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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF
1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
JONES CABLE INCOME FUND 1-A, LTD.
-----------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
-----------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: Limited
Partnership Interests
(2) Aggregate number of securities to which transaction applies: 17,000
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): Pursuant to
Rule 0-11(c)(2), the transaction valuation is based upon the $11,750,000
sales price that is to be paid to the Registrant in connection with the
sale of the Registrant's cable television system, the transaction that
is a subject of the proxy solicitation.
(4) Proposed maximum aggregate value of the transaction to the Registrant:
$11,750,000
(5) Total fee paid: $2,350
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
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[JONES INTERCABLE LOGO]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
NOTICE OF VOTE OF THE LIMITED PARTNERS OF JONES CABLE INCOME FUND 1-A, LTD.
To the Limited Partners of Jones Cable Income Fund 1-A, Ltd.:
A special vote of the limited partners of Jones Cable Income Fund 1-A, Ltd.
(the "Partnership") is being conducted through the mails on behalf of the
Partnership by Jones Intercable, Inc., the general partner of the Partnership,
for the purpose of obtaining limited partner approval of the sale, to an
unaffiliated third party, of the Partnership's cable television systems
serving the communities of Owatonna and Glencoe, Minnesota (the
"Owatonna/Glencoe System") for $11,750,000 in cash, subject to customary
working capital closing adjustments that may have the effect of increasing or
decreasing the sales price by a non-material amount. Information relating to
these matters is set forth in the accompanying Proxy Statement.
If the limited partners approve the proposed sale and if the transaction is
closed, the Partnership will repay all of the amounts borrowed under its
credit facility and capital lease obligations, pay certain fees and expenses
of the transaction, including a brokerage fee to an affiliate of the general
partner, pay deferred cash flow distributions to the general partner and
deposit funds into an indemnity escrow account, and then the net sale proceeds
will be distributed by the Partnership to its partners of record as of the
closing date of the sale of the Owatonna/Glencoe System. Because distributions
to be made on the sale of the Owatonna/Glencoe System together with all prior
distributions made by the Partnership will exceed the amounts originally
contributed to the Partnership by the limited partners plus the limited
partners' liquidation preference, Jones Intercable, Inc. will receive a
general partner distribution on the sale of the Owatonna/Glencoe System. Based
upon financial information as of March 31, 1998, the limited partners as a
group will receive $5,628,750 and Jones Intercable, Inc. will receive
$1,876,250 of the net sale proceeds. This distribution will provide the
Partnership's limited partners with a return of $331 for each $500 limited
partnership interest, or $662 for each $1,000 invested in the Partnership.
Distributions will be net of Minnesota non-resident withholding tax, if
applicable, and distribution checks will be issued to limited partners'
account registration or payment instruction of record.
Once the Partnership has completed the distribution of the net proceeds from
the sale of the Owatonna/Glencoe System, limited partners of the Partnership
will have received a total of $1,107.50 for each $500 limited partnership
interest, or $2,215 for each $1,000 invested in the Partnership, taking into
account the prior distributions to limited partners from the Partnership's
operating cash flow and from the net proceeds of a prior cable television
system sale. After the closing of the sale of the Owatonna/Glencoe System and
the distribution of the net sale proceeds, including the amounts, if any,
remaining 90 days after closing in an indemnity escrow account, the
Partnership will be liquidated and dissolved, most likely in early 1999.
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Only limited partners of record at the close of business on July 31, 1998
are entitled to notice of, and to participate in, this vote of limited
partners. It is very important that all limited partners participate in the
voting. The ability of the Partnership to complete the transaction discussed
in the Proxy Statement and the Partnership's ability to make a distribution to
its partners of the net proceeds of the sale of the Owatonna/Glencoe System
are dependent upon the approval of the transaction by the holders of a
majority of the Partnership's limited partnership interests.
The proposal that is the subject of this proxy solicitation will be adopted
only if approved by the holders of a majority of the limited partnership
interests. Each limited partnership interest entitles the holder thereof to
one vote on the proposal. Because the Partnership's limited partnership
agreement (the "Partnership Agreement") provides that the proposal will be
adopted only if approved by the holders of a majority of the limited
partnership interests, abstentions and non-votes will be treated as votes
against the proposal. A properly executed proxy returned to the general
partner on which a limited partner does not mark a vote will be counted as a
vote for the proposed sale of the Owatonna/Glencoe System. Because limited
partners do not have dissenters' or appraisal rights in connection with the
proposed sale of the Owatonna/Glencoe System, if the holders of a majority of
the limited partnership interests approve the proposal, all limited partners
will receive a distribution of the net sale proceeds in accordance with the
procedures prescribed by the Partnership Agreement regardless of how or
whether they vote on the proposal.
Jones Intercable, Inc., as general partner of the Partnership, urges you to
sign and return the enclosed proxy card as promptly as possible. The proxy
card should be returned in the enclosed envelope.
JONES INTERCABLE, INC.
General Partner
[SIGNATURE OF ELIZABETH STEELE]
Elizabeth M. Steele
Secretary
Dated: August 10, 1998
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[LOGO OF JONES INTERCABLE, INC.]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
PROXY STATEMENT
VOTE OF THE LIMITED PARTNERS
OF JONES CABLE INCOME FUND 1-A, LTD.
This Proxy Statement is being furnished in connection with the solicitation
of the written consents of the limited partners of Jones Cable Income Fund 1-
A, Ltd. (the "Partnership") by Jones Intercable, Inc., the general partner of
the Partnership (the "General Partner"), on behalf of the Partnership, for the
purpose of obtaining limited partner approval of the sale of the Partnership's
cable television systems serving the communities of Owatonna and Glencoe,
Minnesota (the "Owatonna/Glencoe System") for $11,750,000 in cash, subject to
customary working capital closing adjustments that may have the effect of
increasing or decreasing the sales price by a non-material amount, to Bresnan
Communications Company Limited Partnership ("Bresnan"). Bresnan is not
affiliated with the Partnership or with the General Partner.
The Board of Directors has approved the transaction and the General Partner
recommends that the holders of the Partnership's limited partnership interests
approve the transaction.
Proxies in the form enclosed, properly executed and duly returned, will be
voted in accordance with the instructions thereon. Limited partners are urged
to sign and return the enclosed proxy as promptly as possible. Proxies cannot
be revoked except by delivery of a proxy dated as of a later date. Officers
and other employees of the General Partner may solicit proxies by mail, by
fax, by telephone or by personal interview. The deadline for the receipt of
proxy votes is September 15, 1998, unless extended, but the vote of the
Partnership's limited partners will be deemed to be concluded on the date, at
least 20 business days from the date the proxy materials are sent to limited
partners, that the General Partner, on behalf of the Partnership, is in
receipt of proxies executed by the holders of a majority of the limited
partnership interests either consenting to or disapproving of the proposed
transaction. The General Partner may extend the deadline for receipt of proxy
votes if a majority of the limited partners fail to express an opinion on the
transaction by September 15, 1998. If the General Partner extends the deadline
for receipt of proxy votes, the limited partners will be informed by mail of
the reason for the extension and the new deadline. The cost of the proxy
solicitation will be paid by the Partnership.
The Partnership has only one class of limited partners and no limited
partner has a right of priority over any other limited partner. The
participation of the limited partners is divided into limited partnership
interests and each limited partner owns one limited partnership interest for
each $500 of capital contributed to the Partnership.
As of June 30, 1998, the Partnership had 17,000 limited partnership
interests outstanding, held by 942 persons. There is no established trading
market for such interests. To the best of the General Partner's knowledge, no
person or group of persons beneficially own more than five percent of the
limited partnership interests. During the past several years, Madison
Partnership Liquidity Investors 30, LLC and Smithtown Bay, LLC, two firms
unaffiliated with the Partnership, the General Partner and each other,
conducted tender offers for interests in the Partnership. As of June 30, 1998,
Madison Partnership Liquidity Investors 30, LLC and its affiliates owned 591
limited partnership interests, or 3.5 percent of the Partnership's limited
partnership interests.
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As of such date, Smithtown Bay, LLC and its affiliates owned 194 interests, or
1.1 percent of the Partnership's limited partnership interests. Pursuant to
the terms of agreements between the Partnership and the General Partner and
such firms, all of the limited partnership interests held by these firms will
be voted in the same manner as the majority of all other limited partners who
vote on the proposed transaction. Thus, for example, if the limited
partnership interests voted in favor of the proposed transaction constitute a
majority of all limited partnership interests voted but not a majority of all
limited partnership interests, these firms will be required to vote their
limited partnership interests in favor of the transaction, and in such event
the votes of these firms could be sufficient to cause the proposed transaction
to be approved by a majority of all limited partnership interests, which is
the vote necessary to cause the proposed transaction to be approved. The
General Partner owns no limited partnership interests. The officers and
directors of the General Partner also own no limited partnership interests.
Only limited partners of record at the close of business on July 31, 1998 will
be entitled to notice of, and to participate in, the vote.
Upon the consummation of the proposed sale of the Owatonna/Glencoe System,
the Partnership will repay all of the $3,217,500 borrowed under its credit
facility and capital lease obligations totalling $69,109, leaving the
Partnership with no debt outstanding, pay certain fees and expenses of the
transaction, including a brokerage fee of 2.5 percent of the sales price, or
$293,750, to The Jones Group, Ltd., a subsidiary of the General Partner, pay
the General Partner deferred cash flow distributions totaling $87,867, settle
working capital adjustments and deposit $600,000 into an indemnity escrow
account, and then the $7,505,000 of net sale proceeds will be distributed to
the Partnership's partners of record as of the closing date of the sale.
Because distributions to be made on the sale of the Owatonna/Glencoe System
together with all prior distributions made by the Partnership from the
Partnership's operating cash flow and from the net proceeds of a prior cable
television system sale will exceed the amounts originally contributed to the
Partnership by the limited partners plus the limited partners' liquidation
preference, the General Partner will receive a general partner distribution on
the sale of the Owatonna/Glencoe system. Based upon financial information as
of March 31, 1998, the limited partners as a group will receive $5,628,750 and
the General Partner will receive $1,876,250 of the net sale proceeds. This
distribution will provide the Partnership's limited partners with a return of
$331 for each $500 limited partnership interest, or $662 for each $1,000
invested in the Partnership. Distributions will be net of Minnesota non-
resident withholding tax, if applicable, and distribution checks will be
issued to limited partners' account registration or payment instruction of
record.
Once the Partnership has completed the distribution of the net proceeds from
the sale of the Owatonna/Glencoe System, limited partners of the Partnership
will have received a total of $1,107.50 for each $500 limited partnership
interest, or $2,215 for each $1,000 invested in the Partnership, taking into
account the prior distributions to limited partners from the Partnership's
operating cash flow and from the net proceeds of a prior cable television
system sale.
Limited partners should note that there are certain federal and state income
tax consequences of the proposed transactions. These consequences are outlined
herein under the caption "Federal and State Income Tax Consequences."
As of the date of this Proxy Statement, the Partnership's only asset is the
Owatonna/Glencoe System. After the sale of the Owatonna/Glencoe System by the
Partnership, and after the termination of the indemnity escrow period in early
1999, the Partnership will be liquidated and dissolved. The Partnership will
continue to be a public entity subject to the informational reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), after the Owatonna/Glencoe System is sold. The Partnership will cease
to be subject to the informational reporting requirements of the Exchange Act
only after the Partnership is liquidated and dissolved, most likely in early
1999.
The proposal that is the subject of this proxy solicitation will be adopted
only if approved by the holders of a majority of the limited partnership
interests. Each limited partnership interest entitles the holder thereof to
one vote on the proposal. Because the Partnership's limited partnership
agreement (the "Partnership Agreement")
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provides that the proposal will be adopted only if approved by the holders of
a majority of the limited partnership interests, abstentions and non-votes
will be treated as votes against the proposal. A properly executed proxy
returned to the General Partner on which a limited partner does not mark a
vote will be counted as a vote for the proposed sale of the Owatonna/Glencoe
System. Because limited partners do not have dissenters' or appraisal rights
in connection with the proposed sale of the Owatonna/Glencoe System, if the
holders of a majority of the limited partnership interests approve the
proposal, all limited partners will receive distributions of the net sale
proceeds in accordance with the procedures prescribed by the Partnership
Agreement regardless of how or whether they vote on the proposal.
The Board of Directors of the General Partner has approved the proposed sale
of the Owatonna/Glencoe System and the General Partner recommends approval of
the transaction by the holders of the Partnership's limited partnership
interests.
The approximate date on which this Proxy Statement and Form of Proxy are
being sent to limited partners is August 10, 1998.
PARTNERSHIP INFORMATION
THE PARTNERSHIP'S INVESTMENT OBJECTIVES
The Partnership was formed to acquire, develop, operate and, ultimately,
sell cable television systems. The primary objectives of the Partnership have
been to obtain long-term capital appreciation in the value of the
Partnership's cable television properties and to generate a positive cash flow
to permit cash returns in the form of regular quarterly distributions to
limited partners. It was contemplated from the outset of the Partnership's
existence that capital appreciation in Partnership cable television properties
would be converted to cash by a sale of such properties at such time as the
General Partner determined that the Partnership's investment objectives had
substantially been achieved and after a holding period of approximately eight
to ten years.
Sales of the Partnership's limited partnership interests commenced in
January 1986 and the Partnership was formed on June 17, 1986 when
subscriptions for the minimum offering amount were received. Sales of limited
partnership interests closed on July 16, 1986 with 17,000 limited partnership
interests sold, for total proceeds of $8,500,000. The Partnership acquired the
Owatonna/Glencoe System for $2,660,900 on July 31, 1986. The Partnership also
acquired the cable television system serving Milwaukie, Oregon (the "Milwaukie
System") on July 31, 1986 for $4,497,600. The Milwaukie System was sold in
March 1997 to an unaffiliated cable system operator for a sales price of
$8,200,000. A portion of the sale proceeds, $3,200,000, was used to reduce
Partnership debt, and the Partnership paid a $205,000 brokerage fee to The
Jones Group, Ltd., a subsidiary of the General Partner, and the remainder of
the sale proceeds, $4,505,000, was distributed to the limited partners of the
Partnership in April 1997. The distribution of the net proceeds from the sale
of the Milwaukie System resulted in the Partnership's limited partners
receiving a return of $265 for each $500 limited partnership interest, or $530
for each $1,000 invested in the Partnership. No vote of the limited partners
of the Partnership was required in connection with the sale of the Milwaukie
System because the assets of the Milwaukie System did not constitute all or
substantially all of the Partnership's assets.
A primary objective of the Partnership has been to provide quarterly cash
distributions to the limited partners from cash flow from the Partnership's
cable television systems' operations remaining after principal and interest
payments and the creation of any reserves necessary for the operation of the
Partnership. Quarterly cash distributions were paid to the limited partners
through the final quarter of 1997 but, due to the announced sale of the
Owatonna/Glencoe System, which is the Partnership's only remaining asset, the
Partnership does not expect to pay any additional cash flow distributions
during the remaining term of the Partnership. The operating cash flow of the
Owatonna/Glencoe System generated during 1998 will be distributed 99 percent
to the limited partners and 1 percent to the General Partner together with the
partners' respective shares of the net proceeds of the sale of the
Owatonna/Glencoe System. From the Partnership's inception to date, limited
partners have
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received distributions from operating cash flow of the Partnership totaling
$8,699,000, or $511.50 for each $500 limited partnership interest, or $1,023
for each $1,000 invested in the Partnership.
Because the distributions made from the net proceeds of the sale of the
Milwaukie System together will prior distributions from operating cash flow
did not total the amounts originally contributed to the Partnership by the
limited partners plus the limited partners' liquidation preference, the
General Partner did not receive any general partner distribution on the sale
of the Milwaukie System. Although the Partnership Agreement provides that any
distributions made from the cash flow of the Partnership will be allocated 99
percent to the limited partners and 1 percent to the General Partner, early in
the life of the Partnership the General Partner agreed to defer its portion of
distributions from the Partnership's operating cash flow until the Partnership
is liquidated. The Partnership will pay the General Partner its deferred cash
flow distributions totaling $87,867 from the proceeds of the sale of the
Owatonna/Glencoe System. And, because distributions to be made on the sale of
the Owatonna/Glencoe System together with all prior distributions made by the
Partnership will exceed the amounts originally contributed to the Partnership
by the limited partners plus the limited partners' liquidation preference, the
General Partner also will receive a general partner distribution totaling
$1,876,250 from the Owatonna/Glencoe System's net sale proceeds.
Based upon disclosures made to prospective investors about the Partnership's
investment objectives in the Jones Cable Income Fund Limited Partnership
Program prospectus and accompanying sales brochure, investors in the
Partnership reasonably could have anticipated that the Partnership's
investment objectives would be achieved and its assets liquidated after a
holding period of approximately eight to ten years. Due to the uncertain and
then adverse regulatory environment that developed in the early 1990's for the
cable television industry, the resulting decline in the prices for cable
television systems and the subsequent inactivity in the cable television
system marketplace, the General Partner determined that it would be prudent to
delay the sale of the Owatonna/Glencoe System until market conditions
improved, and as a result, the Owatonna/Glencoe System has been held by the
Partnership for 12 years.
The purpose of the sale of the Owatonna/Glencoe System, from the
Partnership's perspective, is to obtain the Partnership's primary investment
objective with respect to the Owatonna/Glencoe System, i.e., to convert the
Partnership's capital appreciation in the Owatonna/Glencoe System to cash. The
sale proceeds will be used to repay all of the Partnership's debts and pay
certain fees and expenses of the transaction, including a brokerage fee of 2.5
percent of the sales price, or $293,750, to The Jones Group, Ltd., a
subsidiary of the General Partner, pay the General Partner deferred cash flow
distributions totaling $87,867 and settle working capital adjustments, and
$600,000 of the sale proceeds will be deposited in a 90-day indemnity escrow
account. The remaining sale proceeds will be distributed to the limited
partners of the Partnership in accordance with the distribution procedures
established by the Partnership Agreement. The sale of the Owatonna/Glencoe
System is thus the necessary final step in the Partnership's accomplishment of
its investment objectives with respect to the Owatonna/Glencoe System.
All distributions of the Partnership from the proceeds of the sales of cable
television systems are to be distributed 100 percent to the limited partners
until the limited partners receive an amount equal to 100 percent of their
initial capital contributions, as reduced by all prior distributions other
than distributions from cash flow, plus a 10 percent preferential return (the
"liquidation preference"), and thereafter all such distributions are to be
shared 75 percent to the limited partners and 25 percent to the General
Partner. With the distributions to be made on the sale of the Owatonna/Glencoe
System, the limited partners of the Partnership will have received
distributions in an amount equal to their initial capital contributions plus
the 10 percent liquidation preference from the distributions made from the
Milwaukie System's sale proceeds and the Owatonna/Glencoe System's sale
proceeds, and thus the sharing arrangement between the limited partners and
the General Partner will be triggered upon the distribution of the net
proceeds from the Owatonna/Glencoe System's sale. Based upon financial
information as of March 31, 1998, the limited partners as a group will receive
$5,628,750 and the General Partner will receive $1,876,250 of the
Owatonna/Glencoe System's net sale proceeds. This distribution will provide
the Partnership's limited partners with an approximate return of $331 for each
$500 limited
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partnership interest, or $662 for each $1,000 invested in the Partnership.
Taking into account the distributions to limited partners from the
Partnership's operating cash flow, from the net proceeds of the sale of the
Milwaukie System and from the net proceeds of the sale of the Owatonna/Glencoe
System, the limited partners of the Partnership will have received a total
return of $1,107.50 for each $500 limited partnership interest, or $2,215 for
each $1,000 invested in the Partnership by the time of the Partnership's
liquidation and dissolution.
VOTING PROVISION OF THE PARTNERSHIP AGREEMENT
Section 2.2(k) of the Partnership Agreement provides that the sale of all or
substantially all of the Partnership's assets is subject to the approval of
the holders of a majority of the Partnership's limited partnership interests.
Because the Owatonna/Glencoe System is the Partnership's sole remaining asset,
the proposed sale of the Owatonna/Glencoe System is being submitted for
limited partner approval.
SALE OF THE OWATONNA/GLENCOE SYSTEM
GENERAL
Pursuant to the terms and conditions of an Asset Purchase Agreement dated as
of April 10, 1998 (the "Agreement") by and between the Partnership and
Bresnan, the Partnership has agreed to sell the Owatonna/Glencoe System to
Bresnan for a sales price of $11,750,000, subject to customary working capital
closing adjustments that may have the effect of increasing or decreasing the
sales price by a non-material amount. Bresnan is a Michigan limited
partnership headquartered at 709 Westchester Avenue, White Plains, New York,
10604. Bresnan is not affiliated with the Partnership or with the General
Partner. The Partnership has been informed that Bresnan intends to finance its
acquisition of the Owatonna/Glencoe System through cash on hand and
borrowings.
THE CLOSING
The closing of the sale is scheduled to occur in September or October 1998.
Because the closing is conditioned upon, among other things, the approval of
the limited partners of the Partnership and the receipt of material third
party consents necessary for the transfer of the Owatonna/Glencoe System to
Bresnan, there can be no assurance that the proposed sale will occur. The
Agreement may be terminated by either the Partnership or Bresnan if the
closing is not consummated on or before October 31, 1998.
THE OWATONNA/GLENCOE SYSTEM
The Owatonna/Glencoe System was acquired by the Partnership in July 1986 for
a purchase price of $2,660,900. At acquisition, the Owatonna/Glencoe System
consisted of cable plant passing approximately 8,980 homes and serving
approximately 5,175 basic subscribers. At December 31, 1997, the
Owatonna/Glencoe System consisted of approximately 138 miles of cable plant
passing approximately 12,000 homes and serving approximately 8,530 basic
subscribers. During the 12 year holding period, the Partnership used
approximately $5,280,000 in capital expenditures to expand and/or upgrade the
cable plant of the Owatonna/Glencoe System. The Owatonna/Glencoe System's
basic penetration rate is approximately 71 percent. As of December 31, 1997,
the system had annual revenue of $3,186,800 and annual cash flow of
$1,357,000. Management of the General Partner projects that 1998 annual
revenue will be $3,385,900 and that 1998 annual cash flow will be $1,384,500.
The $11,750,000 sales price therefore represents 8.7 times 1997's cash flow
and 8.5 times 1998's projected cash flow. The $11,750,000 sales price
represents a sales price per basic subscriber of $1,377.
