in 1995.
ii) During the term of the Grant, the Company shall
establish and maintain a production internship program for high
school seniors. The Company shall offer two internships per school
semester. The program shall include the following elements:
- Eligibility: High school seniors, at least 16 years of
age and a resident of a community served by the System, with an
interest in a career in the telecommunications industry.
- Commitment: Five to ten hours weekly for the length of
the school semester. The Company shall work with the, high schools to
determine whether the internship would merit substantial credit for
the intern.
- Responsibilities: Shall be determined by the Company,
but may include training as a camera operator (studio and remote),
character generator operator, videotape editor, sports statistician,
audio operator, feature news writer or on-camera anchor or reporter.
- Benefits: The internships shall be paid minimum hourly
wages; however, in addition to possible school credit and practical
experience, the Company will assist interns in assembling a video
resume reel.
(i) Scholarship Program. During the term of the Grant, the Company
-------------------
shall establish and fund a scholarship program for graduating high school
students in the Municipality. The Company shall fund two $500 scholarships each
year to be
-9-
<PAGE>
awarded by the Municipality to two graduating high school students who have
plans to enroll in a four-year college program or similar media-related training
program and are interns with the Company. The Company shall work with the
Municipality to establish the scholarship application and selection process.
SECTION 10: CUSTOMER SERVICE
----------
(a) The Company shall establish, operate and maintain in the
Municipality a business office and agent for the purpose of receiving inquiries,
requests and complaints concerning all aspects of the establishment,
construction, maintenance and operation of the System, and the payment of
Subscribers' service charges. The office shall have a listed local telephone
number, and shall be open and sufficiently manned during reasonable business
hours. The Company shall have a local listed telephone number for service calls,
and such telephone service shall be available twenty-four (24) hours a day,
seven (7) days a week. Said number shall be made available to the Subscribers
and the general public.
(b) Customer Service. During the term of the Grant, the Company shall
----------------
provide customer service in concert with the standards established by the FCC
and set forth on Exhibit A to this Ordinance. To validate agreement with these
standards, the Company shall keep maintenance service records that will indicate
the nature of all service complaints, date and time the complaint was received,
the disposition of such complaints and the time and date thereof. These records
shall be available for inspection by the Municipality. The Company shall
maintain all service complaint records for a minimum period of three years.
SECTION 11: SUPERVISION OF THE COMPANY
----------
(a) Unless otherwise provided in this Franchise Agreement, or unless
the Corporate Authorities shall otherwise specify, all administrative actions
required to be taken or which shall or may be taken by the Municipality in
connection with the System, shall be taken by the Village President and Board of
Trustees.
(b) Unless specifically otherwise provided in this Franchise
Agreement, or unless the Corporate Authorities shall otherwise provide, all
filings with the Municipality required by this Ordinance shall be made with the
Village Manager.
SECTION 12: TELECOMMUNICATIONS COMMISSION
----------
A Telecommunications Commission (the "Commission") for the
Municipality shall be established by the Village.
-10-
<PAGE>
SECTION 13: LIABILITY, INSURANCE AND INDEMNITY
----------
(a) The Company hereby agrees to indemnify, defend and save whole and
harmless the Municipality and its officers and employees from liabilities and
related expenses (including reasonable attorneys' fees) of any kind which may
arise out of or from the establishment, construction, operation and maintenance
of the System, or the execution and implementation of this Franchise Agreement
and any related Ordinance. The Municipality shall notify the Company in the
event any person shall in any way notify the Municipality of any claim or demand
in connection with the System or this Franchise Agreement or any related
Ordinance, from which the Company may be subject to liability under this Section
or otherwise. The undertaking in connection with this subsection (a) includes
liability with respect to property damage, personal injury, invasions of the
right of privacy, defamation of any person, the violation or infringement of any
copyright, trademark, trade name, service mark or patent, or of any other right
of any person, and failure of the Company to comply with the provisions of any
federal, state or local statute, ordinance, rule or regulation applicable to the
Company in connection with this Franchise Agreement or any related Ordinance.
The obligations of the Company under this Section 13 shall survive the
termination of this Franchise Agreement regardless of the reason for or the
method of termination.
(b) The Company shall keep the System continuously insured against
such risks as are customarily insured against by businesses of like size and
type, including but not limited to:
i) Insurance to the extent of $2,000,000 per occurrence
against liability for bodily injury including death, and to the
extent of $500,000 per occurrence against liability for damage to
property, including loss of use occurring on, arising out of or in
any way related to the System.
ii) During any period of construction, adequate coverage to
meet liability under the Illinois Structural Work Act (prior to
repeal thereof).
iii) Worker's Compensation Insurance within statutory limits,
and Employer's Liability Insurance of not less than $500,000.
iv) Comprehensive Automobile Liability Insurance to the
extent of $2,000,000 per occurrence against liability for bodily
injury including death, and to the extent of $300,000 per occurrence
against liability for damage to property, including loss of use
occurring on, arising out of, or in any way related to the System.
This subsection (b) shall not be a limit on the Company's undertaking
provided
-11-
<PAGE>
in subsection (a) of this Section.
(c) The Company shall have the Municipality included as co-insured on
all insurance policies referred to in this Section. The Company shall file with
the Municipality, certificates of insurance for such policies. All such policies
shall provide that the issuing insurance company will not cancel them without at
least ten days prior notice to the Company and the Municipality. All such
policies shall be taken out and maintained with generally recognized,
responsible insurance companies.
SECTION 14: PERFORMANCE BOND
----------
Company shall, within thirty days subsequent to the effective date of
this Franchise Agreement, post a performance bond with the Municipality, written
by an approved corporation surety in the amount of $50,000, and in a form
satisfactory to the Municipality, guaranteeing the Company's continued operation
of the System within the Municipality for the period hereinbefore specified in
Section 3 of this Franchise Agreement. All damages which may be directly
occasioned by the failure of the Company to perform under this Franchise
Agreement or related Ordinance, shall be recoverable from the principals and
sureties of said bond by the Municipality.
If the Company shall be in violation of any provision of this
Franchise Agreement or any related Ordinance and not remedy such violation
within thirty days after having received written notice from the Municipality to
do so, then the Municipality, at its discretion, may declare a portion of the
bond equivalent to the amount of damages sustained by the Municipality which are
directly attributable to such breach forfeited, and Company shall thereupon by
required:
(1) To remedy the breach immediately; and
(2) Within thirty days of such forfeiture, replace the
forfeited portion of the bond.
Notwithstanding the foregoing, nothing contained in this subsection
shall serve to absolve the Company of any of its obligations under this
Franchise Agreement or any related Ordinance or the rules and regulations of the
FCC.
No recovery by the Municipality of any sum by reason of the bond
required hereunder shall be any limitation upon the liability of the Company to
the Municipality, except that any sum received by the Municipality by reason of
such bond shall be deducted from any recovery which the Municipality may have
against the Company.
The Company shall pay all premiums chargeable for the bond, and shall
keep the same in full force and effect at all times throughout the term of this
Franchise
-12-
<PAGE>
Agreement and during the removal of all poles, wires, cables, underground
conduits, manholes and other conductors, converters, equipment and fixtures
subsequent to the termination of this Franchise Agreement. The bond shall
contain a provision that it shall not be terminated or otherwise allowed to
expire prior to thirty days written notice given to the Board of Trustees of the
Municipality.
SECTION 15: PUBLIC BUILDINGS
----------
The Company shall provide, without installation charges or monthly
service fee, one basic converter and one installation for one line basic service
connection to the Village Hall, to all firehouses, public work buildings and any
other municipal buildings designated by the Board of Trustees; to all library
buildings, to all park district buildings, and to all public and parochial
elementary, secondary and college level schools located within the Municipality.
The Company shall make such connections at the location designated by the
Municipality for municipal buildings or by the other appropriate officer for
other public buildings. The public buildings so serviced shall be responsible
for all internal wiring from such energized connection source.
SECTION 16: COMPLIANCE WITH LOCAL, STATE AND FEDERAL
---------- JURISDICTION; NO WAIVER BY MUNICIPALITY FOR
FAILURE TO ENFORCE THIS AGREEMENT; JUDICIAL
REMEDIES
(a) The Company shall establish, construct, operate and maintain the
System, subject to the reasonable supervision of the Municipality, and in strict
compliance with all applicable laws, ordinances, rules and regulations.
(b) If at any time the powers of the Municipality, state or federal
government or any agency or official thereof in connection with the System are
duly transferred to or later reside in any other board, authority, agency or
official, such board, authority, agency or official shall have the power, rights
and duties previously vested, in addition to any other which they may acquire.
(c) Notwithstanding any other provisions of this Franchise Agreement
or any related Ordinance, the Company shall at all times comply with all state
and federal laws, rules and regulations, or any administrative agency thereof;
provided, however, if any such ordinance, law, rule or regulation shall require
the Company to perform any service or shall permit the Company to perform any
service in conflict with the provisions and terms of this Franchise Agreement or
any related Ordinance or of any law, rule or regulation, then as soon as
possible following knowledge thereof, the Company shall notify the Municipality
of the point of conflict believed to exist. If the Municipality determines that
a material provision of this Franchise Agreement or any
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<PAGE>
related Ordinance is affected by such action, the parties shall have the right
to modify or amend any of the provisions to such reasonable extent as may be
necessary to carry out the full intent and purpose of this Franchise Agreement
and any related Ordinance.
(d) The Company or other parties shall not be excused from complying
with any of the terms or conditions of this Franchise Agreement or any related
Ordinance by any failure of the Municipality upon any one or more occasions to
insist upon or to seek compliance with any such terms or conditions.
(e) In addition to all remedies herein provided, the parties shall
have the right to apply to any court of competent jurisdiction to secure such
judicial relief as it shall deem proper.
SECTION 17: ACCEPTANCE
----------
(a) Except as expressly provided otherwise in this Franchise
Agreement, the Company shall have no recourse whatsoever against the
Municipality for any loss, cost or expense or damages arising out of the terms,
conditions and provisions or requirements of this Franchise Agreement or any
related Ordinance.
(b) The Company, by acceptance of the right, privilege and franchise
under this Franchise Agreement, acknowledges that it has not been induced to
enter into the franchise by any understanding or promise or other statement,
whether verbal or written by or on behalf of the Municipality concerning any
term or condition of this franchise not expressed herein.
(c) The Company agrees that it shall execute an acceptance of the
Grant made pursuant to the Ordinance in substantially the form that follows:
ACCEPTANCE OF THE VILLAGE OF ORLAND PARK, ILLINOIS
CABLE TELEVISION FRANCHISE
Now this 3rd of June , 1996, the Company, having been advised by the
Village of Orland, Park, Illinois, that its Ordinance No. 2899 has been passed
by the President and Board of Trustees on the 3rd day of June 1996 (the
"Ordinance") to authorize the grant of a new franchise to the Company to
establish, construct, operate and maintain a cable television system within the
Village of Orland Park, Illinois, agrees to comply fully and in all respects
with the terms, conditions and provisions of the Franchise Agreement
-14-
<PAGE>
and any related Ordinance.
CABLE TV FUND 12-A, LTD.
By:
----------------------------------
Title:
-------------------------------
(SEAL)
Attest:
-------------------------------------
Assistant Secretary
SECTION 18: ASSIGNMENT OR TRANSFER
----------
(a) The Company may not assign or transfer the its rights under this
Franchise Agreement without the prior written consent of the Municipality, which
consent shall not be unreasonably withheld. Notwithstanding the foregoing, the
Municipality's consent shall not be necessary (i) for the assignment or transfer
of the Company's rights under this Franchise Agreement to any affiliate of the
Company which has the same or greater technical ability, financial condition and
legal qualifications as the Company, or (ii) for the granting of a security
interest in, or the mortgage or pledge of, all of the Franchise's rights, powers
and privileges under this Ordinance to such lending institution or institutions
as may be designated by the Company.
