<PAGE> 1
FORM 10-K 405
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
(FEE REQUIRED)
For the fiscal year ended December 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
(NO FEE REQUIRED)
For the transition period from to
--------------- ----------------
Commission file number: 0-14906
JONES CABLE INCOME FUND 1-B, LTD.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Colorado 84-1010417
(State of Organization) (IRS Employer Identification No.)
P.O. Box 3309, Englewood, Colorado 80155-3309 (303) 792-3111
(Address of principal executive office and Zip Code) (Registrant's telephone no. including area code)
</TABLE>
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
Indicate by check mark whether the registrants, (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days:
Yes x No
----- -----
Aggregate market value of the voting stock held by non-affiliates of the
registrant: N/A
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. x
---
DOCUMENTS INCORPORATED BY REFERENCE: None
<PAGE> 2
PART I.
ITEM 1. BUSINESS
THE PARTNERSHIP. Jones Cable Income Fund 1-B, Ltd. (the "Partnership") is a
Colorado limited partnership that was formed pursuant to the public offering of
limited partnership interests in the Jones Cable Income Fund 1 Limited
Partnership Program (the "Program"), which was sponsored by Jones Intercable,
Inc. (the "General Partner"). Jones Cable Income Fund 1-A, Ltd. and Jones Cable
Income Fund 1-C, Ltd. ("Fund 1-C") are the other partnerships that were formed
pursuant to the Program. The Partnership and Fund 1-C formed a general
partnership known as Jones Cable Income Fund 1-B/C Venture (the "Venture") in
which the Partnership owns a 40 percent interest and Fund 1-C owns a 60 percent
interest. The Partnership and the Venture were formed for the purpose of
acquiring and operating cable television systems.
The Partnership directly owns the cable television system serving the
community of Orangeburg, South Carolina (the "Orangeburg System"). The Venture
owns the cable television systems serving the communities of Brighton and
Broomfield and portions of Boulder County, Colorado (the "Brighton/Broomfield
System"), Clearlake Oaks, California (the "Clearlake Oaks System"), Canyonville,
Myrtle Creek, Riddle and Winston, Oregon (the "Myrtle Creek System"), South
Sioux City, Nebraska (the "South Sioux City System") and Three Rivers,
Schoolcraft/Vicksburg, Constantine/White Pigeon, Dowagiac, Watervliet and
Vandalia, Michigan (the "Southwestern Michigan System"). The Orangeburg System,
Brighton/Broomfield System, Clearlake Oaks System, Myrtle Creek System, South
Sioux City System and the Southwestern Michigan System may hereinafter
collectively be referred to as the "Systems."
One of the primary objectives of the Partnership is to provide quarterly
cash distributions to the partners. Such cash returns are primarily from cash
generated through the operating activities of the Partnership and from the
distributions made to the Partnership from the Venture. Because the
Partnership's credit facility was at the maximum amount available in 1994, the
Partnership utilized cash generated from operations to fund capital
expenditures. In addition, the Venture's credit facility has a maximum amount
available of $45,000,000, of which $42,100,000 was outstanding at December 31,
1994, which limits the amount of borrowings available to the Venture to fund
capital expenditures; therefore, the Venture did not declare any distributions
in 1994. Due to these conditions, the Partnership did not declare any
distributions for 1994. Distributions for the years ended December 31, 1993 and
1992 were $1,735,352 and $1,642,928, respectively. The General Partner has
agreed to defer its portion of any cash flow distributions until the
Partnership is liquidated. The Venture is not expected to reinstate
distributions in the near term. In January 1995, the Partnership completed
negotiations for a new revolving credit agreement that will provide liquidity
to fund capital expenditures. The Partnership will attempt to provide some
level of distributions from cash generated from operations in 1995. No
determination has been made regarding the level of future distributions. The
level of distributions, if any, will be determined on a quarter-by-quarter
basis. A determination of the level of distributions, if any, will be made on
a quarter by quarter basis. See Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations.
CABLE TELEVISION SERVICES. The Systems offer to their subscribers various
types of programming, which include basic service, tier service, premium
service, pay-per-view programs and packages including several of these services
at combined rates.
Basic cable television service usually consists of signals of all four
national television networks, various independent and educational television
stations (both VHF and UHF) and certain signals received from satellites. Basic
service also usually includes programs originated locally by the system, which
may consist of music, news,
2
<PAGE> 3
weather reports, stock market and financial information and live or videotaped
programs of a public service or entertainment nature. FM radio signals are also
frequently distributed to subscribers as part of the basic service.
The Systems offer tier services on an optional basis to their
subscribers. A tier generally includes most of the cable networks such as
Entertainment and Sports Programming Network (ESPN), Cable News Network (CNN),
Turner Network Television (TNT), Family Channel, Discovery and others, and the
cable television operators buy tier programming from these networks. The Systems
also offer a package that includes the basic service channels and the tier
services.
The Systems also offer premium services to their subscribers, which
consist of feature films, sporting events and other special features that are
presented without commercial interruption. The cable television operators buy
premium programming from suppliers such as HBO, Showtime, Cinemax or others at a
cost based on the number of subscribers the cable operator serves. Premium
service programming usually is significantly more expensive than the basic
service or tier service programming, and consequently cable operators price
premium service separately when sold to subscribers.
The Systems also offer to subscribers pay-per-view programming.
Pay-per-view is a service that allows subscribers to receive single programs,
frequently consisting of motion pictures that have recently completed their
theatrical exhibitions and major sporting events, and to pay for such service on
a program-by-program basis.
REVENUES. Monthly service fees for basic, tier and premium services
constitute the major source of revenue for the Systems. In addition,
advertising sales are becoming a significant source of revenue for the Systems.
As a result of the adoption by the FCC of new rules under the Cable Television
Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"), and
several rate regulation orders, the Systems' rate structures for cable
programming services and equipment have been revised. See Regulation and
Legislation. At December 31, 1994, the Systems' monthly basic service rates
ranged from $6.72 to $15.96, monthly basic and tier ("basic plus") service
rates ranged from $17.83 to $22.39 and monthly premium services ranged from
$3.40 to $12.95 per premium service. Charges for additional outlets have been
eliminated, and charges for remote controls and converters have been
"unbundled" from the programming service rates. In addition, pay-per-view
programs and advertising fees generate revenues. Related charges may include a
nonrecurring installation fee that ranges from $4.95 to $45.00; however, from
time to time the Systems have followed the common industry practice of reducing
or waiving the installation fee during promotional periods. Commercial
subscribers such as hotels, motels and hospitals are charged a nonrecurring
connection fee that usually covers the cost of installation. Except under the
terms of certain contracts with commercial subscribers and residential
apartment and condominium complexes, the subscribers are free to discontinue
the service at any time without penalty. For the year ended December 31, 1994,
of the total fees received by the Systems, basic service and tier service fees
accounted for approximately 69% of total revenues, premium service fees
accounted for approximately 18% of total revenues, pay-per-view fees were
approximately 1% of total revenues, advertising fees were approximately 3% of
total revenues and the remaining 9% of total revenues came principally from
equipment rentals, installation fees and program guide sales. The Partnership
is dependent upon the timely receipt of service fees to provide for maintenance
and replacement of plant and equipment, current operating expenses and other
costs of the Systems.
The Partnership's business consists of providing cable television
services to a large number of customers, the loss of any one of which would have
no material effect on the Partnership's business. Each of the Systems has had
some subscribers who later terminated the service. Terminations occur primarily
because people move to another home or to another city. In other cases, people
terminate on a seasonal basis or because they no longer can afford or are
dissatisfied with the service. The amount of past due accounts in the Systems is
not significant. The General Partner's policy with regard to past due accounts
is basically one of disconnecting service before a past due account becomes
material.
The Partnership does not depend to any material extent on the
availability of raw materials; it carries no significant amounts of inventory
and it has no material backlog of customer orders. The Partnership has no
3
<PAGE> 4
employees because all properties are managed by employees of the General
Partner. The General Partner has engaged in research and development activities
relating to the provision of new services but the amount of the Partnership's
funds expended for such research and development has never been material.
Compliance with Federal, state and local provisions that have been
enacted or adopted regulating the discharge of materials into the environment or
otherwise relating to the protection of the environment has had no material
effect upon the capital expenditures, earnings or competitive position of the
Partnership.
FRANCHISES. The Systems are constructed and operated under
non-exclusive, fixed-term franchises or other types of operating authorities
(referred to collectively herein as "franchises") granted by local governmental
authorities. The Systems' franchises require that franchise fees ranging from
$25.00 per year to 7% of gross revenues of the cable system be paid to the
governmental authority that granted the franchise, that certain channels be
dedicated to municipal use, that municipal facilities, hospitals and schools be
provided cable service free of charge and that any new cable plant be
substantially constructed within specific periods. (See Item 2 for a range of
franchise expiration dates of the Systems.)
The responsibility for franchising of cable television systems
generally is left to state and local authorities. There are, however, several
provisions in the Communications Act of 1934, as amended, that govern the terms
and conditions under which cable television systems provide service, including
the standards applicable to cable television operators seeking renewal of a
cable television franchise. In addition, the 1992 Cable Act also made several
procedural changes to the process under which a cable operator seeks to enforce
its renewal rights which could make it easier in some cases for a franchising
authority to deny renewal. Generally, the franchising authority can finally
decide not to renew a franchise only if it finds that the cable operator has not
substantially complied with the material terms of the franchise, has not
provided reasonable service in light of the community's needs, does not have the
financial, legal and technical ability to provide the services being proposed
for the future, or has not presented a reasonable proposal for future service. A
final decision of non-renewal by the franchising authority is appealable in
court. The General Partner and its affiliates recently have experienced lengthy
negotiations with some franchising authorities for the granting of franchise
renewals and transfers. Some of the issues involved in recent renewal
negotiations include rate reregulation, customer service standards, cable plant
upgrade or replacement and shorter terms of franchise agreements. The inability
of the Partnership to renew a franchise, or lengthy negotiations or litigation
involving the renewal process could have an adverse impact on the business of
the Partnership.
COMPETITION. Cable television systems currently experience competition
from several sources, but two technologies, Multichannel Multipoint Distribution
Service ("MMDS") systems, commonly called wireless cable systems, and Direct
Broadcast Satellite ("DBS") systems, which distribute programming to home
satellite dishes, currently pose the greatest potential threat to the cable
television industry.
MMDS systems will likely focus on providing service to residents of
rural areas that are not served by cable television systems, but providers of
programming via MMDS systems will generally have the potential to compete
directly with cable television systems in urban areas as well, and in some areas
of the country, MMDS systems are now in direct competition with cable television
systems. To date, the Partnership has not lost a significant number of
subscribers, nor a significant amount of revenue, to MMDS operators competing
with its cable television systems.
DBS operators deliver premium channel services and specialized
programming to subscribers by high-powered DBS satellites on a wide-scale basis,
and two major companies began operations in 1994. Subscribers are able to
receive DBS services virtually anywhere in the United States with a rooftop or
wall-mounted antenna. In some instances, DBS systems may serve as a complement
to cable television operations by enabling cable television operators to offer
additional channels of programming without the construction of additional cable
plant. DBS companies use video compression technology to increase the channel
capacity of their satellite systems to provide a wide variety of program
services that are competitive with those of cable television systems.
4
<PAGE> 5
Cable television systems also compete with broadcast television,
private cable television systems known as Master Antenna Television ("MATV"),
Satellite Master Antenna Television ("SMATV") and Television Receive-Only Earth
Stations ("TVRO"). MATV and SMATV generally serve multi-unit dwellings such as
condominiums, apartment complexes and private residential communities, and TVROs
are satellite receiving antenna dishes that are used by "backyard users."
There is also potential competition from an emerging technology, Local
Multipoint Distribution Service ("LMDS"). When it is authorized for service, the
LMDS, sometimes referred to as cellular television, could have the capability of
delivering approximately 50 channels, or if two systems were combined 100
channels, of video programming to a subscriber's home, which capacity could be
increased by using video compression technology. The General Partner believes
that there are not any current fully operational LMDS systems.
Although the Systems have not yet encountered competition from a
telephone company entering into the business of providing video services to
subscribers, the Systems could potentially face competition from telephone
companies doing so. A Federal cross-ownership restriction has historically
limited entry into the cable television business by potentially strong
competitors such as telephone companies. This restriction, which is contained in
the 1984 Cable Act, has generally prohibited telephone companies from owning or
operating cable television systems within their own telephone service areas, but
several recent court decisions have eliminated this restriction. In addition,
the FCC is authorizing telephone companies to provide video dialtone service
within their service areas. Legislation is also pending in Congress that would
permit telephone companies to provide video programming through separate
subsidiaries. The General Partner cannot predict at this time to what extent
current restrictions will be modified to permit telephone companies to provide
cable television services within their own service areas in competition with
cable television systems. See Regulation and Legislation, Ownership and Market
Structure for a description of the potential participation of the telephone
industry in the delivery of cable television services. Entry into the market by
telephone companies as direct competitors of the Systems could adversely impact
the profitability of the Systems. If a telephone company were to become a direct
competitor of the Partnership or Venture in an area served by a Partnership or
Venture System, the Partnership or Venture could be at a competitive
disadvantage because of the relative financial strength of a telephone company
compared to the Partnership or Venture. Depending on a number of factors, such
competition could also result in cable television systems providing the same
types of services now provided by the telephone industry.
The FCC has established a new wireless telecommunications service known
as Personal Communications Service ("PCS"). It is envisioned that PCS would
provide portable non-vehicular mobile communications services similar to that
available from cellular telephone companies, but at a lower cost. PCS would be
delivered by placing numerous microcells in a particular area to be covered,
accessible to both residential and business customers. Because of the need to
link the many microcells necessary to deliver this service economically, many
parties are investigating integration of PCS with cable television operations.
Several cable television multiple systems operators and others, including
affiliates of the General Partner hold or have requested experimental licenses
from the FCC to test PCS technology. The FCC has established spectrum auctioning
procedures for PCS licenses and the licenses are being auctioned in a series of
auction events.
Cable television franchises are not exclusive, so that more than one
cable television system may be built in the same area (known as an "overbuild"),
with potential loss of revenues to the operator of the original cable television
system. The Systems currently face no direct competition from other cable
television operators.
COMPETITION FOR SUBSCRIBERS IN THE SYSTEMS. Following is a summary of
competition from DBS, MMDS, SMATV and TVRO operators in the Systems' franchise
areas:
5
<PAGE> 6
Brighton/Broomfield System There is one MMDS operator in the service area
but it does not provide significant competition.
DBS operators continue to strongly market their
services in the Denver area; however, to date the
system has not experienced any significant loss
of customers.
Clearlake Oaks System There are seven TVRO dealers that primarily serve
rural or remote areas which are not served by the
Clearlake Oaks System. There is an unaffiliated
entity marketing five broadcast channels and four
satellite-type channels to subscribers in the
service area. However, due to the expensive
initial cost for the converters and the lack of
customer service, this entity has presented little
competition.
Myrtle Creek System There are a few TVRO dealers that provide minimal
competition. The competition from DBS services is
minimal at this time.
Orangeburg System There are TVRO dealers that do not provide
significant competition.
South Sioux City System There is one MMDS dealer near the South Sioux City
System's service area; however, this dealer has
focused primarily on rural and outlying areas that
are not located in the South Sioux City System's
service area. There are six TVRO dealers that
market primarily to rural or remote areas that are
not served by the South Sioux City System.
Southwestern Michigan System There are two TVRO operators that
provide minimal competition. There is a DBS
operator that currently provides minimal
competition.
REGULATION AND LEGISLATION. The cable television industry is regulated
through a combination of the Federal Communications Commission ("FCC"), some
state governments, and most local governments. In addition, the Copyright Act of
1976 imposes copyright liability on all cable television systems. Cable
television operations are subject to local regulation insofar as systems operate
under franchises granted by local authorities.
Cable Television Consumer Protection and Competition Act of 1992. On
October 5, 1992, Congress enacted the Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act"), which became effective on
December 4, 1992. This legislation has caused significant changes to the
regulatory environment in which the cable television industry operates. The 1992
Cable Act generally allows for a greater degree of regulation of the cable
television industry. Under the 1992 Cable Act's definition of effective
competition, nearly all cable television systems in the United States, including
those owned and managed by the General Partner, are subject to rate regulation
of basic cable services. In addition, the 1992 Cable Act allows the FCC to
regulate rates for non-basic service tiers other than premium services in
response to complaints filed by franchising authorities and/or cable
subscribers. In April 1993, the FCC adopted regulations governing rates for
basic and non-basic services. The FCC's rules became effective on September 1,
1993.
In compliance with these rules, the General Partner reduced rates
charged for certain regulated services effective September 1, 1993. These
reductions resulted in some decrease in revenues and operating income before
depreciation and amortization; however, the decrease was not as severe as
originally anticipated. The
6
<PAGE> 7
General Partner has undertaken actions to mitigate a portion of these reductions
primarily through (a) new service offerings in some systems, (b) product
re-marketing and re-packaging and (c) marketing efforts directed at
non-subscribers.
On February 22, 1994, however, the FCC adopted several additional rate
orders including an order which revised its earlier-announced regulatory scheme
with respect to rates. The FCC's new regulations generally require rate
reductions, absent a successful cost-of-service showing, of 17% of September 30,
1992 rates, adjusted for inflation, channel modifications, equipment costs, and
increases in programming costs. However, the FCC held rate reductions in
abeyance in certain systems. The new regulations became effective on May 15,
1994, but operators could elect to defer rate reductions to July 14, 1994, so
long as they made no changes in their rates and did not restructure service
offerings between May 15 and July 14.
On February 22, 1994, the FCC also adopted interim cost-of-service
regulations. Rate reductions will not be required where it is successfully
demonstrated that rates for basic and other regulated programming services are
justified and reasonable using cost-of-service standards. The FCC established an
interim industry-wide 11.25% permitted rate of return, and requested comments on
whether this standard and other interim cost-of-service standards should be made
permanent. The FCC also established a presumption that acquisition costs above a
system's book value should be excluded from the rate base, but the FCC will
consider individual showings to rebut this presumption. The need for special
rate relief will also be considered by the FCC if an operator demonstrates that
the rates set by a cost-of-service proceeding would constitute confiscation of
investment, and that, absent a higher rate, the return necessary to operate and
to attract investment could not be maintained. The FCC will establish a uniform
system of accounts for operators that elect cost-of-service rate regulation, and
the FCC has adopted affiliate transaction regulations. After a rate has been set
pursuant to a cost-of-service showing, rate increases for regulated services
will be indexed for inflation, and operators will also be permitted to increase
rates in response to increases in costs beyond their control, such as taxes and
increased programming costs.
After analyzing the effects of the two methods of rate regulation, the
Partnership elected to file cost-of-service showings for its Orangeburg System,
and the Venture elected to file cost-of-service showings for its
Brighton/Broomfield System, Myrtle Creek System, South Sioux City System and
Southwestern Michigan System. The General Partner thus anticipates no further
reduction in revenues or operating income before depreciation and amortization
in these systems resulting from the FCC's rate regulations. At this time,
however, the regulatory authorities have not approved the cost-of-service
showings, and there can be no assurance that the Partnership's or the
Venture's cost-of-service showings will prevent further rate reductions in
these systems until such final approval is received. The Venture complied
with the new benchmark regulations and further reduced rates in its Clearlake
Oaks System in July 1994. The Venture will continue its efforts to mitigate
the effect of such rate reductions.
Among other issues addressed by the FCC in its February 1994 rate
orders was the treatment of packages of a la carte channels. The FCC in its rate
regulations adopted April 1, 1993, exempted from rate regulation the price of
packages of a la carte channels upon the fulfillment of certain conditions. On
November 10, 1994, the FCC reversed its policy regarding rate regulation of
packages of a la carte services. A la carte services that are offered in a
package will now be subject to rate regulation by the FCC, although the FCC
indicated that it cannot envision circumstances in which any price for a
collective offering of premium channels that have traditionally been offered on
a per-channel basis would be found to be unreasonable.
On November 10, 1994, the FCC also announced a revision to its
regulations governing the manner in which cable operators may charge subscribers
for new cable programming services. In addition to the present formula for
calculating the permissible rate for new services, the FCC instituted a
three-year flat fee mark-up plan for charges relating to new channels of cable
programming services. Commencing on January 1, 1995, operators may charge for
new channels of cable programming services added after May 14, 1994 at a rate of
up to 20 cents per channel, but may not make adjustments to monthly rates
totaling more than $1.20 plus an additional 30 cents for programming license
fees per subscriber over the first two years of the three-year period for these
new services. Operators may charge an additional 20 cents in the third year only
for channels added in that year plus the costs for the programming. Operators
electing to use the 20 cent per channel adjustment may not also take a
7
<PAGE> 8
7.5% mark-up on programming cost increases, which is permitted under the FCC's
current rate regulations. The FCC has requested further comment as to whether
cable operators should continue to receive the 7.5% mark-up on increases in
license fees on existing programming services.
The FCC also announced that it will permit operators to offer a "new
product tier" ("NPT"). Operators will be able to price this tier as they elect
so long as, among other conditions, other channels that are subject to rate
regulation are priced in conformity with applicable regulations and operators do
not remove programming services from existing tiers and offer them on the NPT.
There have been several lawsuits filed by cable operators and
programmers in Federal court challenging various aspects of the 1992 Cable Act,
including provisions relating to mandatory broadcast signal carriage,
retransmission consent, access to cable programming, rate regulations,
commercial leased channels and public access channels. On April 8, 1993, a
three-judge Federal district court panel issued a decision upholding the
constitutionality of the mandatory signal carriage requirements of the 1992
Cable Act. That decision was appealed directly to the United States Supreme
Court. The United States Supreme Court vacated the lower court decision on June
27, 1994 and remanded the case to the district court for further development of
a factual record. The Supreme Court's majority determined that the must-carry
rules were content neutral, but that it was not yet proven that the rules were
needed to preserve the economic health of the broadcasting industry. In the
interim, the must-carry rules will remain in place during the pendency of the
proceedings in district court. In 1993, a Federal district court for the
District of Columbia upheld provisions of the 1992 Cable Act concerning rate
regulation, retransmission consent, restrictions on vertically integrated cable
television operators and programmers, mandatory carriage of programming on
commercial leased channels and public, educational and governmental access
channels and the exemption for municipalities from civil damage liability
arising out of local regulation of cable services. The 1992 Cable Act's
provisions providing for multiple ownership limits for cable operators and
advance notice of free previews for certain programming services have been found
unconstitutional. In November 1993, the United States Court of Appeals for the
District of Columbia held that the FCC's regulations implemented pursuant to
Section 10 of the 1992 Cable Act, which permit cable operators to ban indecent
programming on public, educational or governmental access channels or leased
access channels, were unconstitutional, but the court has agreed to reconsider
its decision. All of these decisions construing provisions of the 1992 Cable Act
and the FCC's implementing regulations have been or are expected to be appealed.
Ownership and Market Structure. The FCC rules and Federal law generally
prohibit the direct or indirect common ownership, operation, control or interest
in a cable television system, on the one hand, and a local television broadcast
station whose television signal reaches any portion of the community served by
the cable television system, on the other hand. The FCC recently lifted its ban
on the cross-ownership of cable television systems by broadcast networks. The
FCC revised its regulations to permit broadcast networks to acquire cable
television systems serving up to 10% of the homes passed in the nation, and up
to 50% of the homes passed in a local market. Neither the Partnership nor the
General Partner has any direct or indirect ownership, operation, control or
interest in a television broadcast station, or a telephone company, and they are
thus presently unaffected by the cross-ownership rules.
The Cable Communications Policy Act of 1984 (the "1984 Cable Act") and
FCC regulations generally prohibit the common operation of a cable television
system and a telephone company within the same service area. Until recently, a
provision of a Federal court antitrust consent decree also prohibited the
regional Bell operating companies ("RBOCs") from engaging in cable television
operations. This prohibition was recently removed when the court retaining
jurisdiction over the consent decree ruled that the RBOCs could provide
information services over their facilities. This decision permits the RBOCs to
acquire or construct cable television systems outside of their own service
areas.
The 1984 Cable Act prohibited local exchange carriers, including the
RBOCs, from providing video programming directly to subscribers within their
local exchange telephone service areas, except in rural areas or by specific
waiver of FCC rules. Several Federal district courts have struck down the 1984
Cable Act's telco/cross-ownership provision as facially invalid and inconsistent
with the First Amendment. The United States Courts of Appeals for the Fourth and
the Ninth Circuits have upheld the appeals of two of these district court
8
<PAGE> 9
decisions, and the United States Justice Department is expected to request the
United States Supreme Court to review these two decisions. This Federal
cross-ownership rule is particularly important to the cable industry since these
telephone companies already own certain facilities needed for cable television
operation, such as poles, ducts and associated rights-of-way.
The FCC amended its rules in 1992 to permit local telephone companies
to offer "video dialtone" service for video programmers, including channel
capacity for the carriage of video programming and certain noncommon carrier
activities such as video processing, billing and collection and joint marketing
arrangements. In its video dialtone order, which was part of a comprehensive
proceeding examining whether and under what circumstances telephone companies
should be allowed to provide cable television services, including video
programming to their customers, the FCC concluded that neither the 1984 Cable
Act nor its rules apply to prohibit the interexchange carriers (i.e., long
distance telephone companies such as AT&T) from providing such services to their
customers. Additionally, the FCC also concluded that where a local exchange
carrier ("LEC") makes its facilities available on a common carrier basis for the
provision of video programming to the public, the 1984 Cable Act does not
require the LEC or its programmer customers to obtain a franchise to provide
such service. This aspect of the FCC's video dialtone order was upheld on appeal
by the United States Court of Appeals for the D.C. Circuit. The FCC recently
issued an order reaffirming its initial decision, and this order has been
appealed. Because cable operators are required to bear the costs of complying
with local franchise requirements, including the payment of franchise fees, the
FCC's decision could place cable operators at a competitive disadvantage
vis-a-vis services offered on a common carrier basis over local telephone
company provided facilities. In its Reconsideration Order, the FCC, among other
actions, refused to require telephone companies to justify cost allocations
prior to the construction of video dialtone facilities, and indicated that it
would provide guidance on costs that must be included in proposed video dialtone
tariffs. The FCC also established dual Federal/state jurisdiction over video
dialtone services based on the origination point of the video dialtone
programming service. In a separate proceeding, the FCC has proposed to increase
the numerical limit on the population of areas qualifying as "rural" and in
which LECs can provide cable service without a FCC waiver.
On January 12, 1995, the FCC adopted a Fourth Further Notice of
Proposed Rulemaking in its video dialtone docket. The FCC tentatively concluded
that it should not ban telephone companies from providing their own video
programming over their video dialtone platforms in those areas in which the
cable/telephone cross-ownership rules have been found unconstitutional. The FCC
requested comments on this issue and on further refinements of its video
dialtone regulatory framework concerning, among other issues, telephone
programmer affiliation standards, the establishment of structural safeguards to
prevent cross-subsidization of video dialtone and programming activities, and
the continuation of the FCC's ban prohibiting telephone companies from acquiring
cable systems within their telephone service areas for the provision of video
dialtone services. The FCC will also consider whether a LEC offering video
dialtone service must secure a local franchise if that LEC also engages in the
provision of video programming carried on its video dialtone platform. The FCC
has also proposed to broadly interpret its authority to waive the
cable/telephone cross-ownership ban upon a showing by telephone companies that
they comply with the safeguards which the FCC establishes as a condition of
providing video programming.
A number of bills that would have permitted telephone companies to
provide cable television service within their own service areas were considered
during the last Congress, but none were adopted. These bills would have
permitted the provision of cable television service by telephone companies in
their own service areas conditioned on the establishment of safeguards to
prevent cross-subsidization between telephone and cable television operations
and the provision of telecommunication services by cable television systems.
Similar legislation is expected to be considered by Congress during its current
session. The outcome of these FCC, legislative or court proceedings and
proposals or the effect of such outcome on cable system operations cannot be
predicted.
9
<PAGE> 10
ITEM 2. PROPERTIES
The cable television systems owned by the Partnership and the Venture
at December 31, 1994 are described below:
<TABLE>
<CAPTION>
SYSTEM ACQUISITION DATE
------ ----------------
<S> <C>
Orangeburg System November 1986
Brighton/Broomfield System
Brighton System December 1987
Broomfield System January 1988
Myrtle Creek System December 1987
Clearlake Oaks System December 1987
South Sioux City System February 1988
Southwestern Michigan System September 1988
</TABLE>
The following sets forth (i) the monthly basic plus service rates
charged to subscribers, (ii) the number of basic subscribers and pay units and
(iii) the range of franchise expiration dates for the Systems. The monthly basic
service rates set forth herein represent, with respect to systems with multiple
headends, the basic service rate charged to the majority of the subscribers
within the system. While the charge for basic plus service may have increased in
some cases in 1993 as a result of the FCC's rate regulations, overall revenues
may have decreased due to the elimination of charges for additional outlets and
certain equipment. In cable television systems, basic subscribers can subscribe
to more than one pay TV service. Thus, the total number of pay services
subscribed to by basic subscribers are called pay units. As of December 31,
1994, the Partnership's Orangeburg System operated approximately 350 miles of
cable plant, passing approximately 17,000 homes, representing an approximate 72%
penetration rate, and the Venture's systems operated approximately 2,200 miles
of cable plant, passing approximately 132,000 homes, representing an approximate
65% penetration rate. Figures for numbers of subscribers, miles of cable plant
and homes passed are compiled from the General Partner's records and may be
subject to adjustments.
<TABLE>
<CAPTION>
ORANGEBURG, SOUTH CAROLINA At December 31,
-------------------------- ---------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Monthly basic plus service rate $17.82 $17.83 $17.20
Basic subscribers 11,935 11,463 11,017
Pay units 9,324 7,944 7,896
</TABLE>
Franchise expiration dates range from May 1995 to March 1998. The City of
Orangeburg franchise expires in May 1995. The Partnership and the franchising
authorities continue to negotiate the terms of a new franchise with a longer
term.
<TABLE>
<CAPTION>
CLEARLAKE OAKS, CALIFORNIA At December 31,
-------------------------- ---------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Monthly basic plus service rate $20.05 $20.73 $21.00
Basic subscribers 17,267 15,566 14,550
Pay units 5,859 5,376 5,844
</TABLE>
Franchise expiration dates range from October 1997 to February 2008.
<TABLE>
<CAPTION>
At December 31,
---------------
BROOMFIELD/BOULDER/BRIGHTON, CO 1994 1993 1992
------------------------------- ---- ---- ----
<S> <C> <C> <C>
Monthly basic plus service rate $22.39 $22.39 $19.00
Basic subscribers 17,345 16,357 15,504
Pay units 18,106 17,973 17,146
</TABLE>
10
<PAGE> 11
The franchise expiration dates range from April 1996 to June 2013. There is no
franchise expiration date for Brighton.
<TABLE>
<CAPTION>
SOUTHWESTERN MICHIGAN At December 31,
--------------------- ---------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Monthly basic plus service rate $21.69 $21.69 $21.00
Basic subscribers 15,832 15,087 14,377
Pay units 10,328 9,053 9,605
</TABLE>
Franchise expiration dates range from April 1996 to August 2014.
<TABLE>
<CAPTION>
SOUTH SIOUX CITY, NEBRASKA At December 31,
-------------------------- ---------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Monthly basic plus service rate $21.56 $20.87 $20.65
Basic subscribers 5,730 5,392 4,868
Pay units 3,699 3,555 3,571
</TABLE>
Franchise expiration dates range from June 1998 to July 2004.
<TABLE>
<CAPTION>
At December 31,
---------------
MYRTLE CREEK, OREGON 1994 1993 1992
-------------------- ---- ---- ----
<S> <C> <C> <C>
Monthly basic plus service rate $18.93 $19.55 $19.55
Basic subscribers 6,293 6,034 5,854
Pay units 4,014 3,314 3,042
</TABLE>
Franchise expiration dates range from February 2001 to February 2009.
PROGRAMMING SERVICES
Programming services provided by the Systems include local affiliates
of the national broadcast networks, local independent broadcast channels, the
traditional satellite services (e.g., American Movie Classics, Arts &
Entertainment, Black Entertainment Network, C-SPAN, The Discovery Channel,
Lifetime, Entertainment Sports Network, Home Shopping Network, Mind Extension
University, Music Television, Nickelodeon, Turner Network Television, The
Nashville Network, Video Hits One, and superstations WOR, WGN and TBS. The
Partnership's Systems also provide a selection, which varies by system, of
premium channel programming (e.g., Cinemax, Encore, Home Box Office, Showtime
and The Movie Channel).
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
11
<PAGE> 12
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED SECURITY HOLDER MATTERS
While the Partnership is publicly held, there is no public market for
the limited partnership interests, and it is not expected that a market will
develop in the future. As of February 15, 1995, the approximate number of equity
security holders in the Partnership was 4,470.
12
<PAGE> 13
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
For the Year Ended December 31,
-------------------------------------------------------------------------------------------
Jones Cable Income Fund 1-B 1994 1993 1992 1991 1990
--------------------------- ---------------- ---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Revenues $4,484,892 $4,341,380 $4,163,690 $ 3,889,600 $ 3,439,220
Depreciation and Amortization 1,367,809 1,691,043 1,931,255 1,824,402 1,701,416
Operating Loss (184,959) (446,056) (696,084) (498,040) (477,213)
Equity in net loss of cable
television joint venture (1,949,794) (1,753,583) (1,639,873) (1,927,535) (1,947,990)
Net Loss (2,592,181) (2,623,378) (3,032,014) (3,075,861) (2,731,131)
Net Loss per Limited Partnership
Unit (30.59) (30.96) (35.78) (36.30) (32.23)
Distributions per Limited
Partnership Unit - 20.48 19.39 18.86 21.72
Weighted Average Number of
Limited Partnership Units
Outstanding 83,844 83,884 83,884 83,884 83,884
General Partner's Deficit (276,772) (250,850) (207,264) (160,516) (113,779)
Limited Partners' Capital 5,962,555 8,528,814 12,843,958 17,472,152 22,099,129
Total Assets 11,874,378 14,590,808 19,020,685 22,831,585 26,507,971
Debt 3,544,000 3,547,767 3,525,945 3,539,282 3,363,397
General Partner Advances 2,162,870 1,944,230 1,994,401 1,268,955 379,141
For the Year Ended December 31,
-------------------------------------------------------------------------------------------
Jones Cable Income Fund 1-B/C Venture 1994 1993 1992 1991 1990
------------------------------------- ---------------- ---------------- --------------- --------------- ----------------
Revenues $21,121,787 $ 20,350,776 $18,848,345 $17,065,348 $15,398,182
Depreciation and Amortization 8,632,481 8,787,240 9,131,442 8,666,224 8,073,425
Operating Loss (2,243,001) (2,397,832) (2,216,442) (2,513,496) (2,353,738)
Net Loss (4,902,676) (4,409,310) (4,123,392) (4,846,706) (4,898,139)
Partner's Capital 10,286,146 15,188,822 23,918,132 32,131,524 40,428,230
Total Assets 54,545,774 58,148,834 62,614,638 67,366,941 71,885,757
Debt 42,383,339 36,298,318 35,635,061 32,335,496 28,684,216
Advances from Jones Intercable, Inc. 66,224 4,068,472 602,765 585,943 573,873
</TABLE>
13
<PAGE> 14
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
JONES CABLE INCOME FUND 1-B
Results of Operations
1994 Compared to 1993-
Revenues of Jones Cable Income Fund 1-B, Ltd. (the "Partnership")
increased $143,512, or approximately 3 percent, from $4,341,380 in 1993 to
$4,484,892 in 1994. The Partnership's Orangeburg, South Carolina cable
television system (the "Orangeburg System") added 472 basic subscribers during
1994, an increase of 4 percent. Such expansion of the subscriber base was
primarily responsible for the increase in revenues. The increase in revenues
would have been greater but for the reduction in certain rates charged due to
basic rate regulations issued by the FCC in April 1993 with which the
Partnership complied effective September 1993. See Item 1. No other factor
significantly affected the increase in revenues.
