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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
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Commission file number: 0-15378
CABLE TV FUND 14-A, LTD.
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(Exact name of registrant as specified in its charter)
Colorado 84-1024657
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(State of Organization) (IRS Employer Identification No.)
P.O. Box 3309, Englewood,
Colorado 80155-3309 (303) 792-3111
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(Address of principal executive (Registrant's telephone
office and Zip Code) no. including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
Indicate by check mark whether the registrants, (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days:
Yes x No
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Aggregate market value of the voting stock held by non-affiliates of the
registrant: N/A
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ((S)229.405) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. X
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DOCUMENTS INCORPORATED BY REFERENCE: None
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Information contained in this Form 10-K Report contains forward-
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. All statements, other than statements of historical facts,
included in this Form 10-K Report that address activities, events or
developments that the Partnership, the Venture or the General Partner expects,
believes or anticipates will or may occur in the future are forward-looking
statements. These forward-looking statements are based upon certain assumptions
and are subject to a number of risks and uncertainties. Actual results could
differ materially from the results predicted by these forward-looking
statements.
PART I.
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ITEM 1. BUSINESS
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THE PARTNERSHIP. Cable TV Fund 14-A, Ltd. (the "Partnership") is a
Colorado limited partnership that was formed pursuant to the public offering of
limited partnership interests in the Cable TV Fund 14 Limited Partnership
Program (the "Program"), which was sponsored by Jones Intercable, Inc. (the
"General Partner"). Cable TV Fund 14-B, Ltd. ("Fund 14-B") is the other
partnership that was formed pursuant to the Program. The Partnership and Fund
14-B formed a general partnership known as Cable TV Fund 14-A/B Venture (the
"Venture"), in which the Partnership owns a 27 percent interest and Fund 14-B
owns a 73 percent interest. The Partnership and the Venture were formed for the
purpose of acquiring and operating cable television systems.
The Partnership directly owns cable television systems serving the
areas in and around Buffalo, Minnesota (the "Buffalo System"), Naperville,
Illinois (the "Naperville System"), Calvert County, Maryland (the "Calvert
County System") and certain communities in Central Illinois (the "Central
Illinois System"). The Venture owns the cable television system serving certain
areas in Broward County, Florida (the "Broward County System"). See Item 2.
The Buffalo System, Naperville System, Calvert County System, Central Illinois
System and Broward County System may collectively be referred to as the
"Systems."
It is the General Partners publicly announced policy that it intends
to liquidate its managed limited partnerships, including the Partnership, as
opportunities for sales of partnership cable television systems arise in the
marketplace over the next several years. In accordance with the General
Partners policy, the Central Illinois System and the Naperville System, along
with other Chicago-area systems owned or managed by the General Partner and its
affiliates, were marketed for sale in 1996. The deadline set by the General
Partner for receipt of indications of interest for such systems from prospective
buyers was October 15, 1996. The General Partner did not receive any offer for
the Naperville System but it received several offers for the Central Illinois
System. The General Partner will continue to explore other alternatives for
sale of the Naperville System. There is no assurance as to the timing or terms
of any sales.
DISPOSITION OF CABLE TELEVISION SYSTEM. On January 10, 1997, the
Partnership sold the cable television system serving the areas in and around
Turnersville, New Jersey (the "Turnersville System") to an unaffiliated party
for a sales price of $84,500,000. The Partnership distributed approximately
$25,000,000 (or approximately $313 per each $1,000 invested in the Partnership)
of the sale proceeds to its limited partners, and, as required under the terms
of the Partnerships credit facility, approximately $52,500,000 of the sale
proceeds was used to repay a portion of the Partnerships indebtedness. Because
the $25,000,000 distribution to the limited partners did not return 125 percent
of the amount initially contributed by the limited partners, the General Partner
did not receive a distribution from the proceeds of the sale of the Turnersville
System. The Jones Group, Ltd., a subsidiary of the General Partner, received a
brokerage fee of $2,112,500, representing 2.5 percent of the sales price, for
acting as a broker in this transaction. The balance of the proceeds will be used
by the Partnership for ongoing working capital. Because the sale of the
Turnersville System did not represent a sale of all or substantially all of the
Partnerships assets, no vote of the limited partners of the Partnership was
required to approve this sale.
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PROPOSED DISPOSITION OF CABLE TELEVISION SYSTEM. On March 12, 1997, the
Partnership entered into an asset purchase agreement to sell the Central
Illinois System to an unaffiliated party for a sales price of $20,100,000,
subject to customary closing adjustments. The closing of this sale is subject to
a number of conditions, including obtaining necessary governmental and other
third party consents and the expiration or termination of the waiting period
specified in the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("Hart-
Scott-Rodino") and the rules and regulations thereunder. Closing is expected to
occur during the second half of 1997. Because the sale of the Central Illinois
System does not represent the sale of all or substantially all of the
Partnership assets, no vote of the limited partnership will be required to
approve this sale. Upon the consummation of the proposed sale of the Central
Illinois System, the Partnership will repay $10,050,000 of the then outstanding
balance on its credit facility and a brokerage fee to The Jones Group, Ltd. a
subsidiary of the General Partner totaling approximately $582,500 and then the
Partnership will distribute the net sale proceeds of approximately $9,497,500 to
its limited partners. This distribution will give the Partnership's limited
partners an approximate return of $119 per $1,000 invested in the Partnership.
Because limited partners have not yet received total distributions that are
equal to 125 percent of the capital initially contributed to the Partnership by
the limited partners, the General Partner will not receive any of the proceeds
from the Central Illinois System's sale. Taking into account the distribution
made on the sale of the Turnersville System and the anticipated distribution to
be made on the sale of the Central Illinois System, the limited partners should
receive in 1997 a total of $432 for each $1,000 invested in the Partnership.
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, 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. At December 31, 1996,
the Systems' monthly basic service rates ranged from $6.02 to $15.52, monthly
basic and tier ("basic plus") service rates ranged from $17.95 to $28.04. and
monthly premium services ranged from $2.74 to $10.95 per premium service. In
addition, the Partnership and the Venture earn revenues from the Systems' pay-
per-view programs and advertising fees. Related charges may include a
nonrecurring installation fee that ranges from $1.99 to $43.30; 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
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and residential apartment and condominium complexes, the subscribers are free to
discontinue the service at any time without penalty. For the year ended December
31, 1996, of the total fees received by the Systems, basic service and tier
service fees accounted for approximately 65% of total revenues, premium service
fees accounted for approximately 16% of total revenues, pay-per-view fees were
approximately 2% of total revenues, advertising fees were approximately 6% of
total revenues and the remaining 11% of total revenues came principally from
equipment rentals, installation fees and program guide sales. The Partnership
and the Venture are dependent upon the timely receipt of service fees to provide
for maintenance and replacement of plant and equipment, current operating
expenses and other costs of the Systems.
FRANCHISES. The Systems are constructed and operated under non-
exclusive, fixed-term franchises or other types of operating authorities
(referred to collectively herein as "franchises") granted by local governmental
authorities. These franchises typically contain many conditions, such as time
limitations on commencement and completion of construction, conditions of
service, including the number of channels, types of programming and the
provision of free service to schools and certain other public institutions, and
the maintenance of insurance and indemnity bonds. The provisions of local
franchises are subject to federal regulation.
The Partnership directly holds 38 franchises, and the Venture holds 9
franchises. These franchises provide for the payment of fees to the issuing
authorities and generally range from 3% to 5% of the gross revenues of a cable
television system. The 1984 Cable Act prohibits franchising authorities from
imposing annual franchise fees in excess of 5% of gross revenues and also
permits the cable television system operator to seek renegotiation and
modification of franchise requirements if warranted by changed circumstances.
Neither the Partnership nor the Venture has ever had a franchise
revoked. The Partnership is currently negotiating the renewal of one franchise
that is operating under an extension, and the Venture has no franchises that
will expire prior to December 31, 1997. Some of the issues involved in recent
renewal negotiations include rate regulation, customer service standards, cable
plant upgrade or replacement and shorter terms of franchise agreements.
COMPETITION. Cable television systems currently experience competition
from several sources.
BROADCAST TELEVISION. Cable television systems have traditionally
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competed with broadcast television, which consists of television signals that
the viewer is able to receive directly on his television without charge using an
"off-air" antenna. The extent of such competition is dependent in part upon the
quality and quantity of signals available by such antenna reception as compared
to the services provided by the local cable system. Accordingly, it has
generally been less difficult for cable operators to obtain higher penetration
rates in rural areas where signals available off-air are limited, than in
metropolitan areas where numerous, high quality off-air signals are often
available without the aid of cable television systems.
TRADITIONAL OVERBUILD. Cable television franchises are not exclusive, so
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that more than one cable television system may be built in the same area (known
as an "overbuild"), with potential loss of revenues to the operator of the
original cable television system. The General Partner has experienced overbuilds
in connection with certain systems that it has owned or managed for limited
partnerships, and currently there are overbuilds in the systems owned or managed
by the General Partner. Constructing and developing a cable television system is
a capital intensive process, and it is often difficult for a new cable system
operator to create a marketing edge over the existing system. Generally, an
overbuilder would be required to obtain franchises from the local governmental
authorities, although in some instances, the overbuilder could be the local
government itself. In any case, an overbuilder would be required to obtain
programming contracts from entertainment programmers and, in most cases, would
have to build a complete cable system, including headends, trunk lines and drops
to individual subscribers homes, throughout the franchise areas.
DBS. High-powered direct-to-home satellites have made possible the wide-
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scale delivery of programming to individuals throughout the United States using
small roof-top or wall-mounted antennas. Several companies began offering direct
broadcast satellite ("DBS") service over the last few years and additional
entrants
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are expected. Companies offering DBS service use video compression technology to
increase channel capacity of their systems to 100 or more channels and to
provide packages of movies, satellite network and other program services which
are competitive to those of cable television systems. DBS cannot currently offer
its subscribers local programming, although at least one future DBS entrant is
attempting to offer customers regional delivery of local broadcast signals. In
addition to emerging high-powered DBS competition, cable television systems face
competition from a major medium-powered satellite distribution provider and
several low-powered providers, whose service requires use of much larger home
satellite dishes. Not all subscribers terminate cable television service upon
acquiring a DBS system. The General Partner has observed that there are DBS
subscribers that also elect to subscribe to cable television service in order to
obtain the greatest variety of programming on multiple television sets,
including local programming not available through DBS service. The ability of
DBS service providers to compete successfully with the cable television industry
will depend on, among other factors, the ability of DBS providers to overcome
certain legal and technical hurdles and the availability of equipment at
reasonable prices.
TELEPHONE. Federal cross-ownership restrictions historically limited
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entry by local telephone companies into the cable television business. The 1996
Telecommunications Act (the "1996 Telecom Act") eliminated this cross-ownership
restriction, making it possible for companies with considerable resources to
overbuild existing cable operators and enter the business. Several telephone
companies have begun seeking cable television franchises from local governmental
authorities and constructing cable television systems. Ameritech, one of the
seven regional Bell Operating Companies ("BOCs"), which provides telephone
service in a multi-state region including Illinois, has been the most active BOC
in seeking local cable franchises within its service area. A subsidiary of
Ameritech has obtained a franchise for and begun cable service in Naperville,
Illinois, in direct competition with the Naperville System. This competition is
likely to have an adverse effect on the Naperville System's revenues, cash flow
and fair market value. It could also have an adverse impact on the Partnership's
ability to sell the Naperville System. The General Partner is taking prudent
steps necessary to meet this competition from Ameritech and to safeguard the
value of the Naperville System. These steps include a judicial challenge to the
terms on which the franchise was issued to Ameritech. Litigation is currently
pending in federal court against both the City of Naperville and Ameritech and
includes claims by the City of Naperville against the Partnership. (See Item 3,
Legal Proceedings.) Ameritech has also obtained franchises for Glen Ellyn and
Vernon Hills, Illinois, both of which are currently served by cable systems
owned by two partnerships managed by the General Partner. The General Partner
cannot predict at this time the extent of telephone company competition that
will emerge. The entry of telephone companies as direct competitors, however, is
likely to continue over the next several years and could adversely affect the
profitability and market value of the Systems. The entry of electric utility
companies into the cable television business, as now authorized by the 1996
Telecom Act, could have a similar adverse effect.
PRIVATE CABLE. Additional competition is provided by private cable
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television systems, known as Satellite Master Antenna Television (SMATV),
serving multi-unit dwellings such as condominiums, apartment complexes, and
private residential communities. These private cable systems may enter into
exclusive agreements with apartment owners and homeowners associations, which
may preclude operators of franchised systems from serving residents of such
private complexes. Private cable systems that do not cross public rights of way
are free from the federal, state and local regulatory requirements imposed on
franchised cable television operators. In some cases, neither the Partnership
nor the Venture has been able to provide cable television service to buildings
in which private operators have secured exclusive contracts to provide video and
telephony services. The Partnership and the Venture are interested in providing
these same services, but expects that the market to install and provide these
services in multi-unit buildings will continue to be highly competitive.
MMDS. Cable television systems also compete with wireless program
distribution services such as multichannel, multipoint distribution service
("MMDS") systems, commonly called wireless cable, which are licensed to serve
specific areas. MMDS uses low-power microwave frequencies to transmit television
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programming over-the-air to paying subscribers. The MMDS industry is less
capital intensive than the cable television industry, and it is therefore more
practical to construct MMDS systems in areas of lower subscriber penetration.
Wireless cable systems are now in direct competition with cable television
systems in several areas of the country, including the system in Pima County,
Arizona owned by the General Partner. Telephone companies have recently acquired
or invested in wireless companies, and may use MMDS systems to provide services
within their service areas in lieu of wired delivery systems. Enthusiasm for
MMDS has waned in recent months, however, as Bell Atlantic and NYNEX have
suspended their investment in two major MMDS companies. To date, neither the
Partnership nor the Venture has lost a significant number of subscribers, nor a
significant amount of revenue, to MMDS operators competing with the
Partnership's or the Venture's cable television systems. A series of actions
taken by the FCC, however, including reallocating certain frequencies to the
wireless services, are intended to facilitate the development of wireless cable
television systems as an alternative means of distributing video programming.
The FCC recently held auctions for spectrum that will be used by wireless
operators to provide additional channels of programming over larger distances.
In addition, an emerging technology, Local Multipoint Distribution services
("LMDS"), could also pose a significant threat to the cable television industry,
if and when it becomes established. LMDS, sometimes referred to as cellular
television, could have the capability of delivering more than 100 channels of
video programming to a subscriber's home. The potential impact, however, of LMDS
is difficult to assess due to the newness of the technology and the absence of
any current fully operational LMDS systems.
Cable television systems are also in competition, in various degrees
with other communications and entertainment media, including motion pictures and
home video cassette recorders.
REGULATION AND LEGISLATION
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The operation of cable television systems is extensively regulated by
the FCC, some state governments and most local governments. The new 1996 Telecom
Act alters the regulatory structure governing the nation's telecommunications
providers. It removes barriers to competition in both the cable television
market and the local telephone market. Among other things, it also reduces the
scope of cable rate regulation.
The 1996 Telecom Act requires the FCC to undertake a host of
implementing rulemakings, the final outcome of which cannot yet be determined.
Moreover, Congress and the FCC have frequently revisited the subject of cable
regulation. Future legislative and regulatory changes could adversely affect the
Venture's operations. This section briefly summarizes key laws and regulations
affecting the operation of the Venture's cable systems and does not purport to
describe all present, proposed, or possible laws and regulations affecting the
Partnership or the Venture.
CABLE RATE REGULATION. The 1992 Cable Act imposed an extensive rate
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regulation regime on the cable television industry. Under that regime, all cable
systems are subject to rate regulation, unless they face "effective competition"
in their local franchise area. Federal law now defines "effective competition"
on a community-specific basis as requiring either low penetration (less than
30%) by the incumbent cable operator, appreciable penetration (more than 15%) by
competing multichannel video providers ("MVPs"), or the presence of a competing
MVP affiliated with a local telephone company.
Although the FCC rules control, local government units (commonly
referred to as local franchising authorities or "LFAs") are primarily
responsible for administering the regulation of the lowest level of cable -- the
basic service tier ("BST"), which typically contains local broadcast stations
and public, educational, and government ("PEG") access channels. Before an LFA
begins BST rate regulation, it must certify to the FCC that it will follow
applicable federal rules, and many LFAs have voluntarily declined to exercise
this authority. LFAs also have primary responsibility for regulating cable
equipment rates. Under federal law, charges for various types of cable equipment
must be unbundled from each other and from monthly charges for programming
services. The 1996 Telecom Act allows operators to aggregate costs for broad
categories of equipment across geographic and functional lines. This change
should facilitate the introduction of new technology.
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The FCC itself directly administers rate regulation of any cable
programming service tiers ("CPST"), which typically contain satellite-delivered
programming. Under the 1996 Telecom Act, the FCC can regulate CPST rates only if
an LFA first receives at least two rate complaints from local subscribers and
then files a formal complaint with the FCC. When new CPST rate complaints are
filed, the FCC now considers only whether the incremental increase is justified
and will not reduce the previously established CPST rate.
Under the FCC's rate regulations, most cable systems were required to
reduce their BST and CPST rates in 1993 and 1994, and have since had their rate
increases governed by a complicated price cap scheme that allows for the
recovery of inflation and certain increased costs, as well as providing some
incentive for expanding channel carriage. The FCC has modified its rate
adjustment regulations to allow for annual rate increases and to minimize
previous problems associated with regulatory lag. Operators also have the
opportunity of bypassing this "benchmark" regulatory scheme in favor of
traditional "cost-of-service" regulation in cases where the latter methodology
appears favorable. Premium cable services offered on a per-channel or per-
program basis remain unregulated, as do affirmatively marketed packages
consisting entirely of new programming product. Federal law requires that the
BST be offered to all cable subscribers, but limits the ability of operators to
require purchase of any CPST before purchasing premium services offered on a
per-channel or per-program basis.
The 1996 Telecom Act sunsets FCC regulation of CPST rates for all
systems (regardless of size) on March 31, 1999. It also relaxes existing uniform
rate requirements by specifying that uniform rate requirements do not apply
where the operator faces "effective competition," and by exempting bulk
discounts to multiple dwelling units, although complaints about predatory
pricing still may be made to the FCC.
CABLE ENTRY INTO TELECOMMUNICATIONS. The 1996 Telecom Act provides that
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no state or local laws or regulations may prohibit or have the effect of
prohibiting any entity from providing any interstate or intrastate
telecommunications service. States are authorized, however, to impose
"competitively neutral" requirements regarding universal service, public safety
and welfare, service quality, and consumer protection. State and local
governments also retain their authority to manage the public rights-of-way and
may require reasonable, competitively neutral compensation for management of the
public rights-of-way when cable operators provide telecommunications service.
The favorable pole attachment rates afforded cable operators under federal law
can be gradually increased by utility companies owning the poles (beginning in
2001) if the operator provides telecommunications service, as well as cable
service, over its plant.
Cable entry into telecommunications will be affected by the regulatory
landscape now being fashioned by the FCC and state regulators. One critical
component of the 1996 Telecom Act to facilitate the entry of new
telecommunications providers (including cable operators) is the interconnection
obligation imposed on all telecommunications carriers. Review of the FCC's
initial interconnection order is now pending before the Eighth Circuit Court of
Appeals.
TELEPHONE COMPANY ENTRY INTO CABLE TELEVISION. The 1996 Telecom Act
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allows telephone companies to compete directly with cable operators by repealing
the historic telephone company/cable cross-ownership ban. Local exchange
carriers ("LECs"), including the BOCs, can now compete with cable operators both
inside and outside their telephone service areas. Because of their resources,
LECs could be formidable competitors to traditional cable operators, and certain
LECs have begun offering cable service. As described above, the General Partner
is now witnessing the beginning of LEC competition in a few of its cable
communities.
Under the 1996 Telecom Act, a LEC providing video programming to
subscribers will be regulated as a traditional cable operator (subject to local
franchising and federal regulatory requirements), unless the LEC elects to
provide its programming via an "open video system" ("OVS"). To qualify for OVS
status, the LEC must reserve two-thirds of the system's activated channels for
unaffiliated entities.
Although LECs and cable operators can now expand their offerings across
traditional service boundaries, the general prohibition remains on LEC buyouts
(i.e., any ownership interest exceeding 10 percent) of co-located cable systems,
cable operator buyouts of
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co-located LEC systems, and joint ventures between cable operators and LECs in
the same market. The 1996 Telecom Act provides a few limited exceptions to this
buyout prohibition, including a carefully circumscribed "rural exemption." The
1996 Telecom Act also provides the FCC with the limited authority to grant
waivers of the buyout prohibition (subject to LFA approval).
ELECTRIC UTILITY ENTRY INTO TELECOMMUNICATIONS/CABLE TELEVISION. The
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1996 Telecom Act provides that registered utility holding companies and
subsidiaries may provide telecommunications services (including cable
television) notwithstanding the Public Utilities Holding Company Act. Electric
utilities must establish separate subsidiaries, known as "exempt
telecommunications companies" and must apply to the FCC for operating authority.
Again, because of their resources, electric utilities could be formidable
competitors to traditional cable systems.
ADDITIONAL OWNERSHIP RESTRICTIONS. The 1996 Telecom Act eliminates
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statutory restrictions on broadcast/cable cross-ownership (including broadcast
network/cable restrictions), but leaves in place existing FCC regulations
prohibiting local cross-ownership between co-located television stations and
cable systems. The 1996 Telecom Act also eliminates the three year holding
period required under the 1992 Cable Act's "anti-trafficking" provision. The
1996 Telecom Act leaves in place existing restrictions on cable cross-ownership
with SMATV and MMDS facilities, but lifts those restrictions where the cable
operator is subject to effective competition. In January 1995, however, the FCC
adopted regulations which permit cable operators to own and operate SMATV
systems within their franchise area, provided that such operation is consistent
with local cable franchise requirements.
Pursuant to the 1992 Cable Act, the FCC adopted rules precluding a cable
system from devoting more than 40% of its activated channel capacity to the
carriage of affiliated national program services. A companion rule establishing
a nationwide ownership cap on any cable operator equal to 30% of all domestic
cable subscribers has been stayed pending further judicial review.
There are no federal restrictions on non-U.S. entities having an
ownership interest in cable television systems or the FCC licenses commonly
employed by such systems. Section 310(b)(4) of the Communications Act does,
however, prohibit foreign ownership of FCC broadcast and telephone licenses,
unless the FCC concludes that such foreign ownership is consistent with the
public interest. BCI's investment in the General Partner could, therefore,
adversely affect any plan to acquire FCC broadcast or common carrier licenses.
Neither the Partnership nor the Venture, however, currently plans to acquire
such licenses.
MUST CARRY/RETRANSMISSION CONSENT. The 1992 Cable Act contains broadcast
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signal carriage requirements that allow local commercial television broadcast
stations to elect once every three years between requiring a cable system to
carry the station ("must carry") or negotiating for payments for granting
permission to the cable operator to carry the station ("retransmission
consent"). Less popular stations typically elect "must carry," and more popular
stations typically elect "retransmission consent." Must carry requests can
dilute the appeal of a cable system's programming offerings, and retransmission
consent demands may require substantial payments or other concessions. Either
option has a potentially adverse affect on the Partnership's and the Venture's
business. Additionally, cable systems are required to obtain retransmission
consent for all "distant" commercial television stations (except for satellite-
delivered independent "superstations" such as WTBS). The constitutionality of
the must carry requirements has been challenged and is awaiting a decision from
the U.S. Supreme Court.
ACCESS CHANNELS. LFAs can include franchise provisions requiring cable
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operators to set aside certain channels for public, educational and governmental
access programming. Federal law also requires cable systems to designate a
portion of their channel capacity (up to 15% in some cases) for commercial
leased access by unaffiliated third parties. The FCC has adopted rules
regulating the terms, conditions and maximum rates a cable operator may charge
for use of the designated channel capacity, but use of commercial leased access
channels has been relatively limited. The FCC released revised rules in February
1997 which mandate a modest rate reduction and could make commercial leased
access a more attractive option to third party programmers.
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Access to Programming. To spur the development of independent cable
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programmers and competition to incumbent cable operators, the 1992 Cable Act
imposed restrictions on the dealings between cable operators and cable
programmers. Of special significance from a competitive business posture, the
1992 Cable Act precludes video programmers affiliated with cable companies from
favoring cable operators over competitors and requires such programmers to sell
their programming to other multichannel video distributors. This provision
limits the ability of vertically integrated cable programmers to offer exclusive
programming arrangements to cable companies.
OTHER FCC REGULATIONS. In addition to the FCC regulations noted above,
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there are other FCC regulations covering such areas as equal employment
opportunity, subscriber privacy, programming practices (including, among other
things, syndicated program exclusivity, network program nonduplication,
local sports blackouts, indecent programming, lottery programming, political
programming, sponsorship identification, and children's programming
advertisements), registration of cable systems and facilities licensing,
maintenance of various records and public inspection files, frequency usage,
lockbox availability, antenna structure notification, tower marking and
lighting, consumer protection and customer service standards, technical
standards, and consumer electronics equipment compatibility. The FCC is expected
to impose new Emergency Alert System requirements on cable operators this year.
The FCC has the authority to enforce its regulations through the imposition of
substantial fines, the issuance of cease and desist orders and/or the imposition
of other administrative sanctions, such as the revocation of FCC licenses needed
to operate certain transmission facilities used in connection with cable
operations.
Two pending FCC proceedings of particular competitive concern involve
inside wiring and navigational devices. The former rulemaking is considering
ownership of cable wiring located inside multiple dwelling unit complexes. If
the FCC concludes that such wiring belongs to, or can be unilaterally acquired
by the complex owner, it will become easier for complex owners to terminate
service from the incumbent cable operator in favor of a new entrant. The latter
rulemaking is considering whether cable customers must be allowed to purchase
cable converters from third party vendors. If the FCC concludes that such
distribution is required, and does not make appropriate allowances for signal
piracy concerns, it may become more difficult for cable operators to combat
theft of service.
COPYRIGHT. Cable television systems are subject to federal copyright
---------
licensing covering carriage of television and radio broadcast signals. In
exchange for filing certain reports and contributing a percentage of their
revenues to a federal copyright royalty pool (that varies depending on the size
of the system and the number of distant broadcast television signals carried),
cable operators can obtain blanket permission to retransmit copyrighted material
on broadcast signals. The possible modification or elimination of this
compulsory copyright license is the subject of continuing legislative review and
could adversely affect the Partnership's or the Venture's ability to obtain
desired broadcast programming. In addition, the cable industry pays music
licensing fees to BMI and is negotiating a similar arrangement with ASCAP.
Copyright clearances for nonbroadcast programming services are arranged through
private negotiations.
STATE AND LOCAL REGULATION. Cable television systems generally are
--------------------------
operated pursuant to nonexclusive franchises granted by a municipality or other
state or local government entity in order to cross public rights-of-way. Federal
law now prohibits franchise authorities from granting exclusive franchises or
from unreasonably refusing to award additional franchises. Cable franchises
generally are granted for fixed terms and in many cases include monetary
penalties for non-compliance and may be terminable if the franchisee fails to
comply with material provisions.
The terms and conditions of franchises vary materially from jurisdiction
to jurisdiction. Each franchise generally contains provisions governing cable
operations, service rates, franchise fees, system construction and maintenance
obligations, system channel capacity, design and technical performance, customer
service standards, and indemnification protections. A number of states subject
cable television systems to the jurisdiction of centralized state governmental
agencies, some of which impose regulation of a character similar to that of a
public utility. Although LFAs have considerable discretion in establishing
franchise terms, there are certain federal limitations. For example, LFAs cannot
insist on franchise fees exceeding 5% of the system's gross revenues,
9
<PAGE>
cannot dictate the particular technology used by the system, and cannot specify
video programming other than identifying broad categories of programming.
Federal law contains renewal procedures designed to protect incumbent
franchisees against arbitrary denials of renewal. Even if a franchise is
renewed, the franchise authority may seek to impose new and more onerous
requirements such as significant upgrades in facilities and services or
increased franchise fees as a condition of renewal. Similarly, if a franchise
authority's consent is required for the purchase or sale of a cable system or
franchise, such authority may attempt to impose more burdensome or onerous
franchise requirements in connection with a request for consent. Historically,
franchises have been renewed for cable operators that have provided satisfactory
services and have complied with the terms of their franchises.
GENERAL. The Partnership's and the Venture'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 or the
Venture's business. The Systems have had some subscribers who later terminated
the service. Terminations occur primarily because people move to another home or
to another city. In other cases, people terminate on a seasonal basis or because
they no longer can afford or are dissatisfied with the service. The amount of
past due accounts in the Systems is not significant. The Partnership's and the
Venture's policy with regard to past due accounts is basically one of
disconnecting service before a past due account becomes material.
Neither the Partnership nor the Venture depends 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. Neither the Venture
nor the Partnership has any employees because all properties are managed by
employees of the General Partner. The General Partner has engaged in research
and development activities relating to the provision of new services but the
amount of the Partnership's or the Venture'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 or the Venture.
ITEM 2. PROPERTIES
-------------------
The cable television systems owned by the Partnership and the Venture
are described below:
<TABLE>
<CAPTION>
Ownership System Acquisition Date
--------- ------ ----------------
<S> <C> <C>
Cable TV Fund 14-A, Ltd. Buffalo System September 1987
Naperville System September 1987
Calvert County System September 1987
Central Illinois System May 1991
Cable TV Fund 14-A/B Venture Broward County System March 1988
</TABLE>
The following sets forth (i) the monthly basic plus service rates
charged to subscribers and (ii) the number of basic subscribers 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. In cable television systems,
basic subscribers can subscribe to more than one pay TV service. Thus, the total
number of pay services subscribed to by basic subscribers are called pay units.
As of December 31, 1996, the Buffalo System operated cable plant passing
approximately 23,900 homes, with an approximate 50% penetration rate; the
Naperville System operated cable plant passing approximately 42,500 homes, with
an approximate 64% penetration rate; the Calvert System operated cable plant
passing approximately 25,900 homes, with an approximate 67% penetration rate,
the Central Illinois System operated cable plant passing approximately
10
<PAGE>
162,100 homes, with an approximate 67% penetration rate and the Broward County
System operated cable plant passing approximately 89,100 homes, with an
approximate 57% penetration rate. Figures for numbers of subscribers and homes
passed are compiled from the General Partner's records and may be subject to
adjustments.
Cable TV Fund 14-A, Ltd.
- ------------------------
At December 31,
----------------------------------
Buffalo System 1996 1995 1994
- -------------- ---- ---- ----
Monthly basic plus service rate $22.50 $21.50 $20.00
Basic subscribers 12,050 11,039 9,567
Pay units 7,984 7,313 7,305
At December 31,
----------------------------------
Calvert County System 1996 1995 1994
- --------------------- ---- ---- ----
Monthly basic plus service rate $26.70 $26.63 $25.36
Basic subscribers 17,367 16,454 15,428
Pay units 17,509 17,893 16,034
At December 31,
----------------------------------
Central Illinois System 1996 1995 1994
- ----------------------- ---- ---- ----
Monthly basic plus service rate $19.82 $18.71 $17.21
Basic subscribers 15,416 15,390 14,616
Pay units 12,044 12,292 11,713
At December 31,
----------------------------------
Naperville System 1996 1995 1994
- ----------------- ---- ---- ----
Monthly basic plus service rate $23.87 $23.87 $23.87
Basic subscribers 27,523 27,464 25,063
Pay units 14,413* 17,360 17,636
* For competitive reasons, beginning in 1996 The Disney Channel was
converted from a pay service to a basic plus service resulting in
the loss of approximately 3,000 pay units.
Cable TV Fund 14-A/B Venture
- ----------------------------
At December 31,
----------------------------------
Broward County System 1996 1995 1994
- --------------------- ---- ---- ----
Monthly basic plus service rate $25.58 $24.16 $23.56
Basic subscribers 50,957 49,654 47,819
Pay units 47,286 42,167 41,270
ITEM 3. LEGAL PROCEEDINGS
--------------------------
CABLE TV FUND 14-A, LTD. V. CITY OF NAPERVILLE AND AMERITECH NEW MEDIA,
-----------------------------------------------------------------------
INC. AND CITY OF NAPERVILLE V. CABLE TV FUND 14-A, LTD., United States District
- -------------------------------------------------------
Court for the Northern District of Illinois, Eastern Division, Case No. 96C
5962. The Partnership is plaintiff and counter-defendant in a suit challenging
certain actions arising from the City of Naperville's grant of a franchise to
Ameritech New Media, Inc. ("Ameritech NMI"). Specifically, the Partnership
alleges that under Cable Act standards, the City should have modified the
Partnership's Naperville franchise, because certain provisions of the franchise
are unduly burdensome in a competitive environment.
11
<PAGE>
Further, the Partnership alleges that the franchise granted by the City to
Ameritech NMI is materially more favorable than the franchise granted to the
Partnership, that this is contrary to Illinois law and that the Ameritech NMI
franchise therefore is void. This suit also challenges the City's assertion that
the Partnership has breached its franchise in various ways, particularly by
withholding certain payments allegedly due to the City. In its countersuit, the
City seeks a declaratory ruling that the Partnership has breached its franchise
by withholding those same payments. Cross motions to dismiss and for partial
summary judgment have been briefed and argued and are awaiting decision.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
None.
PART II.
-------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
-------------------------------------------------
AND RELATED SECURITY HOLDER MATTERS
-----------------------------------
While the Partnership is publicly held, there is no public market for
the limited partnership interests, and it is not expected that a market will
develop in the future. As of February 14, 1997, the number of equity security
holders in the Partnership was 12,290.
12
<PAGE>
Item 6. Selected Financial Data
- -------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
---------------------------------------------------------------------
Cable TV Fund 14-A, Ltd. 1996 1995 1994 1993 1992
- ------------------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Revenues $47,808,719 $44,094,802 $40,442,268 $38,916,469 $ 36,315,757
Depreciation and Amortization 14,627,726 14,459,479 14,826,256 15,197,677 15,464,984
Operating Loss (397,890) (1,459,868) (3,323,006) (3,562,804) (4,065,858)
Equity in Net Loss of
Cable Television Joint Venture (815,252) (1,104,003) (1,468,218) (1,277,358) (1,676,435)
Net Loss (7,371,183) (8,536,167) (9,472,910) (8,608,115) (10,382,060)
Net Loss per Limited Partnership Unit (45.61) (52.82) (58.61) (53.26) (64.24)
Weighted average number of
Limited Partnership Units outstanding 160,000 160,000 160,000 160,000 160,000
General Partner's
Deficit (776,152) (702,440) (617,078) (522,349) (436,268)
Limited Partners' Capital (Deficit) (8,215,874) (918,403) 7,532,402 16,910,583 25,432,617
Total Assets 79,343,054 82,900,838 87,556,346 94,106,926 106,808,479
Debt 85,424,507 80,726,793 77,425,047 75,601,829 79,386,274
General Partner Advances 352,232 887,215 706,579 58,974 457,354
For the Year Ended December 31,
--------------------------------------------------------------------
Cable TV Fund 14-A/B Venture 1996 1995 1994 1993 1992
- ---------------------------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues $25,519,105 $23,469,505 $22,183,524 $22,068,952 $ 20,212,867
Depreciation and Amortization 8,360,927 8,774,507 9,188,994 9,352,808 9,971,915
Operating Income (Loss) 28,548 (753,422) (2,661,198) (2,324,939) (3,293,133)
Net Loss (3,008,309) (4,073,811) (5,417,779) (4,713,500) (6,186,107)
Partners' Capital 14,981,843 17,990,152 22,063,963 27,481,742 32,195,242
Total Assets 58,277,058 62,447,556 66,597,460 72,315,816 80,404,133
Debt 41,262,561 40,530,652 42,271,921 43,461,730 46,908,409
Jones Intercable, Inc. Advances 268,256 2,206,959 354,179 57,920 125,873
</TABLE>
13
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- -------------------------------------------------------------------------------
of Operations
- -------------
The following discussion of the financial condition and results of operations
of Cable TV Fund 14-A, Ltd. (the "Partnership") and Cable TV Fund 14-A/B
Venture (the "Venture")contains, in addition to historical information, forward-
looking statements that are based upon certain assumptions and are subject to a
number of risks and uncertainties. The Partnership's and Venture's actual
results may differ significantly from the results predicted in such forward-
looking statements.