(b) The consent or approval of the Municipality to any such
assignment, lease, transfer, sublease, pledge or mortgage shall not constitute a
waiver or release of the rights of the Municipality in and to Public
Rights-of-Way.
SECTION 19: REVOCATION OF FRANCHISE
----------
(a) In addition to all other rights, powers or remedies pertaining to
the Municipality in connection with this Franchise Agreement or otherwise, the
-15-
<PAGE>
Municipality reserves the right to terminate, cancel and revoke the franchise
and all rights and privileges of the Company under this Franchise Agreement in
the event the Company:
(i) Violates any material provision of this Franchise
Agreement or any rule, order or determination of the Municipality
made pursuant to this Franchise Agreement, except where such
violation, other than of subsection (ii) and (iii) below, is without
fault of the Company or through excusable neglect; or
(ii) Becomes insolvent, unable or unwilling to pay its debts,
or is adjudged bankrupt; or
(iii) Fails for a substantial time to provide cable television
service to Subscribers, except as a result of strikes, war, civil
commotion, Acts of God or other causes beyond the reasonable control
of the Company.
(b) The Municipality may make a written demand that the Company
comply with any such provision, rule, order or determination under or pursuant
to this Franchise Agreement. If the violation by the Company continues for a
period of thirty days following such written demand without written proof that
the corrective action has been taken or is being actively and expeditiously
pursued, the Municipality may consider the issue of terminating the Grant,
provided that the Municipality shall cause to be served upon the Company, at
least twenty day prior to the date the Municipality is to consider the issue of
termination, a written notice of intent to request such termination, and the
time and place of the meeting. Public notice shall be given of the meeting and
issue which the Municipality is to consider.
(c) The Corporate Authorities shall hear and consider the issue, and
shall hear any Person interested therein, and the Corporate Authorities shall
determine, in their discretion, whether or not any violation by the Company has
occurred.
(d) If the Corporate Authorities shall determine the violation by
the Company was the fault of Company and within its control, the Corporate
Authorities may, by resolution, declare that the Grant shall be terminated and
revoked unless there is compliance within such period at the Corporate
Authorities may fix; such period shall not be less than ten days, provided that
no opportunity for compliance need be granted for fraud or misrepresentation.
(e) Upon expiration of the time set for compliance by the Company in
subsection (d) and in the event that there has not been full and complete
compliance, the issue of revocation and termination shall be determined at the
first regular meeting of the Corporate Authorities following said expiration,
without further notice to the Company, and in accordance with Illinois law.
-16-
<PAGE>
SECTION 20: RENEWAL
----------
This Grant to the Company herein may be renewed on such terms and
conditions as the parties may agree, in accordance with and subject to the
renewal provisions of the Cable Communications Policy Act of 1984, as amended.
SECTION 21: REMOVAL OF CABLE; PURCHASE BY MUNICIPALITY
----------
Upon the termination or revocation of the franchise granted herein,
as provided herein, the Municipality shall have the option, to be exercised
within ten days thereof, of accepting ownership of the System's facilities by
paying to the Company the fair market value of the System, as determined from
appraisals by appraisers approved by the parties, or the option to require the
sale of such assets to a succeeding company on said terms.
Upon notice from the Municipality that it is not exercising either of
the aforesaid options the Company shall, at its own expense, remove all
designated portions of the System from all streets and public property within
the Municipality, and shall repair and restore the surface of all streets and
public property within the Municipality to the original condition, within a
reasonable period of time specified by the Municipality.
SECTION 22: EQUAL EMPLOYMENT OPPORTUNITY
----------
In carrying out the construction, operation, maintenance, service and
repair of the System, the Company shall not refuse to hire or employ, nor bar or
discharge from employment, nor discriminate against in compensation or in terms,
conditions or privileges of employment, any Person in violation of any statute
or the Constitution of either the United States or the State of Illinois.
SECTION 23: MUNICIPALITY ENGINEERING DEPARTMENT DUTIES AND
----------
AUTHORITY
Unless otherwise specifically stated in this Franchise Agreement or
any related Ordinance, it shall be the duty of the Municipality's Engineering
Department to assure, by inspection or otherwise, that the Company at all times
shall comply with the requirements of this Franchise Agreement in connection
with the construction, erection, operation, modification and maintenance of the
System within the Municipality.
-17-
<PAGE>
SECTION 24: RESERVATION OF RIGHTS
----------
(a) The right is hereby reserved to the Municipality to adopt and
enforce, in addition to the terms, conditions and provisions contained in this
Franchise Agreement and in other applicable ordinances, such additional
ordinances, rules and regulations as it shall find necessary in the exercise of
the police powers; provided that such ordinances, rules and regulations shall be
reasonable and not in material or substantial conflict with the rights herein
granted.
(b) In addition to the specific rights of inspection otherwise
provided for in this Franchise Agreement, the Municipality shall also have the
right to make such reasonable inspections as it shall find necessary to insure
compliance with the terms, provisions and conditions of this Franchise Agreement
and other relevant provisions of law.
SECTION 25: CONSTRUCTION
----------
Principles concerning the construction and interpretation of this
Franchise Agreement shall be as follows:
(a) If any provision of this Franchise Agreement or the application
thereof is for any reason held invalid, illegal, unconstitutional or
unenforceable, such holding shall not affect the remainder of this Franchise
Agreement to any extent, each provision of this Franchise Agreement being a
separate, distinct and independent part.
(b) Words in the present tense include the future.
(c) Words importing the singular number may extend to and include
plural; words importing the plural number may extend to and include the
singular; and words in masculine gender shall include female gender.
(d) The Company shall not be excused from complying with any of the
terms, conditions and provisions of this Franchise Agreement by any failure of
the Municipality upon any one or more occasions to insist upon or to seek
compliance with any such terms, conditions or provisions.
(e) The specification in this Section of principles to apply in the
construction and interpretation of this Franchise Agreement shall not be a
limitation as to others.
SECTION 26: NOTICES
----------
All notices herein provided for shall be sent prepaid, registered or
certified mail
-18-
<PAGE>
addressed to the parties as follows, or at such other address as the parties
shall designate in accordance with this Section:
To the Municipality:
Village of Orland Park
14700 S. Ravinia Avenue
Orland Park, Illinois 60462
Attn: Village Manager
To the Company:
Cable TV Fund 12-A, Ltd.
c/o Jones Intercable, Inc
9697 East Mineral Avenue
P.O. Box 3309
Englewood, Colorado 80155-3309
Attn: Legal Department
VILLAGE OF ORLAND PARK, CABLE TV FUND 12-A, LTD.
Cook and Will Counties, Illinois By: Jones Intercable, Inc.
Its General Partner
By: /s/ [SIGNATURE APPEARS HERE] By: /s/ Ruth E. Warren
------------------------------ -----------------------------------
Village President
Title: Group Vice President/Operations
------------------------------
Attest: Attest:
/s/ [SIGNATURE APPEARS HERE] /s/ Katherine A. LeVoy
- --------------------------------- --------------------------------------
Village Clerk Assistant Secretary
-19-
<PAGE>
CABLE TELEVISION FRANCHISE AGREEMENT
Village of Park Forest, Illinois
And
Cable TV Fund 12-A, Ltd.
d/b/a
Jones Intercable, Inc.
August 26, 1996
Exhibit 10.1.10 to
Cable TV Fund 12-A
<PAGE>
[BLANK PAGE]
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
SECTION SECTION TITLE PAGE
- ------- ------------- ----
<C> <S> <C>
1 DEFINITIONS 1
2 GRANT OF NON-EXCLUSIVE FRANCHISE 8
3 TERM OF AGREEMENT 8
4 ACCEPTANCE OF FRANCHISE 9
5 SERVICE AREA COVERED BY FRANCHISE AGREEMENT 12
6 RETRANSMISSION OF SIGNALS WITHIN A STRUCTURE 12
7 CABLE SYSTEM 12
8 CONSTRUCTION STANDARDS 15
9 INSTITUTIONAL NETWORK 18
10 CUSTOMER SERVICE 18
11 RATE REGULATION 18
12 FRANCHISE FEES 19
13 FRANCHISE FEE AUDITS OR AGREED-UPON
PROCEDURES 20
14 SECURITY FUND; PERFORMANCE BOND 20
15 DAMAGES AND DEFENSE 23
16 LIABILITY INSURANCE AND INDEMNIFICATION 23
17 LIQUIDATED DAMAGES 24
18 PROGRAMMING SERVICES 27
19 PUBLIC, EDUCATIONAL, AND GOVERNMENTAL ACCESS 28
20 LEASED ACCESS CHANNELS 30
</TABLE>
<PAGE>
TABLE OF CONTENTS (CONTINUED)
----------------------------
<TABLE>
<CAPTION>
SECTION SECTION TITLE PAGE
- ------- ------------- ----
<C> <S> <C>
21 LOCAL ORIGINATION PROGRAMMING 30
22 SERVICES TO SCHOOLS AND GOVERNMENT BUILDINGS 32
23 EMERGENCY OVERRIDE 32
24 MODIFICATIONS TO COMMUNICATIONS AND CABLE
ACTS 33
25 REVOCATION 33
26 RIGHTS AND REMEDIES 34
27 RIGHTS AND POWERS RESERVED BY VILLAGE 34
28 SERVICE OF NOTICE 35
29 ORAL MODIFICATION 35
30 SEVERABILITY 36
31 ENTIRE CONTRACT 36
32 OBLIGATIONS TO CONTINUE THROUGHOUT TERM 36
33 FRANCHISE VALIDITY 36
34 HEADINGS 36
35 GOVERNING LAW 36
</TABLE>
MAP OF CORPORATE LIMITS
VILLAGE OF PARK FOREST APPENDIX A
LISTING OF SCHOOLS, LOCAL INSTITUTIONS,
AND GOVERNMENT BUILDINGS TO BE PROVIDED
SUBSCRIBER NETWORK CABLE SERVICE IN
ACCORDANCE WITH THE PRIOR FRANCHISE
AGREEMENT APPENDIX B
<PAGE>
SECTION 1: DEFINITIONS
- ----------------------
For the purposes of this Section, the following phrases, terms, words, and their
derivations shall have the meaning as stated herein. When not inconsistent with
the context, words in the present tense shall include the future, words
indicating a plural number shall include the singular number and words in the
singular number include the plural number. The word "shall" and "will" are
mandatory, and not directory. The word "may" is permissive. Words not defined
shall be given their common and ordinary meaning. Unless a section provides
otherwise, references to statutory enactments shall include any and all
amendments thereto and any successor provisions. All capitalized words defined
herein, and all other capitalized words utilized within this Agreement, shall
have the meaning ascribed to them in the Cable Act unless said terms are not
defined in the Cable Act, whereupon the definition shall be controlled by this
Agreement. For the purpose of this Franchise Agreement, the terms in the
Franchise Agreement shall prevail where there is a conflict between the
Ordinance and the Cable Act. Where the Franchise Agreement is silent, the terms
of the Ordinance and the Cable Act shall control.
ACT (also CABLE ACT): Shall mean the Communications Act of 1934, the Cable
Communications Policy Act of 1984, the Cable Consumer
Protection and Competition Act of 1992 (47 USC 521 et.
seq.) and the Telecommunications Act of 1996, as now or
hereinafter amended.
BASIC SERVICE: Shall consist of all signals carried in fulfillment of the
provisions of Sections 614 and 615 of the Communications
Act of 1934, as amended, any Public, Educational, and
Governmental Access programming required by the Franchise
of the Cable System to be provided to Subscribers, and any
signal of any television broadcast station that is
provided by the Cable Operator to any Subscriber, except a
signal which is secondarily transmitted by a satellite
carrier beyond the local service area of such station.
