<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------------
FORM 10-Q
(MARK ONE)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
--------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to ____________________
Commission File Number 0-15686
---------
Enstar Income Program IV-3, L.P.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Georgia 58-1648320
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
10900 Wilshire Boulevard - 15th Floor
Los Angeles, California 90024
- ---------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 824-9990
----------------
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Exhibit Index located at Page E-1
<PAGE> 2
PART I - FINANCIAL INFORMATION
ENSTAR INCOME PROGRAM IV-3, L.P.
CONDENSED BALANCE SHEETS
===============================================
<TABLE>
<CAPTION>
December 31, September 30,
1996* 1997
------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 450,900 $ 769,500
Accounts receivable, less allowance of $4,500 and
$7,200 for possible losses 61,800 20,700
Prepaid expenses and other assets 25,900 164,500
Equity in net assets of Joint Venture 601,700 670,200
Property, plant and equipment, less accumulated
depreciation and amortization of $4,087,200 and $4,276,700 1,642,100 1,579,500
Franchise cost, net of accumulated
amortization of $1,850,500 and $1,991,800 714,300 573,000
Deferred loan costs and other charges, net 7,600 6,300
----------- -----------
$ 3,504,300 $ 3,783,700
=========== ===========
LIABILITIES AND PARTNERSHIP CAPITAL
-----------------------------------
LIABILITIES:
Accounts payable $ 222,000 $ 210,900
Due to affiliates 158,300 224,500
----------- -----------
TOTAL LIABILITIES 380,300 435,400
----------- -----------
COMMITMENTS AND CONTINGENCIES
PARTNERSHIP CAPITAL (DEFICIT):
General partners (52,000) (49,800)
Limited partners 3,176,000 3,398,100
----------- -----------
TOTAL PARTNERSHIP CAPITAL 3,124,000 3,348,300
----------- -----------
$ 3,504,300 $ 3,783,700
=========== ===========
</TABLE>
*As presented in the audited financial statements.
See accompanying notes to condensed financial statements.
-2-
<PAGE> 3
ENSTAR INCOME PROGRAM IV-3, L.P.
CONDENSED STATEMENTS OF OPERATIONS
===============================================
<TABLE>
<CAPTION>
Unaudited
--------------------------
Three months ended
September 30,
--------------------------
1996 1997
--------- ---------
<S> <C> <C>
REVENUES $ 613,700 $ 662,700
--------- ---------
OPERATING EXPENSES:
Service costs 190,300 230,600
General and administrative expenses 73,300 91,600
General Partner management fees
and reimbursed expenses 84,500 81,900
Depreciation and amortization 171,600 119,100
--------- ---------
519,700 523,200
--------- ---------
OPERATING INCOME 94,000 139,500
--------- ---------
OTHER INCOME (EXPENSE):
Interest income 5,600 9,600
Interest expense (14,200) (3,800)
Loss on sale of assets (5,700) --
--------- ---------
(14,300) 5,800
--------- ---------
INCOME BEFORE EQUITY IN NET INCOME
OF JOINT VENTURE 79,700 145,300
EQUITY IN NET INCOME OF JOINT VENTURE 33,900 34,800
--------- ---------
NET INCOME $ 113,600 $ 180,100
========= =========
Net income allocated to General Partners $ 1,100 $ 1,800
========= =========
Net income allocated to Limited Partners $ 112,500 $ 178,300
========= =========
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 2.82 $ 4.47
========= =========
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 39,900 39,900
========= =========
</TABLE>
See accompanying notes to condensed financial statements.
-3-
<PAGE> 4
ENSTAR INCOME PROGRAM IV-3, L.P.
CONDENSED STATEMENTS OF OPERATIONS
===============================================
<TABLE>
<CAPTION>
Unaudited
------------------------------
Nine months ended
September 30,
------------------------------
1996 1997
----------- -----------
<S> <C> <C>
REVENUES $ 1,797,500 $ 1,988,900
----------- -----------
OPERATING EXPENSES:
Service costs 581,600 649,900
General and administrative expenses 277,900 274,100
General Partner management fees
and reimbursed expenses 237,500 245,600
Depreciation and amortization 535,500 370,400
----------- -----------
1,632,500 1,540,000
----------- -----------
OPERATING INCOME 165,000 448,900
----------- -----------
OTHER INCOME (EXPENSE):
Interest income 18,900 23,800
Interest expense (28,600) (9,100)
Gain (loss) on sale of assets (4,700) 45,000
----------- -----------
(14,400) 59,700
----------- -----------
INCOME BEFORE EQUITY IN NET INCOME
OF JOINT VENTURE 150,600 508,600
EQUITY IN NET INCOME OF JOINT VENTURE 71,300 93,500
----------- -----------
NET INCOME $ 221,900 $ 602,100
=========== ===========
Net income allocated to General Partners $ 2,200 $ 6,000
=========== ===========
Net income allocated to Limited Partners $ 219,700 $ 596,100
=========== ===========
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 5.51 $ 14.94
=========== ===========
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 39,900 39,900
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
-4-
<PAGE> 5
ENSTAR INCOME PROGRAM IV-3, L.P.
STATEMENTS OF CASH FLOWS
===============================================
<TABLE>
<CAPTION>
Unaudited
--------------------------
Nine months ended
September 30,
--------------------------
1996 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 221,900 $ 602,100
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in net income of Joint Venture (71,400) (93,500)
Depreciation and amortization 535,500 370,400
Amortization of deferred loan costs 17,400 -
(Gain) loss on sale of cable assets 4,700 (45,000)
Increase (decrease) from changes in:
Accounts receivable, prepaid expenses and other assets (2,000) (97,500)
Accounts payable and due to affiliates (291,600) 55,100
--------- ---------
Net cash provided by operating activities 414,500 791,600
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (374,500) (158,100)
Proceeds from sale of property, plant and equipment 1,500 45,000
Increase in intangible assets (7,400) (7,100)
Distributions from Joint Venture 350,000 25,000
--------- ---------
Net cash used in investing activities (30,400) (95,200)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt (383,200) -
Distributions to partners (377,800) (377,800)
--------- ---------
Net cash used in financing activities (761,000) (377,800)
--------- ---------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (376,900) 318,600
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 942,400 450,900
--------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 565,500 $ 769,500
========= =========
</TABLE>
See accompanying notes to condensed financial statements.
-5-
<PAGE> 6
ENSTAR INCOME PROGRAM IV-3, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
===============================================
1. INTERIM FINANCIAL STATEMENTS
The accompanying condensed interim financial statements for the three
and nine months ended September 30, 1997 and 1996 are unaudited. These condensed
interim financial statements should be read in conjunction with the audited
financial statements and notes thereto included in the Partnership's latest
Annual Report on Form 10-K. In the opinion of management, such statements
reflect all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the results of such periods. The results of
operations for the three and nine months ended September 30, 1997 are not
necessarily indicative of results for the entire year.
2. TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES
The Partnership has a management and service agreement with a
wholly-owned subsidiary of the Corporate General Partner (the "Manager") for a
monthly management fee of 5% of revenues, excluding revenues from the sale of
cable television systems or franchises. Management fee expense approximated
$33,100 and $99,400 for the three and nine months ended September 30, 1997.
In addition to the monthly management fees described above, the
Partnership reimburses the Manager for direct expenses incurred on behalf of the
Partnership and for the Partnership's allocable share of operational costs
associated with services provided by the Manager. All cable television
properties managed by the Corporate General Partner and its subsidiary are
charged a proportionate share of these expenses. Corporate office allocations
and district office expenses are charged to the properties served based
primarily on the respective percentage of basic subscribers or homes passed
(dwelling units within a system) within the designated service areas. The total
amount charged to the Partnership for these services approximated $48,800 and
$146,200 for the three and nine months ended September 30, 1997.
The Manager has entered into an identical agreement with Enstar Cable
of Macoupin County, a Georgia general partnership, of which the Partnership is a
co-partner (the "Joint Venture"), except that the Joint Venture pays the Manager
only a 4% management fee. However, the Joint Venture is required to distribute
to Enstar Communications Corporation (which is the Corporate General Partner of
the Joint Venture as well as of the Partnership) an amount equal to 1% of the
Joint Venture's gross revenues in respect of Enstar Communications Corporation's
interest as Corporate General Partner of the Joint Venture. No management fee is
payable by the Partnership in respect of any amounts received by the Partnership
from the Joint Venture, and there is no duplication of reimbursed expenses or
costs of the Manager. The Joint Venture paid the Manager management fees of
approximately $20,000 and $59,000 and reimbursement of expenses of approximately
$49,200 and $145,000 under its management agreement for the three and nine
months ended September 30, 1997. In addition, the Joint Venture paid the
Corporate General Partner approximately $5,100 and $14,800 in respect of its 1%
special interest during the three and nine months ended September 30, 1997.
Management fees and reimbursed expenses due the Corporate General Partner are
non-interest bearing.
-6-
<PAGE> 7
ENSTAR INCOME PROGRAM IV-3, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
===============================================
2. TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES (CONTINUED)
The Partnership and the Joint Venture also receive certain system
operating management services from an affiliate of the Corporate General Partner
in addition to the Manager, due to the fact that there are no such employees
directly employed by the Partnership's and Joint Venture's cable systems. The
Partnership and the Joint Venture reimburse the affiliate for their allocable
share of the affiliate's operational costs. The total amount charged to the
Partnership and the Joint Venture approximated $20,400 and $38,400 for the three
and nine months ended September 30, 1997. No management fee is payable to the
affiliate by the Partnership and the Joint Venture and there is no duplication
of reimbursed expenses and costs paid to the Manager.
Certain programming services have been purchased through an affiliate
of the Partnership and the Joint Venture. In turn, the affiliate charges the
Partnership and the Joint Venture for these costs based on an estimate of what
the Corporate General Partner could negotiate for such programming services for
the 15 partnerships managed by the Corporate General Partner as a group. The
Partnership and the Joint Venture recorded programming fee expense of $261,600
and $777,100 for the three and nine months ended September 30, 1997. Programming
fees are included in service costs in the statements of operations.
3. EARNINGS PER UNIT OF LIMITED PARTNERSHIP INTEREST
Earnings and losses per unit of limited partnership interest is based
on the average number of units outstanding during the periods presented. For
this purpose, earnings and losses have been allocated 99% to the Limited
Partners and 1% to the General Partners. The General Partners do not own units
of partnership interest in the Partnership, but rather hold a participation
interest in the income, losses and distributions of the Partnership.
-7-
<PAGE> 8
ENSTAR INCOME PROGRAM IV-3, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
===============================================
4. EQUITY IN NET ASSETS OF JOINT VENTURE
Each of the Partnership and two affiliated partnerships (Enstar
Income Program IV-1, L.P. and Enstar Income Program IV-2, L.P.) owns one third
(1/3) of the Joint Venture. Each of the co-partners shares equally in the
profits and losses of the Joint Venture. The investment in the Joint Venture is
accounted for on the equity method. Summarized financial information for the
Joint Venture as of September 30, 1997 and December 31, 1996, and the results of
its operations for the three and nine months ended September 30, 1997 and 1996,
have been included. The results of operations for the three and nine months
ended September 30, 1997 are not necessarily indicative of results for the
entire year.
<TABLE>
<CAPTION>
December 31, September 30,
1996* 1997
------------ ------------
(Unaudited)
<S> <C> <C>
Current assets $ 528,400 $ 893,600
Investment in cable television properties, net 1,550,400 1,560,800
Other assets 5,600 3,700
------------ ------------
$ 2,084,400 $ 2,458,100
============ ============
Current liabilities $ 279,300 $ 447,500
Venturers' capital 1,805,100 2,010,600
------------ ------------
$ 2,084,400 $ 2,458,100
============ ============
</TABLE>
*As presented in the audited financial statements.
-8-
<PAGE> 9
ENSTAR INCOME PROGRAM IV-3, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
===============================================
4. EQUITY IN NET ASSETS OF JOINT VENTURE (CONTINUED)
<TABLE>
<CAPTION>
Unaudited
------------------------------
Three months ended
September 30,
------------------------------
1996 1997
----------- -----------
<S> <C> <C>
REVENUES $ 463,900 $ 501,100
----------- -----------
OPERATING EXPENSES:
Service costs 130,300 141,600
General and administrative expenses 15,500 49,000
General Partner management fees and reimbursed expenses 64,000 74,300
Depreciation and amortization 152,700 136,900
----------- -----------
362,500 401,800
----------- -----------
OPERATING INCOME 101,400 99,300
OTHER INCOME (EXPENSE):
Interest income 3,200 8,400
Interest expense (2,700) (3,300)
----------- -----------
NET INCOME $ 101,900 $ 104,400
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Unaudited
------------------------------
Nine months ended
September 30,
------------------------------
1996 1997
----------- -----------
<S> <C> <C>
REVENUES $ 1,333,900 $ 1,475,400
----------- -----------
OPERATING EXPENSES:
Service costs 402,000 411,000
General and administrative expenses 91,800 108,200
General Partner management fees and reimbursed expenses 178,800 218,800
Depreciation and amortization 457,700 470,700
----------- -----------
1,130,300 1,208,700
----------- -----------
OPERATING INCOME 203,600 266,700
OTHER INCOME (EXPENSE):
Interest income 16,300 22,500
Interest expense (6,500) (8,700)
Gain on sale of assets 600 -
----------- -----------
NET INCOME $ 214,000 $ 280,500
=========== ===========
</TABLE>
-9-
<PAGE> 10
ENSTAR INCOME PROGRAM IV-3, L.P.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTRODUCTION
The Cable Television Consumer Protection and Competition Act of 1992
(the "1992 Cable Act") required the Federal Communications Commission ("FCC")
to, among other things, implement extensive regulation of the rates charged by
cable television systems for basic and programming service tiers, installation,
and customer premises equipment leasing. Compliance with those rate regulations
has had a negative impact on the Partnership's revenues and cash flow. The
Telecommunications Act of 1996 (the "1996 Telecom Act") substantially changed
the competitive and regulatory environment for cable television and
telecommunications service providers. Among other changes, the 1996 Telecom Act
provides that the regulation of programming service tiers will be phased out
altogether in 1999. The regulatory environment will continue to change pending,
among other things, the outcome of legal challenges and FCC rulemaking and
enforcement activity in respect of the 1992 Cable Act and the 1996 Telecom Act.
There can be no assurance as to what, if any, further action may be taken by the
FCC, Congress or any other regulatory authority or court, or the effect thereof
on the Partnership's business. Accordingly, the Partnership's historical
financial results as described below are not necessarily indicative of future
performance.
This Report includes certain forward looking statements regarding,
among other things, future results of operations, regulatory requirements,
competition, capital needs and general business conditions applicable to the
Partnership. Such forward looking statements involve risks and uncertainties
including, without limitation, the uncertainty of legislative and regulatory
changes and the rapid developments in the competitive environment facing cable
television operators such as the Partnership. In addition to the information
provided herein, reference is made to the Partnership's Annual Report on Form
10-K for the year ended December 31, 1996 for additional information regarding
such matters and the effect thereof on the Partnership's business.
The Partnership conducts its cable television business operations
both (i) through the direct ownership and operation of certain cable television
systems and (ii) through its participation as a partner with a one-third (1/3)
interest in the Joint Venture. The Partnership participates equally with its two
affiliated co-partners under the Joint Venture's partnership agreement with
respect to capital contributions, obligations and commitments and results of
operations. Accordingly, in considering the financial condition and results of
operations for the Partnership, consideration must also be made of those matters
as they relate to the Joint Venture. The following discussion reflects such
consideration, and with respect to results of operations, a separate discussion
is provided for each entity.
RESULTS OF OPERATIONS
THE PARTNERSHIP
The Partnership's revenues increased from $613,700 to $662,700, or by
8.0%, and from $1,797,500 to $1,988,900, or by 10.6%, for the three and nine
months ended September 30, 1997 as compared to the corresponding periods in
1996. Of the $49,000 increase in revenues for the three months ended September
30, 1997 as compared to the corresponding period in 1996, $52,600 was due to
increases in regulated service
-10-
<PAGE> 11
ENSTAR INCOME PROGRAM IV-3, L.P.
RESULTS OF OPERATIONS (CONTINUED)
rates that were implemented by the Partnership in the fourth quarter of 1996 and
the third quarter of 1997 and $7,200 was due to increases in other revenue
producing items. These increases were partially offset by a decrease of $10,800
due to decreases in the number of subscriptions for services, primarily premium
and tier services. Of the $191,400 increase in revenues for the nine months
ended September 30, 1997 as compared to the corresponding period in 1996,
$168,600 was due to increases in regulated service rates, $34,300 was due to the
restructuring of The Disney Channel from a premium channel to a tier channel
effective July 1, 1996 and $14,300 was due to increases in other revenue
producing items. These increases were partially offset by a decrease of $25,800
due to decreases in the number of subscriptions for premium and tier services.
As of September 30, 1997, the Partnership had approximately 6,200 homes
subscribing to cable service and 1,800 premium service units.
Service costs increased from $190,300 to $230,600, or by 21.2%, and
from $581,600 to $649,900, or by 11.7%, for the three and nine months ended
September 30, 1997 as compared to the corresponding periods in 1996. Service
costs represent costs directly attributable to providing cable services to
customers. The increase in both periods was due to increases in programming
expense of $19,300 and $53,400 for the quarter and nine months ended September
30, 1997 as compared to the corresponding 1996 periods. Programming expense
increased primarily as a result of higher rates charged by program suppliers and
due to channel additions. The three months' increase was also due to a decrease
of $20,000 in the capitalization of labor and overhead costs resulting from
reductions in construction activity in the quarter ended September 30, 1997.
General and administrative expenses increased from $73,300 to
$91,600, or by 25.0%, and decreased from $277,900 to $274,100, or by 1.4%, for
the three and nine months ended September 30, 1997 as compared to the
corresponding periods in 1996. The increase for the quarter was primarily due to
an increase in bad debt expense ($7,800), insurance premium service fees
($4,200) and customer billing expense ($4,000). The decrease for the nine months
was primarily due to lower insurance premiums and personnel costs.