FINANCIAL CONDITION
- -------------------
Cable TV Fund 14-A, Ltd. -
- ------------------------
On January 10, 1997, the Partnership sold the cable television system
serving the areas in and around Turnersville, New Jersey (the "Turnersville
System") to an unaffiliated party for a sales price of $84,500,000. The
Partnership distributed approximately $25,000,000 (or approximately $313 per
each $1,000 invested in the Partnership) of the sale proceeds to its limited
partners, and, as required under the terms of the Partnership's credit facility,
approximately $52,500,000 of the sale proceeds will be used to repay a portion
of the Partnership's indebtedness. Because the $25,000,000 distribution to the
limited partners did not return 125 percent of the amount initially contributed
by the limited partners, the General Partner did not receive a distribution from
the proceeds of the sale of the Turnersville System. The Jones Group, Ltd., a
subsidiary of the General Partner, received a brokerage fee of $2,112,500,
representing 2.5 percent of the sales price, for acting as a broker in this
transaction. The balance of the proceeds will be used by the Partnership for
ongoing working capital. Because the sale of the Turnersville System did not
represent a sale of all or substantially all of the Partnership's assets, no
vote of the limited partners of the Partnership was required to approve this
sale.
On March 12, 1997, the Partnership entered into an asset purchase
agreement to sell the Central Illinois System to an unaffiliated party for a
sales price of $20,100,000, subject to customary closing adjustments. The
closing of this sale is subject to a number of conditions, including obtaining
necessary governmental and other third party consents and the expiration or
termination of the waiting period specified in the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and the rules and regulations thereunder. Closing is
expected to occur during the second half of 1997. Upon the consummation of the
proposed sale of the Central Illinois System, the Partnership will repay
$10,050,000 of the then-outstanding balance of its credit facility, and a
brokerage fee to The Jones Group, Ltd. totaling approximately $502,500 and then
the Partnership will distribute the net sale proceeds of approximately
$9,547,500 to its limited partners. This distribution will give the
Partnership's limited partners an approximate return of $119 per $1,000 invested
in the Partnership. Because limited partners have not yet received total
distributions 125 percent of the capital initially contributed to the
Partnership by the limited partners, the General Partner will not receive any of
the proceeds from the Central Illinois System's sale. Taking into account the
distribution made on the sale of the Turnersville System and the anticipated
distribution to be made on the sale of the Central Illinois System, the
limited partners should receive a total of $432 for each $1,000 invested in the
Partnership in 1997. The Partnership will continue to own the cable television
systems serving certain areas in and around Buffalo, Minnesota; Naperville,
Illinois; and Calvert County, Maryland, as well as its 27 percent ownership
interest in the Venture.
During 1996, the Partnership generated net cash from operating
activities totaling $6,647,260, which was available to fund capital expenditures
and non-operating costs. Capital expenditures for the Partnership's directly
owned systems totaled approximately $10,381,000 during 1996. Approximately 37
percent of these expenditures was for new plant construction and approximately
37 percent of these expenditures was attributable to construction of service
drops to subscribers' homes. The remainder of the expenditures related to
various enhancements throughout the Partnership's operating systems. These
expenditures were funded primarily from cash generated from operations and
borrowings under the Partnership's revolving credit facility. Budgeted capital
expenditures for 1997 are approximately $7,700,000. Approximately 39 percent of
the total capital expenditures will be used for new plant construction in all of
the Partnership's systems. Approximately 33 percent will relate to construction
of service drops to subscribers' homes. The remainder of the anticipated
expenditures are for various enhancements in all of the Partnership's systems.
These capital expenditures are necessary to maintain the value of the
Partnership's remaining systems. Funding for the improvements is expected to
come from cash on hand, cash generated from operations, and, if necessary,
borrowings under its credit facility.
Ameritech, which provides telephone service in a multi-state region
including Illinois, has obtained a franchise that allows it to provide cable
television service in Naperville, Illinois, a community currently served by the
Naperville System. Ameritech has begun providing cable television service in
Naperville in direct competition with the Naperville System. This competition is
likely to have an adverse effect on the Naperville System's revenues, cash flow
and fair market value. It could also have an adverse impact on the Partnership's
ability to sell the Naperville System. The General Partner is taking prudent
steps necessary to meet this competition from Ameritech and to safeguard the
value of the Naperville System. These steps include a judicial challenge to the
terms on which the franchise was
14
<PAGE>
issued to Ameritech. Litigation is currently pending in federal court against
both the City of Naperville and Ameritech and includes claims by the City of
Naperville against the Partnership.
During July 1994, the Partnership entered into an $80,000,000 revolving
credit facility. In December 1996, the credit facility was amended to permit a
distribution to the limited partners of a portion of the proceeds from the sale
of the Turnersville System, to amend the then-existing amortization schedule and
to increase the facility to $84,700,000. At December 31, 1996, the maximum
amount of $84,700,000 was outstanding. The effective interest rates on amounts
outstanding as of December 31, 1996 and 1995 were 6.67 and 7.15, respectively.
Upon the sale of the Turnersville System, and as required under the terms of the
Partnership's amended credit facility, $52,500,000 of the sale proceeds was used
to repay bank debt, leaving $32,200,000 outstanding under the revolving credit
facility as of March 12, 1997. The Partnership has received commitments for a
new revolving credit facility, which is expected to be finalized by March 31,
1997, with a commitment of $37,500,000. The Partnership will borrow $32,200,000
from the new credit facility to repay the old credit facility, leaving
$5,300,000 of borrowings available for future needs. The new credit facility
expires on September 30, 2000, at which time the then-outstanding balance is
payable in full. Interest on the new credit facility's outstanding balance is at
the Partnership's option of the London Interbank Offered Rate plus .875 percent
to 1.375 percent, the Certificate of Deposit Rate plus 1.0 percent to 1.5
percent or the Base Rate plus 0 percent to .375 percent.
The General Partner believes that the Partnership has sufficient sources
of capital available from cash on hand, cash generated from operations and, if
necessary, borrowings under its credit facility to meet its anticipated needs.
In addition to those systems owned directly by it, the Partnership owns
a 27 percent interest in the Venture. The Partnership's investment in this
cable television joint venture, accounted for under the equity method, decreased
by $815,252 compared to the December 31, 1995 balance. This decrease represents
the Partnership's proportionate share of losses generated by the Venture during
1996.
Cable TV Fund 14-A/B Venture -
- ----------------------------
For the twelve months ended December 31, 1996, the Venture generated net
cash from operating activities totaling $5,204,336 which is available to fund
capital expenditures and non-operating costs. The Venture expended
approximately $3,880,000 on capital additions during 1996. Cable television
plant extensions accounted for approximately 43 percent of these expenditures.
The construction of service drops to homes accounted for approximately 37
percent of the expenditures. The remainder of these expenditures related to
various enhancements in the Broward County System. These capital expenditures
were funded primarily from cash generated from operations. The Venture plans to
expend approximately $3,916,000 for capital additions in 1997. Of this total,
approximately 35 percent will relate to the construction of service drops to
homes and approximately 34 percent will be expended for cable television plant
extensions. The remainder of the anticipated expenditures are for various
enhancements in the Broward County System. These capital expenditures are
expected to be funded from cash on hand, cash generated from operations and
borrowings under its credit facility.
In June 1996, the Venture amended its existing term loan providing for
a reducing revolving credit facility with an available commitment of
$42,500,000. The entire $42,500,000 commitment is available through December
31, 1998, at which time the commitment will be repaid in twenty quarterly
installments with a final maturity of December 31, 2003. At December 31, 1996,
the balance outstanding was $41,102,968, leaving $1,397,032 available for future
borrowings. Interest is at the Venture's option of Prime plus 1/4 percent, LIBOR
plus 1-1/4 percent or the Certificate of Deposit Rate plus 1-3/8 percent. The
effective interest rates on amounts outstanding as of December 31, 1996 and 1995
were 6.79 percent and 7.17 percent, respectively.
The General Partner believes that the Venture has sufficient sources
of capital from cash on hand, cash generated from operations and borrowings
under its credit facility to service its current needs.
RESULTS OF OPERATIONS
- ---------------------
Cable TV Fund 14-A, Ltd. -
- ------------------------
1996 Compared to 1995-
Revenues of the Partnership increased $3,713,917, or approximately 8
percent, to $47,808,719 for 1996 compared to $44,094,802 in 1995. This increase
was primarily due to basic service rate increases and an increase in the number
of basic subscribers. Basic service rate increases accounted for approximately
51 percent of the increase in revenues. Increases in the number of basic
subscribers accounted for approximately 44 percent of the increase. The number
of basic subscribers increased by 3,167 subscribers, or approximately 3 percent,
to 109,037 at December 31, 1996 compared to 105,870 at December 31, 1995. No
other individual factor was significant to the increase in revenues.
15
<PAGE>
Operating expenses consist primarily of costs associated with the
operation and administration of the Partnership's cable television systems. The
principal cost components are salaries paid to system personnel, programming
expenses, professional fees, subscriber billing costs, rent for leased
facilities, cable system maintenance expenses and marketing expenses.
Operating expenses increased $2,306,798, or approximately 9 percent, to
$28,026,332 for 1996 compared to $25,719,534 in 1995. Operating expenses
represented 59 percent of revenues in 1996 compared to 58 percent in 1995.
Increases in programming fees primarily accounted for the increase in operating
expenses. The increases in programming fees were due, in part, to the increase
in the subscriber base. No other individual factor was significant to the
increase in revenues.
Management fees and allocated overhead from the General Partner
increased $176,894, or approximately 3 percent, to $5,552,551 for 1996 compared
to $5,375,657 in 1995. The increase was due to the increase in revenues, upon
which such management fees are based.
Depreciation and amortization expense increased $168,247, or
approximately 1 percent, to $14,627,726 for 1996 compared to $14,459,479 in
1995. This increase was due to capital additions in 1996.
Operating loss decreased $1,061,978, or approximately 73 percent, to
$397,890 for 1996 compared to $1,459,868 in 1995. This decrease was due to the
increase in revenues exceeding the increases in operating expenses, depreciation
and amortization expense and management fees and allocated overhead from the
General Partner.
The cable television industry generally measures the financial
performance of a cable television system in terms of operating income before
depreciation and amortization. This measure is not intended to be a substitute
or improvement upon the items disclosed on the financial statements, rather it
is included because it is an industry standard. Operating income before
depreciation and amortization expense increased $1,230,225, or approximately 9
percent, to $14,229,836 for 1996 compared to $12,999,611 in 1995. This increase
was due to the increase in revenues exceeding the increases in operating
expenses and management fees and allocated overhead from the General Partner.
Interest expense decreased $51,639, or less than 1 percent, to
$5,949,858 for 1996 compared to $6,001,497 in 1995. This decrease was due
primarily to lower effective interest rates on interest bearing obligations.
Loss before equity in net loss of cable television joint venture
decreased $876,233, or approximately 12 percent, to $6,555,931 for 1996 compared
to $7,432,164 in 1995. This decrease was due to the factors discussed above.
1995 Compared to 1994 -
Revenues of the Partnership increased $3,652,534, or approximately 9
percent, to $44,094,802 for 1995 compared to $40,442,268 in 1994. Increases in
the subscriber base and premium subscriptions accounted for approximately 53
percent of the increase. The number of basic subscribers increased 7,235, or
approximately 7 percent, to 105,870 at December 31, 1995 compared to 98,635 at
December 31, 1994. Premium service subscriptions increased 2,642, or
approximately 3 percent, to 91,792 at December 31, 1995 compared to 89,150 at
December 31, 1994. Rate increases during the first quarter of 1995 accounted
for approximately 20 percent of the increase in revenues for 1995. An increase
in advertising sales accounted for approximately 18 percent of the increase in
revenues. No other individual factor was significant to the increase in
revenues.
Operating expenses increased $1,908,069, or approximately 8 percent, to
$25,719,534 for 1995 compared to $23,811,465 in 1994. Operating expenses
represented 58 percent of revenues in 1995 compared to 59 percent in 1994.
Increases in programming fees and advertising sales related expenses primarily
accounted for the increase in operating expenses. The increases in programming
fees were due, in part, to the increase in the subscriber base. The increase in
advertising sales related expenses was due, in part, to the increase in
advertising sales activity. No other individual factor was significant to the
increase in revenues.
Management fees and allocated overhead from the General Partner
increased $248,104, or approximately 5 percent, to $5,375,657 for 1995 compared
to $5,127,553 in 1994. The increase was due to the increase in revenues, upon
which such fees and allocations are based, and increases in allocated expenses
from the General Partner.
Depreciation and amortization expense decreased $366,777, or
approximately 2 percent, to $14,459,479 for 1995 compared to $14,826,256 in
1994. This decrease was primarily due to the maturation of a portion of the
intangible asset base.
Operating loss decreased $1,863,138, or approximately 56 percent, to
$1,459,868 for 1995 compared to $3,323,006 in 1994. This decrease was due to
the increase in revenues and the decrease in depreciation and amortization
expense exceeding the increases in operating expenses and management fees and
allocated overhead from the General Partner.
16
<PAGE>
Operating income before depreciation and amortization expense increased
$1,496,361, or approximately 13 percent, to $12,999,611 for 1995 compared to
$11,503,250 in 1994. This increase was due to the increase in revenues
exceeding the increases in operating expenses and management fees and allocated
overhead from the General Partner.
Interest expense increased to $1,503,270, or approximately 33 percent,
$6,001,497 for 1995 compared to $4,498,227 in 1994. This increase was due
primarily to higher outstanding balances on interest bearing obligations in
1995.
Loss before equity in net loss of cable television joint venture
decreased $572,528, or approximately 7 percent, to $7,432,164 for 1995 compared
to $8,004,692 in 1994. This decrease was primarily due to the decrease in
operating loss.
In addition to the systems owned directly, the Partnership owns a 27
percent interest in Cable TV Fund 14-A/B Venture (the "Venture"). See
Management's Discussion and Analysis of Financial Condition and Results of
Operations for the Venture for details pertaining to the Venture's operations.
Cable TV Fund 14-A/B Venture -
- ----------------------------
1996 Compared to 1995-
Revenues of the Venture's Broward County System increased $2,049,600, or
approximately 9 percent, to $25,519,105 in 1996 from $23,469,505 in 1995. Basic
service rate increases accounted for approximately 35 percent of the increase in
revenue. An increase in the number of basic subscribers accounted for
approximately 27 percent of the increases in revenue. The number of basic
subscribers totaled 50,957 at December 31, 1996 compared to 49,654 at December
31, 1995, an increase of 1,303, or approximately 3 percent. Increases in
premium service revenue accounted for approximately 16 percent of the increase
in revenue. No other individual factor significantly affected the increase in
revenues.
Operating expenses consist primarily of costs associated with the
operation and administration of the Venture's cable television systems. The
principal cost components are salaries paid to system personnel, programming
expenses, professional fees, subscriber billing costs, rent for leased
facilities, cable system maintenance expenses and marketing expenses.
Operating expense increased $1,528,324, or approximately 12 percent, to
$14,148,533 in 1996 from $12,620,209 in 1995. Operating expenses represented 55
percent of revenue in 1996, compared to 54 percent in 1995. The increase in
operating expenses was due primarily to increases in programming fees, which
were partially offset by decreases in personnel and marketing expenses. No
other individual factor significantly affected the increase in operating
expenses.
Management fees and allocated overhead from Jones Intercable, Inc.
increased $152,886, or approximately 5 percent, to $2,981,097 in 1996 from
$2,828,211 in 1995. This increase was due primarily to the increase in revenues
upon which such fees and allocations are based.
Depreciation and amortization expense decreased $413,580, or
approximately 5 percent, to $8,360,927 in 1996 from $8,774,507 in 1995. The
decrease in depreciation and amortization expense was attributable to the
maturation of the Venture's asset base.
The Partnership reported operating income of $28,548 in 1996 compared to
an operating loss of $753,422 in 1995. This change was due to the increase in
revenues and the decreases in depreciation and amortization expense exceeding
the increase in operating expenses and management fees and allocated overhead
from Jones Intercable, Inc.
The cable television industry generally measures the financial
performance of a cable television system in terms of operating income before
depreciation and amortization. This measure is not intended to be a substitute
or improvement upon the items disclosed on the financial statements, rather it
is included because it is an industry standard. Operating income before
depreciation and amortization expense increased $368,390, or approximately 5
percent, to $8,389,475 in 1996 from $8,021,085 in 1995 due to the increase in
revenues exceeding the increases in operating expenses and management fees and
allocated overhead from Jones Intercable, Inc.
Interest expense decreased $364,677, or approximately 11 percent, to
$3,006,847 in 1996 from $3,371,524 in 1995 due to lower outstanding balances on
interest bearing obligations during 1996 and lower effective interest rates on
interest bearing obligations.
17
<PAGE>
Net loss decreased $1,065,502, or approximately 26 percent, to $3,008,309
in 1996 from $4,073,811 in 1995. These losses were primarily the result of the
factors discussed above.
1995 Compared to 1994 -
Revenues of the Venture's Broward County System increased $1,285,981, or
approximately 6 percent, to $23,469,505 in 1995 from $22,183,524 in 1994. The
number of basic subscribers totaled 49,654 at December 31, 1995 compared to
47,819 at December 31, 1994, an increase of 1,835, or approximately 4 percent.
This increase in basic subscribers accounted for approximately 44 percent of the
increases in revenue. Increases in premium service revenue accounted for
approximately 25 percent of the increases in revenue and basic service rate
adjustments accounted for approximately 11 percent of the increases in revenue.
No other individual factor significantly affected the increase in revenues.
Operating expenses decreased $258,229, or approximately 2 percent, to
$12,620,209 in 1995 from $12,878,438 in 1994. Operating expenses represented 54
percent of revenue in 1995, compared to 58 percent in 1994. The decrease in
operating expenses was due primarily to decreases in personnel and marketing
expenses, which were partially offset by increases in programming fees and
office related expenses. No other individual factor significantly affected the
decrease in operating expense.
Management fees and allocated overhead from Jones Intercable, Inc.
increased $50,921, or approximately 2 percent, to $2,828,211 in 1995 from
$2,777,290 in 1994 primarily due to the increase in revenues upon which such
fees and allocations are based.
Depreciation and amortization expense decreased $414,487, or approximately
5 percent, to $8,774,507 in 1995 from $9,188,994 in 1994. The decrease in
depreciation and amortization expense was attributable to the maturation of the
Venture's asset base.
Operating loss decreased $1,907,776, or approximately 72 percent, to
$753,422 in 1995 from $2,661,198 in 1994. This decrease was due to the increase
in revenues and the decreases in operating and depreciation and amortization
expenses exceeding the increase in management fees and allocated overhead from
Jones Intercable, Inc.
Operating income before depreciation and amortization expense increased
$1,493,289, or approximately 23 percent, to $8,021,085 in 1995 from $6,527,796
in 1994 due to the increases in revenues and decreases in operating expenses
exceeding the increase in management fees and allocated overhead from Jones
Intercable, Inc.
Interest expense increased $643,490, or approximately 24 percent, to
$3,371,524 in 1995 from $2,728,034 in 1994 due to higher effective interest
rates and higher outstanding balances on interest bearing obligations.
Net loss decreased $1,343,968, or approximately 25 percent, to
$4,073,811 in 1995 from $5,417,779 in 1994. These losses were primarily the
result of the factors discussed above.
18
<PAGE>
Item 8. Financial Statements
- -----------------------------
CABLE TV FUND 14-A, LTD. AND
----------------------------
CABLE TV FUND 14-A/B VENTURE
----------------------------
FINANCIAL STATEMENTS
--------------------
AS OF DECEMBER 31, 1996 AND 1995
--------------------------------
INDEX
-----
<TABLE>
<CAPTION>
Page
------------
14-A 14-A/B
---- ------
<S> <C> <C>
Report of Independent Public Accountants 20 32
Balance Sheets 21 33
Statements of Operations 23 35
Statements of Partners' Capital (Deficit) 24 36
Statements of Cash Flows 25 37
Notes to Financial Statements 26 38
</TABLE>
19
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Partners of Cable TV Fund 14-A, Ltd.:
We have audited the accompanying balance sheets of CABLE TV FUND 14-A,
LTD. (a Colorado limited partnership) as of December 31, 1996 and 1995, and the
related statements of operations, partners' capital (deficit) and cash flows for
each of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the General Partner's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Cable TV Fund 14-A,
Ltd. as of December 31, 1996 and 1995, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 12, 1997.
20
<PAGE>
CABLE TV FUND 14-A, LTD.
------------------------
(A Limited Partnership)
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
December 31,
---------------------------
ASSETS 1996 1995
------ ------------ ------------
<S> <C> <C>
CASH $ 1,257,022 $ 293,179
TRADE RECEIVABLES, less allowance for doubtful receivables of
$255,399 and $75,209 at December 31, 1996 and 1995, respectively 1,142,329 1,328,715
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 137,237,866 128,171,454
Less- accumulated depreciation (76,946,443) (67,771,303)
------------ ------------
60,291,423 60,400,151
Franchise costs and other intangible assets, net of accumulated
amortization of $38,800,080 and $35,205,293 at
December 31, 1996 and 1995, respectively 11,788,190 15,382,977
Investment in cable television joint venture 3,963,820 4,779,072
------------ ------------
Total investment in cable television properties 76,043,433 80,562,200
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 900,270 716,744
------------ ------------
Total assets $ 79,343,054 $ 82,900,838
============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
21
<PAGE>
CABLE TV FUND 14-A, LTD.
------------------------
(A Limited Partnership)
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
December 31,
----------------------------
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1996 1995
------------------------------------------- ------------ -------------
<S> <C> <C>
LIABILITIES:
Debt $ 85,424,507 $ 80,726,793
Accounts payable-
General Partner 352,232 887,215
Trade accounts payable and accrued liabilities 2,412,088 2,774,638
Subscriber prepayments 146,253 133,035
------------ ------------
Total liabilities 88,335,080 84,521,681
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 7)
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (777,152) (703,440)
------------ ------------
(776,152) (702,440)
------------ ------------
Limited Partners-
Net contributed capital (160,000 units outstanding at
December 31, 1996 and 1995) 68,722,000 68,722,000
Accumulated deficit (76,937,874) (69,640,403)
------------ ------------
(8,215,874) (918,403)
------------ ------------
Total liabilities and partners' capital (deficit) $ 79,343,054 $ 82,900,838
============ =============
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
22
<PAGE>
CABLE TV FUND 14-A, LTD.
------------------------
(A Limited Partnership)
STATEMENTS OF OPERATIONS
------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES $47,808,719 $44,094,802 $40,442,268
COSTS AND EXPENSES:
Operating expenses 28,026,332 25,719,534 23,811,465
Management fees and allocated overhead from
General Partner 5,552,551 5,375,657 5,127,553
Depreciation and amortization 14,627,726 14,459,479 14,826,256
----------- ----------- -----------
OPERATING LOSS (397,890) (1,459,868) (3,323,006)
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (5,949,858) (6,001,497) (4,498,227)
Other, net (208,183) 29,201 (183,459)
----------- ----------- -----------
Total other income (expense) (6,158,041) (5,972,296) (4,681,686)
----------- ----------- -----------
LOSS BEFORE EQUITY IN NET LOSS OF
CABLE TELEVISION JOINT VENTURE (6,555,931) (7,432,164) (8,004,692)
EQUITY IN NET LOSS OF CABLE TELEVISION
JOINT VENTURE $ (815,252) (1,104,003) (1,468,218)
----------- ----------- -----------
NET LOSS $(7,371,183) $(8,536,167) $(9,472,910)
=========== =========== ===========
ALLOCATION OF NET LOSS:
General Partner $ (73,712) $ (85,362) $ (94,729)
=========== =========== ===========
Limited Partners $(7,297,471) $(8,450,805) $(9,378,181)
=========== =========== ===========
NET LOSS PER LIMITED PARTNERSHIP UNIT $(45.61) $(52.82) $(58.61)
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF LIMITED
PARTNERSHIP UNITS OUTSTANDING 160,000 160,000 160,000
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
23
<PAGE>
CABLE TV FUND 14-A, LTD.
------------------------
(A Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
-----------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
GENERAL PARTNER:
Balance, beginning of year $ (702,440) $ (617,078) $ (522,349)
Net loss for year (73,712) (85,362) (94,729)
----------- ----------- -----------
Balance, end of year $ (776,152) $ (702,440) $ (617,078)
=========== =========== ===========
LIMITED PARTNERS:
Balance, beginning of year $ (918,403) $ 7,532,402 $16,910,583
Net loss for year (7,297,471) (8,450,805) (9,378,181)
----------- ----------- -----------
Balance, end of year $(8,215,874) $ (918,403) $ 7,532,402
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
24
<PAGE>
CABLE TV FUND 14-A, LTD.
------------------------
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (7,371,183) $ (8,536,167) $ (9,472,910)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 14,627,726 14,459,479 14,826,256
Equity in net loss of cable television joint venture 815,252 1,104,003 1,468,218
Amortization of interest rate protection contract - 16,667 16,668
Decrease (increase) in trade receivables 186,386 (258,134) (132,111)
Increase in deposits, prepaid expenses
and deferred charges (726,606) (63,074) (699,666)
Increase (decrease) in trade accounts payable and
accrued liabilities and subscriber prepayments (349,332) 398,277 451,507
Increase (decrease) in advances from General Partner (534,983) 180,636 647,605
------------ ------------ ------------
Net cash provided by operating activities 6,647,260 7,301,687 7,105,567
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (10,381,131) (10,737,233) (8,978,588)
------------ ------------ ------------
Net cash used in investing activities (10,381,131) (10,737,233) (8,978,588)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 5,183,313 3,546,885 77,661,002
Repayment of debt (485,599) (245,139) (75,837,784)
------------ ------------ ------------
Net cash provided by financing activities 4,697,714 3,301,746 1,823,218
------------ ------------ ------------
Increase (decrease) in cash 963,843 (133,800) (49,803)
Cash, beginning of year 293,179 426,979 476,782
------------ ------------ ------------
Cash, end of year $ 1,257,022 $ 293,179 $ 426,979
============ ============ ============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 6,136,741 $ 5,740,361 $ 4,339,995
============ ============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
25
<PAGE>
CABLE TV FUND 14-A, LTD.
------------------------
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(1) ORGANIZATION AND PARTNERS' INTERESTS
------------------------------------
Formation and Business
----------------------
Cable TV Fund 14-A, Ltd. (the "Partnership"), a Colorado limited
partnership, was formed on February 6, l987, under a public program sponsored by
Jones Intercable, Inc. ("Intercable"), a publicly held Colorado corporation.
The Partnership was formed to acquire, construct, develop and operate cable
television systems. Intercable is the "General Partner" and manager of the
Partnership. Intercable and its subsidiaries also own and operate cable
television systems. In addition, Intercable manages cable television systems
for other limited partnerships for which it is general partner and, also, for
other affiliated entities.
On January 8, 1988, the Partnership and Cable TV Fund 14-B, Ltd. formed
Cable TV Fund 14-A/B Venture (the "Venture"), to acquire the cable television
system serving areas in and around Broward County, Florida. The Partnership
contributed $18,975,000 to the capital of the Venture for 27 percent ownership
interest and Cable TV Fund 14-B, Ltd. contributed $51,025,000 to the capital of
the Venture for 73 percent ownership interest.
Cable Television System Acquisitions and Formation of the Venture
-----------------------------------------------------------------
The Partnership acquired the cable television systems serving certain
areas in and around the communities of Turnersville, New Jersey (the
"Turnersville System"); Buffalo, Minnesota; Naperville, Illinois; and Calvert
County, Maryland in 1987. In 1991, the Partnership purchased additional cable
television systems serving certain communities in Central Illinois (the "Central
Illinois System"). As discussed below, the Partnership sold the Turnersville
System on January 10, 1997 and entered into an asset purchase agreement on March
12, 1997 to sell the Central Illinois System.
Cable Television System Sales
-----------------------------
On January 10, 1997, the Partnership sold the Turnersville System to an
unaffiliated party for a sales price of $84,500,000. The Partnership distributed
approximately $25,000,000 (or approximately $313 per each $1,000 invested in the
Partnership) of the sale proceeds to its limited partners, and, as required
under the terms of the Partnership's credit facility, approximately $52,500,000
of the sale proceeds will be used to repay a portion of the Partnership's
indebtedness. Because the $25,000,000 distribution to the limited partners did
not return 125 percent of the amount initially contributed by the limited
partners, the General Partner did not receive a distribution from the proceeds
of the sale of the Turnersville System. The Jones Group, Ltd., a subsidiary of
the General Partner, received a brokerage fee of $2,112,500, representing 2.5
percent of the sales price, for acting as a broker in this transaction. The
balance of the proceeds will be used by the Partnership for ongoing working
capital. Because the sale of the Turnersville System did not represent a sale of
all or substantially all of the Partnership's assets, no vote of the limited
partners of the Partnership was required to approve this sale. The Partnership
will continue to own the cable television systems serving certain areas in and
around Buffalo, Minnesota; Naperville, Illinois; and Calvert County, Maryland,
as well as its 27 percent ownership interest in the Venture.
On March 12, 1997, the Partnership entered into an asset purchase agreement
to sell the Central Illinois System to an unaffiliated party for a sales price
of $20,100,000, subject to customary closing adjustments. The closing of this
sale is subject to a number of conditions, including obtaining necessary
governmental and other third party consents and the expiration or termination of
the waiting period specified in the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 and the rules and regulations thereunder. Closing is expected to occur
during the second half of 1997. Upon the consummation of the proposed sale of
the Central Illinois System, the Partnership will repay $10,050,000 of the then-
outstanding balance of its credit facility, and a brokerage fee to The Jones
Group, Ltd. totaling approximately $502,500, and then the Partnership will
distribute the net sale proceeds of approximately $9,547,500 to its limited
partners. This distribution will give the Partnership's limited partners an
approximate return of $119 per $1,000 invested in the Partnership. Because
limited partners have not yet received total distributions 125 percent of the
capital initially contributed to the Partnership by the limited partners, the
General Partner will not receive any of the proceeds from the Central Illinois
System's sale. Taking into account the distribution made on the sale of the
Turnersville System and the anticipated distribution to be made on the sale of
the Central Illinois System, the limited partners should receive a total of $432
for each $1,000 invested in the Partnership in 1997. The Partnership will
continue to own the cable television systems serving certain areas in and around
Buffalo, Minnesota; Naperville, Illinois; and Calvert County, Maryland, as well
as its 27 percent ownership interest in the Venture.
26
<PAGE>
The pro forma effect of the sale of the Turnersville System on the
results of the Partnership's operations for the years ended December 31, 1996
and 1995, assuming the transaction had occurred at the beginning of the year, is
presented in the following unaudited tabulation:
<TABLE>
<CAPTION>
For the Year Ended December 31, 1996
-----------------------------------------
Pro Forma
As Reported Adjustments Pro Forma
------------ ------------- ------------
<S> <C> <C> <C>
Revenues $47,808,719 $(17,525,511) $30,283,208
=========== ============ ===========
Operating Loss $ (397,890) $ (2,623,944) $(3,021,834)
=========== ============ ===========
Loss Before Equity in Net Loss of
Cable Television Joint Venture $(6,555,931) $ 1,187,766 $(5,368,165)
=========== ============ ===========
For the Year Ended December 31, 1995
-----------------------------------------
Pro Forma
As Reported Adjustments Pro Forma
------------ ------------- ------------
<S> <C> <C> <C>
Revenues $44,094,802 $(16,392,499) $27,702,303
=========== ============ ===========
Operating Loss $(1,459,868) $ (1,995,588) $(3,455,456)
=========== ============ ===========
Loss Before Equity in Net Loss of
Cable Television Joint Venture $(7,432,164) $ 1,771,014 $(5,661,150)
=========== ============ ===========
</TABLE>
Contributed Capital, Commissions and Syndication Costs
------------------------------------------------------
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.
Intercable 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 Intercable, 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's agreement
and interest income earned prior to the first acquisition by the Partnership of
a cable television system, which was allocated 100 percent to the limited
partners.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Accounting Records
------------------
The accompanying financial statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting principles.
The Partnership's tax returns are also prepared on the accrual basis.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the General Partner's management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Purchase Price Allocation
-------------------------
The Partnership allocated the total contract purchase price of cable
television systems acquired as follows: first, to the fair value of net
tangible assets acquired; second, to the value of subscriber lists and a
noncompete agreement with previous owners; third, to franchise costs; and
fourth, to costs in excess of interests in net assets purchased. Other system
acquisition costs were capitalized and charged to distribution systems, except
for the Central Illinois System which were charged to intangible assets.
27
<PAGE>
Investment in Cable Television Joint Venture
--------------------------------------------
In addition to its wholly owned systems, the Partnership owns a 27
percent interest in the Venture through a capital contribution made in March
1988 of $18,975,000. The Venture acquired the Broward County System in March
1988. The Venture incurred losses of $3,008,309, $4,073,811 and $5,417,779 in
1996, 1995 and 1994, respectively, of which $815,252, $1,104,003 and $1,468,218,
respectively, was allocated to the Partnership. The investment is accounted for
on 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 41.
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>
<CAPTION>
<S> <C>
Cable distribution systems 5 - 15 years
Equipment and tools 3 - 5 years
Office furniture and equipment 5 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.
Property, plant and equipment and the corresponding accumulated
depreciation are written off as certain assets become fully depreciated and are
no longer in service.
Intangible Assets
-----------------
Costs assigned to intangible assets are being amortized using the
straight-line method over the following remaining estimated useful lives:
<TABLE>
<CAPTION>
<S> <C>
Franchise costs 1 - 3 years
Subscriber lists 3 years
Costs in excess of interests in net assets purchased 30 - 35 years
</TABLE>
Revenue Recognition
-------------------
Subscriber prepayments are initially deferred and recognized as
revenue when earned.
Reclassification
----------------
Certain prior year amounts have been reclassified to conform to
the 1996 presentation.