Basic Service may also include any additional video
programming signals or services provided by the Cable
Operator to the basic service tier.
BOARD OF TRUSTEES: Means the governing body of the Village or any successors
to the legislative powers of said body (also referred to
as BOARD).
1
<PAGE>
CABLE OPERATOR: Any Person or Persons, including corporations,
partnerships, and joint ventures, who provide cable
programming services through means of a Cable System and
who own a significant interest in the Cable System, or any
Person or Persons, who manage, control, coordinate, or
direct the operations of a Cable System.
CABLE SERVICE: The one-way transmission to Subscribers of video
programming or other programming service, and Subscriber
interaction, if any, which is required for the selection
of such video programming or other programming service.
CABLE SYSTEM: The system of antennas, cables, wires, lines, towers,
waveguides, laser beams, satellite uplinks, microwave
links, or other conductors, converters, amplifiers,
Headend equipment, master controls, earth stations,
equipment and facilities, designed, wired, and constructed
for the purpose of producing, receiving, transmitting,
amplifying storing, processing, or distributing by coaxial
cable, fiberoptics, fiber distributed data interference
(FDDI), microwave, data, or other means, audio, video,
data, and other forms of electronic or electrical signals
within the Village other than those communication units
which are solely wired on private property. A Cable System
shall also mean a facility as described above which is
located within the corporate limits of the Village
regardless of the location of the headend feeding such
system is located within the corporate limits of the
Village.
CHANNEL: A band of frequencies which constitutes the standards
definition of a Channel by the National Television System
Committee (NTSC), which is capable of carrying audio,
video, voice, data, multimedia, and encrypted information
signals.
CONVERTER: A device which may be provided by the Cable Operator to
Subscribers for the purpose of changing the frequency of
midband, superband, or hyperband signals to a suitable
Channel or Channels which the television receiver is able
to deliver at designated dial locations.
DWELLING UNIT: Shall mean a single-family or multiple-family residential,
commercial or industrial place of occupancy.
2
<PAGE>
EDUCATIONAL
ACCESS CHANNEL: Shall mean a Channel or Channels set aside and so
designated for the use of Schools and related educational
institutions, including facilities and equipment for the
use of such Channel, as specified by the Franchising
Authority.
FCC: Shall mean the Federal Communications Commission and any
legally constituted regulatory body, or agency, or
successor.
FRANCHISE: Shall mean the nonexclusive right and privilege granted
through the authority of a Franchise Agreement between the
Village and any Grantee hereunder which allows the Grantee
to own, operate, construct, reconstruct, dismantle, test,
use, and maintain a Cable System within the corporate
boundaries of the Village, or within specified areas of
the Village.
FRANCHISE AREA: The area within the corporate boundaries or jurisdiction
of the Village of Park Forest which is subject to the
terms and conditions granted under the Village's cable
television franchise.
FRANCHISE FEE: Shall include any assessment imposed herein by the Village
on a Grantee solely because of its status as a Grantee.
The term "Franchise Fee" does not include any tax, fee, or
assessment of general applicability (including any such
tax, fee, or assessment imposed on both utilities and
Cable Operators or their services), but not including a
tax, fee, or assessment which is unduly discriminatory
against the Grantee or cable Subscribers; capital costs
which are required by the Franchise to be incurred by
Grantee for the establishment and operation of Public,
Educational, or Governmental Access facilities;
requirements or charges incidental to the awarding,
reviewing, enforcing, or transferring of the Franchise,
including payments for professional, legal, or technical
assistance, bonds, security funds, letters of credit,
insurance, indemnification, penalties, or liquidated
damages; any fee imposed under Title 17, U.S. Code.
FRANCHISING
AUTHORITY: Shall mean the Municipal Authority of the Village of Park
Forest, or its Mayor or his designee or any of its
designated municipal officers or staff having
responsibility over the supervision of the Village's cable
television franchise.
3
<PAGE>
GOVERNMENTAL
ACCESS CHANNEL: Shall mean a Channel or Channels set aside and so
designated for the use of the Village of Park Forest,
including facilities and equipment for the use of such
Channel, as specified by the Franchising Authority.
GRANTEE: Shall mean Cable TV Fund 12-A, Ltd. doing business as
Jones Intercable, or any Person(s), including
corporations, partnerships, associations, joint ventures,
or organizations of any type and its agents,
representatives, employees, subsidiaries, assignees,
transferees or lawful successors having any rights,
powers, privileges, duties, liabilities or obligations
under this Section and also includes all persons having or
claiming any title to or interest in the Cable System,
whether by reason of the Franchise itself directly or by
interest in a subsidiary, parent, or affiliate company,
association, or organization, or by any subcontract,
transfer, assignment, management agreement or operating
agreement, or an approved assignment or transfer resulting
from a foreclosure of a mortgage security agreement, or
whether otherwise arising or created.
GRANTOR: The Village of Park Forest, Illinois.
GROSS REVENUES: Shall mean all cash, credits, property of any kind or
nature or other consideration derived directly or
indirectly by a Grantee, its affiliates, subsidiaries,
transferees, assignees, or any other person in which the
Grantee has a financial interest, arising from or
attributable to the sale or exchange of cable services by
Grantee within the Village, including but not limited to,
monthly fees charged Subscribers for Basic Service,
monthly fees charged Subscribers for any optional Cable
Service; monthly fees charged Subscribers for any tier of
service other than Basic Service; Installation,
disconnection and re-connection fees; leased Channel fees;
fees, payments or other consideration received from
programmers; Converter rentals or sales; advertising
revenues; revenues from home shopping Channels; revenues
from the sale, exchange, or cablecast of any programming
developed on or for community service Channels or
institutional users of the Cable System. This sum shall be
the basis for computing the fee imposed pursuant to
Section 12.1(A)-(B) hereof.
4
<PAGE>
GROSS REVENUES
(continued): This sum shall not include any taxes on services furnished
by Grantee which are levied directly upon any Subscriber
or User by the State of Illinois, Cook and/or Will County,
the Village, or any other governmental unit which is
collected by Grantee on behalf of such governmental unit,
or revenue derived from a similar service that is
regulated exclusively at the state or federal level when
said service is a common carrier or utility service not
subject to regulation.
HEADEND: The control center of a cable television system, where
incoming signals are amplified, converted, processed, and
combined into a common cable along with any origination
cablecasting, for transmission to Subscribers. Headend
usually includes antennas, preamplifiers, frequency
converters, demodulators, processors, and other related
equipment.
INSTALLATION: Shall mean the connection between Subscriber Drop cable to
Subscribers' terminals.
INTERACTIVE ON-
DEMAND SERVICES: A service providing video programming to Subscribers over
switched networks on an on-demand, point-to-point basis,
but does not include services providing video programming
prescheduled by the programming provider.
INTERACTIVE
SYSTEM: A two-way Cable System that provides a Subscriber with the
ability to enter commands or responses on an in-home
terminal and general responses or stimuli at a remote
location.
LEASED ACCESS
CHANNEL: A cable television Channel or Channels, including input
facilities and equipment, specifically designated for
public, non-profit, or private entity broadcasting which
is provided by means of a lease arrangement for cablecast
airtime between the Cable Operator and the Lessee. Shall
include without limitation all use pursuant to Section 612
of the Act (47 USC 532).
LOCAL ORIGINATION
CHANNEL: A Channel providing programs that are produced by the
Cable Operator rather than those received from television
broadcast stations or pay Channel distributors and other
than those produced on Public, Educational, and
Governmental Channels.
5
<PAGE>
MATERIAL BREACH: Any substantial deviation from the terms and conditions of
this Franchise, including, but not limited to, one or more
causes for revocation as described in the Franchise
Ordinance.
MODIFICATION
AGREEMENT: Shall mean any agreement of modification and amendment to
the Franchise Agreement entered into and between the
Grantee and the Village and made a part of the Franchise
Agreement.
ORDINANCE: Shall mean the Village of Park Forest Cable Communications
Ordinance, as may be amended from time to time.
PAY-PER-VIEW: A usage-based fee structure used for cable television
programming in which the Subscriber is charged a price for
individual programs requested.
PERSON: Shall mean any individual, firm, corporation, company,
partnership, association, joint venture, trust, or
organization of any kind and the lawful trustee,
successor, transferee, assignee, or personal
representative thereof.
PUBLIC ACCESS
CHANNEL: A cable television Channel or Channels specifically
designated as a non-commercial Public Access Channel
available on a first-come, non-discriminatory basis,
including facilities and equipment for such use. Shall
include without limitation all use pursuant to Sections
611 and 612 of the Act (47 USC 531, 47 USC 532).
PUBLIC STREET: Shall mean the surface and the space above and below the
surface of any public street, road, highway, lane, path,
alley, court, boulevard, drive, avenue, parkway, driveway,
or bridge, now or hereafter held by the Village which
shall entitle the Village and the Grantee to the use
thereof for the purpose of erecting, installing, and
maintaining the Grantee's Cable System.
PUBLIC WAY: Shall mean the surface and the space above and below any
conduit, tunnel, park, square, waterways, utility
easements, or other public right-of-way now or hereafter
held by the Village which shall entitle the Village and
the Grantee to the use thereof for the purpose of
erecting, installing, and maintaining the Grantee's Cable
System.
6
<PAGE>
SCHOOLS: Any public or private elementary School, secondary
Schools, junior college, or university which conducts
classes or provides instruction services which has been
granted a certificate of recognition by the State of
Illinois.
SHALL AND MUST: Each is mandatory.
SUBSCRIBER: Shall mean any Person, firm, company, corporation, or
association who legally receives one or more of the
services provided by the Grantee's Cable System under the
schedule of charges filed with and approved by the
Village, and does not further distribute such services.
SUBSCRIBER DROP: A cable which connects the tap or coupler of a feeder
cable to Subscriber's premises and television set.
USER: A Person utilizing a Channel or Channels for purposes of
production and/or transmission of material, as contrasted
with receipt in a Subscriber capacity.
VERTICAL BLANKING
INTERVAL: The unused lines in each field of a television signal
(seen as a thick band when the television picture rolls
over, usually at the beginning of each field), that
instruct the television receiver to prepare for reception
of the next field. Some of these lines may be used for
teletext and captioning or maintain specialized test
signals.
VILLAGE: Means the Village of Park Forest, State of Illinois, its
officers and employees unless otherwise specifically
designated, and all the area within the territorial limits
of the Village, its future corporate boundaries and
including any area over which the Village exercises its
jurisdiction.
7
<PAGE>
SECTION 2: GRANT OF NON-EXCLUSIVE FRANCHISE
- -------------------------------------------
Section 2.1: Grant of Operation
-------------------------------
The Village of Park Forest hereby grants to Grantee the non-exclusive right
and privilege to construct, erect, operate, and maintain in, upon, along,
across, over and under Public Ways, Public Streets and public places now
laid out or dedicated, and all extensions thereof and thereto, in the
Village, poles, wires, cables, underground conduits, manholes, and other
television conductors, and fixtures or appurtenances necessary for the
maintenance and operation of a Cable System for the interception,
production, sale, and distribution of audio, video, data, voice, and radio
signals.
Section 2.2: Right of Village to Grant Other Franchises
-------------------------------------------------------
Nothing in this Franchise Agreement shall affect the right of the
Franchising Authority to grant to any other Person a Franchise or right to
occupy and use the Public Streets, Public Ways or public places or any part
thereof for the erection, installation, construction, reconstruction,
operation, maintenance, dismantling, testing, or repair or use of their
Cable System within the Village of Park Forest.
Section 2.3: Limitations on Liability
-------------------------------------
The limitations on the liability of the Village or any official, member,
employee, or agent of the Village shall be governed by the provisions of
Section 635 (A) of the Cable Act (47 U.S.C. (S) 555a).