Management fees and reimbursed expenses decreased from $84,500 to
$81,900, or by 3.1%, and increased from $237,500 to $245,600, or by 3.4%, for
the three and nine months ended September 30, 1997 as compared to the
corresponding periods in 1996. Management fees increased in direct relation to
increased revenues as described above. The increase in management fees was more
than offset in the quarter and partially offset in the nine months ended
September 30, 1997 by a decrease in reimbursed expenses due to lower allocated
telephone and marketing expenses.
Operating income before income taxes, depreciation and amortization
(EBITDA) is a commonly used financial analysis tool for measuring and comparing
cable television companies in several areas, such as liquidity, operating
performance and leverage. EBITDA as a percentage of revenues decreased from
43.3% to 39.0% and increased from 39.0% to 41.2% for the three and nine months
ended September 30, 1997 as compared to the corresponding periods in 1996. The
decrease for the quarter was primarily due to increased programming expense and
decreases in the capitalization of labor and overhead costs. The increase for
the nine months was primarily due to increased revenues. EBITDA decreased from
$265,600 to $258,600, or by 2.6%, and increased from $700,500 to $819,300, or by
17.0%, for the three and nine months ended September 30, 1997 as compared to the
corresponding periods in 1996. EBITDA should be considered in
-11-
<PAGE> 12
ENSTAR INCOME PROGRAM IV-3, L.P.
RESULTS OF OPERATIONS (CONTINUED)
addition to and not as a substitute for net income and cash flows determined in
accordance with generally accepted accounting principles as an indicator of
financial performance and liquidity.
Depreciation and amortization expense decreased from $171,600 to
$119,100, or by 30.6%, and from $535,500 to $370,400, or by 30.8%, for the three
and nine months ended September 30, 1997 as compared to the corresponding
periods in 1996, due to certain plant assets becoming fully depreciated and
certain intangible assets becoming fully amortized.
Operating income increased from $94,000 to $139,500 and from $165,000
to $448,900 for the three and nine months ended September 30, 1997 as compared
to the corresponding periods in 1996, primarily due to increased revenues and
decreased depreciation and amortization as described above.
Interest income increased from $5,600 to $9,600, or by 71.4%, and
from $18,900 to $23,800, or by 25.9%, for the three and nine months ended
September 30, 1997 as compared to the corresponding periods in 1996, primarily
due to higher average cash balances available for investment and due to a change
in investment policy that yielded a higher return on invested cash.
Interest expense decreased from $14,200 to $3,800, or by 73.2%, and
from $28,600 to $9,100, or by 68.2%, for the three and nine months ended
September 30, 1997 as compared to the corresponding periods in 1996. During the
three months ended September 30, 1996, the Partnership fully amortized to
interest expense the remaining $10,000 of deferred loan costs related to its
note payable, which was repaid in February 1996.
The Partnership sold a building in June and recognized a gain on sale
of assets of $45,000 during the nine months ended September 30, 1997.
Due to the factors described above, the Partnership's net income
increased from $113,600 to $180,100 and from $221,900 to $602,100 for the three
and nine months ended September 30, 1997 as compared to the corresponding
periods in 1996.
DISTRIBUTIONS TO PARTNERS
The Partnership distributed $125,900 and $377,800 to its partners
during the three and nine months ended September 30, 1997, respectively. The
Joint Venture distributed $10,000 and $25,000 to the Partnership during the
three and nine months ended September 30, 1997, respectively.
THE MACOUPIN JOINT VENTURE
The Macoupin Joint Venture's revenues increased from $463,900 to
$501,100, or by 8.0%, and from $1,333,900 to $1,475,400, or by 10.6%, for the
three and nine months ended September 30, 1997 as compared to the corresponding
periods in 1996. Of the $37,200 increase in revenues for the three months ended
September 30, 1997 as compared to the corresponding period in 1996, $44,300 was
due to increases in regulated service rates that were implemented by the Joint
Venture in the fourth quarter of 1996 and the third
-12-
<PAGE> 13
ENSTAR INCOME PROGRAM IV-3, L.P.
RESULTS OF OPERATIONS (CONTINUED)
quarter of 1997. These increases were partially offset by a decrease of $4,100
due to decreases in the number of subscriptions for premium services and a
$3,000 decrease in other revenue producing items. Of the $141,500 increase in
revenues for the nine months ended September 30, 1997 as compared to the
corresponding period in 1996, $137,800 was due to increases in regulated service
rates, $24,700 was due to the restructuring of The Disney Channel from a premium
channel to a tier channel effective July 1, 1996 and $2,900 was due to increases
in other revenue producing items. These increases were partially offset by a
decrease of $23,900 due to decreases in the number of subscriptions for premium
services. As of September 30, 1997, the Macoupin Joint Venture had approximately
4,500 homes subscribing to cable service and 1,600 premium service units.
Service costs increased from $130,300 to $141,600, or by 8.7%, and
from $402,000 to $411,000, or by 2.2%, for the three and nine months ended
September 30, 1997 as compared to the corresponding periods in 1996. Service
costs represent costs directly attributable to providing cable services to
customers. The increase in the quarter was primarily due to higher personnel
costs and programming expense. The increase in the nine months was primarily due
to franchise fees and programming expense. Programming expense increased as a
result of higher rates charged by program suppliers. Franchise fees increased as
a result of revenue increases as discussed above.
General and administrative expenses increased from $15,500 to $49,000
and from $91,800 to $108,200 for the three and nine months ended September 30,
1997 as compared to the corresponding periods in 1996. The increase was
primarily due to an insurance premium service fee.
Management fees and reimbursed expenses increased from $64,000 to
$74,300, or by 16.1%, and from $178,800 to $218,800, or by 22.4%, for the three
and nine months ended September 30, 1997 as compared to the corresponding
periods in 1996. Management fees increased in direct relation to increased
revenues as described above. Reimbursed expenses increased primarily due to
higher allocated personnel costs.
Operating income before income taxes, depreciation and amortization
(EBITDA) is a commonly used financial analysis tool for measuring and comparing
cable television companies in several areas, such as liquidity, operating
performance and leverage. EBITDA as a percentage of revenues decreased from
54.8% to 47.1% and increased from 49.6% to 50.0% for the three and nine months
ended September 30, 1997 as compared to the corresponding periods in 1996. The
three month change was primarily due to higher insurance costs, as described
above, while the nine month change was primarily due to increased revenues.
EBITDA decreased from $254,100 to $236,200, or by 7.0%, and increased from
$661,300 to $737,400, or by 11.5%, for the three and nine months ended September
30, 1997 as compared to the corresponding periods in 1996. EBITDA should be
considered in addition to and not as a substitute for net income and cash flows
determined in accordance with generally accepted accounting principles as an
indicator of financial performance and liquidity.
Depreciation and amortization expense decreased from $152,700 to
$136,900, or by 10.3%, for the three months and increased from $457,700 to
$470,700, or by 2.8%, for the nine months ended September 30, 1997 as compared
to the corresponding periods in 1996. The decrease for the quarter was due to
certain intangible assets becoming fully amortized. The increase for the nine
months was due to a reduction in the estimated remaining life of existing
plant being replaced in the Joint Venture's Auburn franchise area.
-13-
<PAGE> 14
ENSTAR INCOME PROGRAM IV-3, L.P.
RESULTS OF OPERATIONS (CONTINUED)
Operating income decreased from $101,400 to $99,300, or by 2.1%, and
increased from $203,600 to $266,700, or by 31.0%, for the three and nine months
ended September 30, 1997 as compared to the corresponding periods in 1996. The
decrease for the quarter was primarily due to an increase in insurance costs.
The nine month increase was primarily due to increased revenues, as described
above.
Interest income, net of interest expense, increased from $500 to
$5,100, and from $9,800 to $13,800, for the three and nine months ended
September 30, 1997 as compared to the corresponding periods in 1996. The
increases were due to higher average cash balances available for investment in
1997 and due to a change in investment policy that yielded a higher return on
invested cash.
Due to the factors described above, the Joint Venture's net income
increased from $101,900 to $104,400, or by 2.5%, and from $214,000 to $280,500,
or by 31.1%, for the three and nine months ended September 30, 1997 as compared
to the corresponding periods in 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's primary objective, having invested its net offering
proceeds in cable systems and the Joint Venture, is to distribute to its
partners all available cash flow from operations and proceeds from the sale of
cable systems, if any, after providing for expenses, debt service and capital
requirements relating to the expansion, improvement and upgrade of its cable
systems. The Partnership relies upon the availability of cash generated from
operations and possible borrowings to fund its ongoing expenses and capital
requirements. In general, these requirements involve expansion, improvement and
upgrade of the Partnership's existing cable television systems.
In March 1997, the Partnership completed the initial construction
phase of the franchise-required rebuild of its Shelbyville, Illinois cable
system and the rebuild of its cable systems in surrounding communities. However,
completion of the entire project and the introduction of addressability will be
delayed until the 1998 completion of rebuild projects in other nearby
communities that involve consolidating the Shelbyville headend. Rebuild
expenditures totaled $96,200 in the first nine months of 1997. Total rebuild
costs are expected to approximate $300,000 in 1997.
Additionally, the Joint Venture is required to rebuild its Auburn,
Illinois cable system as a condition of its franchise agreement. Construction
began in July 1996 and is expected to be completed in the second half of 1997.
Capital expenditures related to the rebuild approximated $226,000 in 1996, with
additional construction costs of $153,000 projected for 1997. The Joint Venture
is also rebuilding portions of its cable systems in surrounding communities at
an estimated total additional cost of approximately $1,100,000, which includes
projected expenditures of approximately $650,000 in 1997 to complete the
project. Rebuild construction costs totaled approximately $447,200 in the nine
months ended September 30, 1997. The Partnership and the Joint Venture also
anticipate expenditures of $120,000 and $100,000, respectively, to upgrade other
assets in 1997. Management believes that existing cash and cash generated by
operations of the Partnership and Joint Venture will be adequate to fund capital
expenditures and the continued payment of distributions in 1997.
-14-
<PAGE> 15
ENSTAR INCOME PROGRAM IV-3, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Partnership paid distributions totaling $125,900 and $377,800
during the three and nine months ended September 30, 1997, respectively.
However, there can be no assurances regarding the level, timing or continuation
of future distributions.
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Operating activities provided $377,100 more cash during the nine
months ended September 30, 1997 than in the corresponding period in 1996. The
Partnership used $346,700 less cash to pay liabilities owed to the Corporate
General Partner and third-party creditors due to timing differences of payments
in the first nine months of 1997 as compared with the prior year period.
Partnership operations generated $125,900 more cash in the nine months ended
September 30, 1997 after adding back non-cash items consisting of depreciation
and amortization expense and deducting equity in net income of Joint Venture and
gain of sale of cable assets. Changes in accounts receivable, prepaid expenses
and other assets used $95,500 more cash in the nine months ended September 30,
1997 than in the corresponding prior year period, due to the timing of
receivable collections and the payment of prepaid expenses.
Investing activities used $64,800 more cash in the nine months ended
September 30, 1997 as compared with the prior year period. The change was
primarily due to a $325,000 decrease in distributions received from the Joint
Venture, partially offset by a decrease of $216,400 in capital expenditures, a
$43,500 increase in proceeds from the sale of certain partnership assets and a
$300 decrease in expenditures for intangible assets. The Partnership used
$383,200 less cash in financing activities during the first nine months of 1997
than in the corresponding 1996 period due to the repayment of its note payable
in February 1996.
INFLATION
Certain of the Partnership's and Joint Venture's expenses, such as
those for wages and benefits, equipment repair and replacement, and billing and
marketing generally increase with inflation. However, the Partnership does not
believe that its financial results have been, or will be, adversely affected by
inflation in a material way.
-15-
<PAGE> 16
ENSTAR INCOME PROGRAM IV-3, L.P.
PART II. OTHER INFORMATION
ITEMS 1-5. Not applicable.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibit 10.19 - Franchise Ordinance and related
documents thereto granting a non-exclusive
community antenna television system franchise for
the City of Auburn, IL.
(b) No reports on Form 8-K were filed during the
quarter for which this Report is filed.
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ENSTAR INCOME PROGRAM IV-3, L.P.
a GEORGIA LIMITED PARTNERSHIP
-----------------------------
(Registrant)
By: ENSTAR COMMUNICATIONS CORPORATION
General Partner
Date: November 12, 1997 By: /s/ Michael K. Menerey
----------------------------
Michael K. Menerey,
Chief Financial Officer
<PAGE> 18
ENSTAR INCOME PROGRAM IV-3, L.P.
EXHIBIT INDEX
Exhibit
Number Description
10.19 Franchise Ordinance and related documents thereto granting a
non-exclusive community antenna television system franchise
for the City of Auburn, IL.
E-1
<PAGE> 1
EXHIBIT 10.19
ORDINANCE NUMBER 1038-95
CABLE TELEVISION ORDINANCE
CITY OF AUBURN, ILLINOIS
<PAGE> 2
TABLE OF CONTENTS
Sec. 1. Short title........................................................1
Sec. 2. Intent and purposes................................................1
Sec. 3. Definitions........................................................2
Sec. 4. Grant of authority; Franchise required.............................8
Sec. 5. Franchise characteristics..........................................8
Sec. 6. Franchisee subject to other laws, police power.....................9
Sec. 7. Interpretation of Franchise terms.................................10
Sec. 8. Applications for grant, renewal, modification
or transfer of Franchises.........................................10
Sec. 9. Grant of Franchises...............................................14
Sec. 10. Insurance; surety; indemnification................................16
Sec. 11. Security fund.....................................................18
Sec. 12. Minimum facilities and services...................................20
Sec. 13. Franchise fee.....................................................21
Sec. 14. Reports and records...............................................23
Sec. 15. Customer service requirements.....................................26
Sec. 16. Cable service and repair standards................................29
Sec. 17. Billing...........................................................31
Sec. 18. Refunds and credits...............................................32
Sec. 19. Subscriber's right upon failure of service........................32
Sec. 20. Notification Procedures...........................................33
Sec. 21. Reports to the grantor............................................35
Sec. 22. Identification of employees.......................................35
Sec. 23. Compliance procedure..............................................36
Sec. 24. Review by the grantor.............................................36
i
<PAGE> 3
Sec. 25. Escrow account....................................................37
Sec. 26. Verification of compliance........................................38
Sec. 27. Noncompliance with standards......................................38
Sec. 28. Discrimination prohibited.........................................38
Sec. 29. Use of right-of-ways..............................................39
Sec. 30. Subscriber privacy and unauthorized reception.....................41
Sec. 31. Technical standards...............................................41
Sec. 32. Enforcement remedies..............................................43
Sec. 33. Renewal of Franchise..............................................44
Sec. 34. Transfers.........................................................47
Sec. 35. Revocation or termination of Franchise............................48
Sec. 36. Arbitration.......................................................51
Sec. 37. Continuity of service mandatory...................................52
Sec. 38. Unlawful solicitation or acceptance of gifts......................53
Sec. 39. Rates.............................................................53
Sec. 40. Access facilities.................................................65
Sec. 41. Cable advisory committee..........................................66
Sec. 42. Performance evaluation............................................68
Sec. 43. Administration....................................................68
Sec. 44. Applicability.....................................................69
ii
<PAGE> 4
AN ORDINANCE OF THE CITY OF AUBURN, ILLINOIS TO PROVIDE FOR
THE REGULATION OF CABLE TELEVISION WITHIN THE CITY
BE IT ORDAINED by the City Council of the City of Auburn, Illinois as
follows:
Sec. 1. Short title.
This Ordinance shall be known and may be cited as the "Auburn Cable
Television Ordinance."
Sec. 2. Intent and purposes.
It is the intent of the City to promote the public health, safety, and
general welfare by providing for the grant of one or more Franchises for the
construction and operation of a cable system; to provide for the regulation of
each cable system; to provide for the regulation of each cable system by the
City; to provide for the payment of fees and other valuable consideration by a
Franchisee to the City for the privilege of using the public rights-of-way for
constructing and operating a cable system; to promote the availability of cable
service to City residents; to encourage the development of cable as a means of
communication between and among the members of the public and public
institutions; to encourage the development of competitive cable services; and to
encourage the provision of diverse information to the community over cable.
<PAGE> 5
Sec. 3. Definitions.
For the purpose of this Ordinance the following words and their
derivations have the meanings defined below. Words not defined herein are given
their meaning in Section 602 of the Cable Act (as hereinafter defined), 47
U.S.C. Section 522, and, if none, their common and ordinary meaning.
When not inconsistent with the context, words used in the present tense include
the future, words in the plural number include the singular number, and words in
the singular number include the plural number. The words "must" or "shall" are
mandatory and the word "may" is permissive.
(a) Access Channel means any channel set aside for public use,
educational use, or governmental use without a charge by the Franchisee for
channel usage.
(b) Application means a proposal to construct and operate a cable system
within the City, transfer a Franchise, renew a Franchise, or modify a Franchise.
An application includes the initial proposal plus all subsequent amendments or
supplements to the proposal and relevant correspondence.
(c) Basic Cable Rates means the monthly charges for a subscription to
the Basic Service Tier and the associated equipment.
(d) Basic Service Tier means a separately available service tier to
which subscription is required for access to any other tier of service,
including as a minimum, but not limited to, all Must-Carry Signals, all PEG
channels, and all domestic television signals other than superstations.
2
<PAGE> 6
(e) Benchmark means a per channel rate of charge for cable service and
associated equipment which the FCC has determined is reasonable.
(f) Cable Act means the Cable Communications Policy Act of 1984, 47
U.S.C. Section 521 et seq.
(g) Cable Act of 1992 means the Cable Television Consumer Protection
Competition Act of 1992.
(h) Cable Operator means any person or group of persons:
(1) who provide any Cable service over a Cable System and directly
or through one or more affiliates owns a significant interest in such a Cable
System; or
(2) who otherwise controls or is responsible for, through any
arrangement, the management and operation of such cable system.
(i) Cable Service means the one-way transmission of video or other
programming service to Subscribers together with any Subscriber interaction
provided in connection with such service.