(3) TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES
----------------------------------------------------
Management Fees, Distribution Ratios and Reimbursements
-------------------------------------------------------
Intercable manages the Partnership and receives a fee for its services
equal to 5 percent of the gross revenues of the Partnership, excluding revenues
from the sale of cable television systems or franchises. Management fees paid
to Intercable by the Partnership for the years ended December 31, 1996, 1995,
and 1994 (exclusive of the Partnership's 27 percent interest in the Venture)
were $2,390,436, $2,204,740 and $2,022,113, respectively.
Any distributions made from cash flow (defined as cash receipts
derived from routine operations, less debt principal and interest payments and
cash expenses) are allocated 99 percent to the limited partners and 1 percent to
Intercable. Any distributions other than interest income on limited partner
subscriptions earned prior to the acquisition of the Partnership's first cable
television system or from cash flow, such as from the sale or refinancing of a
system or upon dissolution of the Partnership, will be made as follows: first,
to the limited partners in an amount which, together with all prior
distributions, will equal 125 percent of the amount initially contributed to the
Partnership capital by the limited partners; the balance, 75 percent to the
limited partners and 25 percent to Intercable.
28
<PAGE>
The Partnership reimburses Intercable for certain allocated overhead
and administrative expenses. These expenses represent the salaries and related
benefits paid for corporate personnel, rent, data processing services and other
corporate related facilities costs. Such personnel provide engineering,
marketing, administrative, accounting, legal and investor relations services to
the Partnership. Such services, and their related costs, are necessary to the
operation of the Partnership and would have been incurred by the Partnership if
it was a stand alone entity. Allocations of personnel costs are based primarily
on actual time spent by employees of Intercable with respect to each partnership
managed. Remaining expenses are allocated based on the pro rata relationship of
the Partnership's revenues to the total revenues of all systems owned or managed
by Intercable and certain of its subsidiaries. Systems owned by Intercable and
all other systems owned by partnerships for which Intercable is the general
partner are also allocated a proportionate share of these expenses. Intercable
believes that the methodology used in allocating overhead and administrative
expenses is reasonable. Reimbursements made to Intercable by the Partnership
for allocated overhead and administrative expenses (exclusive of the
Partnership's 27 percent interest in the Venture) were $3,162,115, $3,170,917
and $3,105,440 in 1996, 1995 and 1994, respectively.
The Partnership was charged interest during 1996 at an average
interest rate of 8.58 percent on the amounts due Intercable, which approximated
Intercable's weighted average cost of borrowing. Total interest charged to the
Partnership by Intercable was $250,004, $23,107 and, $43,708 for the years ended
December 31, 1996, 1995 and 1994, respectively.
Payments to/from Affiliates for Programming Services
----------------------------------------------------
The Partnership receives programming from Superaudio, Jones Education
Company, Great American Country, Inc. and Product Information Network, all of
which are affiliates of Intercable.
Payments to Superaudio totaled $63,513, $54,644 and $51,858 in 1996,
1995 and 1994, respectively. Payments to Jones Education Company totaled
$133,110, $126,679 and $72,733 in 1996, 1995 and 1994, respectively. Payments
to Great American Country, Inc., which initiated service in 1996, totaled
$35,100 in 1996.
The Partnership receives a commission from Product Information Network
based on a percentage of advertising revenue and number of subscribers. Product
Information Network paid commissions to the Partnership totaling $90,304,
$77,790 and $42,223 in 1996, 1995 and 1994, respectively.
(4) PROPERTY, PLANT AND EQUIPMENT
-----------------------------
Property, plant and equipment as of December 31, 1996 and 1995,
consisted of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cable distribution systems $126,936,005 $116,916,533
Equipment and tools 4,124,407 4,130,430
Office furniture and equipment 1,714,390 1,644,051
Buildings 2,407,909 2,393,755
Vehicles 1,667,374 2,698,904
Land 387,781 387,781
------------ ------------
137,237,866 128,171,454
Less - accumulated depreciation (76,946,443) (67,771,303)
------------ ------------
$ 60,291,423 $ 60,400,151
============ ============
</TABLE>
29
<PAGE>
(5) DEBT
----
<TABLE>
<CAPTION>
December 31,
-------------------------
Debt consists of the following: 1996 1995
----------- -----------
<S> <C> <C>
Lending institutions-
Revolving credit and term loan $84,700,000 $80,000,000
Capital lease obligations 724,507 726,793
----------- -----------
$85,424,507 $80,726,793
=========== ===========
</TABLE>
During July 1994, the Partnership entered into an $80,000,000 revolving
credit facility. In December 1996, the credit facility was amended to permit a
distribution to the limited partners of a portion of the proceeds from the sale
of the Turnersville System, to amend the then-existing amortization schedule and
to increase the facility to $84,700,000. At December 31, 1996, the maximum
amount of $84,700,000 was outstanding. The effective interest rates on amounts
outstanding as of December 31, 1996 and 1995 were 6.67 and 7.15, respectively.
Upon the sale of the Turnersville System, and as required under the terms of the
Partnership's amended credit facility, $52,500,000 of the sale proceeds was used
to repay bank debt, leaving $32,200,000 outstanding under the revolving credit
facility as of March 12, 1997. The Partnership has received commitments for a
new revolving credit facility, which is expected to be finalized by March 31,
1997, with a commitment of $37,500,000. The Partnership will borrow $32,200,000
from the new credit facility to repay the old credit facility, leaving
$5,300,000 of borrowings available for future needs. The new credit facility
expires on September 30, 2000, at which time the then-outstanding balance is
payable in full. Interest on the new credit facility's outstanding balance is at
the Partnership's option of the London Interbank Offered Rate plus .875 percent
to 1.375 percent, the Certificate of Deposit Rate plus 1.0 percent to 1.5
percent or the Base Rate plus 0 percent to .375 percent.
Installments due on debt principal for each of the five years in the
period ending December 31, 2001, and thereafter, respectively, are: $6,569,852,
$10,804,852, $15,039,852, $19,129,951, $21,175,000 and $12,705,000. At December
31, 1996, substantially all of the Partnership's property, plant and equipment
secured the above indebtedness.
At December 31, 1996, the carrying amount of the Partnership's long-term
debt did not differ significantly from the estimated fair value of the financial
instruments. The fair value of the Partnership's long-term debt is estimated
based on the discounted amount of future debt service payments using rates of
borrowing for a liability of similar risk.
(6) INCOME TAXES
------------
Income taxes have not been recorded in the accompanying financial
statements because they accrue directly to the partners. The federal and state
income tax returns of the Partnership are prepared and filed by 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.
30
<PAGE>
(7) COMMITMENTS AND CONTINGENCIES
-----------------------------
Cable TV Fund 14-A, Ltd. v. City of Naperville and Ameritech New Media,
-----------------------------------------------------------------------
Inc. and City of Naperville v. Cable TV Fund 14-A, Ltd., United States District
- ------------------------------------------------------
Court for the Northern District of Illinois, Eastern Division, Case No. 96C
5962. The Partnership is plaintiff and counter-defendant in a suit challenging
certain actions arising from the City of Naperville's grant of a franchise to
Ameritech New Media, Inc. ("Ameritech NMI"). Specifically, the Partnership
alleges that under Cable Act standards, the City should have modified the
Partnership's Naperville franchise, since certain items are unduly burdensome in
a competitive environment. Further, the Partnership alleges that the franchise
granted to Ameritech NMI is materially more favorable than the franchise granted
to the Partnership and that this is contrary to Illinois law and that the
Ameritech NMI franchise therefore is void. This suit also challenges the City's
assertion that the Partnership has breached its franchise in various ways,
particularly by withholding certain payments allegedly due to the City. In its
countersuit, the City seeks a declaratory ruling that the Partnership has
breached its franchise by withholding those same payments. Cross motions to
dismiss and for partial summary judgment have been briefed and argued and are
awaiting decision.
The Partnership rents office and other facilities under various long-
term lease arrangements. Rent paid under such lease arrangements totaled
$296,719, $242,084 and $233,251, respectively, for the years ended December 31,
1996, 1995 and 1994. Minimum commitments under operating leases for the five
years in the period ending December 31, 2001, and thereafter are as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $283,384
1998 260,195
1999 171,802
2000 13,200
2001 750
Thereafter 2,250
--------
$731,581
========
</TABLE>
(8) SUPPLEMENTARY PROFIT AND LOSS INFORMATION
-----------------------------------------
Supplementary profit and loss information is presented below:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
Maintenance and repairs $ 633,182 $ 761,244 $ 754,314
=========== =========== ==========
Taxes, other than income and payroll taxes $ 147,180 $ 213,244 $ 162,029
=========== =========== ==========
Advertising $ 717,531 $ 694,205 $ 688,611
=========== =========== ==========
Depreciation of property, plant and equipment $11,032,939 $10,706,143 $9,957,440
=========== =========== ==========
Amortization of intangible assets $ 3,594,787 $ 3,753,336 $4,868,816
=========== =========== ==========
</TABLE>
31
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Partners of Cable TV Fund 14-A/B Venture:
We have audited the accompanying balance sheets of CABLE TV FUND 14-A/B
VENTURE (a Colorado general partnership) as of December 31, 1996 and 1995, and
the related statements of operations, partners' capital and cash flows for each
of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the General Partner's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Cable TV Fund 14-A/B
Venture as of December 31, 1996 and 1995, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 7, 1997.
32
<PAGE>
CABLE TV FUND 14-A/B VENTURE
----------------------------
(A General Partnership)
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
December 31,
--------------------------
ASSETS 1996 1995
------ ------------ ------------
<S> <C> <C>
CASH $ 489,615 $ 371,870
TRADE RECEIVABLES, less allowance for doubtful receivables of
$104,005 and $102,006 at December 31, 1996 and 1995, respectively 879,267 1,093,967
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 55,892,778 52,012,981
Less- accumulated depreciation (27,437,977) (24,307,885)
------------ ------------
28,454,801 27,705,096
Franchise costs and other intangible assets, net of accumulated
amortization of $52,915,541 and $48,078,124 at December 31, 1996
and 1995, respectively 28,071,425 32,908,842
------------ ------------
Total investment in cable television properties 56,526,226 60,613,938
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 381,950 367,781
------------ ------------
Total assets $ 58,277,058 $ 62,447,556
============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
33
<PAGE>
CABLE TV FUND 14-A/B VENTURE
----------------------------
(A General Partnership)
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
December 31,
---------------------------
LIABILITIES AND PARTNERS' CAPITAL 1996 1995
--------------------------------- ------------ ------------
<S> <C> <C>
LIABILITIES:
Debt $ 41,262,561 $ 40,530,652
Jones Intercable, Inc. advances 268,256 2,206,959
Trade accounts payable and accrued liabilities 1,282,624 1,222,013
Subscriber prepayments 481,774 497,780
------------ ------------
Total liabilities 43,295,215 44,457,404
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 7)
PARTNERS' CAPITAL:
Contributed capital 70,000,000 70,000,000
Accumulated deficit (55,018,157) (52,009,848)
------------ ------------
14,981,843 17,990,152
------------ ------------
Total liabilities and partners' capital $ 58,277,058 $ 62,447,556
============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
34
<PAGE>
CABLE TV FUND 14-A/B VENTURE
----------------------------
(A General Partnership)
STATEMENTS OF OPERATIONS
------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES $25,519,105 $23,469,505 $22,183,524
COSTS AND EXPENSES:
Operating expenses 14,148,533 12,620,209 12,878,438
Management fees and allocated overhead from
Jones Intercable, Inc. 2,981,097 2,828,211 2,777,290
Depreciation and amortization 8,360,927 8,774,507 9,188,994
----------- ----------- -----------
OPERATING INCOME (LOSS) 28,548 (753,422) (2,661,198)
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (3,006,847) (3,371,524) (2,728,034)
Other, net (30,010) 51,135 (28,547)
----------- ----------- -----------
Total other income (expense) (3,036,857) (3,320,389) (2,756,581)
----------- ----------- -----------
NET LOSS $(3,008,309) $(4,073,811) $(5,417,779)
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
35
<PAGE>
CABLE TV FUND 14-A/B VENTURE
----------------------------
(A General Partnership)
STATEMENTS OF PARTNERS' CAPITAL
-------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
CABLE TV FUND 14-A, LTD. (27%):
Balance, beginning of year $ 4,779,072 $ 5,883,075 $ 7,351,293
Net loss for year (815,252) (1,104,003) (1,468,218)
----------- ----------- -----------
Balance, end of year $ 3,963,820 $ 4,779,072 $ 5,883,075
=========== =========== ===========
CABLE TV FUND 14-B, LTD. (73%):
Balance, beginning of year $13,211,080 $16,180,888 $20,130,449
Net loss for year (2,193,057) (2,969,808) (3,949,561)
----------- ----------- -----------
Balance, end of year $11,018,023 $13,211,080 $16,180,888
=========== ========== ===========
TOTAL:
Balance, beginning of year $17,990,152 $22,063,963 $27,481,742
Net loss for year (3,008,309) (4,073,811) (5,417,779)
=========== ========== ===========
Balance, end of year $14,981,843 $17,990,152 $22,063,963
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
36
<PAGE>
CABLE TV FUND 14-A/B VENTURE
----------------------------
(A General Partnership)
STATEMENTS OF CASH FLOWS
------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1996 1995 1994
----------- ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(3,008,309) $(4,073,811) $(5,417,779)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 8,360,927 8,774,507 9,188,994
Amortization of interest rate protection agreement 793 82,085 82,080
Decrease (increase) in trade receivables 214,700 (492,782) 225,591
Decrease (increase) in deposits, prepaid expenses
and deferred charges (408,380) (193,197) (206,491)
Increase (decrease) in accounts payable, accrued
liabilities and subscriber prepayments 44,605 (187,604) 592,973
----------- ----------- -----------
Net cash provided by operating activities 5,204,336 3,909,198 4,465,368
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (3,879,797) (3,903,813) (3,630,545)
----------- ----------- -----------
Net cash used in investing activities (3,879,797) (3,903,813) (3,630,545)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 3,612,576 108,593 71,380
Repayment of debt (2,880,667) (1,849,862) (1,261,189)
Increase (decrease) in advances from Jones Intercable, Inc. (1,938,703) 1,852,780 296,259
----------- ----------- -----------
Net cash provided by (used in) financing activities (1,206,794) 111,511 (893,550)
----------- ----------- -----------
Increase (decrease) in cash 117,745 116,896 (58,727)
Cash, beginning of year 371,870 254,974 313,701
----------- ----------- -----------
Cash, end of year $ 489,615 $ 371,870 $ 254,974
=========== =========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 2,929,302 $ 3,467,008 $ 2,454,391
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
37
<PAGE>
CABLE TV FUND 14-A/B VENTURE
----------------------------
(A General Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(1) ORGANIZATION AND PARTNERS' INTERESTS
------------------------------------
Formation and Business
----------------------
On January 8, 1988, Cable TV Fund 14-A, Ltd. and Cable TV Fund 14-B,
Ltd. (the "Venture Partners") formed a Colorado general partnership known as
Cable TV Fund 14-A/B Venture (the "Venture") by contributing $18,975,000 and
$51,025,000, respectively, for 27 percent and 73 percent ownership interests,
respectively. The Venture was formed for the purpose of acquiring the cable
television system serving areas in and around Broward County, Florida (the
"Broward County System").
Jones Intercable, Inc. ("Intercable"), general partner of each of the
Venture Partners, 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 for other 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 the Venture Partners in proportion to their 27 and 73 percent
interests in the Venture.
(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.
The preparation of financial statements in conformity with generally
accepted accounting principles requires Intercable's management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Purchase Price Allocation
-------------------------
The Broward County System acquisition was accounted for as a purchase
with the purchase price allocated to tangible and intangible assets based upon
an independent appraisal. The method of allocation of purchase price was as
follows: first, to the fair value of net tangible assets acquired; second, to
the value of subscriber lists and noncompete agreements with previous owners;
third, to franchise costs; and fourth, to costs in excess of interests in net
assets purchased. Brokerage fees paid to an affiliate of Intercable and other
system acquisition costs were capitalized and included in the cost of intangible
assets.
Property, Plant and Equipment
-----------------------------
Depreciation is provided using the straight-line method over the
following estimated service lives:
<TABLE>
<CAPTION>
<S> <C>
Cable distribution systems 5 - 15 years
Equipment and tools 5 years
Office furniture and equipment 5 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>
Property, plant and equipment and the corresponding accumulated
depreciation are written off as certain assets become fully depreciated and are
no longer in service.
Intangible Assets
-----------------
Costs assigned to franchises, subscriber lists 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>
<CAPTION>
<S> <C>
Franchise costs 1 - 6 years
Subscriber lists 2 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.
Reclassification
----------------
Certain prior year amounts have been reclassified to conform to the 1996
presentation.
(3) TRANSACTIONS WITH 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 for the years ended December 31, 1996, 1995 and 1994
were $1,275,955, $1,173,475 and $1,109,176, respectively.
The Venture reimburses Intercable for 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,
accounting, administrative, legal, and investor relations services to the
Venture. Such services, and their related costs, are necessary to the operation
of the Venture and would have been incurred by the Venture, if it was a stand
alone entity. Allocations of personnel costs are based primarily on actual time
spent by employees of Intercable with respect to each entity managed. Remaining
expenses are allocated based on the pro rata relationship of the Venture's
revenues to the total revenues of all systems owned or managed by Intercable and
certain of its subsidiaries. Systems owned by Intercable and all other systems
owned by partnerships for which Intercable is the general partner are also
allocated a proportionate share of these expenses. Intercable believes that the
methodology used in allocating overhead and administrative expenses is
reasonable. Reimbursements made to Intercable by the Venture for allocated
overhead and administrative expenses during the years ended December 31, 1996,
1995 and 1994 were $1,705,142, $1,654,736 and $1,668,114, respectively.
The Venture was charged interest during 1996 at an average interest rate
of 8.58 percent on the amounts due Intercable, which approximated Intercable's
weighted average cost of borrowing. Total interest charged to the Venture by
Intercable was $122,224, $155,659 and $960 for the years ended December 31,
1996, 1995 and 1994, respectively.
Payments to/from Affiliates for Programming Services
----------------------------------------------------
The Venture receives programming from Superaudio, Jones Education
Company, Great American Country, Inc. and Product Information Network, all of
which are affiliates of Intercable.
Payments to Superaudio totaled $34,421, $30,171 and $30,631 in 1996,
1995 and 1994, respectively. Payments to Jones Education Company totaled
$37,113, $32,268 and $33,445 in 1996, 1995 and 1994, respectively. Payments to
Great American Country, Inc., which initiated service in 1996, totaled $47,590
in 1996.
The Venture receives a commission from Product Information Network based
on a percentage of advertising revenue and number of subscribers. Product
Information Network paid commissions to the Venture totaling $49,973, $23,430
and $23,856 in 1996, 1995 and 1994, respectively.
39
<PAGE>
(4) PROPERTY, PLANT AND EQUIPMENT
-----------------------------
Property, plant and equipment as of December 31, 1996 and 1995, consisted
of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cable distribution systems $ 49,591,013 $ 45,655,600
Equipment and tools 1,899,148 1,749,450
Office furniture and equipment 1,149,554 1,150,940
Buildings 1,870,430 1,869,631
Vehicles 651,766 856,493
Land 730,867 730,867
------------ ------------
55,892,778 52,012,981
Less - accumulated depreciation (27,437,977) (24,307,885)
------------ ------------
$ 28,454,801 $ 27,705,096
============ ============
(5) DEBT
----
Debt consists of the following: December 31,
---------------------------
1996 1995
------------ ------------
Lending institutions-
Revolving credit and
term loan $ 41,102,968 $ 40,365,468
Capital lease obligations 159,593 165,184
------------ ------------
$ 41,262,561 $ 40,530,652
============ ============
</TABLE>
In June 1996, the Venture amended its existing term loan providing for
a reducing revolving credit facility with an available commitment of
$42,500,000. The entire $42,500,000 commitment is available through December
31, 1998, at which time the commitment will be repaid in twenty quarterly
installments with a final maturity of December 31, 2003. At December 31, 1996,
the balance outstanding was $41,102,968, leaving $1,397,032 available for future
borrowings. Interest is at the Venture's option of Prime plus 1/4 percent, the
London Interbank Offered Rate plus 1-1/4 percent or the Certificate of Deposit
Rate plus 1-3/8 percent. The effective interest rates on amounts outstanding as
of December 31, 1996 and 1995 were 6.79 percent and 7.17 percent, respectively.
Installments due on debt principal for each of the five years in the
period ending December 31, 2001 and thereafter, respectively, are: $47,882,
$47,882, $5,450,848, $6,815,949, $8,500,000 and $20,400,000. At December 31,
1996, substantially all of the Venture's property, plant and equipment secured
the above indebtedness.
At December 31, 1996, the carrying amount of the Venture's long-term
debt did not differ significantly from the estimated fair value of the financial
instruments. The fair value of the Venture's long-term debt is estimated based
on the discounted amount of future debt service payments using rates of
borrowing for a liability of similar risk.
(6) INCOME TAXES
------------
Income taxes have not been recorded in the accompanying financial
statements because they accrue directly to the partners of Cable TV Fund 14-A,
Ltd. and Cable TV Fund 14-B, Ltd.
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 the Venture's general partners would likely be changed accordingly.
40
<PAGE>
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.
(7) COMMITMENTS AND CONTINGENCIES
-----------------------------
Office and other facilities are rented under various long-term lease
arrangements. Rent paid under such lease arrangements totaled $21,762, $22,680
and $49,856, respectively for the years ended December 31, 1996, 1995 and 1994.
Minimum commitments under operating leases for each of the five years in the
period ending December 31, 2001 and thereafter are as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 57,708
1998 51,878
1999 50,712
2000 50,712
2001 50,712
Thereafter 462,776
-------
$724,498
--------
</TABLE>
(8) SUPPLEMENTARY PROFIT AND LOSS INFORMATION
-----------------------------------------
Supplementary profit and loss information is presented below:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Maintenance and repairs $ 163,219 $ 204,878 $ 238,893
========== ========== ==========
Taxes, other than income and payroll taxes $ 425,691 $ 268,757 $ 258,369
========== ========== ==========
Advertising $ 197,237 $ 152,727 $ 157,998
========== ========== ==========
Depreciation of property, plant and equipment $3,523,510 $3,429,925 $3,315,438
========== ========== ==========
Amortization of intangible assets $4,837,417 $5,344,582 $5,873,556
========== ========== ==========
</TABLE>
41
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
---------------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
None.
PART III.
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------
The Partnership itself has no officers or directors. Certain information
concerning the directors and executive officers of the General Partner is set
forth below. Directors of the General Partner serve until the next annual
meeting of the General Partner and until their successors shall be elected and
qualified.
Glenn R. Jones 67 Chairman of the Board and Chief
Executive Officer
Derek H. Burney 57 Vice Chairman of the Board
James B. O'Brien 47 President and Director
Ruth E. Warren 47 Group Vice President/Operations
Kevin P. Coyle 45 Group Vice President/Finance
Christopher J. Bowick 41 Group Vice President/Technology
George H. Newton 62 Group Vice President/Telecommunications
Raymond L. Vigil 50 Group Vice President/Human Resources
Cynthia A. Winning 45 Group Vice President/Marketing
Elizabeth M. Steele 45 Vice President/General Counsel/Secretary
Larry W. Kaschinske 37 Vice President/Controller
Robert E. Cole 64 Director
William E. Frenzel 68 Director
Donald L. Jacobs 58 Director
James J. Krejci 55 Director
John A. MacDonald 43 Director
Raphael M. Solot 63 Director
Howard O. Thrall 49 Director
Siim A. Vanaselja 40 Director
Sanford Zisman 57 Director
Robert B. Zoellick 43 Director
Mr. Glenn R. Jones has served as Chairman of the Board of Directors and
Chief Executive Officer of the General Partner since its formation in 1970, and
he was President from June 1984 until April 1988. Mr. Jones is the sole
shareholder, President and Chairman of the Board of Directors of Jones
International, Ltd. He is also Chairman of the Board of Directors of the
subsidiaries of the General Partner and of certain other affiliates of the
General Partner. Mr. Jones has been involved in the cable television business in
various capacities since 1961, is a member of the Board of Directors and the
Executive Committee of the National Cable Television Association. Additionally,
Mr. Jones is a member of the Board of Governors for the American Society for
Training and Development, and a member of the Board of Education Council of the
National Alliance of Business. Mr. Jones is also a founding member of the James
Madison Council of the Library of Congress. Mr. Jones has been the recipient of
several awards including the Grand Tam Award in 1989, the highest award from the
Cable Television Administration and Marketing Society; the President's Award
from the Cable Television Public Affairs Association in recognition of Jones
International's educational efforts through Mind Extension University (now
Knowledge TV); the Donald G. McGannon Award for the advancement of minorities
and women in cable from the United Church of Christ Office of Communications;
the STAR Award from American Women in Radio and Television, Inc. for exhibition
of a commitment to the issues and concerns of women in television and radio; the
Cableforce 2000 Accolade awarded by Women in Cable in recognition of the General
Partner's innovative employee programs; the Most Outstanding Corporate
Individual Achievement Award from the International Distance Learning Conference
for his contributions to distance education; the Golden Plate Award from the
42
<PAGE>
American Academy of Achievement for his advances in distance education; the Man
of the Year named by the Denver chapter of the Achievement Rewards for College
Scientists; and in 1994 Mr. Jones was inducted into Broadcasting and Cable's
Hall of Fame.
Mr. Derek H. Burney was appointed a Director of the General Partner in
December 1994 and Vice Chairman of the Board of Directors on January 31, 1995.
Mr. Burney joined BCE Inc., Canada's largest telecommunications company, in
January 1993 as Executive Vice President, International. He has been the
Chairman of Bell Canada International Inc., a subsidiary of BCE, since January
1993 and, in addition, has been Chief Executive Officer of BCI since July 1993.
Prior to joining BCE, Mr. Burney served as Canada's ambassador to the United
States from 1989 to 1992. Mr. Burney also served as chief of staff to the Prime
Minister of Canada from March 1987 to January 1989 where he was directly
involved with the negotiation of the U.S. - Canada Free Trade Agreement. In July
1993, he was named an Officer of the Order of Canada. Mr. Burney is also a
director of Bell Cablemedia plc, Mercury Communications Limited, Videotron
Holdings plc, Tele-Direct (Publications) Inc., Teleglobe Inc., Bimcor Inc.,
Maritime Telegraph and Telephone Company, Limited, Moore Corporation Limited,
Northbridge Programming Inc. and certain subsidiaries of Bell Canada
International.
Mr. James B. O'Brien, the General Partner's President, joined the
General Partner in January 1982. Prior to being elected President and a Director
of the General Partner in December 1989, Mr. O'Brien served as a Division
Manager, Director of Operations Planning/Assistant to the CEO, Fund Vice
President and Group Vice President/Operations. Mr. O'Brien was appointed to the
General Partner's Executive Committee in August 1993. As President, he is
responsible for the day-to-day operations of the cable television systems
managed and owned by the General Partner. Mr. O'Brien is a board member of Cable
Labs, Inc., the research arm of the U.S. cable television industry. He also
serves as Vice Chairman and a director of the Cable Television Administration
and Marketing Association and as a director and member of the Executive
Committee of the Walter Kaitz Foundation, a foundation that places people of
ethnic minority groups in positions with cable television systems, networks and
vendor companies .
Ms. Ruth E. Warren joined the General Partner in August 1980 and has
served in various operational capacities, including system manager and Fund Vice
President, since then. Ms. Warren was elected Group Vice President/Operations of
the General Partner in September 1990.
Mr. Kevin P. Coyle joined The Jones Group, Ltd. in July 1981 as Vice
President/Financial Services. In September 1985, he was appointed Senior Vice
President/Financial Services. He was elected Treasurer of the General Partner in
August 1987, Vice President/Treasurer in April 1988 and Group Vice
President/Finance and Chief Financial Officer in October 1990.
Mr. Christopher J. Bowick joined the General Partner in September 1991
as Group Vice President/Technology and Chief Technical Officer. Previous to
joining the General Partner, Mr. Bowick worked for Scientific Atlanta's
Transmission Systems Business Division in various technical management
capacities since 1981, and as Vice President of Engineering since 1989.
Mr. George H. Newton joined the General Partner in January 1996 as Group
Vice President/Telecommunications. Prior to joining the General Partner, Mr.
Newton was President of his own consulting business, Clear Solutions, and since
1994 Mr. Newton has served as a Senior Advisor to Bell Canada International.
From 1990 to 1993, Mr. Newton served as the founding Chief Executive Officer and
Managing Director of Clear Communications, New Zealand, where he established an
alternative telephone company in New Zealand. From 1964 to 1990, Mr. Newton held
a wide variety of operational and business assignments with Bell Canada
International.
Mr. Raymond L. Vigil joined the General Partner in June 1993 as Group
Vice President/Human Resources. Previous to joining the General Partner, Mr.
Vigil served as Executive Director of Learning with USWest. Prior to USWest, Mr.
Vigil worked in various human resources posts over a 14-year term with the IBM
Corporation.
43
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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.
Ms. Elizabeth M. Steele joined the General Partner in August 1987 as
Vice President/General Counsel and Secretary. From August 1980 until joining the
General Partner, Ms. Steele was an associate and then a partner at the Denver
law firm of Davis, Graham & Stubbs, which serves as counsel to the General
Partner.
Mr. Larry Kaschinske joined the General Partner in 1984 as a staff
accountant in the General Partner's former Wisconsin Division, was promoted to
Assistant Controller in 1990, named Controller in August 1994 and was elected
Vice President/Controller in June 1996.
Mr. Robert E. Cole was appointed a Director of the General Partner in
March 1996. Mr. Cole is currently self-employed as a partner of First Variable
Insurance Marketing and is responsible for marketing to National Association of
Securities Dealers, Inc. firms in northern California, Oregon, Washington and
Alaska. From 1993 to 1995, Mr. Cole was the Director of Marketing for Lamar Life
Insurance Company; from 1992 to 1993, Mr. Cole was Senior Vice President of PMI
Inc., a third party lender serving the special needs of Corporate Owned Life
Insurance (COLI) and from 1988 to 1992, Mr. Cole was the principal and co-
founder of a specialty investment banking firm that provided services to finance
the ownership and growth of emerging companies, productive assets and real
property. Mr. Cole is a Certified Financial Planner and a former United States
Naval Aviator.
Mr. William E. Frenzel was appointed a Director of the General Partner
in April 1995. Mr. Frenzel has been a Guest Scholar since 1991 with the
Brookings Institution, a research organization located in Washington D. C. Until
his retirement in January 1991, Mr. Frenzel served for twenty years in the
United States House of Representatives, representing the State of Minnesota,
where he was a member of the House Ways and Means Committee and its Trade
Subcommittee, the Congressional Representative to the General Agreement on
Tariffs and Trade (GATT), the Ranking Minority Member on the House Budget
Committee and a member of the National Economic Commission. Mr. Frenzel also
served in the Minnesota Legislature for eight years. He is a Distinguished
Fellow of the Tax Foundation, Vice Chairman of the Eurasia Foundation, a Board
Member of the U.S.-Japan Foundation, the Close-Up Foundation, Sit Mutual Funds
and Chairman of the Japan-America Society of Washington.
Mr. Donald L. Jacobs was appointed a Director of the General Partner in
April 1995. Mr. Jacobs is a retired executive officer of TRW. Prior to his
retirement, he was Vice President and Deputy Manager of the Space and Defense
Sector; prior to that appointment, he was the Vice President and General Manager
of the Defense Systems Group and prior to his appointment as Group General
Manager, he was President of ESL, Inc., a wholly owned subsidiary of TRW. During
his career, Mr. Jacobs served on several corporate, professional and civic
boards.
Mr. James J. Krejci was President of the International Division of
International Gaming Technology, International headquartered in Reno, Nevada,
until March 1995. Prior to joining IGT in May 1994, Mr. Krejci was Group Vice
President of Jones International, Ltd. and was Group Vice President of the
General Partner. He also served as an officer of subsidiaries of Jones
International, Ltd. until leaving the General Partner in May 1994. Mr. Krejci
has been a Director of the General Partner since August 1987.
44
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Mr. John A. MacDonald was appointed a Director of the General Partner in
November 1995. Mr. MacDonald is Executive Vice President of Business Development
and Chief Technology Officer of Bell Canada International Inc. Prior to joining
Bell Canada in November 1994, Mr. MacDonald was President and Chief Executive
Officer of The New Brunswick Telephone Company, Limited, a post he had held
since March of that year. Prior to March 1994, Mr. MacDonald was with NBTel for
17 years serving in various capacities, including Market Planning Manager,
Corporate Planning Manager, Manager of Systems Planning and Development and
General Manager, Chief Engineer and General Manager of Engineering and
Information Systems and Vice President of Planning. Mr. MacDonald was the former
Chairman of the New Brunswick section of the Institute of Electrical and
Electronic Engineers and also served on the Federal Government's Information
Highway Advisory Council. Mr. MacDonald is Chairman of MediaLinx Interactive
Inc. and Stentor Canadian Network Management and is presently a Governor of the
Montreal Exchange. He also serves on the Board of Directors of Tele-Direct
(Publications) Inc., Bell-Northern Research, Ltd., SRCI, Bell Sygma, Canarie
Inc., and is a member of the University of New Brunswick Venture Campaign
Cabinet.
Mr. Raphael M. Solot was appointed a Director of the General Partner in
March 1996. Mr. Solot is an attorney and has practiced law for 31 years with an
emphasis on franchise, corporate and partnership law and complex litigation.
Mr. Howard O. Thrall was appointed a Director of the General Partner in
March 1996. Mr. Thrall had previously served as a Director of the General
Partner from December 1988 to December 1994. Mr. Thrall is Senior Vice
President--Corporate Development for First National Net, Inc., a leading service
provider for the mortgage banking industry, and he heads First National Net's
Washington, D.C. regional office. From September 1993 to July 1996, Mr. Thrall
has served as Vice President of Sales, Asian Region, for World Airways, Inc.
headquartered at the Washington Dulles International Airport. From 1984 until
August 1993, Mr. Thrall was with the McDonnell Douglas Corporation, where he
concluded as a Regional Vice President, Commercial Marketing with the Douglas
Aircraft Company subsidiary. Mr. Thrall is also an active management and
international marketing consultant, having completed assignments with McDonnell
Douglas Aerospace, JAL Trading Inc. Technology Solutions Company, Cheong Kang
Associated (Korea), Aero Investment Alliance, Inc. and Western Real Estate
Partners, among others.
Mr. Siim A. Vanaselja was appointed a Director of the General Partner in
August 1996. Mr. Vanaselja joined BCE Inc., Canada's largest telecommunications
company, in February 1994 as Assistant Vice-President, International Taxation.
In June 1994, he was appointed Assistant Vice-President and Director of
Taxation, and in February 1995, Mr. Vanaselja was appointed Vice-President,
Taxation. On August 1, 1996, Mr. Vanaselja was appointed the Chief Financial
Officer of Bell Canada International Inc., a subsidiary of BCE Inc. Prior to
joining BCE Inc. and since August 1989, Mr. Vanaselja was a partner in the
Toronto office of KPMG Peat Marwick Thorne. Mr. Vanaselja has been a member of
the Institute of Chartered Accountants of Ontario since 1982 and is a member of
the Canadian Tax Foundation, the Tax Executives Institute and the International
Fiscal Association.