Section 2.4: Compliance With Franchise Ordinance
------------------------------------------------
Having fully examined all of the provisions of the Franchise Ordinance,
which is regulatory in nature, and not contractual, Grantee hereby accepts
the award of the non-exclusive Franchise and expressly promises and agrees
to comply in all respects with every provision of the Franchise Ordinance
as it now exists or is hereafter amended or supplemented in accordance with
legal authority, where the provisions are not inconsistent with nor
substantially alter the provisions of this Franchise Agreement.
SECTION 3: TERM OF AGREEMENT
- ----------------------------
Section 3.1: Effective Date
---------------------------
The Agreement and the Franchise granted hereunder shall become effective
upon execution, establishment, and delivery of the Security Fund and
certificates of insurance as hereinafter provided for in Sections 14 and 16
of this Agreement.
8
<PAGE>
Section 3.2: Term of Agreement
------------------------------
The grant of this Franchise shall be for a term of three (3) years and one
(1) day beginning on August 30, 1996.
Section 3.3: Breach of Franchise
--------------------------------
The Franchise Agreement may be terminated for Material Breach of any term
or condition hereof or for violations of any material provision of this
Agreement, as provided for in Section 25 of this Agreement.
SECTION 4: ACCEPTANCE OF FRANCHISE
- ----------------------------------
Section 4.1: Binding Agreement of Terms and Conditions
------------------------------------------------------
The Village and Grantee agree to be bound by, and to timely and fully
perform and fulfill all of the terms, conditions, inducements, offers,
promises, provisions, and representations of this Franchise Agreement.
Anything contained herein to the contrary notwithstanding, all provisions
of this Agreement shall be binding upon the Grantee, its successors,
lessees, delegees, or assignees.
Section 4.2: Acceptance of Power and Authority of Village
---------------------------------------------------------
The Grantee expressly acknowledges that in accepting the Franchise it has
relied upon its own investigation and understanding of the power and
authority of the Village to grant this Franchise.
Section 4.3: Filing of Franchise Agreement
------------------------------------------
A fully executed copy of the Franchise Agreement shall be filed for record
in the Office of the Village Clerk within thirty (30) days after the same
is approved. The recorded copies of such acceptance shall be obtained and
preserved by the Village Clerk. If one or both of the aforementioned fully
executed copies of the Agreement are not filed or deposited as required,
the Agreement shall not take effect but shall be null and void until said
copy or copies are filed or deposited with the Franchising Authority and/or
the Village Clerk.
9
<PAGE>
Section 4.4: Previous Rights Abandoned
--------------------------------------
This Franchise shall be in lieu of any and all other previous rights,
privileges, powers, immunities, and authorities owned, possessed,
controlled, or exercisable by the Grantee or any successor pertaining to
the construction, operation, or maintenance of a Cable System in the
Village. The acceptance of the Franchise shall operate, as between Grantee
and the Franchising Authority, as an abandonment of any and all such
rights, privileges, powers, immunities, and authorities within the Village.
Section 4.5: Regulatory Authority
---------------------------------
Grantee agrees that it is and shall be subject to the regulatory authority
of the Village as set forth in this Franchise Agreement and as the
Franchise Agreement may from time to time be supplemented or amended
pursuant to agreement of the parties and by applicable law.
Section 4.6: Transfers of Ownership
-----------------------------------
The transfer, delegation, or assignment of ownership of the Cable System
and Franchise shall be conducted in accordance with Section 9.1 et. seq. of
the Park Forest Cable Communications Ordinance. Such transfer, delegation,
or assignment of ownership shall not be granted without the prior written
consent of the Franchising Authority as expressed in the form of a
resolution by the Village Board. Such consent shall not be withheld by the
Village Board without showing of cause. The procedures for examination of a
transfer, delegation, or assignment of ownership shall be effective where
five (5) percent or more of the ownership of the Cable System is proposed
for transfer, delegation, or assignment to a Person or group of Persons as
defined herein, none of whom owned or controlled five (5) percent of more
of such right of control, singularly or collectively, on the effective date
of this Franchise.
Section 4.7: Compliance With Laws, Rules, and Regulations
---------------------------------------------------------
In the event any valid law, rule or regulation of any federal and state
governing authority or agency having jurisdiction, including but not
limited to, the Federal Communications Commission or its designated
successor, contravenes the provision of this Agreement subsequent to its
adoption; then the provisions hereof shall be superseded by any such valid
law, rule, regulation, to the extent that the provisions hereof are in
conflict and contrary to any such rule, law, or regulation.
10
<PAGE>
Section 4.8: Fee for Professional Services Pertaining to Franchise
-------------------------------------------------------------------
Renewal or Transfer
-------------------
The Grantee shall provide to the Franchising Authority with the executed
acceptance of the renewed Franchise, a non-refundable fee of $28,570.32
shall be applied to solely defray costs incurred by the Franchising
Authority for professional services and staff time incurred through this
Franchise renewal process. In the event of a transfer, delegation, or
assignation of ownership, the Grantee shall pay for all costs incurred by
the Franchising Authority for professional services and staff time for the
Franchise transfer, delegation, or assignment process.
Section 4.9: Illegal or Wrongful Conduct; Inducements
-----------------------------------------------------
Grantee represents, warrants, and guarantees that neither it, nor its
representatives or agents have committed any illegal acts or engaged in any
wrongful or illicit conduct contrary to, or in violation of any federal,
state, or local law or regulation in connection with the obtaining of the
Franchise. The Grantee by acceptance of this Franchise acknowledges that it
has not been induced to enter into this Franchise by any understanding or
promise or other statement, whether verbal or written, by or on behalf of
the Village concerning any term or condition of this Franchise that is not
included in this Agreement.
Section 4.10: Further Representations of Grantee
------------------------------------------------
The Grantee further warrants and represents as follows:
A. That Grantee is a Colorado partnership authorized to do business in the
State of Illinois, in good standing and has full legal right and
authority to enter into and fully execute and perform the terms of this
Franchise Agreement;
B. That all corporate action required to authorize the acceptance of this
Franchise Agreement, and execution and delivery of this Franchise
Agreement and all other documents to be executed and/or delivered by
the Grantee pursuant to this Franchise Agreement, and to authorize the
performance by the Grantee of all its obligations under this Franchise
Agreement have been validly and duly acted on and are in force and
effect; and
C. That the Franchise Agreement and all other documents executed and/or
delivered by the Grantee have been duly accepted and executed; and
D. That the Grantee has the financial, legal, technical, and construction
capability to operate and maintain the Cable System pursuant to the
terms and conditions of this Franchise Agreement.
11
<PAGE>
Section 4.11: Grantee's Authorized Agent
--------------------------------
For purposes of this Franchise Agreement, Grantee authorizes and appoints
the General Manager, Cable TV Fund 12-A. Ltd., d/b/a Jones Intercable,
------------------------------------------------------------------
Inc., with offices located at 4331 West Lincoln Highway, Matteson, Illinois
----- ---------------------------------------------
60443, to act as its registered agent, and represents to the Franchising
-----
Authority that such agent is authorized to accept notice and service on its
behalf.
SECTION 5: SERVICE AREA COVERED BY FRANCHISE AGREEMENT
- ------------------------------------------------------
Section 5.1: Privilege to Operate Within Municipal Corporate Limits
-------------------------------------------------------------------
The Franchising Authority hereby extends to the Grantee the privilege of
operating the Cable System within the corporate limits of the Village as
now or in the future may exist as shown on the map found in Appendix A
SECTION 6: RETRANSMISSION OF SIGNALS WITHIN A STRUCTURE
- -------------------------------------------------------
Installation or Subscriber use of Cable System service which involves the
retransmission of the signal or signals to multiple reception points within
a structure shall be negotiated between the Grantee and the owner of the
structure.
SECTION 7: CABLE SYSTEM
- -----------------------
Section 7.1: Cable System Channel Capacity
------------------------------------------
A. Grantee shall continue to provide a dual-trunk system, with each trunk
capable of carrying fifty-four (54) NTSC uncompressed analog channels
of television width. The Cable System shall have the capacity to
originate programming at points other than the System's Headend. Where
technically feasible, Grantee may add an additional number of Channels
to the Cable System at any time during the life of this Franchise.
B. Grantee may begin to add Channels to the Cable System within the first
year after the Franchise Agreement is signed. Thereafter, the Grantee
shall meet with the Franchising Authority on an informal basis to
discuss planned Channel additions.
C. Grantee shall provide to all of its Subscribers all components of the
television signal (video and audio) including, but not limited to,
subcarriers and information in the Vertical Blanking Interval to the
extent that such subcarriers and other Vertical Blanking Interval data
are intended by the programmer or broadcaster for general reception
to the public without a fee.
12
<PAGE>
Section 7.2: Channel Capacity
- -----------------------------
Grantee shall provide a system with Channel capacity and technical features that
it is providing as of the date of this Agreement.
Section 7.3: Force Majeure
- --------------------------
No penalties of any kind shall be imposed against the Grantee for delays in
completing repair, maintenance, or construction of the Cable System when such
delays are caused by the following: war, riot, insurrection, rebellion, strike,
lockout, unavoidable casualty or damage to personnel, materials, or equipment,
fire, flood, storm, earthquake, tornado, orders of a court of competent
jurisdiction, any act of God, failure of a utility provider to provide pole
attachments on reasonable terms or conditions therefore, vendor caused equipment
delays, and any cause beyond the control of Grantee. In the case of a vendor
caused equipment delay, the burden of proof will be on the Grantee to show that
the delay was solely the fault of the vendor and that the vendor was an
established equipment provider at the time the order was placed.
Section 7.4: Continuous and Uninterrupted Service
- -------------------------------------------------
During such times when the Cable System is undergoing maintenance or
construction, the Grantee shall conduct construction activities in such manner
that all Subscribers may reasonably receive continuous, uninterrupted service,
except in the case of an emergency. In the event that it is necessary for the
Grantee to interrupt Subscriber service for a period longer than three (3) hours
in any part of the Village, the Franchising Authority shall be notified prior to
the interruption. Any interrupted service shall be subject to the provisions of
this Franchise Agreement.
Section 7.5: Extension of Service
- ---------------------------------
Grantee shall make available the services of the Cable System to local
businesses. Where a building housing one or more businesses, or multiple
buildings housing businesses are not contiguous to residential Dwelling Units,
Grantee shall provide service to such building or buildings if they are located
one hundred twenty-five (125) feet or less from a terminating point along a
trunk, node, or feeder of the Cable System. If said building or buildings are
located more than one hundred twenty-five (125) feet from a terminating point
along a Cable System trunk, node, or feeder, Grantee may voluntarily provide
service to a business or businesses for an amount not to exceed the cost of
construction of said portion of the system.
13
<PAGE>
In the event that the Grantee should provide service to other businesses or
residential Dwelling Units extending from the system constructed for the initial
business unit or units, Grantee shall refund fifty (50) percent of the sum
charged to the initial business unit or units within six (6) months of the
initial provision of service to other businesses or residential Dwelling Units.
Section 7.6: Periodic System Testing
- ------------------------------------
A. Grantee shall comply with all Cable System testing regulations for video
and audio signal quality, and signal leakage as specified in Title 47,
Section 76, Subpart K of the Code of Federal Regulations. Grantee shall
maintain periodic testing throughout the life of the Franchise. In
conducting video and audio signal testing, Grantee shall follow testing
procedures set forth by the FCC.