Operating, general and administrative expenses increased $170,728, or
approximately 7 percent, from $2,550,022 in 1993 to $2,720,750 in 1994.
Operating, general and administrative expenses represented 59 percent of
revenue in 1993, compared to 61 percent in 1994. The increase in operating,
general and administrative expenses was due primarily to increases in
programming fees. No other factor significantly affected the increase in
operating, general and administrative expenses. Management fees and allocated
overhead from the General Partner increased $25,921, or approximately 5
percent, from $546,371 in 1993 to $572,292 in 1994. This increase is due to
the increase in revenues, upon which such fees and allocations are based, and
an increase in expenses allocated from the General Partner. The General
Partner has experienced increases in expenses, including personnel costs and
reregulation costs, a portion of which are allocable to the Partnership.
Depreciation and amortization expense decreased $314,234, or
approximately 19 percent, from $1,691,043 in 1993 to $1,376,809 in 1994. This
decrease is due to a reduction in amortization expense, due to the maturation
of the Partnership's intangible asset base and was offset, in part, by an
increase in depreciation expense due to capital additions in 1993 and 1994.
Operating loss decreased $261,097, or approximately 59 percent, from
$446,056 in 1993 to $184,959 in 1994. This decrease was due to the increase in
revenues and the decrease in depreciation and amortization exceeding the
increases in operating, general and administrative expense and management fees
and allocated overhead from the General Partner. Operating income before
depreciation and amortization decreased $53,137, or approximately 4 percent,
from $1,244,987 in 1993 to $1,191,850 in 1994, due to the increase in revenues
exceeding the increases in operating, general and administrative expense and
management fees and allocated overhead from the General Partner. The decrease
in operating income before depreciation and amortization reflects the current
operating environment of the cable television industry. The FCC rate
regulations under the 1992 Cable Act have caused revenues to increase more
slowly than otherwise would have been the case. In turn, this has caused
certain expenses which are a function of revenue, such as franchise fees,
copyright fees and management fees, to increase more slowly than in prior
years. However, other operating costs such as programming fees, salaries and
benefits, and marketing costs as well as other costs incurred by the General
Partner, which are allocated to the Partnership, continue to increase at
historical rates. This situation has led to reductions in operating income
before depreciation and amortization as a percent of revenue ("Operating
Margin"). Such reductions in Operating Margins may continue in the near term
as the Partnership and the General Partner incur cost increases due to, among
other things, increases in programming fees, compliance costs associated with
reregulation and competition, that exceed increases in revenue. The General
Partner will attempt to mitigate a portion of these reductions through (a) new
service offerings, (b) product re-marketing and re-packaging and (c) marketing
efforts targeted at non-subscribers.
Interest expense increased $15,359, or approximately 4 percent, from
$376,224 in 1993 to $391,583 in 1994 due to higher effective rates on interest
bearing obligations.
Loss before equity in net loss of cable television joint venture
decreased $227,408, or approximately 26 percent, from $869,795 in 1993 to
$642,387 in 1994. This decrease was due to the factors discussed above and are
expected to continue.
14
<PAGE> 15
In addition to its wholly owned Orangeburg System, the Partnership
owns an approximate 40 percent interest in Jones Cable Income Fund 1-B/C
Venture (the "Venture"). The Partnership's share of the Venture's loss
increased from $1,753,583 in 1993 to $1,949,794 in 1994. The Venture's
operations are significant to the Partnership and should be reviewed in
conjunction with this analysis. Refer to Management's Discussion and Analysis
of Financial Condition and Results of Operations for the Venture for details
pertaining to the Venture's operations.
1993 Compared to 1992-
Revenues of the Partnership's Orangeburg System increased $177,690, or
approximately 4 percent, from $4,163,690 in 1992 to $4,341,380 in 1993. During
1993, the Orangeburg System added 446 basic subscribers, an increase of 4
percent. Such expansion of the subscriber base was primarily responsible for
the increase in revenues. The increase in revenue would have been greater but
for the reduction in certain rates charged due to basic rate regulations issued
by the FCC in April 1993 with which the Partnership complied effective
September 1993. No other individual factor significantly affected the increase
in revenues.
Operating, general and administrative expense increased $140,975 or
approximately 6 percent, from $2,409,047 in 1992 to $2,550,022 in 1993.
Operating, general and administrative expense consumed 59 percent of revenue in
1993 compared to 58 percent in 1992. The increase in operating, general and
administrative expense was due primarily to increases in programming fees.
Management fees and allocated overhead from the General Partner increased
$26,899, or approximately 5 percent, from $519,472 in 1992 to $546,371 in 1993.
Such increase was due to the increase in revenue, upon which such fees and
allocations are based, and an increase in costs allocated from the General
Partner.
Depreciation and amortization decreased $240,212, or approximately 12
percent, from $1,931,255 in 1992 to $1,691,043 in 1993. This decrease was due
to a reduction in amortization expense, due to the maturation of the
Partnership's intangible asset base and was offset, in part by an increase in
depreciation expense due to capital additions in 1992 and 1993.
Operating loss decreased $250,028, or approximately 36 percent, from
$696,084 in 1992 to $446,056 in 1993. This decrease is due to the increase in
revenues and the decreases in depreciation and amortization exceeding the
increases in operating, general and administrative expense and management fees
and allocated overhead from the General Partner. Operating income before
depreciation and amortization increased $9,816, or approximately 1 percent,
from $1,235,171 in 1992 to $1,244,987 in 1993, due to the increase in revenues
exceeding the increases in operating, general, and administrative expense and
management fees and allocated overhead from the General Partner.
Interest expense decreased $27,908, or approximately 7 percent, from
$404,132 in 1992 to $376,224 in 1993 due to lower effective rates on interest
bearing obligations. Other expense decreased $244,410, or approximately 84
percent, from $291,925 in 1992 to $47,515 in 1993. This decrease was due to a
reduction in costs associated with the potential overbuild in the Orangeburg
system.
Loss before equity in net loss of cable television joint venture
decreased $522,345, or approximately 38 percent, from $1,392,141 in 1992 to
$869,795 in 1993. This decrease was due to the factors discussed above.
Financial Condition
The Partnership expended approximately $901,000 for capital additions
during 1994. The construction of service drops to subscribers homes accounted
for approximately 27 percent of the capital expenditures. Construction of
cable television plant extensions accounted for approximately 22 percent of the
expenditures. The purchase of converters accounted for approximately 17
percent of the expenditures. The remaining expenditures were for various
enhancements in the Orangeburg System. Funding for these expenditures was
provided by cash generated from operations and advances from the General
Partner. Anticipated capital expenditures for 1995 are approximately
$2,216,000. The construction of service drops to subscribers' homes is
expected to account for 33 percent of the expenditures. The purchase of
converters and advertising equipment are expected to account for approximately
24 percent and 15 percent, respectively, of the expenditures. The remainder
of the expenditures is expected to relate to various enhancements in the
Orangeburg System.Funding for these expenditures is expected to be provided by
cash generated from operations and borrowings under the Partnership's new
revolving credit facility as discussed below.
15
<PAGE> 16
As of December 31, 1994, the full amount of the Partnership's
$3,500,000 credit facility was outstanding. In January 1995, the General
Partner completed negotiations for a new revolving credit facility with a
maximum amount available of $8,500,000. The Partnership borrowed $5,800,000 to
repay the amounts outstanding under the prior credit facility and to repay the
General Partner its advances, leaving $2,700,000 of borrowings available. The
revolving credit facility converts to a term loan on December 31, 1997 at which
time the then-outstanding loan balance will be due in 20 consecutive quarterly
installments beginning March 31, 1998. Interest on the revolving credit
facility is at the Partnership's option of the Prime rate plus 1/4 percent, the
CD rate plus 1 3/8 percent, or the London Interbank Offered Rate plus 1 1/2
percent.
Since the balance on the the Partnership's former credit facility was
at the maximum available, the General Partner had advanced funds necessary for
capital expenditures. Interest on such advances was calculated at the General
Partner's weighted average cost of borrowing. At December 31, 1994, such
advances totalled $2,162,870. Such advances were repaid in January 1995 with
proceeds from borrowings under the new revolving credit facility.
The Partnership's approximate 40 percent interest in the Venture is
accounted for under the equity method. When compared to the December 31, 1993
balance, the investment has decreased by $1,949,794. This decrease represents
the Partnership's share of Venture losses. Refer to Management's Discussion
and Analysis of Financial Condition and Results of Operations for the Venture
for details pertaining to the Venture's financial condition.
One of the primary objectives of the Partnership is to provide
quarterly cash distributions to the partners. Such cash returns are primarily
from cash generated through the operating activities of the Partnership and
from the distributions made to the Partnership from the Venture. Because the
Partnership's credit facility was at the maximum amount available in 1994, the
Partnership utilized cash generated from operations to fund capital
expenditures. In addition, the Venture's credit facility has a maximum amount
available of $45,000,000, of which $42,100,000 was outstanding at December 31,
1994, which limits the amount of borrowings available to the Venture to fund
capital expenditures; therefore, the Venture did not declare any distributions
in 1994. Due to these conditions, the Partnership did not declare any
distributions for 1994. Distributions for the years ended December 31, 1993
and 1992 were $1,735,352 and $1,642,928, respectively. The General Partner has
agreed to defer its portion of the distributions from cash flows until the
Partnership is liquidated. The Venture is not expected to reinstate
distributions in the near term. In January 1995, the Partnership completed
negotiations for a new revolving credit agreement that will provide liquidity
to fund capital expenditures. The Partnership will attempt to provide some
level of distributions from cash generated from operations in 1995. No
determination has been made regarding the level of future distributions. The
level of distributions, if any, will be determined on a quarter-by-quarter
basis.
Regulation and Legislation
On October 5, 1992, Congress enacted the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act"), which became
effective on December 4, 1992. The 1992 Cable Act generally allows for a
greater degree of regulation of the cable television industry. In April 1993,
the FCC adopted regulations governing rates for basic and non-basic services.
These regulations became effective on September 1, 1993. Such regulations
caused reductions in rates for certain regulated services. On February 22,
1994, the FCC adopted several additional rate orders including an order which
revised its earlier-announced regulatory scheme with respect to rates. The
Partnership has filed a cost-of-service showing for its Orangeburg System and
therefore anticipates no further reductions in rates. The cost-of-service
showing has not yet received final approval from franchising authorities,
however, and there can be no assurance that the Partnership's cost-of-service
showing will prevent further rate reductions until such final approval is
received. See Item 1 for further discussion of the provisions of the 1992
Cable Act and the FCC regulations promulgated thereunder.
16
<PAGE> 17
JONES CABLE INCOME FUND 1-B/C VENTURE
Results of Operations
1994 Compared to 1993-
Revenues of Jones Cable Income Fund 1-B/C Venture (the "Venture")
increased $771,011, or approximately 4 percent, from $20,350,776 in 1993 to
$21,121,787 in 1994. An increase in subscribers accounted for approximately 41
percent of the increase in revenues. Increases in premium service revenue and
advertising sales revenue accounted for approximately 28 percent and 26
percent, respectively, of the increase in revenues. The increase in revenues
would have been greater but for the reduction in certain rates charged due to
basic rate regulations issued by the FCC in April 1993 with which the Venture
complied effective September 1, 1993.
Operating, general and administrative expenses increased $645,813, or
approximately 6 percent, from $11,371,695 in 1993 to $12,017,508 in 1994.
Operating, general and administrative expenses represented 56 percent of
revenue in 1993 compared to 57 percent in 1994. The increase in operating,
general and administrative expense was due to increases in programming fees,
personnel related costs, and advertising sales costs. No other individual
factor was significant to the increase in operating, general and administrative
expenses. Management fees and allocated overhead from Jones Intercable, Inc.
increased $125,126, or approximately 5 percent, from $2,589,673 in 1993 to
$2,714,799 in 1994, due primarily to the increase in revenues, upon which such
fees and allocations are calculated, and an increase in expenses allocated from
Jones Intercable, Inc. The General Partner has experienced increases in
expenses, including personnel costs and reregulation costs, a portion of which
are allocated to the Venture.
Depreciation and amortization expense decreased $154,759, or
approximately 2 percent, from $8,787,240 in 1993 to $8,632,481 in 1994. This
decrease is due to the maturation of the Venture's depreciable asset base.
Operating loss decreased $154,831, or approximately 7 percent, from
$2,397,832 in 1993 to $2,243,001 in 1994. This decrease is a result of the
increase in revenues and the decrease in depreciation and amortization
exceeding the increase in operating, general and administrative expenses,
management fees and allocated overhead from Jones Intercable, Inc. Operating
income before depreciation and amortization increased less than 1 percent, from
$6,389,408 in 1993 to $6,389,480 in 1994.
Interest expense increased $745,019, or approximately 37 percent, from
$2,016,390 in 1993 to $2,761,409 in 1994. This increase was due to higher
effective interest rates on interest bearing obligations. Net loss increased
$434,366, or approximately 11 percent, from $4,409,310 in 1993 to $4,902,676 in
1994. These losses are due to the factors discussed above and are expected to
continue in the future.
1993 Compared to 1992-
Revenues of the Venture increased $1,502,431, or approximately 8
percent, from $18,848,345 in 1992 to $20,350,776 in 1993. An increase in
subscribers accounted for approximately 36 percent of the increase in revenues
and basic rate adjustments accounted for approximately 42 percent of the
increase in revenues. Increases in advertising sales revenue accounted for
approximately 11 percent of the increase in revenues. The increase in revenue
would have been greater but for the reduction in certain rates charged due to
new basic rate regulations issued by the FCC in April 1993 with which the
Venture complied effective September 1, 1993.
Operating, general and administrative expenses increased $1,809,113,
or approximately 19 percent, from $9,562,582 in 1992 to $11,371,695 in 1993.
Operating, general and administrative expenses represented 56 percent of
revenue in 1993 compared to 51 percent in 1992. The increase in operating,
general and administrative expense was due to increases in programming fees,
personnel related costs, and plant related costs. No other individual factor
was significant to the increase in operating, general and administrative
expenses. Management fees and allocated overhead from Jones Intercable, Inc.
increased $218,910, or approximately 9 percent, from $2,370,763 in 1992 to
$2,589,673 in 1993, due primarily to the increase in revenues, upon which such
fees and allocations are calculated, and an increase in expenses allocated from
Jones Intercable, Inc.
17
<PAGE> 18
Depreciation and amortization expense decreased $344,202, or
approximately 4 percent, from $9,131,442 in 1992 to $8,787,240 in 1993. This
decrease was due to the maturation of the Venture's depreciable asset base.
Operating loss increased $181,390, or approximately 8 percent, from
$2,216,442 in 1992 to $2,397,832 in 1993. This increase was a result of the
increase in operating, general and administrative expenses, management fees and
allocated overhead from Jones Intercable, Inc. exceeding the growth in revenues
and the decrease in depreciation and amortization expense.
Interest expense increased $100,445, or approximately 5 percent, from
$1,915,945 in 1992 to $2,016,390 in 1993. This increase was due to higher
outstanding balances on interest bearing obligations. Net loss increased
$285,918, or approximately 7 percent, from $4,123,392 in 1992 to $4,409,310 in
1993.
Financial Condition
During 1994, capital improvements within the Venture's operating
systems totaled approximately $4,602,000. Approximately 25 percent were for
the construction of service drops to subscribers' homes. Approximately 23
percent of these expenditures were for rebuilds and upgrades in the Venture's
cable television systems and approximately 15 percent was for the construction
of new cable plant. The remainder of these expenditures related to various
system enhancements and improvements in all of the Venture's systems. Funding
for these expenditures was provided by borrowings under the Venture's credit
facility and cash generated from operations. Anticipated capital expenditures
for 1995 are approximately $5,000,000. Construction of service drops to homes
and the construction of new cable plant will account for approximately 24
percent and 23 percent, respectively, of the anticipated expenditures.
Expenditures for pay security equipment will account for approximately 12
percent, with the remainder of the expenditures relating to other various
enhancements in all of the Venture's systems. Funding for these expenditures
is expected to come from cash generated from operations and borrowings under
the Venture's credit facility.
In May 1994, the Venture completed renegotiation of its credit
facility to increase the maximum amount available to $45,000,000 and to extend
the revolving credit period to June 30, 1997, at which time the outstanding
balance is payable in full. At December 31, 1994, $42,100,000 was outstanding
on the Venture's credit facility leaving $2,900,000 of available borrowings.
Interest on outstanding principal is calculated at the Venture's option of the
Prime rate plus 1/2 percent, or LIBOR plus 1-1/2 percent.
On January 12, 1993, the Venture entered into an interest rate cap
agreement covering outstanding debt obligations of $15,000,000. The agreement
protects the Venture for LIBOR interest rates that exceed 7 percent for three
years from the date of the agreement. The Venture paid a fee of $145,500.
One of the primary objectives of the Venture is to provide quarterly
cash distributions to the Venture partners. Such cash returns are primarily
from cash generated through operating activities of the Venture. The Venture's
credit facility has a maximum amount available of $45,000,000, of which
$42,100,000 was outstanding on December 31, 1994, which limits the amount of
borrowings available to the Venture to fund capital expenditures; therefore,
the Venture did not declare any distributions in 1994. During 1993 and 1992,
the Venture declared and paid distributions to the Venture partners totaling
$4,320,000 and $4,090,000, respectively. Due to the borrowing limitations
discussed above, the Venture will need to use cash generated from operations to
fund capital expenditures and thus the Venture does not anticipate the
resumption of distributions to the Venture partners in the near term.
The General Partner believes that the Venture has sufficient sources
of capital to meet its presently anticipated needs.
Regulatory and Legislation
On October 5, 1992, Congress enacted the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act"), which became
effective on December 4, 1992. The 1992 Cable Act generally allows for a
greater degree of regulation of the cable television industry. In April 1993,
the FCC adopted regulations governing rates for basic and non-basic services.
These regulations became effective on September 1, 1993. Such regulations
caused reductions in rates for certain regulated services. On February 22,
1994, the FCC adopted several additional rate orders including an order which
revised its earlier-announced regulatory scheme with respect to rates. The
Venture has filed cost-of-service showings for its Brighton, Broomfield and
Boulder County, Colorado; Myrtle Creek, Oregon; South Sioux City,
18
<PAGE> 19
Nebraska; and Three Rivers and Watervliet, Michigan systems and thus
anticipates no further reductions in rates in these systems. The
cost-of-service showings have not yet received final approval from franchising
authorities, however, and there can be no assurance that the Venture's
cost-of-service showings will prevent further rate reductions until such final
approvals are received. The Venture complied with the February 1994 benchmark
regulations and further reduced rates in its Clearlake Oaks system effective
July 1994. See Item 1 for further discussion of the provisions of the 1992
Cable Act and the FCC regulations promulgated thereunder.
19
<PAGE> 20
Item 8. Financial Statements
JONES CABLE INCOME FUND 1-B
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1994 AND 1993
INDEX
<TABLE>
<CAPTION>
Page
-----
1-B 1-B/C
--- -----
<S> <C> <C>
Report of Independent Public Accountants 21 32
Balance Sheets 22 33
Statements of Operations 24 35
Statements of Partners' Capital (Deficit) 25 36
Statements of Cash Flows 26 37
Notes to Financial Statements 27 38
</TABLE>
20
<PAGE> 21
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Jones Cable Income Fund 1-B:
We have audited the accompanying balance sheets of JONES CABLE
INCOME FUND 1-B (a Colorado limited partnership) as of December 31, 1994 and
1993, and the related statements of operations, partners' capital (deficit) and
cash flows for each of the three years in the period ended December 31, 1994.
These financial statements are the responsibility of the General Partner's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of Jones Cable
Income Fund 1-B as of December 31, 1994 and 1993, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 8, 1995.
21
<PAGE> 22
JONES CABLE INCOME FUND 1-B
(A Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
----------------------------
ASSETS 1994 1993
------ ----------- -----------
<S> <C> <C>
CASH $ 116,839 $ 44,489
RECEIVABLES:
Trade receivables, less allowance for doubtful
receivables of $14,323 and $12,624 at
December 31, 1994 and 1993, respectively 167,587 118,799
Distribution receivable from cable television joint venture - 429,500
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 10,801,551 9,900,099
Less- accumulated depreciation (4,948,058) (4,044,575)
----------- -----------
5,853,493 5,855,524
Franchise costs, net of accumulated amortization
of $4,671,001 and $4,585,011 at December 31, 1994
and 1993, respectively - 85,990
Subscriber lists, net of accumulated amortization
of $3,024,266 and $2,650,130 at December 31, 1994
and 1993, respectively 1,527,734 1,901,870
Favorable leaseholds, net of accumulated amortization
of $96,806 and $84,830 at December 31, 1994
and 1993, respectively 60,894 72,870
Costs in excess of interests in net assets
purchased, net of accumulated amortization
of $9,894 and $8,670 at December 31, 1994
and 1993, respectively 39,006 40,230
Investment in cable television joint venture 4,086,463 6,036,257
----------- -----------
Total investment in cable television properties 11,567,590 13,992,741
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 22,362 5,279
----------- -----------
Total assets $11,874,378 $14,590,808
=========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
22
<PAGE> 23
JONES CABLE INCOME FUND 1-B
(A Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
------------------------------
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1994 1993
------------------------------------------- ------------ ------------
<S> <C> <C>
LIABILITIES:
Debt $ 3,544,000 $ 3,547,767
Accounts payable-
Trade 5,046 5,101
General Partner 2,162,870 1,944,230
Accrued liabilities 433,865 340,275
Accrued distribution to limited partners - 429,500
Subscriber prepayments 42,814 45,971
------------ ------------
Total liabilities 6,188,595 6,312,844
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 8)
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (177,653) (151,731)
Distributions (100,119) (100,119)
------------ ------------
(276,772) (250,850)
------------ ------------
Limited Partners-
Net contributed capital (83,884 units outstanding
at December 31, 1994 and 1993) 34,449,671 34,449,671
Accumulated deficit (17,469,410) (14,903,151)
Distributions (11,017,706) (11,017,706)
------------ ------------
5,962,555 8,528,814
------------ ------------
Total liabilities and partners' capital (deficit) $ 11,874,378 $ 14,590,808
============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
23
<PAGE> 24
JONES CABLE INCOME FUND 1-B
(A Limited Partnership)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES $ 4,484,892 $ 4,341,380 $ 4,163,690
COSTS AND EXPENSES:
Operating, general and administrative 2,720,750 2,550,022 2,409,047
Management fees and allocated overhead
from General Partner 572,292 546,371 519,472
Depreciation and amortization 1,376,809 1,691,043 1,931,255
----------- ----------- -----------
OPERATING LOSS (184,959) (446,056) (696,084)
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (391,583) (376,224) (404,132)
Other, net (65,845) (47,515) (291,925)
----------- ----------- -----------
Total other income (expense) (457,428) (423,739) (696,057)
----------- ----------- -----------
LOSS BEFORE EQUITY IN NET LOSS OF
CABLE TELEVISION JOINT VENTURE (642,387) (869,795) (1,392,141)
EQUITY IN NET LOSS OF CABLE
TELEVISION JOINT VENTURE (1,949,794) (1,753,583) (1,639,873)
----------- ----------- -----------
NET LOSS $(2,592,181) $(2,623,378) $(3,032,014)
=========== =========== ===========
ALLOCATION OF NET LOSS:
General Partner $ (25,922) $ (26,234) $ (30,320)
=========== =========== ===========
Limited Partners $(2,566,259) $(2,597,144) $(3,001,694)
=========== =========== ===========
NET LOSS PER LIMITED PARTNERSHIP UNIT $ (30.59) $ (30.96) $ (35.78)
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF LIMITED
PARTNERSHIP UNITS OUTSTANDING 83,884 83,884 83,884
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
24
<PAGE> 25
JONES CABLE INCOME FUND 1-B
(A Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1994 1993 1992
----------- ------------ -----------
<S> <C> <C> <C>
GENERAL PARTNER:
Balance, beginning of year $ (250,850) $ (207,264) $ (160,516)
Distributions - (17,352) (16,428)
Net loss for year (25,922) (26,234) (30,320)
----------- ------------ -----------
Balance, end of year $ (276,772) $ (250,850) $ (207,264)
=========== ============ ===========
LIMITED PARTNERS:
Balance, beginning of year $ 8,528,814 $12,843,958 $17,472,152
Distributions - (1,718,000) (1,626,500)
Net loss for year (2,566,259) (2,597,144) (3,001,694)
----------- ------------ -----------
Balance, end of year $ 5,962,555 $ 8,528,814 $12,843,958
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
25
<PAGE> 26
JONES CABLE INCOME FUND 1-B
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1994 1993 1992
----------- ------------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,592,181) $(2,623,378) $(3,032,014)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 1,376,809 1,691,043 1,931,255
Equity in net loss of cable television joint venture 1,949,794 1,753,583 1,639,873
Decrease (increase) in trade receivables (48,788) (12,430) 3,506
Decrease (increase) in deposits, prepaid expenses and (17,083) 47,477 (82,170)
deferred charges
Increase (decrease) in trade accounts payable, accrued
liabilities and subscriber prepayments 90,378 (60,150) 83,805
----------- ------------- ------------
Net cash provided by operating activities 758,929 796,145 544,255
----------- ------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (901,452) (806,938) (1,220,551)
Distributions from cable television joint venture - 1,718,000 1,626,500
Decrease (increase) in receivable from joint venture 429,500 - (51,700)
----------- ------------- ------------
Net cash provided by (used in)
investing activities (471,952) 911,062 354,249
----------- ------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 16,830 30,000 23,600
Repayment of debt (20,597) (8,178) (36,937)
Distributions to limited partners - (1,718,000) (1,626,500)
Increase (decrease) in accrued distributions to
limited partners (429,500) - 51,700
Increase (decrease) in advances from General Partner 218,640 (50,171) 725,446
----------- ------------- ------------
Net cash used in financing activities (214,627) (1,746,349) (862,691)
----------- ------------- ------------
Increase (decrease) in cash 72,350 (39,142) 35,813
Cash, beginning of year 44,489 83,631 47,818
----------- ------------- ------------
Cash, end of year $ 116,839 $ 44,489 $ 83,631
=========== ============ ============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 360,569 $ 396,938 $ 387,532
=========== ============= ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
26
<PAGE> 27
JONES CABLE INCOME FUND 1-B
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION AND PARTNERS' INTERESTS
Formation and Business
Jones Cable Income Fund 1-B, Ltd. (the "Partnership"), a
Colorado limited partnership, was formed on August 14, l986, under a public
program sponsored by Jones Intercable, Inc. ("Intercable"). The Partnership was
formed to acquire, develop and operate cable television systems. Intercable is
the "General Partner" and manager of the Partnership. The General Partner and
its subsidiaries also own and operate cable television systems. In addition,
Intercable manages cable television systems for other limited partnerships for
which it is general partner and, also, for other affiliated entities.
Contributed Capital
The capitalization of the Partnership is set forth in the
accompanying statements of partners' capital (deficit). No limited partner is
obligated to make any additional contribution to partnership capital.
The General Partner purchased its interest in the Partnership
by contributing $1,000 to partnership capital.
All profits and losses of the Partnership are allocated 99
percent to the limited partners and 1 percent to the General Partner, except
for income or gain from the sale or disposition of cable television properties,
which will be allocated to the partners based upon the formula set forth in the
partnership agreement.
Cable Television System Acquisition
The Partnership's acquisition of the cable television system
serving the community of Orangeburg, South Carolina (the "Orangeburg System")
was accounted for as a purchase with the purchase price allocated as follows:
first, to the fair value of net tangible assets acquired; second, to the value
of a subscriber list, franchise costs and favorable leaseholds; and third to
costs in excess of interests in net assets purchased. Brokerage fees paid to a
subsidiary of the General Partner were allocated to intangible assets based
upon the relative value of these assets at acquisition. Other system
acquisition costs were capitalized and included in the cost of distribution
systems.
The Partnership owns the Orangeburg System and also owns an
approximate 40 percent interest in Jones Cable Income Fund 1-B/C Venture (the
"Venture"), through a capital contribution made to the Venture in November 1987
of $24,220,000. The Venture acquired cable television systems in Colorado,
Oregon and California on December 31, 1987 and in Colorado, Nebraska and
Michigan during 1988. The Venture incurred losses of $4,902,676 , $4,409,310
and $4,123,392 in 1994, 1993, and 1992, respectively, of which $1,949,794,
$1,753,583 and $1,639,873, respectively, was allocated to the Partnership.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Records
The accompanying financial statements have been prepared on
the accrual basis of accounting in accordance with generally accepted
accounting principles. The Partnership's tax returns are also prepared on the
accrual basis.
27
<PAGE> 28
Investment in Cable Television Joint Venture
The Partnership's investment in the Venture is accounted for
under the equity method. The operations of the Venture are significant to the
Partnership and should be reviewed in conjunction with these financial
statements. Reference is made to the accompanying financial statements of the
Venture on pages 32 to 42.
Property, Plant and Equipment
Depreciation of property, plant and equipment is provided
primarily using the straight-line method over the following estimated service
lives:
<TABLE>
<S> <C>
Cable distribution systems 5 - 15 years
Equipment and tools 5 years
Office furniture and equipment 5 - 15 years
Buildings 10 - 20 years
Vehicles 3 years
</TABLE>
Replacements, renewals and improvements are capitalized and
maintenance and repairs are charged to expense as incurred.
Intangible Assets
Costs assigned to subscriber lists, favorable leaseholds and
costs in excess of interests in net assets purchased are being amortized using
the straight-line method over the following remaining estimated useful lives:
<TABLE>
<S> <C>
Subscriber lists 4 years
Favorable leaseholds 5 years
Costs in excess of interests in
net assets purchased 32 years
</TABLE>
Revenue Recognition
Subscriber prepayments are initially deferred and recognized
as revenue when earned.
(3) TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES
Management Fees, Distribution Ratios and Reimbursement
The General Partner manages the Partnership and receives a fee
for its services equal to 5 percent of the gross revenues of the Partnership,
excluding revenues from the sale of cable television systems or franchises.
Management fees charged during the years ended December 31, 1994, 1993 and 1992
were $224,245, $217,069 and $208,185, respectively.
Any partnership distributions made from cash flow (defined as
cash receipts derived from routine operations, less debt principal and interest
payments and cash expenses) are allocated 99 percent to the limited partners
and 1 percent to the General Partner. Distributions resulting from the sale or
refinancing of a system or upon dissolution of the Partnership will be made as
follows: first, to the limited partners in an amount which together with all
prior distributions, other than those made regularly from cash flow, will equal
their initial capital contribution; second, payment to the limited partners of
a liquidation preference equal to a 10 percent cumulative return on their
initial capital contribution, reduced by all prior distributions from cash
flow; and the balance, 75 percent to the limited partners and 25 percent to the
General Partner.
The Partnership reimburses the General Partner for certain
allocated overhead and administrative expenses. These expenses represent
salaries and benefits paid to corporate personnel, rent, data processing and
other corporate facilities costs. Such personnel provide engineering,
marketing, administrative accounting, legal, and investor relations services to
the Partnership. Allocations of personnel costs are based primarily on actual
time spent by employees of the General Partner with respect to each partnership
managed. Remaining overhead costs are allocated based on
28
<PAGE> 29
revenues and/or assets managed for the partnership. Effective December 1, 1993
the allocation method was changed to be based only on revenue, which the
General Partner believes provides a more accurate method of allocation.
Systems owned by the General Partner and all other systems owned by
partnerships for which Intercable is the general partner are also allocated a
proportionate share of these expenses. The General Partner believes that the
methodology used in allocating overhead and administrative expenses is
reasonable. Amounts allocated to the Partnership by the General Partner for
overhead and administrative expenses during the years ended December 31, 1994,
1993 and 1992 were $348,047, $329,302 and $311,287, respectively.
The Partnership was charged interest during 1994 at an average
interest rate of 10 percent on the amounts due to the General Partner, which
approximated the General Partner's weighted average cost of borrowing. Total
interest charged by the General Partner during the years ended December 31,
1994, 1993 and 1992 was $176,867, $217,249 and $214,682, respectively.
Payments to/from Affiliates for Programming Services
The Partnership receives programming from Product Information
Network, Superaudio and The Mind Extension University, affiliates of the
General Partner. Payments to Superaudio totaled $7,193, $7,243 and $7,012 in
1994, 1993 and 1992, respectively. Payments to The Mind Extension University
totaled $6,517, $4,212 and $4,017 in 1994, 1993 and 1992, respectively. The
Partnership receives a commission from Product Information Network based on a
percentage of advertising revenues and number of subscribers. Product
Information Network, which initiated service in 1994, paid commissions to the
Partnership totalling $321 in 1994.
(4) DISTRIBUTIONS FROM CASH FLOW
One of the primary objectives of the Partnership is to provide
quarterly cash distributions to the partners. Such cash returns are primarily
from cash generated through the operating activities of the Partnership and
from the distributions made to the Partnership from the Venture. Because the
Partnership's credit facility was at the maximum amount available in 1994, the
Partnership utilized cash generated from operations to fund capital
expenditures. In addition, the Venture's credit facility has a maximum amount
available of $45,000,000, of which $42,100,000 was outstanding at December 31,
1994, which limits the amount of borrowings available to the Venture to fund
capital expenditures; therefore, the Venture did not declare any distributions
in 1994. Due to these conditions, the Partnership did not declare any
distributions for 1994. Distributions for the years ended December 31, 1993
and 1992 were $1,735,352 and $1,642,928, respectively. The General Partner has
agreed to defer its portion of the distributions from cash flows until the
Partnership is liquidated. The Venture is not expected to reinstate
distributions in the near term. In January 1995, the Partnership completed
negotiations for a new revolving credit agreement that will provide liquidity
to fund capital expenditures. The Partnership will attempt to provide some
level of distributions from cash generated from operations in 1995. No
determination has been made regarding the level of future distributions. The
level of distributions, if any, will be determined on a quarter-by-quarter
basis.