Bresnan will purchase all of the tangible assets of the Owatonna/Glencoe
System that are leased or owned by the Partnership and used in the operation
of the system, including the system's real estate, vehicles, headend
equipment, underground and aboveground cable distribution systems, towers,
earth satellite receive stations and furniture and fixtures. Bresnan also will
acquire certain of the intangible assets of the system, including all of the
franchises, leases, agreements, permits, licenses and other contracts and
contract rights necessary for the
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operation of the system. Also included in the sale are the subscriber accounts
receivable of the system and all of the system's records, files, schematics,
maps, reports, promotional graphics, marketing materials, and reports filed
with federal, state and local regulatory agencies. The foregoing
notwithstanding, certain of the system's assets will be retained by the
Partnership, including cash or cash equivalents on hand and in banks,
insurance policies and any federal, state or local income or other tax refunds
to which the Partnership may be entitled.
SALES PRICE
Subject to the closing adjustments described below, the sales price for the
Owatonna/Glencoe System is $11,750,000. The Agreement provides for customary
closing adjustments that may either increase or decrease the sales price by a
non-material amount. Bresnan also will pay to the Partnership 100 percent of
the face amount of all accounts receivable (other than from advertising sales)
that are current or 30 days or less past due as of the closing date plus 80
percent of the face amount of all accounts receivable (other than from
advertising sales) that are between 31 and 60 days past due as of the closing
date, plus 100 percent of the face amount of all direct-billed advertising
accounts receivable that are current or 60 days or less past due as of closing
date, plus 50 percent of the face amount of all direct-billed advertising
accounts receivable that are between 61 and 90 days past due as of the closing
date, plus 100 percent of the face amount of all agency advertising accounts
receivable that are current or 90 days or less past due as of the closing
date, plus 50 percent of all agency advertising accounts receivable that are
between 91 and 120 days past due as of the closing date; provided, that the
Partnership will not receive credit for any accounts receivable (a) any
portion of which is 60 days or more past due as of the closing date (other
than accounts receivable from advertising sales), (b) from subscribers whose
accounts are inactive or whose service is pending disconnection for any reason
as of the closing date or (c) resulting from advertising sales any portion of
which is 120 days or more past due as of the closing date.
Bresnan's account will be credited for the amount of all advance payments
to, or funds of third parties on deposit with, the Partnership as of the
closing date relating to the Owatonna/Glencoe System, including advance
payments and deposits by subscribers served by the system for converters,
encoders, decoders, cable television service and related sales, and the
liability therefor will be assumed by Bresnan. Adjustments to the sales price
on a pro rata basis as of the closing date will be made for all prepaid
expenses (but only to the extent that the full benefit thereof will be
realized by Bresnan within 12 months after the closing date), accrued expenses
(including real and personal property taxes and the economic value of all
accrued vacation time permitted by Bresnan's policies to be taken after the
closing date by the employees of the Owatonna/Glencoe System hired by
Bresnan), prepaid income, subscriber prepayments and accounts receivable
relating to the system, all as determined in accordance with GAAP consistently
applied and to reflect the principal that all expenses and income attributable
to the Owatonna/Glencoe System for the period prior to the closing date are
for the account of the Partnership and all expenses and income attributable to
the Owatonna/Glencoe System for the period on and after the closing date are
for the account of Bresnan.
If the number of basic equivalent subscribers delivered to Bresnan at
closing is less than 8,440, the purchase price will be reduced by an amount
equal to $1,392 multiplied by the number by which the number of basic
equivalent subscribers is less than 8,440. The Partnership will not have an
obligation to close the sale if the sales price would be reduced pursuant to
this adjustment by an amount greater than $403,680.
The General Partner believes that these closing adjustments will neither
increase nor decrease the purchase price by a material amount. Please see Note
3 of the Notes to Unaudited Pro Forma Financial Statements for a detailed
accounting of the General Partner's current best estimate of the anticipated
closing adjustments.
CONDITIONS TO THE CLOSING OF THE SALE
The obligations of Bresnan to consummate the closing are subject to the
satisfaction or waiver of certain customary conditions, including the
following conditions: (a) the representations and warranties of the
Partnership in the Agreement shall be true and accurate in all material
respects at and as of the closing date with the same effect as if made at and
as of the closing date; (b) the Partnership shall have performed in all
material respects all
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obligations and agreements and shall have complied with all covenants in the
Agreement or in any related document to be performed or complied with by it at
or before closing; (c) no action, suit or proceeding is pending or threatened
by or before any governmental authority and no legal requirement has been
enacted, promulgated or issued or become or deemed applicable to any of the
transactions contemplated by the Agreement by any governmental authority which
would prohibit Bresnan's ownership or operation of all or a material portion
of the Owatonna/Glencoe System, which would compel Bresnan to dispose of or
hold separate all or a material portion of the system, which would, if
determined adversely to Bresnan's interest, materially impair the ability of
Bresnan to realize the benefits of the transactions contemplated by the
Agreement (including the ability of Bresnan to acquire the Owatonna/Glencoe
System pursuant to a like-kind exchange under Section 1031 of the Internal
Revenue Code) or have a material adverse effect on Bresnan's right to exercise
full rights of ownership of the system or which would prevent or make illegal
the consummation of any transactions contemplated by the Agreement, (d)
Bresnan shall have received an opinion of the general counsel of the General
Partner addressed to Bresnan and dated as of the closing date in form and
substance reasonably satisfactory to Bresnan; (e) all waiting periods under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act")
applicable to the Agreement or the transactions contemplated thereby shall
have expired or been terminated; (f) the Partnership shall have delivered to
Bresnan all material consents to the transfer of the assets of the
Owatonna/Glencoe System from the Partnership to Bresnan and shall have timely
issued all notifications necessary for such transfer; (g) each of the system's
cable television franchises shall either be extended for a term of not less
than three years or renewed for a term of not less than five years on terms
that are customary for renewals of similarly situated franchises of the same
duration in rural communities of a similar size in the State of Minnesota; (h)
Bresnan shall be satisfied that there are no environmental conditions with
respect to the assets of the Owatonna/Glencoe System that could reasonably be
expected to give rise to a material risk of liability; (i) the
Owatonna/Glencoe System shall have no fewer than 8,150 basic equivalent
subscribers as of the closing date; and (j) there shall have been no material
adverse change in the assets or the financial condition, liabilities or
operations of the Owatonna/Glencoe System.
The obligations of the Partnership to consummate the closing are subject to
the satisfaction or waiver of certain customary conditions, including the
following conditions: (a) the representations and warranties of Bresnan in the
Agreement shall be true and accurate in all material respects at and as of the
closing date with the same effect as if made at and as of the closing date;
(b) Bresnan shall have performed in all material respects all obligations and
agreements and shall have complied with all covenants in the Agreement or in
any related document to be performed or complied with by it at or before
closing; (c) no action, suit or proceeding is pending or threatened by or
before any governmental authority and no legal requirement has been enacted,
promulgated or issued or become or deemed applicable to any of the
transactions contemplated by the Agreement by any governmental authority which
would prohibit Bresnan's ownership or operation of all or a material portion
of the Owatonna/Glencoe System, which would compel Bresnan to dispose of or
hold separate all or a material portion of the system, which would, if
determined adversely to Bresnan's interest, materially impair the ability of
Bresnan to realize the benefits of the transactions contemplated by the
Agreement (including the ability of Bresnan to acquire the Owatonna/Glencoe
System pursuant to a like-kind exchange under Section 1031 of the Internal
Revenue Code) or have a material adverse effect on Bresnan's right to exercise
full rights of ownership of the system or which would prevent or make illegal
the consummation of any transactions contemplated by the Agreement, (d) the
Partnership shall have received an opinion of Bresnan's counsel dated as of
the closing date in form and substance reasonably satisfactory to it; (e) all
waiting periods under the HSR Act applicable to the Agreement or the
transactions contemplated thereby shall have expired or been terminated; (f)
the Agreement and the transactions contemplated thereby shall have been
approved by the Partnership's limited partners; and (g) either the
Owatonna/Glencoe System shall have no fewer than 8,150 basic subscribers as of
the closing date or Bresnan shall agree to limit the sales price reduction due
to a basic subscriber shortfall to $403,680.
The Owatonna/Glencoe System is operated pursuant to four cable television
franchises granted by the cities and townships of Owatonna and Glencoe,
Minnesota, respectively. Each of the four franchising authorities has the
right of first refusal to purchase that portion of the Owatonna/Glencoe System
serving their communities upon the Owatonna/Glencoe System's sale. Each of the
Partnership and Bresnan have requested that the
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franchising authorities waive these rights of first refusal and approve the
sale of the system by the Partnership to Bresnan. It is currently anticipated
that each of the franchising authorities will approve the transfers of the
Owatonna/Glencoe System to Bresnan, but there can be no assurance that they
will do so. Bresnan and the Partnership have agreed that if any one of the
four franchising authorities exercises a right of first refusal to purchase
that portion of the system serving the franchising authority's community,
Bresnan shall have the right to terminate the Agreement without any further
obligation to the Partnership.
INDEMNITY ESCROW
For a period of 90 days following the closing date, $600,000 of the sale
proceeds will remain in escrow as security for the Partnership's agreement to
indemnify Bresnan under the Agreement. Pursuant to the terms of the Agreement,
the Partnership has agreed to indemnify and hold Bresnan harmless from all
losses resulting from or arising out of (i) any breach of any representation
or warranty made by the Partnership in the Agreement or in the related
documents delivered by the Partnership to Bresnan in connection with the
closing of the sale of the Owatonna/Glencoe System, (ii) any breach of any
covenant, agreement or obligation of the Partnership contained in the
Agreement or in any of the related documents delivered by the Partnership to
Bresnan in connection with the closing of the sale of the Owatonna/Glencoe
System, (iii) any act or omission of the Partnership with respect to, or any
event or circumstance related to, the ownership or operation of the
Owatonna/Glencoe System or the conduct of its business, which act, omission,
event or circumstance occurred or existed prior to or at the closing date,
without regard to whether a claim with respect to such matter is asserted
before or after the closing date, (iv) any liability or obligation relating to
the Owatonna/Glencoe System not specifically assumed by Bresnan, (v) any title
defect that the Partnership fails to eliminate as an exception from the title
insurance commitment required to be provided to Bresnan at closing, (vi) any
claim that the transactions contemplated by the Agreement violate the Workers
Adjustment Retraining and Notification Act or any similar state or local law
or any bulk transfer or fraudulent conveyance laws of any jurisdiction, (vii)
the presence, generation, removal or transportation of a hazardous substance
on or from any of the real property relating to the Owatonna/Glencoe System,
including the costs of removal or cleanup of such hazardous substance and
other compliance with the provisions of any environmental laws (whether before
or after closing) or (viii) any rate refund ordered to be made by the
Owatonna/Glencoe System by any governmental authority for periods prior to the
closing date. In addition, the Partnership has agreed to indemnify Bresnan
from and against all claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including
settlement costs and reasonable legal, accounting, experts and other fees,
costs and expenses) incident or relating to or resulting from any of the
foregoing matters.
The Partnership's primary exposure, if any, will relate to the
representations and warranties made about the Owatonna/Glencoe System in the
Agreement. The Partnership will not be liable for any claim for a breach of a
representation or warranty unless and until the aggregate amount of all claims
is at least $250,000; provided, however, that the Partnership shall be liable
for all rate refunds ordered to be made by the Owatonna/Glencoe System by any
governmental authority for periods prior to the closing date and for all
federal, state or local taxes determined by any governmental authority to be
owing for periods prior to the closing date regardless of whether the
aggregate amount of such rate refunds and/or taxes equals or exceeds the
threshold amount of $250,000. Bresnan will have the right to make claims
against the indemnity escrow account and Bresnan must notify the Partnership
of such claims. If the Partnership objects to the payment of any claims by the
escrow agent, and if Bresnan and the Partnership are unable to agree on how
the escrowed funds should be distributed, the escrow agent will be authorized
to submit the dispute to arbitration.
Any amounts remaining from this indemnity escrow account at the end of the
90-day period and not subject to a claim by Bresnan will be distributed to the
partners of the Partnership. If the entire $600,000 escrow amount ultimately
is distributed to partners, of which there can be no assurance, the limited
partners as a group would receive 75 percent ($450,000) and the General
Partner would receive 25 percent ($150,000) of this amount. The limited
partners thus would receive $26 for each $500 limited partnership interest, or
$52 for each $1,000 invested in the Partnership, from this portion of the sale
proceeds. The Partnership will continue in existence at
8
<PAGE>
least until any amounts remaining from the indemnity escrow account have been
distributed. If any disputes with respect to indemnification arise, the
Partnership would not be dissolved until such disputes were resolved, which
could result in the Partnership continuing in existence beyond 1999.
REASONS FOR THE TIMING OF THE SALE
The decision to proceed with the sale of the Owatonna/Glencoe System at this
time was based upon the General Partner's conclusion in 1997 that it would be
in the Partnership's best interests to sell the Owatonna/Glencoe System now
rather than at a later date. During the holding period, the Owatonna/Glencoe
System has grown from serving approximately 5,175 basic subscribers to a
system serving approximately 8,530 basic subscribers. At acquisition, the
Owatonna/Glencoe System passed approximately 8,980 homes. The Owatonna/Glencoe
System is expected to pass approximately 12,000 homes at closing.
In accordance with the General Partner's decision in May 1997 that it was
time for the Partnership to sell the Owatonna/Glencoe System, an information
package describing the Owatonna/Glencoe System was prepared by The Jones
Group, Ltd., the General Partner's cable system brokerage subsidiary. The
Jones Group, Ltd. began marketing the Owatonna/Glencoe System for sale in July
1997. Representatives of The Jones Group, Ltd. contacted five unaffiliated
cable television system operators to determine their interest in purchasing
the Owatonna/Glencoe System. Of the five original prospects, three companies,
Bresnan, Marcus Cable and Triax Telecommunications Company ("Triax"),
requested system information packages, which were delivered to them by The
Jones Group, Ltd. After reviewing the system information, both Triax and
Bresnan separately made due diligence visits to the Owatonna/Glencoe System in
August 1997. Triax first offered $11,000,000 for the system and Bresnan first
offered $11,200,000 for the system. After consulting with management of the
General Partner, representatives of The Jones Group, Ltd. informed both Triax
and Bresnan that their offers for the Owatonna/Glencoe System were not
sufficient. Triax increased its bid for the Owatonna/Glencoe System from
$11,000,000 to $11,500,000. Bresnan increased its bid for the Owatonna/Glencoe
System from $11,200,000 to $11,750,000. Management of the General Partner
determined that accepting Bresnan's $11,750,000 offer for the Owatonna/Glencoe
System was in the best interests of the Partnership and management of the
General Partner instructed The Jones Group, Ltd. to accept the Bresnan offer
on behalf of the Partnership. A definitive agreement was negotiated at arm's-
length between the General Partner, representing the Partnership as seller,
and Bresnan as buyer over a period of several months. The definitive asset
purchase agreement was executed on April 10, 1998.
The Partnership has a finite legal existence of 17 years, over 12 of which
have passed. It was not intended or expected, however, that the Partnership
would hold its cable systems for 17 years. Although it was not possible at the
outset of the Partnership to determine precisely how quickly the investment
objectives with respect to any particular system would be achieved, investors
were informed that past experience with prior partnerships had shown that five
to seven years was the average length of time from the acquisition of a cable
system to its sale. Investors in the Partnership also were able to examine the
track record of prior partnerships because such track record was set forth in
the prospectus delivered in connection with the Partnership's initial public
offering. At the time of the formation of the Partnership, the track record
showed that prior partnerships had rarely held their cable systems for any
longer than six years. The Partnership had somewhat different investment
objectives from most of the General Partner's prior partnerships, however, in
that it sought to provide both current distributions and capital appreciation
in its cable systems. The expected holding period for the Partnership's
systems was therefore eight to ten years.
When investing in the Partnership, by virtue of the provisions of Section
2.2(k) of the Partnership Agreement, the limited partners vested in the
General Partner the right and responsibility to determine when the
Partnership's investment objectives had been achieved. The Owatonna/Glencoe
System was acquired by the Partnership in July 1986 because, in the opinion of
the General Partner at the time of the Owatonna/Glencoe System's acquisition,
the system had the potential for capital appreciation within a reasonable
period of time. It is the General Partner's opinion that during the 12 years
that the Owatonna/Glencoe System has been held by
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<PAGE>
the Partnership, the Partnership's investment objectives with respect to the
system have been achieved. The General Partner determined that now rather than
later was the appropriate time for the Partnership to sell the system. The
General Partner used no specific benchmarks or measurement tools in
determining that now was the time for the Partnership to sell the system. The
General Partner conducted a subjective evaluation of a variety of factors,
including the length of the holding period and the prospects for future growth
of the system as compared to the potential risks of a decline in the value of
the system.
In evaluating whether now was the time for the Partnership to sell the
Owatonna/Glencoe System, the General Partner generally considered the benefits
to the limited partners that might be derived by the Partnership's holding the
system for an additional period of time. The General Partner assumed that the
system might continue to appreciate in value and, if so, the Owatonna/Glencoe
System would be able to be sold for a greater sales price in the future. The
General Partner weighed these assumptions against the potential risk to
investors from a longer holding period, i.e., the risks that regulatory,
technology and/or competitive developments could cause the system to decline
in value, which could result in a lower sales price in the future. A longer
holding period would expose investors to the risk that competition from direct
broadcast satellite companies, telephone companies and/or neighboring cable
companies could diminish the number of subscribers to the system's basic and
premium services, thereby decreasing the value of the system. A longer holding
period would expose investors to the risk that changes in the regulations
promulgated by the governmental agencies that oversee cable operations could
make cable systems a less desirable investment, thereby decreasing the value
of the Owatonna/Glencoe System. The General Partner's decision to sell the
system at this time was greatly influenced by the fact that the originally
contemplated holding period has been exceeded.
RECOMMENDATION OF THE GENERAL PARTNER AND FAIRNESS OF THE PROPOSED SALE
The General Partner believes that the Partnership's proposed sale of the
Owatonna/Glencoe System to Bresnan on the terms and conditions of the
Agreement and the proposed distribution of the net sale proceeds therefrom to
the Partnership's partners are fair to all limited partners of the
Partnership, and it recommends that the limited partners of the Partnership
approve the Partnership's sale of the Owatonna/Glencoe System to Bresnan on
the terms and conditions of the Agreement. In determining the fairness of the
proposed transaction, the General Partner's officers and directors considered
each of the following factors, all of which had a positive effect on the
General Partner's fairness determination:
(i) the limited partnership interests are at present illiquid and the cash
to be distributed to limited partners as a result of the proposed sale of the
Owatonna/Glencoe System will provide limited partners with liquidity;
(ii) the sales price represents the fair market value of the
Owatonna/Glencoe System because the sales price was determined in competitive
bidding and through an arm's-length negotiation between the General Partner,
representing the Partnership, and Bresnan, an unaffiliated entity;
(iii) the Partnership has held the Owatonna/Glencoe System for 12 years;
(iv) the conditions and prospects of the cable television industry in which
the Partnership is engaged, including the competition and threat of
competition from overbuilders, from DBS services and telephone companies, and
the working capital and other financial needs of the Partnership if it were to
continue to operate and upgrade the Owatonna/Glencoe System, a portion of
which is scheduled for a significant rebuild as a condition to the renewal of
the system's Owatonna franchises; and
(v) the terms and conditions of the Agreement by and between the Partnership
and Bresnan, including the fact that the sales price will be paid in cash and
the fact that Bresnan's obligation to close is not contingent upon its ability
to obtain financing.
The General Partner's officers and directors reviewed the terms of the
Agreement and the sales price and, based on their general knowledge of cable
television system transactions undertaken by cable television
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<PAGE>
companies, concluded that the sales price and other transaction terms were
fair and were within industry norms for comparable transactions.
CERTAIN EFFECTS OF THE SALE
Upon consummation of the sale of the Owatonna/Glencoe System, the proceeds
of the sale will be used to repay all of the amounts borrowed under the
Partnership's credit facility and capital lease obligations, pay certain fees
and expenses of the transaction, including a brokerage fee to an affiliate of
the General Partner, pay deferred cash flow distributions to the General
Partner and $600,000 will be deposited into a 90-day indemnity escrow account
and then the $7,505,000 of net sale proceeds will be distributed by the
Partnership to its partners of record as of the closing date of the sale of
the system pursuant to the terms of the Partnership Agreement. Based upon pro
forma financial information as of March 31, 1998, and assuming an unadjusted
sales price of $11,750,000, as a result of the sale of the Owatonna/Glencoe
System, the limited partners of the Partnership, as a group, will receive
$5,628,750 and the General Partner will receive a general partner distribution
of $1,876,250. Limited partners will receive $331 for each $500 limited
partnership interest, or $662 for each $1,000 invested in the Partnership.
The limited partners will be subject to federal and state income tax on the
income resulting from the sale of the Owatonna/Glencoe System. See the
detailed information below under the caption "Federal and State Income Tax
Consequences."
After the sale of the Owatonna/Glencoe System and the distribution of the
net proceeds therefrom, including the indemnity escrow amount, the Partnership
will be liquidated and dissolved, most likely in early 1999.
Neither Colorado law nor the Partnership Agreement afford dissenters' or
appraisal rights to limited partners in connection with the Partnership's
proposed sale of the Owatonna/Glencoe System. If the proposed transaction is
approved by the holders of a majority of limited partnership interests, all
limited partners of the Partnership will receive a distribution of the net
sale proceeds in accordance with procedures prescribed by the Partnership
Agreement regardless of how or whether they vote on the proposal.
It is anticipated that if the proposed transaction is not consummated, the
General Partner's current management team will continue to manage the
Owatonna/Glencoe System on behalf of the Partnership until such time as the
Owatonna/Glencoe System can be sold. No other alternatives have been or
currently are being considered.
FEDERAL AND STATE INCOME TAX CONSEQUENCES
The purpose of the following discussion of the income tax consequences of
the proposed transaction is to inform the limited partners of the 1998 federal
and state income tax consequences to the Partnership and to its partners
arising from the proposed sale of the Owatonna/Glencoe System. These tax
consequences are expected to be incurred in 1998, the year in which the sale
is expected to close. The tax information included herein was prepared by the
tax department of the General Partner. The tax information is taken from tax
data compiled by the General Partner in its role as the Partnerships's tax
administrator and is not based upon the advice or formal opinion of counsel.
The tax discussion that follows is merely intended to inform the limited
partners of factual information and should not be considered tax advice.
PARTNERSHIP ALLOCATION OF GAIN FROM SALE
Section 5.4 of the Partnership Agreement specifies that partnership
distributions of cable television system net sale proceeds shall be allocated
100 percent to the limited partners until they have received a return of their
initial capital contributions plus their 10 percent liquidation preference,
and thereafter such distributions are to be made 75 percent to the limited
partners and 25 percent to the General Partner. Due to prior cash
distributions
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made to the limited partners, approximately all of the Owatonna/Glencoe
System's net sale proceeds will be distributed 75 percent to the limited
partners and 25 percent to the General Partner.