Mr. Sanford Zisman was appointed a director of the General Partner in
June 1996. Mr. Zisman is a member of the law firm, Zisman & Ingraham, P.C. of
Denver, Colorado and has practiced law for 31 years, with an emphasis on tax,
business and estate planning and probate administration. Mr. Zisman currently
serves as a member of the Board of Directors of Saint Joseph Hospital, the
largest hospital in Colorado, and he has served as Chairman of the Board,
Chairman of the Finance Committee and Chairman of the Strategic Planning
Committee of the hospital. Since 1992, he has also served on the Board of
Directors of Maxim Series Fund, Inc., a subsidiary of Great-West Life Assurance
Company.
Mr. Robert B. Zoellick was appointed a Director of the General Partner
in April 1995. Mr. Zoellick is Executive Vice President for Housing and Law of
Fannie Mae, a federally chartered and stockholder-owned corporation that is the
largest housing finance investor in the United States. From August 1992 to
January 1993, Mr. Zoellick served as Deputy Chief of Staff of the White House
and Assistant to the President. From May 1991 to August 1992, Mr. Zoellick
served concurrently as the Under Secretary of State for Economic and
Agricultural Affairs and as Counselor of the Department of State, a post he
assumed in March 1989. From 1985 to 1988, Mr. Zoellick served at the Department
of Treasury in a number of capacities, including Counselor to the Secretary. Mr.
Zoellick received the Alexander Hamilton and Distinguished Service Awards,
highest honors of the Departments of Treasury and State, respectively. The
German Government awarded him the Knight Commanders
45
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Cross for his work on Germany unification. Mr. Zoellick currently serves on the
boards of Alliance Capital, Said Holdings, the Council on Foreign Relations, the
Congressional Institute, the German Marshall Fund of the U.S., the European
Institute, the National Bureau of Asian Research, the American Council on
Germany, the American Institute for Contemporary German Studies and the Overseas
Development Council.
ITEM 11. EXECUTIVE COMPENSATION
--------------------------------
The Partnership has no employees; however, various personnel are
required to operate the Systems. Such personnel are employed by the General
Partner and, the cost of such employment is charged by the General Partner to
the Partnership or the Venture as a direct reimbursement item. See Item 13.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS
----------------------------------------------------------------------
As of March 4, 1997, no person or entity owned more than 5 percent of
the limited partnership interests of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------
The General Partner and its affiliates engage in certain transactions
with the Partnership and the Venture. 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.
TRANSACTIONS WITH THE GENERAL PARTNER
The General Partner charges a management fee, and the General Partner is
reimbursed for certain allocated overhead and administrative expenses.
These expenses represent the salaries and benefits paid to corporate personnel,
rent, data processing services and other corporate facilities costs. Such
personnel provide engineering, marketing, administrative, accounting, legal and
investor relations services to the Partnership and the Venture. Allocations of
personnel costs are based primarily on actual time spent by employees of the
General Partner with respect to each partnership managed. Remaining expenses are
allocated based on the pro rata relationship of the Partnership's and the
Venture's revenues to the total revenues of all systems owned or managed by the
General Partner and certain of its subsidiaries. Systems owned by the General
Partner and all other systems owned by partnerships for which Jones Intercable,
Inc. is the general partner are also allocated a proportionate share of these
expenses.
The General Partner also advances funds and charges interest on the
balance payable. The interest rate charged approximates the General Partner's
weighted average cost of borrowing.
TRANSACTIONS WITH AFFILIATES
Jones Education Company ("JEC") is owned 63% by Jones International,
Ltd. ("International"), an affiliate of the General Partner, 9% by Glenn R.
Jones, 12% by Bell Canada International Inc. ("BCI") and 16% by the General
Partner. JEC operates two television networks, JEC Knowledge TV and Jones
Computer Network. JEC Knowledge TV provides programming related to computers and
technology; business, careers and finance; health and wellness; and global
culture and languages. Jones Computer Network provides programming focused
primarily on computers and technology. JEC sells its programming to certain
cable television systems owned or managed by the General Partner.
46
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The Great American Country network provides country music video programming
to certain cable television systems owned or managed by the General Partner.
This network is owned and operated by Great American Country, Inc., a subsidiary
of Jones International Networks, Ltd., an affiliate of International.
Jones Galactic Radio, Inc. is a company now owned by Jones International
Networks, Ltd., an affiliate of International. Superaudio, a joint venture
between Jones Galactic Radio, Inc. and an unaffiliated entity, provides
satellite programming to certain cable television systems owned or managed by
the General Partner.
The Product Information Network Venture (the "PIN Venture") is a venture
among a subsidiary of Jones International Networks, Ltd., an affiliate of
International, and two unaffiliated cable system operators. The PIN Venture
operates the Product Information Network (PIN), which is a 24-hour network that
airs long-form advertising generally known as infomercials. The PIN Venture
generally makes incentive payments of approximately 60% of its net advertising
revenue to the cable systems that carry its programming. Most of the General
Partners owned and managed systems carry PIN for all or part of each day.
Revenues received by the Partnership from the PIN Venture relating to the
Partnerships owned cable television systems totaled approximately $90,304 for
the year ended December 31, 1996. Revenues received by the Venture from the PIN
Venture relating the Ventures owned cable television systems totaled
approximately $49,973 for the year ended December 31, 1996.
The charges to the Partnership and to the Venture for related party
transactions are as follows for the periods indicated:
For the Year Ended December 31,
-------------------------------
Cable TV Fund 14-A 1996 1995 1994
- ------------------ ---- ---- ----
Management fees $2,390,436 $2,204,740 $2,022,113
Allocation of expenses 3,162,115 3,170,917 3,105,440
Interest expense 250,004 23,107 43,708
Amount of advances outstanding 352,232 887,215 706,579
Highest amount of advances outstanding 3,453,993 887,215 1,004,121
Programming fees:
Jones Education Company 133,110 126,679 72,733
Great American Country 35,100 0 0
Superaudio 63,513 54,644 51,858
For the Year Ended December 31,
-------------------------------
Cable TV Fund 14-A/B Venture 1996 1995 1994
- ---------------------------- ---- ---- ----
Management fees $1,275,955 $1,173,475 $1,109,176
Allocation of expenses 1,705,142 1,654,736 1,668,114
Interest expense 122,224 155,659 960
Amount of advances outstanding 268,256 2,206,959 354,179
Highest amount of advances outstanding 2,206,959 2,206,959 354,179
Programming fees:
Jones Education Company 37,113 32,268 27,751
Great American Country 47,590 0 0
Superaudio 34,421 30,171 30,631
47
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PART IV.
--------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
-------------------------------------------------------------------------
(a)1. See index to financial statements for the list of financial statements
and exhibits thereto filed as part of this report.
3. The following exhibits are filed herewith.
4.1 Limited Partnership Agreement for Cable TV Fund 14-A, Ltd. (1)
4.2 Joint Venture Agreement of Cable TV Fund 14-A/B Venture, dated as of
January 8, 1988, between Cable TV Fund 14-A, Ltd. and Cable TV Fund
14-B, Ltd. (1)
10.1.1 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the Big Cypress Seminole
Indian Reservation, Florida (Fund 14-A/B). (2)
10.1.2 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the Brighton Seminole Indian
Reservation, Florida (Fund 14-A/B). (2)
10.1.3 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the unincorporated portions of
Broward County, Florida (Fund 14-A/B). (3)
10.1.4 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for Cooper City, Florida (Fund 14-
A/B). (10)
10.1.5 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for Dania, Florida (Fund 14-A/B).
(3)
10.1.6 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for Davie, Florida (Fund 14-A/B).
(3)
10.1.7 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the Hollywood Seminole Indian
Reservation, Florida (Fund 14-A/B). (2)
10.1.8 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the Immokalee Seminole Indian
Reservation, Florida (Fund 14-A/B). (2)
10.1.9 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for Lauderdale Lakes, Florida
(Fund 14-A/B). (3)
10.1.10 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the Village of Bement,
Illinois (Fund 14-A). (5)
10.1.11 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the Village of Cerro Gordo,
Illinois (Fund 14-A). (4)
10.1.12 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for Chanute Air Force Base,
Illinois (Fund 14-A). (4)
10.1.13 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the Town of Chatsworth,
Illinois (Fund 14-A). (4)
48
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10.1.14 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the City of Chenoah, Illinois
(Fund 14-A). (4)
10.1.15 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the City of Clinton, Illinois
(Fund 14-A). (4)
10.1.16 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the County of Dupage, Illinois
(Fund 14-A). (1)
10.1.17 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the City of Fairbury, Illinois
(Fund 14-A). (4)
10.1.18 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the City of Farmer City,
Illinois (Fund 14-A).
10.1.19 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the Village of Forest,
Illinois (Fund 14-A). (4)
10.1.20 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the City of Gibson City,
Illinois (Fund 14-A). (4)
10.1.21 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the City of Leroy, Illinois
(Fund 14-A). (4)
10.1.22 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the City of Monticello,
Illinois (Fund 14-A). (4)
10.1.23 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the City of Naperville,
Illinois (Fund 14-A). (1)
10.1.24 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the Village of Pesotum,
Illinois (Fund 14-A). (4)
10.1.25 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the Village of Rantoul,
Illinois (Fund 14-A). (4)
10.1.26 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the Village of Thomasborough,
Illinois (Fund 14-A). (9)
10.1.27 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the Village of Tolono,
Illinois (Fund 14-A). (10)
10.1.28 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the County of Will, Illinois
(Fund 14-A). (1)
10.1.29 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the County of Calvert,
Maryland (Fund 14-A). (1)
10.1.30 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for St. Mary's County, Maryland
(Fund 14-A). (5)
10.1.31 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for Southern Anne Arundel County,
Maryland (Fund 14-A). (1)
49
<PAGE>
10.1.32 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the City of Albertville,
Minnesota (Fund 14-A). (1)
10.1.33 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for City of Big Lake, Minnesota
(Fund 14-A). (1)
10.1.34 Copy of Ordinance No. 1200 dated 3/5/90 relating to the City of Big
Lake franchise (Fund 14-A). (5)
10.1.35 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the City of Buffalo, Minnesota
(Fund 14-A). (1)
10.1.36 Copy of Ordinance dated 4/16/90 relating to the Buffalo franchise
(Fund 14-A). (5)
10.1.37 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the City of Cokato, Minnesota
(Fund 14-A). (1)
10.1.38 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the City of Dassel, Minnesota
(Fund 14-A). (1)
10.1.39 Copy of Ordinance No. 10.044 dated 1/16/90 relating to the Dassel
franchise (Fund 14-A). (5)
10.1.40 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the City of Dayton, Minnesota
(Fund 14-A). (1)
10.1.41 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the City of Delano, Minnesota
(Fund 14-A). (1)
10.1.42 Copy of Ordinance No. 0-90-01 dated 3/20/90 relating to the Delano
franchise (Fund 14-A). (5)
10.1.43 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the City of Elk River,
Minnesota (Fund 14-A). (1)
10.1.44 Copy of Ordinance No. 90-3 dated 2/26/90 relating to the City of Elk
River franchise (Fund 14-A). (5)
10.1.45 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the Township of Hassan,
Minnesota (Fund 14-A). (2)
10.1.46 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the City of Maple Lake,
Minnesota (Fund 14-A). (1)
10.1.47 Copy of Ordinance No. 38 dated 3/5/90 relating to the City of Maple
Lake franchise (Fund 14-A). (5)
10.1.48 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the City of Monticello,
Minnesota (Fund 14-A). (1)
10.1.49 Copy of Ordinance No. 183 dated 2/26/90 relating to the City of
Monticello franchise (Fund 14-A). (5)
50
<PAGE>
10.1.50 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the Township of Monticello,
Minnesota (Fund 14-A). (1)
10.1.51 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the Township of Ostego,
Minnesota (Fund 14-A). (1)
10.1.52 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the City of Rockford,
Minnesota (Fund 14-A). (1)
10.1.53 Resolutions 90-14 and 90-15 dated 4/10/90 relating to the City of
Rockford franchise (Fund 14-A). (5)
10.1.54 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the Town of Rockford,
Minnesota (Fund 14-A). (2)
10.1.55 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the City of St. Michael,
Minnesota (Fund 14-A). (1)
10.1.56 Copy of a franchise and related documents thereto granting a community
antenna television system franchise for the City of Watertown,
Minnesota (Fund 14-A). (1)
10.2.1 Credit Agreement dated as of July 21, 1994 among Cable TV Fund 14-A
and The Bank of Nova Scotia, as agent for various lenders. (Fund 14-A)
(9)
10.2.2 First Amendment dated December 30, 1996 to Credit Agreement dated as
of July 21, 1994 among Cable TV Fund 14-A, Ltd. and The Bank of Nova
Scotia, as agent for various lenders.
10.2.3 Credit Agreement dated as of September 30, 1988 among Cable TV Fund
14-A/B Venture and The Bank of Nova Scotia, as agent for various
lenders. (Fund 14-A/B) (6)
10.2.4 First Letter Amendment dated June 11, 1990 to Credit Agreement dated
as of September 30, 1988 among Cable TV Fund 14-A/B Venture and The
Bank of Nova Scotia, as agent for various lenders. (Fund 14-A/B) (6)
10.2.5 Second Letter Amendment dated May 28, 1992 to Credit Agreement dated
as of September 30, 1988 among Cable TV Fund 14-A/B Venture and The
Bank of Nova Scotia, as agent for various lenders. (Fund 14-A/B) (6)
10.2.6 Third Letter Amendment dated June 30, 1994 to Credit Agreement dated
as of September 30, 1988 among Cable TV Fund 14-A/B Venture and The
Bank of Nova Scotia, as agent for various lenders. (Fund 14-A/B) (9)
10.2.7 Fourth Letter Amendment dated June 24, 1996 to Credit Agreement dated
as of September 30, 1988 among Cable TV Fund 14-A/B Venture and The
Bank of Nova Scotia, as agent for various lenders. (Fund 14-A/B)
10.3.1 Purchase and Sale Agreement dated as of March 31, 1988 by and between
Cable TV Fund 14-A/B Venture as Buyer and Jones Intercable, Inc. as
Seller. (Fund 14-A/B) (7)
10.3.2 Purchase and Sale Agreement dated as of May 30, 1991, by and between
Jones Intercable, Inc. and Fund 14-A. (Fund 14-A) (8)
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10.3.3 Asset Purchase Agreement dated as of March 28, 1996, between Cable TV
Fund 14-A, Ltd. and Lenfest Atlantic, Inc. (11)
10.3.4 Asset Purchase Agreement dated March 12, 1997 between Cable TV Fund
14-A, Ltd. and Triax Midwest Associates, L.P.
27 Financial Data Schedule
__________
(1) Incorporated by reference from Registrant's Report on Form 10-K for
fiscal year ended December 31, 1987 (Commission File Nos. 0-15378 and
0-16200)
(2) Incorporated by reference from Registrant's Report on Form 10-K for
fiscal year ended December 31, 1990 (Commission File Nos. 0-15378 and
0-16200)
(3) Incorporated by reference from Registrant's Report on Form 10-K for
fiscal year ended December 31, 1989 (Commission File Nos. 0-15378 and
0-16200)
(4) Incorporated by reference from the Annual Report on Form 10-K for
fiscal year ended December 31, 1990 of Jones Intercable, Inc.
(Commission File No. 1-9953)
(5) Incorporated by reference from Registrant's Report on Form 10-K for
fiscal year ended December 31, 1992.
(6) Incorporated by reference from Registrants' Reports on Form 8-K dated
March 31, 1993 (Commission File Nos. 0-15378 and 0-16200)
(7) Incorporated by reference from Registrants' Reports on Form 8-K dated
March 31, 1988 (Commission File Nos. 0-15378 and 0-16200)
(8) Incorporated by reference from Fund 14-A's Report on Form 8-K dated
June 12, 1991 (Commission File No. 0-15378).
(9) Incorporated by reference from the Annual Report Reports on Form 10-K
for fiscal year ended December 31, 1994 of Jones Intercable, Inc.
(Commission File No. 1-9953)
(10) Incorporated by reference from Registrant's Report on Form 10-K for
fiscal year ended December 31, 1994.
(11) Incorporated by reference from Registrant's Report on Form 10-K for
fiscal year ended December 31, 1995.
(b) Reports on Form 8-K
-------------------
None.
52
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CABLE TV FUND 14-A, LTD.
a Colorado limited partnership
By: Jones Intercable, Inc.
By: /s/ Glenn R. Jones
--------------------------------
Glenn R. Jones
Chairman of the Board and Chief
Dated: March 24, 1997 Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/ Glenn R. Jones
--------------------------------
Glenn R. Jones
Chairman of the Board and Chief
Executive Officer
Dated: March 24, 1997 (Principal Executive Officer)
By: /s/ Kevin P. Coyle
--------------------------------
Kevin P. Coyle
Group Vice President/Finance
Dated: March 24, 1997 (Principal Financial Officer)
By: /s/ Larry Kaschinske
--------------------------------
Larry Kaschinske
Vice President/Controller
Dated: March 24, 1997 (Principal Accounting Officer)
By: /s/ James B. O'Brien
--------------------------------
James B. O'Brien
Dated: March 24, 1997 President and Director
By: /s/ Derek H. Burney
--------------------------------
Derek H. Burney
Dated: March 24, 1997 Director
By: /s/ Robert E. Cole
--------------------------------
Robert E. Cole
Dated: March 24, 1997 Director
53
<PAGE>
By: /s/ William E. Frenzel
--------------------------------
William E. Frenzel
Dated: March 24, 1997 Director
By: /s/ Donald L. Jacobs
--------------------------------
Donald L. Jacobs
Dated: March 24, 1997 Director
By: /s/ James J. Krejci
--------------------------------
James J. Krejci
Dated: March 24, 1997 Director
By:
--------------------------------
John A. MacDonald
Dated: March 24, 1997 Director
By: /s/ Raphael M. Solot
--------------------------------
Raphael M. Solot
Dated: March 24, 1997 Director
By:
--------------------------------
Howard O. Thrall
Dated: March 24, 1997 Director
By: /s/ Siim A. Vanaselja
--------------------------------
Siim A. Vanaselja
Dated: March 24, 1997 Director
By: /s/ Sanford Zisman
--------------------------------
Sanford Zisman
Dated: March 24, 1997 Director
By: /s/ Robert B. Zoellick
--------------------------------
Robert B. Zoellick
Dated: March 24, 1997 Director
54
<PAGE>
[EXECUTION COPY]
FIRST AMENDMENT TO CREDIT AGREEMENT
AND LIMITED WAIVER
THIS FIRST AMENDMENT TO CREDIT AGREEMENT AND LIMITED WAIVER, dated as of
December 30, 1996 (this "Amendment and Waiver"), to the Existing Credit
--------------------
Agreement referred to below, is entered into by and among CABLE TV FUND 14-A,
LTD., a Colorado limited partnership (the "Borrower"), the various financial
--------
institutions parties hereto (collectively, the "Lenders"), and THE BANK OF NOVA
-------
SCOTIA ("Scotiabank") as the agent (in such capacity, the "Agent") for the
----------
Lenders.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrower, the Lenders and the Agent have heretofore entered
into that certain Credit Agreement, dated as of July 21, 1994 (together with all
Exhibits, Schedules and Attachments thereto, in each case as amended or
otherwise modified prior to the date hereof, being collectively referred to
herein as the "Existing Credit Agreement");
-------------------------
WHEREAS, the Borrower has requested the Lenders and the Agent to amend the
Existing Credit Agreement in certain respects as set forth below in connection
with (i) including as a "Loan" under the Credit Agreement a loan to be made to
the Borrower on the First Amendment Effective Date (as defined below) by
Scotiabank in the principal amount of $4,700,000 and (ii) the proposed sale of
the Turnersville Cable System scheduled to occur in the First Quarter of the
1997 Fiscal Year;
WHEREAS, the Borrower has also requested the Lenders and the Agent to waive
the Borrower's compliance with certain provisions of the Credit Agreement to
permit the Borrower to (i) use the proceeds from the $4,700,000 Loan to repay a
General Partner Advance and (ii) subject to the consummation of the sale of the
Turnersville Cable System, make a cash distribution to the limited partners of
the Borrower of sale proceeds in excess of $50,000,000;
WHEREAS, the Lenders and the Agent are willing, on the terms and conditions
set forth below, to amend the Existing Credit Agreement in certain respects as
provided herein below (the Existing Credit Agreement, as amended pursuant to the
terms of this Amendment and Waiver, being referred to as the "Credit
------
Agreement"); and
- ---------
<PAGE>
WHEREAS, the Lenders and the Agent are willing, on the terms and conditions
set forth below, to grant the limited waivers to the Credit Agreement requested
by the Borrower;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the Borrower, the Lenders and the Agent hereby agree as
follows:
PART I
DEFINITIONS
SUBPART 1.1. Certain Definitions. The following terms (whether or not
-------------------
underscored) when used in this Amendment and Waiver, including its preamble and
recitals, shall, except where the context otherwise requires, have the following
meanings (such meanings to be equally applicable to the singular and plural form
thereof):
"Agent" is defined in the preamble.
----- --------
"Amendment and Waiver" is defined in the preamble.
-------------------- --------
"Borrower" is defined in the preamble.
-------- --------
"Credit Agreement" is defined in the fourth recital.
---------------- --------------
"Existing Credit Agreement" is defined in the first recital.
------------------------- -------------
"First Amendment" is defined in Subpart 4.1.
--------------- -----------
"First Amendment Effective Date" is defined in Subpart 4.1.
------------------------------ -----------
"Lenders" is defined in the preamble.
------- --------
"Scotiabank" is defined in the preamble.
---------- --------
SUBPART 1.2. Other Definitions. Terms for which meanings are provided in
-----------------
the Existing Credit Agreement are, unless otherwise defined herein or the
context otherwise requires, used in this Amendment and Waiver with such meanings
provided therein.
-2-
<PAGE>
PART II
AMENDMENTS TO THE
EXISTING CREDIT AGREEMENT
Effective on (and subject to the occurrence of) the First Amendment
Effective Date, and in reliance upon the representations and warranties made
herein and (if any) in each other agreement furnished to the Agent and/or any of
the Lenders pursuant to the terms hereof or in connection herewith, the parties
hereto hereby agree that the Existing Credit Agreement is hereby amended in
accordance with this Part II. Except as expressly so amended or modified by
-------
this Amendment and Waiver, the Existing Credit Agreement and each other Loan
Document shall continue in full force and effect in accordance with their
respective terms.
SUBPART 2.1. Amendments to Article I ("DEFINITIONS AND ACCOUNTING TERMS")
------------------------------------------------------------
of the Existing Credit Agreement. Article I of the Existing Credit Agreement is
- --------------------------------
hereby amended in accordance with Subparts 2.1.1 and 2.1.2.
-------------- -----
SUBPART 2.1.1. Section 1.1 ("Defined Terms") of the Existing Credit
Agreement is hereby amended by inserting the following definitions in the
appropriate alphabetical order:
"First Amendment" means the First Amendment to Credit Agreement and
---------------
Limited Waiver, dated as of December 30, 1996, among the Borrower, the
Lenders parties thereto and the Agent.
"First Amendment Effective Date" is defined in Subpart 4.1 of the
------------------------------
First Amendment.
SUBPART 2.1.2. Section 1.1 ("Defined Terms") of the Existing Credit
Agreement is hereby further amended as follows:
(a) The definition of "Conversion Date Amount" is hereby deleted in
----------------------
its entirety.
(b) The definition of "Term Loan" is hereby amended in its entirety
---------
to read as follows:
"Term Loan" means, with respect to each Lender other than
---------
Scotiabank, the term loan which was, pursuant to Section 3.1 of this
Agreement as such Section was in effect immediately prior to the First
Amendment Effective Date, deemed to have been made by such Lender on
the Conversion Date as a result of the automatic conversion on such
date of such Lender's then outstanding Revolving Loans, and, with
respect to
-3-
<PAGE>
Scotiabank means, collectively, the term loan deemed made by it on the
Conversion Date and the Loan made by it on the First Amendment
Effective Date.
SUBPART 2.2. Amendment to Article II ("COMMITMENTS, BORROWING PROCEDURES
-----------------------------------------------------------
AND NOTES") of the Existing Credit Agreement. The first sentence of Section 2.6
- --------------------------------------------
("Notes") of the Existing Credit Agreement is hereby amended in its entirety
to read as follows:
Each Lender's Loans (other than Loans made by Scotiabank) shall be
evidenced by a Note payable to the order of such Lender in a maximum
principal amount equal to such Lender's Percentage of the original
Commitment Amount, and Scotiabank's Loans (including the Loan made by it on
the First Amendment Effective Date) shall be evidenced by a Note payable to
the order of Scotiabank in a maximum principal amount equal to the sum of
(i) Scotiabank's Percentage of the original applicable Commitment Amount
and (ii) $4,700,000 (the principal amount of the Loan made to the Borrower
by Scotiabank on the First Amendment Effective Date).
SUBPART 2.3. Amendment to Article III ("CONVERSION, REPAYMENTS,
-------------------------------------------------
PREPAYMENTS, INTEREST AND FEES") of the Existing Credit Agreement. Section 3.1
- -----------------------------------------------------------------
("Conversion, Repayments, and Prepayments") of the Existing Credit Agreement is
hereby amended in its entirety to read as follows:
SECTION 3.1 Repayments and Prepayments of Term Loans. The Borrower
----------------------------------------
shall on the Stated Maturity Date and on each Quarterly Payment Date
occurring on or during any period set forth below, make a scheduled
repayment of the aggregate outstanding principal amount, if any, of all
Term Loans in an amount equal to the amount set forth below opposite the
Stated Maturity Date or such Quarterly Payment Date, as applicable (as such
amounts may have otherwise been reduced pursuant to this Agreement):
<TABLE>
<S> <C>
03/31/1997 through (and
including) 01/31/1998 $1,588,125
03/31/1998 through (and
including) 01/31/1999 $2,646,875
03/31/1999 through (and
including) 01/31/2000 $3,705,625
03/31/2000 through (and
including) 01/31/2001 $4,764,375
</TABLE>
-4-
<PAGE>
<TABLE>
<S> <C>
03/31/2001 through (and
including) 01/31/2002 $5,293,750
03/31/2002 $6,352,500
Stated Maturity Date $6,352,500, or the then
outstanding principal amount of
all Term Loans, if different.
</TABLE>
Prior to the Stated Maturity Date, the Borrower
(a) may, from time to time on any Business Day, make a voluntary
prepayment, in whole or in part, of the outstanding principal amount
of any Term Loans; provided, however, that
-------- -------
(i) any such prepayment shall be made pro rata among Loans
--- ----
of the same type and, if applicable, having the same Interest
Period of all Lenders;
(ii) no such prepayment of any Fixed Rate Loan may be made
on any day other than the last day of the Interest Period for
such Loan;
(iii) all such voluntary prepayments shall require at least
three but no more than five Business Days' prior notice to the
Agent in the case of Fixed Rate Loans, and at least one but no
more than five Business Days' prior notice to the Agent in the
case of Base Rate Loans; and
(iv) all such voluntary partial prepayments shall be in an
aggregate minimum amount of $l,000,000 and an integral multiple
of $l00,000; and
(b) shall, immediately upon any acceleration of the Stated
Maturity Date of any Loans pursuant to Section 8.2 or Section 8.3,
----------- -----------
repay all Loans, unless, pursuant to Section 8.3, only a portion of
-----------
all Loans is so accelerated.
Each voluntary prepayment of Term Loans made pursuant to the foregoing
clause (a) shall be applied, to the extent of such prepayment, in the
----------
inverse order of the scheduled repayments of Term Loans set forth above in
this Section 3.1. Each prepayment of any Term Loans
-----------
-5-
<PAGE>
made pursuant to this Section shall be without premium or penalty, except
as may be required by Section 4.4.
------------
SUBPART 2.4. Amendments to Article VII ("COVENANTS") of the
----------------------------------------------
Existing Credit Agreement. Article VII of the Existing Credit
- -------------------------
Agreement is hereby amended in accordance with Subparts 2.4.1 and
--------------
2.4.2.
- ------
SUBPART 2.4.1. Clause (a) of Section 7.2.4 ("Financial Condition") of the
Existing Credit Agreement is hereby amended in its entirety to read as follows:
(a) Its Leverage Ratio at any time during the periods set forth below
to be greater than the ratio set forth opposite such periods:
Period Maximum Leverage Ratio
------ ----------------------
4/1/95 - 3/31/97 4.5:1
4/1/97 and Thereafter 3.5:1.
Additionally, if the Borrower disposes of either the Turnersville Cable
System or the Naperville Cable System, the Borrower shall not permit its
Leverage Ratio at any time thereafter to be greater than (i) 3.75:1, in the
case of a disposition of the Turnersville Cable System, or (ii) 3.0:1, in
the case of a disposition of the Naperville Cable System.
SUBPART 2.4.2. Clause (b) of Section 7.2.10 ("Asset Dispositions, etc.")
of the Existing Credit Agreement is hereby amended in its entirety to read as
follows:
(a) the resulting transaction consists of a sale of the Turnersville
Cable System or the Naperville Cable System and, after giving effect to
such transaction (and, if necessary, to the repayment of Loans with the
proceeds thereof), the Borrower's Leverage Ratio in effect after such
disposition is less than (i) 3.75:1, in the case of a sale of the
Turnersville Cable System, or (ii) 3.0:1, in the case of a sale of the
Naperville Cable System; or
SUBPART 2.5. Amendments to Article X ("MISCELLANEOUS PROVISIONS") of the
-----------------------------------------------------------
Existing Agreement. Section 10.11.1 ("Assignments") of the Existing Credit
- -------------------
Agreement is hereby amended by deleting the amount of "$80,000,000" in each of
the two places such amount appears in the proviso to the first sentence of such
Section and by inserting in each such place the amount of "$84,700,000".
-6-
<PAGE>
SUBPART 2.6. Amendments to Schedules to the Existing Credit Agreement.
--------------------------------------------------------
Subject to, and effective upon, the consummation of the sale of the Turnersville
Cable System contemplated to occur prior to the end of the first Fiscal Quarter
of the 1997 Fiscal Year pursuant to that certain Purchase and Sale Agreement,
dated as of March 28, 1996, between the Borrower and Lenfest Atlantic, Inc., the
Schedules to the Existing Credit Agreement are hereby amended to delete all
references to the Turnersville Cable System.
SUBPART 2.7. Amendment to Schedule II to the Existing Credit Agreement.
---------------------------------------------------------
Schedule II to the Existing Credit Agreement is hereby amended in its entirety
to read as set forth on Annex I attached hereto.
-------
PART III
LIMITED WAIVERS
Effective on (and subject to the occurrence of) the First Amendment
Effective Date and the modification of the Existing Credit Agreement in
accordance with Part II of this Amendment and Waiver, and in reliance upon the
-------
representations and warranties made herein and (if any) in each other agreement
furnished to the Agent and/or any of the Lenders pursuant to the terms hereof or
in connection herewith, the Lenders hereby agree to grant the limited waivers
set forth in this Part III. Except as expressly so modified by the limited
--------
waivers set forth in this Part III, the Credit Agreement and each other Loan
--------
Document shall continue in full force and effect in accordance with their
respective terms.
SUBPART 3.1. Limited Waiver of Section 7.2.6 ("Restricted Payments") of
----------------------------------------------------------
the Credit Agreement. Compliance by the Borrower with the provisions of Section
- --------------------
7.2.6 of the Credit Agreement is hereby waived through (and including) the end
of the first Fiscal Quarter of the 1997 Fiscal Year to the extent (and only to
the extent) necessary to permit the Borrower to, subject to the consummation of
the sale of the Turnersville Cable System in accordance with Section 7.2.10 of
the Credit Agreement (as well as to the repayment of the Loans as contemplated
in the following proviso) , make a one-time cash distribution to the limited
partners of the Borrower in an aggregate amount not to exceed that amount of the
aggregate sale proceeds resulting from such sale which are in excess of
$50,000,000; provided, that the foregoing limited waiver shall terminate and an
--------
immediate Event of Default shall be deemed to have occurred pursuant to Section
8.1.3 of the Credit Agreement and/or Section 8.1.1 of the Credit Agreement, as
the case may be, if either (X) the Borrower's consummation of the sale of the
Turnersville Cable System is in
-7-
<PAGE>
any way not in accordance with the terms and conditions of Section 7.2.10 of the
Credit Agreement, or (y) the Borrower fails to contemporaneously with (or
immediately following) the consummation of the sale of the Turnersville Cable
System, make a prepayment of the Loans then outstanding in accordance with
Section 3.1 of the Credit Agreement in an aggregate amount of at least
$50,000,000.
In addition, each of the Lenders, by its signature below, hereby
acknowledges and agrees, and hereby authorizes the Agent, immediately prior to
or contemporaneously with the consummation of the sale of the Turnersville Cable
System, as contemplated under that certain Purchase and Sale Agreement, dated as
of March 28, 1996, between the Borrower and Lenfest Atlantic, Inc., to terminate
and release (without recourse and without representation or warranty) , all
Liens on the personal property and the real property of the Borrower
constituting any part of the Turnersville Cable System. In furtherance of the
foregoing, the Agent shall at such appropriate time execute and deliver to the
Borrower (or such other Person designated by the Borrower in writing to the
Agent) Uniform Commercial Code Form UCC-3 release statements pertaining to the
Liens of the Agent in such personal property and a release of mortgage
pertaining to the mortgage in respect of such property.
PART IV
CONDITIONS TO EFFECTIVENESS
SUBPART 4.1. First Amendment Effective Date. This Amendment and Waiver
------------------------------
(and the amendments, waivers and modifications contained herein) shall become
effective, and shall thereafter be referred to as the "First Amendment", on the
---------------
date (the "First Amendment Effective Date") when all of the conditions set forth
------------------------------
in this Subpart 4.1 have been satisfied.
-----------
SUBPART 4.1.1. Execution of Counterparts. The Agent shall have received
-------------------------
counterparts of this Amendment and Waiver, duly executed and delivered on behalf
of the Borrower, the Agent and each of the Lenders.
SUBPART 4.1.2. General Partner's Certificate. The Agent shall have
-----------------------------
received from the General Partner, a certificate of the Secretary or an
Assistant Secretary of the General Partner, dated the date of the First
Amendment Effective Date, as to:
(a) a certificate of good standing for the Borrower issued by the
jurisdiction in which it is organized, dated as of a date reasonably close
to the First Amendment Effective Date,
-8-
<PAGE>
(b) a certificate of good standing for the General Partner issued by
the jurisdiction in which it is organized, dated as of a date reasonably
close to the First Amendment Effective Date,
(c) all action necessary for the execution, delivery and performance
of this Amendment and Waiver, the replacement Note, and each other Loan
Document by the General Partner, as the general partner of the Borrower,
together with copies of all resolutions to such effect attached thereto,
and
(d) the incumbency and signatures of those officers of the General
Partner authorized to act on behalf of and bind the General Partner, in its
capacity as general partner of the Borrower, with respect to this Amendment
and Waiver, the replacement Note and each other Loan Document executed or
to be executed by it in connection herewith,
which certificate each Lender may conclusively rely upon until it shall have
received a further certificate from the General Partner canceling or amending
such prior certificate.