(5) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of December 31, 1994 and 1993,
consisted of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1994 1993
------------ ------------
<S> <C> <C>
Cable distribution systems $10,052,951 $ 9,214,361
Equipment and tools 309,773 285,431
Office furniture and equipment 110,323 105,629
Buildings 36,333 36,000
Vehicles 289,539 256,046
Land 2,632 2,632
------------ ------------
10,801,551 9,900,099
Less-accumulated depreciation (4,948,058) (4,044,575)
------------ ------------
$ 5,853,493 $ 5,855,524
============ ============
</TABLE>
29
<PAGE> 30
(6) DEBT
<TABLE>
<CAPTION>
Debt consists of the following: December 31,
-----------------------------
1994 1993
---------- -----------
<S> <C> <C>
Lending institutions-
Revolving credit agreement $3,500,000 $3,500,000
Capital lease obligations 44,000 47,767
---------- -----------
$3,544,000 $3,547,767
========== ==========
</TABLE>
As of December 31, 1994, the full amount of the Partnership's
$3,500,000 credit facility was outstanding. In January 1995, the General
Partner completed negotiations for a new revolving credit facility with a
maximum amount available of $8,500,000. The Partnership borrowed $5,800,000 to
repay the amounts outstanding under the prior credit facility and to repay the
General Partner its advances, leaving $2,700,000 of borrowings available. The
revolving credit facility converts to a term loan on December 31, 1997 at which
time the then-outstanding loan balance will be due in 20 consecutive quarterly
installments beginning March 31, 1998. Interest on the revolving credit
facility is at the Partnership's option of the Prime rate plus 1/4 percent, the
CD rate plus 1 3/8 percent, or the London Interbank Offered Rate plus 1 1/2
percent. The effective interest rates on outstanding obligations were 8.63
percent and 4.31 percent, respectively, at December 31, 1994 and 1993.
Installments due on debt principal for the five years ending
December 31, 1999 and thereafter, respectively, are $13,200, $13,200, $13,200,
$167,150, $572,250 and $2,765,000. At December 31, 1994, substantially all of
the Partnership assets secured the above indebtedness.
(7) INCOME TAXES
Income taxes have not been recorded in the accompanying
financial statements because they accrue directly to the partners. The Federal
and state income tax returns of the Partnership are prepared and filed by the
General Partner.
The Partnership's tax returns, the qualification of the
Partnership as such for tax purposes, and the amount of distributable
partnership income or loss are subject to examination by Federal and state
taxing authorities. If such examinations result in changes with respect to the
Partnership's qualification as such, or in changes with respect to the
Partnership's recorded income or loss, the tax liability of the general and
limited partners would likely be changed accordingly.
Taxable loss reported to the partners is different from that
reported in the statements of operations due to the difference in depreciation
recognized under generally accepted accounting principles and the expense
allowed for tax purposes under the Modified Accelerated Cost Recovery System
(MACRS). There are no other significant differences between taxable loss and
the net loss reported in the statements of operations.
(8) COMMITMENTS AND CONTINGENCIES
On October 5, 1992, Congress enacted the Cable Television
Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"), which
became effective on December 4, 1992. The 1992 Cable Act generally allows for
a greater degree of regulation of the cable television industry. In April
1993, the FCC adopted regulations governing rates for basic and non-basic
services. These regulations became effective on September 1, 1993. Such
regulations caused reductions in rates for certain regulated services. On
February 22, 1994, the FCC adopted several additional rate orders including an
order which revised its earlier-announced regulatory scheme with respect to
rates. The Partnership has filed a cost-of-service showing for its Orangeburg
System and therefore anticipates no further reductions in rates. The
cost-of-service showing has not yet received final approval from franchising
authorities, however, and there can be no assurance that the Partnership's
cost-of-service showings will prevent further rate reductions until such final
approval is received. See Item 1 for further discussion of the provisions of
the 1992 Cable Act and the FCC regulations promulgated thereunder.
30
<PAGE> 31
The Partnership rents office and other facilities under
various long-term lease arrangements. Rent paid under such lease agreements
totaled $26,875, $27,112, and $27,555, respectively, for the years ended
December 31, 1994, 1993 and 1992. Minimum commitments under operating leases
for each of the five years in the period ending December 31, 1999, and
thereafter are as follows:
<TABLE>
<S> <C>
1995 $ 27,200
1996 27,200
1997 27,200
1998 27,200
1999 24,000
Thereafter -
--------
$132,800
========
</TABLE>
(9) SUPPLEMENTARY PROFIT AND LOSS INFORMATION
Supplementary profit and loss information for the respective
years is presented below:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1994 1993 1992
--------- --------- -----------
<S> <C> <C> <C>
Maintenance and repairs $ 45,139 $ 61,553 $ 47,624
========= ========= ===========
Taxes, other than income and payroll taxes $ 57,742 $ 56,847 $ 57,185
========= ========= ===========
Advertising $ 57,444 $ 51,188 $ 56,647
========= ========= ===========
Depreciation of property, plant and equipment $ 903,483 $ 971,896 $ 844,763
========= ========= ===========
Amortization of intangible assets $ 473,326 $ 719,147 $1,086,492
========= ========= ===========
</TABLE>
31
<PAGE> 32
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Jones Cable Income Fund 1-B/C Venture:
We have audited the accompanying balance sheets of JONES CABLE
INCOME FUND 1-B/C Venture (a Colorado general partnership) as of December 31,
1994 and 1993, and the related statements of operations, partners' capital and
cash flows for each of the three years in the period ended December 31, 1994.
These financial statements are the responsibility of the General Partners'
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of Jones Cable
Income Fund 1-B/C Venture as of December 31, 1994 and 1993, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1994, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 8, 1995.
32
<PAGE> 33
JONES CABLE INCOME FUND 1-B/C VENTURE
(A General Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
-------------------------------------
ASSETS 1994 1993
------ --------------- --------------
<S> <C> <C>
CASH $ 309,848 $ 118,807
TRADE RECEIVABLES, less allowance for doubtful
receivables of $37,534 and $42,088 at December 31, 1994
and 1993, respectively 459,412 432,048
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 57,707,174 53,105,367
Less- accumulated depreciation (24,802,632) (20,804,731)
------------- ------------
32,904,542 32,300,636
Franchise costs, net of accumulated amortization
of $23,207,609 and $19,814,129 at December 31, 1994
and 1993, respectively 13,386,181 16,779,661
Subscriber lists, net of accumulated amortization
of $6,464,742 and $5,506,482 at December 31, 1994
and 1993, respectively 909,418 1,867,678
Cost in excess of interests in net assets purchased,
net of accumulated amortization of $1,219,184 and $1,039,340
at December 31, 1994 and 1993, respectively 5,972,836 6,152,680
Noncompete agreement, net of accumulated amortization
of $230,224 and $201,388 at December 31, 1994 and
1993, respectively 108,076 136,912
------------- ------------
Total investment in cable television properties 53,281,053 57,237,567
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 495,461 360,412
------------- ------------
Total assets $ 54,545,774 $ 58,148,834
============= ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
33
<PAGE> 34
JONES CABLE INCOME FUND 1-B/C VENTURE
(A General Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
-----------------------------------
LIABILITIES AND PARTNERS' CAPITAL 1994 1993
--------------------------------- -------------- --------------
<S> <C> <C>
LIABILITIES:
Debt $ 42,383,339 $ 36,298,318
Accounts payable-
Trade 16,153 36,832
Jones Intercable, Inc. 66,224 4,068,472
Accrued liabilities 1,523,073 1,210,801
Accrued distribution to partners - 1,080,000
Subscriber prepayments 270,839 265,589
------------ ------------
Total liabilities 44,259,628 42,960,012
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 8)
PARTNERS' CAPITAL:
Contributed capital 60,036,950 60,036,950
Accumulated deficit (29,217,862) (24,315,186)
Distributions (20,532,942) (20,532,942)
------------ ------------
10,286,146 15,188,822
------------ ------------
Total liabilities and partners' capital $ 54,545,774 $ 58,148,834
============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
34
<PAGE> 35
JONES CABLE INCOME FUND 1-B/C VENTURE
(A General Partnership)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------
1994 1993 1992
-------------- -------------- --------------
<S> <C> <C> <C>
REVENUES $21,121,787 $20,350,776 $18,848,345
COSTS AND EXPENSES:
Operating, general and administrative 12,017,508 11,371,695 9,562,582
Management fees and allocated overhead from
Jones Intercable, Inc. 2,714,799 2,589,673 2,370,763
Depreciation and amortization 8,632,481 8,787,240 9,131,442
----------- ----------- -----------
OPERATING LOSS (2,243,001) (2,397,832) (2,216,442)
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (2,761,409) (2,016,390) (1,915,945)
Other, net 101,734 4,912 8,995
----------- ----------- -----------
Total other income (expense) (2,659,675) (2,011,478) (1,906,950)
----------- ----------- -----------
NET LOSS $(4,902,676) $(4,409,310) $(4,123,392)
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
35
<PAGE> 36
JONES CABLE INCOME FUND 1-B/C VENTURE
(A General Partnership)
STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------
1994 1993 1992
-------------- -------------- --------------
<S> <C> <C> <C>
Jones Cable Income Fund 1-B:
Balance, beginning of year $ 6,036,257 $ 9,507,840 $12,774,213
Distributions - (1,718,000) (1,626,500)
Net loss for year (1,949,794) (1,753,583) (1,639,873)
----------- ----------- -----------
Balance, end of year $ 4,086,463 $ 6,036,257 $ 9,507,840
=========== =========== ===========
Jones Cable Income Fund 1-C:
Balance, beginning of year $ 9,152,565 $14,410,292 $19,357,311
Distributions - (2,602,000) (2,463,500)
Net loss for year (2,952,882) (2,655,727) (2,483,519)
----------- ----------- -----------
Balance, end of year $ 6,199,683 $ 9,152,565 $14,410,292
=========== =========== ===========
Total:
Balance, beginning of year $15,188,822 $23,918,132 $32,131,524
Distributions - (4,320,000) (4,090,000)
Net loss for year (4,902,676) (4,409,310) (4,123,392)
----------- ----------- -----------
Balance, end of year $10,286,146 $15,188,822 $23,918,132
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
36
<PAGE> 37
JONES CABLE INCOME FUND 1-B/C VENTURE
(A General Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------
1994 1993 1992
-------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(4,902,676) $(4,409,310) $(4,123,392)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 8,632,481 8,787,240 9,131,442
Amortization of interest rate protection contract 48,500 48,501 -
Increase in trade receivables (27,364) (161,826) (22,724)
Increase in deposits, prepaid expenses and
deferred charges (257,709) (53,521) (94,772)
Increase in accounts payable, accrued liabilities
and subscriber prepayments 296,843 134,542 14,702
Increase (decrease) in amount due Jones Intercable Inc. (4,002,248) 3,465,707 16,822
----------- ----------- -----------
Net cash provided by (used in)
operating activities (212,173) 7,811,333 4,922,078
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (4,601,807) (4,125,320) (4,095,453)
----------- ----------- ----------
Net cash used in investing activities (4,601,807) (4,125,320) (4,095,453)
----------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 6,552,832 794,914 3,674,961
Repayment of debt (467,811) (131,657) (375,396)
Distributions to general partners - (4,320,000) (4,090,000)
Increase (decrease) in accrued distributions to
partners (1,080,000) - 130,000
Purchase of interest rate protection contract - (145,500) -
----------- ----------- -----------
Net cash provided by (used in) financing activities 5,005,021 (3,802,243) (660,435)
----------- ----------- -----------
Increase (decrease) in cash 191,041 (116,230) 166,190
Cash, beginning of year 118,807 235,037 68,847
----------- ----------- -----------
Cash, end of year $ 309,848 $ 118,807 $ 235,037
=========== =========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 2,536,991 $ 1,962,699 $ 1,895,997
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
37
<PAGE> 38
JONES CABLE INCOME FUND 1-B/C VENTURE
(A General Partnership)
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION AND PARTNERS' INTERESTS
Formation and Business
On October 21, 1987, Jones Cable Income Fund 1-B, Ltd. ("Fund
1-B") and Jones Cable Income Fund 1-C, Ltd. ("Fund 1-C") formed a Colorado
general partnership known as Jones Cable Income Fund 1-B/C Venture (the
"Venture") by making capital contributions of $24,220,000 and $36,681,000,
respectively (approximately 40 and 60 percent, respectively). The Venture was
formed to acquire, develop and operate cable television systems. During 1988
and 1987, the Venture acquired various cable television systems serving the
areas in and around Brighton, Broomfield and Boulder County, Colorado; Lake
County, California; Myrtle Creek, Oregon; South Sioux City, Nebraska; and Three
Rivers and Watervliet, Michigan.
Jones Intercable, Inc. ("Intercable"), the general partner of
Fund 1-B and Fund 1-C, manages the Venture. Intercable and its subsidiaries
also own and operate cable television systems. In addition, Intercable manages
cable television systems for other limited partnerships for which it is general
partner and, also, for affiliated entities.
Contributed Capital
The capitalization of the Venture is set forth in the
accompanying statements of partners' capital.
All Venture distributions, including those made from cash flow,
from the sale or refinancing of Venture property and on dissolution of the
Venture, shall be made to Fund 1-B and Fund 1-C in proportion to their
interests in the Venture.
Cable Television System Acquisition
Venture acquisitions were accounted for as purchases with the
purchase prices allocated as follows: first, to the fair value of net tangible
assets acquired; second, to the value of subscriber lists, franchise costs and
a noncompete agreement; and third, to cost in excess of interests in net assets
purchased. Brokerage fees paid to a subsidiary of Intercable's parent were
allocated to intangible assets based upon the relative value of these assets at
acquisition. Other system acquisition costs were capitalized and included in
the cost of distribution systems.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Records
The accompanying financial statements have been prepared on the
accrual basis of accounting in accordance with generally accepted accounting
principles. The Venture's tax returns are also prepared on the accrual basis.
Property, Plant and Equipment
Depreciation of property, plant and equipment is provided
primarily using the straight-line method over the following estimated service
lives:
<TABLE>
<S> <C>
Cable distribution systems 5 - 15 years
Equipment and tools 5 years
Office furniture and equipment 5 - 15 years
Buildings 10 - 20 years
Vehicles 3 years
</TABLE>
Replacements, renewals and improvements are capitalized and
maintenance and repairs are charged to expense as incurred.
38
<PAGE> 39
Intangible Assets
Costs assigned to franchises, subscriber lists, a noncompete
agreement and costs in excess of interests in net assets purchased are
amortized using the straight-line method over the following remaining estimated
useful lives:
<TABLE>
<S> <C>
Franchise costs 1 - 16 years
Subscriber costs 1 - 2 years
Noncompete agreement 1 - 4 years
Costs in excess of interests in net
assets purchased 34 years
</TABLE>
Revenue Recognition
Subscriber prepayments are initially deferred and recognized as
revenue when earned.
Reclassifications
Certain prior year amounts have been reclassified to conform to
the 1994 presentation.
(3) TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES
Management Fees and Reimbursements
Intercable manages the Venture and receives a fee for its
services equal to 5 percent of the gross revenues of the Venture, excluding
revenues from the sale of cable television systems or franchises. Management
fees paid to Intercable by the Venture during the years ended December 31,
1994, 1993 and 1992 were $1,056,089, $1,017,539 and $942,417, respectively.
The Venture reimburses Intercable for certain allocated overhead
and administrative expenses. These expenses represent the salaries and related
benefits paid for corporate personnel, rent, data processing services and other
corporate facilities costs. Such personnel provide engineering, marketing,
administrative, accounting, legal and investor relations services to the
Venture. Allocations of personnel costs are based primarily on actual time
spent by employees of Intercable with respect to each entity managed.
Remaining overhead costs are allocated based on revenue and/or assets managed
for the partnership. Effective December 1, 1993, the allocation method was
changed to be based only on revenue, which the General Partner believes
provides a more accurate method of allocation. Systems owned by Intercable and
all other systems owned by partnerships for which Intercable is the general
partner are also allocated a proportionate share of these expenses. Intercable
believes that the methodology of allocating overhead and administrative
expenses is reasonable. Overhead and administrative expenses allocated to the
Venture by Intercable during the years ended December 31, 1994, 1993 and 1992
were $1,658,710, $1,572,134 and $1,428,346, respectively.
The Venture was charged interest during 1994 at an average
interest rate of 10 percent on the amounts due Intercable, which approximated
Intercable's weighted average cost of borrowing. Total interest charged the
Venture by Intercable was $180,316, $187,959 and $67,841 during 1994, 1993 and
1992, respectively.
Payments to/from Affiliates for Programming Services
The Venture receives programming from Product Information
Network, Superaudio, The Mind Extension University and Jones Computer Network,
affiliates of Intercable. Payments to Superaudio totaled $25,189, $26,541 and
$33,913 in 1994, 1993 and 1992, respectively. Payments to The Mind Extension
University totaled $33,199, $20,832 and $20,053 in 1994, 1993 and 1992,
respectively. Payments to Jones Computer Network, which initiated service in
1994, totaled $13,218 in 1994. The Venture receives a commission from Product
Information Network based on a percentage of advertising revenues and number of
subscribers. Product Information Network, which initiated service in 1994,
paid commissions to the Venture totalling $15,283 in 1994.
39
<PAGE> 40
(4) DISTRIBUTIONS FROM CASH FLOW
One of the primary objectives of the Venture is to provide
quarterly cash distributions to the Venture partners. Such cash returns are
primarily from cash generated through operating activities of the Venture. The
Venture's credit facility has a maximum amount available of $45,000,000, of
which $42,100,000 was outstanding on December 31, 1994, which limits the amount
of borrowings available to the Venture to fund capital expenditures; therefore,
the Venture did not declare any distributions in 1994. During 1993 and 1992,
the Venture declared and paid distributions to the Venture partners totaling
$4,320,000 and $4,090,000, respectively. Due to the borrowing limitations
discussed above, the Venture will need to use cash generated from operations to
fund capital expenditures and thus the Venture does not anticipate the
resumption of distributions to the Venture partners in the near term.
(5) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of December 31, 1994 and 1993,
consisted of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1994 1993
---------------- -----------------
<S> <C> <C>
Cable distribution systems $ 52,889,029 $ 48,816,164
Equipment and tools 2,062,435 1,795,192
Office furniture and equipment 673,528 589,766
Buildings 452,428 450,155
Vehicles 1,460,112 1,284,446
Land 169,642 169,642
------------ ------------
57,707,174 53,105,367
Less- accumulated depreciation (24,802,632) (20,804,731)
$ 32,904,542 $ 32,300,636
============ ============
</TABLE>
(6) DEBT
<TABLE>
<CAPTION>
Debt consists of the following: December 31,
-----------------------------
1994 1993
-------------- ------------
<S> <C> <C>
Lending institutions-
Revolving credit agreement $42,100,000 $36,000,000
Capital lease obligations 283,339 298,318
----------- -----------
$42,383,339 $36,298,318
=========== ===========
</TABLE>
In May 1994, the Venture completed negotiation of its credit
facility to increase the maximum amount available to $45,000,000 and to extend
the revolving credit period to June 30, 1997, at which time the
then-outstanding balance is payable in full. At December 31, 1994, $42,100,000
was outstanding on the Venture's credit facility leaving $2,900,000 of
available borrowings. Interest on outstanding principal is calculated at the
Venture's option of the Prime rate plus 1/2 percent, or LIBOR plus 1-1/2
percent. The effective interest rates on amounts outstanding on the Venture's
credit facility as of December 31, 1994 and 1993 were 7.36 percent and 4.67
percent, respectively.
On January 12, 1993, the Venture entered into an interest rate
cap agreement covering outstanding debt obligations of $15,000,000. The
Venture paid a fee of $145,500. The agreement protects the Venture for LIBOR
interest rates that exceed 7 percent for three years from the date of the
agreement.
Installments due on debt principal for each of the five years in
the period ending December 31, 1999, respectively, are $85,002, $85,002,
$42,185,001, $28,334 and $-0-. As of December 31, 1994, substantially all of
the Venture's assets secured the above indebtedness.
40
<PAGE> 41
(7) INCOME TAXES
Income taxes have not been recorded in the accompanying financial
statements because they accrue directly to Fund 1-B and Fund 1-C. The Federal
and state income tax returns of the Venture are prepared and filed by
Intercable.
The Venture's tax returns, the qualification of the Venture as
such for tax purposes, and the amount of distributable Venture income or loss
are subject to examination by Federal and state taxing authorities. If such
examinations result in changes with respect to the Venture's qualification as
such, or in changes with respect to the Venture's recorded income or loss, the
tax liability of Fund 1-B and Fund 1-C would likely be changed accordingly.
Taxable loss reported to Fund 1-B and Fund 1-C is different from
that reported in the statements of operations due to the difference in
depreciation recognized under generally accepted accounting principles and the
expense allowed for tax purposes under the Modified Accelerated Cost Recovery
System (MACRS). There are no other significant differences between taxable
income or loss and the net income or loss reported in the statements of
operations.
(8) COMMITMENTS AND CONTINGENCIES
On October 5, 1992, Congress enacted the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act"), which became
effective on December 4, 1992. The 1992 Cable Act generally allows for a
greater degree of regulation of the cable television industry. In April 1993,
the Federal Communications Commission (the "FCC") adopted regulations
governing rates for basic and non-basic services. These regulations became
effective on September 1, 1993. Such regulations caused reductions in rates
for certain regulated services. On February 22, 1994, the FCC adopted several
additional rate orders including an order which revised its earlier-announced
regulatory scheme with respect to rates. The Venture has filed cost-of-service
showings for its Brighton, Broomfield and Boulder County, Colorado; Myrtle
Creek, Oregon; South Sioux City, Nebraska; and Three Rivers and Watervliet,
Michigan systems and thus anticipates no further reductions in rates in these
systems. The cost-of-service showings have not yet received final approval
from franchising authorities, however, and there can be no assurance that the
Venture's cost-of-service showings will prevent further rate reductions until
such final approvals are received. The Venture complied with the February 1994
benchmark regulations and further reduced rates in its Clearlake Oaks system
effective July 1994.
The Venture rents office and other facilities under various
long-term lease arrangements. Rent paid under such lease arrangements totaled
$82,204 , $78,616 and $88,074, respectively, for the years ended December 31,
1994, 1993 and 1992. Minimum commitments under operating leases for each of
the five years in the period ending December 31, 1999, and thereafter are as
follows:
<TABLE>
<S> <C>
1995 $ 74,284
1996 29,038
1997 21,338
1998 21,248
1999 21,248
Thereafter 161,814
--------
$328,970
========
</TABLE>
41
<PAGE> 42
(9) SUPPLEMENTARY PROFIT AND LOSS INFORMATION
Supplementary profit and loss information for the respective
years is presented below:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Maintenance and repairs $ 203,987 $ 226,863 $ 221,292
========== ========== ==========
Taxes, other than income and payroll taxes $ 455,044 $ 674,649 $ 621,901
========== ========== ==========
Advertising $ 353,212 $ 381,096 $ 375,173
========== ========== ==========
Depreciation of property, plant and equipment $4,072,061 $4,225,967 $4,561,026
========== ========== ==========
Amortization of intangible assets $4,560,420 $4,561,273 $4,570,416
========== ========== ==========
</TABLE>
42
<PAGE> 43
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership itself has no officers or directors. Certain
information concerning the directors and executive officers of the General
Partner is set forth below.
<TABLE>
<CAPTION>
Name Age Positions with the General Partner
---- --- ----------------------------------
<S> <C> <C>
Glenn R. Jones 65 Chairman of the Board and Chief Executive Officer
Derek H. Burney 55 Vice Chairman of the Board
James B. O'Brien 45 President, Chief Operating Officer and Director
Ruth E. Warren 45 Group Vice President/Operations
Kevin P. Coyle 43 Group Vice President/Finance
Christopher J. Bowick 40 Group Vice President/Technology
Timothy J. Burke 44 Group Vice President/Taxation/Administration
Raymond L. Vigil 48 Group Vice President/Human Resources and Director
Cynthia A. Winning 43 Group Vice President/Marketing
Elizabeth M. Steele 43 Vice President/General Counsel/Secretary
Larry W. Kaschinske 35 Controller
James J. Krejci 53 Director
Christine Jones Marocco 39 Director
Daniel E. Somers 47 Director
Robert S. Zinn 58 Director
David K. Zonker 41 Director
</TABLE>
Mr. Glenn R. Jones has served as Chairman of the Board of Directors and
Chief Executive Officer of the General Partner since its formation in 1970, and
he was President from June 1984 until April 1988. Mr. Jones was elected a member
of the Executive Committee of the Board of Directors in April 1985. Mr. Jones is
the sole shareholder, President and Chairman of the Board of Directors of Jones
International, Ltd. He is also Chairman of the Board of Directors of the
subsidiaries of the General Partner and of certain other affiliates of the
General Partner. Mr. Jones has been involved in the cable television business in
various capacities since 1961, is a past and present member of the Board of
Directors of the National Cable Television Association, and is a former member
of its Executive Committee. Mr. Jones is a past director and member of the
Executive Committee of C-Span. Mr. Jones has been the recipient of several
awards including the Grand Tam Award in 1989, the highest award from the Cable
Television Administration and Marketing Society; the Chairman's Award from the
Investment Partnership Association, which is an association of sponsors of
public syndications; the cable television industry's Public Affairs Association
President's Award in 1990, the Donald G. McGannon award for the advancement of
minorities and women in cable; the STAR Award from American Women in Radio and
Television, Inc. for exhibition of a commitment to the issues and concerns of
women in television and radio; and the Women in Cable Accolade in 1990 in
recognition of support of this organization. Mr. Jones is also a founding member
of the James Madison Council of the Library of Congress and is on the Board of
Governors of the American Society of Training and Development.
Mr. Derek H. Burney was appointed a Director of the General Partner in
December 1994 and Vice Chairman of the Board of Directors in January 1995. He is
also a member of the Executive Committee of the Board of Directors. Mr. Burney
joined BCE Inc., Canada's largest telecommunications company, in January 1993 as
Executive Vice President, International. He has been the Chairman of Bell Canada
International Inc., a
43
<PAGE> 44
subsidiary of BCE, since January 1993 and, in addition, has been Chief Executive
Officer of BCI since July 1993. Prior to joining BCE, Mr. Burney served as
Canada's ambassador to the United States from 1989 to 1992. Mr. Burney also
served as chief of staff to the Prime Minister of Canada from March 1987 to
January 1989 where he was directly involved with the negotiation of the U.S. -
Canada Free Trade Agreement. In July 1993, he was named an Officer of the Order
of Canada. Mr. Burney is chairman of Bell Cablemedia plc. He is a director of
Mercury Communications Limited, Videotron Holdings plc, Tele-Direct
(Publications) Inc., Teleglobe Inc., Bimcor Inc., Maritime Telegraph and
Telephone Company, Limited, Moore Corporation Limited and Northbridge
Programming Inc.
Mr. James B. O'Brien, the General Partner's President, joined the
General Partner in January 1982. Prior to being elected President and a Director
of the General Partner in December 1989, Mr. O'Brien served as a Division
Manager, Director of Operations Planning/Assistant to the CEO, Fund Vice
President and Group Vice President/Operations. Mr. O'Brien was appointed to the
General Partner's Executive Committee in August 1993. As President, he is
responsible for the day-to-day operations of the cable television systems
managed and owned by the General Partner. Mr. O'Brien is also President and a
Director of Jones Cable Group, Ltd., Jones Global Funds, Inc. and Jones Global
Management, Inc., all affiliates of the General Partner. Mr. O'Brien is a board
member of Cable Labs, Inc., the research arm of the U.S. cable television
industry. He also serves as a director of the Cable Television Administration
and Marketing Association and as a director of the Walter Kaitz Foundation, a
foundation that places people of any ethnic minority group in positions with
cable television systems, networks and vendor companies.
Ms. Ruth E. Warren joined the General Partner in August 1980 and has
served in various operational capacities, including system manager and Fund Vice
President, since then. Ms. Warren was elected Group Vice President/Operations of
the General Partner in September 1990.
Mr. Kevin P. Coyle joined The Jones Group, Ltd. in July 1981 as Vice
President/Financial Services. In September 1985, he was appointed Senior Vice
President/Financial Services. He was elected Treasurer of the General Partner in
August 1987, Vice President/Treasurer in April 1988 and Group Vice
President/Finance and Chief Financial Officer in October 1990.
Mr. Christopher J. Bowick joined the General Partner in September 1991
as Group Vice President/Technology and Chief Technical Officer. Previous to
joining the General Partner, Mr. Bowick worked for Scientific Atlanta's
Transmission Systems Business Division in various technical management
capacities since 1981, and as Vice President of Engineering since 1989.
Mr. Timothy J. Burke joined the General Partner in August 1982 as
corporate tax manager, was elected Vice President/Taxation in November 1986 and
Group Vice President/Taxation/Administration in October 1990.
Mr. Raymond L. Vigil joined the General Partner in June 1993 as Group
Vice President/Human Resources. Previous to joining the General Partner, Mr.
Vigil served as Executive Director of Learning with USWest. Prior to USWest, Mr.
Vigil worked in various human resources posts over a 14-year term with the IBM
Corporation.
Ms. Cynthia A. Winning joined the General Partner as Group Vice
President/Marketing in December 1994. Previous to joining the General Partner,
Ms. Winning served since 1994 as the President of PRS Inc., Denver, Colorado, a
sports and event marketing company. From 1979 to 1981 and from 1986 to 1994, Ms.
Winning served as the Vice President and Director of Marketing for Citicorp
Retail Services, Inc., a provider of private-label credit cards for ten national
retail department store chains. From 1981 to 1986, Ms. Winning was the Director
of Marketing Services for Daniels & Associates cable television operations, as
well as the Western Division Marketing Director for Capital Cities Cable. Ms.
Winning also serves as a board Member of Cities in Schools, a dropout
intervention/prevention program.
44
<PAGE> 45
Ms. Elizabeth M. Steele joined the General Partner in August 1987 as
Vice President/General Counsel and Secretary. From August 1980 until joining the
General Partner, Ms. Steele was an associate and then a partner at the Denver
law firm of Davis, Graham & Stubbs, which serves as counsel to the General
Partner.
Mr. Larry Kaschinske joined the General Partner in 1984 as a staff
accountant in the General Partner's former Wisconsin Division; was promoted to
Assistant Controller in 1990 and named Controller in August 1994.
Mr. James J. Krejci was President of the International Division of
International Gaming Technology International headquartered in Reno, Nevada,
until March 1995. Prior to joining IGT in May 1994, Mr. Krejci was Group Vice
President of Jones International, Ltd. and a Group Vice President of the General
Partner. Prior to May 1994, he also served as Group Vice President of Jones
Futurex, Inc., an affiliate of the General Partner engaged in manufacturing and
marketing data encryption devices, Jones Interactive, Inc., a subsidiary of
Jones International, Ltd. providing computer data and billing processing
facilities and Jones Lightwave, Ltd., a company owned by Jones International,
Ltd. and Mr. Jones, which is engaged in the provision of telecommunications
services. Mr. Krejci has been a Director of the General Partner since August
1987.
Ms. Christine Jones Marocco was appointed a Director of the General
Partner in December 1994. She is the daughter of Glenn R. Jones. Ms. Marocco is
also a director of Jones International, Ltd.
Mr. Daniel E. Somers was appointed a Director of the General Partner in
December 1994 and also serves on the General Partner's Audit Committee. From
January 1992 to January 1995, Mr. Somers worked as Senior Vice President and
Chief Financial Officer of Bell Canada International Inc. and was appointed
Executive Vice President and Chief Financial Officer on February 1, 1995. He is
also a Director of certain of its affiliates. Prior to joining Bell Canada
International Inc. and since January 1989, Mr. Somers was the President and
Chief Executive Officer of Radio Atlantic Holdings Limited. Mr. Somers is a
member of the North American Society of Corporate Planning, the Financial
Executives Institution and the Financial Analysts Federation.
Mr. Robert S. Zinn was appointed a Director of the General Partner in
December 1994. Mr. Zinn joined the General Partner in January 1991 and is a
member of its Legal Department. He is also Vice President/Legal Affairs of Jones
International, Ltd. Prior to joining the General Partner, Mr. Zinn was in
private law practice in Denver, Colorado for over 25 years.
Mr. David K. Zonker was appointed a Director of the General Partner in
December 1994. Mr. Zonker has been the President of Jones International
Securities, Ltd., a subsidiary of Jones International, Ltd. since January 1984
and he has been its Chief Executive Officer since January 1988. From October
1980 until joining Jones International Securities, Ltd. in January 1984, Mr.
Zonker was employed by the General Partner. Mr. Zonker is a member of the Board
of Directors of various affiliates of the General Partner, including Jones
International Securities, Ltd. Mr. Zonker is licensed by the National
Association of Securities Dealers, Inc. and he is a past chairman of the
Investment Program Association, a trade organization based in Washington, D.C.
that promotes direct investments. He is a member of the Board of Trustees of
Graceland College, Lamoni, Iowa; the International Association of Financial
Planners and the American and Colorado Institutes of Certified Public
Accountants.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no employees; however, various personnel are
required to operate the cable television systems owned by the Partnership. Such
personnel are employed by the General Partner and, pursuant to the terms of the
limited partnership agreement of the Partnership, the cost of such employment is
charged by the General Partner to the Partnership as a direct reimbursement
item. See Item 13.
45
<PAGE> 46
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS
No person or entity owns more than 5 percent of the limited partnership
interests of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The General Partner and its affiliates engage in certain transactions
with the Partnership and the Venture as contemplated by the limited partnership
agreement of the Partnership. The General Partner believes that the terms of
such transactions are generally as favorable as could be obtained by the
Partnership and the Venture from unaffiliated parties. This determination has
been made by the General Partner in good faith, but none of the terms were or
will be negotiated at arm's-length and there can be no assurance that the terms
of such transactions have been or will be as favorable as those that could have
been obtained by the Partnership or the Venture from unaffiliated parties.
The General Partner charges a management fee, and the General Partner
is reimbursed the for certain allocated overhead and administrative expenses.
These expenses consist primarily of salaries and benefits paid to corporate
personnel, rent, data processing services and other facilities costs. Such
personnel provide engineering, marketing, administrative, accounting, legal and
investor relations services. Allocations of personnel costs are based primarily
on actual time spent by employees of the General Partner. Remaining overhead
costs are allocated based on revenues and/or the costs of assets managed.
Systems owned by the General Partner and all other systems owned by
partnerships for which Jones Intercable, Inc. is the general partner, are also
allocated a proportionate share of these expenses.
The General Partner also advances funds and charges interest on the
balance payable. The interest rate charged approximates the General Partner's
weighted average cost of borrowing.
The Systems receive stereo audio programming from Superaudio, a joint
venture owned 50% by an affiliate of the General Partner and 50% by an
unaffiliated party,educational video programming from Mind Extension University,
Inc., an affiliate of the General Partner, and computer video programming from
Jones Computer Network, Ltd., an affiliate of the General Partner, for fees
based upon the number of subscribers receiving the programming.
Product Information Network ("PIN"), an affiliate of the General
Partner, provides advertising time for third parties on the Systems. In
consideration, the revenues generated from the third parties are shared
two-thirds and one-third between PIN and the Partnership or the Venture. During
the year ended December 31, 1994, the Partnership received revenues from PIN of
$321, and the Venture received revenues from PIN of $15,283.
The charges to the Partnership and to the Venture for related party
transactions are as follows for the periods indicated:
<TABLE>
<CAPTION>
Jones Cable Income Fund 1-B At December 31,
--------------------------- ---------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Management fees $ 224,245 $ 217,069 $ 208,185
Allocation of expenses 348,047 329,302 311,287
Interest expense 176,867 217,249 214,682
Amount of notes and advances outstanding 2,162,870 1,944,230 1,994,401
Highest amount of notes and advances outstanding 2,162,870 2,037,483 1,994,401
Programming fees:
Superaudio 7,193 7,243 7,012
Mind Extension University 6,517 4,212 4,017
</TABLE>
46
<PAGE> 47
<TABLE>
<CAPTION>
At December 31,
---------------
Jones Cable Income Fund 1-B/C 1994 1993 1992
----------------------------- ---- ---- ----
<S> <C> <C> <C>
Management fees $ 1,056,089 $ 1,017,539 $ 942,417
Allocation of expenses 1,658,710 1,572,134 1,428,346
Interest expense 180,316 187,959 67,841
Amount of notes and advances outstanding 66,224 4,068,472 602,765
Highest amount of notes and advances outstanding 5,126,872 4,068,472 1,935,501
Programming fees:
Superaudio 25,189 26,541 33,913
Mind Extension University 33,199 20,832 20,053
Jones Computer Network 13,218 -0- -0-
</TABLE>
47
<PAGE> 48
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<S> <C>
(a)1. See index to financial statements for a list of financial statements and exhibits thereto
filed as a part of this report.