B. The Franchising Authority may conduct additional tests of the Cable
System's technical specifications as a part of a Franchise evaluation, or
upon the reasonable notice to the Grantee, so long as such tests do not
unreasonably interfere with Grantee's operation of the Cable System. If a
material deficiency is found or material deficiencies are found in the
performance of the Cable System which result in the failure of the Cable
System to meet the minimum technical standards set forth by the FCC, or
which are in significant violation of the National Electrical Code (ANSI
70-1993/ANSI 70-1995) or the National Electrical Safety Code (ANSI C2-
1993/ANSI C2-1995), Grantee shall pay for the cost of such tests.
C. Where testing of the Cable System has been conducted by the Grantee and a
consultant selected by the Franchising Authority, and it is the opinion of
the Franchising Authority that such testing and assessment be conducted a
second time, such costs shall be borne by the Franchising Authority. If the
results of such repeated tests and assessments indicate that Grantee did
not follow proper testing procedures as prescribed by the FCC or the cable
industry, or indicated that faults uncovered by repeated tests and
assessments were caused by the Grantee, then the costs of such repeated
tests and consulting shall be borne by the Grantee.
D. Upon the Franchising Authority's determination based upon a reasonable
belief, the Franchising Authority may choose to engage a qualified
technical consultant to aid the Franchising Authority in conducting
oversight of the technical aspects of the Grantee's Cable System. The
Franchising Authority may obtain the services for the technical consultant
for a specific amount of time to be dedicated for said oversight and
expenses. Said costs and expenses shall be assumed by either the Grantee or
the Franchising Authority in the manner set forth in Section 7.6 (B) and
(C) hereinabove.
14
<PAGE>
Section 7.7: New Services and Technologies
------------------------------------------
This Agreement shall not restrain or prohibit Grantee from adding new Cable
Services and/or technologies to the Cable System as they become available.
Where Grantee contemplates addition of such services and/or technologies to
the Cable System, Grantee shall notify the Franchising Authority within
forty-five (45) calendar days of addition of such services and/or
technologies and provide a description of the proposed service(s) and/or
technology or technologies to be implemented.
SECTION 8: CONSTRUCTION STANDARDS
- ---------------------------------
Section 8.1: Adherence to Electrical and Safety Codes
-----------------------------------------------------
The construction, installation, activation, re-activation, and operation of
any portion of Grantee's signal origination or signal processing, or signal
distribution system and equipment, including, but not limited to the
towers, antennae, Headend, studio, trunk, and distribution system, drops,
and fixed or portable equipment located on or off Subscriber-occupied
property shall comply with all requirements of the applicable National
Electrical Code (currently ANSI 70-1993/ANSI 70-1995 and replaced by
subsequently promulgated editions), and the applicable National Electrical
Safety Code (Currently ANSI C2-1993/ANSI C2-1995 and replaced by
subsequently promulgated editions). Grantee shall at all times comply with
other applicable federal, state, and local regulations, codes, and other
ordinances of the Village.
Section 8.2: Overhead and Underground Installation
--------------------------------------------------
A. All cables and wires shall be installed parallel with existing
telephone and electric utility wires whenever possible. Where the
Grantee has erected or installed multiple wiring configurations on
utility poles, such configurations shall be in parallel arrangements
and be properly bundled and lashed in accordance with engineering
considerations and the applicable safety codes identified in Section
8.1. All installations shall be underground in those areas of the
Village where both telephone and electric utilities are underground at
the time of installation of the Cable System.
B. In areas where both telephone and electric utility facilities are
above ground at the time of the installation of the Cable System, the
Grantee may install its service above ground, provided, however, that
at such time as either facilities are placed underground by either
utility company, underground installations shall be made by the
Grantee in conformance with all applicable construction, electrical,
and safety codes. Grantee will bury cable underground when pole
clearance cannot be reasonably obtained.
15
<PAGE>
Section 8.3: Grounding
- ----------------------
All towers, antennas, satellite receive stations, and other exposed equipment of
Grantee used in the provision of cable television service shall be properly
grounded. Grantee at its discretion may properly ground said equipment in such a
manner that exceeds normal engineering requirements, provided, however, that
such grounding is in compliance with the National Electrical Code as referenced
in Section 8.1 of this Agreement. Grantee shall also comply with grounding of
system equipment and service connections as required under Section 14.10 of the
Franchise Ordinance.
Section 8.4: Headend Facility
- -----------------------------
Indoor Headend components shall be wired according to applicable National
Electrical Safety Code standards and shall be placed in a properly ventilated
and air-conditioned environment. Outdoor Headend components, including but not
limited to, towers, antennae, and satellite receive stations shall be properly
anchored and wired in accordance with NCTA Standards of Good Engineering
Practices (NCTA 008-0477 EIA Standard RS-222C, "Structural Standards for Steel
Towers and Antenna Supporting Structures") and shall be properly lighted in
accordance with the appropriate Federal Aviation Administration and Federal
Communications Commission rules and regulations as now or hereafter amended. The
Headend shall be equipped with a standby auxiliary power supply for the purpose
of maintaining operations during periods of outage, maintenance, or repair-
related downtime.
Section 8.5: Outage Prevention
- ------------------------------
Grantee shall take measures necessary to prevent Cable System service outages.
Such measures shall include auxiliary power sources at the Headend, installation
of surge protectors at each node and amplifier location or included within each
node site or amplifier unit throughout the system, and installation of stand-by
power supplies which shall have a capacity to provide power to the Cable System
for a period of at least three (3) hours in such event where technology of
outage prevention changes to the extent that a more efficient method of surge
protection becomes available, the Franchising Authority and Grantee shall agree
to a reconfiguration of surge protection devices and locations throughout the
system.
Section 8.6: Emergency Removal of Plant
- ---------------------------------------
If, at any time, in case of fire or other disaster within the Village, it shall
become necessary in the judgment of the Village to cut or move any of the wires,
cables, amplifiers, power supplies, appliances, or appurtenances of the Grantee,
Village shall not be liable for cutting or moving, provided, however, that
nothing herein shall be construed to preclude liability for willful and wanton
acts.
16
<PAGE>
Section 8.7: Damage to Village Property
- ---------------------------------------
Where any damage is caused to any Village property during construction,
installation, or maintenance by Grantee, the Village shall give Grantee notice
to repair said property and provide no less than fifteen (15) calendar days to
cure such damage. The cost of such repairs including all service and materials
required by the Village will be billed to the Grantee. The charges shall be paid
within forty-five (45) days of the date of billing or the Village, at its
option, may withdraw the cost of such repairs from the Security Fund established
by Section 14 of this Agreement.
Section 8.8: Enforcement of Use of Rights-of-Way Public Streets and Public Ways
- -------------------------------------------------------------------------------
Through its acceptance of this Agreement, Grantee agrees to comply with the
provisions of this Agreement, the Franchise Ordinance, and other applicable
ordinances, regulations, and codes of the Village regarding the installation,
maintenance, repair, excavation, and replacement of wires, cables, conduit,
pedestal boxes, and other appurtenance installed upon or beneath the Rights-of-
Way, Public Streets and Public Ways belonging to the Village. The Village shall
have the right to enforce the Franchise Agreement, Franchise Ordinance, and
other appropriate ordinances, regulations, and codes where the Village
reasonably believes that Grantee has committed a violation. This Section shall
not limit Village from providing to Grantee a notice and opportunity to cure the
violation when it is believed by the Village that a violation has occurred.
Section 8.9: Village's Right of Cable System Installation
- ---------------------------------------------------------
The Village reserves the right during the life of this Franchise to install and
maintain free of charge upon or in the poles and conduits of the Grantee any
wire and pole fixtures necessary for municipal subsystems on the condition that
such Installation and maintenance thereof does not interfere with the operation
of the Grantee.
Section 8.10: Failure to Perform
- --------------------------------
In the case of a failure to perform within the provisions of this Section, the
Franchising Authority shall consider such failures to perform as Material
Breaches of the Franchise. The Franchising Authority shall provide Grantee with
reasonable notice and opportunity to cure such violations, however, if Grantee
fails to cure such violations after reasonable notice and opportunity have been
provided, the Franchising Authority may, at its option, consider Grantee to be
in default of the Franchise and initiate Franchise revocation proceedings as
described in Section 10.1 et. seq. of the Franchise Ordinance.
17
<PAGE>
SECTION 9: INSTITUTIONAL NETWORK
- --------------------------------
There shall be no Institutional Network (I-Net) requirement for the Grantee
beyond any I-Net services the Grantee is actually providing in the Village
as of the date of this Agreement.
SECTION 10: CUSTOMER SERVICE
- ----------------------------
Section 10.1: Local Office
--------------------------
Grantee shall maintain a local customer service office within the Village
staffed by skilled customer service representatives and service technicians
for the purpose of accepting payments, adjusting bills, responding to
repair, Installation, reconnection, disconnection, or other service calls,
distributing or receiving Converter boxes, remote control units, digital
stereo units, or other related equipment, and receiving complaints. Said
local office shall be open to the general public at least a minimum of
fifty-four (54) hours per week in accordance with Grantee's response to the
Village's Franchisee Performance Evaluation Survey dated December 1, 1993.
Of the office hours specified, there shall be a minimum of four hours on
Saturday between 9:00 AM and 5:00 PM, and at least one day per week in
which the office is open between 8:00 AM and 10:00 AM.
Section 10.2: Communications to Subscribers
-------------------------------------------
Grantee shall provide at the time of Installation, at least annually, when
there is a change to information provided Subscribers, and upon request by
a Subscriber, that information which is required to be provided under
Section 21.1 A-F of the Franchise Ordinance, along with the Grantee's
policies regarding disconnection and reconnection of service.
Section 10.3: Subscriber Privacy
--------------------------------
The Grantee shall comply with all applicable local and state laws, rules,
and regulations regarding the privacy of cable Subscribers, and shall fully
comply with federal laws concerning the privacy of cable Subscribers as
expressed in Section 631 et. seq. of the Communications Policy Act of 1934
as now or hereafter amended (47 CFR 551) or any successor provision.
SECTION 11: RATE REGULATION
- ---------------------------
Grantee shall recognize the right of the Village to exercise its authority
to regulate rates for basic cable services and associated equipment and
services necessary to provide basic cable service to Subscribers.
18
<PAGE>
Grantee shall abide by all applicable laws, rules, regulations, and orders
with regard to rates and regulation thereof by the Village as promulgated
by the FCC and the Village. Village and Grantee agree that any amendment or
modification of rules with regard to rates and regulation now or hereafter
amended, shall apply to this Franchise Agreement.
SECTION 12: FRANCHISE FEES
- --------------------------
Section 12.1: Franchise Fee Calculation
---------------------------------------
A. As part of the consideration supporting the award of this Franchise
Agreement and Village's permission to use the public Rights-of-Way,
Public Streets, Public Ways and lands of the Village, Grantee shall
pay to the Village on a quarterly basis, an amount equal to five (5)
percent per year of Grantee's annual Gross Revenue permitted by law.
Gross Revenue shall be defined as stated in Section 1.0 hereinabove.
To the extent permitted by law, and in accordance therewith, increases
in Franchise Fees may be levied by the Village after thirty (30) days
advance written notice is given to Grantee.
B. In the event that the maximum amount payable as Franchise Fees under
the law is increased to more than five (5) percent, the Franchising
Authority, may increase the percentage of Gross Revenues applicable to
the Franchise Fee payment. Such increase shall be implemented through
an amendment to the Franchise Ordinance, after official notice has
been provided to the Grantee and an opportunity for public comment as
may be required by state or federal law has been provided therefor.
C. The Franchise Fee payment shall include a statement identifying in
detail the sources and actual amounts of Gross Revenues received by
Grantee during the preceding quarter for which payment is made. Said
statement shall contain those items identified in Section 12.1 of the
Franchise Ordinance. Said payment shall be paid by the Grantee by the
30th day of the month following that quarter for which payment is
being made.