(j) Cable System means a facility, consisting of a set of closed
transmission paths and associated signal generation, reception, and control
equipment that is designed to provide Cable Service which includes video
programming and which is provided to multiple Subscribers within the City. Such
term does not include (1) a facility that serves only to retransmit the
television signals of one (1) or more television broadcast stations; (2) a
facility that serves only Subscribers in one (1) or more multiple unit dwellings
under common ownership, control, or management,
3
<PAGE> 7
unless such facility uses any public right-of-way; (3) a facility of a common
carrier that is subject, in whole or in part, to the provisions of Title II of
the Communications Act of 1934, 47 U.S.C. Section 201 et seq., except that such
facility will be considered a cable system to the extent it is used in the
transmission of video programming directly to Subscribers; or (4) any facilities
of any electric utility used solely for operating its electric utility systems.
(k) Channel means a unit of Cable Service identified and selected by a
channel number or similar designation.
(l) City means Auburn, Illinois, in its present incorporated form or in
any form which may subsequently be adopted.
(m) City Clerk means the administrative officer of the City or designee.
(n) Control of a Franchisee or Applicant means the legal or practical
ability to direct the affairs of the Franchisee or applicant either directly or
indirectly, whether by contractual agreement or majority ownership of an
economic interest.
(o) Cost of Service Showing means a filing in which the Cable Operator
attempts to show that the Benchmark rate or the Price Cap is not sufficient to
allow the Cable Operator to fully recover the cost of providing the Basic
Service Tier and to continue to attract capital.
(p) Council means the City Council that is the legislative body of the
City.
4
<PAGE> 8
(q) Fair Market Value means the price that a willing buyer would pay to
a willing seller for a going concern based on the system valuation prevailing in
the industry at the time but with no value allocated to the Franchise itself.
(r) FCC means the Federal Communications Commission.
(s) Franchise means the right granted by the City to a Franchisee to
construct, maintain and operate a Cable System over, on, or under streets, roads
and all other public ways, easements and right-of-way within all or specified
areas of the City. The term does not include any license or permit that may be
required by other laws, ordinances or regulations of the City for the privilege
of transacting and carrying on a business within the City or for disturbing the
surface of any street or public thoroughfare.
(s) Franchise Agreement means a contract entered into in accordance with
the provisions of this subtitle between the City and a Franchisee that sets
forth the terms and conditions under which the Franchise will be exercised.
(t) Franchisee means any person granted a Franchise pursuant to this
Ordinance and who operates a Cable System within the City of Auburn, Illinois
pursuant to a Franchise Agreement with the City of Auburn, Illinois.
(u) Gross Revenues means all revenues derived by a Franchisee, or an
affiliated entity, from the operation of its cable system within the City,
including, but not limited to, revenues derived from Cable Service, home
shopping channels, institutional services, rental or lease of equipment,
installation fees or ancillary services.
5
<PAGE> 9
(v) Initial Basic Cable Rates means the rates that the Cable Operator is
charging for the Basic Service Tier, including charges for associated equipment,
at the time the City notifies the Cable Operator of the City's qualification and
intent to regulate Basic Cable Rates.
(w) Leased Access Channel means a Channel designated in accordance with
Section 612 of the Cable Act, 47 U.S.C. Section 532, for commercial use by
persons unaffiliated with the Franchisee.
(x) Must-Carry Signal means the signal of any local broadcast station
except superstations which is required to be carried on the Basic Service Tier.
(y) Normal Business Hours means those hours during which most similar
businesses in the community are open to serve customers. In all cases, "Normal
Business Hours" must include some evening hours at least one night per week
and/or some weekend hours.
(z) Normal Operating Conditions means those service conditions which are
within the control of the Franchisee. Those conditions which are not within the
control of the Franchisee include, but are not limited to, natural disasters,
civil disturbances, power outages, telephone network outages, and severe or
unusual weather conditions. Those conditions which are ordinarily within the
control of the Cable Operator include, but are not limited to, special
promotions, pay-per-view events, rate increases, regular peak or seasonal demand
periods, and maintenance or upgrade of the cable system.
(aa) Outage means a SERVICE INTERRUPTION which affects not less than 250
subscribers.
6
<PAGE> 10
(bb) Peg Channel means the Channel capacity designated for public,
educational, or governmental use, and facilities and equipment for the use of
that Channel capacity.
(cc) Person means any individual, corporation, partnership, association,
joint venture or organization of any kind and the lawful trustee, successor,
assignee, transferee or personal representative thereof.
(dd) Price Cap means the ceiling set by the FCC on future increases in
Basic Cable Rates regulated by the City, based on a formula using the GNP fixed
weight price index, reflecting general increases in the cost of doing business
and changes in overall inflation.
(ee) Reasonable Rates Standard means a per Channel rate that is at, or
below, the Benchmark or Price Cap level.
(ff) Service Interruption means loss of picture or sound on one or more
Channels.
(gg) Standard Installation means installations that are located up to 125
feet from the existing distribution system.
(hh) Subscriber means any person, firm or other entity who or which
subscribes to, for any purpose, a service provided by the Cable Operator by
means of or in connection with the Cable System.
(ii) Superstation means any non-local broadcast signal secondarily
transmitted by satellite.
(jj) System Malfunction means an equipment or facility failure that
results in the loss of satisfactory service on one or more Channels. A
Malfunction is major if renders unviewable two
7
<PAGE> 11
(2) or more Channels carrying off-the-air television signals, or a total of five
(5) Channels regardless of the signals carried, and it affects five (5) or more
Subscribers.
(kk) Transfer of a Franchise means any transaction in which (1) an
ownership or other interest in a Franchisee is transferred from one Person or
group of Persons to another Person or group of Persons so that control of the
Franchisee is transferred, or (2) the rights held by the Franchisee under a
Franchise Agreement are transferred or assigned to another Person or group of
Persons. A transfer is pro forma if it involves no significant change in the
ultimate Control of the Franchisee.
Sec. 4. Grant of authority; Franchise required.
The City may grant one or more Franchises in accordance with this
Ordinance. No person may construct or operate a Cable System in the City without
a current and valid Franchise granted by the City.
Sec. 5. Franchise characteristics.
(a) A Franchise authorizes use of the public rights-of-way for
installing and maintaining cable, wires, lines, and other facilities to operate
a cable system within the City, but does not expressly or implicitly authorize
the Franchisee to provide service to, or install cables, wires, lines, or any
other equipment or facilities upon private property without owner consent
(except for use of compatible easements pursuant to 47 U.S.C. Section 541(a)
(2)), or to use publicly or privately owned utility poles or conduits without a
separate agreement with the
8
<PAGE> 12
owners.
(b) A Franchise is nonexclusive and will not expressly or implicitly
preclude the issuance of other Franchises to operate cable systems within the
City or affect the City's right to authorize use of public rights-of-way to
other persons as it determines appropriate.
(c) A Franchise conveys no property right to the Franchisee or right to
renewal other than as may be required by state or federal law.
(d) A Franchise Agreement constitutes a contract between the Franchisee
and the City once it is accepted by the Franchisee. A Franchisee contractually
commits itself to comply with the terms, conditions and provisions of the
Franchise Agreement and with all applicable laws, ordinances, codes, rules,
regulations, and orders.
Sec. 6. Franchisee subject to other laws, police power.
(a) A Franchisee is subject to and must comply with all applicable
local, City, state and federal laws, ordinances, codes, rules, regulations, and
orders. A Franchisee is also subject to the City's police power in accordance
with Illinois law.
(b) A Franchisee or other person may not be excused from complying with
any of the terms and conditions of this Ordinance or a Franchise Agreement by
any failure of the City, upon one or more occasions, to require compliance or
performance.
(c) The City may, on its own motion or at the request of an applicant or
Franchisee for good cause shown, waive any requirement of this Ordinance.
9
<PAGE> 13
Sec. 7. Interpretation of Franchise terms.
(a) The provisions of this Ordinance will apply to a Franchise Agreement
as if fully set forth in the Franchise Agreement. The express terms of this
Ordinance will prevail over conflicting or inconsistent provisions in a
Franchise Agreement.
(b) The provisions of a Franchise Agreement will be liberally construed
in order to effectuate its purposes and objectives consistent with this
Ordinance and the public interest.
(c) A Franchise Agreement will be governed by and construed in
accordance with the laws of the State of Illinois.
Sec. 8. Applications for grant, renewal, modification or transfer of Franchises.
(a) An application must be filed with the City for grant of a new
Franchise, renewal of a Franchise under either the formal or informal procedures
in accordance with Section 626 of the Cable Act, 47 U.S.C. Section 546,
modification of a Franchise Agreement, or a transfer of a Franchise. An
applicant has the burden to demonstrate compliance with all requirements of this
Ordinance and of federal law.
(b) To be acceptable for filing, an application must be submitted in the
number of copies required by the City, be accompanied by the application filing
fee where required, conform to any applicable request for proposals, and contain
all required information. All applications must include the names and addresses
of persons authorized to act on behalf of the applicant with respect to the
application.
(c) All applications accepted for filing must be made
10
<PAGE> 14
available by the City for public inspection. The City shall advertise the
receipt of all accepted applications in accordance with standard procedure.
(d) An application of the grant of a new Franchise may be filed pursuant
to a request for proposals issued by the City or on an unsolicited basis. The
City, upon receipt of an unsolicited application, may issue a request for
proposals. If the City elects to issue a request for proposals upon receipt of
an unsolicited application, the applicant may submit an amended application in
response to the request for proposals, or may inform the City that its
unsolicited application should be considered in response to the request for
proposals, or may withdraw its unsolicited application. An application which
does not conform to the requirements of a request for proposals may be
considered non-responsive and returned.
(e) An application for the grant of a new Franchise must contain, at
minimum, the following information:
(1) Name and address of the applicant and identification of the
ownership and control of the applicant, including: the names and addresses of
the ten (10) largest holders of an ownership interest in the applicant, and all
known persons with five percent (5%) or more ownership interest; the persons who
control the applicant; all officers and directors of the applicant; and any
other business affiliation and cable system ownership interest of each named
person;
(2) An indication of whether the applicant, or any person
controlling the applicant, or any officer or major stockholder of the applicant,
has been adjudged bankrupt, had a
11
<PAGE> 15
Franchise Agreement revoked, or not renewed, or been found guilty by any court
or administrative agency of a violation of a security or antitrust law, or a
felony, or any crime involving moral turpitude; and, if so, identification of
any such person or entity and a full explanation of the circumstances;
(3) A demonstration of the applicant's technical, legal and
financial ability to construct and operate the proposed cable facility,
including identification of key personnel;
(4) A description of applicant's prior experience in cable
operations and identification of communities in which applicant or its
principals have, or had, a cable Franchise or an interest therein, including the
identification of litigation involving any such Franchisees and their
Franchising authorities;
(5) A detailed description of the physical facility proposed,
including Channel capacity, technical design, performance characteristics,
headend, and access facilities to be provided to satisfy the requirements of
Section 31;
(6) A description of the construction of the proposed system,
including an estimate of above-ground and below- ground mileage and its
location, the proposed construction schedule, a description, where appropriate,
of how services will be converted from existing facilities to new facilities,
and information on the availability of space on poles and conduits including,
where appropriate, an estimate of the cost of rearrangement of facilities to
accommodate such use;
(7) A description of the services to be provided initially,
including all broadcast and non-broadcast signals to be
12
<PAGE> 16
carried and all non-television services, and if services will be offered by
Tiers, identification of the signals and\or services to be included on each
Tier;
(8) The proposed rate structure including charges for each Service
Tier, installation, converters, and other equipment or services;
(9) A demonstration of how the proposal will reasonably meet the
future cable-related needs and interests of the community, including a
description of how the proposal will meet the needs described in any recent
community needs assessment conducted for the City;
(10) Pro forma financial projections for the first three (3) years
of the Franchise term, including statement of income, balance sheet, sources and
uses of funds, and schedule of capital additions, with all significant
assumptions explained in notes or supporting schedules;
(11) An affidavit of the applicant or authorized officer certifying
the truth and accuracy of the information in the application, and acknowledging
the enforceability of application commitments, and certifying that the proposal
meets all federal and state requirements; and
(12) Any other information necessary to demonstrate compliance with
the requirements of this Ordinance and information that the City may request of
the applicant.
(f) An application for modification of a Franchise must include, at
minimum, the following information:
(1) The modification requested;
13
<PAGE> 17
(2) The justification for the requested modification, including
the impact of the requested modification on Subscribers and others, and the
impact on the applicant if the modification is not approved;
(3) A statement whether the modification is sought pursuant to
Section 625 of the Cable Act, 47 U.S.C. Section 545, and, if so, a demonstration
that the requested modification meets the legal standards of 47 U.S.C. Section
545; and
(4) Any other information necessary for the City to make a
determination.
(g) An application for renewal of a Franchise must comply with the
requirements of Section 33.
(h) An application of approval of a transfer of a Franchise must comply
with the requirements of Section 34.
(i) To be acceptable for filing an application must be accompanied by a
Non-refundable filing fee in the following amount, as appropriate:
For a new Franchise: $10,000
For renewal of a Franchise: $ 4,000
For a transfer of a Franchise
(other than a pro forma
transfer): $ 2,000
For a modification of a
Franchise pursuant to
47 U.S.C.Section 545: $ 3,000
Sec. 9. Grant of Franchises.
(a) The City may grant a Franchise for a term not to exceed ten (10)
years to serve the City, however, nothing herein shall be construed to prevent
the granting of renewal options the
14
<PAGE> 18
total of which, when added to the initial term of the Franchise, would exceed
ten (10) years.
(b) The City may make the grant of a Franchise conditioned upon the
completion of construction within a prescribed time or upon the performance of
other specific obligations, specifying in the Franchise Agreement that failure
to timely comply with the condition will cause the Franchise to become subject
to revocation or termination as provided hereinafter.
(c) The evaluating an application for a new Franchise, the City shall
consider the applicant's character; the applicant's technical, financial, and
legal qualifications to construct and operate the proposed system; the nature of
the proposed facilities, equipment, and services; the applicant's record in
other communities; if any, and whether the proposal will meet anticipated
community needs and serve the public interest.
(d) Based upon the application, the written and oral testimony and other
material presented at a public hearing before the Council, and any other
information relevant to the application, the Council shall decide whether to
grant or deny a Franchise application.
(e) If the Council grants a Franchise application, the City Attorney and
the applicant must agree on the terms of a Franchise Agreement within ninety
(90) calendar days from the date of the resolution making the grant. This period
may be extended for good cause by the Council. If agreement is not reached with
the City Attorney within ninety (90) calendar days or if the period is not
extended by the Council, the Franchise grant will be
15
<PAGE> 19
null and void without further action by the City.
(f) The text of a proposed Franchise Agreement must be made available by
the City to the public and advertised as required by City procedure and/or
applicable state law.
(g) After complying with the requirements of subsections (c)-(f) above,
the Council shall, following a public hearing, approve or disapprove the
proposed Franchise Agreement by resolution.
(h) Prior to the Franchise becoming effective, the approved applicant
must demonstrate compliance with the surety, insurance and similar provisions of
the Franchise Agreement.
Sec. 10. Insurance; surety; indemnification.
(a) Unless a Franchise Agreement specifies otherwise, the following
insurance coverage shall be in force at all times during the Franchise period:
workmen's compensation insurance to meet all state requirements; and general
comprehensive liability insurance with respect to the construction, operation
and maintenance of a Cable System, including the operation of motor vehicles, in
the following minimum amounts:
(1) For bodily injury, including death, $1,000,000 for any one
person, and $5,000,000 for any one accident;
(2) For property damage $1,000,000; and
(3) For damages resulting from any liability of any nature that
may arise from or be occasioned by operation of the Cable System, including any
communication over the Cable System, excepting programming on government
Channels, $2,000,000.
16
<PAGE> 20
(b) All insurance policies shall name the City as an additional named
insured, shall be evidenced by a certificate of insurance showing, at a minimum,
the surety providing such insurance, all named insureds, the period of
insurance, the limits of coverage provided and the agency providing such
insurance and shall provide that no coverage provided under such policy shall be
canceled or terminated except upon not less than fifteen (15) days prior written
notice to the City.
(c) All insurance policies must be with sureties qualified to do
business in Illinois and in form approved by the City Attorney. The City may
require in a Franchise Agreement coverage and amounts in excess of the above
minimums.
(d) A Franchisee must, at its sole cost and expense, indemnify, hold
harmless, and defend the City, its officials, boards, commissions, agents and
employees, against any and all claims, suits, causes of action, proceedings and
judgments for damages or equitable relief arising out of the construction,
maintenance or operation of its Cable System regardless of whether the act or
omission complained of is authorized, allowed or prohibited by the Franchise
Agreement. This provision includes, but is not limited to, claims arising out of
copyright infringements or a failure by the Franchisee to secure consents from
the owners, authorized distributors, or licensees of programs to be delivered by
the Cable System.
(d) The Franchise Agreement may require the Franchisee to have in force
at all times a performance bond or an irrevocable letter of credit in an amount
as necessary to ensure faithful performance by the Franchisee of its obligation
under the
17
<PAGE> 21
Franchise Agreement. Such surety instruments must be provided by an entity
qualified to do business in the State of Illinois and in a form approved by the
City Attorney.
Sec. 11. Security fund.
(a) Prior to the Franchise becoming effective, the Franchisee must post
with the City a cash security deposit, in such form as the City, in its sole
discretion shall determine, in the minimum amount of $25,000 or such other
amount as specified in the Franchise Agreement to be used as a security fund to
ensure the faithful performance of all provisions of law and the Franchise
Agreement and compliance with all orders, permits and directions of the City,
and the payment by the Franchisee of any claims, liens or taxes due the City
which arise by reason of the construction, operation or maintenance of the
system.
(b) The City shall place the security deposit in an interest bearing
account. The interest will accrue to the benefit of the Franchisee but may not
be withdrawn; all interest will be added to and become part of the original
security fund during the term of the Franchise.
(c) If a Franchisee fails to pay the City any fees or taxes due,
liquidated damages, damages, or costs or expenses incurred by the City by reason
of any act or default of the Franchisee, or if the Franchisee fails to comply
with any provision of the Franchise Agreement that the City reasonably
determines can be remedied by an expenditure of the security fund, the City may,
withdraw that amount with any interest from the security fund. Prior to such
withdrawal, the City shall provide
18
<PAGE> 22
notice to the Franchisee of the intention to withdraw, the reason for such
withdrawal, the amount to be withdrawn and the intended date of such withdrawal.