The allocation of gain from the sale of the Owatonna/Glencoe System will
follow the allocation of the cash distributions from the sale in accordance
with Section 5.3 of the Partnership Agreement. The allocation of gain will be
100 percent to the limited partners to the extent of initial capital
contributions plus the 10 percent liquidation preference, and thereafter 75
percent to the limited partners and 25 percent to the General Partner. This
allocation follows the underlying economic gain of the partners and hence
satisfies the "substantial economic effect" test enacted in Internal Revenue
Code ("IRC") Section 704(b) regarding special partnership allocations.
Application of the allocation provisions of Section 5.3 ensures that the
limited partners' net sum of allocable partnership loss and income during the
Partnership's life will equal the net economic gain realized from their
investment in the Partnership. The estimated allocable limited partner income
from the Owatonna/Glencoe System sale reported below incorporates the
application of the special partnership allocation rules of Section 5.3.
PROJECTED 1998 TAX RESULTS
By the expected date of the proposed system sale in 1998, most of the
limited partners will have received certain tax benefits from their investment
in the Partnership. Assuming maximum federal income tax rates and no other
sources of passive income, original limited partners of the Partnership will
have received $1,060,457 in tax benefits from Partnership losses ($125 per
$1,000 invested). Tax benefits derived from allocable Partnership losses have
been limited due to the passive loss limitation rules enacted in 1986.
The sale of the Owatonna/Glencoe System will result in a gain for federal
income tax purposes. The amount of this gain allocated to limited partners
will be approximately $7,545,213. The General Partner estimates that
$4,894,888 ($576 per $1,000 invested) of this gain will be treated as ordinary
income. This amount of ordinary income results from the recapture of
depreciation on business assets under IRC Section 1245. The General Partner
estimates that the remainder of the gain, $2,650,325 ($312 per $1,000
invested), will be treated as long term capital gain under IRC Section 1231.
It is anticipated that no passive loss carryforwards from the Partnership will
be available to offset these gain allocations.
Assuming the 31 percent rate applies to ordinary income and the 20 percent
rate applies to long term capital gain income, as a result of the sale of the
Owatonna/Glencoe System, a limited partner will be subject to federal income
taxes of $241 per $1,000 invested in the Partnership. The taxable income will
be recognized in the year of closing of the sale, which is expected to be
1998.
SYNDICATION COSTS
Syndication costs represent sales commissions paid by limited partners on
their purchase of their limited partnership interests and allocable costs
associated in forming the Partnership. These costs were capitalized on the
Partnership books and are reflected in the limited partners' capital account
balance. Upon liquidation of the Partnership, the syndication costs cannot be
deducted by the Partnership. However, these costs can be deducted by the
limited partners as a long term capital loss under IRC Section 731. Limited
partners will have an ending capital balance on their final Form 1065,
Schedule K-1 which represents their allocable syndication costs. The
Partnership has syndication costs of $1,168,750 ($138 per $1,000 invested)
that will be deductible by limited partners in the Partnership's final tax
year. Although the sale of the Owatonna/Glencoe System is expected to occur in
1998, it is anticipated that due to the 90-day escrow arrangement, the final
Partnership tax year will be 1999. Syndication costs thus should be deductible
by limited partners on their 1999 returns.
SECONDARY MARKET PURCHASERS
Limited partners that have more recently acquired their partnership
interests in the limited partnership secondary market and/or through limited
tender offers will have allocable income from the Owatonna/Glencoe
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System sale in the amounts reported above. Because the Partnership does not
have an IRC Section 754 election in effect, the purchase of a limited
partnership interest in the Partnership places the new investor in the same
position as the limited partner from whom the interest was purchased.
Recent investors will not have their net tax basis in their partnership
interests reflected on their annual Schedule K-1. Such limited partners must
track their tax basis by adjusting their original cost by allocable income or
loss and partnership distributions. Their adjusted tax basis will be
deductible as a long term capital loss under IRC Section 731 in a manner
similar to the Partnership syndication costs discussed above.
TAX WITHHOLDING ON SALE PROCEEDS
The sale of the Owatonna/Glencoe System will require limited partner
reporting to the State of Minnesota. The General Partner is required by
Minnesota state law to withhold 8.5 percent of each partner's allocable income
occurring within Minnesota without consideration of loss carryforwards. This
withholding requirement does not apply to tax exempt entities such as trusts
and IRAs.
Limited partners are required to file non-resident state tax returns to
compute the appropriate state tax liability. Documentation of withheld taxes
will be reported on state specified forms to limited partners in January 1999.
Detailed Minnesota reporting instructions and blank forms will be provided to
limited partners in their annual tax reporting package, which is mailed to
limited partners in March 1999.
FEDERAL REPORTING BY TAX EXEMPT ENTITIES
The 1998 sale of the Owatonna/Glencoe System will generate Unrelated
Business Taxable Income (UBTI) to tax exempt entities, which will require the
filing of Form 990-T. Although many trust administrators complete the required
tax returns, responsibility for completion of the Form 990-T ultimately rests
with the beneficiaries of trusts, IRAs and other tax exempt entities. Because
this is an area in which there is variance of policy among trust
administrators, each limited partner who is a beneficiary is advised to
confirm with his or her trust administrator that this filing requirement will
be fulfilled.
CERTAIN INFORMATION ABOUT THE PARTNERSHIP, THE GENERAL
PARTNER AND THE PURCHASER OF THE SYSTEMS
The principal executive offices of the Partnership and the General Partner
are located at 9697 East Mineral Avenue, Englewood, Colorado 80112, and their
telephone number is (303) 792-3111. The principal executive offices of Bresnan
are located at 709 Westchester Avenue, White Plains, New York 10604.
The limited partnership interests of the Partnership are registered pursuant
to Section 12(g) of the Exchange Act. As such, the Partnership currently is
subject to the informational reporting requirements of the Exchange Act and,
in accordance therewith, is obligated to file periodic reports, proxy
statements and other information with the SEC relating to its business,
financial condition and other matters. Reports and other information filed by
the Partnership can be inspected and copied at the public reference facilities
maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, and at the following regional offices of the SEC: 7 World Trade Center,
Suite 1300, New York, New York 10048 and Northwest Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. The SEC also maintains a
World Wide Web site that contains reports, proxy statements and information
statements of registrants (including the Partnership) that file electronically
with the SEC at http://www.sec.gov. The Partnership will continue to be
subject to the informational reporting requirements of the Exchange Act after
the sale of the Owatonna/Glencoe System. The Partnership will cease to be
subject to the informational reporting requirements of the Exchange Act only
after the Partnership is liquidated and dissolved, most likely in early 1999.
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USE OF PROCEEDS FROM THE SALE
The following is a brief summary of the Partnership's estimated use of the
proceeds from the sale of the Owatonna/Glencoe System. All of the following
selected financial information is based upon amounts as of March 31, 1998 and
certain estimates of liabilities and the number of basic subscribers at
closing. Final results may differ materially from these estimates. A more
detailed discussion of the financial consequences of the sale of the system is
set forth below under the captions "Unaudited Pro Forma Financial
Information." All limited partners are encouraged to review carefully the
unaudited pro forma financial statements and notes thereto.
If the holders of a majority of limited partnership interests of the
Partnership approve the proposed sale of the system and the transaction is
closed, the Partnership will repay all of the amounts borrowed under its
credit facility ($3,217,500) and capital lease obligations totaling $69,109,
leaving the Partnership with no debt outstanding, pay certain fees and
expenses of the transaction, including a brokerage fee of 2.5 percent of the
sales price, or $293,750, to The Jones Group, Ltd., a subsidiary of the
General Partner, pay the General Partner deferred cash flow distributions
totaling $87,867, settle working capital adjustments and deposit $600,000 in a
90-day indemnity escrow account, and then the $7,505,000 of net sale proceeds
will be distributed to the Partnership's partners of record as of the closing
date of the sale of the system and pursuant to the terms of the Partnership
Agreement. Because distributions to be made on the sale of the
Owatonna/Glencoe System together with all prior distributions made by the
Partnership from the Partnership's operating cash flow and from the net
proceeds of a prior cable television system sale will exceed the amounts
originally contributed to the Partnership by the limited partners plus the
limited partners' liquidation preference, the General Partner will receive a
general partner distribution on the sale of the Owatonna/Glencoe System. Based
upon financial information as of March 31, 1998, the limited partners as a
group will receive $5,628,750 and the General Partner will receive $1,876,250
of the net sale proceeds. This distribution will provide the Partnership's
limited partners with a return of $331 for each $500 limited partnership
interest, or $662 for each $1,000 invested in the Partnership. The estimated
uses of the sale proceeds are as follows:
<TABLE>
<S> <C>
Contract Sales Price of the Owatonna/Glencoe System................... $11,750,000
Add: Cash on Hand Available for Distribution........................ 89,013
Less: Repayment of Debt.............................................. (3,286,609)
Estimated Net Closing Adjustments.............................. (65,787)
Deferred Cash Flow Distributions to General Partner............ (87,867)
Brokerage Fee.................................................. (293,750)
Indemnity Escrow............................................... (600,000)
-----------
Cash Available for Distribution by the Partnership to its
Partners................................................ $ 7,505,000
===========
</TABLE>
Based on financial information available at March 31, 1998, the following
table presents the estimated results of the Partnership when the sale of the
Owatonna/Glencoe System is completed:
<TABLE>
<S> <C>
Dollar Amount Raised.............................................. $8,500,000
Number of Cable Television Systems Purchased Directly............. Two
Date of Closing of Offering....................................... July 1986
Tax and Distribution Data per $1,000 of Limited Partnership
Capital:
Federal Income Tax Results
Ordinary Income (Loss)
--from operations............................................. $ (281)
--from recapture.............................................. $ 822
Capital Gain (Loss)........................................... $ 674
Cash Distributions to Investors
Source (on GAAP basis)
--investment income........................................... $1,215
--return of capital........................................... $1,000
Source (on cash basis)
--sales....................................................... $2,215
</TABLE>
14
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
OF JONES CABLE INCOME FUND 1-A, LTD.
The following unaudited pro forma balance sheet assumes that as of March 31,
1998, the Partnership had sold the Owatonna/Glencoe System for $11,750,000.
The following unaudited pro forma statements of operations assume that the
Partnership had sold the Owatonna/Glencoe System for $11,750,000 and the
Milwaukie System for $8,200,000 as of January 1, 1997. The funds available to
the Partnership from the sale of the Owatonna/Glencoe System, adjusting for
the estimated net closing adjustments of the sale, are expected to total
$11,684,213. Such funds will be used to repay all of the amounts borrowed by
the Partnership under its credit facility and outstanding capital lease
obligations, pay certain fees and expenses of the transaction, including a
brokerage fee to an affiliate of the General Partner, pay deferred cash flow
distributions to the General Partner and make a $600,000 deposit into the
indemnity escrow account, and the balance will be distributed to the
Partnership's partners in accordance with the distribution provisions of the
Partnership Agreement.
The unaudited pro forma financial statements should be read in conjunction
with the appropriate notes to the unaudited pro forma financial statements.
ALL OF THE FOLLOWING UNAUDITED PRO FORMA FINANCIAL INFORMATION IS BASED UPON
AMOUNTS AS OF MARCH 31, 1998 AND CERTAIN ESTIMATES OF LIABILITIES AT CLOSING.
FINAL RESULTS MAY DIFFER FROM SUCH INFORMATION.
15
<PAGE>
JONES CABLE INCOME FUND 1-A, LTD.
UNAUDITED PRO FORMA BALANCE SHEET
MARCH 31, 1998
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
----------- ------------ ----------
<S> <C> <C> <C>
ASSETS
Cash and Cash Equivalents.................. $ 747,108 $ 7,357,892 $8,105,000
Trade Receivables, net..................... 108,612 (108,612) --
Investment in Cable Television Properties:
Property, plant and equipment, net....... 2,881,918 (2,881,918) --
Franchise costs and other intangibles,
net..................................... 12,683 (12,683) --
---------- ------------ ----------
Total investment in cable television
properties............................ 2,894,601 (2,894,601) --
Deposits, Prepaid Expenses and Deferred
Charges................................... 108,526 (108,526) --
---------- ------------ ----------
Total Assets........................... $3,858,847 $ 4,246,153 $8,105,000
========== ============ ==========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Debt..................................... $3,286,609 $(3,286,609) $ --
Trade accounts payable and accrued lia-
bilities................................ 245,710 (245,710) --
Subscriber prepayments................... 37,215 (37,215) --
Accrued distribution to limited part-
ners.................................... -- 5,628,750 5,628,750
Accrued distribution to General Partner.. -- 1,876,250 1,876,250
---------- ------------ ----------
Total Liabilities...................... 3,569,534 3,935,466 7,505,000
---------- ------------ ----------
Partners' Capital:
General Partner.......................... 75,747 74,253 150,000
Limited Partners......................... 213,566 236,434 450,000
---------- ------------ ----------
Total Partners' Capital................ 289,313 310,687 600,000
---------- ------------ ----------
Total Liabilities and Partners' Capital.. $3,858,847 $ 4,246,153 $8,105,000
========== ============ ==========
</TABLE>
The accompanying notes to unaudited pro forma financial statements are an
integral part of this unaudited pro forma balance sheet.
16
<PAGE>
JONES CABLE INCOME FUND 1-A, LTD.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
----------- ----------- ---------
<S> <C> <C> <C>
REVENUES..................................... $834,033 $(834,033) $ --
COSTS AND EXPENSES:
Operating Expenses ........................ 483,415 (483,415) --
Management fees and allocated overhead from
the General Partner....................... 93,495 (93,495) --
Depreciation and Amortization.............. 146,171 (146,171) --
-------- --------- --------
OPERATING INCOME............................. 110,952 (110,952) --
-------- --------- --------
OTHER INCOME (EXPENSE):
Interest expense .......................... (58,505) 58,505 --
Other, net................................. 5,879 (5,879) --
-------- --------- --------
Total other income (expense), net........ (52,626) 52,626 --
-------- --------- --------
NET INCOME................................... 58,326 $ (58,326) --
======== ========= ========
NET INCOME PER LIMITED PARTNERSHIP INTEREST.. $ 3.40 $ --
======== ========
</TABLE>
The accompanying notes to unaudited pro forma financial statements are an
integral part of this unaudited pro forma statement.
17
<PAGE>
JONES CABLE INCOME FUND 1-A, LTD.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
----------- ----------- ----------
<S> <C> <C> <C>
REVENUES................................... $3,598,676 $(3,598,676) $ --
COSTS AND EXPENSES:
Operating Expenses....................... 2,182,150 (2,182,150) --
Management fees and allocated overhead
from
the General Partner..................... 407,027 (407,027) --
Depreciation and Amortization............ 684,748 (684,748) --
---------- ----------- ----------
OPERATING INCOME........................... 324,751 (324,751) --
---------- ----------- ----------
OTHER INCOME (EXPENSE):
Interest expense......................... (215,331) 215,331 --
Gain on sale of cable television system.. 6,684,781 (6,684,781) --
Other, net............................... (254,854) 254,854 --
---------- ----------- ----------
Total other income (expense), net...... 6,214,596 (6,214,596) --
---------- ----------- ----------
NET INCOME................................. 6,539,347 $(6,539,347) --
========== =========== ==========
NET INCOME PER LIMITED PARTNERSHIP INTER-
EST....................................... $ 374.93 $ --
========== ==========
</TABLE>
The accompanying notes to unaudited pro forma financial statements are an
integral part of this unaudited statement.
18
<PAGE>
JONES CABLE INCOME FUND 1-A, LTD.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
1) The unaudited pro forma balance sheet of the Partnership assumes that the
Partnership had sold the Owatonna/Glencoe System for $11,750,000 as of March
31, 1998. The unaudited pro forma statements of operations of the Partnership
assume that the Partnership had sold the Owatonna/Glencoe System for
$11,750,000 and the Milwaukie System for $8,200,000 as of January 1, 1997.
2) The Partnership will have $7,505,000 of net sale proceeds from the sale
of the Owatonna/Glencoe System, which it will distribute to its partners. The
limited partnership distribution of $5,628,750 represents $331 for each $500
limited partnership interest or $662 for each $1,000 invested in the
Partnership.
3) The estimated gain recognized from the sale of the Owatonna/Glencoe
System and corresponding estimated distribution to limited partners as of
March 31, 1998 have been computed as follows:
GAIN ON SALE:
<TABLE>
<S> <C>
Contract sales price.............................................. $11,750,000
Less: Net book value of investment at March 31, 1998............. (2,894,601)
Brokerage fee.............................................. (293,750)
-----------
Gain on sale...................................................... $ 8,561,649
===========
DISTRIBUTION TO PARTNERS:
Contract sales price.............................................. $11,750,000
Add: Trade receivables, net..................................... 108,612
Prepaid expenses........................................... 108,526
Less: Trade accounts payable and accrued liabilities............. (245,710)
Subscribers prepayments.................................... (37,215)
-----------
Adjusted cash received............................................ 11,684,213
Less: Outstanding debt to third parties.......................... (3,286,609)
Brokerage fee.............................................. (293,750)
Deferred cash flow distributions to General Partner........ (87,867)
Add: Cash on hand available for distribution.................... 89,013
-----------
Cash available from sale proceeds................................. $ 8,105,000
-----------
Portion of sale proceeds to be held in a 90-day indemnity escrow.. (600,000)
-----------
Cash available for distribution in 1998........................... $ 7,505,000
===========
Limited partners' share........................................... $ 5,628,750
===========
General Partner's share........................................... $ 1,876,250
===========
</TABLE>
19
<PAGE>
AVAILABLE INFORMATION
The Partnership's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 and the Partnership's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 1998 are being mailed to the limited partners
of the Partnership together with this Proxy Statement.
INCORPORATION BY REFERENCE
The Partnership's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 and the Partnership's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 1998 are incorporated by reference in their
entirety in this Proxy Statement.
20
<PAGE>
[JONES INTERCABLE LOGO]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE PARTNERSHIP BY THE GENERAL PARTNER
The undersigned Limited Partner of Jones Cable Income Fund 1-A, Ltd., a
Colorado limited partnership, hereby votes on the sale of the Partnership's
Owatonna/Glencoe, Minnesota cable television system to Bresnan Communications
Company, for a sales price of $11,750,000 in cash, subject to normal closing
adjustments, pursuant to the terms and conditions of that certain Asset
Purchase Agreement dated as of April 10, 1998, as follows:
[_] CONSENTS [_] WITHHOLDS CONSENT [_] ABSTAINS
(YOU MUST SIGN ON THE REVERSE SIDE OF THIS PROXY CARD FOR YOUR VOTE TO COUNT.)
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED LIMITED PARTNER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE PROPOSED SALE TRANSACTION.
ALL OWNERS MUST SIGN EXACTLY AS
NAME(S) APPEAR ON LABEL.
When limited partnership
interests are held by more than
one person, all owners must sign.
When signing as attorney, as
executor, administrator, trustee
or guardian, please give full
title as such. If a corpo-ration,
please sign in full corporation
name by autho-rized officer. If a
partnership, please sign in
partnership name by authorized
person.
DATED: ______________________, 1998
___________________________________
Signature - Investor 1
___________________________________
Signature - Investor 2
___________________________________
Signature - Investor 3
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE>
[JONES INTERCABLE LOGO]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE PARTNERSHIP BY THE GENERAL PARTNER
The undersigned Limited Partner of Jones Cable Income Fund 1-A, Ltd., a
Colorado limited partnership, hereby votes on the sale of the Partnership's
Owatonna/Glencoe, Minnesota cable television system to Bresnan Communications
Company, for a sales price of $11,750,000 in cash, subject to normal closing
adjustments, pursuant to the terms and conditions of that certain Asset
Purchase Agreement dated as of April 10, 1998, as follows:
[_] CONSENTS [_] WITHHOLDS CONSENT [_] ABSTAINS
(YOU MUST SIGN ON THE REVERSE SIDE OF THIS PROXY CARD FOR YOUR VOTE TO COUNT.)
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED LIMITED PARTNER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE PROPOSED SALE TRANSACTION.
PLEASE SIGN EXACTLY AS NAME
APPEARS ON LABEL.
DATED: ______________________, 1998
___________________________________
Beneficial Owner Signature
(Investor)
___________________________________
Authorized Trustee/Custodian
Signature
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE>
Ex. 99.1
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP
AND
JONES CABLE INCOME FUND 1-A, LTD.