3. The following exhibits are filed herewith:
4.1 Limited Partnership Agreement of Jones Cable Income Fund 1-B, Ltd. (1)
4.2 Joint Venture Agreement of Jones Cable Income Fund 1-B/C Venture. (1)
10.1.1 Copy of a franchise and related documents thereto granting a community antenna television
franchise for the City of Clearlake, California. (1)
10.1.2 Copy of a franchise and related documents thereto granting a community antenna television
franchise for Lake County, California. (1)
10.1.3 Copy of Resolution 91-31 amending the Lake County, California franchise. (2)
10.1.4 Copy of a franchise and related documents thereto granting a community antenna television
franchise for the City of Lakeport, California. (1)
10.1.5 Copy of a franchise and related documents thereto granting a community antenna television
franchise for Adams County, Colorado. (1)
10.1.6 Copies of Utility/Construction Permits for Boulder County, Colorado. (1)
10.1.7 Copy of a franchise and related documents thereto granting a community antenna television
franchise for the City of Brighton, Colorado. (1)
10.1.8 Copy of a franchise and related documents thereto granting a community antenna television
franchise for the City of Broomfield, Colorado. (2)
10.1.9 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for Weld County, Colorado. (Fund 1-B/C) (1)
10.1.9 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Brady, Michigan. (3)
10.1.10 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Calvin, Michigan. (4)
10.1.11 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Village of Centreville, Michigan. (5)
10.1.12 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the City of Coloma, Michigan. (5)
10.1.13 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Coloma, Michigan. (2)
</TABLE>
48
<PAGE> 49
<TABLE>
<S> <C>
10.1.14 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Constantine, Michigan. (5)
10.1.15 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Village of Constantine, Michigan. (5)
10.1.16 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the City of Dowagiac, Michigan. (5)
10.1.17 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the County of Elkhart, Michigan. (5)
10.1.18 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Fabius, Michigan. (5)
10.1.19 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Flowerfield, Michigan. (Fund 1-B/C). (5)
10.1.20 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Hagar, Michigan. (Fund 1-B/C) (3)
10.1.21 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Hartford, Michigan. (Fund 1-B/C) (4)
10.1.22 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the County of LaGrange, Michigan. (Fund 1-B/C) (3)
10.1.23 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Lockport, Michigan. (Fund 1-B/C) (3)
10.1.24 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Mendon, Michigan. (Fund 1-B/C) (3)
10.1.25 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Mottville, Michigan. (Fund 1-B/C) (3)
10.1.26 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Newberg, Michigan. (4)
10.1.27 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Nottawa, Michigan. (5)
10.1.28 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Park, Michigan. (5)
10.1.29 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Pavillion, Michigan. (5)
10.1.30 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Penn, Michigan. (6)
10.1.31 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Pipestone, Michigan. (4)
</TABLE>
49
<PAGE> 50
<TABLE>
<S> <C>
10.1.32 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Pokagon, Michigan. (4)
10.1.33 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Porter, Michigan. (6)
10.1.34 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Schoolcraft, Michigan. (4)
10.1.35 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Sherman, Michigan. (6)
10.1.36 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Silvercreek, Michigan. (5)
10.1.37 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the City of Three Rivers, Michigan. (5)
10.1.38 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Village of Vandalia, Michigan. (2)
10.1.39 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Village of Vicksburg, Michigan. (5)
10.1.40 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the City of Watervliet, Michigan. (5)
10.1.41 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Watervliet, Michigan. (5)
10.1.42 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Wayne, Michigan. (5)
10.1.43 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of White Pigeon, Michigan. (5)
10.1.44 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Village of White Pigeon, Michigan. (5)
10.1.45 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for Dakota City, Nebraska. (1)
10.1.46 Copy of Service Permit granted by Dakota County, Nebraska Board of County Commissioners. (1)
10.1.47 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Village of Homer, Nebraska. (1)
10.1.48 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for South Sioux City, Nebraska. (1)
10.1.49 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Village of Walthill, Nebraska. (2)
</TABLE>
50
<PAGE> 51
<TABLE>
<S> <C>
10.1.50 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Village of Walthill, Nebraska. (1)
10.1.51 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the City of Canyonville, Oregon. (1)
10.1.52 Copy of resolution amending the franchise for the City of Canyonville, Oregon. (2)
10.1.53 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the City of Myrtle Creek, Oregon. (1)
10.1.59 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the City of Riddle, Oregon. (2)
10.1.60 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the City of Winston, Oregon. (1)
10.1.61 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Town of Cordova, South Carolina. (7)
10.1.62 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the City of Orangeburg, South Carolina. (7)
10.1.63 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the County of Orangeburg, South Carolina. (7)
10.2.1 Credit Agreement dated 8/5/88 between Jones Cable Income Fund 1-B, Ltd. and First Wisconsin
National Bank of Milwaukee. (2)
10.2.2 Amendment No. 1 dated 7/21/89 to Credit Agreement dated 8/5/88 between Jones Cable Income
Fund 1-B, Ltd. and First Wisconsin National Bank of Milwaukee. (2)
10.2.3 Amendment No. 2 dated 10/15/90 to Credit Agreement dated 8/5/88 between Jones Cable Income
Fund 1-B, Ltd. and First Wisconsin National Bank of Milwaukee. (2)
10.2.3 Amendment No. 3 dated 6/30/92 to Credit Agreement dated 8/5/88 between Jones Cable Income
Fund 1-B, Ltd. and First Wisconsin National Bank of Milwaukee. (2)
10.2.4 Amended and Restated Revolving Credit Agreement dated September 30, 1994 between Jones
Cable Income Fund 1-B/C Venture, Corestates Bank, N.A., First National Bank of
Maryland, Dresdner Bank AG and Continental Bank.
10.2.5 Revolving Credit and Term Loan Agreement dated as of January 19, 1995 between Jones Cable
Income Fund 1-B and Colorado National Bank.
27 Financial Data Schedule
</TABLE>
-------------------
(1) Incorporated by reference from Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1987.
(2) Incorporated by reference from Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1992.
51
<PAGE> 52
(3) Incorporated by reference from Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1993.
(4) Incorporated by reference from Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1990.
(5) Incorporated by reference from Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1988.
(6) Incorporated by reference from Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1989.
(7) Incorporated by reference from Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1986.
52
<PAGE> 53
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
JONES CABLE INCOME FUND 1-B, LTD.
a Colorado limited partnership
By: Jones Intercable, Inc.
By: /s/ Glenn R. Jones
---------------------------
Glenn R. Jones
Chairman of the Board and Chief
Dated: March 27, 1995 Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/ Glenn R. Jones
---------------------------
Glenn R. Jones
Chairman of the Board and Chief
Executive Officer
Dated: March 27, 1995 (Principal Executive Officer)
By: /s/ Kevin P. Coyle
---------------------------
Kevin P. Coyle
Group Vice President/Finance
Dated: March 27, 1995 (Principal Financial Officer)
By: /s/ Larry Kaschinske
---------------------------
Larry Kaschinske
Controller
Dated: March 27, 1995 (Principal Accounting Officer)
By: /s/ James B. O'Brien
---------------------------
James B. O'Brien
Dated: March 27, 1995 President and Director
By: /s/ Raymond L. Vigil
---------------------------
Raymond L. Vigil
Dated: March 27, 1995 Group Vice President and Director
By: /s/ Robert S. Zinn
---------------------------
Robert S. Zinn
Dated: March 27, 1995 Director
53
<PAGE> 54
By: /s/ David K. Zonker
---------------------------
David K. Zonker
Dated: March 27, 1995 Director
By:
---------------------------
Derek H. Burney
Dated: Director
By:
---------------------------
James J. Krejci
Dated: Director
By:
---------------------------
Christine Jones Marocco
Dated: Director
By:
---------------------------
Daniel E. Somers
Dated: Director
54
<PAGE> 55
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
------- ----
<S> <C> <C>
4.1 Limited Partnership Agreement of Jones Cable Income Fund 1-B, Ltd. (1)
4.2 Joint Venture Agreement of Jones Cable Income Fund 1-B/C Venture. (1)
10.1.1 Copy of a franchise and related documents thereto granting a community antenna television
franchise for the City of Clearlake, California. (1)
10.1.2 Copy of a franchise and related documents thereto granting a community antenna television
franchise for Lake County, California. (1)
10.1.3 Copy of Resolution 91-31 amending the Lake County, California franchise. (2)
10.1.4 Copy of a franchise and related documents thereto granting a community antenna television
franchise for the City of Lakeport, California. (1)
10.1.5 Copy of a franchise and related documents thereto granting a community antenna television
franchise for Adams County, Colorado. (1)
10.1.6 Copies of Utility/Construction Permits for Boulder County, Colorado. (1)
10.1.7 Copy of a franchise and related documents thereto granting a community antenna television
franchise for the City of Brighton, Colorado. (1)
10.1.8 Copy of a franchise and related documents thereto granting a community antenna television
franchise for the City of Broomfield, Colorado. (2)
10.1.9 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for Weld County, Colorado. (Fund 1-B/C) (1)
10.1.9 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Brady, Michigan. (3)
10.1.10 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Calvin, Michigan. (4)
10.1.11 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Village of Centreville, Michigan. (5)
10.1.12 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the City of Coloma, Michigan. (5)
10.1.13 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Coloma, Michigan. (2)
</TABLE>
<PAGE> 56
<TABLE>
<CAPTION>
Exhibit Page
------- ----
<S> <C> <C>
10.1.14 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Constantine, Michigan. (5)
10.1.15 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Village of Constantine, Michigan. (5)
10.1.16 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the City of Dowagiac, Michigan. (5)
10.1.17 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the County of Elkhart, Michigan. (5)
10.1.18 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Fabius, Michigan. (5)
10.1.19 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Flowerfield, Michigan. (Fund 1-B/C). (5)
10.1.20 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Hagar, Michigan. (Fund 1-B/C) (3)
10.1.21 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Hartford, Michigan. (Fund 1-B/C) (4)
10.1.22 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the County of LaGrange, Michigan. (Fund 1-B/C) (3)
10.1.23 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Lockport, Michigan. (Fund 1-B/C) (3)
10.1.24 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Mendon, Michigan. (Fund 1-B/C) (3)
10.1.25 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Mottville, Michigan. (Fund 1-B/C) (3)
10.1.26 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Newberg, Michigan. (4)
10.1.27 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Nottawa, Michigan. (5)
10.1.28 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Park, Michigan. (5)
10.1.29 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Pavillion, Michigan. (5)
10.1.30 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Penn, Michigan. (6)
10.1.31 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Pipestone, Michigan. (4)
</TABLE>
<PAGE> 57
<TABLE>
<CAPTION>
Exhibit Page
------- ----
<S> <C> <C>
10.1.32 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Pokagon, Michigan. (4)
10.1.33 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Porter, Michigan. (6)
10.1.34 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Schoolcraft, Michigan. (4)
10.1.35 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Sherman, Michigan. (6)
10.1.36 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Silvercreek, Michigan. (5)
10.1.37 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the City of Three Rivers, Michigan. (5)
10.1.38 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Village of Vandalia, Michigan. (2)
10.1.39 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Village of Vicksburg, Michigan. (5)
10.1.40 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the City of Watervliet, Michigan. (5)
10.1.41 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Watervliet, Michigan. (5)
10.1.42 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Wayne, Michigan. (5)
10.1.43 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of White Pigeon, Michigan. (5)
10.1.44 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Village of White Pigeon, Michigan. (5)
10.1.45 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for Dakota City, Nebraska. (1)
10.1.46 Copy of Service Permit granted by Dakota County, Nebraska Board of County Commissioners. (1)
10.1.47 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Village of Homer, Nebraska. (1)
10.1.48 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for South Sioux City, Nebraska. (1)
10.1.49 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Village of Walthill, Nebraska. (2)
</TABLE>
<PAGE> 58
<TABLE>
<CAPTION>
Exhibit Page
------- ----
<S> <C> <C>
10.1.50 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Village of Walthill, Nebraska. (1)
10.1.51 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the City of Canyonville, Oregon. (1)
10.1.52 Copy of resolution amending the franchise for the City of Canyonville, Oregon. (2)
10.1.53 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the City of Myrtle Creek, Oregon. (1)
10.1.59 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the City of Riddle, Oregon. (2)
10.1.60 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the City of Winston, Oregon. (1)
10.1.61 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Town of Cordova, South Carolina. (7)
10.1.62 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the City of Orangeburg, South Carolina. (7)
10.1.63 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the County of Orangeburg, South Carolina. (7)
10.2.1 Credit Agreement dated 8/5/88 between Jones Cable Income Fund 1-B, Ltd. and First Wisconsin
National Bank of Milwaukee. (2)
10.2.2 Amendment No. 1 dated 7/21/89 to Credit Agreement dated 8/5/88 between Jones Cable Income
Fund 1-B, Ltd. and First Wisconsin National Bank of Milwaukee. (2)
10.2.3 Amendment No. 2 dated 10/15/90 to Credit Agreement dated 8/5/88 between Jones Cable Income
Fund 1-B, Ltd. and First Wisconsin National Bank of Milwaukee. (2)
10.2.3 Amendment No. 3 dated 6/30/92 to Credit Agreement dated 8/5/88 between Jones Cable Income
Fund 1-B, Ltd. and First Wisconsin National Bank of Milwaukee. (2)
10.2.4 Amended and Restated Revolving Credit Agreement dated September 30, 1994 between Jones
Cable Income Fund 1-B/C Venture, Corestates Bank, N.A., First National Bank of
Maryland, Dresdner Bank AG and Continental Bank.
10.2.5 Revolving Credit and Term Loan Agreement dated as of January 19, 1995 between Jones Cable
Income Fund 1-B and Colorado National Bank.
27 Financial Data Schedule
</TABLE>
-------------------
(1) Incorporated by reference from Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1987.
(2) Incorporated by reference from Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1992.
<PAGE> 59
(3) Incorporated by reference from Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1993.
(4) Incorporated by reference from Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1990.
(5) Incorporated by reference from Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1988.
(6) Incorporated by reference from Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1989.
(7) Incorporated by reference from Registrant's Report on Form 10-K for the
fiscal year ended December 31, 1986.
<PAGE> 1
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
THIS AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT (this
"Agreement") is made this 30th day of September, 1994, by and among JONES CABLE
INCOME FUND 1-B/C VENTURE, a Colorado general partnership (the "Company");
CORESTATES BANK, N.A.(1), a national banking association with offices at 1500
Market Street, Philadelphia, PA 19101 ("CoreStates" and in its capacity as
agent for the Banks, "Agent"); FIRST NATIONAL BANK OF MARYLAND, a national
banking association with offices at 25 South Charles Street, Baltimore, MD
21201 ("First Maryland"); DRESDNER BANK AG, a bank organized under the laws of
Germany acting through its branch office at 75 Wall Street, New York, NY
10005-2889 ("Dresdner"); and CONTINENTAL BANK, a Pennsylvania banking
corporation with offices at 1500 Market Street, Philadelphia, PA 19102
("Continental") (CoreStates, First Maryland, Dresdner and Continental each
individually a "Bank" and collectively the "Banks").
W I T N E S S E T H:
WHEREAS, the Company is a Colorado joint venture general
partnership in which Jones Cable Income Fund 1-B, Ltd. and Jones Cable Income
Fund 1-C, Ltd., each a Colorado limited partnership (the "Partnerships"), are
the sole partners, and Jones Intercable, Inc., a Colorado corporation ("JII"),
is the sole general partner of each of the Partnerships; and
WHEREAS, the Company, Agent and Banks are parties to that
certain Revolving Credit Agreement dated September 29, 1988, as amended by
Amendment No. 1 to Loan Agreement dated November 12, 1990 ("Amendment No. 1"),
Amendment No. 2 to Revolving Credit Agreement and Amendment No. 2 to Security
Agreement dated May 29, 1992 ("Amendment No. 2"), Amendment No. 3 to Revolving
Credit Agreement and Amendment No. 1 to Intercreditor Agreement dated July 9,
1992 ("Amendment No. 3"), Amendment No. 4 to Revolving Credit Agreement dated
May 13, 1993 and accepted and agreed to on May 17, 1993 ("Amendment No. 4"),
Amendment No. 5 to Revolving Credit Agreement dated September 30, 1993
("Amendment No. 5") and Amendment No. 6 to Revolving Credit Agreement dated May
31, 1994 ("Amendment No. 6") (as amended prior to the date hereof, the
"Existing Credit Agreement"); and
WHEREAS, the Company, CoreStates, First Maryland, Dresdner and
Continental have agreed, pursuant to Paragraph 25 of
____________________
(1) CoreStates Bank, N.A. also conducts business as Philadelphia National
Bank, as CoreStates First Pennsylvania Bank and as CoreStates Hamilton Bank.
<PAGE> 2
Amendment No. 6 to the Existing Agreement, to restate the Existing Agreement in
a single document with such modifications as such parties shall approve; and
WHEREAS, the amendment and restatement of the Existing Credit
Agreement hereunder, and the amendment and restatement of related documents in
connection herewith, are not intended by the parties to constitute a novation,
discharge or satisfaction of the indebtedness of the Company under the Existing
Credit Agreement or any collateral security therefor, all of which indebtedness
and collateral security shall remain outstanding under this Agreement and
documents executed in connection herewith.
NOW, THEREFORE, in consideration of the premises and the
agreements herein set forth and intending to be legally bound hereby, the
parties hereby amend and restate the Existing Credit Agreement in its entirety
as follows:
ARTICLE I
LOANS AND NOTE
1.1. Revolvinq Credit Facility.
(a) Loans. Subject to the requirements of Article
III hereof, from time to time prior to the earlier of (i) June 30, 1997 or (ii)
the termination in full of the Commitments (in either case the "Termination
Date"), the Company may obtain Loans from the Banks, on a pro rata basis, up to
the amount of such Bank's outstanding Commitment as set forth in subsection (b)
below, repay such Loans and reborrow hereunder. Each Loan from each Bank shall
be in a minimum amount of One Hundred Thousand Dollars ($100,000).
(b) Banks' Several Commitments. The amount of
each Bank's several Commitment is set forth next to its name below:
<TABLE>
<CAPTION>
Banks Commitment Amount
----- -----------------
<S> <C>
CoreStates $15,000,000
First Maryland $10,000,000
Dresdner $10,000,000
Continental $10,000,000
===========
TOTAL $45,000,000
</TABLE>
-2-
<PAGE> 3
(c) Notes.
(i) All Loans are, and shall continue to
be, evidenced by the Company's Fourth Amended and Restated Revolving Credit
Promissory Note (Limited Recourse) in favor of CoreStates, the Company's
Revolving Credit Promissory Note (Limited Recourse) in favor of First Maryland,
the Company's Revolving Credit Promissory Note (Limited Recourse) in favor of
Dresdner and the Company's Revolving Credit Promissory Note (Limited Recourse)
in favor of Continental, each dated May 31, 1994 and issued in connection with
Amendment No. 6 (individually a "Note", and collectively the "Notes").
(ii) The Company's indebtedness under the
Existing Credit Agreement was originally evidenced by the notes dated September
29, 1988 issued in favor of CoreStates and First Wisconsin National Bank of
Milwaukee ("Firstar") in connection with the Existing Credit Agreement and
thereafter evidenced, without novation, by the notes dated November 12, 1990
issued in favor of CoreStates and Firstar in connection with Amendment No. 1,
the Amended and Restated Revolving Credit Promissory Note (Limited Recourse)
dated May 29, 1992 issued in favor of CoreStates in connection with Amendment
No. 2, the Second Amended and Restated Note and the Amended and Restated Note,
each dated July 9, 1992, issued in favor of CoreStates and Firstar,
respectively, in connection with Amendment No. 3, the Third Amended and
Restated Note and the Second Amended and Restated Note, each dated September
30, 1993, issued in favor of CoreStates and Firstar, respectively, in
connection with Amendment No. 5. The execution and delivery of the Notes in
connection with Amendment No. 6 did not, and the continuation of such Notes
hereunder does not, constitute a novation and did not and does not terminate,
extinguish or discharge the indebtedness of the Company under the Existing
Credit Agreement or the collateral security therefor, all of which indebtedness
and collateral security shall continue as obligations of the Company to the
Banks under and governed by this Agreement, the Security Agreement and the
other Collateral Documents required hereunder.
(iii) Although the Notes are payable in
the full amounts specified above, the Company shall be obligated to pay only
the amounts actually disbursed to or for the account of the Company, together
with interest on the unpaid balance of sums so disbursed which remains
outstanding from time to time, at the rates and on the dates specified in the
Notes and in Section 1.6 hereof, together with the fees and expenses provided
herein. The Company agrees that, if the Banks, in their sole discretion, agree
to extend the Termination Date or increase the Commitment, the Company will
execute and deliver such amended, restated or revised notes or other
instruments and documents, and take such other action, as the Banks may deem
necessary or appropriate in
-3-
<PAGE> 4
connection with any such extension of the Termination Date or increase in the
Commitment.
(d) Maturity. The Company hereby agrees that on
the Termination Date the entire outstanding balance under the Credit Agreement,
principal, interest, fees and expenses, shall be due and payable in full and
the Company hereby agrees to make such payment on such date.
1.2. Use of Proceeds. The Company represents, warrants and
agrees that:
(a) The proceeds of the Loans made to the Company
hereunder have been or shall be used by the Company solely for (i) acquisition
of the cable television (CATV) systems serving the communities originally
listed on Schedule I to the Existing Credit Agreement (the "Acquired Systems"),
pursuant to a Purchase and Sale Agreement dated as of June 17, 1988 (the
"Purchase Agreement") by and between Omega of Michigan Cable Co., Cable TV of
Constantine and White Pigeon Co., Diamond Lake Area Cable TV Co. and Paw Lake
Area Cable TV Co. ("Sellers") and the Company, (ii) capital expenditures for
the improvement of the Acquired Systems and other CATV systems owned by the
Company from time to time (all such CATV systems which are owned or hereafter
acquired by the Company are hereinafter referred to as the "CATV Systems"),
(iii) general working capital requirements of the Company, and (iv) payment to
JII of Management Fees and Home Office Allocations incurred in the ordinary
course of business, to the extent permitted hereunder.
(b) No part of the proceeds of any Loan made
hereunder will be used to "purchase" or "carry" any "margin stock" or to extend
credit to others for the purpose of "purchasing" or "carrying" any "margin
stock" (as such terms are defined in the Regulation U of the Board of Governors
of the Federal Reserve System), and the assets of the Company do not include,
and the Company has no present intention of acquiring, any such security.
1.3. Commitment Fee. The Company shall pay to each Bank a
commitment fee computed at the rate of 1/2% per annum on the difference
existing from time to time between (a) the amount of such Bank's Commitment
(as it may be reduced pursuant to section 1.4), and (b) the outstanding unpaid
principal balance of sums disbursed to the Company by such Bank hereunder. Such
commitment fees shall accrue for the period from the date of this Agreement to
and including the Termination Date, and shall be payable in arrears on the last
day of March, June, September and December of each year, commencing December
31, 1988.
1.4. Termination or Reduction of the Commitment. The
Company shall have the right, upon five Business Days' prior
-4-
<PAGE> 5
written notice to Agent, to ratably reduce in part the Commitments at any time,
provided, however, that each partial reduction of the Commitment of each Bank
shall be in a minimum amount of $100,000, and provided, further, that no
reduction shall reduce the Commitment of any Bank to an amount less than the
aggregate amount of the Loans of such Bank outstanding hereunder at the time.
The entire Commitments of the Banks may be terminated in whole at any time upon
five Business Days' prior written notice to Agent. In addition, the Company
shall be required to reduce the Commitments on a pro rata basis (and the
foregoing $100,000 minimum reduction shall not be applicable thereto), (i) in
connection with any contribution to the Company's capital by the Partnerships,
or any other equity contribution in any form, in an amount equal to the amount
of such contribution, and (ii) in connection with any sale of a CATV System, in
the amount determined pursuant to Section 5.6 hereof.
1.5. Prepayment. Subject to the provisions of
Section 1.8 of this Agreement, the Company may prepay the Loans in whole or in
part at any time without premium or penalty; and the prepayments prior to the
Termination Date shall not reduce the Commitments and may be reborrowed. All
prepayments shall be made and applied pro rata against the Notes then
outstanding. Prepayments of the Note of each Bank shall be not less than
$100,000. The Company shall notify each Bank at least one (1) Business Day in
advance of any such prepayments on a Prime Rate Loan and at least two (2)
Business Days in advance of any such prepayment of a Eurodollar Loan. In
addition to the foregoing, the Company shall be required to make a payment (and
the foregoing $100,000 minimum reduction shall not be applicable thereto), (i)
in connection with any contribution to the Company's capital by the
Partnerships, or any other equity contribution in any form, in an amount equal
to the amount of such contribution, and (ii) in connection with any sale of a
CATV System, in the amount determined pursuant to Section 5.6 hereof.
1.6. Rate of Interest. The Company shall pay
interest on the unpaid principal amount of each Loan from the date of such Loan
until the date the principal balance of such Loan is paid in full at the
following rates:
(a) Prime Rate Loans: During the periods
that such Loan is a Prime Rate Loan, a rate equal to the Base Rate plus the
Applicable Margin per annum, with such interest rate changing when and as the
Base Rate changes and when and as the Applicable Margin changes;
(b) Eurodollar Loans: During each
Interest Period of a Eurodollar Loan, a rate equal to LIBO Rate for the
Interest Period plus the Applicable Margin per annum, with such rate to change
when and as the Applicable Margin changes;
-5-
<PAGE> 6
provided, that, in each case, the unpaid principal balance of a Loan shall bear
interest upon the occurrence and during the continuance of an Event of Default
at a rate equal to two percent (2%) per annum plus the Base Rate, with such
rate changing when and as such Base Rate changes.
1.7. Interest Periods. If and for so long as any Loan
shall be maintained as a Eurodollar Loan, the period commencing on the date of
such Loan and ending on the date of payment in full shall be divided into
"Interest Periods" The initial Interest Period shall be selected by the Company
in the applicable notice required by section 2.1. The Company may select a
subsequent Interest Period for each Loan by notifying the Agent thereof at
least one (1) Business Day (in the case of a Prime Rate Loan) and two (2)
Business Days (in the case of a Eurodollar Loan) prior to the first day of the
new Interest Period. Within 5 Business Days after the commencement of each
Interest Period, the Company shall deliver to the Agent written confirmation of
the interest rate applicable to the Eurodollar Loan to which such Interest
Period relates and the term of such Interest Period. If the Company fails to
select a subsequent Interest Period at the termination of an applicable
Interest Period for any Eurodollar Loan in accordance with the preceding
sentence, such Loan shall be a Prime Rate Loan thereafter, until such time that
an Interest Period is selected. The selection of Interest Periods is subject to
the following provisions:
(a) Each Interest Period for a Eurodollar Loan
shall be for thirty, sixty, ninety, one hundred twenty or one hundred eighty
days or, if reasonably available, such longer period requested by the Company
and made available by the Banks; provided that, anything herein to the contrary
notwithstanding, each Eurodollar Loan of each Bank in an amount of less than
$1,000,000 shall have an Interest Period of one hundred eighty days or less.
(b) If the last day of any Interest Period would
occur on a day other than a Business Day, the last day of that Interest Period
shall occur on the next succeeding Business Day.
(c) No Interest Period for a Loan may extend
beyond the Termination Date.
(d) No more than four separate Interest Periods
may be in effect at any one time.
1.8. Funding Costs. In connection with any prepayment or
repayment of a Eurodollar Loan made on other than the last day of the
applicable Interest Period, whether such prepayment or repayment is voluntary,
mandatory, by demand, acceleration or otherwise, and in connection with any
failure by the Company to fulfill on or before the date specified in a request
for an
-6-
<PAGE> 7
advance of a Eurodollar Loan the applicable conditions as set forth in this
Agreement, the Company shall pay to Banks all funding costs which may arise in
connection with such prepayment or repayment of failure to fund, as calculated
by Agent in accordance with Exhibit A.
1.9. Other Increased Costs. If, as a result of any (a)
change in any law or regulation, or in the interpretation thereof by any court
or administrative or governmental authority, (b) charge generally imposed on
banks which are similarly situated to the Banks which affects any Bank in its
dealings in the London Interbank market, (c) violation by the Company of the
terms of this Agreement, or (d) the adoption of or change in any law, rule,
regulation or guideline affecting capital adequacy or compliance by a Bank (or
any lending office of such Bank) or such Bank's holding company with any
request or directive regarding capital adequacy of any court, administrative or
governmental authority, or central bank:
(i) the basis of taxation of payments to
any Bank of the principal of or interest on any Loan
or any other amounts payable under this Agreement
(other than taxes imposed on the overall net income
of such Bank) is changed;
(ii) any reserve (including, without
limitation, the Certificate Reserve Percentage),
special deposit or similar requirement relating to
any extension of credit or other asset of, or any
deposits with or other liabilities of any Bank which
affects the making or maintaining by such Bank of
Loans hereunder is imposed, modified or deemed
applicable;
(iii) any other condition or cost affecting
this Agreement or the making or maintaining by any
Bank of Loans made hereunder is imposed on such Bank
by law or regulation; or
(iv) the rate of return on any Bank's capital
or on the capital of such Bank's holding company, if
any, as a consequence of this Agreement, the
Commitments or the Loans is or would be reduced
and such Bank reasonably determines that, by reason thereof, the cost to it of
making or maintaining any Loan hereunder is increased, or any amount receivable
by it hereunder in respect to any such Loan is reduced, then the Bank so
affected shall notify the Company thereof within a reasonable time and the
Company shall pay to such Bank, upon written request (which request shall
describe the occurrence and include a calculation of such additional cost or
reduction), such additional amount or amounts
-7-
<PAGE> 8
as will, in the reasonable determination of such Bank, compensate such Bank for
such additional costs or reduction; provided, however, that the Company's
liability for additional amounts computed in accordance with this section shall
neither be changed nor waived by a failure of such Bank to give such notice.
1.10. Payments. Interest on Prime Rate Loans shall be due
and payable quarterly on the last day of each March, June, September, and
December, commencing on the first of such days to occur after the date thereof;
interest on Eurodollar Loans shall be due and payable on the expiration date of
each applicable Interest Period and, if the Interest Period is longer than 90
days, on the last day of each March, June, September and December commencing on
the first of such days to occur after the commencement of such Interest Period.
In addition, interest shall be due and payable on the Termination Date. The
Agent shall give the Company telephonic advice of the amount of each scheduled
principal and interest payment which shall be due on the Notes and shall
thereafter mail a bill to the Company therefor, but failure of the Agent to
give such telephonic advice or to mail any such bill shall not relieve the
Company of its obligations to make timely payments of principal and interest on
the Notes.
1.11. HLT Classification. If, after the date hereof, Agent
is advised by any Bank that such Bank has received notice from any governmental
authority, central bank or comparable agency having jurisdiction over such Bank
that the Loans are or any of them is classified as a "highly leveraged
transaction" or the Company is classified as an "HLT Borrower" (in each case an
"HLT Classification"), or if Agent reasonably determines that the Loans or any
of them or the Company is subject to an HLT Classification, the Agent shall
promptly give notice of such HLT Classification to the Company and the other
Banks. From and after the date of such notice to the Company and Banks of an
HLT Classification, and continuing until such HLT Classification is removed,
all then outstanding or thereafter advanced Loans shall bear interest at the
applicable rates selected by the Company pursuant to Paragraph 1.6 hereof
(including the then-applicable margin) plus one-half of one percent (1/2%) per
annum.
1.12. Special Provisions Applicable to Eurodollar Loans.
(a) Chanqe of LIBO Rate. The LIBO Rate may be
automatically adjusted by Agent on a prospective basis to take into account the
additional or increased cost of maintaining any necessary reserves for
Eurodollar deposits or increased costs due to changes in applicable law
occurring subsequent to the commencement of the then applicable Interest
Period, including but not limited to changes in tax laws (except changes of
general applicability in corporate income tax laws) and changes in the
-8-
<PAGE> 9
reserve requirements imposed by the Board of Governors of the Federal Reserve
System (or any successor) that increase the cost to Banks of funding any
Eurodollar Loan; provided, however, that each Bank shall use reasonable efforts
to minimize such costs, subject, in any event, to such Bank's sole discretion.
Agent shall give the Company notice of such a determination and adjustment,
which determination and adjustment made in good faith shall be prima facie
evidence of the correctness of the fact and the amount of such adjustment. The
Company may, by notice to Agent, (A) request Agent to furnish to the Company a
statement setting forth the basis for adjusting such LIBO Rate and the method
for determining the amount of such adjustment; and/or (B) repay the Eurodollar
Loan with respect to which such adjustment is made pursuant to the requirements
of Sections 1.5 and 1.8 hereof.
(b) Unavailability of Eurodollar Funds. In the
event that the Company shall have requested a Eurodollar Loan in accordance
with Section 1.6 hereof and any Bank shall have reasonably determined that
Eurodollar deposits equal to the principal amount of such Eurodollar Loan and
for the Interest Period specified are unavailable or that the LIBO Rate will
not adequately and fairly reflect the cost of making or maintaining the
principal amount of such Eurodollar Loan during the Interest Period specified
or that by reason of circumstances affecting Eurodollar markets, adequate and
reasonable means do not enlist for ascertaining the LIBO Rate applicable to the
specified Interest Period, Agent on behalf of such Bank shall promptly give
notice of such determination to the Company that the LIBO Rate is not
available. A determination by Agent hereunder made in good faith shall be prima
facie evidence of the correctness of such fact. Upon such a determination, (i)
the obligation to advance or maintain Eurodollar Loans shall be suspended until
Agent shall have notified the Company and Banks that such conditions shall have
ceased to exist, and (ii) the Company shall elect the Prime Rate to be
applicable to such Loan in accordance with Section 1.6 hereof.
1.13. Interest Rate Protection. Commencing within one (1)
year of May 31, 1994 and continuing for three (3) years from the date of any
such agreement, the Company shall maintain not less than fifty percent (50%) of
the outstanding principal amount of the Loans subject to interest rate
protection agreements in form and substance satisfactory to Agent, and the
Company's obligations thereunder shall be secured by the collateral granted
pursuant to the Security Agreement, and shall have the benefit of the
subordination provisions set forth in the Subordination Agreement.