Such notice shall be provided not less than ten (10) days prior to the intended
date of withdrawal.
(d) If the Franchisee objects to such withdrawal, it shall give written
notice as provided in the Franchise Agreement postmarked prior to the date of
such withdrawal and request arbitration of the withdrawal pursuant to Section 36
hereof.
(e) Within thirty (30) calendar days after notice to it that an amount
has been withdrawn by the City from the security fund, the Franchisee must
deposit a sum of money sufficient to restore the security fund to the original
amount. If the Franchisee fails to restore the security fund to the original
amount within thirty (30) calendar days, the entire security fund remaining may
be forfeited, and/or such failure may be considered a material breach of this
Ordinance and may be used as grounds for revocation of the Franchise.
(f) The security fund will become the property of the City in the event
the Franchise is revoked. The Franchisee is entitled to the return of the
security fund that remains following termination of the Franchise, less any
outstanding default or unpaid amounts owed to the City by the Franchisee.
(g) The rights reserved to the City with respect to the security fund
are in addition to all other rights of the City whether reserved by this
Ordinance or authorized by other law, and no action, proceeding or exercise of a
right with respect to such security fund will affect any other right the City
may have.
19
<PAGE> 23
(h) If the City is convinced that its interests can be comparably
protected by a surety device other than a security fund, a Franchise Agreement
may specify such alternative device and set for the terms and conditions of its
use.
Sec. 12. Minimum facilities and service.
(a) the following minimum requirements for facilities and services apply
to all Franchises. The City may require that a Franchise exceed these minimum
requirements.
(1) A Cable System constructed or rebuilt after the effective date
of this Ordinance must have a minimum capacity of seventy two (72) video
Channels available for immediate or potential use and have the capability for
two-way communications.
(2) A Cable System may be required to provide one or more access,
not to exceed four (4) channels, Channels for public, educational or
governmental access. In addition, the City may require a Franchisee to reserve
one or more additional Channels for present or future access use. If the City
determines that the use of existing access facilities warrants the activation of
such reserve Channels, the Franchisee shall activate them upon ninety (90) days
notice from the City. The City may require in a Franchise Agreement that the
Franchisee contribute to capital costs for access studios and related equipment
and facilities.
(3) A Cable System must provide channel space for programming upon
request, leased access as required by federal law.
(4) Service to public buildings may be required without charge as
set forth in the Franchise Agreement.
20
<PAGE> 24
(b) Unless a Franchise Agreement provides otherwise, a Franchisee must
make Cable Service available to every unserved non-commercial structure within
the Franchise service area. Where the Franchise service area is the entire City,
the Franchisee shall extend service to any annexed areas according to the
following schedule:
(1) For areas of territory annexed to the City of ______ acres or
more, the Franchisee shall extend service to such areas within
twelve (12) months of the date of annexation; or
(2) For those areas of less than _______ acres, the Franchisee
shall extend service to such annexed areas within six (6)
months of the date of annexation;
provided, however, the Franchisee is not required to extend service in areas
where the cable would pass fewer than thirty (30) homes per cable mile.
Sec. 13. Franchise fee.
(a) Unless a Franchise Agreement provides otherwise, a Franchisee, in
consideration of the privilege granted under a Franchise for the use of public
rights-of-way to construct and operate a Cable System, must pay to the City five
percent (5%) of the Franchisee's Gross Revenues derived from the operation of
its cable system within the City during the period of its Franchise. Franchise
fees are payable quarterly. A Franchisee must pay the Franchise fee due to the
City for the preceding quarter within forty five (45) calendar days of the end
of that quarter.
21
<PAGE> 25
(b) Any payment of Franchise fees to adjust for a shortfall in the
quarterly payments for the preceding year must be made no later than the filing
date for the annual financial statements. Adjustments for any overpayment will
be credited to subsequent quarterly payments.
(c) Unless a Franchise Agreement provides otherwise, Franchisee fee
payments shall be accompanied by a financial statement showing the Gross
Revenues received by the Franchisee during the period covered by the payments
and the number of Subscribers served at the end of the period.
(d) A Franchisee must file within three (3) months of the end of its
fiscal year the Franchisee's annual financial statements for the preceding year
audited by a Certified Public Accountant or certified as accurate by the
Franchisee's Chief Financial Officer. The Franchisee will bear the cost of the
preparation of such financial statements.
(e) The City may inspect and audit any and all books and records of the
Franchisee which contain information pertaining to the franchise, and recompute
any amounts determined to be payable under the Franchise. The cost of the audit
will be borne by the Franchisee if the annual payment to the City has been
underpaid by more than five percent (5%) as disclosed by the audit.
(f) In the event that a Franchise payment is not received by the City on
or before the due date, interest will be charged from the due date at an
interest rate of one and one half percent (1 1/2%) per month. In addition, the
Franchisee will pay a late charge of five percent (5%) of the amount of such
payment.
22
<PAGE> 26
Interest and late charges will not be imposed for any payment necessary as a
result of the yearly adjustment provided for in subsection (b) above, if the
payment to correct for a shortfall does not exceed ten percent (10%) of the
total payments made during the year. In the event such payment exceeds ten
percent (10%) of the total payments made during the year, the Franchisee will be
liable for interest and late charges for the entire amount due.
(g) When a Franchise terminates for whatever reason, the Franchisee must
file with the City within ninety (90) calendar days of the date its operations
cease a financial statement, audited by a CPA or certified by the Franchisee's
Chief Financial Officer, showing the Gross Revenues received by the Franchisee
since the end of the previous fiscal year. Adjustments will be made at that time
for Franchise fees due to the date that the Franchisee's operations ceased.
Sec. 14. Reports and records.
(a) Within three (3) months of the close of its fiscal year, a
Franchisee must file with the City an annual report that includes the following
information:
(1) A summary of the previous calendar year's activities in
development of the system, including but not limited to services begun or
dropped, number of Subscribers (including gains and losses), homes passed, and
miles of cable distribution plants in service. The summary shall also include a
comparison of any construction, including system upgrades, during the year with
any projections previously provided to the City.
23
<PAGE> 27
(2) A financial statement, including a statement of income, a
balance sheet, and where the Franchisee is in a significant construction phase,
a statement of sources and applications of funds. The statement shall include
notes that specify all significant accounting policies and practices upon which
it is based. A summary shall be provided comparing the current year with
previous years since the beginning of the Franchise.
(3) A copy of updated maps depicting the location of all trunks
where there was construction in the year of the report.
(4) A summary of complaints, identifying the number and nature of
complaints and their disposition. Where complaints involve one or more recurrent
system problems, the nature of each problem and what steps have been taken to
correct it shall be identified. More detailed information on complaints shall be
submitted upon request of the City.
(5) If the Franchisee is a corporation, a list of officers and
members of the board and the officers and board members of any parent
Corporation; and where a parent Corporation's stock is publicly traded, a copy
of its most recent annual report.
(6) A list of all partners or stockholders holding five percent
(5%) or more ownership interest in the Franchisee and any parent corporation;
provided, however, when any such entity has fewer than ten (10) persons holding
five percent (5%) ownership interest, the ten (10) largest such holders.
Alternatively, the annual ownership information required by the
24
<PAGE> 28
FCC for broadcast licensees may be supplied.
(7) A copy of all the Franchisee's commercial policies and
practices applicable to Subscribers and users of the Cable System.
(b) A Franchisee must maintain a complete set of books and records
available for inspection upon reasonable prior notice by the City during normal
business hours.
(c) Upon written request of the Franchisee and approval by the City
Attorney, information of a proprietary nature submitted to the City pursuant to
this Ordinance or a Franchise Agreement will not be made available for public
inspection.
(d) The Franchisee shall provide to the City a copy of all filings of
the Franchisee or affiliated entity made with the Federal Communications
Commission, the Securities Exchange Commission, or other federal agency where
such filings involve matters that affect, or could affect, the operation of the
Franchised Cable System or the Franchisee's capability to carry out its
obligations under the Franchise Agreement and this Ordinance.
(e) For the purposes of subsections a-5, 6 and 7 hereof, a notarized
statement of an officer of the Franchisee stating that no changes in the
information requested therein have occurred since the date of the last report
shall be conclusively deemed to be compliance with such subsections. Such
notarized statement shall specifically refer to those subsections which are
unchanged and shall be provided in lieu of court required therein.
25
<PAGE> 29
Sec. 15. Customer service requirements.
(a) A Franchisee must maintain within fifty (50) miles of the City a
business office open during normal business hours with a listed local toll-free
telephone number and employ a sufficient number of telephone lines to allow
reasonable access by Subscribers and members of the public. When the business
office is closed, an answering machine or service capable of receiving service
complaints and inquiries must be employed.
(b) A Franchisee must have available at all times personnel, equipment
and procedures capable of locating and correcting major system malfunction.
Major system malfunctions must be corrected without delay. Corrective action for
all other malfunctions must be initiated not later than the next business day
after the Subscriber service call is received, and must be completed as promptly
as possible.
(c) A Franchisee must provide each Subscriber at the time Cable Service
is installed written instructions for placing a service call, filing a
complaint, or requesting an adjustment. Each Subscriber must also be provided
with a schedule of the Subscriber's rates and charges, a copy of the service
contract, delinquent Subscriber disconnect and reconnect procedures, and a
description of any other of the Franchisee's policies in connection with its
Subscribers.
(d) A Franchise must maintain a complete record of service complaints
received and action taken. These records must be open to the City for inspection
during normal business hours. Such records must be retained for not less than
two (2) years.
26
<PAGE> 30
(e) Upon termination of cable service by a subscriber, a cable system
operator shall give a subscriber the opportunity to acquire the wiring at the
replacement cost, with the cost to be determined based on the replacement cost
per foot of the cabling multiplied by the length in feet of the cable home
wiring. If the subscriber declines to acquire the cable home wiring, the cable
system operator must then remove it within 30 days, or make no subsequent
attempt to remove it or to restrict its use.
(f) If warranted in the City's judgment, the City may adopt regulations
governing customer service so as to assure prompt, courteous or responsive
treatment of the public by a Cable Operator.
(g) The Franchisee shall maintain a customer service center and bill
payment locations which provide the necessary facilities, equipment and
personnel to comply with the following customer service standards under normal
operating conditions:
(1) Sufficient trained customer service representatives and
toll-free telephone line capacity during normal business hours to assure that
calls will be answered before the fifth ring, and all callers for service will
not be required to wait in excess of thirty (30) seconds before being connected
to a service representative and if the call needs to be transferred, transfer
time shall not exceed thirty (30) seconds. Franchisee shall be deemed in
compliance with this section when the standard has been met no less than ninety
(90) percent of the time on all calls, measured on a quarterly basis.
(2) Emergency toll free telephone line capacity on a 24-hour
basis, including weekends and holidays.
27
<PAGE> 31
(3) After normal business hours, the access line may be answered
by a service or an automated response system, including an answering machine,
inquiries received after normal business hours must be responded to by a trained
company representative on the next business day.
(4) Under normal operating conditions the customer will receive a
busy signal less than three (3) percent of the time.
(5) The Franchisee will not be required to acquire equipment or
perform surveys to measure compliance with the telephone answering standards
above unless an historical record of complaints indicates a clear failure to
comply.
(6) A customer service center and bill payment locations, within
the Franchise area, open during normal business hours and conveniently located
and adequately staffed to accept Subscriber payments and respond to service
requests and complaints.
(7) An emergency system maintenance and repair staff, capable of
responding to and repairing major system malfunction on a 24-hour basis.
(8) An installation staff, normally capable of standard
installation service to any Subscriber within seven (7) business days after the
order has been placed, in all areas where trunk and feeder cable have been
activated. In no event shall the time to install or initiate a new service
exceed thirty (30) days from the date of receipt of a request, in all areas
where trunk and feeder cable have been activated. Franchisee shall be deemed in
compliance with this section when the standard has been met no
28
<PAGE> 32
less than ninety-five (95) percent of the time on all calls for service,
measured on a quarterly basis.
Sec. 16. Cable Service and repair standards.
(a) Franchisee shall render efficient service, make repairs promptly,
and interrupt service only for good cause and for the shortest time possible.
Scheduled interruptions, on trunk and major electronic components, shall be
preceded by notice and shall occur during periods of minimum use of the system,
preferably between midnight and 6:00 a.m.
(b) Franchisee shall maintain a written log, or an equivalent, stored in
computer memory and capable of access and reproduction in printed form, for all
service interruption; and requests for service that result in a service call.
(c) The Franchisee shall maintain a repair force of technicians capable
of responding to Subscriber requests for service within the following time
frames:
(1) For a system outage: Within two hours, including weekend and
holidays, of receiving Subscriber calls or requests for service which identify a
system outage of all Channels, affecting at least ten (10) Subscribers of the
system.
(2) For an isolated outage: Within 24 hours, including weekend and
holidays, of receiving requests for service identifying an outage of all
Channels for any Subscriber.
(3) For inferior signal quality: Within 48 hours, including
weekend and holidays, of receiving a request for service identifying a problem
concerning picture or sound quality, affecting any Subscriber.
29
<PAGE> 33
(a) Franchisee shall be deemed to have responded to a
request for service under the provisions of this section when
a technician arrives at the service location and begins work
on the problem or otherwise responds to the request for
service.
(b) Franchisee shall be deemed in compliance with this
section when the standard has been met no less than
ninety-five (95) percent of the time on all calls for service,
measured on a quarterly basis.
(d) Unless excused, Franchisee shall identify the nature of the problem
within 24 hours of beginning work and resolve all Cable System related problems
within five (5) business days unless technically infeasible. Failure to resolve
Cable System related problems within thirty (30) days pursuant to this section
shall be a material violation of this section.
(e) The "appointment window" alternatives for installations, service
calls, and other installation activities will be either a specific time or, at
maximum, a four-hour time block during normal business hours. The Franchisee may
schedule service calls and other installation activities outside of normal
business hours for the express convenience of the customer.
(f) If a customer misses a service call, a new date for the repair must
be given within ten (10) business days which include Monday through Friday, 8:00
a.m. to 5:00 p.m. If an employee of the Franchisee misses a service call, a new
date for repair shall be made at the customer's convenience and in accord
30
<PAGE> 34
with the Franchisee's business hours.
(g) A Franchisee may not cancel an appointment with a customer after the
close of business on the business day prior to the scheduled appointment.
(h) If a Franchisee representative is running late for an appointment
with a customer and will not be able to keep the appointment as scheduled, the
customer will be contacted. The appointment will be rescheduled, as necessary at
a time which is convenient for the customer.
(i) The Franchisee will initiate prompt corrective action if any is
needed to satisfy unresolved complaints. If a customer is not satisfied with the
solution of a complaint, the customer shall automatically be referred to a
management person. Local management shall work with the person to resolve the
problem within forty-eight (48) hours.
(j) Customers shall receive a copy of the service report and a phone
number to call to resolve any additional problems at the time the service is
completed.
Sec. 17. Billing.
(a) Subscribers shall receive a monthly statement with a date for
payment due.
(b) All statements shall clearly denote a postmark or initiated date of
bill.
(c) A phone number for bill adjustment shall be printed on the
statement.
(d) The statement shall clearly state the dates of service for which the
Subscriber is being billed.
31
<PAGE> 35
(e) Billing complaints shall be resolved within a reasonable time but in
no event shall resolution of the billing complaints exceed a maximum of thirty
(30) days from receipt of a written complaint by the Subscriber.
(f) Late payment charges and the time of institution shall be clearly
stated.
(g) Bills will be clear, concise and understandable. Bills must be fully
itemized, with itemizations including, but not limited to, basic and premium
service charges and equipment charges. Bills will also clearly delineate all
activity during the billing period, including optional charges, rebates and
credits.
Sec. 18. Refunds and credits.
(a) Refund checks will be issued promptly, but no later than either of
the following:
(1) the customer's next billing cycle following resolution of the
request or thirty (30) days, whichever is earlier, or
(2) the return of the equipment supplied by the Cable Operator if
service is terminated.
(b) Credits for service will be issued no later than the customer's next
billing cycle following the determination that a credit is warranted.
Sec. 19. Subscriber's right upon failure of service.
(a) In the event that all service to any Subscriber is interrupted for
forty-eight (48) or more consecutive hours except
32
<PAGE> 36
for reasons beyond the control of the Franchisee and except in circumstances for
which prior approval of the interruption is obtained from the Franchisor, the
Franchisee shall provide a twenty (20) percent rebate of the monthly fees to
affected Subscribers upon the Subscriber's request.
(b) In the event that service to any Subscriber is interrupted for one
hundred twenty (120) or more consecutive hours, except for reasons beyond the
control of the Franchisee and except in circumstances for which prior approval
of the interruption is obtained from the Franchisor, the Franchisee shall
provide a one hundred (100) percent rebate of the monthly fees to affected
Subscribers upon the Subscriber's request.
(c) For purposes of computing the time of interrupted service, said time
shall begin when a complaint for interrupted service is received by the
Franchisee or when the Franchisee has actual or constructive notice of the
interruption.
Sec. 20. Notification procedures.
(a) The Franchisee shall, at the time service is initiated, and
thereafter at least annually or at any time upon request, provide the customer
with written information covering:
(1) The time allowed to pay outstanding bills.
(2) Grounds for termination.
(3) Steps taken before termination.
(4) How customers may resolve billing disputes.
(5) Steps necessary to restore service.
(6) The fact that customer service representatives and service
technicians shall identity themselves.
33
<PAGE> 37
(7) The fact that customers have the right to speak to a
supervisor.
(8) The time frame for resolving reception and billing problems.
(9) The appropriate regulatory authority with whom to register a
complaint and a listed phone number.
(10) The address of the regional office to whom complaints may be
forwarded in the event a customer is dissatisfied.
(11) Charges for late payment or returned checks.
(12) Products and services offered.
(13) Prices and options for programming services and conditions of
subscription to programming and other services.
(14) Installation and service maintenance policies.
(15) Instructions on how to use the Cable Service.
(16) Channel positions of programming carried on the system.
(b) Subscribers will be notified of any changes in rates, programming
services or Channel positions as soon as possible through announcements on the
Cable System and in writing. Notice must be given to Subscribers a minimum of
thirty (30) days in advance of such changes if the change is within the control
of the Cable Operator. In addition, the Cable Operator shall notify Subscribers
thirty (30) days in advance of any significant changes in the other information
required in subsection (1) above.