DATED AS OF
APRIL 10, 1998
<PAGE>
TABLE OF CONTENTS
SECTION 1. DEFINITIONS.........................................................7
SECTION 2. SALE OF ASSETS......................................................7
SECTION 3. CONSIDERATION.......................................................7
3.1 Base Purchase Price.....................................................7
-------------------
3.2 Adjustments to Base Purchase Price......................................7
----------------------------------
3.3 Determination of Adjustments............................................8
----------------------------
3.4 Allocation of Consideration.............................................9
---------------------------
SECTION 4. ASSUMED LIABILITIES AND EXCLUDED ASSETS............................10
4.1 Assignment and Assumption..............................................10
-------------------------
4.2 Excluded Assets........................................................10
---------------
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLER...........................11
5.1 Organization and Qualification.........................................11
------------------------------
5.2 Authority and Validity.................................................11
----------------------
5.3 No Conflict: Required Consents.........................................11
------------------------------
5.4 Assets.................................................................12
------
5.5 Governmental Permits...................................................12
--------------------
5.6 Seller Contracts.......................................................13
----------------
5.7 Real Property..........................................................13
-------------
5.8 Environmental Matters..................................................14
---------------------
5.9 Compliance with Legal Requirements.....................................14
----------------------------------
5.10 Patents, Trademarks and Copyrights....................................16
----------------------------------
5.11 Financial Statements..................................................17
--------------------
5.12 Absence of Certain Changes............................................17
--------------------------
5.13 Legal Proceedings.....................................................17
-----------------
<PAGE>
5.14 Tax Returns: Other Reports............................................18
--------------------------
5.15 Employment Matters....................................................18
------------------
5.16 Systems Information...................................................19
-------------------
5.17 Bonds.................................................................19
-----
5.18 Finders and Brokers...................................................19
-------------------
SECTION 6. BUYER'S REPRESENTATIONS AND WARRANTIES.............................20
6.1 Organization and Qualification.........................................20
------------------------------
6.2 Authority and Validity.................................................20
----------------------
6.3 No Conflicts: Required Consents........................................20
-------------------------------
6.4 Finders and Brokers....................................................21
-------------------
6.5 Legal Proceedings......................................................21
-----------------
SECTION 7. ADDITIONAL COVENANTS...............................................21
7.1 Access to Premises and Records.........................................21
------------------------------
7.2 Continuity and Maintenance of Operations; Financial Statements.........22
--------------------------------------------------------------
7.3 Employee Matters.......................................................24
----------------
7.4 Leased Vehicles: Other Capital Leases..................................25
-------------------------------------
7.5 Required Consents: Estoppel Certificates...............................25
----------------------------------------
7.6 Renewal of Franchises..................................................25
---------------------
7.7 Title Commitments and Surveys..........................................26
-----------------------------
7.8 HSR Notification.......................................................27
----------------
7.9 No Shopping............................................................27
-----------
7.10 Lien and Judgment Searches............................................27
--------------------------
7.11 Transfer Taxes........................................................28
--------------
7.12 Distant Broadcast Signals.............................................28
-------------------------
7.13 Letter to Programmers.................................................28
---------------------
7.14 Updated Schedules.....................................................28
-----------------
<PAGE>
7.15 Use of Names and Logos................................................28
----------------------
7.16 Subscriber Billing Services...........................................29
---------------------------
7.17 Satisfaction of Conditions............................................29
--------------------------
7.18 Confidentiality and Publicity.........................................29
-----------------------------
7.19 Bulk Transfers........................................................30
--------------
7.20 Environmental Reports.................................................30
---------------------
7.21 Construction of an Institutional Network..............................30
----------------------------------------
SECTION 8. CONDITIONS PRECEDENT...............................................31
8.1 Conditions to the Obligations of Buyer and Seller......................31
-------------------------------------------------
8.2 Conditions to the Obligations of Buyer.................................31
--------------------------------------
8.3 Conditions to Obligations of Seller....................................32
-----------------------------------
8.4 Waiver of Conditions...................................................33
--------------------
SECTION 9. CLOSING............................................................33
9.1 The Closing: Time and Place............................................33
---------------------------
9.2 Seller's Delivery Obligations..........................................33
-----------------------------
9.3 Buyer's Delivery Obligations...........................................34
----------------------------
SECTION 10. TERMINATION.......................................................35
10.1 Termination Events....................................................35
------------------
10.2 Effect of Termination.................................................36
---------------------
SECTION 11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.......36
11.1 Survival of Representations and Warranties............................36
------------------------------------------
11.2 Indemnification by Seller.............................................37
-------------------------
11.3 Indemnification by Buyer..............................................38
------------------------
11.4 Third Party Claims....................................................38
------------------
11.5 Limitations on Indemnification - Seller...............................39
---------------------------------------
<PAGE>
11.6 Limitations on Indemnification - Buyer................................39
--------------------------------------
SECTION 12. MISCELLANEOUS.....................................................40
12.1 Parties Obligated and Benefited.......................................40
-------------------------------
12.2 Notices...............................................................40
-------
12.3 Attorneys' Fees.......................................................41
----------------
12.4 Waiver................................................................41
-------
12.5 Captions..............................................................41
---------
12.6 Choice of Law.........................................................41
-------------
12.7 Terms.................................................................41
-----
12.8 Rights Cumulative.....................................................41
-----------------
12.9 Further Actions.......................................................42
---------------
12.10 Time.................................................................42
----
12.11 Late Payments........................................................42
-------------
12.12 Counterparts.........................................................42
------------
12.13 Entire Agreement.....................................................42
----------------
12.14 Severability.........................................................42
------------
12.15 Construction.........................................................42
------------
12.16 Expenses.............................................................43
--------
12.17 Risk of Loss: Condemnation...........................................43
--------------------------
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
--------
A - Indemnity Escrow Agreement
B - Bill of Sale
C - Assignment and Assumption of Contracts
D - Assignment of Leases
E - Letter to Programmers
F - FIRPTA Affidavit
G - Opinion of Seller's Counsel
H - Opinion of Buyer's Counsel
SCHEDULES
---------
1.9 - Owned Equipment and Vehicles
4.2 - Excluded Assets
5.3 - Required Consents
5.4 - Encumbrances to Be Discharged Prior to Closing
5.5 - Governmental Permits
5.6 - Seller Contracts
5.7 - Real Property
5.8 - Environmental Matters
5.9 - Cost of Service Filings
5.11 - Financial Statements
5.13 - Proceedings and Judgments
5.14 - Tax Matters
5.15 - Employee Matters
5.16 - The Business/Systems Information (including Rate
Schedule)
5.17 - Bonds
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
This Asset Purchase Agreement ("Agreement") is made as of April 10,
1998, by and between Bresnan Communications Company Limited Partnership, a
Michigan limited partnership ("Buyer"), and Jones Cable Income Fund 1-A, Ltd., a
Colorado limited partnership ("Seller").
RECITALS
--------
Seller is engaged in the business of providing cable television
service to subscribers in and around the Service Area. Buyer desires to
purchase and Seller desires to sell substantially all the assets of Seller used
or useful in connection with that business.
AGREEMENT
---------
In consideration of the above recitals and the mutual agreements
stated in this Agreement, the parties agree as follows:
SECTION 1. DEFINITIONS.
In addition to terms defined elsewhere in this Agreement, the
following capitalized terms, when used in this Agreement, will have the meanings
set forth below:
1.1 Affiliate. With respect to any Person, any other Person
---------
controlling, controlled by or under common control with such Person, with
"control" for such purpose meaning the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities or voting interests,
by contract or otherwise.
1.2 Assets. All properties, privileges, rights, interests and
------
claims, real and personal, tangible and intangible, of every type and
description that are owned, leased, held, used or useful in the Business in
which Seller has any right, title or interest or in which Seller acquires any
right, title or interest on or before the Closing Date, including Governmental
Permits, Intangibles, Seller Contracts, Equipment, Real Property and deposits
relating to the Business that are held by third parties for the account of
Seller or for security for Seller's performance of its obligations, but
excluding any Excluded Assets.
1.3 Basic Service. The lowest tier of service offered of a System.
-------------
<PAGE>
1.4 Business. The cable television business conducted by Seller on
--------
the date of this Agreement through one or more Systems, as described on SCHEDULE
5.16.
1.5 Business Day. Any day other than Saturday, Sunday or a day on
------------
which banking institutions in Denver, Colorado are required or authorized to be
closed.
1.6 Closing. The consummation of the transactions contemplated by
-------
this Agreement, as described in SECTION 9, the date of which is referred to as
the Closing Date.
1.7 Encumbrance. Any security interest, security agreement,
-----------
financing statement filed with any Governmental Authority, conditional sale or
other title retention agreement, any lease, consignment or bailment given for
purposes of security, any mortgage, lien, indenture, pledge, option,
encumbrance, adverse interest, constructive trust or other trust, claim,
attachment, exception to or defect in title or other ownership interest
(including but not limited to reservations, rights of entry, possibilities of
reverter, encroachments, easements, rights-of-way, restrictive covenants, leases
and licenses) of any kind, which constitutes an interest in or claim against
property, whether arising pursuant to any Legal Requirement, Governmental
Permit, Seller Contract or otherwise.
1.8 Environmental Law. Any Legal Requirement relating to pollution
-----------------
or protection of public health, safety or welfare or the environment, including
those relating to emissions, discharges, releases or threatened releases of
Hazardous Substances into the environment (including ambient air, surface water,
ground water or land), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Substances.
1.9 Equipment. All electronic devices, trunk and distribution
---------
coaxial and optical fiber cable, amplifiers, power supplies, conduit, vaults and
pedestals, grounding and pole hardware, subscriber's devices (including
converters, encoders, transformers behind television sets and fittings), headend
hardware (including origination, earth stations, transmission and distribution
system), test equipment, vehicles and other tangible personal property owned,
leased, used or held for use in the Business, the principal items of which are
described on SCHEDULE 1.9 (and, with respect to leased Equipment, on SCHEDULE
5.6).
1.10 Equivalent Basic Subscribers (or EBSs). An active customer for
--------------------------------------
Basic Service either in a single household, a commercial establishment or in a
multi-unit dwelling (including a hotel unit); provided, however, that the number
of customers in a multi-unit dwelling or commercial establishment that obtain
service on a "bulk-rate" basis will be determined on a System by System basis by
dividing the gross bulk-rate billings for Basic Service and Expanded Basic
Service (but not billings from a la carte tiers or premium services,
installation or other non-recurring charges, converter rental
-2-
<PAGE>
or from any outlet or connection other than the first outlet or connection or
from any pass-through charge for sales taxes, line-itemized franchise fees, fees
charged by the FCC and the like), attributable to such multi-unit dwelling or
commercial establishment during the most recent billing period ended prior to
the date of calculation (but excluding billings in excess of a single month's
charge) by the rate charged at the time of determination to individual
households for the highest level of Basic Service and Expanded Basic Service
offered by such System, such rate not to be less than the rate for such System
set forth on SCHEDULE 5.16 (excluding a la carte tiers or premium services,
installation or other non-recurring charges, converter rental, pass-through
charges for sales taxes, line-itemized franchise fees charged by the FCC and the
like). For purposes of this definition, an "active customer" will mean any
person, commercial establishment or multi-unit dwelling at any given time that
is paying for and receiving Basic Service from the System who has an account
that is not more than 60 days past due (except for past due amounts of $5 or
less, provided such account is otherwise current). For purposes of this
definition, an "active customer" does not include any person, commercial
establishment or multi-unit dwelling that as of the date of calculation has not
paid in full the charges for at least one month of the services ordered or any
subscriber whose service is pending disconnection for any reason. For purposes
of this definition, the number of days past due of a customer account will be
determined from the first day of the period for which the applicable billing
relates.
1.11 Expanded Basic Service. Any video programming provided over a
----------------------
cable television system, regardless of service tier other than (a) Basic
Service, (b) any new product tier and (c) video programming offered on a per
channel or per program basis.
1.12 GAAP. Generally accepted accounting principles as in effect
----
from time to time in the United States of America.
1.13 Governmental Authority. The United States of America, any
----------------------
state, commonwealth, territory or possession of the United States of America and
any political subdivision or quasi-governmental authority of any of the same,
including any court, tribunal, department, commission, board, bureau, agency,
county, municipality, province, parish or other instrumentality of any of the
foregoing.
1.14 Governmental Permits. All franchises, approvals,
--------------------
authorizations, permits, licenses, easements, registrations, qualifications,
leases, variances and similar rights obtained with respect to the Business or
Assets from any Governmental Authority, including those set forth on SCHEDULE
5.5.
1.15 Hazardous Substances. Any pollutant, contaminant, chemical,
--------------------
industrial, toxic, hazardous or noxious substance or waste which is regulated by
any Governmental Authority, including (a) any petroleum or petroleum compounds
(refined or crude), flammable substances, explosives, radioactive materials or
any other materials or pollutants which pose a hazard or potential hazard to the
Real Property or
3
<PAGE>
to Persons in or about the Real Property or cause the Real Property to be in
violation of any laws, regulations or ordinances of federal, state or applicable
local governments, (b) asbestos or any asbestos-containing material of any kind
or character, (c) polychlorinated biphenyls ("PCBs"), as regulated by the Toxic
Substances Control Act, 15 U.S.C. (S) 2601 et seq.,(d) any materials or
-- ---
substances designated as "hazardous substances" pursuant to the Clean Water Act,
33 U.S.C. (S) 1251 et seq., (e) "economic poison," as defined in the
-- ---
Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. (S) 135 et seq.,
-- ---
(f) "chemical substance," "new chemical substance" or "hazardous chemical
substance or mixture" pursuant to the Toxic Substances Control Act, 15 U.S.C.
(S) 2601 et seq., (g) "hazardous substances" pursuant to the Comprehensive
-- ---
Environmental Response, Compensation, and Liability Act, 42 U.S.C. (S) 9601 et
--
seq. and (h) "hazardous waste" pursuant to the Resource Conservation and
- ---
Recovery Act, 42 U.S.C. (S) 6901 et seq.
-- ---
1.16 Intangibles. All intangible assets, including subscriber lists,
-----------
accounts receivable, claims (excluding any claims relating to Excluded Assets),
patents, copyrights and goodwill, if any, owned, used or held for use in the
Business.
1.17 Knowledge. The actual collective knowledge of a particular
---------
matter of one or more of the executive officers of a Person or the general
manager or one or more of the managers of such Person's Systems.
1.18 Legal Requirement. Applicable common law and any statute,
-----------------
ordinance, code, or other law, rule, regulation, order, technical or other
written standard or procedure enacted, adopted or applied by any Governmental
Authority, including judicial decisions applying common law or interpreting any
other Legal Requirement.
1.19 Losses. Any claims, losses, liabilities, damages, penalties,
------
costs and expenses, including interest that may be imposed in connection
therewith, expenses of investigation, reasonable fees and disbursements of
counsel and other experts, and the cost to any Person making a claim or seeking
indemnification under this Agreement with respect to funds expended by such
Person by reason of the occurrence of any event with respect to which
indemnification is sought.
1.20 Pay TV. Premium programming services selected by and sold to
------
subscribers on a per channel or per program basis.
1.21 Permitted Encumbrances. The following Encumbrances: (a) liens
----------------------
securing Taxes, assessments and governmental charges not yet due and payable,
(b) any zoning law or ordinance or any similar Legal Requirement, (c) any right
reserved to any Governmental Authority to regulate the affected property and (d)
as to Real Property interests, any Encumbrance reflected in the public records
and that does not individually or in the aggregate interfere with the right or
ability to own, use or operate the Real Property or to convey good, marketable
and indefeasible fee simple title to such Real Property, provided that
"Permitted Encumbrances" will not include any
4
<PAGE>
Encumbrance which could prevent or inhibit in any way the conduct of the
business of the affected System and provided further that classification of any
Encumbrance as a "Permitted Encumbrance" will not affect any liability Seller
may have for such Encumbrance, including pursuant to any indemnity obligation
under this Agreement.
1.22 Person. Any natural person, corporation, partnership, trust,
------
unincorporated organization, association, limited liability company,
Governmental Authority or other entity.
1.23 Real Property. All assets held by Seller related to the
-------------
Business consisting of realty, including appurtenances, improvements and
fixtures located on such realty, and any other interests in real property,
including fee interests, leasehold interests and easements, wire crossing
permits, rights of entry (except agreements related to multiple dwelling units)
described on SCHEDULE 5.7.
1.24 Required Consents. All franchises, licenses, authorizations,
-----------------
approvals and consents required under Governmental Permits, Seller Contracts or
otherwise for (a) Seller to transfer the Assets and the Business to Buyer, (b)
Buyer to conduct the Business and to own, lease, use and operate the Assets at
the places and in the manner in which the Business is conducted as of the date
of this Agreement and on the Closing Date and (c) Buyer to assume and perform
the Governmental Permits, Seller Contracts and the other Assumed Liabilities.
1.25 Seasonal Subscribers. Customers of the System who, between the
--------------------
date hereof and Closing, have participated in, or will have participated in,
Seller's seasonal subscriber program by paying $5 per month during the months
that such subscribers were out of town, and by resuming service, or agreeing to
resume service, upon their return to town (which service will resume without a
reconnection charge).
1.26 Seller Contracts. All contracts and agreements, other than
----------------
Governmental Permits and those relating to Real Property, pertaining to the
ownership, operation and maintenance of the Assets or the Business or used or
held for use in the Business, as described on SCHEDULE 5.6 or, in the case of
contracts and agreements relating to Real Property, on SCHEDULE 5.7.
1.27 Service Area. The area in which Seller operates the Business,
------------
specifically in and around the Townships of Owatonna and Glencoe and the Cities
of Owatonna and Glencoe, all in the State of Minnesota.
1.28 System. A complete cable television reception and distribution
------
system operated in the conduct of the Business, consisting of one or more
headends, subscriber drops and associated electronic and other equipment, and
which is, or is capable of being without modification, operated as an
independent system without interconnections
5
<PAGE>
to other systems. Any systems which are interconnected or which are served in
total or in part by a common headend will be considered a single System.
1.29 Taxes. All levies and assessments of any kind or nature imposed
-----
by any Governmental Authority, including all income, sales, use, ad valorem,
value added, franchise, severance, net or gross proceeds, withholding, payroll,
employment, excise or property taxes and levies or assessments related to
unclaimed property, together with any interest thereon and any penalties,
additions to tax or additional amounts applicable thereto.
1.30 Other Definitions. The following terms are defined in the
-----------------
Sections indicated:
Term Section
---- -------
Action 11.4
Antitrust Division 7.7
Approval Deadline 10.1.4
Assumed Liabilities 4.1
Base Purchase Price 3.1(b)
Buyer Damages 11.5
CLI 5.9.5
City 7.21
Closing Date 1.8
Code 5.15.2
Cost of Service Election 5.9.4
Employee Benefit Plans 5.15.2
ERISA 5.15.1
Escrow Agent 3.1(a)
Excluded Assets 4.2
FCC 1.12
Final Adjustments Report 3.3.2
Financial Statements 5.11
FTC 7.8
HSR Act 7.8
I-Net 7.21
Indemnified Party 11.4
Indemnifying Party 11.4
Indemnity Escrow Agreement 3.1(a)
Indemnity Escrow Amount 3.1(a)
Intercable 5.1
1992 Cable Act 5.9.4
Outside Closing Date 10.1.3
Preliminary Adjustments Report 3.3.1
Rate Regulation Documents 5.9.4
6
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Reimbursable Amount 7.21
Seller Damages 11.6
Survival Period 11.1
Taking 12.17.2
Transaction Documents 5.2
</TABLE>
SECTION 2. SALE OF ASSETS.
Subject to the terms and conditions set forth in this Agreement, at
the Closing, Seller will sell to Buyer, and Buyer will purchase from Seller, all
of Seller's rights, titles and interests in, to and under the Assets. Except as
otherwise specifically provided in this Agreement, all the Assets are intended
to be transferred to Buyer, whether or not described in the Schedules.
SECTION 3. CONSIDERATION.
3.1 Base Purchase Price. Buyer will pay to Seller total cash
-------------------
consideration of $11,750,000 (the "Base Purchase Price"), subject to adjustment
as provided in SECTIONS 3.2 and 3.3. Such consideration will be paid at Closing
as follows:
3.1.1 Buyer shall wire to Colorado National Bank ("Escrow
Agent") the amount of Six Hundred Thousand Dollars ($600,000), which will secure
payment by Seller of post-Closing adjustments and indemnification obligations of
Seller to Buyer, in accordance with an Indemnity Escrow Agreement in
substantially the form attached as EXHIBIT A (the "Indemnity Escrow Agreement");
and
3.1.2 Buyer shall wire to Seller Eleven Million One Hundred
Fifty Thousand Dollars ($11,150,000) in immediately available funds pursuant to
wire instructions delivered no later than two Business Days prior to the Closing
Date by Seller to Buyer.
3.2 Adjustments to Base Purchase Price. The Base Purchase Price
----------------------------------
will be adjusted as follows:
3.2.1 Reduced by an amount equal to $1,392 multiplied by the
positive difference between (a) 8,440 and (b) the number of EBSs as of the
Closing Date.
3.2.2 Adjustments on a pro rata basis as of the Closing Date
will be made for all prepaid expenses (but only to the extent the full benefit
thereof will be realizable by Buyer within 12 months after the Closing Date),
accrued expenses (including real and personal property Taxes and the economic
value of all accrued vacation time permitted by Buyer's policies to be taken
after the Closing Time by Seller's System employees hired by Buyer), prepaid
income, subscriber prepayments and accounts receivable related to the Business,
all as determined in accordance with
7
<PAGE>
GAAP consistently applied, and to reflect the principle that all expenses and
income attributable to the Business for the period prior to the Closing Date are
for the account of Seller, and all expenses and income attributable to the
Business for the period on and after the Closing Date are for the account of
Buyer. The Purchase Price will be increased by an amount equal to the sum of (a)
100% of the face amount of all accounts receivable (other than from advertising
sales) that are current or 30 days or less past due as of the Closing Date, plus
(b) 80% of the face amount of all accounts receivable (other than from
advertising sales) that are between 31 days and 60 days past due as of the
Closing Date, plus (c) 100% of the face amount of all direct-billed advertising
accounts receivable that are current or 60 days or less past due as of the
Closing Date, plus (d) 50% of the face amount of all direct-billed advertising
accounts receivable that are between 61 and 90 days past due as of the Closing
Date, plus (e) 100% of the face amount of all agency advertising accounts
receivable that are current or 90 days or less past due as of the Closing Date,
plus (f) 50% of all agency advertising accounts receivable that are between 91
and 120 days past due as of the Closing Date; provided, that Seller will not
receive credit for any accounts receivable (a) any portion of which is 60 days
or more past due as of the Closing Date (other than accounts receivable from
advertising sales), (b) from subscribers whose accounts are inactive or whose
service is pending disconnection for any reason as of the Closing Date or (c)
resulting from advertising sales any portion of which is 120 days or more past
due as of the Closing Date.
3.2.3 Buyer's account will be credited for the amount of all
advance payments to, or funds of third parties on deposit with, Seller as of the
Closing Date, relating to the Business, including advance payments and deposits
by subscribers served by the Business for converters, encoders, decoders, cable
television service and related sales, and the liability therefor will be assumed
by Buyer.
3.3 Determination of Adjustments. Preliminary and final adjustments
-----------------------------
to the Base Purchase Price will be determined as follows:
3.3.1 Not later than a date Seller reasonably believes is at
least 10 Business Days prior to the expected Closing Date, Seller will deliver
to Buyer a report (the "Preliminary Adjustments Report"), certified as to
completeness and accuracy by an authorized officer of Intercable, showing in
detail the preliminary determination of the adjustments referred to in SECTION
3.2, which are calculated as of the Closing Date (or as of any other date agreed
by the parties) and any documents substantiating the adjustments proposed in the
Preliminary Adjustments Report. The Preliminary Adjustments Report will include
a complete list of subscribers, a detailed calculation of the number of
Equivalent Basic Subscribers and a schedule setting forth advance payments made
to or by Seller and deposits made by Seller, as well as accounts receivable
information relating to the Business (showing sums due and their respective
aging as of the Closing Date). Seller also will furnish to Buyer its billing
report for the most current period as of the Closing Date. Following receipt of
such Preliminary
8
<PAGE>
Adjustments Report and supporting information, Buyer will have
five Business Days to review such Preliminary Adjustments Report and supporting
information and to notify Seller of any disagreements with Seller's estimates.
If Buyer provides a notice of disagreement with Seller's estimates of the
adjustments referred to in SECTION 3.2 within such five Business Day period,
Buyer and Seller will negotiate in good faith to resolve any such dispute and to
reach an agreement prior to the Closing Date on such estimated adjustments as of
the Closing Date. The basis for determining the Base Purchase Price to be paid
at Closing will be (a) the estimate so agreed upon by Buyer and Seller or (b) if
no notice of disagreement is provided, or if such notice is provided but the
parties do not reach such an agreement prior to the Closing Date, the estimate
of such adjustments set forth in the Preliminary Adjustments Report.