1.14. Taxes. Any and all payments by the Company to the
Banks hereunder shall be made free and clear of and without deduction for any
and all present or future taxes, levies,
-9-
<PAGE> 10
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding in the case of each Bank, (i) taxes assessed solely on the
income of such Bank, (ii) taxes arising solely from a connection between such
Bank and the jurisdiction imposing such tax, other than a connection arising
from the activities of such Bank solely in connection with this Agreement, and
(iii) United States withholding tax payable with respect to payments hereunder
under laws (including, without limitation, any statute, treaty, ruling,
determination or regulation) in effect on the Initial Date (as hereinafter
defined) for such Bank, provided that any United States withholding tax payable
as a result of any changes in such laws occurring after the Initial Date shall
not be excluded (all such non-excluded taxes, levies, imposts, deductions,
charges, withholding and liabilities being hereinafter referred to as "Taxes").
For purposes of this Paragraph 1.14, the term "Initial Date" shall mean, in the
case of each Bank, the date of May 31, 1994 and, in the case of each assignee
(for purposes of this Paragraph 1.14, "Assignee"), the date of the applicable
assignment of the Loan. If any Taxes shall be required by law to be deducted
from or in respect of any sum payable hereunder or under any Note to any Bank
or Assignee, (i) the sum payable by the Company shall be increased as may be
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Paragraph 1.14) such Bank or
Assignee (as the case may be) receives an amount equal to the sum it would have
received had no such deductions been made, but shall be decreased to take into
account any credit, deduction or offset available in any other jurisdiction as
a result of such payment, and (ii) the Company shall make such deductions and
pay the full amount deducted to the relevant taxation authority or other
authority in accordance with applicable law. The Company shall not, however, be
required to pay any amounts pursuant to clause (i) of the preceding sentence to
any Bank organized under the laws of a jurisdiction outside of the United
States, unless such Bank has provided to the Company either (x) a facially
complete Internal Revenue Service Form 4224 or Form 1001 or other applicable
form, certificate or document prescribed by the United States Internal Revenue
Service certifying as to such Bank's entitlement to an exemption from, or
reduction of, United States withholding tax on payments to be made hereunder or
under the Notes or (y) a letter stating that such Bank is unable lawfully to
provide a properly completed and executed Form 4224 or Form 1001 or (z) other
facially complete documents satisfactory to the Agent and the Company
indicating that all payments that will be made to such Bank are exempt from or
subject to a reduced rate of United States withholding tax.
The Company hereby agrees to pay each Bank the full amount of Taxes
(including, without limitation, any Taxes imposed by any jurisdiction on
amounts payable under this Paragraph 1.14) paid by such Bank decreased to take
into account the effect of any
-10-
<PAGE> 11
credit, deduction or offset, as determined and certified by such Bank's tax or
accounting department to Company in good faith, available in any other
jurisdiction on account of the payment of Taxes, and any liability (including
penalties, interest, additions to tax and expenses) arising therefrom or with
respect thereto. Each Bank subject to Taxes agrees either, at its option, to
contest the payment of Taxes or to pay or permit the Company to pay such Taxes
when due and payable and, if any such Bank receives a rebate, refund or other
return of Taxes paid by the Company, such Bank will turn over to the Company
the amount rebated, refunded or returned. Payment under this provision shall be
made within thirty (30) days from the date such Bank makes written demand
therefor.
Within (30) days after the date of any payment of Taxes, the Company
will furnish to the Agent or the applicable Bank the original or a certified
copy of a receipt or other documents reasonably acceptable to the Agent
evidencing payment thereof.
Any Bank or Assignee organized under the laws of a jurisdiction other
than the United States (or any political subdivision thereof) shall provide
from time to time if requested by the Company and the Agent or required by the
Internal Revenue Service of the United States, (i) a facially complete Internal
Revenue Service Form 4224 (or any successor form) certifying that all payments
made to such Bank are effectively connected with its conduct of trade or
business in the United States and will be includable in its gross income or
(ii) a facially complete Internal Revenue Service Form 1001 (or any successor
form) certifying as to its status for purposes of determining the applicability
of a reduced rate of United States withholding taxes with respect to all
payments to be made hereunder to such Bank pursuant to a double tax treaty
obligation of the United States, or (iii) other facially complete documents
satisfactory to the Agent and Company indicating that all payments that will be
made to such Bank are exempt from or subject to a reduced rate of United States
withholding tax. Unless the Company and Agent have received such forms of such
documents validly indicating that payments hereunder are not subject to United
States withholding tax or are subject to such tax at a rate reduced by an
applicable double tax treaty, the Company or the Agent shall withhold taxes
from such payments to such Bank at the applicable statutory rate.
Notwithstanding any other provision contained herein to the contrary,
the Company and the Agent shall be entitled to deduct and withhold United
States withholding taxes with respect to all payments to be made hereunder to
or for any Bank or Assignee as may be required by United States law due to an
assignment and such Bank or Assignee shall indemnify and hold harmless the
Company and the Agent from and against any tax, interest, penalty or other
expense that the Company and the Agent may incur as a
-11-
<PAGE> 12
consequence of any failure to withhold United States taxes applicable because
of any assignment that is not disclosed to them.
ARTICLE II
ADMINISTRATION OF CREDIT
2.1. Borrowing Procedure. Loans hereunder shall be made at
the principal banking office of the Agent located in Philadelphia, Pennsylvania
(or, in the case of a successor Agent, the office identified by such successor
Agent), upon telephonic notice from the Company to the Agent specifying (i) the
date, which must be a Business Day, of the proposed borrowing (hereinafter
referred to as a "Funding Date") (ii) the principal amount and type of the
proposed Loan and (iii) in the case of a Eurodollar Loan, the initial Interest
Period for such Loan. Such telephonic notice shall be given to the Agent not
later than 11:00 a.m., Agent's local time on the first (1st) Business Day prior
to the Funding Date, in the case of Prime Rate Loans, and not later than 11:00
a.m., Agent's local time on the second (2nd) Business Day prior to the Funding
Date in the case of Eurodollar Loans. Upon its receipt of such telephonic
notice from the Company, the Agent shall promptly give telephonic notice to
each other Bank, and each such Bank shall have its portion of the Loans
available to the Agent in Agent's principal banking office in immediately
available funds on the Funding Date. Out of the funds received from the Banks
for the making of the Loans hereunder, the Agent will make a Loan to the
Company in such amount on behalf of such Bank. The failure of any of the Banks
to lend in accordance with its Commitment shall not relieve the other Banks of
their several obligations hereunder, but no Bank shall be liable in respect to
the obligation of any other Bank hereunder or be obligated in any event to lend
in excess of its Commitment. Documents delivered to the Agent for the account
of each Bank shall be promptly delivered to such Bank, or in accordance with
instructions received from it, together with copies of such other documents
received in connection with the borrowing as such Bank shall request. Within
five (5) Business Days after each Funding Date, the Company shall deliver to
the Agent a written certification, dated as of the Funding Date in the form of
Exhibit B attached hereto confirming the matters set forth in clauses (i)
through (iii) of this Section 2.1.
2.2. Computations; Non-Business Days. All interest payable
on Eurodollar Loans shall be computed for the actual number of days elapsed
using a daily rate determined by dividing the annual rate by 360, and all
interest payable on Prime Rate Loans and the commitment fees under Section 1.3
hereof shall be computed on the basis of a year of 365 or 366 days, as
appropriate, for the actual number of days elapsed. Whenever any
-12-
<PAGE> 13
payment to be made hereunder or under any Note shall be stated to be due on a
Saturday, Sunday or a public holiday under the laws of the Commonwealth of
Pennsylvania, such payment may be made on the next succeeding Business Day, and
such extension of time shall be included in the computation of interest under
the Notes, or commitment fees hereunder, as the case may be.
2.3. Application of Payments. All payments and prepayments
of principal, interest and fees under this Agreement and the Notes shall be
made to the Agent at 1500 Market Street, Philadelphia, Pennsylvania 19101 no
later than 1:00 p.m. Philadelphia, Pennsylvania time on the due date thereof in
immediately available funds, for the ratable account of the Banks. The Agent
shall promptly distribute to each such Bank, pro rata, the amount of principal,
interest or fees received by the Agent for the account of such Bank. Any
payment to the Agent for the account of a Bank or a holder of a Note under this
Agreement shall constitute a payment by the Company to such Bank or holder of
the amount so paid to the Agent, and any Notes or portions thereof so paid
shall not be considered outstanding for any purpose after the date of such
payment to the Agent.
2.4. Pro Rata Treatment. All payments or prepayments of
principal, interest or fees shall be made pro rata in accordance with the
amounts of the Notes then outstanding. In the event that any Bank shall receive
from the Company or any other source (other than the sale of a participation to
another commercial lender in the ordinary course of business) any payment of,
on account of, or for any obligation of the Company hereunder or under the
Notes (whether pursuant to the exercise of any right of set off, banker's lien,
realization upon any security held for or appropriated to such obligation,
counterclaim or otherwise) other than as above provided, then such Bank shall
immediately purchase, without recourse and for cash, an interest in the
obligations of the same nature held by the other Bank so that each Bank shall
thereafter have a percentage interest in all of such obligations equal to the
percentage interest which such Bank held in the Notes outstanding immediately
before such payment; provided, that if any payment so received shall be
recovered in whole or in part from such purchasing Bank, the purchase shall be
rescinded and the purchase price restored to the extent of such recovery, but
without interest. The Company specifically acknowledges and consents to the
preceding sentence.
2.5. Deposits; Set Off. The Company grants each Bank, as
security for the Note of such Bank, a lien and security interest in any and all
monies, balances, accounts and deposits of the undersigned at such Bank now or
at any time hereafter. If any Event of Default occurs hereunder or any
attachment of any balance of the Company occurs, such Bank may offset and apply
any such security toward the payment of the Note held by such Bank (subject to
the requirements of Section 2.4 hereof), whether or
-13-
<PAGE> 14
not such Note or any part thereof, shall then be due. Promptly upon its
charging any account of the Company pursuant to this section, the Bank shall
give the Company notice thereof.
ARTICLE III
CONDITIONS OF BORROWING
Without limiting any of the other terms of this Agreement, the
Banks shall not be required to make any Loan to the Company hereunder unless
the requirements of Section 3.1 below are satisfied on the Funding Date for
such Loan. This Amended and Restated Revolving Credit Agreement shall become
effective when executed by the Company, Agent and each Bank and when the
conditions set forth in Sections 3.1 to 3.6, inclusive, below are satisfied.
3.1. Representations. On the date hereof and on the date
of each Loan, the representations and warranties contained in Article IV hereof
and in Section 3 of the Security Agreement (hereinafter defined) continue to be
true and correct; no Default or Event of Default hereunder shall have occurred
and be continuing; and the Agent shall have received a telephonic request
therefor at the times and containing the information required under Section 2.1
above. Each such telephonic request for a Loan shall constitute a certification
by the Company that the matters set forth in clauses (a), (b) and (c) of
Exhibit B hereto are true as of the date thereof. If no Interest Period is
specified by the Company, the Loan request shall be deemed a request for a
Prime Rate Loan.
3.2. Subordination. The Partnerships and JII shall have
executed and delivered to Agent an amended and restated version of the
subordination agreement executed in connection with the Existing Credit
Agreement (as so amended and restated and as amended, modified or restated from
time to time hereafter, the "Subordination Agreement"). An integrated
composite of the Subordination Agreement is attached hereto as Exhibit C.
3.3. Security Aqreement. The Company shall have executed
and delivered to Agent (i) a confirmation of the security agreement executed in
connection with the Existing Credit Agreement (as amended prior to the date
hereof and from time to time hereafter, the "Security Agreement") covering all
tangible and intangible personal property of the Company comprising, relating
to or arising from the CATV Systems of the Company, and (ii) to the extent not
already filed, financing statements, in form satisfactory to the Agent,
covering the collateral described in the Security Agreement. An integrated
composite of the Security Agreement is attached hereto as Exhibit D.
-14-
<PAGE> 15
3.4. Insurance Certificate. Agent shall have received
evidence satisfactory to it that the Company maintains hazard insurance
coverage reasonably satisfactory to Banks.
3.5. Counsel Opinion. Each Bank shall have received from
counsel for the Company and JII, satisfactory opinions as to such matters
relating to the Company and JII, the validity and enforceability of this
Agreement, the Loans made and to be made hereunder and the other documents
required by this Article III and Federal Communications Commission ("FCC"),
U.S. Copyright Office and franchise matters as Banks shall reasonably require.
Banks acknowledge that the opinions delivered in connection with the Existing
Credit Agreement and various of the Amnendments satisfy this requirement. The
Company shall execute and/or deliver to each Bank or its counsel such documents
concerning its partnership status and the authorization of such transactions as
may be reasonably requested.
3.6. Proceedinqs Satisfactory. All proceedings taken in
connection with the transactions contemplated by this Agreement, and all
instruments, authorizations and other documents applicable thereto, shall be
satisfactory in form and substance to each Bank and its counsel.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
In order to induce the Banks to enter into this Agreement and
to make the Loans as provided herein, the Company represents and warrants to
each of the Banks as follows:
4.1. Orqanization. The Company is a joint venture
partnership duly formed and validly existing under the laws of the State of
Colorado and has all requisite partnership power and authority to conduct its
business and to own its properties. The Company has no subsidiaries or
investments in or loans to any other individuals or business entities other
than loans and investments permitted by Section 5.05. The Partnerships are the
sole joint venturers or partners with an ownership interest in the Company, and
JII is the sole general partner of each of the Partnerships. The Company, the
Partnerships and JII are each duly licensed or qualified to do business in the
States of Michigan, California, Colorado, Nebraska, Oregon and Indiana and all
other jurisdictions in which the nature of their activities or the character of
their properties requires such qualification, and failure to so qualify would
have a material adverse effect on the property, financial condition or business
operations of the Company. All joint venture and partnership interests in the
Company are validly existing and the creation and sale thereof are in
compliance with all applicable federal and state
-15-
<PAGE> 16
securities laws and other applicable laws in all material respects.
4.2. Authority. The execution, delivery and performance of
the Existing Credit Agreement, Amendment No. 1 through Amendment No. 6 and the
Notes were, and the execution, delivery and performance of this Agreement and
the documents required by Article III (the "Collateral Documents") are, within
the partnership powers of the Company, were and have been duly authorized by
all necessary partnership action and did not, do not and will not (i) require
any consent or approval of the joint venture partners of the Company which has
not been obtained (and evidence thereof delivered to the Banks), (ii) violate
any provision of the Joint Venture Agreement of the Company dated October 21,
1987 (as amended, the "Joint Venture Agreement") or of any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award
presently in effect having applicability to the Company; (iii) except as set
forth in Exhibit E hereto, require the consent or approval of, or filing or
registration with, any governmental body, agency or authority; or (iv) result
in a material breach of or constitute a default under, or result in the
imposition of any lien, charge or encumbrance upon any property of the Company
pursuant to, any indenture or other material agreement or instrument under
which the Company is a party or by which it or its properties may be bound or
affected, except for Permitted Liens. This Agreement constitutes, and the Notes
and each of the documents required by Article III when executed and delivered
hereunder will constitute, legal, valid and binding obligations of the Company
or other signatory enforceable in accordance with its respective terms, except
as such enforceability may be limited by bankruptcy or similar laws affecting
the enforceability of creditors' rights generally.
4.3. Investment Company Act of 1940. The Company is not an
"investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
4.4. Employee Retirement Income Security Act. The Company
does not presently maintain, nor is the Company required to contribute to, any
Plan on behalf of any of its employees.
4.5. Financial Statements. The balance sheet of the
Company as of December 31, 1993, and the income statement of the Company for
the year ended on such date, as prepared.by Arthur Andersen & Co. and
heretofore furnished to the Banks, are correct and complete and fairly
represent the financial condition and the results of its operations for the
fiscal year ended on such date. Other than as described in Exhibit E attached
hereto, since such date there has been no material adverse change in the
property,
-16-
<PAGE> 17
business, financial condition or operations of the Company or the CATV Systems.
4.6. [Intentionally Left Blank]
4.7. Liens. The Company has good and marketable title to
all of its assets, real and personal, free and clear of all liens, security
interests, mortgages and encumbrances of any kind, except Permitted Liens. All
owned and leased buildings and equipment of the Company are in good condition,
repair and working order in all material respects and, to the best of the
Company's knowledge and belief, conform in all material respects to all
applicable laws, regulations and ordinances.
4.8. Continqent Liabilities. The Company has no guarantees
or other contingent liabilities outstanding (including, without limitation,
liabilities by way of agreement, contingent or otherwise, to purchase, to
provide funds for payment, to supply funds to or otherwise invest in the debtor
or otherwise to assure the creditor against loss), except those permitted by
Section 5.8 hereof.
4.9. Partnership Tax Matters.
(a) Except as set forth on Exhibit E, the Company
has duly and timely filed all information and tax returns and reports with any
federal, state, local or foreign governmental taxing authority, body or agency,
and all taxes, including without limitation income, gross receipt, sales, use,
excise and any other taxes, and any governmental charges, penalties, interest
or fines with respect thereto, due and payable by the Company, have been paid,
withheld or reserved for in accordance with GAAP or, to the extent they relate
to periods on or prior to the date of the financial statements referenced in
Section 4.5 hereof (the "Financial Statements"), are reflected as a liability
on the Financial Statements in accordance with GAAP.
(b) As of the date of this Agreement, none of the
Company's federal income tax information returns have been audited. Except as
set forth on Exhibit E, the Company has not entered into any agreements for the
extension of time for the assessment of any tax or tax delinquency, and the
Company has received no outstanding and unresolved notices from the Internal
Revenue Service or other state, local or foreign taxing authority, agency or
body of any proposed examination or of any proposed change in reported
information which may result in a deficiency or assessment against the Company
or any partner in the Company and there are no suits, actions, claims,
investigations, inquiries or proceedings now pending against the Company in
respect of taxes, governmental charges or assessments.
-17-
<PAGE> 18
4.10. Absence of Litiqation. Except as set forth in Exhibit
E hereto, neither the Company, JII nor any Partnership is a party to any
litigation or administrative proceeding, nor so far as is known by the Company
is any litigation or administrative proceeding threatened against any of them,
(i) which relates to the execution, delivery or performance of this Agreement,
the Notes or any other document required hereunder, or (ii) which could, if
adversely determined, cause any material adverse change in the property,
financial condition or business operations of the Company.
4.11. Absence of Default. No event has occurred which
either of itself or with the lapse of time or the giving of notice or both,
would give any creditor of the Company the right to accelerate the maturity of
any indebtedness of the Company for borrowed money. The Company is not in
default under any other material lease, agreement or instrument, or any law,
rule, regulation, order, writ, injunction, decree, determination or award,
non-compliance with which could materially adversely affect its property,
financial condition or business operations.
4.12. Material Agreements. The Company is not a party to
any agreement, instrument or undertaking, or subject to any other restriction,
(i) which materially adversely affects or may in the future so affect the
property, financial condition or business operations of the Company, or (ii)
under or pursuant to which the Company is or will be required to place (or
under which any other person may place) a lien upon any of its properties
securing indebtedness either upon demand or upon the happening of a condition,
with or without such demand (other than the Collateral Documents required by
this Agreement).
4.13. Partnerships; Joint Ventures. The Company is not a
member of any partnership or joint venture.
4.14. Full Disclosure. No information, exhibit or report
furnished by Company or JII to any Bank in connection with the negotiation or
execution of this Agreement contained any material misstatement of fact as of
the date when made or omitted to state a material fact or any fact necessary to
make the statements contained therein not misleading as of the date when made.
4.15. Fiscal Year. The fiscal year of the Company ends on
December 31 of each year.
4.16. Franchises, Licenses, etc..
(a) On the date hereof the Company holds, and at
all times hereafter it will continue to hold all licenses, franchises, permits
and approvals of, governmental authorities and agencies, including FCC licenses
and local municipal
-18-
<PAGE> 19
licenses, permits and franchises and rights with respect thereto (herein
collectively called "CATV Licenses"), and has made all necessary filings with
and given all necessary notices to governmental authorities and agencies,
including the U.S. Copyright Office, required or necessary for the ownership
and operation of its CATV Systems. The Company is in compliance in all material
respects with such CATV Licenses, without any known conflict with the rights of
others which might result in a material adverse effect on the Company, and in
each case subject to no mortgage, pledge, lien, lease encumbrance or option
except Permitted Liens. Attached hereto as Exhibit F is a complete and accurate
list of all CATV Licenses held by the Company (copies of such CATV Licenses
having been delivered to the Banks) the name of the municipality or other
entity granting the same, the expiration date thereof and the date such CATV
License was issued or transferred to the Company. No event has occurred which
permits, or after notice or lapse of time or both would permit, the revocation
or termination of any such CATV License, or which would materially adversely
affect the rights of the Company thereunder.
(b) On the date hereof and at all times
hereafter, the Company will own or be a party to all pole attachment and
conduit use agreements necessary for the operation of its CATV Systems and all
agreements with public utilities and with microwave transmission companies that
are required in connection with the conduct of its business, and will duly
perform and observe in all material respects the terms and conditions thereof,
and no revocation, suspension or termination of any such agreement shall have
occurred which would have a material adverse affect on the Company, its
business or operations. The Company shall deliver to each Bank at its request,
complete and correct copies of all said agreements.
4.17. CATV Systems. The Company owns the CATV Systems
described in Exhibit G attached hereto, which sets forth a description of the
franchises (including the expiration dates thereof), locations and Basic
Subscriber counts of such CATV Systems as of April 30, 1994 and a description
of the headend and office facilities, and the record owners of such locations
and descriptions of any leases covering the Company's lease of any of such
facilities from others.
4.18. Hazardous Wastes, Substances and Petroleum Products.
(a) The Company has received all permits and
filed all notifications necessary to carry on its business(es) under, and is in
compliance in all material respects with, all Environmental Control Statutes.
-19-
<PAGE> 20
(b) The Company has not given any written or oral
notice to the Environmental Protection Agency ("EPA") or any state or local
agency with regard to any actual or imminently threatened removal, spill,
release or discharge of hazardous or toxic wastes, substances or petroleum
products on properties owned or leased by the Company or in connection with the
conduct of its business and operations.
(c) The Company has not received notice that it
is potentially responsible for costs of cleanup of any actual or imminently
threatened spill, release or discharge of hazardous or toxic wastes or
substances or petroleum products pursuant to any Environmental Control Statute.
4.19. Compliance. The Company is in compliance in all
material respects with all applicable laws and regulations, federal, state and
local (including without limitation those administered by the FCC and all state
and local authorities regulating the Company's CATV Systems), material to the
conduct of its business and operations; the Company has properly withheld all
amounts required by law to be withheld for income taxes and unemployment taxes
including without limitation, all amounts required with respect to social
security and unemployment compensation, relating to its employees, and has
remitted such withheld amounts in a timely manner to the appropriate taxing
authority, agency or body; the Company possesses all the franchises, permits,
licenses, certificates of compliance and approval and grants of authority
necessary or required in the conduct of its business and the same are valid,
binding, enforceable and subsisting without any material defaults thereunder
and are not subject to any proceedings or claims opposing the issuance,
development or use thereof or contesting the validity thereof.
4.20. Perfection of Security Interests. Borrower has no
knowledge of any further action, including any filing or recording of any
documents, which would be necessary in order to establish, perfect and maintain
the first priority security interest of Banks in the personal property assets
of the Company covered by the Security Agreement, except for the periodic
filing of continuation statements with respect to financing statements filed
under the Uniform Commercial Code of applicable jurisdictions.
ARTICLE V
NEGATIVE COVENANTS
For so long as the Commitments of the Banks (or any Bank) to
the Company under this Agreement remain available and while any part of the
principal of or interest on the Loans
-20-
<PAGE> 21
remains unpaid, the Company shall not do any of the following without the prior
written consent of Required Banks:
5.1. Restriction of Indebtedness. Create, incur, assume or
have outstanding any indebtedness for borrowed money or for the deferred
purchase price of any asset (including obligations under Capitalized Leases),
except trade indebtedness in the normal and ordinary course of business for
value received, and (i) the Notes, (ii) indebtedness and obligations incurred
to purchase or lease fixed or capital assets; provided, however, that payments
on such indebtedness and obligations shall not exceed $100,000 in the aggregate
during any fiscal year and the aggregate outstanding principal amount thereof
shall not exceed $1,000,000 at any time, and (iii) indebtedness to JII and the
Partnerships for Management Fees, Home Office Allocations and other advances
subordinated to all indebtedness of the Company to the Banks pursuant to the
Subordination Agreement and subject to Sections 5.10 and 5.11 hereof and (iv)
indebtedness existing on the date of the Existing Credit Agreement and listed
on Exhibit H hereto.
5.2. Amendments and Prepayments. Agree to any amendment,
modification or supplement, or obtain any waiver or consent in respect of
compliance with any of the terms of, or call or redeem, or make any purchase or
prepayment of or with respect to, any instrument or agreement evidencing or
relating to any indebtedness for borrowed money or for the deferred purchase
price of any asset, including Capitalized Leases, if such action would have a
material adverse effect on the Company or its financial condition or business
operations.
5.3. Restriction on Liens. Create or permit to be created
or allow to exist any mortgage, pledge, encumbrance or other lien upon or
security interest in any property or asset now owned or hereafter acquired by
the Company (including, without limitation, assets comprising the CATV
Systems), except Permitted Liens, or agree or covenant with or promise any
person or entity other than the Banks that it will not pledge its assets or
properties or otherwise grant any liens, security interests or encumbrances on
its property on terms similar to those set forth in this Section 5.3.
5.4. Sale and Leaseback. Enter into any agreement
providing for the leasing by the Company of property which has been or is to be
sold or transferred by the Company to the lessor thereof, or which is
substantially similar in purpose to property so sold or transferred.
5.5. Acquisitions, Loans and Investments. Acquire any
other business or any CATV System (or interest therein) not owned on the date
of the Existing Credit Agreement, or make any loan, advance or extension of
credit to, or investment in, any other
-21-
<PAGE> 22
person, corporation or other entity, including investments acquired in exchange
for partnership interests or other securities or obligations of any nature of
the Company, or create or participate in the creation of any Subsidiary or
joint venture, except:
(a) investments in commercial paper maturing in
180 days or less from the date of issuance which is rated A1 or better by
Standard & Poor's Corporation or P1 or better by Moody's Investors Services,
Inc.; investments in direct obligations of the United States of America or
obligations of any agency thereof which are guaranteed by the United States of
America, provided that such obligations mature within twelve (12) months of the
date of acquisition thereof; and investments in certificates of deposit
maturing within one (1) year from the date of acquisition thereof issued by a
Bank or bank or trust company organized under the laws of the United States or
any state thereof, having capital, surplus and undivided profits aggregating at
least $500,000,000 and the long-term indebtedness of which is rated A+ or
better by Moody's Investors Services, Inc. or equivalent by Standard & Poor's
Corporation;
(b) loans and advances made to employees,
subcontractors and suppliers in the ordinary course of business not to exceed
$25,000 in the aggregate principal amount outstanding at any time; and
(c) if no Default or Event of Default exists at
the time thereof, or would be caused as a result thereof, acquisitions of
assets related to the operation of CATV Systems, not to exceed One Million
Dollars ($1,000,000) in the aggregate from May 31, 1994 (the Amendment No. 6
Effective Date) to the Termination Date.
5.6. Liquidation; Merger; Disposition of Assets. Liquidate
or dissolve or discontinue any substantial part of its operations or business;
or merge with or into or consolidate with or into any other corporation,
partnership or other entity; or sell, lease, transfer or otherwise dispose of
all or any material part of its property, assets or business (other than sales
made in the ordinary course of business for value received), or any stock or
capital interest in any Subsidiary; provided, however, that the Company may
sell or dispose of any CATV System for fair value if (a) the Company gives the
Agent written notice of such sale or disposition at least 15 days prior to the
date thereof, (b) prior to and after giving effect to the proposed sale or
disposition of such CATV System (and any required reduction of the Commitments
and payment on the Notes with the proceeds of such sale or disposition pursuant
to Sections 1.4 and 1.5 hereof) (i) no Default or Event of Default under this
Agreement is continuing, (ii) the ratio of the Company's Total Debt to
Operating Cash Flow after giving effect to such sale or
-22-
<PAGE> 23
disposition is no greater than such ratio immediately prior to such sale or
disposition and (iii) the Company is otherwise in compliance with the terms,
provisions and covenants of this Agreement in all material respects, and (c)
commencing with the fourth (4th) sale or disposition of a CATV System
identified on Exhibit G hereto, the Company shall use the net proceeds of any
such sale or disposition to pay Loans on a pro rata basis pursuant to Section
1.5 hereof to the extent necessary to cause the Company's ratio of Total Debt
to Operating Cash Flow (based on the most recently delivered financial
statements and excluding Operating Cash Flow attributable to the sold CATV
System(s)) to be equal to or less than 3.0 to 1, and shall permanently reduce
the Commitments pursuant to Sections 1.4 of the Credit Agreement on a pro rata
basis in the amount of such payment; provided, however, that (i) if the
Lochbuie, Colorado System is one of the first three CATV Systems sold, then
such payment requirement shall commence on the fifth (5th) sale or disposition
of a CATV System, and (ii) if the Boulder, Colorado System is sold in
connection with a sale of the Broomfield, Colorado System, then such aggregate
sale shall be treated as a sale of one (1) CATV System for purposes of this
clause (c).
5.7. Accounts Receivable. Except in connection with the
sale of the accounts receivable of a CATV System as part of a sale by the
Company of such CATV System which is otherwise permitted under Section 5.6
hereof, discount or sell with recourse, or sell for less than the face amount
thereof, any of its notes or accounts receivable, whether now owned or
hereafter acquired.
5.8. Contingent Liabilities. Guarantee or become a surety
or otherwise contingency liable (including, without limitation, liable by way
of agreement, contingent or otherwise, to purchase, to provide funds for
payment, to supply funds to or otherwise invest in the debtor or otherwise to
assure the creditor against loss) for any obligations of others, except
pursuant to the deposit and collection of checks and similar terms in the
ordinary course of business.
5.9. Affiliates. Suffer or permit any transaction with any
Affiliate, except on terms not less favorable to the Company than would be
usual and customary in similar transactions with non-affiliated persons;
provided that this Section 5.9 shall not prohibit the payment of (i) Home
Office Allocations and Management Fees in accordance with the Joint Venture
Agreement except as the same may be restricted by the terms hereof and under
the Subordination Agreement and (ii) commissions to The Jones Group, Ltd. as
described in Paragraph 2 of Article XII of the Joint Venture Agreement.
-23-
<PAGE> 24
5.10. Management Fees and Home Office Allocations. Pay, or
obligate or legally bind itself to pay, Management Fees or Home Office
Allocations; provided, however, that in the absence of a Default or an Event of
Default (and if such payment, together with any payments made pursuant to this
Section 5.10 and Section 5.11 hereof will not create a Default or an Event of
Default) the Company may: (i) pay Management Fees for any fiscal quarter of the
Company not to exceed five percent (5%) of the Gross Operating Revenues of the
Company for such quarter (excluding revenues from the sale of any CATV Systems
or CATV Licenses) and (ii) pay Home Office Allocations in amounts not to exceed
reasonable levels for such payments based on JII's and the Company's historic
practices, taking into account inflation and fluctuations in the cost of the
items comprising Home Office Allocations. Management Fees and Home Office
Allocations accrued but unpaid for any fiscal quarter shall be deferred and
subordinated to indebtedness of the Company to the Banks pursuant to the
Subordination Agreement; provided, however, that so long as there exists no
Default or Event of Default under this Agreement (and such payment, together
with any payments made pursuant to this Section 5.10 and Section 5.11 hereof,
will not create a Default or Event of Default), (i) such deferred Management
Fees and Home Office Allocations may be paid in any subsequent fiscal quarter
to the extent of Adjusted Cash Flow for the preceding quarter and (ii) the
Company may pay accrued interest on deferred Management Fees and Home Office
Allocations at a rate not to exceed JII's cost of capital.
5.11. Restricted Payments. Make any Restricted Payments;
provided, however that the Company may, in the absence of a Default or Event of
Default under this Agreement (and if such payment, together with any payments
permitted to be made pursuant to Section 5.10 hereof, will not create a Default
or Event of Default), (i) make distributions to its joint venture partners
consistent with distributions contemplated by the Partnerships to their
partners as set forth in the Prospectus dated January 10, 1986, as amended
September 29, 1986 and December 19, 1986 in respect to Jones Cable Income Fund
1 previously delivered to the Banks, (ii) make interest payments to JII at a
rate not to exceed JII's cost of capital on any indebtedness subordinated
pursuant to the Subordination Agreement and (iii) in connection with a sale of
a CATV System permitted by Section 5.6 hereof, make distributions to the
Partnerships to the extent the proceeds thereof are not required thereunder to
be used to make a payment of the Loans.
5.12. Partnerships; Joint Ventures; Partnership Documents.
Become a member of any partnership or joint venture; or amend or permit any
amendments of the Joint Venture Agreement.
5.13. Fiscal Year. Change its fiscal year.
-24-
<PAGE> 25
ARTICLE VI
AFFIRMATIVE COVENANTS
For so long as the Commitments of the Banks (or any Bank) to
the Company under this Agreement remain available and while any part of the
principal of or interest on the Loans remains unpaid, and unless waived in
writing by the Banks, the Company shall:
6.1. Financial Covenants. (a) Maintain at all times during
the periods set forth in the left-hand column below a ratio of the Company's
Total Debt as of the date of determination to the Company's Operating Cash Flow
as of the last day of the most recently ended quarter of not greater than the
amount set forth in the right-hand column:
<TABLE>
<CAPTION>
Period Maximum Ratio
------ -------------
<S> <C>
05/31/94 through 06/30/96 5.0 to 1
07/01/96 and at all times 4.5 to 1
thereafter
</TABLE>
(b) Maintain at all times during the periods set
forth in the left-hand column below a ratio of the Company's Operating Cash
Flow as of the last day of the most recently ended quarter to Proforma Interest
Expense for the period commencing on the first day of the current quarter of
not less than the amount set forth in the right-hand column:
<TABLE>
<CAPTION>
Period Minimum Ratio
------ -------------
<S> <C>
05/31/94 through 06/30/96 2.50 to 1
07/01/96 and at all times 3.00 to 1
thereafter
</TABLE>
6.2. Insurance. Maintain insurance in such amounts and
against such risks as is customary by companies engaged in the same or similar
businesses and similarly situated under policies requiring the insurer to
furnish reasonable notice to the Agent and opportunity to cure any non-payment
of premiums prior to termination of coverage; and furnish each Bank with
certificates of such insurance and cause Agent to be named as the lender loss
payee thereof, as its interest may appear.
6.3. Partnership Existence; Obligations. Do all things
necessary to: (i) maintain its partnership existence and all rights and
franchises necessary or desirable for the conduct of its business (except for
transactions permitted by Section 5.6); (ii) comply in all material respects
with all applicable laws, rules, regulations and ordinances, and all
restrictions imposed by governmental authorities, including those relating to
-25-
<PAGE> 26
environmental standards and controls; and (iii) pay, before the same become
delinquent and before penalties accrue thereon, all taxes, assessments and
other governmental charges against it or its property, and all of its other
liabilities, except to the extent and so long as the same are being contested
in good faith by appropriate proceedings in such manner as not to cause any
material adverse effect upon its property, financial condition or business
operations, with adequate reserves provided for such payments.
6.4. Business Activities; Manaqement. Continue to carry on
its business activities in substantially the manner such activities are
conducted on the date of this Agreement and not make any material change in the
nature of its business. Without limiting the generality of the foregoing, the
Company shall cause its CATV Systems to continue to be managed by JII in
substantially the same manner and on substantially the same terms as such CATV
Systems are managed by JII on the date hereof.