Section 12.2: Payment of Franchise Fee in the Event of Termination or
---------------------------------------------------------------------
Cancellation
------------
In the event Grantee continues operation of any part or all of the Cable
System beyond the cancellation or expiration of this Franchise Agreement,
Grantee shall pay to the Village the compensation as set forth hereinabove
at the rate in effect at the time of such cancellation or expiration, and
in the manner set forth in this Franchise Agreement, together with all
taxes it would have been required to pay had its operation been duly
authorized.
19
<PAGE>
Section 12.3: Acceptance of Payment
-----------------------------------
The acceptance of any payment required hereunder by the Village shall not
be construed as an acknowledgement that the amount paid is the correct
amount due nor shall such acceptance of payment be construed as a release
of any claim which the Village may have for further or additional sums due
and payable.
SECTION 13: FRANCHISE FEE AUDITS OR AGREED-UPON PROCEDURES
- ----------------------------------------------------------
Section 13.1: Right of Franchising Authority to Inspect and Audit
-----------------------------------------------------------------
The Franchising Authority shall have the right to inspect and audit
Grantee's income records, worksheets; notes, journals, ledgers, and other
such appropriate and relevant financial records. The Franchising Authority
shall have the right of audit and to conduct agreed-upon procedures, and
shall have the right to require recomputation of any amounts determined to
be payable under this Section and Section 12 hereinabove.
Section 13.2: Payments of Amounts Due
-------------------------------------
Any additional amount due as a result of such inspection, audit or agreed-
upon procedures shall be paid within thirty (30) days with interest
calculated at the prime rate plus two (2) percent per annum as established
by the Bank of America, Chicago main branch following written notice to the
Grantee by the Franchising Authority which notice shall include a copy of
the audit report or agreed-upon procedures report.
SECTION 14: SECURITY FUND; PERFORMANCE BOND
- -------------------------------------------
A. Defaults under the Franchise:
1. The Franchising Authority shall have the option to declare a
Material Breach of the Franchise when penalties or liquidated
damages exceed one thousand dollars ($1000.00) within a three (3)
month period, and invoke procedures to revoke the Franchise as
provided for in Section 10 of the Franchise Ordinance; or,
20
<PAGE>
B. In accordance with the provisions of the Franchise Ordinance, the
Grantee shall, deposit with the Village not later than thirty (30)
days after the date of this Franchise Agreement the sum of ten
thousand dollars ($10,000.00) as a Security Fund for the faithful
performance by the Grantee of the Grantee's obligations under the
Franchise documents, and compliance with all orders and directions of
any officer of the Village having jurisdiction over the Grantee, and
the payment by the Grantee, and the payment of all claims, liens, or
taxes due the Village which arise by reason of the construction,
operation, maintenance, or repair of the Cable System. Failure to
timely make such initial deposit of the Security Fund with the Village
shall constitute a Material Breach of the Franchise Ordinance. The
Village shall deposit the security fund in an interest-bearing account
payable to the Village upon demand; but interest on the Security Fund
as accrued may be withdrawn and paid to the Grantee semi-annually upon
ten (10) calendar days written notice to the Village.
C. If the Grantee fails to observe any of its obligations under the
Franchise Ordinance or this Agreement, or any order or direction of a
Village officer having jurisdiction over the Grantee; or if the
Grantee fails to make timely payment to the Village of any amount due
pursuant to the Franchise Ordinance or Agreement; or fails to make
timely payment to the Village of any penalty or liquidated damage
amount due under the Franchise Ordinance or this Agreement; or fails
to make timely payment to the Village of any taxes due; or (except as
hereinbelow provided) fails to repay to the Village within ten (10)
days of written notification that such repayment is due, any damages,
costs or expenses which the Village shall be compelled to pay by
reason of any act or default of the Grantee in connection with the
Franchise; or fails, after thirty (30) days notice of such failure
from the Village, to comply with any provision of the Franchise
Ordinance or this Agreement which the Village reasonably determines
can be remedied by an expenditure from the Security Fund; the Village
may assess the Grantee, and the Grantee agrees to pay to the Village,
liquidated damages in accordance with the schedule set forth in
Section 17.1 et. seq. of this Agreement. The Village may withdraw the
amount of said liquidated damages from the Security Fund as
hereinafter provided.
D. The Village's assessment of any liquidated damages shall not
constitute a waiver by the Village of any other right or remedy it may
have under the Franchise Ordinance or this Agreement, or under
applicable law, including, without limitation, its right to recover
from the Grantee and its sureties such additional damages, losses,
costs, and expenses as may have been suffered or incurred by the
Village by reason of or arising out of such breach of the Franchise
Ordinance or this Agreement.
21
<PAGE>
E. If at the time of a withdrawal from the Security Fund by the Village
the amount of the fund is insufficient to provide the total payment
toward which the withdrawal is directed, the balance of such payment
shall continue as an obligation of the Grantee to the Village, until
paid.
F. In the event that on August 26, 1997, there is no outstanding default
on the part of the Grantee, the balance remaining in the Security Fund
on August 27, 1997, shall be withdrawn and paid to the Grantee within
ninety (90) days.
G. No later than thirty (30) days after mailing of notification to the
Grantee by certified United States Mail, return receipt requested, of
a withdrawal from the Security Fund, the Grantee shall deliver to the
Village for deposit in the fund and amount equal to the amount so
withdrawn, such that the fund shall maintain a balance of ten thousand
dollars ($10,000.00) at all times. Failure to make timely delivery of
such amount to the Village shall constitute a Material Breach of the
Franchise; provided, however, that the Village shall take no action to
revoke or terminate the Grantee's Franchise where the Grantee has
requested a public hearing by the Village Board of Trustees to
determine, with respect to the action or omission of the Grantee upon
which the liquidated damages were based, that the Grantee was without
fault or that the Grantee's said action occurred as a result of
circumstances beyond the Grantee's control, such as war, civil
disturbance, natural catastrophe, or other acts of God. The Grantee
shall not be excused by mere economic hardship nor by misfeasance or
malfeasance of its directors, officers, agents, employees, or
contractors. If upon the conclusion of such public hearing the Village
Board of Trustees shall determine that the violation by the Grantee
was the fault of, or was within the control of the Grantee, the
Village shall so notify the Grantee in writing and may then take all
appropriate action, including revocation, to enforce the Grantee's
obligation under the Franchise; provided, however, that if the Grantee
shall commence, within thirty (30) days after written notice of the
Village's decision has been delivered to the Grantee, a judicial
proceeding in the Circuit Court of Cook County, Illinois for review of
such decision, the Village shall not revoke the Grantee's Franchise
prior to the entry of final judgment by the Circuit Court in the said
proceeding.
H. The rights reserved by the Village with respect to this Section are in
addition to all other rights of the Village whether reserved by the
Franchise Ordinance or this Agreement or authorized by law, and no
action, proceeding or exercise of a right with respect to this Section
shall affect any other rights the Village may have.
22
<PAGE>
I. The Grantee's liability pursuant to the schedule of liquidated damages
set forth in Section 17.1 shall accrue from the date which the Village
specifies in a written notice of liquidated damages given to the
Grantee, unless the Grantee shall have cured its default prior to such
date on which the liquidated damages are to be assessed; provided,
however, that the Village shall not specify a date for liquidated
damages which is less than thirty (30) days after such notice is given
to the Grantee.
J. The Security Fund provided pursuant to this Franchise Agreement shall
become the property of the Village as liquidated damages, in the event
that this Franchise Agreement is terminated by reason of default of
the Grantee or revoked for cause. Grantee, however, shall be entitled
to return of such Security Fund or portion thereof as remains on
deposit at the expiration of the term of the Franchise, or upon
termination of the Franchise at an earlier date, provided that there
is then no outstanding default on the part of Grantee.
SECTION 15: DAMAGES AND DEFENSE
- -------------------------------
Grantee shall hold harmless Village for all damages and penalties as a
result of Grantee's construction, reconstruction, upgrade, operation, and
maintenance of the Cable System. These damages and penalties shall include,
but not be limited to, damages arising out of copyright infringement,
defamation, and all other damages arising out of the construction,
operation, maintenance, reconstruction, or upgrade of the Cable System
authorized herein, whether or not any act or omission complained of is
authorized, allowed, or prohibited by the Franchise.
SECTION 16: LIABILITY INSURANCE AND INDEMNIFICATION
- ---------------------------------------------------
Grantee shall procure and maintain, throughout the term of this Franchise,
liability workers's compensation, and those types of insurance referred to
in Section 16.1 of the Franchise Ordinance, from an insurer licensed to do
business in the State of Illinois carrying a rating of B+ by Best's
Insurance Rating Services, and approved by the Village. Said insurance
shall insure Grantee and Village with regard to all damages mentioned in
Section 15 hereinabove and in Section 16.1 of the Franchise Ordinance, in
the minimum amounts of:
$ 2,000,000 for bodily injury or death to any one (1) person;
$ 2,000,000 for bodily injury or death resulting from any one (1)
occurrence;
$ 3,000,000 for umbrella liability coverage.
23
<PAGE>
At the time of acceptance, Grantee shall furnish to Franchising Authority a
certificate naming the Village, its officers, agents, and employees as
additional insureds. Such certificate shall require that the Franchising
Authority be notified at least thirty (30) days in advance prior to any
expiration, and thirty (30) days in advance prior to any cancellation. All
premiums on policies required by this Franchise Agreement shall be at the
expense of the Grantee.
SECTION 17: LIQUIDATED DAMAGES
- ------------------------------
Section 17.1: Damage Amounts
----------------------------
By acceptance of a Franchise granted hereunder, the Grantee understands and
agrees that failure to comply with any time and performance requirements as
stipulated under the Ordinance or this Franchise will result in damage to
the Village, and that it may be impracticable to determine the actual
amount of such damage in the event of delay or nonperformance; therefore,
the Grantee agrees that it shall provide compliance with the Franchise and
pay to the Village the following amounts which shall be chargeable to the
Grantee:
A. For failure to make timely applications, registration or any other
filing with the appropriate Franchising Authority, governmental, or
utility authorities pursuant to this Franchise or the Cable
Communications Ordinance, the amount shall be two hundred dollars
($200.00) per day.
B. For failure to obtain a permit where construction, reconstruction, or
relocation of the Cable System or its components within the Public
Streets or Public Ways of the Village is undertaken, the amount shall
be fifty dollars ($50.00) per day.
C. For failure of the Grantee to comply with construction, operation, or
maintenance standards, the amount shall be five hundred dollars
($500.00) per day.
D. For failure to provide customer services as stated in Section 10 of
this Agreement or Section 20 of the Franchise Ordinance, the amount
shall be one hundred dollars ($100.00) per day.
E. For failure to test, analyze, and report on the performance of the
Cable System following a request by the Franchising Authority, the
amount shall be two hundred fifty dollars ($250.00) per day.
24
<PAGE>
F. For failure to provide data, documents, reports, or information, or to
cooperate with the Franchising Authority during a performance review of the
Cable System or during a Franchise Fee audit or agreed-upon procedures
evaluation, the amount shall be two hundred fifty dollars ($250.00) per
day.
G. For failure to submit timely reports as required under this Agreement and
the Franchise Ordinance, the amount shall be fifty dollars ($50.00) per
report per day until such reports are received by the Franchising
Authority.
H. For failure to deposit with the Village the Security Fund pursuant to
Section 14 of the Franchise Agreement within thirty (30) days after notice
and opportunity to cure, the amount shall be five hundred dollars ($500.00)
per day until such deposit is deemed received by the Franchising Authority.
I. For failure to restore an amount withdrawn from the Security Fund within
the timeframe specified by Section 14 of the Franchise Agreement, the
amount shall be two hundred dollars ($200.00) per day until the Security
Fund is reimbursed.