3.3.2 Within 90 days after the Closing, Seller will deliver to Buyer
a report (the "Final Adjustments Report"), similarly certified by Seller,
showing in detail the final determination of all adjustments which were not
calculated as of the Closing Date and containing any corrections to the
Preliminary Adjustments Report, together with any documents substantiating the
adjustments proposed in the Final Adjustments Report. Buyer will provide Seller
with reasonable access to all records which Buyer has in its possession and
which are necessary for Seller to prepare the Final Adjustments Report.
3.3.3 Within 30 days after receipt of the Final Adjustments Report,
Buyer will give Seller written notice of Buyer's objections, if any, to the
Final Adjustments Report. If Buyer makes any such objection, the parties will
agree on the amount, if any, which is not in dispute within 30 days after
Seller's receipt of Buyer's notice of objections to the Final Adjustments
Report. Any disputed amounts will be determined within 120 days after the
Closing Date by the accounting firm of Price Waterhouse, whose determination
will be conclusive; provided, however, that if at the time of such dispute,
Price Waterhouse is the accounting firm for either Seller or Buyer, the parties
shall select a different accounting firm of national standing acceptable to both
parties to determine the dispute. Seller and Buyer will bear equally the fees
and expenses payable to such firm in connection with such determination. The
payment required after such determination will be made by the responsible party
by wire transfer of immediately available funds to the other party within three
Business Days after the final determination.
3.4 Allocation of Consideration. The consideration payable by Buyer
----------------------------
under this Agreement will be allocated among the Assets as set forth in a
schedule to be prepared not later than 180 days after the Closing Date (or April
1 of the year following the Closing Date if earlier) by an independent appraiser
with significant experience in the cable television industry. Such appraiser
will be selected by the mutual agreement of Buyer and Seller within 30 days
after the date of this Agreement, and the fees of such appraiser will be shared
equally by Buyer and Seller; provided, however, that if the parties so agree,
the appraisal and preparation of the schedule
9
<PAGE>
described above may occur prior to Closing. Buyer and Seller agree to be bound
by the allocation and will not take any position inconsistent with such
allocation and will file all returns and reports with respect to the
transactions contemplated by this Agreement, including all federal, state and
local Tax returns, on the basis of such allocation.
SECTION 4. ASSUMED LIABILITIES AND EXCLUDED ASSETS.
4.1 Assignment and Assumption. Seller will assign, and Buyer will
--------------------------
assume and after the Closing will pay, discharge and perform the following (the
"Assumed Liabilities"): (a) Seller's obligations to subscribers of the Business
for (i) subscriber deposits held by Seller as of the Closing Date and which are
refundable, in the amount for which Buyer received credit under SECTION 3.2,
(ii) subscriber advance payments held by Seller as of the Closing Date for
services to be rendered by a System after the Closing Date, in the amount for
which Buyer received credit under SECTION 3.2 and (iii) the delivery of cable
television service to subscribers of the Business after the Closing Date; and
(b) obligations accruing and relating to periods after the Closing Date under
Governmental Permits listed on SCHEDULE 5.5 (to the extent that such
Governmental Permits are transferable) and Seller Contracts. Buyer will not
assume or have any responsibility for any liabilities or obligations of Seller
other than the Assumed Liabilities. In no event will Buyer assume or have any
responsibility for any liabilities or obligations associated with the Excluded
Assets.
4.2 Excluded Assets. The Excluded Assets, which will be retained by
---------------
Seller, will consist of the following: (a) programming contracts, retransmission
consent agreements and pole attachment agreements (except for those set forth on
SCHEDULE 5.6); (b) Employee Benefit Plans; (b) insurance policies and rights and
claims thereunder (except as otherwise provided in SECTION 12.17); (c) bonds,
letters of credit, surety instruments and other similar items; (d) cash and cash
equivalents and notes receivable; (e) Seller's trademarks, trade names, service
marks, service names, logos and similar proprietary rights (subject to Buyer's
rights under SECTION 7.5); (f) Seller's rights under any agreement governing or
evidencing an obligation of Seller for borrowed money; (g) Seller Contracts for
subscriber billing and equipment; (h) Seller's rights and obligations under any
contract, license, authorization, agreement or commitment other than those
creating or evidencing Assumed Liabilities; and (i) the assets described on
SCHEDULE 4.2.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLER.
To induce Buyer to enter into this Agreement, Seller represents and
warrants to Buyer, as of the date of this Agreement and as of the Closing, as
follows:
5.1 Organization and Qualification. Seller is a general partnership duly
------------------------------
organized and validly existing under the laws of the State of Colorado and has
all
10
<PAGE>
requisite partnership power and authority to own, lease and use the Assets
owned, leased or used by it and to conduct the Business as it is currently
conducted. Seller is duly qualified to do business in the State of Minnesota,
and under the laws of each jurisdiction in which the ownership, leasing or use
of the Assets owned, leased or used by it or the nature of Seller's activities
makes such qualification necessary, except in any such jurisdiction where the
failure to be so qualified and in good standing would not have a material
adverse effect on the Business, the Assets or the Systems or on the ability of
Seller to perform its obligations under this Agreement. The general partner of
Seller is Jones Intercable, Inc. ("Intercable").
5.2 Authority and Validity. Seller has all requisite partnership
----------------------
power and authority to execute and deliver, to perform its obligations under,
and to consummate the transactions contemplated by, this Agreement and all other
documents and instruments to be executed and delivered in connection with the
transactions contemplated by this Agreement (collectively, the "Transaction
Documents") to which Seller is a party. Subject to approval by the limited
partners of Seller, the execution and delivery by Seller of, the performance by
Seller of its obligations under, and the consummation by Seller of the
transactions contemplated by, this Agreement and the Transaction Documents to
which Seller is a party have been duly and validly authorized by all necessary
action by or on behalf of Seller and the general partner of Seller. This
Agreement has been, and when executed and delivered by Seller the Transaction
Documents will be, duly and validly executed and delivered by Seller and the
valid and binding obligations of Seller, enforceable against Seller in
accordance with their terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to the enforcement of creditors' rights generally
or by principles governing the availability of equitable remedies.
5.3 No Conflict; Required Consents Except for the Required Consents,
------------------------------
all of which are listed on SCHEDULE 5.3, the execution and delivery by Seller,
the performance of Seller under, and the consummation of the transactions
contemplated by, this Agreement and the Transaction Documents to which Seller is
a party do not and will not: (a) violate any provision of the Partnership
Agreement of Seller; (b) violate any Legal Requirement; (c) require any consent,
approval or authorization of, or filing of any certificate, notice, application,
report or other document with any Governmental Authority or other Person; or (d)
(i) violate or result in a breach of or default under (without regard to
requirements of notice, lapse of time, or elections of any Person, or any
combination thereof), (ii) permit or result in the termination, suspension or
modification of, (iii) result in the acceleration of (or give any Person the
right to accelerate) the performance of Seller under, or (iv) result in the
creation or imposition of any Encumbrance under any Seller Contract or any other
instrument evidencing any of the Assets or by which Seller or any of its assets
is bound or affected, except for purposes of this clause (d) such violations,
conflicts, breaches, defaults, terminations, suspensions, modifications, and
accelerations as would not,
11
<PAGE>
individually or in the aggregate, have a material adverse effect on any System,
the Business or Seller, the validity, binding effect or enforceability of this
Agreement or on the ability of Seller to perform its obligations under this
Agreement or the Transaction Documents to which Seller is a party.
5.4 Assets. Seller has exclusive, good and marketable title to
------
(or, in the case of Assets that are leased, valid leasehold interests in) the
Assets (other than Real Property, as to which the representations and warranties
in SECTION 5.7 apply). The Assets are free and clear of all Encumbrances,
except (a) Permitted Encumbrances and (b) Encumbrances described on SCHEDULE
5.4, all of which will be terminated, released or, in the case of rights of
refusal listed on SCHEDULE 5.4, waived, as appropriate, at or prior to the
Closing. Except as described on SCHEDULE 5.6, none of the Equipment is leased
by Seller from any other Person. All the Equipment is in good operating
condition and repair (ordinary wear and tear excepted). Except for items
included in the Excluded Assets, the Assets constitute all the assets necessary
to permit Buyer to (i) conduct the Business and to operate the Systems
substantially as they are being conducted and operated on the date of this
Agreement and in compliance in all material respects with all Legal
Requirements, Governmental Permits and Seller Contracts and (ii) perform all the
Assumed Liabilities.
5.5 Governmental Permits. All Governmental Permits are listed on
--------------------
SCHEDULE 5.5. Complete and correct copies of all Governmental Permits have been
delivered by Seller to Buyer. Each Governmental Permit is in full force and
effect and Seller is not and, to Seller's Knowledge, the other party thereto is
not, in breach or default of any material terms or conditions thereunder, and is
valid under all applicable Legal Requirements according to its terms. There is
no legal action, governmental proceeding or investigation, pending or, to
Seller's Knowledge threatened, to terminate, suspend or modify any Governmental
Permit and Seller is in compliance with the material terms and conditions of all
the Governmental Permits and with other material applicable requirements of all
Governmental Authorities (including the FCC and the Register of Copyrights)
relating to the Governmental Permits, including all requirements for
notification, filing, reporting, posting and maintenance of logs and records.
As of the date of this Agreement, to Seller's Knowledge, no third party has been
granted or has applied for a cable television franchise or is providing or
intending to provide cable television services in any of the communities or
unincorporated areas currently served by the Business.
5.6 Seller Contracts. All Seller Contracts (other than those
----------------
constituting Excluded Assets) are described on SCHEDULE 5.6 or 5.7. Complete
and correct copies of all Seller Contracts have been delivered by Seller to
Buyer. Each Seller Contract is in full force and effect and constitutes the
valid, legal, binding and enforceable obligation of Seller, and Seller is not
and to Seller's Knowledge each other party thereto is not, in breach or default
of any material terms or conditions thereunder.
12
<PAGE>
5.7 Real Property.
-------------
5.7.1 All the Assets consisting of Real Property interests are
described on SCHEDULE 5.7. Except as otherwise disclosed on SCHEDULE 5.7,
Seller holds good, marketable and indefeasible fee simple title to the Real
Property shown as being owned by Seller on SCHEDULE 5.7 and the valid and
enforceable right to use and possess such Real Property, subject only to the
Permitted Encumbrances. Seller has valid and enforceable leasehold interests in
Real Property shown as being leased by Seller on SCHEDULE 5.7 and, with respect
to other Real Property not owned or leased by Seller, Seller has the valid and
enforceable right to use all such other Real Property pursuant to the easements,
licenses, rights-of-way or other rights described on SCHEDULE 5.7, subject only
to Permitted Encumbrances. Except for routine repairs, all of the material
improvements, leasehold improvements and the premises of the Real Property are
in good condition and repair and are suitable for the purposes used. The
current use and occupancy of the Real Property do not constitute nonconforming
uses under any applicable zoning Legal Requirements.
5.7.2 The documents delivered by Seller to Buyer as evidence of
each Seller Contract that is a lease of Real Property constitute the entire
agreement with the landlord in question. There are no leases or other
agreements, oral or written, granting to any Person other than Seller the right
to occupy or use any Real Property, except as described on SCHEDULE 5.7. All
easements, rights-of-way and other rights appurtenant to, or which are necessary
for Seller's current use of, any Real Property are valid and in full force and
effect, and Seller has not received any notice with respect to the termination,
breach or impairment of any of those rights. Each parcel of Real Property, any
improvements constructed thereon and their current use (a) has access to and
over all public streets, or private streets for which Seller has a valid right
of ingress and egress, (b) conforms in its current use and occupancy to all
zoning requirements without reliance upon a variance issued by a Governmental
Authority or a classification of the parcel in question as a nonconforming use,
and (c) conforms in all material respects in its use to all restrictive
covenants, if any, or other Encumbrances affecting all or part of such parcel.
5.8 Environmental Matters.
---------------------
5.8.1 The Real Property currently complies in all material
respects with and, to Seller's Knowledge, has previously been operated in
compliance in all material respects with, all Environmental Laws. Seller has not
directly or indirectly (a) generated, released, stored, used, treated, handled,
discharged or disposed of any Hazardous Substances at, on, under, in or about,
or in any other manner affecting, any Real Property, (b) transported any
Hazardous Substances to or from any Real Property or (c) undertaken or caused to
be undertaken any other activities relating to the Real Property which could
reasonably give rise to any liability under any Environmental Law, and, to
Seller's Knowledge, no other present or previous owner, tenant, occupant
13
<PAGE>
or user of any Real Property or any other Person has committed or suffered any
of the foregoing. To Seller's Knowledge, (i) no release of Hazardous Substances
outside the Real Property has entered or threatens to enter any Real Property,
nor (ii) is there any pending or threatened claim based on Environmental Laws
which arises from any condition of the land surrounding any Real Property. No
litigation based on Environmental Laws which relates to any Real Property or any
operations on conditions on it (A) has been asserted or conducted in the past or
is currently pending against or with respect to Seller or, to Seller's
Knowledge, any other Person, or (B) to Seller's Knowledge is threatened or
contemplated.
5.8.2 To Seller's Knowledge, other than as described on SCHEDULE 5.8,
(a) no aboveground or underground storage tanks are currently or have been
located on any Real Property, (b) no Real Property has been used at any time as
a gasoline service station or any other facility for storing, pumping,
dispensing or producing gasoline or any other petroleum products or wastes and
(c) no building or other structure on any Real Property contains asbestos-
containing material.
5.8.3 Seller has provided Buyer with complete and correct copies of
(a) all studies, reports, surveys or other materials in Seller's possession or,
to Seller's Knowledge to which it has access, relating to the presence or
alleged presence of Hazardous Substances at, on or affecting the Real Property,
(b) all notices or other materials in Seller's possession or, to Seller's
Knowledge to which it has access, that were received from any Governmental
Authority having the power to administer or enforce any Environmental Laws
relating to current or past ownership, use or operation of the Real Property or
activities at the Real Property and (c) all materials in Seller's possession or,
to Seller's Knowledge to which it has access, relating to any litigation or
allegation by any Person concerning any Environmental Law.
5.9 Compliance with Legal Requirements.
----------------------------------
5.9.1 The ownership, leasing and use of the Assets as they are
currently owned, leased and used and the conduct of the Business and the
operation of the Systems as they are currently conducted and operated do not
violate or infringe, in any material respect, any Legal Requirements currently
in effect (other than the Legal Requirements described in SECTION 5.9.4, as to
which the provisions of SECTION 5.9.4 will apply). Seller has received no
notice of any violation by Seller or the Business of any Legal Requirement
applicable to the Business or the Systems as currently conducted, and to
Seller's Knowledge, there is no basis for the allegation of any such a
violation.
5.9.2 A valid request for renewal has been duly and timely filed
under Section 626 of the Cable Communications Policy Act of 1984 with the proper
Governmental Authority with respect to applicable Governmental Permits with
14
<PAGE>
franchising authorities that have expired prior to, or will expire within 30
months after, the date of this Agreement.
5.9.3 Seller has complied, and the Business is in compliance, in all
material respects, with the specifications set forth in Part 76, Subpart K of
the rules and regulations of the FCC, Section 111 of the U.S. Copyright Act of
1976 and the applicable rules and regulations thereunder and the applicable
rules and regulations of the U.S. Copyright Office, the Register of Copyrights,
the Copyright Royalty Tribunal and the Communications Act of 1934, including
provisions of any thereof pertaining to signal leakage, to utility pole make
ready and to grounding and bonding of cable television systems (in each case as
the same is currently in effect), and all other applicable Legal Requirements
relating to the construction, maintenance, ownership and operation of the
Assets, the Systems and the Business.
5.9.4 Notwithstanding the foregoing, to Seller's Knowledge, each
System is in compliance in all material respects with the provisions of the
Cable Television Consumer Protection and Competition Act of 1992 and the FCC
rules and regulations promulgated thereunder (the "1992 Cable Act") as such
Legal Requirements relate to the operation of the Business; provided, however,
that Seller does not hereby make any representation about rates charged to
subscribers, other than the representation regarding the rates charged to
subscribers set forth below. Seller has complied in all material respects with
the must carry and retransmission consent provisions of the 1992 Cable Act and
has all must carry elections and retransmission consent agreements necessary for
the operation of the Business. Seller has used reasonable good faith efforts to
establish rates charged to subscribers, effective since September 1, 1993, that
are or were allowable under the 1992 Cable Act and any authoritative
interpretation thereof now or then in effect, whether or not such rates are or
were subject to regulation at that date by any Governmental Authority, including
any local franchising authority and/or the FCC, unless such rates were not
subject to regulation pursuant to a specific exemption from rate regulation
contained in the 1992 Cable Act other than the failure of any franchising
authority to have been certified to regulate rates. Notwithstanding the
foregoing, Seller makes no representation or warranty that the rates charged to
subscribers (a) are allowable under any rules and regulations of the FCC or any
authoritative interpretation thereof, or (b) would be allowable under any rules
and regulations of the FCC or any authoritative interpretation thereof
promulgated after the date of the Closing. Seller has delivered to Buyer
complete and correct copies of all FCC Forms 393, 1200, 1205, 1210, 1215, 1220,
1225, 1235 and 1240 filed with respect to the Systems and copies of all other
FCC Forms filed by Seller and of all correspondence with any Governmental
Authority relating to rate regulation generally or specific rates charged to
subscribers with respect to the Systems, including copies of any complaints
filed with the FCC with respect to any rates charged to subscribers of the
Systems, and any other documentation supporting an exemption from the rate
regulation provisions of the 1992 Cable Act claimed by Seller with respect to
any of the Systems (collectively, "Rate Regulation Documents"). As of the date
of this Agreement, Seller has received no notice from any
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Governmental Authority with respect to an intention to enforce customer service
standards pursuant to the 1992 Cable Act and Seller has not agreed with any
Governmental Authority to establish customer service standards that exceed the
customer service standards promulgated pursuant to the 1992 Cable Act. In
addition, Seller has also delivered to Buyer documentation for each of the
Systems in which the franchising authority has not certified to regulate rates
as of the date of this Agreement showing a determination of allowable rates
using a benchmark methodology. Except as described in SCHEDULE 5.9, Seller has
not made any election with respect to any cost of service proceeding conducted
in accordance with Part 76.922 of Title 47 of the Code of Federal Regulations or
any similar proceeding (a "Cost of Service Election") with respect to any of the
Systems.
5.9.5 CLI. Seller has conducted all system and microwave
---
performance tests and all Cumulative Leakage Index ("CLI") related tests
applicable to the System. Seller has (i) maintained appropriate log books and
other recordkeeping which accurately and completely reflect in all material
respects all results required to be shown thereon; (ii) to the extent required
by the rules and regulations of the FCC, corrected any radiation leakage of the
System required to be corrected in connection with Seller's monitoring
obligations under the rules and regulations of the FCC; and (iii) otherwise
complied in all material respects with all applicable CLI rules and regulations
in connection with the operation of the System.
5.10 Patents, Trademarks and Copyrights. Seller has timely and
----------------------------------
accurately made all requisite filings and payments with the Register of
Copyrights with respect to the Business. Seller has delivered to Buyer complete
and correct copies of all current reports and filings, and all reports and
filings for the past three years, made or filed pursuant to copyright rules and
regulations with respect to the Business. Seller does not possess any patent,
patent right, trademark or copyright material to the operation of the Business
and Seller is not a party to any license or royalty agreement with respect to
any patent, trademark or copyright except for licenses respecting program
material and obligations under the Copyright Act of 1976 applicable to cable
television systems generally. The Business and the System have been operated in
such a manner so as not to violate or infringe upon the rights of, or give rise
to any rightful claim of any Person for copyright, trademark, service mark,
patent, license, trade secret infringement or the like.
5.11 Financial Statements. A correct copy of the unaudited
--------------------
financial statements for the Systems as of September 30, 1997, including an
unaudited income statement and balance sheet which fairly present the financial
condition of the Systems, is attached as SCHEDULE 5.11 (collectively, the
"Financial Statements"). At the date of the Financial Statements, Seller had no
liability or obligation, whether accrued, absolute, fixed or contingent
(including liabilities for Taxes or unusual forward or long-term commitments),
required by GAAP to be reflected or reserved against therein that were not fully
reflected or reserved against on the balance sheet included in the
16
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Financial Statements, other than liabilities included in current liabilities,
and none of which was or would be material to the Business (collectively, the
"Unreflected Liabilities"). As of the date of this Agreement, since the date of
the Financial Statements, there has not existed or developed, and Seller is not
aware of, any additional Unreflected Liabilities.
5.12 Absence of Certain Changes. Since September 30, 1997 (a)
--------------------------
Seller has not incurred any obligation or liability (contingent or otherwise),
except normal trade or business obligations incurred in the ordinary course of
business, the performance of which would be reasonably likely, individually or
in the aggregate, to have a material adverse effect on the financial condition
or results of operations of the Business, (b) there has been no material adverse
change (except any change affecting the United States cable industry as a whole,
including any change arising from (i) legislation, litigation, rulemaking or
regulation or (ii) competition caused by or arising from other multiple channel
distribution services) in the business, condition (financial or otherwise) or
liabilities of the Business, and (c) the Business has been conducted only in the
ordinary course of business.
5.13 Legal Proceedings. Except as set forth in SCHEDULE 5.13: (a)
-----------------
there is no claim, investigation or litigation pending or, to Seller's
Knowledge, threatened, by or before any Governmental Authority or private
arbitration tribunal against Seller which, if adversely determined, would
materially adversely affect the financial condition or operations of the
Business, the Systems, the Assets or the ability of Seller to perform its
obligations under this Agreement, or which, if adversely determined, would
result in the modification, revocation, termination, suspension or other
limitation of any of the Governmental Permits, Seller Contracts or leases or
other documents evidencing the Real Property; and (b) there is not in existence
any judgment requiring Seller to take any action of any kind with respect to the
Assets or the operation of the Systems, or to which Seller (with respect to the
Systems), the Systems or the Assets are subject or by which they are bound or
affected.
5.14 Tax Returns; Other Reports. Seller has duly and timely filed
--------------------------
in correct form all federal, state and local Tax returns and all other Tax
reports required to be filed by Seller and has timely paid all Taxes which have
become due and payable, whether or not shown on any such report or return, the
failure of which to be filed or paid could adversely affect the Assets or result
in the imposition of an Encumbrance upon the Assets, except such amounts as are
being contested diligently and in good faith and are not in the aggregate
material. Except as specifically identified on SCHEDULE 5.14, Seller has
received no notice of, nor does Seller have any Knowledge of, any deficiency,
assessment or audit, or proposed deficiency, assessment or audit from any taxing
Governmental Authority which could affect or result in the imposition of an
Encumbrance upon the Assets.