34
<PAGE> 38
Sec. 21. Reports to the Franchisor.
(a) The Franchisee shall notify the Franchisor of the resolution of all
complaints received by the Franchisor on a semi-annual basis, or upon earlier
written request of Franchisor, information shall be provided within five (5)
business days.
(b) The Franchisee shall notify the Franchisor of all outages, system
malfunctions & service interruptions location of the occurrence, and the homes
affected on a semi-annual basis, or upon earlier written request of Franchisor,
information shall be provided within five (5) business days.
(c) Upon the request of the Franchisor, the Franchisee shall make a
written report of an Outage within the Franchise area within 48 hours.
(d) The Franchisee shall notify the Franchisor through a semi-annual
report, or upon earlier written request of Franchisor, information shall be
provided within five (5) business days, giving a breakdown during normal
business hours of phone statistics on all phone lines for customer service and
repair.
Sec. 22. Identification of employees.
(a) Every officer, agency or employee of the Franchisee or its
contractors or subcontractors shall wear on their outer clothing an
identification card bearing their name and photograph. Franchisee shall account
for all identification cards at all times. Every service vehicle of the
Franchisee shall be clearly identified on sight to the public as working for the
Franchisee.
35
<PAGE> 39
Sec. 23. Compliance procedure.
(a) Franchisee shall establish written procedures for receiving, acting
upon and resolving Subscriber complaints without intervention by the Franchisor.
The written procedures shall prescribe the manner in which a Subscriber may
submit a complaint whether orally or in writing specifying the Subscriber's
grounds for dissatisfaction. Said procedures shall provide that the Franchise
shall provide a copy of the subscriber complaint and the Franchise response and
resolution to the Alderman of the ward in which the complaining subscriber
resides. These procedures shall comply with all standards and specifications of
this chapter. Franchisee shall file a copy of these procedures with the
Franchisor.
Sec. 24. Review by the Franchisor.
(a) For the purposes of this Section, unless otherwise indicated, the
power of the Franchisor to act in accordance with the powers conferred in this
Section is delegated to an Alderman who represents the ward in which the
complaining subscriber has service by the Franchiser or has a principal
residence.
(b) The Franchisor may determine, de novo, upon a review of a Subscriber
complaint and the Franchisee's decision, if any, whether further action is
warranted. In the event the Franchisor does not initiate further proceedings
within fifteen (15) days of the filing of the complaint, the Franchisee's
proposed action or resolution shall be final. If the Franchisor decides to
initiate further investigation, the Franchisor shall allow the Franchisee and
the Subscriber to submit, within ten (10)
36
<PAGE> 40
days of notice thereof, a written statement of the facts and arguments in
support of their respective positions. The Franchisee or the Subscriber may
request in such statement that a hearing be conducted by the City Council of the
Franchisor. The City Clerk shall give notice in writing of the time and place
for such hearing. The hearing shall be conducted informally, and the parties may
offer any evidence pertinent to the dispute. The parties shall provide any
additional evidence including testing reports from the Franchisee, which the
Franchisor may deem necessary to an understanding and determination of the
dispute. The Franchisor shall issue a written decision within fifteen (15) days
of receipt of the written statements, or if a hearing is requested, within
fifteen (15) days of the conclusion of the hearing, setting forth the basis of
the decision.
Sec. 25. Escrow account.
(a) The Franchisee shall establish an escrow account wherein a
Subscriber may deposit a disputed portion of the Subscriber's monthly service
charge. If a Subscriber either continues to make full and timely payment of all
monthly service charges to Franchisee or deposits any disputed portion of such
monthly service charges into said escrow account, Franchisee shall not
discontinue service during the pendency of a complaint submitted under the
provisions of this chapter. Any amount deposited in the escrow account shall be
paid to the Franchisee or Subscriber in accordance with a final determination of
a complaint.
37
<PAGE> 41
(b) Franchisee shall advise all Subscribers, in writing, of these escrow
provisions.
Sec. 26. Verification of compliance.
Upon five (5) business days' notice, the Franchisee shall establish
its compliance with any or all of the standards required in this ordinance. The
Franchisee shall provide sufficient documentation to permit the Franchisor to
verify the compliance.
Sec. 27. Noncompliance with standards.
(a) A repeated and verifiable pattern of noncompliance with the consumer
protection standards of this ordinance after Franchisee's receipt of due notice
and an opportunity to cure, may be termed a material violation of this chapter.
Franchisor, at its option, may direct Franchisee to add sufficient personnel
and/or telephone lines and related equipment to insure compliance. Franchisor
reserves the right to utilize any other lawful remedy as well.
Sec. 28. Discrimination prohibited.
(a) Unless approved by the City and to the extent consistent with
federal law, no Franchisee may in its rates or charges, or in the availability
of the services or facilities of its system, or in any other respect, make or
grant undue preferences or advantages to any Subscriber or potential Subscriber
to the system, or to any user or potential user of the system, nor subject any
such persons to any undue prejudice or any
38
<PAGE> 42
disadvantage.
(b) A Franchisee must not deny Cable Service to any potential
Subscribers because of the income of the residents of the area in which the
Subscribers reside.
Sec. 29. Use of right-of-ways.
(a) A Franchisee must utilize, with the owner's permission, existing
poles, conduits or such other facilities whenever possible. Copies of agreements
for use of poles, conduits or other facilities must be filed with the City upon
City request.
(b) All transmission lines, equipment and structures must be installed
and located to cause minimum interference with the rights and reasonable
convenience of property owners. The City may from time-to-time issue such
reasonable rules and regulations concerning the installation and maintenance of
the Cable System installed in the public rights-of-way as may be consistent with
this Ordinance and the Franchise Agreement.
(c) Suitable safety devices and practices as required by local, City,
state and federal laws, ordinances, regulations and permits must be used during
construction, maintenance and repair of a Cable System.
(d) A Franchisee must remove, replace or modify at its own expense the
installation of any of its facilities within any public right-of-way when
required to do so by the City to allow it to change, maintain, repair or improve
a public thoroughfare.
(e) On streets and roads where electrical and telephone utility wiring
are located underground, either at the
39
<PAGE> 43
time of initial construction or subsequently, the cable must also be located
underground at the Franchisee's expense. Between a street or road and a
Subscriber's residence, the cable must be located underground if either
electrical and telephone utility wiring are located underground. If electric or
telephone utility wiring is aerial, a Franchisee may install aerial cable except
where a property owner or resident requests underground installation and agrees
to bear the additional cost over aerial installation.
(f) A Franchisee must obtain any required permits before causing any
damage or disturbance to public thoroughfares or private property as a result of
its construction or operations and must restore to their former condition such
private property and public thoroughfares, the latter in a manner approved by
the City. If such restoration is not satisfactorily performed within a
reasonable time, the City, or the property owner in the case of private property
may, after prior notice to the Franchisee, cause the repairs to be made at the
expense of the Franchisee.
(g) A Franchisee may trim trees within public rights-of-way at its own
expense as necessary to protect its wires and facilities, subject to any
direction that may be provided by the City. Trees on private property may be
trimmed with the consent of the property owner.
(h) At the request of any person holding a valid building moving permit
and upon sufficient notice, the Franchisee must temporarily raise, lower or cut
its wires as necessary to facilitate such move upon not less than 72 hours
advance notice. The direct expense of such temporary changes, including standby
40
<PAGE> 44
time, must be paid by the permit holder and the Franchisee may require payment
in advance.
Sec. 30. Subscriber privacy and unauthorized reception.
(a) A Franchisee must protect the privacy of all Subscribers pursuant to
the provisions of Section 631 of the Cable Act, 47 U.S.C. Section 551. A
Franchisee must not condition Subscriber service on the Subscriber's grant of
permission to disclose information which, pursuant to federal law, cannot be
disclosed without the Subscriber's explicit consent.
(b) It is unlawful for any person to intercept or use any video, voice,
or data signal transmissions over a Cable System, unless such interception or
use is authorized by the Franchisee or other person having the lawful right to
authorize the reception or use.
Sec. 31. Technical standards.
(a) Any Cable System constructed within the City must meet or exceed
technical standards consistent with this Ordinance, the Franchise Agreement, and
the Franchisee's application. The system must be capable of delivering all
National Television Systems Committee (NTSC) color and monochrome standards
signals and designed to provide picture quality of TASO grade 2 or better and
superior reliability. All television signals transmitted on a Cable System must
include any closed captioning information for the hearing impaired. Antennas,
supporting structures, and outside plant used in the system must be designed to
comply with the recommendations of the Electronics Industries Association on
41
<PAGE> 45
tower structures and outside plant.
(b) All construction, installation and maintenance must comply with the
National Electrical Safety Code, the National Electric Code, the standards of
the Occupational Safety and Health Administration, all state and local
regulations, and good and accepted industry practices. Close coordination with
public and private utilities or any other Cable Operator in the area, and the
use of accepted practices and procedures, is required to avoid damage or adverse
impact on existing or planned facilities.
(c) At the stages of any construction specified in the Franchise
Agreement, the Franchisee must perform at its expense proof of performance tests
designed to demonstrate compliance with the requirements of this Ordinance, the
Franchise Agreement, and FCC requirements. The Franchisee must provide the proof
of performance test results promptly to the City.
(d) The Franchisee shall provide to the City copies of all "proof of
performance" tests reports filed by the Franchisee with the Federal
Communications Commission.
(e) The Franchisee must advise the City when a proof of performance test
is scheduled so that the City may have an observer present.
(f) A Franchisee must not design, install or operate its facilities in a
manner that will interfere with the signals of any broadcast station, the
electrical system located in any building, the cable system of another
Franchisee, or individual or master antennas used for receiving television or
other broadcast signals.
42
<PAGE> 46
Sec. 32. Enforcement remedies.
(a) The City has the right to apply any one or combination of the
following remedies in the event a Franchisee violates any provision of the law
or its Franchise Agreement:
(1) Impose liquidated damages in such amount, whether per day,
incident, or other measure of violation, as provided in the Franchise Agreement.
Payment of liquidated damages by the Franchisee will not relieve the Franchisee
of its obligation to meet the Franchise requirements.
(2) Reduce the duration of the Franchise on such basis as the City
determines is reasonable pursuant to the process specified in Section 35.
(3) Revoke the Franchise as provided for in Section 35.
(b) In determining which remedy or remedies are appropriate, the City
must take into consideration the nature of the violation, the person or persons
bearing the impact of the violation, the nature of the remedy required in order
to prevent further violations, and such other matters as the City determines are
appropriate. The City shall not impose any remedy without first giving the
Franchisee notice of the violation and a reasonable opportunity to cure it.
(c) In addition to or instead of any other remedy, the City may seek
legal or equitable relief from any court of competent jurisdiction.
43
<PAGE> 47
Sec. 33. Renewal of Franchise.
(a) If a Franchisee decides to initiate a formal Franchise renewal
process in accordance with Section 626(a)-(g) of the Cable Act, 47 U.S.C.
Section 546(a)-(g), it must notify the City within 30-36 months of the Franchise
expiration date. Upon such notification, or at the City's own initiative, the
City may commence the following process:
(1) The City shall review and evaluate the future cable-related
community needs and interests and the Franchisee's past performance. The review
and evaluation process must include opportunity for public comment.
(2) Immediately upon completion of the review and evaluation
process, the City must notify the Franchisee that it may file a renewal
application. The notice must specify the information to be included in the
renewal application and the deadline for filing the application, which must be
no earlier than sixty (60) calendar days following the date of the notice. If
the Franchisee does not submit a renewal application by the specified date, it
will be deemed not to be seeking renewal of its Franchise.
(3) Upon receipt of the renewal application, the City shall
publish notice of its receipt and may schedule one or more public meetings or
implement other procedures under which comments from the public on the
application may be received.
(b) In considering a renewal application, the City must consider
whether:
(1) The Cable Operator has substantially complied with the
material terms of the existing Franchise and with
44
<PAGE> 48
applicable law;
(2) The quality of the Cable Operator's service, including signal
quality, response to consumer complaints, and billing practices (but without
regard to the mix, quality, or level of Cable Services or other services
provided over the system) has been reasonable in light of community needs;
(3) The Cable Operator has the financial, legal and technical
ability to provide the services, facilities, and equipment set forth in its
proposal; and
(4) The Cable Operator's proposal is reasonable to meet the future
cable-related community needs and interests, taking into account the cost of
meeting such needs and interests.
(c) The Council shall hold at least one public hearing to consider the
application. An advisory committee or a committee of the Council may make
recommendations to the Council prior to its consideration, a copy of which
recommendations shall be made available to the Franchisee in advance of the
Council's consideration. Following the public hearing on the renewal
application, the Council must either:
(1) Pass a resolution agreeing to renew the Franchise, subject to
the negotiation of a Franchise Agreement satisfactory to the City and the
Franchisee, or
(2) Pass a resolution that makes a preliminary assessment that the
Franchise should not be renewed.
(d) the Council's action under subsection (c) above must be taken within
four months of the date of the renewal application notice to the Franchisee
required in subsection (a) (2) above.
45
<PAGE> 49
(e) If a preliminary assessment is made that a Franchise should not be
renewed, at the request of the Franchisee or on its own initiative, the City
must commence an administrative proceeding in accordance with Section 626(c) of
the Cable Act, 47 U.S.C. Section 546(c).
(f) The City shall commence an administrative proceeding, initiated by a
Hearing Order which establishes the issues to be addressed in the hearing and
the procedures to be followed and appoints a presiding officer for the hearing.
Upon the completion of the hearing, the presiding officer shall issue a
recommended decision. Parties to the hearing and the public shall have thirty
(30) calendar days to comment on the recommended decision after its issuance.
(g) Based on the recommended decision, the comment and arguments
presented, and other evidence of record, the Council, following a public
hearing, shall make a final determination on whether to grant or deny the
renewal application. The Council shall issue a written decision setting forth
the reasons for its decision.
(h) The provisions of subsections (a)-(g) above notwithstanding, a
Franchisee may submit a proposal for renewal of a Franchise in accordance with
47 U.S.C. Section 546(h). The City must hold one or more public hearings or
implement other procedures under which comments on the proposal from the public
may be received. Following such public hearings or other procedures, the Council
shall determine whether the Franchise should be renewed in the terms and
conditions of any renewal. In making its determination the Council shall not
consider the pendency of any
46
<PAGE> 50
other application for a Franchise.
(i) Once the Council grants a renewal application, the City and the
Franchisee must agree on a Franchise Agreement, pursuant to the procedures
specified in Section 9(e)-( g), before the renewal becomes effective.
(j) If renewal of a Franchise is denied, the City may acquire ownership
of the Cable System or effect a transfer of ownership of the system to another
person upon the Agreement of the owner of the facilities and approval of the
Council. Any such acquisition by the City must be a fair market value,
determined on the basis of the Cable System valued as a going concern but with
no value allocated to the Franchise itself.
(k) If renewal of a Franchise is denied and the City does not purchase
the cable system, the City may require the former Franchisee to remove its
facilities and equipment. If the former Franchisee fails to do so within a
reasonable period of time, the City may have the removal done at the former
Franchisee's and/or surety's expense.
(l) Notwithstanding any provision of this section, the City Council may,
suspend, by majority vote at a regularly schedule meeting, the renewal
provisions contained herein and direct the Mayor or a committee to be appointed
by the Mayor to negotiate the terms and conditions of a renewal Franchise
Agreement with the Franchisee.
Sec. 34. Transfers.
(a) A transfer of a Franchise must not occur without prior approval of
the City.
47
<PAGE> 51
(b) An application to transfer a Franchise must meet the requirements of
Section 8 and provide complete information on the proposed transaction,
including details on the legal, character, financial, technical and other
pertinent qualifications of the transferee, and on the potential impact of the
transfer on Subscriber rates. At minimum, the information required in Section
8(e)(1)-(4) must be provided by the proposed transferee. The information
required in Section 8(e)(5)-(10) must also be provided whenever the proposed
transferee expects material changes to occur in those areas. Transfer
applications should be filed at least ninety (90) days prior to the anticipated
date of the proposed transaction.
(c) Final action on an application for transfer of a Franchise must be
taken by the Council. In making a determination on such an application, the
Council will consider the legal, financial, technical and character
qualifications of the transferee to operate the system and whether operation by
the transferee would adversely affect the Cable Services to Subscribers or
otherwise be contrary to the public interest.
(d) Approval by the City of a transfer of a Franchise does not
constitute a waiver or release of any of the rights of the City under this
Ordinance or the Franchise Agreement.
Sec. 35. Revocation or termination of Franchise.
(a) A Franchise may be revoked by the Council for failure to construct
as required, operate or maintain the Cable System as required by this Ordinance
or the Franchise Agreement or for other material breach of this Ordinance or the
Franchise
48
<PAGE> 52
Agreement. Notwithstanding all other provisions of this Section, where the City
has issued a Franchise specifically conditioned upon the completion of
construction or other specific obligation by a specified date pursuant to
Section 9(b), failure of the Franchisee to complete construction or comply with
other specific obligation as required will result in the automatic forfeiture of
the Franchise without further action by the City, unless the City, at its
discretion and for good cause demonstrated by the Franchisee, grants an
extension of time. For all other material breaches of this Franchise, within
thirty (30) calendar days following written notice from the City to the
Franchisee that it is in material breach of this Ordinance or the Franchise
Agreement, the Franchisee has not taken corrective action or corrective action
is not being actively and expeditiously pursued, the Council, acting on its own
motion or upon the recommendation of the Mayor, may give written notice to the
Franchisee of its intent to consider revocation of the Franchise or reducing its
term, stating its reasons.
(b) Before final action can be taken, the Council shall hold a public
hearing at which time the Franchisee and members of the public must be given an
opportunity to present evidence and make argument. Following the public hearing
the Council shall determine whether or not to revoke the Franchise or reduce its
term based on any recommended decision, the evidence and argument presented at
the hearing, and other evidence of record. The Council's determination shall be
reflected in a written opinion setting forth the reasons for its decision.