6.5. Properties. Keep its properties (whether owned or
leased) in good condition, repair and working order, ordinary wear and tear and
obsolescence excepted, and make or cause to be made from time to time all
necessary repairs thereto (including external or structural repairs) and
renewals and replacements thereof.
6.6. Accounting Records; Reports. Maintain a standard and
modern system for accounting in accordance with generally accepted principles
of accounting consistently applied throughout all accounting periods; and
furnish to each Bank such information respecting the business, assets and
financial condition of the Company as it may reasonably request and, without
request, furnish to each Bank:
(a) Within 60 days after the end of each of the
first three quarters of each fiscal year of the Company (i) a balance sheet of
the Company as of the close of such quarter and of the preceding fiscal
year-end; and (ii) statements of income and surplus of the Company for such
quarter and for that part of the fiscal year ending with such quarter; all in
reasonable detail and certified as true and correct (subject to audit and
normal year-end adjustments) by the chief financial officer or the Treasurer of
JII; and
(b) As soon as available, and in any event within
105 days after the close of each fiscal year of the Company, a copy of the
audit report for such year and accompanying financial statements of the Company
as prepared by independent public accountants of recognized standing selected
by the Company and satisfactory to each of the Banks, which audit report shall
be accompanied by an opinion of such accountants, in form satisfactory to each
of the Banks, to the effect that the same
-26-
<PAGE> 27
fairly present the financial condition of the Company and the results of its
operations as of the relevant dates thereof; together with copies of any
management letters (or portions thereof) issued by such accountants in
connection with such audit regarding matters which relate to or adversely
effect the Company; and
(c) As soon as available, copies of all reports
or materials (in respect to matters which may have a material adverse effect on
the business or financial condition of the Company) filed with the FCC, the
Securities Exchange Commission or other governmental agency having regulatory
authority over the Company or with any national securities exchange; the
Company shall also deliver to each of the Banks a copy of all information (in
respect to matters which may have a material adverse effect on the business or
financial condition of the Company) sent by the Company to its joint venture
partners or the limited partners of the Partnerships within ten (10) days after
the date such information shall have been sent to such joint venture partners
or limited partners, as the case may be; and
(d) Upon request, evidence that insurance
policies are in force covering all property of the Company; and
(e) Promptly, and in any event within 10 days,
after Company has knowledge thereof a statement of the chief financial officer
or Treasurer of JII describing: (i) in detail any event which, either of itself
or with the lapse of time or the giving of notice or both, would constitute a
Default or an Event of Default hereunder or under any other material agreement
to which the Company is a party, the period of existence thereof together with
a statement of the actions which the Company has taken or proposes to take with
respect thereto; and (ii) any pending or threatened litigation or
administrative proceeding of the type described in section 4.10; and
(f) Together with the financial statements
referred to in (a) and (b) above, a Compliance Certificate signed on behalf of
the Company by the chief financial officer or Treasurer of JII, demonstrating
in reasonable detail compliance by the Company with the requirements of
Sections 5.10, 5.11 and 6.1 hereof; and
(g) Within 30 days after the end of each calendar
month, a report, in form and substance satisfactory to each of the Banks,
showing with respect to the CATV Systems of the Company (individually and in
the aggregate) (i) the number of Basic Subscribers at the beginning and at the
end of such month (not including those whose accounts are more than sixty (60)
days delinquent) and (ii) any other information reasonably requested by either
of the Banks.
-27-
<PAGE> 28
(h) (i) Promptly, and in any event within 30
days, after the Company knows that any Reportable Event with respect to any
Plan has occurred, a statement of the chief financial officer or Treasurer of
JII setting forth details as to such Reportable Event and the action which the
Company proposes to take with respect thereto, together with a copy of any
notice of such Reportable Event given to the Pension Benefit Guaranty
Corporation if a copy of such notice is available to the Company, (ii) promptly
after the filing thereof with the Internal Revenue Service, copies of each
annual report with respect to each Plan administered by the Company and (iii)
promptly after receipt thereof, a copy of any notice (other than a notice of
general application) the Company, any Subsidiary or any member of the
Controlled Group may receive from the Pension Benefit Guaranty Corporation or
the Internal Revenue Service with respect to any Plan administered by the
Company.
The financial statements referred to in (a) and (b) above shall be
accompanied by a certificate by the chief financial officer or Treasurer of JIi
that, as of the close of the last period covered in such financial statements,
no condition or event had occurred which constitutes an Event of Default or a
Default hereunder.
6.7. Inspection of Records; Information. Permit
representatives of each of the Banks to visit and inspect any of the properties
and examine any of the books and records of the Company at any reasonable time
and as often as may be reasonably desired on reasonable notice; and provide
each of the Banks with all documents and information regarding the Company and
the CATV Systems, financial or otherwise, reasonably requested by any Bank.
6.8. INTENTIONALLY LEFT BLANK
6.9. Compliance; Notification.
(a) The Company, each of the Partnerships and JII
(with respect to the CATV Systems) will comply in all material respects with
all local, state and federal laws and regulations applicable to its business
and the provisions and requirements of all franchises, permits, certificates of
compliance and approval issued by regulatory authorities and other like grants
of authority held by the Company; and the Company will notify Banks immediately
in detail of any actual or alleged failure to comply with or perform, breach,
violation or default under any such laws or regulations or under the terms of
any of such franchises, licenses or grants of authority, the existence of which
would be reasonably likely to have a material adverse effect on the business,
operations or financial condition of the Company; or of the occurrence or
existence of any facts or circumstances which with the passage of time, the
giving of notice or otherwise could
-28-
<PAGE> 29
create such a breach, violation or default or could occasion the termination of
any of such franchises or grants of authority.
(b) Each of the Company, the Partnerships and JII
will notify Banks in writing immediately of the institution of any litigation,
the commencement of any administrative proceeding, the happening of any event
or the assertion or threat of any claim, which relates to this Agreement, the
Notes or any Collateral Document or which, if adversely determined, would be
reasonably likely to have a material adverse effect on the business, operations
or financial condition of the Company.
(c) With respect to the Environmental Control
Statutes, the Company shall notify Banks when, in connection with the conduct
of the Company's business(es) or operations, any person or entity, or any
federal, state or local agency provides oral or written notification to the
Company, the Partnerships or JII with regard to an actual or imminently
threatened removal, spill, release or discharge of hazardous or toxic wastes,
substances or petroleum products; and notify Banks in detail immediately (i)
upon the receipt by the Company of an assertion of liability under the
Environmental Control Statutes, (ii) of any actual or alleged failure to comply
with or perform, breach, violation or default under any such Environmental
Control Statutes and (iii) of the occurrence or existence of any facts, events
or circumstances which with the passage of time, the giving of notice, or both,
could create such a breach, violation or default.
ARTICLE VII
DEFAULTS
In the event that any one or more of the following events (each an
"Event of Default") shall occur:
7.1. Default in Payment. The Company shall fail to pay (i)
any interest on any Note, or any other amount payable to any Bank hereunder
(other than a principal payment on any Note), within three (3) days after the
same becomes due or (ii) any principal amount due on any Note when due;
7.2. Default on Certain Covenants. Default in the
performance or observance of any agreement, covenant, condition, provision or
term contained in Article V or Section 6.1 of this Agreement;
7.3. Default in Performance of Other Agreements. Default
by the Company or JII (in the case of the Subordination Agreement) in the
performance or observance of any of the agreements, covenants, conditions,
provisions or terms in this
-29-
<PAGE> 30
Agreement (other than those which constitute Events of Default under Section
7.1 or 7.2 above) or any Collateral Document, continuing for a period of 20
days after written notice thereof is given to the Company by the Agent on
behalf of the Banks;
7.4. Representations or Statements False. Any
representation or warranty made by the Company or JII herein or in any
Collateral Document or other document, certificate or agreement delivered
pursuant hereto, or any financial statement delivered to either Bank hereunder,
shall prove to have been false in any material respect as of the time when made
or given;
7.5. Default on Other Obliqations. The Company shall fail
to pay all or any part of the principal of or interest on any indebtedness of
or assumed by it in excess of $100,000 as and when due and payable (whether by
fixed maturity or acceleration) and such default shall not be cured within the
period or periods of grace, if any, specified in the instruments governing such
obligations; or default shall occur under any evidence of, or any indenture or
agreement or other instrument governing, such obligation, and such default
shall continue for a period of time sufficient to permit the acceleration of
the maturity of any such indebtedness;
7.6. Judgments. Any judgment, writ, warrant, attachment
or execution or similar process which, together with other outstanding
judgments, writs, warrants, attachments and executions against the Company or
its property, which requires payment or presents liability in excess of
$500,000 (not covered by insurance) shall be entered or issued against or
levied against the Company or its property and such judgment or other process
shall not be satisfied, waived, discharged, settled, vacated, fully bonded or
stayed within 60 days after the date of the issuance or levy thereof;
7.7. Bankruptcy; Insolvency. The Company, either of the
Partnerships or JII shall (a) become insolvent; or (b) generally fail to pay
its debts as they mature; or (c) make a general assignment for the benefit of
creditors or to an agent authorized to liquidate any substantial amount of its
property; or (d) become the subject (either voluntarily or involuntarily) of an
"order for relief" within the meaning of the United States Bankruptcy Code; or
(e) file an answer to a creditor's petition (admitting the material allegations
thereof) for liquidation, reorganization or to effect a plan or other
arrangement with creditors; or (f) apply to a court for the appointment of a
receiver, trustee or custodian for any of its assets; or (g) have a receiver,
trustee or custodian appointed for any of its material assets (with or without
its consent); or (h) otherwise become the subject of any insolvency proceeding;
-30-
<PAGE> 31
7.8. Validity. This Agreement, any Note or any document
required by Article III shall, at any time after their respective execution and
delivery, and for any reason, cease to be in full force and effect or shall be
declared null and void, or be revoked or terminated, or the validity or
enforceability thereof or hereof shall be contested by the Company, either of
the Partnerships or JII, or the Company shall deny that it has any or further
liability or obligation thereunder or hereunder, as the case may be;
7.9. ERISA. Any Reportable Event, which Required Banks
determine in good faith to constitute grounds for the termination of any Plan
by the Pension Benefit Guaranty Corporation or for the appointment by the
appropriate United States District Court of a trustee to administer any Plan,
shall have occurred, or any Plan shall be terminated within the meaning of
Title IV of ERISA, or a trustee shall be appointed by the appropriate United
States District Court to administer any Plan, or the Pension Benefit Guaranty
Corporation shall institute proceedings to terminate any Plan or to appoint a
trustee to administer any Plan, and in case of any event described in the
preceding provisions of this section 7.9 the Required Banks determine in good
faith that the aggregate amount of the Company's liability to the Pension
Benefit Guaranty Corporation under ERISA shall exceed $500,000 and such
liability is not covered, for the benefit of the Company, by insurance;
7.10. Revocation of Franchise, etc. Custody or control of
any substantial part of the property of the Company, either Partnership or JII
shall be assumed by any governmental agency or any court of competent
jurisdiction at the request of any governmental agency; if any CATV franchise
of the Company shall be suspended, revoked, not renewed or otherwise terminated
(including if the Company is required by any franchising authority or by court
order or administrative order to halt construction or operations under any CATV
franchise and such action shall continue uncorrected for thirty (30) days after
the Company has received notice thereof), and such CATV franchise, together
with all other CATV franchises suspended, revoked, not renewed or otherwise
terminated at the time of such suspension, revocation or termination, has
either singly or in the aggregate in excess of the greater of ten percent (10%)
of the Basic Subscribers covered by all of the Company's CATV franchises on the
last day of the most recently ended fiscal quarter of the Company; or if any
governmental regulatory authority or judicial body shall make any other final
non-appealable determination the effect of which would be to affect materially
and adversely the operations of the Company as now conducted;
7.11. Termination or Dissolution of the Company, etc. The
Partnerships shall agree to terminate or dissolve the Company; if the Company
is terminated or dissolved and not
-31-
<PAGE> 32
simultaneously continued; if either Partnership shall withdraw as a partner of
the Company; if JII shall cease to be the general partner of each of the
Partnerships and the manager of the Company; or if the sole partners of the
Company shall cease to be the Partnerships;
7.12. Environmental Matters. Any event or condition shall
occur or exist with respect to any activity or substance regulated under the
Environmental Control Statutes and as a result of such event or condition, the
Company has incurred a liability in excess of $500,000 during any consecutive
twelve (12) month period;
THEN:
(a) As to any Event of Default under section 7.1,
7.2, 7.3, 7.4, 7.5, 7.6, 7.8, 7.9, 7.10, 7.11 and 7.12 and at any time
thereafter, and in each case, the Agent at the request of Required Banks may,
by written notice to the Company, immediately terminate the obligation of the
Banks to make Loans hereunder and/or declare the unpaid principal balance of
the Notes, together with all interest accrued thereon, to be immediately due
and payable; and the unpaid principal balance of and accrued interest on the
Notes shall thereupon be due and payable all without presentment, demand,
protest, or further notice of any kind, all of which are hereby waived, and
notwithstanding anything to the contrary herein or in the Notes contained.
(b) As to any Event of Default under section 7.7,
the obligation of the Banks to make Loans hereunder shall immediately terminate
and the unpaid principal balance of the Notes, together with all interest
accrued thereon, shall immediately and forthwith be due and payable, all
without presentment, demand, protest, or further notice of any kind, all of
which are hereby waived, and notwithstanding anything to the contrary herein or
in the Notes contained.
(c) Upon the occurrence of any of said Events of
Default, the rights, powers and privileges provided in this Article VII and all
other remedies available to the Banks under this Agreement, the Collateral
Documents or at law or in equity may be exercised by the Agent on behalf of the
Banks at any time and from time to time, whether or not the indebtedness
evidenced by the Notes and secured by the documents required by Article III
hereof shall be due and payable, and whether or not the Agent on behalf of the
Banks shall have instituted any foreclosure sure proceedings or other action
for the enforcement of the Banks' rights under the Notes or any of the
Collateral Documents securing the same.
(d) For the purpose of carrying out the
provisions and exercising the rights, powers and privileges
-32-
<PAGE> 33
granted by this Article VII and the Collateral Documents, the Company hereby
irrevocably constitutes and appoints the Agent its true and lawful
attorney-in-fact, with full power of substitution upon the occurrence of an
Event of Default, to execute, acknowledge, endorse and deliver any instruments
and do and perform any acts which are referred to in this Article VII and the
Collateral Documents, in the name and behalf of the Company. The power vested
in each said attorney-in-fact is, and shall be deemed to be, coupled with an
interest and cannot be revoked.
(e) In the event that the Notes shall be paid in
whole or in part following acceleration of the maturity thereof while a
Eurodollar Loan is outstanding and such payment date is not the last day of an
Interest Period for such Loan, the Company shall pay to each Bank, on the date
of such accelerated Note payment, the amount required pursuant to Section 1.8
hereof.
ARTICLE VIII
THE AGENT
This Article sets forth the relative rights and duties of
Agent and Banks respecting the Loans and does not confer any enforceable rights
on the Company against Banks or create on the part of Banks any duties or
obligations to the Company. The Banks hereby terminate the Intercreditor
Agreement executed in connection with the Existing Credit Agreement.
8.1. Appointment and Powers. Each of the Banks hereby
appoints CoreStates as Agent for the Banks hereunder, and authorizes the Agent
to take such action as Agent on its behalf and to exercise such powers as are
specifically delegated to the Agent by the terms hereof, together with such
powers as are reasonably incidental thereto. The duties of the Agent shall be
entirely ministerial; the Agent shall not have any duty to ascertain or to
inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement, the Notes or any related document, or to enforce
such performance, or to inspect the property (including the books and records)
of the Company; and the Agent shall not be required to take any action which
exposes the Agent to personal liability or which is contrary to this Agreement
or the Notes or applicable law. CoreStates agrees to act as Agent upon the
express terms and conditions contained in this Article VIII.
8.2. Application of Payments. Agent shall apply all
payments of principal, interest, commitment fee or other amounts hereunder made
to Agent by or on behalf of the Company, to Banks on the basis of their pro
rata shares of the outstanding principal balance of indebtedness hereunder,
except any Agent's fee paid in connection herewith which shall be paid solely
to
-33-
<PAGE> 34
Agent. Such distribution of payments shall be made promptly in federal funds
immediately available at the office of each Bank set forth above.
8.3. Modifications and Waivers. No modification or
amendment hereof, consent hereunder or waiver of Event of Default shall be
effective except by written consent of the Required Banks, provided, however,
that the written consent of all Banks shall be required to modify, amend,
waive, discharge, terminate or suspend compliance with any of the following
provisions or matters: (i) the rate of interest, to the extent it is proposed
to be decreased, (ii) the amount of the Commitments, and of each Bank's
respective Commitment, (iii) the dates of payment hereunder, (iv) the
commitment fee, (v) the release of any Collateral provided to the Agent on
behalf of Banks pursuant to the Collateral Documents if the Collateral to be
released is valued (based on the Company's good faith estimate) at Fifty
Thousand Dollars ($50,000) or more, and (vi) the provisions of this Paragraph
8.3. The Banks hereby agree to execute such further documents including without
limitation amendments to this Agreement and the Note(s), waivers and
certificates and deliver such opinions as the Agent and its counsel shall so
request to implement any modifications approved in accordance with the terms of
this Section 8.3. Any amendment or waiver made pursuant to this Section 8.3
shall apply to and bind all of the Banks and any future holder of any Notes. No
modification or waiver of any provision of this Agreement or any Note, nor any
consent to any departure by the Company herefrom or therefrom, shall in any
case be effective unless the same be in writing, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. No notice to or demand on Borrower in any case shall
entitle Borrower to any other or further notice or demand in any similar or
other circumstances.
8.4. Obligations Several. The obligations of the Banks
hereunder are several, and each Bank hereunder shall not be responsible for the
obligations of the other Banks hereunder, nor, will the failure of one Bank to
perform any of its obligations hereunder relieve the other Banks from the
performance of their respective obligations hereunder.
8.5. Responsibility. The Agent (i) makes no representation
or warranty to any Bank and shall not be responsible to any Bank for any oral
or written recitals, reports, statements, warranties or representations made in
or in connection with this Agreement or any Note; (ii) shall not be responsible
for the due execution, legality, validity, enforceability, genuineness,
sufficiency, collectibility or value of this Agreement or any Note or any other
instrument or document furnished pursuant thereto; (iii) may treat the payee of
any Note as the owner thereof until the Agent receives written notice of the
assignment or transfer thereof signed by such payee and in
-34-
<PAGE> 35
form satisfactory to the Agent; (iv) may execute any of its duties under this
Agreement by or through employees, agents and attorneys in fact and shall not
be answerable for the default or misconduct of any such employee, agent or
attorney in fact selected by it with reasonable care; (v) may (but shall not be
required to) consult with legal counsel (including counsel for the Company),
independent public accountants and other experts selected by it and shall not
be liable for any action taken or omitted to be taken in good faith by it in
accordance with advice of such counsel, accountants or experts; (vi) shall be
entitled to rely upon any Note, notice, consent, waiver, amendment,
certificate, affidavit, letter, telegram, telex, cable or other document or
communication believed by it to be genuine and signed or sent by the proper
party or parties, and may rely on statements contained therein without further
inquiry or investigation. Neither the Agent nor any of its directors, officers,
agents, or employees shall be liable for any action taken or omitted to be
taken by it or them under or in connection with this Agreement on the Notes,
except for its or their own gross negligence or willful misconduct.
8.6. Agent's Indemnification. The Banks agree to indemnify
and reimburse the Agent (to the extent not reimbursed by the Company), ratably
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by, or asserted
against the Agent as such in any way relating to or arising out of this
Agreement or any action taken or omitted by the Agent under this Agreement,
provided that no Bank shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Agent's gross negligence or
willful misconduct. Without limitation of the foregoing, each Bank agrees to
reimburse the Agent promptly upon demand for its ratable share of any
out-of-pocket expenses (including counsel fees) incurred by the Agreement in
connection with the preparation, execution, administration or enforcement of,
or the preservation, execution, administration or enforcement of, or the
preservation of any rights under, this Agreement to the extent that the Agent
is not reimbursed for such expenses by the Company.
8.7. Action on Instruction of Banks; Right to Indemnity.
Agent shall in all cases be fully protected in acting or refraining from acting
hereunder in accordance with written instructions to it signed by Required
Banks unless the consent of all the Banks is expressly required hereunder in
which case Agent shall be so protected when acting in accordance with such
instructions from all the Banks. Such instructions and any action taken or
failure to act pursuant thereto shall be binding on all the Banks, provided
that except as otherwise provided
-35-
<PAGE> 36
herein, Agent may act hereunder in its own discretion without requesting such
instructions. Agent shall be fully justified in failing or refusing to take any
action hereunder unless it shall first be specifically indemnified to its
satisfaction by the other Banks on a pro rata basis against any and all
liability and expense which it may incur by reason of taking or continuing to
take any such action.
8.8. Riqhts as a Lender. With respect to its Commitment
and the Note issued to it, CoreStates, in its individual capacity as a Bank,
shall have, and may exercise, the same rights and powers under this Agreement
and the Note payable to it as the other Bank has under this Agreement and Note,
and the terms "Bank" and "Banks", unless the context otherwise requires, shall
include CoreStates in its individual capacity as a Bank. CoreStates and its
affiliates may accept deposits from, lend money to, act as trustee under
indentures of, and generally engage in any kind of banking or trust business
with, the Company, any Affiliate of the Company, or any of its subsidiaries and
any person, firm or corporation who may do business with or own securities of
the Company, such Affiliate or any subsidiary, all as if it were not the Agent,
and without any duty to account therefor to the Banks; provided, however, that
Agent hereby agrees that if it agrees to make any loan to the Company (but not
any Affiliate of the Company, or any subsidiary or any person, firm or
corporation which may do business with or own securities of the Company), and
the Company provides a security interest in its assets covered by the
Collateral Documents, that any such security interest shall be junior to the
security interests granted to Agent on behalf of Banks under the Collateral
Documents.
8.9. Credit Investigation. Each of the Banks severally
represents and warrants to the other Bank and to the Agent that it has made its
own independent investigation and evaluation of the financial condition and
affairs of the Company in connection with such Bank's execution and delivery of
this Agreement and the making of its loans and has not relied on any
information or evaluation provided by any other Bank or the Agent in connection
with any of the foregoing (other than information provided by the Company to
the Agent for transmittal to the Banks in connection with the foregoing); and
each Bank represents and warrants to the other Bank and to the Agent that it
shall continue to make its own independent investigation and evaluation of the
creditworthiness of the Company while the Commitments and/or the Notes are
outstanding.
8.10. Resiqnation, Removal of Aqent.
(a) Agent may at any time resign its position as
Agent, without affecting its position as a Bank, by giving written notice to
Banks and the Company. Such resignation shall
-36-
<PAGE> 37
take effect upon the appointment of a successor agent in accordance with this
Article. In the event Agent shall resign, Banks shall appoint a Bank as
successor agent. If within thirty (30) days of the Agent's notice of
resignation no successor agent shall have been appointed by Banks and accepted
such appointment, then Agent, in its discretion may appoint any other Bank as a
successor agent, subject to such Bank's acceptance of such appointment and to
approval by the Company, which approval will not be unreasonably withheld.
(b) All Banks other than the Agent may remove the
Agent, without affecting its position as a Bank, by giving written notice
signed by all such Banks to the Agent. Such removal shall take effect thirty
(30) business days following Agent's receipt of notice of removal. The removal
notice shall identify the successor Agent (which shall be a Bank, or shall have
been approved by Company).
8.11. Successor Agent. The successor Agent appointed
pursuant to Paragraph 8.10 shall execute and deliver to its predecessor and
Banks an instrument in writing accepting such appointment, and thereupon such
successor, without any further act, deed or conveyance, shall become fully
vested with all the properties, rights, duties and obligations of its
predecessor Agent. The predecessor Agent shall deliver to its successor Agent
forthwith all collateral security, documents and moneys held by it as Agent, if
any, whereupon such predecessor Agent shall be discharged from its duties and
obligations as Agent under this Agreement.
8.12. Collateral Security. Agent will hold, administer and
manage any collateral security pledged from time to time hereunder either in
its own name or as Agent, but each Bank shall hold a direct, undivided pro rata
beneficial interest therein, by reason of and as evidenced by this Agreement.
8.13. Enforcement by Agent. All rights of action under this
Agreement and under the Notes and all rights to the collateral security, if
any, hereunder may be enforced by Agent and any suit or proceeding instituted
by Agent in furtherance of such enforcement shall be brought in its name as
Agent without the necessity of joining as plaintiffs or defendants any other
Banks, and the recovery of any judgment shall be for the benefit of Banks
subject to the expenses of Agent.
ARTICLE IX
MISCELLANEOUS
9.1. Accounting Terms; Definitions. Except as otherwise
provided, all accounting terms shall be construed in
-37-
<PAGE> 38
accordance with generally accepted accounting principles consistently applied,
and financial data submitted pursuant to this Agreement shall be prepared in
accordance with such principles. As used herein:
(a) "Adjusted Cash Flow" means, for any fiscal
quarter, Cash Flow for such quarter plus Management Fees and Home Office
Allocations deducted in calculating Cash Flow for such quarter, but which are
deferred and not paid to JII during such quarter less Management Fees and Home
Office Allocations which were deferred in a prior quarter but which are
actually paid to JII in such quarter to the extent not deducted in calculating
Cash Flow for such quarter.
(b) "Affiliate" means any person, firm,
corporation or partnership, which, directly or indirectly, controls, is
controlled by, or is under common control with, the Company or a Subsidiary.
(c) "Applicable Margin" shall mean (a) in the
absence of a Default or Event of Default, during any quarter when the ratio of
the Company's Total Debt on the last day of the most recently-ended quarter to
Borrower's Operating Cash Flow as of the last day of the most recently-ended
quarter is less than 3.5 to 1, (i) one quarter of percent (1/4%) per annum with
respect to Prime Rate Loans and (ii) one and one quarter of one percent (1/4%)
per annum with respect to Eurodollar Loans; and (b) at all other times
(except upon the occurrence and during the continuation of Default or Event of
Default), (i) one half of one percent (1/2%) per annum with respect to the Prime
Rate Loans, and (ii) one and one half percent (1-1/2%) per annum with respect to
Eurodollar Loans. The Applicable Margin shall be determined quarterly by Agent
within five (5) days of the receipt by Agent of the financial statements
required to be delivered by the Company pursuant to Section 6.6 (a) or (b)
hereof, as applicable, and shall be effective retroactively to the first day of
the quarter following the quarter by reference to which such Applicable Margin
was calculated, and shall remain in effect until the next quarterly
determination of the Applicable Margin by Agent.
(d) "Bank" shall mean individually and "Banks"
shall mean individually and collectively, the banks or other financial
institutions party to this Agreement at any time of determination and their
respective successors and assigns, being, CoreStates, First Maryland, Dresdner
and Continental on the date hereof.
(e) "Base Rate" means the higher of (a) the
Federal Funds Rate plus one half of one percent (1/2%) per annum or (b) the
Prime Rate.
-38-
<PAGE> 39
(f) "Basic Subscribers" means the subscribers in
the CATV Systems who (a) are currently receiving cable television signals
supplied by the Company; (b) have commenced payment for such signals at the
standard monthly fees and charges for "basic service" (as such term is commonly
understood in the cable television industry) charged by the Company, directly
or indirectly, under subscriptions with the Company; and (c) are not 60 or more
days delinquent in payments as determined on a contractual basis.
(g) "Business Day" means a day other than (i) a
Saturday, Sunday or a day on which national banks or banks located in the
Commonwealth of Pennsylvania are permitted or required by law to close or (ii)
in respect to any Eurodollar Loan, a day on which the London interbank market
is closed.
(h) "Capitalized Lease" means any lease which is
capitalized on the books of the lessee, or should be so capitalized under
generally accepted accounting principles.
(i) "Cash Flow" means, for any fiscal quarter,
total revenues of the Company for such quarter, determined and consolidated in
accordance with generally accepted accounting principles less the sum of (i)
operating expenses of the Company for such quarter (including but not limited
to Management Fees and Home Office Allocations) and (ii) general and
administrative expenses of the Company for such quarter, in each case
determined and consolidated in accordance with generally accepted accounting
principles.
(j) "Controlled Group" means a controlled group
of corporations as defined in Section 1563 of the Internal Revenue Code of
1986, as amended, of which the Company is a part.
(k) "Debt Service" for any period means all
amounts which are required to be paid on indebtedness of the Company during
such period, including, without limitation all payments of principal and
interest and all payments under Capitalized Leases.
(l) "Default" means any event or circumstance
which, with the giving of notice or the passage of time or both, would
constitute an Event of Default.
(m) "Environmental Control Statutes" shall mean
all federal, state and local laws and regulations governing the control,
removal, spill, release or discharge of hazardous or toxic wastes or
substances, pollutants, contaminants, or petroleum products, as in effect from
time to time, including without limitation as provided in the provisions of and
the regulations under the Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA"), the Solid Waste
-39-
<PAGE> 40
Disposal Act, the Clean Water Act, the Clean Air Act, the Resource Conservation
and Recovery Act of 1976, the Federal Water Pollution Control Act Amendments of
1972, the Hazardous Materials Transportation Act, and the Occupational Safety
and Health Act, and the Occupational Safety and Health Act, and all amendments
to the foregoing.
(n) "ERISA" means the Employee Retirement Income
Security Act of 1974, as the same may be in effect from time to time.
(o) "Eurodollar Loan" means the portion of a Loan
bearing interest at the rate specified in section 1.6(b).
(p) "Federal Funds Rate" means, for any day, the
effective rate of interest for such day, as announced from time to time by the
Board of Governors of the Federal Reserve System as shown in publication H.15
as the "Federal Funds Rate."
(q) "Gross Operating Revenues" means, for any
period for which such sum is being computed, the sum of all payments made to
the Company by subscribers in the CATV Systems, and all other revenues and
receipts realized by the Company from the operation of its businesses during
such period.
(r) "Home Office Allocations" means, for any
period for which such sum is being computed, the amount of reimbursement
payable by the Company to JII for general overhead and administrative expenses
of JII allocated to the Company pursuant to paragraph 4 of Article VII of the
Joint Venture Agreement (computed by JII consistently with respect to all
partnerships of which it or a Subsidiary or Affiliate is a general partner or
with which it is otherwise affiliated and payment of which shall be subject to
all the terms and provisions of this Agreement and the Subordination
Agreement).
(s) "LIBO Rate" means, for each Interest Period
for each Eurodollar Loan, the annual rate of interest obtained by dividing (i)
the average rate of interest (rounded upward, if necessary, to the nearest
1/1Oth of 1%) at which deposits in U.S. dollars are offered to prime banks in
the London interbank market at 11 a.m. (London time) two Business Days prior to
the commencement of the applicable Eurodollar Loan Interest Period for a term
equal to such Interest Period and in an amount approximately equal to the
principal amount of the applicable Eurodollar Loan, as reflected on the
Telerate electronic communications terminals in Agent's money center by (ii) a
percentage, expressed as a decimal, equal to 100% minus the reserve percentage
applicable to Agent during such Interest Period under regulations issued from
time to time by the Board of Governors of the Federal Reserve System for
determining the reserve requirements for Agent with respect to Eurocurrency
-40-
<PAGE> 41
Liabilities (as defined in Regulation D) having a term equal to such Interest
Period (including without limitation any marginal, supplemental, special or
other reserves which Agent, in its discretion, determines must be maintained
pursuant to applicable laws and regulations).
(t) "Loan" means a loan made to the Company by
any Bank pursuant to Article I of this Agreement.
(u) "Management Fees" means, for each period for
which such sum is being computed, management fees payable by the Company to JII
pursuant to Article VII, Section 3 of the Joint Venture Agreement, which fees
shall be calculated and payable monthly (payment of which shall be subject to
all of the terms and provisions of this Agreement and the Subordination
Agreement).
(v) "Operating Cash Flow" means the result of (i)
the sum of net income, interest expense, depreciation expense, amortization
expense, losses on sales of assets, extraordinary losses, Management Fees, Home
Office Allocations, and other non-cash charges to income; less (ii) interest and
dividend income, gains on the sale of assets, extraordinary gains and other
non-cash components of income, all for the immediately preceding fiscal quarter
of the company multiplied time four (4).
(w) "Permitted Liens" means:
(i) liens for taxes, assessments or
governmental charges, and liens incident to construction, which are either not
delinquent or are being contested in good faith by the Company by appropriate
proceedings which will prevent foreclosure of such liens, and against which
adequate reserves have been provided; and zoning restrictions, easements,
restrictions, minor title irregularities and similar matters which have no
adverse effect as a practical matter upon the ownership and use of the affected
property by the Company;
(ii) liens or deposits in connection with
worker's compensation or other insurance or to secure customs' duties, public
or statutory obligations in lieu of surety, stay or appeal bonds, or to secure
performance of contracts or bids (other than contracts for the payment of money
borrowed), or deposits required by law or governmental regulations or by any
court order, decree, judgment or rule as a condition to the transaction of
business or the exercise of any right, privilege or license; or other liens or
deposits of a like nature made in the ordinary course of business;
(iii) liens or security interests in favor
of the Banks securing the indebtedness and other obligations of the
-41-
<PAGE> 42
Company to the Banks under or in connection with this Agreement, the Notes and
the Collateral Documents;
(iv) purchase money liens and security
interests in favor of sellers or lessors securing indebtedness or obligations
incurred to acquire or lease fixed or capital assets permitted under clause
(ii) of Section 5.1 of this Agreement (and extension, renewal and replacement
liens upon the same property provided the principal amount secured by each such
lien constituting such extension, renewal or replacement shall not exceed the
principal amount secured by the liens theretofore existing), each such purchase
money lien and security interest to attach only to the specific property the
purchase or lease of which gives rise to the indebtedness or obligation secured
thereby;
(v) In the case of land in which the
Company has a leasehold estate and in the case of any buildings, other
structures or fixtures located on such land, the right, title and interest of
the landlord under the lease creating the leasehold, and in the case of land in
which the Company has a license to construct, own and operate buildings,
fixtures and equipment on such land, the right of the licensor with respect to
such land, provided that such landlord or licensor shall have executed fixtures
disclaimers and attornment agreements if so requested by Agent; and
(vi) liens securing judgments not in
excess of $100,000 in the aggregate arising from legal proceedings, so long as
such proceedings are being contested in good faith by appropriate proceedings
diligently conducted and so long as execution is stayed on all judgments
resulting from any such proceedings.
(x) "Note" and "Notes" shall have the meanings
set forth in Section 1.1 of the Credit Agreement.
(y) "Plan" means any employee pension benefit
plan subject to Title IV of ERISA maintained by the Company, any of its
Subsidiaries, or any member of the Controlled Group, or any such plan to which
the Company, any of its Subsidiaries, or any member of the Controlled Group is
required to contribute on behalf of any of its employees.
(z) "Prime Rate" means the rate of interest
announced by Agent from time to time as its prime rate.
(aa) "Prime Rate Loan" shall mean portion of a
Loan bearing interest at the rate specified in section 1.6(a).
(ab) "Proforma Interest Expense" means, for any
twelve month period, Total Debt as of the first day of such
-42-
<PAGE> 43
period, multiplied by the applicable interest rate (which, in the case of the
Loan, shall be calculated based upon the Base Rate or LIBO Rate or Rates in
effect at the date of calculation, plus the Applicable Margin also in effect at
the date of calculation).