J. For failure of the Cable System to perform pursuant to Section 23 of the
Franchise Agreement in the event of a public emergency or vital public
information situation, the amount shall be two hundred fifty dollars
($250.00) per occurrence.
K. For failure to provide cable service to areas annexed to the Village within
the timeframes established by this Agreement and after a period of an
opportunity to cure has been exhausted, the amount shall be two hundred
fifty dollars ($250.00) per day until all required cable services are made
available to the annexed area.
L. For failure to maintain a local office or to maintain records pursuant to
Section 10 of this Agreement, the amount shall be two hundred fifty dollars
($250.00) per day.
M. For failure to comply with the material provisions of this Agreement for
which an amount is not otherwise specifically provided pursuant to this
Section, the amount shall be one hundred dollars ($100.00) per day.
Section 17.2: Right to Reduce or Waive Damages
- ----------------------------------------------
The Franchising Authority retains the right, at its sole discretion, to reduce
or waive any of the above listed damage amounts where extenuating circumstances
or conditions beyond the control of the Grantee are found to exist.
25
<PAGE>
Section 17.3: Other Remedies
- ----------------------------
Exclusive of the damages provided hereinabove, a violation of any material
provision of the Franchise Agreement shall be considered a separate violation
for which a separate remedy available contractually, at law or in equity may be
imposed.
Section 17.4: Procedure
- -----------------------
Whenever the Franchising Authority finds that Grantee has violated one (1) or
more terms, conditions, or provisions of the Franchise Agreement or Ordinance, a
written notice shall be provided by the Franchising Authority to the Grantee
informing it of such violation. The written notice shall describe in reasonable
detail the specific violation so as to afford Grantee an opportunity to cure or
initiate curative action with respect to the violation. Grantee shall have such
time to cure or initiate curative action as is specified for the violation as is
stated in Section 25 A (1)-(5) of the Franchise Ordinance subsequent to receipt
of the notice before the Village may draw from the Security Fund. Grantee may
notify Franchising Authority within seven (7) calendar days of receipt of notice
that there is a dispute as to whether a violation or failure has, in fact,
occurred. Such notice shall stay the running of the seven (7) day period and
such notice shall specify with particularity the matters disputed by Grantee.
A. In the event that the Franchising Authority and Grantee are unable to
resolve the dispute, the matter shall be heard by the Regulatory Board at
the next regularly scheduled Cable Communications Commission meeting held
not less than ten (10) days after the filing of the dispute by Grantee. The
Franchising Authority shall notify the Grantee of the time and place of the
Cable Communications Commission hearing and provide the Grantee with an
opportunity to be heard.
B. If after hearing the dispute, the claim is upheld by the Cable
Communications Commission, the Cable Communications Commission shall
provide the Grantee with written findings of fact. Grantee shall have
fourteen (14) calendar days to comply with such findings of fact unless an
extension of time is mutually agreed upon by the Franchising Authority and
Grantee. In the event the Grantee seeks administrative or judicial relief
from such findings of fact, before a tribunal of competent jurisdiction,
such proceeding shall not stay compliance with the findings of fact, unless
ordered by the administrative or judicial tribunal. Absent a mutually
agreed upon extension of time or an administrative or judicial order
staying compliance with the findings of fact, at any time after said
fourteen (14) day period, the Village may draw against the Security Fund
all liquidated damages due.
26
<PAGE>
SECTION 17.5: Time is of the Essence
- ------------------------------------
Whenever any provision of this Agreement shall set forth any time for any
act to be performed by Grantee, such time shall be deemed to be of the
essence and the Grantee's failure to perform within the time allotted
shall, in all cases, be sufficient grounds for the Franchising Authority to
invoke an appropriate remedy or penalty, including the possible revocation
of the Franchise Agreement.
SECTION 18: PROGRAMMING SERVICES
- --------------------------------
Section 18.1: Required Cable Television Program Services
--------------------------------------------------------
Grantee shall provide the following cable services:
A. Over-the-Air Broadcast stations, which are in accordance with Title
47, Part 76, Section 76.63 of the of Federal Regulations pertaining to
FCC rules and regulations.
B. All Public, Educational, and Governmental Access Channels as required
under Section 18 of this Agreement.
C. Broadcast, satellite, and other cable programming services comparable
in quality, mix, and level to those being provided as of the date of
this Agreement.
D. All Local Origination programming produced by the Grantee pursuant to
the requirements as stated in Section 20 of this Agreement. Grantee
shall continue to provide a full color Local Origination/television
studio within the Village and one mobile unit for Local Origination
and access purposes. Grantee shall allow the Franchising Authority
access to the mobile van for purposes of providing Local Origination
programming. Grantee shall provide one full-time individual dedicated
to the production of Local Origination programming exclusively for the
Village of Park Forest. Full-Time shall be defined as an individual
who works no fewer than forty (40) hours per week.
E. Grantee may establish an "ala-carte" tier of program and cable network
offerings for specialized programming needs, including, but not
limited to, the programming needs of senior citizens.
F. Where Grantee seeks to develop program tiers which consist of cable
networks heretofore not cablecast to cable Subscribers, Grantee shall
comply with the regulations developed for "New Product Tiers" by the
FCC (47 CFR 76.987).
27
<PAGE>
Section 18.2: Modifications
---------------------------
During the period in which this Agreement is in effect, the Grantee or the
Franchising Authority may obtain modifications of the requirements in the
Franchise Agreement in the following manner and in accordance with Section
625 of the Cable Communications Policy Act of 1984, as now or hereafter
amended:
A. Where the Grantee has requested that modifications made to the
Franchise be made on the basis of commercial impracticability, Grantee
shall adhere to the requirements set forth in Section 6.2 of the
Franchise Ordinance regarding commercial impracticability.
B. In the case of any requirement for services, if the Grantee
demonstrates that the mix' quality, and level of services required by
this Franchise Agreement at the time it was granted will be maintained
after modification.
C. Upon receipt of a request by the Grantee for modification of any
requirement for facilities, equipment, or services, the Franchising
Authority shall consider the request and grant or deny the request in
a public proceeding within one hundred twenty (120) days of receipt of
the request of modification.
D. Notwithstanding the aforementioned sections herein above, Grantee may,
upon thirty (30) days advance notice to the Franchising Authority,
rearrange, replace, or remove a particular service required by this
Agreement if: 1) the service is no longer available to the Grantee, or
2) the service is available only upon payment of a royalty required
under 17 CFR 801(b)(2). The Grantee must be able to document and
support the contention that the amount of the royalty constitutes an
amount substantially in excess of the amount of payment required on
the date of execution of this Franchise Agreement and the Grantee has
not been specifically compensated through a rate increase or other
adjustment.
E. The Village may prohibit award of any proposed modification to this
Agreement pertaining to provision of services relating to Public,
Educational, or Governmental Access.
SECTION 19: PUBLIC, EDUCATIONAL, AND GOVERNMENTAL ACCESS
- --------------------------------------------------------
Section 19.1: Public Access Channel
-----------------------------------
A. Grantee shall continue to provide the same level of Public,
Educational, Governmental and local access Channel space that is
currently being provided for the transmission of this programming as
of the date of this Agreement.
28
<PAGE>
B. Grantee shall provide equipment training classes at least twice annually
for the life of the Franchise to residents of Park Forest for the purpose
of producing Public Access programming in accordance with its proposal of
February 14, 1996. Such training will be provided to Park Forest residents
at no charge.
C. Grantee shall designate a Training Coordinator to organize and develop
training programs for Public, Educational, and Governmental Access. The
Training Coordinator shall be a Park Forest employee in accordance with
Grantee's proposal of February 14, 1996.
D. On or before April 1 of each year, Grantee shall submit to the Village the
Grantee's records showing its required expenditures for Public Access
programming.
E. Grantee shall provide the Cable Communications Commission and the
Franchising Authority with records of Public Access programming on a
monthly basis. Such records shall include the following information:
1. The production number of the program and the date completed;
2. The title of the program and its length;
3. The number of shows;
4. An indication if the program was shown live or recorded;
5. The total number of hours for all programming;
6. The total number of production hours per producer, the names of
producers, and the total number of production hours overall;
7. A schedule of programming showing start times and titles from the
beginning of the month for which the report is generated;
8. A one-line description of special programs and sports programs
referenced on the program schedule in subsection G hereinabove, and;
9. A listing of Grantee's full-time and part-time staff who have worked
on the aforementioned programming, and the number of hours worked per
employee for the month divided into weeks.
Section 19.2: Educational/Governmental Access Channel
- -----------------------------------------------------
Grantee shall continue to provide Educational and Governmental Channels that it
is providing as of the date of this Agreement.
29
<PAGE>
Section 19.3: Training of Municipal Personnel
---------------------------------------------
Grantee shall provide studio and equipment training classes for municipal
personnel at no cost to the Village or other governmental personnel, at
least annually in accordance with its proposal dated February 14, 1996.
Section 19.4: No Credit to Franchise Fees
-----------------------------------------
It is expressly understood and agreed that Grantee will not seek a credit
to its Franchise Fee obligation set forth in Section 12 of this Agreement
based on any expenses incurred pursuant to this Section.
SECTION 20: LEASED ACCESS CHANNELS
- ----------------------------------
Grantee may set aside an amount of uncompressed analog Channel space of no
less than one (1) uncompressed analog Channel to be available for lease by
the public, businesses, or other organizations. Grantee shall not utilize
such Channel space for purposes of data transmission or telephony. Grantee
agrees to comply with all provisions of Section 612 of the Cable
Communications Policy Act of 1984, as now or hereafter amended, regarding
leased Channels.
SECTION 21: LOCAL ORIGINATION PROGRAMMING
- -----------------------------------------
Section 21.1: Studio and Mobile Facilities
------------------------------------------
Grantee shall continue to provide studio facilities for Local Origination
programming which are available for live and/or taped programming. Said
studio facility shall contain a minimum of three tripod-mounted chip
cameras, three portable camera units, three camera switchers, an editing
bay, sound mixing, recording, and playback decks, a personal computer-based
character generator, a lighting grid and tripod-mounted portable lighting
equipment. Grantee shall also continue to provide a mobile studio van which
shall be capable of providing at least one camera switcher, an editing
deck, a sound mixer, recording and playback decks, and portable lighting
and cabling.
Section 21.2: Staffing and Programming Levels
---------------------------------------------
A. Grantee shall continue to provide no fewer than three (3) hours of new
Local Origination programming per week which is exclusive to Park
Forest. Programming exclusive to Park Forest shall be defined as that
programming which has one or more of the following attributes:
1. A program whose subject which is physically located or who
resides within the boundaries of the Village of Park Forest;
30
<PAGE>
2. A program which is taped at an institution located within the
Village of Park Forest, including, but not limited to, Village
Hall, Freedom Hall, the Village Health Department, the Public
Library, police and fire facilities, any Recreation and Parks
Department facility, any School, any business, or any church,
synagogue, or other religious institution located within Park
Forest;
3. A sporting event featuring a sports team or teams that are based
in Park Forest, or which includes a preponderance of players who
are residents of Park Forest. If the programming involves sports
contests featuring area Schools, at least one School must include
within its service boundaries all or part of the Village of
Park Forest.
Said three (3) hours of programming shall not be comprised solely of
sporting events as referred to in subsection A (3) of this Section.
B. Grantee shall provide the equivalent of three (3) full-time employees
assigned to produce Local Origination and Public, Educational, and
Governmental access programming for Park Forest. In accordance with
its proposal of February 14, 1996, Grantee shall commit two full-time
and two part-time employees dedicated to Local Origination and Public,
Educational, and Governmental access programming exclusively serving
Park Forest as a means of providing the equivalent of three (3) full-
time employees. For the purposes of this Agreement, a full-time
employee shall be defined as an employee who works on programming
exclusive to Park Forest at least forty (40) hours per week. Full-time
equivalency of part-time personnel shall be defined as a minimum of
forty (40) combined hours worked by the two part-time personnel.