49
<PAGE> 53
(c) Any Franchise may, at the option of the City, be revoked one hundred
twenty (120) calendar days after an assignment for the benefit of creditors or
the appointment of a receiver or trustee to take over the business of the
Franchisee whether in a receivership, reorganization, bankruptcy assignment for
the benefit of creditors, or other action or proceeding, unless within that one
hundred twenty (120) day period:
(1) Such assignment, receivership or trusteeship has been vacated;
or
(2) Such assignee, receiver or trustee has fully complied with the
terms and conditions of this Ordinance and the Franchise Agreement and has
executed an Agreement, approved by the court having jurisdiction, assuming and
agreeing to be bound by the terms, and conditions of the Franchise.
(d) In the event of foreclosure or other judicial sale of any of the
facilities, equipment or property of a Franchisee, the City may revoke the
Franchise by serving notice upon the Franchisee and the successful bidder at the
sale, in which event the Franchise and all rights and privileges of the
Franchise will be revoked thirty (30) calendar days after serving such notice,
unless:
(1) The City has approved the transfer of the Franchise to the
successful bidder; and
(2) The successful bidder has covenanted and agreed with the City
to assume and be bound by the terms and conditions of the Franchise.
(e) If the City revokes a Franchise, or if for any other reason a
Franchisee abandons, terminates or fails to operate
50
<PAGE> 54
or maintain service to its Subscribers, the following procedures and rights are
effective:
(1) The City may require the former Franchisee to remove its
facilities and equipment. If the former Franchisee fails to do so within a
reasonable period of time, the City may have the removal done at the
Franchisee's and/or surety's expense.
(2) The City, by resolution of the Council, may acquire ownership
of the Cable System at an equitable price.
(3) If a Cable System is abandoned by a Franchisee, the City may
sell, assign or transfer all or part of the assets of the system.
(f) Upon non-renewal revocation or forfeiture of a Franchise. The City
may, upon resolution of the Council, acquire ownership of and operate a Cable
System.
Sec. 36. Arbitration.
(a) If the City exercises a right to purchase a Cable System pursuant to
this Ordinance or a Franchise Agreement and the City and Franchisee are unable
to agree on a price for the purchase of the system, the price may be determined
by arbitration. Other matters that are arbitrable under the provisions of a
Franchise Agreement or this Ordinance may be subjected to the arbitration
procedures specified below.
(b) The arbitration procedure employed shall be consistent with the
rules and procedures of the American Arbitration Association. The City and the
Franchisee will each select a qualified arbitrator. The two (2) persons selected
shall select a third qualified arbitrator, and the three (3) arbitrators
51
<PAGE> 55
will constitute a panel whose decision is binding on both parties. The fees of
the first two (2) arbitrators shall be paid by the party selecting such person,
and the third person shall be compensated one-half by the City and one-half by
the Franchisee. Payment of all other costs of the proceeding shall be determined
by the arbitrator.
Sec. 37. Continuity of service mandatory.
(a) It is the right of all Subscribers to receive all available services
from the Franchisee as long as their financial and other obligations to the
Franchisee are satisfied.
(b) In the event of a termination or transfer of the Franchise for
whatever reason, the Franchisee must do everything in its power to ensure that
all Subscribers receive continuous, uninterrupted service regardless of the
circumstances. The Franchisee must cooperate with the City to operate the system
for a temporary period following termination or transfer as necessary to
maintain continuity of service to all Subscribers. The temporary period will not
exceed six (6) months without the Franchisee's written consent. During such
period the Cable System must be operated under such terms and conditions as the
City and the Franchisee may, agree or such other terms and conditions that will
continue, to the extent possible, the same level of service to Subscribers and
that will provide reasonable compensation to the Cable Operator.
(c) If the Franchisee discontinues service to its Subscribers without
City approval, the Franchise may immediately be terminated, and the City is
empowered to occupy take possession
52
<PAGE> 56
of all facilities and property, real and personal, related to the Cable System
for the purpose of temporarily operating the system. The City may undertake such
operation itself or authorize operation by a contractor.
Sec. 38. Unlawful solicitation or acceptance of gifts.
It is unlawful for any person to offer any gift, favor, loan, service,
promise, employment or anything of value to a City official or employee, or for
a City official or employee to solicit or accept any such thing of value, for
the purpose of influencing the grant, modification, renewal, transfer, or any
other matter affecting a Franchise or the administration or enforcement of this
Ordinance.
Sec. 39. Rates.
A. Initial review of Basic Cable Rates
(1) Notice. Upon the adoption of this ordinance and the
certification of the City by the FCC, the City shall immediately notify all
Cable Operators in the City, by certified mail, return receipt requested, that
the city intends to regulate Subscriber rates charged for the Basic Service Tier
and associated equipment as authorized by the Cable Act of 1992.
(2) Cable Operator response. Within 30 days of receiving notice
from the City, a Cable Operator shall file with the City, its current rates for
the Basic Service Tier and associated equipment are within the FCC's reasonable
rate standard, as determined by the applicable benchmark, the City Council
shall:
53
<PAGE> 57
(a) Hold a public hearing at which interested persons may
express their views; and
(b) Act to approve the rates within 30 days from the date
the Cable Operator filed its Basic Cable Rates with the City.
(c) If the City Council takes no action within 30 days from
the date the Cable Operator filed its Basic Cable Rates with the City, the
proposed rates will continue in effect.
(3) Extended review period. If the Council is unable to determine
whether the rates in issue are within the FCC's reasonable rate standard based
on the material before it, or if the Cable Operator submits a cost-of-service
showing, the City Council shall, within 30 days from the date the Cable Operator
filed its Basic Cable Rates with the City and by adoption of a formal
resolution, invoke the following additional period of time, as applicable, to
make a final determination:
(a) 90 days if the City Council needs more time to ensure
that a rate is within the FCC's reasonable rate standard; or
(b) 150 days if the Cable Operator has submitted a
cost-of-service showing seeking to justify a rate above the applicable
benchmark.
(c) If the City Council has not made a decision within the
90 or 150 day period, the city council shall issue a brief written order at the
end of the period requesting the Cable Operator to keep accurate account of all
amounts received by reason of the proposed rate and on whose behalf the amounts
are paid.
54
<PAGE> 58
(4) Public hearing. During the extended review period and before
taking action on the proposed rate, the City Council shall not hold at least one
public hearing at which interested persons may express their views and record
objections.
(5) Objections. An interested person who wishes to make an
objection to the proposed initial basic rate may request the City Secretary to
record the objection during the public hearing or may submit the objection in
writing anytime before the decision resolution is adopted. In order for an
objection to be made part of the record, the objector must provide the City
Secretary with the objector's name and address.
(6) Benchmark analysis. If a Cable Operator submits its current
basic cable rate schedule as being in compliance with the FCC's reasonable rate
standard, the City Council shall review the rates using the benchmark analysis
in accordance with the standard for authorized by the FCC. Based on the City
Council's findings, the initial Basic Cable Rates shall be established as
follows:
(a) If the current Basic Cable Rates are below the
benchmark, those rates shall become the initial Basic Cable Rates and the Cable
Operator's rates will be capped at that level.
(b) If the current Basic Cable Rates exceed the benchmark,
the rates shall be the greater of the Cable Operator's per Channel rate on
September 30, 1992, reduced by 10 percent, or the applicable benchmark, adjusted
for inflation and any change in the number of Channels occurring between
September 30, 1992 and the initial date of regulation.
55
<PAGE> 59
(c) If the current Basic Cable Rates exceed the benchmark,
but the Cable Operator's per Channel rate was below the benchmark on September
30, 1992, the initial basic cable rate shall be the benchmark, adjusted for
inflation.
(7) Cost-of-service showings. If a Cable Operator does not wish to
reduce the rates to the permitted level, the Cable Operator shall have the
opportunity to submit a cost-of- service showing in an attempt to justify a
initial Basic Cable Rates above the FCC's reasonable rate standard. The City
Council will review a cost-of-service submission pursuant to FCC standards for
cost-of-service review. The City Council may approve initial Basic Cable Rates
above the benchmark if the Cable Operator makes the necessary showing; however,
a cost-of- service determination resulting in rates below the benchmark or below
the Cable Operator's September 30. 1992 rate minus 10 percent, will prescribe
the Cable Operator's new rates.
(8) Decision. By formal resolution. After completion of its review
of the Cable Operator's proposed rates, the City Council shall adopt its
decision by formal resolution. The decision shall include one of the following:
(a) If the proposal is within the FCC's reasonable rates
standard or is justified by a cost-of-service analysis, the City Council shall
approve the initial Basic Cable Rates proposed by the Cable Operator, or
(b) If the proposal is not within the FCC's reasonable rate
standard and the cost-of-service analysis, if any, does not justify the proposed
rates, the City Council shall establish initial Basic Cable Rates that are
within the FCC's
56
<PAGE> 60
reasonable rate standard or that are justified by a cost-of-service analysis.
(c) Rollbacks and refunds. If the City Council determines
that the initial Basic Cable Rates submitted exceed the reasonable rate standard
or that the Cable Operator's cost-of-service showing justifies lower rates, the
City Council may order the rates reduced in accordance with Paragraph (g) or (h)
above, as applicable. In addition, the City Council may order the Cable Operator
to pay to Subscribers, refunds of the excessive portion of the rates with
interest (computed at applicable rates published by the Internal Revenue Service
for tax refunds and the interest rate will be in accordance with FCC regulations
as directed in the City Council's decision resolution.
(d) Statement of reasons for decision and public notice. If
rates proposed by a Cable Operator are disapproved in whole or in part, or if
there were objections made by other parties to the proposed rates, the
resolution must state the reasons for the decision and the City Council must
give public notice of its decision. Public notice will begin by advertisement
once in the official newspaper of the City.
(9) Appeal. The City Council's decision concerning rates for the
Basic Service Tier or associated equipment, may be appealed to the FCC in
accordance with applicable federal regulations.
B. Review of request for increase in Basic Cable Rates
(1) Notice. A Cable Operator in the City who wishes to increase
the rates for the Basic Service Tier or associated
57
<PAGE> 61
equipment shall file a request with the City and notify all Subscribers at least
30 days before the Cable Operator desires the increase to take effect. This
notice may not be given more often than annually and not until at least one year
after the determination of the initial Basic Cable Rates.
(2) Expedited determination and public hearing. (1) If the City
Council is able to expeditiously determine that the Cable Operator's rate
increase request for basic Cable Service is within the FCC's reasonable rate
standard, as determined by the applicable Price Cap, the City Council shall:
(a) Hold a public hearing at which interested persons may
express their views; and
(b) Act to approve the rate increase within 30 days from the
date the Cable Operator filed its request with the City.
(c) If the City Council takes no action within 30 days from
the date the Cable Operator filed its request with the City, the proposed rates
will go into effect.
(3) Extended review period. If the City Council is unable to
determine whether the rate increase is within the FCC's reasonable rate standard
based on the material before it, or if the Cable Operator submits a
cost-of-service showing, the City Council shall, by adoption of a formal
resolution, invoke the following additional periods of time, as applicable, to
make a final determination:
(a) 90 days if the City Council needs more time to ensure
that the requested increase is within the FCC's reasonable rate standard as
determined by the applicable Price
58
<PAGE> 62
Cap; and
(b) 150 days if the Cable Operator has submitted a
cost-of-service showing seeking to justify a rate increase above the applicable
Price Cap.
(c) The proposed rate increase is tolled during the extended
review period.
(d) If the City Council has not made a decision within the
90 or 150 day period, the City Council shall issue a brief written order at the
end of the period requesting the Cable Operator to keep accurate account of all
amounts received by reason of the proposed rate increase and on whose behalf the
amounts are paid.
(4) Public hearing. During the extended review period and before
taking action on the requested rate increases, the City Council shall hold at
least one public hearing at which interested persons may express their views and
record objections.
(5) Objections. An interested person who wishes to make an
objection to the proposed rate increase may request the City Secretary to record
the objection during the public hearing or may submit the objection in writing
anytime before the decision resolution is adopted. In order for an objection to
be made part of the record, the objector must provide the City Secretary with
the objector's name and address.
(6) Delayed determination. If the City Council is unable to make a
final determination concerning a requested rate increase within the extended
time period, the Cable Operator may put the increase into effect, subject to
subsequent refund if the City Council later issues a decision disapproving any
portion of
59
<PAGE> 63
the increase.
(7) Price Cap analysis. If a Cable Operator presents its request
for a rate increase as being in compliance with the FCC's Price Cap, the City
Council shall review the rate using the Price Cap analysis in accordance with
the standard form authorized by the FCC. Based on the City Council's findings,
the Basic Cable Rates shall be established as follows:
(a) If the proposed basic cable rate increase is within the
Price Cap established by the FCC, the proposed rates shall become the new Basic
Cable Rates.
(b) If the proposed Basic Cable Rates increase exceeds the
Price Cap established by the FCC, the City Council shall disapprove the proposed
rate increase and order an increase that is in compliance with the Price Cap.
(8) Cost-of-service showing. If a Cable Operator submits a
cost-of-service showing in an attempt to justify a rate increase above the Price
Cap, the City Council will review the submission pursuant the FCC standards for
cost-of-service review. The City Council may approve a rate increase above the
Price Cap if the Cable Operator makes the necessary showing; however, a
cost-of-service determination resulting in a rate below the Price Cap or below
the Cable Operator's then current rate will prescribe the Cable Operator's new
rate.
(9) Decision. The City Council's decision concerning the requested
rate increase, shall be adopted by formal resolution. If a rate increase
proposed by a Cable Operator is disapproved in whole or in part, or if
objections were made by other parties to the proposed rate increase, the
resolution must
60
<PAGE> 64
state the reasons for the decision. Objections may be made at the public hearing
by a person requesting the City Secretary to record the objection or may be
submitted in writing at anytime before the decision resolution is adopted.
(10) Refunds. The City Council may order refunds of Subscribers'
rate payments with interest if:
(a) The City Council was unable to make a decision within
the extended time period as described in Paragraph (c) above; and
(b) The Cable Operator implemented the rate increase at the
end of the extended review period; and
(c) The City Council determines that the rate increase as
submitted exceeds the applicable Price Cap or that the Cable Operator failed to
justify the rate increase by a cost- of-service showing, and the City Council
disapproves any portion of the rate increase.
(d) The method of paying any refund and the interest rate
will be in accordance with FCC regulations as directed in the City Council's
decision resolution.
(11) Appeal. The City Council's decision concerning rates for the
Basic Service Tier or associated equipment, may be appealed to the FCC in
accordance with applicable federal regulations.
C. Cable Operator information
(1) City may require. (a) In those cases when the Cable Operator
has submitted initial rates or proposed an increase that exceeds the reasonable
rate standard, the City Council may
61
<PAGE> 65
require the Cable Operator to produce information in addition to the submitted,
including proprietary information, if needed to make a rate determination. In
these cases, a Cable Operator may request the information be kept confidential
in accordance with this section.
(b) In cases where initial or proposed rates comply with the
reasonable rate standard, the City Council may request additional information
only in order to document that the Cable Operator's rates are in accord with the
standard.
(2) Request for Confidentiality. A Cable Operator submitting
information to the City Council may request in writing that the information not
be made routinely available for public inspection. A copy of the request shall
be attached to and cover all of the information and all copies of the
information to which it applies.
(a) If feasible, the information to which the request
applies shall be physically separated from any information to which the request
does not apply. If this is not feasible, the portion of the information to which
the request applies shall be identified.
(b) Each request shall contain a statement of the reasons
for withholding inspection and a statement of the facts upon which those reasons
are based.
(c) Casual requests which do not comply with the
requirements of this subsection, shall not be considered.
(d) City Council action. Requests which comply with the
requirements of Subsection (b), will be acted upon the City Council. The City
Council will grant the request if the
62
<PAGE> 66
Cable Operator presents by a preponderance of evidence, a case for nondisclosure
consistent with applicable federal regulations. If the request is granted, the
ruling will be placed in a public file in lieu of the information withheld from
public inspection. If the request does not present a case for nondisclosure and
the City Council denies the request, the City Council shall take one of the
following actions:
(i) If the information has been submitted voluntarily
without any direction from the City, the Cable Operator may request that the
City return the information without considering it. Ordinarily, the City will
comply with this request. Only in the unusual instance that the public interest
so requires will the information be made available for public inspection.
(ii) If the information was required to be submitted by
the City Council, the information will be made available for public inspection.
(3) Appeal. If the City Council denies the request for
confidentiality, the Cable Operator may seek review of that decision from the
FCC within five working days of the City Council's decision, and the release of
the information will be stayed pending review.
D. Automatic rate adjustments
(1) Annual inflation adjustment. In accordance with FCC
regulations, the Cable Operator may adjust its capped base per Channel rate for
the Basic Service Tier annually by the final GNP-PI index.
63
<PAGE> 67
(2) Other external costs. The FCC regulations also allow the Cable
Operator to increase its rate for the Basic Service Tier automatically to
reflect certain external cost factors to the extent that the increase in cost of
those factors exceeds the GNP-PI. These factors include retransmission consent
fees, programming costs, state and local taxes applicable to the provision of
cable television service, and costs of Franchise requirements. The total cost of
an increase in a Franchise fee may be automatically added to the base per
Channel rate, without regard to its relation to the GNP-PI.
(a) For all categories of external costs other than
retransmission consent and Franchise fees, the starting date for measuring
changes in external costs for which the basic service per Channel rate may be
adjusted will be the date on which the Basic Service Tier becomes subject to
regulation or February 28, 1994, whichever occurs first. The permitted per
Channel charge may not be adjusted for costs of retransmission consent fees or
changes in those fees incurred before October 6, 1994.
(3) Notification and review. The Cable Operator shall notify the
City at least 30 days in advance of a rate increase based on automatic
adjustment items. The City shall review the increase to determine whether the
item or items qualify as automatic adjustments. If the City makes no objection
within 30 days of receiving notice of the increase, the increase may go into
effect.
64
<PAGE> 68
E. Enforcement
(1) Refunds. The City may order the Cable Operator to refund to
Subscribers a portion of previously paid rates under the following
circumstances:
(a) A portion of the previously paid rates have been
determined to be in excess of the permanent Tier charge or above the actual cost
of equipment; or
(b) The Cable Operator has failed to comply with a valid
rate order issued by the City.