(ac) "pro rata" or "ratably" or for the "ratable"
benefit of Banks throughout the Credit Agreement shall mean and be a reference
to each Bank's pro rata share of the Loans on the date of determination based
on the ratio of the principal amount of the Loans outstanding in favor of such
Bank to the aggregate principal amount of Loans outstanding, or, if no Loans
are outstanding, based on the amount of such Bank's Commitment to the aggregate
amount of Commitments of all Banks.
(ad) "Reportable Event" means a reportable event
as that term is defined in Title IV of ERISA.
(ae) "Required Banks" means Banks whose
outstanding Loans equal sixty-six and two-thirds percent (66.2/3%) or more of
the aggregate amount of the Loans, or, if no Loans are outstanding, Banks whose
Commitments equal sixty-six and two-thirds percent (66 2/3%) or more of the
Commitments.
(af) "Restricted Payments" means redemptions,
repurchases, dividends and distributions of any kind in respect of partnership
or joint venture interests in the Company, any payments of principal and
interest on indebtedness to JII subordinated to indebtedness to the Banks
pursuant to the Subordination Agreement.
(ag) "Security Agreement" shall mean the Security
Agreement described in Section 3.3 of this Agreement, as it may be amended,
restated, supplemented or modified from time to time.
(ah) "Subordination Agreement" shall mean the
Subordination Agreement described in Section 3.2 of this Agreement, as it may
be amended, restated, supplemented or modified from time to time.
(ai) "Subsidiary" means a corporation of which the
Company owns, directly or through another Subsidiary, at the date of
determination, more than 50% of the outstanding stock or capital interests
having ordinary voting power for the election of directors, irrespective of
whether or not at such time stock or capital interests of any other class or
classes might have voting power by reason of the happening of any contingency.
(aj) "Termination Date" shall have the meaning
set forth in Section 1.1 of this Agreement.
(ak) "Total Debt" means the sum of all obligations
for borrowed money, all payments required under non-compete
-43-
<PAGE> 44
agreements, capital lease obligations, amounts required under installment sale
purchases, all debt or other financial obligations of others guaranteed by the
Company, and any amounts for which the Company is contingently liable to
provide as equity or debt advances to other parties; provided, however, that
Total Debt shall exclude all Management Fees and Home Office Allocations
accrued but not paid and all advances made by JII to the Company, provided,
however, that such Management Fees and advances are expressly subordinated to
indebtedness of the Company to the Banks under the Credit Agreement pursuant to
the Subordination Agreement.
9.2. Expenses and Attorneys' Fees. The Company shall be
responsible for the payment of all fees and out-of-pocket disbursements
incurred by the Banks in connection with the preparation, execution, delivery,
administration and enforcement of this Agreement, the Collateral Documents and
the Notes, including all costs of collection, and including without limitation
the reasonable fees and disbursements of counsel for each of the Banks, whether
or not any transaction contemplated by this Agreement is consummated.
9.3. Securities Act of 1933. Each of the Banks represents
that it is acquiring the Note payable to it without any present intention of
making a sale or other distribution of such Note, provided that each Bank
reserves the right to sell the Note payable to it or participations therein.
Notwithstanding the foregoing, each Bank agrees that it will not sell or assign
the Note payable to it, its rights under this Agreement, or participations
therein, in whole or in part, to any party other than one or more banks which
are affiliated with such Bank by reason of their being subsidiaries of the
present holding company of such Bank.
9.4. Successors. The provisions of this Agreement shall
inure to the benefit of any holder of each Note, and shall inure to the benefit
of and be binding upon any successor to any of the parties hereto. No delay on
the part of either Bank or any holder of any Note in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein specified are cumulative and are not
exclusive of any rights or remedies which the Banks or the holders of the Notes
would otherwise have.
9.5. Survival. All agreements, representations and
warranties made herein shall survive the execution of this Agreement, the
making of the loans hereunder and the execution and delivery of the Notes.
-44-
<PAGE> 45
9.6. Pennsylvania Law; Amendment. This Agreement and the
Notes issued hereunder shall be governed by and construed in accordance with
the internal laws of the Commonwealth of Pennsylvania. This Agreement
constitutes the entire agreement of the parties as to the subject matter
hereof, and no modification, waiver or amendment shall be effective unless made
in a writing signed by the appropriate officers of the parties hereto.
9.7. Counterparts. This Agreement may be signed in any
number of counterparts with the same effect as if the signatures thereto and
hereto were upon the same instrument.
9.8. Notices. All communications or notices required under
this Agreement shall be deemed to have been given on the date received if sent
by telecopy or overnight courier service, and, if mailed, on the fifth day
after deposited in the United States mail, postage prepaid, and addressed as
follows (unless and until any of such parties advises the other in writing of a
change in such address): (a) if to the Company, with the full name and address
of the Company as shown on this Agreement below; and (b) if to a Bank with the
full name and address of such Bank as shown on this Agreement below, to the
attention of the officer of such Bank executing the form of acceptance of this
Agreement.
9.9. Limitation on Recourse to Partners. Anything
contained in this Agreement or the other Collateral Documents to the contrary
notwithstanding, in any action or proceeding brought on any Note, or on any of
the Collateral Documents or the indebtedness evidenced or secured thereby, no
deficiency judgment shall be sought or obtained against JII, the Partnerships
or any limited partner of the Partnerships or enforced against the separate
assets of JII, the Partnerships or any limited partner of the Partnerships, and
the liability of JII, the Partnerships and such limited partners for any
amounts due under the Notes, this Agreement or under the Collateral Documents
shall be limited to the interest of JII, the Partnerships or any limited
partner of the Partnerships in the collateral described in the Collateral
Documents and their interests in any other assets of the Company. The Banks may
join any present or future partners or joint venturers of the Company, in their
capacities as general partners or joint venturers, as defendants in any legal
action it undertakes to enforce its rights and remedies under this Agreement,
the Notes and under the Collateral Documents, but any judgment in any such
action may be satisfied by recourse only to the security provided for in the
Collateral Documents and the other assets of the Company, but not by recourse
directly to or by execution on the separate assets of JII, the Partnerships or
any limited partners of the Partnerships. Notwithstanding the foregoing, (i)
nothing set forth herein shall be deemed to prohibit the Banks from taking any
legal action(s) against JII or its assets arising out of JII's undertakings
under the Subordination Agreement or arising by reason of any fraud or
-45-
<PAGE> 46
intentional misconduct of JII or the Partnerships and (ii) in the event that at
any time the Company is not a validly existing legal entity, then the Banks
shall have recourse to any and all assets (A) described in any financial
statement of the Company delivered to Banks, (B) represented to Banks at any
time as being owned by the Company and (C) that would have been owned by the
Company if it had existed, and all proceeds of the foregoing.
9.10. Indemnification and Release Provisions. The Company
hereby agrees to defend Agent and each Bank and their directors, officers,
agents, employees and counsel from, and hold each of them harmless against, any
and all losses, liabilities (including without limitation settlement costs and
amounts, transfer taxes, documentary taxes, or assessments or charges made by
any governmental authority), claims, damages, interests, judgments, costs, or
expenses, including without limitation reasonable fees and disbursements of
counsel, incurred by any of them arising out of or in connection with or by
reason of this Agreement, the Commitments, the making of the Loans, or any
Collateral Document, or any amendment, waiver or modification with respect
thereto, including without limitation, any and all losses, liabilities, claims,
damages, interests, judgments, costs or expenses relating to or arising under
any Environmental Control Statute or the application of any such Statute to any
of the Company's properties or assets except with respect to such Bank's or
Agent's (as the case may be) own gross negligence or willful misconduct. The
Company hereby releases Agent and each Bank and their respective directors,
officers, agents, employees and counsel from any and all claims for loss,
damages, costs or expenses caused or alleged to be caused by any act or
omission on the part of any of them except with respect to such Bank's or
Agent's (as the case may be) own gross negligence or willful misconduct. All
obligations provided for in this Section 9.10 shall survive any termination of
this Agreement or the Commitments and the repayment of the Loans.
9.11. Participations and Assignments. The Company hereby
acknowledges and agrees that a Bank may at any time: (a) grant participations
in all or any portion of its Loans or Note or of its right, title and interest
therein or in or to this Agreement (collectively, "Participations") to any
other lending office or to any other bank, lending institution or other entity
which has the requisite sophistication to evaluate the merits and risks of
investments in Participations ("Participants"); provided, however, that: (i)
all amounts payable by the Company hereunder shall be determined as if such
Bank had not granted such Participation; and (ii) any agreement pursuant to
which any Bank may grant a Participation: (x) shall provide that such Bank
shall retain the sole right and responsibility to enforce the obligations of
the Company hereunder including, without limitation, the right to approve any
amendment, modification or
-46-
<PAGE> 47
waiver of any provisions of this Agreement; (y) such participation agreement
may provide that such Bank will not agree to any modification, amendment or
waiver of this Agreement without the consent of the Participant if such
modification, amendment or waiver would reduce the principal of or rate of
interest on the Loans or postpone the date fixed for any payment of principal
of or interest on the Loan; and (z) shall not relieve such Bank from its
obligations, which shall remain absolute, to make Loans hereunder; and (b)
assign, with the prior written consent of the Agent and notice to the Company,
together with the payment to the Agent of a $1,500 transfer fee, up to
forty-nine percent (49%) of its Loans and Commitment.
IN WITNESS WHEREOF, the undersigned by their duly authorized
officers, have executed this Amended and Restated Revolving Credit Agreement
the day and year first written above.
JONES CABLE INCOME FUND I-B/C
VENTURE, a Colorado joint
venture general partnership
BY: Jones Cable Income Fund I-B,
Ltd., a general partner
BY: Jones Cable Income Fund I-C,
Ltd, a general partner
Attest: By: Jones Intercable, Inc.,
their general partner
By: /s/ KATHERINE A. LEVOY By: /s/ KEVIN P. COYLE
Katherine A. Levoy Kevin P. Coyle
Title: Asst. Secretrary Title: Treasurer
[CORPORATE SEAL] CORESTATES BANK, N.A., for itself
and as Agent for the Banks
By: /s/ Geoffrey M. Boyd
Title: Assistant Vice President
FIRST NATIONAL BANK OF MARYLAND
By: /s/ John L. Brunch
Title: Vice President
-47-
<PAGE> 48
DRESDNER BANK AG, NEW YORK BRANCH
By: /s/ R. MATTHEW SCHERER
R. Matthew Scherer
Title: Vice President
By: /s/ CHARLES H. HILL
Charles H. Hill
Title: Vice President
CONTINENTAL BANK
A DIVISION OF MIDLANTIC
BANK, N.A.
By: /s/ JOSEPH E. DONAHUE, III
Joseph E. Donahue, III
Title: Senior Vice President
-48-
<PAGE> 1
REVOLVING CREDIT AND TERM LOAN AGREEMENT
THIS AGREEMENT, made this 19th day of January, 1995, by and between JONES CABLE
INCOME FUND 1-B, LTD., a Colorado limited partnership with offices at 9697 East
Mineral Avenue, Englewood, Colorado 80112 (the "Borrower"), and COLORADO
NATIONAL BANK, a national banking association with offices at 918 17th Street,
Denver, Colorado 80202 (the "Bank").
WITNESSETH
WHEREAS, Borrower owns certain cable television franchises, related contract
rights and operating cable television properties and systems in Orangeburg
County, South Carolina, the Town of Cordova, South Carolina, and the City of
Orangeburg, South Carolina (as defined below, the "System");
WHEREAS, Borrower desires to borrow $8,500,000 for the purpose of refinancing
existing debt and obtaining working capital; and
WHEREAS, Bank is willing to lend $8,500,000 to Borrower subject to the terms
and conditions hereof;
NOW, THEREFORE, in consideration of the premises and the agreements hereinafter
set forth, and intending to be legally bound hereby, the parties hereby agree
as follows:
1. DEFINITIONS When used in this Agreement, the following terms shall
have the meaning set forth below; financial and accounting terms used in the
following definitions or elsewhere in this Agreement, except as otherwise
provided herein, shall be defined in accordance with generally accepted
accounting principles consistently applied.
1.1 "Advance Request Form" shall mean the certificate to be delivered by
Borrower to Bank as a condition of each advance of the Loan pursuant
to Paragraph 2.6 hereof and in the form of Exhibit A attached hereto.
1.2 "Agreement" shall mean this Agreement and all the exhibits hereto, as
amended from time to time.
1.3 "Annualized Operation Cash Flow" as of the last day of the fiscal
quarter of Borrower shall mean four (4) times Borrower's Operating
Cash Flow for such fiscal quarter.
1.4 "Bank" shall mean Colorado National Bank, a national banking
association and its successors and assigns.
1.5 "Basic Rate" shall mean the minimum standard monthly fees and charges
for "basic service" (as such term is commonly
<PAGE> 2
understood in the cable television industry) charged to Basic
Subscribers.
1.6 "Basic Subscribers" shall mean the subscribers in the System who are
(a) currently receiving cable television signals supplied by Borrower;
(b) have commenced payment for such signals at the Basic Rate or the
Expanded Basic Rate, directly or indirectly, under subscriptions with
Borrower; and (c) are not sixty (60) or more days delinquent in
payments as determined on a contractual basis. In the case of
commercial buildings, such as hotels or motels, or in the case of
multiple residential dwellings, such as apartment houses and
multifamily homes, which do not obtain reduced bulk service rates,
each separate guest unit or dwelling unit receiving services shall be
counted as one subscriber. The number of subscribers in a commercial
building or in a multiple residential dwelling which does obtain a
reduced bulk service rate shall be obtained by dividing (a) the
aggregate dollar amount of monthly subscribers' fees paid on account
of such commercial building or multiple residential dwelling for basic
service by (b) the applicable Basic rate for the System in which such
building or dwelling is located. Except for discounts to senior
citizens less than 20% of the otherwise applicable rate, residential
households (other than a multiple residential dwelling) paying for
services on a discounted basis or under any form of deferred payment
arrangement shall not be included.
1.7 "Borrower" shall mean Jones Cable Income Fund 1-B, Ltd., a Colorado
limited partnership.
1.8 "Capital Lease" shall mean capital leases and subleases as defined in
the Financial Accounting Standards Board Statement of Financial
Accounting Standards No.13, dated November, 1976.
1.9 "Commitment" shall mean the maximum aggregate principal amount which
Bank has agreed to advance under Section 2.1 hereof.
1.10 "Communications Act" shall mean the Federal Communications Act of
1934, as amended, and the rules and regulations promulgated
thereunder, as from time to time in effect.
1.11 "Copyright Act" shall mean Title 17 of the United States Code, as
amended, and the rules and regulations promulgated thereunder, as from
time to time in effect.
1.12 "Debt Service" shall mean, for any period for which such sum is being
computed, the sum of all principal and interest payments due on Funded
Debt during such period.
-2-
<PAGE> 3
1.13 "Depreciation" shall mean for any fiscal quarter of Borrower, the sum
of all Borrower's depreciation and amortization expenses for such
quarter, as determined in accordance with GAAP.
1.14 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated
thereunder, or from time to time in effect.
1.15 "ERISA Affiliate" shall mean any employer, whether or not
incorporated, which is considered a single employer with Borrower
under Titles I, II, or IV of ERISA.
1.16 "Event of Default" shall have the meaning set forth in Section 7.1
below.
1.17 "Expanded Basic Rate" shall mean the minimum standard monthly fees and
charges for "expanded basic service" (as such term is commonly
understood in the cable television industry) charged to Basic
Subscribers.
1.18 "FCC" shall mean the Federal Communications Commission.
1.19 "Funded Debt" shall mean, at any time as of which such sum is being
computed, the sum of all of Borrower's principal indebtedness for (a)
borrowed money other than trade indebtedness or accrued liabilities
incurred in the normal and ordinary course of business for value
received, (b) Capital Leases, and (c) installment purchases of real or
personal property.
1.20 "GAAP" shall mean generally accepted accounting principles as from
time to time in effect, consistently applied, which shall include the
official interpretations thereof by the Financial Accounting Standards
Board.
1.21 "Gross Operating Revenues" shall mean, for any period for which such
sum is being computed, the sum of all payments made to Borrower by
subscribers in the System, and all other revenues and receipts
realized by Borrower from the operation of its businesses during such
period.
1.22 "Home Office Allocations" shall mean, for any period for which such
sum is being computed, the amount of reimbursement payable by Borrower
to Jones for general overhead and administrative expenses pursuant to
Section 4.2 of the Partnership Agreement during such period.
1.23 "Jones" shall mean Jones Intercable, Inc., a Colorado corporation
which is the sole general partner of Borrower.
1.24 "Loan" shall mean the outstanding principal balance of indebtedness
advanced under the Commitment.
-3-
<PAGE> 4
1.25 "Local Authorities" shall mean individually and collectively the South
Carolina state and local authorities which govern cable television
systems.
1.26 "Management Fees" shall mean for any period for which such sum is
being computed the amount of management fees payable by Borrower to
Jones pursuant to Section 4.1 of the Partnership Agreement.
1.27 "Net Income" shall mean for any fiscal quarter of Borrower, Borrower's
net profit after taxes for such quarter, as determined in accordance
with GAAP.
1.28 "Note" shall mean Borrower's promissory note evidencing Borrower's
indebtedness to Bank under the Loan, in the form attached hereto as
Exhibit B.
1.29 "Operating Cash Flow" shall mean, for any fiscal quarter of Borrower,
the sum of the following items for such quarter: (a) Net Income, (b)
income taxes, (c) Depreciation, and (d) interest expense of Borrower,
less any non-cash gains or income of Borrower determined in accordance
with GAAP.
1.30 "Partnership Agreement" shall mean the Certificate of Limited
Partnership of Borrower dated August 14, 1986, as amended by Amendment
No. 1 To The Limited Partnership Agreement of Borrower dated April 14,
1988, and as it may be amended from time to time, by and among Jones,
as general partner, and certain other parties identified therein, as
limited partners.
1.31 "Restricted Payments" shall mean redemptions, repurchases, dividends
and distributions of any kind in respect of partnership interests in
Borrower.
1.32 "Subordination Agreement" shall mean the Subordination Agreement of
even date herewith executed by Jones in favor of Bank.
1.33 "Subsidiary" shall mean any corporation of which the Borrower,
directly or indirectly, owns more than 50% of any class or classes of
securities.
1.34 "System" shall mean collectively Borrower's cable television
franchises, properties and systems in and around Orangeburg County,
South Carolina, the Town of Cordova, South Carolina, and the City of
Orangeburg, South Carolina, as more particularly described in Exhibit
C hereto.
1.35 "Termination Date" shall mean the earlier of December 31, 1997 or the
date on which the Commitment is terminated 'pursuant to Section 2.7
hereof.
-4-
<PAGE> 5
2. LOAN
2.1 The Facility. From time to time prior to the Termination Date and
subject to the terms and conditions herein, Bank will loan funds to
Borrower and Borrower may repay at the office of Bank specified above
and reborrow under a revolving loan facility in an aggregate principal
amount not to exceed at any time outstanding the sum of Eight Million
Five Hundred Thousand Dollars ($8,500,000).
2.2 Promissory Note. The indebtedness of Borrower to Bank under the Loan
will be evidenced by a Note executed by Borrower in favor of Bank in
the form of Exhibit B hereto. The original principal amount of the
Note will be the amount of the Commitment; provided, however, that
notwithstanding the face amount of the Note, Borrower's liability
under the Note shall be limited at all times to its actual
indebtedness, principal and interest and fees, then outstanding
hereunder and thereunder.
2.3 Use of Proceeds. Funds advanced under the Loan may be used for any
purposes not prohibited by this Agreement.
2.4 Repayment.
(a) The aggregate outstanding principal balance of the Loan on the
Termination Date (the "Termination Balance") shall be due and
payable in consecutive quarterly installment payments on the
last day of each calendar quarter commencing March 31, 1998,
and ending on December 31, 2002. The four quarterly payments
due in each calendar year shall be in equal amounts and shall
total the percentage of the Termination Balance set forth
below for each year.
<TABLE>
<CAPTION>
Percentage of
Year Termination Balance
---- -------------------
<S> <C>
1998 4.65%
1999 16.35%
2000 20.35%
2001 25.25%
2002 33.40%
</TABLE>
(b) Notwithstanding the preceding portion of this Paragraph 2.4,
in the event that Bank shall have terminated the Commitment
upon the occurrence of any Event of Default hereunder, the
aggregate outstanding balance of the Note shall be due and
payable on the date of Bank's declaration of the Event of
Default and termination of the Commitment.
-5-
<PAGE> 6
2.5 Interest. The Loan shall bear interest on the outstanding principal
amount thereof in accordance with the following provisions:
(a) Definitions. As used herein, the following words and terms
shall have the meanings specified below:
(i) "Adjusted Libor Rate" shall mean the Libor Rate plus
one and one-half percent (1-1/2%) per annum.
(ii) "Adjusted Reference Rate" shall mean the Reference
Rate, such rate to change when and as the Reference
Rate changes, plus one quarter of one percent (1/4%)
per annum.
(iii) "Business Day" shall mean any day not a Saturday,
Sunday or public holiday under the laws of the State
of Colorado on which banks are open for the
transaction of business.
(iv) "Business Day in London" shall mean a day on which
banks in London are open for the transaction of
business.
(v) "Interest Period" shall mean, with respect to the
Adjusted Libor Rate, a period of one (1), two (2),
three (3) or six (6) months' duration as Borrower may
elect; provided, however, that (a) if any Interest
Period would otherwise end on a day which shall not
be a Business Day in London, such Interest Period
shall be extended to the next succeeding Business Day
in London, subject to clauses (c) and (d) below; (b)
interest shall accrue from and including the first
day of each Interest Period to, but excluding, the
day on which any Interest Period expires; (c) any
Interest Period which would otherwise end on a day
which is not a Business Day in London shall extend to
the next succeeding Business Day in London unless
such Business Day falls in another calendar month, in
which case such Interest Period shall end on the next
preceding Business Day in London; and (d) any
Interest Period which begins on the last Business Day
of a calendar month (or on a day for which there is
no corresponding day to the calendar month at the end
of the Interest Period) shall end on the last
Business Day of a calendar month.
-6-
<PAGE> 7
(vi) "Libor Rate" shall mean the rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%)
determined pursuant to the following formula:
LIBOR Rate
----------------------
Libor Rate = 1 - Reserve Percentage
For purposes hereof, "LIBOR Rate" shall mean, for any
Interest Period, as applied to a Portion, the
arithmetic average of the rates of interest per annum
(rounded upwards, if necessary to the next 1/16 of
1%) at which Bank is offered deposits of United
States dollars in the London Interbank Market on or
about 9:00 a.m. Denver time two (2) Business Days
prior to the commencement of such Interest Period in
amounts substantially equal to such Portion of the
outstanding principal amount of the Loan as to which
Borrower may elect the Adjusted Libor Rate to be
applicable and with a maturity of comparable duration
to the Interest Period selected by Borrower.
(vii) "Portion" shall mean a portion of a Loan as to which
a specific interest rate and, except in the case of a
Portion bearing interest at the Adjusted Reference
Rate, Interest Period, has been elected by Borrower.
(vii) "Reference Rate" shall mean the rate of interest
which has been publicly announced by First Bank
National Association in Minneapolis, Minnesota
("FNBA"), from time to time, as its "Reference Rate",
which may be a rate at, above or below the rate or
rates at which Bank or FNBA lends to other parties.
(ix) "Reserve" shall mean for any day that reserve
(expressed as a decimal) which may be applicable to
Bank on such day, as prescribed by the Board of
Governors of the Federal Reserve System (or any
successor or any other banking authority to which
Bank is subject including any board or governmental
or administrative agency of the United States or any
other jurisdiction to which Bank is subject), for
determining the maximum reserve requirement
(including without limitation any basic,
supplemental, marginal or emergency reserves) for (i)
-7-
<PAGE> 8
Bank's negotiable non-personal time deposits in
United States dollars of $100,000 or more with
maturities of comparable duration to the Interest
Period elected by Borrower, (ii) deposits of United
States dollars in a non-United States office or an
international banking facility of Bank used to fund a
Portion of the Loan subject to the Adjusted Libor
Rate, (iii) any loan made with the proceeds of the
deposits described in (ii) above, (iv) the principal
amount of or interest on the Loan subject to the
Adjusted Libor Rate, or (v) funds transferred from a
non-United States office or an international banking
facility of Bank to its United States office.
(x) "Reserve Percentage" shall mean, for any day, that
percentage (expressed as a decimal) to which Bank is
subject (whether or not actually incurred by Bank) on
such day, as prescribed by the Board of Governors of
the Federal Reserve System (or any successor or any
other banking authority to which Bank is subject,
including any board or governmental or administrative
agency of the United States or any other jurisdiction
to which Bank is subject), for determining the
reserve requirement (including without limitation any
basic, supplemental, marginal or emergency reserves)
for Bank's negotiable, non-personal time deposits in
United States dollars of $100,000 or more with
maturities of comparable duration to the Interest
Period selected by Borrower. The Libor Rate shall be
adjusted on and as of the effective day of any change
in the Reserve Percentage.
(b) Interest on Loan. At Borrower's election in accordance with
the provisions of Paragraph 2.5(c) below, the Loan or any
Portion thereof, shall bear interest at either one of the
following rates: (i) the Adjusted Libor Rate or (ii) the
Adjusted Reference Rate. Any portion of the Loan for which
Borrower has not made an election, pursuant to Section 2.5(c)
below, shall bear interest at the Adjusted Reference Rate.
(c) Procedure for Determining Interest Periods and Rates of
Interest.
(i) If Borrower anticipates that it may elect the
Adjusted Libor Rate to be applicable to
-8-
<PAGE> 9
a new advance of the Commitment or to a Portion which
was subject to such rate during an expiring Interest
Period or which was subject to the Adjusted Reference
Rate, Borrower must notify Bank at least two (2)
Business Days prior to such new advance and/or the
commencement of the proposed Interest Period of the
rate(s) which Borrower anticipates it may elect to be
applicable to such new advance or Portion and the
duration of the proposed Interest Period(s). If
Borrower anticipates that it may elect the Adjusted
Libor Rate to be applicable to such new advance or
Portion of the Loan, Borrower must request a
quotation of such rate(s) prior to 11:00 a.m. Denver
time two (2) Business Days in London as to the
Adjusted Libor Rate, prior to such advance and/or the
commencement of the proposed Interest Period, and if
Borrower desires to elect such rate(s), Borrower must
accept such quotation of the Adjusted Libor Rate no
later than 1:00 p.m. Denver time on the date such
quotation is given by Bank. If Borrower does not
provide the applicable notice for the Adjusted Libor
Rate, then Borrower shall be deemed to have requested
that the Adjusted Reference Rate shall apply to any
Portion which was subject to the rate of interest
applicable during an expiring Interest Period and to
any new advance of the Commitment until Borrower
shall have given proper notice of a change in or
determination of the rate of interest in accordance
with this Paragraph 2.5(c).
(ii) Borrower shall not request, and Bank shall not be
required to provide, an indication or quotation with
respect to a specified rate of interest for a Portion
in an amount less than $100,000 for an Adjusted Libor
Rate. Borrower shall not elect more than three (3)
different Portions (other than a Portion bearing
interest at the Adjusted Reference Rate) to be
applicable to the Loan.
(iii) Upon an election of the Adjusted Libor Rate made by
Borrower pursuant to subparagraph (c) (i) above, such
rate shall apply to the applicable Portion of the
Loan unless Bank is unable to obtain the necessary
funding for such rate, in which event Bank will so
notify Borrower and interest will accrue at the
Adjusted Reference Rate.
-9-
<PAGE> 10
(d) Payment and Calculation of Interest. With respect to Portions
of the Loan which bear interest at the Adjusted Libor Rate,
Borrower shall pay interest upon the expiration of the
Interest Period for each Portion; with respect to Portions of
the Loan which bear interest at the Adjusted Reference Rate,
Borrower shall pay interest with respect to each outstanding
Portion of the Loan on a quarterly basis on the last day of
each calendar quarter, commencing with March 31, 1995 and
continuing on the last day of each March, June, September and
December thereafter until maturity and thereafter upon demand.
If any Event of Default shall occur and be continuing, and the
Loan is not paid when due, each of the Adjusted Libor Rate and
the Adjusted Reference Rate shall be increased by two percent
(2%) per annum (but not in excess of the maximum rate allowed
by applicable law) and interest shall be payable at the
relevant rate on the Loan or each Portion thereof until the
Loan has been paid in full. Interest shall be calculated in
accordance with the provisions of Paragraph 2.5(b) on the
basis of the actual number of days elapsed over a year of, (i)
with respect to Portions of the Loan bearing interest at the
Adjusted Libor Rate, three hundred sixty (360) days, and (ii)
with respect to Portions of the Loan bearing interest at the
Adjusted Reference Rate, three hundred sixty-five (365) days,
or three hundred sixty-six (366) days, as the case may be.
(e) Reserves. If at any time the Loan or any Portion of the Loan
outstanding hereunder is subject to the Adjusted Libor Rate,
and Bank is subject to and incurs a Reserve, Borrower hereby
agrees to pay within five (5) Business Days of demand thereof
from time to time, as billed by Bank, such additional amount
as is necessary to reimburse Bank for its costs in maintaining
such Reserve. Such amount shall be computed by taking into
account the cost incurred by Bank in maintaining such Reserve
in an amount equal to the Portion on which such Reserve is
incurred. The determination by Bank of such costs incurred
shall be prima facie evidence of the correctness of the fact
and amount of such additional cost.
(f) Special Provisions Applicable to Adjusted Libor Rate. The
following special provisions shall apply to the Adjusted Libor
Rate:
(i) Change of Libor Rates. The Adjusted Libor Rate may be
automatically adjusted by Bank on a prospective basis
to take into account
-10-
<PAGE> 11
the additional or increased cost of maintaining any
necessary reserves for Eurodollar deposits or
increased costs due to changes in applicable law
occurring subsequent to the commencement of the then
applicable Interest Period, including but not limited
to changes in tax laws (except corporate income tax
laws) and changes in the reserve requirements imposed
by the Board of Governors of the Federal Reserve
System (or any successor), including the Reserve
Percentage but excluding the Reserve, that increase
the cost to Bank of funding the Loan or a Portion
thereof bearing interest at the Adjusted Libor Rate.
Bank shall give Borrower notice of such a
determination and adjustment and Borrower may, by
notice to Bank (a) require Bank to furnish to
Borrower a statement setting forth the basis for
adjusting such Adjusted Libor Rate and the method for
determining the amount of such adjustment; and/or (b)
repay the Portion of the Loan with respect to which
such adjustment is made pursuant to the requirements
of Paragraph 2.8 hereof.
(ii) Unavailability of Eurodollar Funds. In the event that
Borrower shall have requested a quotation of the
Adjusted Libor Rate in accordance with Paragraph
2.5(c) hereof and Bank shall have reasonably
determined that Eurodollar deposits equal to the
amount of the principal of the Loan, or a Portion
thereof, and for the Interest Period specified are
unavailable or that the Adjusted Libor Rate will not
adequately and fairly reflect the cost of making or
maintaining the principal amount of the Loan
specified by Borrower during the Interest Period
specified or that by reason of circumstances
affecting Eurodollar markets, adequate and reasonable
means do not exist for ascertaining an Adjusted Libor
Rate applicable to the specified Interest Period,
Bank shall promptly give notice of such determination
to Borrower that the Adjusted Libor Rate is not
available. A determination by Bank hereunder shall be
prima facie evidence of the correctness of the fact.
(iii) Illegality. In the event that it becomes unlawful for
Bank to maintain Eurodollar liabilities sufficient to
fund any Portion of the Loan subject to the Adjusted
Libor
-11-
<PAGE> 12
Rate, then Bank shall immediately notify Borrower
thereof and Bank's obligations hereunder to advance
funds or maintain the Loan or a Portion thereof at
the Adjusted Libor Rate shall be suspended until such
time as Bank may again cause the Adjusted Libor Rate
to be applicable to any Portion of the outstanding
principal balance of the Loan and any portion shall
then be subject to the Adjusted Reference Rate.
(g) Minimizing Additional Cost. To the extent reasonably possible,
Bank will use its best efforts to minimize any additional
costs which may arise under either subparagraphs (e) or (f)
above.
2.6 Advances. In addition to the notice required under Paragraph 2.5(c)
hereof with respect to interest rate elections, Borrower shall give
Bank at least one (1) Business Day's prior notice, in case of an
Adjusted Reference Note advance, and two (2) Business Days' prior
notice, in case of an Adjusted Libor Rate advance, of each requested
new advance under the Commitment, such request to be confirmed in
writing and received by Bank within five (5) Business Days after the
date of the advance by delivering to Bank an Advance Request Form
certified by the President, Group Vice president/Finance or Treasurer
of Jones, in the form attached hereto as Exhibit A, containing the
following information and representations, which must be true and
correct as of the date of the requested advance:
(a) the aggregate amount of the requested advance, which shall be
in multiples of $25,000 or, if less, the unborrowed balance of
the Commitment for a portion subject to the Adjusted Reference
Rate, and of not less than $100,000, for a Portion subject to
the Adjusted Libor Rate;
(b) confirming the interest rate(s) Borrower has elected to apply
to the new advance and, if more than one interest rate has
been elected, the amount of the Portion as to which each
interest rate shall apply; and
(c) representations that (i) the representations and warranties
set forth in Section 3 hereof are true and correct; (ii) no
Event of Default hereunder, or event which with the passage of
time or the giving Of notice or both would constitute an Event
of Default hereunder, has occurred and is then continuing; and
(iii) there has been no material adverse change in Borrower's
financial condition or business since the date hereof.
-12-
<PAGE> 13
2.7 Reduction and Termination of Commitment. Borrower shall have the right
at any time and from time to time, upon three (3) Business Days' prior
written notice to Bank, to reduce the amount of the Commitment in
whole or in part without penalty or premium, provided that on the
effective date of such reduction, Borrower shall make a prepayment of
the Loan in an amount, if any, by which the aggregate outstanding
principal balance of the Loan exceeds the amount of the Commitment as
then so reduced, together with accrued interest on the amount so
prepaid; provided that in the event of such a prepayment of a Portion
of the Loan upon which interest is determined by reference to the
Adjusted Libor Rate prior to the end of the applicable Interest
Period, Borrower shall reimburse Bank for any costs and expenses
incurred by Bank on account of such prepayment, including but not
limited to funding costs. Bank shall have the right to terminate the
Commitment at any time, in its discretion and upon notice to Borrower,
upon the occurrence of any Event of Default hereunder. Any termination
or reduction of the Commitment shall be permanent, and the Commitment
cannot thereafter be restored or increased without the written consent
of Bank.
2.8 Prepayment.
(a) Subject to the provision of subsection (b) below, Borrower may
prepay the outstanding principal balance under the Loan at any
time without premium or penalty, and prepayments prior to the
Termination Date shall not reduce the Commitment and may be
reborrowed. Prepayments made on or after the Termination Date
may not be reborrowed and shall be applied to the payments due
in the inverse order of maturities. To the extent applied to
principal, partial prepayments shall be applied first to any
Portion bearing interest at the Adjusted Reference Rate, with
any remaining amounts of the prepayment to then be applied to
any Portion(s) bearing interest at the Adjusted Libor Rate.