5.15 Employment Matters.
------------------
17
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5.15.1 SCHEDULE 5.15 contains a complete and correct list of names
and positions of all employees of Seller engaged in the Business as of the date
set forth in such SCHEDULE. Seller has no employment agreements, either written
or oral, with any employee of the Business. Seller has complied in all material
respects with applicable Legal Requirements relating to the employment of labor,
including WARN, the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), continuation coverage requirements with respect to group health
plans, and those relating to wages, hours, collective bargaining, unemployment
insurance, worker's compensation, equal employment opportunity, age and
disability discrimination, immigration control and the payment and withholding
of Taxes.
5.15.2 Each "employee benefit plan" or "multiemployer plan" (as
those terms are defined in ERISA) with respect to which Seller or any ERISA
Affiliate (as defined in ERISA) of Seller has any liability is set forth on
SCHEDULE 5.15 (the "Employee Benefit Plans"). Neither Seller nor its ERISA
Affiliates nor any Employee Benefit Plan is in material violation of any
provision of ERISA. No "reportable event," as defined in Section 4043 of ERISA,
has occurred and is continuing with respect to any Employee Benefit Plan. No
"prohibited transaction," within the meaning of Section 406 of ERISA, has
occurred with respect to any such Employee Benefit Plan, and no "accumulated
funding deficiency" or "withdrawal liability" (both as defined in Section 302 of
ERISA) exists with respect to any such Employee Benefit Plan. After the
Closing, Buyer will not be required, under ERISA, the Internal Revenue Code of
1986, as amended (the "Code") or any collective bargaining agreement, to
establish, maintain or continue any Employee Benefit Plan currently maintained
by Seller or any of its ERISA Affiliates, nor will Buyer have any liabilities of
any nature whatsoever under any Employment Benefit Plans.
5.15.3 Seller is not a party to any collective bargaining
agreements and Seller has not recognized or agreed to recognize and has no duty
to bargain with any labor organization or collective bargaining unit. There are
not pending any unfair labor practice charges against Seller, any demand for
recognition or any other request or demand from a labor organization for
representative status with respect to any Person employed by Seller. To Seller's
Knowledge, its employees are not engaged in organizing activity with respect to
any labor organization. Seller has no employment agreement, either written or
oral, express or implied, that would require Buyer to employ any Person after
the Closing Date.
5.16 Systems Information. SCHEDULE 5.16 sets forth a materially true and
-------------------
accurate description of the following information relating to the Business as of
the most recent monthly report generated by Seller in the ordinary course of
business containing the information required to prepare such SCHEDULE (provided
that such date is no earlier than two months prior to the date of this
Agreement):
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(a) the approximate number of miles of plant included in the
Assets;
(b) the number of subscribers and EBS's served by the Systems
for each Franchise;
(c) the approximate number of single family homes and
residential dwelling units passed by the Systems;
(d) a description of basic and optional or tier services
available from the Systems, the rates charged by Seller for each and the
number of subscribers and subscriber equivalents receiving each optional or
tier service;
(e) the stations and signals carried by the Systems and the
channel position of each such signal and station; and
(f) the cities, towns, villages, townships, boroughs and
counties served by the Systems.
5.17 Bonds. Except as set forth on SCHEDULE 5.17, as of the date
-----
of this Agreement, there are no franchise, construction, fidelity, performance,
or other bonds or letters of credit posted by Seller in connection with its
operation or ownership of any of the Systems or Assets.
5.18 Finders and Brokers. Seller has not employed any financial
-------------------
advisor, broker or finder or incurred any liability for any financial advisory,
brokerage, finder's or similar fee or commission in connection with the
transactions contemplated by this Agreement for which Buyer could be liable.
SECTION 6. BUYER'S REPRESENTATIONS AND WARRANTIES.
To induce Seller to enter into this Agreement, Buyer represents and
warrants to Seller, as of the date of this Agreement and as of the Closing, as
follows:
6.1 Organization and Qualification. Buyer is a limited partnership
------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Michigan and has all requisite partnership power and authority to own,
lease and use the assets owned, leased or used by it and to conduct its business
as it is currently conducted. Buyer is duly qualified to do business and is in
good standing under the law of Minnesota, and of each jurisdiction in which the
ownership, leasing or use of the assets owned, leased or used by it or the
nature of Buyer's activities makes such qualification necessary, except in any
such jurisdiction where the failure to be so qualified and in good standing
would not have a material adverse effect on Buyer or on the ability of Buyer to
perform its obligations under this Agreement.
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6.2 Authority and Validity. Buyer has all requisite partnership
----------------------
power and authority to execute and deliver, to perform its obligations under,
and to consummate the transactions contemplated by, this Agreement and the
Transaction Documents to which Buyer is a party. The execution and delivery by
Buyer of, the performance by Buyer of its obligations under, and the
consummation by Buyer of the transactions contemplated by, this Agreement and
the Transaction Documents to which Buyer is a party have been duly and validly
authorized by all necessary action by or on behalf of Buyer and the general
partner of Buyer. This Agreement has been, and when executed and delivered by
Buyer the Transaction Documents will be, duly and validly executed and delivered
by Buyer and the valid and binding obligations of Buyer, enforceable against
Buyer in accordance with their terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
now or hereafter in effect relating to the enforcement of creditors' rights
generally or by principles governing the availability of equitable remedies.
6.3 No Conflicts; Required Consents. Except for the Required
-------------------------------
Consents, the execution and delivery by Buyer, the performance of Buyer under,
and the consummation of the transactions contemplated by, this Agreement and the
Transaction Documents to which Buyer is a party do not and will not (a) violate
any provision of the limited partnership agreement of Buyer, (b) violate any
Legal Requirement, (c) require any consent, approval or authorization of, or
filing of any certificate, notice, application, report or other document with
any Governmental Authority or other Person or (d) (i) violate or result in a
breach of or constitute a default under (without regard to requirements of
notice, lapse of time or elections of any Person or any combination thereof),
(ii) permit or result in the termination, suspension, modification of, (iii)
result in the acceleration of (or give any Person the right to accelerate) the
performance of Buyer under, or (iv) result in the creation or imposition of any
Encumbrance under, any instrument or other agreement to which Buyer is a party
or by which Buyer or any of its assets is bound or affected, except for purposes
of this clause (d) such violations, conflicts, breaches, defaults, terminations,
suspensions, modifications and accelerations as would not, individually or in
the aggregate, have a material adverse effect on the validity, binding effect or
enforceability of this Agreement or on the ability of Buyer to perform its
obligations under this Agreement or the Transaction Documents to which it is a
party.
6.4 Finders and Brokers. Buyer has not employed any financial
-------------------
advisor, broker or finder or incurred any liability for any financial advisory,
brokerage, finder's or similar fee or commission in connection with the
transactions contemplated by this Agreement for which Seller could be liable.
6.5 Legal Proceedings. There are no claims, actions, suits,
-----------------
proceedings or investigations pending or, to Buyer's Knowledge, threatened, by
or before any Governmental Authority, or any arbitrator, by or against or
affecting or relating to Buyer which, if adversely determined, would restrain or
enjoin the consummation of the transactions contemplated by this Agreement or
declare unlawful the transactions or
20
<PAGE>
events contemplated by this Agreement or cause any of such transactions to be
rescinded.
Section 7. Additional Covenants.
7.1 Access to Premises and Records. Between the date of this Agreement
------------------------------
and the Closing Date, Seller will give Buyer and its counsel, accountants and
other representatives full access during normal business hours upon reasonable
notice to all the premises and books and records of the Business and to all the
Assets and to the System personnel and will furnish to Buyer and such
representatives all such documents, financial information, and other information
regarding the Business and the Assets as Buyer from time to time reasonably may
request; provided that no such investigation will affect or limit the scope of
any of Seller's representations, warranties, covenants and indemnities in this
Agreement or any Transaction Document or limit liability for any breach of any
of the foregoing.
7.2 Continuity and Maintenance of Operations; Financial Statements.
--------------------------------------------------------------
Except as Buyer may otherwise consent in writing, between the date of this
Agreement and the Closing:
7.2.1 Seller will (a) conduct the Business and operate the Systems
only in the usual, regular and ordinary course consistent with past practices
(including fulfilling installation requests and making budgeted capital
expenditures; provided, however, that to the extent that any assumption
underlying any of Seller's budgeted capital expenditure(s) turns out to have
been untrue, and such capital expenditure(s) is no longer reasonably necessary
for the operation of the Business, Seller will not be required to make such
capital expenditure(s)) and (b) use commercially reasonable efforts to (i)
preserve its current business intact, including preserving existing
relationships with franchising authorities, suppliers, customers and others
having business dealings with Seller relating to the Business unless Buyer
requests otherwise, (ii) keep available the services of its employees and agents
providing services in connection with the Business and (iii) continue making
marketing, advertising and promotional expenditures with respect to the Business
consistent with past practices.
7.2.2 Seller will maintain the Assets in good repair, order and
condition (ordinary wear and tear excepted), will maintain equipment and
inventory at historical levels consistent with past practices, will maintain in
full force and effect, policies of insurance with respect to the Business in
such amounts and with respect to such risks as customarily maintained by
operators of cable television systems of the size and geographic location as the
Systems and will maintain its books, records and accounts in the usual, regular
and ordinary manner on a basis consistent with past practices. Seller will not
itself, and will not permit any of its officers, directors, shareholders, agents
or employees to, pay any of Seller's subscriber accounts receivable (other than
for their own residences) prior to the Closing Date. Seller will
21
<PAGE>
continue to implement its procedures for disconnection and discontinuance of
service to subscribers whose accounts are delinquent in accordance with those in
effect on the date of this Agreement.
7.2.3 Without the prior approval of Buyer, Seller will not (a) change
the rate charged for Basic Service, Expanded Basic Service or Pay TV or add,
delete, retier or repackage any programming services except to the extent
required under the 1992 Cable Act or any other Legal Requirement, provided
however if Seller changes such rates in order to so comply, Seller will provide
Buyer with copies of any FCC forms (even if not filed with any Governmental
Authority) that Seller used to determine that the new rates were allowable, (b)
sell, transfer or assign any portion of the Assets other than sales in the
ordinary course of business or permit the creation of any Encumbrance on any
Asset other than a Permitted Encumbrance or any Encumbrance which will be
released at or prior to Closing, (c) modify in any material respect, terminate,
suspend or abrogate any Governmental Permits, Seller Contracts or any other
contract or agreement (other than those constituting Excluded Assets), (d) enter
into any contract or commitment or incur any indebtedness or other liability or
obligation of any kind relating to any System or the Business involving an
expenditure in excess of $25,000, other than contracts or commitments which are
cancelable on 30 days' notice or less without penalty, (e) take or omit to take
any action that would result in any of its representations or warranties in this
Agreement or in any Transaction Document not being true and correct when made or
as of the Closing, (f) engage in any marketing, subscriber installation or
collection practices that are inconsistent with past practices, or (g) enter
into any agreement with or commitment to any competitive access providers with
respect to the Systems.
7.2.4 Seller promptly will deliver to Buyer true and complete copies
of monthly and quarterly financial statements and operating reports and any
reports with respect to the operations of the Business prepared by or for Seller
at any time between the date of this Agreement and the Closing Date. All
financial statements so delivered will be prepared in accordance with GAAP on a
basis consistent with the Financial Statements.
7.2.5 Seller will give or cause to be given to Buyer as soon as
reasonably possible but in any event no later than 5 Business Days prior to the
date of submission to the appropriate Governmental Authority, copies of all Rate
Regulation Documents prepared with respect to any of the Systems, and Seller
will make a good faith effort to address any specific concerns raised by Buyer
with respect to such documents.
7.2.6 Seller will duly and timely file a valid notice of renewal
under Section 626 of the Cable Communications Policy Act of 1984 with the
appropriate Governmental Authority with respect to all cable television
franchises of the Business that will expire within 36 months after any date
between the date of this Agreement and the Closing Date.
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<PAGE>
7.2.7 Seller will use reasonable efforts to (a) extend the cable
television franchises of the Business for at least three years or (b) renew such
franchises on terms mutually agreeable to Buyer and Seller.
7.2.8 Seller will promptly notify Buyer of any fact,
circumstance, event or action by it or otherwise (a) which, if known at the date
of this Agreement, would have been required to be disclosed in or pursuant to
this Agreement or (b) the existence, occurrence or taking of which would result
in any of Seller's representations and warranties in this Agreement or any
Transaction Document not being true, complete and correct when made or at the
Closing, and, with respect to clause (b) use its best efforts to remedy the
same; provided, however, that nothing in this Section 7.2.8 shall be deemed to
limit Buyer's rights under Section 10.1.2.
7.3 Employee Matters.
----------------
7.3.1 Buyer will have no obligation to employ or offer
employment to any of the employees of Seller. As of the Closing Date, Seller
will terminate the employment of all its employees who were employed incidental
to the conduct of the Business whose employment will not continue with Seller
after the Closing and will promptly pay to all such employees all compensation,
including salaries, commissions, bonuses, deferred compensation, severance,
insurance, pensions, profit sharing, vacation (except for accrued vacation
included in the adjustments pursuant to SECTION 3.2), sick pay and other
compensation or benefits to which they are entitled for periods prior to the
Closing, including all amounts, if any, payable on account of the termination of
their employment. Seller agrees to cooperate in all reasonable respects with
Buyer to allow Buyer to evaluate and interview employees of the Business to make
hiring decisions. Such cooperation will include but not be limited to allowing
Buyer to contact employees during work time and, with the consent of the
employee, making personnel records available. Buyer will give Seller written
notice on or before 60 days after the date hereof of the name of all employees
of the System to whom Buyer desires to offer employment on and after the Closing
Date (subject to satisfaction of Buyer's conditions for employment). Seller will
not, without the prior written consent of Buyer, change the compensation or
benefits of any employees of the Business except in accordance with past
practice.
7.3.2 All claims and obligations under, pursuant to or in
connection with any welfare, medical, insurance, disability or other employee
benefit plans of Seller or arising under any Legal Requirement affecting
employees of Seller incurred on or before the Closing Date or resulting or
arising from events or occurrences occurring or commencing on or before the
Closing Date will remain the responsibility of Seller, whether or not such
employees are hired by Buyer after the Closing.
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<PAGE>
7.3.3 Seller will remain solely responsible for, and will
indemnify and hold harmless Buyer from and against all Losses arising from or
with respect to, all salaries and all severance, vacation (except for accrued
vacation included in the adjustments pursuant to SECTION 3.2), medical, sick,
holiday, continuation coverage and other compensation or benefits to which
Seller's employees (whether or not hired by Buyer) may be entitled as a result
of their employment by Seller prior to the Closing, the termination of their
employment prior to the Closing, the consummation of the transactions
contemplated hereby or pursuant to any applicable Legal Requirement (including
without limitation WARN) or otherwise relating to their employment prior to the
Closing.
7.3.4 As of the date of this Agreement, Seller is not a party to
any collective bargaining agreements, and nothing in this Agreement will require
Buyer to assume any collective bargaining agreement between Seller and any labor
organization.
7.4 Leased Vehicles; Other Capital Leases. Seller will pay the
-------------------------------------
remaining balances on any leases for vehicles or capital leases included in the
Equipment and will deliver title to such vehicles and other Equipment free and
clear of all Encumbrances (other than Permitted Encumbrances) to Buyer at the
Closing.
7.5 Required Consents; Estoppel Certificates.
----------------------------------------
7.5.1 Seller will use commercially reasonable efforts to obtain
in writing, as promptly as possible and at its expense, all the Required
Consents and any other consent, authorization or approval required to be
obtained by Seller in connection with the transactions contemplated by this
Agreement, in form and substance reasonably satisfactory to Buyer and deliver to
Buyer copies of such Required Consents and such other consents, authorizations
or approvals promptly after they are obtained by Seller; provided, however, that
nothing in this Section 7.5 will limit the rights of Buyer to terminate the
Agreement pursuant to Section 10.1.3 hereof if the condition specified in
Section 8.2.4 has not been met by the Outside Closing Date. Such Required
Consents will be proposed in a form that provides confirmation from the third
party of the continued existence of and the absence of defaults under the
applicable Seller Contract or Governmental Permit. Buyer will cooperate with
Seller to obtain all Required Consents, but Buyer will not be required to accept
or agree or accede to any modifications or amendments to, or changes in, or the
imposition of any condition to the transfer to Buyer of (in each case other than
inconsequential matters with no adverse effect on Buyer), any Seller Contract or
Governmental Permit that are not acceptable to Buyer in its sole discretion.
Notwithstanding the foregoing, Seller will complete, execute and deliver to the
appropriate Governmental Authority, the FCC Forms 394 prepared by Buyer with
respect to each franchise as to which such Form 394 is required within two
Business Days after it receives each such Form 394 from Buyer.
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7.5.2 Seller will use commercially reasonable efforts to obtain for
each lease that has not been recorded in the public records, execution of a
document suitable for recording in the public records and sufficient after
recording to constitute a memorandum of lease.
7.6 Renewal of Franchises.
---------------------
7.6.1 Promptly after the execution of this Agreement, Seller shall
use commercially reasonable efforts, and Buyer shall cooperate with and assist
Seller in all reasonable respects (including, without limitation, attendance at
Town and/or City Council or similar meetings and hearings before local and state
administrative bodies and filing and signing any and all applications,
statements or documents required), to have each of the Franchises (a) extended
for a term of at least three years or (b) renewed for a term of at least five
years on terms and conditions reasonably satisfactory to Buyer and Seller, which
terms and conditions shall be evaluated by Buyer and Seller in the context of
renewals of similarly situated franchises of the same duration in rural
communities of a similar size in the State of Minnesota.
7.6.2 Seller shall keep Buyer informed of all meetings and hearings
(including, without limitation, Town and/or City Council or similar meetings and
hearings before local and state administrative bodies) relating to the
extensions and/or renewal of the Franchises, and Seller acknowledges and agrees
that Buyer shall have the right to participate in any such meetings or hearings.
7.7 Title Commitments and Surveys.
-----------------------------
7.7.1 After the execution of this Agreement, Buyer will order at
Seller's expense (a) commitments for owner's title insurance policies on all
Real Property owned by Seller and on easements which provide access to each such
parcel of real property, (b) commitments for lessee's title insurance policies
for all Real Property leased by Seller which is used for headend or tower sites
and on easements which provide access to each such site and (c) an ALTA survey
(including such items on Table A of the Minimum Standard Detail Requirements and
Classifications thereto that Buyer in its reasonable judgment determines are
desirable or necessary) on each parcel of Real Property for which a title
insurance policy is to be obtained. The title commitments will evidence a
commitment to issue an ALTA title insurance policy insuring good, marketable and
indefeasible fee simple title or leasehold interest, in the case of Leased Real
Property, if (applicable) to each parcel of such Real Property, subject only to
Permitted Encumbrances, for such amount as Buyer directs and will contain no
exceptions except for items which in Buyer's reasonable opinion do not adversely
affect (other than in an immaterial way as to any individual parcel) the good,
marketable and indefeasible title to or Buyer's access or quiet use or enjoyment
of such Real Property in the manner the Real Property is presently used or in
the normal conduct of the Business. At the Closing, Seller will cause Buyer to
receive, at Seller's expense, title commitments redated to the date and time of
Closing. In the event Seller
25
<PAGE>
has not eliminated or caused to be eliminated all unacceptable exceptions from
such policies or commitments prior to Closing, and Buyer elects to proceed with
the Closing, Buyer will be entitled to indemnification with respect to such
exceptions as provided in SECTION 11.2.
7.7.2 Title insurance policies on all Real Property in such
amounts as Buyer directs will be delivered to Buyer at Seller's expense within
30 days after the Closing Date evidencing title to the Real Property vested in
Buyer consistent with the commitments delivered at the Closing pursuant to
SECTION 7.7.1.
7.8 HSR Notification. As soon as practicable after the execution of
----------------
this Agreement, but in any event no later than 30 days after such execution,
Seller and Buyer will each complete and file, or cause to be completed and
filed, any notification and report required to be filed under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"); and each
such filing will request early termination of the waiting period imposed by the
HSR Act. The parties will use their reasonable best efforts to respond as
promptly as reasonably practicable to any inquiries received from the Federal
Trade Commission (the "FTC") and the Antitrust Division of the Department of
Justice (the "Antitrust Division") for additional information or documentation
and to respond as promptly as reasonably practicable to all inquiries and
requests received from any other Governmental Authority in connection with
antitrust matters. The parties will use their respective reasonable best efforts
to overcome any objections which may be raised by the FTC, the Antitrust
Division or any other Governmental Authority having jurisdiction over antitrust
matters. Notwithstanding the foregoing, Buyer will not be required to make any
significant change in the operations or activities of the business (or any
material assets employed therein) of Buyer or any of its Affiliates, if Buyer
determines in good faith that such change would be materially adverse to the
operations or activities of the business (or any material assets employed
therein) of Buyer or any of its Affiliates having significant assets, net worth,
or revenue. Notwithstanding anything to the contrary in this Agreement, if Buyer
or Seller, in its sole opinion, considers a request from a governmental agency
for additional data and information in connection with the HSR Act to be unduly
burdensome, such party may terminate this Agreement by giving written notice to
the other. Within 10 days after receipt of a statement therefor, Seller will
reimburse Buyer for one-half of the filing fees payable by Buyer in connection
with Buyer's filing under the HSR Act.
7.9 No Shopping. None of Seller, its partners or any agent or
-----------
representative of any of them will, during the period commencing on the date of
this Agreement and ending with the earlier to occur of the Closing or the
termination of this Agreement, directly or indirectly (a) solicit or initiate
the submission of proposals or offers from any Person for, (b) participate in
any discussions pertaining to or (c) furnish any information to any Person other
than Buyer relating to, any direct or indirect acquisition or purchase of all or
any portion of the Assets.
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7.10 Lien and Judgment Searches. Not more than 20 nor fewer than 10
--------------------------
days prior to the expected Closing Date, Seller, at its expense, will provide
Buyer with (a) the results of a lien search conducted by a professional search
company of records in the offices of the secretaries of state in each state and
county clerks in each county where there exist tangible Assets, and in the state
and county where Seller's principal offices are located, including copies of all
financing statements or similar notices or filings (and any continuation
statements) discovered by such search company and (b) the results of a search of
the dockets of the clerk of each federal and state court sitting in the city,
county or other applicable political subdivision where the principal office or
any material assets of Seller may be located, with respect to judgments, orders,
writs or decrees against or affecting Seller or any of the Assets.
7.11 Transfer Taxes. Any state or local sales or transfer Taxes
--------------
imposed by any Governmental Authority arising from or payable by reason of the
transfer of any of the Assets pursuant to this Agreement will be paid by Seller.
Any state or local use Taxes or fees or any other charge (including filing fees)
imposed by any Governmental Authority arising from or payable by reason of the
transfer of any of the Assets pursuant to this Agreement will be paid by one-
half by Buyer, with the balance to be paid by Seller.