SUBPART 4.1.3. Other Requested Documents or Certificates. The Agent shall
-----------------------------------------
have received in form and substance satisfactory to the Agent such other
documents (certified if requested) or certificates as the Agent (or any Lender
through the Agent) may reasonably request with respect to this Amendment and
Waiver, the replacement Note, any other Loan Document or any Organic Document or
approval.
SUBPART 4.1.4. Delivery to Scotiabank of a Borrowing Request and a
---------------------------------------------------
Replacement Note for Additional $4,700,000 Loan. Scotiabank shall have
- -----------------------------------------------
received, for its own account, a replacement Note, in form similar to Exhibit A
to the Existing Credit Agreement and satisfactory in all respects to Scotiabank,
duly executed and delivered by the Borrower and in a maximum aggregate principal
amount equal to $29,700,000, such amount representing the aggregate principal
amount of Scotiabank's Term Loan as of the First Amendment Effective Date. Such
replacement Note issued on the First Amendment Effective Date shall be issued in
substitution and exchange for, and not in satisfaction or payment of, the
existing Note of Scotiabank executed and delivered by the Borrower pursuant to
the Existing Credit Agreement, and the Indebtedness (together with the
obligation to pay accrued interest thereon) originally owing to Scotiabank and
to be evidenced by Scotiabank's replacement Note delivered pursuant to this
Amendment and Waiver shall be (and the Borrower hereby acknowledges and agrees
that such Indebtedness, as so increased in connection with the Loan made to the
Borrower by
-9-
<PAGE>
Scotiabank on the First Amendment Effective Date, is) a continuing Indebtedness,
and nothing herein contained shall be construed to release or terminate any Lien
or security interest given to secure such Indebtedness (as so increased) .
Scotiabank shall have also received, for its own account, a borrowing request,
in form similar to Exhibit B to the Existing Credit Agreement and satisfactory
in all respects to Scotiabank, for the borrowing contemplated to be made on the
First Amendment Effective Date and the delivery of such borrowing request and
the acceptance by the Borrower of the proceeds of such borrowing shall
constitute a representation and warranty by the Borrower that on the date of
such borrowing (both immediately before and after giving effect to such
borrowing and the application of the proceeds thereof) the statements made in
Section 5.2.1 of the Credit Agreement are true and correct.
SUBPART 4.1.5. Expenses. etc. The Agent shall have received for its own
-------------
account, or for the account of such Lender(s) , as the case may be, all fees,
costs and expenses due and payable as of the First Amendment Effective Date.
SUBPART 4.1.6. Opinions of Counsel. The Agent shall have received an
-------------------
opinion of Elizabeth Steele, Esq., general counsel to the General Partner of the
Borrower, dated the First Amendment Effective Date, in form and substance
satisfactory to the Agent.
SUBPART 4.1.7. Legal Details etc. All documents executed or submitted
------------------
pursuant hereto shall be satisfactory in form and substance to the Agent and its
counsel. The Agent and its counsel shall have received all information and such
counterpart originals or such certified or other copies or such materials as the
Agent or its counsel may reasonably request, and all legal matters incident to
the transactions contemplated by this Amendment and Waiver shall be satisfactory
to the Agent and its counsel.
PART V
MISCELLANEOUS; REPRESENTATIONS
SUBPART 5.1. Cross-References. References in this Amendment and Waiver to
----------------
any Part or Subpart are, unless otherwise specified or otherwise required by the
context, to such Part or Subpart of this Amendment and Waiver.
SUBPART 5.2. Loan Document Pursuant to Existing Credit Agreement. This
---------------------------------------------------
Amendment and Waiver is a Loan Document executed pursuant to the Existing Credit
Agreement and shall be construed, administered and applied in accordance with
all of the terms and
-10-
<PAGE>
provisions of the Existing Credit Agreement (and, following the First Amendment
Effective Date, the Credit Agreement).
SUBPART 5.3. Successors and Assigns. This Amendment and Waiver shall be
----------------------
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
SUBPART 5.4. Full Force and Effect; Limited Amendment. Except as
----------------------------------------
expressly amended or waived hereby, all of the representations, warranties,
terms, covenants, conditions and other provisions of the Existing Credit
Agreement and the other Loan Documents shall remain unamended and unwaived and
shall continue to be, and shall remain, in full force and effect in accordance
with their respective terms. The amendments and waivers set forth herein shall
be limited precisely as provided for herein to the provisions expressly amended
or waived herein and shall not be deemed to be an amendment to, waiver of,
consent to or modification of any other term or provision of the Existing Credit
Agreement, any other Loan Document referred to therein or herein or of any
transaction or further or future action on the part of the Borrower which would
require the consent of the Lenders under the Existing Credit Agreement or any of
the Loan Documents .
SUBPART 5.5. Payment of Fees and Expenses. The Borrower hereby agrees to
----------------------------
pay and reimburse the Agent for all of its reasonable fees and expenses incurred
in connection with the negotiation, preparation, execution and delivery of this
Amendment and Waiver and related documents, including all reasonable fees and
disbursements of counsel to the Agent.
SUBPART 5.6. Counterparts. This Amendment and Waiver may be executed by
------------
the parties hereto in several counterparts, each of which when executed and
delivered shall be deemed to be an original and all of which shall constitute
together but one and the same agreement.
SUBPART 5.7. Governing Law. THIS AMENDMENT AND WAIVER SHALL BE GOVERNED BY
-------------
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
SUBPART 5.8. Representations. In order to induce the Lenders and the
---------------
Agent to enter into this Amendment and Waiver, the Borrower hereby represents
and warrants as follows:
(a) the execution and delivery of this Amendment and Waiver and the
performance by the Borrower of its obligations hereunder, under each other
Loan Document, under the Existing Credit Agreement as amended hereby and,
upon the occurrence of the First Amendment Effective Date, under the Credit
Agreement are within the Borrower's partnership
-11-
<PAGE>
powers, have been duly authorized by all necessary partnership action, have
received all necessary governmental approvals (if any shall be required and
other than as set forth in Item 6.3 of the Disclosure Schedule), and do not
(i) contravene the Borrower's Organic Documents, (ii) contravene any
contractual restriction, law or governmental regulation or court decree or
order binding on or affecting the Borrower or (iii) result in, or require
the creation or imposition of, any Lien on any of Borrower's properties
(other than pursuant to a Loan Document); and
(b) this Amendment and Waiver, each other Loan Document, the Existing
Credit Agreement as amended hereby and, upon the occurrence of the First
Amendment Effective Date, the Credit Agreement are the legal, valid and
binding obligations of the Borrower, enforceable in accordance with their
respective terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally and by principles of equity).
SUBPART 5.9. Adjusted Percentages. Each of the Lenders, by its signature
--------------------
below, hereby acknowledges and agrees that upon the occurrence of the First
Amendment Effective Date, such Lender's Percentage for purposes of the Credit
Agreement shall be as set forth opposite its signature hereto, as such
percentage may be amended from time to time hereafter pursuant to any Lender
Assignment Agreement(s) executed by such Lender and its Assignee Lender(s) and
delivered pursuant to Section 10.11 of the Credit Agreement.
[THE REMAINDER OF THIS PAGE HAS
BEEN INTENTIONALLY LEFT BLANK]
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment and
Waiver to be executed by their respective officers thereunto duly authorized as
of the day and year first above written.
CABLE TV FUND 14-A, LTD
By: JONES INTERCABLE, INC., as
General Partner
By /s/ J. Roy Pottle
-----------------------------
Title:J. ROY POTTLE
VICE PRESIDENT/TREASURER
PERCENTAGES
- -----------
35.0649351% THE BANK OF NOVA SCOTIA,
as Agent and as a Lender
By /s/ [SIGNATURE APPEARS HERE]
-----------------------------
Title: Authorized Signatory
29.5159386% TORONTO DOMINION (TEXAS), INC.
By /s/ Frederic Hawley
-----------------------------
Title: VICE PRESIDENT
17.7095632% ROYAL BANK OF CANADA
GRAND CAYMAN (NORTH AMERICAN NO. 1) BRANCH
By /s/ [SIGNATURE APPEARS HERE]
-----------------------------
Title: Service Manager
17.7095632% FLEET NATIONAL BANK
By /s/ [SIGNATURE APPEARS HERE]
-----------------------------
Title:
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<PAGE>
June 24, 1996
Cable TV Fund 14-A/B Venture
c/o Jones Intercable, Inc.
9697 E. Mineral Avenue
Englewood, CO 80112
Attention: J. Roy Pottle
Re: Fourth Letter Amendment
-----------------------
Venture Revolving Credit
------------------------
Gentlemen:
Reference is made to that certain Revolving Credit and Term Loan Agreement,
dated as of September 30, 1988, by and among Cable TV Fund 14-A/B Venture (the
"Borrower"), The Bank of Nova Scotia and PNC Bank, National Association
(successor by merger to Provident National Bank) (the "Banks") and The Bank of
Nova Scotia, as agent for the Banks (the "Agent"), as amended by that certain
First Letter Amendment, dated June 11, 1990, that certain Second Letter
Amendment, dated May 28, 1992, and that certain Third Letter Amendment, dated
June 30, 1994 (the "Credit Agreement"). Capitalized terms used herein and not
otherwise defined shall have the meanings assigned to them in the Credit
Agreement.
The Borrower desires the Banks to extend credit in excess of the
Commitments stated in the Third Letter Amendment, allow for a new revolving
period, extend the maturity date of the Term Loans to December 31, 2003, amend
the principal amortization schedule for the Term Loans, amend the Total Debt to
Annualized Cash Flow ratio covenant, extend the Capital Expenditure limitation,
and to make certain other changes to the Credit Agreement. The Banks are
willing to amend the Credit Agreement for such purposes on the terms and
conditions stated in this Fourth Letter Amendment.
Effective upon the satisfaction (or waiver by the Banks) of all of the
conditions precedent stated below, the Credit Agreement shall be amended as
follows:
1. Section 1.1 is hereby amended:
(a) by deleting the definition of "Business Day" and replacing it with
the following language:
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<PAGE>
"'Business Day' shall mean any day other than a Saturday, Sunday,
------------
public holiday under the laws of the State of New York or other day on
which banking institutions are authorized or obligated to close in New York
City, New York.";
(b) by deleting the definition of "Debt Service";
(c) by deleting the definition of "Excess Cash Flow";
(d) by deleting the definition of "Expiration Date" and replacing it with
the following language:
"'Expiration Date' shall mean December 31, 1998.";
---------------
(e) by adding the following definitions after the definition of "FCC
License":
"'Fourth Letter Amendment' shall mean that certain Fourth Letter
-----------------------
Amendment to Cable TV Fund 14-A/B Venture Revolving Credit and Term Loan
Agreement, dated as of June 24, 1996, among Borrower, Agent and the Banks.
"'Fourth Letter Amendment Closing Date' shall mean the date on which
------------------------------------
the amendments contained in the Fourth Letter Amendment become effective
pursuant to the terms thereof.";
(f) by adding the following definition after the definition of
"Indebtedness":
"'Interest Expense' shall mean for any fiscal period the sum of the
----------------
Borrower's cash interest expense paid on Total Debt for such period.";
(g) by adding the following definition after the definition of "Premium
Subscription":
"'Pro Forma Debt Service' shall mean, with respect to the Borrower for
----------------------
the twelve (12) complete calendar months immediately following the date of
calculation, the sum of (a) interest scheduled to accrue in respect of
Total Debt, plus (b) payments of principal scheduled to be paid on Total
Debt, all in accordance with the documents, instruments and agreements
evidencing such Total Debt. For purposes of calculating Pro Forma Debt
Service (i) where any item of interest on any Total Debt varies or depends
upon a
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<PAGE>
variable rate of interest (including, without limitation, the Base
Rate or the Euro-Rate), such rate shall be assumed to equal the rate
in effect on the date of calculation thereof and (ii) the principal
amount outstanding under any revolving or line of credit facility
shall be assumed to be the outstanding principal balance thereunder on
the last day of the fiscal quarter immediately preceding the period in
respect of which the calculation of Pro Forma Debt Service is being
determined or, if less, the aggregate commitment under such revolving
or line of credit facility as of the date of calculation, in each case
adjusted to give effect to any mandatory commitment reductions which
are scheduled to occur during such period in respect of which the
calculation of Pro Forma Debt Service is being determined."; and
(h) by deleting the definition of "Term Loan Expiration Date" and
replacing it with the following language:
"'Term Loan Expiration Date' shall mean December 31, 2003."
-------------------------
2. Section 2.1(a) is hereby deleted in its entirety and replaced with the
following language:
"(a) The Commitments. Subject to the terms and conditions and
---------------
relying upon the representations and warranties herein set forth, each Bank
severally agrees (such agreement being herein called such Bank's
"Commitment") to make loans to the Borrower (the "Revolving Credit Loans")
at any time or from time to time on or after the Fourth Letter Amendment
Closing Date and to, but not including, the Expiration Date in an aggregate
principal amount not exceeding at any one time outstanding such Bank's
Current Commitment at such time. Each Bank's "Current Commitment" at any
given time shall be equal to the amount set forth opposite the name of such
Bank in the table below, as such amount may have been reduced under Section
2.4 hereof at such time."
<TABLE>
<CAPTION>
Percentage
"Name of Bank Current Commitment Interest
------------ ------------------ --------
<S> <C> <C>
The Bank of
Nova Scotia $25,000,000 58.82%
PNC Bank $17,500,000 41.18%
----------- ------
TOTAL $42,500,000 100.00%"
</TABLE>
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<PAGE>
3. Section 2.4(a) is hereby deleted in its entirety and replaced with the
following language:
"(a) Commitment Fee. The Borrower agrees to pay to the Agent, for
--------------
the account of each Bank, as consideration for the Banks' Commitments
hereunder, a commitment fee equal to three-eighths of one percent (0.375%)
per annum (based on a year of 365 or 366 days, as the case may be) on the
unborrowed amount of the Current Commitment for each day from and including
the Fourth Letter Amendment Closing Date to and including the Expiration
Date. A commitment fee shall be due and payable for the preceding period
for which such fee has not been paid (i) on the last day of each March,
June, September and December after the date hereof, (ii) on the date of
each reduction of the Current Commitment on the amount so reduced and (iii)
on the Expiration Date."
4. Section 2.6 is hereby deleted in its entirety and replaced with the
following language:
"2.6 Term Loan Ceiling.
-----------------
"At no time shall the aggregate principal amount of Term Loans
outstanding exceed the Term Loan Ceiling at such time. The "Term Loan
Ceiling" shall mean the aggregate principal amount of the Term Loans made
on the Expiration Date as provided in Section 2.5(a) (the "Initial
Ceiling"), reduced as follows:
"(A) On each March 31, June 30, September 30 and December 31 during
each period indicated below the Term Loan Ceiling shall be reduced by
amounts equal to the following percentages of the Initial Ceiling
(regardless of whether the Term Loan Ceiling shall have been reduced
pursuant to (B) below):
January 1, 1999 - December 31, 1999 4%
January 1, 2000 - December 31, 2000 4%
January 1, 2001 - December 31, 2001 5%
January 1, 2002 - December 31, 2002 6%
January 1, 2003 - December 31, 2003 6%
On December 31, 2003 the Term Loan Ceiling shall be reduced to zero
(0)."
"(B) In addition, if at any time Term Loans are prepaid or Rollover
Loans are made in a lesser aggregate principal amount than the maturing
Term Loans being rolled over except to the extent necessary as a result of
a reduction in the Term Loan Ceiling pursuant to (A) above, the then
current Term Loan Ceiling
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<PAGE>
shall on such date be reduced by the amount of the prepayment or of such
difference.
"Once reduced, the Term Loan Ceiling may not be increased. If on any
Mandatory Reduction Date the outstanding Term Loans on such date shall
exceed the Term Loan Ceiling as reduced on such date, the Borrower shall
pay or prepay (subject, among other things, to Section 2.13(b) hereof)
sufficient Loans to reduce the principal amount of the outstanding Loans to
such reduced Term Loan Ceiling."
5. Section 2.8(a)(i) (Base Rate Option) is hereby deleted in its entirety
and replaced with the following language:
"(i) Base Rate Option: A rate per annum (computed on the basis of a
----------------
year of 365 or 366 days, as the case may be) for each day equal to the Base
Rate for such day, plus the percentage set forth below that corresponds to
the Borrower's then current ratio of Total Debt to Annualized Cash Flow,
such interest rate to change automatically from time to time effective as
of the effective date of each change in the Base Rate or the date of the
Borrower's financial statements evidencing a change in such ratio, as the
case may be:
Ratio Percentage
----- ----------
2.50 to 1.00 or greater 0.250%
less than 2.50 to 1.00 0.125%."
"Base Rate," as used herein, shall mean a fluctuating interest rate per
annum equal at all times to the rate of interest announced by the Agent in
New York City, New York from time to time in its sole discretion as its
base rate.
6. Section 2.8(a)(ii) (CD Rate Option) is amended by deleting the first
sentence thereof and replacing it with the following language:
"A rate per annum (based on a year of 360 days and actual days elapsed) for
each day equal to the CD Rate for such day, plus the percentage set forth
below that corresponds to the Borrower's then current ratio of Total Debt
to Annualized Cash Flow, such percentage to change automatically from time
to time effective as of the date of the Borrower's financial statements
evidencing a change in such ratio:
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<PAGE>
Ratio Percentage
----- ----------
2.50 to 1.00 or greater 1.375%
less than 2.50 to 1.00 1.250%."
7. Section 2.8(a)(iii) Euro-Rate Option is amended by deleting the first
sentence thereof and replacing it with the following language:
"A rate per annum (based on a year of 360 days and actual days
elapsed) for each day equal to the Euro-Rate for such day, plus the
percentage set forth below that corresponds to the Borrower's then current
ratio of Total Debt to Annualized Cash Flow, such percentage to change
automatically from time to time effective as of the date of the Borrower's
financial statements evidencing a change in such ratio:
Ratio Percentage
----- ----------
2.50 to 1.00 or greater 1.250%
less than 2.50 to 1.00 1.125%."
8. Section 2.11 is hereby deleted in its entirety and replaced with the
following language:
"2.11 Interest Payment Dates. Interest on each Base Rate Loan shall
----------------------
be due and payable quarterly in arrears. Interest on each CD Rate Loan
shall be due and payable on the last day of the corresponding CD Rate
Maturity Period and, if such CD Rate Maturity Period is longer than 90
days, also every 90th day during such CD Rate Maturity Period. Interest on
each Euro-Rate Loan shall be due and payable on the last day of the
corresponding Euro-Rate Maturity Period and, if such Euro-Rate Maturity
Period is longer than three months, also quarterly during such Maturity
Period. After maturity of any Loan (by acceleration or otherwise),
interest on such Loan shall be due and payable on demand."
9. Section 5.8 is hereby deleted in its entirety and replaced with the
following language:
"5.8 Use of Proceeds. Except as otherwise provided by Section 2.7
---------------
hereof or the Subordination Agreement, the Borrower shall apply the
proceeds of all Loans hereunder only to (a) repayment of the Term Loans
outstanding on the Fourth Letter Amendment Closing Date, (b) repayment to
Jones of Advances outstanding on the Fourth Letter Amendment Closing Date
in an amount not to exceed three million eight
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<PAGE>
hundred twenty thousand dollars ($3,820,000), and (c) otherwise for Capital
Expenditures and other general business purposes."
10. Article V is amended by adding the following Section 5.11:
"5.11 Interest Rate Protection. On or before the date that is twelve
------------------------
months from the Fourth Letter Amendment Closing Date, the Borrower shall
enter into an interest rate protection agreement on terms and conditions
satisfactory to the Banks in their sole discretion covering not less than
fifty percent (50%) of the principal amount of the Loan outstanding at such
time for a period of not less than three (3) years."
11. Article V is amended by adding the following Section 5.12:
"5.12 Amendment Fee. The Borrower shall pay to the Agent, for the
-------------
account of each Bank in proportion to their respective Current Commitments,
as consideration for the agreement of the Banks to enter into the Fourth
Letter Amendment, an amendment fee equal to one hundred fifty-nine thousand
three hundred seventy-five dollars ($159,375), with one-half of the
amendment fee payable on the Fourth Letter Amendment Closing Date and the
remaining one-half of the amendment fee payable one year from the Fourth
Letter Amendment Closing Date if the Borrower and a seller have not signed
a binding purchase and sale agreement for the sale of all the Borrower's
Systems on terms and conditions reasonably satisfactory to the Banks. If
the Borrower and a seller have signed such a binding purchase and sale
agreement, the remaining one-half of the amendment fee will be due and
payable nineteen months from the Fourth Letter Amendment Closing Date,
unless prior to such time all amounts due hereunder, under the Notes and
any Related Document have been paid in full and the Commitment has been
terminated."
12. Section 6.1(a) is amended by deleting the last two lines of the table
of ratios of Total Debt to Annualized Cash Flow and replacing them with the
following:
"April 1, 1996 - June 30, 1997 4.00 to 1.00
July 1, 1997 - June 30, 1998 3.50 to 1.00
July 1, 1998 and thereafter 3.00 to 1.00"
13. Section 6.1(b) is hereby deleted in its entirety and replaced with the
following language:
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<PAGE>
"(b) Annualized Cash Flow/Pro Forma Debt Service. The ratio of Annualized
-------------------------------------------
Cash Flow to Pro Forma Debt Service shall not be less than 1.50 to 1.00 at
all times after the Fourth Letter Amendment Closing Date."
14. Section 6.1 is further amended by adding the following Section
6.1(c)after Section 6.1(b):
"(c) Cash Flow/Interest Expense. The ratio of Cash Flow to Interest
--------------------------
Expense shall exceed 2.50 to 1.00 at all times after the Fourth Letter
Amendment Closing Date."
15. Section 6.14 is hereby deleted in its entirety and replaced with the
following language:
"6.14 Capital Expenditures. Borrower shall not make any Capital
--------------------
Expenditures which in the aggregate exceed $3,000,000 in fiscal year 1988;
$10,000,000 in fiscal year 1989; $9,000,000 in fiscal year 1990; $4,500,000
in each of fiscal years 1991 through 1998; $5,000,000 in each of fiscal
year 1999 through 2001; and $5,300,000 in any fiscal year of the Borrower
thereafter. No unused portion of Capital Expenditures permitted in any
given year may be carried forward to any subsequent year or years. The
cost of Systems purchased by Borrower pursuant to Section 6.11 shall be
included in Capital Expenditures hereunder."
16. Article VI is amended by adding the following new Section 6.18:
"6.18 Management Fees. Borrower shall not pay Management Fees which
---------------
exceed five percent (5%) of total revenue for any fiscal year of the
Borrower."
17. The Credit Agreement is hereby amended to delete each reference to
"San Francisco time" and replace it with a reference to "New York City time."
On the date upon which the amendments contained in this Fourth Letter
Amendment become effective, the Borrower shall repay all Term Loans outstanding
on such date from funds obtained from Revolving Loans made on such date,
together with all accrued and unpaid interest thereon and all other amounts owed
in connection with such repayment pursuant to the terms of the Credit Agreement.
The effectiveness of the amendments contained in this Fourth Letter
Amendment is subject to the fulfillment, in form and substance satisfactory to
the Agent, of the following conditions precedent on or before June 24, 1996:
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<PAGE>
(a) The Agent shall have received three counterparts of this Fourth Letter
Amendment duly accepted and executed by the Borrower, three counterparts
executed by The Bank of Nova Scotia, as a Bank, and three counterparts executed
by PNC Bank, National Association.
(b) As amended by Exhibit A hereto, the representations and warranties
contained in Article III of the Credit Agreement and in the Related Documents
shall be true on and as of the date of execution and acceptance of this Fourth
Letter Amendment by the Borrower with the same effect as though made on and as
of such date, and no Event of Default and no Potential Default shall have
occurred and be continuing or exist or shall occur or exist after giving effect
to the amendments contained herein.
(c) The Agent shall have received three signed copies of a certificate,
dated the date of the Borrower's acceptance and execution of this Fourth Letter
Amendment, and signed on behalf of the Borrower by the President, Vice
President, Treasurer or Chief Financial Officer of Jones, to the effect that (i)
the representations and warranties described in (b) above are true and correct
on and as of such date and (ii) on such date no Event of Default or Potential
Default has occurred and is continuing or exists or will occur or exist after
giving effect to the amendments contained herein.
(d) The Agent shall have received three signed copies of certificates dated
as of the date of the Borrower's acceptance and execution of this Fourth Letter
Amendment and signed by the Secretary or Assistant Secretary of Jones, on behalf
of Jones, the Borrower, and each General Partner, certifying as to any changes
since the Closing Date, if any, in the corporate, joint venture or partnership
documents and actions referred to in section 4.2 of the Credit Agreement, of
Jones, the Borrower and each General Partner, respectively and, in the case of
Jones, (i) as to the names, true signatures and incumbency of the officer or
officers or other authorized representatives of Jones authorized to accept,
execute and deliver this Fourth Letter Amendment and the certificate referred to
in (c) above, and (ii) as to the resolution of the Board of Directors of Jones
authorizing such action.
(e) The Agent shall have received certificates (i) of the Secretary of
State of the State of Colorado certifying that Jones is a corporation in good
standing and that each General Partner is a limited
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<PAGE>
partnership in good standing, and (ii) of the Secretary of State of the
State of Florida certifying that each General Partner is qualified to do
business in Florida.
(f) The Agent shall have received payment in full of the portion of
the amendment fee due on the Fourth Letter Amendment Closing Date pursuant
to Section 11 of this Fourth Letter Amendment, for distribution to the
Banks in proportion to their respective Current Commitments.
(g) Each Bank shall have received a substitute Note, in the form of
Exhibit B hereto, duly executed by the Borrower, reflecting the amendments
to the Commitment and maturity dates contained in this Fourth Letter
Amendment (and thereafter shall return the Notes issued on June 15, 1990 to
the Borrower).
(h) The Agent shall have received all amendments to the Related
Documents requested by the Banks to reflect the transactions contemplated
hereby, executed by all parties thereto.
(i) All actions necessary or desirable in the opinion of the Banks to
preserve and protect the first priority lien of Agent established by the
Security Documentation shall have been taken, including, without
limitation, recording of an amendment to the Mortgage to reflect the
transactions contemplated hereby and endorsements to all title policies
held by Agent confirming the first priority nature of the Mortgage as so
amended.
(j) The Agent shall have received legal opinions from counsel to
Borrower on such matters related to the transactions contemplated hereby as
the Banks may reasonably request.
(k) The Agent shall have received all such other instruments,
approvals or documents as the Banks may reasonably request.
Except as amended hereby, the Credit Agreement shall remain in full force
and effect and is hereby ratified and confirmed. This Fourth Letter Amendment
may be executed in two or more counterparts, each of which shall be deemed an
original.
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<PAGE>
If you agree to the foregoing amendments to the Credit Agreement, execute
the enclosed counterparts of this letter in the space provided below and return
them to us prior to June 28, 1996.
THE BANK OF NOVA SCOTIA,
as Agent and as a participating
Bank
By [SIGNATURE APPEARS HERE]
---------------------------------------
Title Authorized Signatory
---------------------------------
Accepted:
CABLE TV FUND 14-A/B VENTURE, Date:
a Colorado general partnership
By Cable TV Fund 14-A, Ltd.,
Cable TV Fund 14-B, Ltd.,
both Colorado limited partnerships
By Jones Intercable, Inc.,
a Colorado corporation,
as general partner of each
By [SIGNATURE APPEARS HERE]
---------------------------------
Title VICE PRESIDENT/TREASURER
---------------------------
PNC BANK, NATIONAL ASSOCIATION,
as a participating Bank
By [SIGNATURE APPEARS HERE]
----------------------------------------
Title SVP
----------------------------------
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<PAGE>
EXHIBIT 10.3.4 TO
FUND 14-A 10-K
ASSET PURCHASE AGREEMENT
DATED: MARCH 12, 1997
BETWEEN
TRIAX MIDWEST ASSOCIATES, L.P.
AND
CABLE TV FUND 14-A, LTD.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>.......................................................<C>
RECITALS................................................................... 1
Section 1. Purchase and Sale of Assets............................... 1
1.1. Conveyance of Assets...................................... 1
1.2. Excluded Assets........................................... 3
Section 2. Purchase Price and Method of Payment...................... 4
2.1. Purchase Price............................................ 4
2.2. Deposit................................................... 5
2.3. Method of Payment......................................... 5
2.4. Definitions; Adjustments.................................. 5
2.5. Limited Assumption of Liabilities......................... 10
Section 3. Representations, Warranties, Covenants and Seller
Agreements of............................................. 10
3.1. Organization, Qualification and Authority................. 11
3.2. Due Authorization......................................... 11
3.3. No Conflicts.............................................. 11
3.4. Financial Statements...................................... 12
3.5. Regulatory Licenses and Filings........................... 13
3.6. Franchises and Other Authorities.......................... 14
3.7. Status of the Systems..................................... 15
3.8. Legality of Signals Carried; Compliance with
Applicable Laws........................................... 17
3.9. Real Property and Leases.................................. 19
3.10. Personal Property......................................... 19
3.11. Contracts................................................. 20
3.12. Employee Agreements and Benefits; Labor Matters........... 20
3.13. ERISA..................................................... 21
3.14. Access Agreements......................................... 22
3.15. Bonds, Insurance and Letters of Credit.................... 22
3.16. Litigation................................................ 22
3.17. Intellectual Property..................................... 23
3.18. Payment of Taxes.......................................... 23
3.19. Seller's Accounts and Promotions.......................... 23
3.20. Environmental Compliance.................................. 24
3.21. Continuation of Business.................................. 24
3.22. Approvals and Consents.................................... 24
3.23. Other Financial Interests................................. 25
3.24. Complete Disclosure....................................... 25
</TABLE>
i
<PAGE>
<TABLE>
Page
----
<S> <C> <C>
Section 4. Representations, Warranties, Covenants and Agreements of
Buyer........................................................ 25
4.1. Organization and Authority of Buyer.......................... 25
4.2. Due Authorization by Buyer................................... 25
4.3. No Conflicts................................................. 26
4.4. Litigation................................................... 26
4.5. Complete Disclosure.......................................... 26
Section 5. Covenants and Further Agreements............................. 26
5.1. Application for Assignment of Franchises and Licenses........ 26
5.2. Information; Consultation; Confidentiality................... 27
5.3. Period Pending Closing....................................... 28
5.4. Cooperation.................................................. 29
5.5. Expenses..................................................... 29
5.6. Brokerage.................................................... 30
5.7. Reliance Upon and Survival of Representations and
Warranties................................................... 30
5.8. Further Assurances........................................... 30
5.9. Indemnification.............................................. 31
5.10. No Negotiation............................................... 33
5.11. Special Covenants of Seller.................................. 33
5.12. Employees.................................................... 33
Section 6. Conditions Precedent to the Obligation of Buyer
to Close..................................................... 34
6.1. Truth of Representations and Warranties...................... 34
6.3. Consents of Third Parties.................................... 34
6.4. Opinion of Seller's Counsel.................................. 35
6.5. Opinion of FCC and Copyright Counsel......................... 35
6.6. No Adverse Change............................................ 35
6.7. Inventories.................................................. 35
6.8. No Litigation................................................ 35
6.9. HSR Act Compliance........................................... 35
6.10. Deliveries................................................... 35
Section 7. Conditions Precedent to the Obligation of Seller
to Close..................................................... 36
7.1. Truth of Representations and Warranties...................... 36
7.2. Performance of Agreements.................................... 36
7.3. Opinion of Counsel for Buyer................................. 36
7.4. Consents of Third Parties.................................... 36
</TABLE>
ii
<PAGE>
TABLE OF CONTENTS
(Cont.)
7.5. No Adverse Change.................................. 36
7.6. No Litigation...................................... 36
7.7. HSR Act Compliance................................. 36
7.8. Deliveries......................................... 36
7.9. Subscriber Adjustment Amount and Revenue Adjustment
Amount............................................. 36
Section 8. The Closing........................................ 37
8.1. Time and Place..................................... 37
8.2. Deliveries by Seller............................... 37
8.3. Deliveries by Buyer................................ 37
8.4. Other Action....................................... 38
Section 9. Allocation of Purchase Price....................... 38
Section 10. Termination........................................ 38
10.1. Termination Events................................. 38
10.2. Effect of Termination.............................. 39
Section 11. Casualty Losses.................................... 40
Section 12. Non-competition.................................... 40
Section 13. Notices............................................ 41
Section 14. Parties in Interest................................ 42
Section 15. Entire Agreement................................... 42
Section 16. Governing Law...................................... 42
Section 17. Counterparts....................................... 42
Section 18. Descriptive Headings............................... 42
Section 19. Definitions........................................ 42
iii
<PAGE>
LIST OF SCHEDULES AND EXHIBITS
Schedules
0.1 Systems of Seller
1.1(a) Machinery, Equipment, etc.
1.1(b) Governmental Authorizations
1.1(c) Franchise Authorizations
1.1(d) Access Agreements, etc.
1.1(f) Leases of Real and Personal Property
1.1(g) Owned Real Property
1.1(i) Other Agreements
1.2(h) Excluded Assets
2.4(a)(i) Standard Basic Rates
2.4(a) Spring Subscribers
3.3 Non Conflicts
3.4(c) Contingent Obligations
3.5(a) Exceptions to Regulatory Compliance
3.5(b) Legal or Governmental Actions and Proceedings
3.6 Compliance; Absence of Defaults
3.7(a) Combined Basic and Tier Rates
3.7(b) Cable Services and Rates
3.7(c) Channel Capacity; Matters Affecting or Relating to Channels
3.7(d) Exceptions to Compliance; Complaints
3.7(j) Information Regarding Certifications or Complaints
3.7(k) Information Regarding Rates and Refunds
3.8(a) Information Regarding Signals Carried
3.8(b) Exceptions Regarding Conduct of Business
3.9(c) Exceptions Regarding Real Property
3.12 Employees, Employment Agreements, etc.
3.13 ERISA
3.15 Insurance, Bonds and Letters of Credit
3.16 Litigation
3.18 Tax Matters
3.19(a) Billing Practices
3.19(b) Subscription and Converter Deposit Agreements
3.19(c) Billing and Collection Terms
3.19(d) Concessions; Promotions
3.19(e) Barter/Trade Out Agreements
3.20 Environmental Disclosure Schedule
3.22 Required Notices and Consents
3.23 Other Financial Interests
6.3 Required Consents
9 Allocation of Purchase Price
19 Definitions
iv
<PAGE>
Exhibits
Exhibit A Form of Assumption Agreement
Exhibit B Form of Indemnity Escrow Agreement
Exhibit C Form of Certificate
Exhibit D Form of Franchise Consent
Exhibit E Form of Third Party Consent
Exhibit F Form of Opinion of Seller's Counsel
Exhibit G Form of Opinion of FCC Counsel
Exhibit H Form of Opinion of Buyer's Counsel
Exhibit I Form of Non-Competition Agreement
v
<PAGE>
ASSET PURCHASE AGREEMENT Between
TRIAX MIDWEST ASSOCIATES, L.P. and
CABLE TV FUND 14-A, LTD.