Section 21.3: Records
---------------------
Grantee shall provide the Franchising Authority and the Cable
Communications Commission with records of Local Origination programming
produced for the Village on a monthly basis. Such records shall contain the
following information:
A. The production number of the program and the date completed;
B. The title of the program and its length;
C. The number of shows;
D. An indication if the program was shown live or recorded;
E. The total number of hours for all programming;
F. The total number of production hours per producer, the names of
producers, and the total number of production hours overall;
G. A schedule of programming showing start times and titles from the
beginning of the month for which the report is generated;
31
<PAGE>
H. A one-line description of special programs and sports programs
referenced on the program schedule in subsection G hereinabove, and;
I. A listing of Grantee's full-time and part-time staff who have worked
on the aforementioned programming, and the number of hours worked per
employee for the month divided into weeks.
On or before April 1 of each year, the Grantee shall submit to the Village
the Grantee's records showing its expenditures for Local Origination
programming.
Section 21.4: Maintenance of Facilities and Equipment
-----------------------------------------------------
The Grantee shall, at its own expense, provide and maintain the Local
Origination facilities and equipment specified in the Park Forest Cable
Communications Ordinance and this Agreement.
SECTION 22: SERVICES TO SCHOOLS AND GOVERNMENT BUILDINGS
- --------------------------------------------------------
The Grantee shall provide, at no charge, Subscriber cable connections to
all Schools, library facilities, local institutions and government
buildings as referenced in Grantee's proposal of February 14, 1996 and
identified in Appendix B. Services to be provided at no charge to the
aforementioned Schools, library facilities, local institutions and
government buildings shall include basic service as defined in Section 1.0
of this Agreement.
SECTION 23: EMERGENCY OVERRIDE
- ------------------------------
A. Grantee shall maintain appropriate equipment at its Headend facility
which is designed to override the video and audio portions of each
video cable Channel and substitute an audio emergency message which
may be used by the Village President of Park Forest or his authorized
designee. Said override equipment shall be used by the Village
President or his designee to broadcast alerts of civil emergency in
the event of fire, flood, tornadoes, or other similar severe weather,
or civil defense. Grantee shall configure the emergency override
equipment to accept remote activation by touch-tone telephone.
Said configuration shall include backup by a standby power facility.
Where necessary, Grantee and Village agree to work jointly in
incorporating the emergency alert notification into the Village's
disaster plan. Village shall hold Grantee harmless from any damage to
Persons or property by reason of use or failure of the emergency
override system.
B. Upon requirement by the FCC to participate in the Emergency Alert
System, Grantee shall provide notification to the Village within ten
(10) calendar days of receipt of such notification from the FCC, and
shall provide its procedures for emergency broadcast to the Village.
32
<PAGE>
C. Emergency override services shall be provided to public, private, and
parochial Schools, government buildings, and local institutions
connected to the Cable System as well as residential subscribers, at
no charge to said Schools, government buildings, or local
institutions.
D. Grantee shall continue to include testing of the Emergency Alert
System on a weekly basis at 10:00 AM every Tuesday.
SECTION 24: MODIFICATIONS TO COMMUNICATIONS AND CABLE ACTS
- ----------------------------------------------------------
In the event that the Telecommunications Act of 1996, the Communications
Act of 1934, the Cable Communications Policy Act of 1984, or the Cable
Television Consumer Protection and Competition Act of 1992 are modified or
amended in any manner that is mandatory, or the FCC modifies or alters any
of its regulations pertaining to cable television which may affect any
provision(s) of this Franchise Agreement, such provisions shall remain in
effect until the effective date of such modifications, amendments, or
alterations. The Franchising Authority and Grantee, upon notice that said
modifications, amendments, or alterations may affect any provision(s) of
this Agreement and prior to the effective date of said modifications,
amendments, or alterations, or as soon thereafter as practical, shall meet
in good faith to amend this Franchise Agreement accordingly.
SECTION 25: REVOCATION
- ----------------------
In addition to all other rights and powers retained by the Franchising
Authority under this Franchise Agreement, the Franchising Authority
reserves the right to revoke this Franchise Agreement and all rights and
privileges of the Grantee in the event of a breach of its terms and
conditions. In interpreting the Franchise Agreement, material provisions
shall include all labeled as such and all others, which under the facts and
circumstances indicated, constitute a significant portion of this Franchise
Agreement. A breach by Grantee shall include, but is not limited to, those
infractions so indicated in Section 10.1 of the Franchise Ordinance.
Nothing in this Agreement shall prohibit the Franchising Authority from
imposing sanctions or censures lesser than revocation for violations or
Material Breaches of this Franchise, including the shortening of the
Franchise term for substantial or repeated violations or Material Breaches.
33
<PAGE>
SECTION 26: RIGHTS AND REMEDIES
- -------------------------------
A. All rights and remedies given to Village and Grantee by this Agreement
shall be in addition to and cumulative with any and all other rights
and remedies, existing or implied, now or hereafter available to
Village or Grantee, at law or in equity, and such rights and remedies
shall not be exclusive, but each and every right and remedy
specifically given by this Franchise Agreement may be exercised from
time to time and as often and in such order as may be deemed expedient
by Village or Grantee and the exercise of one or more rights or
remedies shall not be deemed a waiver of right to exercise at the same
time or thereafter any other right or remedy. No delay or omission of
Village or Grantee to exercise any right or remedy, nor any such delay
or omission shall be construed to be a waiver of or acquiescence of
any default.
B. In the event of a sale of the Cable System by Grantee, Village shall
retain the right of first refusal for the purpose of purchasing, at an
equitable price or fair market value of the Cable System as a going
concern, all the assets of the Grantee's operations within the
Village. The Village may exercise this right to purchase any portion
of the Cable System, including all books and records, private
easements and assignable contracts. Unless some later date is agreed
to by the Grantee, the Village shall exercise its right within one
hundred twenty (120) days from the date of notification of sale of the
Cable System by Grantee. Upon determination by the Village that it
intends to purchase the assets of Grantee's Cable System, the Village
shall notify the Grantee by Certified United States Mail of its desire
and intent to acquire the assets of the Cable System from the Grantee.
SECTION 27: RIGHTS AND POWERS RESERVED BY VILLAGE
- -------------------------------------------------
A. Neither the granting of the Franchise nor any provision governing the
Franchise shall constitute a waiver or bar to the exercise of any
governmental right or power of the Village.
B. The Village shall have the right to intervene in any act or other
proceeding to which the Grantee is a party, in accordance with
applicable law or regulation. The Grantee specifically agrees by its
acceptance of the Franchise not to oppose such intervention by the
Village.
C. The Village reserves every right and power which is required to be
reserved or provided by an ordinance of the Village, and the Grantee
by its acceptance of this Franchise, agrees to be bound thereby and to
comply with any action or requirements of the Village in its exercise
of such rights and powers which have been or may be enacted or
established.
34
<PAGE>
SECTION 28: SERVICE OF NOTICE
- -----------------------------
A. For purposes of this Franchise Agreement, Grantee authorizes and
appoints Jones Intercable, Inc. with offices located at 4331 West
Lincoln Highway, Matteson, Illinois 60443 to act as its registered
agent and represents to the Franchising Authority that such agent is
authorized to accept notice and service on its behalf.
B. Grantee shall notify the Franchising Authority in writing, thirty (30)
days in advance, of any change in the registered agent or
representative(s) referenced hereinabove and provide information
regarding any change upon request by the Franchising Authority.
C. Any notice or service served upon Grantee's registered agent shall
also be provided to the Local and Regional Managers and
Operations/Legal representatives as specified below. All notices or
other written communications required to be provided to Franchising
Authority or Grantee under any provision of this Agreement, shall be
deemed served when delivered personally or addressed and mailed by
Certified United States Mail to the Franchising Authority or Grantee
at the following addresses:
Franchising Authority: Office of the Village Clerk
Village of Park Forest
301 Centre
Park Forest, Illinois 60466
Grantee: Cable TV Fund 12-A, LTD.
d/b/a
Jones Intercable
General Manager
4331 West Lincoln Highway
Matteson, Illinois 60443
Grantee: Jones Intercable, Inc.
Vice-President
Cable TV Fund 12-A, LTD.
9697 East Mineral Avenue
Englewood, Colorado 80112
SECTION 29: ORAL MODIFICATION
- -----------------------------
This Franchise Agreement shall not be changed, modified, or amended in
whole or in part except in writing and signed by all of the parties.
35
<PAGE>
SECTION 30: SEVERABILITY
- ------------------------
If any provision of this Franchise Agreement or the particular application
thereof, shall be held invalid, the remaining provisions and their
application, shall not be affected.
SECTION 31: ENTIRE CONTACT
- --------------------------
This Franchise Agreement constitutes the entire contract between the
parties and there are no other understandings, oral and written relating to
the subject hereof.
SECTION 32: OBLIGATIONS TO CONTINUE THROUGHOUT TERM
- ---------------------------------------------------
Unless otherwise specifically stated, all obligations under this Franchise
Agreement shall continue throughout the entire term or extension of this
Franchise Agreement.
SECTION 33: FRANCHISE VALIDITY
- ------------------------------
The Grantee agrees, by the acceptance of this Franchise, to accept the
validity of the terms and conditions of this Franchise and the Ordinance in
their entirety and that it will not, at any time, proceed against the
Franchising Authority in any claim or proceeding challenging any term as
unreasonable, arbitrary, or void, or that the Franchising Authority did not
have the authority to impose such term or condition.
SECTION 34: HEADINGS
- --------------------
Section headings used in this Agreement are for convenience of reference
only and shall not affect the construction of this Franchise Agreement.
SECTION 35: GOVERNING LAW
- -------------------------
This Franchise Agreement shall be governed insofar as applicable with the
laws of the State of Illinois, Circuit Courts of Cook and Will Counties.
Where federal jurisdiction applies, this Franchise Agreement shall be
governed by the applicable laws and agencies of the United States
Government, United States Circuit Court, Northeastern Division, Seventh
Circuit Court of Appeals.
36
<PAGE>
Accepted By:
CABLE TV FUND 12-A, LTD. VILLAGE OF PARK FOREST, ILLINOIS
a Colorado limited partnership,
by: Jones Intercable, Inc.
a Colorado corporation, as
its general partner
BY: /s/ Ruth E. Warren BY: [SIGNATURE APPEARS HERE]
----------------------------------- -----------------------------------
TITLE: Group Vice President/Operations TITLE: Village President
-------------------------------- --------------------------------
ATTEST: /s/ Stephen P. Villano ATTEST: [SIGNATURE APPEARS HERE]
------------------------------- -------------------------------
37
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 4,034,642
<SECURITIES> 0
<RECEIVABLES> 685,452
<ALLOWANCES> (35,573)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 80,190,860
<DEPRECIATION> (48,417,981)
<TOTAL-ASSETS> 38,472,570
<CURRENT-LIABILITIES> 2,387,406
<BONDS> 27,179,908
0
0
<COMMON> 0
<OTHER-SE> 9,263,710
<TOTAL-LIABILITY-AND-EQUITY> 38,472,570
<SALES> 0
<TOTAL-REVENUES> 34,485,280
<CGS> 0
<TOTAL-COSTS> 31,654,912
<OTHER-EXPENSES> (128,213)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,713,677
<INCOME-PRETAX> 988,478
<INCOME-TAX> 0
<INCOME-CONTINUING> 988,478
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 988,478
<EPS-PRIMARY> (9.41)
<EPS-DILUTED> (9.41)
</TABLE>