(C) Fines. If the Cable Operator fails to comply with a rate
decision or refund order, the Cable Operator shall be subject to a fine of $500
for each day the Cable Operator fails to comply.
Sec. 40. Access facilities.
(a) Applications for a Franchise or Franchise renewal shall include
proposals for the provision of public, educational and governmental access
Channels sufficient to meet community needs during term of Franchise as
determined by City. A Franchisee or applicant shall specify what grants, if any,
it is willing to make for studio equipment and facilities to be used for local
program production by all cable access users.
(b) All access Channel operations must conform to the following minimum
requirements:
(1) the City may require that a Franchisee provide studio space
for access use. Access Channels shall be carried on the Franchisee's lowest
priced service offering.
65
<PAGE> 69
(2) The Franchisee shall have no control over the content of any
programming carried on access Channels. The City may require a Franchisee, or
select a non-profit corporation or other entity, to manage the access program
and to establish reasonable rules for the use of access Channels consistent with
the requirements of this Ordinance, the Franchise Agreement and the intended
purpose of such Channels. Such rules shall be subject to review and approval by
the City.
(3) The use of any public access Channel shall be made available to
any City resident on a nondiscriminatory basis at no charge of Channel use.
Where access studio facilities are located on a Franchisee's premises, the
Franchisee shall make its personnel available for consultation and assistance to
access uses at no charge provided that such personnel can be spared from their
normal duties.
(c) At the request of a Franchisee the City shall promulgate rules under
which Channel capacity dedicated to access use may be used by the Franchisee
when it is not being used for access purposes.
Sec. 41. Cable Advisory Committee.
(a) The City may establish a Cable Advisory Committee to advise it on
matters related to the use of Cable Systems and facilities. Unless otherwise
provided, any such committee shall consist of not less than three(3) nor more
than five (5) residents of the City appointed by the Mayor and confirmed by the
Council except that the Chairperson shall be an elected official. If such a
committee is to have a continuing or indefinite existence,
66
<PAGE> 70
members shall serve for overlapping terms of five (5) years, or until their
successors are appointed and confirmed. A vacancy on the committee shall be
filled for the unexpired term of the departing member.
(b) Each Franchisee shall have the right to participate in the Cable
Advisory Committee by the appointment of an ex-officio member of the Committee
who shall be at all times during such service an employee or officer of the
Franchisee. Such member shall be appointed by the Franchisee informing, in
writing, the Mayor of the person designated to act on behalf of the Franchisee
for such purpose. Upon receipt of such notification the Mayor shall inform the
Chairperson of the Cable Advisory Committee of the appointment of such
ex-officio member.
(c) An Advisory Committee shall advise the City on matters related to
the use of cable communications operations as specified by the Mayor or Council
at the time of its establishment. Its functions may be modified from
time-to-time by the Mayor or Council.
(d) Members of the Cable Advisory Committee shall receive no
compensation for their services except reasonable and necessary expenses as may
be provided in the budget. Ex-officio members of the Cable Advisory Committee
shall receive no compensation for their services and shall not be reimbursed for
any expenses in connection with participation in the Cable Advisory Committee.
67
<PAGE> 71
Sec. 42. Performance evaluation.
(a) The City may periodically evaluate the performance of a Franchisee
during the Franchise term. A Franchisee shall cooperate fully with these
evaluations and supply the City with all relevant information requested. If the
City desires to implement a survey of Subscribers in connection with its
evaluation of service, a Franchisee shall distribute the City's questionnaire to
its Subscribers. Any meetings between the City and the Franchisee for purposes
of evaluation shall be publicized in advance and open to the public.
(b) If evaluation indicates the need for modification to the Franchise
Agreement, the City shall attempt to negotiate the necessary changes. The City
shall issue a report to the Council of the results of the performance evaluation
and any recommended changes to the Franchise Agreement as negotiated with the
Franchisee.
(c) The Council may hold a public hearing on any performance evaluation
reports. Any Franchise Agreement modifications must be approved by the Council
before they become effective.
Sec. 43. Administration.
(a) The Chairperson of the Cable Advisory Committee shall have the
responsibility for overseeing the day-to-day administration of cable
communication operations within the City as governed by this Ordinance and the
applicable Franchise Agreement. The City Clerk shall be empowered to take all
administrative actions on behalf of the City except for those
68
<PAGE> 72
actions specified herein which are reserved to the Council or other named
entity.
(b) The Council has the sole authority to: grant Franchises, authorize
the execution of Franchise Agreements, modify Franchise Agreements, renew
Franchises, revoke Franchises, and authorize the transfer of Franchises. Where
this Ordinance or a Franchise Agreement specifies that a certain action will be
taken by the Council or other named City entity, that action is reserved to the
named entity.
(c) All filings and reports required of Franchisees or applicants
pursuant to this Ordinance or a Franchise Agreement shall be made with the City
Clerk unless otherwise specified.
Sec. 44. Applicability.
This Ordinance, or an amendment thereto, shall be applicable to all cable
Franchises issued by the City, whether or not such Franchises were issued prior
to the effective date of this Ordinance or an amendment thereto. However, this
Ordinance shall not act to unilaterally abrogate prior contractual commitments
of the City as contained in any Franchise Agreement.
PASSED and ADOPTED This 16th day of January, 1995.
APPROVED: /s/ Richard L. Hauversburk
----------------------------
Mayor
ATTEST: /s/ Joyce Lewis
------------------
City Clerk
DEPOSITED and FILED with me in my office this 16 day of January, 1995.
/s/ Joyce Lewis
--------------------
City Clerk
69
<PAGE> 73
CERTIFICATION
STATE OF ILLINOIS )
) SS
COUNTY OF SANGAMON )
I, Joyce Lewis, do hereby certify that I am the duly qualified and acting
Clerk of the City of Auburn, Sangamon County, Illinois, and as such, I am the
keeper of records, files and proceedings of the City Council of said City.
I do further certify that the foregoing and attached Ordinance is a full,
true and correct copy of the Ordinance entitled:
AN ORDINANCE OF THE CITY OF AUBURN, ILLINOIS
TO PROVIDE FOR THE REGULATION OF CABLE TELEVISION
WITHIN THE CITY
Said Ordinance was duly adopted by the City Council of the City of Auburn,
Sangamon County, Illinois, at a regularly convened meeting held on the 16th day
of January, 1995 as the same appears in the official records in my care and
custody.
IN WITNESS WHEREOF, I have hereunto affixed my signature and the official
seal of the City of Auburn, Sangamon County, Illinois, this 18 day of January,
1995.
(SEAL)
/s/ Joyce Lewis
- ---------------------------------
Joyce Lewis, City Clerk
<PAGE> 74
FRANCHISE AGREEMENT
THIS AGREEMENT, effective this 1st day of November, 1995, is between the
City of Auburn, Illinois ("City") and Enstar Communications Corporation and
ENSTAR INCOME PROGRAM II-2 L.P., ("Enstar").
WHEREAS, the City Council, at its meeting held on June 19, 1995 agreed to
renew Enstar's franchise pursuant to the terms reflected in this instrument to
which Enstar has agreed.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
contained herein, it is agreed as follows:
Section 1. Short Title. This Agreement may be referred to and cited as the
"Enstar Franchise Agreement."
Section 2. Definitions. Except as provided below, the terms, phrases,
words, and their derivations used in this Agreement shall have the meaning given
in the City's Cable Ordinance;
"Application" means seeking an extension of its franchise, its subsequent
renewal proposals, the public hearings held relevant to the proposed renewal,
and all related correspondence.
"Cable Ordinance" means City Ordinance No. 1038-95 which governs the
operation of a cable system under this Agreement.
"Grantee" or "Franchisee" means Enstar or its lawful successor, transferee
or assignee.
Section 3. Grant of Authority.
(a) There is hereby granted by the City to the Grantee the right and
privilege to construct, operate, maintain and extend a cable system to all
places within the City. The rights granted hereunder
<PAGE> 75
shall be non-exclusive and shall not be transferred or assigned without the
prior approval of the City as specified in the Cable Ordinance, which approval
shall not be unreasonably withheld.
(b) The Grantee shall have the right to use and occupy roads, streets,
alleys, public ways and easements for the purposes of installing its wires,
cables, and associated equipment in or on poles, by direct burial, or in
underground conduits as necessary for the operation of the cable system. This
authority, however, does not obviate the need for obtaining permits from the
City for construction involving the disturbance of public streets, sidewalks or
thoroughfares and for compliance with all City regulations and requirements
relative to construction and operation of facilities in the public
rights-of-way.
Section 4. Compliance with Applicable Laws and Ordinances. The Franchisee
shall, at all times during the life of this Agreement, be subject to all lawful
exercise of the police power by the City consistent with the Franchisee's
contractual rights and to such reasonable regulation as the City shall hereafter
provide, and shall be required to comply fully with all federal and state
statutes and regulations governing cable communications. The authority granted
under this Agreement is subject to the City's Cable Ordinance. By its acceptance
of the terms of this Agreement, the Grantee specifically agrees to also accept
and abide by the requirements of said Cable Ordinance, which requirements are
incorporated hereby by reference, and all subsequent amendments of the Cable
Ordinance provided that
2
<PAGE> 76
such amendments do not abrogate any contractual rights of the Grantee contained
herein.
Section 5. Provision of Service.
(a) 1. Consistent with the requirements of the Cable Ordinance, upon
request the Franchisee shall extend cable service to all residents within the
City limits as determined as of the effective date of this Agreement.
2. The Franchisee and the City agree that as of the date of this
Agreement certain residents of the City do not have cable service available. The
Franchisee and the City agree that the maps attached hereto as Exhibit "A"
display all locations not so served. The Franchisee agrees to provide cable
service to all locations depicted on said maps on or before February 28, 1996.
(b) The Franchisee shall extend service to each school and City building
passed by the cable system. No charge shall be made for installation or for
basic service, except the Franchisee may: 1.) charge for its cost of
installation if more than one connection is desired at each building; or 2.)
charge for that portion of the cost of installation which exceeds One Hundred
Dollars ($100.00). If during the term of this Agreement, new schools or other
public buildings are constructed within the City, the City may also require the
extension of service to such schools under the same terms and conditions as for
existing public buildings.
(c) The initial subscriber rates are to be as specified in Exhibit "A"
hereto. Subscriber rates may be later modified as
3
<PAGE> 77
provided for and as further defined by the Cable Ordinance by federal law or
regulation and as further defined by the Cable Ordinance.
(d) Regular basic service shall consist of a minimum of 12 channels. The
Franchisee shall create and provide such other categories of service as it may
deem necessary, except that the total number of channels available in all
categories of service shall not be less than 35 channels. The programming
carried shall be determined by the Franchisee; provided, however, the City may
suggest changes from time-to-time that it believes will better satisfy public
needs in terms of broad categories of programming.
(e) At intervals of no less than once a year, the Franchisee shall
provide to the City and all of its subscribers the currently applicable
subscriber information specified in Section 15(c) of the Cable Ordinance,
excepting a copy of the service contract.
Section 6. Liability and Indemnification.
(a) By its acceptance of this Agreement, the grantee specifically agrees
that it will indemnify and hold the City, including all its officials, employees
and agents, harmless against any and all claims arising out of the grant of this
franchise and the operation of Grantee's cable system. The Grantee shall pay all
expenses incurred by the City in defending itself against all such claims,
including all out-of-pocket expenses such as attorney and consultant fees, and
the reasonable value of any service rendered by the City Attorney or any
employees of the City.
(b) The Grantee shall maintain throughout the terms of this Agreement
comprehensive liability insurance insuring the City,
4
<PAGE> 78
including its officials, employees and agents, and the Grantee with regard to
all damages with respect to operations performed by, or on behalf of, the
Grantee in the minimum amounts specified in the Cable Ordinance.
(c) In lieu of the twenty five thousand dollars ($25,000) security fund
required by Section 11 of the Cable Ordinance, the Grantee may, within sixty
(60) days of the date of adoption of this Agreement, establish a security fund
in the amount of five thousand dollars ($5,000) and a performance bond in the
amount of twenty thousand dollars ($20,000), which shall be used for insuring
that the Grantee will fulfill and perform each term and condition of this
Agreement and the Cable Ordinance. In case of any breach of a condition hereof,
the amount of damages shall be withdrawn by the City from the security deposit
and then against any performance bond. Following the procedures prescribed in
the Cable Ordinance, the Franchisee shall replenish any amounts withdrawn from
the security fund and any applicable performance bond.
(d) Because the City will suffer damages from any violation of this
Agreement, which damages may be difficult to quantify, the City and the
Franchisee agree to the following schedule of liquidated damages:
(1) Failure to file reports or supply information as required -
$50 per day
(2) Failure to perform annual sweep and balance tests - $100 per
day.
5
<PAGE> 79
(3) Failure to perform maintenance and retain maintenance records
as required - $100 per day.
(4) Failure to maintain insurance or replenish security fund/
performance as required - $100 per day.
(5) Failure to achieve or maintain technical performance standards
- $100 per day.
(6) Failure to maintain customer service standards, - $50 per day.
(7) Other material violations - $100 per day that each violation
continues.
Before assessing the Franchisee for liquidated damages, the City shall give
written notification to the Franchisee in advance so that the Franchisee will
have notice of the violation and an opportunity to correct it. The liquidated
damages shall not commence accruing for uncorrected violations until the 30th
day following the date the notice was received by the Franchisee. A violation
will not constitute a breach of the Agreement nor shall liquidated damages
accrue where it occurs as a result of circumstances beyond its control.
(e) All insurance and bond instruments must be approved as to form by
the City Attorney prior to their effectiveness.
Section 7. Technical Requirements. The Grantee shall maintain and extend
its system so as to provide high quality signals and reliable service consistent
with the proposal contained in its Application. The system shall meet or exceed
any applicable technical performance standards of the FCC and the Cable
Ordinance.
6
<PAGE> 80
Section 8. Emergency Use of Facilities. In the case of any emergency or
disaster, the Grantee shall, upon request of the City, make available its
facilities to the City for emergency use during the emergency or disaster
period.
Section 9. Other Business Licenses. This Agreement authorizes only the
operation of a cable system as provided for herein, and does not take the place
of any other franchise, license, or permit which might be required of the
Grantee by law.
Section 10. Duration and Acceptance of Agreement. This Agreement and the
rights, privileges, and authority hereby granted shall take effect and be in
force from the effective date of this Agreement and shall continue in force
throughout its term provided that within sixty (60) days after the date of
adoption, the Grantee shall provide evidence of satisfactory compliance with
the security fund/performance bond and insurance requirement hereof. Failure of
the Grantee to do so within said time period shall operate to make this
Agreement null and void upon a majority vote of the City Council.
Section 11. Franchise Fee. As compensation to the City for the use made of
its roads, streets, and public thoroughfares, the Franchisee shall pay to the
City a franchise fee at the maximum allowable rate provided by law payable as
specified in the Cable Ordinance. The maximum allowable rate payable shall be
determined annually on September 1st of each year. In the event of a change in
the rate percentum to be paid, such charge shall become effective on the
succeeding January 1st. Enstar shall be permitted to itemize franchise fees on
its customer billings.
7
<PAGE> 81
Section 12. Customer Service. The Franchisee shall provide customer
service consistent with its Application and the provisions of the Cable
Ordinance.
Section 13. System Maintenance.
(a) The Franchisee shall maintain the system at the highest commercially
practical level of technical quality. To that end, it shall perform, at a
minimum, all tests required to be performed by a Cable Operator pursuant to FCC
regulations in effect on the effective date of this franchise.
(b) The Franchisee shall retain a copy of all maintenance logs and
records for a period of two years. Upon request of the City, the Franchisee
shall provide copies of such documentation to the City.
(c) No less than once a year the Franchisee shall perform a sweep and
balance of the system activities to ensure that the entire system is performing
as required.
Section 14. Conflicts.
(a) In the event of a conflict between this Agreement and the Cable
Ordinance, the Cable Ordinance shall prevail unless said Ordinance provides for
an exception in the Franchise Agreement or unless this Agreement explicitly
modifies or waives a provision of the Ordinance.
(b) Section 14(a)(2) of the Cable Ordinance is hereby modified to
require submission of financial statements based upon the method set forth
herein.
(1) The Franchisee shall file with the City Clerk within three (3)
months of its Fiscal Year a financial
8
<PAGE> 82
statement disclosing the income and expenses of the operations
undertaken pursuant to this Agreement.
(2) Such financial statement shall be prepared by the Chief
Financial Officer of the Franchisee and shall be sworn by him
to be true, correct and complete to the best of his personal
knowledge.
(3) Such financial statement shall be prepared as the basis of the
Enstar Income Program II-2, Hillsboro Region, or its successor
(the "Region").
(4) Such Financial Statement shall be calculated by multiplying
the results of operations for said Region by a fraction, the
numerator of which is the number of subscribers in the
Franchisee Territory as of the last day of the Fiscal Year
reported and the denominator of which is the number of basic
subscribers for the Region.
(5) In the event that the Franchisee commences accounting for
individual systems within the Region, such commencement shall
be deemed to be a relinquishment of the relief granted in this
subscription and the Franchisee shall notify the City of such
commencement by the method set forth in Section 16 hereof.
Section 15. Reimbursement of Expenses. Grantee agrees to reimburse the
City for the costs incurred by the City in connection with the renewal process
in the amount of $20,000.00. Such amount
9
<PAGE> 83
shall be paid to the City Clerk within 30 days of the date of this Agreement.
Section 16. Notices. All formal notices under this Agreement shall be
delivered by U.S. mail (certified or registered), or any courier service that
verifies the date of delivery and shall be considered given upon the date of
receipt. Notices sent to the City shall be addressed to the City Clerk with a
copy to the City Attorney. Notices sent to the Franchisee shall be addressed to
its local office to the attention of Regional Manager, Enstar Cable TV, 11
Clearing Avenue, P.O. Box 526, Taylorville, IL 62568 with a duplicate notice to
the attention of Senior Vice President, Enstar Communications Corporation, 10900
Wilshire Blvd., Suite 1500, Los Angeles, CA 90024.
Section 17. Miscellaneous Provisions.
(a) Whenever this Agreement shall set forth any time for an act to be
performed by or on behalf of the Franchisee, such time shall be deemed of the
essence.
(b) This Agreement may not be amended except by written instrument
executed by both parties hereto.