THIS ASSET PURCHASE AGREEMENT, effective as of the 12th day of March, 1997
is entered into by TRIAX MIDWEST ASSOCIATES, L.P., a Missouri limited
partnership ("Buyer"), and CABLE TV FUND 14-A, LTD., a Colorado limited
partnership ("Seller").
R E C I T A L S:
- - - - - - - - -
Seller is franchised or otherwise authorized by law to operate community
antenna television systems and to distribute, and does operate and distribute,
audio and video signals by coaxial and/or fiber optic cable in and around the
communities and other geographic areas set forth in Schedule 0.1 (the
------------
"Systems").
Buyer desires to acquire the Systems and all the assets used or held for
use in the operation of the Systems from Seller (except the Excluded Assets, as
defined in Section 1.2).
Seller desires to sell, transfer and assign the Systems and the assets used
in the Systems to Buyer.
THEREFORE, in consideration of the covenants and agreements and in reliance
on the representations and warranties set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
Section 1. Purchase and Sale of Assets.
- --------- ---------------------------
1.1. Conveyance of Assets. At the Closing (as defined in Section 8.1),
--------------------
Seller will sell, transfer, assign and convey to Buyer, by instruments of
conveyance in the forms reasonably acceptable to Buyer, at Seller's expense
(except as otherwise expressly provided herein), good, valid and marketable
title to all of the assets (tangible and intangible, real, personal and mixed)
comprising the Systems which are owned, used or held for use by Seller primarily
in connection with the operation of the Systems (the "Transferred Assets"),
except for the Excluded Assets (as defined in Section 1.2), free and clear of
all defaults, liens, encumbrances, security interests and pledges, and all
adverse claims, charges, restrictions and title impediments (other than (i)
liens for taxes not yet due and payable and liens for taxes the payment of which
is being contested or the time for doing so has not yet expired, and for which
adequate reserves have been provided; (ii) zoning laws and ordinances and
similar legal requirements; (iii) rights reserved to any governmental authority
to regulate the affected property; and (iv) as to Real Property (as defined in
Section 3.9(c)) interests, any easements, rights-of-way, servitudes, permits,
restrictions and minor imperfections or irregularities in title which are
reflected in the public records and which do not individually or in the
aggregate materially interfere with the right or ability to own, use or operate
the Real Property or to convey good, marketable and indefeasible title to such
Real Property (collectively, "Permitted Liens"); provided that classification of
any
<PAGE>
item as a Permitted Lien will not affect any liability Seller may have for such
item, including pursuant to any indemnity obligation under this Agreement); all
of the above with such warranties of title and full substitution and subrogation
to all rights and actions of warranty against all preceding owners to the
fullest extent that such warranties are transferable. The Transferred Assets
shall include (not by way of limitation) the following:
(a) All of the tangible assets owned, used or held for use by Seller
in connection with the ownership or operation of the Systems, including,
but not by way of limitation, all physical plant and equipment, machinery,
electronic devices, trunk and distribution cable, conduit, vaults and
pedestals, grounding and pole hardware, head-end equipment, microwave
transmission and reception sites and related equipment, installed
subscribers' devices (including, without limitation, drop lines, encoders,
transformers and terminals for television sets and fittings), local
origination equipment, all inventories of materials and supplies, and all
spare parts, equipment (including, but not limited to, all receiving,
transmission and related equipment), converters, other signal control
devices, house-drop inventory, tools, vehicles, real property, personal
property and other assets, including (but not by way of limitation) the
items listed in Schedule 1.1(a);
---------------
(b) The licenses, authorizations, registrations and permits from the
Federal Communications Commission (the "FCC") and the Federal Aviation
Administration (the "FAA") required for the operation of the Systems (the
"FCC Licenses", and the "FAA Licenses", respectively), copyright licenses
and registrations, and all other governmental permits, consents, licenses,
authorizations, registrations and certificates which relate to the
ownership or operation of the Systems, including, but not limited to, all
community antenna relay services, business radio, earth station and other
licenses (collectively, the "Governmental Authorizations"), each of which
Seller has listed in Schedule 1.1(b);
---------------
(c) The franchises and similar grants of governmental authority
(collectively, the "Franchises") which relate to the ownership or operation
of the Systems, each of which Seller has listed in Schedule 1.1(c);
---------------
(d) The pole attachment agreements, easements, public and private
rights-of-way, permits for crossings over or under highways, railroads or
other property, and similar grants of authority which relate to the
ownership or operation of the Systems (collectively, the "Access
Agreements"), each of which Seller has listed in Schedule 1.1(d);
---------------
(e) All instruments of title, rights or claims of Seller under any
warranty, business records, customer lists, files, books, records, maps and
engineering data, blue prints, schematics, drawings, diagrams, surveys,
engineering and technical data, annual FCC proof of performance tests, and
all documents and logs relating to the Transferred
2
<PAGE>
Assets or the construction and operation of the Systems, including, but not
limited to, all subscriber complaint files, and other records maintained
pursuant to the Franchises or applicable law;
(f) The leases of real and personal property used in connection with,
or which relate to the ownership or operation of the Systems (collectively,
the "Leases"), each of which Seller has listed in Schedule 1.1(f);
---------------
(g) The real property interests owned or held by Seller which relate
to the ownership or operation of the Systems, including all improvements
thereon and rights related thereto, such as towers, fixtures, easements,
rights-of-way and other interests therein, each of which Seller has listed
in Schedule 1.1(g), together with a legal description of all owned real
---------------
property;
(h) All accounts receivable of Seller from customers of the Systems or
otherwise related to the Systems or the Transferred Assets existing and
uncollected as of the Closing (the "Closing Accounts Receivable");
(i) All customer subscription agreements, contracts, agreements,
commitments and other arrangements of Seller to provide television signal
in connection with the operation of the Systems (including, but not limited
to, agreements with trailer parks, apartments, condominiums, commercial
users and other multiple dwelling users), all agreements to broadcast
advertising and all other contracts applicable to the operation of the
Systems (collectively, the "Other Agreements"), each of which Seller has
listed in Schedule 1.1(i), and a true and correct copy of each written form
---------------
of which has been delivered to Buyer by Seller, Seller having included in
Schedule 1.1(i) a description of each such agreement which is not in
---------------
written form; and
(j) All subscriber deposits (including converter deposits) and amounts
collected by Seller for services, materials or equipment to be supplied
from and after the Closing Date or which is refundable.
The general language of sale, transfer, assignment and conveyance of assets to
Buyer contained in this Section 1.1 shall be controlling regardless of whether
individual assets are described in this Section 1.1 or on any of the attached
Schedules, all such assets to be transferred and conveyed to Buyer at Closing,
subject to the terms and conditions of this Agreement.
1.2. Excluded Assets. Notwithstanding anything herein, the following
---------------
assets (the "Excluded Assets") are excluded from the Transferred Assets:
(a) Seller's cash on hand and bank deposits on the Closing Date;
(b) Seller's prepaid assets;
3
<PAGE>
(c) Seller's contracts other than the Assumed Contracts (as defined in
Section 2.5);
(d) Seller's partnership assets and books and records and other
agreements and documents which relate to matters among Seller's partners
and/or their affiliates, provided, however, that Seller shall permit Buyer
to have access thereto to the extent and in the manner contemplated by this
Agreement;
(e) All of the patents, trademarks, service marks, trade names and
copyrights (and all applications therefor), and rights to receive payments
with respect thereto, owned or used by Seller in connection with the
operation of the Systems; provided, however, that for a period of 90 days
after the Closing Date, Buyer shall have the right to operate the Systems
using Seller's name and all derivations of such name and related trade
names, trademarks and service marks in use in connection with the Systems
on the Closing Date;
(f) All insurance policies, construction and performance bonds,
letters of credits or other similar items and any cash surrender value in
regard thereto, and any stocks, bonds, certificates of deposit and similar
investments;
(g) Any claims, rights and interests in and to any refunds of federal,
state or local franchise, income or other taxes or fees for periods prior
to the Closing Date; and
(h) Those assets which are listed in Schedule 1.2(h).
---------------
Section 2. Purchase Price and Method of Payment.
- --------- ------------------------------------
2.1. Purchase Price. At Closing, Buyer shall acquire and accept from
--------------
Seller, and Seller shall transfer and convey to Buyer, the Transferred Assets,
and, in consideration therefor, Buyer will:
(a) Pay Seller the sum of Twenty Million One Hundred Thousand Dollars
($20,100,000), in the manner and subject to adjustment as provided herein
(the "Cash Consideration");
(b) Pay Seller in the manner provided herein: (i) 100% of the face
amount of all bona fide Closing Accounts Receivable outstanding for thirty
(30) days or less from the date of first billing thereof and (ii) 90% of
bona fide Closing Accounts Receivable outstanding for 31 through 60 days
from the date of first billing thereof; and
(c) Assume the Assumed Obligations contemplated by Section 2.5 under
the form of Assignment and Assumption Agreement attached as Exhibit A (the
---------
"Assumption Agreement").
4
<PAGE>
The payments made by Buyer and the obligations of Seller which are assumed by
Buyer are sometimes collectively referred to herein as the "Purchase Price."
2.2. Deposit. Upon execution and delivery of this Agreement by Seller and
-------
Buyer, Buyer shall deliver $500,000 (the "Deposit") to Colorado National Bank
("Escrow Agent"), to be held and applied pursuant to the terms of that certain
Deposit Escrow Agreement, dated the date hereof, by and among Seller, Buyer and
Escrow Agent.
2.3. Method of Payment. The Cash Consideration shall be paid on the
-----------------
Closing Date in the following manner:
(a) Escrow Agent shall wire to Seller the amount of the Deposit and
all interest thereon in immediately available funds;
(b) Buyer shall wire to Escrow Agent in immediately available funds
the amount of any Reserve Account to be established under Section 2.4(c);
(c) Buyer shall wire to Escrow Agent One Million Dollars ($1,000,000)
(the "Indemnity Escrow Amount"), which will secure payment by Seller of any
indemnification obligations to Buyer in accordance with the terms of an
indemnity escrow agreement in substantially the form attached hereto as
Exhibit B (the "Indemnity Escrow Agreement"); and
---------
(d) Buyer shall wire to Seller Nineteen Million One Hundred Thousand
Dollars ($19,100,000), (A) minus: (i) the amount of the Deposit and all
interest earned thereon, and (ii) the amount of the Reserve Account, and
(B) plus or minus, as applicable, any other adjustments made at Closing
hereunder in immediately available funds (the "Closing Wire Transfer").
For purposes of all wire transfers which are contemplated by this
Agreement, Seller agrees to provide complete written wire transfer instructions
to Buyer at least three (3) business days prior to the Closing Date.
2.4. Definitions; Adjustments.
------------------------
(a) For the purpose of this Agreement, the following terms shall have
the meanings set forth below:
(i) "Basic Subscriber" shall mean, as to any System and as of any
------------------
date of determination thereof, persons who pay Seller the standard
monthly rates for basic cable service (whether for broadcast basic or
expanded basic service) (each a "Standard Basic Rate") as set forth in
Schedule 2.4(a)(i), each of whom has paid at least one monthly bill
------------------
generated and mailed in the ordinary course of business for cable
television services and one additional payment (which can
5
<PAGE>
include a pro rata payment in respect of a partial month's service or
a full or reasonably discounted payment in respect of installation,
none of whom is pending disconnection for any reason, and none of whom
is delinquent in payment for such cable television services; provided,
however, that those persons who are participants in the "Sprint"
program described on Schedule 2.4(a) (the "Sprint Subscribers") and
---------------
who pay Seller the standard monthly rate therefor shall be deemed to
be paying the standard monthly rate for cable service; and, provided
further, that the parties agree that the Systems had 239 Seasonal
Subscribers in 1996, none of whom shall be deemed to be a Basic
Subscriber. For this purpose, a Basic Subscriber shall be delinquent
if, as of the Listing Date (as hereinafter defined), such Basic
Subscriber is more than fifty-nine (59) days delinquent in payment and
has more than a $5.00 balance which is over two months past due
(excluding amounts in dispute).
(ii) "Equivalent Basic Subscriber Number" shall mean, as of the
------------------------------------
date of determination thereof, the sum of the aggregate number of
Basic Subscribers for each System, the aggregate number of Equivalent
Subscribers for each System, in each case computed as of the Listing
Date, and the aggregate number of Seasonal Subscribers for each
System, determined as provided in Section 2.4(a)(iv).
(iii) "Equivalent Subscribers" shall mean, as to any System and
------------------------
as to the date of determination thereof, the number of equivalent
Basic Subscribers served by such System derived by dividing (A) the
total monthly billings for sales by Seller of basic cable services to
bulk and commercial accounts, by (B) the monthly standard rate charged
by Seller to single family households for broadcast basic cable
services and expanded basic service, where available, as of the
Listing Date in such System. For purposes of the foregoing, there
shall be excluded all billings to any bulk or commercial account
which, as of the Listing Date, is more than two months delinquent in
payment and has more than a $5.00 balance (excluding amounts in
dispute).
(iv) "Seasonal Subscribers" shall mean those subscribers who,
----------------------
during some portion of 1996, were subscribers to a "vacation plan"
offered by the Systems, in which such subscribers paid $6.95 per month
for cable service during months in which the subscribers did not
reside at the locations to which service was being provided. For the
purposes of the determination of the Equivalent Basic Subscriber
Number the aggregate number of Seasonal Subscribers for the Systems
shall be deemed to be 174.
(v) "Tentative Subscribers" shall mean as to any System and as of
-----------------------
the date of determination thereof, persons who have paid one payment
(which can include a pro rata payment in respect of a partial month's
service or a payment in respect of installation equal to at least 50%
of the standard installation fees at
6
<PAGE>
hook-up), but have not yet paid at least one full monthly bill
generated and mailed in the ordinary course of business. Tentative
Subscribers shall be identified on a schedule at Closing. A Tentative
Subscriber who, within sixty (60) days following Closing pays a full
monthly bill generated in the ordinary course of business, shall be
deemed a Basic Subscriber.
For the purposes hereof with respect to all accounts receivable and the
computation of the number of Basic Subscribers, Equivalent Subscribers,
Tentative Subscribers and Seasonal Subscribers, Seller and Buyer shall
credit only actual customer payments. Seller shall deliver to Buyer five
(5) days prior to the Closing Date a written list of all cable television
subscribers of Seller as of the close of business 10 days prior to the
Closing Date (the "Listing Date"), separately identifying all of such
subscribers meeting the definitions of Basic Subscriber, Equivalent
Subscriber, Tentative Subscriber and Seasonal Subscriber hereunder (the
"Pre-Closing Subscriber List").
(b) Seller has delivered, or within 10 days after the date hereof,
will deliver, to Buyer a list of all of the number of Seller's subscribers,
including Basic Subscribers, Sprint Subscribers, Equivalent Subscribers,
each separately identified as such. For the purposes of this Agreement,
the number of Basic Subscribers, in the aggregate, shall be considered to
equal the Equivalent Basic Subscriber Number. Seller represents that in
1996, it had no more than 239 Seasonal Subscribers.
(c) Each Tentative Subscriber included on the Pre-Closing Subscriber
List shall be removed from the Pre-Closing Subscriber List and placed on a
Tentative Subscriber List (the "Tentative Subscriber List") on the Listing
Date for the purpose of making a preliminary determination of the
Equivalent Basic Subscriber Number delivered to Buyer by Seller at Closing.
If and to the extent that accounts which are placed on the Tentative
Subscriber List cause the Equivalent Basic Subscriber Number delivered to
Buyer by Seller at Closing to fall below 15,700, Buyer shall deliver into a
separate escrow account at Closing, funds (the "Reserve Account") equal to
$1,280 multiplied by the difference between 15,700 and the Equivalent Basic
Subscriber Number (the "Subscriber Adjustment Amount"). The amount of
funds transferred to the Reserve Account shall reduce the amount of the
Closing Wire Transfer as provided in Section 2.3(d). If and to the extent
that Tentative Subscribers pay a full monthly bill generated in the
ordinary course of business within 60 days following the Closing Date such
subscribers shall be deleted from the Tentative Subscriber List and
returned to the Pre-Closing Subscriber List. Upon completion of such
reconciliation and agreement thereto by Seller and Buyer, but in no event
later than 90 days following the Closing Date, Seller shall be paid out of
the Reserve Account $1,280 per Tentative Subscriber returned to the Pre-
Closing Subscriber List from the Tentative Subscriber List (subject to the
Pre-Closing Subscriber List reconciliation provided for in Section 2.4(d)
below), plus a pro rata share of any interest or other income earned on the
Reserve Account and applicable to the amount thereof so paid to Seller.
After such payment is made to Seller, all amounts remaining in the Reserve
Account shall be paid to Buyer. In order to obtain payment from
7
<PAGE>
subscribers on the Tentative Subscriber List, Buyer shall exert such
efforts as it exerts in the ordinary course of business to obtain payment
from similarly situated subscribers in other cable systems it owns, but in
no event shall Buyer be required to file a lawsuit (or to hire a collection
agency or law firm) with respect thereto. Buyer: (i) will provide Seller
a list of payments upon reconciliation of the Tentative Subscriber List,
and (ii) will not grant to any subscriber on the Tentative Subscriber List
a deferred payment option which would cause said subscriber not to be
counted as a Basic Subscriber. It is understood that Buyer may, but will
not be obligated to, provide continuing cable service to any account which
is delinquent in any amount payable to Buyer.
(d) Promptly after the expiration of 60 and not more than 90 days
following the Closing Date, Seller and Buyer shall review and reconcile the
Pre-Closing Subscriber List and the Tentative Subscriber List, to determine
the Equivalent Basic Subscriber Number existing on the Listing Date, in
accordance with the foregoing definition and as adjusted with respect to
the Tentative Subscriber List under Section 2.4(c). If, as a result of
such reconciliation, the Equivalent Basic Subscriber Number actually
delivered to Buyer at Closing is less than 15,700, the Cash Consideration
shall be reduced by an amount equal to $1,280 multiplied by the number by
which the Equivalent Basic Subscriber Number is less than 15,700. Any such
adjustment to the Cash Consideration shall be paid to Buyer first out of
any Reserve Account created under Section 2.4(c) or, if such funds are
insufficient, out of the Escrow, and Seller shall pay any remaining balance
due upon demand if the Reserve Account and the Escrow are not sufficient to
pay such adjustment.
(e) The parties agree to make cash adjustments and payments between
them at Closing to transfer to Buyer any converter and other subscriber
deposits received or held by Seller, and any sums which Seller would have a
present or future legal obligation to refund. Seller and Buyer further
agree to make such cash adjustments and payments between them at Closing
and as soon as practicable after the Closing Date (but not later than 90
days following the Closing) to reflect the principles that: (i) all
expenses and income attributable to the Excluded Assets are for the account
of Seller, (ii) all expenses and income attributable to the construction,
installation, ownership or operation of the Systems prior to the Closing
Date are for the account of Seller (including amounts payable for supplies,
inventories and other assets acquired by Seller, which Seller shall deliver
to Buyer at Closing) (the "Current Adjustment Amount"), and (iii) all
expenses and income attributable to the construction, installation,
ownership or operation of the Systems on and after the Closing Date are for
the account of Buyer. Such adjustments shall include, but shall not be
limited to, an allocation of the following between Seller and Buyer: (i)
franchise, copyright, license or other fees; (ii) pole attachment fees and
rentals and charges payable in respect of leasehold interests; (iii)
property taxes and assessments payable in respect of any Transferred
Assets; (iv) charges for utilities, microwave relay and other services
furnished to or in connection with the business of operating the Systems,
provided that pay television and other programming expenses will be
independently incurred and paid for by Seller and Buyer before and after
Closing,
8
<PAGE>
respectively, and will not be subject to adjustment; (v) fees payable to
the FCC or other governmental authority in connection with the Systems or
the ownership or operation thereof; and (vi) wages, salaries, commissions,
bonuses (based on any commitment therefor or amount thereof paid for the
most recent year), accrued vacation (except as otherwise provided below)
and other fringe benefits (and related payroll taxes, etc.) of Seller's
employees as of the Closing Date who become and continue as employees of
Buyer during and beyond the 90 day period following the Closing Date (it
being agreed that Seller shall be liable for all forms of compensation due
to Seller's employees who do not so become and continue as Buyer's
employees, except for actual wage or salary payments and directly related
fringe benefits payable solely with respect to the employment of such
employees by Buyer and services rendered by such employees to Buyer at the
request of Buyer, which shall be paid by Buyer). Seller shall make all
payments due to its employees for services rendered by such employees prior
to the Closing Date or otherwise accruing to such employees as of the
Closing Date in accordance with Seller's normal payment practices, but in
no event later than 30 days following the Closing Date. Nothing herein
shall be deemed to require the pro-rating of any income tax or similar type
of tax.
(f) For purposes of this Agreement, the average monthly revenue per
subscriber paid to Seller by the Basic Subscribers for the last three (3)
complete calendar months prior to Closing shall be computed by dividing (i)
the average monthly total revenue from operations of the Systems for the
last three (3) complete calendar months prior to Closing, computed on the
accrual basis in a manner consistent with Seller's past practices,
(including charges for basic and pay cable television service, home
----------
shopping revenues, installation fees, converter and other equipment fees,
late charges, revenues from advertising sales, and franchise fees not
separately billed, but excluding sales taxes, equipment sales, franchise
---------
fees separately billed, revenues from pay-per-view programming,
extraordinary items and interest income) by (ii) the Equivalent Basic
Subscriber Number (which for this purpose shall be computed based on the
weighted average number of subscribers for the period) (the "Three Month
Average Revenue"). If the Three Month Average Revenue per subscriber is
less than $28.56 for the Systems as of the Closing Date, the Cash
Consideration shall be reduced by an amount equal to the product of the
Cash Consideration, multiplied by a fraction, the numerator of which is the
amount by which the Three Month Average Revenue is less than $28.56 and the
denominator of which is $28.56 (the "Revenue Adjustment Amount").
(g) The Subscriber Adjustment Amount, the Current Adjustment Amount
and the Revenue Adjustment Amount (collectively, the "Adjustment Amounts")
shall be estimated in good faith by Seller, and set forth, together with a
detailed statement of the calculation thereof, in a certificate (the
"Initial Adjustment Certificate") executed by a duly authorized
representative of Seller and delivered to Buyer not later than 10 days
prior to the Closing. Seller shall use reasonable efforts to keep Buyer
informed during its preparation of the Initial Adjustment Certificate. If
accepted by Buyer, the Initial Adjustment Certificate shall constitute the
basis on which the Adjustment Amounts are
9
<PAGE>
calculated for purposes of the Closing. Seller and Buyer shall endeavor in
good faith to agree upon the actual Adjustment Amounts within 90 days after
the Closing. Seller or Buyer, as appropriate, shall pay to the other party
within five (5) business days after the final determination the amount by
which the parties agree that the Adjustment Amounts differ from the
Adjustment Amounts as estimated in the Initial Adjustment Certificate. Any
amounts in dispute at the end of such 90 day period will be determined
within 120 days after the Closing Date by an accounting firm mutually
agreed upon by the parties, whose determination will be conclusive. Buyer
and Seller will each be responsible for one-half of the fees and expenses
payable to such firm in connection with such determination. The payment
required after determination of all disputed amounts will be made by the
responsible party within five business days after the final determination.
2.5. Limited Assumption of Liabilities. At the Closing, Seller shall
---------------------------------
assign and transfer to Buyer, and Buyer shall assume, be obligated to pay or
otherwise satisfy or be responsible for, (i) the obligations and liabilities
arising or accruing on or after the Closing Date under all of the Franchises,
Leases and Governmental Authorizations, and under those Access Agreements and
Other Agreements listed on Schedules 1.1(d) and 1.1(i) (such Franchises, Leases,
---------------- ------
Governmental Authorizations, Access Agreements and Other Agreements are
sometimes referred to herein as the "Assumed Contracts"); (ii) other obligations
and liabilities of Seller only to the extent that there shall be an adjustment
in favor of Buyer with respect thereto pursuant to Section 2.4; and (iii) all
obligations and liabilities arising out of Buyer's ownership of the Transferred
Assets or operation of the Systems after the Closing Date (collectively, the
"Assumed Obligations"). Notwithstanding the foregoing, upon the agreement of
Buyer, if the assignment and transfer of any Assumed Obligation would cause a
breach of or default under the Assumed Contract under which the Assumed
Obligation arises, and if the required consent to its transfer and assignment
has not been obtained by Closing, Seller agrees to continue, at Buyer's expense
(other than charges for personnel or internal operating administrative or
overhead expenses of Seller or any creditor of Seller), the Assumed Contract in
effect, and Buyer shall have and enjoy the benefit of the rights and obligations
thereunder as agent for Seller until such time as the consent is obtained (but
not to extend more than 90 days beyond the Closing Date, at which time such item
shall be deemed to have been automatically assigned and transferred to Buyer,
without any further act on the part of Buyer or Seller). All debts, liabilities
and obligations arising out of or relating to the Transferred Assets or the
operation of the Systems other than the Assumed Obligations shall remain and be
the obligations and liabilities solely of Seller, and Buyer shall not assume or
have any obligation or liability for such debts, liabilities or obligations.
Section 3. Representations, Warranties, Covenants and Agreements of Seller.
- --------- ---------------------------------------------------------------
Seller represents, warrants, covenants and agrees, as of the date hereof
and on the Closing Date (except where another date or period of time is
expressly mentioned) that:
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<PAGE>
3.1. Organization, Qualification and Authority.
-----------------------------------------
(a) Seller is a limited partnership duly organized under the laws of
the State of Colorado and is duly qualified to transact business, and is in
good standing, in the State of Illinois;
(b) The character and location of the properties, assets, licenses and
rights used in the operation of the Systems and the nature of the Systems
as operated by Seller do not require Seller to qualify to transact business
in any jurisdiction other than the states set forth in Section 3.1(a); and
(c) Seller has full partnership power, capacity and authority to own
and lease the properties and assets used in the operation of the Systems,
to carry on the business of the Systems as presently conducted, and to
operate the Systems as heretofore operated by Seller.
3.2. Due Authorization. The execution and delivery of this Agreement and
-----------------
the performance of the transactions contemplated hereby have been duly
authorized and approved by all necessary partnership action of Seller, and by
appropriate resolutions duly adopted, and all other actions required to be taken
by law, by Seller's general partner. Seller has full partnership power to enter
into and to perform this Agreement and the transactions contemplated hereby.
This Agreement constitutes a valid and binding Agreement of Seller and is
enforceable against Seller in accordance with its terms (except as such
enforceability may be limited by bankruptcy, insolvency or similar laws, or by
general principles of equity relating to the availability of equitable
remedies).
3.3. No Conflicts. Subject to the receipt of the consents set forth in
------------
Schedule 3.3, neither the execution and delivery of this Agreement by Seller nor
- ------------
the consummation by Seller of the transactions contemplated by Seller herein,
nor the compliance by Seller with the terms, conditions and provisions hereof,
conflict with or will conflict with Seller's limited partnership agreement or
the articles of incorporation or bylaws of Seller's general partner, nor any
Lease, Access Agreement, Other Agreement or indenture, mortgage, deed of trust,
covenant, instrument, contract or agreement to which Seller is a party or by
which Seller, the Transferred Assets or the Systems is bound; any Franchise or
Governmental Authorization; the Communications Act; the Copyright Act; the
rules, regulations or policies of the FCC, the FAA or United States Copyright
Office; or any applicable federal, state or local law; nor result in a breach or
violation of or default under any of the same (whether immediate or subject to
the passage of time or giving of notice), nor cause the suspension, revocation,
impairment, forfeiture, nonrenewal or termination of any Governmental
Authorization or Franchise, or any other license, permit, franchise,
certificate, registration, consent or authorization.
11
<PAGE>
3.4. Financial Statements.
--------------------
(a) The books of account and financial records of Seller are current
and have been maintained by Seller in the ordinary course of business.
Seller has prepared its financial statements relating to the Systems in
accordance with generally accepted accounting principles applied on a basis
consistent from period to period. Seller has delivered to Buyer: (i)
unaudited financial statements relating to the Systems (including opening
and year end balance sheets and an income and expense statement for each of
the two fiscal years ended December 31, 1994 and 1995, (collectively, the
"Historical Financial Statements"); (ii) monthly reports of all accounts
receivable of the Systems (including an aging thereof in month end
increments) ("Receivable Reports") for the period commencing January 1,
1996; and (iii) monthly managers' subscriber summary reports ("Subscriber
Reports") which include the Systems, separately listing total subscribers,
for the period following December 31, 1995. Seller also has delivered to
Buyer consistently prepared monthly financial statements for each of the
months since the end of Seller's fiscal year ended 1995 ("Operating
Reports") which reflect all billings for basic and premium services and
other sources of revenues, by category, for the interim period between
December 31, 1995 and the end of the month preceding the date of this
Agreement. Seller will deliver to Buyer: (A) as soon as they are
available, but in no event later than thirty (30) days after the end of
each month an Operating Report, a Subscriber Report and Receivable Report
for the Systems for the most recent month; and (B) such other financial and
operating information regarding the Systems and the Transferred Assets as
Buyer reasonably requests. Such financial statements have been and will be
prepared on a basis consistent from period to period. Except as set forth
in the Schedules hereto, each of such financial statements, Historical
Financial Statements, Receivable Reports, Subscriber Reports and such other
reports provided to Buyer is and will be true, correct and complete in all
material respects with respect to the subject matter contained therein, and
fairly presents, and will fairly present, the results of operation of
Seller and the Systems and related information, for the periods covered
thereby, and does not and will not omit to state or reflect any material
fact required to be stated or reflected therein or necessary to make the
statements therein not misleading, subject, however, to normal year end
audit adjustments with respect to unaudited information, which adjustments
are not material individually or in the aggregate.
(b) Since January 1, 1996, (i) with respect to the Systems, Seller has
not incurred any obligation or liability, contingent or otherwise (except
normal trade or business obligations incurred in the ordinary course of
business), the performance of which would be reasonably likely,
individually or in the aggregate, to have a material adverse effect on the
financial conditions or results of operations of the Systems, (ii) there
has been no material adverse change in the Transferred Assets or the
financial condition, liabilities or operations of the Systems, and to the
knowledge of Seller and without notice to the contrary, no fact or
condition exists or is contemplated or threatened that could reasonably be
expected to cause such material adverse change, other than changes
affecting the United States cable industry as a whole, including any change
12
<PAGE>
arising from (A) legislation, litigation, rulemaking or regulation or (B)
competition caused by or arising from other multiple channel distribution
services.
(c) Except as set forth in Schedule 3.4(c), the Systems have no
---------------
outstanding claims, contingent obligations (whether as a guarantor,
indemnitor, surety, accommodation party or otherwise), liability for taxes
which are due and unpaid or long-term commitments or obligations, and, to
Seller's knowledge and without notice to the contrary, there are no
potential unasserted claims with respect to Seller, the Systems or the
Transferred Assets; to the knowledge of Seller and without notice to the
contrary, no person or entity has threatened to assert any of such claims
against Seller, the Systems or the Transferred Assets, except as set forth
in the financial statements provided under Section 3.4(a) or as set forth
in the Schedules to this Agreement.
3.5. Regulatory Licenses and Filings.
-------------------------------
(a) Except as set forth in Schedule 3.5(a): (i) Seller has timely
---------------
filed all notices and all Statements of Account and has made all required
royalty payments under the Copyright Act so as to qualify for the
compulsory license for the carriage of radio and television stations, and
has completed and filed all other registrations and filings required to be
filed with the FCC and FAA, copies of which have been delivered to Buyer by
Seller, and paid all amounts due in connection with such filings or arising
as a result of the information shown thereon; (ii) all Statements of
Account in connection with the operation of the Systems during the last
three (3) years have been completed in compliance in all material respects
with (S)111 of the Copyright Act; (iii) all royalty payments required to be
made in connection with the operation of the Systems during the last three
(3) years were remitted to the Copyright Office and were computed and
reported in accordance with the regulations adopted pursuant to (S)111 of
the Copyright Act; and (iv) the statements, representations, warranties and
calculations contained in and amounts paid under each of such notices,
filings and registrations are true and correct in all material respects and
consistent with applicable federal regulations.
(b) Except as set forth in Schedule 3.5(b), there is no legal action,
---------------
investigation or proceeding pending or, to the knowledge of Seller, and
without notice to the contrary, threatened (or basis existing therefor) for
the purpose of modifying, revoking, terminating, suspending or canceling
any of the Governmental Authorizations, the FCC Licenses, the FAA Licenses,
any Franchise, the compulsory copyright license under (S)111 of the
Copyright Act, or any of Seller's other authorizations or certificates, or
which would have a material adverse effect upon, or cause material
disruption to, the Systems or the consummation of the transactions
contemplated hereby.
(c) Within 90 days after Closing, or such shorter period as may be
required to enable Buyer to make a timely filing with respect to the six-
month Copyright reporting period in which the Closing occurs, upon the
request of Buyer Seller shall deliver to Buyer a certificate in the form
attached as Exhibit C signed by Seller setting forth
---------
13
<PAGE>
Seller's gross receipts (calculated in a manner which is consistent with
the regulations of the Copyright Office adopted under (S)111 of the
Copyright Act) derived from the retransmission of any television or radio
broadcast signals during the portion of the applicable six-month reporting
period that includes the Closing Date.
3.6. Franchises and Other Authorities.
--------------------------------
(a) Except as set forth in Schedule 3.6, Seller has, and is in
------------
compliance in all material respects with (without waiver or other
forbearance of compliance), all Franchises and Governmental Authorizations,
including, but not limited to, all permits (including environmental
permits), licenses, consents, certificates, registrations and other
authorities and rights required by any statute, ordinance, regulation or
other legal authority relating or applicable to the Systems or the
Transferred Assets, and/or the ownership or operation thereof (the
Franchises, Governmental Authorizations and all of the foregoing being
collectively referred to herein as the "Authorities"). A photocopy of each
of which Authorities, as currently in effect, including all amendments,
modifications, consents or waivers of compliance thereof (including,
without limitation, all agreements relating to any form of rate regulation,
customer service and consumer protection requirements or standards) has
been delivered to Buyer by Seller. The Systems have no Authorities which
are not in written form. Seller also has delivered to Buyer a copy of all
material correspondence which resulted in any such amendment, modification,
consent or waiver. A list of the current franchise fees required to be
paid by Seller made under each of such Franchises is set forth in Schedule
--------
1.1(c);
------
(b) Except as set forth in Schedule 3.6, Seller has not previously
------------
caused, suffered or permitted any material default, dispute or
noncompliance to occur or exist, and there is no current default, dispute
or noncompliance, with respect to any Authority, and to the knowledge of
Seller, and without notice to the contrary, no ground or basis exists,
whether or not subject to the giving of notice or passage of time, for
cancellation, termination, suspension, restriction or limitation upon the
rights granted by any Authority; except as set forth in Schedule 3.6, all
------------
Authorities are in full force and effect; and
(c) For any Franchise that has an unexpired term of fewer than three
(3) years from the date of Closing, a timely request for renewal has been
submitted to the appropriate governmental authority pursuant to Section 626
of the Communications Act of 1934, as amended. Except as set forth on
Schedule 3.6, Seller (i) has not been notified in writing by a governmental
------------
authority with respect to any such Franchise of a preliminary decision not
to renew or of any finding that could reasonably be expected to serve as a
basis for a decision not to renew; and (ii) has no knowledge that any such
notice is to be received.