7.12 Distant Broadcast Signals. Unless otherwise restricted or
-------------------------
prohibited by any Governmental Authority or applicable Legal Requirement, if
requested by Buyer, Seller will delete prior to the Closing Date any distant
broadcast signals which Buyer determines will result in unacceptable liability
on the part of Buyer for copyright payments with respect to continued carriage
of such signals after the Closing.
7.13 Letter to Programmers. On or before the Closing Date, Seller
---------------------
will transmit a letter in the form of EXHIBIT E to all programmers from which
Seller purchases programming for the Systems and provide Buyer with a copy of
each such letter.
7.14 Updated Schedules. Not later than ten Business Days prior to the
-----------------
expected Closing Date, Seller will deliver to Buyer revised copies of all
Schedules to this Agreement which will have been updated and marked to show any
changes occurring between the date of this Agreement and the date of delivery;
provided, however, that for purposes of Seller's representations and warranties
and covenants in this Agreement, all references as of the date of signing to the
Schedules will mean the version of the Schedules attached to this Agreement on
the date of signing, and all references as of the date of Closing to the
Schedules will mean the version of the Schedules attached to this Agreement on
the date of Closing, and provided further, that if the effect of any such
updates to Schedules is to disclose any one or more additional properties,
privileges, rights, interests or claims as Assets, Buyer, at or before Closing,
will have the right (to be exercised by written notice to Seller) to cause any
one or
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more of such items to be designated as and deemed to constitute Excluded Assets
for all purposes under this Agreement.
7.15 Use of Names and Logos. For a period of 90 days after the
----------------------
Closing Date, Buyer will be entitled to use all trademarks, trade names, service
marks, service names, logos and similar proprietary rights of Seller and all
derivations and abbreviations of such name and related marks to the extent
incorporated in or on the Assets transferred to it at the Closing.
Notwithstanding the foregoing, Buyer will not be required to remove or
discontinue using any such trade name or mark that is affixed to converters or
other items in or to be used in subscriber homes or properties, or as are used
in a similar fashion making such removal or discontinuation impracticable for
Buyer.
7.16 Subscriber Billing Services. Seller will provide to Buyer, upon
---------------------------
request, on terms and conditions reasonably satisfactory to each party, access
to and the right to use its billing system computers, software and related fixed
assets in connection with the Systems acquired by Buyer for a period of up to 90
days following the Closing to allow for conversion of existing billing
arrangements ("Transitional Billing Services"); provided however that Buyer will
not be required to pay Seller more than Seller's actual cost of providing such
service. Buyer will notify Seller at least 10 days prior to the expected Closing
Date as to whether it desires Transitional Billing Services from Seller.
7.17 Satisfaction of Conditions. Each party will use its best
--------------------------
efforts to satisfy, or to cause to be satisfied, the conditions to the
obligations of the other party to consummate the transactions contemplated by
this Agreement, as set forth in SECTION 8, provided that Buyer will not be
required to agree to any increase in the amount payable with respect to, or any
modification that makes more burdensome in any material respect, any of the
Assumed Liabilities.
7.18 Confidentiality and Publicity. Neither party will issue any
-----------------------------
press release or make any other public announcement or any oral or written
statements to Seller's employees concerning this Agreement or the transactions
contemplated hereby except as required by applicable Legal Requirements, without
the prior written consent of the other party. Each party will hold, and will
cause its employees, consultants, advisors and agents to hold the terms of this
Agreement in confidence; provided that (a) such party may use and disclose such
information once it has become publicly disclosed (other than by such party in
breach of its obligations under this Section) or which rightfully has come into
the possession of such party (other than from the other party) and (b) to the
extent that such party may be compelled by Legal Requirements to disclose any of
such information, but the party proposing to disclose such information will
first notify and consult with the other party concerning the proposed
disclosure, to the extent reasonably feasible. Each party also may disclose such
information to employees, consultants, advisors, agents and actual or potential
lenders whose
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knowledge is necessary to facilitate the consummation of the transactions
contemplated by this Agreement. The obligation by either party to hold
information in confidence pursuant to this Section will be satisfied if such
party exercises the same care with respect to such information as it would
exercise to preserve the confidentiality of its own similar information.
7.19 Bulk Transfers. Buyer waives compliance by Seller with Legal
--------------
Requirements relating to bulk transfers applicable to the transactions
contemplated hereby.
7.20 Environmental Reports. Within 60 days after the execution of
---------------------
this Agreement, Seller will, at its expense, obtain and deliver to Buyer for
each parcel of Real Property owned or leased by Seller a current Phase I
Environmental Site Assessment ("Environmental Report") prepared by a nationally
known environmental engineering firm reasonably satisfactory to Buyer in
accordance with ASTM Standard E 1527-93 and certified to Buyer. Each
Environmental Report will include, in addition to the process described in E
1527-93, such soil and groundwater sampling and other testing as will enable the
environmental engineers to determine if Hazardous Substances are detected and to
provide an estimate of the cost to remove and dispose of the Hazardous
Substances or otherwise remediate the property in accordance with all applicable
Environmental Laws.
7.21 Construction of an Institutional Network. The parties
----------------------------------------
acknowledge that the City of Owatonna (the "City") has requested that Seller
construct an institutional network (the "I-Net") connecting the schools in the
school district, as well as other locations. Although Seller is willing to
construct a coaxial I-Net, Buyer prefers that Buyer design and construct an I-
Net with a fiber backbone. As a result, the parties acknowledge and agree that,
if the City agrees to the following on terms and conditions reasonably
acceptable to Seller and Buyer, Buyer shall design and construct an I-Net that
conforms to the specifications set forth by the City. Such design and
construction shall include, without limitation, Buyer's obtaining all permits
necessary to construct the I-Net, performing all make-ready necessary for such
construction and the actual construction of the I-Net. In connection with such
construction, Buyer shall maintain with financially sound, responsible and
reputable insurance companies insurance covering such construction against such
casualties and contingencies and of such types and in such amounts as is
customary in the case of similar construction projects. Prior to the
commencement of such construction, Buyer shall deliver to Seller certificates of
such insurance naming Seller as loss payee and/or additional insured, as
applicable, under the relevant policies. Unless the City requests otherwise,
Buyer shall complete the construction of the I-Net prior to the commencement of
the 1998-99 school year. At Closing, Seller shall reimburse Buyer for $200,000
of Buyer's costs in designing and constructing the I-Net (the "Reimbursable
Amount"). Such reimbursement will be accomplished by an adjustment to the Base
Purchase Price. If this Agreement is terminated other than pursuant to Section
10.1.3, then Seller shall pay the Reimbursable Amount to Buyer within 10 days
after such termination. If the
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City does not agree to the design and construction of the I-Net by Buyer on
terms and conditions reasonably acceptable to Seller and Buyer, Seller shall be
responsible for the design and construction of the I-Net in conformance with the
requirements of the Franchise of the City.
SECTION 8. CONDITIONS PRECEDENT.
8.1 Conditions to the Obligations of Buyer and Seller. The
-------------------------------------------------
obligations of each party to consummate the transactions contemplated by this
Agreement are subject to the satisfaction, at or before the Closing, of the
following, which may be waived by the parties to the extent permitted by
applicable Legal Requirements:
8.1.1 HSR Act Filings. All filings required under the HSR Act have
---------------
been made and the applicable waiting period has expired or been earlier
terminated without the receipt of any objection or the commencement or threat of
any litigation by a Governmental Authority of competent jurisdiction to restrain
the consummation of the transactions contemplated by this Agreement.
8.1.2 Absence of Litigation. No action, suit or proceeding is
---------------------
pending or threatened by or before any Governmental Authority and no Legal
Requirement has been enacted, promulgated or issued or become or deemed
applicable to any of the transactions contemplated by this Agreement by any
Governmental Authority, which would (a) prohibit Buyer's ownership or operation
of all or a material portion of any System, the Business or the Assets, (b)
compel Buyer to dispose of or hold separate all or a material portion of any
System, the Business or the Assets as a result of any of the transactions
contemplated by this Agreement, (c) if determined adversely to Buyer's interest,
materially impair the ability of Buyer to realize the benefits of the
transactions contemplated by this Agreement (including the ability to acquire
the Systems pursuant to a like-kind exchange under Section 1031 of the Code) or
have a material adverse effect on the right of Buyer to exercise full rights of
ownership of the Systems or (d) prevent or make illegal the consummation of any
transactions contemplated by this Agreement.
8.2 Conditions to the Obligations of Buyer. The obligations of Buyer
--------------------------------------
to consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or before the Closing, of the following conditions, which may
be waived by Buyer to the extent permitted by applicable Legal Requirements:
8.2.1 Representations and Warranties. All representations and
------------------------------
warranties of Seller in this Agreement and any Transaction Document are true and
correct in all material respects, in each case on and as of the Closing Date
with the same effect as if made at and as of the Closing Date, except for
changes permitted or contemplated by this Agreement.
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8.2.2 Performance of Agreements. Seller has performed in all
-------------------------
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions in this Agreement and any Transaction
Document to be performed or complied with by Seller at or before the Closing.
8.2.3 Deliveries. Seller has delivered the items and documents
----------
required to be delivered by it pursuant to this Agreement, including those
required under SECTION 9.2.
8.2.4 Consents and Franchise Extensions and Renewals. Seller has
----------------------------------------------
delivered to Buyer evidence, in form and substance satisfactory to Buyer, that
all of the Required Consents marked with an asterisk on SCHEDULE 5.3 have been
obtained or given (or deemed to have been given) and are in full force and
effect. Each of the Franchises has been (a) extended for a term of not less
than three years or (b) renewed for a term of not less than 5 years on terms
which are customary for renewals of similarly situated franchises of the same
duration in rural communities of a similar size in the State of Minnesota.
8.2.5 Environmental Matters. The Environmental Reports delivered to
---------------------
Buyer pursuant to SECTION 7.20 and any other environmental audits or assessments
conducted with respect to the Assets do not indicate the existence of any
conditions that could reasonably be expected to give rise to a material risk of
liability.
8.2.6 No Material Adverse Change. There has not been any material
--------------------------
adverse change in the Business, the Assets or the Systems since the date of this
Agreement other than any change arising out of general economic conditions in
the United States or any change affecting the United States cable television
industry as a whole, including any change arising from (a) legislation,
litigation, rulemaking or regulation or (b) competition caused by or arising
from other multiple channel distribution services.
8.2.7 EBS. As the Closing Date, the Business has no fewer than 8,150
---
EBSs.
8.3 Conditions to Obligations of Seller. The obligations of Seller
-----------------------------------
to consummate the transactions contemplated by this Agreement are subject to the
satisfaction by Seller at or before the Closing, of the following, which may be
waived by Seller, to the extent permitted by applicable Legal Requirements:
8.3.1 Representations and Warranties. All representations and
------------------------------
warranties of Buyer contained in this Agreement and any Transaction Document are
true and correct in all material respects, in each case on and as of the Closing
Date with the same effect as if made on and as of the Closing Date, except for
changes permitted or contemplated by this Agreement.
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8.3.2 Performance of Agreements. Buyer has performed in all material
-------------------------
respects all obligations and agreements, and complied in all material respects
with all covenants and conditions in this Agreement and any Transaction Document
to be performed or complied with by Buyer at or before the Closing.
8.3.3 Deliveries. Buyer has delivered the items and documents
----------
required to be delivered by it pursuant to this Agreement, including those
required under SECTION 9.3.
8.3.4 EBS. As of the Closing Date, either (a) the Business has no
---
fewer than 8,150 EBSs or (b) Buyer has waived its right to an adjustment
pursuant to SECTION 3.2.1 except to the extent of the adjustment applicable if
the number of EBSs were 8,150.
8.3.5 Limited Partner Approval. The limited partners of Seller shall
------------------------
have approved this Agreement and the transactions contemplated by this
Agreement.
8.4 Waiver of Conditions. Any party may waive in writing any or
--------------------
all of the conditions to its obligations under this Agreement.
SECTION 9. CLOSING.
9.1 The Closing; Time and Place. The Closing will be held on a date specified
---------------------------
by Buyer (upon three Business Days prior notice to Seller) that is within
15 days after all conditions to the Closing contained in this Agreement
(other than those based on acts to be performed at the Closing) have been
satisfied or waived. The Closing will be held at 10:00 a.m. local time at
Seller's office located at 9697 East Mineral Avenue, Englewood, Colorado
80112, or at such place and time as Buyer and Seller may agree.
9.2 Seller's Delivery Obligations. At the Closing, Seller will
-----------------------------
deliver (or cause to be delivered) to Buyer the following:
(a) a Bill of Sale in the form attached as Exhibit B;
(b) a special warranty deed in a form reasonably acceptable to
Buyer (and complying with applicable state laws) with respect to each
parcel of owned Real Property, duly executed and acknowledged and in
recordable form, warranting to defend title to such Real Property against
all persons claiming by, through or under Seller, subject only to Permitted
Encumbrances, and in form sufficient to permit the title company to issue
the title policy described in Section 7.7.1 to Buyer with respect to such
Real Property;
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(c) an Assignment and Assumption of Contracts in the form
attached as Exhibit C;
(d) one or more Assignments of Leases in the form attached as
Exhibit D and, if requested by Buyer, short forms or memoranda of such
Assignments in recordable form;
(e) any memorandum of lease obtained by Seller pursuant to
Section 7.5.2;
(f) an affidavit of Seller, under penalty of perjury, that Seller
is not a "foreign person" (as defined in the Foreign Investment in Real
Property Tax Act and applicable regulations) and that Buyer is not required
to withhold any portion of the consideration payable under this Agreement
under the provisions of such Act in the form attached as Exhibit F;
(g) motor vehicle title certificates and such other transfer
instruments as Buyer may deem necessary or advisable to transfer the Assets
to Buyer and to perfect Buyer's rights in the Assets;
(h) the opinion of Elizabeth Steele, Esq., counsel for Seller,
dated the Closing Date, in substantially the form set forth in Exhibit G;
(i) evidence satisfactory to Buyer that all Encumbrances
affecting any of the Assets (other than Permitted Encumbrances) have been
terminated and released;
(j) the title insurance commitments described in Section 7.7.1;
(k) a certificate, dated the Closing Date, signed by the
President or any Vice President of Intercable, stating that to his or her
knowledge, the conditions set forth in Sections 8.2.1, 8.2.2, 8.2.6 and
8.2.7 are satisfied; and
(l) such other documents as Buyer may reasonably request in
connection with the transactions contemplated by this Agreement.
9.3 Buyer's Delivery Obligations. At the Closing, Buyer will
----------------------------
deliver (or cause to be delivered) to Seller the following:
(a) the Base Purchase Price required to be paid at the Closing,
as adjusted in accordance with this Agreement;
(b) a Bill of Sale in the form attached as Exhibit B;
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<PAGE>
(c) an Assignment and Assumption of Contracts in the form
attached as Exhibit C;
(d) a certificate, dated the Closing Date, signed by an executive
officer of Buyer, stating that to his or her knowledge, the conditions set
forth in Sections 8.3.1 and 8.3.2, are satisfied;
(e) an opinion of Peter J. Bernbaum, counsel to Buyer, or of any
other counsel to Buyer reasonably acceptable to Seller, dated the Closing
Date, in substantially the form set forth in Exhibit H; and
(f) such other documents as Seller may reasonably request in
connection with the transactions contemplated by this Agreement.
SECTION 10. TERMINATION.
10.1 Termination Events. This Agreement may be terminated and the
------------------
transactions contemplated by this Agreement may be abandoned:
10.1.1 At any time by the mutual written agreement of Buyer
and Seller;
10.1.2 By Buyer at any time, if Seller is in material breach or
default of any of Seller's covenants, agreements or other obligations in this
Agreement or in any Transaction Document, or if any of Seller's representations
in this Agreement or in any Transaction Document is not true in all material
respects when made or when otherwise required by this Agreement or any
Transaction Document to be true and such breach or default or failure to be true
is not cured by Seller or waived by Buyer prior to Closing;
10.1.3 By Seller at any time, if Buyer is in material breach or
default of any of Buyer's covenants, agreements or other obligations in this
Agreement or in any Transaction Document, or if any of Buyer's representations
in this Agreement or in any Transaction Document is not true in all material
respects when made or when otherwise required by this Agreement or any
Transaction Document to be true and such breach or default or failure to be true
is not cured by Buyer or waived by Seller prior to Closing;
10.1.4 By either party upon written notice to the other, if Closing
has not occurred on or before October 31, 1998 (the "Outside Closing Date"), for
any reason other than a material breach or default by such party of its
respective covenants, agreements or other obligations under this Agreement, or
any of its representations this Agreement not being true and accurate in all
material respects when made or when
34
<PAGE>
otherwise required by this Agreement to be true and accurate in all material
respects; and
10.1.5 As otherwise provided in this Agreement.
10.2 Effect of Termination. If this Agreement is terminated
---------------------
pursuant to SECTION 10.1, all obligations of the parties under this Agreement
will terminate, except for the obligations set forth in SECTIONS 7.18 and 12.16
and 7.21. Termination of this Agreement pursuant to SECTIONS 10.1.2 OR 10.1.3
will not limit or impair any remedies that any party may have with respect to a
breach or default by the other of its covenants, agreements or obligations under
this Agreement.
SECTION 11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
11.1 Survival of Representations and Warranties. The
------------------------------------------
representations and warranties of Seller in this Agreement and in the
Transaction Documents to be delivered by Seller pursuant to this Agreement will
survive until the first anniversary of the Closing Date, except that (a) all
such representations and warranties with respect to any federal, state or local
Taxes, rates, Environmental Law, ERISA, employment matters or copyright matters
will survive until 60 days after the expiration of the applicable statute of
limitations (including any extensions) for such federal, state or local Taxes,
rates, Environmental Law, ERISA, employment matters or copyright matters,
respectively and (b) the representations and warranties as to ownership of the
Assets in SECTION 5.4, SECTION 5.7.1 and in the deed or deeds delivered with
respect to Real Property will survive the Closing and the delivery of such deeds
and will continue in full force and effect without limitation. The
representations and warranties of Buyer in this Agreement and in the Transaction
Documents to be delivered by Buyer pursuant to this Agreement will survive until
the first anniversary of the Closing Date. The periods of survival of the
representations and warranties prescribed by this SECTION 11.1 are referred to
as the "Survival Period." The liabilities of the parties under their respective
representations and warranties will expire as of the expiration of the
applicable Survival Period; provided, however, that such expiration will not
include, extend or apply to any representation or warranty, the breach of which
has been asserted by Buyer in a written notice to Seller before such expiration
or about which Seller has given Buyer written notice before such expiration
indicating that facts or conditions exist that, with the passage of time or
otherwise, can reasonably be expected to result in a breach (and describing such
potential breach in reasonable detail). The covenants and agreements of the
parties in this Agreement (that are by their terms intended to be performed
after Closing) and in the Transaction Documents to be delivered by Seller or
Buyer pursuant to this Agreement, will survive the Closing and will continue in
full force and effect without limitation.
11.2 Indemnification by Seller. Seller will indemnify and hold
-------------------------
harmless Buyer and its shareholders and its and their respective Affiliates, and
the shareholders,
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<PAGE>
directors, officers, employees, agents, successors and assigns and any Person
claiming by or through any of them, as the case may be, from and against:
(a) all Losses resulting from or arising out of (i) any breach of any
representation or warranty made by Seller in this Agreement or in the
Transactions Documents delivered by Seller, (ii) any breach of any covenant,
agreement or obligation of Seller contained in this Agreement or in the
Transaction Documents delivered by Seller, (iii) any act or omission of Seller
with respect to, or any event or circumstance related to, the ownership or
operation of the Assets or the conduct of the Business, which act, omission,
event or circumstance occurred or existed prior to or at the Closing Date,
without regard to whether a claim with respect to such matter is asserted before
or after the Closing Date, including any matter described on SCHEDULE 5.13, (iv)
any liability or obligation not included in the Assumed Liabilities, (v) any
title defect Seller fails to eliminate as an exception from a title insurance
commitment referred to in SECTION 7.7.1, (vi) any claim that the transactions
contemplated by this Agreement violates WARN, or any similar state or local law
or any bulk transfer or fraudulent conveyance laws of any jurisdiction, (vii)
the presence, generation, removal or transportation of a Hazardous Substance on
or from any of the Real Property prior to the Closing Date, including the costs
of removal or clean-up of such Hazardous Substance and other compliance with the
provisions of any Environmental Laws (whether before or after Closing), or
(viii) any rate refund ordered by any Governmental Authority for periods prior
to the Closing Date; and
(b) all claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including
settlement costs and reasonable legal, accounting, experts' and other fees,
costs and expenses) incident or relating to or resulting from any of the
foregoing.
In the event that an indemnified item arises under both clause (a)(i) and under
one or more of clauses (a)(ii) through (a)(viii) of this SECTION 11.2, Buyer's
rights to pursue its claim under clauses (a)(ii) through (a)(viii), as
applicable, will exist notwithstanding the expiration of the Survival Period
applicable to such claim under clause (a)(i).
11.3 Indemnification by Buyer. Buyer will indemnify and hold
------------------------
harmless Seller and Seller's shareholders, directors, officers, employees,
agents, successors and assigns, and any Person claiming by or through any of
them, as the case may be, from and against:
(a) all Losses resulting from or arising out of (i) any breach of any
representation or warranty made by Buyer in this Agreement or in the Transaction
Documents delivered by Buyer, (ii) any breach of any covenant, agreement or
obligation of Buyer contained in this Agreement or in the Transaction Documents
delivered by Buyer or (iii) the failure by Buyer to perform any of its
obligations in respect of the Assumed Liabilities; and
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<PAGE>
(b) all claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including
settlement costs and reasonable legal, accounting, experts' and other fees,
costs and expenses) incident or relating to or resulting from any of the
foregoing.
In the event that an indemnified item arises under both clause (a)(i) and under
one or more of clauses (a)(ii) or (a)(iii) of this SECTION 11.3, Seller's rights
to pursue its claim under clauses (a)(ii) or (a)(iii), as applicable, will exist
notwithstanding the expiration of the Survival Period applicable to such claim
under clause (a)(i).