(c) This Agreement shall be interpreted under the laws of the State of
Illinois.
(d) If any provisions of this Agreement is found by any court,
government agency or other body having jurisdiction to be invalid, illegal or
unenforceable, the parties shall negotiate appropriate changes to such
provision, and the remaining provisions, to the extent practical, shall remain
in full force and effect.
10
<PAGE> 84
Section 18. Term of Agreement. This Agreement shall take effect as of
January 1, 1996, provided that such execution occurs on or before March 31,
1996, and one such executed copy is delivered to the City Clerk no later than
5:00 p.m., March 31, 1996. If not so executed and delivered in a timely manner,
this Agreement shall be null and void. Once effective, this Agreement shall
remain in effect until December 31, 2004, unless extended or renewed as provided
for in Section 19 hereof. Provided, however, if the requirements of Sections 6
and 15 are not satisfied within sixty (60) days of the date of adoption, this
Agreement shall become null and void.
Section 19. Renewal and Extension of Franchise granted hereunder.
(a) The franchise granted hereunder shall be extended for a term
commencing at 12:00 a.m., January 1, 2005 and expiring at 11:59 p.m., December
31, 2010, upon substantial compliance by the Franchisee with the material terms
and conditions set forth in this section.
(b) In the event the Franchisee has requested a transfer of the
franchise by the filing of an Application for Transfer of Franchise pursuant to
Section 8 of the Cable Ordinance or by any other procedure which resulted in a
transfer of the franchise pursuant to Section 34 of the Cable Ordinance, the
right to extend the franchise set forth in subsection (a) above may be
transferred to any transferee upon a majority vote of the City Council taken at
a regular meeting.
(c) In the event that the City Council has revoked or terminated the
franchise pursuant to Section 35 of the Cable Ordinance, the
11
<PAGE> 85
extension of said franchise set forth in subsection (a) above shall be null and
void.
(d) In the event the Franchisee is determined to have violated
subsection (c) of Section 37 or Section 38 of the Cable Ordinance, the extension
of said franchise set forth in subsection (a) above shall be null and void.
(e)
(1) The Franchisee shall seek such renewal and extension of the
franchise by submitting a notice to the City Clerk requesting such
extension not later than July 1, 2004. Said request shall include a sworn
affidavit of an officer of the company indicating that the Franchisee has
substantially complied with the material provisions of Sections 10 through
19 of the Cable Ordinance; has made payment of any and all sums due to the
City of Auburn; and, the amount paid as liquidated damages as provided for
in Section 6(d) provided herein.
(2) Upon receipt of such notice by the City Clerk, the Mayor and
City Council shall commence a Performance Evaluation as provided for in
Section 33 of the Cable Ordinance for the purpose of determining
substantial compliance with Sections 10 to 19 of the Cable Ordinance and
substantial compliance with subsections (b) through (d) hereof.
(3) In the event that the City Council finds, as a result of said
performance evaluation, that the Franchisee has substantially complied
with said sections, the City Council shall renew and extend the franchise
of the Franchisee through and
12
<PAGE> 86
including December 31, 2010 provided, however, that to obtain such
renewal, Franchisee must agree to pay to the City of Auburn franchise fees
at the maximum allowable rate imposed by law; and to pay all of the costs
incurred by the City of Auburn, not to exceed fifty percent (50%) of the
average annual franchise fee paid to the City hereunder, in conducting a
performance evaluation provided for herein; and, the execution of a
substantially similar franchise agreement setting forth the duties and
obligations of the parties.
(4) In the event that the City Council finds, as a result of said
performance evaluation, that the Franchisee has not substantially complied
with the provisions of this Section and all provisions of the Cable
Ordinance set forth herein, the extension said franchise set forth in
subsection (a) above shall be null and void.
(5) The City Council shall adopt procedural rules for conducting
the Performance Evaluation provided for herein. Said Rules shall provide
that the determinations and findings to be made in the subsections shall
be adopted only by a majority vote of the City Council at a regularly
scheduled meeting.
Section 20. Reconstruction of Existing System. Enstar agrees to upgrade
the distribution system for the provision of the services provided for herein as
set forth in this section.
The upgrade of said system shall begin not later than January 1, 1996,
which the parties agree that said upgrade has begun on a timely basis. The
upgrade of said system shall be completed within 18 months
13
<PAGE> 87
from the effective date of the franchise. The system upgrade shall be designed
to a 750 megahertz and constructed for 550 megahertz capacity operation. Enstar
shall upgrade the system by installing a fiber optic cable piggyback trunkline
throughout said system. The system shall be constructed not less than the same
technical standards and capacities as all other franchise territories that are
served by the Hillsboro region of Enstar and substantially in compliance with
Exhibit B hereto. Enstar shall periodically inform the City of the progress of
such upgrade work and provide monthly written status reports to the City on such
progress, including maps showing areas where such upgrade work is to be
performed.
Prior to the commencement of construction, Enstar shall obtain all
necessary permits, licenses or other authorization as required by all applicable
laws and ordinances and shall otherwise comply with all terms and conditions of
this franchise and the cable Ordinance concerning construction.
Section 21. Extension of Service to Newly Constructed Subdivisions.
Notwithstanding any other provision hereof, Enstar agrees to construct, install
and extend necessary facilities for the provision of cable television service to
any newly constructed subdivision (as hereinafter defined) constructed within
the corporate limits of the City or to be annexed to the City upon construction
as provided for in this section.
(A) For the purposes of this section, the following terms shall have the
following meanings:
14
<PAGE> 88
(1) "Subdivision" shall mean the division of any parcel of Real
Property into tracts, parcels, lots or blocks which requires
compliance with the Plat Act of the State of Illinois (765
ILCS 205/0.01 et seq.)
(2) "Final Plat" shall mean any document prepared and submitted by
any person and approved by the City Council in conformance
with the procedure set forth in Section 2 of the Plat Act.
(B) Upon approval of a Final Plat by the City Council, the City Clerk
shall notify Enstar of such approval and shall transmit to Enstar a copy of such
Final Plat in the same manner as any notice provided for pursuant to this
Franchise Agreement.
(C) Upon receipt of such Final Plat, Enstar shall commence all necessary
activity for the construction, installation and extension of its facilities for
cable television service to said subdivision.
(D) All facilities installed pursuant to this section shall be buried
underground unless Enstar obtains a waiver from the City Council for said
requirement.
(E) Where Enstar has entered into a valid cable burial agreement with
any utility provider other than the City of Auburn, Enstar shall be permitted to
place its facilities in burial trenches with such utility provider constructing
facilities in said subdivision. Enstar shall be prohibited from the burial of
any facilities in any excavation which is utilized by the City of Auburn for
burial of facilities for provision of natural gas, water or sewer service.
15
<PAGE> 89
(F) As a condition of approval of a subdivision, the City shall require
the party or parties developing said subdivision to notify Enstar of the date or
dates when burial trenches will be available for the installation of cable. Such
notice shall be given not less than fourteen (14) days nor more than thirty (30)
days prior to the date or dates that such trenches will be available. The City
agrees to take such additional action as may be necessary for the enforcement of
said conditions, including, but not limited to amendment of appropriate City
Ordinances.
(G) If Grantee is notified of the date burial trenches are available and
fails to install its conduit and/or cable when burial trenches are available,
and the burial trenches are thereafter closed the cost of new burial trenches is
to be borne by the Grantee, said construction to commence within ninety (90)
days after the date on which the burial trenches were available.
(H) If the Grantee is not notified of the date burial trenches are
available, the Grantee shall not be required to install its conduit, cable or
facilities in said subdivision until a minimum density of homes of 20 per cable
mile is reached.
(I) All costs of the installation, construction and extension of said
facilities shall be the sole responsibility of Enstar.
(J) The construction, installation and extension of said facilities
shall be in conformance with all applicable building, electrical, technical or
similar codes for the construction, installation or extension of similar
facilities now adopted or
16
<PAGE> 90
hereinafter adopted by the City of Auburn which are
applicable at the time of such construction, installation and extension.
(K) As additional consideration and an inducement to the City to enter
into this Franchise Agreement Enstar agrees to hold harmless the City for any
damage which occurs to the facilities installed, constructed or extended
pursuant to this section which is caused as a result of subsequent good faith
activities by the City, including excavations and hereby waives any right, cause
of action, claim or demand for compensation arising from any such damage. The
provisions of this subsection shall be deemed to constitute a separate contract
by and between Enstar and the City and such provisions shall survive the
expiration of the term, including subsequent extensions and renewals, of this
Franchise Agreement.
Section 22. Permits for Burial of Cable
Except for construction of cable facilities pursuant to Section 21 hereof,
Enstar shall obtain permits for the burial of cable on public rights-of-way
pursuant to this paragraph. Not less than thirty (30) days prior to the
commencement of any burial of cable on public rights-of-way, Enstar shall submit
to the Mayor a request for such permit which shall briefly describe the work to
be performed, the location of such work and the approximate dates such work is
to commence and be completed. Such request shall be accompanied by a sketch or
map showing the approximate path of such burial along with necessary
identification of the area of such burial.
Upon receipt of such request, the Mayor shall refer the request to the
appropriate city officials and committees for review and
17
<PAGE> 91
comment. Not later than thirty (30) days following the receipt of such request,
the Mayor shall issue a permit for such burial in the manner requested on with
such modification as may be necessary to avoid interference with other lawful
occupants of said rights-of-way. Nothing herein shall require Enstar to obtain a
permit for 1.) burial of cable which connects a service pedestal to a subscriber
premise; or, 2.) burial of cable pursuant to Section 21 hereof.
In addition to requirements for insurance of the operations of Enstar, the
following additional insurance restrictions shall apply during the period of
said upgrade as set forth in this paragraph. Prior to the commencement of
construction, Enstar shall post with the City Clerk a Construction Bond in the
amount of $100,000 conditioned upon the upgrade of the system in a workmanlike
manner in accordance with the standards set forth in this Franchise Agreement
and in the Cable Ordinance; and, a Performance Bond in the amount of $100,000
conditioned upon the completion of the system within the times and in accordance
with the specifications set forth herein. Additionally, Enstar shall cause the
City to be named as an additional named insured on any certificate of insurance
tendered by any contractor or subcontractor performing work in connection with
said upgrade as contemplated by this section. Enstar shall be obligated to
provide said certificates by the latter of 60 days after the commencement of the
upgrade or 60 days after the execution of any contract or subcontract for the
performance of upgrade work.
18
<PAGE> 92
Section 23. Public, Educational and Governmental Access Commitment.
Following completion of the Reconstruction of the System provided for in Section
20 hereof:
(a) Enstar agrees to make available to the City of Auburn and the
appropriate educational and public organizations one channel each for public,
educational and governmental access programming. Such channels shall be
activated by Enstar upon its receipt and approval of an appropriate proposal for
the provision of public, educational or governmental access programming, which
proposal includes an agreement to indemnify Enstar for liability incurred as a
result of programming content. Enstar agrees to cooperate with the City of
Auburn or any appropriate public or educational organization seeking activation
of an access channel and shall, to reasonable commercial limits, provide
assistance, technical expertise and other material as may be required for the
provision of access and programming.
(b) Enstar reserves the right to provide financial or material
assistance to the City of Auburn or any qualified public or educational
organization which Enstar, in its sole discretion, deems appropriate for such
assistance to enhance the provision of access services in the City of Auburn.
(c) Enstar recognizes the value of the provision of cable television
services as an educational tool in the schools within the school districts
located within the corporate boundaries of the City of Auburn. As a result of
such recognition, Enstar hereby covenants and agrees to provide free basic
service to said educational institutions now in existence and to any newly
constructed educational
19
<PAGE> 93
facility within the City of Auburn. In furtherance of said recognition, Enstar
further agrees to continue its participation in the "Cable in the Classroom"
program or any program providing similar substitute services, throughout the
term of this franchise and any extensions hereof.
20
<PAGE> 94
IN WITNESS WHEREOF, the parties hereto have set their hands and seals as
follows:
CITY OF AUBURN, ILLINOIS Attest:
By: /s/ Loren E. Boesdorfer /s/ Joyce Lewis
-------------------------- -----------------------------
Mayor City Clerk
Date: __________________________
ENSTAR COMMUNICATIONS CORPORATION Attest:
By: /s/ Howard Gan /s/ Danielle Millet
--------------------------- ------------------------------
Its V.P.
---------------------
Date: March 31, 1996
---------------------------
A fully executed copy of this Agreement was deposited and filed with the
City of Auburn, Illinois, on the 4 day of March, 1996.
/s/ Joyce Lewis
----------------------------
City Clerk
21
<PAGE> 95
(Effective: 4/1/96)
ENSTAR CABLE TV - Auburn, IL
<TABLE>
<S> <C>
CHANNEL LINE-UP-------------------- RATES----------------------
2 KTVI 2-FOX ST. LOUIS, MO BASIC $19.55
3 KSDK 5-NBC ST. LOUIS, MO TIER (=) 0.72
4 KMOV 4-CBS ST. LOUIS, MO SATELLITE PACKAGE 1 (+) 6.68
* 5 HBO BASIC ON ADDITIONAL OUTLET 0.00
* 6 CINEMAX
* 7 SHOWTIME INSTALLATION/SERVICE (per hr.) 45.00
8 ESPN INSTALL MATERIALS (if any) At Cost
9 KETC 9-PBS ST. LOUIS, MO REMOTE 0.11
10 WICS 20-NBC SPRINGFIELD,IL NON-ADDRESSABLE CONVERTER 0.86
11 KPLR-TV 11-IND ST. LOUIS, MO WIRE MAINTENANCE AGREEMENT 1.50
12 NICKELODEON CABLE PROGRAM GUIDE 1.75
13 THE WEATHER CHANNEL LATE PAYMENT FEE 1.50
* 14 THE DISNEY CHANNEL RETURNED CHECK FEE 15.00
15 LOCAL-CHARACTER GENERATED LOST/STOLEN CONVERTER EQUIP Prices Vary
16 LIFETIME DAMAGED CONVERTER EQUIPMENT Actual Cost
17 THE NASHVILLE NETWORK to Repair
18 WAND 17-ABC DECATUR, IL
19 WRSP-TV 55-FOX SPRINGFIELD, IL
20 WCFN 49-CBS SPRINGFIELD, IL
* 21 THE MOVIE CHANNEL PREMIUM SERVICES (*)-------------------------
22 USA NETWORK CINEMAX 8.45
+ 23 WTBS 17-IND ATLANTA, GA THE DISNEY CHANNEL 8.45
+ 24 TNT HBO 9.45
+ 25 WGN-TV THE MOVIE CHANNEL 8.45
+ 26 THE FAMILY CHANNEL SHOWTIME 8.45
+ 27 NEWSTALK TELEVISION ---------------------------------------------
= 28 CNN All Broadcast TV stations carried on a channel
= 29 THE DISCOVERY CHANNEL higher than 13 can only be received via cable
= 30 CNN HEADLINE NEWS through a converter box, unless you have a cable
31 QVC ready TV set. Converter boxes are available for
32 ARTS & ENTERTAINMENT rent at the low rate listed above.
33 COUNTRY MUSIC TV
34 MTV The above rates may not include applicable taxes
35 AMERICAN MOVIE CLASSICS fees and assessments. Any such amounts will be
36 E!-ENTERTAINMENT itemized on your bill.
37 NEW INSPIRATIONAL NETWORK
98 HOME SHOPPING NETWORK
99 C-SPAN
</TABLE>
EXHIBIT A
<PAGE> 96
AMENDMENT TO FRANCHISE AGREEMENT
WHEREAS, the City of Auburn, Illinois has previously entered into a
Franchise Agreement dated as of the 1st day of November, 1995 by and between
itself and Enstar Communications Corporation and Enstar Income Program II-2
L.P.; and,
WHEREAS, an error in the preparation of the Franchise Agreement has
erroneously identified the contracting party as "Enstar Income Program II-2
L.P."; and,
WHEREAS, the City of Auburn and Enstar Communications Corporation are
desirous of correcting the error to correctly identify the party who owns the
cable television system in the City of Auburn, Illinois;
IT IS NOW THEREFORE AGREED BY AND BETWEEN THE PARTIES AS FOLLOWS:
The parties hereto, the City of Auburn, Illinois and Enstar Communications
Corporation, hereby agree that the preamble of the Franchise Agreement is hereby
amended by deleting the words "Enstar Income Program II-2 L.P." and inserting in
lieu thereof the words "Enstar Cable of Macoupin/Carlinville Joint Venture."
This Amendment shall be effective as of the 1st day of November, 1995.
Enstar Communications Corporation hereby represents and warrants that it
has the lawful power and authority to execute the Franchise and this Amendment
on behalf of Enstar Cable of Macoupin/Carlinville Joint Venture.
All other terms and conditions of the Franchise are ratified as if fully
set forth herein.
<PAGE> 97
IN WITNESS WHEREOF, the parties hereto have set their hands and seals as
follows:
CITY OF AUBURN, ILLINOIS Attest:
By: /s/ Loren E. Boesdorfer /s/ Joyce Lewis
-------------------------- -------------------------
Mayor City Clerk
Date: 4-21-97
--------------------------
ENSTAR COMMUNICATIONS CORPORATION Attest:
By: /s/ Howard Gan /s/ Susan Spanknoble
--------------------------- -------------------------
Its V.P.
----------------------
Date: 5/18/97
----------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT SEPTEMBER 30, 1997, AND THE STATEMENTS OF OPERATIONS FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 769,500
<SECURITIES> 0
<RECEIVABLES> 27,900
<ALLOWANCES> 7,200
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 5,856,200
<DEPRECIATION> 4,276,700
<TOTAL-ASSETS> 3,783,700
<CURRENT-LIABILITIES> 435,400
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,783,700
<SALES> 0
<TOTAL-REVENUES> 1,988,900
<CGS> 0
<TOTAL-COSTS> 1,540,000
<OTHER-EXPENSES> 21,200
<LOSS-PROVISION> 35,400
<INTEREST-EXPENSE> 9,100
<INCOME-PRETAX> 602,100
<INCOME-TAX> 0
<INCOME-CONTINUING> 602,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 602,100
<EPS-PRIMARY> 14.94
<EPS-DILUTED> 0
</TABLE>