14
<PAGE>
3.7. Status of the Systems.
---------------------
(a) The Systems have not less than 23,750 homes passed by not more
than approximately 313 miles of constructed and activated coaxial and/or
fiber optic cable. Seller's posted combined basic and tier rate as of the
date hereof is not less than the current rates set forth in Schedule 3.7(a)
---------------
and as of the Closing shall not be less than the Closing rates set forth in
Schedule 3.7(a).
---------------
(b) Schedule 3.7(b) sets forth as to the Systems: (i) each type of
---------------
cable television service offered by Seller; (ii) as of the date of this
Agreement the number of subscribers for each such service; (iii) as of the
date of this Agreement the rates charged for each service as of a date
within the most recent 10 day period; and (iv) as of the date of this
Agreement the subscribers in such System who receive services at a rate
below the Standard Basic Rate for such System, the amount charged to such
subscribers for such services and the term of the commitment to provide any
such services at less than the Standard Basic Rate. The Systems have the
ability, without additional capital expenditures, to deliver both a basic
and expanded basic service sold and supplied separately to subscribers
using the minimum bandwidth set forth in Schedule 3.7(b). The basic
---------------
service is composed of not more than the number of channels specifically
identified in Schedule 3.7(b) as those channels presently constituting
---------------
Seller's basic service package. Seller has delivered to Buyer strand maps
covering the areas comprising the Systems if Seller has such maps. Except
as set forth in Schedule 3.7(b), as of the date of this Agreement no other
---------------
person or entity has a franchise or is otherwise licensed to offer or
provide, or does offer or provide, cable television services as a cable
operator in any franchise territory of Seller, and to Seller's knowledge
without notice to the contrary (which knowledge shall include any written
application filed with a franchising authority) as of the date of this
Agreement no person or entity has made application to any franchising
authority to provide cable television services in any franchise territory
of Seller.
(c) Schedule 3.7(c) sets forth: (i) the channel capacity of each of
---------------
the Systems to carry video/aural signals which are the equivalent of
television signals (excluding FM channels), each of which delivers the
number of channels set forth therein without additional capital
expenditures; and (ii) the separate identity of such channels which have
been activated and which have not been activated.
(d) Except as set forth in Schedule 3.7(d), each of the Systems and
---------------
all of the channels carried thereon, without additional capital
expenditures, complies in all material respects with all applicable FCC
technical regulations, including the regulations contained at 47 C.F.R.
Part 76 and, to the extent applicable, Part 78 thereof, and with all
technical standards contained in the Authorities. The picture quality
delivered by the Systems through the Closing Date will not deteriorate from
the quality of picture currently being delivered by the Systems as of the
date hereof. Each of the Systems is currently maintained. There are no
obligations or liabilities to subscribers of the Systems
15
<PAGE>
except: (i) with respect to deposits made by such subscribers which will
be transferred to Buyer at the Closing, (ii) the obligation to supply
services to subscribers in the ordinary course of business, and (iii) as
disclosed herein or in the Schedules attached hereto. There are no
complaints of subscribers of which Seller has knowledge or notice that have
not been resolved or (A) will not be resolved in the ordinary course of
business without unusual expense or (B) if not resolved, which will have a
material adverse effect on the Systems individually or in the aggregate.
Since January 1, 1996, Seller has provided a consistent level of customer
service to subscribers of the Systems. Except as set forth in Schedule
--------
3.7(d), the customer service level provided by Seller complies with the
------
standards established by the customer service regulations adopted by the
FCC which became effective on July 1, 1993 and, if applicable, all other
customer service standards established by the grantors of the Franchises.
Except as set forth in Schedule 3.7(d), as of the date of this Agreement
---------------
Seller has received no notice that any franchising authority will seek to
impose the customer service levels established by such FCC regulations.
(e) Except with respect to debts or accounts payable that are being
contested in good faith and for which adequate reserves have been provided:
(i) all debts to contractors, subcontractors, materialmen and other persons
supplying services or property with respect to the construction or
maintenance of the Systems have been paid in full or are included in
Seller's accounts payable, and (ii) all accounts payable with respect to
the construction, maintenance or operation of the Systems have been paid or
are current in accordance with their terms and will be paid by Seller in
accordance with such terms.
(f) There has not occurred any sale or other transfer of ownership of
any System or any material portion thereof since October 4, 1989 other than
assets sold in the ordinary course of business.
(g) Seller has delivered, or within 10 days after the date of this
Agreement will deliver:
(i) a list of the channels presently constituting Seller's
"basic" television package, any "expanded basic" package and each of
Seller's tiers of pay and premium channels on a tier-by-tier basis,
and a description of all changes in channels carried in Seller's
"basic" television package, any expanded basic package and its tiers
of pay and premium channels, including all changes in rates with
respect thereto, since January 1, 1992;
(ii) a list of all local commercial television and radio
broadcast stations presently carried on the Systems, together with the
channel on which each such station was carried on the Systems on (A)
January 1, 1992 and (B) July 19, 1985, to the extent such information
is available. Seller has not received any notice from any local
commercial television or radio broadcast station presently carried on
the Systems that such station desires to be carried on any channel
other than the channel on which such station presently is carried;
16
<PAGE>
(iii) a list of all local non-commercial television and radio
broadcast stations presently carried on the Systems, together with the
channel on which each such station was carried on the Systems on July
19, 1985, to the extent such information is available; and
(iv) a list of each commercial and non-commercial television
broadcast station which Seller and/or its predecessors notified, and
each such station which Seller and/or its predecessors was legally
entitled to notify, on or prior to May 3, 1993, that such station did
not legally qualify for mandatory carriage under the FCC's "must
carry" rules due to signal level, copyright or other legal exemptions,
and specifying for each such station the legal reason why such station
was not entitled to mandatory carriage.
(h) None of the grantors of the Authorities is entitled to be
grandfathered to establish rates under 47 U.S.C. (S)543(j) or the
regulations thereunder.
(i) Each of the Systems was initially activated prior to October 4,
1989.
(j) Except as set forth on Schedule 3.7(j), as of the date of this
---------------
Agreement, (i) no grantor of any of the Authorities has applied to the FCC
for certification under 47 U.S.C. (S)543 and the regulations thereunder or
has indicated an intention to make such application, and (ii) no person has
filed a Form 329 or other complaint with the FCC thereunder.
(k) Except as set forth in Schedule 3.7(k), no basis exists under the
---------------
1992 Act (after giving effect to provisions of the 1992 Act which otherwise
would be effective but for the passage of time) as in effect on the date of
this Agreement, for any rollback of rates for "basic" service, or any
rollback or refund of rates for any premium or pay service, with respect to
any of the Systems.
3.8. Legality of Signals Carried; Compliance with Applicable Laws.
------------------------------------------------------------
(a) Schedule 3.8(a) lists all television and radio stations and other
---------------
programming or signals carried by each of the Systems, separately setting
forth and listing all: (i) commercial and non-commercial television and
radio broadcast stations and (ii) satellite delivered programming carried
by each System. As to each such television and radio broadcast station,
Schedule 3.8(a) also indicates whether its signal is of local or distant
---------------
origin under the Communications Act, and whether such signal is received
off-air, or via satellite or microwave. Timely notice was given to each
commercial and non-commercial station carried by the Systems, and to each
such station which was entitled to notice, under the FCC's mandatory
broadcast station carriage rules contained in and adopted under the 1992
Act. There are no broadcast stations that are entitled to carriage under
the FCC rules which are not carried by the Systems, except as separately
listed in Schedule 3.8(a), which list specifies the exemption which
---------------
provides the basis for not
17
<PAGE>
carrying each such station. Schedule 3.8(a) also indicates, as to each
---------------
broadcast station that is entitled to carriage on the Systems under FCC
rules, whether the station has elected mandatory carriage or retransmission
consent and the date of such station's notice. As to each such station
which requested retransmission consent, the status as of the date of this
Agreement of any negotiations therefor is set forth in Schedule 3.8(a).
---------------
Each retransmission agreement which has been entered into by Seller with
respect to the Systems is listed in Schedule 3.8(a). A copy of each
---------------
retransmission agreement entered into by Seller with respect to the
Systems, and of all written notices and correspondence sent or received in
connection with such mandatory carriage and retransmission consent matters
has been provided to Buyer. The Systems have no retransmission agreement
which is not written. No notices or demands have otherwise been received
by Seller with respect to the Systems challenging the right of any of the
Systems to carry any television or radio broadcast channel or other
programming, or asserting an obligation of any of the Systems to carry any
television or radio broadcast channel or other programming not carried by
the Systems. Except as set forth in Schedule 3.8(a) or 3.8(b), the Systems
--------------- ------
are operated in compliance in all material respects with all FCC and FAA
regulations and rules and Seller is charging such rates as are allowable
under rules and regulations promulgated by the FCC under the 1992 Act and
any authoritative interpretation thereof and any other Governmental
Authority, if such rates are subject to regulation by any Governmental
Authority, including the local franchising authority and/or the FCC. The
Systems are in full compliance in all material respects with all FCC and
FAA regulations relating to tower lighting and marking requirements and
aeronautical frequency signal leakage requirements, including compliance
with the Cumulative Leakage Index specifications ("CLI") and Proof of
Performance technical tests of the FCC. All Systems using restrictive
frequencies (108-137 mhz and 225-245 mhz) comply with CLI requirements.
(b) Except as set forth in Schedule 3.8(b), Seller has conducted the
---------------
business of the Systems, including the ownership and use of the Transferred
Assets, in accordance with, and Seller, the Systems and the Transferred
Assets are in compliance in all material respects with the Communications
Act, the Copyright Act and all other applicable federal, state and local
laws, ordinances, rules and regulations, including, but not limited to, all
laws, ordinances, rules and regulations relating to the installation,
maintenance or operation of cable television systems, building
construction, use or occupancy, zoning, the environment, and the treatment,
handling, use, existence or disposal of pollutants, contaminants or
hazardous, toxic or regulated substances or wastes. Seller has not
received any notice of noncompliance, or any waiver or postponement of or
stay from full and immediate compliance with, and neither Seller nor the
Transferred Assets is the subject of any pending, or, to the knowledge of
Seller and without notice to the contrary, a potential subject, of any
claims, charges or fines under, any of the Franchises, the Governmental
Authorizations or the Authorities or under any such laws, rules or
regulations, nor has Seller received any notice calling attention to the
need for any work, repairs, construction, alterations or installation on or
in connection with the Transferred Assets or the Systems that has not been
corrected.
18
<PAGE>
(c) Neither Seller nor, to the knowledge of Seller, its officers,
general partner, employees or agents has made any illegal or questionable
payments to any third party.
3.9. Real Property and Leases.
------------------------
(a) All real property (including, without limitation, all interests in
any rights to real property) and improvements located thereon, and in each
case a general description thereof, which is owned by Seller is set forth
in Schedule 1.1(g) (the "Owned Real Property").
---------------
(b) A description of real property leased by Seller and of the
improvements thereon and the use made thereof are set forth in Schedule
--------
1.1(f) (the "Leased Real Property").
------
(c) Seller has (and will convey to Buyer at the Closing) fee simple
title to the Owned Real Property and valid and binding leasehold interests
(the "Real Estate Leases") with respect to the Leased Real Property
(collectively, the "Real Property"). Except as set forth in Schedule
--------
3.9(c), Seller is in peaceable possession of the Owned Real Property and
------
Leased Real Property. The Owned Real Property and Seller's interest in the
Leased Real Property are free and clear of all liens, security interests,
pledges and encumbrances, other than the Permitted Liens or liens, security
interests, pledges and encumbrances which will be discharged and released
on or prior to the Closing Date, and are free and clear of all defaults,
adverse claims, title impediments, encroachments, boundary disputes,
covenants, restrictions, rights of way and title objections that would
conflict in any material respect with Buyer's use of said property in the
manner heretofore used by Seller. With respect to each Real Estate Lease:
(i) the Lease is in full force and effect; (ii) all accrued and payable
rents have been paid; (iii) there is no default of Seller, nor to Seller's
knowledge, of any other party thereunder, and there is no waiver,
indulgence or postponement of any obligations thereunder; (iv) to Seller's
knowledge and without notice to the contrary, no event that with the giving
of notice, the lapse of time, the happening of any further event or
otherwise would become a default, has occurred under any such Lease; and
(v) Seller has provided Buyer with a photocopy of each written Real Estate
Lease, including all amendments, modifications, consents, waivers and all
material correspondence relating thereto, and has included in Schedule
--------
1.1(f) a description of each such Real Estate Lease which is not in written
------
form.
(d) Seller has delivered to Buyer all surveys of and title
commitments and title policies with respect to, the Owned Real Property and
the Leased Real Property which are in the possession or control of Seller.
3.10. Personal Property. Seller has (and will convey to Buyer at the
-----------------
Closing): (a) good, valid and marketable title to all of the tangible assets,
machinery, equipment and other tangible personal property of the Systems
("Seller's Personal Property"), including, without limitation, the personal
property listed in Schedule 1.1(a), the Governmental Authorizations, the
---------------
19
<PAGE>
Franchises and the Access Agreements, and (b) valid and binding leasehold
interests with respect to the Leased Personal Property (as hereinafter defined),
in each case free and clear of all liens, security interests, pledges and
encumbrances, other than Permitted Liens or liens, security interests, pledges
and encumbrances which will be discharged and released on or prior to the
Closing Date, and free and clear from any other interest, adverse claim,
covenant or restriction that would conflict in any material respect with Buyer's
use thereof in the manner heretofore used by Seller. All personal property
leased by Seller is identified in Schedule 1.1(f) (the "Leased Personal
---------------
Property"). With respect to each such Lease: (i) the Lease is in full force
and effect; (ii) all accrued and payable rents have been paid; (iii) there is no
default by Seller thereunder nor to Seller's knowledge, of any other party
thereunder, and there is no waiver, indulgence or postponement of any
obligations thereunder; (iv) to Seller's knowledge and without notice to the
contrary, no event that with the giving of notice, the lapse of time, the
happening of any further event or otherwise would become a default, has occurred
under any such Lease; and (v) Seller has provided Buyer a photocopy of each
written Lease, including all amendments, modifications, consents, waivers and
all material correspondence relating thereto, and has included in Schedule
--------
1.1(f) a description of each such Lease which is not in written form.
- ------
3.11. Contracts. The Leases, Access Agreements, and Other Agreements
---------
listed in the Schedules to this Agreement constitute all of the contracts which
are used, held for use or are required primarily to conduct the business of the
Systems as heretofore conducted by Seller (except oral subscriber contracts and
miscellaneous service or other contracts or agreements, none of which is
material and each of which is terminable without penalty at will). Except as
set forth in the Schedules hereto, each of such contracts and agreements is in
full force and effect and current in all material respects as to the performance
thereof by Seller, and to Seller's knowledge (and without notice to the
contrary) by the other party(ies) thereto, in accordance with its terms, without
waiver, indulgence or postponement of any of the obligations thereunder; and to
the knowledge of Seller and without notice to the contrary, no event has
occurred which constitutes, or with the giving of notice, passage of time or
otherwise will constitute, a default thereunder. Seller is not entitled to the
benefit of any representations, warranties and agreements in connection with
Seller's acquisition or the construction of the Systems or any Transferred
Assets.
3.12. Employee Agreements and Benefits; Labor Matters. Schedule 3.12
----------------------------------------------- -------------
lists as of the date of this Agreement the employees of Seller in connection
with the operation of the Systems. Schedule 3.12 also lists the date of
-------------
employment, age, current compensation level, date of last increase in
compensation and prior compensation level of each of such persons and describes
all compensation plans or arrangements, profit sharing, equity option or
purchase plans, and other agreements or arrangements under which employees of
Seller or their dependents receive, or are entitled to receive in the future,
compensation or benefits. Seller has delivered to Buyer a true and correct copy
of all employment handbooks and written materials stating employment policies of
Seller. Seller has no non-written employment policies. In connection with the
Systems, Seller is not a party to or bound by any written or unwritten
employment, non-competition or consulting agreement or understanding which is
not terminable at will without penalty. In
20
<PAGE>
connection with the Systems, Seller is not a party to any collective bargaining
agreement and is not the subject of any complaint or proceeding before the
National Labor Relations Board or similar regulatory body. As of the date of
this Agreement, Seller is not aware of any activities of any labor union or
other party which is currently seeking to represent or organize the employees of
Seller, and Seller has not made any agreement with or commitment to or conducted
negotiations with any labor union or employee association with respect to any
future agreement. There is neither pending nor (to the knowledge of Seller and
without notice to the contrary) threatened any labor dispute, strike or work
stoppage or slowdown which affects or may affect Seller, the Transferred Assets
or the Systems. Except as set forth in Schedule 3.12, Seller is in compliance,
-------------
and since January 1, 1996 has complied, in all material respects with the
relevant provisions of the Communications Act, Subpart E of Part 76 of the FCC's
rules and regulations and all other federal, state and local laws and related
rules and regulations and agreements relating to employment generally and all
aspects thereof, including hiring, firing, discipline, leave, wages, hours,
employee safety and conditions of employment. With respect to the employees of
the Systems, Seller has no liability for any arrears in wages, salaries or
overtime pay (other than for Seller's current pay period) or for any vacation,
time off or pay in lieu of vacation or time off (other than for normal accruals)
or for any other payments or penalties for failure to comply with any statute,
law, rule or regulation or agreement. Seller shall indemnify Buyer and hold
Buyer harmless from and against all such sums (including, but not limited to,
those sums which relate to Seller's current pay period and its normal accruals).
Except as set forth on Schedule 3.5(b), as of the date of this Agreement, no
---------------
proceedings before any court, governmental agency, or arbitrator relating to
such matters, including, but not limited to, unfair labor practice claims, are
pending or (to the knowledge of Seller and without notice to the contrary)
threatened involving Seller. Buyer shall have no obligation to hire any
employee or agent of Seller in connection with the transactions contemplated
hereby.
3.13. ERISA.
-----
(a) Other than as set forth in Schedule 3.13, Seller does not
-------------
provide, contribute to or maintain for the benefit of employees of the
Systems any employee benefit plan (hereinafter referred to as a "Plan"), as
defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations thereunder ("ERISA"), any
Plan which is a "Group Health Plan" (as defined in Section 4980B(g)(2) of
the Code), or any Plan which is an "Employee Welfare Benefit Plan" (as
defined in Section 3(1) of ERISA), nor has Seller provided to such
employees any benefit which is a "Disqualified Benefit" (as defined in
Section 4976(b) of the Code) for which an excise tax would be imposed. [For
purposes of this Section 3.13, Seller shall include all trades or
businesses (whether or not incorporated) which are a member of a group of
which Seller is a member and which are under common control within the
meaning of Section 414 of the Internal Revenue Code of 1986, as amended,
and the rules and regulations thereunder (hereinafter the "Code").]
(b) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby will not result in: (i) a complete
or partial
21
<PAGE>
withdrawal from any Plan, (ii) any funding deficiency or lien under ERISA,
(iii) any payment obligation (whether of severance pay or otherwise),
acceleration, vesting or increase in benefits to any person, or (iv) the
assessment of any amounts, including interest and penalties, or incurrence
of any costs or expenses (including additional taxes, payment of any
funding deficiency, expenses of compliance or any related accounting or
legal fees and costs) attributable to the existence of any Plan.
3.14. Access Agreements. Seller possesses and is in compliance in all
-----------------
material respects with all Access Agreements (including, but not limited to,
rights of access to all trailer parks, hotels, motels, apartments, condominiums
and other multiple dwelling units served by the Systems and the Transferred
Assets), permits and authorizations used by Seller or necessary for the
installation, operation, maintenance, repair or replacement of all cables,
lines, towers, equipment and other facilities which relate to the ownership or
operation of the Systems and the Transferred Assets. A list of each pole
attachment agreement and the number of poles to which Seller has attached cable
under each of such agreements is set forth in Schedule 1.1(d). Except as set
---------------
forth in Schedule 1.1(d), Seller has not made, and is not required to make, any
---------------
deposits under any of such agreements in order to secure Seller's performance
thereunder. Seller has delivered to Buyer a true and complete photocopy of each
such Access Agreement, permit and similar authorization. Seller has no such
Access Agreements, permits or authorizations which are not in written form.
Seller also has delivered to Buyer a copy of all material correspondence which
resulted in any amendment, modification, consent or waiver of such Access
Agreements. Except as set forth in Schedule 1.1(d), Seller has not received
---------------
notice of any noncompliance or additional make-ready or other requirements under
any of such Access Agreements, permits or authorizations which has not been
remedied or will not be remedied by Seller prior to Closing.
3.15. Bonds, Insurance and Letters of Credit. A description of each
--------------------------------------
insurance policy, each performance bond and each letter of credit required to be
maintained, or which is maintained covering the property comprising the Systems
and Transferred Assets, and/or the operation of the Systems, is set forth in
Schedule 3.15, and a copy of each such letter of credit or bond has been
- -------------
delivered to Buyer by Seller. Each of such policies, letters of credit and
bonds is current and in full force and effect. Seller has not received any
notice of default under or intended cancellation or nonrenewal of any such
policies, letter of credit or bonds. There are no pending or, to Seller's
knowledge without notice to the contrary, threatened requests to make a draw
under any such letter of credit.
3.16. Litigation. Except as set forth in Schedule 3.5(b) or Schedule
---------- --------------- --------
3.16, neither Seller nor the Transferred Assets is a party to, subject to or
- ----
bound by any judgment, order, injunction or decree of any court, administrative
agency, arbitration proceeding or other governmental authority that may restrict
or interfere with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, the operation of the
Systems or the ownership or use of the Transferred Assets by Buyer subsequent to
the Closing. Seller is not a party to, nor to the knowledge of Seller and
without notice to the contrary is Seller threatened with, any investigation by
any governmental agency or any legal action or other proceeding before any
court, arbitrator or mediator, administrative or regulatory agency which might
22
<PAGE>
adversely affect the properties, business or condition (financial or otherwise)
of the Systems or the transactions contemplated hereby, and Seller does not know
or have notice of any basis for any such action or proceeding.
3.17. Intellectual Property. Other than Seller's name and the name of
---------------------
Seller's general partner, Seller is not the owner, user or licensee of any
patent, trademark, service mark, trade name or copyright (or application
therefor), nor are any of such items used in connection with the Systems.
Seller has not, nor has the use of any such item in connection with the Systems,
infringed upon or conflicted with any patent, trademark, service mark, trade
name or copyright of others, and Seller has not received any notice of any such
claimed infringement or conflict. During the past five (5) years, Seller has
not existed under or used any name other than "Cable TV Fund 14-A, Ltd.", "Jones
Intercable, Inc." and "Jones Intercable."
3.18. Payment of Taxes. Within the time and in the manner prescribed by
----------------
law, except as otherwise set forth in Schedule 3.18, Seller has: (a) filed all
-------------
federal, state and local tax returns required to be filed; and (b) fully paid
all federal, state and local taxes, charges and assessments of every kind that
are due and payable with respect to the Transferred Assets, the Systems or the
operation thereof, including, without limitation, all payroll, sales, use,
copyright, license, franchise, property and income taxes, charges and
assessments, the failure of which to be filed or paid could adversely affect the
Transferred Assets or result in the imposition of an encumbrance upon the
Transferred Assets, except such amounts as are being contested diligently and in
good faith and for which adequate reserves have been established. Except as set
forth in Schedule 3.18 hereto, no audit or investigation of the tax treatment of
-------------
any of Seller's returns or reports in connection with the Systems or the
Transferred Assets is in progress, pending or, to the knowledge of Seller and
without notice to the contrary, threatened, and, to the knowledge of Seller and
without notice to the contrary, there exists no basis for the assertion or
assessment of any additional taxes against Seller, the Systems or the
Transferred Assets. No waiver or consent to the extension of any statute of
limitations has been given and is in effect with respect to the assessment of
any taxes against Seller, the Systems or the Transferred Assets. Seller has
accrued on its books all taxes, charges and assessments accruing on the
Transferred Assets, the Systems or the operation thereof which are not presently
payable and will pay the same when due and in any event prior to the time when
any penalty or interest arises for the nonpayment thereof, or when the
nonpayment thereof will result in or constitute a lien, charge, security
interest, encumbrance or adverse claim upon or against the Transferred Assets,
the Systems or Buyer.
3.19. Seller's Accounts and Promotions.
--------------------------------
(a) Except as set forth in Schedule 3.19(a), Seller bills its
----------------
subscribers for cable television services monthly and is current in its
billings. Such bills are due and payable in full on the 10th day of the
month in which services are received.
(b) As of the date of this Agreement, except as set forth in
Schedule 3.19(b), Seller does not enter into any written subscription or
----------------
converter deposit agreements.
23
<PAGE>
(c) Seller's other billing and collection terms and practices are set
forth in Schedule 3.19(c).
----------------
(d) Since January 1, 1996, Seller has not given any concession, price
discount, free service, free installation or promotional allowance, except
as set forth in Schedule 3.19(a) or in Seller's 1996 and 1997 marketing
----------------
plans, which are attached as Schedules 3.19(d) and 3.7(b).
----------------- ------
(e) As of the date of this Agreement, except as set forth in Schedule
--------
3.19(e), Seller has no obligation to provide advertising time or other
-------
concessions under any barter or trade-out arrangement.
3.20. Environmental Compliance.
------------------------
(a) Except as set forth in Schedule 3.20, no asbestos-containing
-------------
materials, equipment containing PCB's, underground storage tanks, hazardous
substances, wastes or other pollutants or contaminants [as such terms are
defined under applicable federal and state environmental laws, including
the Comprehensive Environmental Response, Compensation and Liability Act of
1980 and the rules and regulations thereunder, as amended, 42 U.S.C.
(S)9601(14)] are or have been located, disposed of, installed, used or
exposed on or in connection with any of the Transferred Assets, including
the Owned Real Property and the Leased Real Property ("Environmental
Matters"). In connection with the Systems and the Transferred Assets,
Seller has not disposed of or requested any person to dispose of any
asbestos-containing materials, equipment containing PCBs, underground
storage tanks, hazardous substances, wastes, pollutants or contaminants at
any site, including any site being investigated by any environmental agency
or which is the subject of any administrative or judicial proceeding
relating to the clean-up of materials, except at a site duly licensed for
the receipt and disposal of such materials and except in compliance with
all applicable law.
(b) Except as set forth in Schedule 3.20, Seller has no knowledge or
-------------
information of the existence of any Environmental Matters affecting any
other property which would adversely affect any Owned Real Property or
Leased Real Property.
3.21. Continuation of Business. Since June 1, 1996, Seller has continued
------------------------
the operations of the Systems in accordance with Seller's past practices and has
maintained inventories of supplies and equipment in connection with the
operation of the Systems and provided services to subscribers in accordance with
Seller's past practices. Seller has continued to perform routine and required
maintenance on, and replaced when necessary and otherwise in accordance with
Seller's past practices, all machinery, equipment, devices, cable, tools,
vehicles and other items of personal property owned or used by Seller.
3.22. Approvals and Consents. Seller has included in Schedule 3.22 a
---------------------- -------------
complete list and description of the relationship of all persons (including, but
not limited to, governmental
24
<PAGE>
authorities and agencies, creditors, and each party to any other instrument or
agreement to which Seller is a party or by which Seller or the Transferred
Assets is bound or who is affected by the assignment of any rights to be
transferred or obligations to be assumed hereunder) who are entitled to notice
of, or whose consent is required for, the execution of this Agreement or the
consummation of the transactions contemplated hereby by Seller in order to
accomplish the assignment or transfer of any property, instruments or documents
contemplated herein or to preclude any cancellation, suspension, termination or
reformation of any instrument, agreement or right.
3.23. Other Financial Interests. Except as set forth in Schedule 3.23,
------------------------- -------------
Seller has no direct or indirect financial interest in any video programmer, or
any competitor, supplier, customer, lessor or lessee of Seller.
3.24. Complete Disclosure. Seller has no knowledge of any proposed or
-------------------
actual increase in fees or charges under any Franchise, Governmental
Authorization, Authority, Access Agreement or any other contract or agreement,
which would materially adversely affect the Systems or the operation or
financial condition thereof or any of Seller's rights or ability to enter into
and consummate the transactions contemplated by this Agreement or comply with
the terms and conditions hereof. No information, representation, warranty,
covenant or agreement of Seller in this Agreement or any Schedule hereto or
given in any certificate, memorandum, instrument or document or otherwise
furnished by or on behalf of Seller in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements contained herein and therein not misleading.
Section 4. Representations, Warranties, Covenants and Agreements of Buyer.
- --------- --------------------------------------------------------------
Buyer represents, warrants, covenants and agrees as of the date hereof and
on the Closing Date (except where another date or period of time is expressly
mentioned) that:
4.1. Organization and Authority of Buyer. Buyer is a limited partnership
-----------------------------------
duly organized and validly existing under the laws of the State of Missouri and
is duly qualified to transact business and is in good standing in the State of
Illinois. Buyer has full partnership power, capacity and authority to enter
into this Agreement, to consummate the transactions contemplated herein and to
own and operate its properties, including the Transferred Assets, and to carry
on the business of the Systems subsequent to the Closing.
4.2. Due Authorization by Buyer. The execution and delivery of this
--------------------------
Agreement and the performance of the transactions contemplated herein have been
duly authorized and approved by all necessary partnership actions of Buyer, and
by appropriate resolutions duly adopted, and all other actions required to be
taken by law, by Buyer's general partner. Buyer has full partnership power, to
enter into and to perform this Agreement and the transactions contemplated
hereby. This Agreement constitutes a valid and binding agreement of Buyer and
25
<PAGE>
is enforceable against Buyer in accordance with its terms (except as such
enforceability may be limited by bankruptcy, insolvency or similar laws or by
general principles of equity relating to the availability of equitable
remedies).
4.3. No Conflicts. Neither the execution and delivery of this Agreement
------------
nor the consummation of the transactions contemplated by Buyer herein, nor the
compliance by Buyer with the terms, conditions and provisions hereof, conflict
with or will conflict with the terms of the certificate or agreement of limited
partnership of Buyer or of Buyer's general partner or any indenture, mortgage,
deed of trust, covenant, agreement or other instrument to which Buyer is a party
or by which Buyer or any of its property is bound; the Communications Act; the
rules, regulations or policies of the FCC, the FAA or United States Copyright
Office; or any applicable federal, state or local law, nor cause the suspension,
revocation, impairment, forfeiture, nonrenewal or termination of any license,
permit, franchise, certificate, consent or authorization to which Buyer is a
party or is subject.
4.4. Litigation. Buyer is not a party or subject to, or bound by any
----------
judgment, order, injunction or decree of any court, administrative agency,
arbitration proceeding or other governmental authority that may restrict or
interfere with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby.
4.5. Complete Disclosure. No information, representation, warranty,
-------------------
covenant or agreement of Buyer in this Agreement or given in any certificate,
memorandum, instrument or document or otherwise furnished or to be furnished by
or on behalf of Buyer in connection with the transactions contemplated hereby
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
herein and therein not misleading.
Section 5. Covenants and Further Agreements.
- --------- --------------------------------
5.1. Application for Assignment of Franchises and Licenses.
-----------------------------------------------------
(a) Seller and Buyer agree to join in and file and to take such other
actions as are necessary, on forms provided by Buyer or otherwise
satisfactory to Buyer and its lenders, to obtain, at Seller's expense
(excluding Buyer's attorneys' fees, personnel costs and travel expenses),
the approval of applications or requests for approval or consent: (a) with
each local government, the consent of which is necessary to the assignment
of the Franchises and for the operation of the Systems by Buyer on and
after the Closing, (b) with the FCC and the FAA for the assignment of the
FCC Licenses and the FAA Licenses, if any, and (c) with every other
authority, person or entity with respect to any Governmental Authorization,
license, permit, copyright, Lease, Access Agreement or Other Agreement to
which Seller is a party or which affects the transfer or operation of the
Transferred Assets and the Systems, the approval or consent to transfer of
which is required by the terms of the underlying document. Buyer agrees to
provide to any
26
<PAGE>
authority, person or party such information as may be reasonably requested
to determine whether to grant approval or consent to the transactions
contemplated by this Agreement.
(b) If applicable, Buyer and Seller, as soon as practicable following
the execution and delivery of this Agreement, shall file the required
notification with the Federal Trade Commission and the Antitrust Division
of the Department of Justice under the Hart-Scott-Rodino Anti-Trust
Improvements Act of 1976, as amended (the "HSR Act"). Buyer and Seller
shall comply fully with all applicable notification, reporting and other
requirements of the HSR Act, and any similar requirements of any other
jurisdiction. All actions required by Buyer and Seller under this Section
5.1(b) shall be at their own respective expenses, except that Buyer and
Seller shall each pay one-half of the filing fee with respect to such HSR
Act filing.
5.2. Information; Consultation; Confidentiality.
------------------------------------------
(a) Seller will give Buyer (at Buyer's expense) access to and permit
Buyer to review the Transferred Assets and the Systems, the related books
and records, and such other information as shall be reasonably requested by
Buyer, including, but not limited to, access to all books, records and
other information as Buyer may request for the purpose of providing the
FCC, state cable commissions, the grantors of the Franchises or the
Authorities and others with such information concerning rates and the
operations of the Systems, as Buyer, the FCC, state cable commissions, the
grantors of the Franchises or Authorities and others may request or
require, such information and records to include information as to original
cost of services for the purpose of justifying rates. Seller agrees to
continue to be reasonably available through the Closing Date and for 90
days thereafter, at no charge or cost to Buyer, for consultation with
representatives of Buyer with respect to the operation, management and
business of the Systems; provided that Seller will not be required to
maintain any representative at the Systems. Seller has preserved in
confidence, and from and after the date hereof will continue to preserve in
confidence, all of the Systems' confidential information and trade and
business secrets. No party hereto will make or authorize any public
announcement or disclosure relating to the transactions contemplated by
this Agreement without first consulting with the other party, except for
disclosures necessary, useful or appropriate in order to satisfy the
conditions to Closing or as required by law.
(b) If this Agreement terminates without a Closing, Buyer agrees to
return to Seller all written information in Buyer's possession furnished to
Buyer by Seller, including copies thereof, and all other materials and
tangible media relating to the Systems or Seller. From the date of this
Agreement to the Closing Date, or indefinitely hereafter if this Agreement
terminates without a Closing, Buyer will preserve in confidence and not
disclose, any confidential information of Seller to any third party,
27
<PAGE>
except to Buyer's legal, accounting and other advisors, to Buyer's
employees and agents, and as otherwise necessary, useful or appropriate in
order to take such steps as are necessary or desirable to satisfy the
conditions of Closing or as required by law.
5.3. Period Pending Closing. Seller covenants and agrees that between the
----------------------
date of this Agreement and the Closing Date:
(a) Seller will:
(i) pay, when due, all its accounts payable and other debts
relating to Seller, the Systems and the Transferred Assets, the
failure of which to be paid could adversely affect the Transferred
Assets or result in the imposition of an encumbrance upon the
Transferred Assets, except such amounts as are being contested
diligently and in good faith and for which adequate reserves have been
maintained; and
(ii) promptly give notice to Buyer of the receipt by Seller of
any notice of any action, proceeding or investigation with respect to
the Systems or the Transferred Assets.