Except for a prepayment required to be made by Borrower
pursuant to paragraph 2.8 (b) hereof, prepayments shall be in
multiples of $25,000, but not less than $100,000 if subject to
the Adjusted Libor Rate. Borrower shall notify Bank at least
one (1) Business Day in advance of such prepayment.
(b) If a Portion of the Loan upon which interest is determined by
reference to the Adjusted Libor Rate is repaid or prepaid
other than at the end of the applicable Interest Period
(including repayment or prepayment by reason of acceleration
or otherwise), Borrower shall reimburse Bank for any costs and
expenses incurred by Bank on account of such
-13-
<PAGE> 14
repayment or prepayment, including but not limited to funding
costs.
2.9 Payments in Available Funds. All payments and prepayments shall be
made by Borrower at the offices of Bank specified above no later than
2:00 p.m. Denver time and in immediately available funds.
2.10 Commitment Fee. Borrower shall pay Bank a commitment fee of $31,875
upon execution of this Agreement; provided, however, that if
Borrower's request to release the Guaranty pursuant to Section 4.9 of
this Agreement is denied and as a result Borrower terminates the
Commitment and repays the Loan in full on or before one year from the
date of this Agreement, then Bank shall refund $21,250 of the
commitment fee to Borrower.
2.11 Collateral. The repayment of all of Borrower's indebtedness to Bank
shall be secured by first priority security interests (the "Security
Interests") in all real estate, fixtures, accounts, equipment,
inventory and general intangibles (such terms having the meanings
given them in the Colorado Uniform Commercial Code) including all of
the cable television franchises relating to the System, now owned or
hereafter acquired by Borrower, and in all proceeds thereof (the
"Collateral"), excluding Borrower's general partnership interest in
Jones Cable Income Fund 1-B/C Venture. The Security Interests shall be
created and perfected by mortgages, deeds of trust, collateral
assignments, security agreements, UCC financing statements, and any
other collateral documents deemed necessary or advisable by Bank in
its sole discretion, each in form satisfactory to Bank, duly executed
by Borrower (the "Collateral Documents"). Hereafter, Borrower shall
from time to time execute and deliver to Bank such other documents in
form and substance satisfactory Bank, and perform such other acts, as
Bank may reasonably request, to perfect and maintain valid Security
Interests in the Collateral.
3. REPRESENTATIONS AND WARRANTIES Borrower represents and warrants as
follows:
3.1 Organization and Good Standing. Borrower is a limited partnership duly
formed and validly existing under the laws of the State of Colorado;
and Borrower has the partnership power and authority to carry on its
business as now conducted and is qualified to do business in South
Carolina and in all other states in which the nature of its activities
or the character of its properties requires such qualification;
provided, however, that Borrower shall not be required to qualify in
those jurisdictions where
-14-
<PAGE> 15
the failure to so qualify would not have a material adverse effect on
Borrower or its assets.
3.2 Power and Authority; Validity of Agreement. Borrower has the
partnership power and authority under Colorado law and under its
Partnership Agreement to enter into and perform this Agreement, the
Note and all other agreements, documents and actions required
hereunder; and all actions (partnership, corporate or otherwise)
necessary or appropriate for the execution and performance by Borrower
of this Agreement, the Note and all other agreements, documents and
actions required hereunder have been taken, and, upon their execution,
the same will constitute the valid and binding obligations of Borrower
to the extent it is a party thereto, enforceable in accordance with
their terms, and the Collateral Documents will create first priority
security interests in the Collateral contemplated in Paragraph 2.11
hereof in favor of Bank.
3.3 No Violation of Laws or Agreements. The making and performance of this
Agreement, the Note and the other documents, agreements and actions
required of Borrower hereunder will not violate any provisions of any
law or regulation, federal, state or local, or the Partnership
Agreement or result in any breach or violation of, or constitute a
default under, any material agreement by which Borrower or its
property may be bound, other than those agreements shown on Exhibit C
as requiring consent for the granting of a security interest for which
consent has not yet been obtained.
3.4 System. Borrower owns the System described in Exhibit C attached
hereto, which sets forth a description of the franchises, locations
and Basic Subscriber counts of the System on the date hereof and as
supplemented by reports delivered to Bank pursuant to Paragraph 5.4
hereof, a general description of the property and assets comprising
the System, including any property leased from others and including
the locations of all such property and assets, including, without
limitation, headend and office facilities, and the record owners of
such locations and descriptions of any leases covering Borrower's
lease of any of such property, assets or locations from others.
3.5 Material Contracts. Borrower is neither a party to nor in any manner
obligated under any contracts material to its business except the
franchise and other agreements identified on Exhibit C hereto, and
there exists no material default under any of such contracts.
3.6 Compliance. Borrower is in compliance in all material respects with
all applicable laws and regulations, federal, state and local
(including without limitation those administered by the Local
Authorities and the FCC),
-15-
<PAGE> 16
material to the conduct of its business and operations; Borrower
possesses all the franchises, permits, licenses, certificates of
compliance and approval and grants of authority described on Exhibit C
hereto, necessary or required in the conduct of its business, and the
same are valid, binding, enforceable and subsisting without any
material defaults thereunder and are not subject to any proceedings or
claims opposing the issuance, development or use thereof or contesting
the validity thereof; and no approvals, waivers or consents,
governmental (federal, state or local), or non-governmental, other
than the consents set forth on Exhibit C, under the terms of contracts
or otherwise, are required by reason of or in connection with its
execution and performance of this Agreement, the Note and all other
agreements, documents and actions required hereunder.
3.7 Litigation. There are no actions, suits, proceedings or claims which
are pending or, to the best of its knowledge or information,
threatened against Borrower which, if adversely resolved, would
materially adversely affect either of its financial condition or
business.
3.8 Title to Assets. Borrower has good and marketable title to all of its
properties and assets free and clear of any liens and encumbrances
except as described on Exhibit C hereto, and all such assets are in
good order and repair, ordinary wear and tear excepted, and fully
covered by the insurance required under Paragraph 5.6.
3.9 Partnership Interests. The percentage of general partnership interest
in Borrower is accurately set forth on Exhibit C attached hereto; all
partnership interests in Borrower are validly existing and the
creation and sale thereof are in compliance with all applicable
federal and state securities and other applicable laws; and Jones is
the sole general partner of Borrower.
3.10 Financial Information. All information furnished to Bank concerning
the financial condition of Borrower, including Borrower's annual
financial statement for the period ended December 31, 1993, and
Borrower's unaudited statement for the period ended September 30,
1994, copies of which have been furnished to Bank, have been prepared
in accordance with GAAP and fairly present the financial condition of
Borrower as of the dates and for the period covered and include all
liabilities of any kind of Borrower and there have been no material
adverse changes in the financial condition or business of Borrower
from the date of such statements to the date hereof.
3.11 Taxes and Assessments. Borrower has filed all required tax returns or
has filed for extensions of time for the filing thereof, and has paid
all applicable federal, state
-16-
<PAGE> 17
and local taxes, other than taxes not yet due or which may be paid
hereafter without penalty, and has no knowledge of any deficiency or
additional assessment in connection therewith not provided for in the
financial statements required hereunder.
3.12 Indebtedness. Other than trade indebtedness and accrued liabilities
incurred in the normal and ordinary course of business for value
received, Borrower has no presently outstanding indebtedness or
obligations including contingent obligations and obligations under
leases of property from others, except the indebtedness and
obligations described in Exhibit C hereto and in Borrower's financial
statements which have been furnished to Bank.
3.13 Management Agreements. Borrower is a party to no management or
consulting agreements for the provision of services to Borrower.
3.14 Investments. Borrower has no Subsidiaries or investments in or loans
to any other individuals or business entities, except for a general
partnership interest in Jones Cable Income Fund 1-B/C Venture.
3.15 ERISA. Neither Borrower nor any ERISA Affiliate has established or
maintained, or has ever made or been obligated to make contributions
to, any pension or employee benefit plan (a "Plan") covered by ERISA
or any multi-employer plan as defined in Section 4001 of ERISA.
3.16 Fees and Commissions. Borrower owes no fees or commissions of any
kind, and knows of no claim for any fees or commissions, in connection
with Borrower's obtaining the Commitment or the Loan from Bank,
excepting those provided herein.
3.17 No Extension of Credit for Securities. Neither Borrower nor Jones is
now, nor at any time has it been engaged principally, or as one of its
important activities, in the business of extending credit for the
purpose of purchasing or carrying any securities.
3.18 Hazardous Wastes, Substances and Petroleum Products.
(a) Borrower (i) has received all permits and filed all
notifications necessary to carry on its businesses under, and
(ii) is otherwise in compliance in all material respects with,
all federal, state or local laws and regulations governing the
control, removal, spill, release or discharge of hazardous or
toxic wastes, substances and petroleum products, including
without limitation as provided in the provisions of the
regulations under the Comprehensive
-17-
<PAGE> 18
Environmental Response, Compensation and Liability Act of
1980, the Resource Conservation and Recovery Act of 1976, and
the Federal Water Pollution Control Act Amendments of 1972
(all of the foregoing enumerated and non-enumerated statutes,
including without limitation any applicable state or local
statutes, collectively the "Environmental Control Statutes").
(b) Borrower has not given any written or oral notice to the
Environmental Protection Agency ("EPA") or any state or local
agency with regard to any actual or imminently threatened
removal, spill, release or discharge of hazardous or toxic
wastes, substances or petroleum products on properties owned
or leased by Borrower or in connection with the conduct of its
business and operations (an "Event").
(c) Borrower has not received notice that it is potentially
responsible for costs of clean-up of any actual or imminently
threatened spill, release or discharge of hazardous or toxic
wastes or substances or petroleum products pursuant to any
Environmental Control Statute.
4. CONDITIONS The obligation of Bank to make the advances of the Loan
shall be subject to Bank's receipt of the following documents, each in
form and substance satisfactory to Bank:
4.1 Promissory Note and Collateral Documents. The Note and such
Collateral Documents as may be specified by Bank under Paragraph 2.11,
each duly executed by Borrower.
4.2 Authorization Documents. A certified copy of the resolution of the
Board of Directors of Jones authorizing Borrower's execution and full
performance of this Agreement, the Note and all other documents and
actions required hereunder, and an incumbency certificate setting
forth the officers of Jones.
4.3 Opinion Of Counsel. Opinion letters from counsel for Borrower and
Jones covering, with such exceptions and qualifications as may be
satisfactory to Bank, the representations and warranties set forth in
Section 3 hereof.
4.4 Insurance. Certificates of insurance and evidence showing Bank as an
additional insured with respect to all of Borrower's fire, casualty,
liability and other insurance covering its respective property and
business.
-18-
<PAGE> 19
4.5 Franchises and Approvals. Copies of all Borrower's franchises,
certificates of compliance and approvals and material related
contracts, licenses and permits necessary or required in connection
with the System.
4.6 Subordination Agreement. A Subordination Agreement executed by Jones,
in form acceptable to Bank, with appropriate certified board
resolutions and legal opinions as required by Bank.
4.7 Advance Request. As a condition to the first advance and each
subsequent advance of any of the Loan, the Advance Request Form
required under Paragraph 2.6 hereof, and any other documents or
information reasonably required by Bank in connection therewith.
4.8 Partnership Agreement. A copy of the Partnership Agreement, as amended
to the date hereof.
4.9 Guaranty. A Guaranty Agreement executed by Jones, in form satisfactory
to Bank, pursuant to which Jones agrees to pay the Loan in full at any
time that Borrower, for any reason, ceases to hold a cable television
franchise for the City of Orangeburg, South Carolina (the "City
Franchise"). Bank agrees to release the Guaranty Agreement if:
(a) The City Franchise is renewed for a term of not less
than five years from the date of renewal on terms which Bank
determines, in the good faith exercise of its sole discretion
after consultation with counsel: (i) will allow Borrower to
realize sufficient cash flow from the System to repay the Loan
in accordance with its terms, (ii) provide Bank with a margin
of collateral value for the Loan which satisfies its
underwriting guidelines, (iii) do not impair Bank's ability to
realize upon its collateral upon the occurrence of an Event of
Default, and (iv) do not pose any unreasonable risk of
revocation, cancellation or termination; and
(b) either, (i) the term of the renewed City Franchise
ends on or later than December 31, 2002, or (ii) the term of
the renewed City Franchise ends earlier than December 31,
2002, and Borrower executes such documents as Bank may
reasonably request to amend this Agreement and the Note to
provide for a maturity date not later than 90 days before the
end of the term of the renewed City Franchise.
Bank shall make the determination described in Section 4.9(a) within
30 days after Borrower submits the renewed City Franchise to Bank
along with a written request for a
-19-
<PAGE> 20
release of the Guaranty. If Bank has not notified Borrower of its
determination prior to the expiration of such thirty-day period, Bank
shall be deemed to have determined that the conditions of Section
4.9(a) (i) through (iv) have been met, and the Guaranty Agreement
shall be deemed released upon the fulfillment of the conditions of
Section 4.9(b)(i) or (ii). The written request for a release of the
Guaranty must quote the immediately preceding two sentences or the
provisions of such sentences shall not apply.
4.10 Interest Rate Protection. Borrower shall have obtained an interest
rate protection product covering not less than $2,550,000 of the
principal balance of the Loan for a period of not less than two years,
and shall have collaterally assigned to Bank its interest therein.
4.11 Other Documents. Such additional documents as Bank may reasonably
request.
5. AFFIRMATIVE COVENANTS Borrower covenants and agrees that so long as
the Commitment of Bank to Borrower or any indebtedness of Borrower to
Bank is outstanding:
5.1 Existence and Good Standing. Borrower will preserve and maintain its
existence as a Colorado limited partnership and its good standing in
Colorado, South Carolina and all other states in which the nature of
its activities and the character of its properties requires such
qualifications; provided, however, that Borrower shall not be required
to qualify in those jurisdictions where the failure to so qualify
would not have a material adverse effect on Borrower or its assets.
Borrower will preserve the validity of all its franchises, licenses,
permits, certificates of compliance or grants of authority material to
the conduct of its business.
5.2 Quarterly Financial Statements and Subscriber Reports. Borrower will
furnish Bank within seventy-five (75) days of the end of each
quarterly fiscal period hereafter (a) unaudited quarterly financial
statements, including a balance sheet, an income statement, a
statement of cash flow, and the information required to apply the
criteria prescribed in Paragraphs 5.13, 5.14 and 5.15 hereof, prepared
in accordance with GAAP, together with a certificate executed by the
President, Group Vice President/Finance or Treasurer of Jones stating
that the financial statements fairly present the financial condition
of Borrower as of the date and for the periods covered and that as of
the date of such certificate there has not been any violation of any
provision of this Agreement or the happening of any Event of Default
or any event which with the giving of notice or the passage of
-20-
<PAGE> 21
time, or both, would constitute an Event of Default hereunder; and (b)
a report, in form and substance satisfactory to Bank, covering the
System and showing (i) the number of Basic Subscribers at the
beginning and at the end of such quarter, and (ii) any other
information reasonably requested by Bank.
5.3 Annual Financial Statements. Borrower will furnish Bank within one
hundred and thirty-five (135) days after the close of each fiscal year
commencing with fiscal 1994 with audited annual financial statements,
including the financial statements and information required under
Paragraph 5.2 hereof, which financial statements shall be prepared in
accordance with GAAP and shall be fully certified by a nationally
recognized independent certified public accounting firm.
5.4 Disclosures to Partners. To the extent not already provided for in
Paragraphs 5.2 and 5.3 above, Borrower will furnish to Bank a copy of
all information material to Borrower or its financial condition sent
to Borrower's limited partners from time to time, within ten (10) days
after the date any such information is sent to the limited partners.
5.5 Books and Records. Borrower will keep and maintain satisfactory and
adequate books and records of account in accordance with generally
accepted accounting practices and principles consistently applied and
make or cause the same to be made available to Bank or its agents or
nominees at any reasonable time upon reasonable notice for inspection
and to make extracts thereof.
5.6 Insurance. Borrower will keep and maintain all of its property and
assets in good order and repair, ordinary wear and tear excepted, and
fully covered by insurance with reputable and financially sound
insurance companies against such hazards and in such amounts as is
customary in the industry, under policies requiring the insurer to
furnish reasonable notice to Bank and opportunity to cure any
non-payment of premiums prior to termination of coverage; and, as
required above, furnish Bank with certificates of such insurance and
cause Bank to be named as an additional insured thereof.
5.7 Litigation. Borrower will notify Bank in writing immediately of the
institution of any litigation, the commencement of any administrative
proceedings, the happening of any event or the assertion or threat of
any claim which could materially or adversely affect its business,
operations or financial condition, or the occurrence of any Event of
Default hereunder or an event which with the passage of time or the
giving of notice or both would constitute an Event of Default
hereunder.
-21-
<PAGE> 22
5.8 Taxes. Borrower will pay and discharge all taxes, assessments or other
governmental charges or levies imposed on it or any of its property or
assets prior to the date on which any penalty for non-payment or late
payment is incurred, unless the same are currently being contested in
good faith by appropriate proceedings.
5.9 Costs and Expenses. Borrower will pay or reimburse Bank for all
out-of-pocket costs and expenses including all reasonable attorneys'
fees and disbursements relating to the filing of any Collateral
Documents to create and perfect the Security Interests or which Bank
may pay or incur in connection with the preparation and review of this
Agreement, all waivers, consents and amendments in connection
therewith and all other documentation related there to and the making
of the Loan hereunder; and Borrower will pay or reimburse Bank for all
costs and expenses which Bank may pay or incur in connection with the
collection or enforcement of the same.
5.10 Compliance. Borrower will comply in all material respects with all
local, state and federal laws and regulations applicable to its
business including, without limitation, Environmental Control
Statutes, the Communications Act and all laws and regulations of the
FCC and the Local Authorities, the provisions and requirements of all
franchises, permits, certificates of compliance and approval issued by
regulatory authorities and other like grants of authority held by
Borrower, and the requirements of the Copyright Act; and Borrower will
notify Bank immediately in detail of any actual or alleged material
failure to comply with or perform, or any actual or alleged material
breach, violation or default under, any such laws or regulations or
under the terms of any of such franchises or grants of authority, or
of the occurrence or existence of any facts or circumstances which
with the passage of time, the giving of notice or otherwise could
create such a breach, violation or default or could occasion the
termination of any of such franchises or grants of authority.
5.11 ERISA. Borrower will comply in all respects with the provisions of
ERISA to the extent applicable to any employee benefit plan. Borrower
will comply in all respects with the provisions of ERISA to the extent
applicable to any Plan maintained for any of Borrower's or a
Subsidiary's employees; not incur any accumulated funding deficiency
(within the meaning of ERISA and the regulations thereunder) or any
liability to the Pension Benefit Guaranty Corporation ("PBGC"); not
permit any "reportable event" (as defined in ERISA) or other event to
occur which may indicate that its Plans are not sound or which may be
the basis for PBGC to assert a liability against it or which may
result in the imposition of a lien
-22-
<PAGE> 23
on its properties or assets; and notify Bank in writing promptly after
it has come to the attention of Borrower of the assertion or threat of
any "reportable event," the existence of any "reportable threat" or
other event which may indicate that a Plan is not sound or may be the
basis for PBGC to assert a liability against it or impose a lien on
Borrower's properties or assets.
5.12 Other Information. Borrower will provide Bank with any other documents
and information, financial or otherwise, reasonably requested by Bank
from time to time.
5.13 Funded Debt to Annualized Operating Cash Flow. Borrower will maintain
as of the last day of each fiscal quarter of Borrower a ratio of
Funded Debt to Annualized Operating Cash Flow plus Management Fees and
Home Office Allocations at the last day of such fiscal quarter not to
exceed 4.0:1 through December 31, 1997, 3.5:1 from March 31, 1998
through December 31, 1998, and 3.0:1 thereafter.
5.14 Interest Coverage Ratio. From the date of this Agreement through
December 31, 1997, Borrower will maintain as of the last day of each
fiscal quarter of Borrower a ratio of (a) Operating Cash Flow for such
quarter to (b) interest due on Funded Debt for such quarter, which
will not be less than 2.00:1 at all times.
5.15 Debt Service Coverage Ratio. Commencing with the fiscal quarter ending
on March 31, 1998, Borrower will maintain as of the last day of each
fiscal quarter of Borrower a ratio of (a) Operating Cash Flow for such
quarter to (b) Debt Service for such quarter, which will not be less
than 1.50:1 from March 31, 1998 through December 31, 1998, and not
less than 1.25:1 at all times thereafter.
6. NEGATIVE COVENANTS So long as the Commitment or any indebtedness of
Borrower to Bank remains outstanding hereunder, Borrower covenants and
agrees that without Bank's prior written consent, Borrower will not:
6.1 Borrowings. Borrow any monies except borrowings from Bank hereunder,
borrowings permitted by Paragraph 6.2 and subordinated debt
subordinated to the Loan pursuant to the Subordination Agreement.
6.2 Additional Indebtedness. Create any additional indebtedness other than
(a) trade indebtedness in the normal and ordinary course of business
for value received, (b) indebtedness to Jones for Management Fees and
Home Office Allocations or loans or advances subordinated to the Loan
pursuant to the Subordination Agreement, and (c) other indebtedness,
not exceeding, in the aggregate, $250,000, pursuant to capital leases,
purchase money
-23-
<PAGE> 24
obligations and other obligations incurred in the normal course of
Borrower's business.
6.3 Guaranties. Guarantee or assume or agree to become liable in any way
for, either directly or indirectly, any additional indebtedness or
liability of others except (a) to endorse checks or drafts in the
ordinary course of business and (b) to perform its indemnification
obligations pursuant to Section 9.6 of the Partnership Agreement.
6.4 Loans. Make any loans or advances to others except Borrower may make
loans and advances to employees, subcontractors and suppliers in the
ordinary course of business not to exceed $100,000 in the aggregate
principal amount outstanding at any time.
6.5 Liens and Encumbrances. Create, permit or suffer the creation of any
liens, security interests, or any other encumbrances on any of its
property, real or personal, except (a) liens arising in favor of
sellers or lessors for indebtedness and obligations incurred to
purchase or lease fixed or capital assets permitted under Paragraph
6.2(b) hereof, provided, however, that such liens are limited to the
indebtedness and obligations created thereunder and the assets
purchased or leased pursuant thereto; (b) liens for taxes, assessments
or other governmental charges, federal, state or local, which are then
being currently contested in good faith by appropriate proceedings,
(c) pledges or deposits to secure obligations under workmen's
compensation, unemployment insurance or social security laws or
similar legislation, (d) deposits to secure performance or payment
bonds, bids, tenders, contracts, leases, franchises or public and
statutory obligations required in the ordinary course of business, (e)
deposits to secure surety, appeal or custom bonds required in the
ordinary course of business, (f) liens to secure judgments not in
excess of $250,000 so long as they are being currently contested in
good faith by appropriate proceedings and execution thereon has been
stayed, and (g) liens in favor of Bank.
6.6 Restricted Payments. Make any Restricted Payments, provided, however,
that, so long as there exists no Event of Default under this Agreement
and Borrower is otherwise in compliance with the terms and covenants
of this Agreement (and such payment, together with any payments
permitted to be made pursuant to Paragraph 6.9 hereof, will not create
an Event of Default), Borrower may make distributions to partners not
exceeding in the aggregate $903,000 in 1995, $968,000 in 1996 and
$1,064,000 in 1997. Thereafter, no distributions shall be made.
-24-
<PAGE> 25
6.7 Transfer of Assets; Liquidation. Sell, lease, transfer or otherwise
dispose of any part or amount of its assets, real or personal, or
discontinue or liquidate any substantial part of its operations or
business, other than (a) any such transaction in the normal and
ordinary course of business for value received, and (b) any sale of an
asset related to or used in connection with operation of the System,
provided that in connection with such sale, Borrower repays that
portion of the outstanding principal balance of the Loan which bears
the same ratio to $8,500,000 as the fair market value of the asset
being sold bears to the total fair market value of the System, and all
accrued and outstanding interest attributable to the principal being
repaid. The Commitment shall be permanently reduced by the amount of
any principal payment made pursuant to Section 6.7(b). The
determination of fair market value shall be made by the Bank in its
sole discretion.
6.8 Acquisitions and Investments. Purchase or otherwise acquire any part
or amount of the capital stock or assets of, or make any investments
in, any other firm or corporation; or enter into any new business
activities or ventures not directly related to its present business;
or merge or consolidate with or into any other firm or corporation; or
create any subsidiary corporations; except Borrower may invest in or
purchase readily marketable direct obligations of the United States of
America, certificates of deposit issued by commercial banks of
recognized standing operating in the United States of America and
prime commercial paper.
6.9 Management Fees and Home Office Allocations. Make any payments of or
accrue (a) Management Fees for any fiscal quarter of Borrower in an
amount greater than five percent (5%) of Borrower's Gross Operating
Revenues for such quarter, or (b) Home Office Allocations for any
fiscal quarter of Borrower which are not either (i) overhead and
administrative expenses directly attributable to the management or
operation of the Borrower by Jones or (ii) Borrower's proportionate
share of general overhead and administrative expenses incurred by
Jones in the management of all of the partnerships of which Jones is
the manager; provided, however, that prior to December 31, 1998, so
long as there exists no Event of Default under this Agreement and
Borrower is otherwise in compliance with the terms and covenants of
this Agreement (and such payment, together with any payments made
pursuant to this Paragraph 6.9 and Paragraph 6.6 hereof, will not
create an Event of Default), deferred Management Fees and Home Office
Allocations (including any interest related thereto, at an interest
rate not to exceed Jones' weighted average cost of borrowing) may be
paid in any fiscal quarter. After December 31, 1998, Borrower shall
not make
-25-
<PAGE> 26
any payments of Management Fees or Home Office Allocations to Jones,
but may accrue such amounts to the extent permitted by the first
sentence of this Section 6.9. Any Management Fees and Home Office
Allocations accrued but unpaid for any fiscal quarter shall be
deferred and subordinated to Bank pursuant to the Subordination
Agreement.
6.10 Use of Proceeds. Use any of the proceeds of the Loan, directly or
indirectly, to purchase or carry margin securities within the meaning
of Regulation U of the Board of Governors of the Federal Reserve
System; or engage as its principal business in the extension of
credit for purchasing or carrying such securities.
6.11 Partnership Documents. Amend or permit any amendments to the
Partnership Agreement after the date hereof except Jones may make
certain routine amendments as permitted by Section 6.1 of the
Partnership Agreement.
7. DEFAULT
7.1 Events of Default. Each of the following events shall be an "Event of
Default" hereunder:
(a) If Borrower shall fail to pay when due any installment of
principal or any other sum payable to Bank hereunder or
otherwise or, within three (3) days after the date when due,
any payment of interest; or
(b) If any representation or warranty made herein or in connection
herewith or in any statement, certificate or other document
furnished hereunder is or proves false or misleading in any
material respect; or
(c) If Borrower shall default in the payment or performance of any
obligation or indebtedness to another in excess of $100,000,
whether now or hereafter incurred; or
(d) If Borrower shall default in the performance of any other
agreement or covenant contained herein or in any document
executed or delivered in connection herewith and such default
shall continue uncured for thirty (30) days after notice
thereof to Borrower given by Bank; or
(e) If Jones shall cease to be the sole general partner of
Borrower and the manager of Borrower; or
(f) If custody or control of any substantial part of the property
of Borrower shall be assumed by any
-26-
<PAGE> 27
governmental agency or any court of competent jurisdiction at
the instance of any governmental agency; if any franchise
shall be suspended, revoked or otherwise terminated, or if
Borrower is required by any franchising authority or by court
order or administrative order to halt operations under the
franchise and such action shall continue unstayed or
uncorrected for thirty (30) days after Borrower has received
notice thereof or the action of any such authority has not
been stayed within such thirty day period; or if any
governmental regulatory authority or judicial body shall make
any other final nonappealable determination the effect of
which would be to affect materially and adversely the
operations of Borrower as now conducted; or
(g) If Borrower or Jones shall become insolvent, bankrupt or
generally fail to pay its debts as such debts become due; or
if Borrower or Jones admits in writing its inability to pay
its debts; or if Borrower or Jones shall suffer a receiver or
trustee for it or substantially all of its property to be
appointed and if appointed without its consent, not be
discharged within sixty (60) days; or if Borrower or Jones
makes an assignment for the benefit of creditors; or if
Borrower or Jones suffers proceedings under any law related to
bankruptcy or insolvency or the reorganization or the release
of debtors to be instituted against it and if contested by it,
not dismissed or stayed within sixty (60) days; or if
proceedings under any law related to bankruptcy or insolvency
or the reorganization or the release of debtors is instituted
or commenced by Borrower or Jones; or
(h) If any judgment, writ, warrant or attachment or execution or
similar process which calls for payment or presents liability
in excess of $250,000 (not covered by insurance) shall be
rendered or issued against or levied against Borrower or its
property and such process shall not be paid, waived, stayed,
vacated, discharged, settled, satisfied or fully bonded within
sixty (60) days after its issuance or levy.
7.2 Remedies. Upon the happening of any Event of Default and at any time
thereafter, at the election of Bank, and by notice by Bank to Borrower
(except if an Event of Default described in Paragraph 7.1(g) shall
occur in which case acceleration shall occur automatically without
notice): (a) Bank may declare the entire unpaid balance, principal and
interest, of all indebtedness or Borrower to Bank, hereunder or
otherwise, to be immediately due and payable and shall have the
immediate right to enforce or realize
-27-
<PAGE> 28
on any collateral security granted therefor in any manner or order it
deems expedient without regard to any equitable principles of
marshalling or otherwise; and (b) in addition or in the alternative
Bank may terminate its obligation to lend hereunder and the Commitment
shall immediately and automatically terminate and Bank shall have no
further obligation to make any advances. In addition to any rights
granted hereunder or in any documents delivered in connection
herewith, Bank shall have all the rights and remedies granted by any
applicable law, all of which shall be cumulative in nature.
8.2 MISCELLANEOUS
8.1 Non-Recourse. Anything contained in this Agreement to the contrary
notwithstanding, in any action or proceeding brought on the Note, this
Agreement, or the indebtedness evidenced or secured thereby, no
deficiency judgment shall be sought or obtained against Jones or any
limited partner of Borrower or enforced against the separate assets of
Jones or any limited partner of Borrower, and the liability of Jones
or any limited partner of Borrower for any amounts due under the Note
or this Agreement, shall be limited to the interest of Jones or any
limited partner of Borrower in the assets of Borrower. Bank may join
Jones in its capacity as general partner as defendant in any legal
action it undertakes to enforce its rights and remedies under the Note
or this Agreement, but any judgment in any such action may be
satisfied by recourse only to the assets of Borrower, but not by
recourse directly to or by execution on Jones's separate assets.
Notwithstanding the foregoing, nothing set forth herein shall be
deemed to limit the liability of Jones or prohibit Bank from taking
any legal action against Jones or its assets for (a) any fraud or
intentional misconduct of Jones or (b) Jones' undertakings under the
Subordination Agreement or the Agreement described in Section 4.10
above.
8.2 Set Offs. As collateral for the payment of any and all of Borrower's
indebtedness and obligations to Bank, whether matured or unmatured,
now existing or hereafter incurred or created hereunder or otherwise,
Borrower hereby grants to Bank a security interest in and lien upon
all funds, balances or other property of any kind of Borrower, or in
which Borrower has an interest, limited to the interest of Borrower
therein, at any time in the possession, custody or control of Bank.
8.3 Binding and Governing Law. This Agreement and all documents executed
hereunder shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns and shall
be governed as
-28-
<PAGE> 29
to their validity, interpretation and effect by the laws of the State
of Colorado.
8.4 Survival. All agreements, representations, warranties and covenants of
Borrower contained herein or in any documentation required hereunder
shall survive the execution of this Agreement and the making of the
Loan hereunder and will continue in full force and effect as long as
any indebtedness hereunder of Borrower to Bank remains outstanding.
8.5 No Waiver; Delay. If Bank shall waive any power, right or remedy
arising hereunder or under any applicable law, such waiver shall not
be deemed to be a waiver upon the later occurrence or recurrence of
any of said events. No delay by Bank in the exercise of any power,
right or remedy shall, under any circumstances, constitute or be
deemed to be a waiver, express or implied, of the same and no course
of dealing between the parties hereto shall constitute a waiver of
Bank's powers, rights or remedies. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
8.6 Modification. Except as otherwise provided in this Agreement, no
modification or amendment hereof shall be effective unless made in a
writing signed by appropriate officers of the parties hereto.
8.7 Headings. The various headings in this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of
this Agreement or any provision hereof.
8.8 Notices. Any notice, request or consent required hereunder or in
connection herewith shall be deemed satisfactorily given if in writing
and delivered by hand or by facsimile transmission or mailed
(registered or certified mail) to the parties at their respective
addresses set forth in the beginning of this Agreement or their
facsimile number set forth hereafter or such other addresses or
facsimile numbers as may be given by either party to the other in
writing, if to Borrower or Jones to the attention of the Treasurer
(Facsimile No. 790-7324), with a copy to the General Counsel
(Facsimile No. 799-1644), and if to Bank, to the attention of Leslie
Kelly, Vice President (Facsimile No. 623-3750).
8.9 Payment on Non-Business Days. Whenever any payment to be made
hereunder shall be stated to be due on a day which is not a Business
Day, such payment may be made on the next succeeding business day,
provided however that such extension of time shall be included in the
computation of interest due in conjunction with such payment or other
fees due hereunder, as the case may be.
-29-
<PAGE> 30
8.10 Time of Day. All time of day restrictions imposed herein shall be
calculated using Bank's local time.
8.11 Severability. If any provision of this Agreement or the application
thereof to any person or circumstance shall be invalid or enforceable
to any extent, the remainder of this Agreement and the application of
such provisions to other persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent
permitted by law.
8.12 Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all the signatures on such
counterparts appeared on one document, and each such counterpart shall
be deemed to be an original.
IN WITNESS WHEREOF, the undersigned, by their duly authorized partners or
officers, have executed this Agreement the day and year first above written.
ATTEST: JONES CABLE INCOME FUND 1-B, LTD.,
a Colorado limited partnership
By: /s/ KATHERINE A. LEVOY
Title: Ass't Secretary
By: JONES INTERCABLE, INC.,
a Colorado corporation
Its General Partner
[CORPORATE SEAL] By: /s/ J. ROY POTTLE
Title: Treasurer
COLORADO NATIONAL BANK,
a national banking association
By: /s/ LESLIE M. KELLY
Title: Vice President
-30-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 116,839
<SECURITIES> 0
<RECEIVABLES> 167,839
<ALLOWANCES> (14,323)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 10,801,551
<DEPRECIATION> (4,948,058)
<TOTAL-ASSETS> 11,874,378
<CURRENT-LIABILITIES> 2,644,595
<BONDS> 3,544,000
<COMMON> 0
0
0
<OTHER-SE> 5,685,783
<TOTAL-LIABILITY-AND-EQUITY> 11,874,378
<SALES> 0
<TOTAL-REVENUES> 4,484,892
<CGS> 0
<TOTAL-COSTS> 4,669,851
<OTHER-EXPENSES> 2,015,639
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 391,583
<INCOME-PRETAX> (2,592,181)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,592,181)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,592,181)
<EPS-PRIMARY> (30.59)
<EPS-DILUTED> (30.59)
</TABLE>