11.4 Third Party Claims. Promptly after the receipt by any party
------------------
of notice of any claim, action, suit or proceeding by any Person who is not a
party to this Agreement (collectively, an "Action"), which Action is subject to
indemnification under this Agreement, such party (the "Indemnified Party") will
give reasonable written notice to the party from whom indemnification is claimed
(the "Indemnifying Party"). The Indemnified Party will be entitled, at the sole
expense and liability of the Indemnifying Party, to exercise full control of the
defense, compromise or settlement of any such Action unless the Indemnifying
Party, within a reasonable time after the giving of such notice by the
Indemnified Party, (a) admits in writing to the Indemnified Party the
Indemnifying Party's liability to the Indemnified Party for such Action under
the terms of this SECTION 11, (b) notifies the Indemnified Party in writing of
the Indemnifying Party's intention to assume such defense, (c) provides evidence
reasonably satisfactory to the Indemnified Party of the Indemnifying Party's
ability to pay the amount, if any, for which the Indemnified Party may be liable
as a result of such Action and (d) retains legal counsel reasonably satisfactory
to the Indemnified Party to conduct the defense of such Action. The other party
will cooperate with the party assuming the defense, compromise or settlement of
any such Action in accordance with this Agreement in any manner that such party
reasonably may request. If the Indemnifying Party so assumes the defense of any
such Action, the Indemnified Party will have the right to employ separate
counsel and to participate in (but not control) the defense, compromise or
settlement of the Action, but the fees and expenses of such counsel will be at
the expense of the Indemnified Party unless (i) the Indemnifying Party has
agreed to pay such fees and expenses, (ii) any relief other than the payment of
money damages is sought against the Indemnified Party or (iii) the Indemnified
Party will have been advised by its counsel that there may be one or more
defenses available to it which are different from or additional to those
available to the Indemnifying Party, and in any such case that portion of the
fees and expenses of such separate counsel that are reasonably related to
matters covered by the indemnity provided in this SECTION 11 will be paid by the
Indemnifying Party. No Indemnified Party will settle or compromise any such
Action for which it is entitled to indemnification under this Agreement without
the prior written consent of the Indemnifying Party, unless the Indemnifying
Party has failed, after reasonable notice, to undertake control of such Action
in the manner provided in this SECTION 11.4. No
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<PAGE>
Indemnifying Party will settle or compromise any such Action (A) in which any
relief other than the payment of money damages is sought against any Indemnified
Party or (B) in the case of any Action relating to the Indemnified Party's
liability for any Tax, if the effect of such settlement would be an increase in
the liability of the Indemnified Party for the payment of any Tax for any period
beginning after the Closing Date, unless the Indemnified Party consents in
writing to such compromise or settlement.
11.5 Limitations on Indemnification - Seller. Seller will not be
---------------------------------------
liable for indemnification arising solely under SECTION 11.2(A)(I) for (a) any
Losses of or to Buyer or any other person entitled to indemnification from
Seller or (b) any claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including
settlement costs and reasonable legal, accounting, experts' and other fees,
costs and expenses) incidental or relating to or resulting from any of the
foregoing (the items described in clauses (a) and (b) collectively being
referred to for purposes of this SECTION 11.5 as "Buyer Damages") unless the
amount of Buyer Damages for which Seller would, but for the provisions of this
SECTION 11.5, be liable exceeds, on an aggregate basis, $250,000 (the "Threshold
Amount"), in which case Seller will be liable for all such Buyer Damages, which
will be due and payable within 15 days after Seller's receipt of a statement
therefor; provided, however, that Seller shall be liable for (a) all rate
refunds ordered by any Governmental Authority for periods prior to the Closing
Date and (b) all federal, state or local taxes determined by any Governmental
Authority to be owing for periods prior to the Closing Date, regardless of
whether the aggregate amount of such rate refunds and/or taxes equals or exceeds
the Threshold Amount.
11.6 Limitations on Indemnification - Buyer. Buyer will not be
--------------------------------------
liable for indemnification arising solely under SECTION 11.3(A)(I) for (a) any
Losses of or to Seller or any other person entitled to indemnification from
Buyer or (b) any claims, actions, suits, proceedings, demands, judgments,
assessments, fines, interest, penalties, costs and expenses (including
settlement costs and reasonable legal, accounting, experts' and other fees,
costs and expenses) incidental or relating to or resulting from any of the
foregoing the items described in clauses (a) and (b) collectively being referred
to for purposes of this SECTION 11.6 as "Seller Damages") unless the amount of
Seller Damages for which Buyer would, but for the provisions of this SECTION
11.6, be liable exceeds, on an aggregate basis, the Threshold Amount, in which
case Buyer will be liable for all such Seller Damages, which will be due and
payable within 15 days after Buyer's receipt of a statement therefor.
SECTION 12. Miscellaneous
12.1 Parties Obligated and Benefited. Subject to the limitations
-------------------------------
set forth below, this Agreement will be binding upon the parties and their
respective assigns and successors in interest and will inure solely to the
benefit of the parties and their respective assigns and successors in interest,
and no other Person will be entitled to any
38
<PAGE>
of the benefits conferred by this Agreement. Without the prior written consent
of the other party, neither party may assign any of its rights under this
Agreement or delegate any of its duties under this Agreement, except as
described in the following sentence. Seller agrees that Buyer will have the
right to assign its right to purchase the Assets under this Agreement to a
qualified institution, acting as a Qualified Intermediary (as such term is used
in Treas. Reg. Section 1.1031(k)-1(g)(4), and that this Agreement constitutes
notice to Seller of such assignment, which assignment Buyer will make effective
immediately prior to Closing (provided no such assignment will relieve Buyer of
any obligations under this Agreement).
12.2 Notices. Any notice, request, demand, waiver or other
-------
communication required or permitted to be given under this Agreement will be in
writing and will be deemed to have been duly given only if delivered in person
or by first class, prepaid, registered or certified mail, or sent by courier or,
if receipt is confirmed, by telecopier:
To Buyer at:
Bresnan Communications Company, L.P.
709 Westchester Avenue
White Plains, NY 10604
Attention: Michael Bresnan
Telecopy: (914) 993-6601
With a copy similarly addressed to the attention of the General
Counsel.
To Seller at:
c/o Jones Intercable, Inc.
9697 East Mineral Avenue
Englewood, Colorado 80112
Attention: President
Telecopy: (303) 799-1644
With a copy similarly addressed to the attention of the General
Counsel.
Any party may change the address to which notices are required to be sent by
giving notice of such change in the manner provided in this SECTION 12.2. All
notices will be deemed to have been received on the date of delivery, which in
the case of deliveries by telecopier will be the date of the sender's
confirmation, or on the third Business Day after mailing in accordance with this
Section, except that any notice of a change of address will be effective only
upon actual receipt.
39
<PAGE>
12.3 Attorneys' Fees. In the event of any action or suit based
---------------
upon or arising out of any alleged breach by any party of any representation,
warranty, covenant or agreement contained in this Agreement, the prevailing
party will be entitled to recover reasonable attorneys' fees and other costs of
such action or suit from the other party.
12.4 Waiver. This Agreement or any of its provisions may not be
------
waived except in writing. The failure of any party to enforce any right arising
under this Agreement on one or more occasions will not operate as a waiver of
that or any other right on that or any other occasion.
12.5 Captions. The captions of this Agreement are for convenience
--------
only and do not constitute a part of this Agreement.
12.6 Choice of Law. THIS AGREEMENT AND THE RIGHTS OF THE PARTIES
-------------
UNDER IT WILL BE GOVERNED BY AND CONSTRUED IN ALL RESPECTS IN ACCORDANCE WITH
THE LAWS OF THE STATE OF COLORADO, WITHOUT REGARD TO THE CONFLICTS OF LAWS RULES
OF COLORADO.
12.7 Terms. Terms used with initial capital letters will have the
-----
meanings specified, applicable to both singular and plural forms, for all
purposes of this Agreement. The word "include" and derivatives of that word are
used in this Agreement in an illustrative sense rather than limiting sense.
12.8 Rights Cumulative. All rights and remedies of each of the
-----------------
parties under this Agreement will be cumulative, and the exercise of one or more
rights or remedies will not preclude the exercise of any other right or remedy
available under this Agreement or applicable law.
12.9 Further Actions. Seller and Buyer will execute and deliver to
---------------
the other, from time to time at or after the Closing, for no additional
consideration and at no additional cost to the requesting party, such further
assignments, certificates, instruments, records, or other documents, assurances
or things as may be reasonably necessary to give full effect to this Agreement
and to allow each party fully to enjoy and exercise the rights accorded and
acquired by it under this Agreement.
12.10 Time. If the last day permitted for the giving of any notice
----
or the performance of any act required or permitted under this Agreement falls
on a day which is not a Business Day, the time for the giving of such notice or
the performance of such act will be extended to the next succeeding Business
Day.
12.11 Late Payments. If either party fails to pay the other any
-------------
amounts when due under this Agreement, the amounts due will bear interest from
the due date to the
40
<PAGE>
date of payment at the annual rate publicly announced from time to time by The
Bank of New York as its prime rate (the "Prime Rate") plus 2%, adjusted as and
when changes in the Prime Rate are made.
12.12 Counterparts. This Agreement may be executed in counterparts,
------------
each of which will be deemed an original.
12.13 Entire Agreement. This Agreement (including the Schedules
----------------
and Exhibits referred to in this Agreement, which are incorporated in and
constitute a part of this Agreement) and the Transaction Documents contain the
entire agreement of the parties and supersedes all prior oral or written
agreements and understandings with respect to the subject matter. This
Agreement may not be amended or modified except by a writing signed by the
parties.
12.14 Severability. Any term or provision of this Agreement which
------------
is invalid or unenforceable will be ineffective to the extent of such invalidity
or unenforceability without rendering invalid or unenforceable the remaining
rights of the Person intended to be benefited by such provision or any other
provisions of this Agreement.
12.15 Construction. This Agreement has been negotiated by Buyer
------------
and Seller and their respective legal counsel, and legal or equitable principles
that might require the construction of this Agreement or any provision of this
Agreement against the party drafting this Agreement will not apply in any
construction or interpretation of this Agreement.
12.16 Expenses. Except as otherwise expressly provided in this
--------
Agreement, each party will pay all of its expenses, including attorneys' and
accountants' fees, in connection with the negotiation of this Agreement, the
performance of its obligations and the consummation of the transactions
contemplated by this Agreement.
12.17 Risk of Loss; Condemnation.
--------------------------
12.17.1 Seller will bear the risk of any loss or damage to the
Assets resulting from fire, theft or other casualty (except reasonable wear and
tear) at all times prior to the Closing. If any such loss or damage is
sufficiently substantial so as to preclude or prevent resumption of normal
operations of any material portion of a System or the replacement or restoration
of the lost or damaged property within 30 days from the occurrence of the event
resulting in such loss or damage, Seller will immediately notify Buyer in
writing of that fact and Buyer, at any time within 10 days after receipt of such
notice, may elect by written notice to Seller either (a) to waive such defect
and proceed toward consummation of the transaction in accordance with terms of
this Agreement or (b) terminate this Agreement. If Buyer elects to so terminate
this Agreement, Buyer and Seller will stand fully released and discharged of any
and all obligations under this Agreement. If Buyer elects to consummate the
transactions contemplated by this Agreement notwithstanding such loss or damage
and
41
<PAGE>
does so, there will be no adjustment in the consideration payable to Seller on
account of such loss or damage but all insurance proceeds payable as a result of
the occurrence of the event resulting in such loss or damage (to the extent not
used to replace or restore such lost or damaged property) will be delivered by
Seller to Buyer, or the rights to such proceeds will be assigned by Seller to
Buyer if not yet paid over to Seller.
12.17.2 If, prior to the Closing, any part of or interest in the
Assets is taken or condemned as a result of the exercise of the power of eminent
domain, or if a Governmental Authority having such power informs Seller or Buyer
that it intends to condemn all or any part of or interest in the Assets (such
event being called, in either case, a "Taking"), and such Taking involves a
material part of or interest in the Assets, then Buyer may terminate this
Agreement. If Buyer does not elect or have the right to terminate this
Agreement, then (a) Buyer will have the sole right, in the name of Seller, if
Buyer so elects, to negotiate for, claim, contest and receive all damages with
respect to the Taking, (b) Seller will be relieved of its obligation to convey
to Buyer the Assets or interests that are the subject of the Taking, (c) at the
Closing Seller will assign to Buyer all of Seller's rights to all damages
payable with respect to such Taking and will pay to Buyer all damages previously
paid to Seller with respect to the Taking and (d) following the Closing, Seller
will give Buyer such further assurances of such rights and assignment with
respect to the taking as Buyer may from time to time reasonably request.
The parties have executed this Agreement as of the day and year first above
written.
SELLER:
JONES CABLE INCOME FUND 1-A, LTD.
By: Jones Intercable, Inc.,
its general partner
By: /s/ Elizabeth Steele
----------------------------------
Name: Elizabeth Steele
--------------------------------
Title: Vice President
-------------------------------
42
<PAGE>
BUYER:
BRESNAN COMMUNICATIONS
COMPANY LIMITED PARTNERSHIP
By: BCI (USA), L.P., its managing
general partner
By: Bresnan Communications, Inc.,
its managing general partner
By: /s/ Robert Bresnan
----------------------------
Name: ROBERT BRESNAN
--------------------------
Title: VICE PRESIDENT &
-------------------------
GENERAL COUNSEL
-------------------------
43
<PAGE>
Ex. 99.2
August 10, 1998
Re: Proxy Mailing - Proposed Sale of the Owatonna/Glencoe Minnesota Cable
Television System by Jones Cable Income Fund, 1-A, Ltd.
Dear Beneficial Owner of Jones Cable Income Fund 1-A, Ltd.:
Our records indicate that you are a beneficial owner of limited partnership
interests in Jones Cable Income Fund 1-A, Ltd. (the "Partnership"). Enclosed for
your information and review are proxy solicitation materials.
Your qualified plan trustee/custodian, which is the registered owner of your
limited partnership interests, has authorized Jones Intercable, Inc. (the
"General Partner") to mail these proxy materials directly to you and has
authorized its clients, the beneficial owners, to execute the proxy cards on its
behalf.
By this authorization, your signature will be legally sufficient and your vote
of the limited partnership interests in the name of the trustee/custodian will
be counted without the trustee/custodian's counter-signature.
Please vote, date and sign as Beneficial Owner (Investor), and return your proxy
card to the General Partner in the enclosed envelope as soon as possible, but
not later than September 15, 1998.
------------------
If the proposed sale is consummated, the Partnership will mail your share of the
net sale proceeds to your Trustee for your benefit, and the Partnership will
notify you that the distribution has occurred.
After the closing of the sale Owatonna/Glencoe system and the distribution of
the net sales proceeds, including amounts, if any, remaining 90 days after the
closing in an indemnity escrow account, the Partnership will be liquidated and
dissolved, most likely in early 1999.
For planning purposes, please refer to the tax discussion under Federal and
-----------
State Income Tax Consequences on pages 10-12 of the proxy statement.
- -----------------------------
If you have any questions, please call our Investor Services Department.
Sincerely,
Jones Intercable, Inc.
The General Partner
Enclosures
<PAGE>
Ex. 99.3
August 10, 1998
Re: Notice of Proxy Mailing: Proposed Sale of the Owatonna/Glencoe
Minnesota Cable Television System by Jones
Cable Income Fund 1-A, Ltd.
Dear Registered Representative of clients in Jones Cable Income Fund 1-A, Ltd.:
Jones Cable Income Fund 1-A, Ltd. ("Fund 1-A") plans to sell its
Owatonna/Glencoe Minnesota system to an unaffiliated third party in the fourth
quarter of 1998.
The proposed sale and the distribution of net sales proceeds are contingent upon
the approval by the holders of a majority of Fund 1-A's limited partnership
interests, as well as the consents of governmental authorities and other third
parties. Enclosed for your information is a copy of the Fund 1-A Notice and
Proxy Statement.
The proxy record date is July 31, 1998.
- ---------------------------------------
For taxable accounts, proxy materials are being sent directly to investors. For
- -------------------- ---
tax-exempt accounts (IRAs and other qualified plans), proxy materials are being
- -------------------
sent according to the instructions of the Trustees-which are the registered
owners of investors' interests in these plans. Some Trustees required us to send
proxy materials directly to their clients, the beneficial owners, and to accept
the investors' signatures as legally sufficient to count the votes without the
Trustee's counter-signature. Other Trustees required us to mail their clients'
proxy materials directly to the Trustees for their handing.
The proxy due date is September 15, 1998, but we hope to have all votes in as
soon as possible.
If the proposed sale is consummated, limited partners in Fund 1-A are expected
to receive approximately $662 for each $1,000 invested. Distributions will be
net of Minnesota non-resident withholding tax, if applicable, on taxable and
tax-exempt entities including IRAs and other qualified plans. This withholding
requirement does not apply to residents of the State of Minnesota. Distribution
checks will be issued according to the account registration or special payment
of record.
After the closing of the sale Owatonna/Glencoe systems and the distribution of
the net sales proceeds, including amounts, if any, remaining 90 days after the
closing in an indemnity escrow account, the Partnership will be liquidated and
dissolved, most likely in early 1999.
<TABLE>
<CAPTION>
Proposed Sale Prior Cash Flow Prior Sale Anticipated
Owatonna/Glencoe MN System Distributions Milwaukie OR System Total Return
- -------------------------- ------------- ------------------- ------------
<S> <C> <C> <C>
$662 per $1000* $1,023 per $1000 $530 per $1000 $2,215 per $1000**
</TABLE>
* Net of Minnesota non-resident withholding tax, if applicable
** Does not include amounts, if any, which may be distributed from the
indemnity escrow account in early 1999.
Please review the enclosed list that shows registration and check information
and estimated distributions prior to withholding, if applicable, for each of
your clients Fund 1-A. If you find any discrepancies in this information or have
questions, please contact our Investor Services Department as soon as possible.
Sincerely,
Jones Intercable, Inc.
The General Partner
Enclosures
<PAGE>
Ex. 99.4
To: Qualified Plan Trustee/Custodian
From: Jones Intercable, Inc. The General Partner
Date: August 10, 1998
Re: Notice of Proxy Mailing: Proposed Sale of the Owatonna/Glencoe Minnesota
Cable Television Systems by Jones Cable Income
Fund 1-A, Ltd.
Jones Cable Income Fund 1-A, Ltd. ("Fund 1-A", the "Partnership") plans to sell
its Owatonna/Glencoe Minnesota systems to an unaffiliated third party during the
fourth quarter of 1998.
Proxy Information
- -----------------
The proposed sale and the distribution of net sales proceeds are contingent
upon the approval by the holders of a majority of Fund 1-A's limited partnership
interests, as well as the consents of governmental authorities and other third
parties. The proxy record date is July 31, 1998.
---------------------------------------
Enclosed please find proxy materials for each interest in your name as the
entity registered as a limited partner on the books and records of the
Partnership.
IMPORTANT
Your signature as Authorized Trustee must be on each proxy in order for
----------------------------------------------------------
the votes to be counted. If you send the proxies to your clients for their
vote and signature, please instruct the clients to return the proxy to you
for your countersignature!
=====================
Please then return the proxies, with your countersignature as Authorized
Trustee, to us in the envelope provided, as soon as possible, but no later
--------
than September 15, 1998. Please note that you must bear any and all costs
-----------------------
associated with proxy mailing services.
Distribution Information
- ------------------------
If the proposed sale is consummated, the Partnership will distribute
approximately $662 for each $1,000 invested. Distributions will be net of
Minnesota non-resident withholding tax, if applicable, on all accounts including
IRAs and other tax-exempt entities. The Partnership will mail net sales proceeds
to you on behalf of the Beneficial Owners, and the Partnership will notify the
Beneficial Owners that the distribution has occurred.
After the closing of the sale Owatonna/Glencoe System and the distribution of
the net sales proceeds, including amounts, if any, remaining 90 days after the
closing in an indemnity escrow account, the Partnership will be liquidated and
dissolved, most likely in early 1999. Taking into account the prior and pending
liquidation distributions and prior cash flow distributions, limited partners
will have received a total of $2,215 per $1000 invested in the Partnership. This
total does not include amounts, if any, which may be distributed from the
indemnity escrow account in early 1999.
Federal and State Income Tax Consequences
- -----------------------------------------
Please be aware that the sale of the Owatonna/Glencoe system will require
certain tax filings. Income from the partnership may be taxable to an IRA or
pension plan as Unrelated Business Taxable Income (UBTI). Also, reporting to the
State of Minnesota will be required. We strongly urge you to refer to the tax
discussion on pages 10-12 of the proxy statement for information which is
provided solely for tax planning purposes.
If you have any questions, please contact our Investor Services Department.
<PAGE>
Ex. 99.5
To: Qualified Plan Trustee/Custodian
From: Jones Intercable, Inc. The General Partner
Date: August 10, 1998
Re: Notice of Proxy Mailing: Proposed Sale of the Owatonna/Glencoe Minnesota
Cable Television System by Jones Cable Income
Fund 1-A, Ltd.
Jones Cable Income Fund 1-A, Ltd. ("Fund 1-A") plans to sell its
Owatonna/Glencoe Minnesota systems to an unaffiliated third party during the
fourth quarter of 1998.
Proxy Information
- -----------------
The proposed sale and the distribution of net sales proceeds are contingent upon
the approval by the holders of a majority of Fund 1-A's limited partnership
interests, as well as the consents of governmental authorities and other third
parties. The proxy record date is July 31, 1998.
--------------------------------------
According to our records, you have authorized the General Partner to send proxy
materials directly to your clients, the beneficial owners of the limited
partnership interests that are registered in your name and for which you act as
trustee/custodian, and have authorized the beneficial owners to execute the
proxy cards on your behalf without your countersignature.
At your request, the General Partner has sent proxy materials directly to such
beneficial owners. The deadline for the return of the proxy vote by limited
partners is September 15, 1998, but we hope to have all votes in as soon as
------------------
possible.
Distribution Information
- ------------------------
If the proposed sale is consummated, the Partnership will distribute
approximately $662 for each $1,000 invested. Distributions will be net of
Minnesota non-resident withholding tax, if applicable, on all accounts including
IRAs and other tax-exempt entities. The Partnership will mail net sales proceeds
to you on behalf of the Beneficial Owners, and the Partnership will notify the
Beneficial Owners that the distribution has occurred.
After the closing of the sale Owatonna/Glencoe System and the distribution of
the net sales proceeds, including amounts, if any, remaining 90 days after the
closing in an indemnity escrow account, the Partnership will be liquidated and
dissolved, most likely in early 1999. Taking into account the prior and pending
liquidation distributions and prior cash flow distributions, limited partners
will have received a total of $2,215 per $1000 invested in the Partnership. This
total does not include amounts, if any, which may be distributed from the
indemnity escrow account in early 1999.
Federal and State Income Tax Consequences
- -----------------------------------------
Please be aware that the sale of the Owatonna/Glencoe system will require
certain tax filings. Income from the partnership may be taxable to an IRA or
pension plan as Unrelated Business Taxable Income (UBTI). Also, reporting to the
State of Minnesota will be required. We strongly urge you to refer to the tax
discussion on pages 10-12 of the proxy statement for information that is
provided solely for tax planning purposes.
Enclosed please find a copy of the Notice and Proxy Statement and the General
Partner's list of the beneficial owners of limited partnership interests that
are registered in your name. If you find any discrepancies in this information
or have questions, please contact our Investor Services Department as soon as
possible.
Enclosures