(b) Seller will not, without Buyer's prior written consent, which
consent shall not be unreasonably withheld in the case of Section (i)
below:
(i) Transfer. Sell, assign, transfer or convey any of the
--------
Transferred Assets or any portion of the Systems with a book value or
sale price of more than $10,000;
(ii) Encumbrances. Subject any of the Transferred Assets or the
------------
Systems to any security interest, lien, restriction, pledge, charge,
adverse claim or encumbrance not set forth in the Schedules hereto as
of the date of execution of this Agreement which would not be
discharged on or prior to the Closing Date;
(iii) Maintenance. Fail to: (A) keep the Transferred Assets,
-----------
the Systems or the physical plant constituting a part thereof in a
current state of repair and operating efficiency, ordinary wear and
tear excepted; (B) maintain the level of inventories and supplies of
the Systems in accordance with Seller's past practice or otherwise as
necessary to the operation of the Systems as heretofore conducted by
Seller; or (C) maintain any insurance policies, bond or letter of
credit affecting the Transferred Assets or the Systems in effect;
(iv) Books and Records. Fail to currently maintain the books
-----------------
and records relating to the Systems' financial condition, the
Transferred Assets or the operation of the Systems, including, but not
limited to, books and records relating to subscriber orders,
disconnections or complaints;
28
<PAGE>
(v) Promotions. Other than as described in Schedule 3.19(d),
----------
waive the charge for the first month of cable service or installation
or grant any other promotion (whether consisting of free or reduced
charge for installation or service or otherwise which are not in
accordance with Seller's past practices);
(vi) Retransmission Consents. Enter into any agreement with
-----------------------
respect to the retransmission of signals of commercial stations,
Buyer's consent to such agreement not to be unreasonably withheld,
provided, however, that Buyer shall not be required to consent to any
such agreement which would require a payment by Buyer;
(vii) Insurability. Take any action or refrain from taking any
------------
action if the taking of such action or failure to take such action,
respectively, adversely affects the insurability of the Transferred
Assets or the Systems; or
(viii) Other. Otherwise deal with the Transferred Assets or the
-----
Systems or conduct and manage the Transferred Assets or the Systems in
a manner which, when judged in relationship to Seller's past dealings
and operations, is extraordinary or outside the usual and ordinary
course of routine operation, including, but not limited to, any
modifications in Seller's marketing efforts, subscriber services,
subscriber relations programs and installations. Seller will use its
good faith efforts to preserve the goodwill of suppliers, subscribers
and others having business relations with the Systems. Seller shall
not make, enter into, modify, amend or allow to lapse or become
impaired, any contract, agreement, commitment or other obligation
affecting the Systems, the Transferred Assets or any right or
obligation to be assigned to or assumed by Buyer, except agreements
which are cancelable within 90 days, without penalty, or under which
the commitment of Seller does not exceed $20,000 individually or
$100,000 in the aggregate.
5.4. Cooperation. After the Closing Date, Buyer shall provide Seller and
-----------
Seller's representatives with reasonable access to the books of account and
other records of the Systems and Transferred Assets which are reasonably
required or requested by Seller for the preparation of income tax returns and
other proper purposes applicable to periods prior to the Closing Date,
including, without limitation, any determination of amounts to be paid by one
party hereto to another. Seller will provide Buyer and Buyer's representatives
with reasonable access to any records or documents pertaining to the Systems and
the Transferred Assets which are reasonably required or requested by Buyer for
proper purposes and which are retained by Seller and not delivered to Buyer, and
if such documents are retained by someone other than Seller, Seller will cause
such person(s) to provide Buyer and Buyer's representatives access thereto.
5.5. Expenses. Seller agrees to indemnify Buyer and hold Buyer harmless
--------
against any and all loss, damage, liability, cost and expense, including
reasonable attorneys' fees, suffered or incurred by reason of, or arising out
of: (i) any law pertaining to bulk sales or transfers of
29
<PAGE>
assets or affecting the rights of creditors of Seller (as to which Buyer agrees
to waive compliance in consideration of the indemnification agreement of Seller
hereunder) or the effectiveness of the sale or transfer of assets as against
creditors of Seller; (ii) any sales, use, transfer, documentary, vehicle title
transfer, excise or license tax, fee or charge applicable to any of the
Transferred Assets, to any part of the Systems or to the transactions
consummated hereunder; and (iii) any appraisal rights or other liability owing
to any partner of Seller. All other expenses incurred in connection with the
negotiation, preparation, execution and performance of this Agreement shall be
paid by the party incurring such expenses, unless expressly provided otherwise
hereunder.
5.6. Brokerage. Seller represents to Buyer that Seller has not utilized
---------
any brokerage firm or finder in connection with this transaction, except for
Jones Financial Group, Ltd., whose fees will be paid by Seller. Buyer
represents to Seller that it has not utilized any brokerage firm or finder with
respect to this transaction. Buyer agrees to indemnify Seller and hold Seller
harmless against any claim of any person for a broker's or finder's fee or
similar compensation relating to this Agreement or the transactions contemplated
hereby based on an asserted agreement with Buyer; and Seller agrees to indemnify
Buyer and hold Buyer harmless against any such claim based on an asserted
agreement with Seller.
5.7. Reliance Upon and Survival of Representations and Warranties.
------------------------------------------------------------
Notwithstanding any investigation at any time conducted by any of the parties
hereto, each party may rely on the representations and warranties of the other
party or parties set forth herein or in any Schedule hereto or other instrument
or document delivered in connection herewith. Notwithstanding any investigation
made, or information obtained, by any party hereto, the representations and
warranties contained in this Agreement and in any document delivered at Closing
shall survive for a period ending on the date which is one year after the
Closing Date, except for representations and warranties set forth in Sections
3.2, 3.3, 3.13, 3.18, 3.20, 4.2 and 4.3, which shall survive for the period of
the applicable statute of limitations.
5.8. Further Assurances.
------------------
(a) Subject to Section 5.1, Seller and Buyer shall use their good
faith commercially reasonable efforts to obtain all necessary approvals,
consents, waivers and authorizations from all appropriate governmental
authorities, bodies, agencies and persons to the transfer or assignment to
Buyer of all rights and obligations contemplated by this Agreement.
(b) Each party agrees to execute and deliver or cause to be executed
and delivered at all reasonable times and places such additional
instruments and documents as the other party may reasonably request or
which are required for the purpose of carrying out this Agreement.
(c) Seller will maintain all Access Agreements, permits,
authorizations, insurance policies, letters of credit currently maintained
by Seller in connection with the
30
<PAGE>
Systems and the Transferred Assets in full force and effect at all times
through the Closing Date, and thereafter as and to the extent provided in
Section 2.5.
(d) Buyer shall be entitled to participate in any meetings relating
to the extension, transfer or assignment of the Franchises, Authorities,
Access Agreements, and any Lease. The terms and conditions of the
extension, transfer and assignment of the Franchises, Authorities or Access
Agreements, or any Lease, or consents thereto and of all requests for the
extension, transfer and assignment thereof shall be satisfactory and
approved in advance by Buyer, such approval not to be withheld
unreasonably. The approvals of the transfer of the Franchises, Authorities,
Access Agreements and Leases shall not contain any conditions to their
transfer, or changes to the terms of the underlying instruments to which
such consents apply, without the advance approval of Buyer, which approval
shall not be withheld unreasonably; provided, however, that in no event
will the withholding of consent by Buyer to any condition or change that
will cause Buyer to incur costs in excess of $8,000 be deemed to be
unreasonable. Except as otherwise provided above, nothing herein shall
require Buyer or Seller to agree to make any payment as a condition to
obtaining any such extension or approval for transfer.
(e) Seller shall use its good faith efforts to obtain a five (5) year
extension with respect to any Franchise which expires within five (5) years
after the date hereof, other than the Franchises by which the Systems serve
the communities of Chenoa, Pesotum and Rantoul. Any conditions imposed by
the franchising authorities to the extension of such Franchises, or changes
required by the franchising authorities to the underlying terms of the
Franchises in connection with such extensions shall be approved in advance
by Buyer and, if so approved, shall be the sole obligation of Buyer;
provided, however, that if Buyer does not approve such conditions or
changes, and the extensions are not obtained, Seller will be deemed have
used its good faith efforts to obtain any such extensions.
(f) Seller shall use its good faith efforts to obtain a five (5) year
extension of the Franchise by which the Systems serve the community of
Rantoul (the "Rantoul Franchise") or, if unable to obtain such an
extension, shall use its good faith efforts to have the Rantoul Franchise
renewed for a term of at least five (5) years on terms and conditions
reasonably satisfactory to Buyer and Seller.
5.9. Indemnification.
---------------
(a) Seller agrees to indemnify and defend Buyer against and hold
Buyer harmless from any loss, claim, damage, liability or expense
(including reasonable attorneys' fees): (i) incurred or sustained by Buyer
on account of any and all liabilities of Seller, except: (A) the Assumed
Obligations (but subject to the terms of Section 2.5), and (B) liabilities
and obligations arising or accruing after the Closing Date with respect to
the ownership or operation of the Systems or the Transferred Assets which
are
31
<PAGE>
expressly assumed by Buyer under the Assumption Agreement; (ii) incurred or
sustained by Buyer as a result of any misrepresentation or breach of any
representation or warranty of Seller under Section 3 or in any Schedule or
other instrument or document delivered pursuant hereto; (iii) arising under
Sections 5.5 and 5.6 for which Seller is liable thereunder, and (iv)
otherwise arising from Seller's breach of this Agreement.
(b) Buyer agrees to indemnify and defend Seller against and hold
Seller harmless from and against any loss, claim, damage, liability or
expense (including reasonable attorneys' fees): (i) incurred or sustained
by Seller after the Closing Date: (A) under the Assumed Obligations (but
subject to the terms and provisions of Section 2.5); and (B) arising out of
the ownership or operation of the Systems or the Transferred Assets after
the Closing Date; (ii) incurred or sustained by Seller on account of any
misrepresentation or breach of any representation or warranty of Buyer
included in Section 4 or in any Schedule or other document delivered by
Buyer pursuant hereto; (iii) arising under Sections 5.5 and 5.6 for which
Buyer is liable thereunder, and (iv) otherwise arising from Buyer's breach
of this Agreement.
(c) No claim for indemnification, damages or other relief under
Section 5.9(a) or Section 5.9(b) may be brought after the date which is one
(1) calendar year from the Closing Date, except that: (i) Seller's
obligations to indemnify under Section 5.9(a) shall continue and remain in
effect with respect to matters covered by Sections 3.2, 3.3, 3.13, 3.18 and
3.20 for the period of the statute of limitations applicable thereto,
including any extensions thereof, and (ii) Buyer's obligations to indemnify
under Section 5.9(b) shall continue and remain in effect with respect to
matters covered by Section 4.2 and 4.3 for the period of the statute of
limitations applicable thereto, including any extensions thereof. In
addition, Seller and Buyer shall have no liability under Sections 5.9(a)
and 5.9(b), respectively, unless the aggregate amount of losses otherwise
subject to its indemnification obligations thereunder exceeds $50,000 (the
"Threshold Amount"); provided, however, that when the losses of an
indemnified party exceed the Threshold Amount, the indemnifying party shall
be liable for the indemnified party's aggregate losses of the Threshold
Amount and any losses in excess of the Threshold Amount. All losses shall
be computed net of any insurance proceeds received which reduce the losses
that would otherwise be sustained, and provided further that in determining
the Threshold Amount, the term "material" shall not be applied when used in
the representations and warranties of Seller under this Agreement so as to
reduce the obligations of Seller under such representations and warranties
in an amount which would exceed, in the aggregate, if the word material
were not used therein, $5,000. It is further agreed that if Buyer is
required to pay any amount with respect to the usage of the pole line
system owned by the Village of Rantoul during any period on or before the
Closing Date, Seller will indemnify and reimburse Buyer for the amount of
such payment, without application of the Threshold Amount.
(d) Promptly after receipt by a party entitled to indemnification
under this Agreement (the "Indemnified Party") of written notice of the
assertion or the
32
<PAGE>
commencement of any claim, action, suit or proceeding by any person who is
not a party to this Agreement (collectively, an "Action") with respect to
any matter referred to in Sections 5.9(a) and 5.9(b), the Indemnified Party
shall give written notice thereof to the party from whom indemnification is
sought pursuant hereto (the "Indemnifying Party") and thereafter shall keep
the Indemnifying Party reasonably informed with respect thereto; provided,
however, that failure of the Indemnified Party to give the Indemnifying
Party notice as provided herein shall not relieve the Indemnifying Party of
its obligations hereunder. In case any Action shall be brought against any
Indemnified Party, the Indemnifying Party shall be entitled to participate
in such Action and, at the request of the Indemnified Party, shall assume
the defense thereof with counsel reasonably satisfactory to the Indemnified
Party, at the Indemnifying Party's sole expense. If the Indemnifying Party
shall assume the defense of any Action, it shall not settle the litigation
unless the settlement shall include as an unconditional term thereof the
giving by the claimant or the plaintiff of a release of the Indemnified
Party, satisfactory to the Indemnified Party, from all liability with
respect to such Action.
(e) Notwithstanding any provision contained herein to the contrary,
Seller shall not be deemed to have violated its representations or
warranties by virtue of any subscriber claiming ownership of his or her
home wiring to the extent permitted by the 1992 Act.
5.10. No Negotiation. Until this Agreement is terminated, Seller agrees
--------------
not to negotiate or otherwise discuss the sale of the Systems or any interest
therein, any possible sale or other transfer of any ownership interest in
Seller, or the transactions contemplated hereby, directly or indirectly, with
any party other than Buyer other than as may be required, useful or advantageous
to obtain any consent or approval contemplated by this Agreement or otherwise to
facilitate consummation of the transactions contemplated by this Agreement.
5.11. Special Covenants of Seller. At Closing, Seller will lease its
---------------------------
Gibson City office (which is contained in the Excluded Assets) to Buyer on a
month to month basis for $1,000 per month for a period determined by Buyer not
exceeding three months. In addition, Seller leases the premises occupied by
Seller in Rantoul, Illinois, on a month-to-month basis and will renew this lease
for a one-year term on terms mutually acceptable to Buyer and Seller.
5.12. Employees. Buyer shall have no obligation to employ any of Seller's
---------
employees. Within 60 days after the date of this Agreement, Buyer shall notify
Seller of those of Seller's employees which Buyer intends to hire, provided,
however, that such notification shall not be deemed to alter the employment at
will nature of the relationship between Buyer and any such individual.
33
<PAGE>
Section 6. Conditions Precedent to the Obligation of Buyer to Close.
- --------- --------------------------------------------------------
The obligation of Buyer to consummate the transactions herein contemplated
is subject to the satisfaction at or before the Closing of the following
conditions:
6.1. Truth of Representations and Warranties. The representations and
---------------------------------------
warranties of Seller included in this Agreement and in each Schedule or other
instrument or document delivered hereunder shall be true and correct in all
material respects on and as of the Closing Date, with the same effect as though
such representations and warranties had been made on and as of such date (except
for representations and warranties which by their terms relate to a specific
date, which shall remain true and correct as of such date). Buyer shall have
received a certificate to the foregoing effect dated the Closing Date signed by
Seller, together with evidence satisfactory to Buyer that all security interests
in and liens, pledges and encumbrances upon the Transferred Assets have been
satisfied, terminated and released or will be satisfied, terminated and released
simultaneously with the receipt by Seller's lenders of certain portions of the
Closing Wire Transfer. Buyer, in its sole discretion, shall have the right to
waive compliance with any representation and warranty of Seller and proceed with
the Closing.
6.2. Performance of Agreements. Each payment, delivery or other action
-------------------------
required of Seller under this Agreement, and each agreement of Seller to be
performed at or before the Closing under the terms hereof or as contemplated
herein, shall have been duly performed. Buyer shall have received a certificate
to this effect dated the Closing Date and signed by Seller.
6.3. Consents of Third Parties. Seller shall have obtained and delivered
-------------------------
to Buyer on the forms set forth in Exhibit D (with respect to Franchises) and
---------
Exhibit E (with respect to other third parties) or such other forms as are
- ---------
reasonably satisfactory to Buyer, the consents of the third parties listed in
the "Consent" section of Schedule 6.3 and shall have issued notifications to
------------
third parties listed in the "Notices" section of Schedule 6.3 in sufficient time
------------
in advance so that any necessary notice period shall have been met (such
consents and notices being referred to herein as "Required Consents"); provided,
however, that for purposes of this Section 6.3, the consent of the respective
utilities with which Seller has pole attachment agreements listed on Schedule
--------
6.3 shall be deemed to have been given if, as of the Closing, any such utility
- ---
is not threatening: (a) to refuse to: (i) consent to the assignment to Buyer
of Seller's pole attachement agreement with such utility, or (ii) execute with
Buyer a replacement pole attachment agreement in such form as is customarily
executed by such utility with cable television companies and which does not
contain material changes from the agreement heretofore existing between Seller
and the utility, or (b) to order or otherwise compel the removal of the cable
plant owned by Seller from such utility's poles. Notwithstanding the foregoing,
however, Seller agrees to continue to use Seller's good faith commercially
reasonable efforts subsequent to the Closing to complete the transfer to Buyer
of any pole attachment agreements not actually transferred to Buyer as of the
Closing Date and to pay any costs or fees charged by the applicable utility in
connection with such transfers. Without Buyer's consent, the Required Consents
shall contain no changes to the underlying documents to which they apply,
without the advance approval of Buyer, which approval shall not be withheld
unreasonably; provided, however, that in no event
34
<PAGE>
will the withholding of consent by Buyer to any condition or change that will
cause Buyer to incur costs in excess of $8,000 be deemed to be unreasonable.
Except as otherwise provided above, nothing herein shall require Buyer or Seller
to agree to make any payment as a condition to obtaining any such extension or
approval for transfer.
6.4. Opinion of Seller's Counsel. Seller shall provide to Buyer and
---------------------------
Buyer's lenders the favorable opinion, dated the Closing Date, of Elizabeth
Steele, general counsel to the general partner of Seller, or other counsel
satisfactory to Buyer, substantially in the form attached hereto as Exhibit F.
---------
6.5. Opinion of FCC and Copyright Counsel. Seller shall provide to Buyer
------------------------------------
and Buyer's lenders the favorable opinion, dated the Closing Date, of Cole,
Raywid & Braverman, FCC and copyright counsel to Seller, or other FCC and
copyright counsel satisfactory to Buyer and its lenders, in form and substance
satisfactory to counsel for Buyer and its lenders, substantially in the form
attached hereto as Exhibit G.
---------
6.6. No Adverse Change. There shall have been no material adverse change
-----------------
in the Transferred Assets or the financial condition, liabilities or operations
of the Systems.
6.7. Inventories. Seller shall deliver to Buyer on the Closing Date
-----------
inventories of supplies and equipment consistent with those levels maintained as
of the date of this Agreement.
6.8. No Litigation. There shall be no legal requirement, and no judgment
-------------
shall have been entered and not vacated by any governmental authority or court
of competent jurisdiction in any litigation or arising therefrom, which enjoins,
restrains, makes illegal, or prohibits consummation of the transactions
contemplated by this Agreement.
6.9. HSR Act Compliance. All waiting periods under the HSR Act applicable
------------------
to this Agreement or the transaction contemplated hereby shall have expired or
been terminated.
6.10. Deliveries. Seller shall have made or stand willing and able to
----------
make all the deliveries to Seller set forth in Section 8.2.
6.11. Rantoul Franchise. If Seller has not obtained a five (5) year
-----------------
extension of the Rantoul Franchise, the Rantoul Franchise shall have been
renewed for a term of not less than five (5) years on terms and conditions
reasonably satisfactory to Buyer and Seller.
6.12. Monticello Lease. The lease for a tower located in Monticello,
----------------
Illinois referred to in Schedule 6.3, under "Leases", #5, shall have been
------------
renewed for a five year term on terms mutually acceptable to Buyer and Seller.
35
<PAGE>
Section 7. Conditions Precedent to the Obligation of Seller to Close.
- --------- ---------------------------------------------------------
The obligation of Seller to consummate the transactions herein
contemplated is subject to the satisfaction at or before the Closing of the
following conditions:
7.1. Truth of Representations and Warranties. The representations and
---------------------------------------
warranties of Buyer included in this Agreement and in any Schedule or other
instrument or document delivered by Buyer hereunder shall be true and correct in
all material respects on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of such date
(except for representations and warranties which by their terms relate to a
specific date, which shall remain true and correct as of such date). Seller
shall have received a certificate to this effect dated the Closing Date and
signed by Buyer.
7.2. Performance of Agreements. Each payment, delivery or other action
-------------------------
required of Buyer under this Agreement, and each agreement of Buyer to be
performed at or before the Closing under the terms hereof or as contemplated
herein, shall have been duly performed. Seller shall have received a
certificate to this effect dated the Closing Date and signed by Buyer.
7.3. Opinion of Counsel for Buyer. Buyer shall provide to Seller the
----------------------------
favorable opinion of Gallop, Johnson & Neuman, L.C., counsel to Buyer, dated the
Closing Date, substantially in the form attached hereto as Exhibit H.
---------
7.4. Consents of Third Parties. The Required Consents shall have been
-------------------------
obtained.
7.5. No Adverse Change. There shall have been no material adverse change
-----------------
in the Transferred Assets or the financial condition, liabilities or operations
of the Systems.
7.6. No Litigation. There shall be no legal requirement, and no judgment
-------------
shall have been entered and not vacated by any governmental authority or court
of competent jurisdiction in any litigation or arising therefrom, which enjoins,
restrains, makes illegal, or prohibits consummation of the transactions
contemplated by this Agreement.
7.7. HSR Act Compliance. All waiting periods under the HSR Act applicable
------------------
to this Agreement or the transaction contemplated hereby shall have expired or
been terminated.
7.8. Deliveries. Buyer shall have made or stand willing and able to make
----------
all the deliveries to Buyer set forth in Section 8.3.
7.9. Subscriber Adjustment Amount and Revenue Adjustment Amount. The sum
----------------------------------------------------------
of the Subscribers Adjustment Amount and the Revenue Adjustment Amount, if any,
shall be no greater than $800,000.
36
<PAGE>
Section 8. The Closing.
- --------- -----------
8.1. Time and Place. The closing of the transactions contemplated
--------------
hereunder (the "Closing") shall be held at the offices of Triax
Telecommunications Company, L.L.C., 100 Fillmore Street, Suite 600, Denver,
Colorado 80206 at 10:00 a.m. on or before May 30, 1997, or at such other time or
place as may be agreed to in writing by the parties (the "Closing Date").
Either party may terminate this Agreement without penalty or liability if the
Closing has not occurred by July 31, 1997 and such failure is not due to any
breach or default by the terminating party.
8.2. Deliveries by Seller. At the Closing, Seller shall execute, where
--------------------
applicable, and deliver to Buyer:
(a) Such bills of sale, deeds, assignments, consents and other
instruments of conveyance and transfer as may, in the opinion of counsel
for Buyer, be required or appropriate in order to effectively vest in Buyer
title to, and physical possession of, all of the Transferred Assets;
(b) The Assumption Agreement;
(c) The Indemnity Escrow Agreement;
(d) All other certificates, instruments, documents, surveys, lists
and opinions required to be delivered by Seller under this Agreement;
(e) Possession of the Systems and the Transferred Assets; and
(f) All documents, records, files and agreements of Seller relating
to the operations or assets of Seller, including all copies thereof, except
for the Excluded Assets.
(g) Such other instruments and documents as Buyer or its counsel may
reasonably request, including, without limitation, pay off letters from
Seller's lenders indicating that upon receipt of a certain portion of the
Closing Wire Transfer, they will release or terminate financing statements
filed under the Uniform Commercial Code or otherwise recorded under the
laws of any state and any other release or termination of lien and
encumbrance requested for the purpose of closing the transactions
contemplated by this Agreement.
8.3. Deliveries by Buyer. At the Closing, Buyer shall pay or cause to be
-------------------
paid or execute and deliver to or on behalf of Seller:
(a) The Good Faith Deposit, including all interest earned thereon;
37
<PAGE>
(b) The Closing Wire Transfer;
(c) Proof that the Indemnity Escrow Amount and any amount required to
be paid into a Reserve Account have been deposited with the Escrow Agent;
(d) The Indemnity Escrow Agreement;
(e) The Assumption Agreement; and
(f) All other certificates, instruments, consents, documents and
opinions as Seller or its counsel may reasonably request for the purpose of
closing the transactions contemplated by this Agreement.
8.4. Other Action. The parties shall take such further actions, execute
------------
such additional instruments and documents and make such further deliveries as
may be required or desirable to close the transactions contemplated by this
Agreement.
Section 9. Allocation of Purchase Price.
- --------- ----------------------------
The Purchase Price shall be allocated among the Transferred Assets
as set forth in Schedule 9. Each of the parties hereto covenants and agrees for
----------
purposes of all federal, state and other income tax returns filed: (a) to adopt
the allocation of the Purchase Price among the Transferred Assets set forth in
Schedule 9; (b) to execute any forms required by Section 1060 of the Internal
- ----------
Revenue Code of 1986, as amended; and (c) not to take any position inconsistent
therewith upon examination of any such tax return, or in any refund claim,
litigation or otherwise.
Section 10. Termination.
- ---------- -----------
10.1. Termination Events. This Agreement may be terminated and the
------------------
transaction contemplated by this Agreement may be abandoned:
(a) at any time, by the mutual agreement of Buyer and Seller;
(b) by either Buyer or Seller, at any time, if the other is in
material breach or default of its respective covenants, agreements, or
other obligations in this Agreement, or if any of its representations in
this Agreement or any document to be delivered at Closing are not true and
accurate in all material respects when made or when otherwise required by
this Agreement to be true and accurate, provided that such breach or
default is incapable of cure or has not been cured within 15 calendar days
after receipt of written notice of such breach, default or
misrepresentation from the other party;
38
<PAGE>
(c) by either Buyer or Seller, upon written notice to the other, if
any of the conditions to its obligations set forth in Sections 6 and 7,
respectively, shall not have been satisfied on or before July 31, 1997 for
any reason other than (i) a breach or default by such party of its
respective covenants, agreements, or other obligations hereunder, or (ii)
any representations of such party herein not being true and accurate in all
material respects when made or when otherwise required by this Agreement to
be true and accurate in all material respects; or
(d) as otherwise provided in this Agreement.
10.2. Effect of Termination.
---------------------
(a) Costs and Return of Information. Without limiting any other
-------------------------------
provision of this Section 10.2, if the transaction contemplated by this
Agreement is terminated and abandoned as provided herein: (i) each party
shall pay the costs and expenses incurred by it in connection with this
Agreement, and no party (or any of its officers, directors, employees,
agents, representatives or partners) shall be liable to any other party for
any costs, expenses or damages except as expressly specified herein; (ii)
each party shall re-deliver all documents, work papers and other materials
of the other party relating to the transaction contemplated hereby, whether
so obtained before or after the execution hereof, to the party furnishing
the same; (iii) all confidential information received by either party
hereto shall be treated in accordance with Section 5.2 hereof; and (iv)
neither party hereto shall have any liability or further obligation to the
other party to this Agreement except (A) as stated in subparagraphs (ii)
and (iii) of this Section 10.2(a), and (B) to the extent applicable, as set
forth in Sections 10.2(b) and 10.2(c) below.
(b) Buyer's Remedies. If both: (i) this Agreement is terminated by
----------------
Buyer pursuant to Section 10.1(b), and (ii) Seller is in breach in any
material respect of any of its representations and warranties made herein
or its covenants or agreements made herein (and Buyer is not in breach in
any material respect of any of its representations and warranties made
herein or its covenants or agreements made herein), the Deposit and all
accrued interest thereon shall be returned to Buyer, and Buyer shall also
have (in addition to its right to receive the Deposit and all accrued
interest thereon) the right to seek monetary damages from Seller in an
amount equal to the Deposit.
(c) Seller's Remedies. If both: (i) this Agreement is terminated by
-----------------
Seller pursuant to Section 10(b), and (ii) Buyer is in breach in any
material respect of any of its representations and warranties made herein
or its covenants or agreements made herein (and Seller is not in breach in
any material respect of any of its representations and warranties made
herein or its covenants or agreements made herein), the Deposit and all
accrued interest thereon shall be delivered to Seller.
39
<PAGE>
Section 11. Casualty Losses.
- ---------- ---------------
The risk of any loss or damage to the Transferred Assets resulting
from fire, theft, or any other casualty (except reasonable wear and tear) shall
be borne by Seller at all times prior to the Closing. If any such loss or
damage shall be sufficiently substantial so as to preclude and prevent within 30
days after the occurrence of the event resulting in such loss or damage
resumption of normal operations of any portion of the Systems or replacement or
restoration of the lost or damaged Transferred Assets, Seller shall immediately
notify Buyer in writing of its inability to resume normal operations or to
replace or restore the lost or damaged Transferred Assets, and Buyer, at any
time within 10 days after receipt of such notice, may elect by written notice to
Seller to either (i) waive such defect and proceed toward consummation of the
transaction in accordance with terms of this Agreement, or (ii) terminate this
Agreement. If Buyer elects to terminate this Agreement, Buyer and Seller shall
stand fully released and discharged of any and all obligations hereunder, and
the Deposit and all interest accrued thereon shall be returned to Buyer. If
Buyer shall elect to consummate the transaction contemplated by this Agreement
notwithstanding such loss or damage and does so, all insurance proceeds payable
as a result of the occurrence of the event resulting in such loss or damage
shall be delivered by Seller to Buyer, or the rights thereto shall be assigned
by Seller to Buyer if not yet paid over to Seller.
Section 12. Non-competition.
- ---------- ---------------
In consideration of the allocation of $200,000 out of the Purchase
Price (the "Non-Competition Payment"), which it is hereby agreed is fair and
adequate compensation therefor, Seller shall agree in writing with Buyer at
Closing (in the form of Non-Competition Agreement set forth in Exhibit I),
---------
effective on and after the Closing Date and for the three (3) year period
following the Closing Date, not to engage, directly or indirectly, either
personally, or as an owner, employee, partner, associate, officer, manager,
agent, advisor, consultant or otherwise in any business which is competitive
with the business of Buyer within a five (5) mile radius of the Franchise areas
of the Systems. For the purposes hereof, a business will be deemed competitive
with the business of Buyer if it involves the development, construction, sale,
lease, rental or operation of any cable television system, satellite master
antenna television system, multi-point distribution system, low power television
system, direct broadcast satellite system or "open video" system, as such terms
are generally defined and used in the communications industry; provided,
however, that nothing herein shall prohibit Seller from (a) owning securities of
any company in amounts which are not more than 5% of the issued and outstanding
securities of such company, (b) providing programming and programming-related
services to video distributors, provided such services are offered to Buyer on
not less favorable terms than those offered to other third parties, or (c)
engaging or participating in any telephony, satellite or wireless business that
has multi-state distribution capabilities, except that Seller will not purchase
or own an interest in an entity which offers wireless services in any geographic
area in which a System is operated.
40
<PAGE>
Section 13. Notices.
- ---------- -------
Any notice or other communication required or permitted hereunder
shall be sufficiently given if in writing and sent by certified or registered
mail, postage prepaid, or by next business day courier service (such as Federal
Express) or confirmed telecopy, addressed as follows:
(a) If to Seller, addressed to:
Cable TV Fund 14-A, Ltd.
c/o Jones Intercable, Inc.
9697 E. Mineral Avenue
Englewood, Colorado 80112
Attention: President
Telecopy #: (303) 790-0533
With a copy to:
General Counsel
Jones Intercable, Inc.
9697 E. Mineral Avenue
Englewood, Colorado 80112
Telecopy #: (303) 799-1644
(b) If to Buyer, addressed to:
TRIAX MIDWEST ASSOCIATES, L.P.
c/o Triax Telecommunications Company, L.L.C.
Attention: Jay R. Busch, President
100 Fillmore Street, Suite 600
Denver, Colorado 80206
Telecopy #: 303-333-1110
With a copy to:
Alan G. Johnson, Esq.
Gallop, Johnson & Neuman, L.C.
16th Floor
101 South Hanley Road
St. Louis, Missouri 63105
Telecopy #: 314-862-1219
or to such other address(es) as Seller or Buyer shall give notice to the other
by like means. Any such notice or communication shall be deemed to have been
given upon receipt.
41
<PAGE>
Section 14. Parties in Interest.
- ---------- -------------------
Neither party may assign this Agreement or any interest in this
Agreement without the prior written consent of the other party; provided that at
the Closing Buyer may collaterally assign its interest to the financial
institutions who are lenders to Buyer in connection with the transactions
contemplated hereby. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their successors and assigns.
Section 15. Entire Agreement.
- ---------- ----------------
The Schedules hereto are incorporated in and form an integral part
of this Agreement. All understandings and agreements between the parties
relating to the subject matter hereof are merged into this Agreement, which
fully and completely expresses the agreement of the parties and supersedes any
prior agreement or understanding relating to the subject matter hereof,
including, without limitation, any letter of intent and related correspondence
among the parties.
Section 16. Governing Law.
- ---------- -------------
This Agreement and the agreements and instruments contemplated
hereby shall be governed by and construed in accordance with the law of the
State of Colorado, without regard to the conflict of law provisions thereof.
Section 17. Counterparts.
- ---------- ------------
This Agreement may be executed in several counterparts, all of
which taken together shall constitute one instrument.
Section 18. Descriptive Headings.
- ---------- --------------------
The descriptive headings of the several sections of this Agreement
are inserted for convenience only and shall not be deemed to affect the meaning
or construction of any of the provisions hereof.
Section 19. Definitions.
- ---------- -----------
Each of the terms set forth in Schedule 19 shall have the meaning
-----------
ascribed to it in the Section of the Agreement referred to in Schedule 19.
------------
42
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
TRIAX MIDWEST ASSOCIATES, L.P.
By: TRIAX MIDWEST GENERAL PARTNER, L.P., its
Managing General Partner
By: TRIAX MIDWEST, L.L.C., its sole General
Partner
By: /s/ Jay R. Busch
--------------------------------
Jay R. Busch, President
CABLE TV FUND 14-A, LTD.
By: JONES INTERCABLE, INC., its General Partner
By: /s/ Elizabeth Steele
--------------------------------
Elizabeth Steele, Vice President
43
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<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,257,022
<SECURITIES> 0
<RECEIVABLES> 1,142,329
<ALLOWANCES> (255,399)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 137,237,866
<DEPRECIATION> (76,946,443)
<TOTAL-ASSETS> 79,343,054
<CURRENT-LIABILITIES> 2,910,573
<BONDS> 85,424,507
0
0
<COMMON> 0
<OTHER-SE> (8,215,874)
<TOTAL-LIABILITY-AND-EQUITY> 79,343,054
<SALES> 0
<TOTAL-REVENUES> 47,808,719
<CGS> 0
<TOTAL-COSTS> 48,206,609
<OTHER-EXPENSES> 208,183
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<INTEREST-EXPENSE> 5,949,858
<INCOME-PRETAX> (7,371,183)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,371,183)
<DISCONTINUED> 0
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<CHANGES> 0
<NET-INCOME> (7,371,183)
<EPS-PRIMARY> (45.61)
<EPS-DILUTED> (45.61)
</TABLE>
